PLEASANTVILLE DEVELOPMENT CORPORATION VS. COURT OF APPEALS G.R. NO.

79688 253 SCRA 10 FEBRUARY 1, 1996

PONENTE: PANGANIBAN, J.

Doctrine: Good faith consists in the belief of the builder that he land he is building on is his and his ignorance of any defect or flaw in his title. The burden of proving bad faith belongs to the one asserting it.

Facts: Edith Robillo purchased from Pleasantville Development Corporation, herein petitioner a parcel of land at Pleasantville Subdivision, Bacolod City. The property was designated as Lot 9, Phase II. In 1975, herein respondent Eldred Jardinico bought the said subject lot from the former purchaser. Eldred later discovered that the property he purchased had improvements introduced therein by respondent Wilson Kee. Kee on the other hand bought on installments Lot 8 of the same subdivision from C.T. Torres Enterprises, Inc. (CTTEI) which is the exclusive real estate agent of the petitioner. Under the contract Kee was allowed to take possession of the property even before full payment of the price. CTTEI through an employee, Zenaida Octaviano accompanied Kees wife Donabelle to inspect Lot No. 8. Octaviano however mistakenly pointed towards Lot 9. Hence spouses Kee had their residence, an auto repair shop, a store and other improvements constructed on the wrong lot.

Upon discovery of the blunder both Kee and Jardinico tried to reach an amicable settlement but they failed. Jardinico demanded that the improvements be removed but as Kee refused, Jardinico filed a complaint for ejectment with damages against Kee at the Municipal Trial Court in Cities (MTCC) of Bacolod City. Kee filed a third-party complaint against herein petitioner and CTTEI.

The MTCC found that the error was attributable to CTTEI also since at present the contract with Kee has rescinded for Kees failure to pay installments. Kee no longer had any right over the subject property and must pay rentals for its use. The Regional Trial Court (RTC) of Bacolod City ruled that petitioner and CTTEI were not at fault or were not negligent. It argued that Kee was a builder in bad faith. Even if assuming that he was in good faith, he was no longer so and must pay rentals from the time that he was given notice to vacate the lot. The Court of Appeals ruled that Kee was a builder in good faith as he was unaware of the mix-up when he constructed the improvements. It was in fact due to the negligence and wrongful delivery of CTTEI which included its principal the herein petitioner. It further ruled that the award of rental was without basis.

Pending the resolution of the case at the Court of Appeals Jardinico and Kee entered into a deed of sale, wherein Lot 9 was sold to Kee. In the said deed a provision stating that regardless of the outcome of the decision, such shall not be pursued by the parties and shall be considered dismissed and without effect. The appellate court was not informed of this deal.

Issue: Whether or not a lot buyer who constructs improvements on the wrong property erroneously delivered by the owners agent, a builder in good faith?

Held: Yes. Article 527 of the Civil Code provides the presumption that petitioner has the burden of proving that Kee was a builder in bad faith. Kee may be made liable for the violation of the contract with CTTEI but this may not be used as a basis of bad faith and as a sufficient ground to negate the presumption of good faith. Jardinico is presently only allowed to file a complaint for unlawful detainer. Good faith is based on the belief of the builder that the land he is building on is his and his ignorance of any flaw or defect in is title. Since at the time when Kee constructed his improvements on Lot 8, he was not aware that it was actually Lot 9 that was delivered to him. Petitioner further contends that Kee was negligent as a provision in the Contract of Sale on Installment stated that the vendee must have

personally examined the property and shall bear on his own the consequential expenses in the changes that may happen thereon. The court held that such provision cannot be interpreted as a waiver of the vendees right to recover damages resulting from petitioners negligence. Such interpretation of the waiver is contrary to law and public policy and cannot be allowed. Petitioner cannot claim and excuse itself from liability by claiming that it was not directly involved in the delivery of the property. The principal must be responsible for the acts of the agent done within the scope of his authority. CTTEI was the sole real estate representative of the petitioner when the delivery was made. Wilson Kee is therefore declared a builder in good faith. Petitioner and respondent CTTEI are declared solidarily liable for damages due to negligence. The award of rentals to Jardinico is dispensed with.