Full opinion text
SAWTELLE, Circuit Judge. This ease comes to us from the United States District Court for the Southern District of California, Central Division. It involves the validity of three certain oil leases in sections 1 and 2, township 31 south, range 24 east, Kern county, Cal., south of three offset strip leases across the northerly portion of the two sections. The first of the leases, the Visalia 010042 lease, hereinafter known as the E lease, covers 421 acres in section 1, •and was issued to the defendant on December 14, 1921; the second, the Visalia 010043 lease, hereinafter known as the I lease, covers 63.2 acres in section 1, and was issued on December 14,1921, to W. R. Ramsey, who subsequently assigned it to the defendant; the third, the Visalia 010097 lease, hereinafter referred to as the G lease, covers 176.78 acres in section 2, and was issued to defendant on February 8, 1922. This third lease has also been referred to as the lease given in compromise of the placer mining claim of White and Coffin for fuller’s earth. The prior case of United States v. Pan-American Petroleum & Transport Co., hereinafter referred to as the first Pan-American Case, has been reported in the opinions of the District Court, 6 F.(2d) 43-89, of the Circuit Court of Appeals for the Ninth Circuit, 9 F.(2d) 761-773, and of the Supreme Court, 273 U. S. 456-510, 47 S. Ct. 416, 422, 71 L. Ed. 734. The records in the first ease give an exhaustive statement of the history and facts of that ease, all of which records, by stipulation of counsel, are made as much a part of this case as if they were fully herein set forth. The stipulation provided that the records in the first ease be admitted here for the purposes of proving: (1) what was litigated in that ease; (2) the truth of the averments of the amended bill of complaint in the instant case and, indeed, “for all purposes.” For that reason, we will, therefore, endeavor to confine our statement to the facts proved in the instant ease, referring to the evidence adduced in the first ease only when necessary to a proper understanding of the issues here involved. The eases of United States v. Belridge Oil Co. (C. C. A.) 13 F.(2d) 562, and Mammoth Oil Co. v. United States, 275 U. S. 13, 48 S. Ct. 1, 72 L. Ed. 137, also furnish collateral facts which will be referred to. This suit was commenced on September 2, 1924, by the Attorney General at the request of Curtis D. Wilbur, now a member of this court, then Secretary of -the Navy, and Hubert Work, then Secretary of the Interior. It was pending about two months before the trial of the first Pan-American Case. On July 12, 1926, the court below, by consent of counsel, ordered this case continued for the term .pending disposition of the former suit which was then on appeal. Trial of the instant suit commenced December 2, 1929, and was decided by the court below on November 10, 1930. The bill is based upon allegations of (1) fraud tainting all the leases; (2) fraudulent conspiracy to secure the leases; (3) illegality in the terms of the leases, and illegality and lack of authority in the purposes and the making of them. The particular land here involved is located in what is known as Naval Petroleum Reserve No. 1, which comprises some 37,000 acres of land in all. Between 4,400 and 5,9001 acres within the reserve are held in fee, mostly by the Standard Oil Company of California, hereinafter referred to as Standard Oil, leaving about 32,000 acres owned by the government. These lands were a part of the unappropriated public domain of the United States, and as such they were, under the Aet of February 11,1897 (30 USCA § 101), subject to entry for o-il under laws relating to placer mineral claims. They were also, under the Act of July 9, 1870 (30 USCA § 35), subject to entry for fuller’s earth under the provisions of laws relating to placer mineral claims. On September 27, 1909, the Secretary of the Interior issued an order withdrawing from entry a large number of acres of supposedly oil lands “in aid of proposed legislation affecting the use and disposition of the petroleum deposits on the public domain. f * * All locations or claims existing and valid on this date may proceed to entry in the usual manner after field investigation and examination.” The lands here involved were covered by that withdrawal order. On June 25, 1910, Congress passed an aet expressly giving the President power to withdraw from entry lands for “public purposes to bo specified in the orders of withdrawals, and such withdrawals or reservations shall remain in force until revoked by him or by an Act of Congress.” 43 USCA § 141. This aet further protected the rights of any locator who, at the date of any order of withdrawal, was a bona fide occupant or claimant of oil lands, and who, at such date, was in diligent prosecution of work leading to the discovery of oil, so long as such locator continued in diligent prosecution of work. 43 USCA § 142. Following the above act, the President, on July 2, 1910, confirmed a number of withdrawal orders made theretofore covering a large number of acres, including the lands here considered. On September 2, 1912, President Taft created Naval Petroleum Reserve No. 1 “for the exclusive use or benefit of the United States Navy until this order is revoked by the President or by Aet of Congress.” By similar orders in 1912 and 1915 Naval Petroleum 'Reserves Nos. 2 and 3 were created. By the General Leasing Act of February 25, 1920 (30 USCA § 181 et seq.), Congress attempted to fix a general policy for the handling of placer mining claims, excluding lands withdrawn or reserved for naval purposes except as therein otherwise expressly provided. Section 17 thereof (30 USCA § 226) provides for leasing, pursuant to competitive bidding, unappropriated deposits of oil in the known geological structure of a producing field, with a royalty fixed in the lease not less than 12% per cent., and also that: “Whenever the average daily production of any oil well shall not exceed ten (10) barrels per day, the Secretary of the Interior is authorized to reduce the royalty on future production when in his judgment the wells cannot he successfully operated upon the royalty fixed in the lease. The provisions of this section shall apply to all oil and gas leases made under this subehapter.” Section 18 of the same act provides: “Upon relinquishment to the United States, filed in the General La,nd Office within six months after February 26, 1920, of all right, title, and interest claimed and possessed prior to July 3, 1910, and continuously since by the claimant or his predecessor in interest under the preexisting placer mining law to any oil or gas bearing land upon which there has been drilled one o-r more oil or gas wells to discovery embraced in the Executive order of withdrawal issued September 27, 1909, and not within any naval petroleum reserve, and upon'payment as royalty to the United States of an amount equal to the value at the time of production of one-oighth of all the oil or gas already produced except oil or gas used for production purposes on the claim, or unavoidably lost, from such land, the claimant, or his successor, if in possession of such land, undisputed by any other claimant prior to July 1, 1919, shall be entitled to a lease thereon from the United States for a period of twenty years, at a royalty of not less than 12% per centum of all the oil or gas produced except oil or gas used for production purposes on the claim, or unavoidably lost: * * * “Provided, however, That as to all like claims situate within any naval petroleum reserve the producing wells thereon only shall be leased, together with an area of land sufficient for the operation thereof, upon the terms and payment- of royalties for past and future production as herein provided for in the leasing of claims. No wells shall be drilled in the land subject to this provision within six hundred and sixty feet of any such leased well without the consent of the lessee: Provided, however, That the President may, in his discretion, lease the remainder or any part of any sueh claim upon which sueh wells have been drilled, and in the event of sueh leasing said claimant or his successor shall have a preference right to sueh lease:, And provided further, That he may permit the drilling of additional wells by the claimant or his successor within the limited area of six' hundred and sixty feet theretofore provided for upon sueh terms and conditions as he may prescribe. * * * ” 30 USCA § 227. A section of temporary character, 18a (34 USCA § 524a note) dealt with the manner of settlement of claims: “That whenever the validity of any gas or petroleum placer claim under pre-existing law to land embraced in the executive order of withdrawal issued September 27, 1909, has been or may hereafter be drawn in question on behalf of the United States in any departmental or judicial proceedings, the President is hereby authorized at any time within twelve months after the approval of this Act to direct the compromise and settlement of any sueh controversy upon such terms and conditions as may be agreed upon, to be carried out by an exchange or division of land, or division of the proceeds of operation.” The terms of the act are elaborated by Regulations of the Department of the Interi- or in Circular No. 672 that refers to the above section 18 (30 USCA § 227) as a relief measure for claimants of oil and gas lands who had not perfected their claims under pre-existing mining laws and are prevented from doing so by withdrawal of the land or by the act. The conditions for relief are that the land remains withdrawn under the order of September 27, 1909; that the claim was initiated prior to July 3,1910, and possessed continuously since; that' claimant or predecessors must have drilled an oil or gas well on the land to discovery; and that claimant must have filed, on or before August 25, 1920, “a relinquishment to the United States of all rights, title and interest in and to the. land, together with an application for a lease.” Royalties for oil are fixed in two brackets: The first, for oil of 30° Baumé or over, at 12% per cent, up to 20 barrels per day per well; at 16% per cent, up to 50 barrels per day per well; at 20 per cent, up to 100 barrels per day per well; and at 25 per cent, for more than 100 barrels per day per well; the second, for oil less than 30° Baumé, at 12%, 14%, 16%, and 20 per cent, in the above classifications. By the regulations it was further provided that the following may not proceed to patent, notwithstanding absence of fraud and full compliance with law in other respects: “(b) Any location made before withdrawal of the land, but not perfected by discovery at date of withdrawal, which does not come within the protective provision of section 2 of the Act of June 25, 1910; that is to say, any claimant who at the date of withdrawal, was not a bona fide occupant or claimant in diligent prosecution of work leading to discovery of oil or gas, and who has not continued in sueh diligent prosecution to discovery.” It thus appears that, even after the passage of the General Leasing Act, no oficial in the executive department of the government had authority to deal with lands included in the naval petroleum reserves that were not subject to claims upon which there were producing wells or claims which should be compromised in accordance with section 18a, or valid claims for patent under pre-existing law. On March 5,1920, Secretary of the Navy Daniels wrote the chairman of the Naval Committee of the House of Representatives suggesting the need for additional legislation to protect naval petroleum reserve lands from drainage by the development o.f privately owned lands adjoining or within the boundaries of the reserves, and in accordance with his suggestions was passed the Act of June 4, 1920 (34 USCA § 524), providing: “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 [the General Leasing Act] 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 [General Leasing Act] are not affected adversely thereby.” It was after the passage of the above act that Albert B. Fall became Secretary of the Interior on March 5, 1921. The first Pan-American Case showed the facts leading up to the presidential order of May 31, 1921, which transferred the duty of administering the naval petroleum reserves from the Secretary of the Navy to the Secretary of the Interior, but we deem it important to quote the order in toto: “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 Naval Petroleum Reserve; authorizing the President to permit the drilling of additional wells or to lease the remainder of 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. 912), 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 hearing 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 he changed or adopted except upon consultation and co-operation 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 said Reserves subject to the conditions and limitations contained in this order and of the existing laws or such laws as may hereafter be enacted by Congress pertaining thereto.” In construing this order and other acts, the Supreme Court said, in the first Pan-American Case, supra, that all of these “show that it has been and is the policy of the United States to maintain a great naval petroleum reserve in the ground.” After the passage of the Act of June 4, 1920 (41 Stat. 813), Secretary Daniels had resisted suggestions of drilling within the reserve, until finally, shortly prior to his retirement, he called for bids for the drilling of 22 offset wells along the north side of section 1 to protect the naval reserve against intensive drilling by Standard Oil on section 36. The bids were not received until after Mr. Fall beeame Secretary of the Interior and the promulgation of the executive order transferring the administration of the naval petroleum reserves from the Navy Department to the Department of the Interior. When they were received by the Navy Department, they were transmitted to the Interior Department on June 2, 1921, and Secretary Fall accepted defendant’s bid of 55% per cent, royalty as best. At that time the defendant, Pan-American Petroleum Company, hereinafter called Pan-American, was a wholly owned subsidiary of the Pan-American Petroleum & Transport Company, hereinafter called the transport company, and E. L. Doheny was in complete control and domination of both companies. ’ However, at the time of the calling for and accepting of the bid, there was pending in the Interior Department an application by the United Midway Oil Land Company, hereinafter referred to as Uhited Midway, for a lease to certain lands within the reserve, based upon its claim that prior to the creation of the reserve it had expended a large amount of money in attempting to develop oil on section 12, south of section 1, and also that it had a placer mining location on part, of section 1 in the reserve itself. On November 4, 1920, the Secretary of the Navy expressed the opinion that the claimants wore not entitled to relief under any of the provisions of the Oil Leasing Act, and on February 24, 1921, the Secretary of the Interior (John Barton Payne) expressed the same view, denying the petition. Secretary Fall proposed to settle the United Midway claim by giving it an area south of the 212-well strip., but met with the serious' objections of Dr. W. C. Mendenhall, special adviser to Secretary Fall with regard to handling of the naval petroleum reserve, Admiral R. S. Griffin and Commander H. A. Stuart, who had charge of the naval petroleum reserves for the Secretary of the Navy, the three of whom insisted that, if United Midway had any equities, it should be given land outside the reserve. Some considerable feeling seems to have developed between Dr. Mendenhall and Commander Stuart, on the one side, and Secretary Fall on the other, and as a result Fall expressed to Assistant Secretary of the Interior Finney, hereinafter referred to as Judge Einney, his extreme displeasure at having Mendenhall as his adviser on oil matters, and he never thereafter consulted Mendenhall. Commander Stuart shortly afterward was relieved from duty in connection with the naval petroleum reserves, this work being taken over by Admiral John K. Robison, Chief of the Bureau of Engineering of the Navy, who was made representative of Secretary Denby in naval petroleum reserve matters. Later, Commander Stuart was transferred from Washington. All of these pertinent facts appeared in the first Pan-American Case, and were there accepted by the courts as evidence of improper motive upon the part of Fall, with the statement by the Supreme Court, however, that “Robison’s motives were not the same as Fall’s.” First ease, supra, page 493, of 273 U. S., 47 S. C't. 416. After the insistence of Admiral Griffin and Commander Stuart that United Midway be given lands outside of, the reserve, Fall wrote to President Harding that he had asked Doheny whether the latter would object to a portion of the 22-well strip being awarded to United Midway. Mr. Doheny consented, and thereupon two leases were made, the H lease (Visalia 09264) on July 8, 1921, of 52.70. acres to the United Midway for 8 wells, and the D lease (Visalia 010032) on July 12, 1921, of 92 acres, the remainder of the strip, for 14 wells, to the appellee. Each of these two leases was at 55% per cent, straight royalty to the government, and contained a provision that such royalties “shall be subject to reduction whenever the average daily production of any well shall not exceed 10 barrels per day if or in the judgment of the lessor the wells cannot be successfully operated upon the royalty fixed herein.” And a further provision that the number of wells should be fixed at 8 for the H lease and 14 for the D lease, “unless the lessor.shall deem it necessary to have additional wells drilled for the purpose of protecting the property against drainage by wells on adjacent lands, in which event, upon notice thereof, the lessee agrees to drill such necessary offset wells.” Both the United Midway and the Pan-American felt that the land would be very valuable and highly productive, but, when the first well on the D lease was brought in on October 3, 3921, the initial daily production was only 291.77 barrels, and, when the first well was brought in on the H lease on October 24, 1921, the initial daily production was only 108 barrels, contrasted with the initial daily production of the Standard Oil Company of several thousand barrels per well in section 36. W. R. Ramsey had succeeded to the interests of United Midway in the H lease on July 20, 1921, the assignment of the lease being approved by Judge Finney on August 8, 1921. Ramsey was associated with the Continental Asphalt & Petroleum Company, hereinafter referred to as Continental. The latter was apparently unable to carry on its part of the development work, in view of the disappointing results of the first wells, and through A. J. Pizzini, a ■ director of Continental, went to Doheny’s offices with the request that the Pan-American join with it in applying to the Department for a reduction in the royalty. After correspondence on the subject between the New York office of Pan-American and J. Cramptón Anderson, general manager of Pan-American in California, and brother-in-law of Doheny, the Pan-American agreed to join with the United Midway in an application for a reduced royalty. Joseph J. Cotter, at different timesviee president and attorney for appellee’sparent company, the transport company, and. John W. Staggers, attorney for the United! Midway, called upon Secretary Fall and Judge Finney with the request that, in view of the disappointing results of the first wells,, royalties be reduced. Doheny was informed, as to at least some of these negotiations. During the parleys, it was suggested that' additional lands within the section might b"e* granted to the lessees at regulation royalties-Judge Finney told Cotter and Staggers to. put their proposals in writing, and shortly-thereafter he spoke to Fall concerning the-matter, and it was suggested that increased; acreage in lieu of reduced royalties might be granted. The testimony is hopelessly contradictory as to who made the suggestion. As indicative of the futility of attempting to get order out of the evidentiary chaos as to this point, we quote the following extract from Judge Finney’s testimony: “My recollection is that the suggestion that we couldn’t reduce the royalty in section 1, but might give them additional land, was made by Secretary Fall. I have’testified about this matter a good many times. My memory is growing worse as time progresses.” Following the statement of Judge Finney that written application for reduction be filed, the appellee on November 22, 1921, and Ramsey by Staggers on November 23, 1921, filed such application. Some time between November 22, 1921,, and December 1, 1921, Fall directed or authorized the leasing to the two companies of the balance of section 1 at regulation royalties, with the result that on December 14, 1921, the I lease was issued to Ramsey and) the E lease to the Pan-American. It was during these negotiations that Doheny paid to Fall the bribe of $100,000, the-circumstances of which have been set forth at length in the first Pan-American Case-, supra, in the criminal case of Fall v. United States (App. D. C.) 49 F.(2d) 506, and in the following finding of fact of the court below: “November 29, 1921, Fall called upon Doheny, pursuant to an arrangement made late in October or early in November, 1921, for delivery of One Hundred Thousand Dollars ($100,000) for Fall’s personal use. On November 30, 1921, Doheny had his son ohtain the money by the use of a check of his son and sent it in currency by his son to Fa at "W ashington. A few weeks lad® Doheny reimbursed his son. No entry of the transaction was made upon any books of Doheny, the Transport Company, or the defendant. Bank records would not show receipt of money by Fall from Doheny. Fall gave Doheny, Jr., "his demand note for the money, payable to Doheny and the son delivered the note to ■his father. A few weeks thereafter Doheny tore Fall’s signature from the note. The purpose of the tearing was that it would be unenforcible in the hands of third parties. * * * Fall carried the currency to El Paso, Texas; used Ten Thousand Dollars ($10,-■000) of it as a down payment on the purchase of a ranch and subsequently used a large portion of it for the purchase of cashiers’ checks to apply on the purchase price of the ranch, and deposited the balance in several banks, completing his payments on account of the purchase of the ranch by cheeks drawn on such accounts. Up to at least October, 1924, nothing had been paid on the note to Doheny on account of either principal or interest.” Fall directed or authorized the execution of the E and I leases, not for the purpose o£ offsetting drainage, but for the immediate purpose of relieving against the high royallies under the II and D leases and for the ultimate purpose of assisting Doheny, his friend and coconspirator, and Doheny’s joint adventurer Ramsey. , „ ,, . „ „ This entire phase of the case is more fully treated hereafter m our discussion of fraud and lllega ity. On March 10,1922, Ramsey entered into a contract with the defendant for the sale and assignment of the H lease to the defendant for $450,000 in cash, and for the sale of the relief lease I for $300,000 cash. At that time all but one of, the wells on the D lease had been completed, and it was known that prodnction was not over 300 barrels a day. At that time only 5 of the 8 wells on the H lease had been completed, hut production of them was known. No wells had been brought in on the E lease, and only 4 wells were in process of drilling. No wells had been brought in on the I lease, and only 2 wells were in process of drilling. The details of tile sales agreement between Ramsey and the defendant were completed by March 25, 1922, and the two leases were assigned on that date and the assignment approved by Judge Fin-ney on April 7, 1922. On August 9, .1924, Dr. Bain, Director of £be gurealI o£ Mines, and Judge Finney each cerfcifled tllat tbe two leases of December 14, 1921, at issue here, were granted as relief leases pursuant to the direction of Fall, no mention bei mado o£ drainage as a lnotive jor j-bem On November 30, 1921, the day of the payment of $100,000 to Fall, the Bureau of Mines, pursuant to the directions of Fall, prepared an invitation for bids for offset leases in sections 6 and 25 in the center of the reserve, and for a double row of 91 wells, 18 in aU> along the north side of section 2. These invitations were mailed on the 1st of December, 1921, to tho principal oil com-panies on the Pacific Coast. There is testimony that the lease on the north half of section 2 was to offset drilling by the Pacific Oil Company, first owned by tbe Southern Pacific Railroad and later by Standard Oil, on section 35 outside the re-gerve. The Pacific Oil Company had drilled a number of wells in section 35, and was preparing for the drilling of a line of wells aCross the southerly line of the section. There js aiso testimony that the government was faced with the necessity of offsetting that drilling as quickly as possible, but no eon-vincing testimony that Fall was actuated by suc^ considerations. A number of: bids were received for the various leases and were tab-ulated on December 29, 1921. None of the bids for offset leases on sections 25 and 6 were satisfactory. Dr. Bain went to tho Pacific Coast on December 28, 1921, and, wbÜ0 ^ learned tbat a nondriliing agree. mmt could be arranged with the Paeiflo oil Company. Such a “definite arrangement” was actually made orally as to sections 35 and 2, and Fall was informed of it. On the strength of that “additional information,” ,and because of the unsatisfactory nature of the bids, after Dr. Bain returned to "Wash-ington in January, 1922, he recommended that there be no leasing of the strips in sections 6 and 25. Tho bids for the offset leas-es on section 2 were, however, considered and the Bureau of Mines recommended that: “The Navy will probably receive more rovaltv oil from the reserve as a whole if the bids were not given to the Pan-American. * * * The Associated bid of 36 per cent flat will probably yield the Navy the most oil.” Pan-American had bid 35 per cent., and Judge Finney finally recommended that bid as the best. Fall indorsed across the report the word “Approved.” However, a lease to Pan-American could not be issued, for the reason that all of section 2 was covered by four applications for patent for mining claims on an alleged discovery of fuller’s earth. On January 1,1907, E. J. White and associates located upon section 2 a placer mining claim for oil, asphalt-urn, gypsum, and other minerals. By February 21,1911, White had acquired the interests of all of his associates, and he filed an application for a patent to the section based upon the alleged discovery of fuller’s earth. The General Land Office, through special agents, conducted an investigation, with the result that on January 18,1919, adverse proceedings were directed against the application for patent upon charges that no discovery of fuller’s earth or other placer minerals had been made, and that the applicant was not on September 27,1909 (the date of the withdrawal order) diligently prosecuting work leading to the discovery of oil or gas. Such charges were filed, and also on June 3, 1919, the Attorney General, at the request' of the Secretary of the Navy, filed a protest. There had been no hearing on these adverse proceedings up to 1921. On May 17,1921, White and H. T. Coffin, the latter of whom had acquired an interest in the claim, wrote to Commander Landis for a compromise of the claim. The application called attention to the necessity for offset wells in section 2, and proposed to surrender their claim in exchange for a lease at 20 per cent, straight royalty covering a strip 900 feet wide along the entire north line of section 2. The matter went the round of governmental agencies, but on June 28, 1921, Secretary Denby forwarded the correspondence from White and Coffin and from' Landis to Fall with the comment that “it might be advisable to effect some sort of compromise,” but with the additional statement: “In view of the weakness of this claim, it is believed that the claimants will compromise for a much smaller amount of land than they have indicated in the enclosed letter.” Fall referred the correspondence to Dr. Smith, Director of the Geological Survey, who in turn forwarded it to Méndenhall. Fall did not keep the latter informed of his plans after the break between the two, and when Dennett, attorney for White and Coffin, pressed the latters’ claims, Mendenhall, about November 1, 1921, said that he did not know that Fall’s policy had been determined, and stated that Fall had taken personál charge. On November 3,1921, Judge Finney tried to adjudicate the claim, and before he had received from Mendenhall the White and Coffin application for a compromise he wrote to the Commissioner of the General Land Office and asked for a disposition of the application to which he said his attention had been called. On November 10, 1921, Mendenhall sent the application to Judge Finney; on December 7,1921, Judge Finney sent the papers to the Commissioner; and on December 24, 1921, Judge Finney wrote the Commissioner a second letter in which he said: “The Secretary was under the impression that this might be cleared up immediately. * * * Will you please have this ease looked up thoroughly and the exact status ascertained and make any suggestions that occur to you which will aid in the very early disposition of same. * * *” Delay occurred, and finally, on December 30, 1921, T. E. Klipstein and S. P. Wible, owners of the option on the White and Coffin claims, had a conference with J. Crampton Anderson at which they threatened court action if they did not obtain an overriding royalty on any lease which defendant might obtain on the lands in question. Anderson secured an option whereby he agreed to pay Klipstein and Wible an overriding royalty of 7% per cent, on any lease obtained by defendant under its bid if the Klipstein interests would agree to quitclaim to the government their rights under their application for patent. After the matter was brought to the attention of Doheny, on January 4, 1922, a contract embodying the terms of the above option was entered into between the defendant and White and Coffin and Wible and Klipstein. Judge Finney was immediately notified of this by wire, and on February 1, 1922, Cotter, at Judge Finney’s suggestion, wrote the Department a letter under date of February 1,1922., formally offering to deliver a quitclaim for the entire section 2 upon receiving the F lease on the royalty bid and a lease for the balance of the section at regulation royalties of 12% to 20 per cent. Fall approved their recommendation that the compromise be effected. . On February 8,1922, the two' leases were issued, one the F lease and the other the G lease. On that same day Secretary Fall asked the Pacific Oil Company for a nondrilling agreement with reference to the land in the center of the reserve, and this was agreed to within five days after the president of the latter company received the proposal. On February 25, 1922, the contract of January 4, 1922, between appellee and the group composed of White, Coffin, Wible, Klipstein, and W. J. Williams was reduced to final form. On May 24, 1922, Cotter applied to tho Secretary of the Interior for a consolidation of tho E, I, and C leases as a matter of convenience, since they all bore the same rates of royalties and were worded in tho same form. The Bureau of Mines advised that there was no objection from its standpoint, and that in drawing up tho new lease it might be consulted as to the statement of the drilling program. On June %, 1922, Judge Einney directed tho General Land Office to prepare the consolidated lease in eonsnltation with the Bureau of Mines as to the drilling program. The lease was executed by Judge Finney for the United States and Cotter for the defendant on July 28, 1922. Late in March or early in April, 1922, information leaked out that negotiations were pending for the leasing of the naval reserves. Rumors reached Congress, and, on April 14, 1922, that body passed a resolution introduced by Senator Kendrick. This resolution asked for confirmation and details with regard to the leasing of Teapot Dome. The resultant newspaper publicity and disclosures led to the La Follette resolution of April 21, 1922, which called for copies of all leases in all reserves and all papers pertaining to the administration of the reserves, and directed tho Committee on Public Lands and Surveys to the Senate “to investigate this entire subject of leases upon naval oil reserves, with particular reference to the protection of the rights and equities of the Government of the United States and tho preservation of its natural resources, and to report its findings and recommendations to the senate. * * * ? J Secretary Fall responded by sending documents, comprising some 12,000 pages, among which were copies of the D, F, E, I, and H leases, and some of the papers pertaining to the issuance of the three leases involved in this suit. The matter was investigated at great length by the Senate Committees, the progress of which investigation has been set forth in the first Pan-American Case. During these investigations, Doheny, in two letters, offered certain conditions for surrendering other contracts, not in issue here, stated that he understood that there was no criticism of the small leases for “drainage” purposes, and that he took it “that the Committee and Congress will desire the continued operation of those wells in order that the Government’s interests may be protected.” Congress was unwilling to accept this offer. On January 31, 1924, the Senate passed Joint Resolution No. 54, which was subsequently passed by the House of Representatives, and, on February 8,1924, was approved by the President. The text of that resolution follows: “Whereas it appears from evidence taken by tho Committee on Public Lands and Surveys of tho United States Senate that certain lease of Naval Reserve Numbered 3, in the State of Wyoming, bearing date April -7, 3922, made in form by the Government of tho United States, through Albert B. Fall, Secretary of the Interior, and Edwin Den-by, Secretary of the Navy, as lessor, to the Mammoth Oil Company, as lessee, and that certain contract between the Government of tho United States and the Pan American Petroleum and Transport Company, dated April 35, 1922, signed by Edward C. Finney, Acting Secretary of the Interior, and Edwin Denby, Secretary of tho Navy, relating among other things to the construction of oil tanks at Pearl Harbor, Territory of Hawaii, and that certain lease of Naval Reserve Numbered 1, in the State of California, bearing date December 11,1923, made in form by the Government of the United States through Albert B. Fall, Secretary of tho Interior, and Edwin Denby, Secretary of the Navy, as lessor, to the Pan American Petroleum Company, as lessee, were executed under circumstances indicating fraud and corruption; and “Whereas the said leases and contract were entered into without authority on the part of the officers purporting to act in the execution of the same for tho United States and in violation of the laws of Congress; and “Whereas such leases and contract were made in defiance of tho settled policy of the Government, adhered to through three successive administrations, to maintain in tho ground a great reserve supply of oil adequate to the needs of the Navy in any emergency threatening the national security: Therefore be it “Resolved by the Senate and House of Representatives of tho United States of America in Congress assembled, That the said leases and contract arc against the public interest and that the lands embraced therein should be recovered and held for the purpose to which they were dedicated; and “Resolved further, That the President of the United States be, and he hereby is, authorized and directed immediately to cause suit to be instituted and prosecuted for thó annulment and cancellation of the said leases and contract and all contracts incidental or supplemental thereto, to enjoin the further extraction of oil from the said reserves under said leases or from the territory covered by the same, to secure any further appropriate incidental relief, and to prosecute such other actions or proceedings, civil and criminal,as may be warranted by the facts, in relation to the making of the said leases and contract. “And the President is further authorized and directed to appoint, by and with the advice and consent of the Senate, special counsel who shall have charge and control of the prosecution of such litigation, anything in the statutes touching the powers of the Attorney General of the Department of Justice to the contrary notwithstanding.” 43 U. S. Stat. part 1, page 5, chapter 16. Under the authority of that resolution, the President appointed as special counsel the Honorable Owen J. Roberts and the Honorable Atlee Pomerene, who, on March 17, 1924, filed a bill of complaint in the District Court against the said transport company and this appellee, wherein the lands described in the leases dated June 5 and December 11, 1922, were sought to be recovered, and said leases and two contracts, dated April 25 and December 11, 1922, were sought,to be canceled and an accounting had. The trial commenced on October 21, 1924; the opinion of the District Court was handed down on May 28, 1925; and the cause was finally decided by the Supreme Court on February 28, 1927, in favor of the plaintiff. As we have said, the instant suit was continued pending disposition of the former suit. Appellant here has forty-one assignments of error, which may be more briefly summarized as follows: (1) These leases were issued at the direction of Albert B. Pall, then Secretary of the Interior, after he had been given $100,000 by Edward L. Doheny, who was president, a director, and in control and domination, of the appellee on November 30, 1921. The I lease was the result of a joint adventure or conspiracy by Ramsey and the appellee, and was acquired by the appellee from Ramsey. The leases are conclusively presumed fraudulent and voidable by reason of said $100;-000 transaction. (2) On or before November 30, 1921, Pall and Doheny conspired to defraud the United States by getting for the appellee oil and gas leases covering all the unleased lands in Reserve No. 1, and these leases axe affected by and the result of that conspiracy, and, in the case of the I lease, the joint adventure or conspiracy by Ramsey and the appellee and Doheny. (3) There was secrecy and favoritism in the making of leases without advertising, without competition, and without consideration other than royalties lower than those given to other lessees in the vicinity for similar lands. Legal advice was willfully avoided because of the possibility that it would be adverse to the right to make the leases. These facts not only evidence the actual fraud in and effect of the $100,000 transaction, and not only evidence the fraudulent conspiracy, but also are, in themselves, when taken together, fraud rendering the leases voidable. (4) The leases were made to circumvent the law as in the first Pan-American Case. (5) The E and I leases were made to give relief from the higher royalties of other leases, without authority of law therefor, and contrary to the Act of June 4, 1920 (34 USCA § 524). (6) The G lease was made to compromise a placer mining claim for fuller’s earth, without authority of law therefor, and contrary to said Act of June 4, 1920. (7) The leases delegated diseretionary power vested by law exclusively in the Secretary of the Navy to the Secretary of the Interior, and are thereby contrary to said Act of June 4, 1920. The court below held that: (1) The G and I leases were free from fraud and conspiracy, and were ratified by Congress. (2) The E lease was voidable because of the fraud; but that it Avas unnecessary to find Avhether it had been ratified by Congress because the judgment in the former suit was a bar to this suit. (3) In the first Pan-American suit neither the amended bill of complaint nor the answer thereto tendered any issue as to the validity of the E, G, or I leases or the' consolidated lease, but that, in the trial of the first case, the plaintiff, as part of its proof to sustain its bill, placed in evidence substantially all the facts adduced in this suit as to the execution of the instant leases and the P, H, and D, leases, and requested and obtained from the court findings as to- the execution of the instant leases. Accordingly, it was held that the plaintiff is not entitled to any of the relief prayed for, and the amended bill was dismissed [(D. C.) 45 F.(2d) 821]. Therefrom arises this appeal. Three defenses are relied upon by the appellee: (1) The admitted Fall-Doheny fraud and conspiracy, adjudicated in the first Pan-American Case, have not affected the three particular leases involved in the instant ease. (2) Even if it be conceded, for the sake of argument, that these three leases originally were tainted by the Fall-Doheny fraud, Congress, fully informed of the facts concerning that fraud, has seen fit to ratify the leases. (3) If it be assumed, again for the sake of argument, that the three leases now in question were tainted by the Fall-Doheny fraud, and, further, that Congress has not ratified them, or any of them, recovery under them was a necessary part of the first Pan-American Case, these three leases constituting merely additional elements of relief to which the appellant was there entitled. Therefore, under the fundamental rule against splitting causes of action, the government, in this second suit, cannot recover under these three leases. Since the briefs deal largely with these three defenses, rather than with the assignments of error, we are following the plan adopted by counsel, though we are not. taking up the defenses in the precise order observed in the briefs. Fraud is a short and ugly word in representative government. The appellee now concedes the existence of the fraud, and joins in the universal condemnation of it. That the conspiracy was a continuous service of favoritism by the Secretary of the Interior to the Doheny interests, affecting the leases in issue, and others, manifestly appears from the record. It permeates Fall’s official domain in dealings with Doheny and oil reserves. A cordial friendship between Doheny and Fall existed for many years, and Fall, as Senator, prior to his appointment as Secretary of the Interior, had “rendered invaluable services” to- the Doheny and other oil interests in Mexico and shortly before becoming Secretary of the Interior; also Doheny expected Fall to resign as Secretary of the Interior in 1922, something over a year after his appointment (no doubt after Doheny’s oil interests in the reserve were established), and enter his employ. The principal defense relied upon by the appellee is that all three of these leases were primarily entered into for “protection” of the naval petroleum reserve against drainage. It is true, the defendant argues, that two of the leases were for “relief,” and that the third was executed to facilitate the compromise of a fuller’s earth claim. These purposes, however, were only the “immediate” reasons for granting the leases; the protection of the oil stocks in the ground was the primary or ultimate reason, the defense insists. Much expert testimony is cited in support of this contention. As might be expected, there is also testimony tending to show that 22 offset wells in section 1 were sufficient. We need not weigh this expert evidence, however, for an entirely different consideration is decisive of the issue. Regardless of whether or not these particular leases were advantageous to the government, the fact that they were entered into by a faithless public officer on the one hand, and by Doheny, on the other, renders them voidable at the option of the defrauded principal — the United States of America. This fundamental principle of the law of agency is so lucidly expounded by the Supreme Court in the first Pan-American Petroleum Company Case that it almost is unnecessary to cite further authorities: “It was not necessary to show that the money transaction between Doheny and Fall constituted bribery as defined in the Criminal Code or that Fall was financially interested in the transaction or that the United States suffered or was liable to suffer any financial loss or disadvantage as a result of the contracts and leases. It is enough that these companies sought and corruptly obtained Fall’s dominating influence in furtherance of the venture. It is clear that, at the instance of Doheny, Fall so favored the making of these contracts and leases that it was impossible for him loyally or faithfully to serve the interests of the United States.” First Pan-American Case, supra, 273 U. S. 500, 47 S. Ct. 416, 422, 71 L. Ed. 734. Mr. Justice Butler, who delivered the opinion in the first Pan-American Case, used similar language in Mammoth Oil Co. et al. v. United States, supra, 275 U. S. at pages 50 and 53, 48 S. Ct. 1, 9, 72 L. Ed. 137: “And the clandestine and unexplained acquisition of these bonds by Fall confirms the belief, generated by other circumstances in the case, that he was a faithless public officer. * * * “The complaint did not allege bribery; and, in the view we take of the case, there is no occasion to consider, and we do not determine, whether Fall was bribed in respect of the lease or agreement. It was not necessary for the government to show that it suffered or was liable to suffer loss or disadvantage as a result of the lease or that Fall gained by or was financially concerned in the transaction. Pan-American Case, supra, 273 U. S. 500, 47 S. Ct. 416, 71 L. Ed. 734. It requires no discussion to make it plain that the facts and circumstances above referred to require a finding that, pending the making of the lease and agreement, Fall and Sinclair, contrary to the government’s policy for the conservation of oil reserves for the navy, and in disregard of law, conspired to procure for the Mammoth Company all the produets of the reserve on the basis of exchange of royalty oil for construction work, fuel oil, etc.; that Fall so favored Sinclair and the making of the lease and agreement that it was not possible for him loyally or faithfully to serve the interests of the United States or impartially to consider the applications of others for leases in the reserve; and that the lease and agreement were made fraudulently by means of collusion and conspiracy between them.” There is nothing in these three leases that purges them of the fraud. Indeed, they are nearer, in point of time, to the “$100,000 transaction” of November 30; 1921, than were the leases set aside in the first cáse. Nor need it be shown that the conspirators had these particular leases in mind when the sinister transaction took place. Conspirators are too resourceful to lack pretexts for carrying out their corrupt schemes; but such pretexts usually are fabricated as the occasions arise. Such devices need not be provided for in detail, years in advance. We know of no rule of law which requires the details of'a conspiracy to be completely worked out in advance, in order to bring given acts within the scope of the general plan. Fall’s letter to Admiral Robison, dated November 29, 1921 — on the eve of the ill-starred gift — shows that the former had not yet entirely formulated his plan for delivering to his friend and benefactor “oil and gas leases covering all the unleased land in the reserve.” First Pan-American Case, supra, 273 U. S. at page 500, 47 S. Ct. 416, 422, 71 L. Ed. 734. During the oral argument before this court, counsel for the defendant conceded: “Anything that Fall touched was wrong!” We believe that counsel’s candid statement is an accurate epitome of the part that fraud played in these three leases. When Fall accepted the “loan” from Doheny, he became thereafter incapable of properly representing the United States of America in any dealings with his benefactor. The fact that the defrauded principal occasionally may be benefited by certain transactions entered into in his name by the disloyal agent does not deprive the principal of his right to repudiate the bargain. When Fall and Doheny entered into what the Supreme Court has denominated “a conspiracy,” they poisoned the spring of fair dealing between the government, which Fall purported to represent, and the Pan-American Company, which was admittedly dominated by Doheny at the time the transaction took place. The whole course of dealing reeked with wrong. “If a governmental 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. Mammoth Oil Co. et al. (C. C. A. 8) 14 F.(2d) 705, 717, affirmed 275 U. S. 13, 48 S. Ct. 1, 72 L. Ed. 137, supra. Indeed, the lower court found that “the ‘E’ lease was voidable at the instance of the United States, because contra bonos mores and against public policy by reason of the relations existing at the time of its execution between Doheny and Fall.” We are unable to follow the reasoning of the learned judge below as to how the G and I leases may be distinguished from the E lease with regard to the effect of the fraud. We now turn to an examination of the law and the facts regarding the I lease, which was executed originally to Ramsey and was by him later transferred to the defendant-appellee. Fall’s dominance over the Navy Department’s official relation to the oil reserve is obvious. Robison, it appears, was “concerned only with national defense,” and Fall was not oblivious of the fact. A policy of the Navy had long prior been established, and studiously followed, to lease strips of land, not to exceed 900 feet, adjoining other lands to conserve the oil against drainage by other owners, leases D, for 14 wells, and H, for 8 wells, had been granted to defendant Doheny and United Midway (Ramsey) at a royalty of 55% per cent. Ramsey succeeded to the Midway interests, and shortly thereafter, when only 3 wells had been completed in H and 5 in D, Ramsey, through Staggers, his attorney, a former director and attorney for United Midway, applied to Secretary Pall for reduction of royalties, which application was denied. Thereafter, on October 19, 1921, A. J. Pizzini, a director and vice president of Continental, wired Ramsey that it might be a good time to request reduction of royalty, “if I can see Doheny here and get him to join in petition,” and “you might also use this argument in effort to get oil purchase money reduced by stating that it would not pay us to continue further development.” Doheny and his attorney Cotter became interested, and applications were made for reduction of royalties, on November 22, 1921, by defendant and on November 23, .1921, by United Midway (Ramsey). These were denied by Judge Pinney and report made to Pall. Upon Doheny interests’ entering. into the matter of reduction, Pall extended a “listening ear,” and stated that additional land might be granted at a lesser royalty.. November 29, 1921, Fall called Doheny over long-distance telephone, and November 30 Doheny sent Pall the $100,000. On November 28,; 1921, Doheny wrote Pall: “Along thq lines of your suggestion, I have made some inquiries regarding the cost of constructing tanks for the storage of one and one-half million barrels of fuel oil at Pearl Harbor. * * * I am confidentially furnishing Mr. Cotter with the information so that he can intelligently discuss the matter with Mr. Pinney.” November 29, 1921, Pall wrote Robison, who represented the Navy, as follows: “Mr. Cotter will wait upon you with data. * *■ * I have asked him to hand you for your inspection the original letter from Colonel Doheny, addressed to myself, containing résumé of data. Should you think best to accept this proposition, then, of course, it would be necessary, in my judgment, to turn over to Colonel Doheny, if we can do so, leases upon further wells, or area in the naval reserve in which he is now drilling. If this is done it must be understood that the royalty must be made less than the present royalties being paid by the Midway and Pan American.” After receipt of the $100,000, Pall went to his New Mexico home on December 1, and Peeember-6 Staggers wired Ramsey: “Secretary Pall will be in Riverside the 9th. * * * Secretary Pall’s secretary suggests that you wire him for interview as he is familiar with our proposition and will see you.” Pall’s secretary was obviously familiar with the entire plan. A conference had been had between Pall and Doheny, and Pall advised his assistant to execute leases, the I lease to Ramsey, comprising about 60 acres in section 1, immediately south of H, and the remainder of section 1, 421 acres, the E lease, to the defendant company, both at royalties of from 12% to 25 per cent. Doheny, by letter of December 14, 1921, authorized Cotter to execute the lease for the defendant company. The leases are dated December 14, 1921. Nothing was said at any time, either orally or in writing, that the leases were given as drainage necessities, and only 8 of the 22 wells directed by leases H and D had been drilled. On March 10, 1922, 86 days after the date of I lease, carrying a royalty of 12% to 25 per cent., which adjoins H, at a royalty of 55% per cent., received after competitive bidding, and for which abandonment was to be urged, Doheny paid to Ramsey $450,000 for H lease, and $300,000 for I lease, in issue, which was granted without notice or invitation of bids. Thus, defendant had its E lease of 421 acres at. a royalty of 12% to 25 per cent, adjoining D at a royalty of 55 per cent. On the acreage basis of value Doheny paid for the I (Ramsey) lease of 63.2 acres, defendant’s E lease was worth nearly $2,000,-000 above the royalty pledged to the United States. Undoubtedly the I and E leases were a part of the conspiracy. The G lease was granted in section 2, adjoining P lease. Bids had been called for from some of the prominent oil companies, and defendant’s bid was among the highest— 35 per cent. White and Coffin objected, claiming placer mining locations prior to the creation of the reserve. These claims had been -adversely reported, and the Attorney General, at the request of the then Secretary of the Navy, had filed formal protest against allowance of the claims. Secretary of the Navy Denby sent a copy of the White and Coffin correspondence to Pall. White and Coffin proposed a compromise, a lease on a strip 900 feet wide along the north line' of section 2 at a 20 per cent, royalty. This was not accepted, but Cotter, attorney for defendant, after exclusive information as to conditions under which lease would be made, obtained a quitclaim deed, through Anderson, of the White and Cotter interests to the United States, and wired such fact to the Interior Department. The submitted bid was accepted, and Gr lease followed, comprising 176.78 acres, and the quitclaim was delivered to the United States. This was February 8, 1922, 70 days after the receipt of the $100,000 by Fall. For the quitclaim the defendant company agreed to pay, on condition the bid was accepted, to the White and Coffin interests a 7% Per cent, overriding royalty.' Based on the valuation paid by Doheny for the Ramsey I lease, there was a very great difference between the value received by Doheny and the royalties paid to the government and to the White and Coffin interests. From the foregoing, it will be seen that Ramsey and his associates were joint adventurers with the defendant in seeking relief from the high royalties paid on the H lease; such relief being given by the award of the I lease, which is one of the three attacked in this suit. Though it has not been shown that the Ramsey interests themselves were guilty of corrupt practices, the I lease was rendered voidable by the government for the fraud of Doheny, Ramsey’s coadventurer. This rule of law, of.course, is axiomatic as to criminal conspiracies, as well as in the fields of agency and partnership. But it is also applicable as among joint adventurers in .general. In Hitchman Coal & Coke Co. v. Mitchell, Individually, et al., 245 U. S. 229, 249, 38 S. Ct, 65, 72, 62 L. Ed. 260, L. R. A. 1918C, 497, Ann. Cas. 1918B, 461, the Supreme Court said: “In order that the declarations and conduct of third parties may be admissible in such a ease, it is necessary to show by independent evidence that there was a combination between them and defendants, but it is not necessary to show by independent evidence that the combination was criminal or ■otherwise unlawful. The element of illegality may be shown by the declarations themselves. The rule of evidence is commonly applied in criminal cases, but is of general operation; indeed, it originated in the law of partnership. It depends upon the principle that when any number of persons associate themselves together in the prosecution of a ■common plan or enterprise, lawful or unlawful, from the very act of association there arises a kind of' partnership, each member being constituted the agent of all, so that the .act or declaration of one, in furtherance of the common object, is the act of all, and is admissible as primary and original evidence against them.” (Many cases cited.) The appellee contends that this “subsidiary conspiracy” or joint adventure of Doheny and Ramsey should have been pleaded by the government. The answer, of course, is that this joint adventure is not of itself part of the cause of action, but is merely an evidentiary matter to be