April 18, 1996

DAR MEMORANDUM CIRCULAR NO. 05-96

TO                :     All DAR Regional Directors, Provincial
                           Agrarian Reform Officers, Municipal Agrarian
                           Reform Officers, Others Concerned

SUBJECT    :     Guidelines Clarifying Sections 3 and 6 of
                           R.A. 7881 Relative to Applications for
                           Commercial Farms Deferment and the
                           Turn-Over to DAR of Foreclosed Assets
                           of Government Financial Institutions,
                           Respectively

To guide all concerned on the interpretation of Section 3 and 6 of RA 7881 as they relate to applications for commercial farms deferment and the mandate of GFIs to turn over their foreclosed assets to DAR for CARP coverage, respectively, the following clarification is hereby issued:   HSaIDc

1.      Section 3 of RA 7881 does not extend the previously set deadline of 2 May 1989 for the filing of applications for commercial farms deferment.

Although the approved version of the Senate on the exemption of fishponds and prawn farms from CARP (Section 3 of S.B. 740) reads: "Commercial farms, EXISTING AND HERETOFORE TO BE ESTABLISHED, . . ." and the clear intent of said Senate version was to cover future farms, the filial version reported out by the Conference Committee provides:

"Commercial farms which are private agricultural lands devoted to (commercial livestock, poultry and swine raising, and aquaculture including), saltbeds, vegetable and cut flower farms, and cacao, coffee and rubber plantations, shall be subject to immediate compulsory acquisition and distribution after ten years from the effectivity of this Act."

The phase "existing and herefore to be established" has been dropped, and the only change in Section 11 of RA 6657, reflected in Section 3 of RA 7881, has been to delete the references to poultry, livestock, swine raising, fishponds, and prawn farms. Therefore, the clear legislative intent was to make these categories of agricultural lands exempt from CARP, in accordance with the Supreme Court ruling (Luz Farms), and the general intent of RA 7881.

2.      Section 6 of RA 7881 provides the following:

"SEC. 6.        There shall be incorporated after Section 73 Republic Act No. 6657 a new section to read as follows:

"SECTION 73-A.     Exception. — The provisions 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."   cTCaEA

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 RA 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 RA 6657.

As regards private banks, Section 71 of RA 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 16 of RA 6657.   TSacID

Please be guided accordingly.

Diliman, Quezon City. April 18, 1996

(SGD.) ERNESTO D. GARILAO

Secretary