Wood IX: Winning the Willamette Valley Case in 1892

Wood won the case for his client, Lazard Freres, who owned the Willamette Valley and Cascade Mountain Road Company ("WV") in Matthew Deady's courthouse in Portland on May 12, 1890 but the appeal to the US Supreme Court in 1891 reversed Deady's ruling and remanded the case. The essence of Justice Samuel Blatchford's remand was twofold: (1) that the claim of laches or stale claim cannot be made against the federal government; and (2) that the government needed an opportunity to prove the charges of fraud made in their bill. In the words of the Justice:

"It cannot be properly held that, under the act of 1889, final adjudication can be made, on such pleadings alone, as to the extensive interests involved in this litigation," 140 US 632.

Thus, he was authorizing a case with testimony given by both sides on remand. This is precisely what we have in the WV case decided by Judge Gilbert, who just arrived on the district court bench earlier that year, on December 16, 1892 (reported in 55 F 711-18). The remainder of the essay will consider the remanded WV case.

The Remanded Case Before Judge William Ball Gilbert

Now that the government knew it had the blessing of the US Supreme Court to put on a case with witnesses and testimony, it came forward with the following case:

"that no portion of the road was constructed, as required by the act, within the time limited therein; that the certificates of the governor were fatally defective in form, and were procured by the fraud and misrepresentation of the wagon road company, and that the present grantees of the land (i.e., Lazard Freres) from the wagon road company purchased the same with knowledge of said facts," 55 F 714.

The essence of the government's case was that the owners of the road knew, nonwithstanding the certificates of the governor, that the road wasn't finished in 1871, that the governor didn't personally inspect the road nor was there any budget for road inspection but all the expenses of of the state inspector were paid for by the road company. Furthermore, the government alleged, the inspector was seen to be drunk and unable to perform his duty. The net effect of all these faults, in their mind, was that there was a fatal flaw in the entire process of certification, and that because of this the land should be forfeit to the federal government--the original grantor.

Wood Responds

Wood's anwer on behalf of the defendants Alexander Weill (a cousin of the Lazard brothers) and David Cahn (a half-brother of the Lazard brothers) set up the following four defenses, on which testimony was secured:

"(1) That the road was completed in all respects as required by the granting act and within the time limited; (2) That the certificates of the governors of Oregon were by the act made conclusive evidence of the completion of the road, and that upon the strength of said certificates the defendants became bona fide purchasers of the lands; (3) That, conceding that the road may not have been completed within the time limited, nevertheless, subsequently, and before any declaration of forfeiture by the United States (1889), the road was fully completed in the manner requred by the act, and thereby the forfeiture was avoided; and (4) That the defendants, after purchasing the lands, relied upon the action of congress in 1874 in directing the issuance of patents to said land...and the action of the secretary of the interior after his investigation in 1882, directing the issuance of patents, and in consequence thereof expended large sums of money...repairing said road..whereby the United States have become estopped to claim a forfeiture," Id. at 714.

The Court's Decision

Judge Gilbert methodically went through the four claims advanced by Wood. To the first, rather surprisingly, he seemed to agree with the government. More specifically, he stated that the road from Albany to the Deschutes River probably was adequately constructed but the road to the east:

"I am of the opinion that the evidence shows that, for want of bridges, this part of the road was not so constructed as to permit of its regular use as a wagon road," Id. at 715.

One for the government--even though the legal effect of this conclusion is far from clear at this point. On the second point, however, he squarely sided with defendants. He found no convincing evidence to impeach the reports of the inspectors (p. 716); he found that the defects in the forms of the certificates were just that--of form and not of substance. So he concluded, in a conclusion that would affect the rest of the case:

"There is no evidence that they (defendants) had notice of any fraud or misrepresntation on the part of the road company, or that any fact came to their notice that would have imposed upon them the duty of examining the road to see whether it had been constructed according to law...The defendants are clearly shown to be bona fide purchasers," Id. p. 717.

The judge was now on a roll; he handled the third and and fourth answers of defendants much more briefly. To the issue of timely completion of the road, the court held that any time prior to the grantor's "re-entry, or its equivalent" construction or completion of the road could be performed.

"At any time prior to that date (i.e., 1889), the grantee could lawfully comply with the condition subsequent (i.e., building the road), and thereby defeat the forfeiture. The evidence shows that this was done. In 1887 the whole road was repaired and completed by the erection of bridges and the construction of proper grades. The expenditure for that purpose was $89,000, and there can be no doubt that then, if not before, the road was completed in all respects in compliance with the terms of the granting act," Id. at 718.

Finally, though Justice Blatchford had said that the defense of a stale claim or laches wouldn't be permitted, he didn't explicitly say that the very near-neighbor estoppel couldn't be argued by defendants. Judge Gilbert, then, concluded that the government's bringing suit after all the facts of the case, related over the past several essays, was estopped from prevailing. In his words:

"These facts (the 1874 and 1882 patents, plus the money paid for improvements by the company in reliance on such patents) render it inequitable that the United States should at this late date, and after such long nonaction and acquiescence, assert title to the lands, or claim a forfeiture of the same for a failure to construct the road within the five years succeeding the land grant of July 5, 1866," Id.

Only one sentence more was needed: "The bill will therefore be dismissed," Id.

Conclusion

For all intents and purposes, this ended the litigation for the WV. They had won. Wood hit a home run for them, and their title to the complete road was unimpeachable. Though they may have paid about $150,000 for the road, with improvements and additional fees of various kinds that exceeded $250,000, within 18 years they would sell it all for $5,000,000-$6,000,000 (I have seen both figures). Quite a return on their investment! Surely Wood was worth the $50,000 in legal fees that he earned for arguing the case, even though Eugene Meyer, the SF Lazard Freres partner, tried to argue that he ought to charge them only $35,000.

One more essay is needed to state a few points from the 1893 Supreme Court decision, that was binding on the other road companies, and to list several questions/issues that remain for me in trying to understand Wood's contribution and role as attorney for the WV.

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