May 22, 1998

DAR OPINION NO. 63-98

MS. ODETTE T . TIU

3rd Floor State Centre Bldg.

333 Juan Luna St.

Binondo, Manila

Dear Ms. Tiu:

This refers to your letter of 06 April 1998 requesting for clarification on the provision of DAR Memorandum Circular No. 05, Series of 1998, which reads: "However, since said properties fall under CARP coverage, the same shall still be acquired by the government through the DAR for distribution to qualified farmer-beneficiaries as mandated under R.A. 6657."

The query, it appears, is being raised upon the denial by the Provincial Agrarian Reform Officer of your application for DAR clearance of a parcel of land covered by TCT No. T-361959 with an area of 23,354 square meters, located at Bo. Laguerta, Calamba, Laguna, which you acquired through public bidding from the Development Bank of the Philippines (DBP).

Your letter states that the MARO of Calamba interpreted the subject provision of DAR M.C. No. 05, Series of 1996 in such a way that DBP should first turn-over the subject property to DAR, which in turn will determine if the winning bidder/buyer is qualified; and if qualified, the land shall be awarded to the winning bidder/buyer under the Voluntary Land Transfer scheme (VLT) with Certificate of Land Ownership Award, otherwise, DAR will award it to another qualified beneficiary. It is your contention that the said interpretation has the effect of nullifying the Deed of Sale between you and the DBP. You further contend that to give meaning to the letter and spirit of R.A. No. 7881 and DAR M.C. No. 05, Series of 1996, the same should be interpreted by recognizing the right of DBP to sell foreclosed agricultural lands to third persons, with DAR's function being a ministerial one and the same being limited to determination of whether or not the winning bidder/buyer is qualified to acquire subject property. You believe that it is only when the latter is not qualified, i.e., if the total aggregate agricultural landholding of winning bidder/buyer is more than five(5) hectares, that the DAR may acquire the subject property for distribution to qualified beneficiaries.

To begin with, Section 7 of R.A. No. 6657 mandates that all lands foreclosed by government financial institutions (GFIs) shall be acquired and distributed immediately upon the effectivity of said Act on 15 June 1988. Moreover, Executive Order No. 360, Series of 1989, enjoins all government financial institutions to grant the DAR the right of first refusal in the sale or disposition of all lands owned by GFIs which are suitable for agriculture. A similar provision is enunciated under Executive Order No. 407, Series of 1990, which mandates the immediate execution of Deeds of Transfer in favor of the Republic of the Philippines as represented by DAR and surrender to the latter department all landholdings suitable for agriculture. The foregoing laws and executive orders altogether maintain that agricultural landholdings foreclosed by GFIs are within the coverage of the Comprehensive Agrarian Reform Program (CARP).

Following aforesaid issuances, R.A. No. 7881 was enacted to afford GFIs the right to dispose of their foreclosed agrilands to third persons. In clarification to this, the DAR Issued M.C. No. 05, Series of 1996. The proper interpretation of Section 6 of R.A. No. 7881 which is the pertinent provision clarified by DAR M.C. No. 5, Series of 1996, would be that agrilands already foreclosed by GFIs on or after the effectivity of said law (12 March 1995, the effectivity of R.A. No. 7881) are permitted to be disposed to third persons. It should be noted, however, that while Section 6 of R.A. No. 7881 has the effect of allowing the GFIs to dispose of their agrilands, the provision does not exclude such lands from the CARP.

As regards the alleged interpretation made by the MARO of Calamba, we believe that such could not be the intention of the lawmakers in enacting R.A. No. 7881. As correctly interpreted under DAR M.C. No. 05, Series of 1996, DBP can directly dispose of their foreclosed assets to third persons, anyway, subject property is still within the coverage of CARP. It is only after the title (TCT and not CLOA) had been issued to the buyer/bidder, that DAR will come in far its acquisition. Said law did not intend to make its operation any more difficult or burdensome to the GFIs. In other words, VLT or any other form of acquisition scheme does not take place prior to the transfer of such lands to third persons.

Obviously, R.A. No. 7881 was enacted to afford GFIs the right to dispose of their foreclosed agrilands to third persons. Such being the case, we are of the view that DAR has to respect the transaction to be undertaken by the GFIs and the qualified buyer/bidder by issuing, without unduly imposing any condition or qualification, a DAR clearance for its registration, after all, the same regardless of area is still within the coverage of CARP. Only then when a title had been issued by the Register of Deeds that DAR can come in for the eventual acquisition and distribution of the land to qualified farmer-beneficiaries.

From the foregoing, we submit that a GFI could sell its foreclosed agricultural lands to third persons pursuant to Section 6 of R.A. No. 7881 with the corresponding DAR clearance and registration thereof to be allowed and accorded as a matter of course subject, however, to the eventual coverage of said landholdings under CARP irrespective of the aggregate agricultural landholding of the winning bidder/buyer after the transaction (i.e., whether it be less or more than 5 (five) hectares).

Thank you for communicating with us and we hope to have clarified the matter with you.

Very truly yours,

(SGD.) ARTEMIO A. ADASA, JR.

Undersecretary for Legal Affairs, and Policy and Planning

Copy furnished:

PARO Felixberta Q. Kagahastian

Provincial Agrarian Reform Office

Sta. Cruz, Laguna

The Municipal Agrarian Reform Officer

DAR — Municipal Office

Calamba, Laguna