United States v. Detroit Timber & Lumber Company

These are cross appeals from a decree of the circuit court of appeals for the eighth circuit, affirming in part and erversing in part a decree of the circuit court for the western district of Arkansas.

The bill was filed on April 5, 1902, by the United States against the Detroit Tamber & Lumber Company, the MartinAlexander Lumber Company, and a number of individual defendants. The object of the bill was to set aside patents to 44 tracts of land, issued to the individual defendants, and all conveyances, contracts, and leases from them purporting to convey title to or a right to cut and remove timber from the lands, and also for an accounting of the timber cut and removed from the lands by the two companies, and judgment therefor.

The charge was that the lands were entered under the timber act of June 3, 1878 (20 Stat. at L. 89, chap. 151), and in fraud of its provisions, in that the purchase money was advanced by the Martin-Alexander Company under contracts with the entrymen that after the entries they should convey to it all the standing timber thereon. The Martin-Alexander Company denied that there were any such contracts, and the Detroit Company in addition pleaded that it was a bona fide purchaser from the former company. It appeared from the testimony that for some time prior to January 14, 1901, the Martin-Alexander Company owned and operated a sawmill plant in the vicinity of these lands; that most, if not all, of the entrymen were its employees; that it furnished all the money for the purchase prices of these lands, as well as for the expenses connected with the entries, and that after the entries the entrymen, with three exceptions, executed conveyances to it of all the standing timber. Fifty-eight and one half per cent of the stock of the Martin-Alexander Company belonged to E. B. Martin, while A. V. Alexander controlled the remainder, which was owned by himself, his wife, and J. O. Means.

On January 14, 1901, the Detroit Company purchased the entire property of the Martin-Alexander Company for $60,000 cash and an assumption of its obligations, amounting to $17,456.79. Prior to May 9, 1901, patents were issued for all the lands, thirteen having been issued before January 14, 1901. After the purchase from the Martin-Alexander Company the Detroit Company obtained deeds of the lands from the patentees of twenty-seven of the tracts.

The circuit court found that the transactions between the entrymen and the Martin-Alexander Company were not in conflict with the statute, that there were no agreements between them and it prior to the entries in respect to conveyances of the standing timber, and that there was only the mere expectation on the part of the company that it would be able to purchase the timber. Thereupon it dismissed the bill. 124 Fed. 393. The court of appeals, reviewing the testimony, held that there were contracts between the parties making the entries and the Martin-Alexander Company prior to the entries, and that therefore those entries were in fraud of the act, but it also found that the purchase by the Detroit Company was in good faith, and that therefore that company was entitled to protection in its purchase. It ordered the bill dismissed as to the 27 tracts for which patents had been issued and conveyances made to the Detroit Company. As to the seventeen which had not been conveyed, it ordered a decree canceling the patents, but dismissing the bill so far as respects any relief claimed against the Detroit Company. 67 C. C. A. 1, 131 Fed. 668.

Messrs. Marsden C. Burch, Fred A. Maynard, and Solicitor General Hoyt for the United States.

Messrs. W. E. Hemingway, James F. Read, Thomas C. McRae, U. M. Rose, and George B. Rose for the lumber companies.

Statement by Mr. Justice Brewer:

[Argument of Counsel from pages 325-328 intentionally omitted] Mr. Justice Brewer delivered the opinion of the court: