Wilson v. Standefer/Opinion of the Court

The Federal question in this case is founded upon the contention that the act of July 8, 1879, under which the land was purchased by Dolan, having provided in its 12th section for the forfeiture of the contract of purchase, in event of default in payment of annual interest, by a judicial proceeding, such section became part of the obligation of the contract between the state and the purchaser, which was impaired by the subsequent act of August 20, 1897, authorizing a forfeiture without judicial ascertainment or proceedings, and that therefore the proceedings under the last-mentioned act were null and void, as a violation of § 10, art. 1, of the Constitution of the United States.

As the supreme court of Texas overruled that contention, and as the civil court of appeals entered the final judgment in the case in accordance with the opinion of the supreme court, the question is properly before us for determination.

The reasoning upon which the supreme court of Texas proceeded can be best presented by the following extracts from its opinion, as it appears in this record:

'The act of 1897, under which the commissioner took the action the effect of which is in question, authorized the commissioner, when any portion of the interest due by purchasers of such land has not been paid, to declare a forfeiture of the purchase without judicial aid, and gave to his action the effect of putting an end to the contract. That this statute by its terms applies to cases such as this is not disputed.

'We think it clear that all of the terms of the contract between the state and a purchaser under the act of 1879 are contained in §§ 6, 7, 8, 9, and 10, above outlined, and their rights, the obligations of their contract, arise from a compliance with those provisions. The contract there provided for is an executory contract of sale and purchase, which arises upon acceptance of and compliance with the stated terms of the offer made by the state for the sale of the lands. The purchaser presents his application, makes the cash payment, causes the land to be surveyed, and executes his obligation to perform the things to be done in the future. The contract then is complete, and its terms are fixed. Jumbo Cattle Co. v. Bacon, 79 Tex. 12, 14 S. W. 840. Both the state and the purchaser are bound so long as there is compliance with the obligation,-the purchaser to make the further payments, and the state, upon completion thereof, to grant the land to the purchaser. But no title passes, and a right of rescission in the state may arise just as it might arise in an individual upon default in performance on the part of the other party.

'This right might be exercised either by legislative act or by the act of some officer properly empowered thereto. . . . The statute of 1879 does not give authority to any officer to rescind without judicial action; but the right of rescission existed in the state, and its exercise might be subsequently authorized through the lawmaking power, and an exercise of it, based upon the default of the other party, would not be a denial of any right of his. It could only be held that the right of rescission for default of the purchaser did not exist by holding that the contract provided that it should not exist, or that it should be exercised in a particular manner. But the contract embraces no such provision. There is no undertaking on the part of the state with the purchaser that the remedy prescribed in this statute, and no other, shall be pursued, unless it is to be implied from the mere presence of the provision in the statute, and we think it well settled that no such implication arises. In the proposition often stated in the decisions that parties contract with reference to existing laws, and that such laws become a part of the contract, the reference is to those laws which determine and fix the obligation of the contract, the correlative rights and duties springing from it, and not to laws of mere procedure prescribing remedies. With reference to these, there is ordinarily no obligation arising, but the contract is made in contemplation of the power of the legislature to change them. Of course, all remedy cannot be taken away, nor can the existing remedy be so altered as to take away or impair any of the rights given by the contract as interpreted by existing law. It is also true that a specific remedy, provided by the contract itself, cannot be changed by legislation, because it constitutes a part of the contract. International Bldg. & L. Asso. v. Hardy, 86 Tex. 610, 24 L. R. A. 284, 26 S. W. 497. But none of these limitations on legislative power are applicable to this legislation. The act of 1897 simply enforces a right which existed in the state from the formation of the contract. It takes away no right of the purchaser, unless it can be said that he had the right to demand that the particular remedy provided by the act of 1879 should be followed. This could only be true if the contract made that remedy exclusively applicable, which was not the case.

'That prompt payment of interest instalments was made an essential part of this contract is made very clear by the terms of the statute, as well as by its purpose, to provide available funds annually for the support of the public schools, and that a breach of his obligation to make such payment on the part of the purchaser gave the state the right to rescind the contract is equally clear. If the facts did not exist to authorize the action taken by the commissioner, that could be made to appear whenever such action came in question in the courts, and thus the purchaser could be deprived of no right by such action. The statute would only be taken as authorizing rescission when the right of rescission existed.' [93 Tex. 232, 54 S. W. 898.]

It will be observed that, in this opinion, the supreme court of Texas concedes that a contract of sale and purchase of land between the state and Dolan was created by the transactions as they are admitted to have taken place. It is also conceded that it was competent for the parties to have provided, as a substantive part of the contract, special remedies, each against the other, for the enforcement of their respective obligations, and that, in such a case, neither party could, without the consent of the other, resort to any form of remedy other than those stipulated for. But the court held that in the present case, there was no undertaking on the part of the state with the purchaser that the remedy prescribed for the state in the act of 1879, and no other, should be pursued, if the purchaser should fail to comply with his part of the contract; that § 12 of the act was not a contract with purchasers, but was a general law of the state, regulating its method of procedure against delinquent purchasers, and that purchasers in default had no vested rights in the form of remedy reserved by the state in its own behalf.

We are first confronted with a question of construction. The supreme court of Texas having held that § 12 was a law, and not a term of a contract with a purchaser, is it open for this court to put a different construction upon the statute? It is settled law that this court, when reviewing the final judgment of a state court upholding a state enactment alleged to be in violation of the contract clause of the Constitution, possesses paramount authority to determine for itself the existence or the nonexistence of the contract set up, and whether its obligation has been impaired by the state enactment. Jefferson Branch Bank v. Skelly, 1 Black, 436, 17 L. ed. 173; New Orleans Waterworks Co. v. ''Louisiana Sugar Ref. Co.'' 125 U.S. 18, 31 L. ed. 607, 8 Sup. Ct. Rep. 741; Mobile & O R. Co. v. Tennessee, 153 U.S. 486, 38 L. ed. 793, 14 Sup. Ct. Rep. 968; Chicago, B. & Q. R. Co. v. ''Nebraska ex rel. Omaha'', 170 U.S. 58, 42 L. ed. 948, 18 Sup. Ct. Rep. 513; McCullough v. Virginia, 172 U.S. 102, 43 L. ed. 382, 19 Sup. Ct. Rep. 134.

But as the general rule is that the interpretation put on a state Constitution or laws by the supreme court of such state is binding upon this court, and as our right to review and revise decisions of the state courts in cases where the question is of an impairment by legislation of contract rights, is an exception, perhaps the sole exception, to the rule, it will be the duty of this court, even in such a case, to follow the decision of the state court when the question is one of doubt and uncertainty. Especial respect should be had to such decisions when the dispute arises out of general laws of a state, regulating its exercise of the taxing power, or relating to the state's disposition of its public lands. In such cases it is frequently necessary to recur to the history and situation of the country in order to ascertain the reason as well as the meaning of the laws, and knowledge of such particulars will most likely be found in the tribunals whose special function is to expound and interpret the state enactments.

The legislation in question in this case is one of that general character, providing for the sale of public lands theretofore set apart for the benefit of common schools, and was enacted in twenty sections, on July 8, 1879, On April 6, 1881, an act was passed, amendatory of several of the sections of the act of 1879, but such amendments do not seem to have any important bearing on the case. On May 1, 1882, one Thomas Dolan made an application in writing to the country surveyor to purchase the land in question. Under the formalities of the statute, Dolan paid down, on June 22, 1882, the sum of $32, and gave his note, dated May 1, 1882, for the balance of the purchase money, being $608, payable in instalments with annual interest of 8 per cent upon the unpaid principal. Thereafter Dolan sold and conveyed said land to one Buckley, and by successive transfers the title of Dolan became vested, on April 4, 1888, in the Ostrander & Loomis Land & Live Stock Company,-each of the successive vendees assuming to pay the balance of the purchase money and interest, as provided in the obligation of Dolan. Said land with other tracts was mortgaged by said Land & Stock Company to the Knickerbocker Trust Company to secure the payment of $600,000. In 1892 the land company became insolvent, and in a suit in the district court of Tom Green county, to foreclose said mortgage, judgment was entered on May 17, 1898. Upon a sale on said judgment on the first Tuesday of July, 1898, the Dolan tract, with other lands, was bid in by T. K. Wilson, the plaintiff in error, for the sum of $3,250, and the sheriff executed and delivered to him a deed conveying the title of the said Ostrander & Loomis Land & Live Stock Company.

On August 20, 1897, the commissioner of the general land office of Texas, acting under the act of March 25, 1897, indorsed on the application of Thomas Dolan that said land was forfeited, and restored the said land to the public domain. Thereafter J. F. Standefer, on September 13, 1897, who was then residing with his family and being an actual settler upon said land, made his application in writing to purchase said land, and on Otober 25, 1897, the commissioner of the land office awarded said land to him, and Standefer paid down the money and gave his obligation to pay the balance of the purchase money with interest to the state, and has since said purchase paid all interest due upon his said obligation, and has continuously resided upon said land as a home, and has in all things strictly conformed to the laws and with the regulations adopted by the commissioner of the general land office.

On April 25, 1899, T. K. Wilson, through his attorneys, tendered to the state treasurer all the purchase money and back interest due on account of the Dolan purchase, and, on the same day, demanded from the commissioner of the general land office a patent for the land. This tender and demand were refused by the officers, giving the reason that said Dolan purchase had been forfeited on August 20, 1897, for nonpayment of interest, and because said land had afterwards, on September 13, 1897, been sold to J. F. Standefer.

It therefore appears that when T. K. Wilson bid in this land the interest on the Dolan purchase was in arrears from January 1, 1896, to July, 1898, and that when he made a tender to the state treasurer, more than three years' interest was in arrears, and that, in the meantime, and before Wilson's purchase, the land had been declared forfeited, and had been sold by the state for a valuable consideration to J. F. Standefer. While the agreed statement of facts shows that Wilson paid $3,250 for the lands bid in by him at the sheriff's sale, it does not appear how much, if any, of that sum was on account of the Dolan tract. It seems to have been a lump sum for all the lands bought by Wilson. At the time of that sale Standefer was in actual possession of and residing on the land in dispute. It may fairly be presumed that when Wilson bid at the sheriff's sale he knew of the forfeiture and sale of the Dolan tract, for they were matters of record. But whether this were true or not, he certainly had notice of an existing outstanding title by Standefer's actual possession, a fact admitted in the agreed statement of facts.

But whatever may have been the views of the state courts as to the legal rights and equities between the parties, the sole question for our consideration is whether the Supreme Court of Texas erred in overruling the contention of the plaintiff in error that the state was precluded by contract from changing its mode of procedure in respect to purchasers in default.

There seems to be no ground for complaint by the plaintiff in error in point of equity. His counsel does, indeed, contend that he was deprived by the change of remedy of a right to have the forfeiture declared by a judicial proceeding, and that he was thereby deprived of his property without due process of law. But this argument is refuted by the fact that the only question on which he had a right to be heard was whether he had made payment in compliance with his part of the contract. By the 12th section of the act of July, 1879, the purchaser was shut up to the defense whether he had paid the annual interest as provided for in his agreement. True he had a right to show that he had made the requisite payments, and thus defeat the forfeiture. But he had the same right and privilege under the act of March, 1897, which expressly provided that 'the purchaser of said land shall have the right, at any time within six months after such indorsement of 'Lands forfeited' to institute a suit in the district court of Travis county, Texas, against the commissioner of the general land office, for the purpose of contesting such forfeiture and setting aside the same, upon the ground that the facts did not exist authorizing such forfeiture, but if no such suit has been instituted as above provided, such forfeiture of the commissioner of the general land office shall then become fixed and conclusive; and provided, that if any purchaser shall die, or shall have died, his heirs or legal representatives shall have one year in which to make payment after the 1st day of November next after such death.' What would have been the rights of the parties, if time had not been given by the last statute within which to contest the forfeiture evidenced by the commissioners' indorsement, is a question not now necessary to be decided.

It is apparent that the purchaser was not deprived by the act of 1897 of the right to be heard in a court of justice as to the fact of payment. His position under that act was quite as favorable as under the prior act of 1879. It is scarcely necessary to say that this court, when asked to revise proceedings in state courts, have always held that due process of law is afforded litigants if they have an opportunity to be heard at any time before final judgment is entered. Walker v. Sauvinet, 92 U.S. 90, 23 L. ed. 678; Davidson v. New Orleans, 96 U.S. 97, 24 L. ed. 616; Spencer v. Merchant, 125 U.S. 345, 31 L. ed. 763, 8 Sup. Ct. Rep. 921; Gallup v. Schmidt, 183 U.S. 307, ante, 164, 22 Sup. Ct. Rep. 164; King v. Mullins, 171 U.S. 404, 43 L. ed. 214, 18 Sup. Ct. Rep. 925.

Neither Dolan nor any of the successors to his title availed of the opportunity to be judicially heard afforded by the law; and the reason for not doing so clearly appears in the admitted fact that the payments were in arrears for a considerable period of time. The tender made, if it could have had any legal effect at any time, was manifestly too late after the state had declared the forfeiture and sold the land to another.

Upon the whole, we agree with the conclusion of the supreme court of Texas, that no contract rights of a purchaser under the act of 1879 were impaired by the provisions of the subsequent act of 1897; that the 12th section of the act of 1897 was not, in legal contemplation, a sipulation by the state that the only remedy which might be resorted to by the state was the one therein provided for; that, in the language of Chief Justice Marshall, 'the distinction between the obligation of a contract and a remedy given by the legislature to enforce that obligation exists in the nature of things, and without impairing the obligation of the contract, the remedy may certainly be modified as the wisdom of the nation may direct.' Sturges v. Crowninshield, 4 Wheat. 122, 4 L. ed. 529.

The judgment of the Court of Civil Appeals for the Third Judicial District of the State of Texas is affirmed.