## Facts

- Central Pacific Railroad Company held title to large tracts of federally granted land and sold parcels through a land department headed by a land agent authorized to issue sales circulars and appoint deputy agents.
- The railroad circulated a written notice to the public inviting settlement on its lands and stating that settlers and actual occupants who in good faith improved company land would generally receive a preference to buy at the regular price.
- In 1881, Menger was in possession of the disputed tract and received the railroad’s circular and related assurances from the land department.
- Cole considered buying Menger’s possessory interest and asked Perkins, a deputy of the railroad’s land agent, whether Cole could obtain the company’s title if he bought from Menger.
- Perkins provided Cole a copy of the circular and told him that if Cole moved onto the land and made improvements, the railroad would give him a preference to purchase at a price set by the company.
- Relying on the circular and Perkins’s statements, Cole bought Menger’s interest, moved onto the tract immediately, remained in residence, and made improvements.
- Cole applied to the railroad to purchase the tract under the railroad’s stated preference practice, but the company did not complete a sale to him before later events.
- Kelly later sought to purchase land from Central Pacific, including the tract where Cole lived, and falsely represented to the railroad that Kelly was living on that tract so he could receive the occupant’s preference.
- Central Pacific accepted a down payment from Kelly under an agreement to sell the tract to him.
- After learning that Cole—not Kelly—was the actual occupant, Central Pacific refused to complete the sale to Kelly and returned (tendered back) Kelly’s down payment.
- Kelly refused to accept the returned payment and sued Central Pacific for specific performance.
- Cole intervened, asserting that, as the actual occupant who entered and improved the tract in reliance on the railroad’s circular and deputy agent’s assurances, he had the superior equitable right to purchase.
- The trial court ordered relief in Cole’s favor and required Kelly to convey the tract to Cole; Kelly appealed.

## Issues

1. Whether a buyer who obtained a land-sale agreement by falsely claiming to be the tract’s occupant is entitled to specific performance against the seller.
2. Whether an actual occupant who entered, remained, and improved land in reliance on the seller’s published preference for occupants (and assurances by the seller’s authorized agents) has a superior equitable right to the land over a later contracting buyer.

## Decision

- The California Supreme Court affirmed.
- Kelly was not entitled to specific performance because equity would not compel conveyance where Kelly’s asserted right depended on a false claim of occupancy and would defeat the prior equitable claim of the true occupant.
- Cole’s equities—actual possession, improvements, and reliance on the railroad’s circular and its deputy agent’s assurances—were sufficient to defeat Kelly’s request for specific performance.
- The judgment requiring the transfer of the tract to Cole was upheld.

## Legal Principles

- Specific performance is an equitable remedy, not an automatic entitlement; courts may refuse it when enforcement would be unfair in light of the parties’ conduct and competing equities.
- A purchaser who secures a contract advantage through material misrepresentation may be denied specific performance.
- Where a landowner publicly announces that actual occupants will generally receive priority to purchase, and its authorized agents make statements consistent with that practice, an occupant who takes possession and makes improvements in reliance may obtain an equitable claim that can prevail over a later buyer.
- Acts and statements of a land agent and properly appointed deputies, made within the scope of their assigned work, may bind the principal for purposes of equitable relief.

## Conclusion

Because Kelly procured his agreement by falsely claiming to live on the tract and enforcement would defeat the equities of Cole, the actual occupant who took possession and made improvements in reliance on the railroad’s published preference and its agents’ assurances, the court refused specific performance for Kelly and affirmed judgment awarding the land to Cole.


Kelly v. Central Pacific Railroad Co., 74 Cal. 557 (1888)