Pfund v. Valley Loan & Trust Co.

Irvine, C. In 1880 one Frank Kokojan made application and entered upon tbe southeast quarter of section 30, township 28, range 11 west, in Holt county, under the federal homestead laws. In November, 1885, be made final proof, and December12,1885, tbe local land officers issued to him a final receipt. January 11, 1886, be executed a mortgage on tbe land, and tbe Valley Loan & Trust Company, plaintiff below and tbe defendant in error, claims as purchaser at a foreclosure sale under this mortgage. January 3, 1887, tbe United States filed a complaint in tbe local land office charging that Kokojan bad obtained bis final receipt through fraud and perjury. A bearing was bad at which Kokojan appeared. Tbe local office found against him and an appeal was taken to the commissioner of the [475] general land office, which resulted, November 19, 1888, in an affirmance of the action of the local office and a final cancellation of Kokojan’s entry. Lina Girard afterwards entered upon the land under the homestead laws, and November 11, 1890, received a patent therefor. Pfund claims as her grantee. This action was brought by the Yalley Loan & Trust Company, claiming as we have said, under Koko jan, to have Pfund decreed a trustee of the legal title for plaintiff’s benefit, and to compel a conveyance. There was no effort made by pleadings or proof to show that Kokojan’s entry was in fact lawful or that he was entitled to a patent. On this the plaintiff relied solely upon the issuing to him of the final receipt. Neither did the plaintiff, by pleading nor proof, endeavor to establish that Kokojan’s mortgagee or the plaintiff had expended money or other thing of value for the land relying upon the receipt and without notice of the fraud or perjury by which it is charged the receipt was obtained. The plaintiff’s theory was that by the issue of the receipt, Koko jan obtained a vested interest in the land, which the land office had no authority or power to divest by the subsequent proceedings. The broad question raised was that formerly much mooted one of the power of the land officers to cancel an entry after the issuing of a final receipt, for fraud in obtaining it. The district court entered a decree for the plaintiff in accordance with the prayer of the petition, and the defendant brings the case here by petition in error. At the time of trial in the district court the main question presented was an open one, the state courts having reached different conclusions, the inferior federal courts being almost equally divergent in their decisions, and there being then no decision of the supreme court of the United States which threw anything more than a side-light upon the situation. In Orchard v. Alexander, 157 U. S., 372, the supreme court of the United States, in a case much like this, distinctly held that the commissioner of the general land [476] office has power to proceed as was here done, and if the entry be shown to be fraudulent, to cancel the same. This was in the case of a pre-emption entry, but there has not been suggested to us any principle which would differentiate that case from one of a homestead entry. In Parsons v. Venzke, 61 N. W. Rep. [N. Dak.], 1036, the supreme court of North Dakota had before it a case in all respects similar to the case at bar, except again that the entry was a pre-emption, and that the mortgagee, while not a party to the cancellation proceedings, had appeared and defended. The conclusion there reached and expressed in an opinion which evinces the learning and painstaking research distinguishing so much of the work of that court, was that the commissioner has general authority to cancel fraudulent entries; that such power is not one to be exercised arbitrarily, but is limited in its scope; that the findings of fact in such case are binding upon the courts, provided parties have been accorded an opportunity to be heard, but that where no such opportunity ha.s been accorded, the finding is not absolutely a nullity, — the entry having been in fact canceled, — a party seeking equitable relief must assume the burden of proving the facts showing he had earned the patent. This ca,se was taken by writ of error to the supreme court of the United States, where the judgment of the state court has been recently affirmed. (Parsons v. Venzke, 164 U. S., 89.) While the opinion is not so elaborate as in the state court, it clearly establishes the authority of the commissioner in the premises. The question being one of a federal character we must be governed by the decisions referred to. Plaintiff contends that if it be determined that aui hority exists to cancel an entry as against the entryman himself, plaintiff is nevertheless protected by the provisions of the act of congress of March 3, 1891 (26 United States Statutes at Large, p. 1098, ch. 561, sec. 7), whereby it is enacted that “all entries made under the pre-emption, homestead, desert-land, or timber culture laws, in which [477] final proof and payment may have been made and certificates issued, and to which there are no adverse claims originating prior to- final entry and which have been sold or incumbered prior to the first day of March, eighteen hundred and eighty-eight, and after final entry, to bona fide purchasers, or incumbrancers for a valuable consideration, shall unless upon an investigation by a Government Agent, fraud on the part of the purchaser has been found, be confirmed and patented upon presentation of satisfactory proof to the Land Department of such sale or incumbrance.” This statute cannot avail the plaintiff. Without suggesting other reasons it is sufficient to say that in Parsons v. Venzke, supra, the same claim was made and the supreme court of the United States there held that the statute referred only to entries existing at the time of its enactment and not to those which had theretofore been canceled. Plaintiff in argument further insists that it is in any event entitled to relief as one claiming under a bona fide purchaser without notice of the facts invalidating the entry and in reliance upon the receipt. Whether one occupying such a position and not a party to the cancellation proceedings would be entitled to relief in the courts we need not decide, because, as already noticed, the plaintiff did not present this issue by the pleadings or attempt to establish such facts by the proof. Where a claim to real estate can be sustained only upon the ground that the person asserting it is a subsequent purchaser in good faith, such person is required to show affirmatively that he purchased without notice of the equities of another, and relying upon the apparent ownership of his grantor. (Bowman v. Griffith, 35 Neb., 361; Dailey v. Kinsler, 35 Neb., 835; Phœnix Mutual Life Ins. Co. v. Brown, 37 Neb., 705; Baldwin v. Burt, 43 Neb., 245.) It follows that the judgment of the district court must be reversed and the cause remanded. Reversed and remanded.