At the time Congress acted, there was no company in Oregon in condition to become the beneficiary of the grant. In 1867, however, the Oregon Central Railroad Company of Salem was incorporated, and the following year this railroad received the needed legislative designation. It appears that there was some dispute between the Oregon Central of Salem and another organization known simply as the Oregon Central Railroad Company, and that the doubt as to which of these two was entitled to receive the granted lands in Oregon delayed the filing of the necessary formal assent to the terms of the Congressional Act of 1866. In 1869, therefore, Congress extended the time for the filing of the required assent.[610]
At the time this privilege was accorded, however, Congress introduced an important limitation to its previous action, by providing that the lands granted by the Act of 1866 should be sold to actual settlers only, in quantities not greater than 160 acres to one purchaser, and for a price not exceeding $2.50 per acre. So amended, the Act of 1866 was accepted by the Oregon Central, and on March 16, 1870, the rights acquired were assigned to the Oregon and California Railroad. In 1887, the Oregon and California was absorbed by the Southern Pacific.
As a result of the legislation described, the Oregon and California Railroad Company received a total grant estimated at 3,821,902 acres, which it held subject to the requirement that it should dispose of the property to actual settlers, in small lots, at prices not exceeding $2.50 per acre. Now the simple facts with regard to the company’s administration of this estate are that it did not limit the price which it charged to $2.50 per acre, that it took no pains to ascertain whether or not, purchasers of its lands were actual settlers, and that it sold in whatever quantities were convenient from the point of view of revenue. Between 1894 and 1903, to take the period when the company neglected its obligations most grossly, there were sales at prices ranging from $5 to $40 an acre, and in amounts which in one instance reached the figure of 45,000 acres to a single purchaser. Out of 820,000 acres sold during this period, approximately 370,000 were sold to 38 purchasers in quantities exceeding 2,000 acres to each purchaser, and at prices higher than $2.50. These sales, according to the Supreme Court, were to persons other than actual settlers, and for other purposes than settlement. On January 1, 1903, the company reached the climax of its disobedience to law by withdrawing all of its lands from sale and refusing to accept offers for any of them, asserting that they were timber lands and unsuitable for settlement. In 1911 there were 2,360,492.81 acres unsold, of which 2,075,616.45 had been patented. Only a comparatively small part of the grant, that is to say, had been disposed of.
Land Rebought by Government
It is somewhat amazing that so clear a violation of the terms under which the Oregon and California held its land grant should have passed unchallenged. Nor can the obstinacy of the company’s defense fail to excite surprise. When the Attorney-General of the United States sought to have the Oregon and California grant declared forfeit[611] because of the company’s disregard of the terms of the law, it proved necessary to litigate for eight years, to take seventeen volumes of testimony, to consider 2,500 pages of briefs, and to obtain three court decisions and the enactment of a new law before the matter could be finally set at rest. It is unnecessary to go into the elaborate record, or the arguments by which counsel sought to demonstrate that the restrictive provisions of the Act of 1869 were beyond the power of Congress to enact, or to discuss the contentions that breaches of the law had been condoned and that the covenants were not in any case enforceable. The case was considered by the Circuit Court of the United States for the District of Oregon in 1911,[612] and by the Supreme Court of the United States in 1915.[613] Both courts pronounced the restriction on the alienation of Oregon and California lands binding.
The controversy was at last settled by a new Act of June 9, 1916, in which Congress resumed possession of the unsold lands appertaining to the grant, while appropriating the sum of $2.50 an acre for these lands as a payment to the railroad company.[614]
Under the terms of the act, the Secretary of the Interior was directed to ascertain the exact number of acres of land patented to the railroad company, and the number of acres of unpatented land which the company was entitled to receive in the future according to the original grants. The Secretary was then to calculate the value of all this land at $2.50 per acre, and to pay over the amount so ascertained to the railroad company from time to time from the proceeds of future sales of the lands or of the timber upon it, after deducting from the valuation the amounts already received by the railroad and by its predecessors in interest. The intent was clearly to allow to the railroad $2.50 per acre of the original grant, no more and no less, taking full account of the sums already received by the company. The constitutionality of the law was later upheld by the Supreme Court.[615]