December 13, 1996

DAR OPINION NO. 125-96

Mr. Anthony C. Jose

2/F R. Tan Building

Campaner St. cor. Nunez

Zamboanga City

Dear Mr. Jose:

This refers to your letter seeking an opinion on the proposed construction of a rubber processing plant by a cooperative Federation known as FAARMCO in the land owned by TARBEMCO (a member cooperative) and to use the same as collateral for the loan to finance the said project.

As can be gleaned from your letter this issue has already been subject of a legal opinion rendered by DAR IX which according to you asserts that there is a statutory prohibition on the transfer of lands to the federation and as an alternative only the member cooperative (TARBEMCO), can act as the sole proponent and owner of the project facility. A perusal of the Opinion dated June 3, 1996 of DAR IX, reveals among others that, and to quote:

"Applying the statutory prohibition in Section 27 of R.A. 6657 which states that "lands acquired under this Act shall not be sold, transferred, or conveyed except through hereditary succession or to the Republic of the Philippines or to the LBP or to the other, qualified beneficiaries for a period of ten (10) years". Such transfer to a registered cooperative federation may not be allowed. The Federation is not among the foregoing exception".

This is not, however, the "preferred option" of the Federation in relation to said opinion of DAR IX, since they wish to "explore ways of owning and operating the plant on behalf of all its member cooperative".

At the, outset, a qualified beneficiary of Land Redistribution under R.A. 6657 include, among others, farmer cooperatives. They may opt for collective ownership, such as co-ownerships or farmers cooperative or some other form of collective organization, provided, that the total area they may be awarded shall not exceed the total number of co-owners or members of the cooperative or collective organization multiplied by the award limit prescribed.

It goes without saying that the members of TARBEMCO Cooperative are the sole beneficiary of the subject land and it does not mean that by reason of being a member in the Federation of Cooperatives, the property can be transferred to the Federation to used as a collateral for the loan and eventually for the construction of the plant. The right to own the land given to the members of TARBEMCO Cooperative is exclusive. In other words, they are the awardees of the land. TARBEMCO, however, may not be allowed to initiate the construction of the plant since it would change the use of the land without DAR approval.

If TARBEMCO wish, after the lapse of the prohibitory period for the transfer of awarded lands, it may sell or transfer their property to the Federation. Note however, that if in the future the property will be used for the purpose already mentioned, a DAR Clearance is required.

Please be guided accordingly.

Very truly yours,

(SGD.) LORENZO R. REYES

OIC-Undersecretary
LAFMA