## Facts

- A testator devised a New York farm to Charles Octavius Livingston as a life tenant, with a remainder in fee to Octavius’s son, Charles Victor Livingston, and included a restraint against conveyance outside the family.
- Despite having only a life estate, Octavius purported to convey the farm in fee to Morss.
- In 1872, Morss granted the New York, Ontario & Western Railroad a right-of-way through the farm and later conveyed additional interests to the railroad.
- The railroad, acting under deeds and believing it owned the strip, built and paid for substantial railroad facilities on the land, including tracks, a station, and a freight house.
- After Octavius died in 1914, Victor’s remainder became possessory; in 1917 he sued in ejectment and won, establishing his title and entitlement to possession against the railroad.
- The railroad then commenced a condemnation proceeding to acquire the land needed for railroad purposes.
- The valuation proceeding treated the bare land as worth about $15,000 and the railroad-constructed improvements as worth about $49,000; the lower courts awarded Victor the combined total as compensation.

## Issues

1. In a condemnation proceeding, must just compensation to the fee owner include the value of improvements built and paid for by the condemnor in good faith under a mistaken belief of ownership?
2. Should valuation reflect the property’s enhanced value due to such improvements, or be limited to the owner’s compensable interest to avoid a windfall?
3. Does a prior ejectment judgment establishing the owner’s title require treating the condemnor’s improvements as the owner’s compensable property in condemnation?

## Decision

- The Court of Appeals modified the award.
- Victor was entitled to compensation for the land taken.
- Victor was not entitled to recover the full value of improvements the railroad itself erected in good faith under color of title.
- The condemnation award was reduced to exclude the improvement value as such and to reflect only compensation properly attributable to Victor’s interest.

## Legal Principles

- Just compensation is payment for what the owner loses by the taking; it is not a mechanism to transfer to the owner the full value of improvements created and funded by another acting in good faith under mistaken title.
- When a condemnor has made substantial improvements in good faith, condemnation valuation may be adjusted to prevent unjust enrichment of the titleholder and to avoid requiring the condemnor to pay twice for its own investment.
- A judgment in ejectment determines title and possession but does not control the equitable measure of just compensation in a later condemnation proceeding involving good-faith improvements.
- Condemnation compensation is a substitute for the property interest taken, not a penalty against the condemnor.

## Conclusion

The court held that in condemning land occupied under mistaken title, the owner receives compensation for the land interest taken, but not a windfall equal to the value of railroad improvements the condemnor built in good faith; the award was modified accordingly.


N.Y., Ont. & W. Ry. Co. v. Livingston, 238 N.Y. 300, 144 N.E. 589 (N.Y. 1924)