VDA. DE JAYME v.

COURT OF APPEALS
G.R. No. 128669,October 4, 2002
Quisumbing, J.:

FACTS:

On January 8, 1973, spouses Jayme entered into a contract of lease with

George Neri, President of Asian Cars covering one-half of Lot 2700 for 20 years.
Under the contract, Asian Cars used the leased premises as a collateral to
secure payment of loan which Asian Cars may obtain from any bank, provided,
the proceeds of the loans shall be used solely for the construction of the building
which upon the termination of lease shall automatically become the property of
the Jayme spouses. In October1977, Asian Cars obtained a loan of six million
from Metrobank. The entire lot 2700 was offered as one of the several properties
given as collateral for the loan. Due to financial difficulties, Asian Cars conveyed
ownership of the building on the leased premises to MBTC by way of dacion en
pago. Eventually, MBTC extrajudicially foreclosed the mortgage and MBTC was
the highest bidder in a public auction. Heirs of Graciano Jayme filed an action
for annulment of contract with damages and issuance of preliminary injunction
against Asian Cars. RTC declared that the REM executed by Jayme in favor of
Metrobank as valid and binding. XXX CA affirmed the decision declaring valid
also the foreclosure of the mortgage and the foreclosure sale.

ISSUE:

Whether or not the dacion en pago by Asian Cars in favor of MBTC is valid and
binding despite the stipulation in the lease contract

RULING:

Court of Appeal did not err in considering MBTC as a purchase in good faith,
MBTC had no knowledge of the stipulation in the lease contract. There was no
annotation on the title of any encumbrance. Thus, the transfer of the building in
favor of MBTC was properly held valid and binding by respondent CA.

CA decision is affirmed with modification ordering that private respondent MBTC

pay petitioner’s rentals amounting to P602,083.33. with 6 % interest per annum
until fully paid.