DOJ OPINION NO. 091, s. 1995
September 12, 1995

Mr. Edgardo P. Zialcita
Deputy Governor and
Vice-Chairman, Ad Hoc Committee
on Sugar Restitution Law
Bangko Sentral ng Pilipinas
M a n i l a

S i r :

        This refers to your request for opinion on whether the provisions of R.A. No. 6657 (the "Comprehensive Agrarian Reform Law" [CARL]) and Executive Order No. 407 directing government financial institutions (GFIs), among others, to turn over to the Department of Agrarian Reform (DAR) foreclosed collaterals are deemed amended by R.A. No. 7202 (the Sugar Restitution Law).

        The pertinent provisions of the cited laws and presidential issuance are:

        Republic Act No. 6657

"Sec. 7.         Priorities — The DAR, in coordination with the PARC (Presidential Agrarian Reform Council) shall plan and program the acquisition and distribution of all agricultural lands through a period of ten (10) years from the effectivity of this Act. Lands shall be acquired and distributed as follows:

Phase One:    Rice and corn lands under Presidential Decree No. 27; all idle or abandoned lands; all private lands voluntarily offered by the owners for agrarian reform; all lands foreclosed by government financial institutions; all lands acquired by the Presidential Commission on Good Government (PCGG); and all other lands owned by the government devoted to or suitable for agriculture, which shall be acquired and distributed immediately upon the effectivity of this Act, with the implementation to be completed within a period of not more than four (4) years;

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SEC. 40.       Special Areas of Concern. — As an integral part of the Comprehensive Agrarian Reform Program, the following principles in these special areas of concern shall be observed:

. . . (Emphasis supplied)

(4)     Idle, Abandoned, Foreclosed and Sequestered Lands. — Idle, abandoned, foreclosed and sequestered lands shall be planned for distribution a home lost and family-size farm lots to actual occupants. If land area permits, other landless families shall be accommodated in these lands."

. . . (Emphasis supplied)

        Executive Order No. 407

"SECTION 1.           All Government instrumentalities including but not limited to government agencies, government-owned and controlled corporations or financial institutions such as the Development Bank of the Philippines, Philippine National Bank, Republic Planters Bank, Asset Privatization Trust, Presidential Commission on Good Government, Department of Agriculture, State Colleges and Universities, Department of National Defense, shall immediately execute Deeds of transfer in favor of the Republic of the Philippines as represented by the Department of Agrarian Reform and surrender to the latter department all landholdings suitable for agriculture including all pertinent ownership documents in their custody, such as the owner's duplicate copy of the certificates of title, tax declarations and other documents necessary to effect the transfer of ownership." (Emphasis supplied.)

        Republic Act No. 7202

"SEC. 3.        The Philippine National Bank, the Republic Planters Bank, the Development Bank of the Philippines and other government-owned and controlled financial institutions which have granted loans to the sugar producers shall extend to accounts of said sugar producers incurred from Crop Year 1974-1975 up to and including Crop Year 1984-1985 the following:

(a)     Condonation of interest charged by the banks in excess of twelve percent (12%) per annum and all penalties and surcharges.

(b)     The recomputed loans shall be amortized for a period of thirteen (13) years inclusive of a three-year grace period on principal effective upon the approval of this Act. The principal portion of the loan will carry an interest rate of twelve percent (12%) per annum and on the outstanding balance effective when the original promissory notes were signed and funds released to the producer." (Emphasis supplied.)

"SEC. 4.        Account of sugar producers pertaining to Crop Year 1974-1975 up to and including Crop Year 1984-1985 which have been fully or partially paid, or may have been the subject of restructuring and other similar arrangements with government banks shall be covered by the provisions abovestated. The benefit of this Act shall not be extended to any sugar producer with a pending sequestration or ill-gotten wealth case before any administrative or judicial body. Any recovery shall be placed in escrow until the case has been finally resolved." (Emphasis supplied.)

        You state that under R.A. No. 7202, all accounts of sugar producers pertaining to crop years 1974-1975 up to 1984-85, whether fully or partially paid, are subject to restructuring; that pursuant to the above-quoted Section 3 of the law, the Monetary Board by virtue of the authority of Bangko Sentral under Section 6 of the said Act, adopted the following resolution, to wit:

"The GFIs shall defer the implementation of turn-over of foreclosed properties covered by CARL as well as the disposal to third parties of other non-agrarian properties in view of R.A. 7202.

After the expiration of the period prescribed by the financial institution within which the borrower shall apply for the privileges of recomputation, the turn-over of the foreclosed properties to CARL or the disposal to third parties of foreclosed non-agrarian properties may be effected by the financial institution." (MB Res. 411 dated October 27, 1993)

        It is your view that the inclusion of paid accounts in the coverage of R.A. No. 7202 (see Sec. 4, supra) is a manifestation of the legislative intent to extend to all delinquent borrowers, including those whose collaterals have been foreclosed due to such delinquencies, the benefit of R.A. No. 7202 and not to limit the same as originally intended to those whose collaterals are in danger of being foreclosed. Therefore, the benefits that go with the process of condonation and restructuring, which benefits include non-foreclosure of mortgaged properties, should be enjoyed by all borrowers included in the coverage of Section 4 of R.A. No. 7202.

        If we read you correctly, it is your position that sugarlands foreclosed by GFI's are "excluded from the instantaneous transfer" of all agricultural landholdings of GFIs to DAR for CARP purposes under R.A. No. 6657 and E.O. No. 407 because the provisions of R.A. No. 7202 on condonation and restructuring of loans of sugar producers "in effect suspended the efficacy of the foreclosures made by the GFIs because by operation of law, the accounts ipso facto became current in status."

        We believe that sugarlands already foreclosed by GFIs as of the effectivity of R.A. No. 7202 are not excluded from the coverage of the CARL although their respective owners are entitled to the benefit of recomputation of their paid loan accounts for the purpose of determining if they had made any excess payments on interests, penalties and surcharges which are condoned, and if so, for such excess payments to be credited to payment of their remaining accounts, if any, or refunded to them.

        It should be noted that Section 3 of R.A. No. 7202 which authorizes the condonation of interests charged by GFIs beyond 12% as well as penalties and surcharges, and which provides a new amortization period of thirteen (13) years for the recomputed loans does not mention reversion to former owners of properties already foreclosed as a corollary benefit. While the effect of Section 3 is to forestall foreclosure of mortgaged properties, the provision does not in terms undo foreclosure sales already consummated as of the effectivity of R.A. No. 7202. And rightly os, because property rights have already vested after a consummated foreclosure sale which the law (R.A. No. 7202) cannot disturb without violating the constitutional guaranties of due process and non-impairment of contracts clause.

        It has been held that after foreclosure, the mortgagor has no right to reconveyance of the mortgaged property even if he pays the balance or deficiency of the debt remaining. He lost all his rights in the mortgaged property as a result of the sheriff's sale (In re White's Estate, 185 A. 589). After the lapse of the period of redemption, the buyer in a foreclosure sale becomes the absolute owner of the property purchased (F. David Enterprises vs. Insular Bank of Asia and America, 191 SCRA 516; Joven vs. Court of Appeals, 212 SCRA 700). Such property may now be freely conveyed by the buyer (Crane vs. Loomis, 25 A. 2d 650; City Lumber Co. of Bridgeport vs. Murphy, 179 A. 339).

        Additionally, settled rules of statutory construction frown upon repeals of laws by implication. Every attempt should be made to reconcile and harmonize apparently conflicting provisions, for it is to be presumed that the lawmakers, in enacting laws, are aware of existing enactments and if their intention is to repeal a particular or specific law, they would so expressly repeal the same (U.S. vs. Palacio, 33 Phil. 208; Villegas vs. Subido, 41 SCRA 190; Magtajas vs. Pryce Properties Corp. Inc., 234 SCRA 255).

        As earlier stated, Section 3 of R.A. 7202 provides for condonation of interests, penalties and surcharges imposed on sugar loan accounts and restructuring of defaulted accounts. However, Section 3 does not in terms provide that foreclosures shall be stalled or those already done shall be undone. To say, therefore, that R.A. No. 7202 has repealed R.A. No. 6657 simply because Section 3 of R.A. No. 7202 provides for condonation and restructuring of sugar loan accounts and Section 4 of the same Act extends the benefit of Section 3 to sugar producers who had already fully paid their accounts violates this cardinal principle of statutory construction and overlooks the real intention behind R.A. No. 7202 which is to make restitution for losses suffered by sugar producers through a mechanism which would allow them to repay their loan obligations under easier and longer repayment terms.

        The sponsorship speeches of the sponsors of the House bill which later became R.A. No. 7202 are quite explicit as to the purpose and intent of the proposal.

        Representative Guanzon, in his Sponsorship Remarks, stated that the bill's purpose is to put sugar workers "back on their feet" by "providing a mechanism for the restructuring of bank loan accounts; the moratorium on the repayment of past due loan accounts, as well as the granting of new crop loans . . . at reasonable rates of interest". (Records of the House, Aug. 2, 1990, p. 333)

        To the same effect is the Sponsorship Remarks of Representative Lacson. The measure, according to him, "seeks the condonation of all penalties, surcharges and interests charged by the banks in excess of 12 percent" and the "recomputed loan is amortized for 13 years inclusive of a three-year grace period on principal" (ibid., p. 335).

        Representative Laguda expressed a similar intention in his Sponsorship Remarks. He was every specific that the proposal would "put in place two principal steps: first is to condone all of the penalties, surcharges and interests that were charged by the government banks . . . [and] then, thereafter, the recomputed loans shall be amortized . . ." (ibid, p. 360-361).

        The proceedings of the Bicameral Conference Committee on Banks are also enlighting. We quote:

"HON, ANGARA.    . . . I think the general intention of this bill is to grant a general relief-general relief to the debtors. So whether you are paid or unpaid debtors, you are supposed to get the benefit of this general relief, and so we cannot make really a distinction between those who have paid or restructured and those who have not because we will be making an undue classification. . . .

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HON. OSMEÑA.     I support the position of Senator Angara, that the bill is intended to, shall we say, compensate those who were borrowers, be they borrowers who have already repaid, borrowers who have restructured, or borrowers who are still indebted under the original terms of the loan, and I would like to also advance the idea that the intent of this bill actually is reparation, in other words, to repair, as the Latin word 'repair' means, or to be able to make up for the injustices that the sugar producers suffered under the government agencies that were lording it over the industry at that time.

My only problem is, if a debtor has already paid his loan, the bank will be made to reimburse. Now, I don't know what the reaction of the banks would be to this, or what the mechanics would be. So, I was wondering if it would be prudent for us to provide for recovery from the PCGG on the part of the banks who will have to reimburse. Because if you already paid your account, and then you recompute it, and then you paid more than what you should, you have a claim to file and, therefore, the banks will have to pay this claim out of the resources of the banks" (Proc. of the Bicameral Conference Committee on Bank, Jan. 15, 1992, pp. 4-9; Emphasis supplied).

        Based on the foregoing, we are of the view that R.A. No. 7202 has not repealed R.A. No. 6657 insofar as the latter covers foreclosed sugar land, referring to foreclosed land where title has fully vested in the purchaser after the lapse of the period of redemption without the previous owner having exercised his right of redemption. The sugar producers/owners concerned, however, are entitled to the benefit of recomputation of their loan accounts, and if warranted, to restitution of any excess payments on interests, penalties and surcharges pursuant to Section 3 of R.A. No. 7202.

        Please be guided accordingly.

Very truly yours,

TEOFISTO T. GUINGONA, JR.

Secretary