be transferred; and further contend that, even if the power of the state be not so limited, it cannot be exercised to discriminate against interstate commerce.

The rights of abutting owners we will not discuss, nor the rights derived from them by appellees, except to say that whatever rights they had, they conveyed to appellees, and against them there is no necessity of resorting to the exercise of eminent

under the act of March 3, 1855 (10 Stat.
at L. 701, chap. 207), by one who was not
the lawful owner and holder of such war-
rant, since such location did not operate as
a payment of the purchase price, which was
essential to the right to a patent.
[Ed. Note.-For other cases, see Taxation,
Cent. Dig. §§ 31-34; Dec. Dig. § 5.]

[No. 149.]

1911.

N ERROR to the Supreme Court of the

affirmed a decree of the District Court of Clay County, in that state, in favor of plaintiffs in a suit to quiet title. Reversed. See same case below, 140 Iowa, 590, 132 Am. St. Rep. 281, 117 N. W. 751.

domain. We place our decision on the Argued April 25, 1911. Decided May 15, character and purpose of the Oklahoma statute. The state, as we have seen, grants the use of the highways to domestic corporations engaged in intrastate transportation of natural gas, giving such corporations even the right to the longitudinal use of the highways. It denies to appellees the lesser right to pass under them or over them, notwithstanding it is conceded in the pleadings that the greater use given to domestic corporations is no obstruction to them. This discrimination is beyond the power of the state to make. As said by the circuit court of appeals in the eighth cirror. cuit, no state can by action or inaction prevent, unreasonably burden, discriminate against, or directly regulate, interstate commerce or the right to carry it on. And in all of these inhibited particulars the statute of Oklahoma offends.

And, we repeat again, there is no question in the case of the regulating power of the state over the natural gas within its borders. The appellees concede the power, and, replying to the argument of appellant, based on the intention of appellees to erect large pumps to increase the natural rock pressure of the gas, appellees say: "Kansas by legislative enactment forbids the use of artificial apparatus to increase the natural flow from gas wells. Chapter 312, Laws of Kansas, 1909, page 520. To this act the Kansas Natural Gas Company has no objection."

Decree affirmed.

Mr. Justice Holmes, Mr. Justice Lurton, and Mr. Justice Hughes dissent.

(221 U. S. 404.) SARGEANT & LAHR, Charles Sargeant, F. A. Lahr, and Mrs. Frank A. Lahr, Piffs.

in Err.,

V.

HERRICK & STEVENS, C. E. Herrick, E.
B. Stevens, John Watson, and Mrs. John
Watson, His Wife.

TAXATION (§ 5*) · FEDERAL PROPERTY
LAND GRANT NOT PERFECTED.
The equitable title to the land did not
pass from the United States, so as to make
it liable to state taxation, upon the location
of a military bounty land warrant, issued

The facts are stated in the opinion.
Messrs. Robert Healy, M. F. Healy, and
Charles A. Clark for plaintiffs in error.
No brief was filed for defendants in er-

*Mr. Justice Van Devanter delivered the opinion of the court:

This is a suit to quiet the title to 80 acres of land in the state of Iowa, and the facts, in so far as they are material here, are these: In 1857, Hartzell I. Shaffer located upon the land a military bounty land warrant, issued to Jacob Hutson under the act of Congress of March 3, 1855 (10 Stat. at L. 701, chap. 207), and received from the local land office a certificate of location. Shortly thereafter he transferred the certificate and his right to the warrant and to the land to Amos Stanley. When the location was reported to the General Land Office, that office suspended it because Hutson had made two assignments of the warrant, the first to William Maltby and the second to Shaffer, and because there was no relinquishment by Maltby. In 1875, Stanley, or a transferee of his, surrendered the certificate of location to the General Land Office, and withdrew the warrant for the purpose of straightening out the difficulty arising from its double assignment, if that could be done. But apparently nothing was accomplished in that direction, for the warrant never was returned. The suspension continued until 1904, when Sargeant & Lahr, who had succeeded to the rights of Stanley, perfected the location by substituting the government price of the land for the warrant. This was done under rule 41 of the circular of the Land Department relating to such locations, which reads as follows (27 Land Dec. 225):

"When a valid entry is withheld from patent on account of the objectionable char

For other cases see same topic & § NUMBER in Dec. & Am. Digs. 1907 to date, & Rep'r Indexes

*406

⚫405

*407

acter of the warrant located thereon, the parties in interest may procure the issue of a patent by filing in the office for the district in which the lands are situate an acceptable substitute for the said warrant. The substitution must be made in the name of the original locator, and may consist of a warrant, cash, or any kind of scrip legally applicable to the class of lands embraced in the entry."

At the time of the substitution, Sargeant & Lahr received from the local land office a certificate of purchase, issued in Stanley's name, and later in the same year received a patent issued in his name, and reciting that it was predicated upon the substitution of the purchase price for the warrant. In 1875 the land was sold for the nonpayment of taxes levied upon it by the officers of Clay county, Iowa, two years before, and whatever title passed under that sale is held by Herrick & Stevens, who were the plaintiffs in the trial court. Sargeant & Lahr, who were the defendants, claim under the warrant location as ultimately perfected through the substitution of the purchase price, and then passed to patent. The trial court sustained the tax title and entered a decree for the plaintiffs, which was affirmed by the supreme court of the state. 140 Iowa, 590, 132 Am. St. Rep. 281, 117 N. W. 751.

As the state was without power to tax the land until the equitable title passed from the United States, and as* that title did not pass until there was a full compliance with all the conditions upon which the right to a patent depended (Wisconsin C. R. Co. v. Price County, 133 U. S. 496, 505, 33 L. ed. 687, 692, 10 Sup. Ct. Rep. 341), it is apparent that the validity of the tax title depends upon the question whether the location of the warrant in 1857, with out more, gave a right to a patent.

Among the conditions upon compliance with which such a right depends, none has been deemed more essential than the payment of the purchase price, which, in this instance, could have been made in money or by a warrant like the one actually used. The warrant was assignable and was usable at a rate which made it the equivalent of the price of the land. And had Shaffer been the lawful owner and holder of the warrant, there could be no doubt that its location by him would, without more, have entitled him to a patent. But, as the General Land Office found, in effect, that he was not the lawful owner or holder of the warrant, and as that finding is conclusive in the circumstances in which it is brought into this case, it is perfectly plain that the location of the warrant did not, without more, give a right to a patent. In other

words, that location did not operate as a payment of the purchase price, and so did not operate to pass the equitable title from the United States. Besides, until the paymen in 1904, it was wholly uncertain that the location ever would be perfected, there being no obligation upon anyone to perfect it. It follows that during the intervening years the United States had such an interest in the land as to make its taxation by the state void.

The case of Hussman v. Durham, 165 U. S. 144, 41 L. ed. 664, 17 Sup. Ct. Rep. 253, is like this in all material respects, the most noticeable difference being that there the assignment to the locator was forged, while here it was ineffectual because of a prior assignment. In that case this court, after holding, in substance, that the doctrine of relation cannot be invoked to give effect* to, a title resting upon the wrongful taxation of land while both the legal and the equitable title were in the United States, said:

"Confessedly, though a formal certificate of location was issued in 1858, there was then in fact no payment for the land, and the government received nothing until 1888. During these intervening years, whatever might have appeared upon the face of the record, the legal and the equitable title both remained in the government. The land was therefore not subject to state taxation. Tax sales and tax deeds issued during that time were void. The defendant took nothing by such deeds. No estoppel can be invoked against the plaintiff. His title dates from the time of payment in 1888. The defendant does not hold under him, and has no tax title arising subsequently thereto."

For these reasons we hold that the Su

preme Court of the state erred in sustaining the tax title.

Reversed.

(221 U. S. 333.)

CHARLES H. MERILLAT and Mason N.
Richardson, Trustees, Appts.,

V.

MELVILLE D. HENSEY, Mercantile Trust
Company, Frederick A. Mertens, and
Park Agnew.

APPEAL AND ERROR (§ 1094*)-REVIEW Or
FACTS.

1. Concurrent findings of fact by the two lower courts in a suit to set aside a conveyance as in fraud of creditors will ordinarily be accepted by the Federal Supreme Court on appeal.

[Ed. Note.-For other cases, see Appeal and

Error, Cent. Dig. §§ 4324, 4338; Dec. Dig. § 1094.*]

FRAUDULENT CONVEYANCES (§ 308*)—As

SIGNMENT OF CHOSE IN ACTION-PRESER-
VATION OF Surplus.

2. An assignment, as security for a debt,

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$408

⚫840

339

Whereas, the party of the second part has Conveyances, Cent. Dig. §§ 923-940; Dec. Dig. this day executed an assignment of his

cause of action against the Mercantile Trust Company, at law No. 44,822, in the supreme

Argued March 17, 1911. Decided May 15, court of the District of Columbia:

•For other cases see same topic & § NUMBER in Dec. & Am. Digs. 1907 to date, & Rep'r Indexes

sideration or purpose, and because not accompanied by the defeasance. But the assignment of a chose in action was not required to be recorded, and there was no way in which constructive notice might be given. The filing with the clerk was, of course, not constructive notice; the obvious purpose being to protect the assignees against the dismissal of the suit by the assignor, or the payment of the proceeds of the suit to him. Indeed, on the day before, the clerk was directed to "enter the case as to the use of Mertens and Agnew."

That the assignment upon its face is valid is clear. If it is ineffective as to the appellants, it must be because of something behind it constituting evidence of bad faith. Are the inferences to be drawn from that evidence consistent with good faith, or do the facts indubitably establish fraud as matter of law? What are the facts from which we are to conclude as matter of law that the purpose was to hinder, delay, or defraud? It is said that the assignment was not absolute, but was a transfer to secure a debt, with a reservation, by an unpublished agreement, of any balance. The honesty of the debt intended to be secured was attacked, but that this was a baseless charge is hardly doubtful, especially after two courts have adjudged the debt just. It is then said that the assignor was at the time insolvent and intended to prefer the assignees, and that they knew it. This would be effective if bankruptcy had ensued within four months, and the trustee had sought to set it aside as a preference; but that on one side, it is neither immoral nor illegal for a failing debtor to prefer one creditor over another. Huntley v. Kingman & Co. 152 U. S. 527, 38 L. ed. 540, 14 Sup. Ct. Rep.

now is whether the assignees shall get a part of their debt or none.

But it is said that they have agreed to pay back any surplus, if any there should be after paying their debt, and that this is a reservation by the assignor of an interest in the subject assigned, which operates not as a circumstance of fraud, but as that kind of indubitable evidence which makes fraud in law.

Let us look at it. It did not show fraud in fact or law that this assignment was not an absolute sale or transfer of the chose assigned, but a mere security for an honest debt. If the claim came to nothing, the debt was unpaid. If, as proved to be the case, enough was realized to pay a part, the rest is a debt to be paid. But if there should be a surplus, what then? If nothing had been agreed about the surplus, is there any doubt that the law would have implied a promise to account to the assignor for that surplus? Is it, then, the law that promise made to do that which, without the promise, the law would have compelled the assignee to do, constitutes such evidence of fraud as to be fraud in law?

There are some cases which seem to hold that if one makes a general assignment to secure creditors, and inserts a clause reserving to himself any surplus, that he thereby delays his creditors who might seek that surplus until the trust should be wound up, and therefore comes under the condemnation of the statute against conveyances to hinder, delay, or defraud creditors, however innocent his purpose, or the existence of a surplus. There are New York cases which seem to go so far, and perhaps others. Goodrich v. Downs, 6 Hill, 438; Barney v. Griffin, 2 N. Y. 365; Curtis v. Leavitt, 15 N. Y. 9, 124; Collomb v. Caldwell, 16 N. Y. 486. But the same court, in Leitch v. Hollister, 4 N. Y. 211, held that the principle did not apply to assignments in good faith "of a part of a debtor's property to creditors themselves, for the purpose of securing particular demands." "The conveyance," said the New York court, "whatever may be its form, is in effect a mortgage of the property transferred. trust as to the surplus results from the nature of the security, and is not the object, or one of the objects. of the assign

ment.

A

Whether expressed in the instru The assignee does not acquire the legal and ment or left to implication is immaterial. equitable interest in the property conveyed, subject to the trust, but a specific lien upon it. The residuary interest of the assignor may, according to its nature, or that of the property, be reached by execution or by bill in equity. The creditor attaches that interest as the property of the debtor,

3

*344

and is not obliged to postpone action until | conveyance. the determination of any trust. He is 18 L. ed. 750. Other cases are considered therefore neither delayed, hindered, or de- and reviewed in Huntley v. Kingman & Co. frauded in any legal sense."

For other cases see same topic & § NUMBER in Dec. & Am. Digs. 1907 to date, & Rep'r Indexes