« ForrigeFortsett »
Opinion of the Court.
purchase of property from another is bound to presume that the vendor is a wrongdoer, and that, therefore, he must make a searching inquiry as to the validity of his claim to the property. The rule of law in respect to purchases of land or timber is the same as that which obtains in other commercial transactions, and such a rule as is claimed by counsel would shake the foundations of commercial business. No one is bound to assume that the party with whom he deals is a wrongdoer, and if he presents property, the title to which is apparently valid, and there are no circumstances disclosed which cast suspicion upon the title, he may rightfully deal with him, and, paying full value for the same, acquire the rights of a purchaser in good faith. Jones v. Simpson, 116 U. S. 609, 615. He is not bound to make a searching examination of all the account books of the vendor nor to hunt for something to cast a suspicion upon the integrity of the title.
It is further said that the written contract of sale from the Martin-Alexander Company to the Detroit Company was not executed till March 1, 1901, and that on the fourteenth of January, 1901, Martin resigned his position as president of the Martin-Alexander Company, and Clark, the president of the Detroit Company, was elected president of the former company; that, as the chief executive of that company, he was charged with knowledge of all that the company knew, and that therefore, before the written contract was entered into, he and the Detroit Company had constructive notice of the wrongful character of these timber contracts. But that is a mere evasive technicality. The bill charges and the answer admits the sale on January 14, and the facts, as disclosed by the testimony, are that Martin desired to leave at once on receipt of his money and return to his home in Illinois; that Clark was put in his place as president to enable the MartinAlexander Company to close up its outstanding affairs. The real contract between the parties was entered into before Clark became president, and all that was afterwards done was simply to put in writing the terms of the contract which had been
Opinion of the Court.
agreed upon. Equity looks at the substance and not at the mere form in which a transaction takes place. The rule in respect to constructive notice was thus stated in Wilson v. Wall, 6 Wall. 83, 90, 91:
"A chancellor will not be astute to charge a constructive trust upon one who has acted honestly and paid a full and fair consideration without notice or knowledge. On this point we need only to refer to Sugden on Vendors, p. 622, where he says: 'In Ware v. Lord Egmont the Lord Chancellor Cranworth expressed his entire concurrence in what, on many occasions of late years, had fallen from judges of great eminence on the subject of constructive notice, namely, that it was highly inexpedient for courts of equity to extend the doctrine. When a person has not actual notice he ought not to be treated as if he had notice unless the circumstances are such as enable the court to say, not only that he might have acquired, but also that he ought to have acquired it but for his gross negligence in the conduct of the business in question. The question then, when it is sought to affect a purchaser with constructive notice, is not whether he had the means of obtaining and might by prudent caution have obtained the knowledge in question, but whether not obtaining was an act of gross or culpable negligence.''
And, again, in Townsend v. Little, 109 U. S. 504, 511: "Constructive notice is defined to be in its nature no more than evidence of notice, the presumption of which is so violent that the court will not even allow of its being controverted. Plumb v. Fluitt, 2 Anst. 432; Kennedy v. Green, 3 My. & K. 699. As said by Strong, J., in Meehan v. Williams, 48 Penn. State, 238, what makes inquiry a duty is such a visible state of things as is inconsistent with a perfect right in him who proposes to sell: See also Holmes v. Stout, 3 Green Ch. 492; McMechan v. Griffing, 3 Pick. 149; Harwick v. Thompson, 9 Alabama, 409."
In the light of these authorities we see nothing which casts any imputation on the conduct of the Detroit Company, or
that tends to show that it was not a purchaser in absolute good faith.
Now, what is the law controlling under these circumstances? Much reliance is placed by the Government on Hawley v. Diller, 178 U. S. 476, which, affirming prior cases, holds that an entryman under the timber act acquires only an equity, and that a purchaser from him cannot be regarded as a bona fide purchaser within the meaning of the act. But the Detroit Company purchased twenty-seven tracts after the issue of the patents therefor. And in making these purchases it dealt, not with the Martin-Alexander Company, but directly with the patentees. While the amounts paid were small, yet, as counsel for the Government admit in their brief that “the land without the timber is of no value," there can be no suggestion of inadequacy of price. As, also, it had no knowledge or suspicion of wrong in the titles, it is, as to these tracts, strictly and technically, within the language of the act, a bona fide purchaser. If it be contended that, by virtue of the contracts for the sale of timber, it had acquired some interest in the lands prior to the issue of patents, it is sufficient to say that by the doctrine of relation the patents, when issued, became operative as of the dates of the entries. It is true that this doctrine is but a fiction of law, but it is a fiction resorted to whenever justice requires. It is that principle by which an act done at one time is considered to have been done at some antecedent time. It is a doctrine of frequent application, designed to promote justice. Thus, a sheriff's deed takes effect not of its date, but of the time when the lien of the judgment attached. The ordinary railroad land grants have been grants in presenti, and under them the title has been adjudged to pass, not at the completion of the road, but at the date of the grant. Leavenworth, Lawrence & Galveston Railroad v. United States, 92 U. S. 733; St. Paul &c. Railway Co. v. Phelps, 137 U. S. 528; St. Paul & Pacific v. Northern Pacific, 139 U. S. 1; United States v. Southern Pacific Railroad, 146 U. S. 570. A patent from the United States operates to transfer the title, not merely from the date of the
patent, but from the inception of the equitable right upon which it is based. Shepley v. Cowan, 91.U. S. 330. Indeed, this is generally true in case of the merging of an equitable right into a legal title. Although the patents in this case were not issued until after the sales of the timber, yet when issued they became operative as of the date of the original entries. This doctrine has frequently been recognized by this and other courts. Landes v. Brant, 10 How. 348; Lessee of French and Wife v. Spencer, 21 How. 228; Stark v. Starrs, 6 Wall. 402; Lynch v. Bernal, 9 Wall. 315; Gibson v. Chouteau, 13 Wall. 92; Simmons v. Wagner, 101 U. S. 260; Jackson v. Ramsey, 3 Cow. 75; Welch v. Dutton, 79 Illinois, 465; Ormiston, Guardian, v. Trumbo, Admr., 77 Mo. App. 310. In the first of these cases it was said (p. 372):
“To protect purchasers, the rule applies, that where there are divers acts concurrent to make a conveyance estate, or other thing, the original act shall be preferred; and to this the other acts shall have relation,' as stated in Viner's Abr. tit. Relation, 290..
“Cruise on Real Property, vol. V, pp. 510, 511, lays down the doctrine with great distinctness. He says: “There is no rule better founded in law, reason, and convenience than this, that all the several parts and ceremonies necessary to complete a conveyance shall be taken together as one act, and operate from the substantial part by relation.'
Applying the doctrine of relation, and taking all the several parts and ceremonies necessary to complete the title together, 'as one act,' then the confirmation of 1811 and the patent of 1845 must be taken to relate to the first act; that of filing the claim in 1805."
In Simmons v. Wagner, p. 261:
“Where the right to a patent has once become vested in a purchaser of public lands, it is equivalent, so far as the Government is concerned, to a patent actually issued. The execution and delivery of the patent after the right to it has become complete are the mere ministerial acts of
Opinion of the Court.
the officers charged with that duty. Barney v. Dolph, 97 U. S. 652."
200 U. S.
See also United States v. Freyberg, 32 Fed. Rep. 195, a case in the Circuit Court for the Eastern District of Wisconsin, in which it was held by Judge Dyer that an action brought by the Government to recover for timber cut from land, which had been entered as a homestead, but the full equitable title of which had not then passed to the entryman, either by the required occupation of the premises or by a commuting of the homestead to a preëmption entry—an action maintainable at the time it was commenced-was defeated by the issue of the final receiver's receipt and the consequent perfection of a full equitable title.
Counsel for the Government deny the application of this principle in the present case on the ground, first, that it gives vitality and validity to a wrongful acquisition of title from the Government. They say that equity is never founded on a wrong, and that because the original entries were wrongful the doctrine of relation will not be applied. But this is a clear misunderstanding of the purpose and scope of the doctrine of relation. If the original entries were rightful there is no need of its application, for the patents would pass perfect titles. The equity is founded on the rightful conduct of the purchaser and not on the wrongful conduct of the entrymen. It upholds the purchaser in his honest purchase notwithstanding the wrongful character of the entries. This is akin to the ordinary rule in respect to a bona fide purchaser. Equity sustains the title in spite of the fact that his grantor may have wrongfully obtained it, and upholds it because of his rightful conduct.
Counsel also say that the question is settled by the decision in Hawley v. Diller, supra, relying upon the second paragraph in the headnotes:
"An entryman under this act acquires only an equity, and a purchaser from him cannot be regarded as a bona fide purchaser within the meaning of the act of Congress unless he becomes