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of actual fraud, especially if such fraud has been concealed, time will not run in favor of the defendant until the discovery of the fraud, or until, with reasonable diligence, it might have been discovered. Meader y. Norton, 11 Wall. 442, 45S (20 L. Ed. 184); Prevost v. Gratz, 6 Wheat. 481 [5 L. Ed. 311); Michoud v. Girod, 4 How. 503, 561 [11 L. Ed. 1076); Veazie v. Williams, 8 How. 134, 149, 158 [12 L. Ed. 1018); Brown v. Buena Vista County, 95 U. S. 157 [24 L. Ed. 422]; Rosenthal v. Walker, 111 U. S. 185, 190 [4 Sup. Ct. 382, 28 L. Ed. 395); 2 Story, Eq. 1521a; Angell on Limitations."
In Linn & Lane Timber Co. v. United States, 196 Fed. 593, 116 C. C. A. 267, the Circuit Court of Appeals of the Ninth Circuit enforced. the rule referred to in the above citations, where the same statute as is here involved was pleaded in bar of the action.
It will be found from an examination of the cases cited that the rule enunciated by them did not arise from the construction of any particular statue of limitations, but was a rule of equity jurisprudence established soon after the enactment of the Limitations Act of 1623 (St. 21 James I, c. 16). This act contained no exception in regard to actions for fraud, where the fraud had been concealed; but the courts of equity in England established the rule upon the ground that:
"As fraud is a secret thing, and may remain undiscovered for a length of time, during such time the statute of limitations shall not operate, because, untui discovery, the title to avoid it does not completely arise." Hovenden y. Lord Annesley, 2 Schoales & L. 634.
The rule was considered by Mr. Justice Story in Sherwood v. Sutton, 5 Mason, 143 (1828) Fed. Cas. No. 12,782. In this case the statute of limitations of New Hampshire had been pleaded as a bar to an action for fraud and deceit in the sale of a vessel. There was a replication that there was a fraudulent concealment of the deceit until within the six-year period of limitation provided by the statute. On motion in arrest of judgment the replication was held good. The statute of New Hampshire was substantially a transcript of St. 21 James I, c. 16, and contained no special exception as to actions founded upon fraud where the fraud had been concealed during the period of limitation. The learned justice, after reviewing the English decisions, said:
"The inference deducible from this view of the cases is that the constructien adopted by these courts, that the concealment of the fraud avoids the bar of the statute of lii tations, is founded in solid sense, and is a natural limitation upon the language of the statute. I do not stop to inquire whether it is to be deemed an implied exception out of the words of the statute, or whether the right of action, in a legal sense, does not accrue until the discovery of the fraud. The authorities present some diversity of judgment in this respect. Perhaps the true mode of considering it would be that it is a continuing fraud during the whole period of its concealment, thus knitting it to the original wrong."
Counsel for appellees admit the existence of the rule stated above, but insist that it can only be invoked where the statute of limitations provides that the period of limitation shall commence to run from the cause of action or from the accrual of the cause of action, and that where, as in the present case, the period of limitation commences to run from a fixed date, namely, the date of the patent, that the Legislature has thereby repealed this equitable rule; or, in other words, the rule cannot be enforced by a court of equity in respect to the present, statute. It must be admitted that whether a period of limitation com
mences to run from a fixed date, or whether it commences to run from the accrual of the cause of action, affects in no way the reason upon which the rule is based. Take the present statute: It fixes the date of the patent as the time from which the six-year period shall run. Let us suppose that the statute had fixed the accrual of the cause of action as the time from which the six-year period of limitation should run. It will be seen that in the absence of the rule of concealed fraud the date in both cases would be the same, for the reason that the date of the patent would be the date of the accrual of the cause of action. Still it is claimed that because Congress fixed the date of the patent as the time from which the period of limitation should run, and not the time of the accrual of the cause of action, both dates being identical in the absence of the rule as to concealed fraud, that Congress thereby intended to, and did, abrogate in its entirety an old and undisputed principle of equity jurisprudence.
We should hesitate to impute to the lawmaking power such an intention for many reasons: First, there is nothing in the language of the statute which evidences any such intention; second, it would impute to Congress a desire to deprive the United States, in cases of concealed fraud, of a remedy to cancel patents obtained by fraud; third, it would make of a statute enacted to prevent fraud a formidable instrument for the making of fraud successful; fourth, there is no reason why the equitable rule in regard to concealed fraud should not be applied where the statute of limitations fixes a date certain, as well as where the statute provides that the limitation period shall run from the accrual of the cause of action ; fifth, it would render it possible for one who had defrauded the United States of land to prevent an inquiry in regard to the same by the commission of additional fraud; sixth, it would permit one to set off one fraud against another; seventh, it would allow one to take advantage of one's own wrong, which is not to be thought of in a court of equity. The truth is that the rule in regard to concealed fraud is so instinct with justice and common sense that it has been adopted by statute in the following states: Alabama, California, Connecticut, Iowa, Maryland, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New York, North Carolina, North Dakota, Ohio, South Carolina, Washington, Wisconsin, Oklahoma, and Utah.
We will now consider the cases which are cited in support of the contention of counsel for appellees.
United States v. Winona, etc., Railroad, 165 U. S. 463, 17 Sup. Ct. 368, 41 L. Ed. 789, is cited as a case which construed the statute now under consideration, and it is claimed that it was therein determined that it would matter not what the mistake or error of the land department was, what the frauds and misrepresentations of the patentees were, the patent, under the statute, after six years from its date, would become conclusive as a transfer of the title, provided only that the land was public land of the United States and open to sale and conveyances through the land department. This is practically the language used by Mr. Justice Brewer, at page 476 of 165 U: S., at page 371 of 17 Sup. Ct. (41 L. Ed. 789), in the opinion. An examination of the case, however, demonstrates beyond controversy that the limitation portion
of the act of 1891, as amended in 1896, was not before the court in any respect. Just following the language above stated, Mr. Justice Brewer said:
"It is true that these appellees cannot avail themselves of these limitations because this suit was commenced before the expiration of the time prescribed, and we only refer to them as showing the purpose of Congress to uphold titles arising under certification or patent by providing that after a certain time the government, the grantor therein, should not be heard to question them."
The limitation portion of the statute was not before the court for construction, and certainly no question of concealed fraud. The court did apply that portion of the statute which protects bona fide purchasers. The case is no authority whatever in support of the position of counsel for appellees.
United States v. Chandler-Dunbar Co., 209 U. S. 447, 28 Sup. Ct. 579, 52 L. Ed. 881, was a case where the United States sought to annul a patent for the reason that the land had been reserved for public purposes prior to the issuance of the patent. The Supreme Court decided that, whether this was true or not, the statute now under consideration barred a recovery by the United States. There was no question of concealed fraud in the case, and we see no reason why, in the absence of concealed fraud, the statute should not be enforced according to its terms.
Louisiana v. Garfield, 211 U. S. 70, 29 Sup. Ct. 31, 53 L. Ed. 92, is a case in which the statute involved in this action was in no wise in issue. The court there expressed a doubt as to whether the statute now being considered applied to approvals which are given the effect of patents, as well as to patents; but the court said that the doubt could not be resolved in that case, as it raised questions of law and fact upon which the United States would have to be heard.
Alexander H. Mall & Co. v. Ullrich (D. C.) 37 Fed. 653, was a case in the Northern district of Ohio, in which Judge Welker, in a memorandum, decided that section 5120 of the Revised Statutes (bankrupt law) provided an absolute bar where the petition was not filed within two years from the date of the discharge of the bankrupt. Such statutes stand in the same position as statutes relatii to the time in which appeals may be taken, and the case is not applicable to the question now before us.
United States v. Maillard et al., Fed. Cas. No. 15,709, was decided by Blatchford, District Judge, in 1871. Judge Blatchford held that, where a statute does not make a fraudulent concealment of the existence of the cause of action an exception to the running of the statute, the court has no right or power to make such exception, either directly, or by the indirect method of saying that the cause of action does not accrue in the case of a fraudulent concealment until the discovery of the fraud. In so deciding, the learned judge refused to follow Mr. Justice Story in Sherwood v. Sutton, supra, but followed the Supreme Court of New York. Troup v. Smith's Executors, 20 Johns. 33. In view of the fact that this case was decided in 1871, and that Bailey v. Glover, supra, was decided in 1874, we see no reason for citing it.
Pickett v. McGavick, Fed. Cas. No. 11,126, decided by Parker, Dis
trict Judge, in 1876, was another suit to set aside the discharge of a bankrupt, and it was there held that the two years provided by statute in which a suit could be brought to set aside the discharge ran from the date of the discharge, irrespective of when the fraud was discovered. In re Brown, Fed. Cas. No. 1,983, decided by Choate, District Judge, in 1879 is to the same effect. In regard to these two cases, they may have been correctly decided; but we make the same observation in relation to them that we did as to Mall v. Ullrich, supra.
United States v. Smith (C. C.) 181 Fed. 545, wherein District Judge Dean held that the period of limitation contained in the statute under consideration began to run from the date of the issuance of the patent, and not from the discovery of the fraud, was disapproved of on appeal in Linn & Lane Timber Co. v. United States, supra.
United States v. American Lumber Co., 85 Fed. 827, 29 C. C. A. 431, is also cited. The Circuit Court of Appeals of the Ninth Circuit, which decided this case, in Linn & Lane nber Co. v. United States, above mentioned, shows that it is no authority to support the position of counsel for appellees.
We are therefore clearly of the opinion that the decree appealed from must be reversed, and the case remanded to the United States District Court for the District of Colorado, with instruction to overrule the demurrer and allow appellees to plead to the bill.
And it is so ordered.
UNITED STATES V. AMERICAN SMELTING & REFINING CO. et al. 7 (Circuit Court of Appeals, Eighth Circuit. January 13, 1913.)
No. 3,809. Appeal from the District Court of the United States for the District of Colorado; Robert E. Lewis, Judge.
Suit in equity by the United States against the American Smelting & Refining Company and others. Decree for defendants, and the United States appeals. Reversed.
B. D. Townsend, Sp. Asst. Atty. Gen., of Washington, D. C. (Harry E. Kelly, U. S. Atty., of Denver, Colo., on the brief), for the United States.
Horace N. Hawkins, of Denver, Colo., for appellees,
Before SANBORN and CARLAND, Circuit Judges, and W. H. MUNGER, District Judge.
CARLAND, Circuit Judge. This case involves the same questions as have been determined in No. 3,808, United States of America v. Exploration Company, Limited, et al., 203 Fed. 387, and for the reasons stated in the opinion in that case the decree herein must be reversed, and the case remanded to the United States District Court for the District of Colorado, with instruction to overrule the demurrer and allow appellees to answer the bill.
And it is so ordered.
LINN & LANE TIMBER CO. et al. v. UNITED STATES.
UNITED STATES v. SMITH et al.
(Circuit Court of Appeals, Ninth Circuit. February 24, 1913.)
Nos. 1,972, 1,973. LIMITATION OF ACTIONS (8 100*)—SUIT TO CANCEL PATENTS-LIMITATION.
The limitation of six years prescribed by Act March 3, 1891, c. 561, 8 8, 26 Stat. 1099 (U. S. Comp. St. 1901, p. 1521), for suits by the United States to annul patents to lands, in case of suits based on fraud, where the fraud has been purposely concealed, does not begin to run until it is discovered.
[Ed. Note.-For other cases, see Limitation of Actions, Cent. Dig. $$ 323, 480-493; Dec. Dig. § 100.*] On petition for modification of decree, Decree amended. For former opinion, see 196 Fed. 593.
John Lind, A. Ueland, and W. M. Jerome, all of Minneapolis, Minn., and John M. Gearin, of Portland, Or., for appellants Linn & Lane Timber Co.
John McCourt, U. S. Atty., of Portland, Or.
PER CURIAM. This case came on for rehearing upon motion of the district attorney of the United States for an amendment of the decree of this court rendered on May 20, 1912, the decision wherein is reported in Linn & Lane Timber Co. v. United States, 196 Fed. 593, 116 C. C. A. 267.
The motion is based upon the expression of the views of this court in that part of the opinion in which additional ground was found for sustaining the conclusion of the court below as to the lands which were patented on August 12, 1902; that court having found that as to those lands the suit was not barred by the statute of limitations. This court sustained the court below in that conclusion, principally upon the ground that the Linn & Lane Timber Company and C. A. Smith were one and the same; the corporation belonging to him, and organized by him for no other purpose than to conceal therein the title to the lands which were conveyed to it. The additional ground which this court found for sustaining the court below was that the fraud complained of in the bills had been concealed by the defendants, and had not been discovered by the plaintiff until long after the date of the patents, and that the suits had been commenced within the period of six years after such discovery of fraud.
It is now urged that upon the opinion of this court so expressed, the United States, which also appealed from the decree of the court below, was entitled to a decree setting aside all the patents involved in the suits, including those for which patents issued on July 9, 1902, *For other cases see same topic & $ NUMBER in Dec. & Am. Digs. 1907 to date, & Rep'r Indexes