Allen v. Southern Pacific Railroad Company

This suit, commenced by the Southern Pacific Company (the defendant in error here) against Darwin C. Allen, who is plaintiff in error, was based on 84 written contracts entered into on the 1st day of February, 1888. All these contracts were made exhibits to the complaint, and were exactly alike, except that each contained a description of the particular piece of land to which it related. By the contracts the Southern Pacific Company agreed to sell, and Darwin C. Allen to buy, the land described in each contract upon the following conditions: Allen paid in cash a stipulated portion of the purchase price, and interest at 7 per cent. in advance for one year on the remainder. He agreed to pay the balance in five years from the date of the contracts. The deferred payment bore interest at 7 per centum per annum, which was to be paid at the end of each year. He, moreover, bound himself to pay any taxes or assessments which might be levied on the property. The contracts provided:

'It is further agreed that upon the punctual payment of said purchase money, interest, taxes, and assessments, and the strict and faithful performance by the party of the second part [Allen, the purchaser], his lawful representatives or assigns, of all the agreements herein contained, the party of the first part [the Southern Pacific Company] will, after the receipt of a patent therefor from the United States, upon demand and the surrender of this instrument, execute and deliver to the party of the second part, his heirs and assigns, a grant, bargain, and sale deed of said premises, reserving all claim of the United States to the same as mineral land.'

There was a stipulation that the purchaser should have a right to enter into possession of the land at once, and by which he bound himself, until the final deed was executed, not to injure the property by denuding it of its timber. The contracts contained the following:

'The party of the first part [the Southern Pacific Company] claims all the racts hereinbefore described as part of a grant of lands to it by the congress of the United States; that patent has not yet issued to it for said tracts; that it will use ordinary diligence to procure patents for them; that as, in consequence of circumstances beyond its control, it sometimes fails to obtain patent for lands that seem to be legally a portion of its said grant, therefore nothing in this instrument shall be considered a guaranty or assurance that patent or title will be procured; that, in case it be finally determined that patents shall not issue to said party of the first part for all or any of the tracts herein described, it will, upon demand, repay (without interest) to the party of the second part all moneys that may have been paid to it by him on account of any of such tracts as it shall fail to procure patent for, the amount of repayment to be calculated at the rate and price per acre fixed at this date for such tracts by said party of the first part, as per schedule on page 3 hereof; that, said lands being unpatented, the party of the first part does not guaranty the possession of them to the party of the second part, and will not be responsible to him for damages or cost in case of his failure to obtain and keep such possession.'

It was averred that after the execution of the contracts Allen, the purchaser, had entered into possession of the various tracts of land, and so continued up to the time of the commencement of the suit. The amount claimed was three annual installments of interest on the deferred price, which it was alleged had become due in February, 1889, 1890, and 1891. The prayer of the complaint was that the defendant be condemned to pay the amount of these respective installments within 30 days from the date of decree, and, in the event of his failure to do so, that himself, his representatives and assigns, 'be forever barred and foreclosed of all claim, right, or interest in said lands and premises under and by virtue of said agreements, and be forever barred and foreclosed of all right to conveyance thereof, and that said contracts be declared null and void.'

The defendant, while admitting the execution of the contracts, denied that he had ever taken possession of any of the land, and charged that the contracts were void because at the time they were entered into, and up to the time of the institution of the suit, the seller had no ownership or interest of any kind in the land, and therefore that no obligation resulted to the buyer from the contracts. By way of cross complaint it was alleged that the defendant had been induced to enter into the contracts by the false and fraudulent representations of the complainant that it had a title to or interest in the property; that, in consequence of the error of fact produced by these misrepresentations of the plaintiff, the defendant had paid the cash portion of the price and the interest in advance for one year on the deferred installment; that, owing to the want of all title to or interest in the land on the part of the complainant, the defendant had been unable to take possession thereof, and that some time after the contracts were entered into the defendant had an opportunity to sell the land for a large advance over the amount which he had agreed to pay for it, which opportunity was lost in consequence of the discovery of the fact that the be rejected; that the contracts be rescinded; property. The prayer of the cross complaint was that the moneyed demand of the plaintiff be rejucted; that the contracts be rescinded; and that there be a judgment against the plaintiff for the amount paid on account of the purchase price, and for the damage which the defendant had suffered by reason of his failure to sell the property at an advanced price. The complainant put the cross complaint at issue by denying that it had made any representations as to its title to or interest in the land except as stated in the contracts. It denied that at the time of the contracts it had no interest in the land, or that the defendant had been prevented from taking possession, or had been prevented from selling at an advanced price, because of a want of title. Upon these issues the case was heard by the trial court, which made a specific finding of fact embracing, among other matters, the following: That the contracts sued on had been entered into as alleged, and the installments claimed thereunder were due despite demand; that no representations had been made by the plaintiff as to its title other than those which were recited in the contract; that the defendant had not lost the opportunity to sell at an advanced price, as alleged in the cross complaint. As to the title to the land embraced in the contracts, the facts were found to be as follows:

'That the lands and premises therein described were portions of the public domain of the United States, and were granted to plaintiff by an act of the congress of the United States entitled 'An act granting lands to aid in the construction of a railroad and telegraph line from the states of Missouri and Arkansas to the Pacific coast,' approved July 27, 1866. That all of said lands, save section 5, in township 23 south, range 19 east, M. D. M., are situated within a belt more than 20 miles and less than 30 miles from plaintiff's railroad, generally known as the 'Indemnity Belt'; the said section 5 being within 20 miles of said railroad.

'That the loss to plaintiff of odd-numbered sections within said granted limits-i. e. within 20 miles of said railroad-because of the various exceptions and reservations in said act provided for, is fully equal to all the oddnumbered sections within said indemnity belt.

'That on March 19, 1867, an order was made by the secretary of the interior of the United States withdrawing, or purporting to withdraw, from sale or settlement, under the laws of the United States, all of said lands situated in said indemnity belt; and that on August 15, 1887, another order was made by said secretary of the interior revoking, or purporting to revoke, said first-named order, and restoring said lands to the public domain for the usual sale and settlement thereof. The first said order of withdrawal is set forth in volume ___ of 'Decisions of the Secretary of the Interior' at page ___, and the said second order in volume 6 of said 'Decisions,' at pages 84-92; and which said orders as so set forth are here referred to, and made a part of this finding. That plaintiff is the owner of said lands in fee under the provisions of said act of congress. That patents or a patent therefor have not yet been issued to plaintiff by the government of the United States. That it has not been finally determined that patents or a patent shall not issue therefor, or for any part thereof, but proceedings are now pending before the proper department of the government of the United States, instituted by plaintiff, to obtain patents or a patent for said lands and premises, and the whole thereof. That plaintiff has not been guilty of any want of ordinary diligence in instituting or prosecuting said proceedings to obtain said patents or patent.'

There was a decree allowing the prayer of the complaint and rejecting that of the cross complaint. On appeal the case was first heard in department No. 2 of the supreme court of California, and the decree of the trial court was in part reversed. 40 Pac. 752. In accordance with the California practice, the cause was transferred from the court in department to the court in banc, where the decree of the trial court was affirmed. 112 Cal. 455, 44 Pac. 796. To this decree of affirmance this writ of error is prosecuted.

Wilbur G. Zeigler, for plaintiff in error.

Maxwell Evarts and W. F. Herrin, for defendant in error.

Mr. Justice WHITE, after making the foregoing statement, delivered the opinion of the court.