Madrid v. Spears

Brief Fact Summary. In this case, the Plaintiff Spears (Plaintiff) brought a diversity action to cancel a deed and quiet her title to an undivided one-half interest in 320 acres of land in New Mexico, on the grounds that her name to the deed granting an interest to the Defendants, various members of the Madrid family (Defendants), was forged. The Defendants denied the forgery, but alternatively pleaded they had made valuable improvements in good faith under color of title and the Plaintiff was estopped by the doctrine of laches to assert her title. Plaintiff, in responsive pleading, admitted the valuable improvements for which the Defendants were entitled to credit, but alleged that the Defendants had realized large profits from the land during the years 1952, 1953, 1954 and 1955 and that the Defendants should be made to account for such profits.

Synopsis of Rule of Law. A good faith improver is entitled to compensation for his improvements “measured not by the cost of the improvements, but by the amount to which they have enhanced the value of the owner’s estate, less the land profits of the land.” [24 A.L.R. 2nd 14, 31].

Facts. In this case the Plaintiff brought a diversity action to cancel a deed and quiet her title to an undivided one-half interest in 320 acres of land in New Mexico, on the grounds that her name to the deed granting an interest to the Defendants. The Defendants denied the forgery, but alternatively pleaded they had made valuable improvements in good faith under color of title and the Plaintiff was estopped by the doctrine of laches to assert her title. The Plaintiff, in her responsive pleading, admitted the valuable improvements for which Defendants were entitled to credit, but alleged that Defendants had realized large profits from the land during the years 1952, 1953, 1954 and 1955 and that the Defendants should be made to account for such profits. The lower court found that the deed was in fact a forgery and that the Plaintiff was entitled to a one-half interest in the land. The lower court also found that the Defendants had, prior to notice of forgery, made valuable improvement
s in the good faith belief that they were the fee owners. The Defendants were entitled to restitution for one-half of the cost of such improvements, which were agreed to be $14,214.42. The lower court found no evidence of rental value of the land absent the improvements and concluded that the Plaintiff was not entitled to share in the profits realized in the amount of $17,453. The lower court ordered partition and the Defendants made an election, which resulted in a court-ordered lien against the Plaintiff’s one-half interest and the rents and profits therefrom for the amount of the agreed one-half cost of the improvements until discharged. The Defendants appealed from that part of the lower court’s judgment limiting their recovery for the improvements to the actual cost thereof, contending that the amount of their recovery in equity is not measured by the cost of the improvements, but by the amount they have enhanced the value of the land, less the net profits derived therefrom since
the filing of the Plaintiff’s complaint. It is agreed that one-half of the difference between the value of the land at the time the Defendants occupied it under a forged deed and the time they were dispossessed was $39,150. The Plaintiff cross-appealed from the portion of the lower court judgment which denied her any credit or set-off for the rents and profits received by the Defendants after notice of the Plaintiff’s claim in 1953.

Issue. What is the proper measure of damages?

Held. The Plaintiff is not entitled to recover rental profits. Affirmed.
Under statute in New Mexico, an occupying claimant in an ejectment action may plead and prove the value of the good faith improvements under color of title. That would be the Defendants as occupying claimant in this case.
If the value of the good faith improvements shall exceed the land profits, the Plaintiff in such a suit shall elect whether he shall take his judgment and pay for the improvements assessed against him, or take the pay from the Defendants for the for the net profits and the value of the land in its natural state without the improvements.
A good faith improver is entitled to compensation for his improvements “measured not by the cost of the improvements, but by the amount to which they have enhanced the value of the owner’s estate, less the land profits of the land.” [24 A.L.R. 2nd 14, 31].
The lower court based its denial of the setoff for the land profits in favor of the Plaintiff on the basis that the Plaintiff’s recovery was limited to the “rental value of the land in its raw state without its improvements,” and in the absence of any such proof, the Plaintiff was not entitled to recover any of the rents and profits. The Court here found that decision to properly apply the majority rule.

Discussion. Clearly, the Defendants here should be entitled to improvements made in good faith under color of title. As the Court noted, the rules established and discussed herein are departures from the old rule that any interloper is entitled to take nothing, regardless of whether he made improvements under color of title in good faith. The Court found that the earlier rule had unduly harsh results.