Hafemann v. Gross/Dissent White
Mr. Justice White, with whom concur Mr. Justice McKenna and Mr. Justice Holmes, dissenting:

The power to evade the restrictions imposed by Congress upon the right to acquire land by pre-emption, which, it seems to me, must result from the construction now given to the act of Congress as applied to the contract in controversy, causes me to state the reasons for my dissent.

There is no controversy as to the applicable statute, and no question of fact as to the existence and terms of the contract. The bald question, therefore, is, Was the contract in conflict with the requirements of § 2262, Rev. Stat.?

By that section the pre-emptor, before being allowed to enter land, was obliged to make oath, as follows:

'That he has not settled upon and improved such land to sell the same on speculation, but in good faith to appropriate it to his own exclusive use; and that he has not, directly or indirectly, made any agreement or contract, in any way or manner, with any person whatsoever, by which the title which he might acquire from the government of the United States should inure in whole or in part to the benefit of any person except himself.'

By the contract here in question, which was entered into prior to the making of the statutory affidavit, the defendants in error, and one other person-whose interest has since been acquired by one of the defendants in error-agreed to pay one-fourth part of the expenses of the plaintiff in error, the proposed pre-emptor, to be incurred by him in perfecting his entry, he, on the other hand, agreeing to pay $100 in cash 'for locating him on said land,' and binding himself to give to the other parties to the agreement 'one-fourth part of the price and proceeds that may hereinafter be obtained for the sale of said land after he has obtained title thereto from the United States, deducting the one-fourth expense as above provided, and can find a purchaser for and sell the same at its proper value.' My mind cannot perceive how this contract can be held valid, testing its provisions by the statutory prohibitions, for it is settled that the requirement of specific statements in the affidavit implies a prohibition against the doing of that which the pre-emptor must swear in the affidavit that he had not done.

Let me consider what the statute thus requires the pre-emptor to swear, in connection with the contract, in order to test the conflict between them. The pre-emptor must swear 'that he has not settled upon and improved such land to sell the same on speculation, but in good faith to appropriate it to his own exclusive use.' Could this statement have been truthfully made in view of the agreement by which the pre-emptor bound himself after his purchase, if he sold the land, to pay to the other parties to the contract one-fourth part of the purchase price? Further, the statute requires the pre-emptor to swear 'that he has not, directly or indirectly, made any agreement or contract, in any way or manner, with any person whatsoever, by which the title which he might acquire from the government of the United States should inure, in whole or in part, to the benefit of any person except himself.' Was the affidavit made by the pre-emptor in this case true when, at the time it was made, he had executed a contract or agreement by which, when the property was sold, one fourth of the price should go to the benefit of the other parties to this contract? Concede that technically the contract did not purport to be an agreement on the part of the pre-emptor to convey the legal title to one-fourth part of the land to the other parties to the agreement,-can it in reason be said that the agreement did not directly or indirectly provide that the title, when acquired, should inure in whole or in part to the benefit of other contracting parties? To my mind the statute seems so plain, and the terms of the contract to be so clearly in violation of its provisions, that there can reasonably be no room for construction.

But it is said the statute simply prohibits agreements on the part of the pre-emptor by which the title which he might acquire would inure in whole or in part to the benefit of any other person than himself; therefore, to constitute a violation of the statute, it must be found that the contract bound the pre-emptor, after he had acquired the land, to convey a one-fourth interest in the title to the land. But this disregards the fact that the statute expressly forbids the doing of the prohibited thing, either 'directly or indirectly;' and prohibits 'any agreement or contract,' in any way or manner whatsoever, by which the title to be derived from the government of the United States should inure, in whole or in part, to the benefit of any person except the pre-emptor. It is clear, to my mind, that the words 'directly or indirectly and in any manner' were obviously intended to embrace evasions and subterfuges by which the policy of the statute might be frustrated,-that is, the prohibition against giving to another person than the pre-emptor the benefit, in whole or in part, of the results of acquiring the land from the United States.

In Anderson v. Carkins, 135 U.S. 483, 34 L. ed. 272, 10 Sup. Ct. Rep. 905, dealing with an affidavit of a homesteader, where the requirements were less stringent than exacted in pre-emption cases, it was decided that the existence of an agreement to convey, after patent, a part of the land to another, was void as against public policy. To me that case is decisive of this. It is said, however, there the obligation was to convey the land, whilst here there was no obligation on the part of the pre-emptor to convey or to sell the land after he acquired it, but only an obligation, if he did sell, to pay the one fourth of the proceeds. But it cannot be meant by this to say that there was no contract, because the agreement was so purely potestative on the part of the pre-emptor as not to imply an obligation, since the contract is enforced by the decree now rendered. Suppose, however, that the contract could be divided, and held to imply an obligation to pay over to another a portion of the purchase price, after the obtaining of a patent, only in case the pre-emptor chose to sell, does such construction relieve the contract from the prohibitions of the statute? It seems to me not, because to so hold would simply be to permit mere form, and not substance, to control. In Pollock v. Farmers' Loan & T. Co. 157 U.S. 429, 39 L. ed. 759, 15 Sup. Ct. Rep. 673, the question was whether Congress could, in levying an income tax, include as part of the taxable income revenues derived from real estate. It was held that it could not be done, because substance was to control; and that to include rents in the income taxed was to impose a direct burden on the owner of the real estate. After quoting from Co. Litt. 45, the declaration 'for what is the land but the profits thereof,' and a passage in Jarman on Wills, stating that a devise of the rents and profits or of the income of lands passes the land itself, both at law and in equity, the court said (p. 581, L. ed. p. 819, Sup. Ct. Rep. p. 689):

'The real question is, Is there any basis upon which to rest the contention that real estate belongs to one of the two great classes of taxes, and the rent or income which is the incident of its ownership belongs to the other? We are unable to perceive any ground for the alleged distinction. An annual tax upon the annual value or annual user of real estate appears to us the same in substance as an annual tax on the real estate, which would be paid out of the rent or income.'

This being the rule settled by this court, simply as to the right to receive the fruits of real estate, I do not perceive why, in view of the sweeping prohibitions of the act of Congress, the existence of a continued obligation to pay over the price of real estate to another person when sold does not amount to an agreement giving to such person, at least indirectly, an interest in the land itself.

Having said that, in my opinion, there was no ambiguity in the statute as applied to the contract, it seems to me unnecessary to consider the decided cases. But I refer briefly to them. True it is that there are rulings of state courts and of the Land Department, holding that an agreement to execute a mortgage upon pre-empted land is not within the prohibition of the statute. When the opinions so holding are analyzed it will be seen that they proceed upon the theory that the spirit of the statute does not embrace transactions of that character. For the purposes of this case, however, it does not seem to me essential to say whether or not such rulings are correct, as an agreement to mortgage to repay a given sum advanced, to enable the pre-emptor to improve the land, might well be held not to be within the spirit of the prohibitions of the statute, and yet such rulings would not be controlling as to an agreement like the one here in question, especially if the contract is construed as amounting to a perpetual obligation to transfer to a third person, upon a sale of the land, a given portion of the price. Such a contract at once puts the person in whose favor it is made in the attitude, not of a lender, entitled to receive back his loan with simple interest, but in the position of a speculator, who is to benefit from the enhancement in value of the land which may arise in the future, without reference to the amount of any expenditure by him made,-a character of transaction which it was the express purpose of the act of Congress to forbid. Myers v. Croft, 13 Wall. 295, 20 L. ed. 563. And, from another point of view, such a transaction puts the pre-emptor making it in a position where his plain interest is not to improve and develop the land to its full capacity, because the labor expended for that purpose would ultimately inure, in case of a sale of the land, to the benefit of a third person.

Deeming that the contract in question was within the prohibitions of the act of Congress, and void as against public policy, I do not think the court should lend its aid to its enforcement, and I therefore dissent; and am authorized to state that Mr. Justice McKenna and Mr. Justice Holmes concur therein. 

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