August 28, 2003 DAR OPINION NO.

12-03

Mr. Ronald B. De la Rosa Provincial Agrarian Reform Officer II DAR Provincial Office San Fermin St., Cauayan, Isabela

Dear PARO De La Rosa: This refers to your letter requesting for opinion concerning land covered by Homestead and Free Patents which have been encumbered/sold within the prohibitory period of five (5) years. You stated that you received a copy of the Memorandum dated 23 August 2002 of Atty. Dominador S. Reyes, AVP, Head, Legal Services Department, Land Bank of the Philippines re: Homestead and Free Patents Which Have Been Encumbered/Sold Within the Prohibitory Period of Five (5) Years ; that there were properties belonging to the said category foreclosed by private banks, consolidated in their favor and offered for CARP (Comprehensive Agrarian Reform Program) coverage; that when the claim folders were transmitted to LBP-AOC (Land Bank of the Philippines-Agrarian Operations Center) for processing, they were returned to your Office by reason that it is a violation of the provisions of Commonwealth Act No. 141; and that your Office has a total of two hundred (200) hectares, more or less, affected thereof. In his Memorandum dated 23 August 2002, Atty. Dominador S. Reyes of LBP mentioned/cited pertinent provision of law and jurisprudence, quote: ". . . . under Section 118, CA 141, to wit: Lands acquired under free patents or homestead provisions shall not be subject to encumbrance or alienation from the date of the approval of the application and for a term of five years from and after the date of issuance or grant nor shall they become liable to the satisfaction of any debt contracted prior to the expiration of said period; xxx xxx xxx

Where a homestead is sold to a private individual within the prohibitive period of five years, the approval thereby by the Secretary of Natural Resources obtained after five years will not have any valid curative effect. (Narciso Pena; Registration of Land Titles and Deeds, 1994 Revised Edition) page 478. The provision of the law which prohibits the sale or encumbrance of the homestead within five years after the grant of the patent is mandatory 22 and it is immaterial whether such prohibited transaction is registered or not. 22a

In a case of Contract of Sale of a homestead was perfected within the prohibitory period, the same being illegal and void, the execution of the formal deed even after the expiration of said period does not and cannot legalize it, since the law prohibiting such transfer does not distinguish between executory and consummated sales. 22b It can be gleaned from the facts you have presented that there was really a violation of the provision of Sec. 118 of Commonwealth Act 141. If the violation is apparent on the Homestead Patent itself, the bank should immediately return the VOS folder to the Department of Agrarian Reform in accordance with the provision of RA 6657, more specifically Section 50 thereof. Sec. 50 Quasi Judicial Power of the DAR. The DAR is hereby vested with primary jurisdiction to determine and adjudicate agrarian reform matters and shall have exclusive original jurisdiction over all matters involving the implementation of agrarian reform, except those falling under the exclusive jurisdiction of the Department of Agriculture (DA) and the Department of Environment and Natural Resources (DENR). If you fail to immediately return the VOS Claim Folder to the DAR despite the above mentioned observation, the bank can be subjected to harassment cases to value and pay the said lands." (emphasis supplied.) In relation and in addition to the above, it was also ruled that: a) "Where a homestead was alienated contrary to the provision of Section 118 of the Public Land Act, the patent is rendered null and void and the property with the improvements thereon reverts to the State. Such alienation or sale being void, confirmation thereof by means of another instrument of sale outside the forbidden period, although carrying the approval of the Secretary of Agriculture and Natural Resources (now DENR) will not validate the void sale (LRC Consulta No. 39, Gonzalo vs. Register of Deeds of Zamboanga del Sur , March 29, 1955)." (emphasis supplied) "The alienation of a homestead whether in whole or in part within the prohibitive period is a sufficient cause for the reversion to the State of the whole grant (Republic of the Philippines vs. Garcia, 105 Phil. 820)." (emphasis supplied) AHcCDI

b)

Pertinent to the issue are the following provisions of Republic Act No. 6657 (Comprehensive Agrarian Reform Law) and DAR Administrative Order No. 1, series of 2000 (Revised Rules and Regulations on the Acquisition of Agricultural Lands Subject of Mortgage or Foreclosure ): 1. SECTION 4, R.A. No. 6657

"SECTION 4. Scope The Comprehensive Agrarian Reform Law of 1988 shall cover, regardless of tenurial arrangement and commodity produced, all public and privateagricultural lands as provided in Proclamation No. 131 and Executive Order No. 229, including other lands of the public domain suitable for agriculture . More specifically, the following lands are covered by the Comprehensive Agrarian Reform Program:

(a) 2.

All alienable and disposable lands of the public domain devoted to or suitable for agriculture." (emphasis supplied) SECTION 19, R.A. No. 6657

"Section 19. Incentives for Voluntary Offers for Sale . Landowners, other than banksand other financial institutions who voluntarily offer their lands for sale shall be entitled to an additional five percent (5%) cash payment." (emphasis supplied) 3. SECTION 71, R.A. No. 6657

"Section 71. Bank Mortgages. Banks and other financial institutions allowed by law to hold mortgage rights or security interests of 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." (emphasis supplied) 4 SECTION 1, DAR Administrative Order No. 1, series of 2000

"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 ." (emphasis supplied.) Further, the provisions of DOJ Opinion No. 41, series of 1992 (copy herewith attached), although the issue therein is not squarely similar, may find relative application in the instant case: ". . . . the spirit of, and the reason behind , the statutory provision issatisfied in the instance where the said landowner offers his property for CARP coverage. For, in such a situation, the mischief sought to be avoided by the legal provision in issue does not exist and therefore thelegal requirement prescribed therein does not come into play. Moreover, as the Land Registration Authority correctly argued in its opinion adverted to above: "To hold otherwise will result in a complex situation where the initial sale or conveyance will have to be rescinded with both parties under the contract returning that which they received, the title to the property reverting back to the vendor who, in turn, will transfer the same to DAR. Since in the final analysis the property will end up in DAR's hands anyway, we believe that it was not the intention of the law to absolutely treat as null and void the sale or alienation of private agricultural lands executed prior to June 15, 1988 and registered beyond three months thereafter if the transfereeunder the sale is willing to place the land under the coverage of the Comprehensive Agrarian Reform Program." The pertinent rules of statutory construction state "When the interpretation of a statute according to the exact and literal import of its words would lead to absurd and mischievous consequences, or would thwart or contravene the manifest purpose of the legislature in its enactment, it should be

construed according to its spirit and reason , disregarding or modifying so far as may be necessary, the strict letter of the law." xxx xxx xxx

(Black, Statutory Construction cited in Gonzaga, Statutes and their Construction, 1969 Ed., p. 79) "If to construe a stature according to the exact and literal import of the words would lead to absurdity, its letter may be disregarded to follow the reason for its enactment ." (Lopez vs. Court of Appeals, G.R. No. L-9272, February 1, 1957) (emphasis supplied) ACcISa GIVEN ALL THE ABOVE, to preclude circuitous and complex reversion proceedings, and pursuant to the aforequoted/aforecited more recent special provisions of R.A. No. 6657 (CARL) and R.A. No. 337 (The General Banking Act) vis--vis a general provision of the Public Land Act (Section 118 thereof), the subject properties foreclosed by private banks, consolidated in their favor and offered for CARP coverage may be placed under the Program since in the final analysis said properties will end up/revert to the State, through the DAR, for distribution to qualified agrarian reform beneficiaries. Please be guided accordingly.

(SGD.) RICARDO S. ARLANZA Undersecretary for Policy, Planning and Legal Affairs Office

Footnotes

22. De los Santos, etc. vs. Roman Catholic Church of Midsayap, 94 Phil. 405 22a. Republic of the Philippines vs. Garcia, 105 Phil. 826. 22b. Manzano vs. Ocampo, 1 SCRA 691, Menil vs. Court of Appeals, G.R. No. L-43558-59, July 11, 1978 84 SCRA 413.