## Facts

- Producers Lumber & Supply Co., Inc. owned a residential lot in San Antonio and prepared it for a future home.
- Olney Building Co., acting through its president H.P. Orts, mistakenly believed it owned the lot and constructed a nearly completed residence on it without Producers’ consent or participation.
- After a title check revealed Producers’ ownership and negotiations failed, Orts directed Olney’s crew to enter the lot and demolish the residence, leaving debris and materials on the property.
- The parties stipulated that the dwelling had a value of $5,000 and enhanced the value of the lot by $5,000.
- The jury found: (1) Orts acted in good faith in erecting the building; (2) $600 would restore the lot to its pre-construction condition; (3) Orts acted maliciously in removing the building; and (4) $300 in exemplary damages.
- The trial court awarded Producers $600 only, and Producers appealed seeking damages based on the value/enhancement of the destroyed improvement plus exemplary damages.

## Issues

1. What is the proper measure of compensatory damages when a builder wrongfully demolishes a house affixed to another’s land: restoration cost or the value/enhancement of the improvement as part of the realty?
2. How do a builder’s good faith in mistakenly constructing the improvement and malice in later demolishing it affect compensatory and exemplary damages?

## Decision

- The appellate court reversed the trial court’s limited damages award.
- The court held that the residence, once affixed to the lot, became part of the realty and belonged to the landowner.
- Producers was entitled to compensatory damages measured by the value of the improvement to the land (the stipulated $5,000 enhancement), not merely the $600 restoration cost.
- Because the jury found malice in the demolition, Producers was also entitled to the $300 exemplary damages found by the jury.
- The court rendered judgment consistent with $5,000 actual damages plus $300 exemplary damages.

## Legal Principles

- An improvement affixed to land becomes part of the realty; absent an agreement to the contrary, it belongs to the landowner even if built by mistake.
- Wrongful destruction of an improvement that has become part of the realty is compensable by the diminution in the land’s value attributable to the loss of the improvement, including stipulated enhancement in value.
- Restoration cost is not the exclusive measure of damages when it fails to compensate for destruction of a valuable improvement incorporated into the realty.
- Malicious destruction of another’s property supports exemplary damages in addition to full compensatory damages.

## Conclusion

A landowner whose lot is improved by a mistakenly built house may recover the improvement’s value to the land when the builder later wrongfully demolishes it, and malice in the demolition permits exemplary damages on top of the compensatory award.


Producers Lumber & Supply Co. v. Olney Bldg. Co., 333 S.W.2d 619 (Tex. Civ. App.—San Antonio 1960)