United States v. Michigan, 190 U.S. 379 (1903)

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United States v. Michigan

No. 11

Argued April 20-21, 1903
Decided June 1, 1903
190 U.S. 379

ORIGINAL. IN EQUITY

Syllabus

The effect of the legislation of Congress granting a right of way through a military reservation and 750,000 acres of public lands to be sold by the State of Michigan and the proceeds applied, under the conditions prescribed, to the construction of the St. Mary’s River Canal, and of the legislation of the State of Michigan in regard to the construction, maintenance and surrender of the canal to the United States, as the same are set forth in the complaint, was to create a trust, of which the State of Michigan was the trustee, to construct and maintain the canal as a work of national importance, and the State of Michigan acquired no individual beneficial interest therein. When the canal was surrendered to the United States by the state, the federal government was entitled to whatever surplus remained in the hands of the state from the tolls collected over and above the expenses of maintenance and also to the value of the tools and materials connected with the canal at the time of the surrender.

The United States, by leave of court, duly filed in this Court its original bill in equity against the State of Michigan, to which bill the defendant has filed a demurrer substantially for want of equity, and also because it appears therefrom that the complainant has been guilty of gross laches in regard to the matters therein set forth. It will be most convenient to set forth the bill, with the exception of some portions thereof which do not seem to be material, and it is as follows:

To the Chief Justice and the Associate Justices of the

Supreme Court of the United States, in Equity:

Philander C. Knox, Attorney General of the United States of America, for and in behalf of said United States, brings this bill of complaint against the State of Michigan, and thereupon your orator complains and says:

First

That the said State of Michigan, for some years previous to the date first hereinafter mentioned, was desirous of procuring the construction of a canal and lock in the Saint Mary’s River at or near Saint Mary’s Falls, where Lake Superior empties into said river, and did at various times, by joint resolutions of the legislature thereof, importune the Congress of the United States to construct such a canal and lock on the Michigan side of said river, and was able, through the influence of its senators and representatives in Congress from said state, with the cooperation and influence of other states which might become directly affected in a desirable manner, to cause and procure said Congress to pass a law, which became operative on the 26th day of August, 1852, appropriating to the State of Michigan 750,000 acres of land, to be afterwards selected, to construct such ship canal and lock. Said act is in terms as follows:

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That there be, and is hereby, granted to said state the right of locating a canal through the public lands known as the military reservation at the falls at Saint Mary’s River in said state, and that four hundred feet of land in width, extending along the line of such canal, be, and the same is hereby, granted, to be used by said state, or under the authority thereof, for the construction and convenience of such canal, and the appurtenances thereto and the use thereof is hereby vested in said state forever for the purposes aforesaid and no other: Provided, That in locating the line of said canal through said military reservation, the same shall be located on the line of the survey heretofore made for that purpose, or such other route between the waters above and below said falls as, under the approval of the Secretary of War, may be selected. And provided further, That said canal shall be at least one hundred feet wide, with a depth of water twelve feet, and the locks shall be at least two hundred and fifty feet long and sixty feet wide.

SEC. 2. And be it further enacted, That there be, and hereby is, granted to the said State of Michigan, for the purpose of aiding said state in constructing and completing said canal, seven hundred and fifty thousand acres of public lands, to be selected in subdivisions, agreeably to the United States surveys, by an agent or agents, to be appointed by the governor of said state, subject to the approval of the Secretary of the Interior, from any lands within said state subject to private entry.

SEC. 3. And be it further enacted, That the said lands hereby granted shall be subject to the disposal of the legislature of said state for the purposes aforesaid and no other, and the said canal shall be and remain a public highway for the use of the government of the United States, free from toll or other charge upon the vessels of said government engaged in the public service, or upon vessels employed by said government in the transportation of any property or troops of the United States.

SEC. 4. And be it further enacted, That if the said canal shall not be commenced within three, and completed within ten, years, the said State of Michigan shall be bound to pay to the United States the amount which may be received upon the sale of any part of said lands by said state, not less than one dollar and twenty-five cents per acre, the title to the purchasers under said state remaining valid.

SEC. 5. And be it further enacted, That the legislature of said state shall cause to be kept an accurate account of the sales and net proceeds of the lands hereby granted, and of all expenditures in the construction, repairs, and operating of said canal, and of the earnings thereof, and shall return a statement of the same annually to the Secretary of the Interior, and whenever said state shall be fully reimbursed for all advances made for the construction, repairs, and operating of said canal, with legal interest on all advances until the reimbursement of the same, or upon payment by the United States of any balance of such advances over such receipts from said lands and canal, with such interest, the said state shall be allowed to tax for the use of said canal only such tolls as shall be sufficient to pay all necessary expenses for the care, charge, and repairs of the same.

SEC. 6. And be it further enacted, That before it shall be competent for said state to dispose of any of the lands to be selected as aforesaid, the route of said canal shall be established as aforesaid, and a plat or plats thereof shall be filed in the office of the War Department, and a duplicate thereof in the office of the Commissioner of the General Land Office.

Approved, August 26, 1852.

And you orator further shows that the Legislature of the State of Michigan afterwards passed an act providing for the construction of a ship canal around the Falls of Saint Mary, the same being number thirty-eight of the session laws of the State of Michigan for the year 1853. By this act, the appropriation of land made by Congress as aforesaid was accepted, with all conditions therein expressed attached, and made obligatory upon the State of Michigan. By its said act, also, the governor was authorized to appoint a board of five commissioners and an engineer for the purpose of looking after the construction of said canal and lock; provisions were made relative to the contract proposed to be entered into for the construction of the canal; the expenses of surveying, locating, and constructing the same; the manner in which the expenses attendant upon such construction should be paid, which was substantially out of the lands so appropriated by Congress; the keeping of accounts connected with such construction; the turning out of lands to the contractor and subcontractor, and other matters connected with such work, such act being in terms as follows:

SECTION 1. The People of the State of Michigan enact, That he Act of Congress entitled "An Act Granting to the State of Michigan the Right of Way and a Donation of Public Land for the Construction of a Ship Canal Around the Falls of Saint Mary, in Said state," approved August 26, 1852, is hereby accepted, and all conditions expressed in said act are hereby agreed to and made obligatory upon the State of Michigan.

SEC. 2. For the purpose of carrying out the objects of said act, the governor is hereby authorized, by and with the advice and consent of the senate, to appoint five commissioners and an engineer, who shall prepare a plan for the construction of said canal in conformity with the provisions of said act of Congress and this act, to be approved by the governor, and who shall have the entire and absolute control and supervision of the construction of said canal.

* * * *

SEC. 3. The said commissioners shall receive proposals for the construction of said canal, agreeable to said plan, and, in deciding upon said proposals, are required to take into consideration the responsibility of the person or persons offering to contract for the same, and his or their ability to carry into effect the object and intention of said act of Congress by constructing said canal in the best and most expeditious manner, and said commissioners, in making said contract, shall require good and ample security for the performance thereof.

* * * *

SEC. 5. . . . The cost of locating the said canal and all expenses of every kind incidental to the supervision of the construction and completion of said canal shall be reimbursed by the contractors as fast as ascertained, and shall be paid by them into the state treasury, and under the direction of said commissioners. When and as fast as the lands shall have been selected and located, an accurate description thereof, certified by the persons appointed to select the same, shall be filed in the office of the commissioner of the state land office, whose duty it shall be to transmit to the Commissioner of the General Land Office a true copy of said list, and to designate and mark upon the books and plats in his office the said lands as Saint Mary canal lands.

SEC. 6. The commissioners shall require said canal to be constructed and completed within two years from making the contract, and, on the completion of the same within said period to their satisfaction and acceptance and the satisfaction of the governor and engineer, they shall have a certificate thereof, to be signed by the commissioners, governor, and engineer and filed in land office. Thereupon it shall be the duty of the said commissioner of the state land office forthwith to make certificates of purchase for so much of said lands as, by the terms of the contract for the construction of said canal, are to be conveyed for the purpose of defraying its costs and the expenses hereinbefore provided, which certificates shall run to such persons and for such portions of said lands so selected and to be conveyed as the contractor may designate, and shall forthwith be delivered to the secretary of state, and patents shall immediately be issued thereon, as in other cases.

SEC. 7. That said commissioners shall keep an accurate account of the sales and net proceeds of the lands granted by said act of Congress, and of all expenditures in the construction of said canal, and the earnings thereof, and, on or before the first Monday in October in each year, return a statement thereof to the governor, whose duty it shall be to return the same, or a copy thereof, to the Secretary of the Interior at Washington, as required by said act of Congress.

* * * *

SEC. 9. For the selection of the lands granted by Congress as aforesaid for the construction of said canal, the governor shall appoint agents in pursuance of said act. He shall give notice to the person or persons contracting under this act to construct said canal, to recommend to him suitable persons to make such selections, and he shall appoint such agents from the persons so recommended, if, in his judgment, suitable and proper persons for that purpose.

* * * *

Approved, February 5, 1853.

Second

Your orator shows that the lands so appropriated were duly selected and certified to the State of Michigan, and that he is informed and verily believes, and so charges the fact to be, that the lands so appropriated were all sold and disposed of in some manner by the State of Michigan, and that at some time subsequent to such selection and certification, said State of Michigan constructed, or caused to be constructed, and put into operation, the canal and lock so appropriated for, but that the said State of Michigan did not report to the Secretary of the Interior, as required by the terms of section 5 of said act of Congress, an accurate account of the sales and net proceeds of the lands granted and of all expenditures in the construction, repairs, and operating of said canal, and of the earnings thereof; but, on the contrary, your orator shows that, after diligent search and inquiry in the office of the Secretary of the Interior, to whom such annual reports should have been made, no such reports can be found on file, and no record or memoranda indicating that any report or reports such as were provided for in said section were ever made, so that your orator is unable to state in what manner said lands were sold or disposed of or whether all the proceeds thereof were in fact devoted to the construction, control, and management of said canal, as in said act provided.

Third

Your orator further shows that, by an Act of the Legislature of the State of Michigan approved February 12, 1855, a superintendent was authorized to be appointed by the Governor of the State of Michigan, with the advice and consent of the senate thereof, his salary fixed, and the manner of keeping record of the vessels navigating said canal and passing through said lock, as well as the tolls to be collected and the keeping of accounts, were all provided for; that from the completion of said canal and lock, the same were controlled, operated, and managed by the State of Michigan, and that, during the entire management of the same by said state, as your orator is informed and verily believes and therefore charges the fact to be, no funds belonging to the State of Michigan were ever permanently invested or involved in such control, operation, and management, but, on the contrary, said canal was wholly constructed from the appropriation of such lands so made by the United States aforesaid, and was managed, controlled, repaired, and maintained from the amounts collected as tolls from the vessels passing through said canal and lock during the several years when said State of Michigan was in such control thereof.

Fourth

And your orator further shows that he is informed and verily believes, and therefore charges the fact to be, that during such management and control by the State of Michigan, there were from time to time moneys collected in the form of tolls in excess of the amounts actually used at the period of such collection, and that this was done without intention on the part of the State of Michigan to make a profit from the management and control of said canal in violation of the act of Congress hereinbefore quoted, but for the purpose of having cash on hand to make repairs either during the season when the canal was closed to navigation or any time when so needed, and that said fund gradually increased in amount with the increasing volume of commerce through the canal, until finally, at the time when the canal was turned over to the United States, there was in the Treasury of the State of Michigan, belonging to the fund of said canal, not appropriated or the expenditure thereof in any way provided for, the acknowledged sum of $68,927.12, all of which had been paid for or collected in the manner hereinbefore stated for the purposes hereinbefore mentioned, and in direct compliance with the requirements of the act of Congress originally providing for the construction of said canal, and that said money had been collected in good faith and for the purposes of devoting the same ultimately to the repair, improvement, supervision, and expenses of the management thereof.

And your orator further shows that there was purchased and collected from time to time a large quantity of tools, implements, and property of various kinds in connection with extensions, repairs, improvements, management, and control of said canal and lock by defendant, and at the time of the transfer to the United States, as aforesaid, the same were on hand and within the control and in the custody of the defendant, all of which properly belonged and appertained to the said canal and lock and to the defendant in its capacity as the manager and controller thereof; but whether any further and larger sum of money than is hereinbefore stated was, should, or might have been on hand and within the control of said defendant, in its treasury or otherwise or might or should have been accredited to the account of the said canal and lock, your orator does not know and has no means of being informed, and is therefore obliged to depend upon an accounting by the defendant, hereinafter to be prayed for, for correct and authentic information.

Fifth

And your orator further shows that the State of Michigan had no beneficial interest in said canal or lock except as it affected the general public welfare, and had expended, or claimed to have expended, all the appropriation of Congress for the construction of the same, and that the increasing demands of commerce required great expenditures of money for the enlargement and betterment of said canal and lock, together with the probable construction of a new and enlarged lock, and that it was not convenient, if possible, to provide the funds therefor by the collection of tolls upon the vessels passing and repassing through said canal; that the State of Michigan not alone being interested in such enlargement and improvement, but rather the general public, and particularly the inhabitants of several rapidly growing states of the Union, it was proposed to transfer the canal to the United States to accomplish such end, and for that purpose, an act was passed by the Legislature of the State of Michigan and became operative on March 3, 1881.

[This act, although not set forth in the bill, is given in the margin.

By the terms of said act, the board of control of said canal, constituted by defendant for its management, was authorized and empowered at any time when they might deem it proper to transfer all material belonging to said canal and to pay over to the United States all moneys remaining in the canal fund, excepting so much as might be necessary to put the canal in repair for its acceptance in accordance with the act transferring the same to the United States, and the Congress of the United States in turn passed an act authorizing the Secretary of War to accept, on behalf of the United States, from the State of Michigan, the said canal and the public works thereon and appropriating $250,000 to improve and operate the same, the same being the Act approved June 14, 1880, found in 21 Stat. 189.

[This act is correctly set forth in the preamble to the foregoing act of the State of Michigan.]

And thereupon said canal actually was transferred to the officers of the government of the United States connected with the War Department thereof, and your orator shows, avers, and charges that no tools, implements, personal property, chattels, goods, moneys, or effects of any name or nature that were in the Treasury of the State of Michigan, or should or might have been therein at the time of such transfer, or within the custody of said State of Michigan, defendant herein, or might have been in such custody, connected with or belonging to said canal or lock, its funds, its management, and control were so transferred and turned over.

Sixth

Your orator further shows that, while certain of the terms of the act of Congress appropriating the land for the construction of said lock and canal indicated a donation to the State of Michigan for such purpose, it was really the intent and purpose of the Congress of the United States to appropriate such lands not for the purposes of exclusively enriching the State of Michigan, increasing its commerce, or extending its authority alone, but for the purpose of accomplishing a public work for the general good of all classes of people engaged or interested in the commerce of the Great Lakes of the United States, and for that reason, while granting said lands to the State of Michigan in certain of its terms, it was provided that, in case of the failure to construct said canal, the proceeds of the sale of such lands should be returned to the United States; also that the State of Michigan should have no beneficial interest in the revenue from said canal, when constructed, while in its management and control, but that the said canal and lock should be actually free to the United States government, and for the use of all persons desiring the same, except as to the necessary tolls to pay for their supervision, repairs, and maintenance, and it was also provided that a strict account should be kept of the sales of said lands, and that they should be applied to the construction of said canal and lock and to no other purpose whatever; also that annual reports should be made by the State of Michigan, and forwarded by the governor thereof to the Secretary of the Interior, concerning the management, control, and sale of lands, and thus, instead of being an actual grant or donation of lands to the State of Michigan for its individual benefit, and to become a part of its domain and to be within its ownership, the terms of said act merely operated to create a trust in the State of Michigan for the purpose of carrying out a public work in which it, the State of Michigan, had become interested for the general public good. Your orator further shows that, by the act of the legislature of the State of Michigan hereinbefore quoted, said donation or appropriation of lands was accepted subject to all limitations, restrictions, and conditions imposed by Congress, as aforesaid. Your orator further shows that the State of Michigan, at the time and continuously until a very recent period hereinafter to be mentioned and set forth, not only regarded its sale of said lands, its construction of said works, and its management and control of the latter as a trust for the public good from the complainant, but also through its legislature, as well as various of its officers, so declared, and that, in an Act of the Legislature of the State of Michigan passed and approved February 14, 1859, the same being No. 175 of the Session Laws of the State of Michigan for said year, and particularly in the third paragraph of the preamble thereof, said legislature made use of the following language:

Whereas such canal, having been built and accepted by the authorities of this state, is found to need repairs in order to its preservation and usefulness, and the due performance of the trust created by said act of Congress, and the assent of this state thereto,

etc.

And your orator further shows that the Treasurer of the State of Michigan, who, by virtue of his office, was one of the members of the said Board of Control of the Saint Mary’s Falls Ship Canal, in his annual report for the year 1883, duly made to the Governor and transmitted to the legislature of said state, made use of the following language:

Since my last report, the remainder of the personal property belonging to the Saint Mary’s Falls Ship Canal has been sold, making a final balance in that fund of $68,927.12. All business pertaining to the management of the canal on the part of the state has ceased and the moneys in the fund remain in the state treasury under Act No. 17, Laws 1881, the state acting simply as trustee.

But your orator shows that of late said defendant, through its officers and servants, and particularly its Attorney General and the Board of Control of St. Mary’s Falls Ship Canal, denies such a trust, or its liability to the United States in the premises.

Seventh

Your orator further shows and charges that it became and was the duty of the State of Michigan to transfer and pay over to the United States all funds appertaining to or connected with or collected for the repairs and to transfer to the complainant and to transfer to the complainant all property of every name and nature within its custody and control in connection with said canal and lock, and that, instead of so performing its equitable duty in the premises, the said State of Michigan, the defendant herein, converted said funds to its own use by passing a joint resolution transferring the same from the canal fund to the general fund in the treasury of said state, said joint resolution being No. 20 of the Public Acts of 1897, which in terms is as follows:

Whereas there has remained to the credit of the St. Mary’s Ship Canal fund a credit balance which was on hand at the time of the transfer of the said canal from the state to the United States, and no claim has been made for any part of such moneys either by any person who paid the same into the fund or by the general government;

And whereas there now remains on hand, under the Board of Control of the St. Mary’s Ship Canal, an invoice of tools and machinery, and no demand by any person or persons or by the United States having been made for a transfer of said tools and machinery:

Therefore, resolved by the Senate and House of Representatives of the State of Michigan, That the auditor general be, and he is hereby, directed to transfer such balance as shown upon the books of his office to the same, and it shall hereafter become a part of the general fund of the state.

And be it further resolved, That the Board of Control of the St. Mary’s Ship Canal be, and they are hereby, authorized to dispose of at the best possible advantage, the tools and machinery aforesaid and now under their control, and deposit the money received from the sale of said property in the general fund of this state.

Your orator further shows that a due and proper request to account to the United States in the premises, and to pay over all funds and turn over all property in its hands to the United States has been made by your orator of the Governor of the State of Michigan and all of the officers of said state directly concerned in any manner with the custody, management, or control of said fund or property, and particularly of the Board of Control of the St. Mary’s Ship Canal, which consists of the Governor, Auditor General, and Treasurer of the said State of Michigan, and also of the Attorney General of the State of Michigan, and that said reasonable and just request has been refused by them and each of them.

The bill prayed for an accounting as to the sales of the lands, the prices obtained therefor, the application of the proceeds of the sales or exchange of such lands to the cost of the construction of the canal, the tolls received, their application, and also an accounting as to the tools on hand at the time of the transfer of the canal to the United States.