United States v. Oregon Lumber Company/Opinion of the Court

This case is here upon a certificate from the Circuit Court of Appeals for the Ninth Circuit, under section 239 of the Judicial Code (Comp. St. § 1216).

The plaintiff in error brought an action at law against the defendant in error in the United States District Court for the District of Oregon to recover damages for the fraudulent acquisition of certain lands. The complaint was filed in February, 1918, and alleged that the Oregon Lumber Company, a corporation, and certain of its officers, named as codefendants, unlawfully conspired to acquire certain tracts of land in Oregon, under the Timber and Stone Act of June 3, 1878 (20 Stat. 89 [Comp. St. § 4671 et seq.]). The lands were patented in 1900, subsequently conveyed by the patentees to an officer of the defendant corporation, and thereafter (with the exception of a small tract) transferred by such officer to the corporation. The value of the lands was alleged to be $65,000 and judgment was asked for this amount.

The answer denied the material allegations of the complaint and pleaded, among other things, as separate defenses:

'(1) That pro tanto to the measure of damages the United     States received from the several entrymen named in the      complaint the aggregate sum of $16,400, which was the price      fixed by law and the practices in the Land Office for the      lands described in the complaint; (2) that in October, 1912,      the United States brought suit in equity to set aside the      patents for the lands, and alleged that it owned the property      described in the complaint herein and that the patents for      the lands which are the same as are involved in this action      were secured through fraud of the defendants named in the      present action and others, and prayed for the cancellation of      the patents; that in the equity suit substantially the same      facts were pleaded as are pleaded by the United States in      this action; that issue was joined in the equity suit; that      in 1916, after trial upon the merits, the District Court      dismissed the equity suit, for the reason that the United States had had full      knowledge of the matters complained of in its complaint for      more than 6 years before the equity suit was instituted, and      that no appeal was ever taken from the decree dismissing the      complaint of the United States.'

The plaintiff in error demurred to these separate defenses, and the District Court having overruled the demurrer and the plaintiff in error having declined to plead further, the court dismissed the complaint and judgment was entered.

The District Court, in rendering its judgment, decided that, inasmuch as the suit in equity was brought by the United States with knowledge of all the facts, it constituted an election final and conclusive.

Upon these facts the following questions are propounded by the Circuit Court of Appeals:

'1. Is an action by the United States for the value of lands     as damages, against the patentees for the lands for      fraudulent acquisition of the lands patented under the Timber      and Stone Act, barred where more than 6 years have elapsed      after the United States, with knowledge of the fraud, brought      a suit in equity to cancel the patents for the same lands, in      which equity suit decree of dismissal was made against the      United States on the ground that the suit was barred by the      statute of limitations?

'2. If the foregoing question be answered in the negative,     should any damages recoverable be reduced by such amounts as      the United States may have received from the entrymen, as the      price fixed by law for the lands described in the patents?'

Upon the facts stated the sale was voidable (Moran v. Horsky, 178 U.S. 205, 212, 20 Sup. Ct. 856, 44 L. Ed. 1038), and the plaintiff in error was entitled either to disaffirm the same and recover the lands, or affirm it and recover damages for the fraud. It could not do both. Both remedies were appropriate to the facts, but they were inconsistent, since the first was founded upon a disaffirmance and the second upon an affirmance of a voidable transaction. Robb v. Vos, 155 U.S. 13, 43, 15 Sup. Ct. 4, 39 L. Ed. 52; Connihan v. Thompson, 111 Mass. 270, 270; 2 Black on Rescission and Cancellation, § 562, and cases cited. The rule is applicable to the government in cases where patents have been procured by fraud. United States v. Koleno, 226 Fed. 180, 183, 141 C. C. A. 178. Any decisive action by a party, with knowledge of his rights and of the facts, determines his election in the case of inconsistent remedies, and one of the most unequivocal of such determinative acts is the bringing of a suit based upon one or the other of these inconsistent conclusions. Robb v. Vos, supra.

It is suggested in the brief for the plaintiff in error that there is not such inconsistency between a suit to recover lands patented because of fraud and an action to recover damages for the fraud as to bar the latter, citing Friederichsen v. Renard, 247 U.S. 207, 38 Sup. Ct. 450, 62 L. Ed. 1075. That case, however, lends no support to the suggestion. The petitioner, Friederichsen, brought suit to cancel a contract for the exchange of lands, on the ground of fraud practiced upon him. Upon the coming in of the report of the master it appeared that petitioner, pending suit, had cut a considerable amount of timber growing upon the lands which he had taken in exchange. Thereupon the court found that he was not entitled to equitable relief, because, by cutting the timber, he had ratified the contract and had rendered it impossible to put the defendant in statu quo, but his remedy was at law for damages. The court ordered that the master's report be vacated and the case transferred to the law side of the court, pursuant to equity rule 22 (33 Sup. Ct. xxiv), and 'that the parties 'file amended pleadings to conform with an action at law." The question was there presented for decision whether this was the commencement of a new action, so as to bring it within the bar of the statute of limitations, and it was determined in the negative. Holding further that under the circumstances the doctrine of election of remedies did not apply, this court said:

'Thus, we are brought to the conclusion that since the two     remedies asserted by the petitioner were alternative      remedies, and since the order made, requiring the conversion      of the suit in equity into one at law, was entered by the      court sitting in chancery, for us to affirm the judgment of      the Circuit Court of Appeals that the petitioner, in obeying      the order of the trial court, made a fatal choice of an      inconsistent remedy, would be to subordinate substance to      form of procedure, with the result of defeating a claim which      the respondents stipulated had been sufficiently established      to justify a verdict against them. This we cannot consent to     do.'

But here in the equity suit the plaintiff in error, upon the coming in of the defendant's plea of the statute of limitations, made no offer to amend or request to transfer the case to the law docket, but proceeded to trial and judgment upon the original bill, with knowledge of all the facts for more than 6 years prior to the filing of its bill. Defeated in its equity suit, it brought its action at law upon the same allegations of fact. We think it is not admissible to thus speculate upon the action of the court, and having met with an adverse decision, to again vex the defendant with another and inconsistent action upon the same facts.

The justice of enforcing the doctrine of election of remedies in this case is emphasized by a consideration of the facts. The lands in question were conveyed by the United States in the year 1900. It was not until 1912 that the first suit was brought. The judgment, dismissing the bill in that suit, was rendered in 1916, and the present action was brought 2 years later. Thus a period of 18 years had elapsed since the transfer of the lands before the present action was begun, during more than two-thirds of which time the United States had possessed knowledge of all the facts upon which the plea of the statute of limitations was founded and sustained.

The mere filing of the bill in the first suit, according to many authorities, did not constitute an irrevocable election. But upon ascertaining from their plea that the defendants intended to rely upon the statute of limitations, and having knowledge of the facts upon which that plea was founded, and thereafter sustained, the plaintiff in error had fairly presented to it the alternative: (a) Of abandoning that suit and beginning an action at law or transferring it to the law side of the court and making the necessary amendments to convert it into an action for damages, as a 'mere incident in the progress of the original case' (247 U.S. 210, 38 Sup. Ct. 451, 62 L. Ed. 1075); or (b) of proceeding with the original case upon the issues as they stood. The plaintiff in error deliberately chose the latter alternative. If the election was not final before, it became final and irrevocable then. Rehfield v. Winters, 62 Or. 299, 305, 306, 125 Pac. 289; Bowker Fertilizer Co. v. Cox, 106 N. Y. 555, 558, 559, 13 N. E. 95; Moss v. Marks, 70 Neb. 701, 703, 97 N. W. 1031.

The case of Bistline v. United States, 229 Fed. 546, 144 C. C. A. 6, relied upon by the plaintiff in error, is not in conflict with this conclusion. That was an action by the government to recover damages for the fraudulent acquisition of certain public lands. A prior suit had been brought in equity to cancel the patent, but the defendant's answer showed that the land had been conveyed to persons not made parties to the suit. The government thereupon promptly dismissed its suit in equity, and on the same day commenced the action at law for damages. If, in the instant case, a like course had been followed upon the coming in of the defendant's answer pleading the statute of limitations, the case just referred to would have been in point.

Northern Assurance Co. v. Grand View Building Association, 203 U.S. 106, 27 Sup. Ct. 27, 51 L. Ed. 109, William W. Bierce, Limited, v. Hutchins, 205 U.S. 340, 27 Sup. Ct. 524, 51 L. Ed. 828, and Southern Pacific Co. v. Bogert et al., 250 U.S. 483, 39 Sup. Ct. 533, 63 L. Ed. 1099, cited by plaintiff in error in support of its contention, are all distinguishable from the case now under consideration. In Northern Assurance Co. v. Grand View Building Association, supra, an action at law had been brought to enforce an insurance policy, but it was held that no recovery could be had on the policy as it stood. Thereupon a suit was brought to reform the policy and enforce it as reformed. It was held that there was no inconsistency between these two remedies, and clearly there was not, since both cases proceeded in affirmance of the contract. In Bierce v. Hutchins, supra, there had been a conditional sale. Plaintiff first undertook to enforce a lien upon the property and later brought an action in replevin. It was held there was no election because plaintiff could not enforce a lien upon property to which it had title. This court said:

'It [appellant] could not obliterate the condition and leave     the contract in force. It may be that it had an election to     avoid the contract altogether, but, if so, it did not attempt      to do it. It insisted on the contract as the ground of its     claim to a lien for the price of the goods. The election     supposed and relied upon is an election to keep the contract      in force, but to leave out the reservation of title. * *  *      But the assertion of a lien by one who has title, so long as      it is only as assertion and nothing more, is merely a      mistake. It does not purport to be a choice, and it cannot be     one because the party has no right to choose. The claim in     the lien suit, as was said in a recent case, was not an      election but an hypothesis.'

In Southern Pacific Co. v. Bogert et al., supra, there had been much prior litigation over the same subject-matter. It was contended that the plaintiffs were bound as privies to this litigation. As appears by the decision of the lower court (Bogert et al. v. Southern Pacific Co., 244 Fed. 61, 156 C. C. A. 489) the grievance alleged in the prior suits was a corporate grievance. Each of the suits was dismissed on the ground that the decree of foreclosure involved could not be attacked collaterally. The Bogert suit, however, was a suit on behalf of the minority stockholders, asserting no corporate right of the railway company, but only the right of minority stockholders. The right asserted in the prior suits and that asserted in the Bogert suit were, therefore, the rights of different parties.

It is further urged that the judgment of the District Court was not upon the merits, but upon the plea in bar, and that therefore, when the equity suit was begun, plaintiff in error had no choice of remedies, since the judgment rendered established that in fact there was no remedy in equity at all. The contention, we think, is unsound.

The defense of the statute of limitations is not a technical defense but substantial and meritorious. The great weight of modern authority is to this effect. Lilly-Brackett Co. v. Sonnemann, 157 Cal. 192, 106 Pac. 715, 21 Ann. Cas. 1279, and Wheeler v. Castor, 11 N. D. 347, 353, 92 N. W. 381, 61 L. R. A. 746, et seq., where the authorities are reviewed.

Such statutes are not only statutes of repose, but they supply the place of evidence lost or impaired by lapse of time, by raising a presumption which renders proof unnecessary. Bell v. Morrison, 1 Pet. 351, 360, 7 L. Ed. 174; Hanger v. Abbott, 6 Wall. 532, 538, 18 L. Ed. 939; Wood v. Carpenter, 101 U.S. 135, 139, 25 L. Ed. 807; Riddlesbarger v. Hartford Insurance Co., 7 Wall. 386, 390, 19 L. Ed. 257. And see United States v. Chandler-Dunbar Co., 209 U.S. 447, 450, 28 Sup. Ct. 579, 52 L. Ed. 881.

'Statutes of limitation are vital to the welfare of society     and are favored in the law. They are found and approved in     all systems of enlightened jurisprudence. They promote repose     by giving security and stability to human affairs. An     important public policy lies at their foundation. They     stimulate to activity and punish negligence. While time is     constantly destroying the evidence of rights, they supply its place by a presumption which      renders proof unnecessary. Mere delay, extending to the limit     prescribed, is itself a conclusive bar. The bane and antidote     go together.'

In Riddlesbarger v. Hartford Insurance Company:

'They are founded upon the general experience of mankind that     claims which are valid, are not usually allowed to remain      neglected. The lapse of years without any attempt to enforce     a demand creates, therefore, a presumption against its      original validity, or that it has ceased to subsist. This     presumption is made by these statutes a positive bar; and      they thus become statutes of repose, protecting parties from      the prosecution of stale claims, when, by loss of evidence      from death of some witnesses, and the imperfect recollection      of others, or the destruction of documents, it might be      impossible to establish the truth.'

In Parkes v. Clift, 9 Lea (Tenn.) 524, it was held that a decree dismissing a bill on the ground of lapse of time was a judgment upon the merits. The court said (pages 531, 532):

'In order that a judgment or decree should be on the merits,     it is not necessary that the litigation should be determined      'on the merits,' in the moral or abstract sense of these      words. It is sufficient that the status of the action was     such that the parties might have had their suit thus disposed      of, if they had properly presented and managed their      respective cases. * *  * A finding against a party, either      upon final hearing or demurrer, that his cause of action as      shown by him, is barred by the statute of limitations or by      laches is a decision upon the merits, concluding the right of      action.'

See, also, People ex rel. Best v. Preston, 62 Hun, 185, 188, 189, 16 N. Y. Supp. 488; Black v. Miller, 75 Mich. 323, 329, 42 N. W. 837.

Whether based on a plea of the statute of limitations or on a failure to prove substantive allegations of fact, therefore, the result of the judgment is the same, viz. that plaintiff has no case, and to hold that plaintiff may then invoke another and inconsistent remedy is not to recognize an exception to the general operation of the doctrine of election of remedies but to deny the doctrine altogether. Here, upon the facts as stated in the bill in equity and later in the action at law, both remedies were available to the plaintiff in error. In electing to sue in equity plaintiff in error proceeded with full knowledge of the facts, but it underestimated the strength of its cause, and if that were sufficient to warrant the bringing of a second and inconsistent action the result would be to confine the defense of election of remedies to cases where the first suit had been won by plaintiff and to deny it in all cases where plaintiff had lost. But the election was determined by the bringing and maintenance of the suit, not by the final disposition of the case by the court. See, for example, Bolton Mines Co. v. Stokes, 82 Md. 50, 59, 33 Atl. 491, 31 L. R. A. 789.

The distinguishing feature of the instant case is that, after the coming in of the answer pleading the statute of limitations, and the plain warning thus conveyed of the danger of continuing the equity suit further, the plaintiff in error persisted in pursuing it to final judgment, instead of promptly reforming the cause or dismissing the bill and seeking the alternative remedy, not subject to the same defense. The doctrine of election of remedies and that of res adjudicata are not the same, but they have this is common: That each has for its underlying basis the maxim which forbids that one shall be twice vexed for one and the same cause. The policy embodied in this maxim we think requires us to hold that the plaintiff in error, in bringing the original suit, and in continuing after the plea in bar to follow it to a final determination, made an irrevocable election, and that it is now estopped from maintaining the present inconsistent action.

Question No. 1 is somewhat ambiguous, but, taken in connection with the facts, it is clear that what the Circuit Court of Appeals desires to know is whether the action at law by the United States to recover the value of lands, the title to which was fraudulently obtained, is barred for the reason that the United States, with knowledge of the fraud, had previously prosecuted, upon the same facts, a suit in equity to final judgment of dismissal rendered on the ground that the suit was barred by the statute of limitations? This question we answer in the affirmative, and, as this disposes of the case, no answer to question No. 2 is required.

It will be so certified.

Mr. Justice BRANDEIS dissenting, with whom the Chief Justice and Mr. Justice HOLMES concur.