AMENDING CERTAIN PROVISIONS OF REPUBLIC ACT NUMBERED THREE THOUSAND EIGHT HUNDRED FORTY-FOUR, AS AMENDED, ENTITLED "THE CODE OF AGRARIAN REFORM IN THE PHILIPPINES."

• Number: Presidential Decree No. 251
• Sections: 28

Preamble

WHEREAS, there is imperative need for immediate

implementation of agrarian reform envisioned under Presidential Decree Nos. 27

and 85, dated October 21, 1972 and December 25, 1972, respectively;

WHEREAS, the implementation of such a revolutionary program

of rural change demands an effective administrative machinery financially and

organizationally equipped to mobilize and harness properly all available

government resources for the realization of desired agrarian reform; and

WHEREAS, the Land Bank, the only financial institution

established for agrarian reform, is presently deficient and inadequate both in

capitalization and in organization structure to meet the implementation

requirements of the agrarian reform program;

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the

Philippines, by virtue of the powers in me vested by the Constitution as

Commander-in-Chief of all the Armed Forces of the Philippines, and pursuant to

Proclamation No. 1081, dated September 21, 1972, and General Order No. 1, dated

September 22, 1972, as amended, do hereby order and decree:

Section 1

SECTION 1. Section seventy-four of Republic Act Numbered

Three Thousand Eight Hundred and Forty-Four, as amended, is hereby further

amended to read as follows:

"SEC. 74. Creation. — To provide timely and

adequate financial support in all phases involved in the execution of needed

agrarian reform, there is hereby established a body corporate and government

instrumentality to be known as the 'Land Bank of the Philippines, hereinafter

called the 'Bank,' which shall have its principal place of business in Greater

Manila. The legal existence of the Bank shall be for a period of fifty (50)

years from the date of approval hereof."

Section 2

SEC. 2. Section seventy-five of the same Act is hereby

amended to read as follows:

"SEC. 75. Powers in General. — The Bank shall have

the power:

"1. To prescribe, repeal and alter its own by-laws to determine its operating

policies, and to issue such rules and regulations as may be necessary;

"2. To adopt, alter and use a corporate seal;

"3. To hold, purchase, acquire and own real and personal property, introduce

necessary improvements thereon to enhance and develop their social and economic

values, and to sell, mortgage or otherwise dispose of the same;

"4. To sue and be sued, make contracts, negotiate and secure loans from both

local and foreign sources. Before undertaking any such credit operation, the

Bank, through the Secretary of Finance, shall request the opinion, in writing,

of the Monetary Board on the monetary implications of the contemplated action.

All loans from foreign sources shall be subject to approval by the President of

the Philippines and shall be fully guaranteed by the Philippine Government;

"5. To grant short, medium and long term loans and advances against security

of real estate and/or other acceptable assets for the establishment, development

or expansion of agricultural, industrial, home building or home financing

projects and other productive enterprises;

"6. To grant loans to farmers' cooperatives/associations to facilitate

production, marketing of crops and acquisition of essential commodities;

"7. To finance and/or guarantee the acquisition, under Presidential Decree

No. 85, dated December 25, 1972, of farm lots transferred to tenant-farmers

pursuant-to

Presidential Decree No. 27, dated October 21, 1972;

"8. To underwrite, hold, own, purchase, acquire, sell, mortgage, dispose or

otherwise invest or reinvest in stocks, bonds, debentures, securities and other

evidences of indebtedness of other corporations and of the Government or its

instrumentalities which are issued for or in connection with any project or

enterprises;

"9. The provision of any law to the contrary notwithstanding, to guarantee

acceptance(s), credits, loans, transactions or obligations of any person

co-partner ship, association or corporation in favor of any financing or banking

institution whether Foreign or domestic: Provided, That the proceeds of

such acceptances, credits, loans, transactions or obligations are utilized or

earmarked for the development and/or expansion of agriculture and industry;

"10. To borrow from, or rediscount notes, bills of exchange and other

commercial papers with, the Central Bank. The rate of interest to be charged and

the conditions on such obligations or borrowings shall be subject to the rules

and regulations of the Monetary Board;

"11. To act as trustee, or administer any trust or hold property in trust in

accordance with the provisions of law governing trust corporations; and

"12. To exercise the general powers mentioned in the Corporation Law and the

General Banking Act, as amended, insofar as they are not inconsistent or

incompatible with this Decree."

Section 3

SEC. 3. Section seventy-six of the same Act is hereby

amended to read as follows:

"SEC. 76. Issuance of Bonds. — The Bank shall, upon

recommendation of the Secretary of Finance and after consultation with the

National Economic and Development Authority and the Monetary Board, and with the

approval of the President of the Philippines, issue bonds, debentures,

securities, collaterals and other evidences of indebtedness and/or the renewal

or refunding thereof, at such terms, rates and conditions as the Bank may

determine, up to an aggregate amount not exceeding, at any one time, ten times

its paid-in capital and surplus. These bonds and other obligations shall be

redeemable at the option of the Bank at or before maturity and in such manner as

may be stipulated therein and shall bear such rate of interest as may be fixed

by the Bank. Such obligations shall be secured by the assets of the Bank

including the stocks, bonds, debentures, and other securities underwritten,

purchased or held by it under the provisions of this Decree. Such obligations

may be issued in payment and/or replacement of certain assets transferred to the

Bank and/or offered for sale at such price or prices as the Bank may determine,

and shall be exempt from taxation both as to principal and interest, and shall

be fully guaranteed by the Government of the Republic of the Philippines, and

such guarantee shall be expressed on the face thereof. These instruments of

indebtedness shall be negotiable and may be mortgaged in accordance with

established banking procedures and practices with government institutions, their

existing charters and/or laws to the contrary notwithstanding, to enable the

holders of such bonds to make use of them in investments in productive

enterprises. The Board of Directors shall have the power to prescribe rules and

regulations for the issuance, reissuance, servicing, placement and redemption of

the bonds herein authorized to be issued as well as the registration of such

bonds at the request of the holders thereof."

Section 4

SEC. 4. Section seventy-seven of the same Act is hereby

amended to read as follows:

"SEC. 77. Issuance of Preferred Shares of Stock to

Finance Acquisition of Farm Lots and Other Assets. — The Bank shall issue,

from time to time, preferred shares of stock in such quantities as may be

necessary to pay the landowners in accordance with Sections eighty and

eighty-one of this Code, and for acquisition of other assets should the seller

elect to accept such payment. The amount of shares that the Bank may issue shall

not exceed the aggregate amount needed to pay the landowners in the proportion

prescribed in said Section eighty of this Code. The Board of Directors shall

include as a necessary part of the by-laws that it shall issue under Section

seventy-five of this Code, such formula as it deems adequate for determining the

net asset value of its holdings as a guide and basis for the issuance of

preferred shares. The shares of stock issued under the authority of this

provision shall be guaranteed a rate of return of at least six per centum per

annum. In the event that the earnings of the Bank for any single fiscal year are

not sufficient to enable the Bank, after making reasonable allowance for

administration, contingencies and growth, to declare dividends at the guaranteed

rate, the amount equivalent to the difference between the Bank's earnings

available for dividends and that necessary to pay the guaranteed rate shall be

paid by the Bank out of its own assets but the Government shall, on the same day

that the Bank make such payment reimburse the latter in full, for which purpose

such amounts as may be necessary to enable the Government to make such

reimbursements are hereby appropriated out of any moneys in the National

Treasury not otherwise appropriated. The Bank shall give sufficient notice to

the Budget Commissioner and the Secretary of Finance in the event that it is not

able to pay the guaranteed rate of return on any fiscal period. The guaranteed

rate of return on these shares shall not preclude the holders thereof from

participating at a percentage higher than six per centum should the earnings of

the Bank for the corresponding fiscal period exceed the guaranteed rate of

return. The Board of Directors shall declare and distribute dividends within

three months after the close of each fiscal year at the guaranteed rate unless a

higher rate of return is justified by the Bank's earnings after making

reasonable allowance for administration, contingencies and growth, in which

case, dividends shall be declared and distributed at a higher rate. The capital

gains derived from the sale or transfer of such shares and all income derived

therefrom in the form of dividends shall be fully tax-exempt."

Section 5

SEC 5. Section seventy-eight of the same Act is hereby

amended to read as follows:

"SEC. 78. Special Guaranty Fund. — In the event

that the Bank shall be unable to pay the bonds, debentures and other obligations

issued by it, a fixed amount thereof shall be paid from a special guaranty fund

to be set up by the Government, to guarantee the obligation of the Bank, and

established in accordance with this Section and, thereupon, to the extent of the

amounts so paid, the Government of the Republic of the Philippines shall succeed

to all the rights of the holders of such bonds, debentures or other obligations:

Provided, however, That the Government shall pay into the guaranty fund

the sum of five million pesos each year until the cumulative total of such

guaranty fund is no less than twenty percent of the outstanding net obligation

of the Bank at the end of any calendar year.

"The special guaranty fund shall be administered by the Central Bank of the

Philippines in the manner most consistent with its Charter. For the purpose of

such funds, the sum of five million pesos is hereby appropriated annually out of

any moneys in the National Treasury not otherwise appropriated, until the total

amount of one hundred million pesos shall have been attained

therefrom."

Section 6

SEC. 6. Section seventy-nine of the same Act is hereby

amended to read as follows:

"SEC. 79. Receipt of Deposits. — The Bank, subject

to the provisions of the General Banking Act, as amended, is authorized to

receive demand, savings and time deposits.

"The Secretary of Finance, the National Treasurer and his authorized

representatives, city and municipal treasurers as well as custodians of funds or

those belonging to government-owned or controlled corporations, may be

authorized by the Monetary Board to make and actually maintain deposits of any

government or corporate funds with the Land Bank."

"SEC. 79-A. Administration of Agricultural Guarantee Funds. — All

agricultural guarantee funds shall be converted into a trust fund to be

administered by the Bank."

Section 7

SEC. 7. Section eighty of the same Act is hereby amended to

read as follows:

"SEC. 80. Modes of Payment. The Bank shall finance the

acquisition of farm lots under any of the following modes of settlement:

"1. Cash payment of 10% and balance in 25-year tax-free 6% Land Bank

bonds;

"2. Payment of 30% in preferred shares of stock issued by the Bank and

balance in 25-year tax-free 6% Land Bank bonds;

"3. Full guarantee on the payment of the fifteen (15) equal annual

amortizations to be made by the tenant/farmer;

"4. Payment through the establishment of annuities or pensions with

insurance;

"5. Exchange arrangement for government stocks in government-owned or

controlled corporations or private corporations where the Government has

holdings;

"6. Such other modes of settlement as may be further adopted by the Board of

Directors and approved by the President of the Philippines.

"In the event there is existing lien or encumbrance on the land in favor of

any Government lending institution at the time of acquisition by the Bank, the

landowner shall be paid the net value of the land (i.e., the value of the land

determined under Presidential Decree No. 27 minus the outstanding balance/s of

the obligation/s secured by the lien/s or encumbrance/s), and the outstanding

balance/s of the obligations to the lending institution/s shall be paid by the

Land Bank in Land Bank bonds or other securities, existing charters of those

institutions to the contrary notwithstanding. A similar settlement may be

negotiated by the Land Bank in the case of obligations secured by liens or

encumbrances in favor of private parties or institutions.

"Whenever the Bank pays the whole or a portion of the total cost of farm

lots, the Bank shall be subrogated by reason thereof, to the right of the

landowner to collect and receive the yearly amortizations on farm lots or the

amount paid including interest thereon, from tenant-farmers in whose favor said

farm lots had been transferred pursuant to Presidential Decree No. 27, dated

October 21, 1972.

"The profits accruing from payment shall be exempt from tax on capital

gains."

Section 8

SEC. 8. Section eighty-one of the same Act is hereby amended

to read as follows:

"SEC. 81. Capital — The authorized capital stock of

the Bank shall be three billion pesos, divided into one. hundred and eighty

million common shares with a par value of ten pesos each, which shall be fully

subscribed by the Government, and one hundred and twenty million preferred

shares with a par value of ten pesos each, which shall be issued in accordance

with the provisions of Sections seventy-seven and eighty-three of this Code.

These preferred shares shall be non-voting. The Board, upon the recommendation

of the Secretary of Finance and with the approval of the President of the

Philippines, may increase the capitalization of the Bank up to such an amount as

may be necessary to attain the objectives of this Act. The total capital stock

subscribed by the Government shall be paid by the Agrarian Reform Fund

Commission created under Presidential Decree No. 85, hereinafter referred to as

the Commission, as follows: four hundred million pesos within sixty (60) days

from the approval of this Decree, and at least one hundred million pesos every

year thereafter until the total subscription of the Government, is fully paid:

Provided, That the common and preferred shares of the Bank which have

been issued, including those already subscribed, shall form part of the

increased capitalization of the Bank: Provided, further, That the

Government is authorized to appropriate funds out of the National Treasury for

this purpose."

Section 9

SEC. 9. Section eighty-three of the same Act is hereby

amended to read as follows:

"SEC. 83. Preferred Shares. — All preferred shares

of stock issued under Section seventy-seven of this Code shall be entitled to

the income earned by the Bank on its investments and other operations:

Provided, That the holders of such preferred shares of stock shall not

bring derivative suits against the Bank. Such preferred shares shall be fully

transferable: Provided, further, That upon the liquidation of the Bank,

the redemption of such preferred shares shall be given

priority."

Section 10

SEC. 10. Section eighty four of the same Act is hereby

amended to read as follows:

"SEC. 84. Voting of Shares. — The voting power of

all the common shares of stock of the Bank owned and controlled by the

Government shall be vested in the President of the Philippines or in any ex

officio member of the Board of Directors of the Bank as he may designate."

Section 11

SEC. 11. Section eighty-five of the same Act is hereby

amended to read as follows:

"SEC. 85. Use of Bonds. — The bonds issued by the

Bank may be used by the holder thereof and shall be accepted for any of the

following:

"1. Payment for agricultural lands or other real properties purchased from

the Government.

"2. Payment for the purchase of shares of stock or assets of government-owned

or controlled corporations.

"Upon offer by the bondholders, the corporation owned or controlled by the

Government shall, through its Board of Directors, negotiate with such bondholder

with respect to the price and other terms and conditions of the sale. In case

there are various bondholders making the offer, the one willing to purchase

under terms and conditions most favorable to the corporation shall be preferred.

If no price is acceptable to the corporation, the same shall be determined by

the Committee of Appraisers composed of three members, one to be appointed by

the corporation, another by the bondholder making the highest or only offer, and

the third by the two members so chosen. The expense of appraisal shall be borne

equally by the corporation and the successful purchaser.

"Should the Government offer for sale to the public any or all the shares of

stock or the assets of any of the government-owned or controlled corporations,

the bidder who offers to pay in bonds of the Land Bank shall be preferred

provided that the various bids be equal in every respect except in the

medium of payment.

"3. Surety, bail bonds for the provisional release of accused persons or

performance bonds in all cases where the Government may require or accept real

property as bonds.

"4. Security for loans applied with the Philippine National Bank, Development

Bank of the Philippines, Government Service Insurance System, Social Security

System, and other government financial institutions, existing charters of these

institutions to the contrary notwithstanding.

"5. Payment for reparations goods, the provisions of Republic Act No. 1789,

as amended, to the contrary notwithstanding.

Section 12

SEC. 12. Section eighty-six of the same Act is hereby

amended to read as follows:

"SEC. 86. Board of Directors; Membership; Per Diem.

— The affairs and business of the Bank shall be directed and its property

managed and preserved by a Board of Directors consisting of seven (7) members to

be composed of the Secretary of Finance as Chairman, the President of the Bank

as Vice-Chairman, the Secretary of Agrarian Reform and the Secretary of Labor as

ex officio members, and three members to be elected as hereinafter

provided.

"Annually, on the first Tuesday after the First Monday in December, the

stockholders shall meet to take up, among others, the election of three (3)

members of the Board of Directors for the succeeding year, each common

shareholder or proxy to beentitled to as many votes he may have shares of stock

registered in his name on the 31st day of October last preceding and held by him

at the time of the election.

"The Board shall convene as frequently as is necessary to discharge its

responsibilities properly, but shall meet at least once every two weeks. The

Board may be convoked either by the Chairman or, in his absence, the

Vice-Chairman. "The presence of four (4) members shall constitute a quorum. "AH

decisions of the Board shall require the concurrence of at least four (4)

members.

"The Chairman and the members of the Board shall receive a per diem of two

hundred fifty pesos for each session of the Board attended, but in no case to

exceed two thousand pesos a month."

"SEC. 86-A. Powers and Responsibilities of the Board.

— The Board of Directors shall have, among others, the following specific

powers and responsibilities:

"1. Formulate policies, rules and regulations for the effective operation of

the Bank;

"2. Take decisions concerning loans as well as fix the rates of interest

thereon, guarantees, investments, borrowing by the Bank, furnishing of technical

assistance and other operations of the Bank;

"3. Establish such branches and agencies as may be deemed necessary and

convenient;

"4. Provide for the appointment and removal and fix the reasonable

compensations of such personnel as may be necessary for the expeditious conduct

of the business of the Bank; and

"5. Approve the budget of the Bank."

Section 13

SEC. 13. Section eighty-seven of the same Act is hereby

amended to read as follows:

"SEC. 87. Executive Officers; Compensation. — The

Chief Executive of the Bank shall be the President, who shall be chosen and may

be removed by the Board of Directors with the advice and consent of the

President of the Philippines. His salary shall be fixed by the Board of

Directors with the approval of the President of the Philippines. The President

shall be assisted by Vice Presidents as may be required, whose appointments and

removal shall be approved and whose salaries shall be fixed by the Board of

Directors upon recommendation of the President of the Bank.

"SEC. 87-A. Duties and Powers of the President. —

The President of the Bank shall, among others, execute the policies, measures,

orders and resolutions promulgated by the Board of Directors and supervise and

administer the operations of the Bank. He shall be the legal representative of

the Bank and shall make all contracts, enter into all necessary obligations on

behalf of the Bank required or permitted by this Decree. He shall report

periodically to the Board of Directors the main facts concerning the operations

of the Bank, and recommend changes of policies which may to him seem best. He

shall furnish, upon request of the President of the Philippines, any information

in his possession regarding the operations of the Bank.

Section 14

SEC. 14. Section eighty-eight of the same Act is hereby

amended to read as follows:

"SEC. 88. Qualifications of Executive Officers. —

No person shall be appointed to any executive position in the Bank mentioned in

the preceding Section unless he be of good moral character and of unquestionable

integrity and responsibility, and who is of recognized competence in the field

of economics, agriculture, industry, banking and/or finance, at least

thirty-five (35) years of age and possessed of demonstrated administrative skill

and ability."

Section 15

SEC. 15. Section eighty-nine of the same Act is hereby

amended to read as follows:

"SEC. 89. Withdrawal of Persons Having Personal Interest.

-Whenever any member attending a meeting of the Board has a personal interest of

any sort in the discussion or resolution of any given matter, or any of his

relatives within the fourth degree of consanguinity or a second degree of

affinity has such interest, said member shall not participate in the discussion

or resolution of the matter and must retire from the meeting during the

deliberations thereon. The subject matter, when resolved, and the fact that a

member had a personal interest in it, shall be made available to the public. The

minutes of the meeting shall note the withdrawal of the member concerned."

Section 16

SEC. 16. Section ninety of the same Act is hereby amended to

read as follows:

"SEC. 90. Personnel. — The Board of Directors shall

provide for an organization and staff of officers and employees of the Bank and

upon recommendation of the President of the Bank, appoint and fix their

remunerations and other emoluments, and remove such officers and employees:

Provided, That the Board shall have exclusive and final authority to

promote, transfer, assign or reassign personnel of the Bank, any provisions of

existing law to the contrary notwithstanding.

"The Bank officers and employees, including all members of the Board, shall

not engage directly or indirectly in partisan activities or take part in any

election except to vote.

"No officer or employee of the Bank subject to the Civil Service Law and

regulations shall be removed or suspended except for cause as provided

by law."

Section 17

SEC. 17. Section ninety-one of the same Act is hereby

amended to read as follows:

"SEC. 91. Legal Counsel. — Any provision of

existing law or executive order to the contrary notwithstanding, the Bank shall

have its own Legal Department, the chief and members of which shall be appointed

by the Board of Directors."

Section 18

SEC. 18. Section ninety-two of the same Act is hereby

amended to read as follows:

"SEC. 92. Auditor. — The Chairman of the Commission

on Audit shall act as the ex officio Auditor of the Bank and, as such, he is

empowered and authorized to appoint a representative who shall be the auditor in

charge of the auditing office of the Bank and, in accordance with law, fix his

salary, and to appoint and fix the salaries and number of personnel to assist

said representative in his work, but in all cases subject to the approval of the

Board of Directors. The salaries and all other expenses of maintaining the

auditor's office shall be paid by the Bank. The Auditor of the Bank and

personnel under him may be removed only by the Commission on Audit."

Section 19

SEC. 19. Section ninety-three of the same Act is hereby

amended to read as follows:

"SEC. 93. Report on Condition of the Bank. — The

representative of the Commission on Audit shall make a quarterly report on the

condition of the Bank to the President of the Philippines, to the Secretary of

Finance, to the Chairman of the Commission on Audit, and to the Board of

Directors of the Bank. The report shall contain, among other things, a statement

of the resources and liabilities, including earnings and expenses, the amount of

capital stock, surplus, reserve and profits, as well as losses, bad debts, and

suspended and overdue paper carried in the books and assets of the

Bank."

Section 20

SEC. 20. Section ninety-five of the same Act is hereby

repealed.

Section 21

SEC. 21. Section ninety-seven of the same Act is hereby

amended to read as follows:

"SEC. 97. Central Bank Supervision. — The Bank

shall be under the supervision and regulation of the Central Bank of the

Philippines."

Section 22

SEC. 22. Section ninety-eight of the same Act is hereby

amended to read as follows:

"SEC. 98. Tax Exemptions. — The Land Bank shall be

exempt from all national, provincial, municipal and city taxes and assessments

now enforced or hereinafter established.

"The exemption authorized in the preceding paragraph of this Section shall

apply to all property of the Bank, to the resources, receipts, expenditures,

profits and income of the Bank, as well as to all contracts, deeds, documents

and transactions related to the conduct of the business of the Bank:

Provided, That said exemptions shall apply only to such taxes and

assessments payable by persons or other entities doing business with the

Bank."

Section 23

SEC. 23. Section ninety-nine of the same Act is hereby

amended to read as follows:

"SEC. 99. Reorganization of the Bank. — The Bank

shall be reorganized within ninety (90) days from the date this Decree takes

effect. The present personnel complement of the Bank shall in the interim

continue to discharge their respective functions. Officials and personnel whose

services may be dispensed with as a result of this reorganization shall be paid

the usual gratuities to which they may be entitled under existing law."

Section 24

SEC. 24. Section one hundred of the same Act is hereby

amended to read as follows:

"SEC. 100. Penalty for Violation of the Provisions of

this Chapter. — Any director, officer, employee or agent of the Bank who

violates or permits the violation of any of the provisions of this Chapter or

any person aiding or abetting the violation of any of the provisions of this

Chapter, shall be punished by a fine of not to exceed ten thousand (P10,000)

pesos or by imprisonment of not more than five (5) years, or both such fine and

imprisonment at the discretion of the Court."

Section 25 Applicability of Republic Act No. 337, as amended, and Presidential Decree No. 129.

SEC. 25. Applicability of Republic Act No. 337, as

amended, and Presidential Decree No. 129. — The provisions of the General

Banking Act (R.A. No. 337, as amended) and of Presidential Decree No. 129

insofar as they are not in conflict or inconsistent with the provisions of this

Act shall apply to this Bank.

Section 26 Repealing Clause.

SEC. 26. Repealing Clause. — All laws, executive

orders, rules and regulations or parts thereof inconsistent with this Decree are

hereby repealed and/or modified accordingly.

Section 27 Effectivity.

SEC. 27. Effectivity. — This Decree shall take

effect immediately.

Done in the City of Manila, this st day of July, in the year of Our Lord,

nineteen hundred and seventy-three.

(Sgd.) FERDINAND E. MARCOS

President

Republic of the Philippines

By the President:

(Sgd.) ROBERTO V. REYES

Assistant Executive Secretary