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PLEASANTVILLE DEVELOPMENT CORPORATION v. CA

FACTS:

The case involves a dispute between Edith Robillo, who purchased a parcel of land from the petitioner (unidentified), and Eldred Jardinico, who bought the rights to the lot from Robillo. Jardinico later discovered that improvements had been introduced on the lot by Wilson Kee, who had taken possession of the property. It was found that Kee had bought a different lot in the same subdivision from C.T. Torres Enterprises, Inc. (CTTEI), the exclusive real estate agent of petitioner. Kee was mistakenly directed by CTTEI's employee to Lot 9 instead of Lot 8, where he intended to construct his residence and other improvements. After failed attempts at an amicable settlement, Jardinico filed a complaint for ejectment with damages against Kee. Kee, in turn, filed a third-party complaint against petitioner and CTTEI. The Municipal Trial Court in Cities (MTCC) ruled that the delivery of the wrong property to Kee was attributable to CTTEI and ordered Kee to vacate Lot 9 and remove the improvements he introduced. The MTCC also held that petitioner had already rescinded its contract with Kee over Lot 8, rendering Kee's claim over the property invalid. The Regional Trial Court (RTC), on appeal, affirmed the MTCC's ruling and held petitioner and CTTEI not at fault, considering Kee a builder in bad faith.

In this case, Wilson Kee (Kee) commenced construction of improvements on Lot 8, believing it to be the lot he purchased. However, it was later revealed that Kee was actually occupying Lot 9, which was owned by Eldred Jardinico (Jardinico) and sold to him by Pleasantville Development Corporation, the petitioner herein. Kee filed a third-party complaint against C.T. Torres Enterprises, Inc. (CTTEI) and Pleasantville Development Corporation, seeking reimbursement for the value of the improvements and damages. The Regional Trial Court dismissed the third-party complaint and ordered Kee to pay rentals to Jardinico. On appeal, the Court of Appeals reversed the RTC's ruling, declaring Kee a builder in good faith and holding CTTEI and Pleasantville Development Corporation partly liable for the demolition expenses and the value of the improvements. The appellate court also awarded attorney's fees to Jardinico. Petitioner then filed a petition against Kee, Jardinico, and CTTEI, raising various grounds for review, including the issue of whether Kee was a builder in good faith.

ISSUES:

  1. Was Kee a builder in good faith?

  2. What is the liability, if any, of petitioner Pleasantville Development Corporation and its agent, C.T. Torres Enterprises, Inc.?

  3. Is the award of attorney's fees proper?

RULING:

  1. On Good Faith

    The Supreme Court affirmed the Court of Appeals' ruling that Kee was a builder in good faith. The Court recognized that Kee acted as a prudent man in ascertaining the identity of his property and relied on the expertise and authority of the subdivision developer's agent. Thus, Kee's good faith was established, and he was unaware that the lot delivered to him was not Lot 8.

  2. On Petitioner's Liability

    The Supreme Court held that the petitioner, as the principal, was responsible for the negligent acts of its agent, C.T. Torres Enterprises, Inc., which were within the scope of its authority. The agent’s mistake of pointing out the wrong lot constituted negligence, binding the principal to the resulting liabilities.

  3. On Attorney's Fees

    The award of attorney's fees by the Court of Appeals was upheld. Given the circumstances where Jardinico was forced to litigate to protect his interest because of the negligence of petitioner's agent, the awarding of attorney's fees was deemed proper by the Supreme Court.

PRINCIPLES:

  1. Good faith of a builder is presumed, and the burden of proof for bad faith lies on the challenger.

  2. A principal is liable for the acts of its agent when such acts are within the scope of authority, even if performed negligently.

  3. The waiver of rights cannot contravene public policy or be prejudicial to a third person with a recognized legal right.

  4. Attorney’s fees can be awarded at the discretion of the court based on the circumstances, especially if a party was compelled to litigate due to another's fault.