The grant made to the Southern Pacific Railroad Company by § 23 of the act of Congress approved March 3, 1871 (16 Stat. at L. 573, chap. 122), overlapped a prior grant made to the Atlantic & Pacific Railroad Company by the act of July 27, 1866 (14 Stat. at L. 292, chap. 278). A forfeiture of the latter grant by the act of July 6, 1886 (24 Stat. at L. 123, chap. 637), was construed by the Land Department as causing the lands within the overlap to inure to the benefit of the Southern Pacific Company under its grant of 1871. In consequence, patents for a large quantity of land in California within the overlap were issued to the Southern Pacific Company.
The act of March 3, 1887 (24 Stat. at L. 556, chap. 376, U.S.C.omp. Stat. 1901, p. 1595), entitled, 'An Act to Provide for the Adjustment of Land Grants Made by Congress to Aid in the Construction of Railroads, and for the Forfeiture of Unearned Lands, and for Other Purposes,' among other things provided for the immediate adjustment of all railroad land grants made by Congress; and upon the completion of such adjustment, if it should appear that lands had been, from any cause, erroneously certified or patented by the United States to or for the use or benefit of any company claiming by, through, or under grant from the United States to aid in the construction of a railroad, it was made the duty of the Secretary of the Interior to demand from such company a relinquishment or reconveyance to the United States of all such lands, whether within granted or indemnity limits; and, if such company should neglect or fail to so reconvey such lands to the United States within ninety days after such demand, it should thereupon be the duty of the Attorney General to commence and prosecute in the proper courts the necessary proceedings to cancel all patents, certificates, or other evidences of title theretofore issued for such lands, and to restore the title thereof to the United States. By § 4, citizens, or persons who had declared their intention to become citizens, and who had purchased lands from the railroad company in good faith, were authorized, on proof of the fact after the adjustment of the grant, to acquire patents from the United States. And it was among other things further provided that after the issue of patent, demand should be made for payment by the company, which had disposed of such lands, of an amount equal to the government price of similar lands; and in case of neglect or refusal to make payment within ninety days thereafter, the Attorney General was directed to cause a suit or suits to be brought therefor.
Referring to suits brought under this act of 1887, in an opinion delivered in United States v. Southern P. R. Co. 39 Fed. 132, the district court said (p. 137):
'While in these cases but a comparatively small amount of land is involved, the suits, it seems from a decision of the Secretary of the Interior, rendered June 23, 1888, and reported in volume 6 of the decisions of the Department of the Interior, page 816, were instituted by the government to test its right to a large amount of land similarly situated. That decision was made upon an application on the part of the Southern Pacific Railroad Company that it be called on, under the act of Congress of March 3, 1887, for a reconveyance of the lands which were held by the Land Department to have been improperly patented to said company, so that upon a refusal to reconvey, suits might be brought by the government to set aside such patents, and that no further patents should be issued to said company for lands in the limits of the forfeited grant to the Atlantic & Pacific Railroad Company; and also that the then-subsisting withdrawal of lands within the primary grant limit of the Southern Pacific Railroad (branch line), which are also within the granted and indemnity limits of the Atlantic & Pacific Railroad, should remain undisturbed until the rights of the Southern Pacific Company could be determined by suits before the courts.'