City Government of Tagaytay vs. Urban Property Holdings, Inc.

A tax declaration issued by a local government unit over property covered by a Torrens title located in another local government unit casts a cloud on the title that may be removed through an action for quieting of title, and the trial court has jurisdiction over such action where no boundary dispute is actually pending. The two indispensable requisites for quieting of title — legal or equitable title in the plaintiff and a claim that is in fact invalid or inoperative despite its prima facie appearance of validity — were satisfied.

UPHI is a corporation in possession of real properties covered by TCT Nos. 326701 and 326702, which state the properties are located in the Municipality (now City) of Calamba, Province of Laguna, and are in the custodial jurisdiction of the Register of Deeds of Calamba City. Republic Act No. 9024 (the Charter of the City of Calamba) covers the lands, while Section 118 of the Local Government Code of 1991 provides the mechanism for resolving territorial disputes between local government units through their respective Sanggunians.

UPHI is a corporation in possession of real properties covered by Transfer Certificate of Title (TCT) Nos. 326701 and 326702. The TCTs state the properties are located in the Municipality (now City) of Calamba, Province of Laguna, and are in the custodial jurisdiction and safekeeping of the Register of Deeds of Calamba City. UPHI has been paying real property taxes to Calamba City.

The controversy arose when Tagaytay City motu proprio issued Tax Declaration No. 2011-00003-00175 over a portion of the property under TCT No. 326702, asserting that the portion falls under its jurisdiction. Reyes acquired the lot through public auction conducted by the Office of the City Treasurer of Tagaytay City, where she was declared the highest bidder. There is no territorial dispute pending before any court, and the Register of Deeds of Tagaytay City has not made any claim for transfer of the TCTs.

UPHI filed a complaint for quieting of title, annulment of sale, annulment of warrants of levy and cancellation of tax declarations against Tagaytay City, Calamba City, and several individuals including Reyes. UPHI alleged that since both cities were claiming jurisdiction over its property, there is confusion as to which local government unit to pay real estate taxes to, and there exists a risk that the property may be sold at public auction by either city. Reyes, for her part, alleged that she was included as party defendant because the tax declaration issued by Tagaytay City was registered under her name, and she was unaware that there were titles covering the area.

The pre-trial order dated September 22, 2011 laid down the undisputed facts: the properties are titled under the Torrens System and expressly recite that they are located in Calamba; Tagaytay City claims territorial jurisdiction over the barangays but concedes no territorial dispute is pending before any court or tribunal; the TCTs are in the custody of the Register of Deeds of Calamba City; and the Register of Deeds of Tagaytay City has not made any claim for transfer of the TCTs.

The trial court found that the tax declarations issued by Tagaytay City cast a cloud on UPHI's titles, and the Court of Appeals affirmed, finding that the TCTs are conclusive as to the properties' location within Calamba City, and that per Republic Act No. 9024, the properties form part of the lands covered under the Calamba City Charter.

• Premature Filing: Tagaytay City maintained that the action for quieting of title was prematurely filed.
• Nullification of Tax Declarations: Tagaytay City argued that the trial court erred in declaring null and void the tax declarations it issued, as well as the notice of levy and the auction sale conducted by Tagaytay City in the legitimate exercise of its authority over property within its jurisdiction.
• Existing Boundary Dispute: Tagaytay City argued that there is an existing and recognized boundary dispute between the cities of Tagaytay and Calamba, the original jurisdiction over which is vested with the Sanggunian of both cities, and that the trial court therefore had no jurisdiction to determine which city the subject property falls.
• Inappropriateness of Quieting of Title: Reyes maintained that the action for quieting of title is not appropriate in this case.
• Lack of Jurisdiction: Reyes argued that the trial court had no jurisdiction over the subject matter because of an existing boundary dispute, and no jurisdiction to declare the tax declarations issued by Tagaytay City as null and void.

• Cloud on Title: UPHI alleged that the tax declarations issued by Tagaytay City cast a cloud on its Torrens titles, creating confusion as to which local government unit to pay real estate taxes to.
• Risk of Auction: UPHI alleged that without judicial resolution of the purported territorial dispute, there exists a risk that the subject property may be sold at public auction by either city.

• Cloud on Title: Whether there was a cloud on the title of UPHI.
• Jurisdiction: Whether the trial court had jurisdiction over the quieting of title case.

• Cloud on Title: Yes. The tax declarations issued by Tagaytay City without basis cast a cloud on UPHI's title, and the two indispensable requisites for quieting of title were sufficiently alleged and proven.
• Jurisdiction: Yes. There was no existing boundary dispute, as Tagaytay City admitted no territorial dispute was pending before any court or executive agency, and the TCTs are conclusive as to the properties' location within Calamba City.

• Cloud on Title: An action for quieting of title seeks to determine the respective rights of the complainant and other claimants, and to remove a cloud upon or quiet title to land where stale or unenforceable claims exist. Any instrument, record, claim, encumbrance, or proceeding which appears to be valid or effective but is in truth and in fact invalid, ineffective, voidable, or unenforceable, and causes prejudice to a title to real property or any interest therein, is considered a cloud that may be removed. The two indispensable requisites are: (1) the plaintiff has a legal or equitable title to or interest in the real property; and (2) the deed, claim, encumbrance, or proceeding claimed to be casting a cloud must be shown to be in fact invalid or inoperative despite its prima facie appearance of validity or legal efficacy. Here, the tax declarations issued by Tagaytay City without basis cast a cloud on UPHI's titles, and both requisites were sufficiently alleged and proven. The question of whether there was a cloud on the title is factual in nature, requiring examination of the evidence on record, and the lower courts correctly found in UPHI's favor.

• Jurisdiction: Tagaytay City admitted that while it claims the barangays are within its territorial jurisdiction, no territorial dispute is pending before any court or executive agency. It also admitted that the TCTs are in the custodial jurisdiction of the Register of Deeds of Calamba City, and that the Register of Deeds of Tagaytay City has not made any claim for transfer. Per Republic Act No. 9024, the properties form part of Calamba City. The TCTs expressly state the properties are located in Calamba, and a certificate of title is conclusive not only of ownership but also as to location. Tagaytay City has no right to collect real estate taxes on properties not within its territorial jurisdiction. The case of City Government of Tagaytay vs. Guerrero is directly analogous: there, Tagaytay City levied real estate taxes on properties outside its jurisdiction despite the absence of any boundary dispute, and the Court found it acted in bad faith. Similarly, here, the trial court acted well within its powers in nullifying the tax declarations issued by Tagaytay City, and UPHI must continue paying real property taxes to Calamba City.

• Quieting of Title — An action to quiet title seeks to determine the respective rights of the complainant and other claimants, and to remove a cloud upon or quiet title to land where stale or unenforceable claims exist. Two indispensable requisites must concur: (1) the plaintiff has a legal or equitable title to or interest in the real property subject of the action; and (2) the deed, claim, encumbrance, or proceeding claimed to be casting a cloud must be shown to be in fact invalid or inoperative despite its prima facie appearance of validity or legal efficacy. The Court applied this doctrine in finding that the tax declarations issued by Tagaytay City without basis cast a cloud on UPHI's titles, satisfying both requisites.

• Conclusiveness of Torrens Title as to Location — A certificate of title is conclusive not only of ownership of the land but also as to its location. The Court applied this doctrine in holding that TCT Nos. 326701 and 326702, which expressly state the properties are located in Calamba City, are conclusive as to the properties' location, and that for purposes of complying with local tax liabilities, the taxpayer is entitled to rely on the location stated in the certificate of title.

• No Right to Collect Taxes Outside Territorial Jurisdiction — A local government unit has no right to collect real estate taxes on properties that have not been proven to be within its territorial jurisdiction. The Court applied this doctrine, citing City Government of Tagaytay vs. Guerrero, in holding that Tagaytay City acted without basis in issuing tax declarations and levying taxes on UPHI's properties, and that even in cases of boundary disputes, the status of the affected area prior to the dispute shall be maintained and continued for all purposes.

• "Any instrument, record, claim, encumbrance or proceeding which appears to be valid or effective but is, in truth and in fact, invalid, ineffective, voidable, or unenforceable, and causes prejudice to a title to real property or any interest therein is considered a cloud thereto which may be removed through an action for quieting of title." — This defines the cloud on title doctrine and is the basis for the Court's finding that the tax declarations issued by Tagaytay City cast a cloud on UPHI's titles.

• "There are two indispensable requisites for an action to quiet title to prosper: (1) the plaintiff or complainant has a legal or an equitable title to or interest in the real property subject of the action; and (2) the deed, claim, encumbrance, or proceeding claimed to be casting a cloud on their title must be shown to be in fact invalid or inoperative despite its prima facie appearance of validity or legal efficacy." — This states the two-part test applied by the Court in determining that UPHI's quieting of title action was proper.

• "The City of Tagaytay acted in bad faith when it levied real estate taxes on the subject properties. R.A. No. 1418 became law as early as 1956. The City of Tagaytay is conclusively presumed to know the law that delineates its jurisdiction, more especially when the law, as in this case, is clear and categorical." — Quoted from City Government of Tagaytay vs. Guerrero and applied by analogy to the present case, showing that Tagaytay City acted without basis in levying taxes on properties outside its territorial jurisdiction.

• "There is no boundary dispute in the case at bar." — Quoted from Guerrero and applied to the present case, establishing that the trial court acted well within its powers in nullifying the tax declarations issued by Tagaytay City.

• Sps. Yu vs. Topacio, 863 Phil. 397 (2019) — Cited for the definition of cloud on title in an action for quieting of title.
• Bilag vs. Ay-Ay, 809 Phil. 236 (2017) — Cited for the two indispensable requisites for an action to quiet title to prosper.
• City Government of Tagaytay vs. Guerrero, 616 Phil. 28 (2009) — Controlling precedent, followed, where Tagaytay City was found to have acted in bad faith in levying real estate taxes on properties outside its territorial jurisdiction despite the absence of any boundary dispute.

• Rule 45, Section 6, Rules of Court — Review discretionary. The Court cited this provision to explain that a petition for review on certiorari is narrowly confined to grounds of (a) deciding a question of substance not theretofore determined by the Supreme Court or decided in a way probably not in accord with law or applicable decisions, or (b) departure from the accepted and usual course of judicial proceedings. The Court found no such grounds warranting the exercise of its discretionary appellate jurisdiction.
• Republic Act No. 9024 — Charter of the City of Calamba. The Court cited this to show that the real properties of UPHI form part of the lands covered under the Calamba City Charter.
• Section 118, Local Government Code of 1991 — Resolution of boundary disputes. The trial court cited this in its order enjoining the cities of Calamba and Tagaytay to convene their respective Sanggunians in a joint session to resolve any territorial dispute.
• Commonwealth Act 338 — Referenced in the RTC decision regarding the Tagaytay Cadastre and Lot Plotting 4322.

• Leonen, SAJ (Chairperson) — Concurred.
• Lopez, J. — Concurred.
• Kho, Jr., J. — Concurred.
• Villanueva, J. — Concurred.