HOMES, INC. v. HOLT

LAKE, J.

When the appeal was called for argument in this Court the defendant demurred ore tenus to the complaint on the ground that it failed to state a cause of action. Upon such a demurrer the complaint must be construed as a whole. Little v. Little, 205 N.C. 1, 169 S.E. 799. The allegations of the complaint are to be construed liberally in favor of the plaintiff and all reasonable inferences are to be drawn. Hargrave v. Gardner, 264 N.C. 117, 141 S.E.2d 36; Steele v. Cotton Mills, 231 N.C. 636, 58 S.E.2d 620. If, when so construed, the complaint states a cause of action, in any view of it, the demurrer must be overruled. Burroughs v. Womble, 205 N.C. 432, 171 S.E. 616; Scott v. Insurance Co., 205 N.C. 38, 169 S.E. 801; Griffin v. Baker, 192 N.C. 297, 134 S.E. 651.

So construed, the complaint alleges that Mary Holt Richardson, mother of the defendant, contracted with the plaintiff for the construction by it of the house upon the lots in question, giving the plaintiff a warranty that she, Mary Holt Richardson, owned the land, in reliance upon which warranty the plaintiff, in good faith, constructed the house upon the land, improving its value by $3,300; that the defendant, who was and is the owner of the land, claimed ownership thereof and of the house after the construction was complete; the plaintiff thereupon offered to remove the building and restore the lots to their original condition but the defendant has refused to permit the plaintiff to do so; the defendant has assumed dominion over the house and has rented it to a tenant from whom she has collected rent; that the plaintiff has not been paid for the construction of the house and the defendant has been unjustly enriched to the extent of the improvement, in value, of her land.

Taking these allegations to be true, as we must upon a demurrer, they state a cause of action in favor of the plaintiff against the defendant for unjust enrichment. This right of action is not the same as the common law right, or the right under the statute, General Statutes, Chap. I, Art. 30, to claim for betterments when one, in possession of land under color of title, constructs permanent improvements thereon and is thereafter sued in ejectment by the true owner. That right was and is a defensive right. It accrues when an owner of the land seeks and obtains the aid of the court to enforce his right to possession. Commissioners of Roxboro v. Bumpass, 237 N.C. 143, 74 S.E.2d 436. It applies only where the improvement was constructed by one who was in possession of the land under color of title and who, in good faith and reasonably, believed he had good title to the land. Pamlico County v. Davis, 249 N.C. 648, 107 S.E.2d 306; Harrison v. Darden, 223 N.C. 364, 26 S.E.2d 860; Rogers v. Timberlake, 223 N.C. 59, 25 S.E.2d 167; Faison v. Kelly, 149 N.C. 282, 62 S.E. 1086.

In Rhyne v. Sheppard, 224 N.C. 734, 32 S.E.2d 316, the plaintiff having acquired title to two lots in a real estate development, in good faith built a house on two other lots, believing them to be the lots described in his deed. He sued the true owner of the lots for the value of the improvement. Here, neither the common law nor the statutory right to betterments was applicable, for the improver was not being sued and had no color of title to the lots upon which the house was constructed. A demurrer by the defendant to the complaint was overruled, this Court, through Barnhill, J., later C.J., saying:

". . . Plaintiff is not confined to a common law action for improvements, if indeed such right may be enforced by independent action. G.S. 1-340. He may resort to the equitable doctrine of unjust enrichment frequently enforced under the doctrine of estoppel. If the complaint sufficiently states a cause of action under this principle of law, it must stand.

"Where a person has officiously conferred a benefit upon another, the other is enriched but is not considered to be unjustly enriched. The recipient of a benefit voluntarily bestowed without solicitation or inducement is not liable for their value. But he cannot retain a benefit which knowingly he has permitted another to confer upon him by mistake."

In the present case, the complaint does not allege facts sufficient to show an estoppel of the defendant by silently standing by and permitting the construction with knowledge of it. The complaint alleges that while the plaintiff was constructing the house upon her land "the defendant Shirley Holt knew, or should have known, that the house was being erected upon such land." This is not an allegation that she actually had such knowledge. She owed no duty to the plaintiff to maintain a watch upon her lot to see that no unauthorized person built a house upon it. Therefore, the allegation that she "knew or should have known" that it was being built is not sufficient to charge her with actual knowledge thereof.

Neither can the complaint be sustained on the theory that by exercising dominion over the house and renting it to tenants the defendant ratified the contract made by her mother with the plaintiff. There can be no ratification unless the person making the contract professed to do so on behalf of the person claiming or claimed to be the principal. Air Conditioning Co. v. Douglass, 241 N.C. 170, 84 S.E.2d 828; Rawlings v. Neal, 126 N.C. 271, 35 S.E. 597. The theory of the present complaint is that the defendant's mother contracted with the plaintiff on her own account, representing herself to be the owner of the land.

We are thus brought to the question of whether the plaintiff can maintain this action solely on the ground of unjust enrichment of the defendant through a bona fide mistake of fact by the plaintiff, which mistake is not induced by the conduct of the defendant.

The plaintiff did not construct the house believing itself to be the owner of the land. It did so believing the person with whom it contracted was the owner. The plaintiff could certainly have brought suit upon its contract against the defendant's mother with whom it made its contract. That right it has not lost by virtue of the defendant's ownership of the land. However, the plaintiff's mistake of fact as to the ownership of the land was a mistake as to the risk involved in contracting with the defendant's mother and it may be assumed that, but for that mistake, the house would not have been built upon the defendant's land.

The plaintiff does not seek in this action to hold the defendant liable for the payment of the contract price of the house, nor does it seek to recover from her its expenses in the construction. The right of a landowner to remove from his premises a structure placed thereon by a trespasser, innocently or otherwise, and to sue the trespasser for damages, including the cost of such removal, is not involved in this action. The question is, Can the owner of a lot upon which a house has been built by another, who acted in good faith under a mistake of fact, believing he had a right to build it there, keep the house, refuse to permit the builder to remove it so as to restore the property to its former condition, enjoy the enhancement of the value of the property and pay nothing for the house? For the owner to do so is as contrary to equity and good conscience as it would be if the builder had believed itself to be the owner of the land. See: Rhyne v. Sheppard, supra.

In Guaranty Co. v. Reagan, 256 N.C. 1, 9, 122 S.E.2d 774, Parker, J., speaking for the Court, said:

"It is a thoroughly well established general rule that money paid to another under the influence of a mistake of fact, that is, of a mistaken belief of the existence of a specific fact material to the transaction, which would entitle the other to the money, which would not have been paid if it had been known to the payor that the fact was otherwise, may be recovered, provided the payment has not caused such a change in the position of the payee that it would be unjust to require a refund. (Authorities cited). Such is the law in this jurisdiction. (Authorities cited.)

"`An action to recover money paid under a mistake of fact is an action in assumpsit and is permitted on the theory that by such payment the recipient has been unjustly enriched at the expense of the party making the payment and is liable for money had and received.' Morgan v. Spruill, 214 N.C. 255, 199 S.E. 17. In accord, see 4 Am. Jur., Assumpsit, 24."

In Harrington v. Lowrie, 215 N.C. 706, 2 S.E.2d 872, Devin, J., later C.J., speaking for the Court, said:

"In Bahnsen v. Clemmons, 79 N.C. 556, where money was twice paid for the same services, it was said: `It is as inequitable for the one to receive and retain the double payment as it is wrong that the other who has twice paid his money should lose it and be without remedy,' and the following language was quoted from 2 Greenleaf on Evidence, 104: `When the defendant is proved to have in his hands the money of the plaintiff, which ex equo et bono he ought to refund, the law conclusively presumes that he has promised so to do."'

In Allgood v. Trust Co., 242 N.C. 506, 512, 88 S.E.2d 825, Johnson, J., speaking for the Court, said:

"Recovery is allowed upon the equitable principle that a person should not be permitted to enrich himself unjustly at the expense of another. Therefore, the crucial question in an action of this kind is, to which party does the money, in equity and good conscience, belong? The right of recovery does not presuppose a wrong by the person who received the money, and the presence of actual fraud is not essential to the right of recovery. The test is not whether the defendant acquired the money honestly and in good faith, but rather, has he the right to retain it. In short, `the gist of this kind of action is, that the defendant, upon the circumstances of the case, is obliged by the test of natural justice and equity to refund the money.' Moses v. MacFerlan, 2 Burrow 1005, 97 English Reprints 676."

It is as contrary to equity and good conscience for one to retain a house which he has received as the result of a bona fide and reasonable mistake of fact as it is for him to retain money so received We, therefore, hold that where through a reasonable mistake of fact one builds a house upon the land of another, the landowner, electing to retain the house upon his property, must pay therefor the amount by which the value of his property has been so increased. Consequently, the complaint states a cause of action and the demurrer ore tenus is overruled.

When the jury brought in its first proposed verdict, the court properly refused to accept it and sent the jury back for further deliberations and the return of a verdict in the form of answers to the issues without any recommendation as to the judgment to be entered thereon. In cases of this nature it is the function of the jury to find the facts in the form of answers to the issues submitted to it by the court, not to determine or make recommendations concerning the judgment to be rendered.

As the jury was about to return to the jury room for such further deliberations, one member asked the court, with reference to issues three and four, "Does Shirley Holt have to buy the house that is on the property?" The court thereupon, as is above set forth, undertook to explain to the jury the nature of the judgment which would be rendered, if they answered these issues in favor of the plaintiff, and procedures to be followed by the plaintiff to enforce such a judgment. In so doing, the court inadvertently went beyond the statement of the evidence and the declaration and explanation of the law arising thereon. This may well have had the effect of prejudicing the jury against the position of the plaintiff although that was, of course, not the intention of the court. Any remark of the presiding judge, made in the presence of the jury, which has a tendency to prejudice the jury against the unsuccessful party is ground for a new trial. Thompson v. Angel, 214 N.C. 3, 197 S.E. 618; Bank v. McArthur, 168 N.C. 48, 84 S.E. 39; Perry v. Perry, 144 N.C. 328, 57 S.E. 1.

The defendant moved in this Court to dismiss the appeal for failure by the appellant to comply with Rule 19 (3). The appellant, in grouping his exceptions immediately prior to the signatures on the case on appeal, should have set forth in the assignment of error above noted the precise language of the court to which it takes exception. This it did not do. It did, however, in its assignment of that error in grouping its exceptions on page 79 of the record refer to page 78, where the exception is noted and the language in question appears. That is, in the grouping of the exceptions on the right hand page of the record we are referred across to the left hand page. While we have said many times we will not embark upon a "voyage of discovery" through the record to search for alleged errors, we will, in this case, cast our eyes from the right hand page to the left hand page and consider an error which we can examine without leaving port.

Since the case must go back for a new trial, we suggest that the following issues would be more appropriate, assuming the evidence then introduced justifies their submission to the jury under the principles of law here discussed:

1. Did the plaintiff, in good faith, and under a reasonable mistake of fact as to the ownership of the defendant's lots, construct a house thereon?

2. Did the defendant refuse to permit the plaintiff to remove the house and to restore her lots to their former condition?

3. By what amount, if any, was the fair market value of the defendant's lots increased by the construction of the said house thereon?

4. What damage, if any, has the defendant sustained by the plaintiff's trespass upon her lots as alleged in her counterclaim?

The answer to the above suggested issue number four should be a nominal amount only unless the answer to issue number three is "Zero."

New trial.