December 14, 1999
DAR OPINION NO. 77-99
Mr. Melanio El. Yambao, Jr.
Unit 105 Rizalina Annex Building
1677 Quezon Avenue, Quezon City
Dear Mr. Yambao, Jr.,
This has reference to your letter dated 19 February 1998 regarding your request that a certification be issued in order that the properties under your name may be mortgaged to a private bank, particularly, Metrobank. The procurement of certification from the DAR was suggested by Metrobank considering that the subject properties "are restricted as to their disposition and possible encumbrances if being mortgaged to a private bank".
We regret to state that we cannot give due course to your request after a careful consideration of the attached xerox copy of the documents to the letter-request, particularly the 46.0317-hectare parcel of land covered under Transfer Certificate of Title (TCT) No. T-789291 located at Municipality of Naic, Province of Cavite, and the Order dated 4 December 1998 approving the "Application for Conversion over two parcels of land located at San Vicente, Apalit, Pampanga", more specifically identified as follows:
1. Lot 1985-F-2-C-7
TCT No. 435551-R 2.1974 has.
2. Lot 1985-F-2-C-8
TCT No. 435552-R 1.2497 has.
We observed that the abovementioned properties are the subject of your request for the issuance of a certification in order that it can be mortgaged to a private bank (Metrobank).
With regard to the property located at Brgy. Palangue, Naic, Cavite, approximately 460,317 sq. m., the same cannot legally be mortgaged since the property is originally an awarded land to CARP beneficiaries by virtue of the issuance of a Certificate of Land Ownership Award (CLOA-1335). While it is true that CLOA-1335 was cancelled and later registered as TCT No. T789291 in your name on 20 January 1998, it did not however result to the cancellation of the annotation that the property is "encumbered in favor of the Land Bank of the Philippines (LBP) to ensure full payment of its value under R.A. No. 6657 by the farmer-beneficiaries named." Obviously, this particular awarded land was not yet fully paid by the beneficiaries. Moreover, it is crystal clear that the land was, at the time of transfer, still covered under the legally mandated 10-year prohibitory period for its transfer. The CLOA was originally registered on 22 September 1992. Section 27 of R.A. No. 6657 provides, quote:
"SECTION 27. Transferability of Awarded Lands. — Lands acquired by beneficiaries under this Act may not be sold, transferred or conveyed except through hereditary succession, or to the government, or to the LBP, or to other qualified beneficiaries for a period of ten (10) years: Provided, however, That the children or the spouse of the transferor shall have a right to repurchase the land from the government or LBP within a period of two (2) years.
xxx xxx xxx
If the land has not yet been fully paid by the beneficiary, the rights to the land may be transferred or conveyed, with prior approval of the DAR, to any heir of the beneficiary or to any other beneficiary who, as a condition for such transfer or conveyance, shall cultivate the land himself. Failing compliance herewith, the land shall be transferred to the LBP which shall give due notice of the availability of the land in the manner specified in the immediately preceding paragraph.
xxx xxx xxx."
Clearly, the subject property was transferred in favor of parties (i.e., you and your spouse Susana Yambao) other than those explicitly enumerated under Section 27 of R.A. No. 6657. Since the subject property was transferred to private persons (not directly to the NHA), presumably not qualified beneficiaries, the sale between the CLOA beneficiaries and you is therefore covered by the, ten-year restriction period. Concomitantly, it must likewise be noted that the sale between the CLOA beneficiaries and you, aside from the fact that it is a clear violation of Section 27 of R.A. No. 6657 in relation with DAR Administrative Order No. 8, Series of 1995, is also violative of the provisions of Section 73 (a) of the same law as regards the legally allowable maximum landownership ceiling of five (5) hectares only. The total area of the subject landholdings being 46.0317 hectares, all in all, is way beyond the 5-hectare landownership ceiling. Thus, we find such transfer as void ab initio.
The transfer being invalid and void, the land could not, therefore, now be the subject of mortgage much less could this Department certify that the same may be mortgaged to a private bank (i.e., Metrobank in the instant case) For loan purposes.
This opinion, thus, necessarily seeks to rectify the previous Opinion signed by DAR Undersecretary Artemio A. Adaza, Jr. dated 04 March 1998 which pertinently states, quote:
"Obviously, as clearly gleaned from the facts stated in your query, the subject property was acquired under the mandate of R.A. No. 6657. Being so, the prohibition set forth under Section 27 of the said Act is seemingly inescapable. Noting however, that the transfer would ultimately end up the property at the hand of the National Housing Authority (NHA), which is a government entity, then, the transfer is considered in favor of the government. Such being the case, the ten (10) years prohibitory period is no longer applicable."
Corollarily to the above, it bears stressing here, likewise, the well-settled rule that a void agreement or contract does not have legal effect and will not in any way produce a valid result. The New Civil Code explicitly provides, quote:
"Article 1409. The following contracts are inexistent and void from the beginning:
xxx xxx xxx
7. Those expressly prohibited or declared void by law.
These contracts cannot be ratified. Neither can the right to set up the defense of illegality be waived.
Article 1422. A contract which is the direct result of a previous illegal contract, is also void and inexistent."
From the foregoing, although it might be reasoned out and even assuming in the instant case that the subject landholding will allegedly ultimately end up with the National Housing Authority purportedly for social housing purposes; expediency should not be made to prevail over that of an express mandatory and prohibitory provision of law. It is submitted that to uphold the supremacy and clear import of the law is the far better policy and more prudent course to take, otherwise, we will be setting a bad precedent which might open the floodgates towards the widespread circumvention of the Comprehensive Agrarian Reform Program (CARP). Illegal transfer of awarded lands and subsequent transactions relative thereto should not therefore be countenanced.
With regard to the two lots located at San Vicente, Apalit Pampanga, we cannot likewise give due course to your request for a certification that the same could be mortgaged for loan purposes. These two lots are subject of a Conversion Order of approval issued ore 04 December 1998, the dispositive portion of which is herein partly quoted as follows:
"xxx xxx xxx
This Department may cancel or withdraw authorization for conversion based on the following grounds:
1. Misrepresentation or concealment of material facts;
2. Failure to implement the land development phase of the area; and
3. Any other violations of the rules and regulations which are material to the grant of this Order.
SO ORDERED."
Said properties should comply with the abovementioned Order, particularly, for the landowner to implement the land development phase of the area. To mortgage the land may eventually possibly prejudice the implementation of the development phase of the area (i.e., in case of default in the payment of mortgage loan), non-implementation of which is, as stated, a ground for cancellation or withdrawal of the authorization for conversion. To issue a certification allowing that said properties could be mortgaged to a private commercial bank without any restrictions and conditions (emphasis supplied as per letter suggestion/requirement of Metrobank dated 12 February 1999) would not therefore be in consonance and may run counter with the dispositive clause of the abovementioned Order of Conversion.
We hope to have clarified the matters with you.
Very truly yours,
(SGD.) FEDERICO A. POBLETE
Undersecretary for Legal Affairs, and Policy and Planning
Copy furnished:
Silvestre S. David
Branch Head
Metrobank Plaza
Sen. Gil J. Puyat Avenue
Makati City, Philippines
The General Manager
National Housing Authority
Diliman, Quezon City
Mr. Noefito A. Hernandez
Manager, Southern Luzon and Bicol Regions
National Housing Authority (NHA)
Elliptical Road, Diliman, Quezon City
Director Renato F. Herrera
DAR-Region IV
E. Rodriguez Memorial Building
Capitol Compound, Pasig City
The Provincial Agrarian Reform Officer
DAR-Provincial Office
Trece Martirez, Cavite City
The Municipal Agrarian Reform Officer
DAR-Municipal Office
Naic, Cavite City
Director Nestor R. Acosta
DAR-Region III
Pedmar Building, Dolores
San Fernando, Pampanga
The Provincial Agrarian Reform Officer
DAR-Provincial Office
Del Pilar, San Fernando
Pampanga
The Municipal Agrarian Reform Officer
DAR-Municipal Office
Apalit, San Fernando
Pampanga