G.R. No. 215999 , December 17, 2018
SPS. FELIX A. CHUA AND CARMEN L. CHUA; ET AL., PETITIONERS, VS. UNITED COCONUT PLANTERS BANK; ET AL., RESPONDENTS.

FACTS

Petitioners, as property owners, entered into a Joint Venture Agreement (JVA) with corporations controlled by respondent Jose Go for land development. Pursuant to the JVA, petitioners conveyed twelve parcels of land to Revere Realty, another Go-controlled corporation, via an absolute deed of sale. Subsequently, two Deeds of Trust (DoTs) were executed, wherein Revere and Gotesco (the Trustee corporations) acknowledged petitioners as the absolute owners of the properties and held the titles in trust for petitioners’ benefit, undertaking not to encumber the lands without petitioners’ written consent. Separately, some petitioners obtained loans from respondent United Coconut Planters Bank (UCPB), secured by a Real Estate Mortgage (REM) over distinct properties not involved in the JVA.
Upon loan default, petitioners Spouses Chua and Lucena Grand Central Terminal, Inc. (LGCTI) entered into a 2000 Memorandum of Agreement (MOA) with UCPB to settle a consolidated obligation of over P204 million. The MOA stipulated that UCPB would acquire title to specific properties—listed in an Annex “A”—as partial satisfaction of the debt. Crucially, the properties listed in Annex “A” included the twelve parcels previously conveyed to and held in trust by Revere. UCPB later assigned its credit to Asset Pool A (APA), which initiated extrajudicial foreclosure proceedings based on the MOA.

ISSUE

Whether the extrajudicial foreclosure by APA over the twelve parcels of land listed in Annex “A” of the MOA is valid, considering these properties were held in trust by Revere for petitioners and were purportedly conveyed to UCPB without the trustees’ consent as required by the Deeds of Trust.

RULING

Justice Caguioa, in his Separate Opinion, voted to partially grant the Motion for Reconsideration, finding the foreclosure invalid as to the twelve trust properties. The legal logic centers on property rights and the nature of the MOA. The Deeds of Trust established that Revere, as trustee, held naked title, but petitioners retained beneficial ownership. The trustees’ covenant not to encumber the property without petitioners’ consent was a stipulation in favor of petitioners as trustors/beneficiaries, which they could waive. The critical act was petitioners’ agreement in the MOA to transfer these specific trust properties to UCPB in satisfaction of their debt. By listing these properties in Annex “A” and signing the MOA, petitioners, as the beneficial owners, effectively exercised their right to dispose of the trust res and consented to the conveyance, thereby waiving any protection under the DoTs against alienation without their consent. The MOA constituted a dation in payment (dación en pago), a contract where property is alienated to the creditor in satisfaction of a debt. The foreclosure was merely the procedural mechanism to implement this prior agreement. Since petitioners themselves agreed to the transfer via the MOA, the foreclosure based on that agreement was valid. The separate legal personality of the trustee corporation (Revere) did not preclude the beneficial owners from directly agreeing to convey the property to settle their own personal obligations to UCPB.