EXAMPLE OF SELF-DEALING DIRECTOR
On December 23, 2019, Bukidnon Farmers Bank, a Rural Bank, thru its President, Ms.
Nica O. Barosso entered into a lease agreement (Exhibit A) with Sheena Mariel U. Dagawasan,
whereby Ms. Dagawasan was obligated to transfer and convey by way of lease in favor of the
Bukidnon Famers Bank, the third floor of her solely owned Wealthy Building in consideration of
monthly rent of P15,000.00. The lease contract has a term of five years starting on January 1, 2020
and end at noontime on January 1, 2025 renewable upon mutual agreement of the parties.
Ms. Dagawasan is a member of the Board of Directors of Bukidnon Famers Bank and owns
25% of the outstanding capital stock of the Bank. There are seven (7) Directors of the Bank with
two (2) independent directors.
In order for the contract to be valid, the following were made:
a. To determine fairness and reasonableness of the rate, a bank employee was instructed
to search for possible commercial building locations within the City and to get their
offer lease rates. The prospective lessors offered lease rates that are more or less within
the range of the lease contract rate with Ms. Dagawasan. The lease agreement was
reviewed by a lawyer of the Bank.
b. The presence of Ms. Dagawasan was not necessary to constitute a quorum of the Board.
A board meeting was called for to request authority to enter into contract with Ms.
Dagawasan. The By-laws of the Bank provides that majority of the number of directors
shall constitute a quorum for the transaction of corporate business, and every decision
of at least a majority of the directors present at the meeting at which there is a quorum
shall be valid as a corporate act, thus presence of four (4) directors is enough.
c. However, since Bukidnon Farmers Bank is a corporation vested with public interest,
approval by at least two-thirds (2/3) of the entire membership of the board with at least
majority of the independent directors is necessary to for the contract to be valid. Thus
during the Board meeting attended by all directors except Ms. Dagawasan, 6 Directors
including two (2) Independent Directors. The results of the vote showed that five (5)
Directors including the two (2) independent Directors approved the lease agreement.
Exhibit A
CONTRACT OF LEASE
KNOW ALL MEN BY THESE PRESENTS:
This Contract of Lease, made and entered into, by and between:
SHEENA MARIEL U. DAGAWASAN, single, Filipinos, of legal age, and with
residence and postal address at Zone 3, Dalwangan, Malaybalay City, hereinafter
referred to as the “Lessor”;
-and-
BUKIDNON FARMERS BANK, a Rural Bank duly organized and existing under
and by virtue of the laws of the Republic of the Philippines, represented herein by
its President, Nica O. Barosso, hereinafter referred to as the “Lessee”;
WITNESSETH; that -
WHEREAS, the LESSOR is the registered owner of a building known as Wealthy Building
situated at Fortich St., Sumpong, Malaybalay City, Philippines.
WHEREAS, the Lessor desires to lease out a portion of the afore-described property in
favor of the LESSEE and the LESSEE accepts the lease subject to the
terms and conditions herein set forth.
NOW, THEREFORE, for and in consideration of the foregoing premises and the
covenants hereinafter stipulated, the parties hereby agree as follows:
ARTICLE I PROPERTIES FOR LEASE
1.The LESSOR hereby transfers and conveys by way of LEASE in favor of the LESSEE
a portion of the afore-stated properties (hereinafter referred to as the Leased Properties)
specifically described as follows:
60 sq.m. open space, 3rd Floor, Wealthy Building, Fortich St., Malaybalay City.
2. Inspection; No Warranty. - The LESSOR leases the Leased Properties to the LESSEE
on an "as is, where is" basis. The LESSEE hereby declares that it has inspected the
Leased Properties prior to the execution of this Lease Agreement, and acknowledges that
it is fully satisfied with the conditions thereof. The LESSOR makes no warranty as to the
condition, operational or structural capability, or as to any hidden defects of the Property
which the LESSEE warrants to know by virtue of the LESSEE's duty to inspect.
3. Condition Precedent. - It is a condition precedent for the effectivity of this Lease
Agreement that the LESSEE submits to the LESSOR a copy of its latest BIR Income Tax
Return and Business Permit specifically authorizing the Lessee to conduct business
under the terms and conditions contained herein.
ARTICLE II CONSIDERATION
1. Rental Payment and Escalation Clause.- Within the first five (5) days of each calendar
month, the LESSEE shall pay the LESSOR a monthly rent at the rate of two hundred
pesos (P250.00) per square meter or the total amount of fifteen thousand pesos
(P15,000.00). In addition, the monthly rent shall escalate yearly by three (3%) percent of
the base monthly rent starting on the third year and each year thereafter until the
termination of this contract, the base rent being understood to be the monthly rent
applicable for the said year as opposed to the original rent provided above.
2. Advance Rental Payment.-Within five (5) days from the signing of this Lease
Agreement, the LESSEE shall remit to the LESSOR an amount equivalent to two (2)
months rent or the total sum of thirty thousand pesos (P30,000.00) to be applied as rental
payment for the last two (2) months of this contract.
3. Security Deposit. - Within five (5) days upon the signing of this Lease Agreement, the
LESSEE shall remit to the LESSOR an amount equivalent to one (1) month rent or fifteen
thousand pesos (P15,000.00) to serve as security deposit for any unpaid utility bills such
as electricity, water, telephone, sanitation, sewerage and others, and to answer for any
damages which the Leased Properties may suffer as well as to cover any unpaid monthly
rent; interests or penalties. This amount is refundable to the LESSEE free of any interest
thirty (30) days after the termination of this Lease Agreement subject to deduction for
whatever utility bills and monthly rentals, interests, penalties that have remained
unpaid and damages that may have been incurred, provided, that the LESSEE shall still
be liable for any and all bills, rentals, interests, penalties and damages that may exceed
this security deposit. The LESSEE shall not be allowed to offset or use its security deposit
as its monthly rental payment.
ARTICLE III TERM OF LEASE
1. Term. - Unless earlier terminated for reasons specified herein, the term of this Lease
Agreement shall be for five (5) years to start on January 1, 2020 and end at noontime on
January 1, 2025 renewable upon mutual agreement of the parties.
ARTICLE IV PURPOSE OF THE LEASE
1. Use of the Leased Properties. - The LESSEE shall use the Leased Properties
strictly and exclusively as law firm office. If the Leased Properties are used for other
purposes, the LESSOR has the choice to:
(i)Rescind the Lease Agreement; or
(ii)Increase the rent; or
(iii)Compel the LESSEE to stop the new activities.
In no case shall the Leased Properties be used for immoral or illicit purposes and illegal
acts or purposes.
2. Sub-Lease. - The LESSEE may sub-lease the Leased Properties; provided, that it has
secured the prior express written consent of the LESSOR and that the provisions of this
Lease Agreement is incorporated by reference in the proposed sub-lease; provided,
further, that the purpose of the sub-lease will be substantially similar to that of the original
lease provided, finally, that if the LESSOR so consents to the sub-lease, the LESSOR
shall receive a fixed percentage of ten (10%) of the sub-lease rates over and above the
regular rent already collected under this Lease Agreement.
It is understood that the LESSEE shall act as the surety of the sub-lessee for purposes
of this Lease Agreement. The LESSEE shall provide LESSOR with a copy of the sub-
lease agreement not later than ten (10) days after the execution of the sub-lease
agreement. In addition, the LESSEE shall remit LESSOR'S percentage participation in
the sub-lease rentals within the first five (5) days of each calendar month.
ARTICLE V DEFAULT
1. Interest Payment. - In the event the LESSEE fails to pay its monthly rent within the first
five (5) days of each month, the LESSOR shall charge interest on the monthly rent at the
rate of one (1%) percent per month, which shall be compounded monthly until full
payment is made.
Furthermore and whenever applicable, in the event the LESSEE fails to remit the
LESSOR'S percentage participation in the sub-lease rentals within the first five (5) days
of each month, the LESSOR shall charge interest on the LESSOR'S percentage
participation in the sub-lease rentals at the rate of one-half (1/2%) percent per month,
which shall be compounded monthly until full payment is made.
ARTICLE VI CANCELLATION
1.Grounds for Cancellation. - The LESSOR may cancel or terminate this Lease
Agreement, upon the happening of any of the following events:
2.1. The LESSEE fails to pay its monthly rent when the same falls due.
2.2. The LESSEE fails to remit LESSOR'S percentage participation in the sub-lease
rentals, if any, when the same falls due.
2.3. The LESSEE uses the Leased Properties for purposes other than those specified
herein, without prejudice to the options available to LESSOR under Section 1, Article IV
hereof.
2.4. The LESSEE violates any of the other terms and conditions of this Lease Agreement
or fails to get the necessary permits from the national and/or local government units /
agencies.
ARTICLE VII MISCELLANEOUS
1. Insurance. - The LESSEE shall obtain insurance coverage for the Leased Properties,
against all insurable risks applicable from a duly accredited and reputable insurance
company in an amount equal to the maximum insurable value of the Leased Properties.
The LESSOR shall be the Beneficiary of the required Insurance. In case of complete loss
or damage to the Leased Properties, and/or the improvements therein, during the term of
this lease, the LESSOR shall have the option to reconstruct or restore the lost or damaged
Leased Properties, and/or the improvements therein, to their original condition or to
consider this lease automatically terminated. In case of damage in part, rental shall be
reduced in proportion to the remaining tenantable or useable area.
2. Utilities. - All expenses for water, electricity, telephone, sanitation, sewerage,
gas and other public utility services shall be for the account of the LESSEE. The cost of
installation of utilities within the Leased Properties, such as water and electricity, shall be
for the account of the LESSEE; provided, that any installation shall be under the
control and supervision of the LESSOR and the latter has the right to indicate where the
meter connections shall be placed.
3. Improvements. - The LESSEE shall not make any structural changes, alterations,
additions or improvements on the Leased Properties without the prior written consent of
the LESSOR. Any alterations or improvements made or introduced by the LESSEE on
the Leased Properties with the written consent of the LESSOR shall, upon the termination
of this Lease Agreement, automatically be owned by the LESSOR without any obligation
on the part of the LESSOR to pay or refund its value or cost to the LESSEE.
4. Signs and Advertisements. - Subject to prior written consent of the LESSOR, the
LESSEE may install, erect or affix upon the Leased Properties, signs or advertisements
as may be necessary to promote and/or advertise the business in which it is engaged in.
In requesting the approval of the LESSOR, LESSEE should submit a description and the
specification of its proposed sign or advertisement.
5. Care of Leased Properties. - The LESSEE shall, at its own expense, maintain the
Leased Properties in a clean and sanitary condition free from noxious odors, disturbing
noises or other nuisances. The LESSEE, its employees, agents or representatives shall
not in any manner damage or deface any part of the Leased Properties.
The LESSEE shall comply with any and all reasonable rules and safety regulations which
may be promulgated from time to time by the LESSOR, together with all the rules,
regulations, ordinances or laws made by the duly constituted authorities; either by the
National or City government or any of its agencies and instrumentalities, arising from or
regarding the use, occupancy and sanitation of the Leased Properties.
6. General Maintenance, Sanitation, Repairs and Safety. - The cost of general
maintenance and upkeep of the Leased Properties shall be for the account of the
LESSEE. The LESSEE shall keep the Leased Properties in a clean, safe and sanitary
condition and introduce all the needed repairs at all times. The LESSEE shall dispose all
its garbage, waste, and other pollutants in accordance with the rules promulgated by the
national or local government. All major repairs resulting from damages not attributable to
the LESSEE's negligence shall be for the account of the LESSOR. For purposes of
this contract, repairs in amount not exceeding TWENTY THOUSAND PESOS
(P20,000,00) per occurrence of repairs shall be considered as minor repairs.
In case of damage to the Leased Properties or its appurtenances by fire, earthquake,
volcanic eruption, war or any unforeseen cause, the LESSEE shall give notice to the
LESSOR within a reasonable time. In the event that the LESSEE through its own fault or
negligence or that of its employees, agents or representatives, damages the Leased
Properties, and LESSEE fails to repair the damage within a reasonable time, then the
LESSEE shall be liable to LESSOR for liquidated damages in an amount equivalent to
six months rent without prejudice to such other amounts as may be due LESSOR under
this Lease Agreement and/or the law.
7. Fire Hazard and Obnoxious Substances. - The LESSEE shall not introduce, keep,
deposit or store in the Leased Properties any obnoxious substance or inflammable
material or substance not reasonably connected with the herein stated purpose of the
lease which might constitute a fire hazard, without the prior written consent of the
LESSOR. The LESSEE shall also not install within the Leased Properties any apparatus,
machinery or equipment which may cause obnoxious tremors or noises nor store
newspapers, cartons, wood, or other articles of light nature which may expose the Leased
Properties to fire or increase the fire hazard of the Leased Properties or change its
insurance rate.
8. Inspection of Premises. - The LESSOR reserves the right to enter and inspect the
Leased Properties at reasonable times during business hours and with prior notice. The
LESSEE agrees to cooperate with the LESSOR in keeping the Leased Properties in
good and tenantable condition.
9. Assignment. - The LESSOR reserves the right to assign, transfer or encumber any of
its rights and interests under this Lease Agreement to any entity without the need of
obtaining the consent of the LESSEE except to notify the latter of the same. In the event
of such transfer, assignment or encumbrance, the rights and interest of the LESSEE
under this Lease Agreement shall be respected and observed in its entirety by such
assignee, transferee or mortgagee, and for the entire term hereof unless otherwise
mutually agreed upon by the parties including the LESSEE.
10. Return of Premises. - Upon the termination of this Lease Agreement for any reason
whatsoever, the LESSEE shall peacefully and immediately vacate the Leased
Properties and return possession thereof to the LESSOR in good and tenantable
condition, devoid of all occupants, equipment and effects of any kind. Failure of the
LESSEE to return the Leased Properties as provided herein shall make it liable to pay
liquidated damages to the LESSOR in an amount equivalent to six (6) months rent without
prejudice to such other amounts as may be due LESSOR and/or such other remedies
available to the LESSOR under this Lease Agreement and/or under the law.
11. Right to Enter the Premises to Recover Actual Possession.- Upon the failure of the
LESSEE, or the sub-lessee as the case may be, to comply with any of the
terms and conditions of this lease or its failure to vacate and return the premises as
provided herein, the LESSOR or her authorized representative(s) shall have the right,
upon five (5) days written notice to the LESSEE, or upon written notice posted at the
entrance of the Leased Properties for the same period, to enter and take possession of
the said premises, without need of resorting to any court action, holding, taking
custody and impounding such possessions and belongings of the LESSEE found therein
after conducting an inventory of the same in the presence of witnesses, until such time
that all the rentals, interests, penalties, unpaid utility bills, damages or other amounts due
to the LESSOR has been fully settled by the LESSEE. All these acts being hereby agreed
to by the LESSEE as tantamount to his voluntary vacation of the leased premises without
necessity of suit in court and authorizing LESSOR to use all necessary and reasonable
force to break open doors and to enter the premises and take actual possession
thereof, and such entry and use of reasonable force should not be regarded as trespass,
nor be sued as such, or in any wise be considered as unlawful.
12. Transfer of Rights. - The LESSEE shall not assign, or transfer or encumber its rights
under this lease without the prior written consent of the LESSOR and no right, title or
interest thereto or therein shall be conferred on or vested in any other party other than
the LESSEE without such written consent.
13. Indemnity. - The LESSEE shall hold LESSOR free and harmless from any loss,
damage, injury suffered by the LESSEE, its agents or employees, clients, guests or
customers or other third persons arising out of the use of the Leased Properties by
LESSEE, its agents, employees, clients, guests, or customers including but not limited to,
claims for property damage, personal injury or wrongful death, or losses or damages
occasioned by reason of any event or cause which could not be foreseen, or which,
though foreseen, were inevitable such as but not limited to fire, earthquake, lightning,
typhoons, flood, volcanic eruption, robbery, theft or other crimes. In addition, the LESSOR
shall not be liable nor responsible:
(i) For the presence of bugs, vermin, rats, insects, or other similar creatures, if any, in the
Leased Properties:
(ii) For the failure of electrical and/or water supply due to causes beyond LESSOR's
control;
(iii) For any injury, loss or damage which the LESSEE, its agents or employees, might
sustain while in the Leased Properties due to causes attributable to the fault of said
LESSEE, employees, agents and/or representatives, or those of its clients, guests or
customers;
(iv) For any damage done or occasioned by, or arising from the plumbing, gas,
water, and/or other pipes or air-conditioning system or for the bursting, leaking or
destruction of any tank, cistern, washers, and water closets or waste pipelines in, above,
upon, or about said Leased Properties, nor for any damage arising from or attributable to
acts of negligence of the LESSEE or its agents, employees, representatives or any and all
other persons over which the LESSOR has no control.
14. Non-Waiver. - The failure of the LESSOR to insist upon a strict performance of any of
the terms, conditions and covenants hereof shall not be deemed a relinquishment or
waiver of any of the rights or remedies that the LESSOR may have, nor shall it be
construed as a waiver of any subsequent breach or default of its terms,
conditions and covenants which shall continue to be in full force and effect. No waiver by
the LESSOR of its rights under this Lease Agreement shall be deemed to have been
made unless expressed in writing and signed by the LESSOR.
15. Amendments. - Any amendments or additional terms and conditions to this Lease
Agreement must be in writing.
16. Venue. - In case of any dispute arising in connection with this Lease Agreement, the
parties hereby agree that the venue for the settlement of the dispute shall fall exclusively
within the jurisdiction of the proper courts in the City of Malaybalay, Province of Bukidnon,
Philippines.
IN WITNESS WHEREOF, the parties have set their hands and affixed their signatures
this 12th day of December 2019 in the City of Malaybalay, Bukidnon, Philippines.
BUKIDNON FARMERS BANK SHEENA MARIEL U. DAGAWASAN
Lessee Lessor
TIN 412-2414
Place of Issue: Malaybalay City
By:
NICA O. BAROSSO
President
TIN 234-8352
Place of Issue: Malaybalay City
SIGNED IN THE PRESENCE OF:
ELSIE Z. PAREDEZ JOSE L. LISAGAN
ACKNOWLEDGMENT
REPUBLIC OF THE PHILIPPINES }
MALAYBALAY CITY, BUKIDNON } S.S.
BEFORE ME, a Notary Public in the City of Malaybalay personally appeared
Name TIN Place Issued
NICA O. BAROSSO 234-8352 Malaybalay City
SHEENA MARIEL U. DAGAWASAN 412-2414 Malaybalay City
known to me and to me known to be the same persons who executed the foregoing instrument,
and he acknowledged to me that the same is their free act and deed.
This instrument, consisting of nine (9) pages, including the page on which this
acknowledgement is written, has been signed on the left margin on each and every page thereof
by BUKIDNON FARMERS BANK and SHEENA MARIEL U. DAGAWASAN and their witnesses,
and sealed with my notarial seal.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my notarial seal on
the day, year and place first above-written.
ATTY. ANTONIO C. ALFREDO
NOTARY PUBLIC
Until December 31, 2019
PTR No. 1224124/1-4-2019
IBP No. 82141341/1-4-2019
MCLE No. 11099
ROLL No. 531241
Doc. No. : __19_____;
Page No. : __1_____;
Book No. : __12____;
Series of 2019_____.
