March 22, 1999
DAR OPINION NO. 25-99
MS . FELICIDAD C . BAÑARES
OIC-Provincial Agrarian Reform Officer
DAR-Provincial Office
Luna St., La Paz, Iloilo City
Dear PARO Bañares:
This refers to your letter-query dated 13 January 1999 addressed to Director Gloria J. Fabia, Bureau of Land Acquisition and Distribution. Subject letter states that the Registry of Deeds (ROD) of Iloilo submitted a copy of an Emancipation Patent (EP) to your Office with an annotation that the same was encumbered with the Development Bank of the Philippines (DBP); that due to the failure of the mortgagor to pay his obligation, the DBP foreclosed the mortgaged property and caused the consolidation of title and ownership in its favor; and that the ROD annotated the affidavit of consolidation at the back of the title, but was unregistered due to the fact that they are confused on what title to issue, be it an EP or a Transfer Certificate of Title (TCT).
Please be clarified at the outset that under P.D. No. 27, the original transfer of awarded lands to farmer-beneficiaries from the government through the Department of Agrarian Reform (DAR) is evidenced by Emancipation Patent. The above conclusion is clear from Policy Statement No. 4 of DAR Administrative Order No. 8, Series of 1995 which expressly provides, quote: "If awardee was identified as tenant as of 21 October 1972 and amortizations were fully paid, transfer of awarded lands by the original tenant or his heirs may be allowed, regardless of date of issuance of Emancipation Patent (P.D. No. 27, as amended by E.O. No. 228)." By contrast, the subsequent transfer of awarded lands from farmer beneficiaries to third persons shall be evidenced by Transfer Certificate of Title (TCT) and no longer that of EP. Policy Statement No. 7 of said DAR. Administrative Order expressly provides that TCT shall be issued by the Land Registration Authority (LRA) for lands transferred by an awardee to a transferee (P.D. No. 27, as amended by E.O. No. 228).
Considering that your query relates to acquisition of an agricultural property by a government financial institution through foreclosure proceeding, it is worthy to note the provisions of Section 25 of Republic Act No. 337 (General Banking Act) which provides that acquired assets and mortgaged properties foreclosed by the mortgagee bank shall lie disposed of within a period of five (5) years after foreclosure; and Section 71 of R.A. No. 6657 which 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." Moreover, Section 16 of R.A. No. 7881 as clarified by Memorandum Circular No. 5, Series of 1996 "allows government financial institutions to dispose to third parties their properties which were foreclosed on or after the effectivity of R.A. No. 7881, i.e., March 12, 1995. However, since said properties fall under CARP coverage, the same shall still be acquired by the government through this Department for distribution to qualified farmer-beneficiaries as mandated by R.A. No. 6657." (emphasis supplied)
Furthermore, please note that DAR Administrative Order No. 2, Series of 1997 treats a foreclosing bank (i.e., Creditor) for purposes of covering a property under CARP as the landowner 1) when the title to the property is in the name of the Creditor; or 2) when the affidavit of consolidation of ownership or affidavit of non-redemption of the property has been annotated on the title.
In view of all the aforegoing and applying the abovementioned pertinent policy statement of A.O. No. 2, Series of 1997 to the instant issue, it is clear that though a TCT may now be issued in the name of DBP, the subject property is still within the purview of CARL.
Please be guided accordingly.
Very truly yours,
(SGD.) DANILO T. LARA
Undersecretary for Legal Affairs, and Policy and Planning
Copy furnished:
Dir. Gloria J. Fabia
BLAD