200 U.S.

Argument for Lumber Companies.

6 Wall. 83; Devlin on Deeds, 1st ed., § 729; Hall v. Livingston, 3 Del. Ch. 348; Shepherd v. Shepherd, 36 Michigan, 173; Hardy v. Harbin, 1 Sawyer, 194; Mills v. Smith, 8 Wall. 27; Colorado C. & 1. Co. v. United States, 123 U. S. 307; Crawford v. Neal, 144 U. S. 585; Jones v. Simpson, 116 U. S. 609.

The officers of the Detroit Company were only bound to investigate the public records. According to those there was no illegality. They were correct according to statute, 2 U. S. Comp. Stat., p. 1546, and see Lea v. Polk County Copper Co., 21 How. 493; Bagnell v. Broderick, 13 Pet. 448; United States v. California & Oregon Land Co., 148 U. S. 31; United States v. Minor, 29 Fed. Rep. 134; Simmons v. Moore, 2 Fed. Rep. 325.

A vendee is not bound to inquire of the parties to a conveyance whether they are committing a fraud by suppressing anterior deed, etc., for it is evidence that if fraud was intended, deception would be carried out by denial. Such inquiries are not resorted to in practice in business transactions. 2 Hare & Wallace Notes to Leading Cases in Equity, 66; Miller v. Froley, 23 Arkansas, 745; Ferguson v. May, 4 Ky. Law. Rep. 989.

A concealed defect or secret equity arising from the conduct of those who originally owned the property of which the purchaser had no notice cannot be set up against him. Danberry v. Robinson, 14 N. J. Eq. 213.

To secure in equity all the rights of a bona fide and duly vigilant purchaser one is not required to make inquiry whether there is fraud or trust where the title and possession give no indication that there is either. Leach v. Ausbacher, 55 Pa. St. 85; Yardly v. Torr, 67 Fed. Rep. 857; Fletcher v. Peck, 6 Cranch, 135; Anderson v. Roberts, 18 Johns. Rep. 531; 21 Am. & Eng. Ency. of Law, 588.

Even if the officers of the Detroit Company knew of the facts they still acted in good faith as they were in no way connected with the frauds alleged. United States v. Southern Pacific Co., 184 U. S. 54.

At the time this suit was brought the Detroit Company had not only the equitable but the legal title to the property. Kirby's Stat. of Arkansas, §734. As to Hawley v. Diller, supra, see 1 Story's Eq. Jur. 64; 2 Pomeroy Eq. Jur. §§ 740, 766; United States v. Winona & St. Peters R. R. Co., 165 U. S. 463.

There is no testimony that the Detroit Company procured the lands for an inadequate consideration. But had they done so in fact, there are authorities that hold that all that was necessary was that the consideration should be valuable. 23 Am. & Eng. Ency. of Law, 488; Bullock v. Sadlier, Ambler, 763; Dean v. Anderson, 34 N. J. Eq. 508; Wait on Fraud. Convey. and Creditors' Bills, 1st ed., § 369.

It does not matter in this case that the Detroit Company did not acquire the legal title when it paid the purchase price. It acquired a right to call for a legal estate. Pomeroy's Equity, §727; Adams's Equity, 161; Deuber Co. v. Daugherty, 62 Ohio St. 589. And that is sufficient. 23 Am. & Eng. Ency. of Law, 486; St. Johnsbury v. Morrill, 55 Vermont, 165; notes to Bassett v. Nosworthy, 2 Leading Cases in Equity, 102; United States v. Clark, 125 Fed. Rep. 774.

There was no merger of the two companies but an actual transfer. 1 Thompson on Corp. § 315; 6 Am. & Eng. Ency. of Law, 802; The Key City, 14 Wall. 653; McAlpine v. Union Pacific Railway Co., 23 Fed. Rep. 168.

MR. JUSTICE BREWER, after making the foregoing statement, delivered the opinion of the court.

The able and elaborate opinions of both the Circuit Court and the Court of Appeals relieve us from much labor. There are two questions of fact: First, whether the parties making the entries had, prior to acquiring title from the Government, made any agreement with the Martin-Alexander Company for a conveyance of an interest in the properties, or were seeking to acquire title solely for their own benefit. Second, whether

the Detroit Company was a purchaser in good faith from the Martin-Alexander Company. With reference to the first question, the Circuit Court was of the opinion that there were no agreements between the parties. The Court of Appeals was of a different opinion, and held that the entries were made in pursuance of such agreements. This is a case in equity, and while in such a case questions of fact are always open to consideration by an appellate court, great respect is paid to the conclusions of the trial court in respect to them. Certainly, if the Circuit Court and the Court of Appeals had agreed we should be very loath to disturb their conclusions. Differing as they do in the present case, we have examined this question, and agree with the Court of Appeals. The entire management of these entries was in the hands of an agent of the Martin-Alexander Company. It furnished the moneys, both for the purchase prices and all expenses, and it is not easy to believe that it did all this on a mere expectation that after the entries had been made it could purchase the timber. It is a much more reasonable conclusion that it had an understanding with the parties making the entries respecting purchases and prices. It is quite likely that the entrymen were not conscious of wronging the Government, and thought that if it received. the full price demanded that was enough. The testimony of one witness suggests at least that they may have been advised that there was no contract unless it was in writing, and that hence they could conscientiously take the oath required in connection with an entry. So, without casting any imputation of intentional perjury on those parties, we agree with the Court of Appeals that the testimony points strongly to the fact that the entries were in pursuance of an understanding or agreement with the Martin-Alexander Company, that, as it was advancing all the money, the entrymen should convey to it the standing timber at a fixed price.

With reference to the second question of fact, the Circuit Court made no finding, having disposed of the case by its conclusion in respect to the first. The Court of Appeals found

that the Detroit Company was a purchaser in good faith from the Martin-Alexander Company. Here, too, we have examined the testimony, and are satisfied that the conclusion of the Court of Appeals was correct. A brief statement of the salient facts may be not unimportant. The headquarters of the Detroit Company were in St. Louis, of the Martin-Alexander Company in southwest Arkansas. They dealt at arm's length. On December 20, 1900, Alexander, of the Martin-Alexander Company, applied to U. L. Clark, president of the Detroit Company, at St. Louis, to purchase Martin's interest in the Martin-Alexander Company. Clark declined, stating that the Detroit Company would make no purchase of a fractional interest in the property. Thereupon it was arranged that he should make an examination with a view to the purchase of the entire property. The Detroit Company's inspector was sent to Arkansas to examine the lands. Clark himself went down in the January following, and, after receiving the report of the inspector, terms of sale were, on January 14, agreed upon; $60,000 cash and the assumption of the Martin-Alexander Company's debts. The $60,000, by agreement between the stockholders of the Martin-Alexander Company, were divided, $34,850 to Martin, $24,850 to Mrs. Alexander, $150 to A. V. Alexander, and $150 to J. O. Means. Martin and Means were paid at once; the debts were also promptly paid. Alexander desired to take stock in the Detroit Lumber Company in lieu of the money coming to his wife and himself. Clark was not then authorized to make such arrangement, but subsequently the stock of the Detroit Lumber Company was increased and the Alexanders were paid in full in that stock. The entire property of the Martin-Alexander Company, included in which were the sawmill, tram and logging roads, these timber contracts and other like contracts and also all stock on hand, was at the time of the purchase, January 14, turned over to the Detroit Lumber Company, which thereafter continued the business. The Martin-Alexander Company had no deeds of the lands in controversy, but simply contracts for the timber

thereon, and in order to be relieved from the necessity of keeping accounts with respect to the different tracts the Detroit Company proceeded to obtain deeds from twenty-seven of the patentees, paying on an average $25 apiece therefor, which was a fair price for the lands after the timber had been cut off. It had no knowledge or intimation that there was anything wrong in the titles until the last of September or the first of October, 1901,-more than four months after the Government had issued its patents for all the lands-when it received a notice to that effect from a Government inspector.

Now we remark that there is no intimation in the testimony that the purchase price was not paid by the Detroit Company in cash and stock as agreed upon, no suggestion that the price was an unreasonable one. There was nothing strange or unnatural in the contract between the companies; on the contrary it was one which might well be entered into by parties situated as these were. But it is contended by the Government that if the Detroit Company had examined with care the books of the Martin-Alexander Company, and the papers which it turned over as evidences of its titles, it would have perceived that the timber contracts were made shortly after the issue of the final receiver's receipts, that the parties making the contracts were all or nearly all employés of the Martin-Alexander Company, to whom moneys had been advanced, and with each of whom an account was being kept; that it was its duty to critically examine these matters in order to be sure that the titles which it was acquiring were good. In their brief counsel for the Government say:

"We claim that the law as laid down in Hawley v. Diller, that one who takes title before the issuance of patent cannot claim to be a bona fide purchaser, made it the duty of the Detroit Company to make the most searching inquiry at least as to all of the timber contracts except the thirteen for which patents to the land had issued."

We do not understand the law to be as stated, or that one who enters into an ordinary and reasonable contract for the