October 16, 1995

DAR OPINION NO. 62-95

MEMORANDUM

FOR             :     USEC Jose Noel D. Olano
                           Undersecretary for Field Operations
                           and Support Services

SUBJECT    :     Letter of Ms. Cerelita A. Torres of PNB

Anent the request of Ms. Cerelita Torres of PNB subject of your Memorandum dated 9 October 1995, hereunder are our comments and recommendations:

1.         All of the 5 classes of lands listed in the letter of Ms. Torres may be legally used as collateral for loans and the mortgage thereon may be foreclosed, subject, however, to certain conditions on the transfer of said properties in the foreclosure sale.

2.         RE: Prawn farms or fishponds. So long as there is a DAR determination on the exemption of the property as a prawn farm or fishpond in accordance with DAR Administrative Order No. 03, Series of 1995, the same can stand as collateral for a mortgage loan and may be foreclosed and transferred in case of non-payment.

3.         RE: Private agricultural lands retained by landowners under R.A. 6657. So long as there is a DAR determination that it is a retained area pursuant to DAR Administrative Order No. 11, Series of 1990, the same may be used as collateral for a loan, provided that in case of foreclosure the transferee does not own more than the landownership ceiling of 5 hectares including the property acquired, pursuant to Section 73(a) of R.A. 6657.

4.         RE: Lands acquired by beneficiaries under R.A. 6657. Section 27 of CARL which prohibits the sale, transfer or conveyance of lands awarded to agrarian beneficiaries within ten years makes an exception as regards transfers to government institutions, such as the PNB. The PNB stands in the same position as the Land Bank of the Philippines, with respect to the duty that once the mortgaged lot is foreclosed, the same should be transferred to a qualified beneficiary within the ten-year prohibitory period. Therefore, there is no legal impediment in the event the PNB forecloses on the awarded lot, provided the mortgage deed contains a provision that in the event of foreclosure, the lot shall be transferred to a qualified agrarian reform beneficiary.

5.         RE: Lands retained by landowners under PD 27. A property that has been determined by DAR to be a retained area under PD 27 may be used as collateral for a loan. However, in case of foreclosure, the transferee should not own more than the landownership ceiling of five hectares including the land acquired, pursuant to Section 73(a) of CARL.

6.         RE: Lands covered by Homestead Patents. When the property has been determined by DAR to be exempt as a homestead pursuant to Section 6 of CARL, the same may be accepted as collateral and foreclosure is legally feasible, subject, however, to the condition under Section 73(a) of CARL that the transferee should not own more than the 5-hectare landownership ceiling, including the property acquired.

RECOMMENDATIONS:

It is recommended that the foregoing comments be relayed to PNB thru Ms. Celerita A. Torres and that copies of the pertinent DAR and LBP guidelines on valuation be furnished said Bank.

(SGD.) HECTOR D. SOLIMAN
Assistant Secretary Legal Affairs Office