Lyons National Bank v. . Shuler

92 N.E. 800, 199 N.Y. 405, 1910 N.Y. LEXIS 1252

Opinions

Gray, J.

I think that the judgment below is correct, in the one respect in which it is now the subject of attack. It allowed to the respondent, the Lyons Milling Company, compensation for the improvements placed upon the property purchased by it; notwithstanding that the conveyance to it of the lands was held to have been void. The purchase price was not allowed. The conveyance was by the trustee named in the will of Margaret Shuler, in execution of a power of sale conferred upon the trustee, and, upon this appeal, we are to assume the correctness of the decision by the Appellate Division that the trust attempted to be created was invalid, as contravening the statute against perpetuities. The testatrix died seized of the property in 1893 and her wdll was admitted to probate, without contest, shortly thereafter. After making the trust provisions for her children and grandchildren, which have been held invalid, in a subsequent clause of her will, she empowered her “ said trustee to sell and convey any and all of my real estate at public, or private, sale. * * * But all proceeds of said sale * * * to be paid upon said mortgage, or mortgages, which are a lien upon the said real estate in * * * satisfaction thereof until the same are fully paid.” Her trustee was one of her sons and he was, also, appointed as the executor of her will. In 1898, five years later, for a consideration of $4,000, representing the fullest value of the property, he deeded the portion of the real estate in question to one Ennis, who, a few days later, conveyed it to the Lyons Milling Company, for which he had purchased it. At the time, the property was a mill site; the mill on which had been destroyed by fire and which had become unserviceable and unproductive. The milling company restored the mill and properties, borrowing money upon mortgage for the purpose from third parties, and the referee finds that the value of the property was enhanced to the extent of $10,000; offsetting the value of the use and occupation by the amount of taxes paid by the company. The plaintiff bank, appellant, which was conducting its business in the near neighborhood of the milling company, had, in 1884, recovered judgments against three sons of Mrs. Shuler; but had failed to satisfy them by execution. In 1901, three years after the milling company’s purchase and improvements, the plaintiff caused execution to be, again, issued and purchased the interest of the judgment debtors in the real property of which Mrs. Shuler, their mother, had died seized, upon the sheriff’s sale thereof, receiving a deed in 1903. In 1904, it brought this action for a partition of such property; claiming that the devise thereof in Mrs. Shuler’s will was invalid and void; that the conveyance of portions of it by the trustee transferred no title and that, through its purchase of the interest of the three sons at the execution sale, it was the owner of three-fifths of the real property of which Mrs. Shuler died seized.

Although the trust was invalid and the office of trustee, therefore, fell with the trust, the facts and circumstances were such as to warrant the court, in the exercise of its equitable powers, in allowing compensation to this respondent. The will had been unquestioned upon its probate and had stood jmassailed for some five years, when the milling company purchased ; taking an apparent title to the land under a power to sell, authorized for the purpose of procuring the means wherewith to discharge the mortgage debts. Now, although the exercise of the power by the donee may have been ineffectual to transfer the legal title to the real estate, which the testatrix had failed by her testamentary provisions to divert from her heirs at law, the milling company, \yhen purchasing the land, had paid a full consideration, had acted in good faith and had dealt with the apparent holder of the right to convey a legal title, while he was acting in the performance of his duties and, as respondent had the right to believe, exercising his power to sell for the advantage of the estate. It entered into peaceable possession, under claim of lawful title, and proceeded to restore, and to make valuable, a milling property, which had been neglected and had become, practically, worthless; while the plaintiff and the heirs of the testatrix stood by in silence. Their situation was such that they may be considered as looking on while the milling company, in possession of the land, was expending money in constructing permanent improvements. They, presumably, entertained the belief that the milling company had acquired good title.

It is true that the probate of the will did not conclude the question of its validity, as a devise of the real property upon trust, and that in subsequent litigation that question remained open to the heir. But the further question is whether a court of equity, having jurisdiction of this action in partition, (see Hewlett v. Wood, 62 N. Y. 75, 77; Ford v. Knapp, 102 ib. 135, 140), and of all the parties in interest, may not, if the state of facts found upon the trial justifies it, grant to the party who, in good faith and for value, has purchased from the trustee, as donee of a testamentary power of sale, some of the devised real property, compensation for his improvements upon the laud, though he loses the price paid for the land. 1 think that this case presents a state of facts where the respondent is entitled to some protection. Upon principle and within the reasoning of the decisions of this .court, the trial court determined justly and within its proper powers. (See Thomas v. Evans, 105 N. Y. 601; Satterlee v. Kobbe, 173 ib. 91; Ford v. Knapp, supra.) In Thomas v. Evans, the action was brought by some of testator’s children for the purpose of annulling and vacating a deed by his executors, upon the ground that there had been no valid exercise of the power of sale. The plaintiffs succeeded and the decree denied compensation for the improvements placed upon the property by the purchaser. This determination was reversed and it was held that, in addition to the reimbursement of the price paid, the trial court should have imposed, as a condition of relief, such sums as were expended in improvements, so far as they had increased the value of the land. This court refrained from discussing the question as to the validity of the conveyance; as we, also, refrain. It assigned as a reason for its decision that the executors’ deed, apparently, conferred the legal title under the power of sale and the purchaser was entitled to rely upon the apparent power of the executors to receive the consideration and to convey the land. Reference is made to Pomeroy’s work on Equity Jurisprudence, (see sec. 1241, note 1), and this language is quoted : “ 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 expenditures.” In Satterlee v. Kobbe, (supra), an action in partition, where some of the defendants claimed adversely and in hostility to the plaintiff and his co-tenants, the reasoning of the opinion upon the subject of the right to compensation for improvements may be profitably referred to in support of our present views. The three important elements underlying the award of relief are those of the good faith and the innocent mistake of the purchaser, and that the plaintiff is in a court of equity asking its aid. Each case is, necessarily, governed by its peculiar facts.

These reasons have been briefly, but sufficiently, stated. I do not think that the plaintiff-appellant is in any position, under the facts of this case, to successfully oppose the allowance of compensation to the defendant, the Lyons Milling Company, respondent, and that question being the only one presented to us, the judgment should be affirmed; with costs to the respondent, the Lyons Milling Company, against the appellant.