INTERNATIONAL HARDWOOD v UP G.R.

No L-52518 August 13,

1991

International Hardwood and Veneer Company of the Philippines, petitioner-

appellee
vs.
University of the Philippines and Jose C. Campos Jr., respondent-appellants.
Tañada, Vivo & Tan for petitioner-appellee

FACTS:
International Hardwood is, among others, is engaged in the manufacturing,
processing and exporting of plywood and was, for said purpose, granted by the Government
an exclusive license for 25 years, expiring on February 1, 1985, to cut, collect and remove
timber from that portion of the subject timber land. Since the grant of the license, the
plaintiff has been in peaceful possession of the said timber concession and had been felling
cutting and removing timber therefrom, and had constructed improvements worth more than
P7,000,000.00.

In 1961, during the effectivity of the License agreement. Then President Carlos P.
Garcia issued Executive Proclamation No. 791. Under this proclamation, subject to the
private rights if there’s any, a certain parcel of land of the public domain in Quezon City and
Laguna were withdrawn from sale or settlement and were reserved for University of the
Philippines (UP) College of Agriculture, as experiment station for the proposed dairy
research institute and for agricultural research and production studies.

In June 1964, still during the effectivity of the license agreement, the Congress of the
Philippines enacted Republic Act (RA) 3990, establishing a central experiment station for the
use of UP college of agriculture, College of Veterinary Medicine and College of Arts and
Sciences. Under RA 3990, the land describes in Proclamation 791 was fully ceded and
transferred in full ownership to the UP, subject to any existing concessions, if any.

On the strength of RA 3990m UP demanded from Hardwood:

1. Payment of forest charges due and payable under the license agreement be paid
to UP instead of the Bureau of Internal Revenue (BIR); and
2. That the sale of any timber felled or cut by International Hardwood within the
boundaries of the Central Experiment Station as defined in RA 3990 be
performed by UP personnel.

However, despite the demand by UP, International Hardwood refused to comply.

International Hardwood filed before the Court of First Instance (CFI) a Petition for
Declaratory Relief with Injunction against UP. The CFI rendered judgment in favor of the
International Hardwood, declaring that RA 3990 does not empower the UP, in lieu of the
BIR, to scale, measure and seal the timber cut by the petitioner, and to collect the
corresponding forest charges as prescribed by the National Internal Revenue Code.

The respondent appealed the decision to the Court of Appeals, but the court of
appeals elevated the case to the Supreme Court as the case involves purely question of law,
or the interpretation and construction of RA 3990.

ISSUEs:
 1. Whether or not UP, as the owner of the property, has the right to collect from
International Hardwood forest charges due and payable under the license
agreement which was used to be collected by the BIR.
2. Whether or not UP is entitled to supervise the logging, felling and removing of
timber within the Central Experiment Station area as described in RA 3990.

HELD by SC:
Under proclamation no. 791, the parcel of land of the public domain was withdrawn
from sale or settlement and was reserved for the College of Agriculture of the UP as the
experiment station, subject to private rights, if any. Under RA 3990, the reserved area was
now ceded and transferred in full ownership to the University of the Philippines subject to
any existing concession, if any.
When the government ceded and transferred the property to UP, the Republic of the
Philippines completely removed it from the public domain, and more specifically, in respect
to the areas covered by the timber license of the petitioner, removed and segregated it from
a public forest; it divested itself of its rights and title thereto and relinquished and conveyed
the same to UP; and made UP the absolute owner thereof, subject only to the existing
concession. That the law intended to transfer the absolute and full ownership, Full means
entire, complete, or possessing all particulars, or not wanting in any essential quality.
However, the right of the timber licensee must not be affected, impaired or diminished; it
must be respected.
An owner has the right to enjoy and dispose of a thing without other limitation other
than those estanlished by law. The right to enjoy includes the jus utendi or the right to
receive from the thing what it produces, and jus abutendi or the right to consume the thing by
its use. As provided for in Article 441o of the Civil Code, to the owner belongs the natural,
the industrial and the civil fruits. However, the exception to these rules, as where the
property is subject of usufruct, in which case the usufructuary gets the fruits. In the case at
hand, the exception is made for International 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 1, 1985. However, it has the correlative
duty and obligation to pay the forest charges, or royalties, to the new owner, the UP, at the
same rate as provided for in the Agreement. The charges should not be paid anymore to the
Republic of the Philippines through the BIR. Consequently, the BIR automatically lost its
authority and jurisdiction to measure the timber cut from the subject area and to collect
forestry charges and other fees dues.
The judgment of the trial court therefore was reversed, and the Court declared thar
forest charges due from and payable by the petitioner for timber cut pursuant to its license
agreement should be paid to the UP; declaring the the UP is entitled to supervise, though its
duly appointed personnel, the logging, felling and removal of timber within the aforesaid area
covered by RA 3990.