
    Ellis R. Thomas et al., Resp’ts, v. Thomas J. Evans et al., App’lts.
    
    
      (Court of Appeals,
    
    
      Filed June 7, 1887.)
    
    1. Recovery of land through defective title—Reimbursement for improvements made.
    A claim to recover back property which has been fairly sold and paid for at its full value, and the consideration of which has accrued to the benefit of plaintiffs, without offering to render compensation to one who, honestly believing himself to be its lawful owner, expended large sums in its improvement, and which now constitutes its greatest value, is unjust and inequitable, and a court of equity may charge the remainder-men with the reimbursement of moneys actually and honestly expended for the benefit of the estate.
    2. Same.
    In 1841, Evans, in right of his wife, came into possession of the property in question. Previous to the year 1860 all of the remainder-men had ■ arrived at years of maturity, and were aware that he claimed to be absolute owner, but for over twenty years they not only neglected to dispute such claim, but permitted the defendant to go on in apparent security as to his title, and make improvements upon the property and deal with it as his own. Meld, that the circumstances bring the case within the principles compelling reimbursement to him of all the moneys laid out, both purchase-price and improvements.
    Appeal from judgment of supreme court, general term, second department.
    
      George H. Starr, for app’lts; Wm. G. Cooke and Wm. C. Wallace, for resp/bs.
    
      
      
         Reversing 35 Hun, 668 mem.
      
    
   Ruger, C. J.

In July, 1841, Thomas Thomas died, leaving him surviving Catharine Thomas, his widow, and four children, aged, respectfully, three, five and six, and Sarah Thomas, who has since died intestate. At the time of his death, Thomas owned in fee eight small city lots in Williamsburg, six of which were situated on South First, and two of lesser value, on South Second streets, and with the exception of two lots on South First street, were vacant and unimproved. So far as appears from the case, Thomas had no other property, real or personal, and such as he had he devised to his widow for life, with remainder to his four children. By the will he appointed his wife executrix, and John L. Bulkley executor, of his estate, and authorized them to sell the whole or any part of his real estate when they may deem best for those interested therein, either at public or private sale, and invest the proceeds in bonds and mortgages or other securities as they may believe best.” He also appointed his wife guardian, of all of his fchildren. In December, 1841, the widow intermarried with the defendant Evans, and lived with him as his wife until the year 1878. a period of thirty-seven years, and nearly twenty years all of the children had arrived at maturity.

It is conceded that, by the will, the widow took a life-estate in the property of her husband, and that, upon her marriage with Evans, he became entitled to the enjoyment of her interest therein, and that the four children took a vested estate in remainder in such property. Between the years 1841 and 1850 the defendant Evans made considerable improvements upon the property on South First street, and rendered some of it productive which before was a burden and expense to the estate. For the purpose partly of paying the liability of the estate to Evans for these improvements, and partly to raise money to meet anticipated assessments, upon the property, the executors, in 1850, sold and conveyed to Evans, for the agreed price of $1,000, the two vacant lots on South Second street. Three hundred and fifty dollars of this sum was applied as a payment to Evans for the expenses incurred by him, and the balance of $650 was secured by a mortgage upon the property given by Evans to the executors. The price paid was a fair consideration for the land, and all parties then supposed that Evans acquired a valid title under the power of sale contained in the will. Subsequently, however, upon attempting to raise money upon the lots for building purposes, Evans was advised that, by reason of his relationship with one of the grantors, his title was defective, and thereupon he consented to institute an action to have such title declared void, and to reinstate the power of sale in the executors. Such proceedings were thereupon had in the supreme court that judgment was rendered declaring the conveyance from the executors to Evans null and void, and reinstating them with the interest attempted to be conveyed.

Between 1850 and 1854, heavy assessments were levied upon the property of the estate for municipal improvements, and the executors had no means to pay them. These assessments were mainly levied upon the lots on South First street. At the request of the executors, Evans advanced, some money to pay them, but the estate was still unable; to meet the other burdens upon the property. Undler the circumstances, the defendant Evans, under an agreement with one Swackhamer that he would repurchase the property,, and repay him its costs, and such money as he should expend upon it, with a bonus of §500 for his risk and trouble, induced Swackhamer to enter into a contract of purchase of the two lots on South Second street with the executors for the price of $2,000. In 1853 the executors conveyed the property to Swackhamer, receiving therefor $300 in cash, Swackhamer’s note for $700, and a release by Evans to the executors of their indebtedness to him for money advanced and expended for assessments and improvements upon the property. The price paid was more than the value of the property, and the Thomas estate received the full .benefit thereof. It does not appear that the executors had any knowledge of the agreement between Evans and Swackhamer; or that any of the parties had any doubt but that Swackhamer acquired a valid title to the property by the-conveyance. Upon receiving his deed, Swackhamer exe>cuted a mortgage upon the property to third parties for the sum of $4,500, which sum was wholly expended in erecting three substantial brick dwellings upon the two lots. In 185 C, in accordance with his agreement with Evans, Swackhamer conveyed the property to him receiving in payment therefor the sum of upwards of $7,000. Immediately upon receiving his deed, Evans caused it to be placed upon record, and from that time forward claimed to be the absolute owner of the property. Since Evans’ occupation of the lots, he has continued to make additions to and improvements upon them, the value of which, including the original cost of the houses as found by the trial court, exceeded $9,000 a.t the time of the trial. In 1879, Evans conveyed to each of the two other-defendants, Catharine J. Scofield and Jessie E. Scofield, one of the houses erected on the two lots on South Second street as a gift out of consideration of love and affection for them as his daughters..

This action was brought by two of the remaining children of Thomas, the other one refusing to join therein as a plaintiff, in April, 1881, for the purpose of vacating and annulling-the deed given by the executors to Swackhamer, and all subsequent conveyances of the property, and having it adjudged that the two lots, with their improvements, were the property of the plaintiffs, and requiring the defendants to release and convey the property to them, and that the defendant Thomas J. Evans render an account of all of his transactions with the estate of Thomas Thomas, and be decreed to pay to the plaintiffs such sums as might be found, due upon such accounting. The fight to relief was based exclusively upon the allegation in the complaint that the defendant Evans obtained title to the property from the executors “for the purpose of enabling the executors more conveniently to manage the said estate through the defendant Thomas J. Evans, and with a view to increase the revenue for the said real estate, and to put the title thereof in the said Thomas J. Evans as trustee for the said Catharine Evans, and the children of the said Thomas Thomas, deceased.”

Upon the trial no proof was offered by the plaintiffs of the existence of the trust and agreement alleged in the complaint, but the action was sustained upon the ground that the conveyance by which the land was transferred from the executors of Thomas to Swackhamer was not a valid exercise of the power of sale given to them by the will of Thomas, and constituted a cloud upon the title of the true owners, which should be removed. The decree also denied to the defendant the right to compensation for the improve-, ments made to the property by him. The ground upon which this conclusion was reached, is stated to be that Evans was not a bona fide purchaser of the premises. This conclusion was based upon the finding of law made by the,, trial court that neither Evans nor the other defendants were bona fide purchasers of the land.

It is not entirely clear what the trial court meant by this finding of law; but,. if it was intended to convey any other idea than that it was simply a legal deduction from the assumed fact that the conveyances to Swackhamer and Evans were void by reason of the alleged invalidity in the execution of the power of sale, it is contrary to the findings of fact made by the court, and is unsupported by any evidence in the case. It was found by the trial court that from 1856 Evans always claimed to be the absolute owner of the property; and that this claim was known to and acquiesced in by the plaintiffs appears from the allegations of the complaint. It is therein averred that the plaintiffs have all been for many years of full age, and have not requested the transfer of said title to them because of the positive assurance they all had from the said defendant, and from the said testatrix in her life-time, that the same was held for the estate, and because their mother, the said testatrix, was entitled to the income of the same until her death.” This excuse, so far as it alleges any assurance from the defendant Evans, or his wife, of the existence of a trust, is not, as we have seen, supported by the evidence. It also appears that some, if not all, of the surviving children of Thomas, after their majority, had knowledge of the expenditures that the defendant Evans made, not only upon the property in dispute, but also upon the other real estate remaining unsold, and, so far from making any objection thereto, actually requested them to be made.

A careful perusal of the evidence in the case shows us that Evans, m the right of his wife, came into the possession of the eight lots in 1841; and, although both he and the estate were destitute of means to improve it, or to pay the taxes or assessments levied thereon, it was so managed as to make it more valuable and productive, and to preserve for .the remainder-men the greater part of the estate. In the meanwhile he provided a home for the widow and children of Thomas, and educated and supported the children, not only until their majority, but some of them until. long after that time. Under these circumstances, it is not strange that the remainder-men have hesitated so long to assert any rights to the two lots ip question; and that one of them refused altogether to become a party to the proceeding.

A claim to recover back property which has been fairly sold and paid for at its full value, and the consideration of which has accrued to the benefit of the plaintiffs, without offering to render compensation to one who, honestly believing himself to be its lawful owner, expended large sums in its improvement, and which now constitutes its greatest value, seems to be unjust and inequitable. We are of the opinion that the purchase price originally paid for the land, and the value of the improvements, to the extent that they have added to its permanent value, constitute an equitable claim; and that, even if the plaintiffs should establish an equitable right to the property, it would not entitle them to judgment therefor except upon the condition of refunding to the defendant Evans the amount so expended.

It was found by the trial court that the purchase price was mainly paid in relieving the land from the assessments imposed upon it. These assessments were a charge upon all of the land; and the interest of the remainder-men, as well as that of the life-tenant, was liable to be sold therefor. It is provided by statute, in the case of real property in which several persons have successive interests, incumbered by taxes and assessments rendering it liable to sale therefor, that, upon the application of any of the parties interested, the court may order a sale of the fee, or a part thereof, for the purpose of discharging the liens upon the remainder. Laws 1841; chap. 341; Laws 1855, chap. 327; Jackson v. Babcock, 16 N. Y., 246; Dikeman v. Dikeman, 11 Paige, 484. Thus the property of the plaintiffs was legally liable for the payment of these assessments. Although the method provided by statute was not pursued, we see no reason why a court of equity, called upon to settle the equitable rights of the parties, should not charge remainder-men with the re-' imbursement of moneys actually and honestly expended for the benefit of their estate, and which they were legally liable to pay. The general rule applicable to the relation of life-tenants and remainder-men does not authorize the former to charge the latter with the cost and expense of permanent improvements put upon the property by them during the life-tenancy. Dent v. Dent, 30 Beav., 363; Moore v. Cable, 1 Johns. Ch., 385. This rule is founded upon principles of justice having reference to the rights and interests of remainder-men, ana should not be inconsiderately impaired or evaded. It is also the general rule that municipal assessments for permanent improvements upon land are apportionable between the life-tenant and the remainder-men according to the circumstances of the case and their respective interests in the property (Stillwell v. Doughty, 3 Bradf., 359; Peck v. Sherwood 56 N. Y., 615); while the ordinary taxes of government are properly chargeable to the life-tenat alone (Deraismes v. Deraismes, 72 N. Y., 154; Cairns v. Chabert, 3 Edw. Ch., 312).

Such are the rules applicable to those relations when they are open and acknowledged, and no special circumstances exist authorizing the application of principles of equity to reimburse one who in good faith has increased the intrinsic value of the property by expending his own means in making permanent erections and valuable additions thereto under the belief that he was its lawful owner. Such circumstances are held to exist when a trustee or mortgagee in possession, supposing in good faith that he has acquired title in fee to the property, goes on and deals with it as his own, and makes improvements which are of permanent benefit to the property. Putnam v. Ritchie, 6 Paige, 390; Mickles v. Dillaye, 17 N. Y., 86.

In the Putnam Case the chancellor laid down the rule, as expressed in the head-note, that “when industrial accessions have been made to property in good faith by a person who has the legal title to the property, so that the real owner is compelled to resort to a court of equity to assert his equitable title to such property, this court acts upon the civil court rule of natural equity, and compels the complainant to compensate the adverse party for such industrial accessions or improvements, as a condition of granting the equitable relief asked for in the suit.” This was the case of a guardian in socage of infants having a leasehold estate in fee in certain lands, which lease, during the infancy of the wards, was for a good consideration, surrendered by such guardian to the heir of the lessor. It was held that a guardian in socage has no right to surrender a lease in fee belonging to his wards; but that when the legal title is in a trustee, or when the guardian of an infant has complete, legal control over the property so as to place it fully within the power of the chancellor as the general guardian of infants, the court may sanction the acts of the trustee or guardian, although not strictly legal, if the same are done in good faith, and for the benefit of the estate of the infant.

In Mickles v. Dillaye (17 N. Y., 86), the rule weas applied, to a mortgagor who attempted to redeem from a mortgagee in possession under a voidable sale, and the rule adopted is expressed in the head-note of the case as follows: “ When valuable and permanent improvements have been made in good faith by a person standing upon the legal footing of a mortgagee in possession, but who supposed himself to nave acquired the absolute title, and such mistake was favored by the omission of the owner, for several years before and after the improvements, to assert any interest in the premises, the mortgagor, on asking the aid of equity to redeem, will be compelled to allow the value of the improvements, though exceeding the rents and profits received.” In Bright v. Boyd (1 Story, 478), lands had been sold by an administrator, but the sale was void because he had not given security according to the statute. The heir sued the purchaser and recovered possession pf the land. The purchaser then filed his bill in equity to recover from the heir the value of certain improveinents, including the cost of building a large dweling house which he had in good faith put upon the premises while occupying them. Judge Story referred the case to a master to take an account of the enhanced value of the premises, with a strong intimation that the plaintiff was entitled to recover that expense, but postponed the final decision of the question until the coming in of the master’s report. Judge Denio, citing this case in Mickles v. Dillaye, entertained some doubt whether it could be sustained here except upon the principle of estoppel against one fraudulently standing by and seeing another expend money upon his land, although he expressly approved the rule laid down by the chancellor in Putnam v. Ritchie. In the same case he also approved of the doctrine laid down by Judge Hand in Wetmore v. Roberts (10 How. Pr. 51). In that case the defendant had bought the premises from one who had purchased them upon a sale on a prior mortgage, in the foreclosure of which a junior mortgagee had not been made a party. Upon a foreclosure of the junior mortgage, it was held that the premises should be sold, and the defendant should be paid from the purchase money, not only the amount due on the elder mortgage, but also for improvements made by him during his occupation of the property.

In Miner v. Beekman, (50 N. Y., 339), it was said by Grover, J., that “when a plaintiff has permitted his right to satisfy a mortgage to remain dormant for nearly thirty years,,during which others have paid the assessments and taxes, and made improvements in the belief that they had title under a foreclosure of the mortgage, he cannot complain that, as a condition of regaining possession, he is compelled to account for and pay such taxes, assessments, and for such improvements, according to the just and enlightened principles of courts of equity.

Pomeroy, in a note to section 1242 of his work on Equity Jurisprudence, states the rule as follows: “When a person in peaceable possession under claim of lawful title, but really under a defective title, has in good faith made permanent improvements, the true owner, who seeks the aid of equity to establish his own title, will be compelled to reimburse the occupant for his expenditure.” ' Many authorities are cited in support of the proposition.

In Ford v. Knapp, (102 N. Y., 135), the principle is laid down that in an action by a co-tenant out of possession for a partition of the premises upon which the other tenants in common have paid taxes and made improvements in good faith, which have largely increased the value of the property, the amount of such taxes and improvements shall, in case of “sale of the property,-’ be first deducted from the gross sum received, and paid to the improving tenants, and the balance only divided among the parties according to-their respective interests. The case was decided upon the rule “that one who seeks equity must do equity,” and that-the tenant out of the actual occupation, who seeks a court of equity to award him partition, is entitled to relief only upon condition that the equitable rights of his co-tenant shall be respected.

We think the circumstances of this case bring it within the principles of the cases above cited. Previous to the year 1860, all of the remainder-men had arrived at years of maturity, and were aware that the defendant Evans claimed to be the absolute owner of the property in question. For over twenty years they not only neglected to dispute such claim, but permitted the defendant to go on in apparent security as to his title, and make improvements upon the property, and deal with it as his own. There seems to exist here the natural equity which entitles a party who has in good faith, with his own means, improved the property of another, to reimbursement by the parties benefited thereby, but this equity is strengthened by the conduct of the owners,' who stood by and saw such party, without notice or objection, incur expense under the belief that he was improving .his own property. We are therefore of the opinion that the trial court should have imposed, as the condition of any relief to the plaintiffs, the reimbursement by them to Evans of the original price paid by Swackhamer for the lots, and. also of such sums as were expended by Swackhamer and Evans in their improvements, so far as they have increased the value of the land; and, in case Evans is charged with the rents received from the property since the death of the life-tenant, he should be allowed interest on the amount payable to him.

The plaintiffs have sought their remedy in equity, and that course seems to have been requisite as the condition of a right to the relief demanded. The deed from the executors to Swackhamer apparently conferred the legal title under the power of sale contained in the will. The purchaser was under no responsibility for any misapplication by the executors of the consideration paid by him for the land, and was entitled to rely upon their apparent power to receive such consideration, ana to convey the land given to them by the will. 3 R. S. (1st ed.), § 66, p. 2183.

‘ We have altogether refrained from discussing the question as to whether the conveyance by the executors to Swackhamer was a valid execution of the power of sale. There seems to be much reason for saying, under the peculiar condition of this property, its unproductive character, and the want of means in which the testator left his family, the liability of the property to be sold for taxes and assessments for municipal purposes, that the real limitation intended to be put by the testator upon the power of sale was contained in the words that it should be sold when his executors “may deem best for those interested therein,” and not in the language by which they were directed “ to invest the proceeds in bonds and mortgages or other securities as they may believe best.” Some diversity of opinion, however, exists among the members of the court upon this question, and we therefore refrain from determining it, believing that the point decided will substantially dispose of the case upon a, retrial.

The judgments, both interlocutory and final, of the courts below, are reversed, and a new trial ordered, with costs to abide the event.

All concur.  