GREEN ACRES HOLDINGS, INC. v. VICTORIA P.

CABRAL

Facts:

Victoria Cabral was the original owner of a parcel of land in Barangay Pandayan,
Meycauayan, Bulacan with an area of 11,432 square meters and covered by TCT No. T-
73737 (M). The land was placed under the coverage of PD No. 27, and on March 23, 1993,
three Emancipation Patents were issued to the spouses Enrique Moraga and Victoria
Soriano (Spouses Moraga) as follows: EP No. 496039 with an area of 861 square meters;
EP No. 496040 with an area of 2,159 square meters; and EP No. 496041 with an area of
8,941 square meters. The Spouses Moraga thereafter caused the cancellation of EP No.
496041 and its conversion to TCT No. 256260 (M).

On August 1994, Cabral filed a complaint before the Provincial Agrarian Reform
Adjudicator (PARAD) seeking the cancellation of the Emancipation Patents issued to the
Spouses Moraga on the grounds that these were obtained through fraud and that the land
is not suitable for rice and corn production and has long been classified as residential,
commercial, industrial and nonagricultural land by the Zoning Administrator of the Housing
and Land Use Regulatory Board. The PARAD rendered a decision denying the petition for
cancellation of the Emancipation Patents and dismissing the complaint for lack of merit.
Cabral appealed the decision to the Department of Agrarian Reform Adjudication Board
(DARAB).

While the appeal was pending, the Spouses Moraga subdivided the lot covered by
TCT No. 256260 (M) into three smaller lots, the properties subject of this case. TCT Nos.
T-270125 (M) covering 3,511 square meters, T-270126 (M) covering 2,715 square meters,
and T-270127 (M) covering 2,715 square meters were thereafter issued in their names on
May 29, 1996. On June 19, 1996, the Spouses Moraga sold the lots to Filcon Ready Mixed
Inc. (Filcon for brevity) and TCT Nos. T-274486 (M),6 T-274487 (M)7 and T-274488
(M)8 were issued in the name of Filcon on June 24, 1996.

On April 29, 1999, Green Acres purchased five lots from Filcon including the three
subject properties covered by TCT Nos. T-274486 (M), T-274487 (M) and T-274488 (M)
in the name of Filcon. Except for an already cancelled annotation of a real estate mortgage
in favor of Philippine Commercial International Bank (PCI Bank), the titles were free from
any annotations, liens, notices, claims or encumbrances.

On April 30, 1999, the titles of Filcon were cancelled by the Register of Deeds of
Meycauayan, Bulacan and new titles were issued in the name of Green Acres including TCT
Nos. T-345660 (M),11 T-345661 (M)12 and T-345662 (M)13 covering the subject
properties. Green Acres then constructed a warehouse building complex on the said lots.
On January 17, 2001, the DARAB resolved Cabral’s appeal and rendered judgment ordering
the cancellation of the titles issued in the names of the Spouses Moraga and those of
Filcon for having been illegally acquired.

When Green Acres learned about the DARAB decision, it sent a Letter to Filcon
advising the latter that it learned that the properties it bought from Filcon were the
subject of an adverse decision of the DARAB. Fearing that its titles and possession might
be disturbed by the DARAB decision, Green Acres reminded Filcon of its warranties under
the deed of sale.

Filcon replied that it was also an innocent purchaser for value since at the time it
purchased the subject property, it had no knowledge of any legal infirmity in the title of
the Spouses Moraga.

On April 19, 2001, Green Acres filed a Complaint for Quieting of Title, Damages
with Application for Preliminary Injunction and Writ of Preliminary Attachment before the
RTC of Malolos, Bulacan against Cabral, the Spouses Moraga, Filcon, the DARAB and the
Registry of Deeds of Meycauayan, Bulacan. Green Acres sought to quiet its title and
alleged that it is a purchaser in good faith and for value, claiming that it had no notice or
knowledge of any adverse claim, lien, or encumbrance on the properties. Neither was it a
party to the DARAB proceedings nor did it have notice of the said proceedings where the
DARAB Decision of January 17, 2001 was issued. Green Acres claimed that the DARAB
decision casts a cloud on its titles.

Cabral, in her Answer, denied all the material allegations in the complaint and alleged that
Green Acres never acquired valid title to the subject property, much less, can it claim to
be an innocent purchaser for value. She further averred that a declaratory judgment in a
petition to quiet title will effectively subject the DARAB decision to review.

After Green Acres presented its evidence, Cabral filed a Demurrer to Plaintiff’s Evidence
arguing that Green Acres failed to prove that it is a purchaser in good faith and for value.
She maintains that the complaint is not appropriate for quieting of title since it omitted to
assail her titles over the subject property but instead questioned the proceedings held at
the DARAB. She likewise insisted that the trial court has no jurisdiction over the subject
property since the same is still within the coverage of the Comprehensive Agrarian Reform
Law and thus under the jurisdiction of the DARAB.

The trial court granted the demurrer and ordered the case dismissed.
Green Acres’ motion for reconsideration having been denied, Green Acres filed with the
CA an appeal which was docketed as CA-G.R. CV No. 85766, which was dismissed on the
ground that the trial court had no authority to interfere with the proceedings of a court
of equal jurisdiction, much less to annul the final judgment of a co-equal court. The
appellate court further held that the only issue in an action to quiet title is whether there
is a cloud in a title to real property because of any instrument, record, claim, encumbrance
or a proceeding that has a prima facie appearance of validity and the DARAB decision does
not fall within said enumeration. Thus this appeal.

ISSUE: WON THE DARAB DECISION IN FAVOR OF CABRAL CONSTITUTES A CLOUD

Ruling: Green Acres’ arguments are meritorious.

Article 476 of the Civil Code provides that whenever there is a cloud on title to
real property or any interest therein, by reason of any instrument, record, claim,
encumbrance or proceeding which is apparently valid or effective but is in truth and in
fact invalid, ineffective, voidable, or unenforceable, and may be prejudicial to said title, an
action may be brought to remove such cloud or to quiet the title.

An action may also be brought to prevent a cloud from being cast upon title to real
property or any interest therein.

Quieting of title is a common law remedy for the removal of any cloud upon, doubt,
or uncertainty affecting title to real property. Whenever there is a cloud on title to real
property or any interest in real property by reason of any instrument, record, claim,
encumbrance, or proceeding that is apparently valid or effective, but is in truth and in
fact, invalid, ineffective, voidable, or unenforceable, and may be prejudicial to said title,
an action may be brought to remove such cloud or to quiet the title. In such action, the
competent court is tasked to determine the respective rights of the complainant and the
other claimants, not only to place things in their proper places, and make the claimant, who
has no rights to said immovable, respect and not disturb the one so entitled, but also for
the benefit of both, so that whoever has the right will see every cloud of doubt over the
property dissipated, and he can thereafter fearlessly introduce any desired improvements,
as well as use, and even abuse the property.

For an action to quiet title to prosper, two indispensable requisites must concur: (1)
the plaintiff or complainant has a legal or equitable title 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 his title must be shown to be in fact invalid or inoperative despite its
prima facie appearance of validity or legal efficacy.51
There is no dispute as to the first requisite since Green Acres has legal title over the
subject properties. The issue lies in the second requisite.

A cloud on title consists of (1) any instrument, record, claim, encumbrance or proceeding;
(2) which is apparently valid or effective; (3) but is in truth and in fact invalid, ineffective,
voidable, or unenforceable; and (4) may be prejudicial to the title sought to be quieted.52

In this case, the DARAB decision in favor of Cabral satisfies all four elements of a cloud
on title. As Green Acres correctly points out, the DARAB decision, a final one at that, is
both an "instrument" and a "record." Black’s Law Dictionary defines an instrument as a
document or writing which gives formal expression to a legal act or agreement, for the
purpose of creating, securing, modifying or terminating a right. A record, on the other
hand, is defined as a written account of some act, court proceeding, transaction or
instrument drawn up under authority of law, by a proper officer, and designed to remain as
a memorial or permanent evidence of the matters to which it relates.54 is likewise a
"claim" which is defined as a cause of action or a demand for money or property since
Cabral is asserting her right over the subject lots. More importantly, it is a "proceeding"
which is defined as a regular and orderly progress in form of law including all possible
steps in an action from its commencement to the execution of judgment and may refer not
only to a complete remedy but also to a mere procedural step that is part of a larger
action or special proceeding.

Also, the DARAB decision is apparently valid and effective. It is a final decision that has
not been reversed, vacated or nullified. It is likewise apparently effective and may be
prejudicial to Green Acres’ titles since it orders the cancellation of the titles of the
Spouses Moraga and Filcon all from which Green Acres derived its titles. However, as
discussed above, it is ineffective and unenforceable against Green Acres because Green
Acres was not properly impleaded in the DARAB proceedings nor was there any notice of
lis pendens annotated on the title of Filcon so as to serve notice to Green Acres that the
subject properties were under litigation. As such, Green Acres is an innocent purchaser
for value.