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ers' final receipts, and subsequently acquires the legal estate evidenced by patents issued upon them, is charged with notice of fraud and perjury in the inception of his title from the government, and cannot be a bona fide purchaser. U. S. v. Steenerson, 50 Fed. 504, 1 C. C. A. 552; American Mortgage Co. v. Hopper (C. C.) 56 Fed. 67; Id., 64 Fed. 553, 559, 12 C. Č. A. 293, 299; Diller v. Hawley, 81 Fed. 651, 655, 26 C. C. A. 514, 518; Hawley v. Diller, 178
U. S. 476, 20 Sup. Ct. 986, 44 L. Ed. 1157; U. S. v. Bailey, 17 Land Dec. 468; Orchard v. Alexander, 157 U. S. 372, 15 Sup. Ct. 635, 39 L. Ed. 737; Parsons v. Venzke, 164 U. S. 89, 91, 17 Sup. Ct. 27, 41 L. Ed. 360; Guaranty Savings Bank v. Bladow, 176 U. S. 448, 453, 20 Sup. Ct. 425, 44 L. Ed. 540; California Redwood Co. v. Litle (C. C.) 79 Fed. 854; Id., 87 Fed. 1004, 31 C. C. A. 591. But these authorities fail to sustain the proposition. They are cases in which the final receipts which evidenced equitable titles were avoided by the officers of the Land Department before the legal estate had been vested in the innocent purchasers. In these cases the courts held that the receiver's final receipt is prima facie evidence of the right of the entrymen to a patent; that the power is vested in the Land Department to set this aside and to cancel the entry it evidences for fraud or error after proper notice to the parties in interest, and in this way to take away from the innocent purchaser his prima facie evidence of title; that this power is not arbitrary or unlimited, but its exercise is always subject to judicial inquiry; that it is limited in duration to the time anterior to the issue of the patent; and that the avoidance of the receipt and the cancellation of the entry do not strike down the right of the purchaser to enforce the equitable title which he has purchased in the courts of the land, but that its effect is to compel him to sustain that title by evidence de hors the receipt. But the case in hand is not ruled by these conclusions. The Land Department did not avoid, it confirmed, the voidable title which the Detroit Company purchased by adding to it the legal title. The receiver's final receipts were not notice of fraud and perjury in their procurement. They were notice of honesty and legality in the proceedings that induced their issue. They were prima facie evidence that those who received them had the right to patents to the lands, and they raised the legal presumption that entrymen and officers alike had complied with the law. They were notice to the Detroit Company of the power of the Land Department to avoid them for fraud or error before the patents were issued, and of no other defect or danger, and the authorities cited for complainant express no different opinion. The Detroit Company took its equitable title to the timber subject to this notice, and subject to the possible exercise by the Land Department of this power. That department exercised the power, as the legal presumption was that it would exercise it, by affirming the validity of the voidable titles and by issuing the patents upon them. Here the effect of the notice from the purchase of the equitable titles ceased. The only reason that purchase gave notice of a voidable title was the fact that it did not acquire the legal title. The moment the legal estate inured to the benefit of the Detroit Company by the issue of the patents without notice of any fraud or irregularity in their procurement, its defense of a bona fide purchase was complete. It contained every essential element
of a complete defense except the legal title before the patents were delivered. It was the lack of the legal title, and that alone, that made its defense vulnerable in the Land Office. When the patents had issued, the power of the Land Department had ceased, and the Detroit Company's position was conditioned by every attribute of that of a bona fide purchaser. Conceding that the indispensable elements of such a defense are absence of notice of the fraud or defect, good faith, payment of value, and the legal estate, it is not material at what time or in what order the purchaser acquires them. It is only necessary that they all concur in him at the same time. It is indispensable to this defense that the consideration should be paid before notice of the defect. But it is not essential that it should be paid before or at the time the title is conveyed. It is sufficient if the payment is completed at any time before notice of the defect is received. It is not more essential that the legal title should be secured before or at the time when the consideration is paid. It is enough if it is acquired before notice of the alleged fraud or perjury is fastened upon the purchaser.
The legal title to the timber upon 13 of the tracts in dispute vested in the Detroit Company on January 14, 1901, when it purchased of the Martin Company. Its defense to the attack upon the title to the timber upon these tracts did not, however, become complete until April 22, 1901, when it finished its payment of the purchase price of the property. Its title then became unassailable at the suit of the government for fraud or perjury which induced the issue of the patents. U. S. v. Winona & St. Peter R. Co., 15 C. C. A. 96, 109, 67 Fed. 948, 961 ; U. S. v. Burlington & M. R. Co., 98 U. S. 331, 342, 25 L. Ed. 198; U. S. v. California & Oregon Land Co., 148 U. S. 31, 41, 13 Sup. Ct. 458, 37 L. Ed. 35+. On May 9, 1901, four months before it received any intimation of any defect in its title and eleven months before this suit was instituted, the patents to the other 31 tracts had issued, and the legal estate in the timber upon them had been vested in the Detroit Company. The purchase price had been paid in full. The legal title had been acquired. No notice of any fraud or perjury in the inception of, or of any defect in, the title which it had bought, and which had passed from the complainant to it when the patents were issued (Sandels & H. Digest, $ 699), had been received. Why was not its defense that it was a bona fide purchaser impregnable? No satisfactory answer to this question has occurred to us, and our conclusion is that one who purchases in good faith and pays value for the equitable title to land of the government evidenced by the receiver's final receipt, and who subsequently, and before receiving notice of any fraud or defect in hi title, acquires the legal estate through the issue of the patent, is a bona fide purchaser, and his title is unassailable at the suit of the United States to avoid the patent for fraud or perjury of the immediate or s mote grantors of the purchaser. Colorado Coal Co. v. U. S., 123 U.S. 307, 309, 322, 8 Sup. Ct. 131, 31 L. Ed. 182; U. S. v. Clark (C. C.) 125 Fed. 774, 776.
Finally, this is a suit in equity. The equitable claims of the United States appeal to the conscience of a chancellor with the same, but with no greater or less, force than would those of an individual in like circumstances. Bona fide purchasers are the especial favorites of courts of equity. In Boone v. Chiles, 10 Pet. 177, 209, 9 L. Ed. 388, Mr. Justice Baldwin, in delivering the opinion of the Supreme Court, said:
"A court of equity can act only on the conscience of a party. If he has done nothing that taints it, no demand can attach upon it so as to give any jurisdiction. Sugd. Vend. 722. Strong as a plaintiff's equity may be, it can in no case be stronger than that of a purchaser who has put himself in peril by purchasing a title and paying a valuable consideration without notice of any defect in it or adverse claim to it; and when, in addition, he shows a legal title from one seised and possessed of the property purchased, he has a right to demand protection and relief (9 Ves. 30–34), which a court of equity imparts liberally."
Conceding now, for the purpose of the remainder of this discussion, that the Detroit Company purchased and paid for the equitable estate evidenced by the final receipts in the first instance, and that it did not acquire the legal title until the patent issued, what has that company done to taint the conscience of any one, or to entitle the government to any relief against it in this suit?' The record discloses nothing. The general rule in chancery is that, where equities are equal, the defendant prevails; that it is only when the case of the complainant appeals to the conscience of the court with the greater force that it will interfere to grant relief. St. Johnsbury v. Morrill, 55 Vt. 165, 169; 2 Pom. Eq. Jur. § 739; Colyer v. Finch, 5 House of Lords Cas. 694, 706; Medlicott v. O'Donel, 1 Ball & Beatty, 156, 171. Here the equity of the government is far less persuasive than that of the Detroit Company. The former has received and still retains $17,000, the purchase price which it fixed for these lands; and it asks this court that the timber upon them, which constitutes their only real value, be taken from the defendant, which has innocently bought and paid for it, and restored to the complainant. It issued its final receipts, which were prima facia evidence of a right in the grantees therein named to the title to these lands, and the Detroit Company purchased and paid for the timber upon them in reliance upon these certificates, without notice of any fraud in their procurement. The company seeks no relief, but prays only that it be permitted to retain that which it bought and paid for in good faith, while the complainant seeks to keep the purchase price of the property which it sold and to recover back the property itself. The equity of the defendant is the stronger. Not only this, but the Detroit Company has added to its equitable title the legal estate in the timber. Where equities are equal, the law must prevail. A court of equity will not interfere at the suit of the holder of a prior equitable title or claim to deprive the innocent purchaser for value of a junior equitable estate of equal strength of a legal title which he has subsequently bought or obtained after notice of the defect. It will not disarm a bona fide purchaser, or take from him the shield of any legal advantage. 1 Story, Eq. Jur. (13th Ed.) $ 64c; 2 Pom. Eq. Jur. § 766; Bosset v. Nosworthy, 2 Leading Cases in Equity (4th Ed.) 71; Bayley v. Greenleaf, i Wheat. 46, 57, 5 L. Ed. 393; Lea v. Polk County Copper Co., 62 U. S. 493, 498, 16 L. Ed. 203; Dueber Watch-Case Mfg. Co. v. Dougherty, 62 Ohio St. 589, 596, 57 N. E. 455; Zollman v. Moore, 21 Grat. 313, 321. In Dueber Watch-Case Mfg. Co. v. Dougherty, one Coburn held stock in the company, for which he had paid nothing, and which he had agreed to transfer back to the corporation. While this stock
stood in his name he induced Dougherty and another to indorse his note by making an agreement with them that he would subsequently transfer the stock to them as collateral security for his liability to them upon their indorsenient. At the time when the indorsement was made the indorsers had no notice of the right of the company to the stock, but they received notice of that right before Coburn assigned the stock to them. After this notice Coburn made the assignment. The court sustained the claim of the indorsers, and said:
"And here it will be observed that the claim of the company is not that of an innocent purchaser for value. Its claim is that of a mere equity for a reconveyance, prior in time, to the equity of the plaintiffs. The contest is simply between equities. In such cases the settled doctrine is stated by Pomeroy to be 'that, if a second or other subsequent holder, who would otherwise be postponed to the earlier ones, obtains the legal estate, or acquires the best right to call for the legal estate, he thereby secures an advantage which entitles him to priority. It is absolutely essential that he should have acquired his equitable interest without any notice of the prior claims.' Pomeroy, Eq. $ 727; also section 729; Adams, Eq. 161, 162.
The plaintiffs seem to be clearly within the rule here stated. They had no knowledge of the company's claim when they acquired their equity, and had a right to protect it by taking an assignment of the stock for that purpose, which they did on January 7, 1892, though at that time they had knowledge of the company's claim. This gives to them an unquestioned priority over the company, and the right to a sale of the stock for the satisfaction of their claim.”
The case at bar falls far within the rule which these cases illustrate, and differs from them only in the fact that the Detroit Company not only received no notice of the alleged fraud before it purchased its equitable estate, but it received no notice of it until it had also acquired the legal title to the timber.
For the reasons which have now been stated, perhaps at too great length, the United States is not entitled to recover from the Detroit Company the timber which it purchased, to enjoin it from removing that timber from the lands, or to avoid the convevances which vested the title to the timber in the company.
For the same reasons the government is not entitled to a decree avoiding the patents or the subsequent conveyances of the 27 tracts of land which th Detroit Company purchased and obtained deeds of from the entrymen and entrywomen before it had notice of any defects in the titles, and before this suit was commenced.
There remain 17 tracts of land the title to which still stands in the original applicants and patentees. The Detroit Company owns the timber upon these lands, and has the right to remove it according to the terms of the timber contracts. The land without the timber is of little, perhaps of no, value. The evidence in this record has convinced, not that these applicants made any agreements by which the title which they might acquire should inure to the benefit of any person except themselves, but that each one of them applied to enter the lands he or she obtained on speculation for the use and benefit of the MartinAlexander Lumber Company and not in good faith to appropriate it to his or her own exclusive benefit. The salient facts which were proved in this case and which have forced our minds to this conclusion appear in the statement which precedes this opinion, and no good purpose would be subserved by restating them here.
The decree below is accordingly reversed, and the case is remanded to the Circuit Court, with instructions to enter a decree to the effect that the patents issued to the defendants John H. Scott, Thomas J. Clements, Jim P. Copeland, John H. Wilson, Robertson C. Gregory, Martha Gregory, Joseph O. Means, Archibald G. Winslow, Caroline H. Means, Emma Winslow, James F. Patterson, Gus C. Copeland, George T. Colston, Henry Jones, Sherman Garrison, Barbara Garrison, and Bill D. Copeland be avoided, with costs in favor of the United States against them and the Martin-Alexander Lumber Company, and that the complainant is entitled to no relief against the Detroit Timber & Lumber Company, and the bill against it and the other defendants not named above be dismissed, with costs. It is so ordered.
PATILLO et al. v. ALLEN-WEST COMMISSION CO.
No. 1,920. 1. LIMITATION OF ACTIONS-AMENDMENT OF PLEADING-RELATION TO BEGIN
NING OF ACTION.
An amendment to a petition, which sets up no new cause of action or claim, and makes no new demand, but simply varies or expands the allegations in support of the cause of action already propounded, relates back to the commencement of the action, and the running of the statute against the claim so pleaded is arrested at that point. But an amendment which introduces a new or different cause of action, and makes a new or different demand, does not relate back to the beginning of the action, so as to stop the running of the statute, but is the equivalent of a fresh suit upon a new cause of action, and the statute continues to run until the amendment is filed; and this rule applies although the two causes of action arise out of the same transaction, and, by the practice of the state, a plaintiff is only required in his pleading to state the facts which constitute his cause of
action. 2. SAME-RULE APPLIED.
A complaint stated facts from which the law raises the legal presumption of a promise to pay the balance of an account stated, and demanded judgment for that amount. An amendment was made to this complaint by adding to it an averment of a promise to pay the balance of the stated account. Held, this amendment presented no new cause of action, but simply expanded the allegations in support of the cause of action presented in the original complaint, and the amendment related back to the commencement of the action, where the running of the statute of limitations
against the cause of action upon the account stated ceased. 3. ACCOUNT STATED-ESTOPPEL TO DENY LIABILITY.
An account stated, conceded to disclose some just indebtedness received and retained by the debtor without objection for an unreasonable time, estops him, in the absence of fraud or mistake, from denying his liability for all the items it contains, and raises the legal presumption of his promise to pay the balance. A consideration and legal liability for each item outside of the stated account is not essential to sustain a cause of action to recover its balance. The balance is one debt, regardless of the items,
and a consideration for that debt is suificient. 4. TRIAL-COURT MAY WITHDRAW QUESTION OF FACT FROM JURY.
Where the evidence upon a question of fact is so clearly preponderant, or of such a conclusive character, that the court would be bound, in the
(3. See Account Stated, vol. 1, Cent. Dig. $$ 31, 42.