May 26, 1999

DAR OPINION NO. 36-99

Hon. Alberto B. Reyno

Senior Vice-President

Development Bank of the Philippines

Makati City

Dear Mr. Reyno:

This has reference to your letter dated 22 March 1999 in reaction to DAR Opinion No. 204, Series of 1998 where the latter espoused "that the proposed direct payment scheme between tenant Nestor Villanueva and DBP is not tenable and will be violative of existing agrarian laws, rules and regulations", considering that "it is E.O. 407 that will govern the mode of coverage as regards the landholdings in issue".

You state that DBP never submitted the properties to the DAR on the basis of E.O. No. 407, for to do so would be in contravention with the Court of Appeals decision dated 21 February 1994 as affirmed by the Supreme Court in its Resolution dated 18 January 1995. As can be gleaned from your letter, the Supreme Court Resolution became final and executory on 26 April 1995, and thereunder DBP was ordered by the Supreme Court to sell the property to the recognized tenant, Nestor Villanueva, under his right of pre-emption.

We wish to specifically note and emphasize that the coverage of the lands in issue should have been strictly undertaken and effected in accordance with the mandate of Executive Order No. 407, Series of 1990. We observed that the subject property was mortgaged by the original owner and, afterwards, it was foreclosed by the DBP. The proper procedure then would have been for DBP to have immediately surrendered the property to the government through the DAR for coverage and distribution to qualified beneficiaries (in this particular case to Nestor Villanueva himself who has the preferential right, being the legally declared tenant of the lands in issue) under R.A. No. 6657 pursuant to the provisions of E.O. No. 407, Series of 1990. The DBP should not have sold the property in the first place to any third party as this is legally prohibited considering that the same is an agricultural land. It bears stressing that the property was foreclosed prior to the effectivity of R.A. No. 7881, amending R.A. No. 6657. Said law permits government financial institutions to dispose of their properties foreclosed by them to third parties only on or after the effectivity of R.A. No. 7881 (i.e., March 12, 1995) and not those foreclosed prior to said date.

Notwithstanding the above premises, we are left with no choice in this particular case but to abide by the Supreme Court resolution (affirming the decision of the Court of Appeals) which already became final and executory but without completely abrogating the general dispositions in DAR Opinion No. 204, Series of 1998 insofar as future cases of the same facts and circumstances are concerned.

Be it that as it may, any change in the nature of subject lands' use shall not be allowed except with the approval of the DAR under its rules on conversion or exemption.

We hope to have clarified the matters with you.

Very truly yours,

(SGD.) DANILO T. LARA

Undersecretary for Legal Affairs, and Policy and Planning

Copy furnished:

Dir. Gloria J. Fabia

BLAD, DAR, Quezon City

Dir. Nestor R. Acosta

DAR, Region III

San Fernando, Pampanga

PARO Linda Hermogino

DAR Provincial Office

Baliuag, Bulacan

MARO Fe Jacinto

DAR Municipal Office

Sta. Maria, Bulacan