## Facts

- Spears sued to quiet title to an undivided one-half interest in a tract of real property.
- Spears alleged that a deed purporting to convey her one-half interest was forged.
- Madrid occupied the property under the challenged deed for about four years and made improvements during that period.
- Spears conceded that Madrid was entitled to compensation for the improvements made while in good faith, but argued any award should be reduced by profits Madrid earned from using the property while Spears was wrongfully kept out of possession.
- The trial court concluded that Madrid was entitled to a credit for one half the value of the improvements.
- The trial court declined to reduce that credit by profits from Madrid’s use because it had no evidence showing the difference between the land’s rental value in its unimproved condition and its rental value after the improvements.
- The trial court partitioned the property and imposed a lien on Spears’s parcel to secure payment of the improvement credit.
- Madrid appealed, arguing the improvement credit should be measured by the increase in the property’s value attributable to the improvements, not by the improvements’ value standing alone.
- Spears cross-appealed, arguing the trial court should have awarded her an offset for profits from Madrid’s use of the land.

## Issues

1. In awarding restitution to a good-faith occupying claimant for improvements made under a deed later determined invalid, should the measure be the improvements’ value/cost or the amount by which the improvements increased the property’s value?
2. Must the true owner receive an offset for profits or rental value attributable to the occupying claimant’s use of the land, and what proof is required to calculate that offset?

## Decision

- The appellate court agreed that a good-faith improver’s recovery is not determined simply by what the improver spent or by the improvements’ separate value, but by the amount of value the improvements added to the property interest restored to the true owner.
- The appellate court rejected Spears’s request for a profits offset on the record presented, because the proof did not provide a workable basis to determine rental value (or comparable use value) of the land in an unimproved condition so that profits attributable to the land itself could be separated from returns traceable to the improvements.
- The court left in place the equitable framework of partition and a lien to secure whatever net amount was ultimately due, while requiring recalculation of the improvement credit under the proper measure.

## Legal Principles

- A possessor who improves land in good faith under color of title may receive equitable restitution, but the measure is the value actually conferred on the true owner’s restored estate (the value added to the land), not merely the improver’s expenditures.
- In balancing equities between a true owner and a good-faith occupying claimant, benefits received by the occupier from use of the property may be set off against the improvement credit, but the owner bears the burden to present evidence that permits a rational calculation of that use value.
- When the record lacks proof of unimproved rental value (or a comparable baseline), a court may deny a claimed profits offset as too speculative.

## Conclusion

Madrid v. Spears held that compensation for good-faith improvements must be tied to the value added to the property interest returned to the true owner, rather than to improvement cost or stand-alone improvement value, and it refused to award Spears a profits offset where the evidence did not allow the court to determine the land’s unimproved rental value; the judgment’s equitable structure, including partition and a lien securing the improver’s credit, remained subject to recalculation under the correct measure.


Madrid v. Spears, 220 F.2d 51 (1957)