GR 115814; (May, 1995) (Digest)
G.R. No. 115814 . May 26, 1995. PEDRO P. PECSON, petitioner, vs. COURT OF APPEALS, SPOUSES JUAN NUGUID and ERLINDA NUGUID, respondents.
FACTS
Petitioner Pedro Pecson owned a commercial lot in Quezon City with a four-door apartment building. Due to unpaid realty taxes, the lot was sold at public auction to Mamerto Nepomuceno, who later sold it to respondent spouses Juan and Erlinda Nuguid. Pecson challenged the auction sale’s validity. The trial court dismissed his complaint, and the Court of Appeals affirmed, explicitly ruling that the auction and subsequent sale pertained only to the land, not the building. This decision became final.
Subsequently, the respondents filed a motion for delivery of possession of both the lot and the building, invoking Article 546 of the Civil Code, offering to reimburse the 1965 construction cost of P53,000. The trial court granted the motion, ordering the reimbursement, offsetting it against purported lot rentals, and issuing a writ of possession. The Court of Appeals affirmed this order.
ISSUE
Whether the trial court and the Court of Appeals correctly applied Article 546 of the Civil Code in ordering the delivery of the building upon payment of its 1965 construction cost.
RULING
No. The Supreme Court reversed the decisions. The legal logic is anchored on the proper application of Article 546 concerning useful expenses and the right of retention. The provision grants a builder in good faith the right to retain the improvement until reimbursed for useful expenses. Crucially, the indemnity due is not the original construction cost but the current market value of the improvement at the time of reimbursement. The trial court erred in fixing the indemnity at the 1965 construction cost of P53,000, as this amount did not reflect the building’s present worth.
Furthermore, the right of retention is a subsidiary right following from the principal right to be indemnified. Since the builder retains ownership of the improvement until proper indemnity is paid, he is also entitled to the fruits and income derived from it. Therefore, the lower courts erred in ordering Pecson to account for rentals from the building. The case was remanded to the trial court to receive evidence and determine the apartment building’s current market value, which the respondents must pay to acquire it; otherwise, Pecson would be restored to its possession.