United States v. Tennessee & Coosa Railroad Company

This suit was brought under the act of September 25, 1890, to forfeit a land grant made to the state of Alabama in aid of the construction of a railroad from the Tennessee river at or near Gunter's Landing to Gadsden, on the Coosa river, conveyed by the state to the Tennessee & Coosa Railroad Company.

The bill alleges that Congress by an act approved the 3d of June, 1856, granted to the state of Alabama in trust for certain railroads, of which the respondent, the Coosa Railroad, was one, every alternate odd-numbered section for 6 sections in width on each side of the road, with the right of selection of others if rights had attached to such alternate sections, within 15 miles of the line of the road, as follows:

'That a quantity of land not exceeding 120 sections, for each of the roads named in said act, and included within a continuous length of 20 miles of each of said roads named therein, may be sold, and when the governor of Alabama should certify to the Secretary of the Interior that any 20 continuous miles of any of said roads were completed, then another quantity thereby granted, not to exceed 120 sections for each of said roads having 20 continuous miles completed as aforesaid, and included within a continuous length of 20 miles of each of said roads, may be sold and so from time to time until said roads were completed, and if any of said roads were not completed within ten years, no further sales should be made, and the lands unsold should revert to the United States.'

That the state accepted the grant by an act of its legislature approved January 20, 1858, upon the terms and conditions expressed in the act of Congress, and granted a portion of the lands to the Coosa Railroad.

That the railroad constructed 10 and 22-100 miles of road along the line of definite location of survey, to wit, from Gadsden northward toward Gunter's Landing, but did not construct any portion thereof prior to June 3, 1866, and never constructed or completed 20 miles of railroad prior to September 29, 1890.

That by virtue of the act of Congress all the lands unsold at the expiration of ten years from its date reverted to the United States, and that the railroad company did not sell any lands prior to June 3, 1866, and never became entitled to any of the land or to the possession thereof, but that the railroad company selected the lands described in the bill within the 6-mile limit and those within the 15-mile limit, which selections were approved by the Secretary of the Interior. Exhibits were attached to the bill giving detail descriptions.

That the selections and approval were made upon the filing of a map of definite location, and not upon the certificate of the governor of the state showing that 20 continuous miles of road had been constructed, for no section of 20 miles had been constructed before the passage of the act of Congress of September 29, 1890.

That the United States became entitled to the possession of the lands on the 4th of June, 1866, and the right to recover both the title to and the possession of them.

That by the act of September 29, 1890, the United States resumed the title to all the lands which were opposite to and conterminous with any portion of such railroad not completed and in operation at the date of the passage of the act; and that none of the lands described in paragraph 1 and Exhibit A were opposite to and conterminous with road constructed and completed at that date.

That the railroad company on the 4th of April, 1887, executed and delivered to Hugh Carlisle an instrument purporting to be a quitclaim deed, by which the company pretended to convey to him 17,010 33/100 acres of the land granted to it for the consideration of $21,790; and on the 7th of February, 1887, executed another instrument to Carlisle, by which it attempted to convey to him 23,739 51/100 acres, and which recited a payment of $59,348.70.

That said instruments were executed more than twenty years after the expiration of the time required for the construction of the railroad; that the company had no right or power to convey any title or right; that its officers and Carlisle knew the fact, and for the purpose of preventing the reversion of the lands to the United States the company executed and Carlisle accepted the conveyances. That, while they recite a valuable consideration paid by him, no money or valuable thing was paid, but that the whole transaction was merely a device to mislead and deceive for the purpose of enabling Carlisle to set up a claim that he held the lands as a purchaser for value and in good faith from the railroad company. That he is a purchaser mala fide, well knowing that the purchase was in violation of the act of 1856; that he holds them under a secret trust for said company and its stockholders, and that he and his relatives are the largest stockholders, and elected themselves and others subject to their control directors, and by directors so composed the conveyances to him were executed.

That there is valuable timber on the lands which the company and other persons are cutting and carrying away, and valuable mines which they are working, and that the company is collecting the purchase money for lands sold by them, and is alienating other lands, and it is therefore necessary to have a receiver appointed.

A number of persons beside Carlisle are made defendants on the grounds that they are in possession of some of the lands, and the Nashville, etc., Railway Company and the Manhattan Trust Company are also made defendants on the ground that they claim an interest in a large part of the lands under contract with the Tennessee & Coosa Railroad Company, which it is averred were taken with knowledge of the rights of the United States.

The prayer is for a receiver and an injunction and cancelation of the selections made by the company, the conveyances and contracts made by it, and for general relief.

The Exhibits A and B contain a list of lands respectively within the 6 and 15-mile limit, and Exhibits D and E are the conveyances to Carlisle.

A receiver was appointed upon the bill without notice, and an injunction pendente lite issued. The injunction was subsequently modified to exclude from its operation certain of the lands.

Carlisle filed a demurrer and answer to the bill. The answer admitted all the allegations of the bill material to the propositions presented on this appeal, except those charging deception and fraud in the conveyances to him, but specifically alleged that they were executed in good faith and for valuable consideration, and that the lands included in the deed from the company to him (Exhibit D of original bill) are all opposite and conterminous with the 10 and 22-100 miles of completed road. By an amendment to the answer it was alleged that said lands were within 6 miles of the line of definite location of the road and within the primary granted limits.

It was further alleged that he contracted with the railroad company in 1859 to build the road; that in 1860 the company executed a mortgage upon its franchises and other property, especially upon the lands granted by Congress, to secure 400 bonds, each of the value of $1,000, issued by the company, and eleven of them were pledged with him to secure the amount due him for work done prior to 1861, and that at the time the Civil War broke out he had 400 hands working on the road, and was progressing rapidly with the building of the same. That during the war and after the war his and the company's financial condition prevented further construction. In 1871 the company made a conditional sale of the road to the East Alabama & Cincinnati Railroad Company to complete the road, but that company only built 5 miles of it between Gadsden and Attala; that in 1883 the Coosa company resumed possession; and passed a series of resolutions approving and ratifying what he had done, constituting him its financial agent with power to construct, equip, and put in running order the road from Attalla to Guntersville, and empowered him to use all the assets of the company; and agreed to pay him out of the assets the original cost and expenses that he should incur in the construction, equipment, and putting the road in running order, together with 20 per cent in addition for superintendence and advances made by him; and that he retain a lien on the railroad and its franchises, both real and personal, until the costs and expenses incurred by him be fully paid off, together with said 20 per cent in addition. The said resolutions also revived and renewed the indebtedness due to him for work done prior to 1860.

That he put forth every energy to build the road, and expended in the work under a contract with the company large sums of his private resources; that the company had no money and no other resources except said lands, and no means except as supplied by him.

That in 1886 the road was completed as far as Littleton, a distance of 10 and 22-100 miles; that during all this time the money due him for work done prior to 1861 had not been paid, and that sum, amounting to $47,000, and the money expended afterwards by him, amounted to $85,750.92, and that his account was submitted to the board of directors of the company and was credited and approved.

That in February, 1887, the directors, desiring to pay him, and having no assets, offered to convey the lands described in Exhibit E to the bill in payment pro tanto of his account at $2.50 per acre; that he finally agreed to accept 23,739 and 57-100 acres at said price, and the company conveyed the same to him absolutely, without any trust on reservation whatever, and that after receiving such conveyance there still remained due him $26,401.27.

That on the 2d of April, 1888, the company conveyed to him about 16,400 acres of land, described in Exhibit D attached to the original bill, at the price of $1.25 per acre, which was the full value of the interest of the company in the lands, because they lay within the conflicting limits of the grants to the company and the Alabama & Chattanooga Railroad Company, and the Coosa company only owned an undivided moiety; that the consideration was money due the respondent as aforesaid, and the conveyance was absolute and without any trust or reservation.

That all the lands described in Exhibit E are a part of the first 120 sections of the grant, and are opposite to and conterminous with the first 20 miles of the railroad as shown by the map of the definite location, which was duly filed in accordance with the act of Congress, and are included in the lands which the company was authorized to sell in advance of the construction of any portion of the road. And it was alleged in an amendment to the answer that the company sold lands within the first 120 sections at divers times to divers persons for 2 and 50-100 dollars per acre, usually on credit and notes taken and placed in his, Carlisle's, hands as collateral security for the money due him, and most of the notes still remain in his hands, and only a small amount has been paid thereon; that the vendees of the company are in possession, and that he, during the years 1887 and 1888, sold for a valuable consideration the lands described in Exhibit E of the original bill to purchasers in good faith, who paid for the same and received his warranty deed. A list of the purchasers is attached to the answer.

The answer of the railroad company was substantially the same as that of Carlisle, and the answers of the other respondents allege their respective relations to the lands, but are not otherwise material to the propositions in controversy.

Upon the testimony submitted, oral and documentary, the circuit court found as follows:

'First. That prior to the 29th day of September, 1890, the Tennessee & Coosa Railroal Company had sold to bons fide purchasers all the lands embraced in the first 120 sections which by the terms of the granting act it was authorized to sell in advance of the construction of the road. That these sales were bona fide and made to aid in the construction of the road. That the allegations of the bill that the sale to Carlisle was without consideration and colorable are not sustained by the evidence, but the sale to Carlisle was bone fide and based on good consideration, and the proceeds of the sale used in the construction and equipment of the road.

'Second. The court finds that the Tennessee & Coosa Railroad from Gadsden to Littleton, a distance of 10 and 22-100 miles, was completed and in operation on and before the 29th day of September, 1890, and that the lands described in Exhibit D to the original bill, to wit, the lands embraced in and conveyed by the deed from the Tennessee & Coosa Railroad Company to Hugh Carlisle, bearing date the 4th day of April, 1887, are lands which lie opposite to that part of the road which was completed and in operation on the 29th day of September, 1890, and therefore not within the lands forfeited by the act of September 29, 1890.

'The court is therefore of the opinion that there has been no forfeiture of the lands as to which a judicial declaration of forfeiture is sought by the bill, and it is accordingly ordered and decreed that the relief sought by the bill be denied and the bill dismissed.' In the opinion of the court it was said, 'that the lands embraced in the first 120 sections of the granting act the railroad company was authorized to sell in advance of the construction of the road, and that the parties to whom such sale was made, took good title, and there can be no recovery or restitution of any of these lands to the public domain in this case. 2. That the lands described in Exhibit D to original bill are lands which lie opposite to that part of the road which was completed and in operation on the 29th day of September, 1890, and are not within the lands covered by act of September 29, 1890.' 71 Fed. Rep. 71.

The decree of the circuit court was affirmed by the circuit court of appeals (52 U.S. App. 171, 81 Fed. Rep. 544, 26 C. C. A. 499) and the United States took this appeal.

Mr. Charles W. Russell and Solicitor General Richards for appellant.

Mr. Amos E. Goodhue for appellees.

Mr. Justice McKenna delivered the opinion of the court: