The government, like an individual, may maintain any appropriate
action to set aside its grants and recover property of which it has
been defrauded, and while laches or limitations do not of
themselves constitute a distinct defense as against the government,
yet the respect due to a patent, the presumption that all preceding
steps were observed before its issue,
Page 197 U. S. 201
and the necessity of the stability of titles depending on
official instruments demand that suits to set aside or annul them
should be sustained only when the allegations are clearly stated
and fully sustained by proof. In such a suit, the government is
subjected to the same rules as an individual respecting the burden
of proof, quantity and character of evidence, presumptions of law
and fact, and it is a good defense that the title has passed to a
bona fide purchaser for value without notice. Generally
speaking, equity will not simply consider whether the title was
fraudulently obtained from the government, but will also protect
the rights of innocent parties.
This suit was commenced in the Circuit Court of the United
States for the Western District of Wisconsin, on February 25, 1895,
to set aside the patents for fourteen quarter sections of land,
charged to have been fraudulently acquired by the defendant James
Stinson. The lands were entered under the preemption laws, in
1854-1855, by different individuals, and immediately thereafter
conveyed by them to James Stinson. The government, as admitted,
received $1.25 per acre, the statutory price for lands so entered.
The frauds charged are that the entrymen did not occupy and improve
the lands as required by law, and did not enter them for their own
benefit, but were employed by James Stinson to make the entries;
that he paid the purchase price to the government, and also paid
the entrymen for their services, and thus, in defiance of the
provisions of the statutes, obtained title to the lands. James
Stinson, in his answer, under oath, denied specifically the alleged
frauds. Quite a volume of testimony was taken. Upon this, the
circuit court found that it was not true, as alleged, that James
Stinson had been guilty of fraud in obtaining the title to the
lands, and dismissed the bill. This dismissal was affirmed by the
circuit court of appeals, 125 F. 907, from whose decree the United
States appealed to this Court.
Page 197 U. S. 204
MR. JUSTICE BREWER delivered the opinion of the Court.
While the government, like an individual, may maintain any
appropriate action to set aside its grants and recover property of
which it has been defrauded, and while laches or limitation do not
of themselves constitute a distinct defense as against it, yet
certain propositions in respect to such an action have been fully
established. First, the respect due to a patent -- the presumption
that all the preceding steps required by law have been observed
before its issue. The immense importance and necessity of the
stability of titles depending upon these official instruments
demand that suits to set aside and annul them should be sustained
only when the allegations on which this is attempted are clearly
stated and fully sustained by proof.
Maxwell Land-Grant
Case, 121 U. S. 325;
Colorado Coal Company v. United States, 123 U.
S. 307;
United States v. San Jacinto Tin
Company, 125 U. S. 273;
United States v. Des Moines &c. Company, 142 U.
S. 510;
United States v. Budd, 144 U.
S. 154;
United States v. American Bell Telephone
Company, 167 U. S. 224.
Page 197 U. S. 205
Second. The government is subjected to the same rules respecting
the burden of proof, the quantity and character of evidence, the
presumptions of law and fact, that attend the prosecution of a like
action by an individual.
"It should be well understood that only that class of evidence
which commands respect, and that amount of it which produces
conviction, shall make such an attempt successful."
Maxwell Land-Grant Case, supra, p.
121 U. S.
381;
United States v. Iron Silver Mining Co.,
128 U. S. 673,
128 U. S. 677;
United States v. Des Moines &c. Company, supra, p.
142 U. S.
541.
Third. It is a good defense to an action to set aside a patent
that the title has passed to a
bona fide purchaser, for
value, without notice. And, generally speaking, equity will not
simply consider the question whether the title has been
fraudulently obtained from the government, but also will protect
the rights and interests of innocent parties.
United States v.
Burlington & Missouri River Railroad Company, 98 U. S.
334,
98 U. S. 342;
Colorado Coal Company v. United States, supra, p.
123 U. S. 313,
a case in which, as here, suit was brought to set aside land
patents on the ground that they had been obtained by fraud, and in
which we said:
"But it is not such a fraud as prevents the passing of the legal
title by the patents. It follows that, to a bill in equity to
cancel the patents upon these grounds alone, the defense of a
bona fide purchaser for value, without notice, is
perfect."
United States v. Marshall Mining Company, 128
U. S. 579,
128 U. S. 589;
United States v. California &c. Land Company,
148 U. S. 31,
148 U. S. 41;
United States v. Winona &c. Railroad Company,
165 U. S. 463,
165 U. S.
479.
Waiving any inquiry as to the claim of ignorance on the part of
the government, in respect to the matters complained of, until
shortly before suit, and simply noting the fact that there was
fragmentary testimony tending to show notice at about the time of
the entries, sufficient to put upon the government the duty of
inquiry, we pass to consider the merits of the case. Forty years
intervened between the time of the
Page 197 U. S. 206
alleged fraud and the commencement of this suit. Six, at least,
of the fourteen preemptors were then dead. One of the living was
shown to be quite old, and to have failed in health and memory.
Only four were called as witnesses -- two by the government and two
by the defendant. The evidence of the former tended to sustain the
allegations of fraud, and that of the latter supported the denial
of the defendant. At such a lapse of time, it is not strange that
the memory of all the witnesses should be of doubtful reliability.
They might remember the general fact that they entered the land,
and that they received some money out of the transaction, but the
details -- the various acts and conversations -- might well be
forgotten. There is nothing to show that their attention was ever
called to the matter during the intervening time; nothing
transpired which would induce them to fix their memories upon any
particular facts. Even the testimony on behalf of the government
shows that they believed that they were engaged in a legitimate
effort to obtain title to the lands, and expected to make profit
out of them. They naturally took the steps in reference to
occupation and improvement which they were advised were sufficient,
and, having paid for the land, supposed that everything was
rightfully done. The conduct of defendant Stinson does not indicate
a consciousness of wrongdoing. He remained a resident of the
locality, the title was not transferred, there was no attempt to
place it in the hands of a
bona fide purchaser -- no such
conduct as would ordinarily characterize a conscious wrongdoer. He
came to Superior when it was a mere village, interested himself
with others in the building up of a city, having faith in its
future. The money which was invested in these lands was his
father's, and he took the title in his own name, but really in
trust for his father. Subsequently he became the owner of part or
all, and retained the title until after this suit was brought. The
lands, at the time of the entry, were in the forest, with only
scanty population within a reasonable distance, and apparently were
worth no more than the purchase price.
Page 197 U. S. 207
Now that Superior has grown to be a city, they have increased
largely in value. He engaged in financial operations, contracted
debts on the strength of a responsibility based upon the ownership
of these lands, and finally became so deeply in debt that the
property passed into the possession of a receiver, appointed at the
instance of his creditors. Although the latter may not be
technically a
bona fide purchaser, yet he holds the lands
for those who have dealt with the defendant Stinson on the faith of
his ownership, and they are equitably entitled to protection.
Further, the circuit court, on its review of the testimony,
found that there was no fraud, and decreed a dismissal, and that
finding and decree were approved by the court of appeals. While
such a finding is not conclusive upon this Court, yet it is
entitled to great consideration, and should not be disturbed unless
plainly against the testimony.
Putting all these things together, we are of the opinion that
the decree of the circuit court was right, and it is,
Affirmed.
