Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 79688 February 1, 1996
PE!S!NTVIE DEVEOPMENT CORPOR!TION, petitioner,
vs.
COURT OF !PPE!S, "ISON #EE, C.T. TORRES ENTERPRISES, INC. a$%
EDRED &!RDINICO,respondents.
D E C I S I O N
P!NG!NI'!N, J.(
Is a lot buyer who constructs improvements on the wrong property erroneously
delivered by the owner's agent, a builder in good faith? This is the main issue resolved
in this petition for review on certiorari to reverse the ecision
!
of the "ourt of
#ppeals
$
in "#%&.R. 'o. !!()(, promulgated on #ugust $(, !*+,.
-y resolution dated 'ovember !., !**/, the 0irst ivision of this "ourt resolved to
transfer this case 1along with several others2 to the Third ivision. #fter due
deliberation and consultation, the "ourt assigned the writing of this ecision to the
undersigned ponente.
The Facts
The facts, as found by respondent "ourt, are as follows3
4dith Robillo purchased from petitioner a parcel of land designated as 5ot *, Phase II
and located at Taculing Road, Pleasantville 6ubdivision, -acolod "ity. In !*,/,
respondent 4ldred 7ardinico bought the rights to the lot from Robillo. #t that time, 5ot *
was vacant.
8pon completing all payments, 7ardinico secured from the Register of eeds of
-acolod "ity on ecember !*, !*,+ Transfer "ertificate of Title 'o. !(9.9, in his
name. It was then that he discovered that improvements had been introduced on 5ot *
by respondent :ilson ;ee, who had ta<en possession thereof.
It appears that on March $9, !*,), ;ee bought on installment 5ot + of the same
subdivision from ".T. Torres 4nterprises, Inc. 1"TT4I2, the e=clusive real estate agent
of petitioner. 8nder the "ontract to 6ell on Installment, ;ee could possess the lot even
before the completion of all installment payments. >n 7anuary $(, !*,/, ;ee paid
"TT4I the relocation fee of P/(.(( and another P/(.(( on 7anuary $,, !*,/, for the
preparation of the lot plan. These amounts were paid prior to ;ee's ta<ing actual
possession of 5ot +. #fter the preparation of the lot plan and a copy thereof given to
;ee, "TT4I through its employee, ?enaida >ctaviano, accompanied ;ee's wife,
onabelle ;ee, to inspect 5ot +. 8nfortunately, the parcel of land pointed by >ctaviano
was 5ot *. Thereafter, ;ee proceeded to construct his residence, a store, an auto
repair shop and other improvements on the lot.
#fter discovering that 5ot * was occupied by ;ee, 7ardinico confronted him. The
parties tried to reach an amicable settlement, but failed.
>n 7anuary .(, !*+!, 7ardinico's lawyer wrote ;ee, demanding that the latter remove
all improvements and vacate 5ot *. :hen ;ee refused to vacate 5ot *, 7ardinico filed
with the Municipal Trial "ourt in "ities, -ranch ., -acolod "ity 1MT""2, a complaint for
e@ectment with damages against ;ee.
;ee, in turn, filed a third%party complaint against petitioner and "TT4I.
The MT"" held that the erroneous delivery of 5ot * to ;ee was attributable to "TT4I.
It further ruled that petitioner and "TT4I could not successfully invo<e as a defense
the failure of ;ee to give notice of his intention to begin construction reAuired under
paragraph $$ of the "ontract to 6ell on Installment and his having built a sari%sari store
without the prior approval of petitioner reAuired under paragraph $9 of said contract,
saying that the purpose of these reAuirements was merely to regulate the type of
improvements to be constructed on the 5ot.
.
Bowever, the MT"" found that petitioner had already rescinded its contract with ;ee
over 5ot + for the latter's failure to pay the installments due, and that ;ee had not
contested the rescission. The rescission was effected in !*,*, before the complaint
was instituted. The MT"" concluded that ;ee no longer had any right over the lot
sub@ect of the contract between him and petitioner. "onseAuently, ;ee must pay
reasonable rentals for the use of 5ot *, and, furthermore, he cannot claim
reimbursement for the improvements he introduced on said lot.
The MT"" thus disposed3
I' CI4: >0 #55 TB4 0>R4&>I'&, @udgment is hereby rendered as follows3
!. efendant :ilson ;ee is ordered to vacate the premises of 5ot *, covered
by T"T 'o. !(9.9, and to remove all structures and improvements he
introduced thereonD
$. efendant :ilson ;ee is ordered to pay to the plaintiff rentals at the rate of
P!/.(( a day computed from the time this suit was filed on March !$, !*+!
until he actually vacates the premises. This amount shall bear interests 1sic2
at the rate of !$ per cent 1sic2 per annum.
1
.. Third%Party efendant ".T. Torres 4nterprises, Inc. and Pleasantville
6ubdivision are ordered to pay the plaintiff @ointly and severally the sum of
P.,(((.(( as attorney's fees and P,((.(( as cost and litigation e=penses.
)
>n appeal, the Regional Trial "ourt, -ranch )+, -acolod "ity 1RT"2 ruled that
petitioner and "TT4I were not at fault or were not negligent, there being no
preponderant evidence to show that they directly participated in the delivery of 5ot * to
;ee
/
. It found ;ee a builder in bad faith. It further ruled that even
assuming arguendo that ;ee was acting in good faith, he was, nonetheless, guilty of
unlawfully usurping the possessory right of 7ardinico over 5ot * from the time he was
served with notice to vacate said lot, and thus was liable for rental.
The RT" thus disposed3
:B4R40>R4, the decision appealed from is affirmed with respect to the
order against the defendant to vacate the premises of 5ot 'o. * covered by
Transfer "ertificate of Title 'o. T%!(9.9, of the land records of -acolod "ityD
the removal of all structures and improvements introduced thereon at his
e=pense and the payment to plaintiff 1sic2 the sum of 0ifteen 1P!/.((2 Pesos
a day as reasonable rental to be computed from 7anuary .(, !*+!, the date
of the demand, and not from the date of the filing of the complaint, until he
had vacated 1sic2 the premises, with interest thereon at !$E per annum. This
"ourt further renders @udgment against the defendant to pay the plaintiff the
sum of Three Thousand 1P.,(((.((2 Pesos as attorney's fees, plus costs of
litigation.
The third%party complaint against Third%Party efendants Pleasantville
evelopment "orporation and ".T. Torres 4nterprises, Inc. is dismissed. The
order against Third%Party efendants to pay attorney's fees to plaintiff and
costs of litigation is reversed.
9
0ollowing the denial of his motion for reconsideration on >ctober $(, !*+9, ;ee
appealed directly to the 6upreme "ourt, which referred the matter to the "ourt of
#ppeals.
The appellate court ruled that ;ee was a builder in good faith, as he was unaware of
the Fmi=%upF when he began construction of the improvements on 5ot +. It further ruled
that the erroneous delivery was due to the negligence of "TT4I, and that such wrong
delivery was li<ewise imputable to its principal, petitioner herein. The appellate court
also ruled that the award of rentals was without basis.
Thus, the "ourt of #ppeals disposed3
:B4R40>R4, the petition is &R#'T4, the appealed decision is
R4C4R64, and @udgment is rendered as follows3
!. :ilson ;ee is declared a builder in good faith with respect to the
improvements he introduced on 5ot *, and is entitled to the rights granted him
under #rticles ))+, /)9 and /)+ of the 'ew "ivil "ode.
$. Third%party defendants ".T. Torres 4nterprises, Inc. and Pleasantville
evelopment "orporation are solidarily liable under the following
circumstances3
#. If 4ldred 7ardinico decides to appropriate the improvements
and, thereafter, remove these structures, the third%party defendants
shall answer for all demolition e=penses and the value of the
improvements thus destroyed or rendered uselessD
b. If 7ardinico prefers that ;ee buy the land, the third%party
defendants shall answer for the amount representing the value of 5ot
* that ;ee should pay to 7ardinico.
.. Third%party defendants ".T. Torres 4nterprises, Inc. and Pleasantville
evelopment "orporation are ordered to pay in solidum the amount of
P.,(((.(( to 7ardinico as attorney's fees, as well as litigation e=penses.
). The award of rentals to 7ardinico is dispensed with.
0urthermore, the case is R4M#'4 to the court of origin for the
determination of the actual value of the improvements and the property 15ot
*2, as well as for further proceedings in conformity with #rticle ))+ of the 'ew
"ivil "ode.
,
Petitioner then filed the instant petition against ;ee, 7ardinico and "TT4I.
The Issues
The petition submitted the following grounds to @ustify a review of the respondent
"ourt's ecision, as follows3
!. The "ourt of #ppeals has decided the case in a way probably not in accord
with law or the the 1sic2 applicable decisions of the 6upreme "ourt on third%
party complaints, by ordering third%party defendants to pay the demolition
e=penses andGor price of the landD
$. The "ourt of #ppeals has so far departed from the accepted course of
@udicial proceedings, by granting to private respondent%;ee the rights of a
builder in good faith in e=cess of what the law provides, thus enriching private
respondent ;ee at the e=pense of the petitionerD
2
.. In the light of the subseAuent events or circumstances which changed the
rights of the parties, it becomes imperative to set aside or at least modify the
@udgment of the "ourt of #ppeals to harmoniHe with @ustice and the factsD
). Private respondent%;ee in accordance with the findings of facts of the
lower court is clearly a builder in bad faith, having violated several provisions
of the contract to sell on installmentsD
/. The decision of the "ourt of #ppeals, holding the principal, Pleasantville
evelopment "orporation 1liable2 for the acts made by the agent in e=cess of
its authority is clearly in violation of the provision of the lawD
9. The award of attorney's fees is clearly without basis and is eAuivalent to
putting a premium in 1sic2 court litigation.
0rom these grounds, the issues could be re%stated as follows3
1!2 :as ;ee a builder in good faith?
1$2 :hat is the liability, if any, of petitioner and its agent, ".T. Torres
4nterprises, Inc.? and
1.2 Is the award of attorney's fees proper?
The First Issue3 Good Faith
Petitioner contends that the "ourt of #ppeals erred in reversing the RT"'s ruling that
;ee was a builder in bad faith.
Petitioner fails to persuade this "ourt to abandon the findings and conclusions of the
"ourt of #ppeals that ;ee was a builder in good faith. :e agree with the following
observation of the "ourt of #ppeals3
The roots of the controversy can be traced directly to the errors committed by
"TT4I, when it pointed the wrong property to :ilson ;ee and his wife. It is
highly improbable that a purchaser of a lot would <nowingly and willingly build
his residence on a lot owned by another, deliberately e=posing himself and
his family to the ris< of being e@ected from the land and losing all
improvements thereon, not to mention the social humiliation that would follow.
8nder the circumstances, ;ee had acted in the manner of a prudent man in
ascertaining the identity of his property. 5ot + is covered by Transfer
"ertificate of Title 'o. T%9*/9!, while 5ot * is identified in Transfer "ertificate
of Title 'o. T%!(9.9,. Bence, under the Torrens system of land registration,
;ee is presumed to have <nowledge of the metes and bounds of the property
with which he is dealing. . . .
=== === ===
-ut as ;ee is a layman not versed in the technical description of his property,
he had to find a way to ascertain that what was described in T"T 'o. 9*/9!
matched 5ot +. Thus, he went to the subdivision developer's agent and
applied and paid for the relocation of the lot, as well as for the production of a
lot plan by "TT4I's geodetic engineer. 8pon ;ee's receipt of the map, his wife
went to the subdivision site accompanied by "TT4I's employee, >ctaviano,
who authoritatively declared that the land she was pointing to was indeed 5ot
+. Baving full faith and confidence in the reputation of "TT4I, and because of
the company's positive identification of the property, ;ee saw no reason to
suspect that there had been a misdelivery. The steps ;ee had ta<en to
protect his interests were reasonable. There was no need for him to have
acted ex-abundantia cautela, such as being present during the geodetic
engineer's relocation survey or hiring an independent geodetic engineer to
counterchec< for errors, for the final delivery of subdivision lots to their
owners is part of the regular course of everyday business of "TT4I. -ecause
of "TT4I's blunder, what ;ee had hoped to forestall did in fact transpire.
;ee's efforts all went to naught.
+
&ood faith consists in the belief of the builder that the land he is building on is his and
his ignorance of any defect or flaw in his title
*
. #nd as good faith is presumed,
petitioner has the burden of proving bad faith on the part of ;ee
!(
.
#t the time he built improvements on 5ot +, ;ee believed that said lot was what he
bought from petitioner. Be was not aware that the lot delivered to him was not 5ot +.
Thus, ;ee's good faith. Petitioner failed to prove otherwise.
To demonstrate ;ee's bad faith, petitioner points to ;ee's violation of paragraphs $$
and $9 of the "ontract of 6ale on Installment.
:e disagree. 6uch violations have no bearing whatsoever on whether ;ee was a
builder in good faith, that is, on his state of mind at the time he built the improvements
on 5ot *. These alleged violations may give rise to petitioner's cause of action against
;ee under the said contract 1contractual breach2, but may not be bases to negate the
presumption that ;ee was a builder in good faith.
Petitioner also points out that, as found by the trial court, the "ontract of 6ale on
Installment covering 5ot + between it and ;ee was rescinded long before the present
action was instituted. This has no relevance on the liability of petitioner, as such fact
does not negate the negligence of its agent in pointing out the wrong lot. to ;ee. 6uch
circumstance is relevant only as it gives 7ardinico a cause of action for unlawful
detainer against ;ee.
3
Petitioner ne=t contends that ;ee cannot Fclaim that another lot was erroneously
pointed out to himF because the latter agreed to the following provision in the "ontract
of 6ale on installment, to wit3
!.. The Cendee hereby declares that prior to the e=ecution of his contract
heGshe has personally e=amined or inspected the property made sub@ect%
matter hereof, as to its location, contours, as well as the natural condition of
the lots and from the date hereof whatever conseAuential change therein
made due to erosion, the said Cendee shall bear the e=penses of the
necessary fillings, when the same is so desired by himGher.
!!
The sub@ect matter of this provision of the contract is the change of the location,
contour and condition of the lot due to erosion. It merely provides that the vendee,
having e=amined the property prior to the e=ecution of the contract, agrees to shoulder
the e=penses resulting from such change.
:e do not agree with the interpretation of petitioner that ;ee contracted away his right
to recover damages resulting from petitioner's negligence. 6uch waiver would be
contrary to public policy and cannot be allowed. FRights may be waived, unless the
waiver is contrary to law, public order, public policy, morals, or good customs, or
pre@udicial to a third person with a right recogniHed by law.F
!$
The Second Issue3 Petitioner's Liability
;ee filed a third%party complaint against petitioner and "TT4I, which was dismissed by
the RT" after ruling that there was no evidence from which fault or negligence on the
part of petitioner and "TT4I can be inferred. The "ourt of #ppeals disagreed and
found "TT4I negligent for the erroneous delivery of the lot by >ctaviano, its employee.
Petitioner does not dispute the fact that "TT4I was its agent. -ut it contends that the
erroneous delivery of 5ot * to ;ee was an act which was clearly outside the scope of
its authority, and conseAuently, "TT4I I alone should be liable. It asserts that Fwhile
I"TT4IJ was authoriHed to sell the lot belonging to the herein petitioner, it was never
authoriHed to deliver the wrong lot to ;eeF
!.
.
Petitioner's contention is without merit.
The rule is that the principal is responsible for the acts of the agent, done within the
scope of his authority, and should bear the damage caused to third persons
!)
. >n the
other hand, the agent who e=ceeds his authority is personally liable for the damage
!/
"TT4I was acting within its authority as the sole real estate representative of petitioner
when it made the delivery to ;ee. In acting within its scope of authority, it was,
however, negligent. It is this negligence that is the basis of petitioner's liability, as
principal of "TT4I, per #rticles !*(* and !*!( of the "ivil "ode.
Pending resolution of the case before the "ourt of #ppeals, 7ardinico and ;ee on 7uly
$), !*+, entered into a deed of sale, wherein the former sold 5ot * to ;ee. 7ardinico
and ;ee did not inform the "ourt of #ppeals of such deal.
The deed of sale contained the following provision3
!. That "ivil "ase 'o. .+!/ entitled F7ardinico vs. ;eeF which is now pending
appeal with the "ourt of #ppeals, regardless of the outcome of the decision
shall be mutually disregarded and shall not be pursued by the parties herein
and shall be considered dismissed and without effect whatso%everD
!9
;ee asserts though that the Fterms and conditions in said deed of sale are strictly for
the parties theretoF and that F1t2here is no waiver made by either of the parties in said
deed of whatever favorable @udgment or award the honorable respondent "ourt of
#ppeals may ma<e in their favor against herein petitioner Pleasantville evelopment
"orporation andGor private respondent ".T. Torres 4nterprisesD Inc.F
!,
>bviously, the deed of sale can have no effect on the liability of petitioner. #s we have
earlier stated, petitioner's liability is grounded on the negligence of its agent. >n the
other hand, what the deed of sale regulates are the reciprocal rights of ;ee and
7ardinicoD it stressed that they had reached an agreement independent of the outcome
of the case.
Petitioner further assails the following holding of the "ourt of #ppeals3
$. Third%party defendants ".T. Torres 4nterprises, Inc. and Pleasantville
evelopment "orporation are solidarily liable under the following
circumstances3
a. If 4ldred 7ardinico decides to appropriate the improvements and,
thereafter, remove these structures, the third%party defendants shall
answer for all demolition e=penses and the value of the
improvements thus destroyed or rendered uselessD
b. If 7ardinico prefers that ;ee buy the land, the third%party
defendants shall answer for the amount representing the value of 5ot
* that ;ee should pay to 7ardinico.
!+
Petitioner contends that if the above holding would be carried out, ;ee would be
un@ustly enriched at its e=pense. In other words, ;ee would be able to own the lot, as
buyer, without having to pay anything on it, because the aforeAuoted portion of
respondent "ourt's ecision would reAuire petitioner and "TT4I @ointly and solidarily to
FanswerF or reimburse ;ee therefor.
4
:e agree with petitioner.
Petitioner' s liability lies in the negligence of its agent "TT4I. 0or such negligence, the
petitioner should be held liable for damages. 'ow, the e=tent andGor amount of
damages to be awarded is a factual issue which should be determined after evidence
is adduced. Bowever, there is no showing that such evidence was actually presented
in the trial courtD hence no damages could flow be awarded.
The rights of ;ee and 7ardinico vis-a-vis each other, as builder in good faith and owner
in good faith, respectively, are regulated by law 1 i.e. #rts. ))+, /)9 and /)+ of the "ivil
"ode2. It was error for the "ourt of #ppeals to ma<e a Fslight modificationF in the
application of such law, on the ground of FeAuityF. #t any rate, as it stands now, ;ee
and 7ardinico have amicably settled through their deed of sale their rights and
obligations with regards to 5ot *. Thus, we delete items $ 1a2 and 1b2 of the dispositive
portion of the "ourt of #ppeals' ecision Ias reproduced aboveJ holding petitioner and
"TT4I solidarily liable.
The Third Issue 3 !ttorney's Fees
The MT"" awarded 7ardinico attorney's fees and costs in the amount of P.,(((.((
and P,((.((, respectively, as prayed for in his complaint. The RT" deleted the award,
consistent with its ruling that petitioner was without fault or negligence. The "ourt of
#ppeals, however, reinstated the award of attorney's fees after ruling that petitioner
was liable for its agent's negligence.
The award of attorney's fees lies within the discretion of the court and depends upon
the circumstances of each case
!*
. :e shall not interfere with the discretion of the
"ourt of #ppeals. 7ardinico was compelled to litigate for the protection of his interests
and for the recovery of damages sustained as a result of the negligence of petitioner's
agent
$(
.
In sum, we rule that ;ee is a builder in good faith. The disposition of the "ourt of
#ppeals that ;ee Fis entitled to the rights granted him under #rticles ))+, /)9 and /)+
of the 'ew "ivil "odeF is deleted, in view of the deed of sale entered into by ;ee and
7ardinico, which deed now governs the rights of 7ardinico and ;ee as to each other.
There is also no further need, as ruled by the appellate "ourt, to remand the case to
the court of origin Ffor determination of the actual value of the improvements and the
property 15ot *2, as well as for further proceedings in conformity with #rticle ))+ of the
'ew "ivil "ode.F
:B4R40>R4 , the petition is partially &R#'T4. The ecision of the "ourt of
#ppeals is hereby M>I0I4 as follows3
1!2 :ilson ;ee is declared a builder in good faithD
1$2 Petitioner Pleasantville evelopment "orporation and respondent ".T.
Torres 4nterprises, Inc. are declared solidarily liable for damages due to
negligenceD however, since the amount andGor e=tent of such damages was
not proven during the trial, the same cannot now be Auantified and awardedD
1.2 Petitioner Pleasantville evelopment "orporation and respondent ".T.
Torres 4nterprises, Inc. are ordered to pay in solidum the amount of
P.,(((.(( to 7ardinico as attorney's fees, as well as litigation e=pensesD and
1)2 The award of rentals to 7ardinico is dispensed with.
6> >R4R4.
5