Full opinion text
KENYON, Circuit Judge. TMs suit is one in equity brought by the United States in the District Court of the United States for the District of Wyoming, to secure the cancellation of a certain lease of date April 7,1922, made by the United States with the Mammoth Oil Company, one of the appellees, for the development and exploitation of the oil and gas witMn naval petroleum reserve No. 3, in Natrona county, Wyo., embracing approximately 9,000 acres, commonly known as Teapot Dome; also to secure the cancellation of the contract supplemental to said lease signed February 9, 1923, between the same parties, on the ground (a) that the lease and supplemental agreement were fraudulently secured as a result of a conspiracy between Albert B. Fall, the then Secretary of the Interior, and Harry F. Sinclair, organizer of, and owner of all the capital stock of, the Mammoth Oil Company, who negotiated the lease on behalf of said company; and (b) that the lease and supplemental agreement were without authority of law and contrary thereto. March 13, 1924, a temporary restraining order and one appointing receivers for the property involved were entered. Answers were filed by all defendants, and the case was tried in March, 1925, after two continuances had been granted to the United States of America, appellant (so hereinafter designated). The trial court held against the contentions of the United States, and decided that the lease and supplemental agreement were not procured by fraud, that there was no conspiracy between Fall and Sinclair to defraud the United States or otherwise, and that both the lease and agreement were authorized by a special act of Congress, wMch took the matter out of the operation of general laws. Numerous findings of fact were made by the court, and the bill was dismissed on the merits. Prior to trial the appellant attempted to secure a continuance in order to procure the evidence of certain witnesses residing in Canada, particularly one H. S. Osier. The court refused the request for continuance, and denied the petition to reopen the case after trial and before decree, in order to permit the United States to then secure the evidence of the said Osier and other Canadian witnesses; the appellate court of Ontario having in the meantime held that answers must be made to the questions theretofore propounded to Osier in the attempt to take Ms evidence prior to trial. Sixty-four assignments of error are presented. They relate to the validity of the executive order of President Harding of May 31, 1921, under wMch the administration of naval reserves was committed to the Secretary of the Interior; to the question of alleged fraud; to the action of the court in striking from the record certain exMbits and testimony; to the action of the court in sustaining the refusal of M. T." Everhart, son-in-law of Secretary Fall, to testify on the ground of incriminating himself; to alleged abuse of discretion in denying the motion for continuance, and in refusing to reopen the case after hearing and before decree in order to secure the evidence of said Osier. The vitally important questions presented may be grouped as follows: (a) Was there authority of law to make the lease of April 7,1922, and the supplemental agreement of February 9, 1923, and were they made in compliance with law? (b) Were the lease of April 7, 1922, and the supplemental agreement of February 9, 1923, procured by fraud, as claimed by the appellant? (c) Was there an abuse of discretion in not granting the continuance asked for to secure certain evidence or in refusing to re-open the case for that purpose? I. History and Facte. It is advisable briefly to review the situation with reference to its Mstorical aspect and the matters leading up to the execution of the lease and supplemental agreement. What the policy of the federal government may have been as to oil and mineral lands in the past, or whether it had any policy, may not be clear. However, on September 27, 1909, a federal order was issued, withdrawing as part of the public domain part of the oil lands now constituting a portion of naval reserve No. 3, the subject of tMs controversy. June 18, 1910, another executive order was issued to the same effect, covering other lands now included in said naval reserve No. 3. April 30, 1915, naval petroleum reserve No. 3 was created by executive order. The General Leasing Act applying to oil and gas lands became a law February 25, 1920 (chapter 85, §§ 1-38, 41 Stat. 437 [Comp. St. Ann. Supp. 1923, §§ 4640(¡4-4640%ss] ). After the passage of tMs act it was reasonably probable that the Salt Creek field bordering naval reserve No. 3 would be partially, if not entirely, developed, and that tMs would probably affect the question of drainage as to said naval reserve. Other naval reserves would also be affected by development of adjacent territory. Actuated presumably by said situation Congress passed the Act of June 4, 1920, c. 228, § 1, 41 Stat. 813 (Comp. St. Ann. Supp. 1923, § 2804i). This section was contained in the Naval Appropriation Act of June 4,1920, and is as follows: “The Secretary of the Navy is directed to take possession of all properties within the naval petroleum reserves as are or may become subject to the control and use by the United States for naval purposes, and on which there are no pending claims or applications for permits or leases under the provisions of an act of Congress approved February 25, 1920, entitled 'An act to provide for the mining of coal, phosphate, oil, oil shale, gas, and sodium on the public domain,’ or pending applications for United States patent under any law; to conserve, develop, use, and operate the same in his discretion, directly or by contract, lease, or otherwise, and to use, store, exchange, or sell the oil and gas products thereof, and those from all royalty oil from lands in the naval reserves, for the benefit of the United States: And provided further, that the rights of any claimant under said Act of February 25,1920, are not affected adversely thereby: And provided further, that such sums as have been or may be turned into the Treasury of the United States from royalties on lands within the naval petroleum reserves prior to July 1, 1921, not to exceed $500,000, are hereby made available for this purpose Until July 1, 1922: Provided further, that this appropriation shall be reimbursed from the proper appropriations on account of the oil and gas products from said properties used by the United States at such rate, not in excess of the market value of the oil, as the Secretary of the Navy may direct.” Prior to the time that Mr. Denby and Mr. Fall became respectively on March 4, 1921, Secretaries of the Navy and of the Interior, some leases requiring drilling had been made by the retiring Secretary of the Interior for oil drilling on lands in the Salt Creek field, and he had also offered other leases for sale at public auction subsequently to be held. In May, 1921, Secretary Denby suggested to the President that the Secretary of the Interior be placed in charge of the administration of the naval reserves. Secretary Fall on May 11, 1921, wrote to Secretary Denby concerning the matter, and inclosed a letter for him to sign and send to .the President, together with an executive order for the President’s signature, placing in the Interior Department the control and development of the naval reserves. There was opposition to this order in the Navy Department, and changes were made therein which were assented to by Secretary Fall. The order as finally agreed upon by Secretary Denby and Secretary-Fall was taken to the President by Assistant Secretary of the Navy Roosevelt, and signed by the President May 31,1921. It is as follows: “Under the provisions of the Act of Congress approved February 25, 1920. (41 Stat. 437), authorizing the Secretary of the Interior to lease .producing oil wells within any navy petroleum reserve; authorizing the President to permit the drilling of additional wells or to lease' the remainder or any part of a claim upon which such wells have been drilled, and under authority of the Act of Congress approved June 4, 1920 (41 Stat. 812), directing the Secretary of the Navy to conserve, develop, use and operate, directly or by contract, lease, or otherwise, unappropriated lands in naval reserves, the administration, and conservation, of all oil and gas bearing lands in naval petroleum reserves Nos. 1 and 2, California, and naval petroleum reserve No. 3 in Wyoming and naval shale reserves in Colorado and Utah, are hereby committed to the Secretary of the Interior subject to the supervision of the President but no general policy as to drilling or reserving lands located in a naval reserve shall be changed or adopted except upon consultation and in cooperation with the Secretary or Acting Secretary of the Navy. The Secretary of the Interior is authorized and directed to perform any and all acts necessary for the protection, conservation and administration of the said reserves subject to the conditions and limitations contained in this order and the existing laws or “such laws as may hereafter be enacted by Congress pertaining thereto. “Warren G. Harding. “The White House, May 31,1921.” July 8,1921, Secretary Fall wrote to Mr. Doheny, who was interested in a lease upon other naval reserves, as follows: “There will be no possibility of any further conflict with Navy officials and this department, as I have notified Secretary Denby that I should conduct the matter of naval leases under direction of the President, with-. out calling any of his force in consultation, unless I conferred with himself personally upon a matter of policy. He understands the situation and that I shall handle matters exactly as I think best, and will not consult with any officials of any bureau of his department, but only with himself, and such consultation will be confined strictly and entirely to matters of general policy.” On July 23, 1921, Secretary Fall wrote Secretary Denby as to the use of the government’s royalty crude oil in exchange for storage facilities. This letter is as follows: “In connection with the recent authorization to the Pan-American Petroleum Company and the United Midway Oil Company to drill 22 offset wells in naval petroleum reserve No. 1, California, I would like to be advised, as promptly as possible, what arrangements the Navy desires to he made for the handling and disposition of its royalty oil from said wells, as well as from any other wells in naval reserves, to which the Navy is entitled to royalty in kind. “As the lease provides that purchasers will take care of the oil only for a limited period, it is important that provision be made to dispose of same promptly. I suggest the desirability of effecting an exchange of the crude oil received as royalty for an equivalent value of fuel oil, to be stored without expense to the United States by the other party to the exchange, preferably the exchange should be not only of crude oil for fuel oil in storage but for the tanks containing the Navy’s 'Stored oil. In other words, my suggestion is that the crude oil be exchanged for tanks and fuel off, the title to both to be vested in the Navy as a result of the exchange. If this plan meets with your approval, and you desire me to undertake to consummate the arrangement, I shall be glad to do so. In any event, I should like to hear from you on the subject as soon as possible.” Secretary Denby acquiesced in this suggestion by letter of Jiffy 29, 1921, as follows: “Replying to your letter of the 23rd of July, I am glad to acquiesce in the suggestion made by you. It will be of great benefit to the Navy to have the royalty crude oil from wells on the naval reserves (both those already in operation and those to be drilled by the Pan-American Petroleum Company and the United Midway Off Company) exchanged for fuel oil at tidewater, to be stored if practicable without expense to the government, and if possible for tanks in which such fuel oil can be stored. As the Navy has no appropriation to pay for the cost of construction of tank storage, the acquisition of tanks by exchange for crude oil from naval reserve wells will be most acceptable. “While these tanks could be readily utilized at any point at tidewater, the usefulness to the Navy would be increased if they could be located at any one of the following points: San Diego, San Pedro, San Francisco Bay, Puget Sound, Honolulu, or Pearl Harbor, Hawaii. In view of the greatly reduced amount available under the appropriation ‘fuel and transportation’ for the present fiscal year, it would be of special benefit to the Navy to obtain royalty fuel oil at this time, as such oil would not involve a charge against' the appropriation.” Shortly thereafter Secretary Fall went West to confer with oil men and returned in October, 1921. In September, 1921, Harry Foster Bain, Director of the Bureau of Mines, Department of the Interior, made an inspection trip to the West and inspected naval reserve No. 3. He was accompanied by Arthur W. Ambrose, Chief Petroleum Technologist of the Bureau of Mines. They conferred at Denver with Mr. C. A. Fisher, a geologist, and Mr. Carroll H. Wegemann, who had previously been connected with the Geological Survey, and had made an examination and report as to the geological structure of naval reserve No. 3. In September, 1921, Wegemann submitted a report to the Geological Survey differing somewhat from the previous report in that it placed the saddle between Salt Creek and Teapot Dome further south than in the preceding report. This later report states: “From consideration of the above facts, it is obvious that as wells are drilled along the northwest line of the naval reserve, part of the oil produced by these wells will be drawn from the naval reserve itself.” October 1, 1921, Admiral John K. Robison became Chief of the Bureau of Navy Engineering in charge of the Naval Petroleum Reserves, and on October 8, 1921, took personal charge of all naval petroleum reserve matters on the part of the Navy. In October, 1921, Secretary Fall, Robison, Bain, and Ambrose in conference discussed the Wege-. mann report recently submitted. As a result of this meeting, through instructions by Secretary Fall to the Director of the Geologi-: cal Survey, Mr. K. C. Heald was selected to make further investigation of the drainage question as affecting Teapot Dome. He submitted a written report on November 30, 1921, which contains the following: “At the present rate of production a year or more must elapse before any part of the reserve is appreciably damaged. Only one producing well has been drilled within one location of the line of the reserve, and this well will not be likely to affect the territory more than 300 to 400 feet distant for some months. That part of the reserve which it will affect must be regarded as one of its poorest portions. * * * No further leasing should be done. The lands last leased will permit some slight drainage of unleased land within the reserve, but this is unavoidable, if an effective barrier is to be maintained between the producing wells and the underground storage.” On October 25, 1921, Secretary Denby wrote Secretary Pall as follows: “Rear Admiral J. K. Robison reported to me that, as a result of his interview with you on Saturday, October 22, the following general agreement in connection with the naval petroleum reserves was reached: “1. That arrangements will be made by the Interior Department to have naval petroleum reserves Nos. 1 and 2 drilled with offset wells in every ease where adjacent property is drilled. * * * “7. That all leases and contracts, except as provided in paragraph 6, will be arranged and consummated by the Interior Department, copies of same being furnished to the Navy Department as a matter of information and record only. * * * “9. That the development of naval petroleum reserve No. 3 is not to be undertaken, except to protect the government against depletion of the reserve by other, parties.” Secretary Pall ratifying this arrangement, replied: “Washington, October 30, 1921. “My Dear Mr. Secretary: I have your letter of October 25 and have just consulted Admiral Robison about the subject-matter. Responding to your request for information as to whether the policies set forth in the letter are agreeable to the Department of the Interior* I can say without hesitation that they are entirely agreeable and wiE be carried out to the very best of my abiEty. “Of course, should any new matter come up at any time, I wiE unhesitatingly and immediately consult you personáEy or through Admiral Robison. As to the definite date when you may expect fuel oil as payment of your royalties, I can give' you accurate information within a very few days. Several of your weEs are coming in, one or two are in, and we can exchange immediately for fuel oü certificates through which you can draw fuel oE as needed at Pacific ports. “Very sincerely yours, Albert B. PaE.” The question of exchange of royalty crude oil for fuel was discussed November 29, 1921, at a meeting of the Navy CouncE, which consisted of chiefs of bureaus of the Navy, and as a result Admiral Robison on November 30, 1921, wrote to the Judge Advocate General as f oEows: “It is proposed to exchange the royalty crude oE for fuel oE in storage at Pearl Harbor or other points to be later designated by the United States Navy. It is planned that the tanks in which this exchange oE shaE be stored shaE be provided by the lessor of the oE wells. WiE this be legal, it being presumed that the oE in storage at Pearl Harbor, as weE as the tanks and appurtenances, are to become the property of the United States?” The Judge. Advocate General on November 30,1921, answered as foEows: “4. Answering your questions, specifically, you are advised: “(a) It would be legal to exchange the royalty crude oE for fuel oE in storage at Pearl Harbor or other points to be designated by the Secretary of the Navy under arrangement whereby the exchanged oE (shall) be stored in tanks provided by the lessee of the oE weEs, such tanks and their appurtenances to become the property of the United States. “(b) It would be legal to use the royalty oE on board vessels of the United States Navy, and, if so used, it should be expended at such rate, not in excess of the market value of the oE, as the Secretary of the Navy may direct, and should be debited at the rate so fixed by the Secretary to the appropriation ‘fuel ,and transportation.’ ” This opinion was approved by the Secretary of the Navy. Secretary PaE was famEiar with a somewhat contrary opinion rendered by the counsel of one of the companies interested in the Pearl Harbor tank-storage matter. December 9, 1921, Assistant Secretary Roosevelt wrote Secretary PaE with relation to the storage of fuel oü in tanks at Pearl Harbor as foEows: “In view of the fact that this project is embodied in the war plans of the Navy Department we request that aE the matters in connection therewith be regarded as confidentiaEy as possible.” December 31, 1921, Mr. Sinclair and his counsel,, Mr. Zevely, visited Secretary PaE at his home at Three Rivers, N. M. The leasing of naval reserve No. 3 was discussed. After the visit of Sinclair and Zevely to New Mexico, and before PaE’s return to Washington, witness Eddy, who was in the.General Land Office in charge of leasing oil lands, was instructed by Mr. Safford, Administration Assistant to Secretary PaE, to make a memorandum relating to claims of record on Teapot Dome, the same to be given to the Secretary upon his return. This investigation was conducted by Roy W. Tallman. His report January 12, 1922, referred to the report on the subject of one Glenn B. Morgan (formerly mineral surveyor in the department) of date July 26, 1917. In his report Tallman said: “It may be stated that there are no mineral claims to any of the lands in the said Naval Reserve which, deserve serious consideration.” When Secretary Fall returned to Washington on January 27,1922, he had a conference with Bain, Ambrose, and Robison, at which the subject of drainage on naval reserve No. 3 was again discussed. This conference was in the nature of a continuance of the October conference. The opinion of Ambrose and Bain, as expressed at this meeting, was, according to Ambrose’s testimony, “that in all probability the drainage at that time was not serious, but that, if the leases in the southern end of the Salt Creek field were developed, they would actually drain the second Wall Creek sand, and that, as time went on, this drainage would become quite serious.” Bain, as to the conference, testifies: “I certainly did not realize at that time that that conversation was going to dispose of 9,000 acres of oil land by lease. I know that in that conversation we did enter into the question of whether we ought to do something with regard to No. 3; that is, what they would do.” Ambrose was of the opinion that the danger of drainage in naval reserve No. 3 was not immediately serious, but that it would become so as development under the leases of the Salt Creek field proceeded; that it was not such as to necessitate a lease on April 7, 1922. He filed a report on the subject February 18, 1922, having been instructed by Secretary Fall to prepare a memorandum thereon. It contained this: “In conclusion, it is believed that, if oil is found in the saddle in the second Wall Creek sand, the leases which have been granted along the northern zigzag boundary separating the two structures will result in drainage of this sand in the Teapot Dome during the next six or seven, years to a point on the south section line of section 28, T. 39 N., R. 78 W., and if conditions are favorable the productivity of the sand will be affected even farther to the south.” The question of the danger of drainage of Teapot Dome arose entirely as to the second Wall Creek sands. The first Wall Creek sand, according to estimates, contained- between 50,000,000 and 55,000,000 barrels of oil, and was sealed off by a water seal from the first Wall Creek sand in the adjoining Salt Creek field, and was not subject to drainage. The second Wall Creek sand was estimated to contain about 85,000,000 barrels. After the conference' in January, 1922, Robison reported to Secretary Denby that the danger of drainage to reserve No. 3 was grave, and recommended that some action be taken. The Secretary became convinced thereof and instructed him to proceed to accomplish the opening of Teapot Dome reserve as a whole. Robison’s reasons for reaching his conclusion as to Teapot Dome, as stated in his testimony, were: “First, there was the experience we had had in California, where in my opinion we had suffered the loss of several millions of dollars by failing, by delaying too long in putting down offset wells; second, there was what I regarded as a pressing national emergency regarding our state of security; third, and in connection only with the use of the word 'entire,’ the leasing of the entire Teapot Dome, there was a conviction in my mind that by handling it as one matter we could make better terms than we could make if we handled it as a series of small affairs; that it would involve much less cost to us and much less trouble to the government and would produce better terms. Further, I was of tha opinion that to do it in that way would be the only way in which we could secure the big capital expenditures that would be required on the part of the contractor to accomplish some of the, perhaps, overambitious ideas that I had. Those considerations were the major ones that actuated me. If they were not the only ones, they are the only ones that I now recall. They were all potent in reaching that decision.” Shortly after the decision was reached tc* open and develop the entire reserve No. 3, Secretary Fall, Sinclair, Zevely, and Robison had a meeting in Fall’s office and discussed the subject of a lease thereof. Robison was1 instructed by Secretary Fall to set forth the Navy’s requirements as to a lease. He advised Sinclair that a pipe line must be constructed of adequate capacity to care for the. production of the field; that the proceeds from the royalty crude oil should be used in the erecting and building of specified storage facilities on the Atlantic coast; that the royalties were not to be taken in cash, because • the cash would have to be covered into the United States Treasury. Robison at that time had no notice as to the outstanding placer mining claims. February 3, 1922, Sinclair submitted a tentative proposition to the Secretary of the Interior as to the terms on which he would undertake the lease. This contained an undertaking to quiet the outstanding placer mining claims known as the PioneeE and Belgo claims. Negotiations continued respecting the terms of the lease over a con-. siderable period of time. There was extended discussion as to the subject of royalties. Likewise the rate of exchange of royalty crude oil for fuel oil. Secretary Fall instrueted Ambrose (Sinclair and Zevely being present in his office) to prepare a rough draft of a lease embodying the terms of the proposed lease. The lease was prepared chiefly in the Washington office of Mr. Zevely. Mr. G-. T. Sanford, also counsel for Mr. Sinclair, attended to the “mechanics of the lease.” Fall dictated the preamble and settled the questions that arose, inserted something in the contract with respect to the common carrier, and made changes in the wording of the oil certificates. The draft of this lease was not submitted to any lawyer in the Department of the Interior for an opinion thereon. February 28, 1922, the Mammoth Oil Company was incorporated by Sinclair, he being the owner of all its capital stock. While the lease and the subject thereof were under negotiation, there was pending in the Department of the Interior application for leases by the Pioneer and Belgo Companies under the Leasing Law of February 25,1920. The officers of these companies came to Washington and entered into negotiations with Sinclair for sale of their placer mining claims, and a written contract was made dated March 11, 1922, by Mammoth Oil Company with the Pioneer and Belgo Companies, claimants, providing for the payment of the equivalént of $1,000,000 for the claims, subject to the execution of the lease in question here, and quitclaim deeds were executed by the Pioneer and Belgo Companies to the Mammoth Oil Company. On March 11, 1922, the Mammoth Oil Company applied formally to the Secretary of the Interior for a lease of the entire petroleum reserve No. 3, tendering quitclaim deeds to the United States for the Pioneer and Belgo claims, and accompanying the application with a letter from Sinclair to the Secretary of the Interior as follows: “New York, March 11,1922. “To the Honorable the Secretary of the Interior — Sir: The Mammoth Oil Company has this date made application for an oil and gas lease covering that part of the public lands of the United States designated in executive order of withdrawal issued by the President of the United States on April 30, 1915, creating naval petroleum reserve No. 3, Wyoming No. 1, involving 9,321 acres, more or less, situated in Natrona county, state of Wyoming, and more fully described in said application. In the event said application is granted, and a contract of lease is made between the United States and the Mammoth Oil Company covering said lands, I will become the owner of all the capital stock of said Mammoth Oil Company. “In consideration of the United States granting said application and making a contract of lease with the Mammoth Oil Company, I hereby personally guarantee the performance on the part of said Mammoth Oil Company of all its obligations under said contract of lease. This guaranty shall become effective upon delivery to Mammoth Oil Company by the United States of said contract of lease. “Respectfully, H. F. Sinclair.” Secretary Fall signed the lease on April 7,1922, as Secretary of the Interior, and also subscribed himself “and for the Secretary of the Navy.” Secretary Denby formally signed the lease April 12,1922, after having had it in his possession for a number of days. The preamble of the lease dictated by Secretary Fall contained several paragraphs reciting the objects to be attained, as follows: “Whereas, the government of the United States is charged with the duty of securing and storing a supply of fuel oil for naval purposes, and is desirous of acquiring suitable storage for such fuel oil at points easily accessible to the United States Navy; and “Whereas, the government is desirous of avoiding in so far as possible any risks of loss of the supply of crude oil available for the United States Navy by a reduction of gas pressure resulting from the drilling and operating of wells located outside of naval reserve No. 3, Wyoming; and “Whereas, the government is desirous of creating a competitive market and securing the best prices obtainable for royalty oil received and to be received by the government of the United States from the public domain in the Salt Creek field in Wyoming; and “Whereas, the government is desirous of exchanging crude oil that may be received by it as royalty from the said naval reserve No. 3, for fuel oil for the use of the United States Navy, and is desirous of securing adequate storage facilities for the storing of such fuel oil as is received by it in exchange for said crude oil over and above the requirements for use of the United States Navy.” Article 1 provides for the leasing of the lands comprising Teapot Dome to the Mammoth Oil Company. Article 2 provides for bond and the sinking of certain test wells and operations concerning the construction of a pipe line, additional wells and fixing royalties to be paid, and that in lieu of delivering royalty oil to the lessor in kind», the lessee shall issue oil certificates to the lessor as evidence thereof. The lease contains this provision: “The lessee agrees, if and when requested so to do by the lessor, to construct or to pay the cost of construction of steel storage tankage np to, but not in excess of, sucb an amount as shall be estimated to be necessary or required for the storage by the lessor of the fuel oil to be received by it as hereinbefore provided in exchange for royalty crude oil from the lands hereby leased; said storage to be constructed as and when the same shall become necessary or shall be required for the storage of such fuel oil so delivered by the lessee or its nominee, and said storage to be located at points designated by the lessor; the cost of such tankage to be liquidated by lessor by delivering to the lessee or its nominee crude oil certificates hereinbefore referred to, said certificates so delivered to be of the face amount in value equal to the cost of such tankage for which the lessee or its nominee shall have paid or become liable.” No public notice of the intent to lease Teapot Dome was ever given. The representatives of various oil companies learning in some way that there was a prospect for the lease of the Dome wrote to or called upon Secretary Fall or other officials of the Navy or Interior Departments. All were unsuccessful, except two parties, viz. John C. Shaffer and possibly Gerald Hughes. Secretary Fall suggested to Sinclair that he wanted Shaffer to have 200 acres of Teapot Dome reserve and Gerald Hughes 80 acres. After conferences between Sinclair and Shaffer, it was agreed that Shaffer should have approximately 400 acres, the record not disclosing the exact amount. Shaffer wired Fall March 23, 1922, thanking him for his interest and help in the matter. Whether Hughes received any of the leasehold the evidence does not indicate. The oil interests applying to Secretary Fall for leases on parts or all of Teapot Dome were the following: The Producers’ & Refiners’ Corporation of Wyoming, a company with a capital of more than $50,000,000, was represented by one Frank E. Kistler, who called on Assistant Secretary Finney in March 1922, to discuss the matter. Finney referred him to Secretary Fall, who informed him he was not ready to receive applications or to consider the leasing of reserve No. 3, but promised to notify him and give him an opportunity to bid on the reserve if “he did decide to lease.” Bustler heard nothing further until he saw in the newspapers that a lease of Teapot Dome Reserve had been made to the Mammoth Oil Company. Mr. Amos L. Beaty, president of the Texas Company, with a capital of approximately $165,000,000, sought an interview with Secretary Fall on the subject of leasing Teapot Dome, and had the same on March 30, 1922. Secretary Fall informed him that he had a satisfactory proposition from Sinclair, but he would be glad to have the Texas Company submit a bid. Secretary Fall also advised him of the outstanding placer mining claims on the reserve, and that it would be his policy to require that these be satisfied, and that the company acquiring and taking care of them would be given preference treatment. He also advised him that Sinclair had acquired these claims. There was some telegraphic correspondence between Secretary Fall and Beaty with reference to Salt Creek prospects. Birch Helms, vice president of the Texas-Pacific Coal & Oil Company, on or about September 1,1921, called on Assistant Secretary of the Navy Roosevelt and Judge Finney, Assistant Secretary of the Interior, in regard to leasing of Teapot Dome. He was informed that it was not to be leased. In April, 1922, he called on Secretary Denby with relation to the same matter. Secretary Denby informed him it was out of his hands and in the hands of the Interior Department. He saw Secretary Fall on or about April 10, 1922. Fall told him he would entertain a bid from the Texas-Pacific Coal & Oil Company, first inquiring if it was in any way connected with the Standard Oil, as “he wished this contract to be made with a company independent of the Standard Oil.” Helms knew nothing of the lease to the Mammoth Oil Company until April 19, 1922, when he noticed it in a newspaper report from Washington. Some time after negotiating the lease, the government requested the Mammoth Oil Company, in the exercise of the option provided in the lease (hereinbefore set forth), to provide for the construction of steel storage tanks necessary to store the fuel oil which it elected to receive in exchange for royalty oil. Negotiations were entered into between representatives of the Mammoth Oil Company and of the United States respecting the preparation of a supplemental agreement to provide for the storage of fuel oil in accordance with said option. These negotiations culminated in the execution of what is known as the supplemental agreement of February 9, 1923. Secretary Denby and Secretary Fall signed the supplemental agreement on behalf of the United States. Robison testifies that before Secretary Denby signed it he had gone over it thoroughly and familiarized himself with it; that he assisted the Secretary of the Navy in doing this. This contract, which is inextricably interwoven with the lease, provides for the construction by the Mammoth Oil Company of storage tankage and facilities at the navy yard at Portsmouth, N. H., the naval fuel depot, Melville, R. I., Governor’s Island, Boston Harbor, and naval fuel station, Yorktown, Ya. Appellees, Sinclair Crude Oil Purchasing Company and Sinclair Pipe Line Company, were made defendants because of certain rights derived from the Mammoth Oil Company. Both companies have incurred heavy expenditures in carrying out their obligations to Mammoth Oil Company. The United States alleged in its complaint that both were trespassers. Their rights stand or fall with the lease and contract of the Mammoth Oil Company. We do not further set forth the facts shown by the evidence, as of necessity they must be considered in the discussion subsequently of the question of fraud, and there is no need of duplication. .The foregoing covers the important matters leading up to the execution of the lease and contract in question. II. Legality of the Lease and Contract. These instruments were made under the authority of the Act of Congress of June 4, 1920 (hereinbefore set out). The government contends that this act is not an independent act, is* dependent on other general statutes preceding it, and must be construed in connection therewith. Appellees’ contention is that the act is full and complete, covering without reference to other statutes the method of doing the things therein provided. The Act of June 4, 1920, deals entirely with the naval petroleum reserves. These had been only incidentally referred to, if not practically excluded from the Act of February 25, 1920. The purpose of the Act of June 4, 1920, was to preserve the oil in these naval reserves for the benefit of the government in such .mann'er as Congress at that time deemed wise, viz. to place the matter almost exclusively in the hands of the Secretary of the Navy. It is of vital importance that the government’s oil in these reserves shall not be drained away for the benefit of private enterprise, but that it shall be preserved in the interest of national defense. This act is as broad as an act dealing with this subject could well be. It confers upon the Secretary of the Navy wide discretion as to administering the naval reserves, directing him to take possession of the properties within the same as are or may become subject to the control and use by the United States for naval purposes, and “to conserve, develop, use and operate” these properties “in his discretion.” He may do this directly or he may do it by “contract, lease or otherwise,” and he is further given the right to use the oil that may be secured by contract, lease or otherwise, or to “store, exchange or sell’1' the same. Counsel for appellees argue that the language of this act compels the Secretary of the Navy to employ all of the methods suggested, and that the term “in his discretion” applies to the method by which he shall “conserve, develop, use and operate.” We do not agree with this view. It is apparent that, although the conjunction “and” is used, Congress intended that the Secretary should employ any or all of these methods as his discretion should dictate. Certainly if the oil can be properly conserved in the ground the Secretary of the Navy is not under compulsion to develop the properties. What he does must be for the benefit of the United States. That is the limitation of his discretion. If he shall determine that the oil cannot be properly conserved within the ground, then he has the right to develop, use, and operate the properties directly or by contract, lease or otherwise. Having decided in the exercise of a wise discretion that it is -for the interest of the Navy, and therefore of the United States, to develop and operate the properties, he may do this directly, which will require the expenditure of money, or he may do it by contract or by lease. Having made a lease, which in its very nature implies the taking of the oil from the ground, and such oil being erude and not fuel oil in proper condition to be used by the Navy, he may store it. He may sell it, in which case the proceeds must be turned into the Treasury of the United States, or he may exchange the same. While appellant concedes that the right to exchange crude oil for fuel oil is proper and legal, it denies the right to exchange the crude oil for storage facilities for fuel oil. If the Act of June 4,1920, as it seems clear it did, authorized the Secretary of the Navy to store the fuel oil, it would follow that it could be stored at established fuel depots, and, if none sueh existed, then places for the storage of the oil would have to be fixed and provision made for storage tanks. It would not be an arbitrary discretion exercised by the Secretary of the Navy, if he in exchanging royalty erude oil for fuel oil provided also for an exchange of crude oil for storage tanks. There was no restriction upon the Secretary of the Navy as to the amount of oil that he might have extracted from the ground either directly or by contract or lease. The argument does not appear to us sound that under this act it must he held that the Secretary of the Navy could exchange oil for anything, such as battleships or airplanes, or else that it was limited to exchange of crude oil for fuel oil. If such limitation was intended it would have been a simple matter to have expressed it in the act. It is not for the court to supply the same. The purpose of the act was to protect the oil of the government. It would not be in consonance with the purpose of the act to exchange the oil for battleships or airplanes, or land to raise a food supply for the Navy, or materials to weave cloth for the uniforms of marines, but it would be consonant with the purpose of the act to provide storage places for the oil. And under the act express authority is given to store the oil and gas products received from the naval reserves. It may be that the use of the oil certificates provided in the lease in payment for the construction of storage tanks was intended to prevent the proceeds of the sale of the oil going into the Treasury of the United States. If Congress, however, had passed an act that permitted this, then the Navy Department had the right to exercise the power so granted. Nor do we think the act invaded the exclusive right of Congress to appropriate funds for naval uses. There is a distinction between the appropriation of moneys by Congress, and the use of government property incidental to administration under an adequate grant of authority. We are convinced that the appropriation of $500,000 is not a limitation upon the construction of storage tanks.- Certainly it does not limit the amount of royalty oil to be exchanged for fuel oil. The appropriation ended July 1, 1922, but the right to arrange for the extraction of oil in the method provided by the act was not limited to July 1,1922. If the Secretary of the Navy attempted to develop and operate the naval reserves directly, this appropriation would undoubtedly be necessary to commence such operations. It would have been necessary then to call upon Congress for further money, but the appropriation was not necessary where the properties were to be developed by contract or lease. If the Secretary of the Navy should find it essential to immediately develop a naval reserve in order to prevent waste of the oil or depletion thereof by wells on adjacent property, and said oil could not be used for the current needs of the Navy, it would be his duty to store the same or sell or exchange it in his discretion. If it could not be sold, it must be stored, and the appropriation of $500,000 under circumstances easily imaginable and entirely possible would obviously be inadequate to provide storage facilities, and were Congress not in session no relief from that source could be found. We think the appropriation in the act referred to expenditures made necessary if the Secretary in his discretion entered into a direct development and operation of the properties. ) That the Act of June 4, 1920, even though a rider to an appropriation bill, was complete in itself, and that it did not repeal, nor was it dependent on, other acts with relation to the public lands, is our conclusion. It constitutes an exception thereto. In Washington v. Miller, 235 U. S. 422, 428, 35 S. Ct. 119, 122 (59 L. Ed. 295) the Supreme-Court said: “Where there are two statutes-upon the same subject, the earlier being special and the later general, the presumption is,in the absence of an express repeal, or an absolute incompatibility, that the special is intended to remain in force as an exception to the general.” In Witte v. Shelton et al., 240 F. 265, 268, 153 C. C. A. 191, 194, this court said: “Specific legislation upon a particular phase of a single subject is not affected by a subsequent law relating to a general subject which neither refers to the earlier law nor is repugnant to nor inconsistent with it, but the two laws must stand togetner, the former as the law of its specific phase of the subject, and the latter as the general law relating thereto.” Walla Walla City v. Walla Walla Water Co., 172 U. S. 1, 19 S. Ct. 77, 43 L. Ed. 341; Townsend v. Little & Others, 109 U. S. 504, 512, 3 S. Ct. 357, 27 L. Ed. 1012; Kepner v. United States, 195 U. S. 100, 125, 24 S. Ct. 797, 49 L. Ed. 114, 1 Ann. Cas. 655; Rodgers v. United States, 185 U. S. 83, 87, 22 S. Ct. 582, 46 L. Ed. 816; Hemmer v. United States, 204 F. 898, 903, 123 C. C. A. 194; United States v. Matthews, 173 U. S. 381, 19 S. Ct. 413, 43 L. Ed. 738. This special statute, not repealing the general statutes, the two stand together, on® as the law relating to a special thing, viz. the naval reserves; the other relating to general publie land matters. It was therefore unnecessary that there be competitive bidding or advertising as to the making of the lease and contract, and other statutes with relation to the4 method of transacting the general public business of the United States were not applicable to this situation, the special statute fully covering the same. It is urged that the lease is void because the Secretary of the Navy had abdieated tlie powers conferred on him by the act. This record shows great activity on the part of Secretary Fall in leasing naval reserve No. 3, and more or less passivity on the part of the Secretary of the Navy. Fall’s letter to Doheny of July 8, 1921 (hereinbefore set out), and Denby’s letter to Fall of October 25, 1921, in which he said “that all leases and contracts, except as provided in paragraph 6, will be arranged and consummated by the Interior Department, copies of same being furnished to the Navy Department as a matter of information and record only,” would seem to come close to the assumption of exclusive authority by the Secretary of the Interior, and an abdication on the part of the Secretary of the Navy of the powers granted by the Act of June 4,1920. The executive order of May 31,1921, however, while giving great power to the Secretary of the Interior, did not of necessity remove absolutely the administration and control of these reserves from the Secretary of the Navy in such a way as to violate the congressional act. In fact, it seemed to retain just enough control in the Navy to be within the law of June 4, 1920. It provided that no general policy as to drilling or conserving lands located in a naval reserve should be changed or adopted, except upon consultation and in co-operation with the Secretary or Acting Secretary of the Navy. The President had no authority to transfer from the Secretary of the Navy to the Secretary of the Interior powers which Congress had provided should be exercised by the former. The validity of this executive order does not seem to have been seriously questioned in the presentation of the ease to this court. It was proper, of course, for the Secretary of the Navy to act through competent subordinates. Of necessity this must be so. We conclude that enough control was exercised by the Secretary of the Navy through Admiral Robison to preclude a court from holding that the entire power granted by the Act of June 4,1920, to the Secretary of the Navy had been assumed by the Secretary of the Interior.' The Act of June 4, 1920, creates no power in the Secretary of the Navy to establish fuel depots. That is a matter for the Congress, long so recognized. The lease, however, does not necessarily involve the establishment of fuel depots other than those existing. It does involve the providing of facilities for storage. Such storage might have been at fuel depots already established, and, so construed, the lease and contract are not open to the objection that by their terms they established fuel depots. Exceeding power granted does not destroy it. We are not satisfied that the acts contemplated by the lease were beyond the authority granted to the Secretary of the Navy, and the supplemental agreement must be considered a3 merely a necessary incident of the lease. The work thus far done in constructing storage facilities' has been at the Portsmouth navy yard. The record does not disclose whether or not this navy yard was a fuel depot. The Circuit Court of Appeals for the Ninth Circuit in Pan-American Petroleum Co. et al. v. United States, 9 F. (2d) 761, has held that contracts with reference to another naval reserve, executed under the authority of the sarde act and involving a similar question of legality, were not authorized by the act. With great respect for the ability and learning of that distinguished court, we find ourselves unable to arrive at the same conclusion as to this lease and contract. That case is now in the Supreme Court of the United States and this legal question will there be settled. We content ourselves with saying that on this branch of the ease, as at present advised, we are in accord with the conclusion reached by the trial court, that the authority granted by the Act of June 4, 1920, is sufficient to authorize the lease and contract in question. III. Fraud. There is no charge of corruption in this case as to any of the officials of the government, except as to former. Secretary of the Interior, Albert B. Fall. It is the theory of the government, bluntly stated, that Secretary Fall received from Harry F. Sinclair, sole owner of appellee, Mammoth Oil Company, a pecuniary consideration which influenced him in granting to said oil company a lease of naval petroleum reserve No. 3, commonly known as “Teapot Dome.” Counsel for the United States charge in their brief that Mr. Sinclair received as dividends from the Continental Trading Company, Limited, $230,500 face value, of United States Liberty first 3% per cent, bonds, which he turned over to Secretary Fall in May, 1922, as a bribe. This charge is as grave and serious an accusation as could be made against a public official, augmented by the fact that the official so charged was in a sense trustee for the people of the United States of their public lands. The case is one, therefore, in which not only the rights of the appellees and the government of the United States are involved, but the interest of the public likewise. Fraud is not to be presumed. To establish it the evidence must be clear, unequivocal, and convincing, which means there must be sufficient competent evidence, as distinguished from mere suspicion, to satisfy the court trying the question. That is the real test in cases where fraud is an issue. The burden is on the party alleging fraud to show the same. Circumstantial evidence may be sufficient, with the proper inferences to be drawn therefrom, to produce conviction in the minds of the triers of the question that fraud has been committed, yet, if the circumstances are as consistent with honesty and good faith as with dishonesty, the inference of honesty should be drawn. While the law presumes the good faith of business transactions, fraud may be the only legitimate and proper inference that can be drawn from the circumstances disclosed. It is not necessary in a civil action that fraud be established beyond a reasonable doubt. These legal propositions, variously applicable to this case, are well established, and are not, we assume, a matter of controversy here. Jones v. Simpson, 116 U. S. 609, 615, 6 S. Ct. 538, 29 L. Ed. 742; United States v. Maxwell Land Grant Case, 121 U. S. 325, 7 S. Ct. 1015, 30 L. Ed. 949; United States v. Hancock, 133 U. S. 193, 10 S. Ct. 264, 33 L. Ed. 601; United States v. Clark, 200 U. S. 601, 26 S. Ct. 340, 50 L. Ed. 613; Mastin et al. v. Noble et al., 157 F. 506, 85 C. C. A. 98; Glaspie v. Keator et al., 56 F. 203, 5 C. C. A. 474; Foster v. McAlester et al., 114 F. 145, 52 C. C. A. 107; Wilson v. Sands et al., 231 F. 921, 146 C. C. A. 117; Folk et al. v. United States et al., 233 F. 177, 147 C. C. A. 183. It is the general rule also as to circumstantial evidence that inferences of fact cannot be drawn from other inferences or rebuttable presumptions, but must arise from circumstances proved. Important inferences, however, may legitimately arise from slight circumstances. United States v. Ross, 92 U. S. 281, 23 L. Ed. 707; Missouri K. & T. Ry. Co. v. Foreman et al., 174 F. 377, 98 C. C. A. 281; Manning v. Mut. L. Ins. Co., 100 U. S. 693, 25 L. Ed. 761; Looney v. Metropolitan R. Co., 200 U. S. 480, 26 S. Ct. 303, 50 L. Ed. 564. Persons engaging in conspiracies to commit fraud or to give or accept bribes do not publish their plans to the world, and there is seldom any one who can furnish direct evidence thereof. If a government official, engaged in making contracts for the government, receives pecuniary favor from'one with whom such contracts are made, a fraud is committed on the government, and it matters not that the government is subjected to no pecuniary loss, or that the contract might have been an advantageous one to it. The entire transaction is tainted with favoritism, collusion, and corruption, defeating the proper and lawful function of the government. United States v. Carter, 217 U. S. 286, 30 S. Ct. 515, 54 L. Ed. 769, 19 Ann. Cas. 594; Haas v. Henkel, 216 U. S. 462, 30 S. Ct. 249, 54 L. Ed. 569, 17 Ann. Cas. 1112; Hammerschmidt v. United States, 265 U. S. 182, 44 S. Ct. 511, 68 L. Ed. 968; United States v. Pan-American Petroleum Co. et al. (D. C.) 6 F. (2d) 43; Pan-American Petroleum Co. et al. v. United States (C. C. A.) 9 F. (2d) 761. Nothing is so essential to the perpetuity of representative government as fidelity of public officials. That the highest degree of fairness and honesty is required of them goes without saying, and .the same standards apply to those with whom they deal. In this ease appellant claims that the facts and circumstances shown in evidence are sufficient to raise controlling inferences of fraud and bribery, and are inconsistent with any honesty of purpose on the part of Fall and Sinclair. The trial court made findings of fact in this ease, one of which is that there was no fraud connected with the negotiation or execution of the lease or the supplemental agreement. Where the trial court has considered conflicting evidence and passed thereon, its conclusion is entitled to great weight, and unless in the opinion of the appellate court it is against the weight of the evidence, or is based on a mistake, will not be disturbed. State of Iowa v. Carr et al., 191 F. 257, 112 C. C. A. 477; Gorham Mfg. Co. v. Emery-Bird-Thayer Dry Goods Co. et al., 104 F. 243, 43 C. C. A. 511; Thallmann et al. v. Thomas, 111 F. 277, 49 C. C. A. 317; United States v. Delatour (C. C. A.) 275 F. 137; Schlafly v. United States (C. C. A.) 4 F. (2d) 195; Fineup v. Klein-man et al. (C.C.A.) 5 F.(2d) 137. Here the appellate court is not at the usual disadvantage which prevails when the trial court determines the facts. The views of the trial court are not controlling, as the situation presents, not so much a dispute as to the evidence or the veraeity of witnesses, as it does an opportunity for differences of opinion with respect to the inferences to be drawn from all the circumstances appearing in the record. This court has the same right to draw "conclusions from the silence or evasiveness of witnesses as has the trial court. Central Imp. Co. et al. v. Cambria Steel Co. et al., 201 F. 811, 120 C. C. A. 121; Central Imp. Co. et al. v. Cambria Steel Co. et al., 210 F. 696, 127 C. C. A. 184. Further, the conclusion of the trial court as to fraud is a mixed one of law and fact. We proceed, therefore, to a somewhat extended examination of this-record, and attempt to sift from the mass of evidence the important and relative parts, assuming for said purposes that a part at least of the records and exhibits stricken by the trial court were proper evidence, a question subsequently discussed. Whether the idea of placing tiie naval reserve control in the Department of the Interior originated with Secretary Denby, or was suggested to him by Secretary Fall, is a matter of conjecture. It is certain that Secretary Fall was not only willing, but anxious, that such suggestion of Secretary Denby be earned out. He prepared an order for the President to sign and sent the same to Secretary Denby with a letter for him to sign and send with the proposed order to the President. This order was changed at the instance of the Navy Department, and then taken by the Assistant Secretary of the Navy to the President, who promptly signed it. Of course, this executive order must have been discussed by the President and the two Secretaries, as a matter of so great magnitude and so at variance with previous practices of the government would not have been so readily signed without previous consideration and discussion. The question of its legality was not submitted to any attorney of the Navy or Interior Department, or the Department of Justice. While Admiral Robison represented the Secretary of the Navy and took some part in negotiations leading up to the leasing of naval reserve No. 3, he generally coincided with the views of Secretary Fall. After Robison explained them to Secretary Denby, he likewise quite generally acquiesced therein. Secretary Denby was not present at any of the conferences with Sinclair or others in regard to leasing Teapot Dome. So far as he was concerned, the idea of opening Teapot Dome as a whole had not been considered or conceived. He never met Sinclair prior to the time of the signing of the lease. His part seemed to consist merely in consenting to the plans and purposes originating with Secretary Fall. Seekers of information were all directed to Secretary Fall. The letter of Secretary Denby to Secretary Fall of October 25,1921, shows thé acceptance by the Navy of the dominance of the Interior Department. We quote therefrom: “That all leases and contracts, except as provided in paragraph 6, will be arranged and consummated by the Interior Department; copies of same being furnished to the Navy Department as a matter of information and record only.” This arrangement was ratified by Secretary Fall in a letter of October 30, 1921. Secretary Denby seemed to have so little information concerning the leasing of Teapot Dome that Secretary Fall thought it necessary to writ him a long letter of date April 12,1922, explaining the same. The evidence shows it was also explained to him by Admiral Robison before he signed the lease on April 12, 1922. No suggestions seem to have been made by him as to the lease. That Secretary Fall, as to this matter, dominated Secretary Denby, Admiral Robison, and other government officers, and practically controlled the action of the Navy Department as to the leasing of Teapot Dome, is a conclusion difficult to escape under this record. As early as July, 1921, he wrote Edward L. Doheny, referring to the Secretary of the Navy: “He understands the situation, and that I shall handle matters exactly as I think best, and will not consult with any officials of any bureau of his department, but only with himself, and such consultation will be confined strictly and entirely to matters of general policy.” He originated the idea of development of fuel oil storage plants. Secretary Denby acquiesced therein. He instructed Judge Finney, Assistant Secretary of the Interior, and Director Bain to look after the negotiations for the Pearl Harbor storage project, and advised them that he would deal with naval reserve No. 3 himself. He gave orders covering even the Navy Department, forbidding the giving out of information as to negotiations for naval reserve leases. He ordered the investigation of the Pioneer and Belgo placer mining claims. Practically all the conferring and negotiating for the lease of Teapot Dome were carried on by Secret