Foreign banks on ownership of real properties (2)

In 1947, the participation of a corporation in the foreclosure sale of real property was governed by Republic Act 133. Section 1 of RA 133 provides that private real property may be mortgaged to a corporation for a period not exceeding five years, renewable for another five. However, if the mortgagee is disqualified to acquire or hold lands in the Philippines, it shall not bid or take part in any sale of such real property because of such mortgage, thus:

SECTION 1. Any provision of law to the contrary notwithstanding, private real property may be mortgaged for a period not exceeding five years, renewable for another five, in favor of any individual, corporation, or association, but the mortgagee or his successor in interest, if disqualified to acquire or hold lands of the public domain in the Philippines, shall not bid or take part in any sale of such real property as a consequence of such mortgage.

In 1967, RA 4882 amended RA 133. In RA 4882, the law underscores that "a mortgagee who is prohibited from acquiring public lands may possess the property for five years after default and for the purpose of foreclosure. However, it may not bid or take part in any foreclosure sale of the real property." Section 1 of RA 4882 states:

"SECTION 1. Any provision of law to the contrary notwithstanding, private real property may be mortgaged in favor of any individual, corporation, or association, but the mortgage or his successor in interest, if disqualified to acquire or hold lands of the public domain in the Philippines, shall not take possession of the mortgaged property during the existence of the mortgage and shall not take possession of mortgaged property except after default and for the sole purpose of foreclosure, receivership, enforcement or other proceedings and in no case for a period of more than five years from actual possession and shall not bid or take part in any sale of such real property in case of foreclosure: Provided, That said mortgagee or successor in interest may take possession of said property after default in accordance with the prescribed judicial procedures for foreclosure and receivership and in no case exceeding five years from actual possession."

Indeed, "It is a rule in statutory construction that a special law prevails over a general law — regardless of their dates of passage — and the special law is to be considered as an exception to the general law." The general law does not nullify the specific or special law. Simply put, "where two statutes are of equal theoretical application to a particular case, the one designed therefore should prevail."

The constitutional principle remains that "the right to acquire lands of the public domain is reserved only to Filipino citizens or corporations, at least 60 percent of the capital of which is owned by Filipinos."

A domestic corporation is considered a Philippine national if Philippine citizens own 60 percent of the capital stock outstanding and are entitled to vote. Significantly, corporations disqualified from acquiring public domain lands are also disqualified from acquiring private lands.

In 1994, the Foreign Bank Liberalization Act (RA 7721) was enacted "to develop a more stable, competitive, efficient and dynamic banking financial system by encouraging greater foreign participation."

Under RA 7721, foreign banks can operate in the Philippine banking system through any of the following modes of entry:

1.By acquiring, purchasing, or owning up to 60 percent of the voting stock of an existing bank;

2.By investing in up to 60 percent of the voting stock of a new banking subsidiary incorporated under the laws of the Philippines; or

3.By establishing branches with full banking authority.

As gleaned, RA 7721 was silent on whether foreign banks could foreclose mortgages and acquire mortgaged properties.

(To be continued)