J. M. Tuason & Co., Inc. vs. Bolaños

Adverse, notorious, and continuous possession under claim of ownership for the period fixed by law is ineffective against a Torrens certificate of title, and the decree of registration can no longer be impugned on the ground of fraud, error, or lack of notice once more than one year has elapsed from its issuance and entry.

J. M. Tuason & Co., Inc. is a corporation represented in the suit by its managing partner, Gregorio Araneta, Inc., another corporation. The disputed land is situated in barrio Tatalon, Quezon City, and was originally registered on July 8, 1914 under Original Certificate of Title No. 735, with two portions subsequently covered by Transfer Certificate of Title No. 37686 (Lot No. 4-B-3-C, approximately 5,297,429.3 square meters) and Transfer Certificate of Title No. 37677 (Lot No. 4-B-4, approximately 74,789 square meters), both of the land records of Rizal Province. Quirino Bolaños occupied a portion of these lots, claiming ownership through possession since time immemorial. As early as 1939, an ejectment action had already been filed against him.

On July 8, 1914, the land in barrio Tatalon, Quezon City was originally registered under Original Certificate of Title No. 735. Two portions of this land subsequently came to be covered by Transfer Certificate of Title No. 37686 (Lot No. 4-B-3-C, approximately 5,297,429.3 square meters) and Transfer Certificate of Title No. 37677 (Lot No. 4-B-4, approximately 74,789 square meters), both issued by the land records of Rizal Province and held in the name of J. M. Tuason & Co., Inc. Quirino Bolaños occupied a portion of these lots and asserted ownership over the same, claiming open, continuous, exclusive, and notorious possession under a claim of ownership adverse to the entire world by himself and his predecessors in interest since time immemorial.

J. M. Tuason & Co., Inc., represented by its managing partner Gregorio Araneta, Inc., filed an action in the Court of First Instance of Rizal, Quezon City Branch, to recover possession of the occupied land. The original complaint described the land as a portion of a lot under TCT No. 37686 containing approximately 13 hectares. After Bolaños indicated to the plaintiff's surveyors the portion he claimed and occupied, the complaint was amended to reduce the area to approximately 6 hectares. A second amendment became necessary when plaintiff's surveyors testified that a portion of the area was embraced in TCT No. 37677. During trial, after Bolaños's own surveyor and witness, Quirico Feria, testified that the area occupied and claimed by defendant was about 13 hectares as shown in his Exhibit 1, plaintiff again amended the complaint with leave of court to make its allegations conform to the evidence.

Bolaños, in his answer, set up prescription and title in himself through adverse possession since time immemorial. He further alleged that the registration of the land was obtained by plaintiff or its predecessors through fraud or error and without knowledge of or notice to defendant or his predecessors, and prayed that the complaint be dismissed and that plaintiff be required to reconvey the land or pay its value. At an early stage of the trial, Bolaños's then counsel admitted that the land in dispute was that described in plaintiff's Exhibits A and B, enclosed in red pencil with the name "Quirino Bolaños." After changing lawyers, however, Bolaños shifted his theory and attempted to prove that the land was not covered by plaintiff's certificates of title.

The evidence established through the testimony of plaintiff's witnesses Antonio Manahan and Magno Faustino, as well as Bolaños's own witness Quirico Feria, that the portion claimed by defendant was composed of a part of Lot 4-B-3-C and the major portion of Lot 4-B-4, both well within the area covered by the two transfer certificates of title. This fact was also admitted in Bolaños's answer to the third amended complaint. The trial court found for the plaintiff, declaring Bolaños without any right to the land, ordering him to restore possession and to pay ₱132.62 monthly rent from January 1940 until he vacates the premises, plus costs. Bolaños appealed directly to the Supreme Court due to the value of the property involved.

• Real Party in Interest: Bolaños contended that the action was not brought by the real party in interest, arguing that J. M. Tuason & Co., Inc. was not properly before the court and that Gregorio Araneta, Inc. could not act as managing partner for plaintiff because it is illegal for two corporations to enter into a partnership.
• Improper Admission of Third Amended Complaint: Bolaños argued that the trial court erred in admitting the third amended complaint and in denying his motion to strike, and that the decision included land not involved in the litigation.
• Land Not Covered by TCTs: Bolaños contended that the land in dispute was not covered by Transfer Certificates of Title Nos. 37686 and 37677.
• Defendant as True Owner: Bolaños maintained that he was the true and lawful owner of the land by virtue of open, continuous, exclusive, and notorious possession under claim of ownership since time immemorial, and that the registration was obtained through fraud or error without notice to him or his predecessors.
• Unwarranted Rental Award: Bolaños argued that there was no evidence to sustain the award of ₱132.62 monthly rent from January 1940.
• Reconveyance: Bolaños asserted that the plaintiff should be ordered to reconvey the land to him.
• Pending Action (Motion to Dismiss): During the pendency of the appeal, Bolaños filed a motion to dismiss alleging that another action between the same parties and for the same cause was pending before the Court of First Instance of Rizal.

• Real Party in Interest: Whether the action was properly brought in the name of the real party in interest, given that the plaintiff corporation was represented by another corporation as its managing partner.
• Amendment to Conform to Evidence: Whether the trial court erred in admitting the third amended complaint and in denying the defendant's motion to strike.
• Coverage of Torrens Title: Whether the land in dispute is covered by plaintiff's Transfer Certificates of Title Nos. 37686 and 37677.
• Prescription vs. Torrens Title: Whether the defendant acquired ownership of the land through prescription or adverse possession, and whether the decree of registration may still be impugned on the ground of fraud, error, or lack of notice.
• Rental Liability: Whether the defendant is liable to pay ₱132.62 monthly from January 1940 until he vacates the premises.
• Reconveyance: Whether the plaintiff should be ordered to reconvey the land to the defendant.
• Motion to Dismiss (Lis Pendens): Whether the appeal should be dismissed on the ground of another pending action between the same parties for the same cause.

• Real Party in Interest: Yes. The Rules of Court require that an action be brought "in the name of" the real party in interest, not necessarily "by" it, and a corporation may be represented by another corporation as managing partner where the venture is in line with its corporate business.
• Amendment to Conform to Evidence: No error. Section 4 of Rule 17 of the Rules of Court expressly sanctions amendment of pleadings to conform to the evidence, and such amendment is not even necessary for rendering judgment on issues proved though not alleged.
• Coverage of Torrens Title: Yes. The combined testimony of plaintiff's witnesses and defendant's own witness established that the portion claimed by defendant is well within the area covered by TCT Nos. 37686 and 37677.
• Prescription vs. Torrens Title: No. Adverse, notorious, and continuous possession under claim of ownership is ineffective against a Torrens title, and the decree of registration can no longer be impugned after one year from its issuance and entry.
• Rental Liability: Yes. The award was based on the stipulated reasonable compensation of ₱10 per month per hectare applied to the 13.2619 hectares occupied by defendant, and an ejectment action had been filed as early as 1939.
• Reconveyance: No. This assignment of error was but a consequence of the other alleged errors and was without merit.
• Motion to Dismiss (Lis Pendens): No. The other case was for recovery of ownership while the present was for recovery of possession, and the complaint in the other case did not show identity of parties or cause of action.

• Real Party in Interest: Section 2, Rule 2 of the Rules of Court requires that an action be brought "in the name of" the real party in interest, not necessarily "by" it. The complaint was signed by the law firm of Araneta and Araneta as counsel for plaintiff and commenced with the statement "comes now plaintiff, through its undersigned counsel." The complaint's reference to Gregorio Araneta, Inc. as managing partner did not render it defective, because although a corporation has no power to enter into a partnership, it may enter into a joint venture with another where the nature of the venture is in line with the business authorized by its charter (citing Wyoming-Indiana Oil Gas Co. vs. Weston). Nothing in the record indicated that the venture was outside the corporate business of either corporation.

• Amendment to Conform to Evidence: Section 4 of Rule 17 expressly allows amendment of pleadings to conform to the evidence when issues not raised by the pleadings are tried by express or implied consent of the parties. Under this provision, amendment is not even necessary for rendering judgment on issues proved though not alleged. Citing Chief Justice Moran's commentary on the Rules, American courts have ruled that where the facts shown entitle plaintiff to relief other than that asked for, no amendment is necessary, especially where defendant has himself raised the point on which recovery is based. The appellate court may treat the pleadings as amended to conform to the evidence even if they were not actually amended.

• Coverage of Torrens Title: The identity of the lots was established by the testimony of plaintiff's witnesses Antonio Manahan and Magno Faustino, and the identity of the portion claimed by defendant was established by the testimony of defendant's own witness, Quirico Feria. The combined testimony showed that the portion claimed by defendant was composed of a part of Lot 4-B-3-C and the major portion of Lot 4-B-4, both within the area covered by TCT Nos. 37686 and 37677. This fact was also admitted in defendant's answer to the third amended complaint. Defendant's initial admission through his first counsel that the land was that described in Exhibits A and B further confirmed the coverage.

• Prescription vs. Torrens Title: Because the land was covered by a Torrens certificate of title registered in 1914, the decree of registration could no longer be impugned on the ground of fraud, error, or lack of notice, as more than one year had elapsed from its issuance and entry. The decree could not be collaterally attacked by any person claiming title or interest prior to the registration proceedings (citing Soroñgon vs. Makalintal). Title in derogation of that of the registered owner could not be acquired by prescription or adverse possession (Section 46, Act No. 496), as adverse, notorious, and continuous possession under claim of ownership for the period fixed by law is ineffective against a Torrens title (citing Valiente vs. Judge of CFI of Tarlac). The right to secure possession under a decree of registration does not prescribe (citing Francisco vs. Cruz and Jose Alcantara et al. vs. Mariano et al.).

• Rental Liability: The record showed that reasonable compensation for the use and occupation of the premises was stipulated at ₱10 per month per hectare, and the area occupied by defendant was 13.2619 hectares, yielding a total of ₱132.62 per month. Testimony of J. A. Araneta and witness Emigdio Tanjuatco established that an ejectment action had been filed against defendant as early as 1939. Because defendant had been asserting ownership all along, it could not be supposed that he had been paying rent, justifying the award from January 1940.

• Reconveyance: This assignment of error was but a consequence of the other alleged errors and required no further consideration, as all preceding contentions had been found without merit.

• Motion to Dismiss (Lis Pendens): Examination of the complaint in the other pending case revealed no identity of parties or cause of action. The other case was for recovery of ownership, while the present was for recovery of possession. Although Bolaños claimed involvement in the other action as a class suit, the complaint did not show that the action sought relief on behalf of others; rather, it appeared that each individual plaintiff sought relief for himself alone.

• Indefeasibility of Torrens Title — A certificate of title issued under the Torrens system becomes incontrovertible after one year from the issuance and entry of the decree of registration. The decree may no longer be impugned on the ground of fraud, error, or lack of notice, and may not be collaterally attacked by any person claiming title or interest in the land prior to the registration proceedings.

• Prescription Does Not Run Against Registered Land — Adverse, notorious, and continuous possession under claim of ownership for the period fixed by law is ineffective against a Torrens title. No title in derogation of that of the registered owner may be acquired by prescription or adverse possession (Section 46, Act No. 496). The right to secure possession under a decree of registration does not prescribe.

• Amendment to Conform to Evidence — Under Section 4, Rule 17 of the Rules of Court, when issues not raised by the pleadings are tried by express or implied consent of the parties, they are treated as if raised in the pleadings. Amendment is not even necessary for rendering judgment on issues proved though not alleged; the appellate court may treat the pleadings as amended to conform to the evidence.

• Corporate Joint Ventures — Although a corporation has no power to enter into a partnership, it may enter into a joint venture with another corporation where the nature of the venture is in line with the business authorized by its charter.

• "Adverse, notorious and continuous possession under claim of ownership for the period fixed by law is ineffective against a Torrens title." — This passage states the controlling rule on the incompatibility of prescription with registered land, forming a cornerstone of the Court's reasoning that the defendant's possession could not defeat the plaintiff's Torrens title.

• "As the land in dispute is covered by plaintiff's Torrens certificate of title and was registered in 1914, the decree of registration can no longer be impugned on the ground of fraud, error or lack of notice to defendant, as more than one year has already elapsed from the issuance and entry of the decree." — This passage applies the one-year incontrovertibility rule to the facts, explaining why the defendant's collateral attack on the registration proceedings was barred.

• "Though a corporation has no power to enter into a partnership, it may nevertheless enter into a joint venture with another where the nature of that venture is in line with the business authorized by its charter." — This formulation, drawn from American corporate jurisprudence, resolves the threshold question of whether one corporation may act as managing partner for another in litigation, and is frequently cited in subsequent Philippine corporation law decisions.

• Soroñgon vs. Makalintal, 80 Phil. 259 (45 Off. Gaz. 3819) — Cited as authority for the proposition that a decree of registration may not be collaterally attacked by any person claiming title or interest in the land prior to the registration proceedings.
• Valiente vs. Judge of CFI of Tarlac, 80 Phil. 415 (45 Off. Gaz., Supp. 9, p. 43) — Cited for the rule that adverse, notorious, and continuous possession under claim of ownership is ineffective against a Torrens title.
• Francisco vs. Cruz, 43 Off. Gaz. 5105 — Cited for the proposition that the right to secure possession under a decree of registration does not prescribe.
• Jose Alcantara et al. vs. Mariano et al., 92 Phil. 796 — A recent decision of the Court at the time, cited as additional authority on the ineffectiveness of prescription against a Torrens title.
• Wyoming-Indiana Oil Gas Co. vs. Weston, 80 A.L.R. 1043 (citing 2 Fletcher Cyc. of Corp. 1082) — Cited for the rule that a corporation may enter into a joint venture with another where the venture is in line with its authorized corporate business.

• Section 2, Rule 2, Rules of Court — Requires that an action be brought "in the name of" the real party in interest; applied to hold that the complaint was properly filed in the name of J. M. Tuason & Co., Inc. even though brought through counsel and with a managing partner corporation.
• Section 4, Rule 17, Rules of Court — Governs amendment of pleadings to conform to evidence; applied to uphold the admission of the third amended complaint and the trial court's treatment of issues tried by consent as if raised in the pleadings.
• Section 46, Act No. 496 (Land Registration Act) — Provides that title to registered land cannot be acquired by prescription or adverse possession; applied to defeat the defendant's claim of ownership through long possession.

Paras, C.J., Pablo, Bengzon, Montemayor, Jugo, Bautista Angelo, Labrador, and Concepcion, JJ., concurred.