So far as concerns the issues before this court, the facts of this case are as follows:
The Rock Island Improvement Company sued J. C. Brookfield alleging that, under a bona fide claim of title, it had paid taxes for many years on lands owned by Brookfield. It asked judgment for such taxes, with interest; for a lien on the land to secure the payment of the judgment, and for a foreclosure of such lien.
Brookfield's answer "expressly pleads the statute of limitations in bar of plaintiff's right of recovery." Brookfield later filed a plea, which he styled "Exceptions to Depositions and Amendment to Answer," and, in such pleading, he excepted to "any tax payments . . . beyond three years, and again pleads the statute of three years limitations provided under 8928, Pope's Digest."
The chancery court gave judgment for the taxes paid over a period of eighteen years, with interest, declared it a lien on the land and ordered a sale. Brookfield has appealed.
The suit was begun on January 16, 1941, and the taxes paid within three years prior thereto were those for the years 1937, 1938 and 1939.
The court found, and there was sufficient evidence to sustain its finding, that plaintiff had paid the taxes in good faith, claiming to be the owner of the land and without knowledge of any claim to said lands by the defendant. The plaintiff was not officious in making the *Page 575 payments. Defendant knew of the payments and never did anything about them.
The plaintiff is entitled to recover the taxes it has paid, except such payments as are barred by the statute of limitations, and to a lien on the lands to secure the payment thereof.
The basis of the right to recover is that the defendant has been unjustly enriched at the expense of the plaintiff, and that plaintiff is entitled to restitution therefor. See 1 of Restatement of the Law of Restitution.
In 43 of Restatement of the Law of Restitution it is said: "A person who, by payment to a third person, . . . has released another's property from an adverse interest, . . . acting because of an erroneous belief induced by a mistake of fact that he was thereby discharging a duty of his own or releasing property of his own from a lien, is entitled to restitution from such other of the value of the benefit conferred up to the value of what was given, unless the other disclaims the transaction."
In 54 of Restatement of the Law of Restitution, a similar statement is made as to the law where such a payment is made because of an erroneous belief induced by a mistake of law.
To enforce this right of restitution for the taxes it has paid in good faith, but under a mistake, equity creates for the plaintiff a lien on the lands — a lien similar in many respects to the lien which was released or satisfied by such payments. The language the courts use is that plaintiff is "subrogated" to the tax lien. The original tax lien is, however, gone. The plaintiff is not a transferee or assignee of the original right to exact taxes from the lands nor of the lien to secure that right. Equity creates a new lien for he protection of his right to restitution. In Belleclair Planting Co. v. Hall, 125 Ark. 203,188 S.W. 574, Mr. Justice HART, speaking for the court, points out that "subrogation" is an equitable right and that the lien created by subrogation is a creature of equity and will not be enforced where it will work an *Page 576 injustice to those having an equal equity. This would not be true if the original right and lien were still in existence and the plaintiff were the holder thereof by transfer or assignment. The subject is discussed in 162 of the Restatement of the Law of Restitution. Subrogation is a remedial device, similar to the creation of a constructive trust.
The plaintiff's right of recovery is subject to the statute of limitations. Section 8928 of Pope's Digest provides: "The following actions shall be commenced within three years after the cause of action shall accrue, and not after: First. All actions founded upon any contract or liability, expressed or implied, not in writing . . ."
In Richardson v. Bales, 66 Ark. 452, 51 S.W. 321, it was held that an action for the recovery of money paid under a mistake is barred in three years, where there was no fraudulent concealment, even though the mistake was not discovered until some time after.
In Person v. Cogbill, 180 Ark. 664, 22 S.W.2d 161, plaintiff sued to recover taxes paid, over a period of fifteen years, under an alleged agreement with the landowner. This court first found that there was no agreement and that the plaintiff was a stranger and a volunteer, and held that he could not recover any of the taxes so paid. This court then said, page 666: ". . . and in no event could he have recovered, the statute of limitations being pleaded, more than the amount of the taxes for three years, had the evidence supported his contention of an express promise by appellant to repay the taxes." This statement may be regarded as dicta in that opinion, but we regard it as a correct statement of the law, and adopt it as such.
In 104a, illustration 3 (p. 437) of Restatement of the Law of Restitution, in discussing the right to restitution of one who has paid taxes under somewhat similar circumstances, the statement is made that the statute of limitations runs from the time of the payment.
The appellee argues that the statute of limitations is not applicable, that when the taxes were due to the state, *Page 577 the sovereign, the statute of limitations did not run against it; that when the plaintiff paid the taxes under a mistake it was entitled to be "subrogated" to the state's rights, and, therefore, has the same immunities that the state had. It cites the case of Childs v. Smith, et al., 51 Wash. 457, 99 P. 304, 21 L.R.A., N.S., 263, 130 Am. St. Rep. 1100. The case does support appellee's contention, but we do not agree that it states the law which is applicable in this state.
Some of the explanations which have been given for the doctrine that the statute of limitations does not run against the sovereign are stated in 37 C.J., p. 711. It is said that the sovereign ought not to be injured by the neglect of its officers; or, that the sovereign's time and attention are occupied by the cares of government and it must not be held to be negligent in its delay. It is also said that the sovereign will not be presumed to advance any unjust or oppressive claim. Even if the plaintiff could be regarded as a transferee or assignee of the sovereign's rights (which it is not), still none of the reasons for the sovereign's immunity from limitations would apply. Plaintiff seeks to enforce rights which it holds purely for its private benefit. The sovereign has no further interest. When these taxes were paid all of the sovereign's interest ceased, just as the sovereign's interest in land ceases when the sovereign conveys the land. Limitation will not operate to deprive the sovereign of title to land, but it will operate against its grantee who holds the land in a purely private capacity.
The contention that limitations will not run against this plaintiff, because it is said to be "subrogated" to the rights of the sovereign, overlooks the true nature of the so-called subrogation. The basis of the right to recover is unjust enrichment. There has been no transfer or assignment of the right to exact taxes. The plaintiff is entitled to restitution. In order to secure this right, equity gives the plaintiff a lien on the land — a lien similar in some respects to the lien which the payments released. We call this process a "subrogation," but in truth and in fact this lien is a new creation, and is created and given by equity as a means of protecting and enforcing *Page 578 the right to restitution. The person for whose protection this equitable right is created does not step into the shoes nor acquire all of the personal characteristics, privileges and immunities of the holder of the original lien. For one example, the sovereign can enforce its lien by a tax sale. The plaintiff here could not do so. The state's rights are free from all equities. Those of the plaintiff may be subject to the equities of others. It is not the state's tax lien which will be enforced, but a new lien created by equity as a remedial device to secure and protect the right of restitution which is personal to the plaintiff.
It follows that the statute of limitations applies and that, the statute having been pleaded, the chancellor erred in giving judgment for taxes paid prior to three years before the bringing of the suit.
When the case was tried below there was a bona fide dispute as to the title. During the pendency of the suit the plaintiff paid the taxes for 1940, due in 1941, and is entitled to reimbursement for those taxes as well as for the taxes paid within three years prior to the suit.
As the decree herein affected the title to land, the order of the court will be that the decree be reversed and the cause remanded with directions to modify the decree heretofore entered and to enter judgment in favor of the appellee for the taxes for the years 1937 to 1940, inclusive, with interest from the date they were paid, and for further proceedings not inconsistent with this opinion. Costs in both courts will be taxed against the appellee.