R.A. 6389

REPUBLIC ACT No. 6389

AN ACT AMENDING REPUBLIC ACT NUMBERED THIRTY-EIGHT HUNDRED AND FORTY-FOUR, AS AMENDED, OTHERWISE KNOWN AS THE AGRICULTURAL LAND REFORM CODE, AND FOR OTHER PURPOSES

Section 1. Section 1, 2, 3 and 4 of Republic Act No. thirty eight hundred and forty-four, otherwise known as the Agricultural Land Reform Code, are hereby amended to read as follows:

"Sec. 1. Title. - This Act shall be known as the Code of Agrarian Reforms of the Philippines."

"Sec. 2. Declaration of Policy. - It is the policy of the State:

"Sec. 3. Composition of Code. - In pursuance of the policy enunciated in Section two, the following are established under this Code:

"Sec. 4. Automatic Conversion to Agricultural Leasehold. - Agricultural share tenancy throughout the country, as herein defined, is hereby declared contrary to public policy and shall be automatically converted to agricultural leasehold upon the effectivity of this section.

"The credit assistance traditionally extended by a land-owner and a local lender to a tenant under the share tenancy systems in agriculture for production loans and loans for the purchase of work animals, tillage equipment, seeds, fertilizers, poultry, livestock feed and other similar items, and advances for the subsistence of a lease and his family, may be continued by said landowner and local lender: Provided, That the total charges on these loans, including interest and service, inspection and issuance fees, shall not exceed fourteen per cent per calendar year and the principal thereof shall not be subject to upward adjustment even in case of extraordinary inflation and/or devaluation: Provided, further, That on all loans or advances other than money, the interest shall be computed on the basis of current price of the goods at the time when the loans or advances were made.

"Any work animal and tillage equipment in the possession of a share tenant but owned by a landowner shall automatically be sold to said tenant on installment for a period not exceeding five years and at a price agreed upon by the parties: Provided, however, That the tenant shall pay in advance ten per cent of the price agreed upon.

"Existing share tenancy contracts may continue in force and effect in any region or locality, to be governed in the meantime by the pertinent provisions of Republic Act Numbered Eleven hundred and ninety-nine, as amended, until the end of the agricultural year when the President of the Philippines shall have organized by executive order the Department of Agrarian Reform in accordance with the provisions of this amendatory Act, unless such contracts provide for a shorter period or the tenant sooner exercises his option to elect the leasehold system: Provided, That in order not to jeopardize international commitments, lands devoted to crops covered by marketing allotments shall be made the subject of a separate proclamation by the President upon the recommendation of the department head that adequate provisions, such as the organization of cooperatives, marketing agreement, or other similar workable arrangements, have been made to insure efficient management on all matters requiring synchronization of the agricultural with the processing phases of such crops.

"In case some agricultural share tenants do not want to become agricultural lessees of their respective landholding, they shall, with the assistance of the Bureau of Agrarian Legal Assistance, notify in writing the landowners concerned. In such a case, they shall have one agricultural year from the date of the notice to accept leasehold relationship, otherwise the landowner may proceed to their ejectment."

Section 2. Sections 11 and 12 of the same Code are hereby amended to read as follows:

"Sec. 11. Lessee's Right of Pre-emption. - In case the agricultural lessor decides to sell the landholding, the agricultural lessee shall have the preferential right to buy the same under reasonable terms and conditions: Provided, That the entire landholding offered for sale must be pre-empted by the Department of Agrarian Reform upon petition of the lessee or any of them: Provided, further, That where there are two or more agricultural lessees, each shall be entitled to said preferential right only to the extent of the area actually cultivated by him. The right of pre-emption under this Section may be exercised within one hundred eighty days from notice in writing, which shall be served by the owner on all lessees affected and the Department of Agrarian Reform.

"If the agricultural lessee agrees with the terms and conditions of the sale, he must give notice in writing to the agricultural lessor of his intention to exercise his right of pre-emption within the balance of one hundred eighty day's period still available to him, but in any case not less than thirty days. He must either tender payment of, or present a certificate from the land bank that it shall make payment pursuant to section eighty of this Code on, the price of the landholding to the agricultural lessor. If the latter refuses to accept such tender or presentment, he may consign it with the court.

"Any dispute as to the reasonableness of the terms and conditions may be brought by the lessee or by the Department of Agrarian Reform to the proper Court of Agrarian Relations which shall decide the same within sixty days from the date of the filing thereof: Provided, That upon finality of the decision of the Court of Agrarian Relations, the Land Bank shall pay to the agricultural lessor the price fixed by the court within one hundred twenty days: Provided, further, That in case the Land Bank fails to pay within that period, the principal shall earn an interest equivalent to the prime bank rate existing at the time.

"Upon the filing of the corresponding petition or request with the department or corresponding case in court by the agricultural lessee or lessees, the said period of one hundred and eighty days shall cease to run.

"Any petition or request for pre-emption shall be solved within sixty days from the filing thereof; otherwise, the said period shall start to run again."

"Sec. 12. Lessee's right of Redemption. - In case the landholding is sold to a third person without the knowledge of the agricultural lessee, the latter shall have the right to redeem the same at a reasonable price and consideration: Provided, That where there are two or more agricultural lessees, each shall be entitled to said right of redemption only to the extent of the area actually cultivated by him. The right of the redemption under this Section may be exercised within one hundred eighty days from notice in writing which shall be served by the vendee on all lessees affected and the Department of Agrarian Reform upon the registration of the sale, and shall have priority over any other right of legal redemption. The redemption price shall be the reasonable price of the land at the time of the sale.

"Upon the filing of the corresponding petition or request with the department or corresponding case in court by the agricultural lessee or lessees, the said period of one hundred and eighty days shall cease to run.

"Any petition or request for redemption shall be resolved within sixty days from the filing thereof; otherwise, the said period shall start to run again.

"The Department of Agrarian Reform shall initiate, while the Land Bank shall finance, said redemption as in the case of pre-emption."

Section 3. Section fourteen of the same Code is hereby repealed.

Section 4. Section 32 of the same Code is hereby amended to read as follows:

"Sec. 32. Cost of Irrigation System. - The cost of construction of a permanent irrigation system, including distributary canals, may be borne exclusively by the agricultural lessor who shall be entitled to an increase in rental proportionate to the resultant increase in production: Provided, That if the agricultural lessor refuses to bear the expenses of construction the agricultural lessee/or lessees may shoulder the same, in which case the former shall not be entitled to an increase in rental and shall, upon the termination of the relationship, pay the lessee or his heir the reasonable value of the improvement at the time of the termination: Provided, further, That if the irrigation system constructed does not work, it shall not be considered as an improvement within the meaning of this Section: Provided, furthermore, That the lessees, either as individuals or as groups, shall undertake the management and control of irrigation systems with their respective jurisdiction. However, those constructed and operated by the government may be given to the lessees either as individuals or as groups at their option with the right to maintain, manage and operate such irrigation systems and to collect and receive rentals therefrom: Provided, still further, That the lessees, either as individuals or as groups, shall allocate not more than twenty-five per cent of their collection for rentals to the government if the irrigation systems has obligations to meet until paid, otherwise such irrigation system will be maintained, managed and operated solely by the lessees either as individuals or as groups, subject to such rules on water rights and water use promulgated by the National Irrigation Administration or such other government agencies authorized by law: Provided, finally, That if the irrigation system is installed and/or constructed at the expense of the landowner or agricultural lessor, the Department of Agrarian Reform shall initiate, while the Land Bank shall finance, the acquisition of such irrigation system at its current fair market value so that the ownership thereof may be vested in the lessees as individuals or groups."

Section 5. Section 34 of the same Code is hereby amended to read as follows:

"Sec. 34. Consideration for the Lease of Riceland and Lands Devoted to Other Crops. - The consideration for the lease of riceland and lands devoted to other crops shall not be more than the equivalent of twenty-five per centum of the average normal harvest or if there have been no normal harvests, then the estimated normal harvest during the three agricultural years immediately preceding the date the leasehold was established after deducting the amount used for seeds and the cost of harvesting, threshing, loading, hauling and processing, whichever are applicable: Provided, That if the land has been cultivated for a period of less than three years, the initial consideration shall be based on the average normal harvest or if there have been no normal harvests, then the estimated normal harvest during the preceding years when the land was actually cultivated, or on the harvest of the first year in the case of newly cultivated lands, if that harvest is normal harvests, the final consideration shall be based on the average normal harvest during these three preceding agricultural years.

"In the absence of any agreement between the parties as to the rental, the Court of Agrarian Relations shall summarily determine a provisional rental in pursuance of existing laws, rules and regulations and production records available in the different field units of the department, taking into account the extent of the development of the land at the time of the conversion into leasehold and the participation of the lessee in the development thereof. This provisional rental shall continue in force and effect until a fixed rental is finally determined. The court shall determined the fixed rental within thirty days after the petition is submitted for decision.

"If capital improvements are introduced on the farm not by the lessee to increase its productivity, the rental shall be increased proportionately to the consequent increase in production due to said improvements. In case of disagreement, the Court shall determine the reasonable increase in rental."

Section 6. A new section is hereby inserted after Section 34, to be designated as Section "34-A", which shall read as follows:

"Sec. 34-A. Rental credited as amortization payment on purchase price. - The rental paid under the preceding section after the approval of this amendatory Act shall be credited as amortization payment on the purchase price of the landholding tilled by the lessee in any of the following instances:

"The purchase price of the landholding shall be determined by the parties or the government agencies concerned on the same basis prescribed under section fifty-six of this Code: Provided, That whatever balance remains after crediting as amortization the rental paid, the same may be financed by the Land Bank in the same ratio and mode of payment as provided under section eighty of this Code.

"The provisions of Act Numbered Four hundred ninety-six, as amended, and other laws to the contrary notwithstanding, the Land Registration Commission is hereby authorized concurrently with the Bureau of Lands to approve survey plans of lands intended for original registration and to issue transfer certificate of title in favor of the new amortizing-owner-beneficiaries under this section and the Registries of Deeds to register the same. For this purpose, the Land Registration Commissioner shall issue the necessary rules and regulations for the implementation of this provision.

"The Department and/or the Bank, in appropriate cases, shall facilitate the immediate issuance of the corresponding transfer certificate of title of the landholding to the new amortizing owner with the encumbrance thereof duly annotated.

"Provisions of existing laws, rules and regulations to the contrary notwithstanding, any amortizing owner may use this transfer certificate of title to obtain a loan from any public or private lending institution and he shall be entitled to borrow therefor an amount not less than sixty per centum of the fair market value of the property: Provided, That the proceeds of such loan shall be applied as follows: fifty per centum as partial payment of any unpaid balance on the landholding and the remaining fifty per centum for the capital improvement of the land and operating capital for farm operations of the amortizing owner.

"The payment of all loans obtained pursuant to the provisions of this section shall be guaranteed by the Land Bank and for this purpose, it shall set aside a sinking fund in such amount as may be necessary to be determined by its Board of Trustees.

"In case of default in the payment of three consecutive installments on the loan, the lender shall immediately notify, among others, the Land Bank and the department of such default, and thereafter, these agencies shall take the appropriate steps either:

"In the latter case mentioned under the preceding paragraph, the government shall endeavor to substitute the defaulting amortizing owner with a new one who does not own any land and who shall be subrogated to the rights, and shall assume the obligations, of the former amortizing owner.

"The rules prescribed in the two immediately preceding paragraphs shall apply in case the lessee defaults in the payment of at least three consecutive rental amortizations, with the former landowner giving the required notice in proper cases.

"In all instances where default is due to fortuitous events the Land Bank shall be answerable for such default and the farmers shall be released from the obligations to pay such installment or installments due together with interest thereon."

Section 7. Section 36(1) of the same Code is hereby amended to read as follows:

Section 8. Section 39(2) of the same Code is hereby amended to read as follows:

Section 9. The Titles of Chapter III and Article I and Section 49 and 50 of the same Code are hereby amended to read as follows:

"Chapter III
Department of Agrarian Reform.

"Article I
Organization and Functions of the Department of Agrarian Reform.

"Sec. 49. Creation of the Department of Agrarian Reform. - For the purpose of carrying out the policy of establishing owner-cultivatorship and the economic family size farm as the basis of Philippine agriculture and other policies enunciated in this Code, there is hereby created a Department of Agrarian Reform, hereinafter referred to as Department, which shall be directly under the control and supervision of the President of the Philippines. It shall have authority and responsibility for implementing the policies of the state on agrarian reforms as provided in this Code and such other existing laws as are pertinent thereto.

"The Department shall be headed by a Secretary who shall be appointed by the President with the consent of the Commission on Appointments.

"He shall be assisted by one Undersecretary who shall be appointed by the President with the consent of the Commission on Appointments.

"Sec. 50. Qualifications and Compensations of Secretary and Undersecretary. - No person shall be appointed Secretary or Undersecretary of the Department unless he is a natural born citizen of the Philippines, with proven executive ability and adequate background and experience in land reform here and/or elsewhere for at least five (5) years, and at least thirty-five years of age: Provided, however, That the Undersecretary shall be a career administrator and, at the time of his appointment, shall not be more than fifty-seven (57) years of age, unless the President has determined that he possesses special qualifications and his services are needed.

"The Secretary and the Undersecretary shall have, among other qualifications, demonstrated interest in, and concern for, the needs and problems of the rural and farm populations and the solutions thereto: Provided, That no person who owns any farmholding shall be appointed as Secretary or Undersecretary unless such farmholding is under the leasehold system or the system of agricultural land ownership transfer direct to the tiller.

"The Secretary shall receive an annual compensation equivalent to any other executive department secretary; the Undersecretary shall receive an annual compensation equivalent to any other executive department undersecretary."

Section 10. The following new sections are hereby inserted after Section 50, to be designated as Sections "50-A to 50-I," which shall read as follows:

"Sec. 50-A. Powers and functions of the Secretary. - In addition to the powers and functions specified in this Code, the Secretary shall exercise such powers and perform such functions and duties as are required of any executive department secretary under existing laws."

"Sec. 50-B. Powers and functions of the Undersecretary. - In addition to the powers and functions specified in this Code, the Undersecretary shall exercise such powers and perform such functions and duties as are required of any executive Department Undersecretary under existing laws."

"Sec. 50-C. Vacancy in office or incapacity. - In case of vacancy in the office of Secretary or inability of the Secretary to exercise his powers and perform his functions and duties due to his illness, absence or any other cause, the Undersecretary shall temporarily perform the functions of the said office."

"Sec. 50-D. Office of the Secretary; Appointment of Personnel. - The office of Secretary shall be composed of the Secretary, the Undersecretary, the chiefs of the staff services or units directly under the department proper, together with the personnel thereof.

"All personnel of the department proper shall be appointed by the Secretary in accordance with applicable civil service law and rules."

"Sec. 50-E. Creation of Staff Services; Functions. - There shall be created in the department a planning service, a financial and management service, an administrative service, and such other staff services as the Secretary may deem necessary to establish in accordance with this section, each to be headed by a chief, which shall be organized and shall perform the functions as follows:

"The Administrative Services shall be responsible for providing the department with economical, efficient, and effective services relating to personnel, legal assistance, information, records, supplies, equipment, collection, disbursements, security, and custodial work.

"Sec. 50-F. Creation of Bureaus; Functions. - There shall be under the department the following bureaus each to be headed by a Director who shall be assisted by an Assistant Director, charged with the direct implementation of the programs and policies of the Department:

"Each of these bureaus may establish such divisions as are necessary for the economical, efficient and effective performance of its functions."

"Sec. 50-G. Appointment, Qualifications and Compensations of Directors and the Assistant Directors; Appointment of Personnel. - The Director of a Bureau and his assistant shall each receive the equivalent compensation and shall be appointed in the same manner as any other director or assistant director of a bureau.

"No person shall be appointed director or assistant director of a bureau unless he is a natural-born citizen of the Philippines, with proven executive ability and adequate background and experience in land reform here and/or elsewhere for at least three (3) years, and at least twenty-five years of age; Provided, That the Director or Assistant Director shall be a career administrator and; at the time of his appointment, shall not be more than fifty-seven (57) years of age, unless the President has determined that he possesses special qualifications and his services are needed: Provided, further, That the Director or Assistant Director shall have, among other qualifications, demonstrated interest in, and concern for, the needs and problems of the rural and farm population and the solutions thereto: Provided, finally, That no persons who owns any farmholding shall be appointed as Director or Assistant Director unless such farmholding is under the leasehold system or the system of agricultural land ownership-transfer direct to the tiller.

"All personnel of the Bureaus shall be appointed by the Secretary, upon recommendation of their respective Director, in accordance with applicable civil service law and rules."

"Sec. 50-H. Functions of Directors and Assistant Directors. - The Director or in his absence, the Assistant Director, shall exercise such powers and perform such functions and duties as are provided for under existing laws, in addition to the powers and functions provided for in this Code."

"Sec. 50-I. Regional and Field Offices. - The Department may have regional and other field offices, the number, location and organization of which shall be determined by the Department in conformity with the area pattern prescribed hereunder:

Section 11. The Land Reform Project Administration and its governing body, the National Land Reform Council, under the Office of the President, are hereby abolished; and their functions are transferred to the Department, together with applicable appropriations, records, equipment, property and all the organic, contributed and/or assigned personnel to the Land Reform Project Administration pursuant to this Code, other existing laws and Executive Order Numbered Seventy-five, Series of Nineteen hundred and sixty-four, as well as such personnel as may be necessary from its governing body, the National Land Reform Council.

Section 12. The Land Authority under the Office of the President and a member-agency of the Land Reform Project Administration is hereby abolished; and its functions are transferred to the Department, together with applicable appropriations, records, equipment, property, and such personnel as may be necessary.

Section 13. The Secretary shall, in consultation with the Undersecretary and Bureau Directors, allocate by Department Order to the different bureaus, agencies and regional offices of the Department the functions of the agencies, offices and/or units abolished and not otherwise assigned by this Amendatory Act or by the organization plan of the Department to a particular agency or office.

Section 14. The Land Bank of the Philippines is hereby attached to the Department as its land financing arm and shall devote all of its resources to agrarian reforms.

The Land Bank of the Philippines and the Agricultural Credit Administration, in addition to the functions and duties assigned to them under existing laws, executive and administrative orders, and rules and regulations, shall be responsible for rendering staff advice and assistance to the Secretary of the Department. The regional offices or field units of these entities and/or instrumentalities shall likewise coordinate and cooperate with the regional office or field units of the Department, respectively.

Section 15. Within sixty (60) days from the approval of this Amendatory Act, the President by Executive Order shall, upon recommendation of the Special Technical Committee created under Special Order Numbered Eleven, Series of Nineteen hundred and seventy-one, of the Land Reform Project Administration, and the Commission on Reorganization created pursuant to Republic Act No. 5435, as amended, organize the said Department in accordance with the provisions of this Amendatory Act with the end in view of achieving economy and maximum efficiency and effectiveness and of strictly observing the merit system in the retention and promotion of the best qualified personnel: Provided, That the administrative machineries of the entities attached and/or required under this Code to coordinate and cooperate with the Department, as well as the agencies servicing the same, shall also be reorganized to enable them to align their activities with the requirements and objectives of this Code: Provided, further, That not more than ten per cent of the personnel of the Department and the bureaus, offices, agencies and/or entities under, coordinating or servicing it shall be stationed in the Central Office; Provided, finally, That not more that five per cent of the total personnel in the regional, team, resettlement agency or equivalent field offices shall be stationed in such offices.

Section 16. Section 51 of the same Code is hereby amended to read as follows:

"Sec. 51. Powers and Functions. - It shall be the responsibility of the Department:

Section 17. Section 56 of the same Code is hereby amended to read as follows:

"Sec. 56. Just Compensation. - In determining the just compensation of the land to be expropriated pursuant to this Chapter, the Court shall consider as basis, the fair market value, without prejudice to considering the assessed value and other pertinent factors.

"The owner of the land expropriated shall be paid in accordance with Section eighty of this Code by the Land Bank and pursuant to an arrangement herein authorized."

Section 18. Section 71 of the same Code is hereby amended to read as follows:

"Sec. 71. Power of the Department of Agrarian Reform to sell to Holders of Bonds Issued to Former Landowners whose Land have been Purchased for Redistribution. - The Department of Agrarian Reform shall sell, for a price not less than the appraised value, any portion not exceeding one hundred forty-four hectares in the case of individuals of the public agricultural lands transferred to the Land Bank which is suitable for large-scale farm operations to any holder, who is qualified to acquire agricultural lands through purchase, of bonds issued to former landowners whose lands have been purchased for redistribution under this Code, subject to condition that the purchaser shall, within two years after acquisition, place under cultivation at least thirty per centum of entire area under plantation administration and the remaining seventy per centum within five years from the date of acquisition. The Secretary shall issue the title of said land upon showing that the purchaser has developed and cultivated at least one-fourth of his land under plantation administration.

Any public agricultural land sold as hereinabove specified shall not be the object of any expropriation as long as the same is developed and cultivated for large-scale production under farm labor management: Provided, however, That after the capital invested therein for development, plus a reasonable margin of profit shall have been fully recovered, or after the lapse of twenty-five years from the date of acquisition, whichever comes earlier, said land shall become expropriable.

The selling price of the portion of the public agricultural land sold under this Section shall be credited to the Land Bank. As payment for the land sold under this Section, the Land Bank shall accept as sole instruments of payment the bonds issued pursuant to Section seventy-six. Issued bonds accepted as payment for the land sold shall be cancelled to the extent of the amount paid.

All sales under this Code shall be subject to the rules and regulations which the Department of Agrarian Reform in consultation with the Land Bank, shall prescribe insofar as they are not inconsistent with the provisions of this Code.

Section 19. Sec 76 of the same Code is hereby amended to read as follows:

"Sec. 76. Issuance of Bonds. - The Land Bank shall, upon recommendation by the Board of Trustees and approval of the Monetary Board of the Central Bank, issue bonds, debentures and other evidences of indebtedness at such terms, rates and conditions as the Bank may determine up to an aggregate amount not exceeding, at any one time, five times its unimpaired capital and surplus. Such bonds and other obligations shall be secured by the assets of the Bank and shall be fully tax exempt both as to principal and income. Said income shall be paid to the bondholders every six (6) months from the date of issue. These bonds and other obligations shall be fully negotiable and unconditionally guaranteed by the Government of the Republic of the Philippines and shall be redeemable at the option of the Bank at or prior to maturity, which in no case shall exceed twenty-five years. These negotiable instruments of indebtedness shall be mortgageable in accordance with established banking procedures and practice to government institutions, existing charters and/or laws to the contrary notwithstanding, not to exceed sixty per centum of their face value to enable the holders of such bonds to make use of them in investments in productive enterprises. They are eligible as legal reserves against deposit liabilities of banks, subject to the terms and conditions which the Central Bank of the Philippines may impose. They shall also be accepted as payments for reparation equipment and materials, the provisions of Republic Act Numbered Seventeen hundred and eighty-nine, as amended, to the contrary notwithstanding.

The Board of Trustees shall have the power to prescribe rule and regulations for the registration of the bonds issued by the Bank at the request of the holders thereof."

Section 20. Section 80 of the same Code is hereby amended to read as follows:

"Sec. 80. Making Payment to Owners of Landed Estates. - The Land Bank shall make payments in the form herein prescribed to the owners of the land acquired by the Department of Agrarian Reform for division and resale under this Code. Such payment shall be made in the following manner: twenty per centum in cash and the remaining balance in six per cent, tax-free, redeemable bonds issued by the Bank in accordance with Section twenty-six, unless the landowner desires to be paid in shares of stock issued by the Land Bank in accordance with Section seventy-seven in an amount not exceeding thirty per centum of the purchase price.

"In the event there is an existing lien or encumbrance on the land in favor of any Government institution at the time of acquisition by the Land Bank, the bonds and/or shares, in that order, shall be accepted as substitute collaterals to secure the indebtedness, existing charters of these institutions to the contrary notwithstanding.

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

Section 21. Section 85 of the same Code is hereby amended to read as follows:

"Sec. 85. Use of Bonds. - The bonds issued by the Land Bank may be used by the holder thereof and shall be accepted in the amount of their face value as any of the following:

Section 22. Section 101 of the same Code is hereby amended to read as follows:

"Sec. 101. Reorganization of ACA to align its activities. - The administrative machinery of the Agricultural Credit Administration, shall be reorganized to enable it to align its activities with the requirements and objectives of this Code: Provided, That the Board of Governors established by Republic Act Numbered Eight hundred and twenty-one, as amended, shall be composed of a chairman and four (4) members, three (3) of whom shall be the Undersecretary of Agrarian Reform who shall be the Chairman ex-officio, the Administrator of the Agricultural Credit Administration who shall be the Vice-Chairman ex-officio and the Vice-President in charge of agricultural loans of the Philippine National Bank, who shall be ex-officio member thereof. The two other members shall be appointed by the President of the Philippines with the consent of the Commission of Appointments for a term of three years, one of whom shall represent the farmers-beneficiary of the Agrarian Reform Program and shall be appointed upon recommendation of either or both the farmers and/or cooperatives movement, federation or league existing at the same time such recommendation is submitted, and the other to represent the political party receiving the second highest number of votes in the immediately preceding presidential elections: Provided, however, That the term of the farmers' representative shall ipso facto terminate when such member cease to be in the farmers and/or cooperatives movement, federation or league, and that of the minority party at the pleasure of the nominating political party.

"The Administrator shall be the Chief Executive of the Administration and shall serve for a term of six years unless he resigns or is removed for cause. The compensation of the Administrator shall be fixed by the President but shall not be less that twenty-four thousand pesos per annum. The members of the Board shall receive per diems of not more than fifty pesos for each session of the Board that they attend: Provided, however, That the total per diems, including all other remunerations, shall not exceed six hundred pesos a month.

"No person shall be appointed as Administrator unless he is a natural-born citizen of the Philippines, with proven executive ability and experience in the field of agricultural cooperatives and/or banking and finance, adequate background and experience in land reform here and/or elsewhere for at least five (5) years, and at least thirty-five years of age: Provided, however, That he shall have, among other qualifications, demonstrated interest in, and concern for, the needs and problems of the rural population and/or peasantry and the solutions thereto: Provided, further, That no person who owns any farmholding shall be appointed as Administrator unless such farmholding is under the leasehold system or the system of agricultural land ownership-transfer direct to the tiller."

Section 23. Section 105 and 106 of the same Code are hereby amended to read as follows:

"Sec. 105. Loaning Activities. - Loaning activities of the Agricultural Credit Administration shall be directed to stimulate the development and operation of farmers' cooperatives. The term "Farmers Cooperatives" shall be taken to include all cooperatives relating to the production and marketing of agricultural products and these formed to manage and/or own, on a cooperative basis, agricultural farmlands, services and facilities, such as irrigation and transport systems, established to support production and/or marketing of agricultural products.

"Under such rules and regulations in accordance with generally accepted banking practices and procedures as may be promulgated by the Agricultural Credit Administration, Rural Banks, Cooperative Banks, and Development Banks may, in their respective localities, be designated to act as agents of the Agricultural Credit Administration in regard to its loaning activities."

"Sec. 106. Credit to Small Farmers and/or Tillers of the land. - Production loans and loans for the purchase of work animals, tillage equipment, seeds, fertilizers, poultry, livestock, feed and other similar items, may be extended to small farmers as defined in Republic Act Numbered Eight hundred twenty-one and/or tillers of the land, based upon their paying capacity and such securities as they can provide, and under such terms and conditions as the Agricultural Credit Administration may impose, provided the amount thereof does not exceed two thousand pesos, or such amount as may be fixed by the President at any given agricultural year: Provided, That his total outstanding obligations shall not exceed five thousand pesos, but in no case shall the amount of loan exceed eighty per centum of the value of the collateral pledged. In instance where credit is extended for items which are not consumed in their use, such items may be pledged as security thereof. The Agricultural Credit Administration shall promulgate such rules and regulations as may be necessary in the extension of the loans herein authorized so as to assure their repayment: Provided, That such rules and regulations shall follow and be in accordance with generally accepted financing practices and procedures."

Section 24. Section 108 of the same Code is hereby amended to read as follows:

"Sec. 108. Loans to Cooperatives. - The Agricultural Credit Administration is hereby authorized to extend such types of loans as it may deem necessary for the effective implementation of this Code to eligible farmers' cooperatives as herein defined, under such terms and conditions as it may impose and with such securities as it may require: Provided: That the said Administration is hereby authorized to extend production loans to cooperatives at not more than eight per cent interest per calendar year and directly to the farmers at not more than twelve per cent per calendar year: Provided, further, That cooperatives are hereby authorized to extend loans directly to their members at not more than twelve per cent per calendar year. A farmers' cooperative that has been registered with the Agricultural Credit Administration shall be eligible for loans if, in the judgment of the latter, its organization, management and business policies are of such character as will insure the safety and effective use of such loans."

Section 25. Section 110 of the same Code is hereby amended to read as follows:

"Sec. 110. Total charges on Loans. - The total charges including interest, insurance fees and inspection, notarization and other service charges on all kinds of loans shall not be more than twelve per centum per calendar year: Provided, That if an impairment of the capitalization of the Agricultural Credit Administration is imminent by reason of the limitation appropriated out of the unappropriated funds in the National Treasury such amounts as is necessary to cover the losses of the Agricultural Credit Administration, but not exceeding six million pesos for any one year."

Section 26. Section 112 of the same Code is hereby amended to read as follows:

"Sec. 112. Registration of and guidance to Cooperatives, Associations and Organizations. - The Agricultural Credit Administration shall have the power to register, finance and supervise all agricultural cooperatives, including multi-purpose cooperatives, and farm associations or organizations; and provide credit guidance or assistance to all agricultural, irrigation, and other cooperative associations, multi-purpose cooperatives, farm organizations or fund corporations: Provided, That all cooperatives, associations or organizations registered under this Section shall have juridical personality."

Section 27. Section 124 of the same Code is hereby amended to read as follows:

"Sec. 124. Function of Extension Workers. - In addition to their functions under Republic Act Numbered six hundred eighty, it shall be the duty of extension workers:

Section 28. Sections One hundred twenty-six and One hundred twenty-seven of the same Code is hereby repealed.

Section 29. A new section is hereby inserted after Sec. 128, to be designated therein as "Section 128-A," which shall read as follows:

"Sec. 128-A. Participation of Local Governments. - The Department of Agrarian Reform shall, in every way possible to insure the successful implementation of the Agrarian Reform Program, involve local governments and secure their participation in the various aspects of the program, such as the leasehold system, the acquisition and distribution of private and public agricultural lands, the development of cooperatives and small-scale industries and the like, and the other corollary operational activities that should be carried out through barrio, municipal, provincial and city governments.

"In pursuing this approach, however, the Department shall formulate the policies and programs necessary in the implementation of this Code.

"The Department shall also render technical assistance to local governments necessary to carry out the objective of agrarian reforms."

Section 30. Section 155 of the same Code is hereby amended to read as follows:

"Sec. 155. Powers of the Court; Rules of Procedure. - The Courts of Agrarian Relations shall have all the powers and prerogatives inherent in or belonging to the Court of First Instance.

"The Courts of Agrarian Relations shall be governed by the Rules of Court: Provided, That in the hearing, investigation and determination of any question or controversy pending before them, the Courts without impairing substantial rights, shall not be bound strictly by the technical rules of evidence and procedure, except in expropriation cases: Provided, further, That in case the persons referred to under Section one hundred sixty-three hereof, are not represented by a lawyer of their own choice, the duly authorized leaders of duly registered farmers organizations may enter their appearances as counsel for their respective member and/or organization before the Court of Agrarian Relations, if the Court is fully convinced that the said leader could competently protect the interest of his client subject to the basic duties and obligations as officers of the Court.

"The Court of Agrarian Relations is hereby authorized to conduct compulsory arbitration between agricultural labor and agricultural management, agricultural share tenants and agricultural landlords, and agricultural lessees and agricultural lessors in conflicts arising out of, and in connection with, their agrarian relations upon certification by the Secretary of Justice.

"The rights and duties of the parties to the proceedings, the functions and responsibilities of the Court, and the bidding effect of awards, orders and processes of the Court shall be covered by Section six to twenty-four of Commonwealth Act Numbered One hundred three.

"Where the litigant is an agricultural tenant, tiller or lessee, he shall be entitled to the rights of a pauper litigant under the rules of Court and the privileges of an indigent litigant under Republic Act Numbered Sixty hundred and thirty-five, without further proof thereof."

Section 31. Section 163 of the same Code, as amended by Republic Act No. 4886, is further amended to read as follows:

"Sec. 163. Functions of the Office of the Agrarian Counsel. - It shall be the responsibility of the Office of the Agrarian Counsel upon proper notification by the party concerned or by the association or organization to which he belong, to represent tenants, agricultural lessees, agricultural farm workers and agricultural owner-cultivators or the members of their immediate farm household referred to in this Code who cannot engage the services of competent private counsel in cases before the Court of Agrarian Relations. This responsibility shall include representation before courts, including appellate, in cases civil or criminal, instituted by or against said tenant, agricultural lessees, farm workers or owners-cultivator or the members of their immediate farm household, where the cases arise from or are connected with, or results or effects of an agrarian dispute. The decision of the Office of the Agrarian Counsel to provide legal assistance shall be final."

Section 32. Section 164 of the same Code is hereby amended to read as follows:

"Sec. 164. Authority to Administer Oath and Acknowledgment. - The Agrarian Counsel, the Deputy Agrarian Counsel and the Special Attorneys of the Office of the Agrarian Counsel are hereby authorized to administer oaths and acknowledgment free of charge."

Section 33. Section 167 of the same Code is hereby amended by adding after paragraph (5) thereof, the following two paragraphs which shall read as follows:

"The period for filing the corresponding criminal action for any criminal violation falling under the foregoing provisions of this section shall cease to run, whenever a case is filed before the Court of Agrarian Relations for the determination of a prejudicial question in relation to the criminal action, until said determination has become final."

Section 34. To carry out the objectives of this Amendatory Act, and notwithstanding any provisions of existing laws, rules and regulations to the contrary, all lending institutions, whether public or private, shall set aside at least twenty-five per cent of their loanable funds and make it available for agricultural credit to agricultural lessees, owner-cultivator, amortizing owners, and cooperatives, including multi-purpose cooperatives and farm associations and organizations owned and operated by those who live and work on the land as tillers and registered with the Agricultural Credit Administration.

Section 35. Notwithstanding any provision of existing laws, rules and regulations to the contrary, the Department of Agrarian Reform is hereby authorized to segregate any area of three thousand hectares out of any of its reservations as demonstration farm or pilot project for the resettlement program of the Department on the moshave-type of communal agriculture.

Section 36. The personnel of the agencies, offices and/or units abolished, merged, renamed and/or reorganized under this Amendatory Act shall have the same rights and privileges afforded to the personnel of abolished or reorganized agencies under the Agricultural Land Reform Code and in pursuance of Section One hundred sixty-nine thereof.

To carry out the provisions of this Section, there is hereby appropriated the sum of One million pesos out of the unappropriated funds in the National Treasury: Provided, That ten per cent of this appropriation or so much thereof as may be necessary is hereby set aside for the expenses of the organizing staff created under Section 15 hereof.

Section 37. Any reference to the Land Reform Project Administration, the National Land Reform Council and the Land Authority in the Agricultural Reform Code or under any other existing laws shall be understood to refer to the Department of Agrarian Reform.

Section 38. If, for any reason, any section or provisions of this Amendatory Act shall be held unconstitutional or invalid, no other section or provision of the same shall be affected thereby.

All laws or parts of any law inconsistent with the provisions of this Amendatory Act are hereby repealed and/or modified accordingly.

Section 39. This Act shall take effect upon its approval.

Approved: September 10, 1971