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LAND TITLES AND DEEDS

CASE DIGESTS

INTERNATIONAL
HARDWOOD AND VENEER
COMPANY OF THE
PHILIPPINES v. UP
August 13, 1991
Davide, Jr., J
Luciano, Noel Christian O.

SUMMARY: International Hardwood was the grantee of a


License Agreement effective until 1985. On 1961, Proc. 791
segregates from the public domain parcels of land and
reserved them for use by UP. The land subject of
Hardwoods timber concession was covered by said
Proclamation. On 1964, RA 3990 was enacted fully ceding
ownership over the land described in Proc. 791 to UP. UP
sought to collect forestry charges from Hardwood and
demanded that the latter subject itself to the control and
supervision of UP. Hardwood resisted and filed a petition for
declaratory relief.
The SC held that UP has the right to enjoy and dispose of
the thing without other limitations than those established
by law. In this case, that exception is made for Hardwood
as licensee or grantee of the concession, which has been
given the license to cut, collect, and remove timber from
the area ceded and transferred to UP until February 1985.
However, Hardwood has the correlative duty and obligation
to pay the forest charges or royalties to the new owner, UP
DOCTRINE: The Philippines relinquished and conveyed its
rights over the area to UP. Thus, UP became the owner of
the land, subject only to existing concession. Since there is
an express proviso on existing concessions, this means
that the right of Hardwood as a timber licensee must not
be affected, impaired, or diminished; it must be respected
BUT insofar as the Government is concerned, all its rights

as grantor of the license were effectively assigned, ceded


and conveyed to U.P
Having been effectively segregated and removed from the
public domain or from a public forest and, in effect,
converted into a registered private woodland, the authority
and jurisdiction of the Bureau of Forestry over it were
likewise terminated. BIR also lost authority to measure the
timber cut from the subject area and to collect forestry
charges and other fees thereon because of this full
transfer.
FACTS: International Hardwood is engaged in the
manufacture, processing, and exportation of plywood. It was
granted by the Government an exclusive license for 25
years expiring on Feb 1985 to cut, collect and remove
timber from a timber land in the provinces of Quezon and
Laguna.
Sometime on 1961, during the effectivity of the License
Agreement, the President issued Executive Proclamation No.
791. Under this proclamation, certain parcels of land of the
public domain in Quezon and Laguna were withdrawn from
sale or settlement and were reserved for the UP College of
Agriculture as experiment station for the college.
On 1964, still during the effectivity of the License
Agreement, RA 3990 was enacted establishing a central
experiment station for UP for the colleges of agriculture,
veterinary medicine, arts and sciences. Under RA 3990 the
land described in Proc. 791 was fully cede to UP, subject to
any existing concessions, if any.
On the strength of RA 3990, UP demanded from Hardwood:
1. Payment of forest charges due and demandable
under the License Agreement to UP, instead of the
BIR
2. That the sale of any timber felled or cut by Hardwood
within the land described in RA 3990 be performed
by UP personnel

LAND TITLES AND DEEDS


CASE DIGESTS

However, despite repeated demands, Hardwood refused to


accede to UPs demands.
International Hardwood filed before the CFI a petition for
declaratory relief seeking a declaration that UP does NOT
have the right to:
1. Supervise and regulate the cutting and removal of
timber and other forest products,
2. Scale, measure and seal the timber cut and/or
3. Collect forest charges, reforestation fees and
royalties from Hardwood and/or
4. Impose any other duty or burden upon the latter in
that portion of its concession covered by a License
Agreement, ceded in full ownership to UP by RA 3990
Hardwood also prayed for an injunction and P100,000
in damages.
UP filed its Answer:
1. Interposed affirmative defenses of improper venue
and that the petition states no cause of action
2. Set up counterclaim for payment of forest charges on
the forest products cut and felled within the area
ceded to UP under RA 3990
CFI DECISION: CFI rendered judgment in favor of
Hardwood:
1. RA 3990 does not empower UP to scale, measure,
and seal the timber cut by International Hardwood
within the tract of land and collect the corresponding
charges prescribed by NIRC
2. Dismissed UPs counterclaim
CA DECISION: Elevated the case to the SC as the case
involves purely legal questions.
ISSUE: WON UP as owner had the right to scale, measure,
and seal the timber cut by Hardwood and collect forestry
charges thereon.

HELD: YES, by virtue of the full cession of ownership to UP.


I.

Arguments of the Parties


A. UP asserts that:
1. Under RA 3990, the Philippines may effect
collection of forest charges through UP
because the License Agreement does not
expressly provide that they be paid to the BIR
2. UP is vested with administrative jurisdiction
over and has ownership over the land in
question. Thus, it acquired full control and
benefit of the timber and other resources in
the area
3. UP is entitled to the income derived from the
tract of land ceded to it by RA 3990
4. UP is duty bound to operate and maintain a
central experiment station
5. Supervision of the License Agreement in favor
of Hardwood by UP was intended by RA 3990
6. BIR and the Bureau Of Forestry issued specific
rulings recognizing the authority of UP to
collect royalties and charges
B. Hardwood contends:
1. UP has not been granted by RA 3990 the
authority to collect forest charges or the
authority to supervise the operation of the
timber concession
2. Cession of the land was expressly made
subject to any concession, if any
3. Rulings of BIR and Bureau of Forestry are
incorrect
4. It has acquired vested right to operate the
timber concession under the supervision and
control of the Bureau of Forestry

II. Discussion on the effect of the laws


A. The laws:
1. Under Proc. 791 a parcel of land of the
public domain was withdrawn from sale or

LAND TITLES AND DEEDS


CASE DIGESTS

settlement and was reserved for the UP


College of Agriculture as experiment station,
subject to private rights, if any
2. Under RA 3990 the very same lot referred to
in Proc. 791 was ceded fully to UP, subject to
any existing concessions, if any
B. Effect of the laws on the concession of Hardwood:
1. When RA 3990 ceded the property to UP, the
Philippines completely removed it from the
public domain and segregated the areas
covered by the timber license from the public
forest
2. The Philippines relinquished and conveyed its
rights over the area to UP
a. Thus, UP became the owner of the land,
subject only to existing concession
3. Since there is an express proviso on existing
concessions, this means that the right of
Hardwood as a timber licensee must not be
affected, impaired, or diminished; it must be
respected
4. BUT insofar as the Government is concerned,
all its rights as grantor of the license were
effectively assigned, ceded and conveyed to
UP
a. Having been effectively segregated and
removed from the public domain or from a
public forest and, in effect, converted into
a registered private woodland, the
authority and jurisdiction of the Bureau of
Forestry over it were likewise terminated
b. BIR also lost authority to measure the
timber cut from the subject area and to
collect forestry charges and other fees
thereon because of this full transfer.
III. As owner, UP has the right to enjoy and dispose of
the thing without other limitations than those
established by law. In this case, that exception is
made for Hardwood as licensee or grantee of the

concession, which has been given the license to cut,


collect, and remove timber from the area ceded and
transferred to UP until February 1985.
A. However, Hardwood has the correlative duty and
obligation to pay the forest charges or royalties to
the new owner, UP
B. Thus, the charges should not be paid to the
Government but to UP.
C. It follows then that respondent UP is entitled to
supervise, through its duly appointed personnel,
the logging, felling and removal of timber within
the area covered by R.A. No. 3990
DISPOSITIVE: Judgment is rendered reversing the decision
of the trial court. Thus:
1. Forest charges due from and payable by petitioner
for timber cut pursuant to its License Agreement
within the area ceded and transferred to UP pursuant
to R.A. No. 3990 shall be paid to UP;
2. UP is entitled to supervise, through its duly appointed
personnel, the logging, felling and removal of timber
within the aforesaid area covered by R.A. No. 3990.