Union Hall Ass'n v. Morrison

Bartol, C. J., delivered the opinion of the Court. The questions presented by this appeal arise upon the following state of facts: The appellant, an association duly incorporated, purchased from Thomas Hammond a small lot of vacant ground 50 by 130 feet in extent, situated in Hammond’s Addition to Westernport, in Allegany County for $125.00, which, according to the proof, was its full value, went into possession thereof and erected thereon an expensive building, costing $3000. The building was erected in 1859-1860. On the 23rd day bf April, 1861, the lot was conveyed to the appellant by Thomas Hammond, and is described in the deed as part of Military Lot, No. 3905. It appears that in March, 1814, a patent had been issued by the State to one Thomas Johnson, of Military Lot, No. 3905, (with others), and that the title thereto has been conveyed by regular mesne conveyances down to Thomas Hammond, from whom the appellant purchased. The appellee held title to a tract of land called “ The Trap,” which had been patented to Magruder, in 1803 ; but was ignorant of its precise limits, until in 1867, its location was ascertained by actual survey, and it was found to include a part of Military Lot, No. 3905, whereupon the appellee, in 1868, instituted an action of ejectment against certain persons then in possession of parts of the said Military Lot, and recovered judgment,, which was affirmed by this Court, in 33 Md.} 95, on the ground that Morrison’s title was superior to Hammond’s. The lot of ground which had been purchased and improved by the appellant, was included in the lines of the tract called “The Trap,” but the appellant was not made a defendant in the action of ejectment. Afterwards, on the 24th day of September, 1870, a writ of habere facias pos — 289 — sessionem having been obtained by the appellee under his judgment in ejectment, the sheriff demanded thereunder the possession of the house erected by tbe appellant; and declaring his purpose to assert bis authority by force if necessary, the possession thereof was surrendered by Eredlock, the President of the Association; and the appellee asserts his title thereto, and claims to hold the same as legal owner. Whereupon the bill of complaint in this case was filed by the appellant, alleging that it purchased the lot of ground and made valuable improvements thereon in good faith, believing that its title thereto was good, and without any knowledge of any adverse claim in any one, and without any notice that the appellee had any right or claim whatever thereto. The bill alleges that the appellant is without remedy at law, by reason of the defect in its title purchased in good faith, and prays relief; averring that it has an equitable claim against the appellee to be remunerated for the valuable improvement erected upon the lot, and that for its claim in this behalf, it has an equitable lien upon the land. It avers that it is ready and willing to account to the appellee, and pay him a fair and reasonable compensation as ground rent foi the use of the lot, without the improvements, to be fixed by a decree of the Court; and prays that the appellee may he decreed to pay to the appellant whatever balance may be i'ound due upon the statement of an account allowing him a fair ground rent as offered; and that the lands may be sold to satisfy the lien of the appellant; or that it may have such other and further relief as its case'may require. The hill charges substantially, as one ground for relief, that the appellee had full knowledge of his title since 1842; and while he was all the time cognizant of his, right, and living in the neighborhood, suffered the appellant to go on in the erection of the building upon his, ground, and to expend large sums of money, without — 290 — giving the appellant any notice of his claim, and did not set up his right till afterwards. The general principle is well established that “ if a man, supposing he has an absolute title to an estate, should build upon the land, with the knowledge of the real owner, who should stand by and suffer the erections to proceed, without giving any notice of his own claim ; he would not be permitted to avail himself of such improvements, without paying a full compensation therefor ; for, in conscience, he was bound to disclose the defect of title to the builder.” 1 Story Eq. Juris., sec. 388. This general principle has been recognized by the Court of Appeals in Casey vs. Inloes, 1 Gill, 432; Hoffman vs. Smith, 1 Md., 475, 491; Tongue vs. Nutwell, 17 Md., 212; but in those cases it was held to be inapplicable. A reference to them will show that the general principle, must be understood with certain qualifications: some of these are thus clearly stated by Judge Story, 1 Eq. Juris., sec. 386: “ In order, however, to justify the application of this cogent moral principle, it is indispensable that the party so standing by and concealing bis rights, should be fully apprised of them, and should, by his conduct, or gross negligence encourage or influence the purchase ; for if he is wholly ignorant of his rights, or the purchaser knows them ; or, if his acts, or silence, or negligence, do not mislead, or in any manner affect the transaction, there can be no just inference of actual or constructive fraud on his part. [For a right can be lost or forfeited only by such conduct, as would make it fraudulent, or against conscience to assert it.”] This qualification of the general rule is stated in the text books, and asserted by all the well adjudged cases, which need not be here cited. It rests on the plainest principles of reason and justice which always govern the law of equitable estoppel. Applying'this rule to the case before us, we concur in the opinion expressed by the — 291 — Judge of the Circuit Court, that the charge of constructive fraud on the part of the appellee is not sustained. The facts touching this point, are stated in a written agreement, signed by the solicitors, as follows : That “James Morrison was a resident of Allegany County, and resided about three or four miles from said premises, about the time of the erection of the brick building by the Union Hall Association, and knew of its erection, and being erected, but that he had no knowledge of the particular location of said tract of land called ‘ The Trap,’ or of the lot claimed by said complainant at the time of said erection, and never did know the exact location of said tract of land, until he had a survey thereof made by James Chisholm, surveyor, about the year 1867, and that he then knew for the first time that said brick building was upon said tract called ‘ The Trap.’ ” Now upon this state of facts, it is very clear that there has been nothing in the conduct of the appellee creating an equitable estoppel; his silence and acquiescence at the time of the purchase by the appellant, and during the erection of the building, cannot conclude him, because it is conceded that he was ignorant of his rights to the lot of ground in question until 1867. It has been argued by the appellant, that as he was cognizant of his title, to the tract called “The Trap,’’ the law imputes to him knowledge of its limits and extent; but such a presumption cannot arise against the positive admission, that he was in fact ignorant of its true location ; and that he did not know till 1867, that the building erected by the appellant, was embraced within its lines. Nor is there any ground for imputing to him gross negligence, creating an estoppel. This is not a case to which that doctrine can apply. There was no privity between him and the appellant; they were strangers to each other, and there is no evidence that the appellee — 292 — encouraged or influenced the appellant to purchase the lot or erect the building, or had any actual connection therewith. We conclude, therefore, that the appellant is not entitled to relief upon the ground of any fraud, actual or constructive, on the part of the appellee, or of any equitable estoppel arising from the conduct or acquiescence of the latter. On the other hand, there is no doubt or question as to the bona fides of the appellant. It purchased the lot in good faith for its full value, and erected the building in the honest belief that it had a good title, and was ignorant that the same was contested by the appellee, or any other person claiming a better right. The appellant, therefore, comes strictly within the definition of a “bona fide possessor,” according to the doctrine of the Civil Law, (31 Md., 454.) The equitable rights of a party so situated, to an allowance for improvements, in a suit against him by the real owner, were fully considered by this Court, in the recent case of McLaughlin vs. Barnum, 31 Md , 425. There is no doctrine of equity better established, than that a bona fide possessor is entitled to such allowance, where he is the defendant, and the rightful owner seeks the aid of the Court to recover rents and profits, or to enforce his title against him. "In such cases, a Court of Equity practically enforces the rule of the Civil Law, founded in natural justice nemo debet locupletari aliena jactura, as well as the cherished maxim of equity jurisprudence, that he who seeks equity must do equity,’ ” 31 Md., 453. In the case just cited, it was said to be doubtful, " whether from the present state of the authorities, the weight of judicial opinion and precedent goes farther than to sanction the exercise of the jurisdiction in such cases in favor of defendants, or as auxiliary to some other relief properly cognizable in equity.” On that question, however, no opinion was expressed, the Court said "the case before us does not call for any judgment upon that point.” — 293 — In this case, the question is directly presented, and we have given it all the consideration its importance demands. It may be conceded, that there is an absence of precedent-in the English cases, maintaining the right of a bona fide possessor to sustain a bill of this kind, except upon some ground of fraud or estoppel, growing out of the conduct of the owner of the land; and consequently, we find in the text books, where the cases are referred to, and the general principles stated, the rule allowing to a bona fide possessor compensation for improvements, is said to be limited to cases where he is defendant. In 3 Sugden, Vendors & Purchasers, ch. 22, sec. 1, pl. 55, the learned author says, “But if the aid of a Court of Equity is not required, and a person can recover the estate at law, equity, unless there be fraud, cannot, it is conceived, relieve the purchaser on account of money laid out in repairs and improvements; but must dismiss a bill for that purpose with costs.” In 2 Story's JEq. Jur., sec. 1238, the rule is stated in the same way; for which the passage in Sugden is cited. But no case is cited by either Sugden or Story, in which the precise question has arisen, and relief has been refused. We may except the case of Putnam vs. Ritchie, 6 Paige, 390, in which Chancellor Walworth refused to grant relief for the reason, that “ he had not been able to find any case either in this country or in England, wherein the Court of Chancery has assumed jurisdiction to give relief to a complainant who has made improvements on land, the legal title to which was in the defendant, where there has been neither fraud, nor acquiescence on the part of the latter after he had knowledge of his legal rights.” The learned Chancellor thought to do so, would be introducing anew principle into the law of the Court. Some years after the decision of Putnam vs. Ritchie, the question arose before Judge Story in Bright vs. Boyd, 1 Story's Rep., 478, upon a bill filed by a bona fide — 294 — purchaser, claiming compensation for improvements. The learned Judge said, (p. 494,) “Upon the general principles of Courts of Equity, acting ex cequo et bono, I own that there does not seem to me any just ground to doubt that compensation, under such circumstances, ought tó be allowed to the full amount of the enhanced value, upon the maxim of the Common Law, Nemo debet locupletari ex alterius incommodo.” After referring to the well settled doctrine of Courts of Equity, under which allowance is made to á party defendant, by way of recoupment out of the rents and profits, or in cases where the aid of the Court is asked by the owner of an equitable title to enforce that title, Judge Story says,.(p. 495,) “But it has been supposed, that Courts of Equity do not, and ought not to go further, and to grant active relief in favor of such a bona fide possessor, making permanent meliorations and improvements,- by sustaining a bill brought by him therefor, against the true owner, after he has recovered the premises at law. I find that Chancellor Walworth, in Putnam vs. Ritchie, (6 Paige, R.,) entertained this opinion, admitting at the same time, that he could find no case in England or America, where the point had been expressly decided either way. Now, if there be no authority against the doctrine, I confess, that I should be reluctant to be the first Judge to lead to such a decision. It appears to me, speaking with all deference to other opinions, that the denial of all compensation to such a bona fide purchaser, in such a case, where he has manifestly added to the permanent value of an estate by his meliorations and improvements, without the slightest suspicion of any infirmity in his own title, is contrary to the first principles of equity. Take the case of a vacant lot in a city, where a bona fide purchaser builds a house thereon, enhancing the value of the estate to ten times the original value of the land, under a title apparently perfect and complete; is it reasonable or just, that in — 295 — such a case the true owner should recover and possess the whole, without any compensation whatever to the bona fide purchaser ? To me it seems manifestly unjust and inequitable, thus to appropriate to one man, the property and money of another, who is in no default. The argument, I am aware is, that the moment the house is built, it belongs to the owner of the land by mere operation of law; and that he may certainly possess and enjoy his own. But this is merely stating the technical rule of law, by which the true owner seeks to hold, what in a mst sense, he never had the slightest title to, that is, the house. It is not answering the objection; but merely and dryly stating, that the law so holds. But, then, admitting this to be so, does it not furnish a strong ground why equity should interposé and grant relief? ” We have cited the language of Judge Story at considerable length, because it has appeared to us to be quite applicable to the present case, and expresses clearly and forcibly, the grounds upon which rests the claim of the appellant for relief. The case of Bright vs. Boyd, came again before Judge Story for final decree, upon the report of the master. (2 Story’s B., 605, 607.) When he said, “ I have reflected a good deal upon the present subject; and the views expressed by me at the former hearing remain unchanged ; or rather to express myself more accurately, have been thereby strengthened and confirmed,” and he decreed accordingly: using this emphatic language, “ I wish, in coming to this conclusion, to be distinctly understood as affirming and maintaining the broad doctrine, as a doctrine of equity, that so far as an innocent purchaser for. a valuable consideration, without notice of any infirmity in his title, has by his improvements and meliorations, added to the permanent value of the estate, he is entitled to a full remuneration, and that such increase of value is a lien and charge on flie estate, which the absolute owner is bound to discharge — 296 — before he is restored to his original rights in the land. This is the, clear, result of the Roman law, and it has the most persuasive equity, and I may add common sense, and common justice for its foundation.” This careful and well considered decision meets with our entire approval, and rests upon such plain principles of equity, that we have no hesitation in adopting it, as applicable to the- case before us. It seems to us that so far from introducing any “new principle into the law of the Court ” as said by Chancellor Walworth, it is nothing more than the application of the well settled principles of Equity, to a case coming clearly within their scope and operation. It can mak.e no difference in the equitable rights of the appellant, whether it appears in the character of complainant or defendant. , In support of the views expressed by Judge Story, tl:e case of Bright vs. Boyd, does not stand alone. The Supreme Court of Kentucky decided the question in the same way, (in 1855), in Thomas vs. Thomas' Ex’cr, 16 B. Monroe, 421, granting relief to a bona fide possessor, upon a bill filed-by him against the parties holding the legal title,; and in McKelway vs. Armour, (2 Stockton’s Chy. R., 115), a bill was filed “to relieve the complainant from the embarrassment of having erected a valuable dwelling house by mistake, on the land of the. defendant Armour.” Chancellor 'V^.iLLiAMsoN.thus states the facts of the case. “-It is proved beyond all doubt that the complainant erected his improvements on this lot by mistake, he supposed that it was the lot next3 that belonged to Armour. Armour labored under the same mistake. He lived in the vicinity; he saw the complainant progressing from day, to day .with these improvements. If he knew this to be. Kis lot, his, silence was a fraud upon the complainant,, but this is not pretended. He admits that he did not suspect the erections to be upon his lot until some time after their erection, when by actual measurement, to his — 297 — surprise, he discovered the mistake. Under such circumstances, it would be most unjust to permit Armour to take these improvements, and to send the complainant away remediless;” and accordingly relief was decreed in favor of the complainant. These cases are cited to show that this question, although now for the first time presented to this Court for adjudication in its present form, is not without precedent elsewhere. It has been argued that the appellant was guilty of laches and neglect in failing to adopt proper means to ascertain the state of the title before purchasing the lot, or making the improvements, by an examination of the land records. It is obvious, however, that such an examinaion could not have led to the information desired. The difficulty has arisen not from the state of the title, but from the location of the appellee’s tract, which was not even known to the appellee himself until it was ascertained by actual survey in 1867. The witness Patrick Hamill, who was present at the survey^ says, “I don’t think the line is more than from three to ten feet from the building; I don’t know that Morrison knew where the lines of ‘ The Trap ’ were, previous to that time; that was the first authenticated beginning that I ever knew; there was a good deal of trouble in finding the lines of the said tract.” Under these circumstances, it is impossible, with justice, to deny to the appellant relief, on the ground of laches in not ascertaining the true location of “The Trap,” or that the lot in question was included within its lines. There was nothing in the situation of the property to suggest any doubt as to the title of Hammond or to put the appellant on inquiry. The lot was not inclosed in “The Trap;” but was vacant, and had been laid out by Thomas Hammond as a town lot in Hammond’s Addition to the village of Western-port. No fault or laches, therefore, can be imputed to the appellant, and we are of opinion that it is entitled to re — 298 — lief, in respect to the permanent and valuable improvements ; the decree of the Circuit Court will be reversed and the cause remanded, to the end that a decree may be passed in accordance with this opinion and the equitable rights of the parties. With respect to the nature and terms of the decree it will be proper that the appellee shall have the option to accept from the appellant payment for the lot of ground, estimated at its just value, without the improvements thereon, and be required on the payment thereof with interest, to convey the same to the appellant, by a sufficient deed. Or at his election to take and hold the lot with improvements, paying to the appellant the actual value of the improvements, to the extent of the additional value which they have conferred upon the land, and in default of such payment, the same ought to be declared to be a lien, and charge on the property, and the lot and improvements should be decreed to be sold for the payment thereof. (Decided 22nd January, 1874.) Decree reversed and • cause remanded.