L. ed. 547, 556; Patterson v. Jenks, 2 Pet. 216, 7 L. ed. 402; United States v. Iron Silver Min. Co. 128 U. S. 673, 32 L. ed. 571, 9 Sup. Ct. Rep. 195; United States v. Stinson, 197 U. S. 200, 49 L. ed. 724, 25 Sup. Ct. Rep. 426; Moffat v. United States, 112 U. S. 24, 28 L. ed. 623, 5 Sup. Ct. Rep. 10. In the absence of an express forfei 6. A court of equity, while usually reluctant to lend its aid in enforcing a forfeiture clause in the act under which the ture, will not withhold equitable relief, if grant was obtained, or of authority from otherwise appropriate, where the right to Congress declaring a forfeiture, no right the forfeiture is clear, and is asserted in to sue for a forfeiture exists. the public interest. [For other cases, see Equity, I. d, 9, in Digest suit to vacate 7. In so far as a suit seeks to enforce a forfeiture of a grant of a right of way through the public lands for a breach of the condition subsequent on which the grant was made, it is plainly not a suit to vacate or annul a patent, within the meaning of the provisions of the Act of March 3, 1891, placing a limitation of six years on the time within which suits to vacate and annul patents may be brought. [For other cases, see Limitation of Actions, I. d, in Digest Sup. Ct. 1908.] [No. 50.] Noble v. Union River Logging R. Co. 147 U. S. 165, 37 L. ed. 123, 13 Sup. Ct. Rep. 271; Moore v. Robbins, 96 U. S. 530, 24 L. ed. 848; Beley v. Naphtaly, 169 U. S. 353–365, 42 L. ed. 775-777, 18 Sup. Ct. Rep. 354; United States v. Washington Improv. & Development Co. 189 Fed. 674; St. Louis, I. M. & S. R. Co. v. McGee, 115 U. S. 469, 29 L. ed. 446, 6 Sup. Ct. Rep. 123; United States v. Northern P. Co. 177 Ú. S. 435, 44 L. ed. 836, 20 Sup. Ct. Rep. 706; United States v. Tennessee & C. R. Co. 71 Fed. 71; Schulenburg v. Harriman, 21 Wall. 44, 62, 22 L. ed. 551, 555. The suit was barred by the Statute of Limitations contained in the act under Argued October 20 and 21, 1921. Decided which the grant was obtained. November 21, 1921. United States v. Chandler-Dunbar Water Power Co. 209 U. S. 447, 52 L. ed. APPEAL from the United States Cir- 881, 28 Sup. Ct. Rep. 579; United States cuit Court of Appeals for the Ninth Circuit to review a decree which reversed a decree of the District Court for the Southern District of California, dismissing the bill in a suit by the United States, attacking a right of way through the public lands. Modified, and, as modified, affirmed. See same case below, 264 Fed. 412. The facts are stated in the opinion. Mr. James A. Gibson argued the cause, and, with Messrs. Roy V. Reppy and Henry F. Prince, filed a brief for appellants: The stipulated facts and reasonable inferences therefrom conclusively establish that there was no fraud perpetrated upon the Department of the Interior in obtaining the right of way in question, or mistake by said Department. United States v. Safe Invest. Gold Min. Co. 169 C. C. A. 592, 258 Fed. 879, Wall v. Parrott Silver & Copper Co. 244 U. S. 407, 61 L. ed. 1229, 37 Sup. Ct. Rep. 609; Farrar v. Churchill, 135 U. S. 609, 34 L. ed. 246, 10 Sup. Ct. Rep. 771; Jones v. Simpson, 116 U. S. 609, 29 L. ed. 742, 6 Sup. Ct. Ren. 538; United States v. Arrendondo, 6 Pet. 691, 716, 8 v. Puget Sound Traction, Light & P. Co. 215 Fed. 436; United States v. Norris, 137 C. C. A. 552, 222 Fed. 14; United States v. Winona & St. P. R. Co. 165 U. S. 476, 41 L. ed. 795, 17 Sup. Ct. Rep. 368; Louisiana v. Garfield, 211 U. S. 70, 76, 53 L. ed. 92, 96, 29 Sup. Ct. Rep. 31; Wood v. Carpenter, 101 U. S. 135, 139, 25 L. ed. 807, 808. Assistant Attorney General Riter argued the cause, and Special Assistants to the Attorney Garnett and Underwood filed a brief for appellee: The United States was entitled to bring this suit without specific statutory authorization. Rio Grande Western R. Co. v. Stringham, 239 U. S. 44, 60 L. ed. 136, 36 Sup. Ct. Rep. 5; Schulenburg v. Harriman, 21 Wall. 44, 22 L. ed. 551; Bybee v. Oregon & C. R. Co. 139 U. S. 663, 35 L. ed. 305, 11 Sup. Ct. Rep. 641; Atlantie & P. R. Co. v. Mingus, 165 U. S. 413, 428, 41 L. ed. 770, 776, 17 Sup. Ct. Rep. 348; United States v. Whitney, 176 Fed. 593; United States v. Washington Improv. & Development Co. 189 Fed. 674; Union Land & Stock Co. v. United States, 168 C. C. A. 585, 257 Fed. 635; Noble v. Union River Logging R. Co. 147 U. S. 165, 37 L. ed. 123, 13 Sup. Ct. Rep. 271; Utah Power & Light Co. v. United States, 243 U. S. 389, 61 L. ed. 791, 37 Sup. Ct. Rep. 387. The approval of the Secretary of the Interior of the applications for right of way was secured by fraud, concealment, and misrepresentation. Re Sinclair, 18 Land Dec. 573; Re South Platte Canal & Reservoir Co. 20 Land Dec. 156; Re Chaffee County Ditch & Canal Co. 21 Land Dec. 65; Re Marr, 25 Land Dec. 345; Re Delta, 32 Land Dec. 462; Re Inyo Consol. Water Co. 37 Land Dec. 79. The Secretary's approval was beyond his authority, since the acts under which the applications were made did not contemplate use of the right of way solely for power-generating purposes. United States v. Kern River Co. 264 Fed. 417; United States v. Whited & Wheless, 246 U. S. 552, 62 L. ed. 879, 38 Sup. Ct. Rep. 367. Mr. Justice Van Devanter delivered the opinion of the court: A right of way for a canal, several miles in length, through lands of the United States in a public forest reserve, in California, is here in controversy. The right of way was acquired by the Kern River Company, one of the appellants, through the approval by the Secretary of the Interior of an original map of the canal on April 14, 1899, and of an amended map on November 27, 1905. The purpose of the amended map was to conform the right of way to intervening changes in the line of the canal. The Secretary's approval, in both instances, was sought and was given under § 18-21 of the Act of March 3, 1891, chap. 561, 26 Stat. at L. 1095, Comp. Stat. §§ 4934-4937, 8 Fed. Stat. Anno. 2d ed. pp. 803, 806, as supplemen ted by § 2 of the Act of May 11, 1898, chap. 292, 30 Stat. at L. 404, Comp. Stat. § 4938, 8 Fed. Stat. Anno. 2d ed. p. 810. The canal was constructed between July, 1902, and December, 1904, and ever since has been used for developing electric power, but never for irrigation. The power is transmitted to other parts of the state, and there commercially supplied for use in operating electric railway systems, lighting municipalities, and operating pumping appliances on farms and ranches. The [150] appellants other than the Kern River Company claim under and through that company. This suit in equity was brought by the United States to obtain (a) a cancelation of the Secretary's approval of the two maps on the ground that it was obtained fraudulently by falsely representing that the right of way was sought with irrigation as the main purpose and the development of electric power as a subsidiary purpose, when in truth the latter was the sole purpose; or (b) a judicial declaration and enforcement of a forfeiture of the right of way on the ground that, although granted on condition that it be used mainly for irrigation, it in fact has been used solely for developing electric power, and its use for irrigation is precluded by a binding and continuing agreement on the part of the grantee. In the bill the first phase of the suit is set forth with greater precision and detail than are shown in the presentation of the other; but the other is there in full substance.1 [151] The bill, while thus assailing the right of way obtained under the Acts of 1891 and 1898, concedes that the ap pellants may yet apply for and obtain, under the Act of February 15, 1901, chap. 372, 31 Stat. at L. 790, Comp. Stat. § 4946, 8 Fed. Stat. Anno. 2d ed. p. 811, a permit or license to use the land for the purpose to which they now are applying it. 1 The district court, in a memorandum opinion, said: "There are two aspects of this bill. One charges fraud perpetrated upon the government in the application for the grant. The other relies upon a forfeiture of the grant by reason of the alleged nonperformance by the defendant of the condition subsequent in the grant, or a breach of a continuing And also: covenant." "The defendant is not using the right of way for irrigation, and never has so used it, and the plaintiff claims that the grant should be forfeited to the government for failure to so use said right of way." The circuit court of appeals, taking a different view, said: "This is not a suit to declare a forfeiture of a land grant for breach of condition, but the ordinary suit to set aside the approval of the Secretary of the Interior on the ground of fraud and mistake." The appellants, in their brief in this court, speak of the suit as one "seeking to forfeit the right of way," and also say: "The bill was brought against appellant, Kern River Company, on the ground that and misrepresentation, and upon the ground the right of way had been obtained by fraud that appellant was using the right of way for purposes other than those for which it had been acquired; namely for purposes ther than irrigation or power purposes subsidiary to the main purpose of irrigation." After issue was joined, the cause was heard on an agreed statement of facts, supplemented by the testimony of a single witness and by some documentary proof. The district court concluded that the charge of fraud in procuring the Secretary's approval was not sustained, and that, in the absence of an act of Congress declaring a forfeiture or providing for a suit to that end, a forfeiture could not be decreed by the court. The bill was accordingly dismissed. On appeal by the United States, the circuit court of appeals concluded that the charge of fraud was adequately proved, and also that, if the Secretary acted with full knowledge of the facts, he exceeded his authority. So the decree of dismissal was reversed, with directions that a decree be entered, canceling the Secretary's approval, and also enjoining the further maintenance of the canal unless, within a reasonable time, the claimants applied for and obtained a lawful permit or license to use the same. C. C. A., 264 Fed. 412. The Act of 1891, §§ 18-21, provided for rights of way through the public lands and reservations of the United States for ditches, canals, and reservoirs for the purpose of irrigation, but not for any other purpose. These rights of way were to be obtained by making application at the local land office, and ultimately securing the approval by the Secretary of the Interior of a map of the ditch, canal, or reservoir. There WAS no provision for a patent. The grant was to become effective when the approval was given; that is to say, the right of way was then to vest in the applicant for the purpose indicated in the act. The approval, once given, could not be recalled or annulled by [152] the Secretary, either for fraud practised in procuring it or for mistake in giving it. To do that, it was necessary to resort to a suit in equity. Noble v. Union River Logging R. Co. 147 U. S. 165, 172, 176, 37 L. ed. 123, 126, 127, 13 Sup. Ct. Rep. 271. The right of way intended by the act was neither a mere easement nor a fee simple absolute, but a limited fee on an implied condition of reverter in the event the grantee ceased to use or retain the land for the purpose indicated in the act. Rio Grande Western R. Co. v. Stringham, 239 U. S. 44, 47, 60 L. ed. 136, 137, 36 Sup. Ct. Rep. 5. An Act of May 14, 1896, chap. 179, 29 Stat. at L. 120, Comp. Stat. § 4944, 8 Fed. Stat. Anno. 2d ed. p. 807, made express provision for rights of way through the public lands and forest reservations for the purpose of developing electric power; but this act differed from the one of 1891 in several respects, the one of most significance being that what the beneficiary was to receive was a revocable permit or license, and not a limited fee. This act was superseded by that of February 15, 1901, supra, which deals with the same subject along similar lines. Utah Power & Light Co. v. United States, 243 U. S. 389, 407, 61 L. ed. 791, 817, 37 Sup. Ct. Rep. 387. The Act of May 11, 1898, enacted while those of 1891 and 1896 were in force, provided in its second section: "That the rights of way for ditches, canals, or reservoirs heretofore or hereafter approved under the provisions of sections eighteen, nineteen, twenty, and twenty-one of the act entitled, 'An Act to Repeal Timber-culture Laws, and for Other Purposes,' approved March third, eighteen hundred and ninety-one, may be used for purposes of a public nature; and said rights of way may be used for purposes of water transportation, for domestic purposes, or for the development of power, as subsidiary to the main purpose of irrigation." This section did no more than to permit rights of way obtained under the Act of 1891, the use of which was restricted to irrigation, to be also used for the other purposes named in the section. Irrigation was still to be the "main purpose," and the other purposes were to be subsidiary. [153] True, there are in the section words and punctuation from which it might be argued that the "purposes of a public nature" were to be independent, and might even be exclusive; but the fair import of the section as a whole is the other way. Besides, its legislative history indicates that what actually was intended was to recognize irrigation as the primary purpose, and to make all the other purposes secondary to it. When the bill was introduced in Congress it contained a provision declaring, without any qualification, that rights of way under the Act of 1891 might be used for supplying water for "domestic, public and other beneficial uses." The committee in charge of the bill sought the views of the Land Department, and the Assistant Commissioner of the General Land Office submitted a report wherein he criticized that provision as being too much of a departure from the principle and spirit of the Act of 1891, and recommended that it be eliminated and the present section substituted in its stead. In ex plaining and commending the section he | The agreed statement of facts shows said: "If it were allowable to use the that the right of way never has been right of way for domestic or public pur- used for irrigation, and also that the poses, or for certain other purposes, appellants are effectually and permawhich will not diminish the amount of nently precluded from using it for that water available for irrigation, as sub-purpose by reason of an agreement ensidiary to the main purpose of irriga- tered into by the grantee, and of a judition, the Act of 1891 would be much cial decree to the rendition of which the more satisfactory in its operation, and grantee expressly consented. Thus it the intention of the act, as conferring a appears that the condition on which the general benefit, would be fully sub-grant was made has been not only served." The bill was amended in ac- broken, but also rendered impossible of cordance with his recommendation, and performance. This entitles the United was enacted in that form. House Re-States to assert and enforce a forfeiture port, No. 2790, 54th Cong., 2d Sess.; of the grant; and it is for this purpose House Report, No. 279, 55th Cong., 2d that the present suit is brought. True, Sess. In administering the Act of 1891, Congress has neither declared a forfeias thus supplemented, the Secretary of ture nor directed the suit; but [155] the Interior was called upon to construe this is not a valid objection. In the abthe section on several occasions, and his sence of some legislative direction to the decisions were uniformly to the effect contrary, and there is none, the general that it regarded irrigation as the con- authority of the Attorney General in retrolling purpose, and all the other uses spect of the pleas of the United States as essentially subsidiary. See 28 Land and the litigation which is necessary to Dec. 474; Denver, N. W. & P. R. Co. v. establish and safeguard its rights affords Hydro-Electric Power Co. 32 Land Dec. ample warrant for the institution and 452; Re Delta, 32 Land Dec. 461; Re prosecution by him of a suit such as this. Inyo Consol. Water Co. 37 [154] Land United States v. San Jacinto Tin Co. Dec. 78; House Doc. No. 5, pp. xii, xiii. 125 U. S. 273, 278-285, 31 L. ed. 747, 56 Cong. 1st Sess.; Utah Power and Light 749-751, 8 Sup. Ct. Rep. 850. A suit Co. v. United States, supra. Even if brought in virtue of that authority, and the meaning were not otherwise made otherwise appropriate to the occasion, is plain, we should be slow to reject the authorized by law in the sense of our construction thus put on the section by decisions. See United States v. Repthe head of the Department charged entigny, 5 Wall. 211, 267, 268, 18 L. ed. with administering it. Logan v. Davis, 627, 645, 646; Atlantic & P. R. Co. v. 233 U. S. 613, 627, 58 L. ed. 1121, 1128, Mingus, 165 U. S. 413, 430-434, 41 L. 34 Sup. Ct. Rep. 685. ed. 770, 777-779, 17 Sup. Ct. Rep. 348; Spokane & B. R. Co. v. Washington & G. N. R. Co. 219 U. S. 166, 173, 174, 55 L. ed. 159, 162, 163, 31 Sup. Ct. Rep. 182. This suit meets these requirements. The appellants take the position that the purposes for which they are selling the electric power are such as to make their use of the right of way a use for "purposes of a public nature" in the sense of that section. But of this it suffices to say that whether such a use be regarded as falling under that head or under the one described as the "development of power," it is a use which the section permits only where it is subsidiary to irrigation. It cannot take the place of the latter as the main purpose. With this understanding of the statutes under which the right of way was obtained, we pass the controverted charge of fraud in procuring the Secretary's approval, and come at once to the question of forfeiture. The appellants invoke the rule that a court of equity usually is reluctant to lend its aid in enforcing a forfeiture. But where, as here, the right to the forfeiture is clear, and is asserted in the public interest, equitable relief, if otherwise appropriate, is not withheld. Farnsworth v. Minnesota & P. R. Co. 92 U. S. 49, 68, 23 L. ed. 530, 536; Union Land & Stock Co. v. United States, 168 C. C. A. 585, 257 Fed. 635. The statute placing a limitation of six years on the time within which "suits to vacate and annul patents" may be brought (Act March 3, 1891, chap. 559, The right of way, as we have seen, was granted on an implied condition that it 26 Stat. at L. 1093, Comp. Stat. § 4992, should revert to the United States in 8 Fed. Stat. Anno. 2d ed. p. 869) is also the event the grantee ceased to use or relied on. But, in so far as this suit retain it for the purpose indicated in seeks to enforce a forfeiture for a the statutes. That purpose-the main breach of a condition subsequent, it and controlling one-was irrigation. I plainly is not a suit to vacate or annul a patent, and so is not within the | come, taxable against the stockholder, has statute. been received by means of the dividend. [For other cases, see Internal Revenue, III. b, Internal revenue — income tax - divi We conclude that the United States is entitled to a decree declaring and enforcing a forfeiture. This renders it unnecessary to deal with the other phase of the suit. The decree of the Circuit Court of Appeals is accordingly so modified as to direct the District Court to enter a decree declaring and enforcing a forfeiture of the right of way, and also enjoining the appellants from further [156] occupying or using the land, unless, within some reasonable time, to be fixed by that court, they apply for and obtain a right or license to use the same under the Act of February 15, 1901, or some other applicable statute, and, as so modified, is affirmed. Decree modified and affirmed. in Digest Sup. Ct. 1908.] dends. 3. The question whether a dividend made out of the profits of a corporation constitutes taxable income of the stockholders is not affected by antecedent transfers of the stock from hand to hand. [For other cases, see Internal Revenue, III. b, in Digest Sup. Ct. 1908.] Corporations reorganization - identity of new and old corporations. 4. A new corporation organized under the laws of another state, and with a much larger capital stock, pursuant to a reorganization and financial adjustment plan transfer all its assets to the new corporaby which an existing corporation was to tion, receiving in return a part of the latter's capital stock, and was to distribute the same to its own stockholders as a dividend against accumulated profits, cannot be regarded as virtually identical with the old corporation, although there is no present change of officers or stockhold UNITED STATES OF AMERICA, Appt., ers, but must be treated as a substantial corporate body, with its own separate iden- in Digest Sup. Ct. 1908.] dividends reorganization stock - accu 1. The declaration in the Act of October | Internal revenue - income tax3, 1913, that income shall include, among other things, gains derived "from interest, rent, dividends, securities, or the transaction of any lawful business carried on for gain or profit, or gains or profits and income derived from any source whatever," does not mean that everything in the form of a dividend must be treated as income, but that income derived in the way of dividends shall be taxed. [For other cases, see Internal Revenue, III. b, in Digest Sup. Ct. 1908.] 5. The market value of the stock of a new corporation which a previously existing corporation distributed pro rata among its stockholders as a dividend against accumulated surplus, pursuant to a reorgani zation and financial adjustment plan by which the old corporation was to transfer all its assets and business to a corporation to be organized in another state, with a much larger capital stock, and was to re Internal revenue - income tax divi-ceive in return a part of the capital stock dends. 2. A comparison of aggregate values immediately before, with those immediately after, the distribution among the stockholders of a corporation, as a dividend, of the stock of a new corporation to which the former corporation, under a reorganization and financial adjustment plan, had transferred all its assets, including a surplus of accumulated profits, is not a proper test for determining whether individual in of the new corporation, there being no present change of personnel, either in officers or stockholders, or change in the proportionate interest of any individual stockholder, must be regarded as part of the stockholder's income, taxable as such under the Act of October 3, 1913, although a comparison of the market value of the shares in the old corporation immediately before, with the aggregate market value of those shares, plus the dividend shares, imthe stockholders acquired no increase in mediately after, the dividend, showed that aggregate wealth through the mere effect of the reorganization and consequent dividend. [For other cases, see Internal Revenue, III. b, Note. On stock dividends as income see notes to Holbrook v. Holbrook, 12 L.R.A. (N.S.) 768; Newport Trust Co. v. Van Rensselaer, 35 L.R.A.(N.S.) 563: Re Osborne, 50 L.R.A. (N.S.) 510; Re Heaton, L.R.A.1916D, 211; Trefry v. Putnam, L.R.A.1917F. 814; Towne v. Eisner, L.R.A.1918D, 254; and Eisner v. Argued October 11, 1921. Decided NovemMacomber, 9 A.L.R. 1594. in Digest Sup. Ct. 1908.] ber 21, 1921. |