payment, and by the defendant was paid out of said account. This particular transaction was thus closed as between the defendant bank and collecting bank. The defendant bank in this transaction was certainly not acting as agent for the owner of the note which was thus collected. The defendant bank had done in that transaction the following acts: (1) It had honored and paid to the drawee the check of its customer the Western Implement Company, drawn for the payment of the promissory note held for collection by the Northwestern National Bank, the drawee of the check. (2) It had charged to the Western Implement Company's account upon the books of the defendant bank the amount of the check so paid. (3) It had credited itself in its Western Implement Company's account with the amount so paid on the check, and thereby reduced its indebtedness to the Western Implement Company by so much.

"Two similar notes were paid in the same manner to the other banks holding them for collection. Precisely the same three acts were performed by the defendant bank with respect to the payment of the notes of the plaintiff bank: (1) The defendant bank had honored and paid to the drawee (itself) the check of its customer, the Western Implement Company, drawn for the payment of the promissory notes held for collection by the drawee of the check. (2) It had charged to the Western Implement Company's account the amount of the check so paid. (3) It had credited itself in its Western Implement Company's account with the amount so paid on the check, and thereby reduced its indebtedness to the Western Implement Company by so much. In no one of these three acts was defendant bank agent of plaintiff.

"On the other hand, it was agent of plaintiff in the following acts: (1) In demanding payment of the notes sent by plaintiff for collection. (2) In receiving from itself as bank so much of the proceeds of the Western Implement Company's check for $20,818.15, which it as bank had honored, as was necessary to pay plaintiff's notes. (3) In stamping the notes of the plaintiff 'Paid. (4) In procuring from itself as bank a draft payable to plaintiff to cover amount of notes collected less commission for collection. (5) In transmitting to plaintiff the draft thus procured.

"But plaintiff does not claim that defendant was negligent in performing these acts as agent. Negligence is not the gist of plaintiff's complaint, and the case is not governed by the principles of the law of negligence as between principal and agent, because those principles are not applicable to the facts. Defendant, as plaintiff's agent, collected the notes owned by plaintiff and made remittance by draft, but now seeks to recall the remittance because it (not as plaintiff's agent, but in an entirely different capacity) had entered into an independent transaction with the maker of the notes, which enabled the maker to pay the notes, but which independent transaction turned out to be an unfortunate one for the defendant bank.

"The value of the principles of commercial law depends largely upon their certainty. If the test of the applicability and application of these principles is to be made dependent upon 'relative gain or loss of the parties to a given transaction, uncertainty would take the place of certainty, and the value of supposedly established principles would be very largely destroyed. The oft-quoted words of Judge Cooley in the case of First Nat. Bank v. Burkham, 32 Mich. 328, would seem to be here applicable: The beauty and value of the rules governing commercial paper consist in their perfect certainty and reliability; they would be more than useless if the ultimate responsibility for such paper, as between payee and drawee, both acting in good faith, could be made to depend on the motives which influenced the latter to honor the paper.' I am aware that there are decisions holding to the contrary of the views expressed above, but I am unable to harmonize those decisions with the principles applicable to the case at bar, as laid down by the courts whose decisions this court is bound to follow."

SOUTHERN OREGON CO. v. UNITED STATES.

(Circuit Court of Appeals, Ninth Circuit. February 13, 1917.)

No. 2771.

1. PUBLIC LANDS 66-GRANTS FOR INTERNAL IMPROVEMENTS-COVENANTSCONSTRUCTION.

By Act March 3, 1869, c. 150, 15 Stat. 340, the United States granted to the state of Oregon, to aid in the construction of a military wagon road from Coos Bay, every alternate section of public land for 3 miles on each side of the road as constructed, provided that the lands should be exclusively applied to the construction of said road and to no other purpose, and should be disposed of only as the work progressed, and provided, further, that the grant "shall be upon the condition that the lands shall be sold to any one person only in quantities not greater than one quarter section and for a price not exceeding $2.50 per acre." Section 5 provided that on proof of the completion of 10 consecutive miles of the road a quantity of the land granted, not exceeding 30 sections, might be sold, and so on until the road should be completed, and if not completed within five years no further sales should be made, and the land remaining unsold should revert to the United States. Held, that section 5 did not limit the effect of the proviso governing the quantity and price in making sales to such sales as were made within the five years, but that the same remained in effect as an enforceable covenant of the grant.

[Ed. Note.-For other cases, see Public Lands, Cent. Dig. §§ 219, 220.] 2. PUBLIC LANDS 66-GRANTS FOR INTERNAL IMPROVEMENTS-CONDITIONS -NOTICE TO SUBSEQUENT PURCHASERS.

Although the state assigned its interest in the lands granted to a corporation which undertook to build the road, and patents were issued directly to the corporation, such corporation and all subsequent purchasers were charged with notice of the terms and conditions of the grant, especially as the act was referred to in the assignment and the patents.

[Ed. Note. For other cases, see Public Lands, Cent. Dig. §§ 219, 220.] 3. PUBLIC LANDS 66-GRANTS FOR INTERNAL IMPROVEMENTS-SALE-ESTOPPEL.

That officers of the government had knowledge that lands granted to aid in an internal improvement had been disposed of in violation of the terms of the grant, and that no action was taken in regard thereto, does not amount to an estoppel against the enforcement of covenants in the grant.

[Ed. Note.-For other cases, see Public Lands, Cent. Dig. §§ 219, 220.] 4. JUDGMENT 713(1)—JUDGMENTS AS BAR-IDENTITY OF QUESTIONS IN

VOLVED.

A suit by the United States to enforce a covenant in a land grant held not barred by the judgments in prior suits relating to certain other lands claimed under the grant, but in which the questions involved in the later suit were not presented or decided.

[Ed. Note.-For other cases, see Judgment, Cent. Dig. §§ 1063, 12341237, 1239.]

Appeal from the District Court of the United States for the District of Oregon; Chas. E. Wolverton, Judge.

Suit in equity by the United States against the Southern Oregon Company. Decree for the United States, and defendant appeals. Affirmed.

For other cases see same topic & KEY-NUMBER in all Key-Numbered Digests & Indexes

The United States brought a suit against the appellant to obtain a decree forfeiting title to 96,000 acres of land, on the ground that the land which had been granted to the appellant's predecessors in interest by the United States contained conditions subsequent which had been breached. The bill alleged that the lands were granted by the act of Congress of March 3, 1869 (15 Stat. 340), entitled "An act granting lands to the state of Oregon to aid in the construction of a military wagon road from the navigable waters of Coos Bay to Roseburg in said state"; that the act by its terms granted to the state of Oregon, to aid in the construction of said wagon road, alternate sections or public lands designated by odd numbers, to the extent of 3 sections in width on each side of said road, "provided that the lands hereby granted shall be exclusively applied to the construction of said road and to no other purpose, and shall be disposed of only as the work progresses; provided further, that the grant of lands hereby made shall be upon the condition that the lands shall be sold to any one person only in quantities not greater than one quarter section, and for a price not exceeding two dollars and fifty cents per acre." In section 2 it was enacted: "That the lands hereby granted to said state shall be disposed of by the Legislature thereof for the purpose aforesaid, and for no other; and the said road shall be and remain a public highway, for the use of the government of the United States, free from tolls or other charges upon the transportation of any property, troops, or mails of the United States." In section 5 it was enacted that: "When the Governor of said state shall certify to the Secretary of the Interior that ten continuous miles of said road are completed, then a quantity of the land hereby granted, not to exceed thirty sections, may be sold, and so on from time to time, until said road shall be completed; and if said road is not completed within five years, no further sale shall be made, and the lands remaining unsold shall revert to the United States." The bill alleged that through inadvertence the said act of Congress contained no provision authorizing the issuance of patents, and to correct the omission Congress on June 18, 1874, passed an act providing: "That in all cases when the roads in aid of the construction of which lands were granted are shown by the certificate of the Governor of the state of Oregon, as in said acts provided, to have been constructed and completed, patents for said lands shall issue in due form to the state of Oregon as fast as the same shall, under said grants, be selected and certified, unless the state of Oregon shall by public act have transferred its interests in said lands to any corporation or corporations, in which case the patent shall issue from the General Land Office to such corporation or corporations upon their payment of the necessary expenses thereof: Provided, that this shall not be construed to revive any land grant already expired, nor to create any new rights of any kind except to provide for issuing patents for lands to which the state is already entitled." Act June 18, 1874, c. 305, 18 Stat. 80 (Comp. St. 1913, § 4871).

The bill alleged further that on October 22, 1870, the state of Oregon granted to the Coos Bay Wagon Road Company, a corporation, all lands, right of way privileges, and immunities theretofore granted or pledged to the state by the act of Congress for the purpose of aiding the said company in constructing the road mentioned and described in said act, upon the conditions and limitations therein prescribed; that thereafter there were issued to the Wagon Road Company, upon its representation that it had complied with the act, a patent of date February 12, 1875, conveying 42,496.93 acres, a patent of date March 18, 1876, conveying 1,080 acres, a patent dated November 8, 1876, conveying 61,111.53 acres, and a patent of date February 17, 1877, conveying 431.65 acres; that prior to May 31, 1875, the Wagon Road Company sold and conveyed about 6,963 acres of said lands to 53 purchasers, and that in evasion of the proviso of the granting act the Wagon Road Company on May 31, 1875, entered into a contract with one John Miller to convey to him 96,676.96 acres of the granted lands, and on that day delivered to him a conveyance of 35,534 acres for the sum of $35,534, also a deed of the Wagon Road for the sum of $37,200; that in those transactions said Miller was acting for the benefit of Collis P. Huntington, Charles Crocker, Leland Stanford, and Mary Hopkins, to whom on June 22, 1875, he conveyed the said 241 F.-2

35,534 acres; that by the contract between the Wagon Road Company and Miller it was provided that the directors of that company should continue to act for the use and benefit of Miller, for the purpose of enabling him and those for whom he was acting to conceal from the government the violations of the granting act in so conveying the lands and road to him, and that the patents were applied for in the name of the Wagon Road Company, and that its corporate existence was maintained only for the purpose of concealing from the government that company's violation of the terms of the grant; that on March 27, 1882, Huntington, Stanford, and Hopkins conveyed to Crocker their interests under Miller's deed to them, and on December 20, 1883, Crocker conveyed the same to William H. Besse, and on December 29th of that year Besse conveyed the same to Russell Gray, and he on January 5, 1884, conveyed the same to the Oregon Southern Improvement Company, a corporation of Oregon; that on January 7, 1884, in violation of the terms of the grant, the Wagon Road Company conveyed to Besse 61,143.37 acres, which was the remainder of the grant, and on June 4th of that year Besse conveyed the same to the Oregon Southern Improvement Company; that on January 4, 1884, in violation of the terms of the grant, the Oregon Southern Improvement Company gave a trust deed of all the property then held by it or thereafter to be acquired, to the Boston Safe Deposit & Trust Company, to secure payment of bonds; that on November 9, 1886, the Trust Company was succeeded by William J. Rotch and Edward D. Mandell, as trustees under the deed of trust; that on December 28, 1886, the trustees instituted a suit in the Circuit Court of the United States for the District of Oregon, to foreclose the trust deeds, and on April 11, 1887, a decree was entered ordering that the Oregon Southern Improvement Company pay the trustees the sum of $1,516,666.66; that in default of payment the property was sold in pursuance of the decree to said Rotch and William W. Crapo for the purported sum of $120,000, and that subsequently the purchasers obtained a master's deed to the property, and on December 14, 1887, they conveyed it to the Southern Oregon Company, a corporation of Oregon; that Rotch, Mandell, and Crapo in all these transactions acted for the benefit of the Oregon Southern Improvement Company, and that the officers and stockholders of that company were identical with the stockholders and owners of the Southern Oregon Company, the latter company being a reorganization of the former; that the indebtedness which the trust deed purported to secure was fictitious, and represented simply the interests of the stockholders, and that the deed of trust was executed and foreclosed with the intention of evading and defeating the rights of the government under the grant; that none of the bonds which the deed of trust purported to secure were held by others than stockholders of the Oregon Southern Improvement Company; that the price alleged to have been paid for the property at the master's sale was paid by the stockholders of that company, and was a part of a nominal transaction, the purpose of which was to defeat the rights of the United States.

The bill set forth that there were other sales after May 31, 1875, the date of the deed to Miller, which sales were described in an exhibit attached to the bill, and it alleged that the lands involved in the suit are wild and unoccupied and exceed in value $4,000,000; that the appellant asserts and assumes and exercises an unconditional estate in fee in all of said lands; that all the parties to said conveyances had notice of what had theretofore transpired with respect to the title; that the lands are all situated in a remote portion of the state of Oregon, and difficult of access; that the Wagon Road Company has from time to time sold small quantities of the land, ostensibly in pursuance of the terms of the grant; that the violations of the act alleged in the bill were wholly unknown to the complainant until 1907, and that when they were brought to the attention of Congress a joint resolution was passed and approved April 30, 1908, directing the Attorney General to prosecute any and all suits in equity and actions at law, which he may deem appropriate to enforce the rights of the United States, in any manner arising out of certain grants of land by Congress, including the aforesaid act granting lands to the state of Oregon, including the right to enforce the claims of the United States to the forfeiture of such land grants. The bill alleged that the said lands in

volved in the suit were forfeited to the United States free of all right of the appellant, and the bill prayed for discovery, for a decree of forfeiture, and for a decree quieting the title of the government and enjoining the appellant from asserting any right or interest in the lands, and for such further relief as pertained to equity.

The answer admitted many of the allegations of the bill, admitted the contract between the Wagon Road Company and Miller for 96,676.96 acres, but alleged that the sale was made in good faith and for a valuable consideration, and that the Wagon Road Company then had an unconditional fee-simple title to the lands, evidenced by a patent. The answer alleged that the other conveyances were made in good faith, but denied that the corporate existence of the Wagon Road Company was maintained for the purposes alleged in the bill, and alleged that it was maintained for the purpose of receiving the patents which were to issue under the terms of the grant and not for the purpose of deception. It alleged that Congress, by the act of June 18, 1874, waived the conditions of the proviso of the grant, and authorized the issuance of patents free and clear of all conditions, and the answer denied that the trust deed was in violation of the granting act, or that it was executed for the benefit of the stockholders of the Oregon Southern Improvement Company, or that the indebtedness which it secured was fictitious, or that the foreclosure was for the purpose of evading the conditions of the grant, or that the price purported to have been paid at the foreclosure sale was not paid in fact, and it alleged that the sale was made in good faith and that the title actually passed. The answer denied the allegations of fraud and concealment in the matter of sales of land by the Wagon Road Company.

For affirmative defenses it set up the following: (1) That during the 43 years which have elapsed since the date of the grant the Wagon Road Company and all persons claiming under it, including the appellant, have been in open and notorious possession of the land, claiming it by adverse possession, and that the government has acquiesced in the claim. (2) That the suit is barred by the statute of limitations of Oregon, and by section 8 of the act of Congress of March 3, 1891 (26 Stat. 1099, c. 561 [Comp. St. 1913, § 4992]), and section 1 of the act of Congress approved March 2, 1896 (29 Stat. 42, c. 39 [Comp. St. 1913, § 4901]). (3) That the suit is barred by laches, acquiescence, and ratification, and by estoppel resulting from (a) the passage of the act of Congress of 1874, with the knowledge of the transfer of the land from the state of Oregon to the Wagon Road Company, (b) open and notorious possession, such as the nature of the lands would admit, by the Wagon Road Company and its successors in interest, (c) the use of the wagon road by the United States under the terms of the grant, and (d) acquiescence for upwards of 40 years in the transfers as shown by the record. (4) That the proviso defeated the object for which the act was passed and being repugnant to the grant is wholly void. (5) That the appellant is a bona fide purchaser in good faith and for full value. (6) That before purchasing it carefully examined all legislation by Congress and the state of Oregon affecting the title, and made special inquiry concerning the same, and carefully examined the patents, and was advised by eminent counsel that the title was clear and unincumbered. (7) That before purchasing the appellant ascertained that the Wagon Road Company had sold all the lands for which purchasers could be found willing to purchase in tracts of 160 acres. (8) That on February 27, 1896, and on three subsequent dates in said month, the United States commenced certain suits in the Circuit Court of the United States for the District of Oregon against parties, including the appellant herein, to recover certain of the lands described in the present suit, and the decision in each of those cases constitutes a bar to the present suit, and by the institution of said suits, and the acquiescence of the United States in the decree, the United States waived any and all rights which it might have had to assert title to the lands described in the bill, and is estopped from asserting title thereto.

Upon the issues so framed and the testimony in the case, the court below held that the grant was not made upon condition subsequent, but that it contained certain enforceable covenants which had been violated by the appellant and certain of its predecessors in interest. The decree enjoined the