APPEAL FROM THE CIRCUIT COURT OF APPEALS FOR THE EIGHTH CIRCUIT.
MR. JUSTICE HARLAN delivered the opinion of the court.
By an act approved March 3, 1887, c. 376, 24 Stat. 556, (amended by act of March 2, 1896, c. 18, and by act of March 2, 1896, c. 39, 29 Stat. 6, 42), Congress provided for the adjustment of land grants theretofore made in aid of the construction of railroads and for the forfeiture of unearned lands, and for the relinquishment or reconveyance to the United States of lands which had been certified or patented to or for the use of any railroad company.
If upon completing such adjustment it appeared that from any cause lands had been erroneously certified or patented by the United States, to or for the use of a railroad company, by, through or under grant from the United States, to aid in the construction of a railroad, then it became the duty of the Secretary of the Interior to demand the relinquishment or reconveyance of such lands to the United States, whether within granted or indemnity limits; and if such demand was not complied with by a named time, then the Attorney-General was to institute the necessary proceedings to cancel all patents, certificates or other evidence of title issued for such lands, and to restore the title to the United States. Provision was made for the protection, by patents, of purchasers in good faith from the grantee company, and the Secretary of the Interior was required to demand, on behalf of the United States, "payment from the company which has so disposed of such lands of an amount equal to the Government price for similar lands;" and if payment was refused, within a time named, "the Attorney-General was to institute suits against the company for such amount." 24 Stat. 556; 29 Stat. 6, 42.
Under the authority of that act the present suit was brought by the United States in 1903. It relates to about
,300 acres of lands in Kossuth, Palo Alto and Dickinson Counties Iowa, which, the United States alleges, were erroneously patented (in 1880) to the defendant railway company. That company sold the lands to purchasers in good faith, and refuses to account to the United States for the proceeds of such sales.
The relief asked is a decree compelling the railway company to account for such proceeds, and declaring such indebtedness to be a lien upon all funds in its hands realized from the above sales. The company took issue with the Government by answer, but before the cause was heard the material facts were stipulated by the parties. The Circuit Court dismissed the bill and its judgment was affirmed by the Circuit Court of Appeals.
In order that the grounds upon which the lower courts proceeded may fully appear, the circumstances under which the defendant railroad company became connected with the lands must be stated.
By an act passed May 12, 1864, c. 84, 13 Stat. 72, Congress, in aid of the construction of certain railroads, granted to the State of Iowa, for the use and benefit of the McGregor Western Railroad Company, "every alternate section of land designated by odd numbers for ten sections in width on each side of said roads; but, in case it shall appear that the United States have, when the lines or routes of said roads are definitely located, sold any section or any part thereof granted as aforesaid, or that the right of preemption or homestead settlement has attached to the same, or that the same has been reserved by the United States for any purpose whatever, then it shall be the duty of the Secretary of the Interior to cause to be selected, for the purposes aforesaid, from the public lands of the United States nearest to the tiers of sections above specified, so much land in alternate sections, or parts of sections, designated by odd numbers, as shall be equal to such lands as the United States have sold, reserved, or
otherwise appropriated, or to which the right of homestead settlement or preemption has attached, as aforesaid, which lands thus indicated by odd numbers and sections, by the direction of the Secretary of the Interior, shall be held by the State of Iowa for the uses and purposes aforesaid: Provided, That the lands so selected shall in no case be located more than twenty miles from the lines of said roads: Provided, further, That any and all lands heretofore reserved to the United States by any act of Congress, or in any other manner by competent authority, for the purpose of aiding in any object of internal improvement or other purpose whatever, be, and the same are hereby, reserved and excepted from the operation of this act, except so far as it may be found necessary to locate the routes of said roads through such reserved lands, in which case the right of way shall be granted, subject to the approval of the President of the United States." The provisions of this act were duly accepted by the State in 1866. Laws of Iowa, 1866, p. 189, c. 144.
The McGregor Western Pailroad Company failed to comply with the conditions of the above act. Thereupon, all lands and rights to land granted to it by the act of 1864 (the lands now in dispute being part of those so granted) were "absolutely and entirely resumed by the State of Iowa," by an act of February 27, 1868, which declared that "the same be and are as fully and absolutely vested in the State as if the same had never been granted to said railroad company." Laws of Iowa, 1868, p. 20. The State then, by an act of March 31, 1868, gave the benefit of the grant for the road in question to the McGregor and Sioux City Railway Company, which accepted the terms prescribed by that act. Laws of Iowa, 1868, p. 70, c. 58. But that company also failed to ...