July 14, 1999
DAR OPINION NO. 38-99
MEMORANDUM
FOR : Director Susana Evangelista-Leones
Chairperson, DAR-CDA Technical Working Committee
SUBJECT : Request for Legal Opinion on the Issues Relative to the Proposed Joint DAR-CDA
Administrative Order No. 3, Rules and Regulations on the Valuation and Transfer
of Membership Shares in Agrarian Reform Plantation-Based Cooperatives
Anent your request for opinion on some issues relative to the abovementioned proposed guideline, subject of your Memorandum dated 24 June 1999, the following are our comments on the issues raised therein:
A. Ownership of the Land: (Collective vs. Cooperative)
1. Is collective ownership equal to cooperative ownership?
1.1 In terms of ownership, how do we treat the following:
a. CLOA issued in the name of the cooperative without the names of individual ARBs indicated at the back.
b. CLOA issued in the name of the cooperative with the name of ARBs listed at the back.
c. CLOA issued in the name of Juan dela Cruz, et al., with the names of individual ARBs listed at the back.
d. CLOA which include/does not include the specific number of hectarage per ARB.
Ownership of an awarded land always pertains to a natural person. Section 22 of R.A. No. 6657 provides that the basic qualification of a beneficiary shall be his willingness, aptitude and ability to cultivate and make the land as productive as possible. Only a natural person can possess these qualifications.
Cooperative ownership of an awarded land is actually just a kind or form of collective ownership by the individual beneficiaries (Section 25, R.A. No. 6657 and Item 1, DAR Administrative Order No. 3, Series of 1993). In collectivism, there is an aggregate participation of individuals relating to a co-ownership. Thus, as far as CARP awarded lands are concerned:
a) Where the collective CLOA is issued in the name of the cooperative without the names of individual ARBs listed at the back thereof, which were resorted to in the past to speed up, simplify and facilitate the distribution process of awarded lands, it presupposes that a cooperative had already been organized even prior to the acquisition and eventual distribution of the lands wherein the beneficiaries may not yet have been identified or were only partially identified. This is what is contemplated under Section 22 (f) of R.A. No. 6657. Notwithstanding the issuance of the collective CLOA in the name of the cooperative alone, the ownership of the land is, however, still actually vested with the individual beneficiaries to the extent of their respective shares based on the aforementioned legal premises but in no case to exceed the equivalent of the award ceiling.
b) Where the collective CLOA is issued in the name of the cooperative with the name of the ARBs listed at the back thereof, it presupposes that during the acquisition and distribution process of the land to be awarded, there were already identified ARBs who opted to collectively own the awarded land through a cooperative. This may also be the case where the land is not economically feasible and sound to divide among the worker-beneficiaries pursuant to Section 29 of R.A. No. 6657. The annotation or listing of the names of ARBs at the back of the collective CLOA is intended to protect the farmer-beneficiaries from possible summary and unjust separation by the cooperative or association (Items III.A and IV.A.1, DAR A.O. No. 3, Series of 1993).
c) Where the collective CLOA is issued in the name of Juan dela Cruz, et al. with names of individual ARBs listed at the back, it presupposes that the awarded land is co-owned by each individual ARBs listed therein. A collective CLOA on a co-ownership basis shall indicate the approximate area actually occupied by each ARB (Item III.B, A.O. No. 3, Series of 1993).
d) Where specific number of hectarage is included in the CLOA, it indicates that the different portions of the awarded land are owned by different ARBs. There is already a concrete determination and identification of each ARB's corresponding area of award, which should not exceed three (3) hectares, even if not yet technically described. Where no specific number of hectarage is indicated per ARB, it connotes that there is a juridical concept of co-ownership. Each ARB, being a co-owner, is the owner of an undivided aliquot part thereof (not to exceed the award limit of 3 hectare) which is presumed to be equal with the respective aliquot shares of the other co-owners, unless the contrary is proved (Article 485, Civil Code and Section 25, R.A. No. 6657).
2. Is partitioning of the land applicable to both individual/cooperative or collective ownership?
Partition has for its purpose the separation, division or assignment of things held in common among the people to whom they belong.
Award of CARP-covered lands in the name of a cooperative may happen when beneficiaries opt for collective ownership through a farmers' cooperative or when it is not economically feasible and sound to divide the land (Sections 25 and 29, R.A. No. 6657).
The bicameral committee report of Friday, February 12, 1988 page 25 thereof states, quote:
"On the provision providing for collective ownership of the land Senator Laurel pointed out that the New Civil Code of the Philippines frowns upon co-ownership. He then inquired on the ramifications in case a farmer wants to separate from the collective. In reply, Senator Alvarez explained that the bill seeks to establish a certain public policy. He stressed that the intent of the bill is to improve the condition of the farmers for which reason the Committee took cognizance of the fact that certain economies of scale must be kept intact if breaking them up would be disadvantageous to the farmers. Following this logic, he stated that the individual farmer would have to subordinate his interest for the bigger collective interest."
Section 17 of DAR Administrative Order No. 9, Series of 1998 further provides, insofar as pertinent, the following:
"To expedite the acquisition, the commercial farms shall be initially distributed collectively or under co-ownership.
In case the beneficiaries desire to partition the land, DAR shall first determine whether it is economically feasible and sound to divide the land, in coordination with the Department of Agriculture and other concerned agencies.
Thereafter, the beneficiaries may, by a majority vote, decide whether to proceed with the partition or not.
In the event the beneficiaries decide to partition, the land shall be allocated to the individual beneficiaries by drawing lots in the presence of DAR representatives."
Items III.E and F of DAR Administrative Order No. 3, Series of 1993 likewise provide:
a) Item E
". . . Landholdings covered by CLOAs in the name of a cooperative or farmers' association may, at the option of the organization, also be subdivided based on the share of each member defined in Section III-A above provided that the subdivision as determined by the DAR shall be economically feasible."
b) Item F.
"Within 10 years from the issuance of a collective CLOA, the DAR shall retain the option to generate the individual CLOAs in the name of the ARBs . . . " (emphasis and emphasis supplied).
In view of the foregoing, it is believed that whether the land is awarded collectively or through the cooperative the same cannot be the subject of a partition within ten (10) years from issuance of the CLOA unless the following conditions and requirements are all complied with:
1. Determination by DAR that it is economically feasible and sound to divide in coordination with the Department of Agriculture and other concerned agencies;
2. Majority vote of the ARBs to partition the land; and
3. Approval by the DAR considering that it retains the option to generate individual CLOAs within the 10-year period.
Finally, it must be stressed that the provision of law under Section 29 of R.A. No. 6657 that "in case it is not economically feasible and sound to divide the land, then it shall be owned collectively by the worker beneficiaries" is a specific limitation to the general right of a co-owner to demand at any time the partition of the thing owned in common (Article 494, Civil Code). Well-entrenched is the rule that provisions of a specific law (e.g., R.A. No. 6657) prevail over that of a general law (e.g., Civil Code). Our Constitution itself recognizes the need to regulate the acquisition, ownership, use and disposition of property (Section 1, paragraph 2, Article XIII, Philippine Constitution) and that the exercise of one's rights of ownership is subject to limitations as established by law (Article 428, Civil Code).
B. Land as Asset of the Cooperative:
1. Under the proposed A.O., the land forms part of cooperative asset. Is this legal/possible?
2. For accounting purposes, the awarded land will be recorded as asset of the cooperative.
2.1 Will there be reconveyance of the property from the ARBs to the cooperative?
2.2 Will the land be included in the liquidation process in cases of voluntary or involuntary dissolution of a cooperative?
Cooperative is only a vehicle created for practical necessity, convenience and purposes towards the ARBs upliftment. Legally, the owners are the ARBs. Therefore, the land cannot be made as part of the cooperative's assets. However, for accounting purposes, the land may be recorded as "asset" of the cooperative but this is counterbalanced by the ownership claim of the ARBs over such land as reflected in the equity section of the balance sheet. Thus, when the awarded land is recorded as "asset" of the cooperative for accounting purposes, there is actually no transfer of title or ownership over the land, hence, ownership thereof by the cooperative cannot be said to have legally taken place.
Whether in voluntary or involuntary dissolution, the awarded land may be included in the liquidation process only if said land was used as security in the fulfillment of a principal obligation incurred with the consent and for the general benefit of the ARBs. In this case, the ARBs may thereby lose the award. Any of the foregoing, however, shall be without prejudice to the right given a CLOA holder under Executive Order No. 26, Series of 1998.
C. Annotation on the CLOA:
1. Does the listing or "annotation" of the names of the ARBs at the back of the CLOA constitute an encumbrance on the property?
Listing or "annotating" the names of the ARBs at the back of the CLOA does not constitute an encumbrance on the property. It only shows that the listed names are the collective owners of the land technically described in the title. Encumbrance is a burden or lien against the property that lessens its value.
D. Membership of ARBs in Plantation-Based Cooperatives:
1. In corporate farms/commercial farms, is membership of ARBs to association or cooperative mandatory or directory?
While it is true that the provisions of R.A. No. 6938 provides for open and voluntary membership in a cooperative, the same does not apply in the case of an agrarian reform plantation-based cooperative considering that it is a special cooperative composed exclusively of ARBs who were awarded a collective CLOA.
Thus, membership of the aforesaid ARBs to such association or cooperative is mandatory. This can be inferred from the provision of Section 29 of R.A. No. 6657 itself, which states:
"In case it is not economically feasible and sound to divide the land, then it shall be owned collectively by the worker- beneficiaries who shall form a workers' cooperative or association which will deal with the corporation or business association."
E. Valuation of Members' Land Shares:
1. Will DAR be involved in the determination of the value of members' land shares? If yes, how will DAR value land shares of the transferee and the transferor.
Within the ten (10) year prohibitory period under Section 27 of R.A. No. 6657, the DAR shall be involved in the determination of the value of member's land shares to safeguard possible abuse in the transfer of awarded lands. The qualified transferee may assume the rights of the transferor or outgoing cooperative member, where the transferee shall be obliged to pay the transferor's land share based on the regular amortization cost of the land at six percent (6%) interest rate per annum reckoned from the date of award of the land.
F. Transfer of Members' Land Shares:
1. Under "transfer through hereditary succession", who will succeed?
2. In case of transfer in land share, how can we effect the change in the title?
In case a beneficiary dies, his land share shall be transferred and registered in the name of the heir who gets the land as his/her share in the inheritance as stipulated in the Settlement of Estate among the heirs. However in case the estate is not yet settled and there are several heirs, the land share shall be transferred and registered collectively in the name of Heirs of the deceased beneficiary. In the latter situation, the heirs shall choose among themselves who will represent them in the cooperative. Such representative-heir should qualify as beneficiary and as member thereof.
However, where the surviving heir or heirs are minors and could not yet qualify as beneficiary/ies, he or they, as the case may be, shall be represented by the guardian in cultivating or directly managing the land until the eldest minor, or if he shall not qualify, the next eldest, and so on, shall have qualified.
In the following cases, where the land has not yet been fully paid and the 10-year period from award has not yet lapsed, the land shall be reallocated by DAR to another deserving ARB:
(1) where the beneficiary dies without an heir; and
(2) except where the surviving heir or heirs are minors and not yet qualified as beneficiary/ies, where no surviving heir is a qualified beneficiary.
In the second case above, the deceased member's land share shall, however, be monetized for distribution to his heirs. The rationale behind the aforestated reallocation is to uphold the time-honored principle and policy of land-to-the-tiller/owner-cultivatorship and to foreclose a return of absentee landlordism which is the very social problem sought to be resolved by the Comprehensive Agrarian Reform Program (CARP).
In case of transfer of member's land share, the title (TCT-CLOA) may be corrected through a petition for administrative correction of registered EP/CLOA filed before the DAR Adjudication Board where the land is located (DAR Administrative Order No. 2, Series of 1994).
Relative thereto, Section IV.D of Joint DAR-CDA-DA Administrative Order No. 2, Series of 1997 pertinently provides, quote:
"Listing and Delisting of ARBs shall be undertaken periodically by the Department of Agrarian Reform (DAR) every two (2) years, until full payment of the land by the ARBs.
A list of proposed qualified and disqualified ARBs shall be submitted by the Board of Directors of the Cooperative, subject to approval by the General Assembly, to the DAR PARO once a year
The PARO shall file a petition with the Provincial/Regional Agrarian Reform Adjudicator (RARAD) . . . "
Please be guided accordingly.
(SGD.) DANILO T. LARA
Undersecretary for Legal Affairs, and Policy and Planning
Copy furnished:
USEC Conrado S. Navarro
FOSSO, This Department