January 28, 1997
DAR OPINION NO. 09-97
PARO Alexis M. Arsenal
Provincial Agrarian Reform Office
Luna St., La Paz, Iloilo City
Dear PARO Arsenal:
This refers to your request for opinion regarding Section 6 of R.A. 7881, quote:
"Sec. 6. There shall be incorporated after Section 73 of R.A. 6657 a new Section to read as follows:
Section 73-A. Exception. The provision of Section 73 paragraph (E), to the contrary notwithstanding, the sale and/or transfer of agricultural land in cases where such sale, transfer or conveyance is made necessary as a result of a bank's foreclosure of the mortgaged land is hereby permitted."
You state that the aforequoted provision of law was construed in M.C. 5, Series of 1996 as allowing government financial institution to dispose to third parties their properties which were foreclosed on or before the effectivity of R.A. 7881 and another statement under said Memorandum which caused confusion, according to you, is that, "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." Hence, you posed the following queries, to wit:
First, since the government financial institutions or any private banks will depend on Section 73-A of R.A. 7881 which according to you works in their favor because we are allowing them to dispose of their foreclosed properties, then what would be the implication if the foreclosure by the GFI or Bank took place before the effectivity of R.A. 7881?
Second, since said properties fall under CARP coverage the same shall still be acquired by the government through the DAR, then who will be treated as the landowner for purposes of CARP coverage considering that before a transfer and registration is effected in favor of the third-party, a corresponding DAR Clearance will be issued and therefore according to you it is already determined that the transferee is qualified to acquire, he/she having no agricultural land or do not exceed five (5) hectares.
As clarified under Memorandum Circular No. 5, Series of 1996 the net effect of the aforequoted provision is to allow government financial institutions to dispose to third parties their properties which were foreclosed on or after the effectivity of R.A. 7881 i.e. March 12, 1995 under the General Banking Act. 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.
As regards private banks, Section 71 of R.A. 6657 provides that said foreclosed assets are subject to existing laws on their compulsory transfer (that is, under the General Banking Act) and acquisition under Section 16 of said Act. This means that private banks may sell to third parties their foreclosed assets but still subject to acquisition under Section 18 of R.A. 6657.
With regard to your first query, if foreclosure took place before the effectivity of R.A. 7881 by the GFI the effect would be for the latter to immediately transfer their foreclosed assets to the government through DAR under EO 407, Series of 1990. As clearly stated under M.C. 5, Series of 1995, the cut-off period for GFI's to be allowed to dispose their foreclosed assets to third parties is "on or after March 12, 1995 (that is the effectivity of R.A. 7881), contrary to your observation that GFIs are allowed to dispose their foreclosed asset "on or before" the effectivity of R.A. 7881. It goes without saying that if the foreclosure took place prior to March 12, 1995 no sale to third parties of foreclosed assets by the GFI shall be made, such properties shall be immediately transferred to the government through the DAR, whereas foreclosed properties of private bank is subject to Section 71 of R.A. 6657.
In reply to your second query, we wish to inform you that GFIs and private banks are now allowed to sell their foreclosed assets. In such a case, however, it is submitted that the DAR Certification Clearance required under A.O. No. 1, Series of 1989, is no longer necessary as the buyer cannot legally exercise any retention right on the land purchased.
Please be guided accordingly.
Very truly yours,
(SGD.) ARTEMIO A. ADASA, JR.
Undersecretary for Legal Affairs, and Policy and Planning