July 1, 1997
DAR OPINION NO. 69-97
Jose L. Centeno, Jr.
Municipal Agrarian Reform Officer
B. S. Aquino Avenue
Baliuag, Bulacan
Dear MARO Centeno:
This has reference to your letter dated 21 April 1997 seeking opinion on the queries posed therein, to wit:
a.) Whether a property mortgaged to Manila Newtown Development Corporation and later assigned to Banco Filipino would carry-over the encumbrance in the title if reconstituted and in the individual Certificates of Land Ownership Award ( CLOAs ) of qualified CARP beneficiaries?
b) Is the ten (10) year prescriptive period for encumbrance of real estate mortgage embodied under the General Banking Act still applicable?
Anent your first query, only liens or encumbrances on the title or CLOA as a result of a mortgage or other encumbrance equivalent to the landowner's compensation value as provided in Section 72, of R.A. No. 6657 and DAR Administrative Order No. 2, Series of 1997 shall be cancelled. Otherwise stated, not all liens or encumbrances appearing on the title shall be assumed by the government in its entirety for the latter's obligation is only limited to the landowners compensation value and any excess thereat would be carried over to the title or CLOA.
Specifically, Land Registration Circular No. 54, Series of 1993 declares in unequivocal terms that: "the liens or encumbrances shall be carried over to the EP/CLOA upon presentment for registration, unless the appropriate instrument for each cancellation is likewise presented". Accordingly, from the foregoing aforequoted provisions of law, liens or encumbrances in excess of the landowner's compensation value shall continue to exist unless assumed by the government or by the farmer beneficiaries themselves.
Anent your second query, nowhere in Republic Act No. 337 (General Banking Act) as amended by Presidential Decree No. 1317 suggests that the prescriptive period for encumbrance of real estate mortgage is ten (10) years. A careful scrutiny of the said law reveals that: "no bank shall hold the possession of any real estate purchased to secure any debt due to it, for a longer period than five years". This declaration is further reiterated in DAR Administrative Order No. 02, Series of 1997 which provides that acquired assets and mortgaged properties foreclosed by the mortgagor banks shall be disposed of within a period of five (5) years after foreclosure. Further, Section 71 of R.A. No. 6657 provides that: "Banks and other financial institutions allowed by law to hold mortgage rights or security interests in agricultural lands to secure loans and other obligations of borrowers, may acquire title to these mortgaged properties, regardless of area, subject to existing laws on compulsory transfer of foreclosed assets and acquisition as prescribed under Section 16 of this Act".
We hope to have clarified the matters with you.
Very truly yours,
(SGD.) ARTEMIO A. ADASA, JR.
Undersecretary for Legal Affairs, and Policy and Planning