199 U. S. WHITE, MCKENNA and HOLMES, JJ., dissenting. My mind cannot perceive how this contract can be held valid, testing its provisions by the statutory prohibitions, for it is settled that the requirement of specific statements in the affidavit implies a prohibition against the doing of that which the preemptor must swear in the affidavit that he had not done. Let me consider what the statute thus requires the preemptor to swear, in connection with the contract, in order to test the conflict between them. The preemptor must swear "that he has not settled upon and improved such land to sell the same on speculation, but in good faith to appropriate it to his own exclusive use." Could this statement have been truthfully made in view of the agreement by which the preemptor bound himself after his purchase, if he sold the land, to pay to the other parties to the contract one-fourth part of the purchase price? Further, the statute requires the preemptor to swear "that he has not, directly or indirectly, made any agreement or contract, in any way or manner, with any person whatsoever, by which the title which he might acquire from the Government of the United States should inure in whole or in part to the benefit of any person except himself." Was the affidavit made by the preemptor in this case true when, at the time it was made, he had executed a contract or agreement by which, when the property was sold, onefourth of the price should go to the benefit of the other parties to this contract? Concede that technically the contract did not purport to be an agreement on the part of the preemptor to convey the legal title to one-fourth part of the land to the other parties to the agreement, can it in reason be said that the agreement did not directly or indirectly provide that the title when acquired should inure in whole or in part to the benefit of other contracting parties? To my mind the statute seems so plain and the terms of the contract to be so clearly in violation of its provisions that there can reasonably be no room for construction. But it is said the statute simply prohibits agreements on WHITE, MCKENNA and HOLMES, JJ., dissenting. 199 U. S. the part of the preëmptor, by which the title which he might acquire would inure in whole or in part to the benefit of any other person than himself; therefore, to constitute a violation of the statute, it must be found that the contract bound the preëmptor, after he had acquired the land, to convey a onefourth interest in the title to the land. But this disregards the fact that the statute expressly forbids the doing of the prohibited thing, either "directly or indirectly," and prohibits "any agreement or contract," in any way or manner whatsoever, by which the title to be derived from the Government of the United States should inure, in whole or in part, to the benefit of any person except the preëmptor. It is clear, to my mind, that the words "directly or indirectly and in any manner" were obviously intended to embrace evasions and subterfuges by which the policy of the statute might be frustrated that is, the prohibition against giving to another person than the preëmptor the benefit, in whole or in part, of the results of acquiring the land from the United States. In Anderson v. Carkins, 135 U. S. 483, dealing with an affidavit of a homesteader, where the requirements were less stringent than exacted in preemption cases, it was decided that the existence of an agreement to convey after patent a part of the land to another was void as against public policy. To me that case is decisive of this. It is said, however, there the obligation was to convey the land, whilst here there was no obligation on the part of the preemptor to convey or to sell the land after he acquired it, but only an obligation if he did sell to pay the one-fourth of the proceeds. But it cannot be meant by this to say that there was no contract, because the agreement was so purely potestative on the part of the preëmptor as not to imply an obligation, since the contract is enforced by the decree now rendered. Suppose, however, that the contract could be divided and held to imply an obligation to pay over to another a portion of the purchase price, after the obtaining of a patent, only in case the preemptor chose to sell, does such construction relieve the contract from 199 U. S. WHITE, MCKENNA and HOLMES, JJ., dissenting. the prohibitions of the statute? It seems to me not, because to so hold would simply be to permit mere form and not substance to control. In Pollock v. Farmers' Loan & Trust Co., 157 U. S. 429, the question was whether Congress could, in levying an income tax, include as part of the taxable income revenues derived from real estate. It was held that it could not be done, because substance was to control, and that to include rents in the income taxed was to impose a direct burden on the owner of the real estate. After quoting from Co. Lit. 45, the declaration "For what is the land but the profits thereof," and a passage in Jarman on Wills, stating that a devise of the rents and profits or of the income of lands passes the land itself, both at law and in equity, the court said (p. 581): "The real question is, is there any basis upon which to rest the contention that real estate belongs to one of the two great classes of taxes, and the rent or income which is the incident of its ownership belongs to the other? We are unable to perceive any ground for the alleged distinction. An annual tax upon the annual value or annual user of real estate appears to us the same in substance as an annual tax on the real estate, which would be paid out of the rent or income." This being the rule settled by this court, simply as to the right to receive the fruits of real estate, I do not perceive why, in view of the sweeping prohibitions of the act of Congress, the existence of a continued obligation to pay over the price of real estate to another person when sold, does not amount to an agreement giving to such person, at least indirectly, an interest in the land itself. Having said that, in my opinion, there was no ambiguity in the statute as applied to the contract, it seems to me unnecessary to consider the decided cases. But I refer briefly to them. True it is that there are rulings of state courts and of the Land Department, holding that an agreement to execute a mortgage upon preëmpted land is not within the prohibition of the statute. When the opinions so holding are analyzed it will be seen that they proceed upon the theory WHITE, MCKENNA and HOLMES, JJ., dissenting. 199 U.S. that the spirit of the statute does not embrace transactions of that character. For the purposes of this case, however, it does not seem to me essential to say whether or not such rulings are correct, as an agreement to mortgage to repay a given sum advanced, to enable the preemptor to improve the land, might well be held not to be within the spirit of the prohibitions of the statute, and yet such rulings would not be controlling as to an agreement like the one here in question, especially if the contract is construed as amounting to a perpetual obligation to transfer to a third person upon a sale of the land a given portion of the price. Such a contract at once puts the person in whose favor it is made in the attitude, not of a lender entitled to receive back his loan with simple interest, but in the position of a speculator who is to benefit from the enhancement in value of the land which may arise in the future, without reference to the amount of any expenditure by him made, a character of transaction which it was the express purpose of the act of Congress to forbid. Myers v. Croft, 13 Wall. 291, 295. And from another point of view such a transaction puts the preemptor making it in a position where his plain interest is not to improve and develop the land to its full capacity, because the labor expended for that purpose would ultimately inure in case of a sale of the land to the benefit of a third person. Deeming that the contract in question was within the prohibitions of the act of Congress and void as against public policy, I do not think the court should lend its aid to its enforcement, and I therefore dissent, and am authorized to state that MR. JUSTICE MCKENNA and MR. JUSTICE HOLMES concur therein. 199 U. S. Syllabus. ROYAL INSURANCE COMPANY v. MILLER. ERROR TO THE DISTRICT COURT OF THE UNITED STATES FOR THE DISTRICT OF PORTO RICO. No. 7. Argued October 17, 18, 1905.-Decided November 27, 1905. The owner of an estate in Porto Rico mortgaged the property to a bank, the mortgage being granted by notarial act describing the property and the fruits thereof and declaring that it was all planted in cane except certain specified parts including the sugar manufactory and that the loan secured was to enable the borrower to develop and keep the plantation; as additional collateral the owner delivered to the bank a policy of fire insurance on "stock of sugar and molasses deposited in the sugar manufactory on the estate" which was not to take effect, however, until several months thereafter; after the policy took effect and during its life the sugar house and stock was burned; action was not brought until more than fifteen but less than twenty years thereafter. Meanwhile the bank had become bankrupt and a special master appointed with power to collect the assets thereof. In an action by the special master on the policy the company denied liability and the plaintiff's capacity to sue, also pleading prescription. The lower court permitted one of the parties claiming an after-acquired interest in the policy antagonistic to the plaintiff to be joined as party plaintiff. A verdict was rendered for both against the company. In sustaining the verdict, Held, that: Where the decree appointing a special master gave him express authority to sue to collect all assets of the bankrupt, the fact that he was merely designated as special master did not deprive him of the special powers to sue conferred on him by the decree. Under the law in force in Porto Rico the growing crop was, by operation of law, included in the mortgage to the bank even though it had not expressly purported to embrace the fruits growing upon the mortgaged premises. The growing crop continued to be affected by the mortgage after its harvest or manufacture into sugar up to the time of its removal or warehousing. The rights of the mortgage creditor attached to indemnity for insurance upon the mortgaged property, including the crops, provided the loss occurred after the execution of the mortgage. In countries governed by the civil law a mortgage is indivisible and where junior incumbrances have not acquired rights necessitating a different course a mortgagee may assert the entirety of his mortgage rights against any or all of the property affected by the mortgage. In the absence of express Spanish legislation affecting Porto Rico the law prior to the extension of the Civil Code thereto in 1889 concerning limiVOL. CXCIX-23 |