Weeks v. Milwaukee, Lake Shore & Western Railway Co.

Taylor, J. The only arguments insisted upon by the counsel for the respondent as a ground for sustaining the demurrer to the complaint were: (1) The defendant is to be protected as a bona fide purchaser for value, without notice, express or implied, of the fraud in the proceedings under which the pretended assignment of the land claim was made to the persons under whom the patentee claimed; and (2) that the plaintiffs show upon the face of their complaint that they have been guilty of such laches as ought to estop them from insisting upon their title. It is sufficient to say, as to the second point, the allegations in the complaint which are admitted by the demurrer show that the plaintiffs have proceeded with reasonable promptness in endeavoring to enforce their claim after they became aware of the illegal and fraudulent proceedings on the part of those now claiming the grant. Header v. Norton, 11 Wall. 442, 458. Upon the first point, it is insisted on the part of the learned counsel for the appellants that the defendant is bound to take notice of all facts which appear in its chain of title; that the patent is the basis of its title; and what is stated in said patent, by way of recital or otherwise, must be held to have been known by the defendant when it purchased the lands from the patentee. It was not contended by the learned counsel for the respondent, upon the argument of this appeal, that the facts stated in the complaint do not show that the proceedings taken in the probate court of Louisiana, under which there was a pretended sale of the land claim belonging to the heirs and legal representatives of William Weeks, deceased, were fraudulent and void as against the said heirs and legal representatives. The brief of the learned counsel for the appellants has discussed that question with great force, and has cited abundant authorities to sustain their contention upon that question. We are not called upon, therefore, on this appeal to go into — 516 — that discussion further than to say that we think the contention of the appellants on that point is amply sustained ■in the authorities cited in appellants’ brief. The real question is whether the respondent is to be charged with knowledge of such fraud, either actual or implied, as will make it a holder of the title conveyed to it in trust for the real owners thereof. It will be seen that by the act of Congress of January 12, 1855, the then heirs at law and legal representatives of William Weeks, deceased, became the owners of the grant made to said Weeks by “ Grand Pre,” governor of West Florida, in 1806, and that unless the lands so granted and surveyed had been otherwise disposed of the said heirs would have been entitled to recover possession of such grant, unless the same were held by some better and adverse title. It is equally clear that, under the act of Congress of 1858 above cited, the same heirs and legal representatives of William Weeks,' to whom the title to said grant was confirmed by the act of 1855, were the only persons who were entitled to obtain certificates for the location of other lands of the United States, of the same number of acres contained in said original grant, in case such original grant had not been located or satisfied, either for want of a specific location prior to such confirmation, or for any reason whatsoever other than a discovery of fraud in such claim subsequent to such confirmation. The act then makes it the duty of the surveyor-general of the district in which such claim was situated, upon satisfactory proof that such claim has been so confirmed, and that the same in whole or in part remains unsatisfied, to issue to the elcmnant or Ms legal representcc-tmes a certificate of location for a quantity of land equal to that so confirmed and unsatisfied, which certificate may be located upon any public lands of the United States subject to sale at private entry, at a price not exceeding $1.25 per acre. It is clear that under these statutes no person or per — 517 — sons could lawfully obtain a certificate of location under said statutes, except the person or persons to whom said grants bad been confirmed, or their legal representatives, and in the case at bar no one was entitled to receive such certificate of location except the heirs or legal representatives of William Weeks, deceased, who were such at the date of the passage of the act of confirmation, January 12, 1855. They are the only persons to whom the grant was confirmed, and consequently the only persons entitled to receive a certificate of location for such part of the grant as had not been received by them, but had been otherwise disposed of, and they were the only persons to whom the surveyor-general of Louisiana was, under the act of 1858, authorized to issue said certificates of location. It seems to us clear that the words “ claimant or his legal representatives,” found in the act of 1858, were clearly intended to mean the same persons mentioned in the confirmatory act of 1855, viz., “the heirs and legal representatives of William Weeks, deceased,” and not the assignee of such heirs and representatives. It seems almost too clear for argument that if any person or persons, not being the said heirs or legal representatives of said deceased, made application to said surveyor-general for such certificates of location, and not in fact being their true and lawful assignee, and through fraud or otherwise obtained the same under such claim, and used them in entering lands of the United States in satisfaction of such claim, and took a patent therefor, the holder of such patent would hold such lands in trust for the true heirs and representatives; and the only remedy of the true heirs would be to bring an action in a court of equity to compel the holder of such patent to transfer the title to them. The rule is well established that, where the United States has transferred any of the lands owned by the United States by patent, the legal title to such land passes to the — 518 — patentee named in the patent; and, although he obtained it by fraud or forgery, still the legal title has passed from the United States to the grantee, and any rights that third persons may have to the lands described in the patent must be obtained by an action in equity brought against the pat-entee and those claiming under him with notice of the rights of such third person or persons. The status of such grantee named in the patent, as respects the real owner, is well defined in the South Dakota Code (sec. 8920, Comp. Laws): “One who gains a thing by fraud, accident, mistake, undue influence, the violation of a trust, or other wrongful act, is, unless he has some other and better right thereto, an involuntary trustee of the thing gained, for the benefit of the person who would otherwise have had it.” It is not seriously contended by the learned counsel for the respondent that the grantee in the original patent, upon the facts stated in the complaint, should not be adjudged to hold the title in trust for the benefit of the plaintiffs. He is charged in the complaint with knowledge of the fraud which was perpetrated by the parties’ proceedings in the probate court of Louisiana, and is therefore in no better condition than Cluverius, the purchaser at said pretended administrator’s sale, would have been, had he procured the certificates of location and the patent in his own name. In Farmers' & T. Bank v. Kimball Millinng Co. 47 N. W. Rep. (S. D.), 404, the court say: .“Involuntary or constructive trusts embrace a much larger class of cases, and include all those instances in which a trust is raised by the doctrine of equity for the purpose of working out justice in the most ■efficient manner, when there is no intention of the parties to create a trust relation, and contrary to the intention of the one holding the legal title. This class of trusts may be usually referred to fraud, either active or constructive, as an essential element. This extension of the fundamental principles of trusts enables courts of equity to wield a — 519 — remedial power of great efficacy in protecting tbe rights of property. They can follow the real owner’s property, and pursue his real ownership, into whatever form it may be changed or transmuted, even into the hands of third parties, so long as the property or fund into which it has been converted can be traced, until it goes into the hands of an innocent purchaser for value and without notice.” The doctrine stated in the above quotation is so well established as to need no citation of authorities, and, as we understand, is not disputed by the learned counsel for the respondent in the case. * The fact that a patent for the land has been issued by the TJnited States does not in any way interfere with the rights of parties which existed previously to its issue. These rights are not adjudicated by the officers issuing the same, except in cases where there is some provision of law made for determining the rights of such parties before the patent is issued, for the purpose of determining to whom it should issue, such as cases arising under the pre-emption laws, and in other special cases. In the case at bar no provision was made by the law for determining the question by the surveyor-general as to what particular person is entitled to have a certificate of location, but he is simply required to issue a certificate of location to the claimant or his legal representatives. His judgment is ex parte, as it must necessarily be, and cannot defeat the right of the real owner. This has been frequently decided by the supreme court of the United States. Hogan v. Page, 2 Wall. 605; Header v. Norton, 11 Wall. 442, 451; United States v. Morillo, 1 Wall. 709; Beard v. Federy, 3 Wall. 493; Martin v. United States, Hoff. Land Cas. 146; Simmons v. Wagner, 101 U. S. 260; Carrol v. Safford, 3 How. 440, 460; Witherspoon v. Duncan, 4 Wall. 210, 218. See, also, Cornelius v. Kessel, 53 Wis. 395, which was affirmed by the supreme court of the United States in 128 U. S. 456. — 520 — In the case of Hogan v. Page, supra, the supreme court says: “ A difficulty had occurred at the land office at an early day in respect to the form of patent certificates and of patents, arising out of applications to have them issued in the name of the assignee or present elavmcmb, thereby imposing upon the office the burden of inquiring into the derivative title presented by the applicant. This difficulty also existed in respect to boards of commissioners under the acts of Congress for the settlement of French and Spanish claims. The result seems to have been, after consulting the attorney general, that the commissioners of the land office recommended a formula that has since been very generally observed, namely, the issuing of the patent certificate, and even the patent, to the original grantee or his legal representatives ; and the same has been adopted by the several boards of commissioners. This formula,£ or his legal representatives,’ embraces representatives of the original grantee in the land by contract, such as assignees or grantees, as well as by operation of law, and leaves the guestion open to inquiry in a court of justice as to the party to whom, the certificate, patent, or confirmation should inure.” The patentee, claiming in his application for the patent that he is the assignee or personal representative of the plaintiffs, must, in order to deprive the plaintiffs of their rights under the oi’iginal grant made to them by act of confirmation in 1855, show that he is such assignee. It hardly needs authority for this statement. Having acknowledged the right of the plaintiffs to the lands he claims under the patent, in order to make his claim good he 'must show that he has in some lawful way become vested with such right. So far as the grantee in the patent is concerned, there can be no doubt upon the question of the right of the plaintiffs to contest his right to the land by showing that he is not their assignee in fact, and that his pretended claim to be such is a fraud upon them. — 521 — Tbe only question as between the patentee and the true owner is as to the burden of proof whether, after a patent has been issued to a person claiming to be assignee of the true owner, such patent will be presumed to have been issued to the party rightfully entitled to the land, and that any other party claiming the same, as against such patent, must take the burden of proving that the claim of the pat-entee is a fraudulent one. This question is not a material one in this case, as the complaint alleges all the facts necessary to show the fraudulent claim of the patentee. That the rights of the parties, as between the plaintiffs and pat-entee, are open to litigation in the court, is really not seriously disputed by the respondent. It- is urged by the learned counsel for the respondent that as the United States has issued a patent to the person claiming to be assignee of the real parties entitled to make the entry and for whose benefit the law authorized the patents to be made, and as the defendant purchased from the person named in said patent as grantee of the United States, it is not chargeable with notice of the title of the plaintiffs; in other words, that it is a purchaser in good faith, for value, without notice. This claim would be unanswerable if there were nothing in the patent itself which was notice to the defendant of jthe rights of the plaintiffs to the lands granted to the patentee. But the patent on its face shows that the certificates of location were issued in satisfaction of the claim of the heirs and representatives of William Weeks. It recites the act of confirmation to said heirs and representatives of January 12, 1855, and that the location of the particular tract thereby granted was “ in part satisfaction of the aforesaid claim of the heirs and legal representatives of William Weeks,” and that the locator was George M. Wakefield, assignee of J. L. Bradford, attorney in fact of Winslow Robinson, “ legal representative of the — 522 — heirs and legal representatives of William Weeks.” It is not claimed that the defendant is not to be charged with knowledge of this patent and its contents, but it is claimed that, admitting that it had knowledge of its contents when it purchased from the patentee therein named, there was no duty imposed upon the defendant, by reason of such knowledge, to make any investigation or inquiry as to the truth of the statement made in said patent. Under the rule above stated by the supreme court of the United States, that the grant by the United States of lands in satisfaction of a previously confirmed grant to some particular person or persons is not a conclusive adjudication that the particular person to whom the grant is made, when made to a person claiming to be an assignee of such other person or persons, is such assignee in fact, but leaves that question open to be disposed of in the courts, it seems to us that the purchaser from the patentee takes the risk of the title; and if the true owners can show that there never was any assignment of their claims made to the party named in the patent, directly or indirectly, they will defeat the title of the defendant; and, if the claim of the pretended assignee was fraudulent as to the true owners, the title derived from the government will be held in trust for them. It would hardly be contended that, if the defendant had itself purchased the certificate of location, it could have held it against the real parties entitled to it upon proof of the facts stated in the complaint. In such case they would be simply claiming as the assignee of the plaintiffs, not directly, but through alleged intermediate assignees, all of whom are chargeable with fraud in obtaining it. And under the rule stated in the case of Hogan v. Page, 2 Wall. 605, the issuing of the patent in favor of such supposed assignee does not destroy the right of the true owner, but possibly changes the burden of proof, and requires the real owner — 523 — to show the fraudulent obaraoter of the pretended assignment, instead of compelling the pretended assignee to show his right by affirmative proof. Upon the facts stated in the complaint, it appears to us, by a reasonable search and investigation the defendant could have discovered the fraudulent character of the claim of the assignee mentioned in the patent. If the allegations of the complaint are true, no assignment of the plaintiffs’ claim was ever made, and the pretended assignment would have been easily found to have been utterly fraudulent and void. We do not intend to intimate that the defendant was bound to investigate as to frauds which might have been perpetrated to procure an assignment, which only rested in parol and were in the nature of secret frauds. If, by making reasonable inquiry, the defendant had found an assignment in fact by the plaintiffs to an immediate or remote assignee, he would not have been chargeable with notice of any secret fraudulent practices on the part of such assignee in procuring such assignment. So, if in searching for the title-of such alleged assignee he had found that he became such by reason of a judicial sale made by a court having jurisdiction of the parties and the subject matter, he could not be defeated in his title by any evidence not appearing in the record of such proceeding which would show that such judgment and sale were procured by the fraud of the parties taking such proceedings. In all such cases the defendant would stand in the same position as it would against the true owner had it purchased from the fraudulent grantee of the true owner without knowledge of such fraud. See Jackson v. Henry, 10 Johns. 185, 194. It seems to us that in cases of the kind at bar the United States acts as the agent of the true owner of the lands confirmed to the plaintiffs by the statute referred to in the patent, with power simply ■ to convey to them or to their assignee, and, if it grants to an individual who is not in fact — 524 — the assignee of the true owners, such transfer conveys no equitable title to such grantee, and, the fact appearing upon the face of the grant that the grantee claims solely as such assignee, the title taken under such patent must be held for the benefit of the real owner. It could not be contended that, if a grantee of real property claims to hold it by virtue of a deed executed on behalf of the real owner by virtue of a power of attorney from such owner, it would not be necessary for him to show affirmatively that the party so executing the deed was in fact authorized to execute the same on behalf of the owner; and if it turned out that the power under which the deed was executed was a forgery, or void for other reason appearing upon its face, such deed would fail to convey any title either in law or equity. See Jackson v. Burgott, 10 Johns. 457; Jackson v. Neely, 10 Johns. 374. The only difference in favor of the patent is that under the law the patent conveys the legal title to the grantee, but subject to the claims of the rea1 owner. It.seems to be pretty well settled that a purchaser is held to have notice of what appears on the face of the title under which he claims; and this rule applies as well to patents as to deeds and conveyances by individuals. Pringle v. Dunn, 37 Wis. 449; Brush v. Ware, 15 Pet. 93; Reeder v. Barr, 4 Ohio, 446; Bagnell v. Broderick, 13 Pet. 436; Burkart v. Bucher, 2 Bin. 455; Sigourney v. Munn, 7 Conn. 324; 2 Pom. Eq. Jur. § 626; Wade, Notice, §§ 46, 310, 311; American Emigrant Oo. v. Call, 22 Fed. Rep. 765, 768; Barney v. Dolph, 97 U. S. 656. Pomeroy sums up the matter, as to the duty of a claimant to examine all the evidences of title under which he claims, briefly as follows: “ It is an imperative duty in law imposed upon him to ascertain all the instruments which constitute essential parts of his title, and to inform himself of all they contain.” See 2 Pom. Eq. Jur. § 626, supra. Under this rule it would seem that the defendant was bound to inform itself of all the assignments — 525 — indicated in the patent; and if it bad done so, and the facts are as stated in tbe complaint, it would have found that there never had been any assignment of the plaintiffs’ claim to any one, and especially that it had not been assigned to the person or persons under whom the patentee claims. ¥e conclude, therefore, that under the patent and upon the facts stated in the complaint it was the duty of the defendant to have made examination of its title, and that if it had done so with reasonable diligence and care it would have been found absolutely void in equity. There is another reason why the demurrer in this case should have been overruled. The allegations in the complaint establish the equitable title to the lands in question in the plaintiffs, and simply admit that the defendant holds the legal title. It is not alleged or admitted that the defendant is a purchaser for value and without notice of the plaintiffs’ right; and upon a demurrer to such complaint the 'court cannot consider the equities which the defendant may have to th,e lands in question, as a purchaser without notice, to defeat the plaintiffs’ claim. These equities, if it has any, must be shown to the court by answer stated clearly and. fully, so that if they be proved on the trial they will defeat the plaintiffs’ claim. The plaintiffs in their complaint have shown an equitable title which antedates the legal title held by the defendant, and must prevail unless the defendant can show an equitable claim to the lands equally as good or better than the plaintiffs. See Boone v. Chiles, 10 Pet. 177; 1 Daniell, Ch. Pr. 702; Balcom v. New York L. I & T. Co. 11 Paige, 454; 2 Pom. Eq. Jur. §§ 784, 785; Farmer's & T. Bank v. Kimball Milling Co. 47 N. W. Rep. (S. D.), 406. By the Court.— The order of the superior court is reversed, and the cause is remanded with directions to the superior court to overrule the demurrer, and for further proceedings according to law.