[A.M. No. P-98-1264.

July 28, 1999]

BASILIO P. MAMANTEO, FLORENTINO B. TRINIDAD, BONIFACIO MANGANIP and EDGAR S.
SALLIDAO, complainants, vs. DEPUTY SHERIFF MANUEL M. MAGUMUN,[1] respondent.
DECISION
BELLOSILLO, J.:
What should the sheriff do when he is informed by the defendant in a replevin that the property to
be seized is in custodia legis and in fact already forfeited in favor of the government by order of
another government agency?
This question assumes importance in light of the charges of grave misconduct filed by
complainants Basilio P. Mamanteo, Provincial Environment and Natural Resources (PENR) Officer;
Florentino B. Trinidad, Community Environment and Natural Resources (CENR) Officer; and
Bonifacio Manganip and Edgar S. Sallidao, both DENR forestry employees stationed in Tabuk,
Kalinga, against Deputy Sheriff Manuel M. Magumun of the Regional Trial Court, Br. 4, Tuguegarao,
Cagayan.
On 12 April 1996 forestry employees of the DENR, Cordillera Administrative Region, Tabuk,
Kalinga, tasked with the enforcement of forestry laws, intercepted a San Miguel Corporation van with
Plate No. PJC-321 loaded with narra flitches wrapped in nylon sacks and covered with empty beer
bottles and cartons. Confronted by the forestry employees, Villamor Martinez, driver of the van, could
not produce any legal permit authorizing him to transport the narra lumber. Hence, after issuing
seizure receipts, the vehicle and its load of narra flitches were confiscated by the DENR forestry
employees.
On 24 May 1996 a criminal complaint against driver Villamor Martinez was filed before the
Provincial Prosecutors Office of Tabuk, Kalinga, for violation of Sec. 78 of P.D. 705 [2] as amended,
and implemented by DENR Administrative Order 59. [3] On 24 July 1996, after due notice and
opportunity to be heard, an order of forfeiture of the vehicle and its load was issued by the DENR
Regional Office pursuant to its quasi-judicial authority to administratively order the confiscation and
forfeiture of lumber possessed without permit including its conveyance.
Thereafter, San Miguel Corporation, the owner of the vehicle, through its agent Aimardo V.
Interior, filed a case for recovery of personal property and damages with application for writ
of replevin with the Regional Trial Court, Br. 4, Tuguegarao, Cagayan, against herein
complainants. The trial court issued a warrant of seizure of personal property directing its sheriff to
take hold of the van and its contents.
On 1 August 1996 Deputy Sheriff Manuel M. Magumun, escorted by Sheriff Jacinto Contapay of
RTC-Br. 1, Tabuk, Kalinga, and agents of the Philippine National Police, went to the office of the
DENR in Tabuk, Kalinga, to enforce the warrant issued by the trial court but the forestry employees
and officials refused to release the van on the ground that it had already been forfeited in favor of the
government and was now in custodia legis. Despite this explanation, on 7 August 1996, Deputy
Sheriff Magumun accompanied this time by Sheriff John Dongui-is Jr. of the Office of the Clerk of
Court of Tabuk, Kalinga, and twenty (20) other persons, took the van without permission of the
employees and officials of the DENR. On 13 August 1996, after the lapse of the five-day period
prescribed by law for filing an opposition to the writ, the vehicle was delivered to Aimardo V. Interior,
agent of SMC.
In his comment, Deputy Sheriff Magumun explained that it was his ministerial duty to execute the
warrant in accordance with its mandate and his duties as sheriff under the Rules of Court and the

Manual for Clerks of Court.[4] He conceded that he was informed by the forestry employees and
officials of the forfeiture of the vehicle subject of the warrant of seizure but he reasoned that it was not
within his discretion to withhold the implementation of the warrant. [5] The execution of a warrant of
seizure on a vehicle allegedly forfeited in favor of the government was a question of law too technical
for him to resolve[6] and faced with such a dilemma he opted to follow the order of the court and
execute the warrant in accordance with its mandate.
On 20 October 1997 the complaint was referred to the Office of the Court Administrator (OCA) for
evaluation, report and recommendation. The OCA observed that Deputy Sheriff Magumun made a
very literal interpretation of Sec. 4, Rule 60, of the Rules of Court as amended. [7] The OCA noted that
while Rule 60 was silent on what should be done when the sheriff is informed by the defendant in
the replevin that the personal property to be seized has been forfeited in favor of the government and
is already in custodia legis, Deputy Sheriff Magumun should not have insisted on seizing the property
subject of the warrant of seizure. [8] The appropriate action should have been for respondent to inform
his judge of the situation by way of partial Sheriffs Return and wait for instructions on the proper
procedure to be observed.[9] For such ignorance of proper procedure the OCA recommended that
Sheriff Magumun be penalized in the amount of P5,000.00 at the very least.[10]
We agree. Respondent was placed in a difficult situation where the vehicle subject of the warrant
of seizure had already been confiscated by another government agency and forfeited in favor of the
government. However, the novelty of his predicament did not call for him to use his discretion and
justify his insistence on taking the property subject of the warrant without waiting for instructions from
his judge. A sheriffs prerogative does not give him the liberty to determine who among the parties is
entitled to the possession of the attached property,[11] much less does he have any discretion to
decide which agency has primary jurisdiction and authority over the matter at hand.
When a writ is placed in the hands of a sheriff, it is his duty, in the absence of any instructions to
the contrary, to proceed with reasonable celerity and promptness to execute it according to its
mandate.[12] However, the prompt implementation of a warrant of seizure is called for only in instances
where there is no question regarding the right of the plaintiff to the property. Where the plaintiff has
shown by his own affidavit that he is entitled to the possession of the property; that the property is
wrongfully detained by the defendant; that the same has not been taken for tax assessment or seized
under execution or attachment, or if so seized, that it is exempt from such seizure, [13] then the
executing officer has no other recourse but to execute the warrant or writ expeditiously.
In the instant case, Deputy Sheriff Magumun has been informed that the property had been
impounded due to violation of forestry laws and an order for its forfeiture had already been issued by
the DENR. Moreover, he was advised that the proper remedy for SMC, owner of the vehicle, was to
appeal the order of forfeiture to the Secretary of the DENR. [14] The prudent recourse then for
respondent was to desist from executing the warrant and convey the information to his judge and to
the plaintiff. Instead, Deputy Sheriff Magumun carried out the implementation of the warrant of seizure
with undue haste as evidenced by the mere 6-day lapse from the time he first served the warrant of
seizure on the DENR officials to the time of his precipitate seizure of the van. A warrant could be
returned within a period of not less than ten (10) days nor more than sixty (60) days after its receipt
by the executing officer.[15] Within this time frame, Deputy Sheriff Magumun should have conferred
with his judge and thereafter execute the warrant judiciously and with more certainty.
True, sheriffs must comply with their mandated ministerial duty to implement writs promptly and
expeditiously, but equally true is the principle that sheriffs by the nature of their functions must at all
times conduct themselves with propriety and decorum and act above suspicion. [16] There must be no
room for anyone to conjecture that sheriffs and deputy sheriffs as officers of the court have conspired
with any of the parties to a case to obtain a favorable judgment or immediate execution. The sheriff is
the front line representative of the judiciary and by his act he may build or destroy the institution.

As observed by the OCA, the writ of replevin has been repeatedly used by unscrupulous plaintiffs
to retrieve their chattel earlier taken for violation of the Tariff and Customs Code, [17] tax assessment,
attachment or execution. Officers of the court, from the presiding judge to the sheriff, are implored to
be vigilant in their execution of the law otherwise, as in this case, valid seizure and forfeiture
proceedings could easily be undermined by the simple devise of a writ of replevin. Hence, sheriffs
and deputy sheriffs, as agents of the law, are called upon to discharge their duties with due care and
utmost diligence because in serving the courts writs and processes and implementing the orders of
the court, they cannot afford to err without affecting the integrity of their office and the efficient
administration of justice.[18]
WHEREFORE, respondent Deputy Sheriff Manuel M. Magumun is found guilty of grave
misconduct and, as recommended, is fined P5,000.00 for arbitrarily implementing the warrant of
seizure of personal property and for ignorance of the proper procedure in serving writs of replevin in
cases where the personal property to be recovered has already been seized and forfeited in favor of
the government for violation of forestry laws. Respondent is warned that a repetition of the same or
similar act will merit a more severe sanction.
SO ORDERED.
Puno, Mendoza, Quisumbing, and Buena, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. 162243

December 3, 2009

HON. HEHERSON ALVAREZ substituted by HON. ELISEA G. GOZUN, in her capacity as

Secretary of the Department of Environment and Natural Resources, Petitioner,
vs.
PICOP RESOURCES, INC., Respondent.
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 164516
PICOP RESOURCES, INC., Petitioner,
vs.
HON. HEHERSON ALVAREZ substituted by HON. ELISEA G. GOZUN, in her capacity as
Secretary of the Department of Environment and Natural Resources Respondent.
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 171875
THE HON. ANGELO T. REYES (formerly Hon. Elisea G. Gozun), in his capacity as Secretary of
the Department of Environment and Natural Resources (DENR), Petitioner,
vs.
PAPER INDUSTRIES CORP. OF THE PHILIPPINES (PICOP), Respondent.
RESOLUTION

CHICO-NAZARIO, J.:
The cause of action of PICOP Resources, Inc. (PICOP) in its Petition for Mandamus with the trial
court is clear: the government is bound by contract, a 1969 Document signed by then President
Ferdinand Marcos, to enter into an Integrated Forest Management Agreement (IFMA) with PICOP.
Since the remedy of mandamus lies only to compel an officer to perform a ministerial duty, and since
the 1969 Document itself has a proviso requiring compliance with the laws and the Constitution, the
issues in this Motion for Reconsideration are the following: (1) firstly, is the 1969 Document a contract
enforceable under the Non-Impairment Clause of the Constitution, so as to make the signing of the
IFMA a ministerial duty? (2) secondly, did PICOP comply with all the legal and constitutional
requirements for the issuance of an IFMA?
To recall, PICOP filed with the Department of Environment and Natural Resources (DENR) an
application to have its Timber License Agreement (TLA) No. 43 converted into an IFMA. In the middle
of the processing of PICOPs application, however, PICOP refused to attend further meetings with the
DENR. Instead, on 2 September 2002, PICOP filed before the Regional Trial Court (RTC) of Quezon
City a Petition for Mandamus1 against then DENR Secretary Heherson T. Alvarez. PICOP seeks the
issuance of a privileged writ of mandamus to compel the DENR Secretary to sign, execute and
deliver an IFMA to PICOP, as well as to
[I]ssue the corresponding IFMA assignment number on the area covered by the IFMA, formerly TLA
No. 43, as amended; b) to issue the necessary permit allowing petitioner to act and harvest timber
from the said area of TLA No. 43, sufficient to meet the raw material requirements of petitioners pulp
and paper mills in accordance with the warranty and agreement of July 29, 1969 between the
government and PICOPs predecessor-in-interest; and c) to honor and respect the Government
Warranties and contractual obligations to PICOP strictly in accordance with the warranty and
agreement dated July 29, [1969] between the government and PICOPs predecessor-in-interest. x x
x.2
On 11 October 2002, the RTC rendered a Decision granting PICOPs Petition for Mandamus, thus:
WHEREFORE, premises considered, the Petition for Mandamus is hereby GRANTED.
The Respondent DENR Secretary Hon. Heherson Alvarez is hereby ordered:
1. to sign, execute and deliver the IFMA contract and/or documents to PICOP and issue the
corresponding IFMA assignment number on the area covered by the IFMA, formerly TLA No.
43, as amended;
2. to issue the necessary permit allowing petitioner to act and harvest timber from the said
area of TLA No. 43, sufficient to meet the raw material requirements of petitioners pulp and
paper mills in accordance with the warranty and agreement of July 29, 1969 between the
government and PICOPs predecessor-in-interest; and
3. to honor and respect the Government Warranties and contractual obligations to PICOP
strictly in accordance with the warranty and agreement dated July 29, 1999 (sic) between the
government and PICOPs predecessor-in-interest (Exhibits "H", "H-1" to "H-5", particularly the
following:
a) the area coverage of TLA No. 43, which forms part and parcel of the government
warranties;
b) PICOP tenure over the said area of TLA No. 43 and exclusive right to cut, collect and
remove sawtimber and pulpwood for the period ending on April 26, 1977; and said
period to be renewable for [an]other 25 years subject to compliance with constitutional
and statutory requirements as well as with existing policy on timber concessions; and
c) The peaceful and adequate enjoyment by PICOP of the area as described and
specified in the aforesaid amended Timber License Agreement No. 43.

The Respondent Secretary Alvarez is likewise ordered to pay petitioner the sum of P10 million a
month beginning May 2002 until the conversion of TLA No. 43, as amended, to IFMA is formally
effected and the harvesting from the said area is granted. 3
On 25 October 2002, the DENR Secretary filed a Motion for Reconsideration. 4 In a 10 February 2003
Order, the RTC denied the DENR Secretarys Motion for Reconsideration and granted PICOPs
Motion for the Issuance of Writ of Mandamus and/or Writ of Mandatory Injunction. 5 The fallo of the 11
October 2002 Decision was practically copied in the 10 February 2003 Order, although there was no
mention of the damages imposed against then DENR Secretary Alvarez. 6 The DENR Secretary filed a
Notice of Appeal7 from the 11 October 2002 Decision and the 10 February 2003 Order.
On 19 February 2004, the Seventh Division of the Court of Appeals affirmed 8 the Decision of the RTC,
to wit:
WHEREFORE, the appealed Decision is hereby AFFIRMED with modification that the order directing
then DENR Secretary Alvarez "to pay petitioner-appellee the sum of P10 million a month beginning
May, 2002 until the conversion to IFMA of TLA No. 43, as amended, is formally effected and the
harvesting from the said area is granted" is hereby deleted. 9
Challenging the deletion of the damages awarded to it, PICOP filed a Motion for Partial
Reconsideration10 of this Decision, which was denied by the Court of Appeals in a 20 July 2004
Resolution.11
The DENR Secretary and PICOP filed with this Court separate Petitions for Review of the 19
February 2004 Court of Appeals Decision. These Petitions were docketed as G.R. No. 162243 and
No. 164516, respectively. These cases were consolidated with G.R. No. 171875, which relates to the
lifting of a Writ of Preliminary Injunction enjoining the execution pending appeal of the foregoing
Decision.
On 29 November 2006, this Court rendered the assailed Decision on the Consolidated Petitions:
WHEREFORE, the Petition in G.R. No. 162243 is GRANTED. The Decision of the Court of Appeals
insofar as it affirmed the RTC Decision granting the Petition for Mandamus filed by Paper Industries
Corp. of the Philippines (PICOP) is hereby REVERSED and SET ASIDE. The Petition in G.R. No.
164516 seeking the reversal of the same Decision insofar as it nullified the award of damages in favor
of PICOP is DENIED for lack of merit. The Petition in G.R. No. 171875, assailing the lifting of the
Preliminary Mandatory Injunction in favor of the Secretary of Environment and Natural Resources is
DISMISSED on the ground of mootness.12
On 18 January 2006, PICOP filed the instant Motion for Reconsideration, based on the following
grounds:
I.
THE HONORABLE COURT ERRED IN HOLDING THAT THE CONTRACT WITH PRESIDENTIAL
WARRANTY SIGNED BY THE PRESIDENT OF THE REPUBLIC ON 29 JUNE 1969 ISSUED TO
PICOP IS A MERE PERMIT OR LICENSE AND IS NOT A CONTRACT, PROPERTY OR PROPERTY
RIGHT PROTECTED BY THE DUE PROCESS CLAUSE OF THE CONSTITUTION
II.
THE EVALUATION OF PICOPS MANAGEMENT OF THE TLA 43 NATURAL FOREST CLEARLY
SHOWED SATISFACTORY PERFORMANCE FOR KEEPING THE NATURAL FOREST
GENERALLY INTACT AFTER 50 YEARS OF FOREST OPERATIONS. THIS COMPLETES THE
REQUIREMENT FOR AUTOMATIC CONVERSION UNDER SECTION 9 OF DAO 99-53.
III.
WITH DUE RESPECT, THE HONORABLE COURT, IN REVERSING THE FINDINGS OF FACTS OF
THE TRIAL COURT AND THE COURT OF APPEALS, MISAPPRECIATED THE EVIDENCE,
TESTIMONIAL AND DOCUMENTARY, WHEN IT RULED THAT:

i.
PICOP FAILED TO SUBMIT A FIVE-YEAR FOREST PROTECTION PLAN AND A SEVEN-YEAR
REFORESTATION PLAN FOR THE YEARS UNDER REVIEW.
ii.
PICOP FAILED TO COMPLY WITH THE PAYMENT OF FOREST CHARGES.
iii.
PICOP DID NOT COMPLY WITH THE REQUIREMENT FOR A CERTIFICATION FROM THE NCIP
THAT THE AREA OF TLA 43 DOES NOT OVERLAP WITH ANY ANCESTRAL DOMAIN.
iv.
PICOP FAILED TO HAVE PRIOR CONSULTATION WITH AND APPROVAL FROM THE
SANGUNIAN CONCERNED, AS REQUIRED BY SECTION 27 OF THE REPUBLIC ACT NO. 7160,
OTHERWISE KNOWN AS THE LOCAL GOVERNMENT CODE OF 1991.
v.
PCIOP FAILED TO SECURE SOCIAL ACCEPTABILITY UNDER PRESIDENTIAL DECREE NO.
1586.
IV
THE MOTIVATION OF ALVAREZ IN RECALLING THE CLEARANCE FOR AUTOMATIC
CONVERSION HE ISSUED ON 25 OCTOBER 2001 WAS NOT DUE TO ANY SHORTCOMING
FROM PICOP BUT DUE TO HIS DETERMINATION TO EXCLUDE 28,125 HECTARES FROM THE
CONVERSION AND OTHER THINGS.
On 15 December 2008, on Motion by PICOP, the Third Division of this Court resolved to refer the
consolidated cases at bar to the Court en banc. On 16 December 2008, this Court sitting en banc
resolved to accept the said cases and set them for oral arguments. Oral arguments were conducted
on 10 February 2009.
PICOPs Cause of Action: Matters PICOP Should Have Proven to Be Entitled to a Writ of Mandamus
In seeking a writ of mandamus to compel the issuance of an IFMA in its favor, PICOP relied on a 29
July 1969 Document, the so-called Presidential Warranty approved by then President Ferdinand E.
Marcos in favor of PICOPs predecessor-in-interest, Bislig Bay Lumber Company, Inc. (BBLCI).
PICOPs cause of action is summarized in paragraphs 1.6 and 4.19 of its Petition for Mandamus:
1.6 Respondent Secretary impaired the obligation of contract under the said Warranty and Agreement
of 29 July 1969 by refusing to respect the tenure; and its renewal for another twenty five (25) years, of
PICOP over the area covered by the said Agreement which consists of permanent forest lands with
an aggregate area of 121,587 hectares and alienable and disposable lands with an aggregate area of
approximately 21,580 hectares, and petitioners exclusive right to cut, collect and remove sawtimber
and pulpwood therein and the peaceful and adequate enjoyment of the said area as described and
specified in petitioners Timber License Agreement (TLA) No. 43 guaranteed by the Government,
under the Warranty and Agreement of 29 July 1969. 13
4.19 Respondent is in violation of the Constitution and has impaired the obligation of contract by his
refusal to respect: a) the tenurial rights of PICOP over the forest area covered by TLA No. 43, as
amended and its renewal for another twenty five (25) years; b) the exclusive right of PICOP to cut,
collect and remove sawtimber and pulpwood therein; and c) PICOPs peaceful and adequate
enjoyment of the said area which the government guaranteed under the Warranty and Agreement of
29 July 1969.14
The grounds submitted by PICOP in its Petition for Mandamus are as follows:

I
Respondent secretary has unlawfully refused and/or neglected to sign and execute the IFMA contract
of PICOP even as the latter has complied with all the legal requirements for the automatic conversion
of TLA No. 43, as amended, into an IFMA.
II
Respondent Secretary acted with grave abuse of discretion and/or in excess of jurisdiction in refusing
to sign and execute PICOPs IFMA contract, notwithstanding that PICOP had complied with all the
requirements for Automatic Conversion under DAO 99-53, as in fact Automatic Conversion was
already cleared in October, 2001, and was a completed process.
III
Respondent Secretary has impaired the obligation of contract under a valid and binding warranty and
agreement of 29 July 1969 between the government and PICOPs predecessor-in-interest, by
refusing to respect: a) the tenure of PICOP, and its renewal for another twenty five (25) years, over
the TLA No.43 area covered by said agreement; b) the exclusive right to cut, collect and remove
sawtimber and pulpwood timber; and c) the peaceful and adequate enjoyment of the said area.
IV
As a result of respondent Secretarys unlawful refusal and/or neglect to sign and deliver the IFMA
contract, and violation of the constitutional rights of PICOP against non-impairment of the obligation
of contract (Sec. 10, Art. III, 1997 [sic] Constitution), PICOP suffered grave and irreparable
damages.15
Petitions for Mandamus are governed by Rule 65 of the Rules of Court, Section 3 of which provides:
SEC. 3. Petition for mandamus.When any tribunal, corporation, board, officer or person unlawfully
neglects the performance of an act which the law specifically enjoins as a duty resulting from an
office, trust, or station, or unlawfully excludes another from the use and enjoyment of a right or office
to which such other is entitled, and there is no other plain, speedy and adequate remedy in the
ordinary course of law, the person aggrieved thereby may file a verified petition in the proper court,
alleging the facts with certainty and praying that judgment be rendered commanding the respondent,
immediately or at some other time to be specified by the court, to do the act required to be done to
protect the rights of the petitioner, and to pay the damages sustained by the petitioner by reason of
the wrongful acts of the respondent. (Emphasis supplied.)
PICOP is thus asking this Court to conclude that the DENR Secretary is specifically enjoined by law
to issue an IFMA in its favor. An IFMA, as defined by DENR Administrative Order (DAO) No. 9953,16 is [A] production-sharing contract entered into by and between the DENR and a qualified applicant
wherein the DENR grants to the latter the exclusive right to develop, manage, protect and utilize a
specified area of forestland and forest resource therein for a period of 25 years and may be renewed
for another 25-year period, consistent with the principle of sustainable development and in
accordance with an approved CDMP, and under which both parties share in its produce. 17
PICOP stresses the word "automatic" in Section 9 of this DAO No. 99-53:
Sec. 9. Qualifications of Applicants. The applicants for IFMA shall be:
(a) A Filipino citizen of legal age; or,
(b) Partnership, cooperative or corporation whether public or private, duly registered under
Philippine laws.
However, in the case of application for conversion of TLA into IFMA, an automatic conversion after
proper evaluation shall be allowed, provided the TLA holder shall have signified such intention prior to
the expiry of the TLA, PROVIDED further, that the TLA holder has showed satisfactory performance

and have complied in the terms of condition of the TLA and pertinent rules and regulations.
(Emphasis supplied.)18
This administrative regulation provision allowing automatic conversion after proper evaluation can
hardly qualify as a law, much less a law specifically enjoining the execution of a contract. To enjoin is
"to order or direct with urgency; to instruct with authority; to command." 19 "Enjoin is a mandatory
word, in legal parlance, always; in common parlance, usually." 20 The word "allow," on the other hand,
is not equivalent to the word "must," and is in no sense a command. 21
As an extraordinary writ, the remedy of mandamus lies only to compel an officer to perform a
ministerial duty, not a discretionary one; mandamus will not issue to control the exercise of discretion
of a public officer where the law imposes upon him the duty to exercise his judgment in reference to
any manner in which he is required to act, because it is his judgment that is to be exercised and not
that of the court.22
The execution of agreements, in itself, involves the exercise of discretion. Agreements are products of
negotiations and mutual concessions, necessitating evaluation of their provisions on the part of both
parties. In the case of the IFMA, the evaluation on the part of the government is specifically mandated
in the afore-quoted Section 3 of DAO No. 99-53. This evaluation necessarily involves the exercise of
discretion and judgment on the part of the DENR Secretary, who is tasked not only to negotiate the
sharing of the profit arising from the IFMA, but also to evaluate the compliance with the requirements
on the part of the applicant.
Furthermore, as shall be discussed later, the period of an IFMA that was merely automatically
converted from a TLA in accordance with Section 9, paragraph 2 of DAO No. 99-53 would only be for
the remaining period of the TLA. Since the TLA of PICOP expired on 26 April 2002, the IFMA that
could have been granted to PICOP via the automatic conversion provision in DAO No. 99-53 would
have expired on the same date, 26 April 2002, and the PICOPs Petition for Mandamus would have
become moot.
This is where the 1969 Document, the purported Presidential Warranty, comes into play. When
PICOPs application was brought to a standstill upon the evaluation that PICOP had yet to comply
with the requirements for such conversion, PICOP refused to attend further meetings with the DENR
and instead filed a Petition for Mandamus, insisting that the DENR Secretary had impaired the
obligation of contract by his refusal to respect: a) the tenurial rights of PICOP over the forest area
covered by TLA No. 43, as amended, and its renewal for another twenty-five (25) years; b) the
exclusive right of PICOP to cut, collect and remove sawtimber and pulpwood therein; and c) PICOPs
peaceful and adequate enjoyment of the said area which the government guaranteed under the
Warranty and Agreement of 29 July 1969. 23
PICOP is, thus, insisting that the government is obligated by contract to issue an IFMA in its favor
because of the 1969 Document.
A contract, being the law between the parties, can indeed, with respect to the State when it is a party
to such contract, qualify as a law specifically enjoining the performance of an act. Hence, it is possible
that a writ of mandamus may be issued to PICOP, but only if it proves both of the following:
1) That the 1969 Document is a contract recognized under the non-impairment clause; and
2) That the 1969 Document specifically enjoins the government to issue the IFMA.
If PICOP fails to prove any of these two matters, the grant of a privileged writ of mandamus is not
warranted. This was why we pronounced in the assailed Decision that the overriding controversy
involved in the Petition was one of law.24 If PICOP fails to prove any of these two matters, more
significantly its assertion that the 1969 Document is a contract, PICOP fails to prove its cause of
action.25 Not even the satisfactory compliance with all legal and administrative requirements for an
IFMA would save PICOPs Petition for Mandamus.
The reverse, however, is not true. The 1969 Document expressly states that the warranty as to the
tenure of PICOP is "subject to compliance with constitutional and statutory requirements as well as
with existing policy on timber concessions." Thus, if PICOP proves the two above-mentioned matters,

it still has to prove compliance with statutory and administrative requirements for the conversion of its
TLA into an IFMA.
Exhaustion of Administrative Remedies
PICOP uses the same argument that the government is bound by contract to issue the IFMA in
its refusal to exhaust all administrative remedies by not appealing the alleged illegal non-issuance of
the IFMA to the Office of the President. PICOP claimed in its Petition for Mandamus with the trial
court that:
1.10 This petition falls as an exception to the exhaustion of administrative remedies. The acts of
respondent DENR Secretary complained of in this petition are patently illegal; in derogation of the
constitutional rights of petitioner against non-impairment of the obligation of contracts; without
jurisdiction, or in excess of jurisdiction or so capriciously as to constitute an abuse of discretion
amounting to excess or lack of jurisdiction; and moreover, the failure or refusal of a high government
official such as a Department head from whom relief is brought to act on the matter was considered
equivalent to exhaustion of administrative remedies (Sanoy v. Tantuico, 50 SCRA 455 [1973]), and
there are compelling and urgent reasons for judicial intervention (Bagatsing v. Ramirez, 74 SCRA 306
[1976]).
Thus, if there has been no impairment of the obligation of contracts in the DENR Secretarys nonissuance of the IFMA, the proper remedy of PICOP in claiming that it has complied with all statutory
and administrative requirements for the issuance of the IFMA should have been with the Office of the
President. This makes the issue of the enforceability of the 1969 Document as a contract even more
significant.
The Nature and Effects of the Purported 29 July 1969 Presidential Warranty
Base Metals Case
PICOP challenges our ruling that the 1969 Document is not a contract. Before we review this finding,
however, it must be pointed out that one week after the assailed Decision, another division of this
Court promulgated a Decision concerning the very same 1969 Document. Thus, in PICOP
Resources, Inc. v. Base Metals Mineral Resources Corporation, 26 five other Justices who were still
unaware of this Divisions Decision,27 came up with the same conclusion as regards the same issue of
whether former President Marcoss Presidential Warranty is a contract:
Finally, we do not subscribe to PICOPs argument that the Presidential Warranty dated September
25, 1968 is a contract protected by the non-impairment clause of the 1987 Constitution.
An examination of the Presidential Warranty at once reveals that it simply reassures PICOP of the
governments commitment to uphold the terms and conditions of its timber license and guarantees
PICOPs peaceful and adequate possession and enjoyment of the areas which are the basic sources
of raw materials for its wood processing complex. The warranty covers only the right to cut, collect,
and remove timber in its concession area, and does not extend to the utilization of other resources,
such as mineral resources, occurring within the concession.
The Presidential Warranty cannot be considered a contract distinct from PTLA No. 47 and FMA No.
35. We agree with the OSGs position that it is merely a collateral undertaking which cannot amplify
PICOPs rights under its timber license. Our definitive ruling in Oposa v. Factoran that a timber license
is not a contract within the purview of the non-impairment clause is edifying. We declared:
Needless to say, all licenses may thus be revoked or rescinded by executive action. It is not a
contract, property or a property right protected by the due process clause of the Constitution. In Tan
vs. Director of Forestry, this Court held:
"x x x A timber license is an instrument by which the State regulates the utilization and disposition of
forest resources to the end that public welfare is promoted. A timber license is not a contract within
the purview of the due process clause; it is only a license or a privilege, which can be validly
withdrawn whenever dictated by public interest or public welfare as in this case.

A license is merely a permit or privilege to do what otherwise would be unlawful, and is not a contract
between the authority, federal, state, or municipal, granting it and the person to whom it is granted;
neither is it a property or a property right, nor does it create a vested right; nor is it taxation' (C.J.
168). Thus, this Court held that the granting of license does not create irrevocable rights, neither is it
property or property rights (People vs. Ong Tin, 54 O.G. 7576). x x x"
We reiterated this pronouncement in Felipe Ysmael, Jr. & Co., Inc. vs. Deputy Executive Secretary:
"x x x Timber licenses, permits and license agreements are the principal instruments by which the
State regulates the utilization and disposition of forest resources to the end that public welfare is
promoted. And it can hardly be gainsaid that they merely evidence a privilege granted by the State to
qualified entities, and do not vest in the latter a permanent or irrevocable right to the particular
concession area and the forest products therein. They may be validly amended, modified, replaced or
rescinded by the Chief Executive when national interests so require. Thus, they are not deemed
contracts within the purview of the due process of law clause [See Sections 3(ee) and 20 of Pres.
Decree No. 705, as amended. Also, Tan v. Director of Forestry, G.R. No. L-24548, October 27, 1983,
125 SCRA 302]."
Since timber licenses are not contracts, the non-impairment clause, which reads:
"SEC. 10. No law impairing the obligation of contracts shall be passed."
cannot be invoked.
The Presidential Warranty cannot, in any manner, be construed as a contractual undertaking assuring
PICOP of exclusive possession and enjoyment of its concession areas. Such an interpretation would
result in the complete abdication by the State in favor of PICOP of the sovereign power to control and
supervise the exploration, development and utilization of the natural resources in the area. 28
The Motion for Reconsideration was denied with finality on 14 February 2007. A Second Motion for
Reconsideration filed by PICOP was denied on 23 May 2007.
PICOP insists that the pronouncement in Base Metals is a mere obiter dictum, which would not bind
this Court in resolving this Motion for Reconsideration. In the oral arguments, however, upon
questioning from the ponente himself of Base Metals, it was agreed that the issue of whether the
1969 Document is a contract was necessary in the resolution of Base Metals:
JUSTICE TINGA:
And do you confirm that one of the very issues raised by PICOP in that case [PICOP Resources Inc.
v. Base Metal Mineral Resources Corporation] revolves around its claim that a Presidential Warranty
is protected by the non-impairment c[l]ause of the Constitution.
ATTY. AGABIN:
Yes, I believe that statement was made by the Court, your Honor.
JUSTICE TINGA:
Yes. And that claim on the part of PICOP necessarily implies that the Presidential Warranty according
to PICOP is a contract protected by the non-impairment clause.
ATTY. AGABIN:
Yes, Your Honor.
JUSTICE TINGA:
Essentially, the PICOP raised the issue of whether the Presidential Warranty is a contract or not.
ATTY. AGABIN:

Yes, Your Honor.

JUSTICE TINGA:
And therefore any ruling on the part of the Court on that issue could not be an obiter dictum.
ATTY. AGABIN:
Your Honor, actually we believe that the basic issue in that case was whether or not Base Metals
could conduct mining activities underneath the forest reserve allotted to PICOP and the Honorable
Court ruled that the Mining Act of 1995 as well as the Department Order of DENR does not disallow
mining activity under a forest reserve.
JUSTICE TINGA:
But it was PICOP itself which raised the claim that a Presidential Warranty is a contract. And therefore
be, should be protected on the under the non-impairment clause of the Constitution.
ATTY. AGABIN:
Yes, Your Honor. Except that
JUSTICE TINGA:
So, how can you say now that the Court merely uttered, declared, laid down an obiter dictum in
saying that the Presidential Warranty is not a contract, and it is not being a contract, it is not
prohibited by the non-impairment clause.
ATTY. AGABIN:
This Honorable Court could have just ruled, held that the mining law allows mining activities under a
forest reserve without deciding on that issue that was raised by PICOP, your Honor, and therefore we
believe.
JUSTICE TINGA:
It could have been better if PICOP has not raised that issue and had not claimed that the Presidential
Warranty is not a contract.
ATTY. AGABIN:
Well, that is correct, your Honor except that the Court could have just avoided that question.
Because
JUSTICE TINGA:
Why[?]
ATTY. AGABIN:
It already settled the issue, the basic issue.
JUSTICE TINGA:
Yes, because the Court in saying that merely reiterated a number of rulings to the effect that the
Presidential Warranty, a Timber License for that matter is not a contract protected by the nonimpairment laws.
ATTY. AGABIN:
Well, it is our submission, your Honor, that it is obiter because, that issue even a phrase by PICOP
was not really fully argued by the parties for the Honorable Court and it seems from my reading at

least it was just an aside given by the Honorable Court to decide on that issue raised by PICOP but it
was not necessary to the decision of the court.
JUSTICE TINGA:
It was not necessary[?]
ATTY. AGABIN:
To the decision of the Court.
JUSTICE TINGA:
It was.
ATTY. AGABIN:
It was not necessary.
JUSTICE TINGA:
It was.
ATTY. AGABIN:
Yes.
JUSTICE TINGA:
And PICOP devoted quite a number of pages in [its] memorandum to that issue and so did the Court
[in its Decision].
ATTY. AGABIN:
Anyway, your Honor, we beg the Court to revisit, not to 29
Interpretation of the 1969 Document That Would Be in Harmony with the Constitution
To remove any doubts as to the contents of the 1969 Document, the purported Presidential Warranty,
below is a complete text thereof:
Republic of the Philippines
Department of Agriculture and Natural Resources
OFFICE OF THE SECRETARY
Diliman, Quezon City
D-53, Licenses (T.L.A. No. 43)
Bislig Bay Lumber Co., Inc.
(Bislig, Surigao)
July 29, 1969
Bislig Bay Lumber Co., Inc.
[unreadable word] Bldg.
Makati, Rizal
S i r s:
This has reference to the request of the Board of Investments through its Chairman in a letter dated
July 16, 1969 for a warranty on the boundaries of your concession area under Timber License
Agreement No. 43, as amended.

We are made to understand that your company is committed to support the first large scale integrated
wood processing complex hereinafter called: "The Project") and that such support will be provided not
only in the form of the supply of pulpwood and other wood materials from your concession but also by
making available funds generated out of your own operations, to supplement PICOPs operational
sources of funds and other financial arrangements made by him. In order that your company may
provide such support effectively, it is understood that you will call upon your stockholders to take such
steps as may be necessary to effect a unification of managerial, technical, economic and manpower
resources between your company and PICOP.
It is in the public interest to promote industries that will enhance the proper conservation of our forest
resources as well as insure the maximum utilization thereof to the benefit of the national economy.
The administration feels that the PICOP project is one such industry which should enjoy priority over
the usual logging operations hitherto practiced by ordinary timber licensees: For this reason, we are
pleased to consider favorably the request.
We confirm that your Timber License Agreement No. 43, as amended (copy of which is attached as
Annex "A" hereof which shall form part and parcel of this warranty) definitely establishes the
boundary lines of your concession area which consists of permanent forest lands with an aggregate
area of 121,587 hectares and alienable or disposable lands with an aggregate area of approximately
21,580 hectares.
We further confirm that your tenure over the area and exclusive right to cut, collect and remove
sawtimber and pulpwood shall be for the period ending on April 26, 1977; said period to be renewable
for other 25 years subject to compliance with constitutional and statutory requirements as well as with
existing policy on timber concessions.
The peaceful and adequate enjoyment by you of your area as described and specified in your
aforesaid amended Timber License Agreement No. 43 is hereby warranted provided that pertinent
laws, regulations and the terms and conditions of your license agreement are observed.
Very truly yours,
(Sgd.) FERNANDO LOPEZ
Secretary of Agriculture
and Natural Resources
Encl.:
RECOMMENDED BY:
(Sgd.) JOSE VIADO
Acting Director of Forestry
APPROVED:
(Sgd.) FERDINAND E. MARCOS
President of the Philippines
ACCEPTED:
BISLIG BAY LBR. CO., INC.
By:
(Sgd.) JOSE E. SORIANO
President
PICOP interprets this document in the following manner:
6.1 It is clear that the thrust of the government warranty is to establish a particular area defined by
boundary lines of TLA No. 43 for the PICOP Project. In consideration for PICOPs commitment to
pursue and establish the project requiring huge investment/funding from stockholders and lending

institutions, the government provided a warranty that ensures the continued and exclusive right of
PICOP to source its raw materials needs from the forest and renewable trees within the areas
established.
6.2 As a long-term support, the warranty covers the initial twenty five (25) year period and
is renewable for periods of twenty five (25) years provided the project continues to exist and
operate. Very notably, the wording of the Presidential Warranty connotes that for as long as the holder
complies with all the legal requirements, the term of the warranty is not limited to fifty (50) years but
other twenty five (25) years.
6.3 Note must be made that the government warranted that PICOPs tenure over the area and
exclusive right to cut, collect and remove saw timber and pulpwood shall be for the period ending on
26 April 1977 and said period to be renewable for other 25 years subject to "compliance with
constitutional and statutory requirements as well as existing policy on timber requirements". It is clear
that the renewal for other 25 years, not necessarily for another 25 years is guaranteed. This explains
why on 07 October 1977, TLA No. 43, as amended, was automatically renewed for another period of
twenty five (25) years to expire on 26 April 2002. 30
PICOPs interpretation of the 1969 Document cannot be sustained. PICOPs claim that the term of the
warranty is not limited to fifty years, but that it extends to other fifty years, perpetually, violates Section
2, Article XII of the Constitution which provides:
Section 2. All lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all
forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural
resources are owned by the State. With the exception of agricultural lands, all other natural resources
shall not be alienated. The exploration, development, and utilization of natural resources shall be
under the full control and supervision of the State. The State may directly undertake such activities, or
it may enter into co-production, joint venture, or production-sharing agreements with Filipino citizens,
or corporations or associations at least sixty per centum of whose capital is owned by such citizens.
Such agreements may be for a period not exceeding twenty-five years, renewable for not more than
twenty-five years, and under such terms and conditions as may be provided by law.In cases of water
rights for irrigation, water supply fisheries, or industrial uses other than the development of water
power, beneficial use may be the measure and limit of the grant.
Mr. Justice Dante O. Tingas interpretation of the 1969 Document is much more in accord with the
laws and the Constitution. What one cannot do directly, he cannot do indirectly. Forest lands cannot
be alienated in favor of private entities. Granting to private entities, via a contract, a permanent,
irrevocable, and exclusive possession of and right over forest lands is tantamount to granting
ownership thereof. PICOP, it should be noted, claims nothing less than having exclusive, continuous
and uninterrupted possession of its concession areas, 31 where all other entrants are illegal,32 and
where so-called "illegal settlers and squatters" are apprehended. 33
IFMAs are production-sharing agreements concerning the development and utilization of natural
resources. As such, these agreements "may be for a period not exceeding twenty-five years,
renewable for not more than twenty-five years, and under such terms and conditions as may be
provided by law." Any superior "contract" requiring the State to issue TLAs and IFMAs whenever they
expire clearly circumvents Section 2, Article XII of the Constitution, which provides for the only
permissible schemes wherein the full control and supervision of the State are not derogated: coproduction, joint venture, or production-sharing agreements within the time limit of twenty-five years,
renewable for another twenty-five years.
On its face, the 1969 Document was meant to expire on 26 April 2002, upon the expiration of the
expected extension of the original TLA period ending on 26 April 1977:
We further confirm that your tenure over the area and exclusive right to cut, collect and remove
sawtimber and pulpwood shall be for the period ending on April 26, 1977; said period to be renewable
for other 25 years subject to compliance with constitutional and statutory requirements as well as with
existing policy on timber concessions.1avvphi1
Any interpretation extending the application of the 1969 Document beyond 26 April 2002 and any
concession that may be granted to PICOP beyond the said date would violate the Constitution, and
no amount of legal hermeneutics can change that. Attempts of PICOP to explain its way out of this

Constitutional provision only led to absurdities, as exemplified in the following excerpt from the oral
arguments:
JUSTICE CARPIO:
The maximum trend of agreement to develop and utilize natural resources like forest products is 25
years plus another 25 years or a total of 50 years correct?
ATTY. AGABIN
Yes, Your Honor.
JUSTICE CARPIO:
That is true for the 1987, 1973, 1935 Constitution, correct?
ATTY. AGABIN:
Yes, Your Honor.
JUSTICE CARPIO:
The TLA here, TLA 43, expired, the first 25 years expired in 1977, correct?
ATTY. AGABIN:
Yes, Your Honor.
JUSTICE CARPIO:
And it was renewed for another 25 years until 2002, the 50th year?
ATTY. AGABIN:
Yes, Your Honor.
JUSTICE CARPIO:
Now, could PICOP before the end of the 50th year lets say in 2001, one year before the expiration,
could it have asked for an extension of another 25 years of its TLA agreement[?]
ATTY. AGABIN:
I believe so, Your Honor.
JUSTICE CARPIO:
But the Constitution says, maximum of fifty years. How could you ask for another 25 years of its TLA.
ATTY. AGABIN:
Well, your Honor, we believe on a question like this, this Honorable Court should balance the interest.
JUSTICE CARPIO:
The Constitution is very clear, you have only a maximum of 50 years, 25 plus another 25. PICOP
could never have applied for an extension, for a third 25-year term whether under the 1935
Constitution, the 1973 Constitution and the 1987 Constitution, correct?
ATTY. AGABIN:
Your Honor, except that we are invoking the warranty, the terms of the warranty.

JUSTICE CARPIO:
Can the warranty prevail over the Constitution?
ATTY. AGABIN:
Well, it is a vested right, your Honor.
JUSTICE CARPIO:
Yes, but whatever it is, can it prevail over the Constitution?
ATTY. AGABIN:
The Constitution itself provides that vested rights should be .
JUSTICE CARPIO:
If it is not in violation of specific provision of the Constitution. The Constitution says, 25 years plus
another 25 years, thats the end of it. You mean to say that a President of the Philippines can give
somebody 1,000 years license?
ATTY. AGABIN:
Well, that is not our position, Your Honor. Because our position is that .
JUSTICE CARPIO:
My question is, what is the maximum term, you said 50 years. So, my next question is, can PICOP
apply for an extension of another 25 years after 2002, the 50th year?
ATTY. AGABIN:
Yes, based on the contract of warranty, Your Honor, because the contract of warranty.
JUSTICE CARPIO:
But in the PICOP license it is very clear, it says here, provision 28, it says the license agreement is for
a total of 50 years. I mean it is very simple, the President or even Congress cannot pass a law
extending the license, whatever kind of license to utilize natural resources for more than fifty year[s]. I
mean even the law cannot do that. It cannot prevail over the Constitution. Is that correct, Counsel?
ATTY. AGABIN:
It is correct, Your Honor, except that in this case, what is actually our application is that the law
provides for the conversion of existing TLA into IFMA.
JUSTICE CARPIO:
So, they file the petition for conversion before the end of the 50th year for IFMA.
ATTY. AGABIN:
Yes, Your Honor.
JUSTICE CARPIO:
But IFMA is the same, it is based on Section 2, Article 12 of the Constitution, develop and utilize
natural resources because as you said when the new constitution took effect we did away with the old
licensing regime, we have now co-production, a production sharing, joint venture, direct undertaking
but still the same developing and utilizing the natural resources, still comes from section 2, Art. 12 of
the Constitution. It is still a license but different format now.

ATTY. AGABIN:
It is correct, Your Honor, except that the regimes of joint venture, co-production and production
sharing are what is referred to in the constitution, Your Honor, and still covered
JUSTICE CARPIO:
Yes, but it is covered by same 25 year[s], you mean to say people now can circumvent the 50 year
maximum term by calling their TLA as IFMA and after fifty years calling it ISMA, after another 50
years call it MAMA.
ATTY. AGABIN:
Yes, Your Honor. Because
JUSTICE CARPIO:
It can be done.
ATTY. AGABIN:
That is provided for by the department itself. 34
PICOP is, in effect, arguing that the DENR issued DAO No. 99-53 in order to provide a way to
circumvent the provisions of the Constitution limiting agreements for the utilization of natural
resources to a maximum period of fifty years. Official duties are, however, disputably considered to be
regularly performed,35 and good faith is always presumed.
DAO No. 99-53 was issued to change the means by which the government enters into an agreement
with private entities for the utilization of forest products. DAO No. 99-53 is a late response to the
change in the constitutional provisions on natural resources from the 1973 Constitution, which
allowed the granting of licenses to private entities, 36 to the present Constitution, which provides for coproduction, joint venture, or production-sharing agreements as the permissible schemes wherein
private entities may participate in the utilization of forest products. Since the granting of timber
licenses ceased to be a permissible scheme for the participation of private entities under the present
Constitution, their operations should have ceased upon the issuance of DAO No. 99-53, the rule
regulating the schemes under the present Constitution. This would be iniquitous to those with existing
TLAs that would not have expired yet as of the issuance of DAO No. 99-53, especially those with new
TLAs that were originally set to expire after 10 or even 20 or more years. The DENR thus inserted a
provision in DAO No. 99-53 allowing these TLA holders to finish the period of their TLAs, but this time
as IFMAs, without the rigors of going through a new application, which they have probably just gone
through a few years ago.
Such an interpretation would not only make DAO No. 99-53 consistent with the provisions of the
Constitution, but would also prevent possible discrimination against new IFMA applicants:
ASSOCIATE JUSTICE DE CASTRO:
I ask this question because of your interpretation that the period of the IFMA, if your TLA is converted
into IFMA, would cover a new a fresh period of twenty-five years renewable by another period of
twenty-five years.
DEAN AGABIN:
Yes, Your Honor.
ASSOCIATE JUSTICE DE CASTRO:
Dont you think that will, in effect, be invidious discrimination with respect to other applicants if you are
granted a fresh period of twenty-five years extendible to another twenty-five years?
DEAN AGABIN:

I dont think it would be, Your Honor, considering that the IFMA is different regime from the TLA. And
not only that, there are considerations of public health and ecology which should come into play in
this case, and which we had explained in our opening statement and, therefore the provision of the
Constitution on the twenty-five limits for renewal of co-production, joint venture and production
sharing agreements, should be balanced with other values stated in the Constitution, like the value of
balanced ecology, which should be in harmony with the rhythm of nature, or the policy of forest
preservation in Article XII, Section 14 of the Constitution. These are all important policy
considerations which should be balanced against the term limits in Article II of the Constitution.
ASSOCIATE JUSTICE DE CASTRO:
The provision of this Administrative Order regarding automatic conversion may be reasonable, if, I
want to know if you agree with me, if we limit this automatic conversion to the remaining period of the
TLA, because in that case there will be a valid ground to make a distinction between those with
existing TLA and those who are applying for the first time for IFMA?
DEAN AGABIN:
Well, Your Honor, we beg to disagree, because as I said TLAs are completely different from IFMA.
The TLA has no production sharing or co-production agreement or condition. All that the licensee has
to do is, to pay forest charges, taxes and other impositions from the local and national government.
On the other hand, the IFMAs contained terms and conditions which are completely different, and that
they either impose co-production, production sharing or joint venture terms. So its a completely
different regime, Your Honor.
ASSOCIATE JUSTICE DE CASTRO:
Precisely, that is the reason why there should be an evaluation of what you mentioned earlier of the
development plan.
DEAN AGABIN:
Yes, Your Honor.
ASSOCIATE JUSTICE DE CASTRO:
So it will be reasonable to convert a TLA into an IFMA without considering the development plan
submitted by other applicants or the development plan itself of one seeking conversion into IFMA if it
will only be limited to the period, the original period of the TLA. But once you go beyond the period of
the TLA, then you will be, the DENR is I think should evaluate the different proposals of the applicants
if we are thinking of a fresh period of twenty-five years, and which is renewable under the Constitution
by another twenty-five years. So the development plan will be important in this case, the submission
of the development plan of the different applicants must be considered. So I dont understand why
you mentioned earlier that the development plan will later on be a subject matter of negotiation
between the IFMA grantee and the government. So it seems that it will be too late in the day to
discuss that if you have already converted the TLA into IFMA or if the government has already
granted the IFMA, and then it will later on study the development plan, whether it is viable or not, or it
is sustainable or not, and whether the development plan of the different applicants are, are, which of
the development plan of the different applicants is better or more advantageous to the government. 37
PICOP insists that the alleged Presidential Warranty, having been signed on 29 July 1969, could not
have possibly considered the limitations yet to be imposed by future issuances, such as the 1987
Constitution. However, Section 3, Article XVIII of said Constitution, provides:
Section 3. All existing laws, decrees, executive orders, proclamations, letters of instructions, and
other executive issuances not inconsistent with this Constitution shall remain operative until
amended, repealed, or revoked.
In the recent case Sabio v. Gordon,38 we ruled that "(t)he clear import of this provision is that all
existing laws, executive orders, proclamations, letters of instructions and other executive issuances
inconsistent or repugnant to the Constitution are repealed."

When a provision is susceptible of two interpretations, "the one that will render them operative and
effective and harmonious with other provisions of law" 39 should be adopted. As the interpretations in
the assailed Decision and in Mr. Justice Tingas ponencia are the ones that would not make the
subject Presidential Warranty unconstitutional, these are what we shall adopt.
Purpose of the 1969 Document: Assurance That the Boundaries of Its Concession Area Would Not
Be Altered Despite the Provision in the TLA that the DENR Secretary Can Amend Said Boundaries
In the assailed Decision, we ruled that the 1969 Document cannot be considered a contract that
would bind the government regardless of changes in policy and the demands of public interest and
social welfare. PICOP claims this conclusion "did not take into consideration that PICOP already had
a valid and current TLA before the contract with warranty was signed in 1969." 40 PICOP goes on:
"The TLA is a license that equips any TLA holder in the country for harvesting of timber. A TLA is
signed by the Secretary of the DANR now DENR. The Court ignored the significance of the need for
another contract with the Secretary of the DANR but this time with the approval of the President of the
Republic."41 PICOP then asks us: "If PICOP/BBLCI was only an ordinary TLA holder, why will it go
through the extra step of securing another contract just to harvest timber when the same can be
served by the TLA signed only by the Secretary and not requiring the approval of the President of the
Republic(?)"42
The answer to this query is found in TLA No. 43 itself wherein, immediately after the boundary lines of
TLA No. 43 were established, the following conditions were given:
This license is granted to the said party of the second part upon the following express conditions:
I. That authority is granted hereunder to the party of the second part 43 to cut, collect or remove
firewood or other minor forest products from the area embraced in this license agreement
except as hereinafter provided.
II. That the party of the first part44 may amend or alter the description of the boundaries of the
area covered by this license agreement to conform with official surveys and that the decision of
the party of the first part as to the exact location of the said boundaries shall be final.
III. That if the party of the first part deems it necessary to establish on the ground the boundary
lines of the area granted under this license agreement, the party of the second part shall
furnish to the party of the first part or its representatives as many laborers as it needs and all
the expenses to be incurred on the work including the wages of such laborers shall be paid by
the party of the second part.45
Thus, BBLCI needed an assurance that the boundaries of its concession area, as established in TLA
No. 43, as amended, would not be altered despite this provision. Hence, BBLCI endeavored to obtain
the 1969 Document, which provides:
We confirm that your Timber License Agreement No. 43, as amended (copy of which is attached as
Annex "A" hereof which shall form part and parcel of this warranty) definitely establishes the
boundary lines of your concession area which consists of permanent forest lands with an aggregate
area of 121,587 hectares and alienable or disposable lands with an aggregate area of approximately
21,580 hectares.
We further confirm that your tenure over the area and exclusive right to cut, collect and remove
sawtimber and pulpwood shall be for the period ending on April 26, 1977; said period to be renewable
for other 25 years subject to compliance with constitutional and statutory requirements as well as with
existing policy on timber concessions.
The peaceful and adequate enjoyment by you of your area as described and specified in your
aforesaid amended Timber License Agreement No. 43 is hereby warranted provided that pertinent
laws, regulations and the terms and conditions of your license agreement are observed. 46
In Koa v. Court of Appeals,47 we ruled that a warranty is a collateral undertaking and is merely part of
a contract. As a collateral undertaking, it follows the principal wherever it goes. When this was pointed
out by the Solicitor General, PICOP changed its designation of the 1969 Document from "Presidential
Warranty" or "government warranty" in all its pleadings prior to our Decision, to "contract with

warranty" in its Motion for Reconsideration. This, however, is belied by the statements in the 29 July
1969 Document, which refers to itself as "this warranty."
Re: Allegation That There Were Mutual Contract Considerations
Had the 29 July 1969 Document been intended as a contract, it could have easily said so. More
importantly, it could have clearly defined the mutual considerations of the parties thereto. It could
have also easily provided for the sanctions for the breach of the mutual considerations specified
therein. PICOP had vigorously argued that the 1969 Document was a contract because of these
mutual considerations, apparently referring to the following paragraph of the 1969 Document:
We are made to understand that your company is committed to support the first large scale integrated
wood processing complex hereinafter called: "The Project") and that such support will be provided not
only in the form of the supply of pulpwood and other wood materials from your concession but also by
making available funds generated out of your own operations, to supplement PICOPs operational
surces (sic) of funds and other financial arrangements made by him. In order that your company may
provide such support effectively, it is understood that you will call upon your stockholders to take such
steps as may be necessary to effect a unification of managerial, technical, economic and manpower
resources between your company and PICOP.1avvphi1
This provision hardly evinces a contract consideration (which, in PICOPs interpretation, is in
exchange for the exclusive and perpetual tenure over 121,587 hectares of forest land and 21,580
hectares of alienable and disposable lands). As elucidated by PICOP itself in bringing up the
Investment Incentives Act which we shall discuss later, and as shown by the tenor of the 1969
Document, the latter document was more of a conferment of an incentive for BBLCIs investment
rather than a contract creating mutual obligations on the part of the government, on one hand, and
BBLCI, on the other. There was no stipulation providing for sanctions for breach if BBLCIs being
"committed to support the first large scale integrated wood processing complex" remains a
commitment. Neither did the 1969 Document give BBLCI a period within which to pursue this
commitment.
According to Article 1350 of the Civil Code, "(i)n onerous contracts the cause is understood to be, for
each contracting party, the prestation or promise of a thing or service by the other." 48 Private
investments for ones businesses, while indeed eventually beneficial to the country and deserving to
be given incentives, are still principally and predominantly for the benefit of the investors. Thus, the
"mutual" contract considerations by both parties to this alleged contract would be both for the benefit
of one of the parties thereto, BBLCI, which is not obligated by the 1969 Document to surrender a
share in its proceeds any more than it is already required by its TLA and by the tax laws.
PICOPs argument that its investments can be considered as contract consideration derogates the
rule that "a license or a permit is not a contract between the sovereignty and the licensee or
permittee, and is not a property in the constitutional sense, as to which the constitutional proscription
against the impairment of contracts may extend." All licensees obviously put up investments, whether
they are as small as a tricycle unit or as big as those put up by multi-billion-peso corporations. To
construe these investments as contract considerations would be to abandon the foregoing rule, which
would mean that the State would be bound to all licensees, and lose its power to revoke or amend
these licenses when public interest so dictates.
The power to issue licenses springs from the States police power, known as "the most essential,
insistent and least limitable of powers, extending as it does to all the great public
needs."49 Businesses affecting the public interest, such as the operation of public utilities and those
involving the exploitation of natural resources, are mandated by law to acquire licenses. This is so in
order that the State can regulate their operations and thereby protect the public interest. Thus, while
these licenses come in the form of "agreements," e.g., "Timber License Agreements," they cannot be
considered contracts under the non-impairment clause. 50
PICOP found this argument "lame," arguing, thus:
43. It is respectfully submitted that the aforesaid pronouncement in the Decision is an egregious and
monumental error.

44. The Decision could not dismiss as "preposterous" the mutual covenants in the Presidential
Warranty which calls for a huge investment of Php500 million at that time in 1969 out of which
Php268,440,000 raised from domestic foreign lending institution to establish the first large scale
integrated wood processing complex in the Philippines.
45. The Decision puts up a lame explanation that "all licensees put up investments in pursuing their
business"
46. Now there are about a hundred timber licenses issued by the Government thru the DENR, but
these are ordinary timber licenses which involve the mere cutting of timber in the concession area,
and nothing else. Records in the DENR shows that no timber licensee has put up an integrated large
wood processing complex in the Philippines except PICOP.51
PICOP thus argues on the basis of quantity, and wants us to distinguish between the investment of
the tricycle driver and that of the multi-billion corporation. However, not even billions of pesos in
investment can change the fact that natural resources and, therefore, public interest are involved in
PICOPs venture, consequently necessitating the full control and supervision by the State as
mandated by the Constitution. Not even billions of pesos in investment can buy forest lands, which is
practically what PICOP is asking for by interpreting the 1969 Document as a contract giving it
perpetual and exclusive possession over such lands. Among all TLA holders in the Philippines,
PICOP has, by far, the largest concession area at 143,167 hectares, a land area more than the size
of two Metro Manilas.52 How can it not expect to also have the largest investment?
Investment Incentives Act
PICOP then claims that the contractual nature of the 1969 Document was brought about by its
issuance in accordance with and pursuant to the Investment Incentives Act. According to PICOP:
The conclusion in the Decision that to construe PICOPs investments as a consideration in a contract
would be to stealthily render ineffective the principle that a license is not a contract between the
sovereignty and the licensee is so flawed since the contract with the warranty dated 29 July 1969 was
issued by the Government in accordance with and pursuant to Republic Act No. 5186, otherwise
known as "The Investment Incentives Act."53
PICOP then proceeds to cite Sections 2 and 4(d) and (e) of said act:
Section 2. Declaration of Policy To accelerate the sound development of the national economy in
consonance with the principles and objectives of economic nationalism, and in pursuance of a
planned, economically feasible and practicable dispersal of industries, under conditions which will
encourage competition and discharge monopolies, it is hereby declared to be the policy of the state to
encourage Filipino and foreign investments, as hereinafter set out, in projects to develop agricultural,
mining and manufacturing industries which increase national income most at the least cost, increase
exports, bring about greater economic stability, provide more opportunities for employment, raise the
standards of living of the people, and provide for an equitable distribution of wealth. It is further
declared to be the policy of the state to welcome and encourage foreign capital to establish pioneer
enterprises that are capital intensive and would utilize a substantial amount of domestic raw
materials, in joint venture with substantial Filipino capital, whenever available.
Section 4. Basic Rights and Guarantees. All investors and enterprises are entitled to the basic rights
and guarantees provided in the constitution. Among other rights recognized by the Government of the
Philippines are the following:
xxxx
d) Freedom from Expropriation. There shall be no expropriation by the government of the property
represented by investments or of the property of enterprises except for public use or in the interest of
national welfare and defense and upon payment of just compensation. x x x.
e) Requisition of Investment. There shall be no requisition of the property represented by the
investment or of the property of enterprises, except in the event of war or national emergency and
only for the duration thereof. Just compensation shall be determined and paid either at the time of
requisition or immediately after cessation of the state of war or national emergency. Payments

received as compensation for the requisitioned property may be remitted in the currency in which the
investment was originally made and at the exchange rate prevailing at the time of remittance, subject
to the provisions of Section seventy-four of republic Act Numbered Two hundred sixty-five.
Section 2 speaks of the policy of the State to encourage Filipino and foreign investments. It does not
speak of how this policy can be implemented. Implementation of this policy is tackled in Sections 5 to
12 of the same law,54which PICOP failed to mention, and for a good reason. None of the 24 incentives
enumerated therein relates to, or even remotely suggests that, PICOPs proposition that the 1969
Document is a contract.
PICOP could indeed argue that the enumeration is not exclusive. Certainly, granting incentives to
investors, whether included in the enumeration or not, would be an implementation of this policy.
However, it is presumed that whatever incentives may be given to investors should be within the
bounds of the laws and the Constitution. The declaration of policy in Section 2 cannot, by any stretch
of the imagination, be read to provide an exception to either the laws or, heaven forbid, the
Constitution. Exceptions are never presumed and should be convincingly proven. Section 2 of the
Investment Incentives Act cannot be read as exempting investors from the Constitutional provisions
(1) prohibiting private ownership of forest lands; (2) providing for the complete control and supervision
by the State of exploitation activities; or (3) limiting exploitation agreements to twenty-five years,
renewable for another twenty-five years.
Section 4(d) and (e), on the other hand, is a recognition of rights already guaranteed under the
Constitution. Freedom from expropriation is granted under Section 9 of Article III 55 of the Constitution,
while the provision on requisition is a negative restatement of Section 6, Article XII. 56
Refusal to grant perpetual and exclusive possession to PICOP of its concession area would not result
in the expropriation or requisition of PICOPs property, as these forest lands belong to the State, and
not to PICOP. This is not changed by PICOPs allegation that:
Since it takes 35 years before the company can go back and harvest their residuals in a logged-over
area, it must be assured of tenure in order to provide an inducement for the company to manage and
preserve the residuals during their growth period. This is a commitment of resources over a span of
35 years for each plot for each cycle. No company will undertake the responsibility and cost involved
in policing, preserving and managing residual forest areas until it were sure that it had firm title to the
timber.57
The requirement for logging companies to preserve and maintain forest areas, including the
reforestation thereof, is one of the prices a logging company must pay for the exploitation thereof.
Forest lands are meant to be enjoyed by countless future generations of Filipinos, and not just by one
logging company. The requirements of reforestation and preservation of the concession areas are
meant to protect them, the future generations, and not PICOP. Reforestation and preservation of the
concession areas are not required of logging companies so that they would have something to cut
again, but so that the forest would remain intact after their operations. That PICOP would not accept
the responsibility to preserve its concession area if it is not assured of tenure thereto does not speak
well of its corporate policies.
Conclusion
In sum, PICOP was not able to prove either of the two things it needed to prove to be entitled to a
Writ of Mandamus against the DENR Secretary. The 1969 Document is not a contract recognized
under the non-impairment clause and, even if we assume for the sake of argument that it is, it did not
enjoin the government to issue an IFMA in 2002 either. These are the essential elements in PICOPs
cause of action, and the failure to prove the same warrants a dismissal of PICOPs Petition for
Mandamus, as not even PICOPs compliance with all the administrative and statutory requirements
can save its Petition now.
Whether PICOP Has Complied with the Statutory and Administrative Requirements for the
Conversion of the TLA to an IFMA
In the assailed Decision, our ruling was based on two distinct grounds, each one being sufficient in
itself for us to rule that PICOP was not entitled to a Writ of Mandamus: (1) the 1969 Document, on

which PICOP hinges its right to compel the issuance of an IFMA, is not a contract; and (2) PICOP has
not complied with all administrative and statutory requirements for the issuance of an IFMA.
When a court bases its decision on two or more grounds, each is as authoritative as the other and
neither is obiter dictum.58 Thus, both grounds on which we based our ruling in the assailed Decision
would become judicial dictum, and would affect the rights and interests of the parties to this case
unless corrected in this Resolution on PICOPs Motion for Reconsideration. Therefore, although
PICOP would not be entitled to a Writ of Mandamus even if the second issue is resolved in its favor,
we should nonetheless resolve the same and determine whether PICOP has indeed complied with all
administrative and statutory requirements for the issuance of an IFMA.
While the first issue (on the nature of the 1969 Document) is entirely legal, this second issue (on
PICOPs compliance with administrative and statutory requirements for the issuance of an IFMA) has
both legal and factual sub-issues. Legal sub-issues include whether PICOP is legally required to (1)
consult with and acquire an approval from the Sanggunian concerned under Sections 26 and 27 of
the Local Government Code; and (2) acquire a Certification from the National Commission on
Indigenous Peoples (NCIP) that the concession area does not overlap with any ancestral domain.
Factual sub-issues include whether, at the time it filed its Petition for Mandamus, PICOP had
submitted the required Five-Year Forest Protection Plan and Seven-Year Reforestation Plan and
whether PICOP had paid all forest charges.
For the factual sub-issues, PICOP invokes the doctrine that factual findings of the trial court,
especially when upheld by the Court of Appeals, deserve great weight. However, deserving of even
greater weight are the factual findings of administrative agencies that have the expertise in the area
of concern. The contentious facts in this case relate to the licensing, regulation and management of
forest resources, the determination of which belongs exclusively to the DENR:
SECTION 4. Mandate. The Department shall be the primary government agency responsible for the
conservation, management, development and proper use of the countrys environment and natural
resources, specifically forest and grazing lands, mineral resources, including those in reservation and
watershed areas, and lands of the public domain, as well as the licensing and regulation of all natural
resources as may be provided for by law in order to ensure equitable sharing of the benefits derived
therefrom for the welfare of the present and future generations of Filipinos. 59
When parties file a Petition for Certiorari against judgments of administrative agencies tasked with
overseeing the implementation of laws, the findings of such administrative agencies are entitled to
great weight. In the case at bar, PICOP could not have filed a Petition for Certiorari, as the DENR
Secretary had not yet even determined whether PICOP should be issued an IFMA. As previously
mentioned, when PICOPs application was brought to a standstill upon the evaluation that PICOP had
yet to comply with the requirements for the issuance of an IFMA, PICOP refused to attend further
meetings with the DENR and instead filed a Petition for Mandamus against the latter. By jumping the
gun, PICOP did not diminish the weight of the DENR Secretarys initial determination.
Forest Protection and Reforestation Plans
The Performance Evaluation Team tasked to appraise PICOPs performance on its TLA No. 43 found
that PICOP had not submitted its Five-Year Forest Protection Plan and its Seven-Year Reforestation
Plan.60
In its Motion for Reconsideration, PICOP asserts that, in its Letter of Intent dated 28 August 2000 and
marked as Exhibit L in the trial court, there was a reference to a Ten-Year Sustainable Forest
Management Plan (SFMP), in which a Five-Year Forest Protection Plan and a Seven-Year
Reforestation Plan were allegedly incorporated. PICOP submitted a machine copy of a certified
photocopy of pages 50-67 and 104-110 of this SFMP in its Motion for Reconsideration. PICOP claims
that the existence of this SFMP was repeatedly asserted during the IFMA application process. 61
Upon examination of the portions of the SFMP submitted to us, we cannot help but notice that
PICOPs concept of forest protection is the security of the area against "illegal" entrants and settlers.
There is no mention of the protection of the wildlife therein, as the focus of the discussion of the
silvicultural treatments and the SFMP itself is on the protection and generation of future timber
harvests. We are particularly disturbed by the portions stating that trees of undesirable quality shall
be removed.

However, when we required the DENR Secretary to comment on PICOPs Motion for
Reconsideration, the DENR Secretary did not dispute the existence of this SFMP, or question
PICOPs assertion that a Ten-Year Forest Protection Plan and a Ten-Year Reforestation Plan are
already incorporated therein. Hence, since the agency tasked to determine compliance with IFMA
administrative requirements chose to remain silent in the face of allegations of compliance, we are
constrained to withdraw our pronouncement in the assailed Decision that PICOP had not submitted a
Five-Year Forest Protection Plan and a Seven-Year Reforestation Plan for its TLA No. 43. As
previously mentioned, the licensing, regulation and management of forest resources are the primary
responsibilities of the DENR.62
The compliance discussed above is, of course, only for the purpose of determining PICOPs
satisfactory performance as a TLA holder, and covers a period within the subsistence of PICOPs TLA
No. 43. This determination, therefore, cannot prohibit the DENR from requiring PICOP, in the future,
to submit proper forest protection and reforestation plans covering the period of the proposed IFMA.
Forest Charges
In determining that PICOP did not have unpaid forest charges, the Court of Appeals relied on the
assumption that if it were true that PICOP had unpaid forest charges, it should not have been issued
an approved Integrated Annual Operation Plan (IAOP) for the year 2001-2002 by Secretary Alvarez
himself.63
In the assailed Decision, we held that the Court of Appeals had been selective in its evaluation of the
IAOP, as it disregarded the part thereof that shows that the IAOP was approved subject to several
conditions, not the least of which was the submission of proof of the updated payment of forest
charges from April 2001 to June 2001. 64 We also held that even if we considered for the sake of
argument that the IAOP should not have been issued if PICOP had existing forestry accounts, the
issuance of the IAOP could not be considered proof that PICOP had paid the same. Firstly, the best
evidence of payment is the receipt thereof. PICOP has not presented any evidence that such receipts
were lost or destroyed or could not be produced in court. 65 Secondly, the government cannot be
estopped by the acts of its officers. If PICOP has been issued an IAOP in violation of the law,
allegedly because it may not be issued if PICOP had existing forestry accounts, the government
cannot be estopped from collecting such amounts and providing the necessary sanctions therefor,
including the withholding of the IFMA until such amounts are paid.
We therefore found that, as opposed to the Court of Appeals findings, which were based merely on
estoppel of government officers, the positive and categorical evidence presented by the DENR
Secretary was more convincing with respect to the issue of payment of forestry charges:
1. Forest Management Bureau (FMB) Senior Forest Management Specialist (SFMS) Ignacio
M. Evangelista testified that PICOP had failed to pay its regular forest charges covering the
period from 22 September 2001 to 26 April 2002 in the total amount
of P15,056,054.0566 PICOP also allegedly paid late most of its forest charges from 1996
onwards, by reason of which, PICOP is liable for a surcharge of 25% per annum on the tax
due and interest of 20% per annum which now amounts to P150,169,485.02.67Likewise,
PICOP allegedly had overdue and unpaid silvicultural fees in the amount of P2,366,901.00 as
of 30 August 2002.68 Summing up the testimony, therefore, it was alleged that PICOP had
unpaid and overdue forest charges in the sum of P167,592,440.90 as of 10 August 2002. 69
2. Collection letters were sent to PICOP, but no official receipts are extant in the DENR record
in Bislig City evidencing payment of the overdue amount stated in the said collection
letters.70 There were no official receipts for the period covering 22 September 2001 to 26 April
2002.
We also considered these pieces of evidence more convincing than the other ones presented by
PICOP:
1. PICOP presented the certification of Community Environment and Natural Resources Office
(CENRO) Officer Philip A. Calunsag, which refers only to PICOPs alleged payment of regular
forest charges covering the period from 14 September 2001 to 15 May 2002. 71 We noted that it
does not mention similar payment of the penalties, surcharges and interests that PICOP
incurred in paying late several forest charges, which fact was not rebutted by PICOP.

2. The 27 May 2002 Certification by CENRO Calunsag specified only the period covering 14
September 2001 to 15 May 2002 and the amount of P53,603,719.85 paid by PICOP without
indicating the corresponding volume and date of production of the logs. This is in contrast to
the findings of SFMS Evangelista, which cover the period from CY 1996 to 30 August 2002
and includes penalties, interests, and surcharges for late payment pursuant to DAO 80, series
of 1987.
3. The 21 August 2002 PICOP-requested certification issued by Bill Collector Amelia D.
Arayan, and attested to by CENRO Calunsag himself, shows that PICOP paid only regular
forest charges for its log production covering 1 July 2001 to 21 September 2001. However,
there were log productions after 21 September 2001, the regular forest charges for which have
not been paid, amounting to P15,056,054.05.72The same certification shows delayed payment
of forest charges, thereby corroborating the testimony of SFMS Evangelista and substantiating
the imposition of penalties and surcharges.
In its Motion for Reconsideration, PICOP claims that SFMS Evangelista is assigned to an office that
has nothing to do with the collection of forest charges, and that he based his testimony on the
Memoranda of Forest Management Specialist II (FMS II) Teofila Orlanes and DENR, Bislig City Bill
Collector Amelia D. Arayan, neither of whom was presented to testify on his or her Memorandum.
PICOP also submitted an Addendum to Motion for Reconsideration, wherein it appended certified true
copies of CENRO Summaries with attached Official Receipts tending to show that PICOP had paid a
total of P81,184,747.70 in forest charges for 10 January 2001 to 20 December 2002, including the
period during which SFMS Evangelista claims PICOP did not pay forest charges (22 September 2001
to 26 April 2002).
Before proceeding any further, it is necessary for us to point out that, as with our ruling on the forest
protection and reforestation plans, this determination of compliance with the payment of forest
charges is exclusively for the purpose of determining PICOPs satisfactory performance on its TLA
No. 43. This cannot bind either party in a possible collection case that may ensue.
An evaluation of the DENR Secretarys position on this matter shows a heavy reliance on the
testimony of SFMS Evangelista, making it imperative for us to strictly scrutinize the same with respect
to its contents and admissibility.
PICOP claims that SFMS Evangelistas office has nothing to do with the collection of forest charges.
According to PICOP, the entity having administrative jurisdiction over it is CENRO, Bislig City by
virtue of DENR Administrative Order No. 96-36, dated 20 November 1996, which states:
1. In order for the DENR to be able to exercise closer and more effective supervision, management
and control over the forest resources within the areas covered by TLA No. 43, PTLA No. 47 and IFMA
No. 35 of the PICOP Resources, Inc., (PRI) and, at the same time, provide greater facility in the
delivery of DENR services to various publics, the aforesaid forest holdings of PRI are hereby placed
under the exclusive jurisdiction of DENR Region No. XIII with the CENR Office at Bislig, Surigao del
Sur, as directly responsible thereto. x x x.
We disagree. Evangelista is an SFMS assigned at the Natural Forest Management Division of the
FMB, DENR. In Evangelistas aforementioned affidavit submitted as part of his direct examination,
Evangelista enumerated his duties and functions as SFMS:
1. As SFMS, I have the following duties and functions:
a) To evaluate and act on cases pertaining to forest management referred to in the
Natural forest Management Division;
b) To monitor, verify and validate forest management and related activities by timber
licences as to their compliance to approved plans and programs;
c) To conduct investigation and verification of compliance by timber licenses/permittees
to existing DENR rules and regulations;
d) To gather field data and information to be used in the formulation of forest policies
and regulations; and

e) To perform other duties and responsibilities as may be directed by superiors. 73

PICOP also alleges that the testimony of SFMS Evangelista was based on the aforementioned
Memoranda of Orlanes and Arayan and that, since neither Orlanes nor Arayan was presented
as a witness, SFMS Evangelistas testimony should be deemed hearsay. SFMS Evangelistas
1 October 2002 Affidavit,74 which was offered as part of his testimony, provides:
2. Sometime in September, 2001 the DENR Secretary was furnished a copy of forest
Management Specialist II (FMS II) Teofila L. Orlanes Memorandum dated September 24, 2001
concerning unopaid forest charges of PICOP. Attached to the said Memorandum was a
Memorandum dated September 19, 2001 of Amelia D. Arayan, Bill collector of the DENR R1314, Bislig City. Copies of the said Memoranda are attached as Annexes 1 and 2, respectively.
3. The said Memoranda were referred to the FMB Director for appropriate action.
4. Thus, on August 5, 2002, I was directed by the FMB Director to proceed to Region 13 to
gather forestry-related data and validate the report contained in the Memoranda of Ms.
Orlanes and Arayan.
5. On August 6, 2002, I proceeded to DENR Region 13 in Bislig City. A copy of my Travel
Order is attached as Annex 3.
6. Upon my arrival at CENRO, Bislig, surigao del Sur, I coordinated with CENRO Officer Philip
A. Calunsag and requested him to make available to me the records regarding the forest
products assessments of PICOP.
7. After I was provided with the requested records, I evaluated and collected the data.
8. After the evaluation, I found that the unpaid forest charges adverted to in the Memoranda of
Mr. Orlanes and Arayan covering the period from May 8, 2001 to July 7, 2001 had already
been paid but late. I further found out that PICOP had not paid its forest charges covering the
period from September 22, 2001 to April 26, 2002 in the total amount of P15,056,054.05.
9. I also discovered that from 1996 up to august 30, 2002, PICOP paid late some of its forest
charges in 1996 and consistently failed to pay late its forest charges from 1997 up to the
present time.
10. Under Section 7.4 of DAO No. 80 Series of 197\87 and Paragraph (4a), Section 10 of BIR
revenue Regulations No. 2-81 dated November 18, 1980, PICOP is mandated to pay a
surcharge of 25% per annum of the tax due and interest of 20% per annum for late payment of
forest charges.
11. The overdue unpaid forest charges of PICOP as shown in the attached tabulation marked
as Annex 4 hereof is P150,169,485.02. Likewise, PICOP has overdue and unpaid silvicultural
fees in the amount ofP2,366,901.00 from 1996 to the present.
12. In all, PICOP has an outstanding and overdue total obligation of P167,592,440.90 as of
August 30, 2002 based on the attached tabulation which is marked as Annex 5 hereof. 75
Clearly, SFMS Evangelista had not relied on the Memoranda of Orlanes and Arayan. On the contrary,
he traveled to Surigao del Sur in order to verify the contents of these Memoranda. SFMS Evangelista,
in fact, revised the findings therein, as he discovered that certain forest charges adverted to as
unpaid had already been paid.
This does not mean, however, that SFMS Evangelistas testimony was not hearsay. A witness may
testify only on facts of which he has personal knowledge; that is, those derived from his perception,
except in certain circumstances allowed by the Rules. 76 Otherwise, such testimony is considered
hearsay and, hence, inadmissible in evidence. 77
SFMS Evangelista, while not relying on the Memoranda of Orlanes and Arayan, nevertheless relied
on records, the preparation of which he did not participate in. 78 These records and the persons who
prepared them were not presented in court, either. As such, SFMS Evangelistas testimony, insofar as

he relied on these records, was on matters not derived from his own perception, and was, therefore,
hearsay.
Section 44, Rule 130 of the Rules of Court, which speaks of entries in official records as an exception
to the hearsay rule, cannot excuse the testimony of SFMS Evangelista. Section 44 provides:
SEC. 44. Entries in official records. Entries in official records made in the performance of his duty by
a public officer of the Philippines, or by a person in the performance of a duty specially enjoined by
law, are prima facie evidence of the facts therein stated.
In Africa v. Caltex,79 we enumerated the following requisites for the admission of entries in official
records as an exception to the hearsay rule: (1) the entries were made by a public officer or a private
person in the performance of a duty; (2) the performance of the duty is especially enjoined by law; (3)
the public officer or the private person had sufficient knowledge of the facts stated by him, which must
have been acquired by him personally or through official information.
The presentation of the records themselves would, therefore, have been admissible as an exception
to the hearsay rule even if the public officer/s who prepared them was/were not presented in court,
provided the above requisites could be adequately proven. In the case at bar, however, neither the
records nor the persons who prepared them were presented in court. Thus, the above requisites
cannot be sufficiently proven. Also, since SFMS Evangelista merely testified based on what those
records contained, his testimony was hearsay evidence twice removed, which was one step too many
to be covered by the official-records exception to the hearsay rule.
SFMS Evangelistas testimony of nonpayment of forest charges was, furthermore, based on his
failure to find official receipts corresponding to billings sent to PICOP. As stated above, PICOP
attached official receipts in its Addendum to Motion for Reconsideration to this Court. While this
course of action is normally irregular in judicial proceedings, we merely stated in the assailed
Decision that "the DENR Secretary has adequately proven that PICOP has, at this time, failed to
comply with administrative and statutory requirements for the conversion of TLA No. 43 into an
IFMA,"80 and that "this disposition confers another chance to comply with the foregoing
requirements."81
In view of the foregoing, we withdraw our pronouncement that PICOP has unpaid forestry charges, at
least for the purpose of determining compliance with the IFMA requirements.
NCIP Certification
The Court of Appeals held that PICOP need not comply with Section 59 of Republic Act No. 8371,
which requires prior certification from the NCIP that the areas affected do not overlap with any
ancestral domain before any IFMA can be entered into by the government. According to the Court of
Appeals, Section 59 should be interpreted to refer to ancestral domains that have been duly
established as such by the continuous possession and occupation of the area concerned by
indigenous peoples since time immemorial up to the present. The Court of Appeals held that PICOP
had acquired property rights over TLA No. 43 areas, being in exclusive, continuous and uninterrupted
possession and occupation of these areas since 1952 up to the present.
In the assailed Decision, we reversed the findings of the Court of Appeals. Firstly, the Court of
Appeals ruling defies the settled jurisprudence we have mentioned earlier, that a TLA is neither a
property nor a property right, and that it does not create a vested right. 82
Secondly, the Court of Appeals resort to statutory construction is misplaced, as Section 59 of
Republic Act No. 8379 is clear and unambiguous:
SEC. 59. Certification Precondition. All departments and other governmental agencies shall
henceforth be strictly enjoined from issuing, renewing or granting any concession, license or lease, or
entering into any production-sharing agreement, without prior certification from the NCIP that the area
affected does not overlap with any ancestral domain. Such certification shall only be issued after a
field-based investigation is conducted by the Ancestral Domains Office of the area concerned:
Provided, That no certification shall be issued by the NCIP without the free and prior informed and
written consent of the ICCs/IPs concerned: Provided, further, That no department, government
agency or government-owned or controlled corporation may issue new concession, license, lease, or

production sharing agreement while there is a pending application for a CADT: Provided, finally, That
the ICCs/IPs shall have the right to stop or suspend, in accordance with this Act, any project that has
not satisfied the requirement of this consultation process.
PICOP had tried to put a cloud of ambiguity over Section 59 of Republic Act No. 8371 by invoking the
definition of Ancestral Domains in Section 3(a) thereof, wherein the possesssion by Indigenous
Cultural Communities/Indigenous Peoples (ICCs/IPs) must have been continuous to the present.
However, we noted the exception found in the very same sentence invoked by PICOP:
a) Ancestral domains Subject to Section 56 hereof, refers to all areas generally belonging to
ICCs/IPs comprising lands, inland waters, coastal areas, and natural resources therein, held under a
claim of ownership, occupied or possessed by ICCs/IPs, by themselves or through their ancestors,
communally or individually since time immemorial, continuously to the present except when
interrupted by war, force majeure or displacement by force, deceit, stealth or as a consequence of
government projects or any other voluntary dealings entered into by government and private
individuals/corporations, and which are necessary to ensure their economic, social and cultural
welfare. It shall include ancestral lands, forests, pasture, residential, agricultural, and other lands
individually owned whether alienable and disposable or otherwise, hunting grounds, burial grounds,
worship areas, bodies of water, mineral and other natural resources, and lands which may no longer
be exclusively occupied by ICCs/IPs but from which they traditionally had access to for their
subsistence and traditional activities, particularly the home ranges of ICCs/IPs who are still nomadic
and/or shifting cultivators;
Ancestral domains, therefore, remain as such even when possession or occupation of these areas
has been interrupted by causes provided under the law, such as voluntary dealings entered into by
the government and private individuals/corporations. Consequently, the issuance of TLA No. 43 in
1952 did not cause the ICCs/IPs to lose their possession or occupation over the area covered by TLA
No. 43.
Thirdly, we held that it was manifestly absurd to claim that the subject lands must first be proven to be
part of ancestral domains before a certification that the lands are not part of ancestral domains can be
required, and invoked the separate opinion of now Chief Justice Reynato Puno in Cruz v. Secretary of
DENR83:
As its subtitle suggests, [Section 59 of R.A. No. 8371] requires as a precondition for the issuance of
any concession, license or agreement over natural resources, that a certification be issued by the
NCIP that the area subject of the agreement does not lie within any ancestral domain. The provision
does not vest the NCIP with power over the other agencies of the State as to determine whether to
grant or deny any concession or license or agreement. It merely gives the NCIP the authority to
ensure that the ICCs/IPs have been informed of the agreement and that their consent thereto has
been obtained. Note that the certification applies to agreements over natural resources that do not
necessarily lie within the ancestral domains. For those that are found within the said domains,
Sections 7(b) and 57 of the IPRA apply.
PICOP rejects the entire disposition of this Court on the matter, relying on the following theory:
84. It is quite clear that Section 59 of R.A. 8371 does not apply to the automatic conversion of TLA 43
to IFMA.
First, the automatic conversion of TLA 43 to an IFMA is not a new project. It is a mere continuation of
the harvesting process in an area that PICOP had been managing, conserving and reforesting for the
last 50 years since 1952. Hence any pending application for a CADT within the area, cannot affect
much less hold back the automatic conversion. That the government now wishes to change the
tenurial system to an IFMA could not change the PICOP project, in existence and operating for the
last 30 (sic) years, into a new one.84
PICOPs position is anything but clear. What is clearly provided for in Section 59 is that it covers
"issuing, renewing or granting (of) any concession, license or lease, or entering into any production
sharing agreement." PICOP is implying that, when the government changed the tenurial system to an
IFMA, PICOPs existing TLA would just be upgraded or modified, but would be the very same
agreement, hence, dodging the inclusion in the word "renewing." However, PICOP is conveniently
leaving out the fact that its TLA expired in 2002. If PICOP really intends to pursue the argument that

the conversion of the TLA into an IFMA would not create a new agreement, but would only be a
modification of the old one, then it should be willing to concede that the IFMA expired as well in 2002.
An automatic modification would not alter the terms and conditions of the TLA except when they are
inconsistent with the terms and conditions of an IFMA. Consequently, PICOPs concession period
under the renewed TLA No. 43, which is from the year 1977 to 2002, would remain the same.
PICOP cannot rely on a theory of the case whenever such theory is beneficial to it, but refute the
same whenever the theory is damaging to it. In the same way, PICOP cannot claim that the alleged
Presidential Warranty is "renewable for other 25 years" and later on claim that what it is asking for is
not a renewal. Extensions of agreements must necessarily be included in the term renewal.
Otherwise, the inclusion of "renewing" in Section 59 would be rendered inoperative.
PICOP further claims:
85. Verily, in interpreting the term "held under claim of ownership," the Supreme Court could not have
meant to include claims that had just been filed and not yet recognized under the provisions of DENR
Administrative Order No. 2 Series of 1993, nor to any other community / ancestral domain program
prior to R.A. 8371.
xxxx
87. One can not imagine the terrible damage and chaos to the country, its economy, its people and its
future if a mere claim filed for the issuance of a CADC or CADT will already provide those who filed
the application, the authority or right to stop the renewal or issuance of any concession, license or
lease or any production-sharing agreement. The same interpretation will give such applicants through
a mere application the right to stop or suspend any project that they can cite for not satisfying the
requirements of the consultation process of R.A. 8371. If such interpretation gets enshrined in the
statures of the land, the unscrupulous and the extortionists can put any ongoing or future project or
activity to a stop in any part of the country citing their right from having filed an application for
issuance of a CADC or CADT claim and the legal doctrine established by the Supreme Court in this
PICOP case.85
We are not sure whether PICOPs counsels are deliberately trying to mislead us, or are just plainly
ignorant of basic precepts of law. The term "claim" in the phrase "claim of ownership" is not a
document of any sort. It is an attitude towards something. The phrase "claim of ownership" means
"the possession of a piece of property with the intention of claiming it in hostility to the true owner." 86 It
is also defined as "a partys manifest intention to take over land, regardless of title or right." 87 Other
than in Republic Act No. 8371, the phrase "claim of ownership" is thoroughly discussed in issues
relating to acquisitive prescription in Civil Law.
Before PICOPs counsels could attribute to us an assertion that a mere attitude or intention would
stop the renewal or issuance of any concession, license or lease or any production-sharing
agreement, we should stress beforehand that this attitude or intention must be clearly shown by overt
acts and, as required by Section 3(a), should have been in existence "since time immemorial,
continuously to the present except when interrupted by war, force majeure or displacement by force,
deceit, stealth or as a consequence of government projects or any other voluntary dealings entered
into by government and private individuals/corporations."
Another argument of PICOP involves the claim itself that there was no overlapping:
Second, there could be no overlapping with any Ancestral Domain as proven by the evidence
presented and testimonies rendered during the hearings in the Regional Trial Court. x x x.
x x x x.
88. The DENR issued a total of 73 CADCs as of December 11, 1996. The DENR Undersecretary for
Field Operations had recommended another 11 applications for issuance of CADCs. None of the
CADCs overlap the TLA 43 area.
89. However former DENR Secretary Alvarez, in a memorandum dated 13 September, 2002
addressed to PGMA, insisted that PICOP had to comply with the requirement to secure a Free and
Prior Informed Concent because CADC 095 was issued covering 17,112 hectares of TLA 43.

90. This CADC 095 is a fake CADC and was not validly released by the DENR. While the Legal
Department of the DENR was still in the process of receiving the filings for applicants and the
oppositors to the CADC application, PICOP came across filed copies of a CADC 095 with the
PENRO of Davao Oriental as part of their application for a Community Based Forest Management
Agreement (CBFMA). Further research came across the same group filing copies of the alleged
CADC 095 with the Mines and Geosciences Bureau in Davao City for a mining agreement
application. The two applications had two different versions of the CADCs second page. One had Mr.
Romeo T. Acosta signing as the Social reform Agenda Technical Action Officer, while the other had
him signing as the Head, Community-Based Forest Management Office. One had the word "Eight"
crossed out and "Seven" written to make it appear that the CADC was issued on September 25,
1997, the other made it appear that there were no alterations and the date was supposed to be
originally 25 September 1997.
What is required in Section 59 of Republic Act No. 8379 is a Certification from the NCIP that there
was no overlapping with any Ancestral Domain. PICOP cannot claim that the DENR gravely abused
its discretion for requiring this Certification, on the ground that there was no overlapping. We reiterate
that it is manifestly absurd to claim that the subject lands must first be proven to be part of ancestral
domains before a certification that they are not can be required. As discussed in the assailed
Decision, PICOP did not even seek any certification from the NCIP that the area covered by TLA No.
43, subject of its IFMA conversion, did not overlap with any ancestral domain. 88
Sanggunian Consultation and Approval
While PICOP did not seek any certification from the NCIP that the formers concession area did not
overlap with any ancestral domain, PICOP initially sought to comply with the requirement under
Sections 26 and 27 of the Local Government Code to procure prior approval of the Sanggunians
concerned. However, only one of the many provinces affected approved the issuance of an IFMA to
PICOP. Undaunted, PICOP nevertheless submitted to the DENR the purported resolution 89 of the
Province of Surigao del Sur indorsing the approval of PICOPs application for IFMA conversion,
apparently hoping either that the disapproval of the other provinces would go unnoticed, or that the
Surigao del Sur approval would be treated as sufficient compliance.
Surprisingly, the disapproval by the other provinces did go unnoticed before the RTC and the Court of
Appeals, despite the repeated assertions thereof by the Solicitor General. When we pointed out in the
assailed Decision that the approval must be by all the Sanggunians concerned and not by only one of
them, PICOP changed its theory of the case in its Motion for Reconsideration, this time claiming that
they are not required at all to procure Sanggunian approval.
Sections 2(c), 26 and 27 of the Local Government Code provide:
SEC. 2. x x x.
xxxx
(c) It is likewise the policy of the State to require all national agencies and offices to conduct periodic
consultations with appropriate local government units, nongovernmental and peoples organizations,
and other concerned sectors of the community before any project or program is implemented in their
respective jurisdictions.
SEC. 26. Duty of National Government Agencies in the Maintenance of Ecological Balance. It shall
be the duty of every national agency or government-owned or controlled corporation authorizing or
involved in the planning and implementation of any project or program that may cause pollution,
climatic change, depletion of non-renewable resources, loss of crop land, rangeland, or forest cover,
and extinction of animal or plant species, to consult with the local government units, nongovernmental
organizations, and other sectors concerned and explain the goals and objectives of the project or
program, its impact upon the people and the community in terms of environmental or ecological
balance, and the measures that will be undertaken to prevent or minimize the adverse effects thereof.
SEC. 27. Prior Consultations Required. No project or program shall be implemented by government
authorities unless the consultations mentioned in Sections 2(c) and 26 hereof are complied with, and
prior approval of the sanggunian concerned is obtained: Provided, That occupants in areas where

such projects are to be implemented shall not be evicted unless appropriate relocation sites have
been provided, in accordance with the provisions of the Constitution.
As stated in the assailed Decision, the common evidence of the DENR Secretary and PICOP, namely,
the 31 July 2001 Memorandum of Regional Executive Director (RED) Elias D. Seraspi, Jr.,
enumerated the local government units and other groups which had expressed their opposition to
PICOPs application for IFMA conversion:
7. During the conduct of the performance evaluation of TLA No. 43 issues complaints against PRI
were submitted thru Resolutions and letters. It is important that these are included in this report for
assessment of what are their worth, viz:
xxxx
7.2 Joint Resolution (unnumbered), dated March 19, 2001 of the Barangay Council and Barangay
Tribal Council of Simulao, Boston, Davao Oriental (ANNEX F) opposing the conversion of TLA No. 43
into IFMA over the 17,112 hectares allegedly covered with CADC No. 095.
7.3 Resolution Nos. 10, s-2001 and 05, s-2001 (ANNEXES G & H) of the Bunawan Tribal Council of
Elders (BBMTCE) strongly demanding none renewal of PICOP TLA. They claim to be the rightful
owner of the area it being their alleged ancestral land.
7.4 Resolution No. 4, S-2001 of Sitio Linao, San Jose, Bislig City (ANNEX I) requesting not to renew
TLA 43 over the 900 hectares occupied by them.
7.5 Resolution No. 22, S-2001 (ANNEX J) of the Sanguniang Bayan, Lingig, Surigao del Sur not to
grant the conversion of TLA 43 citing the plight of former employees of PRI who were forced to enter
and farm portion of TLA No. 43, after they were laid off.
7.6 SP Resolution No. 2001-113 and CDC Resolution Nos. 09-2001 of the Sanguniang Panglungsod
of Bislig City (ANNEXES K & L) requesting to exclude the area of TLA No. 43 for watershed
purposes.
7.7 Resolution No. 2001-164, dated June 01, 2001 (ANNEX M) Sanguniang Panglungsod of Bislig
City opposing the conversion of TLA 43 to IFMA for the reason that IFMA do not give revenue benefits
to the City.90
PICOP had claimed that it complied with the Local Government Code requirement of obtaining prior
approval of the Sanggunian concerned by submitting a purported resolution 91 of the Province of
Surigao del Sur indorsing the approval of PICOPs application for IFMA conversion. We ruled that this
cannot be deemed sufficient compliance with the foregoing provision. Surigao del Sur is not the only
province affected by the area covered by the proposed IFMA. As even the Court of Appeals found,
PICOPs TLA No. 43 traverses the length and breadth not only of Surigao del Sur but also of Agusan
del Sur, Compostela Valley and Davao Oriental.92
On Motion for Reconsideration, PICOP now argues that the requirement under Sections 26 and 27
does not apply to it:
97. PICOP is not a national agency. Neither is PICOP government owned or controlled. Thus Section
26 does not apply to PICOP.
98. It is very clear that Section 27 refers to projects or programs to be implemented by government
authorities or government-owned and controlled corporations. PICOPs project or the automatic
conversion is a purely private endevour. First the PICOP project has been implemented since 1969.
Second, the project was being implemented by private investors and financial institutions.
99. The primary government participation is to warrant and ensure that the PICOP project shall have
peaceful tenure in the permanent forest allocated to provide raw materials for the project. To rule now
that a project whose foundations were commenced as early as 1969 shall now be subjected to a
1991 law is to apply the law retrospectively in violation of Article 4 of the Civil Code that laws shall not
be applied retroactively.

100. In addition, under DAO 30, Series of 1992, TLA and IFMA operations were not among those
devolved function from the National Government / DENR to the local government unit. Under its
Section 03, the devolved function cover only:
a) Community Based forestry projects.
b) Communal forests of less than 5000 hectares
c) Small watershed areas which are sources of local water supply.93
We have to remind PICOP again of the contents of Section 2, Article XII of the Constitution:
Section 2. All lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all
forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural
resources are owned by the State. With the exception of agricultural lands, all other natural resources
shall not be alienated. The exploration, development, and utilization of natural resources shall be
under the full control and supervision of the State. The State may directly undertake such activities, or
it may enter into co-production, joint venture, or production-sharing agreements with Filipino citizens,
or corporations or associations at least sixty per centum of whose capital is owned by such
citizens. Such agreements may be for a period not exceeding twenty-five years, renewable for not
more than twenty-five years, and under such terms and conditions as may be provided by law. In
cases of water rights for irrigation, water supply, fisheries, or industrial uses other than the
development of water power, beneficial use may be the measure and limit of the grant.
All projects relating to the exploration, development and utilization of natural resources are projects of
the State. While the State may enter into co-production, joint venture, or production-sharing
agreements with Filipino citizens, or corporations or associations at least sixty per centum of whose
capital is owned by these citizens, such as PICOP, the projects nevertheless remain as State projects
and can never be purely private endeavors.
Also, despite entering into co-production, joint venture, or production-sharing agreements, the State
remains in full control and supervision over such projects. PICOP, thus, cannot limit government
participation in the project to being merely its bouncer, whose primary participation is only to "warrant
and ensure that the PICOP project shall have peaceful tenure in the permanent forest allocated to
provide raw materials for the project."
PICOP is indeed neither a national agency nor a government-owned or controlled corporation. The
DENR, however, is a national agency and is the national agency prohibited by Section 27 from
issuing an IFMA without the prior approval of the Sanggunian concerned. As previously discussed,
PICOPs Petition for Mandamus can only be granted if the DENR Secretary is required by law to
issue an IFMA. We, however, see here the exact opposite: the DENR Secretary was actually
prohibited by law from issuing an IFMA, as there had been no prior approval by all the other
Sanggunians concerned.
As regards PICOPs assertion that the application to them of a 1991 law is in violation of the
prohibition against the non-retroactivity provision in Article 4 of the Civil Code, we have to remind
PICOP that it is applying for an IFMA with a term of 2002 to 2027. Section 2, Article XII of the
Constitution allows exploitation agreements to last only "for a period not exceeding twenty-five years,
renewable for not more than twenty-five years." PICOP, thus, cannot legally claim that the projects
term started in 1952 and extends all the way to the present.
Finally, the devolution of the project to local government units is not required before Sections 26 and
27 would be applicable. Neither Section 26 nor 27 mentions such a requirement. Moreover, it is not
only the letter, but more importantly the spirit of Sections 26 and 27, that shows that the devolution of
the project is not required. The approval of the Sanggunian concerned is required by law, not
because the local government has control over such project, but because the local government has
the duty to protect its constituents and their stake in the implementation of the project. Again, Section
26 states that it applies to projects that "may cause pollution, climatic change, depletion of nonrenewable resources, loss of crop land, rangeland, or forest cover, and extinction of animal or plant
species." The local government should thus represent the communities in such area, the very people
who will be affected by flooding, landslides or even climatic change if the project is not properly

regulated, and who likewise have a stake in the resources in the area, and deserve to be adequately
compensated when these resources are exploited.
Indeed, it would be absurd to claim that the project must first be devolved to the local government
before the requirement of the national government seeking approval from the local government can
be applied. If a project has been devolved to the local government, the local government itself would
be implementing the project. That the local government would need its own approval before
implementing its own project is patently silly.
EPILOGUE AND DISPOSITION
PICOPc cause of action consists in the allegation that the DENR Secretary, in not issuing an IFMA,
violated its constitutional right against non-impairment of contracts. We have ruled, however, that the
1969 Document is not a contract recognized under the non-impairment clause, much less a contract
specifically enjoining the DENR Secretary to issue the IFMA. The conclusion that the 1969 Document
is not a contract recognized under the non-impairment clause has even been disposed of in another
case decided by another division of this Court, PICOP Resources, Inc. v. Base Metals Mineral
Resources Corporation,94 the Decision in which case has become final and executory. PICOPs
Petition for Mandamus should, therefore, fail.
Furthermore, even if we assume for the sake of argument that the 1969 Document is a contract
recognized under the non-impairment clause, and even if we assume for the sake of argument that
the same is a contract specifically enjoining the DENR Secretary to issue an IFMA, PICOPs Petition
for Mandamus must still fail. The 1969 Document expressly states that the warranty as to the tenure
of PICOP is "subject to compliance with constitutional and statutory requirements as well as with
existing policy on timber concessions." Thus, if PICOP proves the two above-mentioned matters, it
still has to prove compliance with statutory and administrative requirements for the conversion of its
TLA into an IFMA.
While we have withdrawn our pronouncements in the assailed Decision that (1) PICOP had not
submitted the required forest protection and reforestation plans, and that (2) PICOP had unpaid
forestry charges, thus effectively ruling in favor of PICOP on all factual issues in this case, PICOP still
insists that the requirements of an NCIP certification and Sanggunian consultation and approval do
not apply to it. To affirm PICOPs position on these matters would entail nothing less than rewriting the
Indigenous Peoples Rights Act and the Local Government Code, an act simply beyond our
jurisdiction.
WHEREFORE, the Motion for Reconsideration of PICOP Resources, Inc. is DENIED.
SO ORDERED.
MINITA V. CHICO-NAZARIO
Associate Justice
WE CONCUR:
REYNATO S. PUNO
Chief Justice
ANTONIO T. CARPIO
Associate Justice

RENATO C. CORONA
Associate Justice

CONCHITA CARPIO MORALES

Associate Justice

PRESBITERO J. VELASCO, JR.

Associate Justice

No part
ANTONIO EDUARDO B. NACHURA*
Associate Justice

TERESITA J. LEONARDO-DE CASTRO

Associate Justice

ARTURO D. BRION
Associate Justice

DIOSDADO M. PERALTA
Associate Justice

LUCAS P. BERSAMIN
Associate Justice

MARIANO C. DEL CASTILLO

Associate Justice

ROBERTO A. ABAD
Associate Justice

MARTIN S. VILLARAMA, JR.

Associate Justice
C E R T I F I C AT I O N

Pursuant to Article VIII, Section 13 of the Constitution, it is hereby certified that the conclusions in the
above Resolution were reached in consultation before the case was assigned to the writer of the
opinion of the Court.
REYNATO S. PUNO
Chief Justice

Footnotes
*

No part.

Records, pp. 1-38.

Id. at 36.

Rollo (G.R. No. 162243), pp. 221-222.

Records, Vol. 2, pp. 393-456.

Records, Vol. 4, pp. 1349-1575.

The dispositive portion of the 10 February 2003 Order reads:

WHEREFORE, premises considered, the Motion for Reconsideration dated October 25,
2002 is hereby DENIED for utter lack of merit while the Motion for the Issuance of Writ
of Mandamus and/or Writ of Mandatory Injunction is GRANTED. Accordingly,
respondent DENR Secretary Heherson Alvarez, now substituted by Secretary Elisea
Gozun, is hereby ordered:
1. to sign, execute and deliver the IFMA contract and/or documents to PICOP and issue
the corresponding IFMA assignment number on the area covered by IFMA, formerly
TLA No. 43, as amended;
2. to issue the necessary permit allowing petitioner to act and harvest timber from the
said area of TLA No. 43, sufficient to meet the raw material requirements of petitioners
pulp and paper mills in accordance with the warranty and agreement of July 29, 1969
between the government and PICOPs predecessor-in-interest; and
3. to honor and respect the Government Warranties and contractual obligations to
PICOP strictly in accordance with the warranty and agreement dated July 29, 1999 (sic)
between the government and PICOPs predecessor-in-interest (Exhibits "H", "H-1" to
"H-5", particularly the following:
a) The area coverage of TLA No. 43, which forms part and parcel of the
government warranties;
b) PICOP tenure over the said area of TLA No. 43 and exclusive right to cut,
collect and remove sawtimber and pulpwood for the period ending on April 26,
1977; and said period to be renewable for another 25 years subject to

compliance with constitutional and statutory requirements as well as with existing

policy on timber concessions, and
c) The peaceful and adequate enjoyment by PICOP of the area as described and
specified in the aforesaid amended Timber License Agreement No. 43. (Records,
Vol. 4, pp. 1374-1375)
7

Records, Vol. 2, p. 611.

Rollo (G.R. No. 162243), pp. 229-258. Penned by Associate Justice Ruben T. Reyes, with
Associate Justices Edgardo P. Cruz and Noel G. Tijam concurring; rollo (G.R. No. 162243), pp.
229-258.
9

Rollo (G.R. No. 162243), p. 257.

10

Rollo (G.R. No. 164516), pp. 107-119.

11

Id. at 121-122.

12

Id. at 814.

13

PICOPs Petition for Mandamus; records, p. 5.

14

Id.; records, p. 20.

15

Id. at 20-21.

16

Regulations Governing the Integrated Forest Management Program (IFMP); records, pp. 4155.
17

Records, p. 43.

18

Id. at 46.

19

14A Words and Phrases, West Publishing Co., p. 290 (1952), citing Lawrence v. Cooke,
N.Y., 32 Hun 126, 134.
20

Id., citing Clifford v. Stewart, 49 A. 52, 55, 95 Me. 38.

21

3 Words and Phrases, West Publishing Co., p. 344 (1953), citing Giffin v. Petree, 46 S.W. 2d
609, 618, 226 Mo. App. 718.
22

Akbayan-Youth v. Commission on Elections, 407 Phil. 618, 646 (2001).

23

PICOPs Petition for Mandamus; records, p. 20.

24

Decision, p. 26.

25

The nature of PICOPs Petition for Mandamus reads in full:

NATURE OF THE PETITION/COMPLAINT
1. This is a Special Civil Action for Mandamus, with prayer for issuance of Writ of
Preliminary Prohibitory and Mandatory Injunction with Damages under Rule 65 of the
1997 Rules of Civil Procedure, as amended.
1.1 Petitioner invokes the jurisdiction of this Honorable Court conferred by Batas
Pambansa Blg. 129, The Judiciary Reorganization Act of 1980, under Sections 21
thereof:
"Sec. 21. Original Jurisdiction in other cases. Regional Trial Court shall exercise original
jurisdiction:

(1) In the issuance of writs of certiorari, prohibition mandamus, quo warranto, habeas
corpus and injunction which may be enforced in any part of their respective regions; xxx
(underscoring supplied).
1.2 Petitioner brings the instant petition for the grant of the privileged writ of mandamus,
with prayer for the issuance of provisional remedies of preliminary prohibitory and
mandatory injunction pendente lite against respondent Secretary for illegal acts which
impinge on and violate the constitutional rights of petitioner, and respondent Secretary
has acted without jurisdiction or in excess of jurisdiction or so capriciously as to
constitute an abuse of discretion amounting to excess of jurisdiction.
1.3 Appropriateness of Recourse to Mandamus. The 1997 Rules of Civil Procedure, as
amended, under Rule 65, Sec. 3 thereof provides relief against official acts by public
officers which are illegal and traduces fundamental rights of a party aggrieved, or acts
done without or in excess of jurisdiction, or with grave abuse of discretion amounting to
lack or excess of jurisdiction. Thus:
"Sec. 3. Petition for Mandamus. When any tribunal, corporation, board, officer or person
unlawfully neglects the performance of an act which the law specifically enjoins as a
duty resulting from an office, trust or station, or unlawfully excludes another person from
the use and enjoyment of a right or office to which such other is entitled, and there is no
other plain, speedy and adequate remedy in the ordinary course of law, the person
aggrieved thereby may file a verified petition in the proper court, alleging the facts with
certainty and praying that judgment be rendered commanding the respondent,
immediately or at some other time to be specified by the court, to do the act required to
be done to protect the rights of the petitioner, and to pay damages sustained by the
petitioner by reason of the wrongful acts of the respondent." (Emphasis supplied)
1.4 The jurisdiction of this Honorable Court to adjudicate the matters raised in this
petition and to issue the privileged writ of mandamus is a settled matter. In Taada v.
Angara, 272 SCRA 18 [1997], the Supreme Court held:
The jurisdiction of this Court to adjudicate the matters raised in the petition is clearly set
out in the 1987 Constitution, as follows:
Judicial power includes the duty of the courts of justice to settle actual controversies
involving rights which are legally demandable and enforceable, and to determine
whether or not there has been a grave abuse of discretion amounting to lack or excess
of jurisdiction on the part of any branch or instrumentality of the government.
The foregoing text emphasizes the judicial departments duty and power to strike down
grave abuse of discretion on the part of any branch or instrumentality of government
including Congress. It is innovation in our political law. As explained by former Chief
Justice Roberto Concepcion, the judiciary is the final arbiter on the question of whether
or not a branch of government or any of its officials has acted without jurisdiction or in
excess of jurisdiction or so capriciously as to constitute an abuse of discretion
amounting to excess of jurisdiction. This is not a judicial power but a duty to pass
judgment on matters of this nature.
As this Court has repeatedly and firmly emphasized in many cases, it will not shirk,
digress from or abandon its sacred duty and authority to uphold the Constitution in
matters that involve grave abuse of discretion brought before it in appropriate cases,
committed by any officer, agency, instrumentality or department of the government.
As the petition alleges grave abuse of discretion and as there is no other plain, speedy
or adequate remedy in the ordinary course of law, we have no hesitation at all in holding
that this petition should be given due course and the vital questions raised therein ruled
upon under Rule 65 of the Rules of Court. Indeed, certiorari, prohibition and mandamus
are appropriate remedies to raise constitutional issues and to review and/or
prohibit/nullify, when proper, acts of legislative and executive officials. On this, we have
no equivocation.

1.5 By this privileged writ of mandamus, petitioner seeks to:

1.5.1 Compel respondent Department of Environment and Natural Resources (DENR)
Secretary Heherson T. Alvarez to execute and deliver the Integrated Forestry
Management Agreement (IFMA for short), and issue the corresponding IFMA number
assignment to petitioner and to which it has a clear legal right and respondent has the
legal duty to perform.
Respondent DENR Secretary has unlawfully refused and neglected and continue to
unlawfully refuse and neglect, to issue the IFMA and corresponding IFMA number
assignment to PICOP, the performance of which the law specifically enjoins as a duty
resulting from his office. Respondent Secretary Alvarez in refusing to sign, execute and
deliver the IFMA and corresponding IFMA assignment number to PICOP has acted
without jurisdiction or in excess of jurisdiction or so capriciously as to constitute an
abuse of discretion amounting to excess or lack of jurisdiction.
1.5.2 Compel respondent DENR Secretary to abide by and respect the obligation of
contract embodied under a letter warranty and agreement entered into by and between
the Government and PICOPs predecessor-in-interest dated 29 July 1969, with the
following covenants:
"This has reference to the request of the Board of Investment through its Chairman in a
letter dated July 16, 1969 for a warranty on the boundaries of your concession area
under Timber License Agreement No. 43, as amended.
We are made to understand that your company is committed to support the first large
scale integrated wood processing complex (hereinafter called "The Project") and that
such support will be provided not only in the form of the supply of pulpwood and other
wood materials from your concession but also by making available funds generated out
of your own operations, to supplement PICOPs operational sources of funds and other
financial arrangements made by him. In order that your company may provide such
support effectively, it is understood that you will call upon your stockholders to take such
steps as may be necessary to effect in unification of managerial, technical, economical
and manpower resources between your company and PICOP.
It is in the public interest to promote industries that will enhance the proper conservation
of our forest resources as well as insure the maximum utilization thereof to the benefit of
the national economy. The Administration feels that the PICOP project is one such
industry which should enjoy priority over the usual logging operations hitherto practiced
by ordinary timber licenses for this reason, we are pleased to consider favorably the
request.
We confirm that your Timber License Agreement No. 43, as amended, (copy of which is
attached as Annex "A") hereof attached to form part and parcel of this warranty)
definitely establishes the boundary lines of your concession area which consists of
permanent forest lands with an aggregate area of 121,587 hectares and alienable or
disposable lands with an aggregate area of approximately 21,580 hectares.
We further confirm that your tenure over the area and exclusive right to cut, collect and
remove sawtimber and pulpwood shall be for the period ending on April 26, 1997; said
period to be renewable for other 25 years subject to compliance with constitutional and
statutory requirements as well as with existing policy on timber concessions.
The peaceful and adequate enjoyment by you of your area as described and specified
in your aforesaid amended Timber License Agreement No. 43 is hereby warranted
provided that pertinent laws, regulations and the terms and conditions of your license
agreement are observed."
Copy of which is attached as Annex "A".
1.6 Respondent Secretary impaired the obligation of contract under the said Warranty
and Agreement of 29 July 1969 by refusing to respect the tenure; and its renewal for

other twenty five (25) years, of PICOP over the area covered by said Agreement which
consists of permanent forest lands with an aggregate area of 121,587 hectares and
alienable or disposable lands with an aggregate area of approximately 21,580 hectares,
and petitioners exclusive right to cut, collect and remove sawtimber and pulpwood
therein and the peaceful and adequate enjoyment of the said area as described and
specified in petitioners Timber License Agreement (TLA) No. 43 guaranteed by the
Government, under the Warranty and Agreement of 29 July 1969.
1.7 The Bill of Rights of the 1987 Constitution guarantees the non-impairment of the
obligation of contract, providing in Sec. 10, Art. III thereof that:
"Sec. 10. No law impairing the obligation of contracts shall be passed."
1.8 The obligation of a contract is the law or duty which binds the parties to perform
their agreement according to its terms or intent (Sturgess v. Crownshields, 4 Wheat
122). The treaties on the Constitution state the scope of terms "law" and "contract", to
mean:
(1) The law, the enactment of which is prohibited, includes executive and
administrative orders issued by heads of departments, and ordinances enacted
by local governments. (citing Lim v. Secretary of Agriculture, 34 SCRA 751
[1970]).
(2) The contract, the obligation of which is secured against impairment by the
Constitution, includes contracts entered into by the Government (citing
Maddumba v. GSIS, 182 SCRA 281 [1990]). An example of impairment by law is
when a tax exemption based on a contract entered into by the government is
revoked by a letter taxing statute (citing Casanova v. Hord, 8 Phil. 125 [1907]).
(3) The State when contracting does so upon the same terms as a private
individual or corporation and may not plead its sovereignty as justification in
impairing a contractual obligation which it has assumed (citing Willoughby, op.
Cit. p. 1224).
(4) In a Contract, a party acquires a right and the other assumed an obligation
arising from the same (Art. 1305, New Civil Code). A contract is the law between
the contracting parties, their assigns, and their heirs (Arts. 1159, 1311 par. 1, Civil
Code) (De Leon, Philippine Constitutional Law, Principles and Cases, 1999 Ed.,
pp. 682, 283).
As used in the Constitution, the word "Contracts" includes other arrangement not
normally considered to be contracts such as a legislative grant of a public land to
particular individuals, such that a subsequent attempt by the State to annul the title of
purchasers in good faith from the grantee would be unconstitutional (citing Fletcher v.
Peck, 10 US 87). (ibid., p. 6).
1.9 There is no appeal or any other plain, speedy and adequate remedy in the ordinary
course of law except the privileged writ of mandamus prayed for in this petition.
1.10 This petition falls as an exception to the exhaustion of administrative remedies.
The acts of respondent DENR Secretary complained of in this petition are patently
illegal; in derogation of the constitutional rights of petitioner against non-impairment of
the obligation of contracts; without jurisdiction, or in excess of jurisdiction or so
capriciously as to constitute an abuse of discretion amounting to excess or lack of
jurisdiction; and moreover, the failure or refusal of a high government official such as a
Department head from whom relief is brought to act on the matter was considered
equivalent to exhaustion of administrative remedies (Sanoy v. Tantuico, 50 SCRA 455
[1973]), and there are compelling and urgent reasons for judicial intervention (Bagatsing
v. Ramirez, 74 SCRA 306 [1976]). (PICOPs Petition for Mandamus, Records pp. 1-6.)

26

G.R. No. 163509, 6 December 2006, 510 SCRA 400, penned by Associate Justice Dante O.
Tinga with Associate Justices Leo A. Quisumbing, Antonio T. Carpio, Conchita Carpio Morales,
and Presbitero J. Velasco, Jr., concurring.
27

That the erstwhile Third Division of this Court was still unaware of this Divisions Decision is
shown by the following excerpts in its Decision:
PICOP brings to the Courts attention the case of PICOP Resources, Inc. v. Hon.
Heherson T. Alvarez, wherein the Court of Appeals ruled that the Presidential Warranty
issued to PICOP for its TLA No. 43 dated July 29, 1969, a TLA distinct from PTLA No.
47 involved in this case, is a valid contract involving mutual prestations on the part of
the Government and PICOP.
xxxx
The case of PICOP Resources, Inc. v. Hon. Heherson T. Alvarez, supra, cited by PICOP
cannot be relied upon to buttress the latters claim that a presidential warranty is a valid
and subsisting contract between PICOP and the Government because the decision of
the appellate court in that case is still pending review before the Courts Second
Division. (Id. at 411-415.)
28

Id. at 426-428.

29

TSN, Oral Arguments, pp. 174-181.

30

PICOPs Petition for Mandamus; records, pp. 26-27.

31

PICOPs Memorandum, p. 101; rollo, p. 1262.

32

PICOPs Motion for Reconsideration, p. 50; rollo, p. 1391a; TSN, 19 September 2002, pp.
27-35; 41-45.
33

Id. at 51; rollo, p. 1391b.

34

Oral Arguments, 10 February 2009; TSN, pp. 158-167.

35

RULES OF COURT, Section 3(m), Rule 131.

36

Article XIV, Section 8, 1973 Constitution provides:

Section 8. All lands of public domain, waters, minerals, coal, petroleum and other
mineral oils, all forces of potential energy, fisheries, wildlife, and other natural resources
of the Philippines belong to the State. With the exception of agricultural, industrial or
commercial, residential, or resettlement lands of the public domain, natural resources
shall not be alienated, and no license, concession, or lease for the exploration, or
utilization of any of the natural resources shall be granted for a period exceeding
twenty-five years, except as to water rights for irrigation, water supply, fisheries, or
industrial uses other than development of water power, in which cases, beneficial use
may by the measure and the limit of the grant.

37

Oral Arguments, 10 February 2009, TSN, pp. 230-236.

38

G.R. No. 174340, 17 October 2006, 504 SCRA 704, 730.

39

Javellana v. Tayo, 116 Phil. 1342, 1351 (1962).

40

PICOPs Motion for Reconsideration, p. 16; rollo, p. 1385.

41

Id.

42

Id.

43

PICOP (CA rollo, p. 176).

44

Secretary of Agriculture and Natural Resources (id.).

45

Timber License Agreement No. 43; CA rollo, p. 177.

46

CA rollo, pp. 323-324.

47

G.R. No. 84847, 5 March 1993, 219 SCRA 541.

48

Quirino v. Palarca, 139 Phil. 488, 492 (1969).

49

Ermita-Malate Hotel and Motel Operators Association, Inc. v. City Mayor of Manila, 127 Phil.
306, 318 (1967).
50

The definition in DAO No. 99-53 that an IFMA is a "production sharing contract" has not been
assailed as unconstitutional, thus prohibiting us from determining its constitutionality.
Nonetheless, a mere designation in an administrative rule cannot alter the legal nature thereof.
51

PICOPs Motion for Reconsideration, p. 21; rollo, p. 1386.

52

The land area of Metro Manila is 63,600 hectares, or 636 square kilometers. Metro Manila
includes within its boundaries the following cities and municipalities: Quezon City, Manila,
Caloocan, Makati, Pasig, Marikina, Mandaluyong, Pasay City, Muntinlupa, Paraaque, Las
Pias, Valenzuela, Taguig, Malabon, Navotas, San Juan and Pateros.
53

PICOPs Motion for Reconsideration, pp. 22-23; rollo, pp. 1386a-1386b.

54

SECTION 5. Incentives to Investors in a Registered Enterprise. An investor, with respect

to his investment in a registered enterprise, shall be granted the following incentive benefits:
(a) Protection of Patents and Other Proprietary Rights. The right to be
protected from infringement of patents, trademarks, copyright, trade names, and
other proprietary rights, where such patents, trade marks, copyright, trade
names, and other proprietary rights have been registered with the Board and the
appropriate agencies of the Government of the Philippines.
(b) Capital Gains Tax Exemption. Exemption from income tax on that portion
of the gains realized from the sale, disposition, or transfer of capital assets, as
defined in Section thirty-four of the National Internal Revenue Code, that
corresponds to the portion of the proceeds of the sale that is invested in new
issues of capital stock of a registered enterprise within six months from the date
the gains were realized: Provided, (1) that the said sale, disposition or transfer
and the investment of the proceeds thereof have been registered with the Board
and the Bureau of Internal Revenue; and (2) that the shares of stock
representing the investment are not disposed of, transferred, assigned, or
conveyed for a period of five years from the date the investment was made. If
such shares of stock are disposed of within the said period of five (5) years, all
taxes due on the gains realized from the original transfer, sale or disposition of
the capital assets shall immediately become due and payable.
SECTION 6. Incentives to Philippine Nationals Investing in Pioneer Enterprises. In
addition to the incentives provided in the preceding sections, Philippine Nationals
investing in a pioneer enterprise shall be granted the following incentives benefits:
(a) Tax Allowance for Investments. An investment allowance to the extent of
his actual investment, paid in cash or property shall be allowed as a deduction
from his taxable income but not to exceed ten per cent thereof: Provided, (1)
That the investment is made in a subscription of shares in the original and/or
increased capital stock of a pioneer enterprise within seven years from the date
of registration; (2) that the shares are held for a period of not less than three
years and; (3) that the investment is registered with the Board. If the shares are

disposed of within the said three year period, the tax payer shall lose the benefit
of this deduction, his income tax liability shall be recomputed, and he shall pay
whatever additional sum be due plus interest thereon, within thirty days from the
date of disposition.
(b) Capital Gains Tax Exemption. Exemption from income tax on the portion of
the gains realized from the sale, disposition, or transfer of capital assets, as
defined in Section thirty-four of the National Internal Revenue Code, that
corresponds to the portion of the proceeds of the sale that is invested in new
issues of capital stock of, or in the purchase of stock owned by foreigners in,
pioneer enterprises, within six months from the date the gains were realized:
Provided, (1) That such sale, disposition or transfer and the investment of the
proceeds thereof are registered with the Board and the Bureau of Internal
Revenue; and (2) that the shares of stock representing the investment are not
disposed of, transferred, assigned or conveyed for a period of three (3) years
from the date the investment was made. If said shares of stock are disposed of
within the said period of three (3) years, all taxes due on the gains realized from
the original transfer, sale or disposition of the capital assets shall immediately
become due and payable.
(c) Tax Exemption on Sale of Stock Dividends. Exemption from income tax on
all gains realized from the sale, disposition, or transfer of stock dividends
received from a pioneer enterprise: Provided, That the sale, disposition or
transfer occurs within seven years from the date of registration of the enterprise.
SECTION 7. Incentives to a Registered Enterprise. A registered enterprise, to the
extent engaged in a preferred area of investment, shall be granted the following
incentive benefits:
(a) Deduction of Organizational and Pre-Operating Expenses. All capitalized
organizational and pre-operating expenses attributable to the establishment of a
registered enterprise may be deducted from its taxable income over a period of
not more than ten years beginning with the month the enterprise begins
operations, provided the taxpayer indicates the desired amortization period at the
time of the filing of the income tax returns for the first taxable year. For the
purpose of this provision, organizational and pre-operating expenses shall
include expenses for pre-investment studies, start up costs, costs of initial
recruitment and training, and similar expenses.
(b) Accelerated Depreciation. At the option of the taxpayer and in accordance
with the procedure established by the Bureau of Internal Revenue, fixed assets
may be (1) depreciated to the extent of not more than twice as fast as normal
rate of depreciation or depreciated at normal rate of depreciation if expected life
is ten years or less; or (2) depreciated over any number of years between five
years and expected life if the latter is more than ten (10) years; and the
depreciation thereon allowed as a deduction from taxable income: Provided, That
the taxpayer notifies the Bureau of Internal Revenue at the beginning of the
depreciation period which depreciation rate allowed by this section will be used
by it.
(c) Net Operating Loss Carry-over. A net operating loss incurred in any of the
first ten years of operations may be carried over as a deduction from taxable
income for the six years immediately following the year of such loss. The entire
amount of the loss shall be carried over to the first of the six taxable years
following the loss, and any portion of such loss which exceeds the taxable
income of such first year shall be deducted in like manner from the taxable
income of the next remaining five years. The net operating loss shall be
computed in accordance with the provisions of the National Internal Revenue
Code, any provision of this Act to the contrary notwithstanding, except that
income not taxable either in whole or in part under this or other laws shall be
included in gross income.

(d) Tax Exemption on Imported Capital Equipment. Within seven years from
the date of registration of the enterprise, importation of machinery and
equipment, and spare parts shipped with such machinery and equipment, shall
not be subject to tariff duties and compensating tax: Provided, That said
machinery, equipment and spare parts: (1) are not manufactured domestically in
reasonable quantity and quality at reasonable prices; (2) are directly and actually
needed and will be used exclusively by the registered enterprise in the
manufacture of its products; (3) are covered by shipping documents in the name
of the registered enterprise to whom the shipment will be delivered direct by
customs authorities; (4) the prior approval of the Board was obtained by the
registered enterprise before the importation of such machinery, equipment and
spare parts; and (5) the registered enterprise chooses not to avail of the
privileges granted by Republic Act Numbered Thirty-one hundred twenty-seven,
as amended. If the registered enterprise sells, transfers, or disposes of these
machinery, equipment and spare parts without the prior approval of the Board
within five (5) years from the date of acquisition, the registered enterprise shall
pay twice the amount of the tax exemption given it. However, the Board shall
allow and approve the sale, transfer, or disposition of the said items within the
said period of five (5) years if made: (1) to another registered enterprise; (2) for
reasons of proven technical obsolescence; or (3) for purposes of replacement to
improve and/or expand the operations of the enterprise.
(e) Tax Credit on Domestic Capital Equipment. A tax credit equivalent to one
hundred per cent (100%) of the value of the compensating tax and customs
duties that would have been paid on the machinery, equipment and spare parts
had these items been imported shall be given to the registered enterprise who
purchases machinery, equipment and spare parts from a domestic manufacturer,
and another tax credit equivalent to fifty per cent (50%) thereof shall be given to
the said manufacturer: Provided, (1) That the said machinery, equipment and
spare parts are directly and actually needed and will be used exclusively by the
registered enterprise in the manufacture of its products; (2) that the prior
approval of the Board was obtained by the local manufacturer concerned; and (3)
that the sale is made within seven years from the date of registration of the
registered enterprise. If the registered enterprise sells, transfers or disposes of
these machinery, equipment and spare parts without the prior approval of the
Board within five years from the date of acquisition, then it shall pay twice the
amount of the tax credit given it. However, the Board shall allow and approve the
sale, transfer, or disposition of the said items within the said period of five years if
made (1) to another registered enterprise; (2) for reasons of proven technical
obsolescence; or (3) for purposes of replacement to improve and/or expand the
operations of the enterprise
(f) Tax Credit for Withholding Tax on Interest. A tax credit for taxes withheld on
interest payments on foreign loans shall be given a registered enterprise when
(1) no such credit is enjoyed by the lender-remittee in his country and (2) the
registered enterprise has assumed the liability for payment of the tax due from
the lender-remittee.
(g) Employment of Foreign Nationals. Subject to the provisions of Section
twenty-nine of Commonwealth Act Numbered Six hundred thirteen, as amended,
an enterprise may, within five years from registration, employ foreign nationals in
supervisory, technical or advisory positions not in excess of five per centum of its
total personnel in each such category: Provided, That in no case shall each
employment exceed five years. The employment of foreign nationals after five
years from registration, or within such five years but in excess of the proportion
herein provided, shall be governed by Section twenty of Commonwealth Act
Numbered Six hundred thirteen, as amended.
Foreign nationals under employment contract within the purview of this Act, their
spouse and unmarried children under twenty-one years of age, who are not
excluded by Section twenty-nine of Commonwealth Act Numbered Six hundred

thirteen, shall be permitted to enter and reside in the Philippines during the
period of employment of such foreign nationals.
A registered enterprise shall train Filipinos in administrative, supervisory, and
technical skills and shall submit annual reports on such training to the Board of
Investments.
(h) Deduction for Expansion Reinvestment. When a registered enterprise
reinvests its undistributed profit or surplus by actual transfer thereof to the capital
stock of the corporation for procurement of machinery, equipment and spare
parts previously approved by the Board under Subsections "d" and "e" hereof or
for the expansion of machinery and equipment used in production or for the
construction of the buildings, improvements or other facilities for the installation
of the said machinery and equipment, the amount so reinvested shall be allowed
as a deduction from its taxable income in the year in which such reinvestment
was made: Provided, (1) That prior approval by the Board of such reinvestment
was obtained by the registered enterprise planning such reinvestment, and (2)
that the registered enterprise does not reduce its capital stock represented by the
reinvestment within seven years from the date such reinvestment was made. In
the event the registered enterprise does not order the machinery and equipment
within two (2) years from the date the reinvestment was made or reduces its
capital stock represented by the reinvestment within a period of seven years from
the date of reinvestment, a recomputation of the income tax liability therefor shall
be made for the period when the deduction was made, and the proper taxes shall
be assessed and paid with interest.
(i) Anti-Dumping Protection. Upon recommendation of the Board, made after
notice and hearing, the President shall issue a directive banning for a limited
period the importation of goods or commodities which, as provided in Section
three hundred one (a) of the Tariff and Customs Code of the Philippines, unfairly
or unnecessarily complete with those produced by registered enterprises:
Provided, (1) That the Board certifies to the satisfactory quality of the goods or
commodities produced or manufactured by the registered enterprises; and (2)
that the enterprises agree not to increase the price of these goods or
commodities during this period, unless for good cause, the Board allows such an
increase.
(j) Protection from Government Competition. No agency or instrumentality of
the government shall import, or allow the importation tax and duty free of
products or items that are being produced or manufactured by registered
enterprises, except when the President determines that the national interest so
requires or when international commitments require international competitive
bidding.
SECTION 8. Incentives to a Pioneer Enterprise. In addition to the incentives provided
in the preceding section, pioneer enterprises shall be granted the following incentives
benefits:
(a) Tax Exemptions. Exemptions from all taxes under the National Internal
Revenue Code, except income tax, to the following extent:
(1) One hundred per cent up to December 31, 1972;
(2) Seventy-five per cent up to December 31, 1975;
(3) Fifty per cent up to December 31, 1977;
(4) Twenty per cent up to December 31, 1979;
(5) Ten per cent up to December 31, 1981;

(b) Employment of Foreign Nationals. Subject to the provisions of Section

twenty nine of Commonwealth Act Numbered Six hundred thirteen, as amended,
to employ and bring into the Philippines foreign nationals under the following
conditions:
(1) That all such foreign nationals shall register with the Board;
(2) That the employment of all foreign nationals shall cease and they shall
be repatriated five years after the registered enterprise has begun
operating: Provided, That when the majority of the capital stock of the
pioneer enterprise is owned by foreign investors, the positions of
president, treasurer and general manager, or their equivalents, may be
retained by foreign nationals. In exceptional cases, the Board may allow
employment of foreign nationals in other positions that cannot be filled by
the Philippine nationals, but in such cases the limitations of Section seven
paragraph (g) of this Act shall apply.
Foreign nationals under employment contract within the purview of this Act, their
spouse and unmarried children under twenty-one years of age, who are not
excluded by Section twenty-nine of Commonwealth Act Numbered Six hundred
thirteen, shall be permitted to enter and reside in the Philippines during the
period of employment of such foreign nationals.
(c) Post-Operative Tariff Protection. Upon recommendation of the Board, the
President, with or without the recommendation of the Tariff Commission or the
National Economic Council, shall issue a certification that a pioneer industry shall
be entitled to post-operative tariff protection to an extent not exceeding fifty per
cent of the dutiable value of imported items similar to those being manufactured
or produced by a pioneer enterprise, unless a higher rate or amount is provided
for in the Tariff Code or pertinent laws. Said tariff shall take effect automatically
upon certification by the Board that the pioneer enterprise is operating on a
commercial scale: Provided, That said tariff, once operative, may be modified in
accordance with Section four hundred one of the Tariff and Customs Code.
SECTION 9. Special Export Incentives for Registered Enterprises. Registered
enterprises shall be entitled to the following special incentives for exports of their
completely finished products and commodities:
(a) Double Deduction of Promotional Expenses. To deduct from taxable
income twice the amount of the ordinary and necessary expenses incurred for
the purpose of promoting the sale of their products abroad;
(b) Double Deduction of Shipping Costs. To deduct from taxable income twice
the amount of shipping freight incurred in connection with the export of their
products, if the shipments are made in vessels of Philippine registry to their
regular ports of call; and to deduct one hundred fifty per cent (150%) of the
freight when shipments are made in vessels of foreign registry to a port which is
not a regular port of call of Philippine vessels;
(c) Special Tax Credit on Raw Materials. A tax credit equivalent to seven per
cent (7%) of the total cost of the raw materials and supplies purchased by
registered enterprises or an amount equivalent to the taxes actually paid by
registered enterprises on said raw materials, whichever is higher, to the extent
used in manufacturing exported products and commodities.
Before registered enterprises may avail themselves of the foregoing exports incentives
benefits, the shall apply first with the Board, which shall approve the application upon
proof: (1) that the enterprise proposes to engage in good faith in creating a market for
its products abroad; (2) that the product to be exported is one included in the
government priorities plan as suitable for export, or if not so included that its export will
not adversely affect the needs of the domestic market for the finished product to be
exported or for the domestic raw materials used in its manufacture; (3) that the

enterprise has or will set up an adequate accounting system to segregate revenues,

purchases and expenses of its export market operations from those of its domestic
market operations; and (4) that the exported products and commodities meet the
standards of quality established by the Bureau of Standards or, in default thereof, by the
Board.
SECTION 10. Preference in Grant of Government Loans. Government financial
institutions such as the Development Bank of the Philippines, Philippine National Bank,
Government Service Insurance System, Social Security System, Land Bank, and such
other government institutions as are now engaged or may hereafter engage in financing
or investment operations shall, in accordance with and to the extent allowed by the
enabling provisions of their respective charters or applicable laws, accord high priority to
applications for financial assistance submitted by pioneer and other registered
enterprises, whether such financial assistance be in the form of equity participation in
preferred, common, or preferred convertible shares of stock, or in loans and
guarantees, and shall facilitate the processing thereof and the release of the funds
therefor. However, no financial assistance shall be extended under this section to any
investor or enterprise that is not a Philippine National.
The above-mentioned financial institutions, to the extent allowed by their respective
charters or applicable laws, shall contribute to the capital of a registered enterprise
whenever the said contribution would enable the formation of pioneer or other
registered enterprise with at least sixty per cent control by Philippine Nationals:
Provided, That the capital contribution of the said financial institutions shall be limited to
the amount that cannot be contributed by private Filipino investors, and shall in no case
exceed thirty per cent of the total capitalization of the pioneer or other registered
enterprises. The shares representing the contribution of the said financial institutions
shall be offered for public sale to Philippine Nationals through all the members of a
registered Philippine stock exchange.
To facilitate the implementation of the provisions of this Section, all the said financial
institutions shall coordinate their financial assistance programs with each other,
exchange relevant information about applicants and applications, and submit a monthly
report to the Board showing the amount of funds available for financial assistance to
pioneer or other registered enterprises. The Board shall recommend to the Board of
Directors of each such financial institution what order of priority shall be given the
applications of pioneer and other registered enterprises, or of applicants that propose to
seek registration as such.
SECTION 11. Private Financial Assistance. Any provision of existing laws to the
contrary notwithstanding, the Insurance Commissioner is hereby authorized to allow
insurance companies, under such rules and regulations as he may issue, to invest in
new issues of stock of registered enterprises, notwithstanding that said enterprises may
not have paid regular dividends, to the extent set out in section two hundred,
paragraphs (c) and (f) of the Insurance Act, as amended: Provided, that said
investments are diversified.
SECTION 12. Loans for Investment. The Government Service Insurance System and
the Social Security System shall extend to their respective members five-year loans at a
rate of interest not to exceed six per cent per annum for the purchase of shares of stock
in any registered enterprise: Provided, That (1) the shares so purchased shall be
deposited in escrow with the lending institution for the full five-year term of the loan;
partial releases of the shares shall, however, be allowed to the extent of the payment of
amortization made therefor; (2) such loans shall be amortized in sixty equal monthly
installments which shall be withheld by the employer from the monthly salary of the
employee concerned and remitted to the lending institution by the employer; but any
and all dividends earned by shares of stock while they are held in escrow shall be
delivered to the employee; and (3) the maximum loan available to each employee in any
one calendar year shall not exceed fifty per centum of the employee's annual gross
income: Provided, further, That the total investment of the government financial
institution concerned, consisting of its direct investment in the registered enterprise and
the loans it has extended to its respective members which have been invested by the

members in a registered enterprise, shall not be more than forty-nine per cent (49%) of
the total capitalization of the registered enterprise in which the investments have been
made.

SECOND DIVISION
[G.R. No. 98310. October 24, 1996]
MATUGUINA INTEGRATED WOOD PRODUCTS, INC., petitioner, vs. The HON. COURT OF
APPEALS, DAVAO ENTERPRISES CORPORATION, The HON. MINISTER, (NOW
SECRETARY) of NATURAL RESOURCES AND PHILLIP CO, respondents.
DECISION
TORRES, JR., J.:
Matuguina Integrated Wood Products Inc. (MIWPI, for brevity) filed this action for prohibition,
Damages and Injunction, in order to prevent the respondent Minister (now Secretary) of Natural
Resources from enforcing its Order of Execution against it, for liability arising from an alleged
encroachment of the petitioner over the timber concession of respondent DAVENCOR located in
Mati, Davao Oriental.

The Regional Trial Court, Branch 17, Davao City, ruled in favor of the petitioner, but on appeal,
was reversed by the respondent Court of Appeals in its decision dated February 25, 1991, which
found MIWPI, as an alter ego of Milagros Matuguina and/or Matuguina Logging enterprises (MLE, to
be liable to DAVENCOR for illegal encroachment.
The following are the antecedent facts:
On June 28, 1973, the Acting Director of the Bureau of Forest Development issued Provisional
Timber License (PTL) No. 30, covering an area of 5,400 hectares to Ms. Milagros Matuguina who was
then doing business under the name of MLE, a sole proprietorship venture. A portion, covering 1,900
hectares, of the said area was located within the territorial boundary of Gov. Generoso in Mati, Davao
Oriental, and adjoined the timber concession of Davao Enterprises Corporation (DAVENCOR), the
private respondent in this case.
On July 10, 1974, petitioner Matuguina Integrated Wood Products, Inc. (MIWPI), was
incorporated, having an authorized capital stock of Ten Million Pesos (P10,000,000.00).[1] The
incorporators/stockholders of MIWPI, and their stock subscriptions were as follows:
Name No. Of Shares Subscribed Amount of Capital
Stock Subscribed
1. Henry Wee 1,160,000 1,160,000.00
2. Ma. Milagros Matuguina 400,000 400,000.00
3. Alejandro Chua Chun 200,000 200,000.00
4. Bernadita Chua 120,000 120,000.00
5. Domingo Herrera 40,000 40,000.00
6. Manuel Hernaez 40,000 40,000.00
7. Luis Valderama 40,000 40,000.00
----------------- -----------------2,000,000 2,000,000.00
=========== ===========
Milagros Matuguina became the majority stockholder of MIWPI on September 24, 1974, when
the latters Board of Directors approved by Resolution the transfer of 1,000,000 shares from Henry
Wee to Milagros Matuguina, thus giving her seventy percent (70%) stock ownership of MIWPI.
In an undated letter[2] to the Director of Forest Development (BFD) on November 26, 1974,
Milagros Matuguina requested the Director for a change of name and transfer of management of PTL
No. 30, from a single proprietorship under her name, to that of MIWPI.
This request was favorably endorsed on December 2, 1974[3] by the BFDs Acting Director, Jose
Viado to respondent Secretary of Natural Resources, who approved the same on September 5, 1975.
[4]

On July 17, 1975, Milagros Matuguina and petitioner MIWPI executed a Deed of
Transfer[5] transferring all of the formers rights, interests, ownership and participation in Provincial
Timber License No. 30 to the latter for and in consideration of 148,000 shares of stocks in MIWPI.
A copy of said deed was submitted to the Director of Forest Development and Petitioner MIWPI
had since been acting as holder and licensee of PTL No. 30.
On July 28, 1975, pending approval of the request to transfer the PTL to MIWPI, DAVENCOR,
through its Assistant General Manager, complained to the District Forester at Mati, Davao Oriental
that Milagros Matuguina/MLE had encroached into and was conducting logging operations in
DAVENCORs timber concession.
After investigation of DAVENCORs complaint, the Investigating Committee which looked into
DAVENCORs complaint submitted its report to the Director, finding that MLE had encroached on the
concession area of DAVENCOR. In line with this, the Director of Forest Development issued an
Order[6] on July 15, 1981, finding and declaring MLE to have encroached upon, and conducted illegal
logging operations within the licensed or concession area of DAVENCOR.
MLE appealed the Order to the Ministry of Natural Resources, which appeal was docketed as
MNR CASE No. 6450. During the pendency of the appealed case with the Minister of Natural
Resources, Ma. Milagros Matuguina disposed of her shares in petitioner MIWPI, thereby ceasing to
be a stockholder of the petitioner of March 16, 1986.[7]
On October 1, 1986, The Minister of Natural Resources, Hon. Ernesto M. Maceda rendered his
Decision,[8] affirming the aforesaid order of the Director of Forest Development, stating thus:
DECISION
For our Resolution is the appeal by MATUGUINA LOGGING ENTERPRISES (MLR, for short) of the
Order dated 15 July 1991 of the Director of Forest Development finding and declaring MLE to have
encroached upon, and conducted illegal logging operations within the license or concession area of
DAVAO ENTERPRISES CORPORATION. The aforesaid Order dispositively states:
WHEREFORE, there being a clear and convincing proof that Matuguina Conducted illegal operation
within the licensed area of DAVENCOR, above named respondent is hereby ordered to pay to the
complainant the equivalent value in pesos of 2,352.04 cubic meters of timber based on the market
price obtaining, at the logpond of the respondent at the time of cutting, minus the cost of production,
or to restitute to the complainant equal volume of 2,352.04 cubic meters of logs owned by respondent
to be taken at respondents logpond. The respondent is hereby directed to comply with this Order
within a period of ninety (90) days from receipt of this Order and after the lapse of the said period, no
compliance has been made by the respondent, its logging operations shall ipso facto become
automatically suspended until respondent shall have complied as directed.
The Regional Director of Region II, Davao City is hereby instructed to implement this Order and to
submit his compliance report within ten (10) days after the lapse of the ninety (90) days period within
which the respondent is directed to comply with this order.
And that the dispositive portion of the said decision states;
WHEREFORE, the Order dated 15 July 1981 of the Director of Forest Development is hereby
AFFIRMED.
When the Decision of the Minister of Natural Resources became final and executory, Philip Co
and DAVENCOR requested the respondent Minister on October 30, 1986 to issue immediately a writ
of execution against MLE and/or MIWPI.[9] The Order of Execution[10] was issued on January 6,
1987 by the Minister through the latters Assistant on Legal Affairs. The said Order directed the

issuance of a writ of execution, not only against MLE, but likewise against MIWPI. The dispositive
portion of the order provides:
WHEREFORE, let a Writ of Execution be issued against Matuguina Logging Enterprises and/or
Matuguina Integrated Wood Products, Inc. For the satisfaction of the Decision of the Bureau of Forest
Development dated 15 July 1981, and the Order of this office dated 1 October 1986.
SO ORDERED.
Subsequently, a writ of execution [11] dated January 8, 1987 was issued in favor of the respondent
DAVENCOR, which states:
The City/Provincial Sheriff
Davao City
GREETINGS:
You are hereby directed to enforce, implement and execute the Order of Execution dated 06 June
1987 of this Office in the above-entitled case against Matuguina Logging Enterprises and/or
Matuguina Integrated Wood Products, Inc. its officers or any person or corporation in its behalf and
conformably with the Order dated 15 July 1981 of the Director of Forest Development, stating
dispositively.
You are hereby requested to submit your return to this Office within the period of sixty (60) days from
your receipt hereof as to action taken hereon.
SO ORDERED."
On February 11, 1987, MIWPI filed the instant complaint [12] for prohibition, damages and
injunction, with prayer for restraining order, which case was docketed as Civil Case No. 18,457-87 in
the Regional Trial Court Davao City, Branch 17. MIWPI stated its primary cause of action, the relevant
portion of which reads, viz.:
5. That plaintiff which has a distinct and separate personality of its own under the law, and was never
a party to the case between DAVENCOR and MLE, suddenly became a party to the case after the
decision became final and executory with the issuance of Annex B hereof for reasons known to the
defendants alone:
6. That the issuance of Annex B hereof (the order of execution) by the defendant Minister has been
made not only without or in excess of his authority but that the same was issued patently without any
factual or legal basis, hence, a gross violation of plaintiffs constitutional rights under the due process
clause;
7. That plaintiff, in the face of the order (Annex B) complained of, there being no appeal or any plain,
speedy, and adequate remedy in the ordinary course of law, does not have any alternative but to
ventilate the present recourse;
8. That defendant Minister is doing, threatens or is about to do, or is procuring or suffering to be done,
some act which definitely is in violation of the plaintiffs rights respecting the subject matter of the
action, and unless said act or acts are restrained or prohibited at least during the pendency of this
case, said act or acts would probably work not only injustice to plaintiff but world tend to render the
judgment of this Honorable court ineffectual;

9. That the commission or continuance of the acts complained of during the present litigation would
not only cause great and irreparable injury, but will also work injustice to the plaintiff, and would
complicate, aggravate and multiply the issues in this case;
10. That the plaintiff is entitled to the relief demanded, and the whole or part of such relief consist in
restraining the commission or continuance of the acts complained of, or in the performance of acts,
either for a limited period or perpetually;
11. That great and irreparable injury would inevitably result to the plaintiff before the matter can be
heard on notice, hence, immediate issuance of a restraining order is necessary and proper;
12. That the plaintiff is willing and able to file the necessary bond executed to the defendants, in an
amount to be fixed by the Court, to the effect that the plaintiff will pay to the defendants all damages
which they may sustain by reason of the injunction if the court should finally decide that the plaintiff
was not entitled thereto.
MIWPI, likewise alleges that in wantonly and imprudently procuring the Writ of Execution against
it, which DAVENCOR and Philip Co seek to enforce a 2.5 Million Peso liability of plaintiff, the latter
has been constrained to bring the present action, thereby incurring damages in the sum
of P500,000.00 in concept of actual and compensatory damages, and P250,000.00 in attorneys fees,
which amount petitioner now seeks to recover.
The trial court issued a temporary restraining order the next day, February 12, 1987, restraining
and/or enjoining the private respondents and the Hon. Secretary of Natural Resources from
enforcing, implementing and/or carrying into effect, the decision of the respondent Secretary dated
October 1, 1986, as well as the order of execution dated January 6, 1987.
On February 17, 1987, private respondent filed a Motion to Dismiss [13] alleging that the trial court
had no jurisdiction over the case under Presidential Decree No. 705, to which Motion to Dismiss,
petitioner filed an Opposition[14] dated February 1987. On March 9, 1987, the trial court issued an
order[15] denying private respondents Motion to Dismiss. Hence, private respondents filed their
Answer[16] dated March 13, 1987 and an Amended Answer [17]
In the latter pleading, private respondents raised the following special and affirmative defenses:
7. That neither Milagros Matuguina nor Matuguina Integrated Wood Products, Inc. advised defendant
Davencor of the change of name, and transfer of management of PTL No. 30. From Milagros
Matuguina to Matuguina Integrated Wood Products, Inc., during the pendency of MNR Case No.
6540 before the Bureau of Forest Develoment and the Ministry of Natural Resources, notwithstanding
that the lawyer of matuguina Integrated Wood Products, Inc., who was also a stockholder thereof,
had appeared for Milagros Matuguina in said administrative case.
8. That plaintiff has acted in bad faith and is now in estoppel from questioning the Writ of Execution
issued against Milagros Matuguina (now Matuguina Integrated Wood Products, Inc.) to satisfy the
judgment in MNR Case No. 6540.
9. This Honorable Court has no jurisdiction over the nature and subject matter of this action,
especially because:
(a) The plaintiff has not exhausted administrative remedies available to it before initiating this
action;
(b) In the guise of entertaining an action for damages, this Court is being misled by the
plaintiff into deciding questions properly for the Department of Natural Resources to
decide exclusively in the lawful exercise of its regulatory jurisdiction;

(c) The plaintiff is now precluded and estopped from filing this action.
10. The plaintiff has no cause of action against the defendants and has not stated any in its
complaint, especially because:
(a) Having failed to exhaust administrative remedies, plaintiff is without a ripe cause of action
that can be pleaded before this Honorable Court;
(b) In substance, there is no justifiable question raised under the facts and circumstances of
this case.
Meanwhile, on June 2, 1987, the trial court issued an order [18] granting the petitioners prayer for
the issuance of a writ of preliminary injunction against the private respondents and the Secretary of
Natural Resources, ordering them to desist, refrain and prevent from enforcing respondent Secretarys
Decision dated October 1, 1986 as well as the writ of execution dated January 8, 1987.
On May 10, 1989, the trial court rendered its Decison [19] in favor of the petitioner, disposing of the
action as follows:
WHEREFORE, in view of the foregoing, finding the evidence of plaintiff, Matuguina Integrated Wood
Products, Inc. sufficient to sustain a preponderance of evidence, showing that the order of execution
dated January 6, 1987, issued by the Minister of Natural Resources, through Alexander C. Castro,
Assistant Minister for Legal Affairs, included therein, plaintiff Matuguina Integrated Wood Products,
Inc., despite non-inclusion of plaintiff in the decision of the then Minister of Natural Resources, dated
October 1, 1986, already final and executory before the issuance of the order and execution, said
order or execution is hereby declared null and void and without any legal effect.
As a consequence thereof, the writ of preliminary injunction issued by this court, dated June 2, 1987
is hereby made permanent.
Moreover, as a result of the filing of this case, defendant Philip Co and Davencor Corporation, are
ordered to jointly and severally pay the amount of P100,000.00 as actual and compensatory
damages, along with another amount of P20,000.00 as attorneys fees and costs of this action, in
favor of plaintiff Matuguina Integrated Wood Products, Inc.
SO ORDERED.
Private respondents appealed the trial courts decision on May 19, 1989. Their notice of appeal
was approved by the trial court. The appealed case was docketed with respondent Honorable Court
of Appeals as CA-G.R. SP No. 19887.
On February 25, 1991, the respondent Court rendered its Decision, [20] reversing the lower courts
pronouncement. The dispositive portion of the decision reads:
WHEREFORE, premises considered, the decision appealed from is reversed and set aside and the
Order of Execution issued by the Minister of Natural Resources dated January 6, 1987 is
affirmed. Without pronouncement as to costs.
SO ORDERED.
In due time, petitioner filed a motion for reconsideration. [21] Private respondents filed their
opposition[22] to the same on April 2, 1991. In a Resolution[23] dated April 12, 1991, the motion was
denied by the respondent Court.

Not content with the courts pronouncement, petitioner is now before us on a Petition for Review
on Certiorari,[24] alleging that the respondent court acted with grave abuse of discretion in rendering
the questioned decision and its companion resolution, denying the motion for reconsideration.
The reasons relied upon by the Petitioner in filing its petition are hereby restated:
I
PETITIONER WAS DENIED DUE PROCESS OF LAW WHEN IT WAS MADE LIABLE BY
RESPONDENT SECRETARY OF NATURAL RESOURCES IN HIS ORDER OF EXECUTION
DATED 06 JANUARY 1987 (EXHIBIT B OF ATTACHMENT O) ISSUED IN MNR CASE NO.
6540 DESPITE THE FACT THAT PETITIONER WAS NEVER A PARTY NOR A PARTICIPANT
IN THE SAID CASE: IN FACT, PETITIONER NEVER HAD NOTICE OF THE PROCEEDINGS
IN MNR CASE NO. 6540.
II
THE FAILURE TO AFFORD PETITIONER THE OPPORTUNITY TO BE HEARD IN THE
ADMINISTRATIVE LEVEL (MNR CASE NO. 6540) COULD NOT HAVE BEEN CURED BY
THE INSTITUTION OF THE ACTION FOR PROHIBITION IN THE TRIAL COURT BECAUSE
SAID COURT HAD NO JURISDICTION TO DETERMINE WHETHER PETITIONER WAS
GUILTY OF ENCROACHMENT ON PRIVATE RESPONDENT DAVENCORS TIMBER
CONCESSION; FURTHERMORE, THE QUESTION ON WHETHER PETITIONER WAS
GUILTY OF ENCROACHMENT WAS NEVER PUT IN ISSUE IN THE CASE BEFORE THE
TRIAL COURT.
III
THE LIABILITY OF MILAGROS/MLE AS FOUND BY RESPONDENT SECRETARY IN ITS
DECISION DATED 01 OCTOBER 1986 (EXHIBIT A OF THE ATTACHMENT 0) CANNOT BE
IMPUTED AGAINST PETITIONER SINCE THE LATTER IS A CORPORATION HAVING A
PERSONALITY SEPARATE AND DISTINCT FROM MILAGROS/MLE.
IV
PETITIONER CANNOT BE MADE LIABLE TO PRIVATE RESPONDENTS UNDER THE DEED
OF TRANSFER DATED 18 JULY 1975 (EXHIBIT 3 OF ATTACHMENT P) AND SECTION 61 OF
THE REVISED FORESTRY CODE OF THE PHILIPPINES (P.D. 705, AS AMENDED):
A. THE ALLEGED TRANSFER OF PTL NO. 30 FROM MILAGROS/MLE TO PETITIONER
NEVER BECAME BINDING AND EFFECTIVE SINCE PTL NO. 30 REMAINED IN THE
NAME OF MILAGROS/MLE UNTIL ITS EXPIRATION ON 30 JUNE 1977: THIS IS DUE
TO THE FACT THAT SAID TRANSFER WAS NEVER APPROVED BY THE
SECRETARY OF NATURAL RESOURCES.
B. GRANTING ARGUENDO THAT THERE WAS AN EFFECTIVE TRANSFER OF PTL NO.
30 FROM MILAGROS/MLE TO PETITIONER, THE TRANSFER COULD NOT MAKE
PETITIONER LIABLE FOR THE ALLEGED ENCROACHMENT OF PRIVATE
RESPONDENT DAVENCORS TIMBER CONCESSION, SINCE:
1. SAID TRANSFER WAS EXECUTED PRIOR TO THE COMMISSION OF THE
ALLEGED ENCROACHMENT AND THE FILING OF THE ADMINISTRATIVE
COMPLAINT FOR ENCROACHMENT DATED 28 JULY 1975; THUS,
PETITIONER CANNOT BE MADE LIABLE FOR OBLIGATONS OF
MILAGROS/MLE WHICH WERE INCURRED AFTER DATE OF THE SAID
TRANSFER.

2. SAID TRANSFER COVERED ONLY FORESTRY CHARGES AND OTHER

GOVERNMENT FEES, AND DID NOT INCLUDE THE PERSONAL LIABILITY
OF MILAGROS/MLE THAT AROSE FROM THE ENCROACHMENT OF THE
TIMBER CONCESSION OF RESPONDENT DAVENCOR.[25]
Private Respondent DAVENCOR and the public respondent Hon. Minister (now Secretary) of
Natural Resources filed separate Comments[26] on September 5, 1991 and June 8, 1992 respectively.
The essential issues of the present controversy boil down to the following:
Was the Petitioner denied due process when it was adjudged liable with MLE for encroaching
upon the timber concession of DAVENCOR in the respondent Minister's order of Execution?
Is the petitioner a transferee of MLE's interest, as to make it liable for the latters illegal logging
operations in DAVENCORs timber concession, or more specifically, is it possible to pierce the veil of
MIWPIs corporate existence, making it a mere conduit or successor of MLE?
Generally accepted is the principle that no man shall be affected by any proceeding to which he is
a stranger, and strangers to a case are not bound by judgment rendered by the court. In the same
manner an execution can be issued only against a party and not against one who did not have his
day in court. In Lorenzo vs. Cayetano, 78 SCRA 485 [1987], this Court held that only real parties in
interest in an action are bound by judgment therein and by writs of execution and demolition issued
pursuant thereto.[27]
Indeed a judgment cannot bind persons who are not parties to the action. [28] It is elementary that
strangers to a case are not bound by the judgment rendered by the court and such judgment is not
available as an adjudication either against or in favor of such other person. A decision of a court will
not operate to divest the rights of a person who has not and has never been a party to a litigation,
either as plaintiff or as defendant. Execution of a judgment can only be issued against one who is a
party to the action, and not against one who, not being a party in the action has not yet had his day in
court.[29]
The writ of execution must conform to the judgment which is to be executed, as it may not vary
the terms of the judgment it seeks to enforce. [30] Nor may it go beyond the terms of the judgment
which sought to be executed. Where the execution is not in harmony with the judgment which gives it
life and exceeds it, it has pro tanto no validity. To maintain otherwise would be to ignore the
constitutional provision against depriving a person of his property without due process of law. [31]
The writ of execution issued by the Secretary of Natural Resources on January 8, 1987 clearly
varies the term of his Decision of October 1, 1986, inasmuch as the Writ includes the MIWPI as party
liable whereas the Decision only mentions Milagros Matuguina/MLE.
There is no basis for the issuance of the Order of Execution against the petitioner. The same was
issued without giving the petitioner an opportunity to defend itself and oppose the request of
DAVENCOR for the issuance of a writ of execution against it. In fact, it does not appear that petitioner
was at all furnished with a copy of DAVENCORs letter requesting for the Execution of the Honorable
Secretarys decision against it. Petitioner was suddenly made liable upon the order of execution by the
respondent Secretarys expedient conclusions that MLE and MIWPI are one and the same, apparently
on the basis merely of DAVENCORs letter requesting for the Order, and without hearing or
impleading MIWPI. Until the issuance of the Order of execution, petitioner was not included or
mentioned in the proceedings as having any participation in the encroachment in DAVENCORs
timber concession. This action of the respondent Secretary disregards the most basic tenets of due
process and elementary fairness.

The liberal atmosphere which pervades the procedure in administrative proceedings does not
empower the presiding officer to make conclusions of fact before hearing all the parties concerned.
[32]
In Police Commission vs. Hon Judge Lood, [33] we held that the formalities usually attendant in court
hearings need not be present in an administrative investigation, provided that the parties are heard
and given the opportunity to adduce their evidence. The right to notice and hearing is essential to due
process and its non-observance will, as a rule, invalidate the administrative proceedings.
As observed by the appellate court, to wit:
the appellant should have filed a Motion with the Minister with Notice to the appellee to include the
latter as party liable for the judgment in order to afford the appellee an opportunity to be heard on its
liability for the judgment rendered against Ma. Milagros Matuguina doing business under the name
Matuguina Logging Enterprises.[34]
Continuing, the said court stated further that:
Nevertheless, the failure to comply with the procedure in order to satisfy the requirements of due
process was cured by the present action for prohibition where the liability of appellee has been
ventilated.
We do not agree. Essentially, Prohibition is a remedy to prevent inferior courts, corporations,
boards or persons from usurping or exercising a jurisdiction or power with which they have not been
vested by law[35] As we held in Mafinco Trading Corporation vs. Ople, et al, [36] in a certiorari or
prohibition case, only issues affecting the jurisdiction of the tribunal, board and offices involved may
be resolved on the basis of undisputed facts.
The issue of whether or not petitioner is an alter ego of Milagros Matuguina/MLE, is one of fact,
and which should have been threshed out in the administrative proceedings, and not in the prohibition
proceedings in the trial court, where it is precisely the failure of the respondent Minister of Natural
Resources to proceed as mandated by law in the execution of its order which is under scrutiny.
Assuming, arguendo, that prohibition is the proper remedy for determining the propriety of
piercing the separate personality of petitioner with its stockholders, the evidence presented at said
trial does not warrant such action.
It is settled that a corporation is clothed with a personality separate and distinct from that of
persons composing it. It may not generally be held liable for that of the persons composing it. It may
not be held liable for the personal indebtedness of its stockholders or those of the entities connected
with it. Conversely, a stockholder cannot be made to answer for any of its financial obligations even if
he should be its president. [37] But when the juridical personality of the corporation is used to defeat
public convenience, justify wrong, protect fraud or defend crime, the corporation shall be considered
as a mere association of persons (Koppel, Inc. vs. Yatco, 77 Phil 496, Palay, Inc. vs. Clave, G.R. No.
56076, September 21, 1983, 124 SCRA 638), and its responsible officers and/or stockholders shall
be individually liable (Namarco vs. Associated Finance Co., Inc., G.R. No. L- 20886, April 27, 1967,
19 SCRA 962). For the same reasons, a corporation shall be liable for the obligations of a stockholder
(Palacio vs. Fely Transportation Co., G.R. No. L-15121, August 31, 1963, 5 SCRA 1011), or a
corporation and its successor-in-interest shall be considered as one and the liability of the former
attach to the latter.[38]
But for the separate juridical personality of a corporation to be disregarded, the wrongdoing must
be clearly and convincingly established. It cannot be presumed.[39]
In the case at bar, there is, insufficient basis for the appellate courts ruling that MIWPI is the same
as Matuguina. The trial courts observation is enlightening.

Despite apparently opposing evidence of both parties, the Court gathered and finds, that defendants
attempt to pierce the veil of corporate personality of plaintiff corporation, as to consider plaintiff
corporations merely an adjunct or alter ego of Maria Milagros Matuguina Logging Enterprises, to
justify defendants claim against plaintiff corporation, suffers heavily from insufficiency of evidence.
It is the vehement contention of defendants, to bolster its claim, that plaintiff corporation is the alter
ego of Maria Milagros Matuguina Logging Enterprises, because when Milagros Matuguina became
the Chairman of the Board of Directors of plaintiff corporation, she requested for the change of name
and transfer of management of PTL No. 30, from her single proprietorship, to plaintiff corporation.
Secondly, when Milagros Matuguina executed the deed of transfer, transferring her forest concession
under PTL No, 30, together with all the structures and improvements therein, to plaintiff corporation,
for a consideration of P14,800.00 representing 148,000 shares of stocks of plaintiff corporation
actually all existing shares of stocks of Milagros Matuguina, in plaintiff corporation represents 77.4%
therein; suffice to say that plaintiff corporation practically became an alter ego of Milagros Matuguina.
Defendants arguments on this peripheral aspect of corporate existence, do not at all indicate that
such a legal fiction, was granted.
In the first place the alleged control of plaintiff corporation was not evident in any particular corporate
acts of plaintiff corporation, wherein Maria Milagros Matuguina Logging Enterprises using plaintiff
corporation, executed acts or powers directly involving plaintiff corporation.
Neither was there any evidence of defendants, that Maria Milagros Matuguina Logging Enterprises,
using the facilities and resources of plaintiff corporation, involved itself in transaction using both single
proprietorship and plaintiff corporation in such particular line of business undertakings.
As stated by this court in resolving plaintiffs prayer for issuance of a writ of preliminary injunction,
said:
There is actually, no evidence presented by defendant, showing that sometime on March 15, 1986, to
January 1987, during which period, the subject decision of Hon. Secretary of Natural Resources and
corresponding writ of execution, Maria Milagros Matuguina was a stockholder of plaintiff corporation
in such amount or was she an officer of plaintiff corporation in whatever capacity.
The above circumstances is relevant and significant to assume any such justification of including
plaintiff corporation in the subject writ of execution, otherwise as maintained by defendants, what
matters most was the control of Milagros Matuguina Logging Enterprises of plaintiff corporation in
1974 and 1975, when the administrative case was pending, this circumstance alone without formally
including plaintiff corporation in said case, will not create any valid and sufficient justification for
plaintiff corporation, to have been supposedly included in the suit against defendants and Maria
Milagros Matuguina Logging Enterprises, in the administrative case.
Yet, granting as claimed by defendants, that in 1974 or in 1975, Maria Milagros Matuguina became
the controlling stockholder of plaintiff corporation, on account of the change of name and transfer of
management of PTL No. 30, this circumstance, we repeat, does not of itself prove that plaintiff
corporation was the alter ego of Maria Milagros Matuguina Logging Enterprise, as enunciated in
various decisions of this Court, to wit:
It is important to bear in mind that mere ownership by a single stockholder or by another corporation
of all or nearly all of the capital stocks of the corporation, is not itself a sufficient warrant for
disregarding the fiction of separate personality. (Liddel and Co. vs. Collector of Internal revenue, G.R.
No. 9687, June 30, 1961).

It is recognized as lawful to obtain a corporation charter, even with a single substantial stockholder, to
engage in specific activity and such activity may co-exist with other private activities of the
stockholders.
If the corporation is substantial one, conducted lawfully; without fraud on another, its separate identity
is to be respected.[40]
In this jurisdiction, it is a settled rule that conclusions and findings of fact by trial court are entitled
to great weight on appeal and should not be disturbed unless for strong and cogent reasons because
the trial court is in a better position to examine real evidence, as well as to observe the demeanor of
the witnesses while testifying in the case.[41]
It is likewise improper to state that the MIWPI is the privy or the successor-in-interest of MLE, as
the liability for the encroachment over DAVENCORs timber concession is concerned, by reason of
the transfer of interest in PTL No. 30 from MLE to MIWPI.
First at all, it does not appear indubitable that the said transfer ever became effective, since PTL
No. 30 remained in the name of Milagros Matuguina/MLE until it expired on June 30, 1977. [42]
More importantly, even if it is deemed that there was a valid change of name and transfer of
interest in the PTL No. 30, this only signifies a transfer of authority, from MLE to MIWPI, to conduct
logging operations in the area covered by PTL No. 30. It does not show indubitable proof that MIWPI
was a mere conduit or successor of Milagros Matuguina/MLE, as far the latters liability for the
encroachment upon DAVENCORs concession is concerned. This is the only conclusion which we can
discern from the language of Section 61 of P.D. 705, [43] and the letters of the Acting Minister of Natural
Resources to Milagros Matuguina/MLE and to MIWPI, on September 16, 1975. [44] In Soriano vs. Court
of Appeals, this Court stated in clear language, thatIt is the general rule that the protective mantle of a corporations separate and distinct personality
could only be pierced and liability attached directly to its officers and/or members stockholders, when
the same is used for fraudulent, unfair, or illegal purpose. In the case at bar, there is no showing that
the Association entered into the transaction with the private respondent for the purpose of defrauding
the latter of his goods or the payment thereof. xxx. Therefore, the general rule on corporate liability,
not the exception, should be applied in resolving this case. (G.R. No. 49834, June 22, 1989)
The respondents cite Section 61 of P.D. 705 to establish MIWPIs succession to the liability of
Milagros Matuguina/MLE:
SEC. 61. Transfer. Unless authorized by the Department Head, no licensee, lessee, or permittee may
transfer, exchange, sell, or convey his license agreement, license, lease or permit, or any of his rights
or interest therein, or any of his assets used in connection therewith.
The licensee, lessee, or permittee shall be allowed to transfer or convey his license agreement,
license, lease, or permit only if he has not violated any forestry law, rule or regulation; has been
faithfully complying with the terms and conditions of the license agreement, license, lease or permit;
the transferee has all the qualifications and none of the disqualifications to hold a license agreement,
license, lease or permit; there is no evidence that such transfer or conveyance is being made for
purposes of speculation; and the transferee shall assume all the obligations of the transferor.
The transferor shall forever be barred from acquiring another license agreement, license, lease or
permit.
Even if it is mandated in the abovestated provision that the transferee shall assume all the
obligations of the transferor this does not mean that all obligations are assumed, indiscriminately.

Invariably, it is not the letter, but the spirit of the law and intent of the legislature that is
important. When the interpretation of a statute according to the exact and literal import of its words
would lead to absurdity, it should be construed according to the spirit and reason, disregarding if
necessary the letter of the law.[45]
In construing statutes, the terms used therein are generally to be given their ordinary meaning,
that is, such meaning which is ascribed to them when they are commonly used, to the end that
absurdity in the law must be avoided. [46] The term obligations as used in the final clause of the second
paragraph of Section 61 of P.D. 705 is construed to mean those obligations incurred by the transferor
in the ordinary course of business. It cannot be construed to mean those obligations or liabilities
incurred by the transferor as a result of transgressions of the law, as these are personal obligations of
the transferor, and could not have been included in the term obligations absent any modifying
provision to that effect.
In the September 16, 1975 letters of Acting Director of the Bureau of Forest Development to
Milagros Matuguina and MIWPI informing them of the approval of Matuguina's request for the change
of name and transfer of management of PTL No. 30, the following statements were made by the
Acting Director:
"In view hereof, (Matuguina Integrated Wood Products, Inc.) shall assume the responsibility of paying
whatever pending liabilities and/or accounts remaining unsettled, if any, by the former licensee,
Milagros Matuguina, with the government." (Emphasis ours)[47]
Accordingly, the letter's language implies that the obligations which MIWPI are to assume as
transferee of Milagros Matuguina/MLE are those obligations in favor of the government only, and not
to any other entity. Thus this would include Forestry Charges, Taxes, Fees, and similar
accountabilities.
In sum, the Court makes the following pronouncements:
(a) The respondent Honorable Minister of Natural Resources gravely abuse its discretion
when it issued its Order of Execution on January 6, 1987, including therein as one of the parties
liable the petitioner Matuguina Integrated Wood Products, Inc., which was never a party to the
assailed proceeding resulting in the issuance of such Order and, without affording the same an
opportunity to be heard before it was adjudged liable.
(b) The petitioner is a corporate entity separate and distinct from Milagros
Matuguina/Matuguina Logging Enterprises, there being no clear basis for considering it as a mere
conduit or alter ego of Matuguina/MLE, and therefore, cannot be made liable for the obligations of
the same for encroachment over the timber concession of private respondent DAVENCOR.
IN VIEW OF THE FOREGOING, the petition is hereby GRANTED, and the Decision dated
February 25, 1991 is SET ASIDE. The decision of the Regional Trial Court is hereby REINSTATED,
and correspondingly, Order of Execution of the respondent Secretary of Natural Resources is
declared Null and Void and without effect.
No pronouncement as to cost.
SO ORDERED.
Regalado (Chairman), Romero, Puno, and Mendoza, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION

G.R. No. 121587 March 9, 1999

SOLEDAD DY, doing business under the name and style RONWOOD LUMBER, petitioner,
vs.
COURT OF APPEALS and ODEL BERNARDO LAUSA, respondent.

MENDOZA, J.:
This is a petition for review of the decision 1 of the Court of Appeals in CA G.R. SP 33099 setting
aside two orders of the Regional Trial Court of Butuan City (Branch 5) and the appeallate court's
resolution denying petitioner's motion for reconsideration.
The facts are as follows.
On May 31, 1993, the Mayor of Butuan City issued Executive Order No. 93-01 creating Task Force
Kalikasan to combat "illegal logging, log smuggling or possession of and/or transport of illegally cut or
produced logs, lumber, flitches and other forest products" in that city. 2 The team was composed of
personnel of the Philippine Army Philippine National Police (PNP), the Department of Natural
Resources (DENR), and the Office of the City Mayor of Butuan. Respondent Odel Bernardo Lausa,
who was the acting chief of civilian security in the mayor's office, was a member of the team.
On July 1, 1993, the members of the task force received confidential information that two truckloads
of illegally cut lumber would be brought to Butuan City from the Ampayon-Taguibe-Tiniwisan area.
Accordingly, the team set up a check-point along kilometer 4 in Baan, Butuan City. 3 What happened
thereafter is summarized in the following portion of the decision of the Court of Appeals: 4
At around 10:00 p.m., two trucks with Plate Nos. KAK-542 and KBL-214 and loaded
with lumber approached the checkpoint. They were flagged down by the operatives but
instead of stopping, they accelerated their speed hence, the task gave chase. They
finally caught up with the two vehicles ar the compound of Young Metalcraft and
Peterwood Agro-Forest Industries at Baan, Butuan City, about two kilometers from the
checkpoint. When requested by the operatives, Pulcita Lucero, caretaker/in charge of
the a compound could not produce any document as proof of the legality of the
origin/possession of the forest products.
Forester Resurrection Maxilom of the DENR issued a temporary seizure order and a seizure receipt
for the two vehicles and their cargo consisting of several pieces of lumber of different sizes and
dimensions, but Lucero, the caretaker of the compound where they were seized, refused to accept
them. The seized lumber and vehicles were then taken to the City motorpol and placed in the custody
of respondent Lausa.
The next day, July 2, 1993, Maxilom submitted a memorandum-report to the Community Environment
and Natural Resources Officer (CENRO) of Butuan City on the seizure of the lumber and the two
vehicles. 5 On July 6, the CENRO issued a notice of confiscation which was duly posted for three
days.

For lack of claimants, DENR Regional Technical Director Raoul Geollegue recommended to the
Secretary on July 29, 1993 the forfeiture of the lumber and the two vehicles. 6 Accordingly, on July 30,
1993, DENR Regional Director De la Rosa ordered the CENRO of Butuan City to issue the requisite
forfeiture orders, 7 which CENRO Angelita Orcasitas issued on August 15, 1993. 8
On October 20, 1993, more than two months after the lumber had been forfeited, petitioner, claiming
to be the owner of the lumber, filed a suit for replevin in the Regional Trial Court of Butuan City
(Branch 5) for its recovery. The next day, October 21, 1993, the trial court issued a preliminary writ of
replevin.
On October 29, 1993, respondent Lausa filed a motion for the approval of a counterbond. Before the
court could act on his motion, he moved to dismiss and/or quash the writ of replevin on the ground
that the lumber in question, having been seized and forfeited by the DENR pursuant to P.D. No. 705,
as amended (Revised Forestry Code), was under its custody and, therefore, resort should first be
made to the DENR.
On November 29, 1993, the trial court denied respondent Lausa's application for the approval of the
counterbond as well as his motion to dismiss and/or quash the suit for replevin. For his reason,
respondent filed a petition forcertiorari in the Court of Appeals in which he sought the approval of his
counterbond and the nullification of two orders, dated October 21, 1993, and November 29, 1993,
granting petitioner's prayer for a preliminary writ of replevin and denying his Motion to Dismiss Case
and/or Quash Writ of Replevin.
On January 19, 1995, the Court of Appeals rendered a decision, the dispositive portion of which
reads:
WHEREFORE, the petition is hereby GRANTED, and
a. The Orders dated 21 October 1993 and 29 November 1993 are SET ASIDE.
b. Respondent judge is directed to approve a duly qualified counterbond to be filed by
petitioner, even with a period of at least one year.
No pronouncements as to costs.
SO ORDERED 9
Petitioner's subsequent motion for reconsideration was denied in a resolution, dated July 26, 1995.
Hence, this petition. Petitioner alleges that:
FIRST ERROR
WITH DUE RESPECT RESPONDENT COURT OF APPEALS ERRED IN RULING
THAT THE VERIFICATION MADE BY LORENCIO DY AND NOT BY PETITIONER
SOLEDAD Y. DY WAS INSUFFICIENT TO JUSTIFY THE ISSUANCE OF THE
REPLEVIN WRIT 10
SECOND ERROR
THE RESPONDENT COURT OF APPEALS ERRED IN RULING THAT A
COUNTERBOND IN REPLEVIN WHICH IS EFFECTIVE FOR ONLY ONE YEAR IS
VALID TO CAUSE THE RETURN OF THE PROPERTY TO DEFENDANT 11
THIRD ERROR

THE RESPONDENT COURT OF APPEALS ERRED IN GIVING DUE COURSE TO

PRIVATE RESPONDENT'S PETITION FOR CERTIORARI. 12
The appeal is without merit. The threshold question is whether the Regional Trial Court could in fact
take cognizance of the replevin suit, considering that the object was the recovery of lumber seized
and forfeited by law enforcement agents of the DENR pursuant to P.D. No. 705 (Revised Forestry
Code), as amended by Executive Order No. 277.
The rule is that a party must exhaust all administrative remedies before he can resort to the courts. In
a long line of cases, we have consistently held that before a party may be allowed to seek the
intervention of the court, it is a pre-condition that he should have availed himself of all the means
afforded by the administrative processes. Hence, if a remedy within the administrative machinery can
still be resorted to by giving the administrative officer concerned even opportunity to decide on a
matter that comes within his jurisdiction then such remedy should be exhausted first before a court's
judicial power can be sought. The premature invocation is fatal to one's cause of action. Accordingly,
absent any finding of waiver or estoppel, the case is susceptible of dismissal for lack of cause of
action. 13
Sec. 8 of P.D. No. 705, as amended, provides:
Sec. 8. Review. All actions and decisions of the Director are subject to review, motu
propio or upon appeal of any person aggrieved thereby, by the Department Head whose
decision shall be final and executory after the lapse of thirty (30) days from receipt by
the aggrieved party of said decision, unless appealed to the President in accordance
Executive Order No. 19, series of 1966. The Decision of the Department Head may not
be reviewed by the courts except through a special civil action for certiorari or
prohibition.
In Paat v. Court of Appeals, 14 where, as in the case at bar, the trial court issued a writ of replevin
against the DENR, thus allowing the claimant to obtain possession of the conveyance used in
transporting undocumented forest products, this Court stated:
Dismissal of the replevin suit for lack of cause of action in view of the private
respondents' failure to exhaust administrative remedies should have been the proper
cause of action by the lower court instead of assuming jurisdiction over the case and
consequently issuing the writ ordering the return of the truck. Exhaustion of the
remedies in the administrative forum, being a condition precedent prior to one's
recourse to the courts and more importantly, being an element of private respondents'
rights of action is too significant to be waylaid by the lower court. 15
As petitioner clearly failed to exhaust available administrative remedies, the Court of Appeals
correctly set aside the assailed orders of the trial court granting petitioner's application for a replevin
writ and denying private respondent's motion to dismiss. Having been forfeited pursuant to P.D. No.
705, as amended, the lumber properly came under the custody of the DENR and all actions seeking
to recover possession thereof should be directed to that agency.
The appellate court's directive to the trial court judge to allow the respondent agent of the DENR to
file a counterbond in order to recover custody of the lumber should be disregarded as being contrary
to its order to dismiss the replevin suit of petitioner. For, indeed, what it should have done was to
dismiss the case without prejudice to petitioner filing her claim before the Department of Natural
Resources (DENR).
In view of the conclusion reached in this case, it is unnecessary to discuss the errors assigned by
petitioner. These pertain to the questions whether petitioner's complaint below was properly verified
and whether private respondent's counterbond should be approved. Both are based on the premise

that the trial court can take cognizance over the case. As shown above, however, such is not the
case.
WHEREFORE, the decision of the Court of Appeals, dated January 19, 1995, and its Resolution,
dared July 26, 1995, in CA-G.R. SP 33099 are AFFIRMED with the modification that the complaint for
recovery of personal property is DISMISSED.
SO ORDERED.