Alvarez V PICOP 606 SCRA 444

3/17/2021 SUPREME COURT REPORTS ANNOTATED VOLUME 606
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.
G.R. No. 164516. December 3, 2009.*
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.
G.R. No. 171875. December 3, 2009.*
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.
Natural Resources; Forest Lands; Timber License Agreements

(TLAs); Integrated Forest Management Agreements (IFMAs);
Mandamus; Administrative Law; Words and Phrases; “Enjoin,”
and “Allow,” Explained; An 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; As an extraordinary writ, the remedy of
mandamus lies only to compel an officer to perform a ministerial
duty, not a discretionary one; The execution of agreements, in
itself, involves the exercise of discretion.—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 com-
_______________
* EN BANC.
445
VOL. 606, DECEMBER 3, 2009 445
central.com.ph/sfsreader/session/000001783d7e75673944a6ee003600fb002c009e/t/?o=False 1/78
Alvarez vs. PICOP Resources, Inc.
mand.” “ ‘Enjoin’ is a mandatory word, in legal parlance, always;

in common parlance, usually.” The word “allow,” on the other
hand, is not equivalent to the word “must,” and is in no sense a
command. 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. 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.
Same; Same; Same; Same; Same; Contracts; 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.—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.
Same; Same; Same; Same; 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’s interpretation of the 1969 Document cannot be
446
446 SUPREME COURT REPORTS ANNOTATED
sustained. PICOP’s 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. Tinga’s
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,
where all other entrants are illegal, and where so-called “illegal
settlers and squatters” are apprehended.
Same; Same; Same; Same; Integrated Forest Management
Agreements (IFMAs) are production-sharing agreements
concerning the development and utilization of natural resources,
and 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.”—
447
VOL. 606, DECEMBER 3, 2009 447
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: co-production, joint venture, or production-sharing
agreements within the time limit of twenty-five years, renewable
for another twenty-five years.
Same; Same; Same; Same; Administrative Law; Official
duties are, however, disputably considered to be regularly
performed, and good faith is always presumed; Department of
Environment and Natural Resources Administrative Order (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, to the present Constitution, which provides for
co-production, joint venture, or production-sharing agreements as
the permissible schemes wherein private entities may participate
in the utilization of forest products.—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, 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, to the present Constitution, which
provides for co-production, joint venture, or production-sharing
agreements as the permissible schemes wherein
448
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.
Same; Same; Same; Same; Statutory Construction; When a
provision is susceptible of two interpretations, “the one that will
render them operative and effective and harmonious with other
provisions of law” should be adopted.—When a provision is
susceptible of two interpretations, “the one that will render them
operative and effective and harmonious with other provisions of
law” should be adopted. As the interpretations in the assailed
Decision and in Mr. Justice Tinga’s ponencia are the ones that
would not make the subject Presidential Warranty
unconstitutional, these are what we shall adopt.
Same; Same; Same; Same; Contracts; Warranties; A warranty
is a collateral undertaking and is merely part of a contract—as a
collateral undertaking, it follows the principal wherever it goes.—
In Koa v. Court of Appeals, 219 SCRA 541 (1993) 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.”
449
VOL. 606, DECEMBER 3, 2009 449
Same; Same; Same; Same; Same; Police Power; Contract

Clause; Paper Industries Corp. of the Philippines’ (PICOP’s)
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”; The power to issue licenses springs from the State’s
police power, known as “the most essential, insistent and least
limitable of powers, extending as it does to all the great public
needs”; 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, and
while these licenses come in the form of “agreements,” e.g., “Timber
License Agreements,” they cannot be considered contracts under
the non-impairment clause.—PICOP’s 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
State’s police power, known as “the most essential, insistent and
least limitable of powers, extending as it does to all the great
public needs.” 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.
450
Same; Same; Same; Same; Reforestation; Ecology;

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.—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.
Judgments; Obiter Dicta; When a court bases its decision on
two or more grounds, each is as authoritative as the other and
neither is obiter dictum.—When a court bases its decision on two
or more grounds, each is as authoritative as the other and neither
is obiter dictum. 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 PICOP’s 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.
Administrative Law; 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.—When
parties file a Petition for Certiorari against judgments of
administrative agencies tasked with overseeing the
implementation of laws, the
451
VOL. 606, DECEMBER 3, 2009 451
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 PICOP’s 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 Secretary’s
initial determination.
Same; Since the agency tasked to determine compliance with
Integrated Forest Management Agreement (IFMA) administrative
requirements chose to remain silent in the face of allegations of
compliance, the Court is constrained to withdraw its
pronouncement in the assailed Decision that Paper Industries
Corp. of the Philippines (PICOP) had not submitted a Five-Year
Forest Protection Plan and a Seven-Year Reforestation Plan for its
TLA No. 43.—Upon examination of the portions of the SFMP
submitted to us, we cannot help but notice that PICOP’s 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 PICOP’s Motion for Reconsideration, the
DENR Secretary did not dispute the existence of this SFMP, or
question PICOP’s 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,
452
the licensing, regulation and management of forest resources are

the primary responsibilities of the DENR.
Evidence; Hearsay Evidence Rule; Entries in Official Records;
Requisites.—In Africa v. Caltex, 16 SCRA 448 (1966), 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.
Indigenous Peoples’ Rights Act (IPRA [R.A. No. 8371]);
Indigenous Cultural Communities/Indigenous Peoples (ICCs/IPs);
Ancestral Domains; Ancestral domains 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—the
issuance of TLA No. 43 in 1952 did not cause the Indigenous
Cultural Communities/Indigenous Peoples (ICCs/IPs) to lose their
possession or occupation over the area covered by TLA No. 43.—
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
453
VOL. 606, DECEMBER 3, 2009 453
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.
Same; Same; Same; Legal Ethics; Words and Phrases;
“Claim” and “Claim of Ownership,” Explained; The Court is not
sure whether Paper Industries Corp. of the Philippines’s (PICOP)
counsels are deliberately trying to mislead it, 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—and 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.”—We are not sure
whether PICOP’s 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
454
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.” It is
also defined as “a party’s manifest intention to take over land,
regardless of title or right.” 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 PICOP’s
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.”
Natural Resources; Local Government Units; 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 Paper Industries Corp. of the Philippines
(PICOP), the projects nevertheless remain as State projects and
can never be purely private endeavors; The Department of
Environment and Natural Resources (DENR) is the national
agency prohibited by Section 27 of the Local Government Code
from issuing an Integrated Forest Management Agreement (IFMA)
without the prior approval of the Sanggunian concerned.—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
455
VOL. 606, DECEMBER 3, 2009 455
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,
PICOP’s 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.
Same; Same; 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.—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 non-
renewable 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 re-
456
quirement 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.
MOTION FOR RECONSIDERATION of a decision of the

Supreme Court.
The facts are stated in the resolution of the Court.
Quasha, Ancheta, Peña and Nolasco and Agabin,
Verzola, Hermoso and Layaoen Law Offices for Paper
Industries Corporation of the Philippines (PICOP)
Resources, Inc.
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-Impair-
ment 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?
457
VOL. 606, DECEMBER 3, 2009 457

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 PICOP’s 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 petitioner’s pulp and paper mills in

accordance with the warranty and agreement of July 29, 1969
between the government and PICOP’s 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 PICOP’s predecessor-in-interest. x x x.”2
On 11 October 2002, the RTC rendered a Decision

granting PICOP’s 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
_______________
1 Records, pp. 1-38.

2 Id., at p. 36.
458

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 petitioner’s pulp and paper mills
in accordance with the warranty and agreement of July 29, 1969
between the government and PICOP’s 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
PICOP’s 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
_______________
3 Rollo (G.R. No. 162243), pp. 221-222.
459
VOL. 606, DECEMBER 3, 2009 459

On 25 October 2002, the DENR Secretary filed a Motion

for Reconsideration.4 In a 10 February 2003 Order, the
RTC denied the DENR Secretary’s Motion for
Reconsideration and granted PICOP’s 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
_______________
4 Records, Vol. 2, pp. 393-456.

5 Records, Vol. 4, pp. 1349-1575.
6 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 petitioner’s pulp and paper mills in
accordance with the warranty and agreement of July 29, 1969 between the
government and PICOP’s 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 PICOP’s
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;
460

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 affirmed8 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
_______________
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.
8 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 pp. 121-122.
461
VOL. 606, DECEMBER 3, 2009 461

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
_______________
12 Id., at p. 814.
462

II.
THE EVALUATION OF PICOP’S 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.
463
VOL. 606, DECEMBER 3, 2009 463

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.
PICOP’s 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 PICOP’s
predecessor-in-interest, Bislig Bay Lumber Company, Inc.
(BBLCI). PICOP’s 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
464

lands with an aggregate area of approximately 21,580 hectares,

and petitioner’s 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
petitioner’s 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) PICOP’s 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 PICOP’s
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.
_______________
13 PICOP’s Petition for Mandamus; Records, p. 5.

14 Id.; Records, p. 20.
465
VOL. 606, DECEMBER 3, 2009 465

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 PICOP’s 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 Secretary’s 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.)
_______________
15 Id., at pp. 20-21.
466

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. 99-53,16 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
qual-
_______________
16 Regulations Governing the Integrated Forest Management Program

(IFMP); Records, pp. 41-55.
17 Records, p. 43.
18 Id., at pp. 46.
467
VOL. 606, DECEMBER 3, 2009 467

ify 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 aforequoted
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.
_______________
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; 356
SCRA 318. 342 (2001).
468

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
PICOP’s Petition for Mandamus would have become moot.
This is where the 1969 Document, the purported
Presidential Warranty, comes into play. When PICOP’s
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) PICOP’s 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
_______________
23 PICOP’s Petition for Mandamus; Records, p. 20.
469
VOL. 606, DECEMBER 3, 2009 469

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
_______________
24 Decision, p. 26.
25 The nature of PICOP’s 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 capri-
470

even the satisfactory compliance with all legal and

administrative requirements for an IFMA would save
PICOP’s Petition for Mandamus.
_______________
ciously 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 Tañada 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.
471
VOL. 606, DECEMBER 3, 2009 471

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
_______________
The foregoing text emphasizes the judicial department’s 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
472

statutory requirements as well as with existingC policy

on timber concessions.” Thus, if PICOP proves the two
_______________
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 PICOP’s 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 PICOP’s
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
473
VOL. 606, DECEMBER 3, 2009 473

above-mentioned matters, it still has toD prove

compliance with statutory and administrative
requirements for the conversion of its TLA into an
IFMA.
_______________
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 petitioner’s 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 petitioner’s 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
474

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
_______________
[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]). (PICOP’s Petition for
Mandamus, Records pp. 1-6.)
475
VOL. 606, DECEMBER 3, 2009 475

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 Secretary’s non-issuance 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 Deci-
476

sion, 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 Division’s Decision,27 came up with the same
conclusion as regards the same issue of whether former
President Marcos’s Presidential Warranty is a contract:
“Finally, we do not subscribe to PICOP’s 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 government’s
commitment to uphold the terms and conditions of its
timber license and guarantees PICOP’s peaceful and
adequate possession and enjoyment of the areas which are
the basic sources of raw materials for its wood processing
_______________
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
Division’s Decision is shown by the following excerpts in its Decision:
PICOP brings to the Court’s 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 latter’s 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 Court’s Second Division. (Id., at pp. 411-415.)
477
VOL. 606, DECEMBER 3, 2009 477

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 OSG’s position that it is merely a collateral
undertaking which cannot amplify PICOP’s 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 re-
478

sources 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
_______________
28 Id., at pp. 426-428.
479
VOL. 606, DECEMBER 3, 2009 479

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.
480

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 non-
impairment 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[?]
481
VOL. 606, DECEMBER 3, 2009 481

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.
_______________
29 TSN, Oral Arguments, pp. 174-181.
482

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
PICOP’s 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.
483
VOL. 606, DECEMBER 3, 2009 483

We further confirm that your tenure over the area 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:
484

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 PICOP’s
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
PICOP’s 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
PICOP’s interpretation of the 1969 Document cannot be

sustained. PICOP’s 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:
_______________
30 PICOP’s Petition for Mandamus; Records, pp. 26-27.
485
VOL. 606, DECEMBER 3, 2009 485

“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. Tinga’s 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
_______________
31 PICOP’s Memorandum, p. 101; Rollo, p. 1262.

32 PICOP’s Motion for Reconsideration, p. 50; Rollo, p. 1391a; TSN, 19
September 2002, pp. 27-35; 41-45.
33 Id., at p. 51; Rollo, p. 1391b.
486

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: co-production, 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
existing policy on timber concessions.”
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?
487
VOL. 606, DECEMBER 3, 2009 487

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 let’s 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?
488

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, that’s 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?
489
VOL. 606, DECEMBER 3, 2009 489

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
_______________
34 Oral Arguments, 10 February 2009; TSN, pp. 158-167.
490

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 co-production, 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
_______________
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.
491
VOL. 606, DECEMBER 3, 2009 491

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.
Don’t 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 don’t 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
492

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.
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 TLA’s 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 it’s a completely different regime, Your Honor.
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.
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
493
VOL. 606, DECEMBER 3, 2009 493

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 don’t 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
_______________
37 Oral Arguments, 10 February 2009, TSN, pp. 230-236.

38 G.R. No. 174340, 17 October 2006, 504 SCRA 704, 730.
494

harmonious with other provisions of law”39 should be

adopted. As the interpretations in the assailed Decision
and in Mr. Justice Tinga’s 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
_______________
39 Javellana v. Tayo, 116 Phil. 1342, 1351, 6 SCRA 1050 (1962).

40 PICOP’s Motion for Reconsideration, p. 16; Rollo, p. 1385.
41 Id.
42 Id.
495
VOL. 606, DECEMBER 3, 2009 495

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 part43 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 estab-
_______________
43 PICOP (CA Rollo, p. 176).

44 Secretary of Agriculture and Natural Resources (Id.).
45 Timber License Agreement No. 43; CA Rollo, p. 177.
496

lishes 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
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
_______________
46 CA Rollo, pp. 323-324.

47 G.R. No. 84847, 5 March 1993, 219 SCRA 541.
497
VOL. 606, DECEMBER 3, 2009 497

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 PICOP’s 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.”
This provision hardly evinces a contract consideration

(which, in PICOP’s 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
BBLCI’s 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 BBLCI’s 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.
498

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 one’s 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.
PICOP’s 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 State’s
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 inte-
_______________
48 Quirino v. Palarca, 139 Phil. 488, 492, 29 SCRA 1, 4 (1969).

49 Ermita-Malate Hotel and Motel Operators Association, Inc. v. City
Mayor of Manila, 127 Phil. 306, 318, 20 SCRA 849, 857-858 (1967).
499
VOL. 606, DECEMBER 3, 2009 499

rest, 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
_______________
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 PICOP’s Motion for Reconsideration, p. 21; Rollo, p. 1386.
500

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 PICOP’s 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 PICOP’s

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
_______________
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, Parañaque, Las Piñas, Valenzuela,
Taguig, Malabon, Navotas, San Juan and Pateros.
501
VOL. 606, DECEMBER 3, 2009 501

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.
_______________
53 PICOP’s Motion for Reconsideration, pp. 22-23; Rollo, pp. 1386a-1386b.
502

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,54

_______________
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
503
VOL. 606, DECEMBER 3, 2009 503
which PICOP failed to mention, and for a good reason.

None of the 24 incentives enumerated therein relates to, or
_______________
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.
504

even remotely suggests that, PICOP’s proposition that the

1969 Document is a contract.
_______________
(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
505
VOL. 606, DECEMBER 3, 2009 505

PICOP could indeed argue that the enumeration is not

exclusive. Certainly, granting incentives to investors,
_______________
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
506

whether included in the enumeration or not, would be an

implementation of this policy. However, it is presumed
_______________
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
507
VOL. 606, DECEMBER 3, 2009 507

that whatever incentives may be given to investors should

be within the bounds of the laws and the Constitution. The
_______________
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
508

declaration of policy in Section 2 cannot, by any stretch of
_______________
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.
509
VOL. 606, DECEMBER 3, 2009 509

the imagination, be read to provide an exception to either

the laws or, heaven forbid, the Constitution. Exceptions
_______________
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 materi-
510

are never presumed and should be convincingly proven.

Section 2 of the Investment Incentives Act cannot be read
_______________
als 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, they 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 abovementioned 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 con-
511
VOL. 606, DECEMBER 3, 2009 511

as exempting investors from the Constitutional provisions

(1) prohibiting private ownership of forest lands; (2)
providing for the complete control and supervision by the
_______________
tribution 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
512

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 III55 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 PICOP’s property, as these
forest lands belong to the State, and not to PICOP. This is
not changed by PICOP’s allegation that:
_______________
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.
55 Section 9. Private property shall not be taken for public use
without just compensation.
56 Section 18. The State may, in the interest of national welfare or
defense, establish and operate vital industries and, upon payment of just
compensation, transfer to public ownership utilities and other private
enterprises to be operated by the Government.
513
VOL. 606, DECEMBER 3, 2009 513

“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
_______________
57 PICOP’s Motion for Reconsideration, pp. 17-18. Rollo, pp. 1386a-

1386b.
514

IFMA in 2002 either. These are the essential elements in

PICOP’s cause of action, and the failure to prove the same
warrants a dismissal of PICOP’s Petition for Mandamus, as
not even PICOP’s 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 PICOP’s 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 PICOP’s
com-
_______________
58 Riss & Co. v. Wallace, 195 S.W. 2d 881, 885, 239 Mo.App. 979, cited
in Words and Phrases, Permanent Edition, Vol. 29, p. 13.
515
VOL. 606, DECEMBER 3, 2009 515

pliance 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 country’s 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
_______________
59 E.O. No. 192, otherwise known as the “Reorganization Act of the
Department of Environment and Natural Resources,” Section 4.
516

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 PICOP’s 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 Secretary’s initial determination.
Forest Protection and Reforestation Plans
The Performance Evaluation Team tasked to appraise

PICOP’s 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
_______________
60 Exhibit “7-g-2,” Folder of Exhibits, Vol. 3, pp. 480-482.

61 Motion for Reconsideration, p. 30.
517
VOL. 606, DECEMBER 3, 2009 517

Upon examination of the portions of the SFMP

submitted to us, we cannot help but notice that PICOP’s
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 PICOP’s Motion for Reconsideration, the
DENR Secretary did not dispute the existence of this
SFMP, or question PICOP’s 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 PICOP’s satisfactory
performance as a TLA holder, and covers a period within
the subsistence of PICOP’s 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.
_______________
62 E.O. No. 192, otherwise known as the “Reorganization Act of the
Department of Environment and Natural Resources,” Section 4.
518

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
_______________
63 Rollo (G.R. No. 162243), p. 252.

64 Folder of Exhibits, Vol. 2, pp. 398-399.
65 See Rules of Court, Rule 130, Section 3(a).
519
VOL. 606, DECEMBER 3, 2009 519

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 P150,169,485.02.67
Likewise, 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
_______________
66 Folder of Exhibits, Vol. 3, pp. 433-434.

67 Exhibit “6,” p. 440; Folder of Exhibits, Vol. 3.
68 Id.
69 Id.
70 TSN, 1 October 2002, pp. 13-14.
520

(CENRO) Officer Philip A. Calunsag, which refers

only to PICOP’s 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
P15,056,054.05.72 The 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
_______________
71 Exhibit “NN,” p. 349; Folder of Exhibits, Vol. 2.

72 Records, Vol. 2, pp. 457-458.
521
VOL. 606, DECEMBER 3, 2009 521

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 PICOP’s 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 Secretary’s 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 Evangelista’s 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
522

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 Evangelista’s 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 Evangelista’s
testimony should be deemed hearsay. SFMS Evangelista’s
_______________
73 Folder of Exhibits, Volume 3, p. 423.
523
VOL. 606, DECEMBER 3, 2009 523

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 unpaid 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 R13-14, 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 consis-
_______________
74 Folder of Exhibits, Volume 3, pp. 423-425.
524

tently 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 of P2,366,901.00 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 Evangelista’s
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
_______________
75 Id.
76 Section 36, Rule 130 of the Rules of Court.
77 People v. Parungao, 332 Phil. 917, 924, 265 SCRA 140, 147 (1996).
525
VOL. 606, DECEMBER 3, 2009 525

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 Evangelista’s
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
_______________
78 TSN, Volume 2, 1 October 2002, p. 32.

79 123 Phil. 272, 277; 16 SCRA 448, 452 (1966).
526

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 Evangelista’s 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
_______________
80 Alvarez v. PICOP Resources, Inc., G.R. No. 162243, 29 November

2006, 508 SCRA 498, 553.
81 Id.
527
VOL. 606, DECEMBER 3, 2009 527

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, li-
_______________
82 Oposa v. Factoran, Jr., G.R. No. 101083, 30 July 1993, 224 SCRA 792, 812;
Tan v. Director of Forestry, 210 Phil. 244; 125 SCRA 302 (1983).
528

cense, 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
volun-
529
VOL. 606, DECEMBER 3, 2009 529

tary 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 DENR:83
“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
_______________
83 400 Phil. 904, 1012-1013; 347 SCRA 128, 238 (2000), Separate Opinion of
Justice Reynato Puno.
530

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
PICOP’s 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, PICOP’s 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, PICOP’s 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
_______________
84 PICOP’s Motion for Reconsideration, p. 41; Rollo, pp. 1390a-1390b.
531
VOL. 606, DECEMBER 3, 2009 531

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 PICOP’s 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 owner-
_______________
85 PICOP’s Motion for Reconsideration, pp. 43-44; Rollo, pp. 1390a-

1390b.
532

ship” 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 party’s 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 PICOP’s 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.
_______________
86 Black’s Law Dictionary (Eighth Edition), p. 265.

87 Id.
533
VOL. 606, DECEMBER 3, 2009 533

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,
534

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 former’s 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 resolution89 of the Province of Surigao
del Sur indorsing the approval of PICOP’s 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.
_______________
88 Rollo (G.R. No. 162243), pp. 470-472.

89 Folder of Exhibits, Vol. 2, Exhibit “OO,” p. 351.
538

x x x x
(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
people’s 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 PICOP’s application for IFMA conversion:
536

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
_______________
90 Folder of Exhibits, Vol. 2, Exhibit “O-1,” p. 176; Folder of Exhibits,

Vol. 3, Exhibit “7-g,” p. 475.
537
VOL. 606, DECEMBER 3, 2009 537

PICOP had claimed that it complied with the Local

Government Code requirement of obtaining prior approval
of the Sanggunian concerned by submitting a purported
resolution91 of the Province of Surigao del Sur indorsing
the approval of PICOP’s 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, PICOP’s 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. PICOP’s 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.
_______________
91 Folder of Exhibits, Vol. 2, Exhibit “OO,” p. 351.

92 Rollo (G.R. No. 162243), p. 230.
538

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 ven-
_______________
93 PICOP’s Motion for Reconsideration, pp. 48-49, Rollo, pp. 1391a-

1391b.
539
VOL. 606, DECEMBER 3, 2009 539

ture, 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, PICOP’s 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 PICOP’s 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 project’s term started in
1952 and extends all the way to the present.
540

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 non-renewable 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
PICOP’c 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
541
VOL. 606, DECEMBER 3, 2009 541

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. PICOP’s 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, PICOP’s 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 PICOP’s position on these matters
would entail nothing less than rewriting the Indigenous
_______________
94 Supra note 26.
542

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.
Puno (C.J), Carpio, Corona, Carpio-Morales, Velasco,

Jr., Leonardo-De Castro, Brion, Peralta, Bersamin, Del
Castillo, Abad and Villarama, Jr., JJ., concur.
Nachura, J., No part.
Motion for Reconsideration denied.
Notes.—The Supreme Court, in accordance with the

presumption of regularity in the performance of official
functions, will presume that, even in the absence of a copy
of the document, there is such an alleged order suspending
a Timber License Agreement (TLA) where such order is
cited both in the order of the DENR and the decision of the
Office of the President as it is improbable that so
responsible officials as the Secretary of the DENR and the
Executive Secretary would cite an order that did not exist.
(C & M Timber Corporation (CMTC) vs. Alcala, 273 SCRA

402 [1997])
Possession of a public land while still inalienable forest
land, or before it was declared alienable and disposable
land of the public domain, could not ripen into private
ownership, and should be excluded from the computation of
the 30-year open and continuous possession in the concept
of owner. Land classified as forest land may form part of
the disposable agricultural lands of the public domain only
by a release in an official proclamation to that effect.
(Republic vs. de Guzman, 326 SCRA 574 [2000])
——o0o——
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3/17/2021 SUPREME COURT REPORTS ANNOTATED VOLUME 606

G.R. No. 162243. December 3, 2009.*

HON. HEHERSON ALVAREZ substituted by HON.

G.R. No. 164516. December 3, 2009.*

PICOP RESOURCES, INC., petitioner, vs. HON.

G.R. No. 171875. December 3, 2009.*

THE HON. ANGELO T. REYES (formerly Hon. Elisea G.

Natural Resources; Forest Lands; Timber License Agreements

VOL. 606, DECEMBER 3, 2009 445

Alvarez vs. PICOP Resources, Inc.

mand.” “ ‘Enjoin’ is a mandatory word, in legal parlance, always;

446 SUPREME COURT REPORTS ANNOTATED

Alvarez vs. PICOP Resources, Inc.

sustained. PICOP’s claim that the term of the warranty is not

development, and utilization of natural resources shall be

VOL. 606, DECEMBER 3, 2009 447

Alvarez vs. PICOP Resources, Inc.

IFMAs are production-sharing agreements concerning the

utilization of forest products—DAO No. 99-53 is a late response to

448 SUPREME COURT REPORTS ANNOTATED

Alvarez vs. PICOP Resources, Inc.

private entities may participate in the utilization of forest

warranty is a collateral undertaking and is merely part of a

VOL. 606, DECEMBER 3, 2009 449

Alvarez vs. PICOP Resources, Inc.

Same; Same; Same; Same; Same; Police Power; Contract

450 SUPREME COURT REPORTS ANNOTATED

Alvarez vs. PICOP Resources, Inc.

Same; Same; Same; Same; Reforestation; Ecology;

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Alvarez vs. PICOP Resources, Inc.

findings of such administrative agencies are entitled to great

previously mentioned, when PICOP’s application was brought to a

452 SUPREME COURT REPORTS ANNOTATED

Alvarez vs. PICOP Resources, Inc.

the licensing, regulation and management of forest resources are

presented in court, provided the above requisites could be

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Alvarez vs. PICOP Resources, Inc.

by PICOP: a) Ancestral domains—Subject to Section 56 hereof,

lose their possession or occupation over the area covered by TLA

454 SUPREME COURT REPORTS ANNOTATED

Alvarez vs. PICOP Resources, Inc.

any sort. It is an attitude towards something. The phrase “claim

State projects and can never be purely private endeavors.

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Alvarez vs. PICOP Resources, Inc.

limit government participation in the project to being merely its

456 SUPREME COURT REPORTS ANNOTATED

Alvarez vs. PICOP Resources, Inc.

quirement of the national government seeking approval from the

MOTION FOR RECONSIDERATION of a decision of the

VOL. 606, DECEMBER 3, 2009 457

To recall, PICOP filed with the Department of

“[I]ssue the corresponding IFMA assignment number on the area

raw material requirements of petitioner’s pulp and paper mills in

On 11 October 2002, the RTC rendered a Decision

“WHEREFORE, premises considered, the Petition for Mandamus is

1 Records, pp. 1-38.