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May 31, 2000

DAR ADMINISTRATIVE ORDER NO. 01-00

 

SUBJECT    :     Revised Rules and Regulations on the Acquisition of Agricultural Lands Subject of Mortgage or Foreclosure

 

Pursuant to Section 49 of Republic Act (RA) No. 6657, otherwise known as the "Comprehensive Agrarian Reform Law of 1988", and Section 7, Chapter 2, Book IV of Executive Order No. 292, otherwise known as "The Revised Administrative Code of 1987", the rules and regulations on the acquisition of private agricultural lands subject of mortgage or foreclosure are hereby revised as follows:   cdll

SECTION 1.   Rationale. — Section 25 of Republic Act No. 337, otherwise known as "The General Banking Act", provides that acquired assets and mortgaged properties foreclosed by banks shall be disposed of within a period of five (5) years after foreclosure. Further, Section 71 of RA 6657 provides that "(b)anks 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." Furthermore, Section 72 (b) of RA 6657 provides that "(m)ortgages and other claims registered with the Register of Deeds (ROD) shall be assumed by the government up to an amount equivalent to the landowner's compensation value as provided in this Act."

SECTION 2.   Definition of Terms. — As used in this Order, the terms enumerated are defined as follows:

a)         Banks include banking institutions, commercial banks, savings banks, mortgage banks, trust companies, building and loan associations, branches and agencies in the Philippines of foreign banks, and all other corporations, companies, partnerships and associations performing banking functions in the Philippines. (Section 22, Act No. 335).

b)         Mortgage is an accessory contract whereby the debtor (or a third person) guarantees the performance of the principal obligation by subjecting real property or real rights as security in case of non-fulfillment of said obligation within the period agreed upon.

c)         Mortgagor is one who, having all or some title to property, by written instrument, pledges that property for some particular purpose such as security for a debt.

d)         Mortgagee refers to banks, financial institutions and other persons whether natural or juridical, holding registered mortgage rights over said lands.

e)         Foreclosure is the procedure by which the mortgaged property is sold on default of the mortgagor in satisfaction of the mortgage debt. It denotes the procedure adopted by the mortgagee to terminate the rights of the mortgagor on the property and includes the sale itself. (Development Bank of the Phils. vs. Zaragoza, 84 SCRA 668 [1978]).

f)         Redemption is a transaction by which the mortgagor reacquires or buys back the property which may have passed under the mortgage or divests the property of the lien which he may have created.

g)         Right of Redemption is the right of the mortgagor to redeem the mortgaged property within a certain period after it was sold for the satisfaction of the mortgage debt.

Where the mortgagee is a bank, the right of redemption exists in both judicial and extra-judicial foreclosure. In such case, the mortgagor or his successor-in-interest may exercise his right of redemption within one year from the date of the registration of the certificate of sale. (Section 78, RA 337; Rosario vs. Tayug Rural Bank, 22 SCRA 1220 [1968]). However, when a land covered by homestead or free patent mortgaged with a rural bank is foreclosed, the homesteader or free patent holder, as well as his heirs, shall have the right to redeem the same within one (1) year from the date of foreclosure in the case of land not covered by a Torrens Title or one (1) year from the date of registration of the foreclosure in the case of land covered by a Torrens Title (Section 6, par. 3, RA 7353, otherwise known as, "The Rural Banking Act of 1992").

Where the mortgagee is other than a bank, the right of redemption exists only in extra-judicial foreclosure. In such case, the debtor, his successor in interest or any judicial creditor or judgment creditor of said debtor, or any person having a lien on the property subsequent to the mortgage or deed of trust under which the property is sold may redeem the same within the term of one year from the date of registration of the certificate of sale with the appropriate Register of Deeds (Section 6, Act No. 3135, otherwise known as "An Act to Regulate the Sale of Property Under Special Powers Inserted In Or Annexed to Real Estate Mortgages; Reyes vs. Noblejas, GR No. 1-23691. November 25, 1967).

h)         Equity of Redemption refers to the right of the mortgagor to redeem the mortgaged property after his default in the performance of the conditions of the mortgage but before the sale of the mortgaged property or confirmation of the sale. (Top Rate International Services, Inc. vs. Intermediate Appellate Court, 142 SCRA 467 [1986]).

Equity of redemption exists in judicial foreclosure, except where the mortgagee is a bank. The equity of redemption may be exercised by the mortgage debtor, the second mortgagee, the subsequent attaching creditor or purchaser, within a period not less than ninety (90) days nor more than one hundred twenty (120) days from the entry of judgment of foreclosure and even thereafter, provided he does so before the foreclosure sale is confirmed by the court, (Sections 2 & 3, Rule 68, Revised Rules of Court).

SECTION 3.   Coverage. — These rules shall cover all agricultural lands subject of mortgage or foreclosure. They shall not apply to cases where the mortgagee is already the registered owner of the property at the start of the acquisition proceedings. In such cases, the procedures provided in DAR Administrative Order No. 2 (1996), as amended, shall govern.

SECTION 4.   Mortgagee Deemed as Landowner. — For purposes of covering the property under the agrarian reform program, the mortgagee shall be considered as the new landowner if before the deposit of just compensation is made:   cdll

a)         The mortgagee is the purchaser in the foreclosure sale and the redemption period, as provided by law, has already expired in cases where the right of redemption exists; or

b)         The mortgagee is the purchaser in the foreclosure sale and said foreclosure sale is confirmed by the court in cases where only equity of redemption is provided.

SECTION 5.   Mortgagee Deemed as Lien-holder. — The mortgagee shall be considered a lien-holder if on the date the land transfer claim was received by the Land Bank of the Philippines (LBP) from the Department of Agrarian Reform (DAR):

a)         The mortgage debt is not yet due and demandable; or

b)         The mortgage debt is already due and demandable but the mortgagee has not foreclosed on the property; or

c)         The mortgage has already been foreclosed but the period to exercise the right of redemption, in cases provided by law, has not yet expired; or the foreclosure sale has not yet been confirmed by the court in cases where there is only equity of redemption.

SECTION 6.   Consolidation of Mortgagee's Title. The mortgagee may proceed to effect the cancellation of the mortgagor's certificate of title and the issuance of a new one in his or its name in accordance with Section 63 of PD No. 1529, or the "Property Registration Decree", upon the expiration of the redemption period or upon confirmation by the court of the foreclosure sale, as the case may be.

If the mortgagee fails to cause the issuance of a certificate of title in his or its name within thirty (30) days from receipt of the notice of land valuation and acquisition, the procedure for the transfer of title in the name of the Republic of the Philippines shall be followed in accordance with DAR AO 2 (1996). The Provincial Agrarian Reform Office shall furnish the Register of Deeds (ROD) all supporting documents to effect the consolidation of title in the name of the mortgagee as provided in Section 63 of PD 1529, as follows:

a)         Where there is only equity of redemption, a certified copy of the final order of the court confirming the sale;

b)         In cases where the right of redemption exists:

1)        In judicial foreclosure, the final deed of sale executed by the sheriff in favor of the mortgagee;

2)        In extra-judicial foreclosure, either a final deed of sale executed by the person authorized by virtue of the power of attorney embodied in the deed of mortgage, or an affidavit of the mortgagee attesting to the fact of non-redemption. In case the latter requirement is not executed by the mortgagee, an affidavit executed by the Provincial Agrarian Reform Officer (PARO) attesting to the fact of the mortgagee's failure to execute such affidavit of non-redemption shall be sufficient.

After the submission of said supporting documents, in addition to those required in ordinary acquisition proceedings under AO 2 (1996), and after the corresponding annotations of the consolidation of ownership and of the transfer of the property to the Republic of the Philippines on the mortgagor's title, the mortgagor's title shall be cancelled and a new one issued in the name of the Republic of the Philippines, without the need of issuing a certificate of title in the name of the mortgagee.

SECTION 7.   Payment of Taxes, Penalties, Fines, Registration Fees and Other Impositions. All taxes, penalties, fines, registration fees and other impositions required to be paid by the mortgagor and the mortgagee before title can be registered in the name of the Republic of the Philippines shall be deducted from the proceeds of the land transfer claim and paid by the LBP if the mortgagee fails to pay such fees within fifteen (15) days after due notice and demand either through personal service or registered mail by the PARO. Upon failure of the mortgagee/landowner to pay said fees within the prescribed period, the PARO shall verify whether an order converting, exempting or lifting the coverage or acquisition was issued involving the subject property, and if there is none, he shall direct the LBP to deduct from the proceeds of the land transfer claim the necessary amount and pay the said taxes, penalties, registration fees, fines and other impositions.

SECTION 8.   Rights and Privileges of Mortgagee. — The rights and privileges of the mortgagee as new landowner or lien-holder are as follows:

a)         As new landowner, the bank, financial institution, or other concerned person shall be entitled, among others, to:

1)        Receive all notices, advices, correspondence, and all other communications from the DAR and/or LBP, such as, but not limited to, Notice of Coverage, Notice of Land Valuation and Acquisition, Letter-Requirement for Processing and Payment of Claim, etc.;

2)        Transact with DAR and/or LBP regarding all aspects of subject land transfer claim, to the exclusion of all other persons;

3)        Be named as the recipient of all cash and bond deposits; and

4)        Receive all the proceeds of subject land transfer claim, less deductions to which the land may be liable.

b)         As lienholder, the bank, financial institution, or other concerned person shall be entitled, among others, to:

1)        Receive payment for the obligation of the mortgagor from the land transfer proceeds up to an amount equivalent to the landowner's compensation value; and

2)        Receive notices, advices, and all other communications pertaining to the obligation of the landowner-debtor (mortgagor).

SECTION 9.   Obligations of Mortgagee. — The obligations of the mortgagee as new landowner or lien-holder are as follows:

a)         As new landowner, the mortgagee shall:

1)        Comply with all the requirements for processing and payment of the claim such as surrender of the Owner's Duplicate Copy of Title; and

2)        Sign all land transfer documents required as a consequence of the processing and payment of the land transfer claim such as: Deed of Assignment, Warranties and Undertaking, Deed of Transfer, Deed of Confirmation of Coverage and Transfer, etc.

b)         As lienholder, the mortgagee shall:

1)        Issue a release of mortgage, or execute a deed of redemption, and deliver the Owner's Duplicate Copy of Title after payment of the value of the lien; and

2)        Sign all other documents necessary to effect the cancellation of the mortgage.

SECTION 10. Sanctions for Failure to Comply with Obligation. — The proceeds of the land transfer claim shall not be released to the landowner until and unless he complies with his obligations set forth in Section 9 (a). Likewise, the lienholder shall not be paid the amount of his claim until and unless he complies with his obligations enumerated in Section 9 (b).

SECTION 11. Operating Procedures. — In cases where the mortgagee is considered as the landowner, the following procedures shall apply:

a)         Land transfer claim under process by DAR/LBP

Steps       Responsible                                                                       Documentary

               Person/Office                         Activity                                Requirements

    1         DARPO                 Proceeds with the processing of

                                             the claim folder in accordance

                                             with AO 2 (1996), as amended

 

    2         LBP-LVLCO         Proceeds with the usual processing

                                             & approval of the land transfer

                                             claim

 

    3         LBP-LVLCO         Sends Memorandum of Valuation           CARP Form No.

                                             (MOV), together with Claim Folder        9 - Memorandum

                                             Profile and Valuation Summary to          of Valuation and

                                             PARO with advice to send notice           Claim Folder

                                             to the mortgagee (new                           Profile and

               .                             landowner), for consolidation of              Valuation

                                             ownership in mortgagee's name.             Summary

 

    4         DARPO                 Sends Notice of Land Valuation             CARP Form No.

                                             and Acquisition (NLVA) to the              10 - Notice of

                                             mortgagee (new landowner),                  Land Valuation

                                             together with the Notice to                     and Acquisition

                                             Consolidate Ownership within               

                                             thirty (30) days from receipt                   CARP Form No.

                                             thereof. If there is a subsequent             10.b - Notice to

                                             transfer or reconveyance of the              Consolidate

                                             property, the mortgagee shall                  Ownership

                                             notify DAR of said                               

                                             transfer/reconveyance                           CARP Form No.

                                             within fifteen (15) days from                  10.c - Affidavit

                                             receipt of DAR's Notice to                    of Consolidation

                                             Consolidate Ownership.                         of Ownership

                                             Otherwise, the mortgagee shall

                                             be deemed owner of the property

                                             notwithstanding the subsequent

                                             transfer. In case the mortgagee

                                             does not respond, the PARO shall

                                             consolidate the ownership in the

                                             mortgagee's name.

 

    5         Mortgagee as          Accepts or rejects the land                     CARP Form No.

               new landowner        valuation.                                              10.a - LO's

                                             (Note: Procedures on the                       Reply to NLVA

                                             acceptance or rejection of the

                                             valuation outlined in

                                            AO 2 [1996] shall apply)

 

                                             Executes affidavit of consoli-                 Copy of New

                                             dation duly annotated/registered              Title

                                             or a certified copy of the new

                                             title in mortgagee's name and

                                             forwards same to DARPO.

 

                                             DAR shall request ROD to issue            CARP Form No.

                                             TCT in the name of RP as                     18 - Request

                                             provided in AO 2 (1996).                       to issue TCT

                                             In such case, the PARO shall                 in the name of

                                             furnish the ROD all documents               RP

                                             showing the consolidation of

                                             title in the name of the

                                             mortgagee.

 

    6         DARPO                 Sends LBP a request to pay                   CARP Form No.

                                             or to deposit the land transfer                 12 - Request to

                                             claim.                                                   Pay or

 

                                             i.  In case the mortgagee (new               CARP Form No.

                                             landowner) has effected                        15 - Request to

                                             consolidation of ownership,                     Deposit (as the

                                             forwards to LBP a certified                   case may be)

                                             copy of the new title;

 

                                             ii. In case the mortgagee (new               CARO Form No.

                                             landowner) has not effected                   10.c - Affidavit

                                             consolidation of ownership,                     of Consolidation

                                             furnishes LBP affidavit of                      of Ownership

                                             consolidation duly executed                   

                                             by PARO with a statement                    CARP Form No.

                                             of account on the expenses                    15.a - Request

                                             incurred (such as taxes,                         to Deduct

                                             impositions, penalties and                       Expenses

                                             other fees) to effect the

                                             transfer of title. Verifies if an

                                             order was issued converting,

                                             exempting or lifting the

                                             coverage or acquisition of

                                             subject property, and if there

                                             is none, directs LBP to deduct

                                             said expenses from the

                                             proceeds of the land transfer

                                             claim.

 

    7         LBP                       Prepares payment and remits                 CARP Form No.

                                             the same to agencies                             17 - Certification

                                             concerned; issues Certification               of Deposit

                                             of Deposit (COD) to the DAR

 

b)         Land transfer claim already approved by LBP and Certificate of Deposit issued in favor of former registered owner where the redemption period has expired or the foreclosure sale has been confirmed by the court, as the case may be.   cdphil

Steps       Responsible                                                                       Documentary

               Person/Office                         Activity                                Requirements

    1         DAR                      Sends notice/invitation to new                 CARP Form No.

                                             landowner for conference to                  2.b - Notice to

                                             discuss matters pertaining to                   Mortgagee/New

                                             the land transfer claim and other             Landowner

                                             information relative thereto

 

    2         DAR/                     Mortgagee as new landowner

               LBP-LVO              may, during the conference,

                                             present specific issues

                                             and/or concerns which shall

                                             be discussed and resolved by

                                             DAR, LBP-LVO, and other

                                             agencies concerned

 

    3         The                        If no issues and/or

               mortgagee               concerns are raised mortgagee

               as new                    as new landowner will

               landowner               execute affidavit of

                                             consolidation of ownership

 

    4         DAR                      Issues order directing LBP to                 CARP Form No.

                                             inscribe in the COD and in other             18.b - Letter

                                             pertinent documents contained                to the LBP

                                             in the claim folder the name of

                                             the mortgagee as new land-

                                             owner in place of the former

                                             owner

 

    5         The                        If mortgagee as new

               mortgagee               landowner raises

               as new                    issues and/or concerns

               landowner               pertinent to land

                                             transfer claim and other

                                             information relative thereto:

 

               DAR                      i.  If the issue involves coverage,

                                             shall advise the mortgagee, as

                                             the new landowner, that the                  

                                             matter shall be resolved

                                             administratively by filing a

                                             written protest thereof.

 

                                             ii.  If the issue involves land

                                             valuation, the same shall be

                                             resolved through quasi-

                                             judicial proceedings by the

                                             Adjudication Board.

 

    6         DAR                      PARO shall request mortgagee              CARP Form No.

                                             (new landowner) to execute                   10.b - Notice to

                                             affidavit of consolidation.                         Consolidate

                                                                                                             Ownership

               The mortgagee        a) The mortgagee as the new

               as the new              landowner executes affidavit

               landowner               of consolidation.

              

               DAR                      i.  issues order directing LBP                 CARP Form No.

                                             to inscribe the name of the                     18.b - Letter to

                                             mortgagee as the new                            LBP

                                             landowner in the COD

                                             and in other pertinent

                                             documents contained in

                                             the claim folder in place

                                             of the former landowner.

 

               LBP                       ii.  Issues COD in the name of               CARP Form No.

                                             the mortgagee as the new                      17 - Certification

                                             landowner. In such case,                        of Deposit

                                             processing of the land

                                             transfer claim shall

                                             proceed accordingly.

                                            

                                             b)  if the mortgagee (new land-

                                             owner) refuses or fails to

                                             execute the affidavit of

                                             consolidation, the activity

                                             provided under Sec. 6(b) (2)

                                             hereof, shall be undertaken.

 

c)         Procedures for transfer of title and registration.   cdlex

Steps       Responsible                                                                       Documentary

               Person/Office                         Activity                                Requirements

    1         DARPO                 Requests ROD to issue title in           a)  CARP Form

                                             the name of RP                                     No. 18 or

                                                                                                         18.a -

                                                                                                         Request to

                                                                                                         Issue TCT in

                                                                                                         the name of

                                                                                                         RP

                                                                                                         b)  CARP Form

                                                                                                         No. 10.c -

                                                                                                         Affidavit of

                                                                                                         Consolidation

                                                                                                         c)  CARP Form No. 17 - LBP

                                                                                                         Certification

                                                                                                         of Deposit

 

    2         ROD                      Issues title in the name of RP            New TCT in the

                                                                                                         name of RP

 

                                             Note: Procedures on the

                                             generation and registration of

                                             CLOA outlined under the Joint

                                             DAR-LRA Memorandum Circular

                                            No. 9 (1996) shall apply.

SECTION 12. Procedure when Mortgagee is Lienholder. — In case the period of redemption has not yet expired or the foreclosure sale has not been confirmed by the court at the time item D.1, Step 25 or item D.2, Step 26 of DAR Administrative Order No. 2, Series of 1996 is undertaken, the mortgagee shall be simply paid the amount of the mortgage debt but not exceeding the equivalent of the landowner's compensation value. For this purpose, the guidelines outlined in the said administrative order shall apply.

SECTION 13. Repealing Clause. — All other previous orders, circulars, memoranda and other issuances inconsistent herewith are hereby revoked or modified accordingly.

SECTION 14. Effectivity. — This Order shall take effect ten (10) days after its publication in two (2) national newspapers of general circulation pursuant to Section 49 of RA 6657.

Diliman, Quezon City, May 31, 2000.   llcd

(SGD.) HORACIO R. MORALES, JR.
Secretary



CONTACT INFORMATION

Department of Agrarian Reform
Elliptical Road, Diliman
Quezon City, Philippines
Tel. No.: (632) 928-7031 to 39

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