Grana vs. Court of Appeals

A Torrens certificate of title that has become indefeasible is conclusive evidence of ownership and cannot be altered or modified by a subsequent resurvey plan; a builder in good faith under Article 448 of the Civil Code may not be required to pay rentals and has the right to retain the land until reimbursed, with the landowner given the option to buy the improvement or sell the land.

Respondents Aurora Bongato and Jardenio Sanchez trace their claim to a parcel in Butuan, Agusan, originally covered by Original Certificate of Title No. RO-72 (138), issued in 1923 in favor of Gregorio Bongato and Clara Botcon and later acquired by the spouses Marcos Bongato and Eusebia More, from whom respondents inherited it. Petitioners Leonor Grana and Julieta Torralba trace their claim to adjoining Lot No. 310 of their predecessor in interest, Isidaria Trillo. The dispute implicates the Torrens system's indefeasibility and the rights of a builder in good faith under Article 361 of the old Civil Code, now Article 448 of the new Civil Code.

On April 13, 1951, Aurora Bongato and Jardenio Sanchez sued Leonor Grana and Julieta Torralba before the Court of First Instance of Agusan to recover 87 square meters of residential land. The land in dispute was part of a parcel in Butuan, Agusan, included in the 1909 cadastral survey as part of the lot of Gregorio Bongato and Clara Botcon, for which Original Certificate of Title No. RO-72 (138) was issued on February 12, 1923. On November 25, 1933, the lot was purchased by the spouses Marcos Bongato and Eusebia More; upon their death, it was inherited by respondents Aurora Bongato, daughter of Marcos Bongato by his first marriage, and Jardenio Sanchez, son of Eusebia More by her first marriage.

Petitioners claimed that the lands in Butuan were subsequently resurveyed because of conflicts and overlapping boundaries. In that resurvey, identified as TS-65 Butuan Cadastre, Gregorio Bongato's lot was identified as Lot No. 311 and the lot of Isidaria Trillo, petitioners' predecessor in interest, as Lot No. 310. Petitioners pointed out that Original Certificate of Title No. RO-72 (138) covered 295 square meters while the sketch plan of the second cadastral survey showed Lot No. 311 as having only 230 square meters. On that basis, they maintained that only the latter area belonged to respondents and that the disputed land formed part of the adjoining Lot No. 310 of their predecessor.

The record showed no proof that the first survey was erroneous or that it had included part of the contiguous land of petitioners' predecessor as part of the lot covered by Original Certificate of Title No. RO-72 (138). The difference in area between the land covered by that title and Lot No. 311 of the resurvey plan was 65 square meters, while the disputed area was 87 square meters. The alleged sketch plan of the resurvey was not presented in evidence. It was undisputed that the land in question was part of the lot covered by the Torrens title issued in 1923 in the name of respondents' predecessor, and that title had not been contested.

The Court of Appeals found that, although petitioners had no legal and valid claim over the land, they had constructed a portion of their house thereon in good faith. Petitioners also contended that Maria Cupin, their mother, owned the land as part of her Lot No. 310 and had not been made a party defendant, and they asserted a claim for damages in their counterclaim.

• Ownership and Resurvey: Petitioners claimed the disputed land was part of Lot No. 310 of their predecessor, Isidaria Trillo, because the second cadastral survey identified Gregorio Bongato's lot as Lot No. 311 with only 230 square meters, while Original Certificate of Title No. RO-72 (138) covered 295 square meters; they argued that only 230 square meters belonged to respondents and that the remainder formed part of Lot No. 310.
• New Trial: Petitioners contended that the Court of Appeals erred in not granting their motion for new trial on the ground of newly discovered evidence, namely the sketch plan of the second survey.
• Nonjoinder of Indispensable Party: Petitioners further contended that the complaint should have been dismissed for nonjoinder of an indispensable party, Maria Cupin, their mother, who allegedly owned the land as part of her Lot No. 310 and had not been made a party defendant.
• Damages: Petitioners asserted that they should have been awarded damages alleged to have been suffered by them in their counterclaim.

• Ownership Under Torrens Title: Whether the disputed 87-square-meter portion belongs to respondents as part of the lot covered by Original Certificate of Title No. RO-72 (138), notwithstanding petitioners' claim based on the subsequent resurvey plan and Lot No. 310.
• New Trial: Whether the Court of Appeals erred in denying petitioners' motion for new trial on the ground of newly discovered evidence, specifically the sketch plan of the second cadastral survey.
• Builder in Good Faith and Rentals: Whether petitioners, found to have built a portion of their house in good faith, may be ordered to pay monthly rentals from the filing of the complaint, and what relief should be granted under Article 361 of the old Civil Code, now Article 448 of the new Civil Code.
• Nonjoinder of Indispensable Party: Whether the complaint should have been dismissed for nonjoinder of Maria Cupin as an indispensable party.
• Damages: Whether petitioners should have been awarded damages on their counterclaim.

• Ownership Under Torrens Title: No. The disputed land formed part of the lot covered by Original Certificate of Title No. RO-72 (138), which became conclusive and indefeasible; no proof showed the original survey was erroneous, and the resurvey plan was not presented in evidence.
• New Trial: No. The sketch plan could have been discovered with reasonable diligence and produced at trial; in any event, a resurvey plan cannot alter or modify a previous Torrens title.
• Builder in Good Faith and Rentals: Yes as to good faith. The appellate court erred in ordering rentals from the filing of the complaint; under Article 448, respondents must choose within 30 days either to buy the improvement or sell the land, and rentals run only from respondents' choice if petitioners cannot buy.
• Nonjoinder of Indispensable Party: No. The issue was not raised in the trial court, and petitioners asserted ownership over the disputed land and Lot No. 310 in their answer, estopping them from claiming otherwise.
• Damages: No. Petitioners failed to prove any damage by reason of the filing of the complaint.

• Ownership Under Torrens Title: The Torrens certificate issued in 1923 in favor of respondents' predecessor had not been contested and had become conclusive and indefeasible after the lapse of the period within which it could be impugned. Petitioners presented no proof that the first survey was erroneous or that it included part of the contiguous land of their predecessor. The area discrepancy of 65 square meters did not match the disputed area of 87 square meters, and the alleged sketch plan of the resurvey was not offered in evidence. A subsequent resurvey plan cannot alter or modify a previous Torrens title; the Court cited Reyes vs. Borbon, Yumul vs. Rivera, and Government of the Philippines vs. Arias.
• New Trial: A motion for new trial on newly discovered evidence requires that the evidence could not have been discovered with reasonable diligence and would probably change the result. The sketch plan of the second survey could have been discovered and produced at trial with reasonable diligence. Even if presented, it would not alter the result because a subsequent certificate of title cannot prevail over a previous Torrens title, and with more reason a resurvey plan cannot modify such title.
• Builder in Good Faith and Rentals: The Court of Appeals found that petitioners constructed a portion of their house in good faith. Under Article 361 of the old Civil Code, now Article 448 of the new Civil Code, the owner of the land on which anything has been built in good faith may appropriate the building after payment of necessary and useful expenses, or oblige the builder to pay the price of the land. The Court considered it impractical for respondents to buy the portion of the house because the whole building might be rendered useless; the more workable solution was for respondents to sell the land under the improvement. If petitioners were unwilling or unable to buy, they must vacate and pay rentals. If the land's value was considerably more than the improvement, petitioners could elect to rent, with the parties agreeing on lease terms or the court fixing them. A builder in good faith may not be required to pay rentals and has the right to retain the land until reimbursed, citing Miranda vs. Fadullon, Martinez vs. Baganus, De Guzman vs. De la Fuente, and Kasilag vs. Rodriguez. Thus, the appellate court erred in ordering rentals from the filing of the complaint.
• Nonjoinder of Indispensable Party: The nonjoinder issue was not raised in the trial court and deserved scant consideration. Petitioners clearly asserted ownership over the disputed land and Lot No. 310 in their answer, so they were estopped from alleging that Maria Cupin was an indispensable party.
• Damages: Petitioners failed to prove that they suffered any damage by reason of the filing of the complaint. In light of the Court's ruling, they could not have substantiated their claim for damages.

• Indefeasibility of Torrens Title — Once the period to impugn a Torrens certificate lapses, the certificate becomes conclusive and indefeasible evidence of ownership. It cannot be altered or modified by a subsequent certificate of title or by a resurvey plan. In this case, Original Certificate of Title No. RO-72 (138), issued in 1923, was uncontested; petitioners' resurvey plan was not presented and could not change the title's coverage.
• Builder in Good Faith Under Article 448 — The owner of land on which another has built in good faith has the option to appropriate the building after indemnity or to oblige the builder to pay the price of the land. A builder in good faith may not be required to pay rentals and has the right to retain the land until reimbursed. The Court applied this to direct respondents to choose within 30 days whether to buy the improvement or sell the land, and disallowed rentals before that choice.
• Newly Discovered Evidence as Ground for New Trial — A new trial may be granted for newly discovered evidence only if it could not have been discovered with reasonable diligence and would probably alter the result. The sketch plan was discoverable and, in any event, could not prevail over a prior Torrens title.
• Nonjoinder and Estoppel by Asserting Ownership — A party who asserts ownership over the land in an answer is estopped from later claiming that another person is an indispensable party. Failure to raise nonjoinder in the trial court also warrants scant consideration.
• Damages Must Be Proved — A counterclaim for damages requires proof of actual damage; failure to prove damage defeats the claim.

• "Well settled is the rule that a Torrens certificate of title becomes conclusive and indefeasible after the lapse of the period within which it may be impugned" — States the ratio on Torrens indefeasibility, which defeated petitioners' claim based on the subsequent resurvey plan.
• "A builder in good faith may not be required to pay rentals. He has a right to retain the land on which he has built in good faith until he is reimbursed the expenses incurred by him." — States the builder-in-good-faith rule that led the Court to disallow rentals from the filing of the complaint.
• "with more reason should a resurvey plan not to be allowed to alter or modify such title so as to make the area of the land therein described agree with that given in the plan." — Explains why the new trial motion would not change the result and why the resurvey plan could not alter the Torrens title.
• "The more workable solution, it would seem, is for respondents to sell to petitioners that part of their land on which was constructed a portion of the latter's house." — States the practical application of Article 448, favoring sale of the land under the improvement over purchase of the improvement.

• Reyes vs. Borbon, 50 Phil. 791 — Cited for the rule that a Torrens certificate of title becomes conclusive and indefeasible after the lapse of the period to impugn it, and that a subsequent certificate cannot prevail over a previous Torrens title.
• Yumul vs. Rivera, 64 Phil. 13 — Cited with Reyes vs. Borbon for the same rule on the conclusiveness and indefeasibility of a Torrens certificate.
• Government of the Philippines vs. Arias, 36 Phil. 195 — Cited for the principle that a resurvey plan cannot alter or modify a Torrens title to make the area of the land agree with the plan.
• Miranda vs. Fadullon, 97 Phil. 801; 51 Off. Gaz. 6226 — Cited for the rule that a builder in good faith may not be required to pay rentals and has the right to retain the land until reimbursed.
• Martinez vs. Baganus, 28 Phil. 500 — Cited in support of the builder-in-good-faith rule.
• De Guzman vs. De la Fuente, 55 Phil. 501 — Cited in support of the builder-in-good-faith rule.
• Kasilag vs. Rodriguez, Off. Gaz., Supp., August 16, 1941, p. 247 — Cited in support of the builder-in-good-faith rule.

• Article 361, old Civil Code (Article 448, new Civil Code) — Provides that the owner of land on which anything has been built in good faith may appropriate the building after payment of necessary and useful expenses, and in proper cases expenses for luxury, or oblige the builder to pay the price of the land. The Court applied it to require respondents to choose within 30 days either to buy the portion of petitioners' house or sell the land under it, and to allow petitioners to rent if the land's value was considerably more than the improvement.

Paras, C.J.; Bengzon; Bautista Angelo; Labrador; Concepcion; Reyes, J.B.L.; Barrera; and Dizon, JJ.