G.R. No. 79688 ; February 1, 1996
PLEASANTVILLE DEVELOPMENT CORPORATION, petitioner, vs. COURT OF APPEALS, WILSON KEE, C.T. TORRES ENTERPRISES, INC. and ELDRED JARDINICO, respondents.

FACTS

Respondent Wilson Kee purchased Lot 8 from petitioner Pleasantville Development Corporation through its exclusive agent, C.T. Torres Enterprises, Inc. (CTTEI). After paying relocation fees, CTTEI’s employee accompanied Kee’s wife to inspect the lot but erroneously pointed to the adjacent Lot 9. Relying on this representation, Kee constructed substantial improvements on Lot 9. Unbeknownst to him, Lot 9 had been previously sold to respondent Eldred Jardinico, who later obtained a Transfer Certificate of Title. Upon discovery, Jardinico demanded Kee to vacate and remove the structures. Kee refused, prompting Jardinico to file an ejectment suit. Kee, in turn, filed a third-party complaint against Pleasantville and CTTEI.
The Municipal Trial Court ordered Kee to vacate, pay rentals, and remove the improvements, holding CTTEI responsible for the erroneous delivery. The Regional Trial Court affirmed the ejectment but dismissed the third-party complaint, finding Kee a builder in bad faith. On appeal, the Court of Appeals reversed, declaring Kee a builder in good faith and holding Pleasantville and CTTEI solidarily liable for damages due to negligence.

ISSUE

Whether Wilson Kee is a builder in good faith, and whether Pleasantville Development Corporation is liable for the negligence of its agent, CTTEI.

RULING

Yes, Kee is a builder in good faith. Good faith is presumed, and the party alleging bad faith must prove it. Kee built on Lot 9 solely due to the specific and erroneous identification by CTTEI’s authorized employee. He had no knowledge of the encroachment or any flaw in his title at the time of construction. His failure to notify the subdivision owner before building, as required by his contract for Lot 8, did not constitute bad faith regarding Lot 9, as that contractual provision was intended merely to regulate the type of improvements, not to govern possession of a wholly different property.
Yes, Pleasantville is solidarily liable with CTTEI for damages due to negligence. CTTEI, as Pleasantville’s exclusive real estate agent, acted within its scope of authority in transacting with Kee and physically identifying the lot. The erroneous delivery was a direct result of CTTEI’s negligence in performing this authorized act. Under the Civil Code, the principal is liable for the acts of its agent performed within the scope of its authority. Therefore, Pleasantville cannot evade liability for the damages caused by its agent’s mistake. However, the Supreme Court modified the Court of Appeals decision, noting that while liability was established, the exact quantum of damages was not proven and thus could not be awarded. The award of attorney’s fees to Jardinico was sustained, as he was compelled to litigate due to the agent’s negligence.