Case Summary (G.R. No. 79688)
Key Dates
– March 26, 1974: Kee acquires rights to Lot 8 under an installment contract.
– January 20 & 27, 1975: Kee pays relocation and lot‐plan fees to CTTEI.
– December 19, 1978: Transfer Certificate of Title No. 106367 issued to Jardinico for Lot 9.
– March 12, 1981: Jardinico files ejectment suit against Kee.
– August 20, 1987: Decision of the Court of Appeals.
– February 1, 1996: Decision of the Supreme Court.
Applicable Law
– 1987 Philippine Constitution
– New Civil Code of the Philippines:
• Articles on builders in good faith and bad faith (Arts. 526–527, 448, 546, 548)
• Agency and principal’s liability (Arts. 1897, 1909–1910)
• Attorney’s fees (Art. 2208)
Facts
Kee contracted through CTTEI to purchase Lot 8 and paid fees for lot relocation and planning. CTTEI’s employee mistakenly led Kee and his wife to Lot 9, where Kee built a house, store, and repair shop. Upon securing title to Lot 9, Jardinico demanded ejectment. The MTCC attributed the error to CTTEI, rescinded Kee’s contract for default, ordered ejectment, removal of improvements, rentals, and held CTTEI and petitioner liable for attorney’s fees. The RTC reversed CTTEI’s liability, found Kee a bad-faith builder, ordered ejectment, removal of improvements, and rentals but dismissed CTTEI as third-party defendant. The Court of Appeals reversed the RTC, declaring Kee a good-faith builder entitled to civil‐code rights, imputing CTTEI’s negligence to petitioner, dispensing with rentals, and directing CTTEI and petitioner to answer for demolition costs or land-value, plus attorney’s fees.
Issues
- Whether Kee qualifies as a builder in good faith.
- The extent of petitioner’s and CTTEI’s liability for the erroneous delivery.
- The propriety of the award of attorney’s fees.
Analysis of Good Faith
Under Arts. 526–527, good faith exists when a builder sincerely believes in the validity of his title and is ignorant of any defect. Kee pursued customary safeguards—engaging CTTEI for a relocation survey and lot plan, relying on its geodetic engineer and employee’s identification. As a non-expert, he was not obliged to conduct independent checks beyond ordinary business practice. The presumption of good faith shifted the burden to petitioner to prove bad faith, which it failed to do. Contractual breaches regarding notice or approval of improvements do not negate Kee’s state of mind at the time of construction on Lot 9.
Analysis of Principal’s Liability
Pursuant to Arts. 1909–1910, a principal is liable for its agent’s negligent acts within the scope of authority. CTTEI, as petitioner’s exclusive real estate representative, had authority to deliver lots and guide purchasers on location. Its employee’s error in pointing to Lot 9 constitutes a negligent act within that scope, rendering petitioner solidarily liable for resulting damages. The subsequent deed of sale between Kee and Jardinico, resolving their inter se rights, does not affect petitioner’s independent obligation to compensate for its agent’s negligence. The CA’s additional mandate—requiring CTTEI and petitioner to fund demolition or land pu
Case Syllabus (G.R. No. 79688)
Procedural Posture
- Petition for review on certiorari to the Supreme Court under G.R. No. 79688, filed by Pleasantville Development Corporation (Petitioner).
- Challenged the Court of Appeals Decision in CA-G.R. SP No. 11040 promulgated August 20, 1987.
- Case transferred to the Third Division of the Supreme Court by resolution dated November 13, 1995.
- Supreme Court assigned Justice Panganiban as ponente for the final decision.
Facts
- Edith Robillo originally purchased Lot 9 in Pleasantville Subdivision; Eldred Jardinico acquired it in 1975 and secured TCT No. 106367 on December 19, 1978.
- Wilson Kee bought Lot 8 on installment from C.T. Torres Enterprises, Inc. (CTTEI) in March 1974, paid relocation and plan fees in January 1975, then was shown the wrong parcel (Lot 9) by CTTEI’s employee, Zenaida Octaviano.
- Kee proceeded to build a residence, store, auto repair shop, and other improvements on the misdelivered Lot 9.
- Upon discovering the error, Jardinico demanded vacatur and removal of improvements on January 30, 1981; Kee refused.
- Jardinico filed an ejectment complaint with damages in the Municipal Trial Court in Cities (MTCC), Branch 3, Bacolod City; Kee filed a third-party complaint against Petitioner and CTTEI.
MTCC Decision
- Held CTTEI negligent for erroneous lot delivery; Petitioner liable as principal.
- Found Kee’s right to the contract over Lot 8 rescinded in 1979; he had no right to remain on Lot 9.
- Ordered Kee to vacate, remove improvements, and pay P15/day rentals from suit filing until actual vacatur, with 12% interest.
- Ordered Petitioner and CTTEI to pay P3,000 attorney’s fees and P700 costs, jointly and severally.
RTC Decision
- Affirmed the ejectment and removal orders against Kee and the P15/day rental obligation from January 30, 1981.
- Reversed award of attorney’s fees and costs against Petitioner and CTTEI; dismissed third-party complaint.
- Held Kee a builder in bad faith or, at best, liable for unlawful detainer from notice date.