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Page 1

Copyright 1994-2009 CD Technologies Asia, Inc. Philippine Taxation 2008 1

July 8, 1999



Manila Bank Building
6772 Ayala Avenue,
Makati City

Attention: Atty. Clarence D. Guerrero

Gentlemen :

This refers to your letter dated June 18, 1999 which, in effect, seeks the
confirmation by this Office of your opinion on certain consequences arising from the
Dacion en Pago con Pacto de Retro agreement entered into by your client, The
Manila Banking Corporation (TMBC), calling for the "transfer" of certain bank
properties in favor of the Central Bank Board of Liquidators (CB-BOL). cdtai

It is represented that in May 1987, TMBC was place under receivership by the
then Central Bank of the Philippines (now Bangko Sentral ng Pilipinas); that as a
result thereof, TMBC was directed to cease and desist from engaging in any form of
banking activity; that attempts are now made to arrive at an acceptable Rehabilitation
Plan for TMBC; that one of the conditions for the approval of the proposed
Rehabilitation Plan by the Monetary Board is for TMBC to settle its obligation with
CB-BOL in the amount of PhP8,636,941,026.43, whereby the amount of
PhP6,370,987,647.60 is to be paid in cash, while the payment of the balance of
PhP2,265,953,378.83 is to be guaranteed by bank assets; that the latter arrangement
shall be reflected in a Deed of Assignment with Right to Repurchase (Dacion en Pago
con Pacto de Retro) which instrument calls for the transfer and conveyance by
TMBC, as assignor, in favor of CB-BOL, as assignee, of certain parcels of lands, to

A. Silang (Cavite) Property (Foreclosed from Capitol City Farms,

Page 2

Copyright 1994-2009 CD Technologies Asia, Inc. Philippine Taxation 2008 2


TCT No. Area (sq. m.)

T-128673 32,290
T-128674 252,354
T-128675 252,354
T-829169 34,542
T-829170 211,231
T-829171 6,582

B. Porac, Pampanga Property

TCT No. 308513-R 10,240,000 sq.m.

C. San Miguel, Bulacan Property (Foreclosed from Baguio Growers
and Producers, Inc.)

TCT No. Area

T-275531 78,008
T-285532 78,008
T-275553 1,560,267
T-275554 984,298
T-276442 1,009,420

D. San Miguel (Bulacan) Property (Foreclosed from Aseabrid Farms

TCT No. Area

T-277927 1,680,064
T-277928 2,472,379
T-277929 459,358
T-277930 240,868
T-277931 1,575,235
T-277932 278,891
T-277933 66,067
T-277934 240,000
T-277935 868,738

E. San Miguel (Bulacan) Property (Foreclosed from Interfarms

Page 3

Copyright 1994-2009 CD Technologies Asia, Inc. Philippine Taxation 2008 3

Livestock Feeds, Inc.)

TCT No. Area

T-284752 289,044
T-284753 327,265
T-284754 173,382
T-284755 64,602
T-284756 309,727
T-284757 278,448
T-284758 1,023,678
T-284677 863,243
T-284678 11,792
T-284679 9,441
T-284680 446,191
T-277956 123,002

F. San Jose del Monte, Bulacan Property (Foreclosed from Gregorio
Araneta, Inc.)

TCT Area

T-203043 830,894
T-203045 903,914

G. San Jose del Monte, Bulacan Property (Foreclosed from Carmel
Farms, Inc.)

TCT Area

T-43.500(M) 68,545
T-44.782(M) 966,208

It is your further contention that although such assignment was denominated as
Dacion en Pago con Pacto de Retro, as evidenced by a copy of the agreement which
you likewise submitted to this Office, the same was in reality a Mortgage Agreement
as the transfer and conveyance is not absolute and unconditional but intended merely
to secure the payment of the balance of the loan obligation; that under Article 1602 of
the New Civil Code, a contract of sale with right of repurchase shall presumed to be
an equitable mortgage when (a) the price of the sale is inadequate, (b) the vendor
remains in possession of the property, (c) the vendee a retro retains part of the
purchase price, and (d) when it can be fairly inferred that the real intention of the

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