Donation of subdivision roads, parks and open spaces under Section 31, PD 957 - "Section 31's compulsion to donate (and concomitant compulsion to accept) cannot be sustained as valid. Not only does it run afoul of basic legal concepts; it also fails to withstand the more elementary test of logic and common sense. As opposed to this, the position that not only is more reasonable and logical, but also maintains harmony between our laws, is that which maintains the subdivision owner's or developer's freedom to donate or not to donate. This is the position of the 1998 White Plains Decision. Moreover, as this 1998 Decision has emphasized, to force this donation and to preclude any compensation-is to suffer an illegal taking."

G.R. No. 194190, January 25, 2017
REPUBLIC OF THE PHILIPPINES, represented by the DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS (DPWH), Petitioner
vs.
SPOUSES FRANCISCO R. LLAMAS and CARMELITA C. LLAMAS, Respondents


"x x x.

In insisting on a compulsion on subdivision owners and developers to cede open spaces to government, the Department of Public Works and Highways references Presidential Decree No. 957, as amended by Presidential Decree No. 1216, otherwise known as the Subdivision and Condominium Buyer's Protective Decree.

The first paragraph of Section 31 of Presidential Decree No. 957 spells out the minimum area requirement for roads and other open spaces in subdivision projects. Its second paragraph spells out taxonomic or classification parameters for areas reserved for parks, playgrounds, and for recreational use. It also requires the planting of trees. The last paragraph of Section 31 requires-note the use of the word "shall"-subdivision developers to donate to the city or municipality with territorial jurisdiction over the subdivision project all such roads, alleys, sidewalks, and open spaces. It also imposes upon cities and municipalities the concomitant obligation or compulsion to accept such donations:

SEC. 31. Roads, Alleys, Sidewalks and Open Spaces. - The owner as developer of a subdivision shall provide adequate roads, alleys and sidewalks. For subdivision projects one (1) hectare or more, the owner or developer shall reserve thirty percent (30%) of the gross area for open space. Such open space shall have the following standards allocated exclusively for parks, playgrounds and recreational use:

a. 9% of gross area for high density or social housing (66 to 100 family lot per gross hectare).

b. 7% of gross area for medium-density or economic housing (21 to 65 family lot per gross hectare).

c. 3.5 % of gross area low-density or open market housing (20 family lots and below per gross hectare).

These areas reserved for parks, playgrounds and recreational use shall be non-alienable public lands, and non-buildable. The plans of the subdivision project shall include tree planting on such parts of the subdivision as may be designated by the Authority.

Upon their completion as certified to by the Authority, the roads, alleys, sidewalks and playgrounds shall be donated by the owner or developer to the city or municipality and it shall be mandatory for the local governments to accept; provided, however, that the parks and playgrounds may be donated to the Homeowners Association of the project with the consent of the city or municipality concerned. No portion of the parks and playgrounds donated thereafter shall be converted to any other purpose or purposes. (Emphasis supplied)
The last paragraph of Section 31 is oxymoronic. One cannot speak of j a donation and compulsion in the same breath.

A donation is, by definition, "an act of liberality." Article 725 of the Civil Code provides:

Article 725. Donation is an act of liberality whereby a person disposes gratuitously of a thing or right in favor of another, who accepts it.
To be considered a donation, an act of conveyance must necessarily proceed freely from the donor's own, unrestrained volition. A donation cannot be forced: it cannot arise from compulsion, be borne by a requirement, or otherwise be impelled by a mandate imposed upon the donor by forces that are external to him or her. Article 726 of the Civil Code reflects this commonsensical wisdom when it specifically states that conveyances made in view of a "demandable debt" cannot be considered true or valid donations.49

In jurisprudence, animus donandi (that is, the intent to do an act of liberality) is an indispensable element of a valid donation, along with the reduction of the donor's patrimony and the corresponding increase in the donee’s patrimony.50

Section 31's compulsion to donate (and concomitant compulsion to accept) cannot be sustained as valid. Not only does it run afoul of basic legal concepts; it also fails to withstand the more elementary test of logic and common sense. As opposed to this, the position that not only is more reasonable and logical, but also maintains harmony between our laws, is that which maintains the subdivision owner's or developer's freedom to donate or not to donate. This is the position of the 1998 White Plains Decision. Moreover, as this 1998 Decision has emphasized, to force this donation and to preclude any compensation-is to suffer an illegal taking.
III

The Court of Appeals correctly stated that a "positive act"51 must first be made by the "owner-developer before the city or municipality can acquire dominion over the subdivision roads."52 As there is no such thing as an automatic cession to government of subdivision road lots, an actual transfer must first be effected by the subdivision owner: "subdivision streets belonged to the owner until donated to the government or until expropriated upon payment of just compensation."53 Stated otherwise, "the local

government should first acquire them by donation, purchase, or expropriation, if they are to be utilized as a public road."54

This Court's 2014 Decision in Republic v. Ortigas55 succinctly captures all that we have previously stated:

Delineated roads and streets, whether part of a subdivision or segregated for public use, remain private and will remain as such until conveyed to the government by donation or through expropriation proceedings. An owner may not be forced to donate his or her property even if it has been delineated as road lots because that would partake of an illegal taking. He or she may even choose to retain said properties. 56
The Department of Public Works and Highways makes no claim here that the road lots covered by TCT No. 179165 have actually been donated to the government or that their transfer has otherwise been consummated by respondents. It only theorizes that they have been automatically transferred. Neither has expropriation ever been fully effected. Precisely, we are resolving this expropriation controversy only now.

Respondents have not made any positive act enabling the City Government of Parafiaque to acquire dominion over the disputed road lots. Therefore, they retain their private character (albeit all parties acknowledge them to be subject to an easement of right of way). Accordingly, just compensation must be paid to respondents as the government takes the road lots in the course of a road widening project.

x x x."

Expropriation of subdivision roads - "Section 50 of Presidential Decree No. 1529 does not apply in a case that is the proper subject of an expropriation proceeding. Respondent Ortigas may sell its property to the government. It must be compensated because its property was taken and utilized for public road purposes."

G.R. No.171496 March 3, 2014
REPUBLIC OF THE PHILIPPINES, represented by the DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS (DPWH), Petitioner,
vs.
ORTIGAS AND COMPANY LIMITED PARTNERSHIP, Respondents.

"x x x.

In any event, we resolve the substantive issue on whether respondent Ortigas may not sell and may only donate its property to the government in accordance with Section 50 of Presidential Decree No. 1529.

Section 50 of Presidential Decree No. 1529 does not apply in a case that is the proper subject of an expropriation proceeding
Respondent Ortigas may sell its property to the government. It must be compensated because its property was taken and utilized for public road purposes.

Petitioner Republic of the Philippines insists that the subject property may not be conveyed to the government through modes other than by donation. It relies on Section 50 of the Property Registration Decree, which provides that delineated boundaries, streets, passageways, and waterways of a subdivided land may not be closed or disposed of by the owner except by donation to the government. It reads:

Section 50. Subdivision and consolidation plans. Any owner subdividing a tract of registered land into lots which do not constitute a subdivision project as defined and provided for under P.D. No. 957, shall file with the Commissioner of Land Registration or the Bureau of Lands a subdivision plan of such land on which all boundaries, streets, passageways and waterways, if any, shall be distinctly and accurately delineated.

If a subdivision plan, be it simple or complex, duly approved by the Commissioner of Land Registration or the Bureau of Lands together with the approved technical descriptions and the corresponding owner’s duplicate certificate of title is presented for registration, the Register of Deeds shall, without requiring further court approval of said plan, register the same in accordance with the provisions of the Land Registration Act, as amended: Provided, however, that the Register of Deeds shall annotate on the new certificate of title covering the street, passageway or open space, a memorandum to the effect that except by way of donation in favor of the national government, province, city or municipality, no portion of any street, passageway, waterway or open space so delineated on the plan shall be closed or otherwise disposed of by the registered owner without the approval of the Court of First Instance of the province or city in which the land is situated. (Emphasis supplied)

Petitioner Republic of the Philippines’ reliance on Section 50 of the Property Registration Decree is erroneous. Section 50 contemplates roads and streets in a subdivided property, not public thoroughfares built on a private property that was taken from an owner for public purpose. A public thoroughfare is not a subdivision road or street.

More importantly, when there is taking of private property for some public purpose, the owner of the property taken is entitled to be compensated.48

There is taking when the following elements are present:

1. The government must enter the private property;

2. The entrance into the private property must be indefinite or permanent;

3. There is color of legal authority in the entry into the property;

4. The property is devoted to public use or purpose;

5. The use of property for public use removed from the owner all beneficial enjoyment of the property.49

All of the above elements are present in this case. Petitioner Republic of the Philippines’ construction of a road — a permanent structure — on respondent Ortigas’ property for the use of the general public is an obvious permanent entry on petitioner Republic of the Philippines’ part. Given that the road was constructed for general public use stamps it with public character, and coursing the entry through the Department of Public Works and Highways gives it a color of legal authority.

As a result of petitioner Republic of the Philippines’ entry, respondent Ortigas may not enjoy the property as it did before. It may not anymore use the property for whatever legal purpose it may desire. Neither may it occupy, sell, lease, and receive its proceeds. It cannot anymore prevent other persons from entering or using the property. In other words, respondent Ortigas was effectively deprived of all the bundle of rights50 attached to ownership of property.

It is true that the lot reserved for road widening, together with five other lots, formed part of a bigger property before it was subdivided. However, this does not mean that all lots delineated as roads and streets form part of subdivision roads and streets that are subject to Section 50 of the Property Registration Decree. Subdivision roads and streets are constructed primarily for the benefit of the owners of the surrounding properties. They are, thus, constructed primarily for private use — as opposed to delineated road lots taken at the instance of the government for the use and benefit of the general public.

In this case, the lot was reserved for road widening at the instance of petitioner Republic of the Philippines. While the lot segregated for road widening used to be part of the subdivided lots, the intention to separate it from the delineated subdivision streets was obvious from the fact that it was located at the fringes of the original lot51 — exactly at petitioner Republic of the Philippines’ intended location for the road widening project. Moreover, petitioner Republic of the Philippines’ intention to take the property for public use was obvious from the completion of the road widening for the C-5 flyover project and from the fact that the general public was already taking advantage of the thoroughfare.

Delineated roads and streets, whether part of a subdivision or segregated for public use, remain private and will remain as such until conveyed to the government by donation or through expropriation proceedings.52 An owner may not be forced to donate his or her property even if it has been delineated as road lots because that would partake of an illegal taking.53 He or she may even choose to retain said properties.54 If he or she chooses to retain them, however, he or she also retains the burden of maintaining them and paying for real estate taxes.

An owner of a subdivision street which was not taken by the government for public use would retain such burden even if he or she would no longer derive any commercial value from said street. To remedy such burden, he or she may opt to donate it to the government. In such case, however, the owner may not force the government to purchase the property. That would be tantamount to allowing the government to take private property to benefit private individuals. This is not allowed under the Constitution, which requires that taking must be for public use.55

Further, since the Constitution proscribes taking of private property without just compensation,56 any taking must entail a corresponding appropriation for that purpose. Public funds, however, may only be appropriated for public purpose.57 Employment of public funds to benefit a private individual constitutes malversation.58 Therefore, private subdivision streets not taken for public use may only be donated to the government.

In contrast, when the road or street was delineated upon government request and taken for public use, as in this case, the government has no choice but to compensate the owner for his or her sacrifice, lest it violates the constitutional provision against taking without just compensation, thus:

Section 9. Private property shall not be taken for public use without just compensation.59

As with all laws, Section 50 of the Property Registration Decree cannot be interpreted to mean a license on the part of the government to disregard constitutionally guaranteed rights.

The right to compensation under Article III, Section 9 of the Constitution was put in place to protect the individual from and restrain the State’s sovereign power of eminent domain,60 which is the government’s power to condemn private properties within its territory for public use or purpose.61 This power is inherent and need not be granted by law.62 Thus, while the government’s power to take for public purpose is inherent, immense, and broad in scope, it is delimited by the right of an individual to be compensated. In a nutshell, the government may take, but it must pay.

Respondent Ortigas, immediately upon the government’s suggestion that it needed a portion of its property for road purposes, went so far as to go through the process of annotating on its own title that the property was reserved for road purposes. Without question, respondent Ortigas allowed the government to construct the road and occupy the property when it could have compelled the government to resort to expropriation proceedings and ensure that it would be compensated. Now, the property is being utilized, not for the benefit of respondent Ortigas as a private entity but by the public. Respondent Ortigas remains uncompensated. Instead of acknowledging respondent Ortigas’ obliging attitude, however, petitioner Republic of the Philippines refuses to pay, telling instead that the property must be given to it at no cost. This is unfair.

In the parallel case of Alfonso v. Pasay City63 wherein Alfonso was deprived of his property for road purposes, was uncompensated, and was left without any expropriation proceeding undertaken, this court said:

When a citizen, because of this practice loses faith in the government and its readiness and willingness to pay for what it gets and appropriates, in the future said citizen would not allow the Government to even enter his property unless condemnation proceedings are first initiated, and the value of the property, as provisionally ascertained by the Court, is deposited, subject to his disposal. This would mean delay and difficulty for the Government, but all of its own making.64

"There is nothing that can more speedily and effectively embitter a citizen and taxpayer against his Government and alienate his faith in it, than an injustice and unfair dealing like the present case."65

Title to the subject lot remains under respondent Ortigas’ name. The government is already in possession of the property but is yet to acquire title to it. To legitimize such possession, petitioner Republic of the Philippines must acquire the property from respondent Ortigas by instituting expropriation proceedings or through negotiated sale, which has already been recognized in law as a mode of government acquisition of private property for public purpose.66

In a negotiated sale, the government offers to acquire for public purpose a private property, and the owner may accept or reject it. A rejection of the offer, however, would most likely merely result in the commencement of an expropriation proceeding that would eventually transfer title to the government. Hence, the government's offer to acquire for public purpose a private property may be considered as an act preparatory to an expropriation proceeding. Therefore, a private owner's initiative to segregate a property to accommodate government needs saves the government from a long and arduous expropriation proceeding. This is a commendable act on the part of the owner. It must be encouraged, not dampened by threats of property deprivation without compensation.

Respondent Ortigas, which merely accommodated petitioner Republic of the Philippines' request, remains uncompensated for the taking of its property. Respondent Ortigas could have brought action to recover possession of the property, but it instead chose to sell its property to petitioner Republic of the Philippines. This is both fair and convenient as the road construction had long been completed, and the road is already being utilized by the public.

Taking of private property without just compensation is a violation of a person's property right.1âwphi1 In situations where the government does not take the trouble of initiating an expropriation proceeding, the private owner has the option to compel payment of the property taken, when justified. The trial court should continue to proceed with this case to determine just compensation in accordance with law.

x x x."

Appeals - "Section 2 of Rule 50 of the Rules of Court provides that appeals taken from the Regional Trial Court to the Court of Appeals raising only pure questions of law are not reviewable by the Court of Appeals. In which case, the appeal shall not be transferred to the appropriate court. Instead, it shall be dismissed outright."

G.R. No.171496 March 3, 2014
REPUBLIC OF THE PHILIPPINES, represented by the DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS (DPWH), Petitioner,
vs.
ORTIGAS AND COMPANY LIMITED PARTNERSHIP, Respondents.

"x x x.

Appeals from the Regional Trial Court to the Court of Appeals under Rule 41 must raise both questions of fact and law

Section 2 of Rule 50 of the Rules of Court provides that appeals taken from the Regional Trial Court to the Court of Appeals raising only pure questions of law are not reviewable by the Court of Appeals. In which case, the appeal shall not be transferred to the appropriate court. Instead, it shall be dismissed outright.
Appeals from the decisions of the Regional Trial Court, raising purely questions of law must, in all cases, be taken to the Supreme Court on a petition for review on certiorari in accordance with Rule 45.37 An appeal by notice of appeal from the decision of the Regional Trial Court in the exercise of its original jurisdiction to the Court of Appeals is proper if the appellant raises questions of fact or both questions of fact and questions of law.38

There is a question of law when the appellant raises an issue as to what law shall be applied on a given set of facts.39 Questions of law do "not involve an examination of the probative value of the evidence presented."40 Its resolution rests solely on the application of a law given the circumstances.41 There is a question of fact when the court is required to examine the truth or falsity of the facts presented.42 A question of fact "invites a review of the evidence."43

The sole issue raised by petitioner Republic of the Philippines to the Court of Appeals is whether respondent Ortigas’ property should be conveyed to it only by donation, in accordance with Section 50 of Presidential Decree No. 1529. This question involves the interpretation and application of the provision. It does not require the Court of Appeals to examine the truth or falsity of the facts presented. Neither does it invite a review of the evidence. The issue raised before the Court of Appeals was, therefore, a question purely of law. The proper mode of appeal is through a petition for review under Rule 45. Hence, the Court of Appeals did not err in dismissing the appeal on this ground.

Nevertheless, we take time to emphasize that Rule 41, Section 1, paragraph (a) of the Rules of Court, which provides that "[n]o appeal may be taken from [a]n order denying a x x x motion for reconsideration," is based on the implied premise in the same section that the judgment or order does not completely dispose of the case. The pertinent portion of Rule 41, Section 1 provides:

Section 1. Subject of appeal. – An appeal may be taken from a judgment or final order that completely disposes of the case, or of a particular matter therein when declared by these Rules to be appealable.

In other words, what Section 1 of Rule 41 prohibits is an appeal taken from an interlocutory order. An interlocutory order or judgment, unlike a final order or judgment, does "not completely dispose of the case [because it leaves to the court] something else to be decided upon."44 Appeals from interlocutory orders are generally prohibited to prevent delay in the administration of justice and to prevent "undue burden upon the courts."45

Orders denying motions for reconsideration are not always interlocutory orders. A motion for reconsideration may be considered a final decision, subject to an appeal, if "it puts an end to a particular matter,"46 leaving the court with nothing else to do but to execute the decision.

"An appeal from an order denying a motion for reconsideration of an order of dismissal of a complaint is effectively an appeal of the order of dismissal itself."47 It is an appeal from a final decision or order.

The trial court’s order denying petitioner Republic of the Philippines’ motion for reconsideration of the decision granting respondent Ortigas the authority to sell its property to the government was not an interlocutory order because it completely disposed of a particular matter. An appeal from it would not cause delay in the administration of justice. Petitioner Republic of the Philippines’ appeal to the Court of Appeals, however, was properly dismissed because the former used the wrong mode of appeal.

x x x."

Section 21(1), Article II of R.A. No. 9165 - chain of custody of evidence in drug cases

G.R. No. 231989, September 4, 2018
PEOPLE OF THE PHILIPPINES, Plaintiff-Appellee
vs.
ROMY LIM y MIRANDA, Accused-Appellant

"x x x.

Our Ruling

The judgment of conviction is reversed and set aside, and Lim should be acquitted based on reasonable doubt.

At the time of the commission of the crimes, the law applicable is R.A. No. 9165. 10 Section 1(b) of Dangerous Drugs Board Regulation No. 1, Series of 2002, which implements the law, defines chain of custody as -

the duly recorded authorized movements and custody of seized drugs or controlled chemicals or plant sources of dangerous drugs or laboratory equipment of each stage, from the time of seizure/confiscation to receipt in the forensic laboratory to safekeeping to presentation in court for destruction. Such record of movements and custody of seized item shall include the identity and signature of the person who held temporary custody of the seized item, the date and time when such transfer of custody were made in the course of safekeeping and use in court as evidence, and the final disposition. 11

The chain of custody rule is but a variation of the principle that real evidence must be authenticated prior to its admission into evidence. 12 To establish a chain of custody sufficient to make evidence admissible, the proponent needs only to prove a rational basis from which to conclude that the evidence is what the party claims it to be. 13 In other words, in a criminal case, the prosecution must offer sufficient evidence from which the trier of fact could reasonably believe that an item still is what the government claims it to be. 14 Specifically in the prosecution of illegal drugs, the well-established federal evidentiary rule in the United States is that when the evidence is not readily identifiable and is susceptible to alteration by tampering or contamination, courts require a more stringent foundation entailing a chain of custody of the item with sufficient completeness to render it improbable that the original item has either been exchanged with another or been contaminated or tampered with. 15 This was adopted in Mallillin v. People, 16 where this Court also discussed how, ideally, the chain of custody of seized items should be established:

As a method of authenticating evidence, the chain of custody rule requires that the admission of an exhibit be preceded by evidence sufficient to support a finding that the matter in question is what the proponent claims it to be. It would include testimony about every link in the chain, from the moment the item was picked up to the time it is offered into evidence, in such a way that every person who touched the exhibit would describe how and from whom it was received, where it was and what happened to it while in the witness' possession, the condition in which it was received and the condition in which it was delivered to the next link in the chain. These witnesses would then describe the precautions taken to ensure that there had been no change in the condition of the item and no opportunity for someone not in the chain to have possession of the same. 17

Thus, the links in the chain of custody that must be established are: (1) the seizure and marking, if practicable, of the illegal drug recovered from the accused by the apprehending officer; (2) the turnover of the seized illegal drug by the apprehending officer to the investigating officer; (3) the turnover of the illegal drug by the investigating officer to the forensic chemist for laboratory examination; and ( 4) the turnover and submission of the illegal drug from the forensic chemist to the court. 18

Seizure and marking of the illegal
drug as well as the turnover by the
apprehending officer to the
investigating officer

Section 21(1), Article II of R.A. No. 9165 states:

Sec. 21. Custody and Disposition of Confiscated, Seized, and/or Surrendered Dangerous Drugs, Plant Sources of Dangerous Drugs, Controlled Precursors and Essential Chemicals, Instruments/Paraphernalia and/or Laboratory Equipment. - The PDEA shall take charge and have custody of all dangerous drugs, plant sources of dangerous drugs, controlled precursors and essential chemicals, as well as instruments/paraphernalia and/or laboratory equipment so confiscated, seized and/or surrendered, for proper disposition in the following manner:

(1) The apprehending team having initial custody and control of the drugs shall, immediately after seizure and confiscation, physically inventory and photograph the same in the presence of the accused or the person/s from whom such items were confiscated and/or seized, or his/her representative or counsel, a representative from the media and the Department of Justice (DOJ), and any elected public official who shall be required to sign the copies of the inventory and be given a copy thereof[.]19

Supplementing the above-quoted provision, Section 21(a) of the Implementing Rules and Regulations (IRR) of R.A. No. 9165 mandates:


(a) The apprehending officer/team having initial custody and control of the drugs shall, immediately after seizure and confiscation, physically inventory and photograph the same in the presence of the accused or the person/s from whom such items were confiscated and/or seized, or his/her representative or counsel, a representative from the media and the Department of Justice (DO.T), and any elected public official who shall be required to sign the copies of the inventory and be given a copy thereof: Provided, that the physical inventory and photograph shall be conducted at the place where the search warrant is served; or at the nearest police station or at the nearest office of the apprehending officer/team, whichever is practicable, in case of warrantless seizures; Provided, further, that noncompliance with these requirements under justifiable grounds, as long as the integrity and the evidentiary value of the seized items are properly preserved by the apprehending officer/team, shall not render void and invalid such seizures of and custody over said items. 20

On July 15, 2014, R.A. No. 10640 was approved to amend R.A. No. 9165. Among other modifications, it essentially incorporated the saving clause contained in the IRR, thus:


(1) The apprehending team having initial custody and control of the dangerous drugs, controlled precursors and essential chemicals, instruments/paraphernalia and/or laboratory equipment shall, immediately after seizure and confiscation, conduct a physical inventory of the seized items and photograph the same in the presence of the accused or the person/s from whom such items were confiscated and/or seized, or his/her representative or counsel, with an elected public official and a representative of the National Prosecution Service or the media who shall be required to sign the copies of the inventory and be given a copy thereof: Provided, That the physical inventory and photograph shall be conducted at the place where the search warrant is served; or at the nearest police station or at the nearest office of the apprehending officer/team, whichever is practicable, in case of warrantless seizures: Provided, finally, That noncompliance of these requirements under justifiable grounds, as long as the integrity and the evidentiary value of the seized items are properly preserved by the apprehending officer/team, shall not render void and invalid such seizures and custody over said items.

In her Sponsorship Speech on Senate Bill No. 2273, which eventually became R.A. No. 10640, Senator Grace Poe admitted that "while Section 21 was enshrined in the Comprehensive Dangerous Drugs Act to safeguard the integrity of the evidence acquired and prevent planting of evidence, the application of said section resulted in the ineffectiveness of the government's campaign to stop increasing drug addiction and also, in the conflicting decisions of the courts."21 Specifically, she cited that "compliance with the rule on witnesses during the physical inventory is difficult. For one, media representatives are not always available in all comers of the Philippines, especially in more remote areas. For another, there were instances where elected barangay officials themselves were involved in the punishable acts apprehended."22 In addition, "[t]he requirement that inventory is required to be done in police station is also very limiting. Most police stations appeared to be far from locations where accused persons were apprehended."23

Similarly, Senator Vicente C. Sotto III manifested that in view of the substantial number of acquittals in drug-related cases due to the varying interpretations of the prosecutors and the judges on Section 21 of R.A. No. 9165, there is a need for "certain adjustments so that we can plug the loopholes in our existing law" and "ensure [its] standard implementation."24 In his Co-sponsorship Speech, he noted:


Numerous drug trafficking activities can be traced to operations of highly organized and powerful local and international syndicates. The presence of such syndicates that have the resources and the capability to mount a counter-assault to apprehending law enforcers makes the requirement of Section 21(a) impracticable for law enforcers to comply with. It makes the place of seizure extremely unsafe for the proper inventory and photograph of seized illegal drugs.

x x x x

Section 21(a) of RA 9165 needs to be amended to address the foregoing situation. We did not realize this in 2002 where the safety of the law enforcers and other persons required to be present in the inventory and photography of seized illegal drugs and the preservation of the very existence of seized illegal drugs itself are threatened by an immediate retaliatory action of drug syndicates at the place of seizure. The place where the seized drugs may be inventoried and photographed has to include a location where the seized drugs as well as the persons who are required to be present during the inventory and photograph are safe and secure from extreme danger.

It is proposed that the physical inventory and taking of photographs of seized illegal drugs be allowed to be conducted either in the place of seizure or at the nearest police station or office of the apprehending law enforcers. The proposal will provide effective measures to ensure the integrity of seized illegal drugs since a safe location makes it more probable for an inventory and photograph of seized illegal drugs to be properly conducted, thereby reducing the incidents of dismissal of drug cases due to technicalities.

Non-observance of the prescribed procedures should not automatically mean that the seizure or confiscation is invalid or illegal, as long as the law enforcement officers could justify the same and could prove that the integrity and the evidentiary value of the seized items are not tainted. This is the effect of the inclusion in the proposal to amend the phrase "justifiable grounds." There are instances wherein there are no media people or representatives from the DOJ available and the absence of these witnesses should not automatically invalidate the drug operation conducted. Even the presence of a public local elected official also is sometimes impossible especially if the elected official is afraid or scared.25

We have held that the immediate physical inventory and photograph of the confiscated items at the place of arrest may be excused in instances when the safety and security of the apprehending officers and the witnesses required by law or of the items seized are threatened by immediate or extreme danger such as retaliatory action of those who have the resources and capability to mount a counter-assault.26 The present case is not one of those.

Here, IO1 Orellan took into custody the ₱500.00 bill, the plastic box with the plastic sachet of white substance, and a disposable lighter. IO1 Carin also turned over to him the plastic sachet that she bought from Lim. While in the house, IO1 Orellan marked the two plastic sachets. IO1 Orellan testified that he immediately conducted the marking and physical inventory of the two sachets of shabu.27 To ensure that .they were not interchanged, he separately marked the item sold by Lim to 101 Carin and the one that he recovered from his possession upon body search as BB AEO 10-19-10 and AEO-RI 10-19-10, respectively, with both bearing his initial/signature.28

Evident, however, is the absence of an elected public official and representatives of the DOJ and the media to witness the physical inventory and photograph of the seized items. 29 In fact, their signatures do not appear in the Inventory Receipt.

The Court stressed in People v. Vicente Sipin y De Castro: 30


The prosecution bears the burden of proving a valid cause for noncompliance with the procedure laid down in Section 21 of R.A. No. 9165, as amended. It has the positive duty to demonstrate observance thereto in such a way that during the trial proceedings, it must initiate in acknowledging and justifying any perceived deviations from the requirements of law. Its failure to follow the mandated procedure must be adequately explained, and must be proven as a fact in accordance with the rules on evidence. It should take note that the rules require that the apprehending officers do not simply mention a justifiable ground, but also clearly state this ground in their sworn affidavit, coupled with a statement on the steps they took to preserve the integrity of the seized items. Strict adherence to Section 21 is required where the quantity of illegal drugs seized is miniscule, since it is highly susceptible to planting, tampering or alteration of evidence.31

It must be alleged and proved that the -presence of the three witnesses to the physical inventory and photograph of the illegal drug seized was not obtained due to reason/s such as:


(1) their attendance was impossible because the place of arrest was a remote area; (2) their safety during the inventory and photograph of the seized drugs was threatened by an immediate retaliatory action of the accused or any person/s acting for and in his/her behalf; (3) the elected official themselves were involved in the punishable acts sought to be apprehended; (4) earnest efforts to secure the presence of a DOJ or media representative and an elected public official within the period required under Article 125 of the Revised Penal Code prove futile through no fault of the arresting officers, who face the threat of being charged with arbitrary detention; or (5) time constraints and urgency of the anti-drug operations, which often rely on tips of confidential assets, prevented the law enforcers from obtaining the presence of the required witnesses even before the offenders could escape.32

Earnest effort to secure the attendance of the necessary witnesses must be proven. People v. Ramos33 requires:


It is well to note that the absence of these required witnesses does not per se render the confiscated items inadmissible. However, a justifiable reason for such failure or a showing of any genuine and sufficient effort to secure the required witnesses under Section 21 of RA 9165 must be adduced. In People v. Umipang, the Court held that the prosecution must show that earnest efforts were employed in contacting the representatives enumerated under the law for "a sheer statement that representatives were unavailable without so much as an explanation on whether serious attempts were employed to look for other representatives, given the circumstances is to be regarded as a flimsy excuse." Verily, mere statements of unavailability, absent actual serious attempts to contact the required witnesses are unacceptable as justified grounds for noncompliance. These considerations arise from the fact that police officers are ordinarily given sufficient time - beginning from the moment they have received the information about the activities of the accused until the time of his arrest - to prepare for a buy-bust operation and consequently, make the necessary arrangements beforehand knowing full well that they would have to strictly comply with the set procedure prescribed in Section 21 of RA 9165. As such, police officers are compelled not only to state reasons for their non-compliance, but must in fact, also convince the Court that they exerted earnest efforts to comply with the mandated procedure, and that under the given circumstances, their actions were reasonable. 34

In this case, IO1 Orellan testified that no members of the media and barangay officials arrived at the crime scene because it was late at night and it was raining, making it unsafe for them to wait at Lim's house.35 102 Orcales similarly declared that the inventory was made in the PDEA office considering that it was late in the evening and there were no available media representative and barangay officials despite their effort to contact them.36 He admitted that there are times when they do not inform the barangay officials prior to their operation as they might leak the confidential information.37 We are of the view that these justifications are unacceptable as there was no genuine and sufficient attempt to comply with the law.

The testimony of team-leader IO2 Orcales negates any effort on the part of the buy-bust team to secure the presence of a barangay official during the operation:


ATTY. DEMECILLO:

xx xx

Q x x x Before going to the house of the accused, why did you not contact a barangay official to witness the operation?

A There are reasons why we do not inform a barangay official before our operation, Sir.

Q Why?

A We do not contact them because we do not trust them. They might leak our information. 38

The prosecution likewise failed to explain why they did not secure the presence of a representative from the Department of Justice (DOJ). While the arresting officer, IO1 Orellan, stated in his Affidavit that they only tried to coordinate with the barangay officials and the media, the testimonies of the prosecution witnesses failed to show that they tried to contact a DOJ representative.

The testimonies of the prosecution witnesses also failed to establish the details of an earnest effort to coordinate with and secure presence of the required witnesses. They also failed to explain why the buy-bust team felt "unsafe" in waiting for the representatives in Lim's house, considering that the team is composed of at least ten (10) members, and the two accused were the only persons in the house.

It bears emphasis that the rule that strict adherence to the mandatory requirements of Section 21(1) of R.A. No. 9165, as amended, and its IRR may be excused as long as the integrity and the evidentiary value of the confiscated items are properly preserved applies not just on arrest and/or seizure by reason of a legitimate buy-bust operation but also on those lawfully made in air or sea port, detention cell or national penitentiary, checkpoint, moving vehicle, local or international package/parcel/mail, or those by virtue of a consented search, stop and frisk (Terry search), search incident to a lawful arrest, or application of plain view doctrine where time is of the essence and the arrest and/or seizure is/are not planned, arranged or scheduled in advance.

To conclude, judicial notice is taken of the fact that arrests and seizures related to illegal drugs are typically made without a warrant; hence, subject to inquest proceedings. Relative thereto, Sections 1 (A.1.10) of the Chain of Custody Implementing Rules and Regulations directs:


A. I. I 0. Any justification or explanation in cases of noncompliance with the requirements of Section 2I (1) of R.A. No. 9I65, as amended, shall be clearly stated in the sworn statements/affidavits of the apprehending/seizing officers, as well as the steps taken to preserve the integrity and evidentiary value of the seized/confiscated items. Certification or record of coordination for operating units other than the PDEA pursuant to Section 86 (a) and (b), Article IX of the IRR of R.A. No. 9I65 shall be presented.39

While the above-quoted provision has been the rule, it appears that it has not been practiced in most cases elevated before Us. Thus, in order to weed out early on from the courts' already congested docket any orchestrated or poorly built up drug-related cases, the following should henceforth be enforced as a mandatory policy:


1. In the sworn statements/affidavits, the apprehending/seizing officers must state their compliance with the requirements of Section 21 (1) of R.A. No. 9165, as amended, and its IRR.

2. In case of non-observance of the provision, the apprehending/seizing officers must state the justification or explanation therefor as well as the steps they have taken in order to preserve the integrity and evidentiary value of the seized/ confiscated i terns.

3. If there is no justification or explanation expressly declared in the sworn statements or affidavits, the investigating fiscal must not immediately file the case before the court. Instead, he or she must refer the case for further preliminary investigation in order to determine the (non) existence of probable cause.

4. If the investigating fiscal filed the case despite such absence, the court may exercise its discretion to either refuse to issue a commitment order (or warrant of arrest) or dismiss the case outright for lack of probable cause in accordance with Section 5,40 Rule 112, Rules of Court.

WHEREFORE, premises considered, the February 23, 2017 Decision of the Court of Appeals in CA-G.R. CR HC No. 01280-MIN, which affirmed the September 24, 2013 Decision of Regional Trial Court, Branch 25, Cagayan de Oro City, in Criminal Cases Nos. 2010-1073 and 2010-1074, finding accused-appellant Romy Lim y Miranda guilty of violating Sections 11 and 5, respectively, of Article II of Republic Act No. 9165, is REVERSED and SET ASIDE. Accordingly, accused-appellant Romy Lim y Miranda is ACQUITTED on reasonable doubt, and is ORDERED IMMEDIATELY RELEASED from detention, unless he is being lawfully held for another cause. Let an entry of final judgment be issued immediately.

Let a copy of this Decision be furnished the Superintendent of the Davao Prison and Penal Farm, B.E. Dujali, Davao del Norte, for immediate implementation. The said Director is ORDERED to REPORT to this Court within five (5) days from receipt of this Decision the action he has taken.

Let copies of this Decision be furnished to the Secretary of the Department of Justice, as well as to the Head/Chief of the National Prosecution Service, the Office of the Solicitor General, the Public Attorney's Office, the Philippine National Police, the Philippine Drug Enforcement Agency, the National Bureau of Investigation, and the Integrated Bar of the Philippines for their information and guidance. Likewise, the Office of the Court Administrator is DIRECTED to DISSEMINATE copies of this Decision to all trial courts, including the Court of Appeals.

SO ORDERED.

x x x."

Any member country can file a Red Notice as long as it complies with Interpol’s rules. The agency does little vetting. Last year, Interpol issued 13,516 Red Notices, many suspected to be persecutory.

"x x x.

How Authoritarian Governments Are Exploiting Interpol to Harass Political Enemies
By Masood Farivar

October 3, 2019 12:10 AM 

https://www.voanews.com/usa/how-authoritarian-governments-are-exploiting-interpol-harass-political-enemies

WASHINGTON - For decades, Interpol, the France-based global police network, has played a critical role in fighting crime across international borders. Among other things, it promotes global cooperation among law enforcement agencies.

But the same agency that has helped catch thousands of criminals is increasingly being exploited by authoritarian regimes such as Russia and Turkey to harass their political enemies who live in exile, according to U.S. officials, lawmakers and immigration attorneys.

Their weapon of choice? The Red Notice, an alert issued by Interpol to member countries that a person is wanted for arrest and extradition. Any member country can file a Red Notice as long as it complies with Interpol’s rules. The agency does little vetting. Last year, Interpol issued 13,516 Red Notices, many suspected to be persecutory.

Critics say the abuse has trickled down through the U.S. immigration system where authorities often treat Red Notices as “arrest warrants” to target asylum-seekers and other foreign nationals wanted on trumped-up charges in their home countries.

The problem dates back to the early days of the administration of former President Barack Obama, but immigration lawyers say it has escalated amid the Trump administration-led immigration crackdown.

“This blind acceptance of an Interpol communication without scrutiny can, and often does, turn ICE officials and our own immigration judges into unwitting agents of repressive regimes,” Sandra Grossman, an immigration attorney, recently testified before the U.S. Helsinki Commission, an independent U.S. government agency investigating the abuses.

The precise number of asylum seekers and other immigrants affected by persecutory Red Notices is not known. One expert, Ted Bromund of the Heritage Foundation, estimates it runs into the dozens, and possibly “the low 100." A recent survey by the American Immigration Lawyers Association turned up nearly two dozen previously unreported cases of abuse of the Red Notice.

Increasingly alarmed, members of Congress are pushing legislation to put a stop to the abuses. Last month, a bipartisan group of lawmakers introduced the Transnational Repression Accountability and Prevention Act.

In addition to requiring the U.S. government to press for enhanced screening of Interpol alerts, the TRAP Act codifies a long-standing U.S. prohibition against arresting someone solely based on a Red Notice.

If enacted, the legislation “should help counter Interpol abuse in the United States and perhaps globally if it’s able to achieve reforms within Interpol itself,” Nate Schenkkan, director of special research at the Freedom House, said at a recent Helsinki Commission hearing.

Interpol, despite its name, is not a police agency with the power to investigate and arrest. Instead, the group, headquartered in Lyon, France, serves as more of a conduit for its 194 members, notifying law enforcement agencies about wanted persons through Red Notices and other color-coded alerts.

Immigration and Customs Enforcement officials say they vet Red Notices to ensure they’re legitimate.

But while the agency has successfully removed thousands of dangerous criminals from the country on the basis of Interpol alerts, critics say ICE’s policy of treating a Red Notice as an arrest warrant has swept up otherwise innocent foreign nationals seeking to live in the United States.

This policy is at odds with the Justice Department’s own manual, which cautions prosecutors that a Red Notice in and of itself is not a basis for arrest.

“We’re talking about issues involving U.S. government policy and agencies that are supposed to carry out those policies not following them,” Grossman said.

Arrested by ICE
In 2017, a Russian entrepreneur, escaping from what he claimed was a cooked-up prosecution in Russia, was arrested by ICE at his asylum interview, said Grossman, who later filed a Freedom of Information Act disclosure request with ICE to find out the basis for the entrepreneur's arrest.

“It was quite enlightening to read the FOIA results,” Grossman said. “It just said, ‘Individual is the subject of a Red Notice. Danger to the community. Extreme flight risk. Apprehend Immediately.’”

Although Interpol later canceled the Red Notice on appeal, Grossman said her client remains “in a legal limbo, unable to travel, unable to normalize his status until his deportation hearings are final.”

ICE did not respond to questions about its use of Red Notices. In a statement to VOA, a Justice Department spokeswoman said, “Interpol has instituted a number of safeguards and processes to detect abuses and ensure that all notices meet the Interpol standards and we continue to work within that framework. At the same time, we actively consult with other U.S. agencies on their use of Interpol notices issued by other countries.”

It’s not just ICE that treats Red Notices as evidence of criminality. Immigration judges, too, often impose exceptionally high bonds or refuse to release a detained immigrant because of a Red Notice, according to immigration attorneys.

A Chinese citizen represented by Grossman has spent months locked up in a detention center because of a Red Notice, she said. “The judge has refused to issue him a bond solely because of the Red Notice."

The problem stems from a larger systematic abuse of Red Notices that for years has dogged Interpol, where submitting an alert is as easy as filling out an online message. The result has been a dramatic escalation in the number of Red Notices, many of them abusive, over the past 10 years.

“It made abuse much easier to perpetrate,” said Bromund, of the Heritage Foundation, referring to Interpol's new electronic filing system.

Most prolific

Turkey is believed to be the most prolific abuser, followed by Russia, China, and the Central Asian Republics of Kazakhstan, Tajikistan and Uzbekistan.

U.S. authorities have pushed back against clearly spurious Red Notices, dismissing at least eight alerts issued by Russia for prominent Kremlin critic Bill Browder.

“We cannot allow Interpol to be weaponized against journalists, dissenting voices and oppressed minorities,” Edward O’Callaghan, a senior Justice Department official, said at a recent event commemorating Interpol Washington’s 50th anniversary.

Interpol, too, has at times intervened in blatantly abusive cases. When Turkey submitted requests for the arrests of “tens of thousands of people” after a failed 2016 coup attempt, Interpol “essentially set aside and didn’t honor them,” said Schenkkan, of Freedom House.

“It does indicate that there is at least some willingness to address the most flagrant abuses of the system,” he said.

x x x."

A homeowners’ association may regulate passage into a subdivision for the safety and security of its residents, even if its roads have already been donated to the local government. It has the right to set goals for the promotion of safety and security, peace, comfort, and the general welfare of its residents.”

"Right to regulate passage in subdivisions

By: Artemio V. Panganiban - @inquirerdotnet  

Philippine Daily Inquirer / 05:06 AM October 06, 2019

A homeowners’ association may regulate passage into a subdivision for the safety and security of its residents, even if its roads have already been donated to the local government. It has the right to set goals for the promotion of safety and security, peace, comfort, and the general welfare of its residents.”

So ruled the Supreme Court in its very first sentence in Kwong v Diamond Homeowners (June 10, 2019), penned by Justice Marvic M. V. F. Leonen.

Specifically, the Court upheld the “No Sticker, No ID, No Entry” policy of gated villages. Under this scheme, visitors on vehicles seeking entry must leave with the subdivision guards their identification cards (IDs), which they may reclaim upon leaving. Residents may obtain stickers for their vehicles, which may then enter and exit freely without need of IDs.

Note that Presidential Decree (PD) 957, as amended by PD 1216, requires that “[u]pon their completion…, the roads, alleys, sidewalks and playgrounds shall be donated by the owner or developer to the city or municipality and it shall be mandatory for the local governments to accept…”

While these PDs were silent on the homeowners’ rights on these donated roads, a later law approved in 2010 (Republic Act 9904) gave the associations the right to “[r]egulate access to, or passage through the subdivision/village roads for purposes of preserving privacy, tranquility, internal security, safety and traffic order: (p)rovided, that (1) public consultations are held; (2) existing laws and regulations are met; (3) the authority of the concerned government agencies or units are obtained; and (4) the appropriate and necessary memoranda of agreement are executed among concerned parties.”

This law does not distinguish whether the roads have been donated or not. Thus, the Court ruled that the homeowners have the right to regulate the use of the roads, alleys, sidewalks and playgrounds even without owning them.

Despite the seeming mandatory provisions of the PDs compelling the donation of the subdivision roads, the Court, in Republic v. Llamas (Jan. 25, 2017) also penned by J Leonen, said that a “positive act” like a deed of donation must first be made by the owner-developer before the government can acquire dominion over them.

“To be considered a donation, an act of conveyance must necessarily proceed freely from the donor’s own, unrestrained volition. A donation cannot be forced: it cannot arise from compulsion, be borne by a requirement, or otherwise be impelled by a mandate imposed upon the donor by forces that are external to him or her.” Thus, “The local government should first acquire them by donation, purchase, or expropriation, if they are to be utilized as public roads.”

Republic v. Ortigas (March 3, 2014, also written by J Leonen) succinctly captures the essence of free conveyancing: “An owner may not be forced to donate his or her property even if it has been delineated as road lots because that would partake of an illegal taking. He or she may even choose to retain said properties.” In such situation, the villagers’ right to regulate passage is even more compelling.

True, the Local Government Code recognizes the power of cities and municipalities to own, improve and pave donated roads. Nonetheless, the Court, in the Kwong case, held that “homeowners’ associations are not entirely powerless in protecting (their) interests.” While the “ownership of public spaces is with the local government, enjoyment, possession, and control are with the residents and homeowners.”

Significantly, the Court observed that “[i]t is common knowledge that when homeowners purchase their properties from subdivisions, they pay a more valuable consideration in exchange for better facilities, safer security, and a higher degree of peace, order and privacy.”

Moreover, some may have acquired their homes “in contemplation of their right to organize and to take measures to protect (their) interests. It would be an injustice if these were not taken into consideration in determining the validity of the Policy.”

Given these emphatic rulings, the government may not forcefully open gated subdivisions to public traffic without giving due respect to the villagers’ right to regulate passage therein.

Comments to chiefjusticepnganiban@hotmail.com."

Read more: https://opinion.inquirer.net/124424/right-to-regulate-passage-in-subdivisions#ixzz61m1pIj6X

 

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The Real Estate Investment Trust (REIT) Act of 2009

REPUBLIC ACT No. 9856

AN ACT PROVIDING THE LEGAL FRAMEWORK FOR REAL ESTATE INVESTMENT TRUST AND FOR OTHER PURPOSES

ARTICLE I

GENERAL PROVISIONS

Section 1. Short Title. - This Act shall be known as "The Real Estate Investment Trust (REIT) Act of 2009".

Section 2. Declaration of Policy. - It IS the policy of the State to promote the development of the capital market, democratize wealth by broadening the participation of Filipinos in the ownership of real estate in the Philippines, use the2 capital market as an instrument to help finance and develop infrastructure projects, and protect the investing public by providing an enabling regulatory framework and environment under which real estate investment trusts, through certain incentives granted herein, may assist in achieving the objectives of this policy.

Section 3. Definition of Terms. - For the purposes of this Act, the term:

(a) "Adviser" means a lawyer, accountant, auditor, financial or business consultant, and such other persons rendering professional advisory services to the real estate investment trust.

(b) "Affiliate" means a corporation that directly or indirectly, through one or more intermediaries, is controlled by, or is under the common control of another corporation, which thereby becomes its parent corporation.

(c) "Associate" of a person includes:

i. Any relative of such person within the fourth (4th) degree of consanguinity or affinity; and

ii. Any company in which he/she and his/her relative within the fourth (4th) degree of consanguinity or affinity, directly or indirectly, has an interest of twenty - five percent (25%) or more.

(d) "Cash Equivalent Items" means instruments or investments that are highly liquid and marketable and are considered good as cash as determined in accordance with the rules and regulations prescribed by the Commission.

(e) "Commission" or "SEC" means the Securities and Exchange Commission of the Philippines.

(f) "Constitutive Documents" means the articles of incorporation and bylaws of a REIT.

(g) "Control" exists in favor of a parent corporation when it has the power to direct or govern the financial and operating3 policies of an enterprise so as to obtain benefits from Its activities. Control is presumed to exist when the parent owns, directly or indirectly, through subsidiaries, more than one - half (112) of the voting power of an enterprise, unless m exceptional circumstances, it can clearly be demonstrated that such ownership does not constitute control. Control also exists even when the parent owns one - half (112) or less of the voting power of an enterprise when there is power

i. Over more than one - half (1/2) of the voting rights by virtue of an agreement with investors;

ii. To direct or govern the financial and operating policies of the enterprise under a statute or an agreement;

iii. To appoint or remove the majority of the members of the board of directors or equivalent governing body; or

iv. To cast the majority votes at meetings of the board of directors of equivalent governing body.

(h) "Corporation Code" refers to Batas Pambansa Bilang 68, otherwise known as the Corporation Code of the Philippines.

(i) "Deposited Property" means the total value of the REIT's assets based on the latest valuation determined m accordance with the rules and regulations promulgated by the Commission.

(j) "Distributable Income" means net income as adjusted for unrealized gains and losses/expenses and impairment losses and other items in accordance with internationally accepted accounting standards. Distributable income excludes proceeds from the sale of the REIT's assets that are re - invested in the REIT within one (1) year from the date of the sale.

(k) "Exchange" means any entity registered with the Commission as a stock exchange pursuant to the Securities Regulation Code.

(l) "Fund Manager" refers to the person responsible for the allocation of the deposited property to the allowable investment outlets and selection of income - generating real4 estate. It shall execute investment strategies for the REIT and oversee and coordinate all of the following activities: property acquisition; property management; leasing; operational and financial reporting (including operating budgets); appraisals; audits; market review; accounting and reporting procedures, as well as refinancing and asset disposition plans. For clarity, a fund manager is considered independent from the REIT and its sponsors/promoters under this Act if it is in compliance with the independence, corporate governance (including the fit and proper rule) and other requirements prescribed by this Act, its implementing rules and regulations and the Commission.

(m) "Income - generating Real Estate" means real property which is held for the purpose of generating a regular stream of income such as rentals, toll fees, user's fees and the like, as may be further defined and identified by the Commission. The Commission may promulgate rules to include real rights over real property, provided they generate interest or other regular payments to the REIT.

(n) "Independent Director" means a director who has the qualifications and none of the disqualifications of an independent director specified in the Securities Regulation Code and its implementing rules and regulations.

(o) "IRR" refers to the Implementing rules and regulations promulgated to implement the provisions of this Act.

(p) "Investible Funds" refer to funds of the REIT that can be placed in investment vehicles other than income generating real estate such as real estate - related assets, managed funds, government securities, and cash and cash equivalents.

(q) "Investor" means the owner of investor securities or investor shares.

(r) "Investor Securities" or "Investor Shares" mean shares of stock issued by a REIT or derivatives thereof.

(s) "Managed Funds" mean any arrangement whereby funds are solicited from the investing public and pooled for the purpose of Investing in securities duly registered with and/or approved by the appropriate regulatory agency of the government for investment by the REIT.

(t) "Material Contract" refers to an agreement or arrangement where the amount involved is at least five percent (5%) of the deposited property of the REIT or which is not entered into in the ordinary course of business of the REIT: Provided, however, That the following shall be deemed a material contract regardless of the amount:

i. Related party transactions under Section 8.11 hereof;

ii. Contract between the REIT and fund manager;

iii. Agreement between the REIT and property manager;

iv. Agreements between and among shareholders such as voting trust agreements, pooling agreements, joint venture agreements or other shareholder agreements as may be determined by the Commission;

v. Any acquisition or disposition of real estate by the REIT;

vi. Contracts relating to investments of the REIT under Section 8.3 hereof;

vii. Any contract creating mortgages, encumbrances, liens or rights on the real estate of the REIT;

viii. Contract of any nature that limits the declaration or distribution of dividends by the REIT;

ix. Any contract relating to joint venture, spin - off, consolidation or merger involving the REIT;' and

x. Any contract that may be expected to materially affect the market activity and/or the price of the investor securities issued by the REIT as may be determined by the Commission.

(u) "Net Asset Value" or "NAV" means the total '1ssets less total liabilities as determined by the implementing rules and regulations (lRR) of the Commission.

(v) "Net Income" means net income as determined under the Philippine Financial Reporting Standards (PFRS).

(w) "Overseas Filipino Investor" refers to an individual citizen of the Philippines who is working abroad, including one who has retained or reacquired his Philippine citizenship under Republic Act No. 9225, otherwise known as the "Citizenship Retention and Re - acquisition Act of 2003".

(x) "Parent' means a corporation which has control over another corporation, directly or indirectly, through one or more intermediaries.

(y) "Principal Officer" means the chairman of the board of directors, president, chi(,'!f executive officer - , chief operating officer. treasurer, chief financial officer corporate secretary, vice president, their equivalent positions, or such other officers occupying positions of significant influence in a company as may be determined by the Commission.

(z) "Principal Stockholder" means a stockholder who is directly or indirectly the beneficial owner of more than ten percent (10%) of any class of security of the REIT.

(aa) "Public Shareholder" means a shareholder of a REIT other than the following persons (non - public shareholders):

i. The sponsor/promoter of the REIT;

ii. A director, principal officer or principal shareholder of the sponsor/promoter of the REIT;

iii. A director, principal officer or principal shareholder of the REIT;

iv. An associate of a director, principal officer or principal shareholder of the REIT or its sponsor/promoter;

v. A related corporation to the REIT or its sponsor promoter; and

vi. Any person who holds legal title to the shares of stock of the REIT for the benefit of another for the purpose of circumventing the provisions of this Act.

(bb) "Property Manager" refers to a professional administrator of real properties who IS engaged by the REIT to provide property management services, lease management services, marketing services, project management services, including rent collection, tenant services, care of the physical plant, security, leasing, marketing of the property to outside prospects, and other similar services pertaining to the property under administration. For clarity, a property manager IS considered independent from the REIT and its sponsor(s)/promoter(s) under this Act if it is in compliance with the independence, corporate governance (including the fit and proper rule) and other requirements prescribed by this Act, its IRR and the Commission.

(cc) "Real Estate Investment Trust' or "RElT' IS a stock corporation established in accordance with the Corporation Code of the Philippines and the rules and regulations promulgated by the Commission principally for the purpose of owning income - generating real estate assets. For purposes of clarity, a REIT, although designated as a "trust", does not have the same technical meaning as "trust" under existing laws and regulations but is used herein for the sole purpose of adopting the internationally accepted description of the company in accordance with global best practices.

(dd) "Real Property" shall have the same definition as "Immovable Property" under Article 415 of the Civil Code of the Philippines. Real estate, when used in this Act, shall have the same meaning as real property.

(ee) "REIT Plan" refers to the plan, including its amendments, of the REIT registered with the Commission.

(ff) "Real Estate - Related Assets" mean:8 i. Debt securities and listed shares issued by listed property companies; or Ii. Other funds and assets, including personal property, incidental to the ownership of real estate.

(gg) "Related Corporation" means the parent, subsidiary or affiliate of the REIT.

(hh) "Related Party" includes:

i. The director, officer or principal stockholder. of the REIT or associate of such persons;

ii. The sponsor/promoter of the REIT;

iii. The fund manager of the REIT;

iv. The adviser of the REIT;

v. The property manager of the REIT;

vi. A director, principal shareholder or principal officer of the sponsor/promoter of the REIT, REIT's fund manager or property manager, or associate of any such persons; and 1avvph!1

vii. Related corporation to the REIT.

(ii) "Securities Regulation Code" or "SRC" refers to the Securities Regulation Code of 2000 and its implementing rules and regulations.

(jj) ,"Sponsor/Promoter" means any person who, acting alone or in conjunction with one or more other persons, directly or indirectly, contributes cash or property in incorporating a REIT.

(kk) "Subsidiary" means a corporation more than fifty percent (50%) of the voting stock of which is owned or controlled, directly or indirectly, through one or more intermediaries, by another corporation, which thereby becomes its parent corporation.

(ll) "Synthetic Investment Products" are derivatives and other securities created exclusively out of one or more financial instruments to simulate the returns of the underlying financial instruments, such as credit - linked notes, collateralized debt obligations. total return swaps, credit spread options, credit default options, and similar products determined by the Commission.

(mm) "Taxable Net Income" means the pertinent items of gross income specified in Section 32 of the National Internal Revenue Code of 1997, as amended, less all allowable deductions enumerated in Section 34 of the National Internal Revenue Code of 1997, as amended, less the dividends distributed by a REIT out of its distributable income as of the end of the taxable year as: (a) dividends to owners of the common shares; and (b) dividends to owners of the preferred shares pursuant to their rights and limitations specified in the articles of incorporation of the REIT.

ARTICLE II
REAL ESTATE INVESTMENT TRUST

Section 4. Investment in the REIT. - Investment in the REIT shall be by way of subscription to or purchase of shares of stock of the REIT. No shares of stock of the REIT shall be offered for subscription or sale except in accordance with a REIT plan and other requirements and restrictions as may be prescribed by the Commission.

Section 5. Registration and Listing. - The shares of stock of the REIT must be registered with the Commission and listed in accordance with the rules of the Exchange.

Section 6. Nationality Requirement. - A REIT that owns land located in the Philippines must comply with foreign ownership limitations imposed under Philippine law.

Section 7. Dividend Distribution. - A REIT must distribute annually at' least ninety percent (90%) of its distributable income as dividends to its shareholders not later than the last day of the fifth (5") month following the close of the fiscal 10 year of the REIT. Subject to the provisions of this Act, the dividends shall be payable only from out of the unrestricted retained earnings of the REIT as provided for under Section 43 of the Corporation Code of the Philippines. The percentage of dividends received by the public shareholders to the total dividends distributed by the REIT from out of its distributable income must not be less than such percentage of their aggregate ownership of the total outstanding shares of the REIT. Any structure, arrangement or provision which would have the effect of diminishing or circumventing in any form this entitlement to dividends shall be void and of no force and effect.

Distributable income excludes proceeds from the sale of the REIT's assets that are re - invested by the REIT within one (1) year from the date of the sale.

Section 8. Requirements. - Unless the Commission provides otherwise and after public hearing, taking into account public interest, the need to protect investors and develop the country's real estate investment industry to make it globally competitive, the following requirements shall apply:

8.1 Minimum Public Ownership - A REIT must be a public company and to be considered as such, 'a REIT, must: (a) maintain its status as a listed company; and (b) upon and after listing, have at least one thousand (1,000) public shareholders each owning at least fifty (50) shares of any class of shares who in the aggregate own at least one - third (1/3) of the outstanding capital stock of the REIT.

The Commission shall prescribe a recording and monitoring system that will effectively ensure that the shares of the public shareholders are traceable to their names and for their own benefit and not for the benefit of any of the non - public shareholders mentioned above.

Compliance With the minimum public ownership requirement under this section must be duly certified by a responsible person designated by the Commission upon listing, as of record date for any dividend declaration or any qorporate action requiring shareholder approval and other relevant times as may be required by the IRR of this Act.

8.2 Capitalization - A REIT must have a minimum paid - up capital of Three hundred million pesos (Php300, 000.000.00).

i. Real estate, whether freehold or leasehold, located In the Philippines. A REIT may invest in income - generating real estate located outside of the Philippines: Provided, That such investment does not exceed forty percent (40%) of its deposited property and only upon special authority from the Commission. The Commission in issuing such authority shall consider, among others, satisfactory proof that the valuation of assets is fair and reasonable. An investment in real estate may be by way of direct ownership or a shareholding in an unlisted special purpose vehicle constituted to hold/own real estate;

ii. Real estate - related assets, wherever the issuers, assets, or securities are incorporated, located, issued, or traded;

iii. Managed funds, debt securities and listed shares issued by local or foreign non - property corporations;

iv. Government securities issued on behalf of the Philippine government or governments of other countries and securities issued by multilateral agencies;

v. Cash and cash equivalent items; and

vi. Such other similar investment outlets as the Commission may allow.

8.4 Investment in Synthetic Investment Products - A REIT may invest not more than five percent (5%) of its investible funds in synthetic investment products such as, but not limited to, credit default swaps, credit - linked notes, collateralized debt obligations, total return swaps, credit spread options, and credit default options, and only upon special authority from the appropriate regulatory authority.

8.5 Income - generating Real Estate - At least seventy - five percent (75%) of the deposited property of the REIT must be invested in, or consist of, income - generating real estate.

8.6 Property Development - A REIT must not undertake property development activities whether on its own, in a joint venture with others, or by investing in unlisted property development companies, unless it intends to hold the developed property upon completion. The total contract value of property development activities undertaken and investments in uncompleted property developments should not exceed ten percent (10%) of the deposited property of the REIT.

8.7 Single Entity Limit - Not more than fifteen percent (15%) of investible funds of the REIT may be invested in any one issuer's securities or anyone managed fund, except with respect to government securities where the limit is twenty - five percent (25%).

8.8 Foreign Assets - A REIT may invest in local or foreign, assets, subject to the terms of its articles of incorporation. Where an investment in a foreign real estate asset is made, the REIT should ensure that the investment complies with all the applicable laws and requirements in that foreign country such as, but not limited to, foreign ownership restrictions, if any, and requisites of having good and valid title to that real estate.

8.9 Joint Venture - When investing in real estate as a joint owner, the REIT should make such investment by acquiring shares or interests in an unlisted special purpose vehicle constituted to hold/own the real estate and the REIT should have freedom to dispose of such investment. The joint venture agreement, memorandum and articles of association or other constitutive documents of the special purpose vehicle should provide for a minimum percentage of distributable profits of the special purpose vehicle that will be distributed and grant the REIT veto rights over key operational issues of the special purpose vehicle. .

8.10 Aggregate Leverage Limit - The total borrowings and deferred payments of a REIT should not exceed, 'thirty - five percent (35%) of its deposited property: Provided, however, That the total borrowings and deferred payments of a REIT that has a publicly disclosed investment grade credit rating by a duly accredited or internationally recognized rating agency may exceed thirty - five percent (35%) but not more than seventy percent (70%) of its deposited property.

8.11 Related Party Transactions - Any contract or amendment thereto, between the REIT and related parties, including contracts involving the acquisition or lease of assets and contracts for services, must comply with the following minimum requirements:

i. Full, fair, timely and accurate disclosures on the identity of the parties their relationship

with the REIT, and other important details of the transaction have been made to the Exchange and the Commission;

ii. Be on fair and reasonable terms, including the contract price;

iii. Approved by at least a majority of the entire membership of the board of directors, including the unanimous vote of all independent directors of the REIT;

iv. Accompanied by a fairness opinion by an independent appraiser done in accordance with the valuation methodology prescribed by the Commission, in the case of an acquisition or disposition of real estate assets and property or share swaps or similar transactions; and

v. Any other matter that may be materially relevant to a prospective investor in deciding whether or not to invest in the REIT.

8.12 Valuation - A full valuation of a REIT's assets must be conducted by an independent appraisal company, duly accredited by the Commission, at least once a year In accordance with the applicable rules of asset valuation and valuation methodology' as prescribed by the Commission.

8.13 Fund Manager - A REIT must appoint a fund manager that is independent from the REIT and its sponsor(s)/ promoter(s) and shall be subject to the following minimum requirements:

i. It must be a corporation duly organize under the laws of the Republic of the Philippines or a foreign corporation engaged in the business' of fund management with proven track record and duly licensed to do business in the Philippines by the appropriate regulatory agency;

ii. It must have a minimum paid - up capital" stock or assigned capital of Ten million pesos (Php10, 000.000.00), unless the Commission provides otherwise;

iii. Its office in the Philippines must have a meaningful role in its business activities and must perform accounting, compliance and investor relations, services in the Philippines;

iv. It must comply with the requirements of the relevant law or appropriate regulatory authority on the number of independent directors;

v. It must comply with the corporate, governance requirements, including the fit and proper rule, prescribed by this Act and its IRR;

vi. It must adopt measures as may be prescribed by the IRR of this Act to avoid conflicts of interest in the discharge of its duties as fund manager for the REIT; and

vii. It must employ a resident chief executive officer and at least two (2) full - time professional employees who have a track record' and experience in financial management as well as experience in the real estate industry.

8.14 REIT Property Manager - The. RElT must appoint a REIT property manager who shall be responsible for managing the real estate assets such as apartment buildings, office buildings, warehouses, hospital buildings" medical facilities, hotel buildings, resort facilities, manufacturing plants and other physical assets of the REIT. The contract between the REIT and the property manager must comply with the disclosure and other requirements prescribed for related party transactions.

The REIT property manager shall be independent from the REIT and its sponsor/promoter and possess the qualifications and be subject to such functions and responsibilities, restrictions and other requirements prescribed by the Commission.

The property manager must comply with the following minimum qualifications:

i. It must comply with the requirement of the SRC or the Commission on the number of independent directors;

ii. It must comply with the corporate governance requirements, including the fit and proper rule, prescribed by this Act and its IRR; and

iii. It must adopt measures as may be prescribed by the IRR of this Act to avoid conflicts of interest in the discharge of its duties as property manager for the REIT.

8.15 Independent Directors - At least one - third (113) of the board of directors of a REIT must be independent directors.

8.16 Fit and Proper Rule - To maintain the quality of management of the REIT and afford better protection to REIT investors, the Commission, or the concerned regulatory agency, shall prescribe or pass upon and review the qualifications and disqualifications of individuals elected or appointed as directors or officers of the REIT, REIT fund managers, REIT property managers, distributors and other REIT participants and disqualify those found unfit. The appropriate regulatory agency may disqualify, suspend or remove any director or officer who commits or omits an act which renders him unfit for the position.

In determining whether an individual is fit and proper to hold the position, regard shall be given to his integrity, experience, education, training, and competence: Provided, however, That the following persons shall in no case be allowed to serve or act in the capacity of officer, director or consultant of any REIT, REIT fund manager, or REIT property manager:

i. Any person convicted of any crime involving any security or financial product;

ii. Any person convicted of an offense involving fraud or embezzlement, theft, estafa or other fraudulent acts or transactions;

iii. Any person who, by reason of any misconduct, is enjoined by order, judgment, or decree by any court, quasi - judicial body or administrative agency of competent jurisdiction from acting as a director, officer; employee, consultant, or agent occupying any fiduciary position;

iv. Any person found by the appropriate regulatory agency to have violated, or aided, abetted, counseled commanded, induced, or procured the violation of this Act, the Corporation Code, the General Banking Law, the Insurance Code, the SRC, or' any related laws and any rules, regulations or orders thereunder; ,

v. Any person judicially declared to be' insolvent, or incapacitated to contract; and

vi. Any person found guilty by a foreign court, regulatory authority or government agency of the, acts or violations similar to any of the acts' or misconduct enumerated in the foregoing paragraphs.

A conviction in the first instance shall be considered sufficient ground for disqualification.:

8.17 Executive Compensation - The total annual compensation of all executive officers of the REIT shall not exceed such percentage of the net income before regular corporate income tax of the REIT during the immediately preceding taxable year, as may be provided in the IRR of this Act and shall be governed by the provisions on related party transactions.

8.18 Fund Manager and Property Manager Fees - Fees received by the REIT fund manager and the RET property manager from the REIT shall not exceed one percent (1%) of the net asset value of the assets under management.

Section 9. Reportorial and Disclosure Requirements. –

9.1 Requirements - The REIT shall comply with the reportorial and disclosure requirements prescribed by the Corporation Code, the SRC and the Exchange. At the minimum, the REIT shall disclose the following information:

i. Material contracts as defined under Section 3 of this Act;

ii. Allowable investments of the REIT under Section 8.3 hereof;

iii. Related party transactions under Section 8.11 hereof;

iv. Contracts between the REIT and fund manager or the property manager, including the identity of the parties, contract price, fees and the other basic terms of the contract;

v. Valuation of the real estate properties of the REIT, including the valuation methodology used therefore;

vi. Material changes in the income stream of the REIT;

vii. Any fee received by any party relating to the acquisition or disposition of the real estate of the REIT;

viii. Merger, consolidation, joint venture, takeover or spin - off involving the REIT;

ix. Any modification of the rights of the holders of any class of securities issued by the REIT and the corresponding effect of such modification upon the rights of the holders;

x. Any declaration of cash dividend, stock dividend, property dividend and pre - emptive rights by the REIT;

xi. Appointment of a receiver or liquidator for the REIT;

xii. Change in control of the REIT;

xiii. Losses, or potential losses which amount to at least five percent (5%) of the deposited property of the REIT;

xiv. Occurrence of any event of dissolution with details in respect thereto;

xv. Acts or facts that might seriously impair the business activities of the REIT;

xvi. Creation of mortgages, pledges or liens on the properties of the REIT;

xvii. Any development activity undertaken by the REIT, including the essential details thereof;

xviii. Direct and indirect ownership of directors and principal officers in the securities of the REIT;

xix. Any amendment to the articles of incorporation and bylaws of the REIT; and

xx. Any planned acquisition of outstanding shares or disposition of treasury shares of the REIT.

9.2 Special Quarterly and Annual Reports - In addition to the quarterly and annual reportorial and disclosure requirements prescribed for public and listed companies, the REIT shall make a report on and disclose the following to the Commission and the Exchange:

i. Summary of all real estate transactions entered into during the period, including the identity of the parties, the contract price, and their valuations:' including the methods' used to value the assets;

ii. Summary of all the REIT's real estate assets, including the location of such assets, their purchase' prices and the latest valuations, rentals received and occupancy rates, and/or the remaining terms of the REIT's leasehold properties;

iii. Comparative summary of the financial performance of the REIT covering various time periods (e.g. quarterly, one (1) - year, three (3) - year, five (5) - year or (l0) - year).

9.3 REIT Plan - The REIT plan or prospectus shall comply with the requirements of the SRC and disclose the risks specific to investing in REITs.

9.4 Failure of Compliance - Failure to comply with reportorial and disclosure requirements shall subject the REIT to the applicable penalties under the SRC and the rules of the Exchange, without prejudice to the filing of the appropriate administrative, civil or criminal action under this Act or existing laws.

ARTICLE III
TAXES AND OTHER RELATED ISSUES

Section 10. Income Taxation of REITs. - A REIT shall be subject to income tax under Chapter IV, Title II of the National Internal Revenue Code of 1997, as amended, on its taxable net income as defined in this Act: Provided, That in no case shall a REIT be subject to the minimum corporate income tax, as provided under Section 27(E) and Section 28(A)(2) of the same Code: Provided, further, That for purposes of computing the taxable net income of a REIT, dividends distributed by a REIT from its distributable income after the close of a taxable year and on or before the last day of the fifth (5") month following the close of the taxable year shall be considered as paid on the last day of such taxable year.

A REIT shall be subject to the income tax on its taxable net income as defined in Chapter V, Title II of the National Internal Revenue Code of 1997, as amended, instead of its taxable net income as defined in this Act, upon the occurrence of any of the following events subject to such curing period as may be prescribed in the IRR of this Act:

i. Failure to maintain its status as a public company as defined in Section 8.1 of this Act;

ii. Failure to maintain the listed status of the investor securities on the Exchange and the registration of the investor securities by the Commission; and/or

iii. Failure to distribute at least ninety percent (90%) of its distributable income required under Section 7 of this Act.

Section 11. Creditable Withholding Tax. - Income payments to a REIT shall be subject to a lower creditable withholding tax of one percent (1%).

Section 12. Transfer of Real Property. - Any existing, law to the contrary notwithstanding, the sale or transfer of real property to REITs, which includes the sale or transfer of any and all security interest thereto, shall be subject to fifty percent (50%) of the applicable Documentary Stamp Tax (DST) imposed under Title VII of the National Internal Revenue Code of 1997, as amended.

All applicable registration and annotation fees to be paid, related or incidental to the transfer of assets or the security interest thereto, shall be fifty percent (50%) 'of the' applicable registration and annotation fees.

The incentives granted under this section can be availed of by an unlisted REIT, provided it is listed with an Exchange not later than two (2) years from the date of the initial availment of the incentives.

The fifty percent (50%) of the applicable DST shall nevertheless be due and demandable together with the applicable surcharge, penalties, and interest thereon reckoned from the date such taxes should have been paid upon the occurrence of any of the following events subject to such curing period as may be prescribed in the IRR of this Act:

i. Failure to list with an Exchange within the period prescribed in this section;

ii. Failure to maintain its status as a public company as defined in Section 8.1 of this Act;

iii. Failure to maintain the listed status of the investor securities on the Exchange and the registration of the investor securities by the Commission; and/or

iv. Failure to distribute at least ninety percent (90%) of its distributable income required under Section 7 of this Act.

Section 13. Issuance and Transfer of Investor Securities. - The following rules shall apply:

i. The original Issuance of investor securities shall be subject to DST under Title VII of the National Internal Revenue Code of 1997, as amended;

ii. Any sale, barter, exchange or other disposition of listed investor securities through the Exchange, including block sales or cross sales with prior approval from the Exchange, shall be subject to the stock transaction tax imposed under Section 127(a) of the National Internal Revenue Code of 1997, as amended;

iii. Any sale, barter or exchange or other disposition of listed investor securities through the Exchange, including block sales or cross sales with prior approval from the Exchange, shall be exempt from the DST prescribed under Title VII of the National Internal Revenue Code of 1997, as amended; and

iv. Any initial public offering and secondary offering of investor securities shall be exempt from the tax imposed under Section 127(b) of the National Internal Revenue Code of 1997, as amended.

Section 14. Dividends Paid by REITs. - Cash or property dividends paid by a REIT shall be subject to a final tax of ten percent (10%), unless: (a) the dividends are received by a nonresident alien individual or a nonresident foreign corporation entitled to claim a preferential withholding tax rate of less than ten percent (10%) pursuant to an applicable tax treaty; or (b) the dividends are received by a domestic corporation or resident foreign corporation, or an overseas Filipino investor in which case, they are exempt from income tax or any withholding tax: Provided, That in the case of overseas Filipino investors, they are exempt from the dividends tax for seven (7) years from the effectivity of the tax regulations implementing this Act.

Section 15. VAT on Gross Sales or Gross Receipts of RElTs. - A REIT shall be subject to value - added tax (VAT) imposed under Title IV of the National Internal Revenue Code of 1997, as amended, on its gross sales from any disposal of real property, and on its gross receipts from the rental of such real property. A REIT shall not be considered as a dealer in securities and shall not be subject to VAT on its sale, exchange or transfer of securities forming' part of its real estate - related assets.

Section 16. General Application of the National Internal Revenue Code of 1997, as amended. - Unless otherwise provided under this Act, the internal revenue taxes under" the National Internal Revenue Code of 1997, as amended, shall apply.

Section 17. Delisting of REITs. - In the event the REIT is delisted from the Exchange, whether voluntarily or involuntarily, for failure to comply with the provisions of this Act or rules of the Exchange, the tax incentives granted under this Act shall be ipso facto revoked and withdrawn as of the date the delisting becomes final and executory and any tax incentives that may have been availed 'of by the REIT thereafter shall immediately be refunded to the Government and the surcharge and penalty prescribed by Section 19 hereof shall apply. If the delisting is for causes highly prejudicial to the' interest of the investing public such as violation of the disclosure and related party provisions of this Act or insolvency of the REIT due to mismanagement or misappropriation, conversion, wastage or dissipation of its corporate assets, the responsible persons shall refund to its investors at the time of final delisting the value of their shares.

ARTICLE IV
PENAL PROVISIONS

Section 18. Revocation of Registration. - If the Commission finds out that the REIT was established so as to seek the benefits of this Act without a true, intention to carry out its provisions and/or the IRR, the Commission shall revoke or cancel the registration of the securities of the REIT. The REIT shal1 pay the applicable taxes plus interests and23 surcharges under the National Internal Revenue Code of 1997, as amended.

Section 19. Penalties. - A fine of not less than Two hundred thousand pesos (Php200,000.00) nor more than Five million pesos (Php5, 000.000.00) or imprisonment of not less than six (6) years and one (1) day nor more than twenty - one (21) years, or both at the discretion of the court, shall be imposed upon any person, association, partnership or corporation, its officer, employee or agent, who, acting alone or in connivance with others, shall:

i. Understate or overstate the financial statements of the RElT;

ii. Cause any loss, conversion, misappropriation of the assets, securities or income of the REIT;

iii. Use another person to hold the legal title of the shares of the REIT for his benefit for the purpose of circumventing the minimum public ownership prescribed in Section 8.1 of this Act;

iv. Allow himself to be used by another person to hold legal title to the shares' of the REIT for the purpose of circumventing the minimum public ownership prescribed m Section 8.1 of this Act;

v. Submit false or misleading certification on the minimum public ownership required by this Act; or

vi. Violate any of the provisions of this Act, or the rules and regulations promulgated under authority hereof.

If the offender is a corporation, partnership or association or other juridical entity, the penalty may, at the discretion of the court, be imposed upon such juridical entity and/or upon the officer or officers of the corporation, partnership, association or entity responsible for the violation, and if such officer is an alien, he shall in addition to the penalties prescribed, be deported without further proceedings after service of sentence.

The prosecution and conviction of the offender under this Act and the imposition of the above penalties shall be without prejudice to the administrative, civil and criminal liabilities of the offender under the SRC.

ARTICLE V
MISCELLANEOUS PROVISIONS

Section 20. Corporate Governance. - The REIT property manager and the REIT fund manager shall be subject to the principles of corporate governance adopted by the proper regulatory body.

Section 21. Use of Registration Fees. - To carry out the purposes of this Act, the. Commission shall retain and use fifty percent (50%) of all fees paid to it relative to the establishment of REITs and the registration of their securities in addition to its annual budget.

Section 22. Implementing Rules and Regulations. - Within ninety (90) days from the effectivity of this Act; the Commission, in coordination with the Bangko Sentral ng Pilipinas (BSP) and the Department of Finance (DOF) and in consultation with other stakeholders such as the Philippine Stock Exchange and the real estate industry, shall promulgate the implementing rules and regulations of the provisions of this Act: Provided, That the Commission, the BSP and the DOF may continue to issue separate regulations that will apply exclusively to the institutions under their, respective jurisdiction, consistent with the implementing rules and regulations: Provided, further, That the Commissioner of the Bureau of Internal Revenue shall issue the lRR regarding all tax provisions of this Act (Tax Regulations), subject to the review of the Secretary of Finance, in accordance with Section 4 of the National Internal Revenue Code, as amended, after full and complete consultation with all concerned.1avvphi1

Section 23. Separability Clause. - If, for any reason, any article or provision of this Act or any portion therefore or application of such article, provision or portion thereof to any person, group or circumstance is declared invalid or unconstitutional, the remainder of this Act shall not be affected by such decision.

Section 24. Repealing Clause. - All laws, executive orders, rules and regulations and parts thereof which are inconsistent With this Act are hereby repealed or amended accordingly.

Section 25. Effectivity Clause. - This Act shall take effect fifteen (15) days after its complete publication in the Official Gazette or in at least two (2) newspapers of general circulation in the Philippines.

Lapsed into law on DEC 17 2009
without the signature of the President,
in accordance with Article VI
Section 27 (1) of the Constitution