Case Summary (G.R. No. 79688)
Petitioner
- Pleasantville Development Corporation, owner and developer of Pleasantville Subdivision; principal of CTTEI, its exclusive real estate agent responsible for lot relocation and delivery.
Respondents
- Wilson Kee: contracted to buy Lot 8, took possession after CTTEI’s pointing-out, constructed residence and commercial improvements on the lot wrongly identified as Lot 8 (in fact Lot 9).
- C.T. Torres Enterprises, Inc. (CTTEI): petitioner’s agent that prepared lot plan and accompanied Kee’s wife to inspect the lot; employee Octaviano pointed to Lot 9 in error.
- Eldred Jardinico: bought Lot 9 from Edith Robillo, later registered under TCT No. 106367 and sued Kee for ejectment and damages.
Key Dates and Transactions
- March 26, 1974: Kee bought on installment Lot 8 from CTTEI.
- January 20 & 27, 1975: Kee paid relocation and lot plan fees to CTTEI.
- December 19, 1978: Jardinico secured TCT No. 106367 for Lot 9.
- March 12, 1981: Jardinico filed ejectment suit against Kee.
- July 24, 1987: Kee and Jardinico executed a deed of sale wherein Jardinico sold Lot 9 to Kee; they agreed the litigation between them would be disregarded.
- Decision under review and final disposition occurred after 1990; therefore the 1987 Constitution is the governing constitutional framework for the Court’s exercise of jurisdiction.
Applicable Law and Authorities Cited
- Civil Code provisions relevant to rights and remedies of builders and owners: Articles 448, 526–528 (presumptions and builders’ rights), 546, 548.
- Agency and principal liability: Articles 1897, 1909, 1910 (Civil Code).
- Waiver and public policy: Article 6 (Civil Code).
- Damages and costs: Article 2208 (Civil Code) and court discretion on attorney’s fees (cited precedents).
Facts Found by the Courts
- Kee paid for lot relocation and received a lot plan; CTTEI’s employee Octaviano accompanied Kee’s wife to identify the lot but erroneously pointed to Lot 9. Kee then constructed multiple improvements on the lot subsequently revealed to be Lot 9, owned by Jardinico.
- MTCC found CTTEI responsible for the erroneous delivery, held Kee had no right after contract rescission, ordered ejectment, removal of improvements, rentals, and awarded attorney’s fees to Jardinico.
- RTC reversed the finding of CTTEI/petitioner’s fault, found Kee a builder in bad faith and liable for rentals from the date of demand, and dismissed third-party claims against petitioner/CTTEI.
- Court of Appeals reversed the RTC, declared Kee a builder in good faith, imputed CTTEI’s negligence to petitioner, awarded Kee rights under Articles 448, 546 and 548, ordered petitioner and CTTEI solidarily liable under specified circumstances (demolition or sale), reinstated attorney’s fees, and remanded for valuation of improvements and land.
Issues Presented
- Whether Kee was a builder in good faith when he constructed improvements on Lot 9.
- Whether petitioner Pleasantville Development Corporation (and CTTEI as its agent) is liable for CTTEI’s erroneous pointing-out/delivery.
- Whether the award of attorney’s fees to Jardinico is proper.
Analysis — Builder in Good Faith
- Legal standard: Good faith of a builder consists in his belief that the land he is building upon is his and ignorance of any defect in title; good faith is presumed (Arts. 526–527; precedent Floreza v. Evangelista).
- Application: Kee took reasonable steps to verify his lot (paid relocation fee, obtained lot plan, and inspected the lot accompanied by CTTEI’s employee who positively identified the lot). Given his lay status regarding technical descriptions and the authoritative identification by CTTEI’s representative, Kee’s reliance was reasonable.
- Contractual breaches (violations of paragraphs 22 and 26 requiring notice and approval for construction) affect contractual remedies but do not negate the presumption of good faith as to the state of mind at the time improvements were made.
- Rescission of Kee’s installment contract prior to Jardinico’s complaint affects Kee’s contractual rights but does not disprove that Kee acted in good faith when constructing the improvements.
- Conclusion: Kee was properly declared a builder in good faith; burden was on petitioner to prove bad faith and it failed to do so.
Analysis — Principal and Agent Liability
- Governing principle: A principal is liable for acts of its agent done within the scope of authority; an agent exceeding authority may be personally liable, but negligence by an agent acting within authority is imputable to the principal (Arts. 1897, 1909, 1910; Lopez v. Alvendia).
- Application: CTTEI was the exclusive agent tasked with relocation and lot delivery. The erroneous pointing-out occurred in the course of CTTEI’s authorized duties; while the agent did not exceed the scope of its authority, it acted negligently. That negligence is attributable to Pleasantville as principal.
- Limits on remedies ordered by Court of Appeals: The Supreme Court found error in the appellate court’s imposition of specific solidary liability forms (i.e., requiring petitioner/CTTEI to pay demolition expenses or the land value to effect ownership transfer), reasoning that the rights and remedies between owner and builder are governed by the Civil Code (Arts. 448, 546, 548) and that the Court of Appeals improperly modified statutory rules under the guise of equity.
- Procedural posture affecting damages: No proper evidence on the extent or amount of damages was adduced at trial, so petitioner’s liability for damages could not be quantified on the present record. The deed of sale between Jardinico and Kee, executed July 24, 1987, settles the reciprocal rights between those two parties and renders unnecessary the remand for valuation contemplated by the Court of Appeals.
- Conclusion: Petitioner is liable for damages caused by its agent’s negligence, but the particular remedies and quantification of damages requested by the Court of Appeals were not sustained; items in the appellate disposition imposing specific solidary obligations (demolition costs or land payment) were deleted.
Analysis — Attorney’s Fees
- Legal rule and discretion: Award of attorney’s fees lies within the court’s discretion and depends on circumstances (cited precedent). Article 2208 provides for recovery of damages including attorney’s fees where appropriate.
- Application: Because Jardinico was compelled to litigate to protect his rights due to the agent’s negligence, t
Case Syllabus (G.R. No. 79688)
Case Caption, Citation and Panel
- Reported at 323 Phil. 12, Third Division; G.R. No. 79688; Decision promulgated February 1, 1996.
- Ponente: Justice Panganiban; Narvasa, C.J. (Chairman), Davide, Jr., and Melo, JJ., concur. Justice Francisco took no part and was a member of the division in the Court of Appeals which rendered the assailed decision.
- The petition is a petition for review on certiorari to reverse the Decision of the Court of Appeals in CA-G.R. SP No. 11040 promulgated August 20, 1987; case transferred to the Third Division by resolution dated November 13, 1995.
Procedural Posture and Relief Sought
- Petition seeks review of the Court of Appeals’ reversal of trial court findings and of the CA’s dispositive orders that (a) declared Wilson Kee a builder in good faith with rights under Articles 448, 546 and 548 of the New Civil Code; (b) imposed solidary liability on third-party defendants C.T. Torres Enterprises, Inc. (CTTEI) and Pleasantville Development Corporation for demolition expenses or value of improvements/land under certain circumstances; (c) awarded attorney’s fees and litigation expenses to plaintiff; and (d) dispensed with award of rentals.
- The Supreme Court was asked to determine: (1) whether Kee was a builder in good faith; (2) the liability of petitioner Pleasantville Development Corporation and its alleged agent CTTEI; and (3) the propriety of the award of attorney’s fees.
Stipulated and Found Facts
- Edith Robillo purchased a parcel designated Lot 9, Phase II, Pleasantville Subdivision, Taculing Road, Bacolod City, from petitioner; in 1975 respondent Eldred Jardinico bought Robillo’s rights to that lot.
- At the time of Jardinico’s purchase, Lot 9 was vacant. After completing payments, Jardinico secured Transfer Certificate of Title No. 106367 in his name on December 19, 1978.
- Respondent Wilson Kee bought on installment Lot 8 of the same subdivision from C.T. Torres Enterprises, Inc. (CTTEI), the exclusive real estate agent of petitioner, under a Contract to Sell on Installment dated March 26, 1974.
- Under the Contract to Sell on Installment, Kee could possess the lot before completion of all installment payments.
- Kee paid CTTEI a relocation fee of P50.00 on January 20, 1975 and another P50.00 on January 27, 1975 for preparation of the lot plan; these payments occurred prior to Kee’s taking actual possession of Lot 8.
- CTTEI prepared a lot plan and delivered a copy to Kee; CTTEI’s employee Zenaida Octaviano accompanied Kee’s wife, Donabelle Kee, to inspect what CTTEI identified as Lot 8, but Octaviano pointed to Lot 9 in error.
- Kee thereafter constructed his residence, a store, an auto repair shop and other improvements on the mistakenly pointed parcel (Lot 9).
- After Jardinico discovered Kee’s occupation and improvements on Lot 9, he confronted Kee; parties attempted settlement but failed.
- On January 30, 1981 Jardinico’s lawyer demanded Kee remove improvements and vacate Lot 9; Kee refused.
- Jardinico filed ejectment with damages in the Municipal Trial Court in Cities (MTCC), Branch 3, Bacolod City; Kee filed a third-party complaint against petitioner Pleasantville Development Corporation and CTTEI.
MTCC Disposition and Findings
- MTCC held that the erroneous delivery of Lot 9 to Kee was attributable to CTTEI.
- MTCC found petitioner and CTTEI could not successfully invoke Kee’s failure to give notice required by paragraph 22 of the contract or Kee’s having built a sari-sari store without prior approval under paragraph 26, because those requirements merely regulated the type of improvements.
- MTCC found petitioner had rescinded the contract with Kee over Lot 8 for nonpayment in 1979, unchallenged by Kee; thus Kee no longer had any right over Lot 8.
- MTCC concluded Kee must pay reasonable rentals for use of Lot 9 and cannot claim reimbursement for improvements introduced.
- MTCC’s judgment (as disposed): Kee ordered to vacate Lot 9 and remove all structures; Kee ordered to pay rentals at P15.00 a day from suit filing on March 12, 1981 until vacatur with 12% interest per annum; CTTEI and Pleasantville ordered jointly and severally to pay Jardinico P3,000.00 as attorney’s fees and P700.00 as costs and litigation expenses.
Regional Trial Court (RTC) Disposition on Appeal
- On appeal, RTC, Branch 48, Bacolod City, ruled that petitioner and CTTEI were not at fault or negligent, as no preponderant evidence showed direct participation in wrongful delivery.
- RTC found Kee to be a builder in bad faith.
- RTC held that even if Kee had been in good faith, upon service of demand to vacate he unlawfully usurped Jardinico’s possessory right from that time and was liable for rental.
- RTC’s final disposition: affirmed MTCC’s order for Kee to vacate and remove improvements and to pay P15.00 per day as rental computed from January 30, 1981 (date of demand) with 12% interest; judgment against Kee to pay P3,000.00 as attorney’s fees plus costs; third-party complaint against petitioner and CTTEI dismissed; order against third-party defendants to pay attorney’s fees reversed.
Court of Appeals Decision (Assailed)
- Court of Appeals reversed the RTC and declared:
- Wilson Kee a builder in good faith with respect to improvements he introduced on Lot 9, entitled to rights under Articles 448, 546 and 548 of the New Civil Code.
- CTTEI was negligent in delivering the wrong lot (error attributable to CTTEI’s employee Octaviano), and such negligence was imputable to its principal, Pleasantville Development Corporation.
- CTTEI and Pleasantville were ordered solidarily liable under specified circumstances:
- If Jardinico appropriated the improvements and then removed them, third-party defendants to answer for demolition expenses and value of destroyed or rendered useless improvements.
- If Jardinico preferred that Kee buy the land, third-party defendants to answer for the amount representing the value of Lot 9 that Kee should pay to Jardinico.
- Third-party defendants ordered to pay in solidum P3,000.00 to Jardinico as attorney’s fees and litigation expenses.
- Award of rentals to Jardinico dispensed with.
- Case remanded to determine actual value of improvements and property (Lot 9) and for proceedings under Article 448 of the New Civil Code.