6/18/2017 G.R.No.

L52518

TodayisSunday,June18,2017

CustomSearch

RepublicofthePhilippines
SUPREMECOURT
Manila

THIRDDIVISION

G.R.No.L52518August13,1991

INTERNATIONALHARDWOODANDVENEERCOMPANYOFTHEPHILIPPINES,petitionerappellee,
vs.
UNIVERSITYOFTHEPHILIPPINESandJOSEC.CAMPOS,JR.,respondentsappellants.

Taada,Vivo&Tanforpetitionerappellee.

DAVIDE,JR.,J.:p

FromanadversedecisionofthethenCourtofFirstInstance(nowRTC)Lagunadated3June1968inaspecial
civilactionfordeclaratoryreliefwithinjunction,CivilCaseNo.SC650entitledInternationalHardwoodandVeneer
Company of the Philippines vs. University of the Philippines and Jose Campos, the dispositive portion of which
reads:

WHEREFORE,theCourtherebyrendersjudgmentinfavorofpetitionerandagainsttherespondents:

(a)DeclaringthatRep.ActNo.3990doesnotempowertheUniversityofthePhilippines,inlieuofthe
BureauofInternalRevenueandBureauofForestry,toscale,measureandsealthetimbercutbythe
petitionerwithinthetractoflandreferredtoinsaidAct,andcollectthecorrespondingforestcharges
prescribedbytheNationalInternalRevenueCodethereforand

(b)Dismissingtherespondents'counterclaim.

respondentsappealedtotheCourtofAppeals.TheappealwasdocketedasC.A.G.R.No.49409R.

After the parties filed their respective Briefs in 1971, the Court of Appeals (Sixth Division) promulgated on 28
December1979aresolutionelevatingthecasetothisCourtasthe"entirecasehingesontheinterpretationand
construction of Republic Act 3990 as it applies to a set of facts which are not disputed by the parties and
therefore,isalegalquestion.1

CivilCaseNo.SC650wasfiledbypetitionerHardwoodbeforethetrialcourton28June1966. 2 Petitioner seeks

therein a declaration that respondent University of the Philippines (hereafter referred to as UP) does not have the right to
supervise and regulate the cutting and removal of timber and other forest products, to scale, measure and seal the timber
cutand/ortocollectforestcharges,reforestationfeesandroyaltiesfrompetitionerand/orimposeanyotherdutyorburden
uponthelatterinthatportionofitsconcession,coveredbyLicenseAgreementNo.27Aissuedon1February1963,ceded
in full ownership to the UP by Republic Act No. 3990 asks that respondents be enjoined from committing the acts
complained of and prays that respondents be required to pay petitioner the sum of P100,000.00 as damages and costs of
thesuit.

Itsmotiontodismissonthegroundofimpropervenuehavingbeenunfavorablyactedupon,andpursuanttothe
orderofthetrialcourtof26August1967,respondentsfiledtheirAnsweron13September1987, 3 wherein they
interpose the affirmative defenses of, among others, improper venue and that the petition states no cause of action they
furthersetupacounterclaimforthepaymentofitbypetitionerofforestchargesontheforestproductscutandfelledwithin
the area ceded to UP under R.A. No. 3990 from 18 June 1964, with surcharges and interests as provided in the National
InternalRevenueCode.

PetitionerfiledaReplyandAnswertoCounterclaim.4

On 18 October 1967, the parties submitted a Joint Stipulation of Facts and Joint Submission of the Case for
Judgment,5whichreadsasfollows:

COME NOW the parties in the above entitled case by the undersigned counsel, and respectfully
submitthefollowingJOINTSTIPULATIONOFFACTSANDJOINTSUBMISSIONOFTHECASEFOR
JUDGMENT,withoutprejudicetothepresentationofevidencebyeitherparty:

xxxxxxxxx

2.Plaintiffis,amongothers,engagedinthemanufacture,processingandexportationofplywoodand
was, for said purpose, granted by the Government an exclusive license for a period of 25 years
expiring on February 1, 1985, to cut, collect and remove timber from that portion of timber land
located in the Municipalities of Infanta, Mauban and Sampaloc Province of Quezon and in the
Municipalities of Siniloan, Pangil, Paete, Cavite and Calauan, Province of Laguna under License
Agreement No. 27A (Amendment) issued and promulgated by the Government through the
SecretaryofAgricultureandNaturalResourcesonJanuary11,1960....

3.ThataforementionedTimberLicenseNo.27A(Amendment)isarenewaloftheTimberLicense
Agreement No. 27A previously granted by the Government to the plaintiff on June 4, 1953 to
February1,1963....

http://www.lawphil.net/judjuris/juri1991/aug1991/gr_l_52518_1991.html 1/8
6/18/2017 G.R.No.L52518

4.Plaintiff,sinceJune4,1953,continuouslyuptothepresent,hasbeeninpeacefulpossessionof
saidtimberconcessionandhadbeenfellingcuttingandremovingtimbertherefrompursuanttothe
aforementionedTimberLicenseAgreementNo.27A(Amendment)ofJanuary11,1960

5.Plaintiff,onthestrengthoftheLicenseAgreementexecutedbytheGovernmentonJune4,1953
(LicenseAgreementNo.27A)andoftheLicenseAgreementNo.27A(Amendment)ofJanuary11,
1960, has constructed roads and other improvements and installations of the aforementioned area
subject to the grant and purchased equipment in implementation of the conditions contained in the
aforementionedLicenseAgreementandhasinconnectiontherewithspentmorethanP7,000,000.00
asfollows:...

6. Sometime on September 25, 1961, during the effectivity of License Agreement No. 27A
(Amendment) of January 11, 1960, the President of the Philippines issued Executive Proclamation
No.791whichreadsasfollows:

xxxxxxxxx

RESERVING FOR THE COLLEGE OF AGRICULTURE, UNIVERSITY OF THE

PHILIPPINES, AS EXPERIMENT STATION FOR THE PROPOSED DAIRY RESEARCH
AND TRAINING INSTITUTE AND FOR AGRICULTURAL RESEARCH AND
PRODUCTION STUDIES OF THIS COLLEGE A CERTAIN PARCEL OF LAND OF THE
PUBLICDOMAIN,SITUATEDPARTLYINTHEMUNICIPALITIESOFPAETEANDPAKIL
,PROVINCE OF LAGUNA, AND PARTLY IN THE MUNICIPALITY OF INFANTA,
PROVINCEOFQUEZON,ISLANDOFLUZON.

UpontherecommendationoftheSecretaryofAgricultureandNaturalResourcesandpursuanttothe
authority vested in me by law, I, Carlos P. Garcia, President of the Philippines, do hereby withdraw
from sale or settlement and reserve for the College of Agriculture, University of the Philippines, as
experimentstationfortheproposedDairyResearchandproductionstudiesofthisCollege,acertain
parceloflandofthePublicdomainsituatedpartlyinthemunicipalitiesofPaeteandPakilprovinceof
Laguna, and partly in the municipality of Infants, Province of Quezon, Island of Luzon, subject to
private rights, if any there be, and to the condition that the disposition of timber and other forest
products found therein shall be subject to the forestry laws and regulations, which parcel of land is
moreparticularlydescribedasfollows,towit:

xxxxxxxxx

IN WITNESS WHEREOF, I have hereunto set my hand and caused the seal of the Republic of the
Philippinestobeaffixed.

DoneintheCityofManilathis25thdayofSeptember,intheyearofOurLord,nineteenhundredand
sixtyone,andoftheIndependenceofthePhilippines,thesixteenth.

(SGD.) CARLOS P. GARCIA President of the

Philippines

xxxxxxxxx

7.ThatonoraboutJune18,1964,duringtheeffectivityoftheaforementionedLicenseAgreement
No.27A(Amendment)ofJuly11,1960,RepublicActNo.3990wasenactedbytheCongressofthe
PhilippinesandapprovedbythePresidentofthePhilippines,whichRepublicActprovidesasfollows:

AN ACT TO ESTABLISH A CENTRAL EXPERIMENT STATION FOR THE UNIVERSITY

OFTHEPHILIPPINES.

Be it enacted by the Senate and the House of Representatives of the Philippines in Congress
assembled:

SECTION1.Thereisherebyestablishedacentralexperimentstationfortheuseofthe
University of the Philippines in connection with its research and extension functions,
particularlybytheCollegeofAgriculture,CollegeofVeterinaryMedicineandCollegeof
ArtsandSciences.

SEC.2.For this purpose, the parcel of the public domain consisting of three thousand
hectares, more or less, located in the Municipality of Paete, Province of Laguna, the
preciseboundariesofwhicharestatedinExecutiveProclamation791,Seriesof1961,is
hereby ceded and transferred in full ownership to the University of the Philippines,
subjecttoanyexistingconcessions,ifany.

SEC.3.Alloperationsandactivitiescarriedoninthecentralexperimentstationshallbe
exempt from taxation, local or general, any provision of law to the contrary
notwithstanding, and any incidental receipts or income therefrom shall pertain to the
generalfundoftheUniversityofthePhilippines.

SEC.4.ThisActshalltakeeffectuponitsapproval.Approved,June18,1964.

8.ThatonthestrengthoftheprovisionsofRepublicActNo.3990,andpriortotheinstitutionofthe
presentsuit,defendantshavedemanded,verballyaswellasinwritingtoplaintiff.

(a) That the forest charges due and payable by plaintiff under the License Agreement
27A (Amendment) referred to in paragraph 2 hereof be paid to the University of the
Philippines,insteadoftheBureauofInternalRevenueand

(b) That the selling of any timber felled or cut by plaintiff within the boundaries of the
Central Experiment Station as defined in Republic Act No. 3990 be performed by
personneloftheUniversityofthePhilippines.

http://www.lawphil.net/judjuris/juri1991/aug1991/gr_l_52518_1991.html 2/8
6/18/2017 G.R.No.L52518

9.Thatthepositionoftheplaintiffoilthedemandofthedefendantswasfullydiscussedintheletter
dated April 29, 1966 of plaintiffs lawyer addressed to the President of the University of the
Philippines,copyofwhichisheretoattachedasAnnex"A"hereof.

10.Thatinlinewithitspositionasstatedinparagraphthereof,plaintiffhasrefusedtoallowentryto
personneloftheUniversityofthePhilippinestotheCentralExperimentStationareaassignedthereto
forthepurposeofsupervisingthefellingcuttingandremovaloftimberthereinandscalinganysuch
timbercutandfelledpriortoremoval

11. That in view of the stand taken by plaintiff and in Relation to the implemetation of Republic Act
No. 3990 the defendant Business Executive sent the letter quoted below to the Commissioner of
InternalRevenue:

xxxxxxxxx

February8,1966

CommissionerofInternalRevenue

Manila

Re:ForestChargesofU.P.PaeteLandGrant

DearSir:

Under Republic Act 3990 approved in June, 1964 a parcel of forest land approximately 3,500
hectaresinareawascededinfullownershipbythegovernmenttotheUniversityofthePhilippines.
This area is known as Paete Land Grant, the title to which is presently issued in the name of the
University of the Philippines. The law transferring the ownership to the University of the Philippines
gives the university full rights of dominion and ownership, subject to the existing concession of
InternationalHardwoodandVeneerCompanyofthePhilippines.Underthetermsofthislawallforest
charges due from the concessionaire should now be paid to the University of the Philippines. The
purposeofgivingthislandgranttotheUniversityistoenableustogenerateincomeoutoftheland
grantandestablisharesearchandexperimentalstationfortheCollegesofAgriculture,Forestry,Arts
andSciencesandVeterinaryMedicine.

Iwouldlike,therefore,toinformyouandtosecureyourapprovalofthefollowingmatters:

1. All forest charges paid by Interwood to the District Forester of Laguna from June,
1964 up to the present should be remitted in favor of the University of the Philippines
pines

2. All forest charges presently due from Interwood shall hereafter be paid to the
UniversityofthePhilippinesandlastly

3.HereaftertheUniversityofthePhilippinesshallreceiveallforestchargesandroyalties
duefromanyloggingconcessionatthelandgrant.

May we request that proper instructions be issued by the district Forester of Laguna about this
matter.Thankyou.

Verytrulyyours,

Sgd.)JOSEC.CAMPOSJR.

BusinessExecutive

12. That in reply to the above letter of defendant Business Executive dated February 8, 1966, the
CommissionerofInternalRevenueissuedthefollowingletterrulingdatedMarch11,1966:

xxxxxxxxx

March11,1966

U.P.PaeteLandGrant

UniversityofthePhilippines

Diliman,QuezonCity

Attn:JoseC.Campos,Jr.

BusinessExecutive

Gentlemen:

ThishasreferencetoyourletterdatedFebruary8,1966statingasfollows:

xxxxxxxxx

Inreplythereto,Ihavethehonortoinformyouasfollows:

In accordance with Section 266 of the Tax Code as amplified by Section 15(a) of Revenue
Regulations No. 85, the Forest Products Regulations, forest products, cut, gathered and removed
fromregisteredprivatewoodlandsarenotsubjecttoforestcharges,buttheymustbeinvoicedwhen
removed to another municipality or for commercial purposes in the manner prescribed by the
regulations.AsthePaeteLandGrantwascededbylawtotheU.P.infullprivateownershipandas
thegrantismanifestlytobeconsideredregistered,noforestchargesareactuallydueandpayable
on the timber cut and removed therefrom. The forest charges purportedly to be paid by any
http://www.lawphil.net/judjuris/juri1991/aug1991/gr_l_52518_1991.html 3/8
6/18/2017 G.R.No.L52518

concessionaire under any licensing agreement entered or to be entered into by the U.P. are,
therefore,tobeconsiderednotasthechargescontemplatedbytheNationalInternalRevenueCode
butaspartoftheroyaltiespayablebytheconcessionairesfortheexploitationofthetimberresources
ofthelandgrant.

Accordingly,youqueriesareansweredviz:

1. The University may directly collect the supposed forest charges payable by
concessionairesofthelandgrant.

2. The forest charges paid by International Hardwood and Veneer Company of the
Philippinesmayberefundedprovidedthataformalclaimfortherefundthereofismade
within two years from the date of payment. The proper claimant shall be International
HardwoodandnottheUniversity.

Verytrulyyours,

(Sgd.)MISAELP.VERA

CommissionerofInternalRevenue

13. That subsequently, defendant Business Executive sent the letter quoted below to the District
ForesteroftheprovinceofLagunaunadatedApril18,1966:

April18,1966

TheDistrictForester

BureauofForestry

Sta.Cruz,Laguna

DearSir:

Enclosed is a copy of a letter to the Commissioner of Internal Revenue concerning the right of the
UniversityofthePhilippinestocollectforestchargesfromtheexistingloggingconcessionaireatthe
Laguna Land Grant (formerly Paete Land Grant). This tract of forest land containing some 3,500
hectares was ceded to the University of the Philippines in full ownership by Republic Act No. 3990,
approvedinJune,1964.Inviewthereof,theUniversityofthePhilippinesrequestedthatitsauthority
over said land be recognized and that the existing concessionaire, International Hardwood and
VeneerCompanyofthePhilippines,inturnpayitsforestchargesdirectlytotheUniversityinsteadof
tothenationalgovernment.

Pleasetakenoteofpage"2"oftheenclosedletteroftheCommissionerofInternalRevenueonthe
officialrulingoftheBureauofInternalRevenuetothefollowingpointsraisedbytheUniversity:

1. That the University of the Philippines may now directly collect forest charges from
INTERWOOD,theexistingloggingconcessionaire.

2.ThatforestchargespaidbyINTERWOODtotheBureauofForestryfromJune,1964
up to April, 1966 shall be refunded to the University of the Philippines. In this manner,
INTERWOODisrequestedtofileaclaimfortherefundintheamountheretoforepaidby
ittoberemittedtotheUniversityofthePhilippines.

On the basis of this letter to the Commissioner of Internal Revenue, it is understood that forest
charges on timber cut from the Laguna Land Grant as scaled by scalers of the University of the
Philippines shall now be paid directly to the University of the Philippines. In another ruling by the
CommissionerofInternalRevenue,theUniversity,particularlytheLagunaLandGrant,isexempted
fromallkindsofInternalRevenuetaxes.

Verytrulyyours,

(Sgd.)JoseC.Campos,Jr.

BusinessExecutive

14. That the above quoted letter of defendant Business Executive dated April 18, 1966 was duly
endorsedbytheDistrictForesteroftheprovinceofLagunatotheDirectorofForestry.

15.ThatonoraboutJune7,19667theAssistantDirectorofForestryaddressedtoplaintifftheletter
datedJune7,1966,whichstatesasfollows:

Sirs:

This is in connection with your request for this Office to comment on your reply to the
letterofMr.JoseC.Campos,Jr.oftheUniversityofthePhilippines.

InyourreplytotheletterofMr.Campos,itisstatedthattheUniversityofthePhilippines
isclaimingtheright:

(a) To scale, measure and seal the timber cut inside the area covered by
theU.P.LandGrantatPaete,Laguna

(b)Tocollectthecorrespondingforestcharges

(c)Tocollectroyaltiesasidefromtheforestchargesand

(d)ToexerciseineffectalltheauthorityvestedbylawupontheBureauof
Forestryinthecutting,removalanddispositionofthetimberfromsaidarea,
http://www.lawphil.net/judjuris/juri1991/aug1991/gr_l_52518_1991.html 4/8
6/18/2017 G.R.No.L52518

and the authority of the Bureau of Internal Revenue respecting the

measurement and scaling of the logs and the collection of the
correspondingforestchargesandotherfeesinconnectiontherewith.

ThisofficeisinfullaccordwithyourargumentsagainsttheclaimoftheUniversityofthe
Philippines to have acquired the above rights. We believe that the right vested the
INTERWOODbyvirtueofnumberLicenseAgreementNo.27A(Amendment)toutilize
thetimberinsidesubjectareaisstillbindingandshouldtherefore,berespected.Itison
thebasisofthisacknowledgmentthatwesentyourclientourletterofNovember4,1965
requesting him to comment on the application of the State University for a Special
TimberLicenseoverthesaidarea.

16. That acting on the endorsement referred to in paragraph l4, the Director of Bureau of Forestry
issuedtheletterrulingquotedbelow,datedJune30,1966:

xxxxxxxxx

June30,1966

DistrictForester

Sta.Cruz,Laguna

(ThrutheRegionalDirectorofForestry,Manila)

Sir:

This concerns your inquiry contained in the 3rd paragraph of your letter dated April 26, 1966,
designatedasabove,astowhetherornotyoushallturnoverthescalingworkforlogscutfromthe
areaoftheInternationalHardwood&VeneerCompanyofthePhilippinesinthePactoLandGrantto
ScalersoftheUniversityofthePhilippines.

In view of the ruling of the Commissioner of Internal Revenue that the Paete Land Grant, which
embraces the area of the International Hardwood & Veneer Company of the Philippines, is
consideredaregisteredprivatewoodlandoftheUniversityofthePhilippinesandthereforenoforest
chargesareactuallydueandpayableonthetimbercutandremovedtherefrom,andinviewfurther
of the ruling of said Commissioner that the forest charges purportedly to be paid by any
concessionaire under any licensing agreement entered or to be entered into by the U.P. are to be
considerednotasthechargedcontemplatedbytheNationalInternalRevenueCodebutaspartof
theroyaltiespayablebytheconcessionairesfortheexploitationofthetimberresourcesoftheland
grant,youmayturnoverthescalingworkthereintothescalersoftheU.P.

However,youshouldguardagainsttheuseofsuchlicensingagreementsenteredortobeentered
intobytheU.P.asameansofsmugglingforestproductsfromtheneighboringpublicforests.

Verytrulyyours,

(SGD.)ANTONIOA.QUEJADA

xxxxxxxxx

On the basis of the above JOINT STIPULATION OF FACTS, the pleadings filed in the case, and
whateveradditionalevidencemaybepresentedbytheparties,thepartieshereto,throughcounsel,
jointly move and pray of this Honorable Court that judgment be rendered granting full and
appropriaterelief,onthefollowingissues:

1.Whetherplaintiff,asofthedateofpresentcasewasfiled,shouldpayforestcharges
due and payable under its timber License Agreement No. 27A (Amendment) as set
forth in paragraph 2 hereof', to the Bureau of Internal Revenue, or to the University of
thePhilippinesand

2.IntheeventthatitbefoundbythisHonorableCourtthatsaidforestchargesaretobe
paidtotheUniversityofthePhilippines,whetherornottheUniversityofthePhilippines
is entitled to supervise, through its duly appointed personnel, the logging, telling and
removal of timber within the Central Experiment Station area as described in Republic
ActNo.3990,andtoscalethetimberthusfelledandcut.

ManilaforLaguna,September29,1967.

Upon the foregoing Stipulation of Facts, the trial court rendered its judgment on 3 June 1968 in favor of the
petitioner,thedispositiveportionofwhichisquotedatthebeginningofthisdecision.Indecidingthecaseagainst
UP,itheld:

...thecourtfindsthattherespondents'demandonthepetitionerhasnolegalbasis.Inthefirstplace,
thecessioninfullownershipofthetractoflandreferredtointheActwasexpresslymade'subjectto
anyexistingconcessions.'InasmuchasatthetimeoftheenactmentoftheAct,thepetitioner'stimber
concessionoverthetractoflandwasexistingandwouldcontinuetoexistuntilFebruary1,1985,the
University of the Philippines will acquire full ownership' and exclusive jurisdiction to control and
administerthepropertyonlyafterFebruary1,1985.ThecessionofthepropertytotheUniversityof
thePhilippinesisakintothedonationofaparcelofland,subjecttousufruct.Thedoneeacquiresfull
ownershipthereofonlyupontheterminationoftheusufruct.Atthetimeofthedonation,allwhatthe
donee acquires is the 'naked' ownership of the property donated. In the second place, the
respondents' demand cannot be valid unless the provisions of Sees. 262 to 276 of the National
Internal Revenue Code regarding the measuring of timber cut from the forest and the collection of
the prescribed forest charges by the Bureau of Internal Revenue and Bureau of Forestry are first
amended.Intheirarguments,therespondentstriedtostretchthescopeoftheprovisionsofRepublic
Act No. 3990 in order to include therein such amendment of the provisions of the National Internal
Revenue Code and Revised Administrative Code, but they failed to convince the Court, not only
http://www.lawphil.net/judjuris/juri1991/aug1991/gr_l_52518_1991.html 5/8
6/18/2017 G.R.No.L52518

becauseofthefirstreasonabovestated,butalsobecauseitclearlyappearsthatsuchamendmentis
notintendedinRepublicActNo.3990,whichdoesnotcontainevenaremoteallusiontheretoinits
titleorageneralamendatoryprovisionattheend.Inthethirdplace,underRepublicActNo.3990,
the University of the Philippines cannot legally use the tract of land ceded to it for purposes other
than those therein expressly provided, namely, 'for the use of the University of the Philippines in
connection with its research and extension functions, particularly by the College of Agriculture,
CollegeofVeterinaryMedicineandCollegeofArtsandSciences.'Hence,upontheexpirationofthe
petitioner'stimberconcession,theUniversityofthePhilippinescannotevenlegallyrenewitorgrant
timber concession over the whole tract of land or over portions thereof to other private individuals
andexercisethefunctionsoftheBureauofInternalRevenueandBureauofForestrybyscalingand
measuringthetimbercutwithintheareaandcollectingfromthemtheforestchargesprescribedby
theNationalInternalRevenueCode.

RespondentsclaimintheirBriefthatthetrialcourterred:

... WHEN IT DID NOT DISMISS THE PETITION FOR DECLARATORY RELIEF WITH INJUNCTION
INSPITEOFITSINHERENTJURISDICTIONALDEFECTSTHATSHOULDWARRANTADISMISSAL.

II

... WHEN IT DECLARED THAT REPUBLIC ACT NO. 3990 DOES NOT EMPOWER THE
RESPONDENT UNIVERSITY OF THE PHILIPPINES, IN LIEU OF THE BUREAU OF INTERNAL
REVENUEANDBUREAUOFFORESTRY,TOSCALE,MEASUREANDSEALTHETIMBERCUTBY
THE PETITIONER WITHIN THE TRACT OF LAND REFERRED TO IN SAID ACT, AND COLLECT
THE CORRESPONDING FOREST CHARGES PRESCRIBED BY THE NATIONAL INTERNAL
REVENUECODE.

1.Thefirstassignederroriswithoutmerit.IntheJointStipulationofFacts,thepartiesjointlymoveandpraythat
thetrialcourtrenderjudgmentgrantingfullandappropriateremedyonthefollowingissues:

l. Whether plaintiff, as of the date of present case was filed, should pay forest charges due and
payable under its Timber License Agreement No. 27A (Amendment) as set forth in paragraph 2
hereof,totheBureauofInternalRevenue,ortotheUniversityofthePhilippinesand

2.IntheeventthatitbefoundbythisHonorableCourtthatsaidforestchargesaretobepaidtothe
UniversityofthePhilippines,whetherornottheUniversityofthePhilippinesisentitledtosupervise,
through its duly appointed personnel, the logging, felling and removal of timber within the Central
ExperimentStationareaasdescribedinRepublicActNo.3990,andtoscalethetimberthusfelled

TheseissuesbringthematterwithinthescopeofanactionfordeclaratoryreliefunderSection1,Rule64ofthe
RulesofCourtandrendermeaninglesstheappealtotherulelaiddowninSarmiento,etal.vs.Caparas,etal. 6
thatdeclaratoryreliefcannotbejoinedbyinjunction,becausehereinpetitioner,foralllegalintentsandpurposes,abandoned
itbyitsfailuretoraiseitintheStipulationofFacts.Thus,whatattainsisanamendmenttobothpleadings(thecomplaint
andtheanswer),whichisauthorizedbySection5,Rule10oftheRulesofCourt.Saidsectionpertinentlyprovides:

SEC.5.Amendmenttoconformtoorauthorizepresentationofevidence.Whenissuesnotraised
by the pleadings are tried by express or implied consent of the parties, they shall be treated in all
respect, as if they had been raised in the pleadings. Such amendment of the pleadings as may be
necessarytocausethemtoconformtotheevidenceandtoraisetheseissuesmaybemadeupon
motion of any party at any time, even after judgment but failure to so amend does not affect the
resultofthetrialbytheseissues....

Thestipulationoffactsandtheagreementastotheissuesunquestionablysatisfytherequisitesfordeclaratory
relief.(a)theremustbeajusticiablecontroversy(b)thecontroversymustbebetweenpersonswhoseinterests
are adverse (c) the party seeking declaratory relief must have a legal interest in the controversy and (d) the
issueinvokedmustbeapeforjudicialdetermination.7

There is a justiciable controversy where there is an actual controversy, or the ripening seeds of one exists
between the parties, all of whom are suijuris and before the court, and that the declaration sought will help in
endingthecontroversy.Adoubtbecomesajusticiablecontroversywhenitistranslatedintoaclaimofrightwhich
isactuallycontested.8

2. On the second assigned error, respondents assert that: (a) Under R.A. No. 3990, the Republic of the
PhilippinesmayeffectcollectionofforestchargesthroughtheUniversityofthePhilippinesbecausetheLicense
AgreementdoesnotexpresslyprovidethattheforestchargesshallbepaidtotheBureauofInternalRevenuein
theabsenceofaspecificcontractualprovisionlimitingittoaparticularagencyincollectingforestchargesowing
toit,theRepublicmayeffectsuchcollectionthroughanotheragency.(b)Havingbeenvestedwithadministrative
jurisdictionoverandbeingtheownerofthetractoflandinquestion,theUPacquiredfullcontrolandbenefitofthe
timberandotherresourceswithinthearea.Timberareaswithinthecededpropertybutoutsidetheconcessionof
petitionercanbefullyexploitedbyUP.However,inrespecttotimberareaswithinthecededpropertybutcovered
bytheconcessionofpetitioner,onlyforestcharges(ormoreappropriately,royalties)maybeenjoyedbyUPuntil
theexpirationofpetitioner'slicense.Todenyitsuchchargeswouldrenderits"fullownership"emptyandfutile.(c)
TheUPisclearlyentitledtotheincomederivedfromthetractoflandcededtoit,forSection3ofR.A.No.3990
expresslyprovides:

All operations and activities carried on in the central experiment station shall be exempt from
taxation, local or general, any provision of law to the contrary notwithstanding, and any incidental
receipts or income therefrom shall pertain to the general fund of the University of the Philippines.
(emphasissuppliedforemphasis).

(d) As provided by R.A. No. 3990, the UP is duty bound to operate and maintain a central experiment station
since this law does not provide for appropriations for such purpose, it is clearly the legislative intention that the
establishment and maintenance thereof must be financed by the earnings or income from the area, which can
onlycomefromthetimberandtheroyaltiesorchargespayabletherefrom.Thisisinaccordancewiththegeneral
principle that a grant of authority or jurisdiction extends to all incidents that may arise in connection with the
http://www.lawphil.net/judjuris/juri1991/aug1991/gr_l_52518_1991.html 6/8
6/18/2017 G.R.No.L52518

matteroverwhichjurisdictionisexercised.(e)SupervisionoftheLicenseAgreementinfavorofpetitionerbyUP
wasintendedbyR.A.No.3990.(f)Finally,thetwogovernmentagenciesaffectedbyR.A.No.3990haveissued
specificrulingsrecognizingtheauthorityofUPtocollectroyaltiesorchargesandtosupervisepetitioner'slogging
operations.

Petitionerrefutestheforegoingargumentsofrespondentsbyassertingthat:(a)TheUPhasnotbeengrantedby
R.A.No.3990theauthoritytocollectforestchargesortheauthoritytosupervisetheoperationbythepetitionerof
thetimberconcessionaffectedbysaidAct.

The rule is wellsettled that legislative grants must be construed strictly in favor of the public and most strongly
againstthegrantee,andnothingwillbeincludedinthegrantexceptthatwhichisgrantedexpresslyorbyclear
implication. Under Section 262 of the Tax Code, as amended, the duties incident to the measuring of forest
productsandthecollectionofthechargesthereonshallbedischargedbytheBureauofInternalRevenueunder
theregulationsoftheDepartmentofFinance.ThereforestationfeeshallbecollectedbytheBureauofForestry.9
The supervision and regulation of the use of forest products and of the cutting and removal of forest products are vested
upontheBureauofForestry. 10R.A.No.3990doesnotexpressly,orevenimpliedly,granttheUPanyauthoritytocollect
fromtheholdersoftimberconcessionsontheareacededtoitforestchargesdueandpayabletotheGovernmentunderthe
Tax Code, or to enforce its provisions relating to charges on forest products or to supervise the operations of the
concessionsbytheholdersthereof(b)Thecessioninfullownershipofthelandinquestionwasexpresslymade"subjectto
any concession, if any", and that petitioner's concession would continue until 1 February 1985 the UP then would acquire
full ownership and exclusive jurisdiction to control and administer the property only after 1 February 1985. The position of
UPisakintothatofadoneeofaparceloflandsubjecttousufruct.(c)TherulingsoftheCommissionerofInternalRevenue
andtheActingDirectoroftheBureauofForestryarepatentlyincorrectmoreover,saidagenciesdonothavethepowerto
interpretthelaw,whichisprimarilyafunctionofthejudiciary.(d)Finally,ithasacquiredavestedrighttooperatethetimber
concessionunderthesupervisionandcontroloftheBureauofForestry.

Thereismeritinthesecondassignederror.

UnderProclamationNo.791,dated25September1961,aparceloflandofthepublicdomaindescribedtherein,
withanareaof3,500hectares,whichistheveryparceloflandsubjectofR.A.No.3990,waswithdrawnfromsale
orsettlementandwasreservedfortheCollegeofAgricultureoftheUPasexperimentstationfortheproposed
DairyResearchandTrainingInstituteandforresearchandproductionstudiesofsaidcollege,subjecthoweverto
private rights, if any, and to the condition that the disposition of timber and other forest products found thereon
shallbesubjecttoforestrylawsandregulations.

Theabovereservationiswithintheareacoveredbypetitioner'stimberlicense.

Pursuant, however, to R.A. No. 3990 which establishes a central experiment station for the use of the UP in
connection with its research and extension functions, particularly by the College of Agriculture, College of
VeterinaryMedicineandCollegeofArtsandSciences,theabove"reserved"areawas"cededandtransferredin
fullownershiptotheUniversityofthePhilippinessubjecttoanyexistingconcessions,ifany."

WhenitcededandtransferredthepropertytoUP,theRepublicofthePhilippinescompletelyremoveditfromthe
publicdomainand,morespecifically,inrespecttotheareascoveredbythetimberlicenseofpetitioner,removed
andsegregateditfromapublicforestitdivesteditselfofitsrightsandtitletheretoandrelinquishedandconveyed
thesametotheUPandmadethelattertheabsoluteownerthereof,subjectonlytotheexistingconcession.That
thelawintendedatransferoftheabsoluteownershipisunequivocallyevidencedbyitsuseoftheword"full" to
describeit.Fullmeansentire,complete,orpossessingallparticulars,ornotwantinginanyessentialquality. 11
Theprovisoregardingexistingconcessionsreferstothetimberlicenseofpetitioner.Allthatitmeans,however,isthatthe
right of petitioner as a timber licensee must not be affected, impaired or diminished it must be respected. But, insofar as
the Republic of the Philippines is concerned, all its rights as grantor of the license were effectively assigned, ceded and
conveyedtoUPasaconsequenceoftheabovetransferoffullownership.ThisisfurtherhomeoutbySection3ofR.A.No.
3990 which provides, inter alia, that "any incidental receipts or income therefrom shall pertain to the general fund of the
UniversityofthePhilippines.Havingbeeneffectivelysegregatedandremovedfromthepublicdomainorfromapublicforest
and, in effect, converted into a registered private woodland, the authority and jurisdiction of the Bureau of Forestry over it
were likewise terminated. This is obvious from the fact that the condition in Proclamation No. 971 to the effect that the
dispositionoftimbershallbesubjecttoforestrylawsandregulationsisnotreproducediiiR.A.No.3990.Thelatterdoesnot
likewiseprovidethatitissubjecttotheconditionssetforthintheproclamation.Anownerhastherighttoenjoyanddispose
ofathingwithoutotherlimitationsthanthoseestablishedbylaw. 12Therighttoenjoyincludesthejusutendiortherightto
receivefromthethingwhatitproduces,andthejusabutendiortherighttoconsumethethingbyitsuse.13Asprovidedfor
in Article 441 of the Civil Code, to the owner belongs the natural fruits, the industrial fruits and the civil fruits. There are,
however, exceptions to this rules, as where the property is subject to a usufruct, in which case the usufructuary gets the
fruits.14Intheinstantcase,thatexceptionismadeforthepetitioneraslicenseeorgranteeoftheconcession,whichhas
beengiventhelicensetocut,collect,andremovetimberfromtheareacededandtransferredtoUPuntilIFebruary1985.
However,ithasthecorrelativedutyandobligationtopaytheforestcharges,orroyalties,tothenewowner,theUP,atthe
same rate as provided for in the Agreement. The charges should not be paid anymore to the Republic of the Philippines
through the Bureau of Internal Revenue because of the very nature of the transfer as aforestated. Consequently, even the
BureauofInternalRevenueautomaticallylostitsauthorityandjurisdictiontomeasurethetimbercutfromthesubjectarea
andtocollectforestrychargesandotherfeesduethereon.

TheforegoingdisposesofthecontentionofpetitionerthatR.A.No.3990doesnotgranttheUPtheauthorityto
collectforestchargesandtosupervisetheoperationsofitsconcessioninsofarasthepropertyoftheUPwithinit
isconcerned.Itsargumentthatithasacquiredvestedrightstooperateitsconcessionunderthesupervisionand
control of the Bureau of Forestry is preposterous. The grantor, Republic of the Philippines, was by no means
bound under the License to perpetuate the Bureau as its agent. Neither is there force to its contention that
legislativegrantsmustbeconstruedstrictlyinfavorofthepublicandmoststronglyagainstthegrantee.Thegrant
under R.A. No. 3990 is transfer of absolute, full and entire ownership which leaves no room for a strict
interpretationagainstthegrantee,theUP.Thereservationthereinmadeisinfavoroftheprivatepartypursuant
tothelicense,whichisneverthelessprotected.Itistheconcessioninfavorofthepetitionerwhichshould,onthe
contrary,beboundbytherule.

It follows then that respondent UP is entitled to supervise, through its duly appointed personnel, the logging,
fellingandremovaloftimberwithintheareacoveredbyR.A.No.3990.

IN THE LIGHT OF ALL THE FOREGOING, judgment is hereby rendered REVERSING the decision of the trial
courtinCivilCaseNo.C650,renderedon3June1968DECLARINGthatforestchargesduefromandpayable
bypetitionerfortimbercutpursuanttoitsLicenseAgreementNo.27A(Amendment)withintheareacededand
http://www.lawphil.net/judjuris/juri1991/aug1991/gr_l_52518_1991.html 7/8
6/18/2017 G.R.No.L52518

transferred to the University of the Philippine pursuant to R.A. No. 3990 shall be paid to the University of the
PhilippinesDECLARINGthattheUniversityofthePhilippinesisentitledtosupervise,throughitsdulyappointed
personnel,thelogging,fellingandremovaloftimberwithintheaforesaidareacoveredbyR.A.No.3990.

Costsagainstpetitioner.

SOORDERED.

Fernan,C.J.,Gutierrez,Jr.,FelicianoandBidin,JJ.,concur.

Footnotes

1Rollo,47.

2AmendedRecordonAppeal,114.

3RecordonAppeal,4760.

4AmendedRecordonAppeal,6165.

5Ibid.,6682.

64SCRA816.

7Delumenetal.vs.Republic,94Phil.287Tolentinovs.BoardofAccountancy,90Phil.83.

8MORAN,M.V.CommentsontheRulesofCourt,vol.III,1980ed.,153.

9RepublicActNo.115.

10Section816oftheRevisedAdministrativeCode.

11Black'sLawDictionary,5thed.,604605Webster'sThirdNewInternationalDictionary,1986,919.

12Article428,CivilCodeofthePhilippines.

13TOLENTINO,A.M.,CivilCodeofthePhilippines,vol.11,1983ed.,42.

14Op.cit.,94.

TheLawphilProjectArellanoLawFoundation

http://www.lawphil.net/judjuris/juri1991/aug1991/gr_l_52518_1991.html 8/8