Opinion
Department One
Appeal from an order of the Superior Court of Humboldt County denying a motion for a new trial.
COUNSEL
The denials in the answer are insufficient to constitute an issue, and the allegations of the complaint must be taken as true. (Landers v. Bolton , 26 Cal. 417; 85 Am. Dec. 78; Gay v. Winter , 34 Cal. 161; Code Civ. Proc., sec. 590. See also Cunningham v. Skinner , 65 Cal. 385; People v. McCumber , 18 N.Y. 315; 72 Am. Dec. 515.) The patents, having been obtained by fraud by the original parties, should be set aside and canceled. (United States v. Minor , 114 U.S. 234; Moffat v. United States , 112 U.S. 24. See McGregor v. Donelly , 67 Cal. 151.) Title obtained by fraud makes the holder a trustee, and the purchaser from such holder with notice becomes a voluntary trustee for the state. (Plummer v. Brown , 70 Cal. 544; Smelting Co. v. Kemp , 104 U.S. 636; Moore v. Robbins , 96 U.S. 530.) The contract here made was clearly to evade the law (McGregor v. Donelly , 67 Cal. 150; Kreamer v. Earl , 91 Cal. 112), and therefore will be set aside as against public policy. (Dial v. Hair , 18 Ala. 800; 54 Am. Dec. 179; Smith v. Johnson , 37 Ala. 636.) The deeds to the defendants were made before the patents were issued, and they therefore purchased an inchoate or imperfect title, and must stand or fall by it as it existed in the hands of their grantors. (McSorley v. Hill, 2 Wash. St. 638.) The claim of innocent purchaser without notice does not aid such respondents. (Kramer v. Arthurs , 7 Pa. St. 170; Briscoe v. Ashby, 24 Gratt. 479; Taylor v. Weston , 77 Cal. 534.)
Attorney-General W. H. H. Hart, and John W. Turner, for Appellant.
Horace L. Smith, for Respondents.
The plaintiff is estopped from questioning the sufficiency of the answers for the first time upon appeal, as the action was tried upon the theory that the answers denied all the allegations of the complaint, and the plaintiff introduced evidence to prove the allegations of its complaint. (White v. San Rafael etc. R. R. Co ., 50 Cal. 417; Tevis v. Hicks , 41 Cal. 123; Smith v. Penny , 44 Cal. 161; Horton v. Dominguez , 68 Cal. 642.) The evidence is clearly insufficient to justify the cancellation of the patents. The evidence, to warrant such action, must be clear, unequivocal, and convincing. (Colorado Coal Co. v. United States , 123 U.S. 307.) Even if the land had been acquired by fraud, the title having passed to bona fide purchasers, the patents could not be canceled. (Colorado Coal Co. v. United States , 123 U.S. 307; United States v. Budd , 143 U.S. 575.)
JUDGES: Garoutte, J. Harrison, J., and Paterson, J., concurred.
OPINION
GAROUTTE, Judge
This action was brought by the state to cancel certain patents issued for redwood timber-land situated in Humboldt County. After the certificates of purchase were issued to the several entrymen, each respectively conveyed the land included in his certificate to David Evans, who subsequently conveyed to one J. D. Walker, and upon June 16, 1885, Walker conveyed to the defendants H. W. Swift, T. W. Harvey, and Robert J. Walker, as trustees for other persons. It is sought by plaintiff to cancel these patents, upon the grounds that they were procured by fraud and conspiracy practiced by the various parties to these transfers, in connection with other persons, for the benefit of and with the full knowledge and active consent of the defendant the California Redwood Company, a corporation. This corporation answered the complaint, denying the allegations thereof, and disclaiming any interest in the land involved in the litigation, and thereupon the action was dismissed as to such defendant. The defendants Swift, Harvey, and Walker denied the allegations of the complaint as to any fraud or conspiracy, admitted the land was conveyed to them as trustees, and set out that they held it in trust for the Humboldt Redwood Company, Limited, and that such company was a bona fide purchaser for a valuable consideration, and without notice of any fraud practiced in the procurement of the title from the state.
The plaintiff was nonsuited, and now appeals from the order denying the motion for a new trial. Many of the denials of the answer are as follows: "And further answering, this defendant says 'that he has no knowledge or information sufficient to enable him to form a belief as to the truth of or to answer the allegation in said complaint contained, that. .. . and therefore he denies the said allegation, and the whole thereof.'" It is now insisted by appellant that these denials are not sufficient to constitute an issue, and that all the allegations of the complaint, where such character of denial exists in the answer, must be taken as true. The form of the denials is neither in line with the statute, nor valuable for future precedent, yet no objection was made to its sufficiency in the trial court, and the case undoubtedly went to judgment upon the theory that these denials were sufficient to create an issue. While they are imperfectly made, we do not consider them fatally defective, in view of the fact that appellant treated them as creating an issue, by supporting the allegations of the complaint in such regard with evidence, and from the further fact that the trial court undoubtedly so considered the matter in passing upon the motion [31 P. 17] for a nonsuit. To now sustain appellant's contention, as to the insufficiency of the denials, would not only be an injustice to respondents, but an injustice to the trial court. As was said in White v. San Rafael etc. R. R. Co ., 50 Cal. 419: "The case seems to have been tried upon the supposition that the answer presented a sufficient denial to the allegations of the complaint, and to raise the objection for the first time in this court is too late."
If the defendants are bona fide purchasers for value without notice, their title cannot be attacked by the state, notwithstanding fraud was practiced by their grantors in securing the patents. The recent case of Colorado Coal Co. v. United States , 123 U.S. 307, is in many essential features similar to the case at bar, and there the court, speaking to this point through Mr. Justice Matthews, said: "It is fully established by the evidence that there was no actual settlements and improvements on any of the lands, as falsely set out in the affidavits in support of the pre-emption claims, and in the certificates issued thereon. This undoubtedly constituted a fraud upon the United States sufficient in equity as against the parties perpetrating it, or those claiming under them with notice of it, to justify the cancellation of the patents issued to them. 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."
It is insisted that defendants were not innocent purchasers, and for that reason are not entitled to the benefits of the rule quoted. Before passing to an examination of the record upon this point, we would say the evidence necessary to be produced in a court of equity to justify the setting aside of a patent to state or United States lands must be clear, convincing, and unequivocal. As was said in the Maxwell Land Grant Case , 121 U.S. 381: "It is not to be admitted that the titles by which so much property in this country and so many rights are held, purporting to emanate from the authoritative action of the officers of the government, and as in this case, under the seal and signature of the President of the United States himself, shall be dependent upon the hazard of successful resistance to the whims and caprices of every person who chooses to attack them in a court of justice; but 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."
The foregoing rule of evidence not only applies to the matter of fraud practiced upon the government by the entrymen or others in the actual procurement of the patents, but applies with equal force and effect to the good faith and innocence of the subsequent grantee.
Upon a careful examination of the record, we are of the opinion that the evidence entirely fails to establish the fact that defendants actually connived at, or had notice of, the fraud and perjury practiced in the procurement of these patents; for that some of them at least were procured through fraud and perjury amply sufficient to justify their cancellation by the state if held by the original parties or those claiming under them with notice, the evidence fully indicates. The actual purchasers of these lands were principally residents of Scotland, and it is not claimed that they were personally conversant with any of the details of the transaction; but it is insisted that their agent, one J. D. Walker, living in San Francisco, made the agreement of purchase with notice of the frauds to be practiced in the procurement of the title. We find but one fact in the case that to any degree casts suspicion upon the good faith and innocence of Walker in entering into this agreement of purchase, and that is the fact that he knew at the date of the agreement that the lands were the public lands of the state. But to create a suspicion of fraud, however strong that suspicion may be, is not sufficient under the rules of evidence by which we are guided; these parties should not lose their lands by a judgment based upon evidence from which suspicions, inferences, and conjectures of fraud only can be deduced; the stability of titles demands that a patent should only be annulled by a court of equity upon full and complete proof, -- upon testimony which the courts say must be "clear, unequivocal, and convincing." As against the suspicion of fraud created by Walker's knowledge that the title to these lands was vested in the state, we have his positive denials in detail of any participation in or knowledge of any fraud of any kind or character practiced in the procurement of these patents. His testimony, if true, sustains the judgment, and the character of the judgment clearly indicates that such testimony favorably impressed the trial court.
It is insisted that defendants having purchased the land before the patent issued, they simply purchased an equity, and that the rule of bona fide purchasers for value, without notice, does not apply to equitable titles. If defendants' title had not ripened into a perfect legal title by virtue of the issuance of the patents prior to the commencement of this action, there would be merit in the contention, under the authority of Taylor v. Weston , 77 Cal. 534. But in that case, after a careful review of the authorities, the opinion of the court concludes by saying: "It is hardly necessary to add, that in what we have said we have no reference to cases where the legal title has passed to the person through whom the bona fide purchaser claims." That is the status of this case exactly, and there can be no question but that these bona fide purchasers, being possessed of a perfect legal title at the time this attack was made, although having purchased prior to the issuance of the patent, were in no worse position than though the patent had issued prior to the date of their purchase.
Let the order be affirmed.