October 3, 1995

DAR OPINION NO. 57-95

Mr. Alfredo C . Antonio

Chairman

Development Bank of the Philippines

Sen. Gil Puyat Ave. cor. Makati Avenue

Sir:

May I bring to your attention the herein letter-appeal of the Alamada Integrated Livelihood Cooperative (AILC) regarding their application for a loan intended, to finance their rubber production project, using as collateral the Certificate of Landownership Award covering a lot in a Resettlement Project.

Per information relayed by Mr. Nicolas B. Alcover of DBP Kidapawan, your Chief Legal Counsel has advised against accepting CLOAs as collateral for loans. Said advice may have been prompted by the provision in Section 27 of RA 6657 that lands awarded to agrarian reform beneficiaries may not be sold, transferred or conveyed within ten years. However, the same Section makes an exception as regards transfers to government institutions, such as the DBP. The DBP stands in the same position as the Land Bank, with respect to the duty that once the mortgaged lot is foreclosed, the same should be transferred to a qualified beneficiary within the ten-year prohibitory period.

The DAR, therefore, sees no legal impediment in the event the DBP forecloses on the awarded lot subject of the mortgage, provided the mortgage deed contains a provision that in the event of foreclosure, the lot shall be transferred to qualified agrarian reform beneficiaries/cooperative members.

If this proviso is made part of the agreement, then the DAR interposes no objection to the project and I request that the loan application of the members of Alamada Integrated Livelihood Cooperative (AILC) be given favorable consideration.

On behalf of the members of the AILC, thank you for your kind attention.

Very truly yours,

(SGD.) ERNESTO D. GARILAO
Secretary

Copy furnished:

Mr. Nicolas M. Alcover

DBP Kidapawan Branch

Kidapawan, Cotabato

Mr. Genio N. Demetillo

Chairman, Credit Committee

Alamada Integrated Livelihood Cooperative

Alamada, Cotabato