December 23, 1996

DAR OPINION NO. 141-96

Mr. Abelardo G. Luzano

Vice-President

Remedial Management Group

SSS (Makati) Bldg.

Ayala Avenue, cor. Herrera St.

Makati, Metro Manila

Dear Mr. Luzano:

This refers to your request for clarification on the application of Memorandum Circular No. 5, Series of 1996, more particularly its last paragraph which reads:

"As regards private banks, Section 71 of R.A. 6657 provides that said foreclosed assets are subject to existing laws on their compulsory transfer (that is, under the General Banking Act) and acquisition under Section 16 of said Act. This means that private banks may sell to third parties their foreclosed assets but still subject to acquisition under Section 16 of R.A. 6657".

You state that the Union Bank of the Philippines has at present several foreclosed agricultural lands devoted to rice and corn which should be disposed within five years from acquisition of the bank as mandated under section 25 of the General Banking Act (R.A. 337). However, the bank hesitated to execute Deeds of Sale to prospective buyers for fear that the sale might violate the last paragraph of Section 6 of R.A. 6657. With the issuance of Memorandum Circular No. 5, Series of 1996, the Bank feels that, as can be gleaned in the aforecited provision, it can now sell foreclosed agricultural lands to a third party without violating the law. Hence, your request for clarification.

In reply we wish to inform you that private banks are now allowed to sell their foreclosed assets. In such a case however, it is submitted that the DAR Certification Clearance required under A.O. No. 1, Series of 1989, is no longer necessary as the buyer cannot legally exercise any retention right on the land purchased.

Please be guided accordingly.

Very truly yours,

(SGD.) LORENZO R. REYES

OIC-Undersecretary
LAFMA