Pritchard Petroleum Co. v. Farmers Co-Op. Oil & Supply Co.

Appellant brought this action to recover the value of the use and occupancy of a tract of land situated in the city of Conrad, Montana, together with certain buildings thereon and improvements and fixtures attached thereto. The complaint was filed in the district court on February 8, 1941. Therein it is alleged that appellant was, and for more than ten years prior to the commencement of the action had been, the owner in fee of the tract of land, and that prior to and on or about March 30, 1935, there was situated upon it certain attached property, namely, two buildings, six steel storage tanks, and certain pumps, pipes and fittings connecting the tanks with the pumps so that the entire property could be used for carrying on therefrom the business of retailing and wholesaling gasoline, lubricating oils, and kindred products.

It is averred that at the time last mentioned the respondent entered upon the property and took possession of all of it and used and occupied the premises for dealing in gasoline, oil, and kindred products, and maintained such possession and occupancy to the date of the complaint.

It is further averred that during the period of respondent's occupancy and use of the property it passed through the tanks and pumps and sold from the property in excess of three million gallons of gasoline, distillate, kerosene and lubricating oils, and greases in excess of 125,000 pounds, and that the actual and reasonable value of the use and occupancy of the property for the said period was 1¢ per gallon for each gallon of gasoline and like products sold from the property and 1¢ per pound for all greases sold therefrom.

The complaint then avers that by reason of the facts stated, the respondent became indebted to appellant in the sum of $31,250 and that no part thereof has been paid.

The complaint does not negative a lawful entry and use of the property, and standing alone, might not meet the requirements of Elijah v. Wright, 52 Mont. 438, 158 P. 475, but it is aided by averments and admissions in the subsequent pleadings whereby the issues were framed.

A demurrer to the complaint was filed but abandoned and respondent filed answer to the complaint on April 16, 1941, and an amended answer and cross complaint on December 3, 1945, to which was interposed a general and special demurrer, which was sustained in part and overruled in part, and a second amended answer and cross complaint was filed on March 4, 1946, pursuant to permission of the court for the filing thereof. A general demurrer to the second amended answer and cross complaint was interposed by appellant which was overruled, and reply to the second amended answer and answer to the cross complaint therein contained was filed on April 29, 1946. The dates of the filing of the various pleadings are here given because of appellant's specifications of error in overruling its demurrers and in permitting the filing of amended pleadings by respondent.

Two actions between the same parties involving the ownership of certain storage tanks placed on the said tract, consolidated for trial, were before this court for review and the opinion therein, Pritchard Petroleum Co. v. Farmers Cooperative Oil Supply Co., Mont., 161 P.2d 526, contains a statement of some of the facts of this case, and as that opinion is properly before us by virtue of averment and admission in the pleadings herein, reference to it will permit more of brevity in statement than otherwise might be possible.

The record discloses that the plaintiff corporation acquired the property described in its complaint on April 17, 1931, and from that time operated the same as a wholesale and retail gasoline station continuously until January 1933; that the business was then closed until April 1933, when it was reopened and operated for two days a week until July and was intermittently reopened and operated for two days a week until May, 1934, when it was finally closed and not again operated by the appellant. The reason of closing during these periods, the restricted operation thereof, and the final entire discontinuance of business in 1934, was due to bad business conditions and the fact that it would have entailed a loss to keep the place open. The property was encumbered by a real estate mortgage dated October 19, 1931, securing a promissory note in the sum of $3,750 on which only $150 had been paid.

At the time appellant ceased operating the station there were two 15,000 gallon storage tanks purchased from the Brown Sheet Iron Steel Company, under conditional sale contract, on the premises, two 12,000 gallon steel storage tanks and two 550 gallon tanks used for retailing of gasoline, together with certain pumps, pipes and fittings connecting the tanks and pumps. Two buildings were also on the premises. In December, 1934, the Brown Sheet Iron Steel Company repossessed the 15,000 gallon storage tanks and removed them from the premises and later sold them to the respondent. The two 12,000 gallon storage tanks were removed from the land by the respondent in April 1935, and used by it at Ledger, Montana.

The respondent went into possession of the property in April 1935, shortly after it had received a quitclaim deed from one Beim purporting to convey the property to it but which only described one of the boundaries of the said property 120 feet in length and another of the boundaries thereof 30 feet in length and which did not complete the lines so as to enclose or describe any land. Beim had received a tax deed from the treasurer of Pondera county on April 1, 1935, purporting to convey to him the premises but with the same incomplete description set forth in his deed to the respondent. Respondent then placed four horizontal storage tanks on the property, including the repossessed tanks which it had purchased from the owner, repaired, enlarged and improved the buildings, and installed new gasoline pumps, and then operated the property for dealing in gasoline, oils and oil products until May 1942. In November 1941 it removed the four storage tanks that it had placed thereon from the property and these, with the two storage tanks on the premises when it took possession, and which it removed to and used at Ledger, were the subject of the litigation between the parties in the case of Pritchard Petroleum Co. v. Farmers Cooperative Oil Supply Co., supra. Respondent after removal of the four storage tanks from the property in November 1941 continued to operate a retail gasoline station thereon until May 1942, when it removed pumps, pipes, meters, valves, and other equipment onto an adjoining tract of land owned by it and upon which it had previously placed the four storage tanks.

In November 1939 the respondent commenced suit to quiet title to the premises and in the progress of that action the defective description of the premises in the tax deed to Beim and in the quitclaim deed to respondent first became apparent to the respondent. The result of the action was that title to the property was by decree entered February 9, 1942, quieted in appellant.

Thus it appears that during the period from April 6, 1935,[1] until May 1942, the respondent was in wrongful occupation of real property of appellant. What is the remedy of the owner of the premises? What are the respective rights and obligations of the parties arising out of the facts thus briefly outlined?

Compensation in money, designated as damages, is the remedy afforded, sec. 8659, Rev. Codes of Montana 1935, and the measure of damages for the wrongful occupation of real property as here involved is provided in section 8687, Revised Codes, as follows: "The detriment caused by the wrongful occupation of real property * * * is deemed to be the value of the use of the property for the time of such occupation, not exceeding five years next preceding the commencement of the action or proceeding to enforce the right to damages, and the costs, if any, of recovering the possession."

This statute governs the case. The action afforded by the[2] statute is to recover the value of the use of the property for the period of its wrongful detention, not exceeding the time fixed by the statute. The value of the use is the value to the owner of the property, not its value to the wrongdoer. Compensation is the purpose and basis of the action. 28 C.J.S., Ejectment, sec. 144. The value of the use is ordinarily held to be the reasonable rental value of the premises withheld. Leyson v. Davenport, 38 Mont. 62, 98 P. 641; 28 C.J.S., Ejectment, sec. 144. Special circumstances may justify other considerations of value. None such appear here.

Instead of a direct averment that the value of the use of the property for the period of its withholding was $31,250, the appellant circuitously stated its case and alleged the amount of gasoline, oils and greases that the respondent sold from the premises during the period of its occupation, and that the reasonable value of the use and occupancy of the property during the period of its withholding was 1¢ per gallon for each gallon of gasoline, etc., sold and dispensed from the premises and 1¢ per pound for all greases so sold and dispensed therefrom, and that upon that basis the respondent became indebted to appellant in the sum of $31,250.

At the trial appellant sought to prove that the value of the[3] use of the property, equipped as alleged in its complaint, was 1¢ per gallon for the number of gallons of gasoline, oil, etc., and 1¢ per pound for all grease sold from the premises. Objection to this testimony upon the ground that the property was not equipped with tanks and complete as outlined for basis of the question, and upon the general ground that the evidence sought was incompetent, irrelevant and immaterial, was sustained and offers of proof to the same effect were made, objected to by respondent, and the objections sustained. The objections to this offered testimony were properly sustained. Not only was the foundation for the offers inadequate, but the testimony, if received, would not constitute proof of the value of the use, which here is the rental value of the premises. The volume of business to be done by an alert and able business organization, or by a cooperative with sales advantages incident to its plan of operation, will greatly exceed the amount of business that an inefficient operator will do. The measure implicit in the offered testimony is too uncertain to constitute what is termed rental value. If the occupant had done no business at all, or but little business, the owner of the premises is still entitled to the value of the use. It is the detriment suffered by the owner, not the withholder's gain, nor yet his loss, that measures the compensation to be paid for the wrongful withholding. 28 C.J.S., Ejectment, sec. 144.

When the term "rent" is used, a fixed sum is implied. Blatt[4] Co. v. United States, 305 U.S. 267, 59 S. Ct. 186,83 L. Ed. 167; 2 Washburn on Real Property, 6th Ed., sec. 1187. And "value of use" and "rental value" mean practically the same. Straight Bros. Co. v. Chicago, M. St. P.R. Co., 183 Iowa 934,167 N.W. 705. Nor would the fact that sometimes a business place is leased for a minimum cash rental and a percentage of profits above a stated amount effect the rule of evidence. Nor even if custom could be shown of such or similar lease contracts.

The character of the tenant, his business capacity, the uncertainties of business, all make the offered testimony incompetent and inadmissible. It is alleged in respondent's answer that the property when it took possession thereof had no rental value whatever. For the same reason the fact that the owner closed the place entirely because of lack of business would not prove that the property had no rental value.

Not being permitted to make proof of the value of the use of[5, 6] the property under the theory that such value is to be determined by the amount of business done thereat by the respondent, the appellant offered the testimony of its president that the reasonable rental value of the property in the condition it was in when respondent entered into possession thereof, during the time of respondent's occupancy, was $100 per month. This testimony was admitted in evidence. Upon the record and proof made, showing ownership of the property by appellant, the wrongful withholding thereof by respondent, and the rental value thereof as stated, the appellant rested, whereupon respondent moved for nonsuit on the grounds of failure of proof, and for material variance between the pleadings and the proof, in that there was a variance in the measure of damages claimed, and in the ownership of the property for which rental was sought. The court sustained the motion, evidently on the ground of variance as to the measure of damages alleged and the measure proved, for the court had previously stated that "the mere fact that a less quantity of improvements are being taken into consideration would not in the court's opinion at least, mislead the defendant." When a motion for directed verdict on the ground of variance appears contrary to the theory of defense pleaded in the answer, the motion is properly denied. Webber v. Massachusetts Bonding Insurance Co., 81 Mont. 351, 263 P. 101. Where a party is "not surprised by having to meet at the trial issues not pleaded, he cannot have been misled to his prejudice, and the provisions of section 6585, Rev. Codes (now 9183, Revised Codes 1935), are properly invoked against him." Frederick v. Hale, 42 Mont. 153, 112 P. 70, 73.

The respondent in the affirmative defense set forth in its answer alleged that "the rental value of the premises hereinabove described, in the condition in which they were when defendant took possession thereof, for and during the entire period of defendant's occupation, was nothing." And also that prior to the making of certain improvements alleged to have been made by respondent, "said premises had no rental value." And again, "that said premises in the condition in which they were" at the time respondent took possession, "had very little value for any purpose and had no rental value whatsoever."

"In the trial of lawsuits variances between pleading and proof[7, 8] are certain to occur, as long experience has shown. Hence, the Code prescribes rules upon the subject, and, in so doing, with the design of preventing mistrials as a result of variances between the pleading and proof, looks to the substance rather than to the form. Material variances only are regarded with gravity. Immaterial variances are deemed of slight consequence. Except that the sections of the 1921 instead of the 1907 Codes are given, the following is quoted from the opinion of Mr. Justice Holloway in Ryan Co. v. Russell, 52 Mont. 596,161 P. 307, 308: ``Our Codes recognize three degrees of disagreement between pleadings and proof. A material variance is one which actually misleads the adverse party to his prejudice in maintaining his action or defense upon the merits. Section 9183, Rev. Codes 1921. An immaterial variance is a discrepancy between the pleading and proof of a character so slight that the adverse party cannot say that he was misled thereby. Section 9184. A failure of proof results when the evidence offered so far departs from the cause of action pleaded that it may be said fairly that the allegations of the pleading in their general scope and meaning are unproved. Section 9185. If the variance is a material one, the court should permit the pleading to be amended, upon such terms as may be just. Section 9187. If the variance is immaterial, the court may direct the facts to be found according to the evidence, or may permit the pleading to be amended without the imposition of terms. Section 9184.'" Kakos v. Byram, 88 Mont. 309, 292 P. 909, 911.

In view of the state of the pleadings, of respondent's clear conception of the facts and the law involved, as disclosed by the entire record, we do not consider that there was a material variance between the pleadings and the proof. The respondent could not have been misled by appellant's manner of alleging the value of the use of the property. It denied that it had any use value, and affirmatively and repeatedly alleged that it had no rental value whatever. There being no material variance, as defined by the statute, there could be no requirement of amending the complaint. It was error to grant the motion for nonsuit.

There is a question raised in appellant's specifications of error that we are asked to consider. It arises out of the matters of defense and cross complaint set forth in respondent's answer. This and other questions were not directly passed upon at the trial as the respondent was not put to its proof, but the court stated, during the trial, its view of the law applicable to the issues framed by the pleadings.

To this end we advert to respondent's pleading. In its second amended answer and cross complaint it is stated that respondent went into possession of the property in good faith, under color of title, setting forth as an exhibit the tax deed to Beim and alleging conveyance by Beim to it. These deeds, as stated, described only one side line and one end line of the tract. That it thereupon placed permanent improvements on the property to the value of $2,000; that appellant knew of its occupancy of the property, knew of the tax proceedings taken for the purpose of divesting appellant's title to the property, knew of the improvements being made by respondent on the property, but made no claim and asserted no title to the property until 1939 when the respondent commenced its suit to quiet title to the property; that the property in the condition it was in when it took possession was of no rental value whatever for the entire period of respondent's occupancy thereof.

The adjudication of the trial court in the two cases involving[9] ownership of the six storage tanks, and the opinion and judgment of this court in the case of Pritchard Petroleum Co. v. Farmers Cooperative Oil Supply Co., supra, are also pleaded. The appellant demurred generally to this pleading and assigns error because the demurrer was overruled. We see no error in this nor in the orders of the court permitting respondent to file its amended pleadings. No abuse of discretion is shown in granting leave to file amended pleadings. Ample time to meet the issues was given before trial.

The rule is to allow rather than deny amendment. To deny is an[10] exception. Fowlis v. Heinecke, 87 Mont. 117,287 P. 169. The second amended answer and cross complaint was not vulnerable to attack by general demurrer.

Appellant contends that the respondent did not hold "under color of title" and therefore cannot offset against the value of the use of the property, the value of permanent improvements if any, placed upon the property by it. This is the question appellant particularly urges us to answer. This by reason of the statute, section 9491, Revised Codes 1935, which is as follows: "When damages are claimed for withholding the property recovered, upon which permanent improvements have been made by a defendant, or those under whom he claims, holding under color of title adversely to the claim of plaintiff, in good faith, the value of such improvements must be allowed as a set-off against such damage."

This court said in the case of Pritchard Petroleum Co. v. Farmers Cooperative Oil Supply Co., supra [161 P.2d 531], that, "the tanks were returned to said tract in good faith under color of title and in the mistaken belief that it was the legal owner of said tract." Respondent contends that this statement is an adjudication that the deed to it constituted "color of title." Appellant says it is but obiter dictum. This statement, however, was made in determining the intention of respondent in returning certain tanks to the land. "Did respondent intend, in placing the tanks on the land, that they should become fixtures," was the question under consideration by the court when the language was used. Whether respondent then held the land under "color of title," or under claim of title without color, or without title or claim, was only of importance in the inquiry as to its intention when it affixed the tanks to the land.

One may place fixtures upon the land of another without either claim or color of title thereto and still intend that they shall become part of the realty. The quoted statement is, as appellant contends, and as clearly appears, merely obiter dictum. It was in no sense an adjudication or holding as to what is required to constitute "color of title," as the expression is used, in the cases relating to adverse possession of real estate, or in the occupying claimants Act, section 9491, Revised Codes. In Morrison v. Linn, 50 Mont. 396, 147 P. 166, 167, Justice Holloway refers to the confusion that has been introduced into the books by the ill advised use of "color of title" and "claim of title" and indicates that the legislators should have used, in section 9019, treating of occupation under written instrument or judgment, the term "color of title" instead of "claim of title." It is to be noted, however, that nowhere in the statute relating to adverse possession of real estate, Chapter 26, Revised Codes of 1935, "Limitation of Actions for the recovery of Real Property," is the term "color of title" used. Section 9019 of the Chapter provides that one who holds land adversely to the true owner, under a claim of title, basing such claim "upon a written instrument, as being a conveyance of the property in question, or upon the decree or judgment of a competent court, and that there has been a continued occupation and possession of the property included in such instrument, decree, or judgment, or of some part of the property, under such claim, for ten years, the property so included is deemed to have been held adversely." This section describes what text writers and courts have termed "color of title" but there is no statutory definition thereof expressly using the term. The term is merely a shorthand rendering of the status and rights of one who holds real property under the conditions set forth in section 9019. The statute refers to "the property included in such instrument," as being the property held under the "claim of title," and the property held adversely, even though only part thereof be actually occupied by the claimant. The purpose of the rule of "color of title" is that the instrument or document relied on as "color" shall describe the land so that the extent of the claim of an occupant may be determined.

This court has adhered to this rule, and it cannot permit such passing statement, no part of its decision, to be construed as a departure from its recognized and settled decision. The description of the land is the sine qua non of color of title, as it is applied in cases of adverse possession. If the instrument, though invalid or ineffective for the purpose intended, "describes the land with sufficient certainty, purports to convey it, and is not void on its face, it gives color of title." This rule, as stated in Allen v. Mansfield, 108 Mo. 343, 18 S.W. 901, is the rule in Montana. (Morrison v. Linn, 50 Mont. 396,147 P. 166. A description of the land is necessary in an instrument relied on as color of title. Sullivan v. Neel, 105 Mont. 253,73 P.2d 206; Fitschen Bros. Commercial Co. v. Noyes' Estate,76 Mont. 175, 246 P. 773. This is in accord with the language of section 9019, Revised Codes of Montana 1935.

The fact that the instrument under which respondent claimed title did not constitute color of title does not mean, however, that it may not offset against the value of the use of the property, the value of such permanent improvements, if any, which it placed thereon, while in possession thereof in good faith, believing it owned the same. Its right to such set off is not entirely dependent upon the statute, section 9491, Revised Codes.

At common law, after it had adopted the rule of equity, which[11] equity, in turn, had borrowed from the civil law, an occupying claimant in good faith of land upon which he had placed permanent improvements could recoup the value of the improvements, to the extent that they had enhanced the value of the land, against the claim of the true owner for mesne profits. Green v. Biddle, 8 Wheat., 21 U.S. 1, 5 L. Ed. 547; 27 Am. Jur. 262-3.

This rule has been followed in cases at common law, and in some cases recovery over against the true owner when the value of the improvements exceeds the value of the mesne profits has been allowed. The latter is not the prevailing rule, however. See Roses Notes to the cited case in Volume 1 thereof, pages 1191-1202.

How has our occupying claimants Act, section 9491, Revised[12, 13] Codes of 1935, affected the rule? While the Code provides that there is in this state no common law in any case where the law is declared by the Code, it also provides that where the law is not so declared, "if the same is applicable and of a general nature, and not in conflict with the code or other statutes, the common law shall be the law and rule of decision." Sec. 10703, Rev. Codes 1935. There being no words of prohibition in the statute, that in no other cases than the one specifically named in section 9491 is an occupying claimant permitted to recoup the value of improvements placed on the land of another against the owner's claim for use and occupation, it follows that other cases that may arise, such as estoppel by conduct, or by silent acquiescence when under duty to speak, fraud, or the like, are to be governed by the rule and decision of the common law, because the field indicated is not covered by the specific statute. In such cases the rule that a statute upon a subject governed by the common law is not presumed to make any alterations in that law further than is expressly declared, and that a statute, made in the affirmative, without a negative, expressed or implied, does not take away the common law save to the extent that is expressly or by necessary implication so declared. 50 Am. Jur., pp. 339-340, par. 346 and cases cited.

This is the rule in Montana and it is applicable here in the light of the purpose, scope and purview of section 9491, Revised Codes. Conley v. Conley, 92 Mont. 425, 15 P.2d 922; State ex rel. La Point v. District Court, 69 Mont. 29, 220 P. 88; Forrester v. Boston Montana Consol. Copper Silver Min. Co.,21 Mont. 544, 55 P. 229, 353.

It follows that upon the trial, if the facts shown warrant the[14] application of the equitable rules adopted by the common law, such rules may be applied herein. The value of the improvements only to the extent that the value of the property is enhanced thereby may be considered. 27 Am. Jur. 277. The rule does not go to the extent that a judgment over may be given the owner if the value of the improvements exceeds the value of the use of the premises.

For the error of granting the nonsuit the judgment appealed from is reversed and the cause is remanded for a new trial.

Mr. Justice Choate, concurs.

Mr. Justice Angstman, not participating.