1. In Louisiana, where a railroad, in a state of complete
dilapidation and ruin, was sold under a mortgage under
circumstances which, importing some fraud in the purchasers,
induced the court to set the sale aside and order a resale, such
purchasers, though deemed possessors in bad faith, are entitled, by
the spirit of article 508 of the Civil Code of that state, to
compensation for reconstructing and repairing the road and putting
it in working order.
2. Whatever question may exist about compensation for
inseparable improvements made by a possessor in bad faith, there is
no question about his right to be reimbursed for necessary repairs,
both according to article 2314 of that code and to the general
civil law.
3. It seems to be held in Louisiana, contrary to former
decisions, that compensation will not be allowed to the possessor
in bad faith for inseparable improvements to land such as clearing
and ditching, but reconstructing a railroad and putting it in
working order, thereby restoring it to its normal condition,
partake so much of the nature of repairs that compensation therefor
is required by an equitable construction of article 508 of the
Civil Code.
4. The rule of compensation in such a case is to allow credit to
the possessors for the value of the materials of such improvements
as are yet in existence, and the cost of the labor bestowed
thereon, not to exceed their value when delivered up; but not for
the improvements which were consumed in the use. Interest on the
outlay of the possessors will also be allowed to an amount not
exceeding the net earnings, or fruits, received from the
improvements. They will be accountable, however, for all the fruits
received by them from the property, and will have a lien on it for
any balance found to be due them on such an accounting.
Quaere, are they accountable for such fruits beyond the
allowance made to them for the improvements.
The facts are stated in the opinion of the Court.
MR. JUSTICE BRADLEY delivered the opinion of the Court.
This case, like
Parsons v. Jackson, supra, p.
99 U. S. 434,
arises out of the supplementary proceedings which took place in the
case of
Jackson v. The Vicksburg, Shreveport, & Texas
Railroad
Page 99 U. S. 514
Co. -- reported as
Jackson v.
Ludeling in 21 Wall. 616, after our decision
therein. In pursuance of the mandate in that case, the Circuit
Court for the District of Louisiana made a further decree on the
twenty-second day of March, 1875, containing amongst other things,
the following directions, that is to say:
"2. It is further adjudged and decreed that the writ of
injunction directed by the decree issue to the parties to the deed
of the 5th of February, 1866, executed to John T. Ludeling and his
associates, and to all of the defendants in this cause, according
to the directions of said mandate, and that they be required to
cancel the said deed, and deliver the same as cancelled to the
master of this court hereinafter named."
"3. It is ordered that F. A. Woolfley be appointed special
master to receive the said deed as cancelled; to take the proofs of
the bonds
bona fide issued, &c.; that he take an
account of the property embraced in the mortgage described in the
bill executed to John Ray or bearer, which was not sold or disposed
of prior to 23d December, 1865, and render the account between the
plaintiffs and defendants provided for in the decree aforesaid. He
will give notice to the holders of bonds, &c. He will give
notice to the defendants, or their solicitor, of his taking the
account, and for all purposes of his duties under this order he may
refer to the testimony on file in the cause, and shall also report
upon the sale of the property and the best mode of effecting it, so
as to promote the interests of all concerned under the decree. He
is authorized to make special reports from time to time to the
court, and to ask for instructions."
"4. It is further ordered that John W. Greene be appointed
receiver under the decree to collect, receive, and hold possession
of all of the estate, property, and effects described in the
mortgage aforesaid, executed to John Ray or bearer, by the
Vicksburg, Shreveport, and Texas Railroad Company, not sold or
disposed of prior to the 23d of December, 1865, and to hold the
same subject to the orders of this court."
To understand the questions that are raised on the present
appeal, it is necessary briefly to rehearse the history of the
case.
The Vicksburg, Shreveport, and Texas Railroad Company,
Page 99 U. S. 515
on the first day of September, 1857, by an authentic act of
mortgage, did grant to John Ray a first mortgage lien and privilege
upon its entire railroad from the Mississippi River, opposite
Vicksburg, by way of Monroe and Shreveport, to the boundary line of
Louisiana and Texas, a distance of one hundred and ninety miles,
more or less, including right of way, lands, property, and
franchises of every description, with all its rolling stock,
machinery, and effects, including also a land grant of over four
hundred and twenty thousand acres -- to secure the payment of a
contemplated issue of two thousand bonds, of $1,000 each. A
considerable portion of these bonds were issued; but the
disturbances arising from the late civil war resulted in the
destruction of the company's property, and default in the payment
of interest on the bonds. In the month of December, 1865, an order
of seizure and sale was made by the Twelfth District Court of
Louisiana, for the sale of the mortgaged premises, at the instance
of one William R. Gordon, a holder of some of the bonds, and on the
third day of February, 1866, the whole property was sold by the
sheriff of the Parish of Ouachita to John T. Ludeling and others,
for the sum of $50,000; and a regular act of sale was passed to
them on the tenth day of February, 1866; and they thereupon took
possession of the property, and commenced to reconstruct the same
and put it in repair. A large number of the bondholders, however,
on the first day of December, 1866, filed their original bill in
this case, complaining that the said proceedings were irregular and
fraudulent, and praying that the said sale might be set aside, and
that the property might be again sold by virtue of the mortgage for
the benefit of all the
bona fide bondholders, and that the
purchasers under the first sale might be decreed to account for all
moneys received, or which they might have received, from the use of
the property; and for an injunction and receiver. This bill was
dismissed by the circuit court, but that decree was reversed by
this court, and a decree made in favor of the complainants,
establishing the mortgage, declaring the sale to Ludeling and his
associates fraudulent and void, and setting it aside, and ordering
an injunction against them to refrain from setting up any title by
reason thereof. The cause was thereupon remitted to the
Page 99 U. S. 516
circuit court with instructions to direct an account to be taken
of all the property of the corporation, to appoint a receiver
thereof, and to order the same to be sold for the benefit of the
bondholders. It was further ordered and decreed that the defendants
should account for all money and property received by them out of
the property, or from its profits or income, receiving in their
account such credits as, under the circumstances of the case, by
the law of Louisiana, they were entitled to, and that they should
pay and deliver to the receiver whatever on such accounting might
be found due from them. A mandate was issued corresponding to this
decree; and in obedience thereto the decree of the circuit court
was made, which is first above recited. In pursuance of this decree
an accounting was had, in which the amounts received by the
defendants from the earnings of the railroad were stated and in
which the defendants claimed large allowances for expenditures made
by them in rebuilding and repairing the railroad and its
appurtenances, and in providing it with rolling stock, machinery,
&c. The plaintiffs resisted all claim for allowances to the
defendants, beyond the necessary expenses of operating the road;
and whether any, and what, allowances should be made to them is the
principal question in the cause. The court below made such
allowances, decreeing, amongst other things, as follows:
"
Third, that the defendants have expended on said
mortgaged property in the making of improvements and betterments
thereon, which still remain upon said property ready to be turned
over, the sum of four hundred and eighty-eight thousand one hundred
and nine dollars and fifty-four cents ($488,109.54), on which they
are entitled to interest from the date of said expenditures, at the
rate of five percent per annum, until said mortgaged property was
placed in the hands of a receiver by this court; that defendant
have received from the earnings of said property, over and above
all sums paid out for maintenance of said property and running
expenses, the sum of one hundred and sixty-one thousand four
hundred and seventy-six dollars and sixty-nine cents, for which
they should account, with interest at the rate of five percent per
annum from the receipt of said sum; that the interest on said sum
expended
Page 99 U. S. 517
and said sum received by the defendants should be computed for
the same period of time, or what is equivalent thereto, the said
sum received should be deducted from the said sum expended and the
interest computed on the remainder; that after making said
deduction the remainder is three hundred and twenty-six thousand
six hundred and thirty-two dollars and eighty-five cents
($326,632.85), which with interest added from the time when
interest should be computed, up to April 13, 1875, when the
receiver of this court took possession of said property, amounts to
three hundred and ninety-one thousand nine hundred and fifty-nine
dollars and forty-two cents ($391,959.42), for which sum defendants
are entitled to compensation out of said property, to be raised in
the manner hereinafter at forth."
"
Fourth, that article 508 of the Revised Code of
Louisiana, which authorizes the owner of property to require the
removal or demolition of the improvements made in his land by a
third person, or to keep them at the value of the materials and
cost of the workmanship, is not applicable to this case, because
the plaintiffs are mortgagees and not owners, and because the
removal of many of said improvements is impossible, and because
said improvements cannot be demolished without destroying the
property of which they form a part, and therefore the claim to said
election made by plaintiffs under said article of the code is
disallowed."
"
Fifth, that all of said mortgaged property, including
the improvements placed thereon by the defendants, shall be set up
at the price of $833,098.38, the actual value thereof, as shown in
the report of the experts; and that if this sum or a greater amount
be obtained at the sale the defendants shall be entitled to the sum
of $391,959.40, fixed as the value of their improvements and
interest thereon, as settled in the third paragraph of this decree;
and if the said sum of $833,098.38 cannot be obtained, then they
shall have in the same proportion of the sum actually obtained as
that sum bears to the upset price aforesaid if any less amount
shall be obtained."
"
Sixth, that the holders of a majority of the bonds and
coupons shall be at liberty to agree upon a committee to purchase
the property for their account upon articles and terms of
associations,
Page 99 U. S. 518
and with concessions to any bondholder to become a party thereto
at or within fifteen days from the day of sale. Should the purchase
be made, the purchasers shall not be required to make a payment
beyond the costs, charges, expenses of the sale, and the amount of
the judgment in favor of the defendants hereinbefore stated, with
five percent interest to the day of sale, which shall be a
privilege upon the proceeds of sale; and the said purchasers shall
be entitled to credit their bonds with the sums that may be due
from the purchasers on them as a part of the payment."
From this decree both parties have appealed, the complainants
insisting:
1. That no allowance at all should have been made to the
defendants for ameliorations and improvements.
2. That the allowances made are too great.
3. That interest should not have been allowed.
The defendants, on the other hand, insist:
1. That the allowances made are insufficient in amount.
2. That no allowance is made for improvements worn out in the
service of the railroad.
3. That an insufficient amount of interest is allowed.
4. That no allowance is made for salaries and contingent
expenses, taxes, &c.
5. That it does not enforce the right of the defendants to
retain possession until their claim for improvements is paid.
6. That the account of earnings is incorrectly stated.
Other errors are assigned, but they are either included in those
stated, or are not of sufficient importance to require serious
consideration.
Assuming that the determinations of this court in its former
decree are not open to further question, and that the defendants
acquired possession of the property by a proceeding which was
founded in fraud, still it cannot be doubted that they supposed
themselves to be the legal owners of the property by virtue of the
judicial sale, and made the repairs and improvements in controversy
under that idea. But as the vice of their title consisted in their
own inequitable acts and proceedings, we think that they are to be
regarded, in the language of the civil law, as possessors in bad
faith. The common law allows
Page 99 U. S. 519
nothing to the possessor in good or bad faith for expenditures
made upon land from which he is evicted by superior title; but
equity, in cases within its jurisdiction, allows the possessor in
good faith both for repairs and improvements; but where the
possessor (being a trustee) has been guilty of actual fraud, it
makes him no allowance for improvements, but allows him
compensation for necessary repairs. Lewin, Trusts 466. The present
case, however, is to be governed by the law of Louisiana, which is
based upon the civil law, not precisely as laid down in the
compilations of Justinian, but as interpreted in the jurisprudence
of France and Spain; and has some peculiar rules in this subject.
When Louisiana was acquired by the United States in 1803, it had
been a colony of Spain for more than thirty years, except in the
formal transfer to France at the time of our purchase; and the
Spanish law was the common law of the territory until modified by
subsequent legislation. In 1808, the first civil code was adopted,
based partly on the Spanish Partidas and partly on the project of
the Code Napoleon, the completed code not having yet been received.
In 1825, the Civil Code was revised, and was made to conform more
closely to the French code, often copying its phraseology. The
provisions of the code which have the nearest application to the
present case are the same both in the code of 1808 and 1825, and
are very nearly an exact copy of the corresponding provisions of
the Code Napoleon, whilst they also correspond, substantially, with
the Spanish law. They are as follows:
"ART. 508. When plantations, constructions, and works have been
made by a third person, and with such person's own materials, the
owner of the soil has a right to keep them, or to compel this
person to take away or demolish the same."
"If the owner requires the demolition of such works, they shall
be demolished at the expense of the person who erected them,
without any compensation; such person may even be sentenced to pay
damages, if the case require it, for the prejudice which the owner
of the soil may have sustained."
"If the owner keeps the works, he owes to the owner of the
materials nothing but the reimbursement of their value and of the
price of workmanship, without any regard to the greater or less
value which the soil may have acquired thereby."
"Nevertheless, if the plantations, edifices, or works have
been
Page 99 U. S. 520
done by a third person evicted, but not sentenced to make
restitution of the fruits, because such person possession
bona
fide, the owner shall not have a right to demand the
demolition of the works, plantations, or edifices, but he shall
have his choice either to reimburse the value of the materials and
the price of workmanship, or to reimburse a sum equal to the
enhanced value of the soil."
"ART. 2314. He to whom property is restored must refund to the
person who possessed it, even in bad faith, all he had necessarily
expended for the preservation of the property."
These articles are substantially equivalent to articles 555 and
1381 of the Code Napoleon. They are also nearly equivalent to the
laws of the Partidas. The latter divide ameliorations into three
kinds -- necessary, useful, and voluntary: necessary, such as
preserve the property and prevent it from going to ruin, as repairs
to a house, causeways to prevent inundations, &c.; useful, such
as augment the value of the property and its rents, as the planting
of trees or vines, the erection of a furnace, wine press, barn, or
stable; voluntary, such as are made for ornament or pleasure. The
Partidas declare that if the possessor in bad faith makes necessary
repairs, or does other things by which the estate is benefited, he
may recover the expense thereof, less the amount of rents received,
and will not be obliged to deliver the property to the owner until
such compensation is made. But if he construct an edifice, or plant
seed, he can only deduct the expense from the fruits for which he
is made accountable; or if he has defrayed expenses for works of
profit and utility, and the owner is unwilling to reimburse him, he
may carry away the additional works which he has erected. Partida
III. title 28, laws 42, 44; Escriche, titles
Mejores and
Poseedor de mala fe.
From these laws it seems clear that for necessary repairs the
possessor, even in bad faith, is entitled to full indemnity, and
for useful improvements, he will also be entitled to full indemnity
to the value of the materials and price of workmanship, if the
owner elects to retain them; or the right to demolish them and
remove the materials, if the owner shall elect not to retain them.
The general principal upon which this law is founded is that no one
should be made richer at the expense of another, even though the
latter has acted in bad faith.
Page 99 U. S. 521
The question then arises how the laws which we have quoted are
to be applied in a case like the present -- the case of a railroad
which was in a state of ruin and dilapidation, and which the
purchasers have repaired and put in working order. Are they to be
indemnified in any way or to any extent for the expense which they
have been at, or are they to lose it all?
We have no great difficulty in considering the parties as
holding the relation of rightful owners on one side, and ejected
possessors on the other. Both claim under the same title -- the
mortgage, and question between them was, whether the derivative
title of the defendants was a valid one or not. The complainants,
if not the owners, represent the owners -- namely the railroad
company, which is conceded to be utterly insolvent and practically
out of existence. So far as the parties are concerned, therefore,
the laws above quoted may be regarded as applicable to them.
But in regard to the subject matter, it seems almost impossible
to apply them literally. It is not like the case of lands, either
in the country or the town. These may be recovered and enjoyed by
the owner, though the improvements erected thereon be demolished.
But a railroad is not land: it is a peculiar species of property,
of a compound character, consisting of roadway, embankment,
superstructure, and equipment. These constitute the corpus of the
property. There is no room to exercise the election which the law
gives to the owner, of keeping the ameliorations, or requiring the
ejected possessor to demolish them. The demolition of the
ameliorations would be the demolition of the thing itself. If any
room for election does exist, it is virtually made in bringing the
suit to recover the property. To carry out the spirit of the law,
therefore, since we cannot carry out its letter, the other
alternative, of allowing the defendants compensation for their
ameliorations, seems to be the only course that is left. Its
propriety in this case is corroborated by the fact that the
property in its improved state has been taken possession of by a
receiver at the instance of the complainants, and has been used for
their benefit for now nearly four years past.
In addition to these considerations, it is very questionable
whether a large portion of what are called ameliorations in
Page 99 U. S. 522
this case are not rather to be regarded as repairs. The railroad
has been rescued from destruction and repaired by the defendants.
These repairs were necessary in order to restore the property to
its condition and quality as a railroad -- the thing which the
mortgage contemplated, and which the complainants seek to possess
under and by virtue of the mortgage. So far as the improvements may
be regarded as necessary repairs, there is no question that the
defendants would be entitled to compensation for their expenses in
making the same. But as it is impossible to distinguish what might
properly be called repairs from ameliorations, we think that the
rule laid down in the law for the case where the owner elects to
keep the constructions and works erected by the unlawful possessor
may be equitable applied. This rule is that the latter shall be
reimbursed the value of his materials and the price of the
workmanship. This was the rule adopted by the circuit court, and we
think that its decision in this respect was correct, except that,
in an equitable application of the rule, the allowance made to the
defendants should not exceed the value of the improvements. For
this amount, therefore, with interest, less the fruits received,
the defendants should have remuneration.
After a careful examination of the authorities bearing upon the
case, we find nothing which, properly considered, derogates from
this view of the case. The class of cases which comes nearest to
the present is that of lands which have been cleared up, and
brought to a state of cultivation by embankments and ditches,
though even here, there is a point of difference which it is
material to notice -- namely that such clearings and reclamations
of new land involve a change in its character, which was not
produced by the rehabilitation of the railroad. The repairs made on
the latter had the effect to restore the property to its first
estate and use; and the expenditures for that purpose are such as
the true owner must necessarily have made, in order to have the
property in the only form which its nature and uses admit of, and
which the mortgage contemplated.
A leading case in Louisiana relating to clearing and reclaiming
land is
Pearce v. Frantum, decided in 1840, and reported
in 16 La.Ann. 414. In that case, the defendant
Page 99 U. S. 523
had settled on the land, supposing it to belong to the United
States, and that he had a right of preemption to it, but it turned
out to be an Indian claim under which the plaintiff's title was
derived. Whether the defendant was a possessor in good or bad faith
the court do not seem to have decided, and do not appear to have
regarded it as material. The defendant cleared about one hundred
and fifty acres of the land, and put up a very ordinary dwelling on
it, and some cabins. The clearing was the principal improvement,
and with regard to the defendant's claim to compensation therefor,
the court said:
"The right of the defendant to be paid for the improvements by
which the value of the premises was enhanced depends upon other
provisions of law. It rests upon the broad principle of equity that
no man ought to enrich himself at the expense of another. If
instead of recovering four hundred arpents of waste land, covered
with heavy timber, the plaintiffs succeeded in establishing their
title to that quantity, of which one hundred and fifty is ready for
the plough, together with the convenience of a dwelling and a gin,
the result of the industry of his adversary, he cannot justly
resist the latter's claim for remuneration. If the party evicted be
entitled to be paid for edifices erected on the premises, of which
the successful party has taken possession, no plausible reason can
be perceived why he should lose the lasting conquest his industry
has achieved over the forest."
On a reargument of the case, the court, in support of the same
views, further said:
"The character of Frantum's possession, his liability to restore
fruits upon eviction, and his right to be paid for useful
improvements, are to be determined by the provisions of the code of
1808, and the Spanish law then in force. Admitting that the
provisions of the code itself left it doubtful whether Frantum was
or was not a possessor in bad faith, in that sense which would
deprive him of a right to claim for improvements, yet, the
forty-fourth law, twenty-eighth title, of the third Partida,
appears fully to sustain the court in the position first assumed;
to-wit, that"
"in respect to the right to be reimbursed for useful expenses,
by which the property has been made more valuable to the owner, the
code makes little or no distinction between the possessor in
good
Page 99 U. S. 524
or bad faith."
"The words of that law of the Partida are:"
"Men may incur expenses on account of other persons' houses or
lands, not by erecting new works there, but by making necessary
repairs, or doing other things there by which the estate is
benefited. In that case, we say that if such expenses were
necessary, they who made them may and ought to recover them back,
while in possession of the estate upon which they expended them,
whether they hold in good or in bad faith, and though the owner may
evict them by a judgment of the court, they will not be obliged to
deliver him the house or estate until he shall have paid the
expenses incurred on account of the same."
The court also cites Merlin as follows:
"Merlin, after treating this subject
ex professo and in
a manner, as usual with that author, which leaves little to be said
on either side, and after discussing the opinions of Cujas, Favre,
and other distinguished doctors, opinions not always in harmony
with each other, sums up his conclusions in the following manner. .
. . We may therefore lay it down as a settled rule that the
proprietor who sues for an immovable (
un fonds) never
ought to enrich himself at the expense of the possessor, whether in
good or in bad faith, no matter in what manner the maxim ought to
be applied."
Repertoire de Jurisprudence, verbo Amelioration, 16 La. 431.
Quite a number of cases, which it is not necessary to quote,
followed the general reasoning of this case. In
Beard v.
Morancy, 2 La.Ann. 347, decided in 1847, the court allowed a
party compensation for improvements of the same kind as those in
Pearce v. Frantum, made after judicial demand, and after
judgment of eviction, holding that they were necessary
improvements, and that the rule of compensation should extend to
such, though not to improvements merely useful. The court said:
"But there can be no doubt that the party evicted is entitled to
be paid for necessary improvements. The improvements in this case
were clearings, levees, and ditches, without which the land could
not have been brought into cultivation, so as to yield the rents
and profits which the plaintiff now claims."
If the Supreme Court of Louisiana was correct in this case
Page 99 U. S. 525
in holding that the ameliorations made by the defendants were
necessary improvements, taking into view the fact that the
character of the property was changed thereby from its original
condition, then, much more in the present case ought the
improvements effected by the defendants to be regarded as
necessary, resulting as they did in the restoration of the property
to its original and normal state. It is for the use by the
defendants of these very improvements that the complainants are
seeking in this suit for an account of fruits and profits of the
estate.
There is a series of cases, however, in which it is held by the
Supreme Court of Louisiana that a person without title, going into
possession of the public lands of the United States, cannot set up
a claim for improvements against the government or its grantees.
This was decided in
Jenkins v. Gibson, 3 La.Ann. 203; in
Hollon v. Sapp, 4
id. 519; and in
Jones v.
Wheelis, 4
id. 541. In
Hollon v. Sapp, the
court say expressly,
"We are of opinion that this article of the code is not
applicable to materials used and labor expended in making
settlements upon the national domain. No right can be acquired in
relation to the public lands except under authority of
Congress."
The case of
Gibson v. Hutchins, 12
id. 545, is
much relied on by the complainants, and in its general reasoning
does undoubtedly overrule the doctrine of
Pearce v.
Frantum, though, as in
Jenkins v. Gibson, Hollon v.
Sapp, and
Jones v. Wheelis, the title of the land was
in the government when the improvements were made. The court
said:
"The mere possessor is presumed to have made such changes for
his own amelioration, and to have received a sufficient reward in
the immediate benefit which he reaps from the enhanced production
of the soil. Perhaps the true owner would have preferred that the
primitive forest should remain. Perhaps the ditching will not suit
the purposes for which he wishes to use the land."
It is evident from the reasons here given that the court
regarded the change of the condition and character of the land as a
material circumstance, and the suggestion is not without force,
that the owner might have preferred that the original timber of the
forest should not have been destroyed. The present case, as already
intimated, is distinguishable from
Gibson v. Hutchins, and
others
Page 99 U. S. 526
of like character, in that the character of the property is not
changed by the improvements, but the property is restored to its
original condition, purpose, and use, and to the only condition and
use which it is susceptible of, and which makes it what it is -- a
railroad. It is this aspect of the present case which gives to a
large portion of the improvements made the character of necessary
repairs.
But the fact that the title to the land in the case of
Gibson v. Hutchins was in the government when the
improvements were made is sufficient of itself to place it in a
different category from the present. The court, indeed, said:
"He [the defendant] had no claim against the United States for
improvements. He was rather indebted to the United States for the
privilege of living so long undisturbed upon the public land. And
the United States ceded its rights to the plaintiff's authors. They
took it free from any legal demand against either the government or
themselves for improvements."
12 La.Ann. 547. Reference is then made by the court to
Pearce v. Frantum, and other cases, as being overruled.
But one of the grounds for overruling them is stated to be that
they sustained a claim for improvements against the United States.
"The overruled cases," said the court,
"conceded to a settler upon the United States lands, who
possessed with the hope of securing a preemption, the right of
retaining the land against a vendee or patentee of the United
States government until such patentee should reimburse the settler
the increased value of the property as resulting from improvements
and expenses upon it during the settlement."
It is true, the court adds,
"we said in
Hemkin v. Overly [a case which seems not to
have been reported] that 'we are unable to recognize the doctrine
that one who makes improvements upon property to which he knows he
has no title has any legal or equitable claim to reimbursement for
such improvements.'"
But with the feature referred to -- namely the right of the
government, present in the case of
Gibson v. Hutchins, to
which so much importance is given -- it is impossible to regard it
as a decisive authority on the general question of a possessor's
right to compensation for improvements which are inseparable from
the land.
Page 99 U. S. 527
It must be conceded, however, that in several subsequent cases,
the Supreme Court of Louisiana has used expressions indicating an
intention to adhere to the general views enunciated in
Gibson
v. Hutchins, and to hold that for improvements of the kind
referred to the only compensation which the maker of such
improvements can claim is the benefits which he has enjoyed from
the use of them. Thus, in
Connon v. White, 16 La.Ann. 91,
the defendant having been adjudged a possessor in bad faith, the
court held that he was entitled to no other claim for improvements
than those stated in the first three sections of the article of the
Civil Code before recited. Art. 508. The improvements consisted of
a clearing of two hundred and thirty acres of land, and of certain
erections on the land, costing $5,250. The clearing was set off in
compensation of the fruits and cordwood derived from the land
cleared, which, the court said, would more than compensate for the
clearing made. As to the erections, the plaintiff was decreed to
elect in thirty days whether he would keep them and pay for their
cost, or not; if he so elected or made default, it was decreed that
he should pay for them; on his refusal to retain them, the
defendant was allowed to remove them in a reasonable time.
But in the case of
Stanbrough v. Wilson, 13
id. 494, decided a year later than
Gibson v.
Hutchins, the defendant, who had purchased land at a probate
sale, which was declared void, and which would probably place him
in the category of a possessor in bad faith, was allowed
compensation for his improvements, including over $4,000 for
clearing the land, and judgment was given in his favor for a
balance exceeding $5,000, over the rent of the property.
And in the case of
D'Armand v. Pullin, 16
id.
243, where the defendant had erected various improvements on land
to which he had no just title, the court held that, under the code,
the plaintiff had the right either to keep them, or to cause their
removal or demolition; but also held, that by executing a lease to
the defendant for a few months, after having procured an
adjudication of his title, he had elected to keep the improvements,
and must pay the defendant their cost.
The case of
Wilson v. Benjamin, 26
id. 587,
was decided at the same term with
D'Armand v. Pullin,
1861, and
Page 99 U. S. 528
the judgment was affirmed on a rehearing in 1874. In that case,
the plaintiff, who had been a possessor in bad faith, sued for the
value of his improvements; and it was held that his expenses in
clearing the land should be set off in compensation for his
detention thereof, and judgment was given in his favor for the
value of his other improvements, consisting of erections on the
land, and the court refused to charge him any rent therefor,
because they were his own property.
On the whole, we should infer the prevailing doctrine of the
Supreme Court of Louisiana at present to be, that for inseparable
improvements on land, such as clearings, &c., made by a
possessor in bad faith, he cannot recover any compensation from the
owner; though he will not be accountable for the fruits derived
from such improvements.
But, as before suggested, we do not think that the decisions
referred to govern the present case. It is so different in its
circumstances from the cases in which those decisions were made,
that any attempt to carry out the spirit of the code will require
that those circumstances should be taken into consideration.
The character of the property -- a railroad -- so different from
that of land; the character of the ameliorations made to it,
partaking so nearly of that of necessary repairs; the acts and
demands of the parties in this suit, wherein the plaintiffs seek
possession of the ameliorations in question, and thereby in effect
elect to retain them, and seek to charge the defendants for all the
fruits and profits thereof; the fact that, at the instance of the
complainants, and for their benefit, the property, with all its
ameliorations, has been taken out of the defendants' hands, and
placed in the hands of a receiver; the fact that the plaintiffs, in
getting possession of the property, cannot but come into the
enjoyment of large expenditures which the defendants have made, and
which, if they had not made, the plaintiffs, or the persons who may
purchase the property, would have to make, and which they are now
relieved from making; the fact, in other words, that the taking of
the property in its present state would make the complainants so
much richer as the improvements are worth -- all these things
combined present a case so peculiar, that we do not see how it is
possible for the
Page 99 U. S. 529
complainants, under any fair interpretation of the code, to
avoid allowing the defendants the value of the improvements. On the
contrary, we think that the code, interpreted according to its
spirit and meaning, requires that the complainants should take the
property, or rather that it should be sold, subject to the lien of
the defendants for the actual expense which they have incurred in
creating and putting into repair the works as they now exist, but
not to exceed the actual value thereof.
We have not thought it necessary to discuss or review the
commentaries on the French code cited by both parties, except in a
single instance, which will be presently stated. We have examined
them sufficiently to ascertain that they give us no clear light on
the precise question in this case. They are not consentaneous even
on the general question of inseparable improvements made to land.
The references to the Roman law, even if otherwise applicable to
the case, cannot be received against the positive laws of France
and Spain, much less against the text of the Civil Code of
Louisiana. It is this code, and the proper meaning and effect to be
given to its provisions, adopting its spirit where the letter is
imperfect, that must decide the case before us. It is conceded by
many French jurisconsults that the Roman law of Justinian refuses
any reimbursement for improvements to a possessor in bad faith. But
the French law has always been otherwise.
See Denisart,
verbo Ameliorations, vol. i. p. 495, where this subject is
discussed.
Cujas thought the rule for reimbursement could be deduced from
the general principle that no one ought to enrich himself by
another's loss; and from the dispositions of the thirty-eighth law
of the title De Petitione Hereditatis. Dig., lib. v. tit. iii.
Pothier, expounding the old French law, says:
"In our practice, it is left to the discretion of the judge to
decide, according to the different circumstances, whether or not
the owner ought to reimburse the possessor in bad faith for useful
expenses to the amount that the property recovered is benefited
thereby."
And then he distinguishes between possessors in bad faith whose
acts partake of a criminal character (such as usurping an estate
without any title during the long absence of the owner), and those
who have taken a title
Page 99 U. S. 530
which they knew was not valid, yet had some excuse for doing so
(such as purchasing from a guardian, &c.). The former class
should receive the utmost rigor of the law; the latter should be
treated with indulgence, and should receive compensation for their
ameliorations to the amount they have benefited the property.
Pothier, Traite du Droit de Propriete, sec. 350.
The Code Napoleon settled many uncertainties of the old law, and
attempted to lay down a fixed rule; but nevertheless, as we have
seen, left the question of inseparable improvements somewhat at
large.
Demolombe, one of the ablest commentators on this code, in vol.
ix. sec. 689, has a very interesting article on this subject. He
thinks that inseparable improvements are not provided for by
article 555 of the code; but that the question of compensation
therefor is to be governed by general principles of equity, to be
drawn from other sources. He instances the case of a possessor in
bad faith who has drained a marsh, cleared lands, dug ditches for
irrigation, or who has caused paintings to be made or paper to be
placed on the walls of a mansion, or who has performed any other
like work of intrinsic amelioration. And he asks, is article 555
applicable in such a case? After stating the argument on both sides
of this question, he gives his own opinion in the negative. He says
the article refers to works which the possessor may be compelled to
remove; but such as those mentioned are not susceptible of removal,
and the option given to the owner, either to keep them by payment,
or to cause them to be removed, cannot be exercised. Besides, it
would be a savage doctrine to hold that the possessor might in any
case destroy such improvements, even though he should leave the
property in its first estate. He therefore concludes that the
specific case is unprovided for, and thinks that it is necessary to
resort to analogies deduced from similar matters and to the general
principles of the law, and that a solution of the case may be found
in the
quasi-contract of agency. We find here, he says,
two rules of equity, both equally certain:
First, that no one ought to enrich himself at the
expense of another -- a rule which the law applies in the very case
of
Page 99 U. S. 531
the relations between the owner and possessor, even in bad
faith.
Second, that a third person cannot impose upon the
owner of the soil, without his authority and against his will,
expenses which he would not have made himself, and which exceed his
means, and for the payment of which, if forced to it, he would have
to sell an estate that he would prefer to keep.
In the combination and conciliation of these two rules, he
thinks, we may find the solution of the difficulty.
He then quotes to his purpose a law of the Digest (law 38, De
Rei Vindicatione, book vi. tit. i.), which he characterizes as full
of good sense, equity, wisdom, and practical knowledge of affairs.
It is a passage from Celsus, as follows:
"On another's land which you have unwittingly bought, you have
builded, or made repairs; then you are evicted; a good judge will
decide according to the merits of the parties, and according to the
circumstances. Suppose the owner would have done the same thing,
then let him reimburse the expense, as a condition of receiving his
land, but only to the amount that it is benefited. If he is poor,
and cannot pay without selling his home, you should be satisfied in
being permitted to remove what you can of your improvements,
leaving the estate in as good condition as if they had not been
made. But it has been decided that if the owner can pay what the
possessor can get for them, if removed, he should have that
privilege. And let nothing be done in malice as by defacing plaster
or pictures on the walls, which could do you no good, but only
result in injury. If it is the owner's intention immediately to
sell the property, you will not be condemned to give it up, until
he has paid what we have said he ought to pay."
Considering the possessor in bad faith as a
quasi-agent
in charge, and applying these principles, we must look, says
Demolombe:
First, to the
character of the possessor, as
whether he has taken a title which he knew to be invalid, but which
he hoped to have confirmed, or whether he was a mere interloper,
without title, taking possession in the absence of the owner.
Second, to the
character of the owner, as
whether he would himself have been able and willing to make the
improvements
Page 99 U. S. 532
in question; whether they would be useful to him, considering
his profession, habits, &c., and whether it was his intention
to keep the property, or to offer it for sale.
Third, to the
nature of the improvements made,
as whether they have added to the income and to the actual value
and salableness of the property, &c., or only to its
ornamentation, &c.; also whether the improvements have or have
not been excessive and unreasonable.
The consideration of these three elements, giving due weight to
each, will enable the judge to decide whether any indemnity should
be given; that it should be; and how it should be paid, whether at
once or on time, whether in a capital sum or in the way of
rent.
This is the substance of Demolombe's article. We can only say,
that if it is a sound explication of the law of France, and,
therefore, of the law of Louisiana (which in this matter is exactly
the same as that of France), it is in direct accord with the result
to which we have been brought in this case, by the application of
the principles which we suppose to be involved in article 508 of
the Civil Code of Louisiana, interpreted according to its spirit
and intent. If by the course of decisions in Louisiana it cannot be
held to apply to the case of an ordinary immovable, it is at least
applicable to such a case as that with which we are now dealing,
considered in all its various circumstances.
The other points raised in the case do not present much
difficulty. We shall proceed to consider those which we deem
material.
First, the defendants complain that they were not
allowed for the cost of those things which were consumed by them in
the use, such as cross-ties, &c., which were worn out and had
to be replaced. The court below only allowed them compensation for
those things which were in existence when the railroad was turned
over to the receiver, in April, 1875. This, it seems to us, is in
strict accordance with the law. In ordinary cases of possessors in
bad faith, the owner, according to article 508, has an election
either to keep the constructions and works or to require their
removal. He certainly cannot keep, nor require the removal of, that
which no longer exists.
Page 99 U. S. 533
When he elects to keep them, as we suppose to be virtually the
case here, he owes to the owner of the materials nothing but the
reimbursement of their value and of the price of workmanship. This
evidently refers only to the materials which compose the things
which are in existence at the time of making the election -- and
that time, in this case, must be deemed to be the time of the
delivery of the property to the receiver, which was on the 13th of
April, 1875. We think the court was right in deciding that it was
the improvements then in existence, the value or cost of which was
to be allowed to the defendants.
Secondly, the defendants complain that the full first
cost of the improvements which were in existence was not credited
to them in the decree: they contend that these improvements cost
them at least forty percent more than their value at the time they
were appraised by the experts, besides the sum of $49,005, which
the experts deducted for deterioration.
The experts appraised these improvements in the fall of 1875,
and estimated their then cash value at the sum of $347,361.29. It
was sufficiently shown that their original cost was considerably
more than this. The master, from the evidence before him, estimated
and reported that the cost of materials and workmanship was, on the
whole, twenty-five percent more than their then value, the cost
being much greater when the improvements were made than the same
would be at the time of the appraisement, in consequence of the
condition of the country after the war, the disturbance in labor,
and the expansion of the currency. He therefore reported the cost
at $434,201.61. But as the experts had deducted $49,005 for
deterioration of iron rails whilst used by defendants, this sum
added would make the whole first cost $483,206.61. The court, in
its opinion, considers the allowance of twenty-five percent as
excessive, because, whilst prices were higher when the improvements
were made, so also the currency was depreciated; and the court was
of opinion that fifteen percent additional was sufficient. This
would make the first cost of the improvements equal to $399,465.48.
But the decree allows the sum of $488,109.54, which is more than
forty percent greater than the amount of the appraisement. No
explanation of this discrepancy has been
Page 99 U. S. 534
made. It seems to be the result of some inadvertent error in
making the computations.
But in our judgment there should be no allowance for increased
cost. We have proceeded on the principle of carrying out the spirit
and equity of the law, since it cannot be carried out in the
letter. Now the letter gives the owner the option of requiring the
improvements to be removed. This option is a means in his hands of
protecting himself if the original cost is greater than the
improvements are worth. As he cannot actually exercise it in this
case, it would violate the spirit of the law to allow the
defendants a greater sum. We think, therefore, that the appraised
value of $347,361.61 is all that can be allowed to the
defendants.
Thirdly, as to the question of interest. On this
subject there does not seem to have been any distinct adjudication
by the Supreme Court of Louisiana. In all the cases which we have
examined, the rents, or fruits, have been deducted from the cost of
the improvements, or vice versa, and judgment given for the
balance, without any calculation of interest on either side, except
where the possessor, in exoneration of the estate, has paid money
which was a lien thereon. The question of interest does not seem to
have been debated. But the French jurisconsults, who have given
special attention to this subject, agree that when the owner of the
land compels the unlawful possessor to account for the fruits of
his improvements, the latter is entitled to interest on their value
-- on the principle that it would be unjust to charge him for the
fruits of his own improvements without allowing him interest on
their cost, provided it does not exceed the amount of such fruits
-- not, indeed, as interest properly so called, but as an
equivalent
pro tanto to the fruits received, in the
account to be rendered thereof. They all agree, however, in saying
that interest cannot be allowed beyond the amount of such fruits,
and that it cannot be brought into compensation with the fruits of
the original property. Demolombe on the Code Napoleon, Vol. ix.
art. 679; Aubry & Rau, Droit Civ.Fr., vol. ii. sec. 204 b, p.
232 and note; Dalloz, vol. xxxviii. p. 273, tit. Propriete, art.
429.
In the present case, the fruits were in fact the results of
Page 99 U. S. 535
the improvements made. The property, when taken possession of by
the defendants, was a ruin. They reconstructed it and made it
capable of producing what it did produce. According to the French
rule, therefore, the defendants were entitled to interest on their
expenditures in making the improvements in question, provided it
did not exceed the fruits and profits with which they were charged.
It is conceded that interest should only be charged at the rate of
five percent annum. The master estimates four and a half years as
the proper average time for allowing interest. In this we concur.
The interest, therefore, on the whole first cost of the
improvements, without deducting for deterioration, would be
$108,721.48. This should be credited against the net earnings for
which the defendants are held responsible, both being in the same
currency. These net earnings were found to be $161,476.69; and
deducting the said interest therefrom, the remainder is $52,755.21,
which is to be deducted from the value of the improvements. Being
so deducted, the balance is $294,606.08.
This sum, according to our view, was the amount due to the
defendants at the time when they delivered the property to the
receiver, and not the sum of $391,959.42, as stated in the decree
of the circuit court, which should therefore be reversed with
directions to be corrected in respect to the amount, as now stated,
which amount, with interest at the rate of five percent per annum
from the time of delivering the property to the receiver, should be
first paid to the defendants out of the proceeds of the sale of the
property, before any payment made to the bondholders. But as it may
be difficult for the bondholders, or other persons purchasing the
property, to raise at once the whole amount due to the defendants,
the court below should direct the property to be sold subject to
the lien of the defendants for said amount with interest as
aforesaid, and should allow a reasonable time to the purchaser, not
exceeding nine months from the day of sale, to pay the same, with a
condition annexed to said sale, that if the amount due the
defendants be not paid within the time so limited, a resale of the
property shall be made for the purpose of satisfying said amount
due the defendants, with interest as aforesaid and expenses. The
court should also direct that, subject to said
Page 99 U. S. 536
lien, no bid be received for a less sum than will be sufficient
as a fund to defray the costs, expenses, and charges arising in the
cause since the former decree of this court, which costs, expenses,
and charges, except the costs of the defendants for attorneys',
counsel, and witness fees, should be paid from said fund. The
amount of said fund should be fixed by the court, and should be
paid to the special master making said sale before adjudicating the
property as sold to any bidder.
In view of the dispositions thus to be made in the decree, the
defendants will not be concerned or interested in the accounts and
transactions of the receiver, but any net earnings of the railroad,
or proceeds of property, which shall have come into his hands as
such receiver, after paying his expenses and compensation, will go
to the benefit of the bondholders, and any deficiency of moneys in
his hands to pay said expenses and compensation should be paid out
of the said fund required to be paid in cash as aforesaid.
As to the costs in the court below, incurred since the former
decree of this court, the defendants should be decreed to pay their
own attorneys', counsel, and witness fees; and the residue of the
costs, expenses, and charges in the cause should be paid out of the
proceeds of said sale from the fund before specified in that
behalf.
We do not deem it necessary to discuss the remaining points
which have been raised on either side. We have given them due
attention, and do not regard them as presenting any valid objection
to the residue of the decree.
The decree of the circuit court will be reversed, and the record
remitted with directions to enter a decree in conformity with this
opinion, each party to pay their own costs of this appeal, and it
is
So ordered.
MR. JUSTICE FIELD dissenting.
I agree with the court that the decree should be reversed, but I
do not agree with it in allowing the defendants compensation for
expenditures and improvements upon the road whilst they were in
control of it. This Court has held, after elaborate consideration,
that they were possessors in bad faith,
Page 99 U. S. 537
having obtained control of the road fraudulently. I know of no
law and no principle of justice which would allow them any thing
for expenditures upon property they wrongfully obtained and
wrongfully withheld from the owners, who were constantly calling
for its restitution. Why should the owners pay for expenditures
they never ordered, or for the construction of works they never
authorized? The defendants knew all the time the vice of their
title; they knew they were not possessors in good faith; they
concocted the scheme by which the fraudulent sale was made, and
this Court has so adjudged.
In the courts that administer the common law the rights of the
owner are paramount and exclusive. An occupant without title is not
recognized as entitled to compensation for improvements. Heron, in
his History of Jurisprudence, says: there is no case
"decided in England, Ireland, or the United States, grounded
upon common law principles, declaring that an occupant of land,
without a special contract, is entitled to payment for his
improvements as against the true owners, when the latter had not
been guilty of a fraud in concealing the title."
P. 715.
And courts of chancery do not give to an occupant compensation
for improvements, unless there are circumstances attending his
possession which affect the conscience of the owner, and impose an
obligation upon him to pay for them or to allow for their value
against a demand for the use of the property.
Putnam v.
Ritchie, 6 Paige (N.Y.), 390; Story, Eq.Jur., sec. 799;
Mill v. Hill, 3 H.L.Cas. 828;
Gibson v. D'Este, 2
Y. & C. 542;
Mulhallen v. Marum, 3 Dru. & W. 317.
To a possessor whose title originates in fraud, or is attended with
circumstances of circumvention and deception, no compensation for
improvements is ever allowed.
Railroad Company v.
Soutter, 13 Wall. 517;
Morrison v.
Robinson, 31 Pa. 456;
Van Horne v. Fonda, 5 Johns.
(N.Y.) Ch. 388, 416;
Russell v. Blake, 2 Pick. (Mass.)
505;
McKim v. Moody, 1 Rand. (Va.) 58;
Morris v.
Terrell, 2
id. 6.
The learned counsel for the appellants who argued this case
showed, I think, conclusively, by reference to numerous
adjudications and approved text writers, that the civil law as
enforced in Europe and in Louisiana draws the same line of
Page 99 U. S. 538
demarcation between the possessor in good faith and the
possessor in bad faith in allowing for improvements and
expenditures on the property of another. Pothier, the great legal
writer, referring to the rule that no man ought to enrich himself
at the expense of another, upon which compensation for improvements
is here claimed, says:
"A
bona fide possessor may properly oppose it against
an owner, but it is not available to a
mala fide
possessor. The owner can reply to the latter that equity did not
empower him to take possession of his land and to make thereon such
changes as he desired and so put the owner to charges that were
burdensome, and that he might not wish to bear, and which this
possessor had no right to impose. If the latter suffers from the
failure to reimburse him, he must blame himself, as being in fault,
and no one can complain of consequences he has brought upon
himself."
Traite du Droit de Propriete, sec. 350.
The civil law as thus stated corresponds with what a great
chancellor of England said of the interference of equity to allow
one the value of improvements on another's property. "If a person,"
he said,
"really entitled to the estate will encourage the possessor of
it to expend his money in improvements, or if he will look on and
suffer such expenditures, without apprising the party of his
intention to dispute his title, and will afterwards endeavor to
avail himself of such fraud, the jurisdiction of equity will attach
in such a case. But does it follow from thence that if a man has
acquired an estate by a rank and abominable fraud, and shall
afterwards expend his money in improving the estate, that therefore
he shall retain it in his hands against the lawful proprietor? If
such a rule shall prevail, it will certainly justify a proposition
which I once heard stated at the bar of the Court of Chancery, that
a common equity of this country was to improve a man out of his
estate."
I prefer in this case to stand by the ancient law, than to
follow any new doctrines supposed to arise out of the character of
railroad property. To me it seems that the peculiar character of
that property requires the special application of the old law; for
just in proportion to the value of this property is the temptation
to get possession of it, and if plunderers can, when
Page 99 U. S. 539
compelled to restore it, be allowed for their expenditures and
alleged improvements, there will be an added incentive to
plunder.
I therefore dissent from so much of the decree of this court as
allows for expenditures upon property the possession of which the
defendants did not obtain in good faith.