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BUTLER, ET AL. v. HAYES, ET AL. (59915)


BUTLER, ET AL. v. HAYES,
ET AL.


June 6, 1997
Record No. 961857

SAMUEL M. BUTLER, ET AL.

v.

CARRIE C. HAYES, ET AL.

OPINION BY JUSTICE A. CHRISTIAN COMPTON
FROM THE CIRCUIT COURT OF FAUQUIER COUNTY

Carleton Penn, Judge Designate
Present: All the Justices


In this chancery suit, we consider whether the trial court
erred in denying cotenants an allowance for permanent
improvements made to land they had acquired as the result of a
forged deed.

The facts are undisputed. The controversy involves a two-acre
parcel of land in Fauquier County.

In June 1989, one David Brown, Sr., inherited a one-eighth
interest in the subject property upon the death of his wife,
Leodor James Brown. The wife was one of eight children of the
last record owners of the parcel, John and Maggie James, who died
in 1941 and 1962 respectively. The children, or their
descendants, resided in the District of Columbia, Maryland, and
New Jersey.

In October 1989, Brown, a Maryland resident, arranged for the
preparation of a "Deed of Gift" purportedly conveying
the subject property to him. Named as grantors in the deed were
four of the James children.

Brown persuaded an acquaintance, Michele M. Kaub, a Maryland
notary public, to execute acknowledgements to the instrument
certifying that the grantors had appeared before her. In fact,
none of those persons appeared before the notary nor were they
aware of the transaction at that time. Their signatures on the
instrument were forged. Subsequently, the deed, dated October 27,
1989, was recorded among the land records in Fauquier County.
During October 1989, Brown appeared unannounced at the home of
appellants Samuel M. Butler and Betty C. Butler. The Butlers’
property adjoined the subject unimproved tract and he had been
maintaining it for about 20 years. Brown offered to sell the
parcel to Mr. Butler and, after some negotiation on the price,
Butler agreed to purchase it for $32,500 cash. The Butlers’
attorney searched the title and procured title insurance.
Eventually, the transaction was closed and the parcel was
conveyed by deed from Brown to the Butlers dated and recorded
April 11, 1990. The Butlers had no notice of the forgeries at the
time of purchase, and there was nothing in the land records to
indicate the recitals in the deed were incorrect.

On April 16, 1990, Easter Monday, appellees Verrell McPherson
(now Woods) and Carrie Hayes, two of the eight James children,
were visiting in Fauquier County. As the result of a report in a
county newspaper, they "first became aware" on that day
of the Brown-Butler transfer. They notified their brother,
Charles James, who promptly contacted Brown and "told him
not to cash [Butler's] check." Brown ignored the request.

Several days later, James telephoned Mr. Butler. James
notified Butler that Butler had "no interest" in the
subject parcel because the signatures on the 1989 deed to Brown
were forged. Butler responded that he would not place any
improvements on the parcel "because the land wouldn’t
perk."

By letter dated May 22, 1990, James wrote Butler, enclosing a
copy of the 1989 deed, stating that the grantors’ signatures were
forged and that both the 1989 and 1990 deeds were not
"legal." On June 19, 1990, the four purported grantors
in the 1989 deed wrote a letter jointly to Butler
"concerning an alleged purchase by you of our
property." They wrote: "We have not consented to any
sale of this property, nor is anybody authorized to sell our
property." Labelling any claim by Butler to the property to
be "fraudulent," they threatened immediate litigation
"seeking punitive damages and attorney’s fees from the
parties responsible for the fraud."

Butler "took" both letters to his attorney. Stating
he had been "threatened that something wasn’t right" on
prior occasions in connection with a purchase of land, Butler
"just kind of ignored" the telephone call and the
letters.

Butler immediately proceeded to resolve the "perk"
problem by locating a reserve septic field on adjacent property
that he owned. During "the first part" of July 1990, he
erected a modular home "in a week’s time" on the
property. By August 1990, Butler had procured a tenant for the
property who had moved into the home paying $700 per month rent.

In February 1991, Hayes, McPherson, and James filed a bill of
complaint naming Brown and the Butlers as defendants. The
plaintiffs sought rescission of the forged deed and an
adjudication that the Butlers had "no right, title, or
interest" in the subject property "other than the
interest of David Brown, Sr. which he obtained through his wife
Leodor S. James Brown." Subsequently, the Butlers filed a
cross-bill against Brown and Kaub, the notary public. The Butlers
sought, in the event the plaintiffs prevailed against them,
damages from Kaub for violation of her notarial duties.

The suit remained pending for almost four years while
discovery proceedings were initiated. During this period, an ore
tenus hearing was held on the forgery issue, and both Brown and
James died. Before his death, Brown repeatedly refused to submit
to the taking of his deposition.

In January 1995, plaintiffs Hayes and McPherson filed an
amended bill of complaint naming as defendants the Butlers; the
James heirs; heirs, devisees, and successors of deceased James
heirs; and "Parties Unknown." The plaintiffs sought the
same relief requested in the original bill and added a request
for partition of the property. The Butlers filed another
cross-bill against Kaub, but the court struck it and allowed the
Butlers to proceed against Kaub under the initial cross-bill.

In an answer to the amended bill, the Butlers asserted they
were bona fide purchasers for valuable consideration without
notice of the plaintiffs’ claim and, as such, should not have to
surrender "all or part of their title to the subject
property." They also asserted that "since purchasing
the subject property they have improved it and the [plaintiffs] would be unjustly enriched if they were awarded the relief
sought." In addition, the Butlers alleged that if Brown had
only a partial interest in the property and the other defendants
also have only a partial interest, the Butlers have both a
common-law and statutory claim of compensation for improvements
to the property.

Following a December 1995 ore tenus hearing, the chancellor
issued a letter opinion in April 1996. The court decided that the
1989 deed was "a nullity" because the grantors’
signatures were forged. The court also ruled that the 1990 deed
conveyed to the Butlers only the one-eighth interest of Brown
that he inherited from his wife. After fixing the fractional
shares of the various parties in interest, the trial court found
that the "present fair market value" of the subject
property with improvements is $130,000 and without improvements
is $35,000.

In addition, the court decided that the "Butlers are
entitled to no credit for the improvements they placed upon the
property" because "the Butlers had actual notice of an
infirmity in their title, and they did not place the improvements
on the property in good faith."

Among its other rulings, the trial court determined the
property should be partitioned, noting that the Butlers are
willing to take the whole property and pay the other coparceners
according to their respective interests. The court also ruled
that the "coparceners, except the Butlers, shall be entitled
to rent, based upon their respective shares of the rental value
of the land itself, which the Court finds to be $30.00 per
year." The court did not require that the Butlers be charged
with the rent of $700 per month that he had been receiving since
August 1990.

Finally, the trial court mentioned some incidental issues that
were still pending, including the liability of the notary, who
the court found to be "not only grossly negligent, but
guilty of an intentional tort."

In May 1996, the Butlers filed a "Motion for
Reconsideration and Clarification." They claimed the trial
court failed to address "whether the Butlers, as holders of
a one-eighth interest in the land, should be entitled to credit
for their improvements as cotenants and coparceners pursuant to
the general rule of equity." They asserted "that
generally a coparcener who places permanent improvements upon
common property at his own expense is entitled to compensation in
the event of a partition," even in the absence of a showing
that the cotenants consented to the improvements, citing White
v. Pleasants, 227 Va. 508, 514, 317 S.E.2d 489, 492
(1984), and Jones v. Jones, 214 Va. 452, 454-55,
201 S.E.2d 603, 605 (1974).

In June 1996, the trial court entered a decree that confirmed
the rulings set forth in the court’s opinion letter. The decree
implicitly denied the Butlers’ motion for reconsideration,
repeating the finding that the Butlers "did not place the
improvements on the property in good faith."

The Butlers appeal from that decree. Although the decree is
not final, it is appealable according to the provisions of Code ? 8.01-670(B)(3)
because it has adjudicated the principles of a chancery cause.
Plaintiffs Hayes and McPherson are the only appellees appearing
on appeal.

First, invoking equitable principles, the Butlers contend the
trial court erred by not giving them "credit for their
improvements as cotenants or coparceners, in view of their
holding a one-eighth interest in the land at the time the
improvements were made." We do not agree.

The allowance ordinarily given a cotenant for permanent
improvements upon real estate that is ultimately partitioned is
not a legal right. Rather, compensation of this kind is allowable
to enable a court of equity to do justice and to prevent one
tenant from becoming enriched at the expense of another. Shotwell
v. Shotwell, 202 Va. 613, 618, 119 S.E.2d 251, 255 (1961).
But, according to a settled equity maxim, a litigant who seeks to
invoke an equitable remedy must have clean hands. The Butlers
fall short of fulfilling this requirement.

Even though it was eventually determined that the Butlers had
a one-eighth interest in the parcel, the evidence shows that at
the time the improvements were placed upon the property, they did
not know conclusively whether they had any interest at all in the
land. Butler ignored all the information he received notifying
him, as he testified, "that there was going to be
trouble" with the validity of his title. Armed with this
information, Butler had the affirmative obligation to inquire
about the alleged defect in title. Instead, proceeding at his own
risk, he built a house within weeks, quickly found a tenant, and
immediately began collecting rent of $700 per month.

This property had been in the James family for many years. It
was unimproved and, according to the evidence, had been enjoyed,
along with other adjacent family owned land, by various family
members during their infrequent visits to Fauquier County. The
Butlers’ unilateral, defiant act of improving the property
prevented the other cotenants from enjoying the land in its
unimproved state. Indeed, the Butlers have had exclusive use of
the land for over six years and have unjustly enriched themselves
at the expense of the other cotenants by receiving thousands of
dollars in rent during the period.

In sum, we cannot say that the trial court abused its
discretion in refusing to give the Butlers credit for
improvements based on a purely equitable remedy.

Second, the Butlers seek a statutory remedy. They argue the
trial court erred by refusing to give them an allowance for
improvements pursuant to Code ? 8.01-166.

According to ? 8.01-166,
a defendant mistakenly holding land and against whom a decree or
judgment is rendered regarding the land "may, at any time
before the execution of the decree or judgment, present a
pleading to the court rendering such decree or judgment, stating
that he, or those under whom he claims while holding the premises
under a title believed by him or them to have been good, have
made permanent improvements thereon," and may move for an
allowance for the improvements.

Construing the statute, this Court repeatedly has held that it
has no application to a party who is not a bona fide purchaser,
and that a person with notice, actual or constructive, of
infirmity in the title cannot recover compensation for permanent
improvements made on the premises. Richmond v. Hall,
251 Va. 151, 157, 466 S.E.2d 103, 106 (1996); Richardson
v. Parris, 246 Va. 203, 206, 435 S.E.2d 389, 391 (1993); Kian
v. Kefalogiannis, 158 Va. 129, 132, 163 S.E. 535, 537
(1932).

The Butlers argue that "[a]lthough there have been no
cases in Virginia specifically addressing the point in time at
which one must believe one’s title to be good in order to be
entitled to an allowance for improvements, the logical reading of
Section 8.01-166 is that this determination should be made at the
time of purchase." The Butlers point out they paid full
value for the land, "were bona fide purchasers," and
"only received notice after paying full value." We
reject this argument.

An analysis of the statutes dealing with compensation for
improvements to real property, found in Article 15 of Chapter 3
of Title 8.01 of the Code, reveals that the critical time for
believing title is good is not when the property is purchased,
but when improvements are placed upon the land. For example, Code
? 8.01-166 speaks
of a claimant making improvements "while holding the
premises under a title" believed by the claimant to be good.
Additionally, Code ? 8.01-169,
addressing how value of improvements is to be determined,
requires a jury to be satisfied the claimant made permanent
improvements on the premises "at a time when there was
reason to believe the title good." Clearly, these statutory
provisions contemplate a focus on the time when improvements are
made rather than some prior time.

And, as we have said, the Butlers were fully aware of the
title defect when the improvements were made. Thus, the trial
court correctly ruled they are not entitled to the statutory
relief sought.

Consequently, we will affirm the decree appealed from and will
remand the cause for further proceedings.

Affirmed and remanded.

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