GERALD S. LEVIN, District Judge:
This suit was instituted by the United States Government to secure declaratory
The facts of the case are as follows: Coos Bay Lumber Company, hereafter referred to as "Lumber Company", owned certain timberlands in 1934, consisting of approximately 58,900 acres in Coos and Douglas Counties, Oregon, both within and without the northern exterior boundaries of the Siskiyou National Forest as it existed in 1934. Those timberlands are known as the "Eden Ridge Tract".
In 1933 Oregon's economy and lumber industry were in a depressed condition. In the 1930's many timber owners in the Northwest abandoned cutover lands to eliminate further payment of ad valorem taxes. When the lands were thus abandoned, the counties foreclosed the tax liens and provided fire protection to the lands and also offered the lands for sale at tax foreclosure sales. Sometimes small landholders located and attempted to establish homesteads in isolated, fertile valleys of the area. These homesteads located in forest areas tended to increase fire hazards.
In 1933, the president of Lumber Company proposed to representatives of the Forest Service that the Government extend the boundaries of the Siskiyou National Forest to include all of the Eden Ridge Tract and that Lumber Company would thereafter convey to the Government its forest lands in the Eden Ridge Tract after the forest growth thereon had been harvested. In 1934, a document (hereafter referred to as the "1934 Document") was executed under seal incorporating the above proposal. The signatories thereto were Lumber Company, the then owner of the lands, and the then Acting Regional Forester of the United States Forest Service, Region 6.
By letter dated April 20, 1934, Senator McNary asked for the Forest Service's comments on a letter dated April 16, 1934, from John D. Goss concerning a proposed bill which resulted in the passage by Congress of Public Law 131, referred to hereafter. The Forest Service replied on April 25, 1934. Letters from Goss and from Acting Regional Forester Sherman recommended passage of the bill and referred to Lumber Company's proposed agreement to donate cutover forest land if the boundaries of the forest were extended to include Lumber Company land.
The boundaries of the Siskiyou National Forest were thereupon extended to include all the lands described in Schedule "B" of the 1934 Document.
The 1934 Document was recorded on June 10, 1935, in Douglas County, Oregon. By this unambiguous Document, the Lumber Company assumed a continuing duty to convey lands to the Government as they were cut over. As consideration, the Government extended the boundaries of the Siskiyou National Forest, thus giving the Lumber Company additional fire protection. This is what the Lumber Company wanted in exchange for this duty to convey these lands over a period of time, and that is what it received. When the Lumber Company entered into this bargain, it thought that there would be added fire protection for it since it was within the boundaries of the National Forest. The 1934 Document created a clear binding contract. Congress performed its function of acceptance and at the same time,
From 1936 through 1941, Lumber Company conveyed to Government a total of 9,356.82 acres of land within the exterior boundaries of the Siskiyou National Forest. Of the lands conveyed, 2,938.37 acres of land were from those described in Schedule "A" of the 1934 Document, being within the original boundary of the Siskiyou National Forest, and 6,418.45 acres of land were from those described in Schedule "B" of the 1934 Document, being within the boundaries of the Siskiyou National Forest as extended by the Act of June 13, 1935, 49 Stat. 338.
Lumber Company conveyed the lands remaining in its ownership in the Eden Ridge Tract to Timber Company, together with other lands, by Deed dated July 10, 1956.
From 1934 through April 4, 1958, Lumber Company or its successors did not complete cutting and slash disposal on any quarter section or a portion thereof in the Eden Ridge Tract except for lands previously conveyed to Government as set forth herein.
Public Land Order [P.L.O.] 1610, 23 Fed.Reg. 2340, dated April 4, 1958, was issued after the exterior boundaries of the Siskiyou National Forest were extended by the Act of June 13, 1935. This Order retracted the northern boundary of the Forest, excluding lands described in Schedule "B" of the 1934 Document (except for lands previously conveyed) then owned by Georgia-Pacific, and re-establishing the northern boundary as it was before the 1935 extension. The maps of the Forest were changed and the personnel of the Forest Service then began acting as if this was no longer part of the National Forest. For all practical purposes it was not and is not a part of the National Forest.
Over the years the Government made no claim upon Lumber Company or its successors to convey any land under the 1934 Document. No assertion of ownership or other rights in the land was made until 1961 (with the exception of 1958, when Government, inferentially at least, asserted some ownership interest by discontinuing negotiations for a land exchange). During the same period of time, Government, without interference, allowed Georgia-Pacific to manage this timberland at a very considerable expense, meanwhile adding a great deal of value to it.
Based on the foregoing facts, the district court found that the 1934 Document was a valid contract, but whose purposes and objectives were frustrated by the retraction of the boundaries of the Siskiyou National Forest in 1958, thereby terminating the duty of Georgia-Pacific to convey any cutover lands pursuant to the 1934 Document. The district court found the 1958 retraction to constitute a failure of consideration, rendering the 1934 Document void and unenforceable.
Equitable estoppel is a doctrine adjusting the relative rights of parties based upon consideration of justice and good conscience. Smale & Robinson, Inc. v. United States, 123 F.Supp. 457,
3 Pomeroy § 804, at 189. See also Dickerson v. Colgrove, 100 U.S. 578, 580, 25 L.Ed. 618 (1879); Bankers Trust Co. v. Pacific Employers Insurance Co., 282 F.2d 106, 112 (9th Cir. 1960). Equitable estoppel prevents a party from assuming inconsistent positions to the detriment of another party, Lebold v. Inland Steel Co., 125 F.2d 369, 375 (7th Cir. 1941) or, as stated in Bigelow, Law of Estoppel 603 (6th ed. Carter 1913), "`He who keeps silent when duty commands him to speak shall not speak when duty commands him to keep silent.'" See also 31 C.J.S. Estoppel § 108, at p. 548.
Equitable estoppel is a rule of justice which, in its proper field, prevails over all other rules. City of Chetopa v. Board of County Com'rs., 156 Kan. 290, 133 P.2d 174, 177 (1943). An equitable estoppel will be found only where all the elements necessary for its invocation are shown to the court. The test in this circuit was reiterated in Hampton v. Paramount Pictures Corp., 279 F.2d 100, 104, 84 A.L.R.2d 454 (9th Cir. 1960):
In the instant case, the facts show that Government has engaged in just that kind of conduct which would render it liable to the defense of equitable estoppel, subject to the possible immunity therefrom enjoyed by Government, to be discussed hereafter.
Using the test previously enunciated by this Court in the Hampton and California State Board of Equalization cases, supra, we find all the requirements stated there to be met. First, the party to be estopped, Government, certainly "knew the facts"
Second, whether or not Government and its representatives "intended" that Georgia-Pacific act in reliance on Government's actions (and inactions), it is beyond dispute that Georgia-Pacific had a reasonable right to act in reliance thereon. All of Government's actions during the period 1934-1958 were consistent with the belief that Government was not pressing any claims it had under the 1934 Document other than to accept cutover lands as Lumber Company and its successors might convey them. And all of Government's actions during the period 1958-1967 were consistent with Georgia-Pacific's belief that P.L.O. 1600 had in fact reduced the boundaries of Siskiyou National Forest to their status existing prior to the execution of the 1934 Document.
Third, Georgia-Pacific was "ignorant of the true facts", if, as Government claims, the "true facts" are that it never relinquished any claims it had under the 1934 Document and that P.L.O. 1600 was ineffective to cut off Government's rights because its issuance was not validly authorized. There was no explicit statute, ruling, order or case authority to give Georgia-Pacific any indication whatsoever that P.L.O. 1600 might have been issued pursuant to an improper delegation of authority, assuming for the moment such to be the case. Government and its representatives, as discussed above, even treated the Order as binding, changing the pertinent maps and Forest Service routines to coincide with the changes decreed by the Order.
Fourth and finally, it is true that Georgia-Pacific did rely on the representations (or lack of same in some instances) to its injury. Georgia-Pacific spent some $350,000, beginning in 1956, in an intensive forest management program. Georgia-Pacific has maintained a 300-mile road system and has reseeded or planted a new crop of trees. In addition, Georgia-Pacific has continued to pay its annual ad valorem taxes to Coos and Douglas Counties and to pay its annual dues for fire protection to the Fire Patrol Association.
The major issue facing this Court is not whether the facts are sufficient to raise the defense of equitable estoppel, but whether under the circumstances such estoppel can be raised against Government. It has been held generally that the Government is not subject to the same rules of property and estoppel as
In the leading case expressing the limitations of equitable estoppel against the Government, Utah Power & Light Co. v. United States, 243 U.S. 389, 409, 37 S.Ct. 387, 391, 61 L.Ed. 791 (1916), the United States Supreme Court said:
In Federal Crop Ins. Corp. v. Merrill, 332 U.S. 380, 68 S.Ct. 1, 92 L.Ed. 10, 175 A.L.R. 1075 (1947), the Supreme Court declined to find the Federal Crop Insurance Corporation estopped to deny liability on a policy for wheat protection issued to Merrill. Provisions restricting the coverage of certain kinds of wheat having been published in the Federal Register, Merrill was found to have been on constructive notice thereof to the extent that insurance could not be issued to protect his type of crop.
The growth of government and the concomitant increase in its functions, power and contacts with private parties has made many courts increasingly reluctant to deny the defense of equitable estoppel in appropriate situations. The Government, in its caretaker role for all the public, should not be bound by the unauthorized or unlawful acts of its representatives. On the other hand, it is hardly in the public's interest for the Government to deal dishonestly or in an unconscientious manner. This is especially imperative in a time when few individuals and corporations, if any, can escape numerous dealings with the Government and its agents.
Numerous cases reflect the position that equitable estoppels may be found against the Government in certain situations. Thus the courts have held that an equitable estoppel may be found against the Government (1) if the Government is acting in its proprietary rather than sovereign capacity;
(1) While it is said that the Government can be estopped in its proprietary role, but not in its sovereign role, the authorities are not clear about just what activities are encompassed by each. In its proprietary role, the Government is acting as a private concern would; in its sovereign role, the Government is carrying out its unique governmental functions for the benefit of the whole public.
In the instant case, the Government is suing to enforce a contract between it and a third party, and is thus acting as a private party would. The question here is not that of preserving public lands — since Government never had title to the cutover lands it is now claiming — but only of enforcing a private contract to gain new title to lands.
In United States v. A. Bentley & Sons Co., 293 F. 229, 235 (S.D.Ohio 1923), a case dealing with commercial paper, the court noted that
(2) We must also ask whether Assistant Secretary of the Interior Sherman, in issuing P.L.O. 1600 in 1958, was acting beyond the scope of his authority, thus rendering such Order ineffective to bind the Government under the principles discussed above. And if it is found that such Order was ineffective when issued, was it nonetheless ratified and thus binding by the action of Congress in passing the Act of August, 1958?
Government contends that P.L.O. 1600 was never valid to affect its rights because the officer who issued it, Assistant Secretary of the Interior Sherman, was without lawful authority to do so. Although Sherman issued the Order pursuant to a valid delegation of authority within the Executive branch, the question is whether by so doing he was usurping a function reserved to Congress.
An examination of the relevant statutes leads us to the conclusion that nothing forbade the executive issuance of P.L.O. 1600.
By Congressional Act of 1891
The Siskiyou National Forest was such a forest established by executive order on October 5, 1906.
Thus the 1907-1912 Acts limited Presidential power to extend and create national forests in western states but did not purport to affect his power to reduce such boundaries as conferred under the 1897 Act. The limitations in the 1907-1912 Acts were express; limitations on reduction of boundaries were neither expressed, implied nor intended.
By reading all the pertinent Congressional legislation together insofar as it lays out a general system of land laws,
Following the 1907-1912 Acts, presidential proclamations reducing national forests in the western states continued as before. On May 4, 1914, for example, the President by Proclamation pursuant to the 1897 Act changed the boundaries of Siskiyou National Forest to exclude and eliminate certain areas from that forest and restored the excluded public lands "to settlement in advance of entry." (38 Stat. 1994).
We find that it does not lie with the Forest Service to argue now against the validity of an administrative power which apparently has been exercised by the President or his representative without being questioned for over 50 years.
In any event, even assuming arguendo that P.L.O. 1600 was invalid for lack of authority in the President to issue it, we are faced with subsequent Congressional action which in effect confirmed the April, 1958, boundary change.
In August, 1958, Congress, with knowledge of the previous boundary reduction,
Therefore, even assuming lack of executive or administrative authority, the April, 1958, boundary reduction was confirmed and ratified by this subsequent Congressional action. See Polson Logging Co. v. United States, 160 F.2d 712, 714-715 (9th Cir. 1947); Restatement, Agency 2d §§ 82, 83.
Mr. Justice Holmes once wrote, "Men must turn square corners when they deal with the Government,"
A second equitable defense here is that of clean hands, a doctrine somewhat akin to, but distinguishable from, that of estoppel.
The Government comes before this Court seeking the equitable remedy of specific performance, a decree for which can be denied if the plaintiff has not come into court with clean hands.
If a court of equity finds the plaintiff to be guilty of unfair conduct or any inequitable advantage it may refuse him the remedy of specific performance — even though such conduct would not be sufficient for rescission of the contract sought to be enforced. Shikes v. Gabelnick, 273 Mass. 201, 173 N.E. 495, 497, 87 A.L.R. 1339 (1930).
Pomeroy, in noting the applicability of the doctrine of clean hands to the remedy of specific performance, states, (2 Pomeroy § 400, at 100):
It is clear that in the present case a decree of specific performance in favor of Government will result in an inequitable advantage to it to the extent that Georgia-Pacific has made considerable investment in the Eden Ridge Tract based upon good faith reliance on both the boundary changes of 1958 and the failure of Government to assert any claim to the subject lands until the present suit was instituted.
The Government's actions can hardly be described as comporting with the dictates of good faith, fair dealing or conscience. Georgia-Pacific was given no indication that the boundary changes effected in 1958 were invalidly made (as Government claims) or that Government would later repudiate such changes to the considerable financial detriment of Georgia-Pacific. It is just these considerations which find Government's hands tainted and thus lead this court to deny its claim for specific performance.
Other Equitable Considerations in Granting Specific Performance
Our final consideration relates to the general rules of equity surrounding the discretionary remedy of specific performance. Because addressed to the discretion of the court, the remedy may be denied where the equities are such as to convince the court that justice and good conscience requires denial.
Courts of equity have long refused to decree specific performance where the result would be unconscionable, unjust, inequitable, oppressive or unduly harsh. See Union Pacific R'y Co. v. Chicago Etc. R'y Co., 163 U.S. 564, 603-604, 16 S.Ct. 1173, 41 L.Ed. 265 (1896); Restatement, Contracts § 367 (1932); 2 Pomeroy, § 400, at 101; 4 Pomeroy § 1405a, at 1043; 49 Am.Jur. Specific Performance § 6, at 10; § 58, at 73; 81 C.J.S. Specific Performance § 1, at pp.
In the instant case, a decree of specific performance would inure to the obvious and substantial hardship of Georgia-Pacific. Georgia-Pacific's program of reseeding and planting would be rendered futile, and its expenditures on the subject land and appurtenant roads and facilities would be lost. A decree of specific performance would result in a severe diminution of the forest reserve assets of Georgia-Pacific, and Georgia-Pacific would have lost any chances it had to purchase similar timberland in the past ten years.
We find it unnecessary to consider the applicability of the doctrine of frustration of contract and of failure of consideration in relation to the 1934 Document briefed and argued by the parties in view of the grounds of our decision.
The judgment of the District Court is affirmed.
"SUBJECT, HOWEVER, to the restrictions, exceptions, reservations, conditions, limitations, interests and other matters, if any, appearing of record in the office of the County Recorder * * *."
Other authorities rely on a somewhat different statement of analogous elements in order to make out a defense of equitable estoppel. One test that is followed in varying form is that set out in 3 Pomeroy § 805, at 191-192:
See Sly v. United States, 220 F.2d 212, 214-215 (7th Cir. 1955); Smale & Robinson, supra, 123 F.Supp. at 463; Comment, Never Trust a Bureaucrat: Estoppel Against the Government, 42 So.Cal.L.Rev. 391 passim (1969). Cf. 28 Am.Jur.2d Estoppel and Waiver § 35, at 640; Bigelow, supra, at p. 602 passim; Pospishl, Equitable Estoppel, 19 Neb.L.Bull. 222, 232-235 (1940); 4 A.L.R.3d 361, Comment Note; Quantum or Degree of Evidence Necessary to Prove an Equitable Estoppel (1965); Comment, 12 Ore.L. Rev. 316 (1933). See also Comment, Equitable Estoppel and the Statute of Frauds in California, 53 Cal.L.Rev. 590 (1965); Comment, Equitable Estoppel — Actual or Constructive Knowledge by the Person Estopped, 26 Neb.L.Rev. 461 (1947).
This is also true to varying degrees in proceedings against state governments and their subdivisions. At least one state, Louisiana, permits estoppels to be asserted against its political bodies to the same degree that they would be available against private parties. Prebensen & Blakstad v. Board of Commissioners, 241 F.Supp. 757, 760-761 (E.D.La.1965). See Comment, Never Trust a Bureaucrat: Estoppel Against the Government, 42 So. Cal.L.Rev. 391, 396 (1969).
Numerous articles have criticized the unavailability, or limited availability, of estoppel as a defense against the Government. E. g., Davis, Administrative Law Treatise §§ 17.01-17.09 (1958); Berger, supra at n. 12, Pillsbury, supra, at n. 12; Newman, Should Official Advice Be Reliable? — Proposals as to Estoppel and Related Doctrines in Administrative Law, 53 Colum.L.Rev. 374 (1953); Schwartz, supra; Whelan and Dunigan, Comment: Government Contracts: Apparent Authority and Estoppel, 55 Geo.L.J. 830 (1967); Comment, 42 So.Cal.L.Rev., supra; Note, The Proper Case for Estoppel Against Federal Administrative Agencies, 28 Notre Dame Law 234 (1953); Comment, 16 Geo.Wash.L.Rev. 273 (1948).
Other articles dealing with the problem of equitable estoppel against the Government or other political bodies include: Gordon, Finality of Immigration and Nationalization Determinations — Can the Government Be Estopped?, 31 U.Chi.L. Rev. 433 (1964); Jones, Estoppel in Tax Litigation, 26 Geo.L.J. 868 (1938); Kenney, Availability of the Equitable Defense of Estoppel Against the Government in Federal Taxation Law, 3 U.Det.L.Rev. 123 (1940): McIntyre, Authority of Government Contracting Officers: Estoppel and Apparent Authority, 25 Geo.Wash.L. Rev. 162 (1956); De Y. Manning, The Application of the Doctrine of Estoppel Against the Government in Federal Tax Cases, 30 N.C.L.Rev. 356 (1952); Wagner, Estoppel by Informal Administrative Action or Opinion in Sales and Use Tax Cases, 64 Dick.L.Rev. 47 (1959).
The distinction between proprietary (private) and sovereign (governmental) functions is not often an easy or meaningful one to make. See Comment, Estoppel Against State, County, and City, 23 Wash.L.Rev. 51, 53 (1948).