DILLON, Circuit Judge.
The railroad company claims that the lands upon which the state authorities have levied taxes for the year 1872, are not subject to taxation for two. reasons: one based upon a provision in section 3 of the act of July 1st, 1862, and the other of July 2d. 1864. These will be noticed in their order.
Section 3 of the act of 1862, is the one which makes the grant of land to the company within a specified distance of its line of road, and it concludes with this provision: “And all such lands so granted by this section, which shall not be sold or disposed of by tne company within three years after the entire road shall be completed, shall be subject to settlement and pre-emption like other lands, at a price not exceeding $1.25 per acre, to be paid to the company.”
Section 4 directs patents to issue for lands on each side of the toad from time to time on the completion of sections of forty (after-wards reduced to twenty) consecutive miles, which patents it is enacted shall “convey the right and title to said lands to said company.”
Section 21 of the amendatory act of 1864 provides “that before any land granted shall be conveyed to • the company * * there shall first be paid into the treasury of the United States, the cost of surveying, selecting, and conveying the same,” etc.
From the bill and the proofs, it appears that the work of constructing the road was commenced in 1865, that the road was completed and accepted from time to time in sections of forty and twenty miles, and that the entire road was completed by May 10th, 1869, and has since that time been in constant use and operation.
In 1867 the company “for the purpose of raising money to aid in the construction of its railroad,” mortgaged its land grant to secure the payment of bonds for about ten millions of dollars. This mortgage is still in full force.
Upon this legislation and upon this state of facts, the first ground taken by the company upon which it insists that the state of Nebraska has no right to tax any of its lands, whether patented or not patented, is, that by the provision in section three above mentioned, these lands are “subject to settlement and pre-emption like other public lands, at a price not exceeding $1.25 per acre, to be paid to the company.” In support of this proposition the counsel for the company rely upon the case of Kansas Pac. R. Co. v. Prescott, 16 Wall. [83 U. S.] 603.
I confess to some difficulty in distinguishing that case from the one now before the court; but upon the best consideration 1 have been able to give to the subject, I am of opinion that that case does not control this one, so far at least as regards the lands to which this company holds the patent of the United States
There are two elements in that case which, in material respects, distinguish it from the present one so far as the plaintiff company has received a patent for its lands; the first is. that in that case the taxes were assessed before any patent had been issued: and the second is, that they were assessed at a time when by reason of the non-pay-’ ment of the costs of surveying, etc., required by section twenty-one of the act of 1864, the company was not entitled to a patent.
* If, in that case, the cost of surveying the land had been paid, and a patent for the land there in question had actually been issued before the taxes were assessed, it would seem that a different result would or might have been reached.
It is not my purpose to discuss at length the respective rights of the general government and of the railroad company in the lands, after the lapse of three years from the completion of ihe road, nor whether a mortgage of the lands is such a “disposition” of them as would defeat the right of settlement or pre-emption. The proofs show that the company has dealt with these lands, and is now dealing with them as if they were in all respects their absolute property. They are advertising and selling them at their own prices and upon their own terms, and they do not recognize the rights of the public to settle upon and pre-empt them, and to buy them at $1.25 per acre. On the other hand, neither congress nor the interior department has taken any steps to subject these lands to settlement and pre-[643]*643emptiou, and the public are denied the right to the benefit of the privilege or reservation in their favor.
I am inclined to consider the true meaning and effect of the provision in question to be this: While the road is being constructed and for a period of three years after the •completion of the entire line, the company may sell or dispose of the lands at their •own price, and they are subject during this period to no right of settlement or pre-emption; after three years have elapsed, the company may still sell or dispose of their lands in good faith, but as to any lands not thus sold or disposed of, there is a right on the part of the public to settle upon and pre-empt them in the same manner as if they were part of the public domain — the price not exceeding $1.25 per acre, being payable to the company instead of the gov-ernment.
This view harmonizes and gives effect to all the different provisions of the act. The right of the company to the lands granted is a substantial one. The title passes to the company. Patents are required to' be issued to the company conveying the “right and title to the lands ” During the three years the right of the company to sell at its own price is clear, and has not been denied. After the three years the title does not change. The company still owns the lands, but “subject” to the right of any person possessing the qualifications of a pre-emptor, to settle upon them and obtain them as a pre-emptor may obtain other public lands. But this right does not prevent the company from selling lands in good faith to persons who may not wish to pre-empt or occupy them. The rights intended to be given to the public are secured and the evils apprehended from the company having a monopoly of such a vast amount of lands, are avoided by this construction — which recognizes the right of the actual settler to preempt the lands, and thus destroy the monopoly, and also the right of the company actually and in good faith, to sell any tract not at the time pre-empted, and which, if sold, likewise destroys to that extent the monopoly, since a sale of lands is usually the first step towards their settlement and cultivation.
If this be a correct view of section three of the act of 1802, it results that the lands of the company so far as they are patented, are subject to taxation by the authority of the state, and this privilege reserved in favor of the actual settler, and of which he may never wish to avail himself, which is contingent in its nature and subject to be defeated by a sale of the lands by the company, is not inconsistent with and will not defeat the rightful authority of the state to tax the lands.
As to the-lands which have been patented to the company, I am of the opinion that it is the substantial owner, and that equity should not relieve it from taxation in respect thereto, because it may be compelled to sell particular tracts here and there to actual settlers at $1.25 an acre.
The other ground of exemption, in view of the.decision in the Prescott Case, may be disposed of briefly.
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DILLON, Circuit Judge.
The railroad company claims that the lands upon which the state authorities have levied taxes for the year 1872, are not subject to taxation for two. reasons: one based upon a provision in section 3 of the act of July 1st, 1862, and the other of July 2d. 1864. These will be noticed in their order.
Section 3 of the act of 1862, is the one which makes the grant of land to the company within a specified distance of its line of road, and it concludes with this provision: “And all such lands so granted by this section, which shall not be sold or disposed of by tne company within three years after the entire road shall be completed, shall be subject to settlement and pre-emption like other lands, at a price not exceeding $1.25 per acre, to be paid to the company.”
Section 4 directs patents to issue for lands on each side of the toad from time to time on the completion of sections of forty (after-wards reduced to twenty) consecutive miles, which patents it is enacted shall “convey the right and title to said lands to said company.”
Section 21 of the amendatory act of 1864 provides “that before any land granted shall be conveyed to • the company * * there shall first be paid into the treasury of the United States, the cost of surveying, selecting, and conveying the same,” etc.
From the bill and the proofs, it appears that the work of constructing the road was commenced in 1865, that the road was completed and accepted from time to time in sections of forty and twenty miles, and that the entire road was completed by May 10th, 1869, and has since that time been in constant use and operation.
In 1867 the company “for the purpose of raising money to aid in the construction of its railroad,” mortgaged its land grant to secure the payment of bonds for about ten millions of dollars. This mortgage is still in full force.
Upon this legislation and upon this state of facts, the first ground taken by the company upon which it insists that the state of Nebraska has no right to tax any of its lands, whether patented or not patented, is, that by the provision in section three above mentioned, these lands are “subject to settlement and pre-emption like other public lands, at a price not exceeding $1.25 per acre, to be paid to the company.” In support of this proposition the counsel for the company rely upon the case of Kansas Pac. R. Co. v. Prescott, 16 Wall. [83 U. S.] 603.
I confess to some difficulty in distinguishing that case from the one now before the court; but upon the best consideration 1 have been able to give to the subject, I am of opinion that that case does not control this one, so far at least as regards the lands to which this company holds the patent of the United States
There are two elements in that case which, in material respects, distinguish it from the present one so far as the plaintiff company has received a patent for its lands; the first is. that in that case the taxes were assessed before any patent had been issued: and the second is, that they were assessed at a time when by reason of the non-pay-’ ment of the costs of surveying, etc., required by section twenty-one of the act of 1864, the company was not entitled to a patent.
* If, in that case, the cost of surveying the land had been paid, and a patent for the land there in question had actually been issued before the taxes were assessed, it would seem that a different result would or might have been reached.
It is not my purpose to discuss at length the respective rights of the general government and of the railroad company in the lands, after the lapse of three years from the completion of ihe road, nor whether a mortgage of the lands is such a “disposition” of them as would defeat the right of settlement or pre-emption. The proofs show that the company has dealt with these lands, and is now dealing with them as if they were in all respects their absolute property. They are advertising and selling them at their own prices and upon their own terms, and they do not recognize the rights of the public to settle upon and pre-empt them, and to buy them at $1.25 per acre. On the other hand, neither congress nor the interior department has taken any steps to subject these lands to settlement and pre-[643]*643emptiou, and the public are denied the right to the benefit of the privilege or reservation in their favor.
I am inclined to consider the true meaning and effect of the provision in question to be this: While the road is being constructed and for a period of three years after the •completion of the entire line, the company may sell or dispose of the lands at their •own price, and they are subject during this period to no right of settlement or pre-emption; after three years have elapsed, the company may still sell or dispose of their lands in good faith, but as to any lands not thus sold or disposed of, there is a right on the part of the public to settle upon and pre-empt them in the same manner as if they were part of the public domain — the price not exceeding $1.25 per acre, being payable to the company instead of the gov-ernment.
This view harmonizes and gives effect to all the different provisions of the act. The right of the company to the lands granted is a substantial one. The title passes to the company. Patents are required to' be issued to the company conveying the “right and title to the lands ” During the three years the right of the company to sell at its own price is clear, and has not been denied. After the three years the title does not change. The company still owns the lands, but “subject” to the right of any person possessing the qualifications of a pre-emptor, to settle upon them and obtain them as a pre-emptor may obtain other public lands. But this right does not prevent the company from selling lands in good faith to persons who may not wish to pre-empt or occupy them. The rights intended to be given to the public are secured and the evils apprehended from the company having a monopoly of such a vast amount of lands, are avoided by this construction — which recognizes the right of the actual settler to preempt the lands, and thus destroy the monopoly, and also the right of the company actually and in good faith, to sell any tract not at the time pre-empted, and which, if sold, likewise destroys to that extent the monopoly, since a sale of lands is usually the first step towards their settlement and cultivation.
If this be a correct view of section three of the act of 1802, it results that the lands of the company so far as they are patented, are subject to taxation by the authority of the state, and this privilege reserved in favor of the actual settler, and of which he may never wish to avail himself, which is contingent in its nature and subject to be defeated by a sale of the lands by the company, is not inconsistent with and will not defeat the rightful authority of the state to tax the lands.
As to the-lands which have been patented to the company, I am of the opinion that it is the substantial owner, and that equity should not relieve it from taxation in respect thereto, because it may be compelled to sell particular tracts here and there to actual settlers at $1.25 an acre.
The other ground of exemption, in view of the.decision in the Prescott Case, may be disposed of briefly. Upon the proofs in this case, which on some points are indefinite, I am of opinion that lands which have not been patented, either because the costs of surveying required by section twenty-one of the act of 1864 have not been paid, or because patents have been withheld by the interior department as indemnity to make good the deficiencies in the construction of the road, are not taxable, and to this extent the injunction will be continued in force. But as to all lands which have actually been patented to the company the injunction will be dissolved. It is true that as respects patented lands within the ten miles limit, Mr. Davis, the land agent of the company, states that the surveying fees have not been paid, but he also states that the reason why they were not paid was that the interior department did not require it.
It does not appear that there are any lands not patented which have been fully earned and set apart to the company upon which all fees have been paid, and for which the patents are not retained by the government for its own security, and therefore for all practical purposes, I hold that the lands in this case may, upon the proofs before the court, be divided into two classes: 1st, those which are taxable; 2d, those which have not been patented and which are not shown to be taxable.
Without stating at length the reasons for the view, my opinion is that the bill is not multifarious by reason of the joinder of the various counties through which the road runs, as the question on which the case turns is common to all, and the counties are in fact the agencies of the state as to that part of the taxes which they must pay into the state treasury. •
I am also of the opinion that the bill presents a ease of equitable cognizance so far as the tax sought to be enjoined is illegal, because of the multiplicity of suits which the sale of many hundred separate tracts of land would engender; because of the cloud which, under the legislation of Nebraska, would be cast upon the title of the lands by a tax sale and deed; because so far as the taxes going to the state are concerned, there is no remedy at law to recover them back (First Nat. Bank of Omaha v. Douglas Co. [Case No. 4,809], May term, 1873, decided by Mr. Justice Miller); and because the threatened seizure of the trains of the company in a new and remote region, causing delay and injury, should not be permitted in order to enforce an illegal tax. Let a decree be drawn dismissing the bill as to all lands embraced in the company's patent of February 23, 1871, and making the injune[644]*644tion perpetual as to the lauds which have not been patented to the company. Decree accordingly.
NOTE. The decree in the foregoing case was rendered in July, 1874, and cross-appeals taken. By reason of its character and importance the case was advanced by the supreme court and a decree rendered January, 1875, affirming the decree of the circuit court both as to the patented lands and the lands not patented. [22 Wall. (89 U. S.) 444.] The following propositions as stated by Mr. Justice Hiller, were ruled by the supreme court:
1. Kansas Pac. R. Co. v. Prescott. 16 Wall. [83 U. S.] 603, modified and overruled so far ns it asserts the contingent right of pre-emption in lands granted to the Pacific Railroad Company to constitute an exemption of those lands from state taxation.
2. But affirmed so far as it holds that lands on which the costs of survey have not been paid, and for which the United States have not issued a patent to the company, are exempt from state taxation.
3. But where the government has issued tlr> patent the lands are taxable, whether payment of those costs have been made to the United States or not. •