May 28, 1996
DAR OPINION NO. 34-96
Atty. Danilo C. Campos
Famador Campos & Boquia Law Firm
Unit 103-A Victoria Condominium
41 Annapolis St., Greenhills
San Juan, Metro Manila
Dear Atty. Campos:
This has reference to your letter seeking opinion on the following facts, to wit:
X Corporation obtained an unsecured loan from ABC Bank. After the loan became overdue, ABC Bank filed a civil case for collection against X Corporation. In the course of the trial, and in order to avoid a protracted litigation, X Corporation executed in favor of ABC Bank a Deed of Dacion over 21 hectares of agricultural land, in full payment and satisfaction of the litigated loan. The Deed of Dacion was accepted by ABC Bank.
Specifically, you seek opinion as regards the following:
a) May the DAR issue a clearance for the Register of Deeds to register the Deed of Dacion and issue a new title in the name of ABC Bank?
b) May this transaction be considered as within the scope of Section 71 of the Comprehensive Agrarian Reform Law (R.A. 6657)?
Anent your first query, the answer is in the negative. The DAR Clearance signifies that the transaction involved does not contravene R.A. 6657 and its implementing guidelines and therefore, registration follows as a matter of course. Since the landholding subject of your query is an agricultural land, CARL mandates the compulsory acquisition of the same for distribution to qualified beneficiaries. It follows that the transfer of the property to a person other than a beneficiary would be in circumvention of CARL, hence no DAR Clearance for the registration of said transaction can be issued.
The answer to your second query is likewise in the negative. Although the final result of the Deed of Dacion is the payment of the loan to the bank, the transaction cannot be considered as within the scope of Section 71 because the properties over which banks are allowed to acquire title under Section 71 of CARL are those landholdings used to secure loans, whereas, in the instant case the loan is unsecured. More importantly, the properties squarely fall under CARL coverage and are therefore subject to acquisition and redistribution to qualified beneficiaries pursuant to said law.
We hope to have clarified matters with you.
Very truly yours,
(SGD.) LORENZO R. REYES
OIC-Undersecretary
LAFMA