[80 Ariz. 157] Clark & Coker, Phoenix, for appellant.
Head & Palmer, Prescott, for appellees.
LA PRADE, Chief Justice.
Pursuant to Section 11-312, A.C.A.1939, plaintiff-appellant, on September 6, 1950 petitioned the State Land Department to bring an action in the Superior Court to have appellees' state grazing lease cancelled on the ground that said lease had been 'obtained through fraud and deceit or concealment of facts'. After a hearing before the State Land Commissioner, in which both sides were represented, the Commissioner denied appellant's petition. From this decision plaintiff-appellant appealed to the Superior Court of Yavapai County where, under Section 11-210, 1952 Cum.Supp., A.C.A.1939, the court tried the case de novo, made independent findings of fact and conclusions of law, and affirmed the decision of the Land Commissioner. This is an appeal from the judgment of the Superior Court.
The essential facts are as follows: In 1941, appellant, Mrs. Schell, obtained a grazing lease of various federal properties, [80 Ariz. 158] including the E 1/2 E 1/2 of Section 35, T16 1/2N, R9W, from the United States Government for a period of five years under the provisions of the Taylor Grazing Act, 43 U.S.C.A. § 315 et seq. During the following year appellees' predecessor in interest, one Wooten, requested the State of Arizona to apply to the federal government for an exchange of lands, pursuant to Section 8 of the Taylor Grazing Act, supra. The State of Arizona approved this request by Wooten, and on June 10, 1942 filed its application with the United States General
Land Office for an exchange of lands, including the aforementioned E 1/2 E 1/2. In July, 1942 Wooten filed a formal written application under oath with the Arizona State Land Department to lease the E 1/2 of Section 35. In this application Wooten stated that there were no occupants or improvements on the land, and claimed superior rights to that portion of the range, whereas in truth and fact Mrs. Schell was in possession under her grazing lease and also had a valid unpatented mining partially extending into the E 1/2E 1/2. Within the same month he received a five-year lease of lands which included the E 1/2 E 1/2, since it was the practice of the State Land Department at that time to immediately lease any lands which had been applied for under the Taylor Grazing Act, even though patents had not issued. In 1947, Wooten made application to renew his lease and again failed to disclose the true facts. This time his lease was renewed for ten years. Appellant's lease of the land in question from the United States expired in 1946, prior to which time she applied for renewal. Her lease of federal lands was renewed, but the E 1/2 E 1/2 was not included therein. Appellant's application for leasing the E 1/2 E 1/2 was not rejected; it was merely suspended, in accordance with Section 147.19, Code of Federal Regulations, Title 43, 1940 Ed., pending final action by the Bureau of Land Management (formerly the General Land Office), on the State of Arizona's exchange application for said lands.
In August, 1949 Wooten, with the approval of the State Land Commissioner, assigned his state grazing lease, which included the lands in question, to Robert L. and Betty White and C. M. and Helen Floyd. On June 1, 1950 the said Floyds, with the approval of the Commissioner, assigned all of their interest in said lease to the Whites, the appellees herein.
On March 13, 1950, approximately eight years after the state had applied therefor, the United States approved the state's application for an exchange of lands and on May 4, 1950 issued a patent to said lands, including the E 1/2 E 1/2. Subsequently, on May 24, 1950 the federal government notified Mrs. Schell of the issuance by it of a patent to the lands in question to the State of Arizona and thereupon rejected her application for a lease of the E 1/2 E 1/2, action on which had been suspended in 1947. Within four months from receiving the above notification Mrs. Schell petitioned [80 Ariz. 159] the State Land Commissioner to bring an action to cancel appellees' lease of the E 1/2 E 1/2 of Section 35 on the grounds of fraud.
Upon denial of her petition by the State Land Commissioner she appealed to the Superior Court of Yavapai County, which held her guilty of laches and stale demand, and that she was estopped to seek the relief prayed for since appellees were bona fide purchasers for value and 'any misrepresentation or fraud on the part' of Wooten, the original applicant, was not chargeable to appellees.
Appellant presents many assignments of error on this appeal, but we believe that the disposition of this case depends primarily on the following questions: (1) What were the rights of the State of Arizona as to the land for which it had made application to the United States Government under the exchange provisions of the Taylor Grazing Act before patent issued on May 4, 1950? (2) Did Wooten misrepresent the facts in his original application and renewal application for a state grazing lease to the State Land Department and, if so, were these misrepresentations instrumental in his procurement of said lease? and (3) Were appellees bona fide purchasers for value of the lease originally granted to Wooten, and renewed in 1947 by the State of Arizona?
What right did the State have in lands prior to patent?
In 1940, in the opinion of the General Land Office, which, at the time had jurisdiction over federal public lands, the State of Arizona had no rights to the exchange lands until patent issued. In February of that year the federal agency declared in a letter that Arizona should not issue leases for lands applied for under the Taylor Grazing Act until patents for the lands had been issued to it by the
United States. Subsequent to this letter the Arizona Land Commissioner wrote to the General Land Office, asking that agency to reconsider its February pronouncement. On July 23, 1940, Mr. E. K. Burlew, Acting Secretary of the Interior, wrote a letter to the State Land Commissioner in reply to the latter's request for reconsideration of the question. Mr. Burlew quoted directly from the Taylor Grazing Act and examined cases cited by the Land Commissioner and concluded: 'It is apparent that a state cannot lawfully lease and collect rent for land to which it has no legal or equitable title.' This conclusion is amply supported by the cases. A patent is an instrument by which the United States conveys title to public lands. McCarty v. Helbling, 1914, 73 Or. 356, 144 P. 499. Untile the patent issues the fee of the land is in the United States. Baker v. Berg, 1917, 138 Minn. 109, 164 N.W. 588, certiorari denied 1918, 246 U.S. 661, 38 S.Ct. 332, 62 L.Ed. 927; Bovey-Shute Lumber Co. v. Erickson, 1918, 41 N.D. 365, 170 N.W. 628.
From the above statements of the law concerning the issuance of land patents by the United States to public lands it is [80 Ariz. 160] indisputable that title to the lands sought by the State of Arizona from the federal government in 1942 was not conveyed to Arizona until the patent issued on May 4, 1950. Prior to that date the United States owned said lands in fee simple; after that date the fee was in the State of Arizona. As a result, prior to May 4, 1950 Arizona had no legal right, authority or power to grant a lease to the E 1/2 E 1/2 (land in question) to anyone, and any attempts to do so were null and void. Consequently, as a matter of law, Wooten obtained nothing from the State of Arizona in either 1942 or 1947. During the entire period before his assignment of the purported lease in 1949 to the Whites and the Floyds, Wooten had no legal rights to the land in question, except perhaps a bare expectancy that his application made to the State Land Department in 1942, and renewed in 1947, would be favorably acted upon when said department got jurisdiction over the land. Therefore, when Wooten assigned his 'lease' in 1949 to the Whites and the Floyds, all he was actually doing from a legal standpoint was assigning all his rights in his renewed application to said parties. Appellees herein and their co-grantees, the Floyds, received nothing more from Wooten since that was all he owned. It is probable that neither Wooten, the Whites, the Floyds, nor even perhaps the State Land Commissioner realized that under the law Wooten had nothing to assign except a mere expectancy, but this ignorance of the law could not affect the rights of third parties.
Appellees contend that even if it be admitted that the State of Arizona had no legal authority to grant Wooten a lease before patent issued, the acquisition of good title by the State validated previous acts by the Land Department, with the result that the after-acquired title inured to the benefit of Wooten's assignees as of May 4, 1950. Assuming without deciding that this is so we do not believe that it can have any bearing on the outcome of this decision for the reason that the Whites were not bona fide purchasers for value, as will be more specifically pointed out.
Prior to May 4, 1950 Mrs. Schell depended on the legal premise that jurisdiction over these lands remained in the federal government and as a result she did not take any action with the State Land Department until this department acquired jurisdiction to act. This did not occur until May 4, 1950. Consequently, the lower court was in error when it held that appellant was barred by laches and stale demand for not contesting Wooten's application prior to 1950. A party is not required to present his case before a governmental agency ...