G.R. No. L-46001 - Caro vs. Court of Appeals

In January 1982, spouses Domingo Villamor, Sr. and Trinidad Gutierrez Villamor (spouses Villamor, Sr.), parents of respondents Mancer Villamor, Carlos Villamor, and Domingo Villamor, Jr., mortgaged a 4.5-hectare coconut land (Lot No. 1814, Sta. Rosa, San Jacinto, Masbate) to Rural Bank of San Jacinto (San Jacinto Bank) to secure a P10,000 loan.
Due to non-payment, San Jacinto Bank foreclosed extrajudicially, bought the land as highest bidder, and obtained a final deed of sale in its favor in 1991 after spouses Villamor, Sr. failed to redeem within the redemption period. The bank offered the land for sale thereafter.

The respondents and their sister Catalina Villamor Ranchez, who had been in possession and cultivation, decided to acquire the land from San Jacinto Bank.
The bank agreed to sell the land for P65,000, payable in installments. Respondents and Catalina made four installment payments from November 1991 to June 1994 totaling P65,000.
Despite full payment, San Jacinto Bank refused to issue a deed of conveyance; respondents and Catalina filed a complaint for specific performance with damages on October 11, 1994 (Civil Case No. 200).
San Jacinto Bank claimed it issued a deed of repurchase to spouses Villamor, Sr., crediting installment payments to the latter’s account, asserting the Villamor, Sr. as the real buyers.
RTC dismissed respondents' specific performance case in a February 10, 2004 decision, ruling the bank acted in good faith in issuing deed of repurchase to spouses Villamor, Sr., since Domingo, Sr. transacted with the bank for redemption.
The Court of Appeals (CA), however, reversed the RTC, ruling respondents and Catalina made payments on their own behalf and not as representatives of spouses Villamor, Sr.; the redemption period had lapsed and transaction was alien to the mortgage. CA ordered San Jacinto Bank to execute deed of sale to respondents and Catalina and awarded attorney’s fees. No further appeal noted.

On July 19, 1994, San Jacinto Bank executed a deed of sale in favor of Domingo Villamor, Sr. (spouse Villamor, Sr.).
On July 21, 1994, spouses Villamor, Sr. sold the land to petitioners Erosto and Nelsie Santiago for P150,000.
Respondents and Catalina refused petitioners’ demand to vacate the land.
Petitioners filed a complaint for quieting of title and recovery of possession against respondents on October 20, 1994 (Civil Case No. 201).
Respondents and Catalina challenged validity of spouses Villamor, Sr.’s deed of sale, asserting their own claim based on installment payments and possession.
RTC, in its May 28, 1997 decision, ruled in favor of petitioners, declaring them legal and absolute owners and ordering respondents to vacate and pay moral damages.
On appeal, CA in Aug 10, 2004 decision set aside RTC ruling, citing petitioners’ failure to prove legal or equitable title, lack of actual or constructive possession, and presence of conflicting claim by respondents. CA dismissed the complaint without prejudice to the pending specific performance case.
CA denied petitioners’ motion for reconsideration on June 8, 2005.
Petitioners filed the present petition for review under Rule 45.

Petitioners claim spouses Villamor, Sr.’s execution of July 21, 1994 deed was equivalent to constructive delivery under Article 1498 Civil Code; they are purchasers in good faith with no notice of respondents’ claim or possession; respondents’ possession is customary familial use not adverse to petitioners.
Respondents and John Villamor contend:

They hold legal title by virtue of installment payments starting November 4, 1991 and actual possession;
Petitioners are not purchasers in good faith for failing to inquire about respondents’ possession and claim.

Whether the Court of Appeals erred in setting aside the RTC’s decision in favor of petitioners in the quieting of title case and dismissing petitioners’ complaint for quieting of title and recovery of possession.
Whether petitioners are purchasers in good faith and whether constructive delivery occurred upon the execution of the deed of sale by spouses Villamor, Sr. in their favor.