May 31, 2000
DAR ADMINISTRATIVE ORDER NO. 01-00
SUBJECT : Revised Rules and Regulations on the Acquisition of Agricultural Lands Subject of Mortgage or Foreclosure
Pursuant to Section 49 of Republic Act (RA) No. 6657, otherwise known as the "Comprehensive Agrarian Reform Law of 1988", and Section 7, Chapter 2, Book IV of Executive Order No. 292, otherwise known as "The Revised Administrative Code of 1987", the rules and regulations on the acquisition of private agricultural lands subject of mortgage or foreclosure are hereby revised as follows: cdll
SECTION 1. Rationale. — Section 25 of Republic Act No. 337, otherwise known as "The General Banking Act", provides that acquired assets and mortgaged properties foreclosed by banks shall be disposed of within a period of five (5) years after foreclosure. Further, Section 71 of RA 6657 provides that "(b)anks and other financial institutions allowed by law to hold mortgage rights or security interests in agricultural lands to secure loans and other obligations of borrowers may acquire title to these mortgaged properties, regardless of area, subject to existing laws on compulsory transfer of foreclosed assets and acquisition as prescribed under Section 16 of this Act." Furthermore, Section 72 (b) of RA 6657 provides that "(m)ortgages and other claims registered with the Register of Deeds (ROD) shall be assumed by the government up to an amount equivalent to the landowner's compensation value as provided in this Act."
SECTION 2. Definition of Terms. — As used in this Order, the terms enumerated are defined as follows:
a) Banks include banking institutions, commercial banks, savings banks, mortgage banks, trust companies, building and loan associations, branches and agencies in the Philippines of foreign banks, and all other corporations, companies, partnerships and associations performing banking functions in the Philippines. (Section 22, Act No. 335).
b) Mortgage is an accessory contract whereby the debtor (or a third person) guarantees the performance of the principal obligation by subjecting real property or real rights as security in case of non-fulfillment of said obligation within the period agreed upon.
c) Mortgagor is one who, having all or some title to property, by written instrument, pledges that property for some particular purpose such as security for a debt.
d) Mortgagee refers to banks, financial institutions and other persons whether natural or juridical, holding registered mortgage rights over said lands.
e) Foreclosure is the procedure by which the mortgaged property is sold on default of the mortgagor in satisfaction of the mortgage debt. It denotes the procedure adopted by the mortgagee to terminate the rights of the mortgagor on the property and includes the sale itself. (Development Bank of the Phils. vs. Zaragoza, 84 SCRA 668 ).
f) Redemption is a transaction by which the mortgagor reacquires or buys back the property which may have passed under the mortgage or divests the property of the lien which he may have created.
g) Right of Redemption is the right of the mortgagor to redeem the mortgaged property within a certain period after it was sold for the satisfaction of the mortgage debt.
Where the mortgagee is a bank, the right of redemption exists in both judicial and extra-judicial foreclosure. In such case, the mortgagor or his successor-in-interest may exercise his right of redemption within one year from the date of the registration of the certificate of sale. (Section 78, RA 337; Rosario vs. Tayug Rural Bank, 22 SCRA 1220 ). However, when a land covered by homestead or free patent mortgaged with a rural bank is foreclosed, the homesteader or free patent holder, as well as his heirs, shall have the right to redeem the same within one (1) year from the date of foreclosure in the case of land not covered by a Torrens Title or one (1) year from the date of registration of the foreclosure in the case of land covered by a Torrens Title (Section 6, par. 3, RA 7353, otherwise known as, "The Rural Banking Act of 1992").
Where the mortgagee is other than a bank, the right of redemption exists only in extra-judicial foreclosure. In such case, the debtor, his successor in interest or any judicial creditor or judgment creditor of said debtor, or any person having a lien on the property subsequent to the mortgage or deed of trust under which the property is sold may redeem the same within the term of one year from the date of registration of the certificate of sale with the appropriate Register of Deeds (Section 6, Act No. 3135, otherwise known as "An Act to Regulate the Sale of Property Under Special Powers Inserted In Or Annexed to Real Estate Mortgages; Reyes vs. Noblejas, GR No. 1-23691. November 25, 1967).
h) Equity of Redemption refers to the right of the mortgagor to redeem the mortgaged property after his default in the performance of the conditions of the mortgage but before the sale of the mortgaged property or confirmation of the sale. (Top Rate International Services, Inc. vs. Intermediate Appellate Court, 142 SCRA 467 ).
Equity of redemption exists in judicial foreclosure, except where the mortgagee is a bank. The equity of redemption may be exercised by the mortgage debtor, the second mortgagee, the subsequent attaching creditor or purchaser, within a period not less than ninety (90) days nor more than one hundred twenty (120) days from the entry of judgment of foreclosure and even thereafter, provided he does so before the foreclosure sale is confirmed by the court, (Sections 2 & 3, Rule 68, Revised Rules of Court).
SECTION 3. Coverage. — These rules shall cover all agricultural lands subject of mortgage or foreclosure. They shall not apply to cases where the mortgagee is already the registered owner of the property at the start of the acquisition proceedings. In such cases, the procedures provided in DAR Administrative Order No. 2 (1996), as amended, shall govern.
SECTION 4. Mortgagee Deemed as Landowner. — For purposes of covering the property under the agrarian reform program, the mortgagee shall be considered as the new landowner if before the deposit of just compensation is made: cdll
a) The mortgagee is the purchaser in the foreclosure sale and the redemption period, as provided by law, has already expired in cases where the right of redemption exists; or
b) The mortgagee is the purchaser in the foreclosure sale and said foreclosure sale is confirmed by the court in cases where only equity of redemption is provided.
SECTION 5. Mortgagee Deemed as Lien-holder. — The mortgagee shall be considered a lien-holder if on the date the land transfer claim was received by the Land Bank of the Philippines (LBP) from the Department of Agrarian Reform (DAR):
a) The mortgage debt is not yet due and demandable; or
b) The mortgage debt is already due and demandable but the mortgagee has not foreclosed on the property; or
c) The mortgage has already been foreclosed but the period to exercise the right of redemption, in cases provided by law, has not yet expired; or the foreclosure sale has not yet been confirmed by the court in cases where there is only equity of redemption.
SECTION 6. Consolidation of Mortgagee's Title. The mortgagee may proceed to effect the cancellation of the mortgagor's certificate of title and the issuance of a new one in his or its name in accordance with Section 63 of PD No. 1529, or the "Property Registration Decree", upon the expiration of the redemption period or upon confirmation by the court of the foreclosure sale, as the case may be.
If the mortgagee fails to cause the issuance of a certificate of title in his or its name within thirty (30) days from receipt of the notice of land valuation and acquisition, the procedure for the transfer of title in the name of the Republic of the Philippines shall be followed in accordance with DAR AO 2 (1996). The Provincial Agrarian Reform Office shall furnish the Register of Deeds (ROD) all supporting documents to effect the consolidation of title in the name of the mortgagee as provided in Section 63 of PD 1529, as follows:
a) Where there is only equity of redemption, a certified copy of the final order of the court confirming the sale;
b) In cases where the right of redemption exists:
1) In judicial foreclosure, the final deed of sale executed by the sheriff in favor of the mortgagee;
2) In extra-judicial foreclosure, either a final deed of sale executed by the person authorized by virtue of the power of attorney embodied in the deed of mortgage, or an affidavit of the mortgagee attesting to the fact of non-redemption. In case the latter requirement is not executed by the mortgagee, an affidavit executed by the Provincial Agrarian Reform Officer (PARO) attesting to the fact of the mortgagee's failure to execute such affidavit of non-redemption shall be sufficient.
After the submission of said supporting documents, in addition to those required in ordinary acquisition proceedings under AO 2 (1996), and after the corresponding annotations of the consolidation of ownership and of the transfer of the property to the Republic of the Philippines on the mortgagor's title, the mortgagor's title shall be cancelled and a new one issued in the name of the Republic of the Philippines, without the need of issuing a certificate of title in the name of the mortgagee.
SECTION 7. Payment of Taxes, Penalties, Fines, Registration Fees and Other Impositions. All taxes, penalties, fines, registration fees and other impositions required to be paid by the mortgagor and the mortgagee before title can be registered in the name of the Republic of the Philippines shall be deducted from the proceeds of the land transfer claim and paid by the LBP if the mortgagee fails to pay such fees within fifteen (15) days after due notice and demand either through personal service or registered mail by the PARO. Upon failure of the mortgagee/landowner to pay said fees within the prescribed period, the PARO shall verify whether an order converting, exempting or lifting the coverage or acquisition was issued involving the subject property, and if there is none, he shall direct the LBP to deduct from the proceeds of the land transfer claim the necessary amount and pay the said taxes, penalties, registration fees, fines and other impositions.
SECTION 8. Rights and Privileges of Mortgagee. — The rights and privileges of the mortgagee as new landowner or lien-holder are as follows:
a) As new landowner, the bank, financial institution, or other concerned person shall be entitled, among others, to:
1) Receive all notices, advices, correspondence, and all other communications from the DAR and/or LBP, such as, but not limited to, Notice of Coverage, Notice of Land Valuation and Acquisition, Letter-Requirement for Processing and Payment of Claim, etc.;
2) Transact with DAR and/or LBP regarding all aspects of subject land transfer claim, to the exclusion of all other persons;
3) Be named as the recipient of all cash and bond deposits; and
4) Receive all the proceeds of subject land transfer claim, less deductions to which the land may be liable.
b) As lienholder, the bank, financial institution, or other concerned person shall be entitled, among others, to:
1) Receive payment for the obligation of the mortgagor from the land transfer proceeds up to an amount equivalent to the landowner's compensation value; and
2) Receive notices, advices, and all other communications pertaining to the obligation of the landowner-debtor (mortgagor).
SECTION 9. Obligations of Mortgagee. — The obligations of the mortgagee as new landowner or lien-holder are as follows:
a) As new landowner, the mortgagee shall:
1) Comply with all the requirements for processing and payment of the claim such as surrender of the Owner's Duplicate Copy of Title; and
2) Sign all land transfer documents required as a consequence of the processing and payment of the land transfer claim such as: Deed of Assignment, Warranties and Undertaking, Deed of Transfer, Deed of Confirmation of Coverage and Transfer, etc.
b) As lienholder, the mortgagee shall:
1) Issue a release of mortgage, or execute a deed of redemption, and deliver the Owner's Duplicate Copy of Title after payment of the value of the lien; and
2) Sign all other documents necessary to effect the cancellation of the mortgage.
SECTION 10. Sanctions for Failure to Comply with Obligation. — The proceeds of the land transfer claim shall not be released to the landowner until and unless he complies with his obligations set forth in Section 9 (a). Likewise, the lienholder shall not be paid the amount of his claim until and unless he complies with his obligations enumerated in Section 9 (b).
SECTION 11. Operating Procedures. — In cases where the mortgagee is considered as the landowner, the following procedures shall apply:
a) Land transfer claim under process by DAR/LBP
Steps Responsible Documentary
Person/Office Activity Requirements
1 DARPO Proceeds with the processing of
the claim folder in accordance
with AO 2 (1996), as amended
2 LBP-LVLCO Proceeds with the usual processing
& approval of the land transfer
3 LBP-LVLCO Sends Memorandum of Valuation CARP Form No.
(MOV), together with Claim Folder 9 - Memorandum
Profile and Valuation Summary to of Valuation and
PARO with advice to send notice Claim Folder
to the mortgagee (new Profile and
. landowner), for consolidation of Valuation
ownership in mortgagee's name. Summary
4 DARPO Sends Notice of Land Valuation CARP Form No.
and Acquisition (NLVA) to the 10 - Notice of
mortgagee (new landowner), Land Valuation
together with the Notice to and Acquisition
Consolidate Ownership within
thirty (30) days from receipt CARP Form No.
thereof. If there is a subsequent 10.b - Notice to
transfer or reconveyance of the Consolidate
property, the mortgagee shall Ownership
notify DAR of said
transfer/reconveyance CARP Form No.
within fifteen (15) days from 10.c - Affidavit
receipt of DAR's Notice to of Consolidation
Consolidate Ownership. of Ownership
Otherwise, the mortgagee shall
be deemed owner of the property
notwithstanding the subsequent
transfer. In case the mortgagee
does not respond, the PARO shall
consolidate the ownership in the
5 Mortgagee as Accepts or rejects the land CARP Form No.
new landowner valuation. 10.a - LO's
(Note: Procedures on the Reply to NLVA
acceptance or rejection of the
valuation outlined in
AO 2  shall apply)
Executes affidavit of consoli- Copy of New
dation duly annotated/registered Title
or a certified copy of the new
title in mortgagee's name and
forwards same to DARPO.
DAR shall request ROD to issue CARP Form No.
TCT in the name of RP as 18 - Request
provided in AO 2 (1996). to issue TCT
In such case, the PARO shall in the name of
furnish the ROD all documents RP
showing the consolidation of
title in the name of the
6 DARPO Sends LBP a request to pay CARP Form No.
or to deposit the land transfer 12 - Request to
claim. Pay or
i. In case the mortgagee (new CARP Form No.
landowner) has effected 15 - Request to
consolidation of ownership, Deposit (as the
forwards to LBP a certified case may be)
copy of the new title;
ii. In case the mortgagee (new CARO Form No.
landowner) has not effected 10.c - Affidavit
consolidation of ownership, of Consolidation
furnishes LBP affidavit of of Ownership
consolidation duly executed
by PARO with a statement CARP Form No.
of account on the expenses 15.a - Request
incurred (such as taxes, to Deduct
impositions, penalties and Expenses
other fees) to effect the
transfer of title. Verifies if an
order was issued converting,
exempting or lifting the
coverage or acquisition of
subject property, and if there
is none, directs LBP to deduct
said expenses from the
proceeds of the land transfer
7 LBP Prepares payment and remits CARP Form No.
the same to agencies 17 - Certification
concerned; issues Certification of Deposit
of Deposit (COD) to the DAR
b) Land transfer claim already approved by LBP and Certificate of Deposit issued in favor of former registered owner where the redemption period has expired or the foreclosure sale has been confirmed by the court, as the case may be. cdphil
Steps Responsible Documentary
Person/Office Activity Requirements
1 DAR Sends notice/invitation to new CARP Form No.
landowner for conference to 2.b - Notice to
discuss matters pertaining to Mortgagee/New
the land transfer claim and other Landowner
information relative thereto
2 DAR/ Mortgagee as new landowner
LBP-LVO may, during the conference,
present specific issues
and/or concerns which shall
be discussed and resolved by
DAR, LBP-LVO, and other
3 The If no issues and/or
mortgagee concerns are raised mortgagee
as new as new landowner will
landowner execute affidavit of
consolidation of ownership
4 DAR Issues order directing LBP to CARP Form No.
inscribe in the COD and in other 18.b - Letter
pertinent documents contained to the LBP
in the claim folder the name of
the mortgagee as new land-
owner in place of the former
5 The If mortgagee as new
mortgagee landowner raises
as new issues and/or concerns
landowner pertinent to land
transfer claim and other
information relative thereto:
DAR i. If the issue involves coverage,
shall advise the mortgagee, as
the new landowner, that the
matter shall be resolved
administratively by filing a
written protest thereof.
ii. If the issue involves land
valuation, the same shall be
resolved through quasi-
judicial proceedings by the
6 DAR PARO shall request mortgagee CARP Form No.
(new landowner) to execute 10.b - Notice to
affidavit of consolidation. Consolidate
The mortgagee a) The mortgagee as the new
as the new landowner executes affidavit
landowner of consolidation.
DAR i. issues order directing LBP CARP Form No.
to inscribe the name of the 18.b - Letter to
mortgagee as the new LBP
landowner in the COD
and in other pertinent
documents contained in
the claim folder in place
of the former landowner.
LBP ii. Issues COD in the name of CARP Form No.
the mortgagee as the new 17 - Certification
landowner. In such case, of Deposit
processing of the land
transfer claim shall
b) if the mortgagee (new land-
owner) refuses or fails to
execute the affidavit of
consolidation, the activity
provided under Sec. 6(b) (2)
hereof, shall be undertaken.
c) Procedures for transfer of title and registration. cdlex
Steps Responsible Documentary
Person/Office Activity Requirements
1 DARPO Requests ROD to issue title in a) CARP Form
the name of RP No. 18 or
Issue TCT in
the name of
b) CARP Form
No. 10.c -
c) CARP Form No. 17 - LBP
2 ROD Issues title in the name of RP New TCT in the
name of RP
Note: Procedures on the
generation and registration of
CLOA outlined under the Joint
No. 9 (1996) shall apply.
SECTION 12. Procedure when Mortgagee is Lienholder. — In case the period of redemption has not yet expired or the foreclosure sale has not been confirmed by the court at the time item D.1, Step 25 or item D.2, Step 26 of DAR Administrative Order No. 2, Series of 1996 is undertaken, the mortgagee shall be simply paid the amount of the mortgage debt but not exceeding the equivalent of the landowner's compensation value. For this purpose, the guidelines outlined in the said administrative order shall apply.
SECTION 13. Repealing Clause. — All other previous orders, circulars, memoranda and other issuances inconsistent herewith are hereby revoked or modified accordingly.
SECTION 14. Effectivity. — This Order shall take effect ten (10) days after its publication in two (2) national newspapers of general circulation pursuant to Section 49 of RA 6657.
Diliman, Quezon City, May 31, 2000. llcd
(SGD.) HORACIO R. MORALES, JR.