9 Land Dec. 408; Rice v. California, 4, 1897. The act clearly contemplates 24 Land Dec. 14; United States v. an exchange of equivalents. Such is Morrison, 240 U. S. 192, 207, 60 L. the unmistakable import of its terms. ed. 599, 606, 36 Sup. Ct. Rep. 326; In the case of the relinquishment of United States v. Sweet, 245 U. S. 563, patented lands, title is to be given by 572, 62 L. ed. 473, 480, 38 Sup. Ct. the government for title received." Rep. 193. And, as respects cash en- And again, p. 564: "It would be tries and entries under the pre-emption, strange indeed if, by the latter [1897] homestead, desert land, and kindred act, Congress intended that one who, laws, the Land Department always has accepting the government's offer of exruled that if, when the claimant has change, relinquishes a tract to which he done all that he is required to do to has obtained full title in a forest reserentitle him to receive the title, the vation, and in lieu thereof selects a tract land is not known to be mineral, he of land which, at the time, is vacant and acquires a vested right which no subse- open to settlement, and does all that is quent discovery of mineral will devest required of him to complete the selecor disturb. Harnish v. Wallace, 13 tion and to perfect the exchange, should Land Dec. 108; Rea v. Stephenson, 15 thereby acquire only an inchoate right Land Dec. 37; Reid v. Lavallee, 26 Land to the selected tract, liable to be defeatDec. 100, 102; Aspen Consol. Min. Co. ed by subsequent discoveries of mineral v. Williams, 27 Land Dec. 1, 17; Dia- at any time before patent, or before mond Coal & Coke Co. v. United States, final action upon the selection by the 233 U. S. 236, 240, 58 L. ed. 936, 939, 34 Land Department. Such a construction Sup. Ct. Rep. 507. And this rule has would not only tend to defeat the obbeen applied by that Department, al- jects for which the act was passed, by though not uniformly, to selections made discouraging owners of lands in forest in lieu of relinquished lands in public reservations from giving up their titles, reservations. Thus, in Kern Oil Co. v. but would be against both the letter and Clarke, 30 Land Dec. 550, where a lieu spirit of the act. Parties would be selection under the Act of June 4, 1897, slow indeed to relinquish their complete chap. 2, 30 Stat. at L. 36, 9 Fed. Stat. titles if it were once understood that Anno. 2d ed. p. 587, was under consid- they could obtain only doubtful or coneration, the Secretary of the Interior tingent rights in return for them. It said, p. 556: "When do rights under could not have been the intention of the selection become vested? In the Congress that parties accepting the govdisposition of the public lands of the ernment's offer of exchange should be United States, under the laws relating embarrassed by any such conditions of thereto, it is settled law: (1) That doubt and uncertainty." when a party has complied with all the terms and conditions necessary to the securing of title to a particular tract of land, he acquires a vested interest therein, is regarded as the equitable owner thereof, and thereafter the government holds the legal title in trust for him; (2) that the right to a patent, once vested, is, for most purposes, equivalent to a patent issued, and when in fact issued, the patent relates back to the time when the right to it became fixed; and (3) that the conditions with respect to the state or character of the land, as they exist at the time when all the necessary requirements have been complied with by a person seeking title, determine the question whether the land is subject to [502] sale or other disposal, and no change in such conditions, subsequently occurring, can impair or in any manner affect his rights." Again, p. 560: "These established principles, in the opinion of the Department, are applicable to selections under the Act of June

That view was repeated and applied in many other departmental decisions dealing with lieu selections. But afterwards the Secretary, conceiving that the decisions of this court in Wisconsin C. R. Co. v. Price County, 133 U. S. 496, 33 L. ed. 687, 10 Sup. Ct. Rep. 341, and Cosmos Exploration Co. v. Gray Eagle Oil Co. 190 U. S. 301, 47 L. ed. 1064, 23 Sup. Ct. Rep. 692, 24 Sup. Ct. Rep. 860, justified him in so doing, ruled that [503] no right attached under such a selection unless and until it was approved by him, and therefore that, even though the selection was lawfully made, he possessed a discretion to reject it and give effect to an intervening change in conditions, as where a new claimant settled upon the land or sought to make entry of it while the selection was pending.

Under this changed ruling the Secre tary rejected several selections lawfully made by one Daniels, and awarded and patented the land to others. Daniels then brought suits against the patentees,

charging that, by the selections, he | Commissioner of the General Land Ofacquired the equitable title, that his fice had reported that the company selections were rejected and the patents already had received indemnity lands issued through a misapprehension of the largely in excess of the losses for which law, and therefore that the patentees it was entitled to indemnity, and the took the legal title in trust for him. company was disputing that report. Ultimately the suits came to this court, Until that controversy was determined and, after a full review, the changed it could not be known whether the comruling of the Secretary was disapproved pany was entitled to an approval of the and Daniels's contention sustained. selection. In that situation the United Daniels v. Wagner, 237 U. S. 547, 59 States had such an interest in the land L. ed. 1102, L.R.A.1916A, 1116, 35 Sup. as made it nontaxable. Whether the Ct. Rep. 740, Ann. Cas. 1917A, 40. The selection was valid or otherwise was prisubstance of the decision was that, as marily a question for the Secretary of the selections were lawful when made, the Interior to determine. Ultimately "it was the plain duty" of the Secretary he held it valid, but not until after the to approve them; that the contrary view tax was levied, indeed, after the suit found no justification in Cosmos Ex- was brought. The suit involved the ploration Co. v. Gray Eagle Oil Co. validity of the tax, and nothing more. supra; and that the real authority and Its purpose was not to control the acduty of the Secretary in dealing with tion of the Secretary by a writ of mansuch selections were pointed out in damus or injunction, nor to determine Weyerhaeuser v. Hoyt, 219 U. S. 380, the title as between the United States 387, 388, 55 L. ed. 258, 261, 262, 31 and the company, or between the comSup. Ct. Rep. 300, where it was said: pany and a grantee of the United States. "The requirement of approval by the True, the court, after commenting on Secretary consequently imposed on that the difference between the granted lands official the duty of determining whether in place and the indemnity lands, as the selections were lawful at the time they were made, which is inconsistent with the theory that anyone could appropriate the selected land pending action of the Secretary. The scope of the power to approve lists of selections conferred on the Secretary was clearly pointed out in Wisconsin C. R. Co. v. Price County, 133 U. S. 496, 511, 33 L. ed. 687, 694, 10 Sup. Ct. Rep. 341, where it was said that the power to approve was judicial in its nature. Pos-occasion to consider those questions, nor sessing that attribute, the authority could they properly be determined therefore involved not only the power, without the presence of parties not then but implied the duty, to determine the before the court. And that the court lawfulness of the selections [504] as of did not intend its words to be taken so the time when the exertion of the au- broadly is illustrated by the fact that thority was invoked by the lawful filing it cited with approval the case of St. of the list of selections." Paul & S. C. R. Co. v. Winona & St. P. R. Co. 112 U. S. 720, 733, 28 L. ed. 872, 877, 5 Sup. Ct. Rep. 334, wherein an indemnity selection lawfully made, but disapproved by the Secretary, was sustained against an adverse certification on the ground that "this erroneous decision of his" did not deprive the selector "of rights which became vested by its selection of those lands."

As the circuit court of appeals in the present case, like the Secretary in the other, regarded the decisions in the Wisconsin C. R. Co. Case and the Cosmos Exploration Co. Case as showing that no right attaches under a lieu selection unless and until approved by the Secretary, it is well to point out just what was involved in those cases; for it then will be apparent that there was no purpose in either to go to the length suggested.

The Wisconsin C. R. Co. Case was a suit to enjoin the collection of a tax levied on land which, at the time, was covered by a pending indemnity selection under a railroad land grant. The

respects the mode of identification, very
broadly stated that an indemnity selec-
tion, to be effective, required the ap-
proval of the Secretary; but it was not
meant by this that the Secretary arbi-
trarily could [505] defeat the right of
selection by withholding his approval,
nor that if, through a mistake of law, he
rejected a selection which was valid at
the time it was made, the company
would be remediless.
There was


The Cosmos Exploration Co. Case was a suit by a lieu-land selector to establish his title as against others who were claiming under placer mining locations. The selection was not accompanied by proof that the land was not then occupied adversely, although that was required. Within the time prescribed by

upon in Daniels v. Wagner as interpretative of the decision, and this court answered: "But we are of opinion that this [507] interpretation of the Cosmos Exploration Co. Case cannot be justified." Besides, it was adjudged in the Daniels Case that a lieu selection which is lawful at the time it is made does invest the selector with equitable rights which he may enforce in an appropriate way where the Secretary, through an error of law, rejects the selection. And that ruling was reaffirmed and applied in Payne v. Central P. R. Co. 255 U. S. 228, ante, 598, 41 Sup. Ct. Rep. 314, and Payne v. New Mexico, 255 U. S. 367, ante, 680, 41 Sup. Ct. Rep. 333.

the regulations the mining claimants taken as declaring that no right vests filed in the land office verified protests under a lieu selection unless the Secreassailing the regularity and validity of tary approves it; but that such a ruling the selection, setting up locations of the was intended is refuted by the opinion selected land made under the placer as a whole, and particularly by the mining law prior to the selection, and statements therein that the power of the alleging that the lands "were not sub- Secretary is not to be exercised arbiject to selection" because "the same trarily, and that his "decision of any was mineral land and was included legal question would not, of course, be within" the mining locations. The pro- binding on the courts" should the questests were entertained, and, with the tion properly arise in future litigation. selection, were pending when the suit The general expressions were relied was begun, which was shortly after the protests were filed. The suit was brought on the theory that by the selection the selector acquired "the full, complete, and equitable title" to the selected land, notwithstanding he had not submitted any proof of nonoccupancy, and that the protests were not such as could be entertained or investigated by the Land Department. That case and another (United States ex rel. Riverside Oil Co. v. Hitchcock, 190 U. S. 316, 47 L. ed. 1074, 23 Sup. Ct. Rep. 698), [506] wherein a writ of mandamus was sought against the Secretary by another lieu-land selector, were heard and disposed of as related cases, and the decision in one should be read in connection with that in the other. The full substance of the decision in the Cosmos Exploration Co. Case is in the following excerpt from the opinion, 190 U. S. 315: "Concluding, as we do, that th question whether the complainant has ever made a proper selection of land in lieu of the land relinquished has never been decided by the Land Department, but is still properly before that Department, the courts cannot take jurisdiction and proceed to decide such question themselves. The government has provided a special tribunal for the decision of such a question arising out of the administration of its Public Land Laws, and that jurisdiction cannot be taken away from it by the courts. United States v. Schurz, 102 U. S. 378, 395, 26 L. ed. 167, 171. The bill is not based upon any alleged power of the court to prevent the taking out of mineral from the land, pending the decision of the Land Department upon the rights of the complainant, and the court has not been asked by any averments in the bill or in the prayer for relief to consider that question. For the reasons stated, we think the bill does not state sufficient facts upon which to base the relief asked for, and that the defendants' demurrer to the same was properly sustained." There are general expressions in the opinion, which, separated from the rest, might be

The only exception to the general rule before stated respecting the time as of which the character of the land-whether mineral or nonmineral-is to be determined is one which, in principle and practice, is confined to railroad land grants. From the beginning the Land Department, by reason of the terms of those grants and the restrictive interpretation to which they are subjected, uniformly has construed and treated them as requiring that the character of the land be determined as of the time when the patent issues. In 1890 Secretary Noble, in declining to disturb this construction and practice, pointed out the reasons which had led the Department to make a distinction in this regard between those grants and other land laws, and said: "This practice, having been uniformly followed and generally accepted for so long a time, there should be, in my judgment, the clearest evidence of error, as well as the strongest reasons of policy and justice controlling, before a departure from it should be sanctioned. It has, in effect, become a rule of property." Central P. R. Co. v. Valentine, 11 Land Dec. 238, 246. In 1894 the matter came before this court, and the construction and practice of the Land Department were sustained. Barden v. Northern P. R. Co. 154 U. S. 288, 38 L. ed. 992, 14 Sup. Ct. Rep. 1030. As the opinion in that

case shows, the court recognized that the mineral land exception in other land laws simply operates to exclude from sale, etc., "land known at the time to be mineral," and was careful to explain that its decision related to "grants in aid of [508] railroads," and to "no other grants." The grounds on which the decision was put were, (a) that the railroad land grants, besides being confined in the granting clause to lands "not mineral," contain provisos declaring in words or effect "that all mineral lands be, and the same hereby are, excluded from the operation of this" grant; (b) that such grants, although expressly requiring that the question whether the lands are otherwise excepted be determined as of the time the map of definite location is filed, contain no such provision in respect of the exception of mineral land; (c) that it was well understood that many years would necessarily elapse between the filing of the map and the time when, by construction of the road, the grantee would be entitled to patents; and, as the grants covered great areas, in one instance nearly equal to that of Ohio and New York, it hardly could have been intended to arrest mineral development in those areas in the meantime; (d) that such grants "must be strictly construed," and "if they admit of different meanings, one of extension and one of limitation, they must be accepted in a sense favorable to the grantor;" and (e) that the long-prevailing construction and practice of the Land Department ought not to be disturbed. Plainly, the decision in that case is without bearing here, save as it recognizes that rights under other land laws are to be tested by a different rule. And this is emphasized by the fact that in Shaw v. Kellogg, 170 U. S. 312, 42 L. ed. 1050, 18 Sup. Ct. Rep. 632, where the selection of Baca tract No. 4 was involved, the court distinguished the Barden Case, and applied the general rule before stated. And it is of further significance that this court has recognized that the legislation of Congress designed to aid the common schools of the states is to be construed liberally rather than restrictively. Beecher v. Wetherby, 95 U. S. 517, 526, 24 L. ed. 440, 441; Johanson v. Washington, 190 U. S. 179, 183, 47 L. ed. 1008, 1010, 23 Sup. Ct. Rep. 825.

Of the executive withdrawal of the land two years after [509] the lieu selection was lawfully made, it suffices to say, following the recent decision in Payne v. Central P. R. Co. 255 U. S. 228, ante, 598,

41 Sup. Ct. Rep. 314, that the Act of 1910, under which the withdrawal was made, is confined to "public lands;" that by the selection this land had ceased to be public, and that the act could not be construed to embrace it without working an inadmissible interference with vested rights.

It results that the Secretary erred in matter of law in rejecting the selection, and that the District Court rightly entered a decree for the defendants. See Cornelius v. Kessel, 128 U. S. 456, 461, 32 L. ed. 482, 483, 9 Sup. Ct. Rep. 122; United States v. Detroit Timber & Lumber Co. 200 U. S. 321, 338, 50 L. ed. 499, 506, 26 Sup. Ct. Rep. 282. The decree of the Circuit Court of Appeals is accordingly reversed.

MERCHANTS' LOAN & TRUST COMPANY, as Trustee of the Estate of Arthur Ryerson, Deceased, Plff. in Err.,


JULIUS F. SMIETANKA, formerly United States Collector of Internal Revenue for the First District of the State of Illinois.

(See S. C. Reporter's ed. 509-522.) Error to district court Federal question constitutionality of income tax.

1. The Federal Supreme Court has jurisdiction of a writ of error to a district court to review a judgment which sustained a demurrer to a declaration in assumpsit to recover back Federal income taxes, where the claim to recover is based upon the con

tention that the fund taxed was not income within the scope of U. S. Const., 16th Amend., and that the effect given by the

Note.-On direct review in Federal Supreme Court of judgments of district or circuit courts-see notes to Gwin v. United States, 46 L. ed. U. S. 741; B. Altman & Co. v. United States, 56 L. ed. U. S. 894; and Berkman v. United States, 63 L. ed. U. S. 877.

As to constitutionality of income taxsee notes to Alderman v. Wells, 27 L.R.A. (N.S.) 864, and State ex rel. Bolens v. Frear, L.R.A.1915B, 569.

As to income tax on sales of property-see note to State ex rel. Bundy v. Nygaard, L.R.A.1917E, 566.

That popular and received import of words furnishes rule of interpretation in laws as well as in public and social transactions-see note to Maillard v. Lawrence, 14 L. ed. U. S. 925.

And see note to this case as reported in 15 A.L.R. 1311.

lower court to the Federal legislation under tion in assumpsit to recover back Fedwhich such taxes were imposed renders iteral income taxes. Affirmed.

unconstitutional and void.

[For other cases, see Appeal and Error, 938989, in Digest Sup. Ct. 1908.] Internal revenue- income accretions of selling values.

2. A testator cannot, by declaring in his will that accretions of selling values shall be considered principal, and not income, render such items nontaxable under Federal income tax legislation, if the terms of such legislation are broad enough to in

clude them.

[For other cases, see Internal Revenue, III.

b, in Digest Sup. Ct. 1908.] Internal revenue income accretions of selling values.

3. A gain or profit derived from the sale by a testamentary trustee of personal property of the estate which has appre

ciated in value over its market value on March 1, 1913, the testator having died prior to that date, and the property being among the assets which came to the trustee, is taxable under the Act of September 8, 1916, § 2a, as amended by the Act of October 3, 1917, which defines the income of a taxable person as including gains, profits, and income derived from sales or dealings in property, whether real or personal, growing out of the ownership or use of, or interest in, real or personal property, or gains or profits and income derived from any source whatever.

[For other cases, see Internal Revenue, III.

b, in Digest Sup. Ct. 1908.] Internal revenue income tax -taxable persons testamentary trustee. 4. A testamentary trustee is, by the express provisions of the Income Tax Acts of September 8, 1916, § 2b, and October 3, 1917, § 1204 (1) (c), a taxable person. [For other cases, see Internal Revenue, III. Internal revenue- - income — definition.

b, in Digest Sup. Ct. 1908.]

5. The word "income" must be given the same meaning in all of the Income Tax Acts of Congress that was given to it in the Federal Corporation Excise Tax Act. [For other cases, see Internal Revenue, III. b, in Digest Sup. Ct. 1908.] Internal revenue income tax — accretions of selling values.

6. The gain derived from a single, isolated sale of personal property which has appreciated in value during a series of years is income within the meaning of the 16th Amendment to the Federal Constitu


[For other cases, see Internal Revenue, III. b, in Digest Sup. Ct. 1908.]

[No. 608.]

The facts are stated in the opinion.

Mr. Albert M. Kales argued the cause, and, with Mr. Walter L. Fisher, filed a brief for plaintiff in error:

The mere increase in the value of capital assets (prior to any conversion or redemption) is not income.

Eisner v. Macomber, 252 U. S. 189, 64 L. ed. 521, 9 A.L.R. 1570, 40 Sup. Ct. Rep. 189; Gray v. Darlington, 15 Wall. 63, 66, 21 L. ed. 45, 46; Lynch v. Turrish, 247 U. S. 221, 231, 62 L. ed. 1087, 1093, 38 Sup. Ct. Rep. 537.

The conversion by the trustee in the case at bar does not cause the increase in the value of capital assets to be income.

Smith v. Hooper, 95 Md. 31, 51 Atl. 844; Stewart v. Phelps, 71 App. Div. 91, 75 N. Y. Supp. 526, affirmed in 173 N. Y. 621, 66 N. E. 1117; Guthrie v. Akers, 157 Ky. 649, 163 S. W. 1117; Boardman v. Mansfield, 79 Conn. 634, 12 L.R.A. 793, 118 Am. St. Rep. 178, 66 Atl. 169; Connolly's Estate, 198 Pa. 137, 47 Atl. 1125; Kemble's Estate, 201 Pa. 523, 51 Atl. 310; Re Kernochan, 104 N. Y. 618, 11 N. E. 149; Re Armitage [1893] 3 Ch. 337, 63 L. J. Ch. N. S. 110, 7 R. 290, 69 L. T. N. S. 619; Bulkeley v. Worthington Ecclesiastical Soc. 78 Conn. 532, 12 L.R.A. (N.S.) 785, 63 Atl. 351; Wilberding v. Miller, 88 Ohio St. 609, L.R.A. 1916A, 718, 106 N. E. 665; Graham's Estate, 198 Pa. 216, 47 Atl. 1108; McKeon's Estate, 263 Pa. 78, 106 Atl. 189; Thayer v. Burr, 201 N. Y. 155, 94 N. E. 604; Re Stevens, 111 App. Div. 773, 98 N. Y. Supp. 28, 187 N. Y. 471, 12 L.R.A. (N.S.) 814, 80 N. E. 358, 10 Ann. Cas. 511; United States Trust Co. v. Heye, 224 N. Y. 254, 120 N. E. 645; Re Gerry, 103 N. Y. 445, 9 N. E. 235; Devenney v. Devenney, 74 Ohio St. 96, 77 N. E. 688; Whittingham v. Scofield, 23 Ky. L. Rep. 2444, 67 S. W. 846.

The gain or increase has not been derived, that is, received or drawn by the recipient (the taxpayer), for his separate use, benefit, and disposal.

Eisner v. Macomber, 252 U. S. 189, 207, 215, 64 L. ed. 521, 528, 532, 9 A.L.R. 1570, 40 Sup. Ct. Rep. 189.

Even where the legal and beneficial owner of capital assets sells them at a

Argued January 11 and 12, 1921. Decided profit as a single, isolated transaction (he

March 28, 1921.

N ERROR to the District Court of the United States for the Northern District of Illinois to review a judgment which sustained a demurrer to a declara

not being in any sense in the business of buying and selling for profit), and ascertains the gain in cash, and uses the same as he pleases, the gain is not income.

Eisner v. Macomber, 252 U. S. 189, 64 L. ed. 521, 9 A.L.R. 1570, 40 Sup. Ct.

255 U. S.

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