Island City Savings Bank v. Dowlearn , 94 Tex. 383 ( 1901 )

The subject of controversy in this suit is a fractional section of land belonging to the free school fund of the State of Texas, situated in De Witt County, which was regularly upon the market on January __, 1884, when, under the law of 1883, W.H. Crain purchased it, complying with the terms of the law by giving his obligation and making the first payment. On December 31, 1895, the title vested in the Island City Savings Bank and the members of the firm of Ball, Hutchings Co. through a regular chain of transfer from Crain.

"The interest upon said obligation or note of said Crain evidencing the balance of the purchase money of said land in controversy, bought by him as stated in finding first herein, was duly paid by the several respective holders of title under him for the years 1884 to 1889, both inclusive. The installment of interest accruing for 1890 on said obligation or note, being the installment which under the terms of said obligation was payable on or before March 1, 1891, had not been paid on January 20, 1892, and upon said last mentioned date the Commissioner of the General Land Office indorsed on said obligation ``land forfeited,' and on the same date caused an entry to that effect to be made in the account kept in the treasurer's office in the name of the purchaser, W.H. Crain, and because of said declaration of forfeiture, the commissioners of the General Land Office have continuously since the date of said declaration, refused to recognize that any right or title continued to exist under the said purchase by said Crain.

"Three proper and sufficient tenders have been made to the State Treasurer to pay — on February 15, 1892, of the amount of interest to January 1, 1891, owing upon said obligation of said W.H. Crain; and on April 3, 1895, of the amount of interest to January 1, 1895, owing upon said obligation of said Crain; and on August 16, 1897, of the amount of interest to January 1, 1897, owing on said obligation of said Crain. That these tenders were made by the agents of the holders, at the times of said tenders respectively, of the rights acquired under said purchase by said Crain, and that each and all of said tenders were refused by said Treasurer when the respective tenders were made, and in each instance the reason or ground of refusal was stated to be, ``it can not be received and applied for the reason that said account has been forfeited upon the books of this office for nonpayment of interest for 1890,' and which statement of the ground of refusal in each instance referred to the said declaration of forfeiture made by the Commissioner of the General Land Office on January 20, 1892, as aforesaid."

On August 2, 1895, the defendant in error settled upon the land and on that day filed in the General Land Office, according to law, his application to purchase the land, which was awarded to him under the provisions of the Act of April 16, 1895. The defendant in error has complied with the law in all respects. At the time of his settlement and purchase from the State, the defendant in error was aware of the condition of the title of Crain, the land being embraced in a large pasture and claimed by Crain and those who succeeded him down to and including the plaintiffs in error.

The plaintiffs in error brought suit against the defendant in error. The case was tried without a jury and a judgment was rendered in favor of defendant, which judgment was affirmed by the Court of Civil Appeals of the First District.

It has been the policy of the Legislature of this State to have the time of forfeiture of all contracts for the purchase of free school lands on account of the nonpayment of interest to occur at the same date in order to prevent confusion in the General Land Office in making the entries required by the statute, and also that there might be no uncertainty with purchasers as to the time when their contracts might be terminated. In furtherance of this policy, the Act of April 1, 1887, "providing for the sale and lease of school and other public lands," was passed. Section 11 of that act provides: "If, upon the first day of August of any year, the interest due on any obligation remains unpaid, the Commissioner of the General Land Office shall indorse on such obligation, ``Land forfeited,' and shall cause an entry to that effect to be made on the account kept with the purchaser, and thereupon said land shall be forfeited to the State without the necessity of re-entry or judicial ascertainment, and shall revert to the particular fund to which it originally belonged and be resold under the provisions of this act or any future law." This act applied to all contracts, whether made before or after its passage, and made the time when the entry of forfeitures might be made uniform, on the first day of August of each year after the interest should become due. Fristoe v. Blum, 92 Tex. 82. In the year 1889, the Legislature amended that section of the law of 1887, using the same language, except that the time for forfeiture was fixed at the first day of January following the first, day of August when the interest should become due, and a penalty of 50 per cent upon the amount of interest defaulted was prescribed, to be paid by the purchaser; and on failure to pay the interest and the penalty by the first day of the succeeding January, the contract was to be indorsed "forfeited" as required in the former statute, with the same effect. In 1891, the eleventh section of the Act of 1889 was amended to read thus: "If, upon the first day of November of any year, the interest due on any obligation remains unpaid, the purchaser shall have until the first day of April following in which to pay said interest, and for said default said purchaser shall pay twenty per cent penalty on said interest then past due; and if said purchaser shall fail to pay said past due interest and penalty on or before the first day of April, the Commissioner of the General Land Office shall indorse on said obligation ``Land forfeited' and shall cause an entry to that effect to be made on the account kept with the purchaser, and thereupon said land shall be forfeited to the State without necessity of re-entry or judicial ascertainment, and shall revert to the particular fund to which it originally belonged and be resold under the provisions of this act or any future law." This last act was in force at the time the forfeiture was entered in this case and was the only authority for the Commissioner of the Land Office to declare the land forfeited for the nonpayment of interest and the penalty.

It is manifest from the course of legislation that the State has never desired to forfeit any contract for the purchase of the free school lands, but the clause of forfeiture has been used to stimulate payment of the interest, and as a last resort to repossess the land. The State has frequently extended the time of payment and made provisions by which forfeitures already incurred might be relieved. While the State has the right to declare a forfeiture for the nonpayment of the interest under these executory contracts, it can only be done by an officer authorized by law to assert the State's right, but no officer has power to declare a forfeiture except at the time and in the manner provided by the law.

The interest, for the nonpayment of which the forfeiture in this case was declared, fell due on the first day of March, 1891, and the effect of the law just above quoted was to extend the time at which the payment might be made without penalty to the first of the succeeding November, and to extend the time of payment with penalty to the first day of the succeeding April. At the time the Commissioner of the General Land Office entered the forfeiture upon his books and declared the land forfeited, he had no authority to do so, for the purchaser had the right to make the payment of the interest and the 20 per cent at any time before the first day of the succeeding April. The declaration of forfeiture, therefore, entered by the Commissioner was without authority and had no effect upon the title of the purchaser.

It is claimed, however, that a failure to pay the interest and the 20 per cent penalty on or before the first day of April worked a forfeiture of itself, and that the subsequent sale of the land was valid. The language of the act is plain and explicit as to the time when the forfeiture shall occur. The Commissioner had no power to enter the words "Lands forfeited" upon the obligation until after the first day of April, 1892, and no forfeiture could occur until that entry was lawfully made. The conclusion is irresistible that no declaration of forfeiture could be lawfully entered at the time this was made and that no forfeiture could occur until the entry required by law was lawfully made in the Land Office after the first day of April, 1892. The contract not being lawfully forfeited, the rights of the plaintiffs remained intact and they had the right to pay up the past due interest and such penalties as were required by law. The sale to the defendant was without authority on the part of the Land Commissioner and conferred no title on him.

Defendant in error claims that the laws which extended the time for payment of interest on the contracts for purchase of free school lands were in the nature of relief to the purchasers and in conflict with the following provision of article 7, section 4, of the Constitution: "The lands herein set apart for the public free school fund shall be sold under such regulations, at such times, and on such terms as may be prescribed by law; and the Legislature shall not have power to grant any relief to purchasers thereof." This court has held that such a law is not obnoxious to the constitutional inhibition. Barker v. Torrey,69 Tex. 7. The object of the convention was to prevent the impairment of the school fund. The act in question had the effect to protect and secure that fund. It was an act of policy on the part of the State by which it would induce the purchaser to carry out the contract which was favorable to the school fund.

The trial court erred in entering judgment for the defendant. It is therefore ordered that the judgment of the District Court and Court of Civil Appeals be reversed, and that judgment here be rendered for the plaintiffs in error that they recover the land described in their petition of the defendant, together with all costs of suit. In accordance with the agreement of the parties made in trial court, this cause is remanded for trial of the issue of valuable improvements made in good faith by defendant in error.