Posted: April 12, 2017 in case digests, civil law, torts
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G.R. No. 150666



Respondents’ spouses purchased a land from Vergon Realty located in a subdivision in Las Pinas (Lot 2R) with a registered TCT. Vergon on the other hand owns the adjacent land (Lot 2S).


In 1984, after obtaining the building permit and approval of Vergon, Jose Macabagdal constructed a house on Lot 2R which they thought was Lot 2S. After being informed of the mix up, spouses immediately demanded for demolition of the house constructed. Jose, refused. Spouses then filed an action to recover ownership and possession of the said land in RTC Makati.


Jose, insisted that the lot which they constructed their house was the lot which was consistently pointed to them by the Vergon’s agents over the 7-year period of paying the lot. They interposed the defense of being buyers in good faith and impleaded indemnity from Vergon because of the warranty against eviction, in case the suit is decided against them.


RTC ruled in favor of the spouses. Defendants were ordered to demolish their house and vacate the premises and return the possession of the lot to the spouses with damages. Defendants counterclaim as well as the 3rd-party complaint were dismissed for lack of merit and with no cause of action.  On appeal, CA affirmed the RTC. Saying that, there was no basis that the error was Vergon’s fault and that they cannot invoke the defense of a purchaser in good faith for wrongful occupation of the land.


Thus, this petition.


Issue: In the main, it is petitioners’ position that they must not bear the damage alone. Petitioners insist that they relied with full faith and confidence in the reputation of Vergon’s agents when they pointed the wrong property to them. Even the President of Vergon, Felix Gonzales, consented to the construction of the house when he signed the building permit. Also, petitioners are builders in good faith.


Held: Petition is partly meritorious.


RATIO: RTC erred in out rightly ordering petitioners to vacate the subject property or to pay respondent spouses the prevailing price of the land as compensation.  Article 527[14] of the Civil Code presumes good faith, and since no proof exists to show that the mistake was done by petitioners in bad faith, the latter should be presumed to have built the house in good faith (Art. 448).


The builder in good faith can compel the landowner to make a choice between appropriating the building by paying the proper indemnity or obliging the builder to pay the price of the land. The choice belongs to the owner of the land, a rule that accords with the principle of accession, i.e., that the accessory follows the principal and not the other way around.  However, even as the option lies with the landowner, the grant to him, nevertheless, is preclusive. He must choose one. He cannot, for instance, compel the owner of the building to remove the building from the land without first exercising either option.  It is only if the owner chooses to sell his land, and the builder or planter fails to purchase it where its value is not more than the value of the improvements, that the owner may remove the improvements from the land.  The owner is entitled to such remotion only when, after having chosen to sell his land, the other party fails to pay for the same.


Moreover, petitioners have the right to be indemnified for the necessary and useful expenses they may have made on the subject property. Articles 546 and 548 of the Civil Code provide,


ART. 546. Necessary expenses shall be refunded to every possessor; but only the possessor in good faith may retain the thing until he has been reimbursed therefor.


Useful expenses shall be refunded only to the possessor in good faith with the same right of retention, the person who has defeated him in the possession having the option of refunding the amount of the expenses or of paying the increase in value which the thing may have acquired by reason thereof.


ART. 548.  Expenses for pure luxury or mere pleasure shall not be refunded to the possessor in good faith; but he may remove the ornaments with which he has embellished the principal thing if it suffers no injury thereby, and if his successor in the possession does not prefer to refund the amount expended.

Consequently, the respondent-spouses have the option to appropriate the house on the subject land after payment to petitioners of the appropriate indemnity or to oblige petitioners to pay the price of the land, unless its value is considerably more than the value of the structures, in which case petitioners shall pay reasonable rent.


As to the liability of Vergon, petitioners failed to present sufficient evidence to show negligence on Vergon’s part. It is the plaintiff who has to prove by a preponderance of evidence: (1) the damages suffered by the plaintiff; (2) the fault or negligence of the defendant or some other person for whose act he must respond; and (3) the connection of cause and effect between the fault or negligence and the damages incurred.


Considering that petitioners acted in good faith in building their house on the subject property of the respondent-spouses, there is no basis for the award of moral damages to respondent-spouses. Likewise, the Court deletes the award to Vergon of compensatory damages and attorney’s fees for the litigation expenses Vergon had incurred as such amounts were not specifically prayed for in its Answer to petitioners’ third-party complaint. Under Article 2208 of the Civil Code, attorney’s fees and expenses of litigation are recoverable only in the concept of actual damages, not as moral damages nor judicial costs. Hence, such must be specifically prayed for—as was not done in this case—and may not be deemed incorporated within a general prayer for “such other relief and remedy as this court may deem just and equitable.” It must also be noted that aside from the following, the body of the trial court’s decision was devoid of any statement regarding attorney’s fees. In Scott Consultants & Resource Development Corporation, Inc. v. Court of Appeals, we reiterated that attorney’s fees are not to be awarded every time a party wins a suit. The power of the court to award attorney’s fees under Article 2208 of the Civil Code demands factual, legal, and equitable justification; its basis cannot be left to speculation or conjecture. Where granted, the court must explicitly state in the body of the decision, and not only in the dispositive portion thereof, the legal reason for the award of attorney’s fees.



WHEREFORE, the Decision dated December 11, 2000 of the Court of Appeals in CA-G.R. CV No. 48109 is AFFIRMED WITH MODIFICATION. The award of moral damages in favor of respondent-spouses Jose and Fe Macabagdal and the award of compensatory damages and attorneys fees to respondent Vergon Realty Investments Corporation are DELETED. The case is REMANDED to the Regional Trial Court of Makati City, Branch 135, for further proceedings consistent with the proper application of Articles 448, 546 and 548 of the Civil Code.


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