76 Alvarez vs PICOP.docx

8/18/2019 76 Alvarez vs PICOP.docx

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HON. HEHERSON T. ALVAREZ v. PICOP RESOURCES, INC.G.R. No. 162243, Decembe 3, 2!!"

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EN BANC

[ G.R. No. 162243, December 03, 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]

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. 171 75]

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.

R E S O L U T I O N CHICO-NAZARIO, J.:

The cause of action of PICOP Resources, Inc. (PICOP) in its P etition for Mandamus w ith the trial court is cl ear: the

government is bo und b y con tract, a 1 969 D ocument signed by then President Ferdinand Marcos, to e nter i nto a n

Integrated Forest Management Agreement (IFMA) with P ICOP. Since the remedy of mandamus l ies o nly to co mpel an

officer to perform a ministerial d uty, and since the 1969 Document itself has a proviso requiring compliance with the

laws a nd the Constitution, the issues i n this M otion for Reconsideration are the following: (1) rstly, is t he 1969

Document a contract e nforceable under the Non-Impairment Clause of the Constitution, so as to make the signing of

the IFMA a ministerial duty? (2) secondly, did PICOP comply w ith all the legal and constitutional requirements f or the

issuance of an IFMA?

To recall, PICOP led with the Department of Environment and Natural Resources ( DENR) an application to h ave its

Timber License A greement (TLA) No. 43 converted into a n IFMA. In the middle o f the processing of PICOP's

application, however, PICOP refused to a ttend further meetings w ith the DENR. Instead, on 2 S eptember 2002,

PICOP led before the Regional Trial Court (RTC) of Quezon City a Petition for Mandamus [1] against then DENR

Secretary Heherson T. Alvarez. PICOP seeks the issuance of a p rivileged writ of mandamus t o co mpel the DENR

Secretary t o sign, execute and deliver an I FMA 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) t o issue the necessary p ermit allowing petitioner t o act and harvest timber from the said area of TLA No.

43, sufficient to meet the raw material requirements o f petitioner's p ulp and paper mills i n accordance with the

warranty an d a greement of July 29 , 1969 between the government and P ICOP's pr edecessor-in-interest; and c) to

honor and respect the Government Warranties and contractual obligations t o PICOP strictly in accordance with the

warranty an d a greement dated July 29 , [1969] between the government and P ICOP's pr edecessor-in-interest. x x x. [2]


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On 11 October 2002, the RTC rendered a Decision granting PICOP's P etition for Mandamus, thus:

WHEREFORE, premises consi dered, the P etition for Mandamus is hereby GRANTED.

The Respondent DENR Secretary Hon. Heherson Alvarez is her eby ordered:

1. to sign, execute an d de liver the IFMA contract and/or documents to P ICOP and issue t he cor responding

IFMA assignment number on the area covered by the IFMA, formerly TLA No. 43, as am ended;

2. to issue the necessary pe rmit allowing petitioner to a ct and h arvest timber from the said area of TLA No. 43,

sufficient to meet the raw material requirements o f petitioner's p ulp and paper mills i n accordance with the

warranty a nd agreement of July 2 9, 1969 between the government and PICOP's p redecessor-in-interest; and

3. to honor and respect the Government Warranties an d co ntractual obligations t o P ICOP strictly in a ccordance

with the warranty a nd agreement dated July 2 9, 1999 (sic) between the government and PICOP's pr edecessor-in-

interest (Exhibits "H ", "H-1" t o "H-5", particularly t he following:

a) the area co verage o f TLA No. 43, which forms pa rt and p arcel of the government warranties;

b) P ICOP tenure o ver the said a rea of TLA No. 43 and e xclusive r ight to cu t, collect and remove sawtimber and

pulpwood for t he period ending on April 26, 1977; and said period to be renewable for [ an]other 25 years su bject

to compliance with constitutional and statutory req uirements a s w ell as w ith existing policy on timber concessions;

and

c) The peaceful and a dequate e njoyment by P ICOP of the area as d escribed a nd specied in the aforesaid

amended Timber License Agreement No. 43.

The Respondent Secretary A lvarez is l ikewise ordered to pay p etitioner t he sum of P10 million a month beginning

May 2 002 until the conversion of TLA No. 43, as amended, to IFMA is f ormally e ffected and the harvesting from the

said area is g ranted. [3]

On 25 October 2002, the DENR Secretary led a Motion for Reconsideration. [4] In a 10 February 20 03 Order, the RTC

denied the DENR Secretary's Motion for Reconsideration and g ranted PICOP's Motion for the Issuance o f Writ of

Mandamus a nd/or Writ of Mandatory Injunction. [5] The

fa llo o f the 11 October 20 02 Decision was practically co pied in

the 10 February 20 03 Order, although there w as n o m ention of the damages i mposed against then DENR Secretary

Alvarez. [6] The DENR Secretary led a Notice of Appeal [7] from the 11 October 2002 Decision and the 10 February

2003 Order.

On 1 9 February 20 04, the Seventh Division of the Court of Appeals affirmed [8] the Decision of the RTC, to wit:


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COURT AND THE COURT OF APPEALS, MISAPPRECIATED THE EVIDENCE, TESTIMONIAL AND

DOCUMENTARY, WHEN IT RULED THAT:

i.

PICOP FAILED TO SUBMIT A FIVE-YEAR FOREST PROTECTION PLAN AND A SEVEN-YEAR REFORESTATION

PLAN FOR THE YEARS UNDER REVIEW.

ii.

PICOP FAILED TO COMPLY WITH THE PAYMENT OF FOREST CHARGES.

iii.

PICOP DID NOT COMPLY WITH THE REQUIREMENT FOR A CERTIFICATION FROM THE NCIP THAT THE AREA

OF TLA 43 DOES NOT OVERLAP WITH ANY ANCESTRAL DOMAIN.

iv.

PICOP FAILED TO HAVE PRIOR CONSULTATION WITH AND APPROVAL FROM THE SANGUNIAN

CONCERNED, AS REQUIRED BY SECTION 27 OF THE REPUBLIC ACT NO. 7160, OTHERWISE KNOWN AS

THE LOCAL GOVERNMENT CODE OF 1991.

v.

PCIOP FAILED TO SECURE SOCIAL ACCEPTABILITY UNDER PRESIDENTIAL DECREE NO. 1586.

IV

THE MOTIVATION OF ALVAREZ IN RECALLING THE CLEARANCE FOR AUTOMATIC CONVERSION HE ISSUED

ON 25 OCTOBER 2001 WAS NOT DUE TO ANY SHORTCOMING FROM PICOP BUT DUE TO HIS

DETERMINATION TO EXCLUDE 28,125 HECTARES FROM THE CONVERSION AND OTHER THINGS.

On 1 5 December 2008, on Motion by P ICOP, the Third Division of this C ourt resolved to refer t he consolidated cases

at bar to the Court en banc . On 1 6 D ecember 2008, this C ourt sitting en banc resolved to a ccept the said c ases and

set them for oral arguments. Oral arguments were co nducted on 10 February 20 09.

PICOP's Cause o f Action: Matters P ICOP Should Have Proven to Be Entitled to a Writ of Mandamus

In seeking a w rit of mandamus to compel the issuance of an IFMA in its favor, PICOP relied on a 29 July 19 69


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Document, the so-called Presidential Warranty a pproved b y then P resident Ferdinand E. Marcos i n favor of PICOP's

predecessor-in-interest, Bislig Bay L umber Company, Inc. (BBLCI). PICOP's ca use of action is su mmarized in

paragraphs 1.6 and 4.19 of its P etition for M andamus:

1.6 R espondent Secretary i mpaired the obligation of contract under the said Warranty an d Agreement of 29 July 1969

by ref using to respect the t enure; and its r enewal for an other twenty ve (25) years, of PICOP over the area c overed

by the said Agreement which consists o f permanent forest lands with an aggregate area of 121,587 hectares and

alienable and disposable lands w ith an aggregate area of approximately 2 1,580 hectares, and petitioner's e xclusive

right to c ut, collect and remove sawtimber and pulpwood t herein and the peaceful and adequate enjoyment of the said

area as d escribed a nd specied in petitioner's T imber License Agreement (TLA) No. 43 guaranteed by t he

Government, under the Warranty an d Agreement of 29 July 1969. [13]

4.19 Respondent is i n violation of the Constitution and has i mpaired the obligation of contract by h is r efusal to

respect: a) t he tenurial rights o f PICOP over the forest area covered by TLA No. 43, as amended and its r enewal for

another twenty ve (25) years; b) t he exclusive right of PICOP to cut, collect and remove sawtimber and pulpwood

therein; and c) PICOP's pe aceful and a dequate enjoyment of the said a rea which t he government guaranteed under

the Warranty an d Agreement of 29 July 19 69. [14]

The grounds su bmitted by PICOP in its P etition for Mandamus are as follows:

I

Respondent secretary ha s u nlawfully r efused and/or neg lected to sign and execute the IFMA contract of PICOP even

as the latter ha s co mplied with all the legal requirements f or t he automatic co nversion of TLA No. 43, as amended,

into a n IFMA.

II

Respondent Secretary a cted with grave abuse of discret ion and/or in excess of jurisdiction in refusing to sign and

execute PICOP's I FMA contract, notwithstanding that PICOP had complied with all the requirements f or A utomatic

Conversion under DAO 99-53, as i n fact Automatic C onversion was already cl eared in O ctober, 2001, and was a

completed process.

III

Respondent Secretary ha s i mpaired the obligation of contract under a valid a nd binding warranty a nd agreement of

29 July 1 969 between the government and PICOP's p redecessor-in-interest, by refusing to respect: a) t he tenure o f

PICOP, and its r enewal for ano ther twenty ve (25) years, over the TLA No.43 area covered by s aid a greement; b) the


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exclusive right to cut, collect and remove sawtimber and pulpwood timber; and c) the peaceful and adequate

enjoyment of the said a rea.

IV

As a result of respondent Secretary's u nlawful refusal and/or neglect to sign and deliver the IFMA contract, and

violation of the constitutional rights o f PICOP against non-impairment of the obligation of contract (Sec. 10, Art. III,

1997 [sic] Constitution), PICOP suffered grave and irreparable d amages. [15]

Petitions for Mandamus a re g overned by Rule 6 5 o f the Rules o f Court, Section 3 o f which p rovides:

SEC. 3. Petition for mandamus.-- When any tribunal, corporation, board, officer or person u nlawfully n eglects t he

performance of an act which the law specically e njoins a s a d uty resu lting from an office, trust, or station , or

unlawfully e xcludes a nother from the use and e njoyment of a right or office to w hich such other is e ntitled, and t here i s

no other plain, speedy and a dequate rem edy in the ordinary co urse of law, the person a ggrieved thereby m ay l e a

veried petition in the proper court, alleging the facts w ith certainty a nd praying that judgment be rendered

commanding the respondent, immediately o r at some o ther time t o b e specied by t he court, to d o t he act required to

be done to protect the rights o f the petitioner, and to pay the damages s ustained by the petitioner by reason of the

wrongful acts of the respondent. (Emphasis su pplied.)

PICOP is t hus a sking this C ourt to c onclude t hat the DENR Secretary i s sp ecically e njoined b y law to issue a n IFMA

in its favor. An IFMA, as d ened by DENR Administrative O rder (DAO) No. 99-53, [16] is -

[A] production-sharing contract entered into by and between the DENR and a qualied applicant wherein the DENRgrants t o the latter the exclusive right to develop, manage, protect and utilize a specied area of forestland and forest

resource therein for a p eriod o f 25 ye ars a nd m ay 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 t he word "aut omatic" in S ection 9 o f this D AO No. 99-53:

Sec. 9. Qualications o f Applicants . - The applicants f or IFMA shall be:

(a) A Filipino citizen of legal age; or,

(b) Partnership, cooperative or corporation whether public o r private, duly reg istered under Philippine laws.

However, in the c ase of application for conversion o f TLA into IFMA, an automatic co nversion a fter proper evaluation

shall be allowed , provided the TLA holder shall have signied such intention prior t o the expiry o f the TLA, PROVIDED


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further, that the T LA holder has sh owed s atisfactory performance and h ave complied in the t erms o f condition o f the

TLA and pertinent r ules and regulations. (Emphasis supplied.) [18]

This a dministrative regulation p rovision allowing a utomatic co nversion after proper evaluation can hardly q ualify a s a

law, much less a law specically enjoining the execution of a contract. To enjoin is "t o order or di rect with urgency; t oinstruct with authority; to c ommand." [19] "Ènjoin' is a mandatory word, in legal parlance, always; in c ommon p arlance,

usually." [20] The word " allow," on the other hand, is n ot equivalent to the word " must," and is in n o se nse a command.[21]

As a n extraordinary writ, the remedy o f mandamus lies only to compel an officer t o perform a ministerial d uty, not a

discret ionary o ne; mandamus w ill not issue to control the exercise of discret ion of a public officer where the law

imposes u pon him the duty to exercise his j udgment in reference to any m anner in which he is r equired to act,

because it is h is j udgment t hat is t o be exercised and not that of the court. [22]

The e xecution o f agreements, in itself, involves t he e xercise of discretion. Agreements a re p roducts o f negotiations

and m utual concessions, necessitating evaluation o f their provisions o n t he part of both parties. In t he c ase of the

IFMA, the evaluation on the part of the government is sp ecically m andated in t he afore-quoted Section 3 o f DAO No.

99-53. This e valuation n ecessarily involves t he e xercise of discretion and judgment on the p art of the D ENR

Secretary, who is t asked not on ly t o negotiate the sharing of the prot arising from the IFMA, but also to evaluate the

compliance with t he requirements o n the part of the applicant.

Furthermore, as shall be discussed later, the period of an IFMA that was merely a utomatically co nverted from a TLA

in a ccordance w ith S ection 9, paragraph 2 of DAO No. 99-53 would o nly be for the remaining period of the TLA. Since

the TLA of PICOP expired on 26 April 2002, the IFMA that could have b een g ranted to P ICOP via the automaticconversion provision in DAO No. 99-53 would have e xpired on the same date, 26 April 2002, and the PICOP's P etition

for Mandamus would have bec ome moot.

This is w here t he 1969 Document, the purported Presidential Warranty, comes into p lay. When P ICOP's ap plication

was brought to a standstill upon the evaluation that PICOP had yet to comply w ith the requirements f or such

conversion, PICOP refused to a ttend further meetings w ith the DENR and instead led a P etition for Mandamus,

insisting that the DENR Secretary h ad impaired the obligation of contract by h is r efusal to respect: a) the tenurial

rights of PICOP over the forest area covered by T LA No. 43, as a mended, and its r enewal for another twenty-ve (25)

years; b) t he exclusive right of PICOP to cut, collect and remove sawtimber and pulpwood therein; and c) PICOP's

peaceful and a dequate e njoyment of the said a rea which t he government guaranteed under the Warranty an d

Agreement of 29 July 1 969. [23]

PICOP is, thus, insisting that the government is obligated by contract to issue a n IFMA in its favor because of the

1969 Document.


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A contract, being the law between the parties, can indeed, with respect to the State when it is a party t o such contract,

qualify a s a l aw specically e njoining the p erformance o f an a ct. Hence, it is p ossible t hat a w rit of mandamus m ay b e

issued to PICOP, but only if it proves both of the following :

1) Th at the 1969 Document is a contract recognized under the non-impairment clause; and

2) That the 1969 Document specically e njoins t he government to issue the IFMA.

If PICOP fails t o prove any of these two m atters, the grant of a p rivileged w rit of mandamus i s n ot warranted. This w as

why we pronounced in the assailed D ecision that the overriding c ontroversy i nvolved in t he Petition was o ne o f law.[24] If PICOP fails t o p rove any of these two m atters, more s ignicantly its a ssertion that the 1969 D ocument is a

contract, PICOP fails t o prove its ca use of action. [25] Not eve n the satisfactory c ompliance with all legal and

administrative r equirements f or an IFMA would save PICOP's P etition for M andamus.

The reverse, however, is n ot true. The 1969 Document expressly st ates that the warranty a s t o t he tenure of PICOP is

"subject to compliance with constitutional and statutory r equirements a s w ell as w ith existing policy on timberconcessions." Th us, if PICOP proves the t wo above-mentioned matters, it still has to prove c ompliance with

statutory and administrative requirements f or the c onversion of its T LA into an IFMA .

Exhaustion of Administrative Remedies

PICOP uses the same argument -- that the government is b ound by c ontract to issue t he IFMA -- in its r efusal to

exhaust all administrative remedies b y n ot appealing t he alleged i llegal non-issuance of the IFMA to t he Office of the

President. PICOP claimed in its Petition for Mandamus with the trial court that:

1.10 T his p etition falls a s a n e xception to t he e xhaustion of administrative rem edies. The a cts o f respondent DENR

Secretary c omplained of in this p etition are patently illegal; in derogation of the constitutional rights of

petitioner against non-impairment of ; without jurisdiction, or i n excess of jurisdiction

or so capriciously a s t o c onstitute an a buse of discretion amounting to excess o r lack o f jurisdiction; and m oreover, the

failure or r efusal of a high government official such as a Department head from whom relief is b rought to act on the

matter w as considered equivalent to exhaustion of administrative remedies (Sanoy v. Tantuico, 50 SCRA 455 [1973]),

and there are compelling and urgent r easons for j udicial intervention (Bagatsing v. Ramirez, 74 SCRA 306 [1976]).

Thus, if there has b een no impairment of t he obligation of con tracts i n the DENR Secretary's n on-issuance of t he

IFMA, the proper remedy o f PICOP in c laiming t hat it has co mplied with all statutory a nd administrative requirements

for the issuance o f the IFMA should h ave been with the Office o f the President. This m akes t he issue o f the

enforceab ility o f the 1969 Document as a c ontract even more s ignicant.

The Nature an d Effects o f the Purported 29 J uly 1969 Presidential Warranty

Base Metals Case


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PICOP challenges ou r ruling that the 1969 Document is not a contract. Before we review this nding, however, it must

be p ointed out that one w eek a fter the assailed D ecision, another division o f this C ourt promulgated a Decision

concerning the very sam e 1 969 Document. Thus, in PICOP Resources, Inc. v. Base M etals Mineral Resources

Corporation ,[26]

ve other Justices w ho were s till unaware of this D ivision's D ecision,[27]

came up with the sam econclusion as regards t he same issue of w hether former P resident M arcos's P residential Warranty is a contract:

Finally, we do not subscribe to PICOP's a rgument that the Presidential Warranty d ated September 25, 1968 is a

contract protected by the non-impairment clause of the 1987 C onstitution.

An e xamination of the Presidential Warranty a t once reveals t hat it simply reassures P ICOP of the g overnment's

commitment to uphold the terms an d c onditions o f its t imber license an d g uarantees P ICOP's p eaceful and

adequate p ossession and enjoyment of the areas w hich are t he basic so urces of raw materials for its w ood

processing complex . The w arranty co vers o nly the right to c ut, collect, and rem ove t imber in i ts co ncession a rea,

and does n ot extend to the utilization of other resources, such as mineral resources, occurring within the concession.

The Presidential Warranty can not be c onsidered a c ontract distinct from PTLA No. 47 an d FMA No. 35. We

agree with the O SG's p osition t hat it is m erely a c ollateral undertaking w hich cannot amplify P ICOP's r ights

under i ts t imber l icense. Our denitive ruling in Oposa v. Factoran that a timber l icense is not a contract within

the p urview of t he n on-impairment clause is e difying. We declared:

Needless to say, all licenses m ay thus b e revoked or rescinded by executive action. It is n ot a co ntract, property o r a

property r ight protected b y the due p rocess c lause of the C onstitution. In Tan vs. D irector of Forestry , this C ourt held:

"x x x A timber license is a n instrument by which the State regulates t he utilization and disposition of forest resources

to the end that public w elfare is p romoted. A timber license is n ot a contract within the purview of the due process

clause; it is o nly a license or a privilege, which can be validly w ithdrawn whenever dictated by p ublic i nterest or public

welfare a s i n t his ca se.

À license is merely a permi

authority, federal, state, or municipal, granting it and the person to whom it is g ranted; neither is i t a property o r a

property ri ght, nor does i t crea te a vested right; nor is i t taxation' (C.J. 168). Thus, this Court held that the granting of

license does n ot create irrevocable rights, neither is i t property o r property ri ghts (P eople vs. Ong Tin, 54 O.G. 7576).

x x x"

We reiterated this p ronouncement in Felipe Ysmael, Jr. & Co., Inc. vs. Deputy E xecutive Secretary :

"x x x T imber l icenses, permits a nd l icense agreements a re the principal instruments b y which the S tate regulates t he

utilization and disposition of forest resources t o the end that public w elfare is p romoted. And it can hardly b e gainsaid

that they m erely e vidence a privilege granted by t he State to qualied entities, and do not vest in the latter a


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permanent or irrevocable right to the particular concession area and the forest products t herein. They m ay be validly

amended, modied, replaced or r escinded by the Chief Executive when national interests so require. Thus, they a re

not deemed contracts w ithin the purview of the due p rocess of law clause [ See Sections 3( ee) and 2 0 o f Pres. Decree

No. 705, as a mended. Also, Tan v. Director of Forestry , G.R. No. L-24548, October 27, 1983, 125 S CRA 302]."

Since timber licenses a re n ot contracts, the n on-impairment clause, which reads:

"SEC. 10. No law impairing the obligation of contracts sh all be passed."

cannot be invoked.

The P residential Warranty ca nnot, in any m anner, be construed as a contractual undertaking assuring PICOP

of exclusive p ossession and enjoyment of its co ncession areas. S uch an interpretation would result in the

complete a bdication by the S tate in favor of PICOP of the sovereign p ower to c ontrol and s upervise the e xploration,

development and utilization of the natural resources in the area. [28]

The Motion for R econsideration was denied with nality o n 14 February 2 007. A Second Motion for R econsideration

led by PI COP was denied on 23 M ay 2007.

PICOP insists that the pronouncement in Base Metals is a m ere obiter d ictum , which would not bind this C ourt in

resolving this M otion for Reconsideration. In the oral arguments, however, upon questioning from the ponente himself

of Base Metals , it was a greed that the issue o f whether the 1969 Document is a c ontract was necessary in the

resolution of Base Metals :

JUSTICE TINGA:

And do you conrm that one o f the very issues r aised by P ICOP in that case [ PICOP Resources I nc. v. Base M etal

Mineral Resources C orporation ] revolves a round i ts cl aim that a P residential Warranty is p rotected by the n on-

impairment c[l]ause of the Constitution.

ATTY. AGABIN:

Yes, I believe that statement was m ade b y the Court, your Honor.

JUSTICE TINGA:

Yes. And that claim on the part of PICOP necessarily implies that the Presidential Warranty a ccording to PICOP is a

contract protected by the non-impairment clause.


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ATTY. AGABIN:

Yes, Your Honor.

JUSTICE TINGA:

Essentially, the PICOP raised the issue of whether t he Presidential Warranty i s a contract or not.

ATTY. AGABIN:

Yes, Your Honor.

JUSTICE TINGA:

And t herefore a ny ruling o n t he part of the Court on t hat issue c ould n ot be a n obiter d ictum .

ATTY. AGABIN:

Your Honor, actually w e believe that the basic i ssue in that case was whether or not Base Metals co uld conduct

mining activities u nderneath the f orest reserve allotted to P ICOP and t he H onorable C ourt ruled t hat the M ining Act of

1995 as w ell as the Department Order of DENR does not disallow mining activity under a f orest reserve.

JUSTICE TINGA:

But it was P ICOP itself which raised the claim that a Presidential Warranty is a contract. And therefore be, should be

protected o n the u nder the n on-impairment clause of the C onstitution.

ATTY. AGABIN:

Yes, Your Honor. Except that...

JUSTICE TINGA:

So, how can you say n ow that the Court merely u ttered, declared, laid down an obiter d ictum in saying that the

Presidential Warranty i s n ot a contract, and it is n ot being a contract, it is n ot prohibited by the non-impairment clause.

ATTY. AGABIN:

This H onorable Court could have just ruled, held that the mining law allows m ining activities u nder a forest reserve


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without deciding on t hat issue t hat was r aised by PICOP, your Honor, and t herefore we b elieve....

JUSTICE TINGA:

It could h ave been b etter if PICOP has n ot raised that issue a nd h ad n ot claimed that the Presidential Warranty is n ota c ontract.

ATTY. AGABIN:

Well, that is c orrect, your Honor except t hat the Court could have just avoided that question. Because...

JUSTICE TINGA:

Why[?]

ATTY. AGABIN:

It already s ettled the issue, the basic i ssue.

JUSTICE TINGA:

Yes, because the Court in saying that merely r eiterated a number of rulings to the effect that the Presidential

Warranty, a Timber License for that matter is n ot a contract protected b y the non-impairment laws.

ATTY. AGABIN:

Well, it is o ur submission, your Honor, that it is obiter be cause, that issue e ven a p hrase b y P ICOP was not really fully

argued by the parties for t he Honorable Court and it seems f rom my reading at least it was just an aside given by the

Honorable Court to decide on that issue raised by PICOP but it was not necessary to the decision of the court.

JUSTICE TINGA:

It was not necessary[?]

ATTY. AGABIN:

To the decision o f the Court.

JUSTICE TINGA:


14/45

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 a nd so d id the Court [in its D ecision].

ATTY. AGABIN:

Anyway, your H onor, 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 a s t o the contents o f the 1969 Document, the purported Presidential Warranty, below is a

complete t ext thereof:

Republic o f the Philippines

Department of Agriculture an d Natural Resources

OFFICE OF THE SECRETARY

Diliman, Quezon City

D-53, Licenses (T.L.A. No. 43)

Bislig B ay Lumber Co., Inc.

(Bislig, Surigao)

July 29, 1969


15/45

Bislig B ay Lumber Co., Inc.

[unreadable w ord] Bldg.

Makati, Rizal

S i r s:

This h as r eference to t he request of the B oard of Investments t hrough i ts C hairman in a l etter dated July 1 6, 1969 for

a w arranty on the boundaries o f your concession area under Ti mber License Agreement No. 43, as a mended.

We are made to understand that your company is co mmitted to support the rst large scale integrated wood

processing complex hereinafter called: "The Project") and that such support will be provided not only i n the form of

the supply of pulpwood a nd other wood m aterials from your concession but also b y making available funds g enerated

out of your own o perations, to su pplement PICOP's o perational sources of funds and o ther nancial arrangements

made b y h im. In o rder that your company m ay p rovide s uch support effectively, it is u nderstood t hat you w ill call upon

your stockholders t o take such steps a s m ay b e necessary to effect a unication of managerial, technical, economic

and manpower resources between your company and P ICOP.

It is i n the public i nterest to promote industries t hat will enhance the proper conservation of our forest resources a s

well as i nsure the maximum utilization thereof to the benet of the national economy. The administration feels t hat the

PICOP project is o ne such industry w hich should enjoy priority o ver the usual logging operations h itherto practiced by

ordinary t imber l icensees: For this r eason, we are pleased to consider favorably t he request.

We co nrm that your Timber License Agreement No. 43, as a mended (copy o f which is at tached a s Annex "A" hereofwhich shall form part and parcel of this w arranty) de nitely e stablishes t he boundary l ines o f your concession area

which consists o f permanent forest lands with an aggregate area of 121,587 hectares and alienable or di sposable

lands with an aggregate area of approximately 2 1,580 h ectares.

We further conrm that your tenure ove r the area and exclusive right to cut, collect and remove sawtimber and

pulpwood s hall be f or the period ending o n April 26, 1977; said period t o b e renewable for other 25 years su bject to

compliance with constitutional and statutory req uirements a s w ell as w ith existing policy on timber concessions.

The peaceful and a dequate e njoyment by you of your area as d escribed a nd specied in you r aforesaid a mended

Timber License Agreement No. 43 is he reby warranted provided that pertinent laws, regulations a nd the terms a nd

conditions o f your license agreement are observed.

Very t ruly y ours,

(Sgd.) FERNANDO LOPEZ


16/45

Secret ary o f Agriculture

and Natural Resources

Encl.:

RECOMMENDED BY:

(Sgd.) JOSE VIADO

Acting Director of Fo restry

APPROVED:

(Sgd.) FERDINAND E. MARCOS

President of the Philippines

ACCEPTED:

BISLIG BAY LBR. CO., INC.

By:

(Sgd.) JOSE E. SORIANO

President

PICOP interprets t his d ocument in the following manner:

6.1 It is c lear that the thrust of the government warranty is t o establish a particular area dened by b oundary lines o f

TLA No. 43 for the PICOP Project. In co nsideration for PICOP's co mmitment to p ursue and e stablish the project

requiring huge investment/funding from stockholders a nd lending institutions, the government provided a warranty

that ensures the continued and exclusive right of PICOP to source i ts r aw materials n eeds from the forest and

renewable trees w ithin the areas e stablished.

6.2 As a long-term support, the warranty c overs t he initial twenty ve (25) year period and is renewable for periods

of twenty ve (25) years p rovided the project continues to exist and operate. Very n otably, the wording of the

Presidential Warranty c onnotes that for a s l ong as the holder co mplies with all the legal requirements, the term of the

warranty is n ot limited to fty (50) years b ut other t wenty ve (25) years.

6.3 Note m ust be made t hat the government warranted that PICOP's t enure ove r the area and e xclusive r ight to c ut,

collect and remove saw timber and p ulpwood sh all be for the period ending on 26 April 1977 and sa id p eriod to b e

renewable for other 25 years subject to "compliance with constitutional and statutory requirements as well as e xisting


17/45

policy on timber requirements". It is c lear that the renewal for other 25 years, not necessarily for another 25 years i s

guaranteed. This expl ains w hy on 07 October 1977, TLA No. 43, as a mended, was a utomatically renewed for another

period of twenty ve (25) yea rs t o e xpire on 2 6 April 2002. [30]

PICOP's i nterpretation of the 1969 Document cannot be sustained. PICOP's cl aim that the term of the warranty is n otlimited to fty y ears, but that it extends t o other fty y ears, perpetually, violates S ection 2, Article XII of the

Constitution which provides:

Section 2. All lands o f the public d omain, waters, minerals, coal, petroleum, and other mineral oils, all forces o f

potential energy, sheries, forests o r timber , wildlife, ora and fauna, and other natural resources are ow ned by

the S tate. With the e xception of agricultural lands, all other n atural resources s hall not be a lienated. The

exploration, development, and utilization of natural resources s hall be under t he f ull control and supervision

of the S tate. The S tate m ay directly u ndertake s uch activities, or it may enter i nto co-production, joint

venture, or production-sharing agreements with Filipino citizens, or corporations o r associations a t least

sixty per centum of whose cap ital is ow ned by su ch citizens. Such agreements m ay be for a period not

exceeding twenty-ve years, renewable for not more than twenty-ve years, and under such terms an d

conditions as m ay be provided by law. In cases of water r ights for i rrigation, water su pply sheries, or i ndustrial

uses o ther than the development of water power, benecial use m ay b e the measure a nd limit of the grant.

Mr. Justice Dante O . Tinga's i nterpretation of the 1969 Document is m uch more i n accord w ith the laws a nd the

Constitution. What one cannot do directly, he cannot do indirectly. Forest lands c annot 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 t antamount to granting ownership thereof. PICOP, it should be noted, claims n othing less t han

having e xclusive, continuous a nd u ninterrupted p ossession o f its co ncession a reas,[31]

where a ll other entrants a reillegal, [32] a nd where so-called "illegal settlers a nd squatters" ar e apprehended. [33]

IFMAs a re production-sharing agreements c oncerning the development and utilization of nat ural resources. As s uch,

these a greements "may b e for a p eriod not exceeding twenty-ve ye ars, renewable for not more t han twenty-ve

years, and under such terms a nd conditions a s m ay be provided by law." Any superior " contract" r equiring the State to

issue T LAs a nd IFMAs w henever they e xpire c learly ci rcumvents S ection 2 , Article X II of the C onstitution, which

provides f or the only p ermissible schemes w herein the full control and supervision of the State are not derogated: co-

production, joint venture, or production-sharing agreements w ithin the time limit of twenty-ve years, renewable for

another twenty-ve years.

On its face, the 1969 Document was m eant to e xpire o n 2 6 April 2002, upon the expiration of the expected extension

of the original TLA period ending on 26 April 1977:

We further conrm that your tenure ove r the area and exclusive right to cut, collect and remove sawtimber and

pulpwood s hall be f or the period ending o n April 26, 1977; said period t o b e renewable for other 25 years su bject to



18/45

Any interpretation extending the application of the 1969 Document beyond 26 April 2002 and a ny c oncession that

may b e granted to PICOP beyond the said date would violate the Constitution, and no amount of legal hermeneutics

can c hange t hat. Attempts o f PICOP to e xplain its w ay o ut of this C onstitutional provision only led t o a bsurdities, as

exemplied in the following e xcerpt from the o ral arguments:

JUSTICE CARPIO:

The maximum trend of agr eement to develop and utilize natural resources l ike forest products i s 2 5 years p lus

another 25 years o r a total of 50 years c orrect?

ATTY. AGABIN

Yes, Your Honor.

JUSTICE CARPIO:

That is t rue for the 1987, 1973, 1935 Constitution, correct?

ATTY. AGABIN:

Yes, Your Honor.

JUSTICE CARPIO:

The TLA here, TLA 43, expired, the rst 25 years e xpired in 1977, correct?

ATTY. AGABIN:

Yes, Your Honor.

JUSTICE CARPIO:

And it was renewed for ano ther 25 years u ntil 2002, the 50 th yea r?

ATTY. AGABIN:

Yes, Your Honor.


19/45

JUSTICE CARPIO:

Now, could P ICOP before the end of the 50 th ye ar let's sa y in 2001, one y ear before t he e xpiration, could it have a sked

for an extension of another 25 years o f its T LA agreement[?]

ATTY. AGABIN:

I believe s o, Your Honor.

JUSTICE CARPIO:

But the Constitution says, maximum of fty ye ars. How could yo u a sk f or ano ther 25 years o f its T LA.

ATTY. AGABIN:

Well, your Honor, we believe on a question like this, this H onorable Court should balance the interest.

JUSTICE CARPIO:

The Constitution is very cl ear, you have o nly a maximum of 50 years, 25 plus a nother 25. PICOP could n ever have

applied for an extension, for a t hird 25-year term whether under the 1935 Constitution, the 1973 Constitution and the

1987 Constitution, correct?

ATTY. AGABIN:

Your Honor, except that we are invoking the warranty, the terms o f 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?


20/45

ATTY. AGABIN:

The Constitution itself provides t hat vested rights s hould be ....

JUSTICE CARPIO:

If it is not in violation of specic provision of the Constitution. The Constitution says, 25 years plus another 25 years,

that's t he e nd o f it. You mean to s ay t hat a P resident of the P hilippines ca n g ive s omebody 1 ,000 ye ars l icense?

ATTY. AGABIN:

Well, that is not our po sition, Your H onor. Because our po sition is that ....

JUSTICE CARPIO:

My q uestion is, what is t he maximum term, you said 50 years. So, my ne xt question is, can PICOP apply for an

extension o f another 25 ye ars a fter 2002, the 50 th yea r?

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 v ery c lear, it says here, provision 28, it says the license agreement is f or a total of 50

years. I mean it is ve ry si mple, the President or even Congress ca nnot pass a law extending the license, whatever

kind of license to utilize natural resources f or more than fty ye ar[s]. I mean even the law cannot do that. It cannot

prevail over the Constitution. Is t hat correct, Counsel?

ATTY. AGABIN:

It is c orrect, Your Honor, except that in this c ase, what is a ctually o ur application is t hat the law provides f or the

conversion of existing TLA into IFMA.

JUSTICE CARPIO:

So, they l e t he p etition for conversion before t he e nd o f the 50 th yea r for IFMA.

ATTY. AGABIN:


21/45

Yes, Your Honor.

JUSTICE CARPIO:

But IFMA is t he same, it is b ased on Section 2, Article 12 of t he Constitution, develop and utilize natural resources

because as yo u sa id w hen the new constitution took effect we did away w ith the old licensing regime, we h ave now

co-production, a production sharing, joint venture, direct undertaking but still the same developing and utilizing the

natural resources, still comes f rom section 2, Art. 12 of the Constitution. It is s till a license but different format now.

ATTY. AGABIN:

It is co rrect, Your Honor, except that the regimes o f joint venture, co-production a nd p roduction sharing a re what is

referred to in the constitution, Your Honor, and still covered...

JUSTICE CARPIO:

Yes, but it is cover ed by sam e 2 5 yea r[s], you m ean to say p eople n ow can circumvent the 50 year maximum term by

calling their TLA as I FMA and after fty ye ars c alling it ISMA, after another 50 years ca ll it MAMA.

ATTY. AGABIN:

Yes, Your H onor. Because...

JUSTICE CARPIO:

It can be done.

ATTY. AGABIN:

That is p rovided for by the department itself. [34]

PICOP is, in effect, arguing that the DENR issued DAO No. 99-53 in o rder to p rovide a way t o ci rcumvent the

provisions o f the Constitution limiting agreements f or the utilization of natural resources t o a maximum period of fty

years. Official duties a re, however, disputably co nsidered to be reg ularly p erformed, [35] a nd good faith is a lways

presumed.

DAO No. 99-53 was i ssued to ch ange the means b y which t he government enters into a n a greement with private

entities f or the utilization of forest products. DAO No. 99-53 is a late response to the change in the constitutional


22/45

provisions o n natural resources f rom the 1973 Constitution, which allowed the granting of licenses t o private entities,[36] to t he p resent Constitution, which provides f or co-production, joint venture, or production-sharing a greements a s

the permissible schemes w herein private entities m ay participate in the utilization of forest products. Since the

granting of timber licenses ce ased to be a p ermissible s cheme f or the p articipation of private entities u nder the

present Constitution, their operations s hould have ceased upon the issuance of D AO No. 99-53, the rule regulatingthe schemes under the present Constitution. This w ould be iniquitous t o those with existing TLAs t hat would not have

expired ye t as o f the i ssuance of DAO No. 99-53, especially those with n ew TLAs t hat were o riginally se t to e xpire

after 10 or even 20 or more ye ars. The DENR thus inserted a p rovision in DAO No. 99-53 allowing these T LA holders

to nish the period of their TLAs, but this t ime as I FMAs, without the rigors o f going through a new application, which

they h ave probably just gone through a few years a go.

Such an interpretation would n ot only m ake D AO No. 99-53 c onsistent with the p rovisions o f the C onstitution, but

would a lso p revent possible d iscrimination a gainst new IFMA applicants:

ASSOCIATE JUSTICE DE CASTRO:

I ask this q uestion because of your interpretation that t he period of the IFMA, if your TL A is c onverted into IFMA,

would c over a n ew a fresh p eriod of twenty-ve ye ars r enewable b y an other period of twenty-ve years.

DEAN AGABIN:

Yes, Your Honor.


Don't you think t hat will, in effect, be invidious d iscrimination with respect to other applicants i f you are granted a fresh

period of twenty-ve years e xtendible to another twenty-ve years?

DEAN AGABIN:

I don't think it would be, Your H onor, considering that the IFMA is d ifferent regime from the TLA. And not only t hat,

there are considerations o f public h ealth and ecology w hich should come into play i n this ca se, and which we had

explained in our op ening statement and, therefore the provision of the Constitution on the twenty-ve limits f or renewal

of co-production, joint venture and production sharing agreements, should be balanced with other values st ated in the

Constitution, like the value of balanced ecology, which should be in harmony with the rhythm of nature, or t he policy o f

forest preservation in Article XII, Section 14 of the Constitution. These are all important policy considerations w hich

should be balanced against the term limits i n Article II of the Constitution.



23/45

The provision of this A dministrative Order r egarding automatic co nversion may be reasonable, if, I want to know if you

agree with me, if we limit this a utomatic c onversion 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 t he rst time

for IFMA?

DEAN AGABIN:

Well, Your Honor, we b eg to d isagree, because a s I said TLA's ar e co mpletely different from IFMA. The TLA has no

production sharing or co-production agreement or condition. All that the l icensee h as t o d o i s, to pay forest charges,

taxes a nd other impositions f rom the local and n ational government. On the other hand, the IFMAs co ntained terms

and conditions w hich are completely d ifferent, and that they either impose co-production, production sharing or joint

venture terms. So it's a completely d ifferent regime, Your Honor.


Precisely, that is t he reason why there should be an evaluation of w hat 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 o r the development plan itself of one seeking conversion into IFMA if it will only b e 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 o f the a pplicants i f we a re thinking of a fresh period of twenty-ve y ears, and w hich is

renewable u nder the C onstitution b y a nother twenty-ve years. So the d evelopment plan will be important in this ca se,

the submission of the development plan of the different applicants m ust be considered. So I don't understand why yo u

mentioned e arlier that the development plan w ill later on be a s ubject matter of negotiation b etween t he IFMA grantee

and the government. So it seems t hat it will be too late in the day to discuss t hat if you have already c onverted the

TLA into IFMA or i f the government has a lready granted the IFMA, and then it will later on study the development

plan, whether it is v iable or not, or it is s ustainable or not, and whether the development plan of the different

applicants a re, are, which of the development plan of the different applicants i s b etter or more a dvantageous t o the

government. [37]

PICOP insists t hat the alleged Presidential Warranty, having b een s igned o n 2 9 J uly 19 69, could n ot have p ossibly


24/45

considered the l imitations ye t to b e imposed by future issuances, such as t he 1 987 C onstitution. However, Section 3 ,

Article XVIII of said Constitution, provides:

Section 3. All existing laws, decree s, executive orders, proclamations, letters o f instructions, and o ther executive

issuances not i nconsistent with this Constitution shall remain operative until amended, repealed, or r evoked.

In the rece nt case Sabio v. Gordon ,[38] we ruled that "(t)he clear import of this p rovision is t hat all existing laws,

executive orders, proclamations, letters o f instructions a nd other executive issuances i nconsistent or repugnant to the

Constitution are repealed."

When a provision is s usceptible of two interpretations, "the one that w ill render them operative and effective and

harmonious w ith o ther provisions o f law" [39] sh ould be adopted. As t he interpretations in the assailed Decision and in

Mr. Justice Tinga's ponencia a re the ones t hat would not make the subject Presidential Warranty u nconstitutional,

these are what we shall adopt.

Purpose o f the 1969 Document: Assurance That the Boundaries of Its C oncession Area Would Not Be Altered

Despite the Provision in the TLA that the DENR Secretary Can Amend Said Boundaries

In the assailed Decision, we rul ed that the 1969 Document cannot be considered a c ontract that would bind the

government regardless o f changes i n policy a nd the demands of public i nterest and social welfare. PICOP claims t his

conclusion "did n ot take into c onsideration that PICOP already h ad a valid and current TLA before the contract with

warranty was signed in 1969." [40] P ICOP goes on: "The TLA is a license that equips any TLA holder in the country for

harvesting of timber. A TLA is si gned by the Secretary of the DANR now DENR. The Court ignored the signicance o f

the need for another contract with the Secretary o f the DANR but this t ime with the approval of the President of the

Republic." [41] P ICOP then a sks u s: "If PICOP/BBLCI was only a n o rdinary TLA holder, why w ill it go through the extra

step of securing another contract just to h arvest timber when the same ca n b e se rved by t he TLA signed only by t he

Secretary a nd not requiring the approval of the President of the Republic(?)" [42]

The answer t o this q uery is f ound in TLA No. 43 itself wherein, immediately a fter t he boundary lines o f TLA No. 43

were established, the following conditions w ere given:

This l icense is g ranted to the said party o f the second part upon the following express conditions:

I. That authority i s g ranted hereunder to the party of the second part [43] to cut, collect or remove rewood or other

minor forest products from the a rea e mbraced in this l icense a greement except as he reinafter provided.

II. That the party of the rst part [44] m ay a mend or alter t he d escription of the boundaries of the area covered

by this l icense a greement to conform with official surveys and that the decision of the p arty of the rst pa rt as

to the ex act location of the s aid boundaries shall be nal.


25/45

III. That if the party o f the rst part deems i t necessary to e stablish on t he ground the boundary lines o f the a rea

granted under this l icense agreement, the party o f the second part shall furnish to the party o f the rst part or its

representatives as many laborers a s i t needs a nd all the expenses t o be incurred on the work i ncluding the wages of

such laborers sh all be p aid b y the party o f the s econd p art.[45]

Thus, BBLCI needed an assurance that the boundaries o f its co ncession area, as e stablished in TLA No. 43,

as a mended, would n ot be al tered d espite this p rovision. Hence, BBLCI endeavored to obtain the 1969

Document, which provides:

We co nrm that your Timber License Agreement No. 43, as a mended (copy o f which is at tached a s Annex "A" hereof

which shall form part and p arcel of this w arranty) denitely e stablishes t he b oundary l ines o f your concession

area which consists o f permanent forest lands with an aggregate area of 121,587 hectares and alienable or

disposable l ands with an aggregate a rea of approximately 2 1,580 h ectares.

We further conrm that your tenure over t he a rea and exclusive right to cut, collect and remove s awtimber an d

pulpwood sh all be for the period ending on April 26, 1977; said period to be renewable for other 25 years su bject to


The p eaceful and a dequate en joyment by you o f your area as d escribed and s pecied in your aforesaid

amended Timber License A greement No. 43 is her eby warranted p rovided that pertinent laws, regulations a nd the

terms an d co nditions of your license a greement are o bserved. [46]

In Koa v. Court of Appeals ,[47]

we rul ed t hat a warranty is a collateral undertaking and i s m erely p art of a c ontract. As acollateral undertaking, it follows t he principal wherever it goes. When this was p ointed out by t he Solicitor General,

PICOP changed its d esignation of the 1969 Document from "Presidential Warranty" or "government warranty" in all its

pleadings p rior to our Decision, to "contract with warranty" i n its M otion for Reconsideration. This, however, is b elied

by the statements i n the 29 July 1 969 Document, which refers t o itself as "t his w arranty."

Re: Allegation That There W ere Mutual Contract Considerations

Had the 29 July 1 969 Document been intended as a contract, it could have easily sa id so. More importantly, it could

have clearly d ened t he mutual considerations o f the parties t hereto. It could h ave a lso easily p rovided for the

sanctions f or t he breach of the mutual considerations s pecied therein. P ICOP had vigorously a rgued that the 1969

Document was a c ontract because o f these mutual considerations, apparently referring to the following p aragraph o f

the 1969 Document:

We are made to understand that your company is co mmitted to support the rst large scale integrated wood

processing complex hereinafter called: "The Project") and that such support will be provided not only i n the form of

the supply of pulpwood a nd other wood m aterials from your concession but also b y making available funds g enerated


26/45

out of your own operations, to supplement PICOP's o perational surces ( sic) of funds and other nancial arrangements

made b y h im. In o rder that your company m ay p rovide s uch support effectively, it is u nderstood t hat you w ill call upon

your stockholders t o take such steps a s m ay b e necessary to effect a unication of managerial, technical, economic

and manpower resources between your company and P ICOP.

This p rovision hardly e vinces a contract consideration (which, in PICOP's i nterpretation, is i n exchange for

the exclusive a nd p erpetual tenure o ver 121,587 h ectares o f forest land a nd 2 1,580 h ectares o f alienable a nd

disposable lands ). As e lucidated by PICOP itself in bringing up the Investment Incentives A ct which we shall discuss

later, and a s sh own by the tenor of the 1969 Document, the latter document was m ore o f a co nferment of an incentive

for B BLCI's i nvestment rather than a contract creating m utual obligations o n the p art of the government, on o ne hand,

and B BLCI, on t he o ther. There w as n o s tipulation providing for sanctions f or breach if BBLCI's b eing "co mmitted to

support the rst large s cale integrated wood p rocessing complex" r emains a commitment. Neither did the 1969

Document give BBLCI a p eriod within which t o pursue this com mitment.

According to Article 1350 of the Civil Code, "(i)n onerous c ontracts t he cause is u nderstood to be, for ea ch contracting

party, the prestation or promise of a thing or service by the other." [48] P rivate investments f or one's b usinesses, while

indeed e ventually b enecial to the country a nd d eserving to b e g iven incentives, are still principally a nd p redominantly

for the benet of the investors. Thus, the "mutual" contract considerations b y b oth parties t o this a lleged contract

would be both for t he benet of one of the parties thereto, BBLCI, which is n ot obligated by the 1969 Document to

surrender a s hare in its p roceeds a ny m ore t han it is a lready required b y its T LA and by t he t ax laws.

PICOP's a rgument that its i nvestments ca n b e c onsidered as co ntract consideration d erogates t he rul e t hat "a l icense

or a permit is n ot a contract between the sovereignty a nd the licensee or permittee, and is n ot a property in the

constitutional sense, as t o which the constitutional proscription against the impairment of contracts m ay extend." Alllicensees o bviously p ut up investments, whether t hey are as sm all as a tricycle unit or as b ig as t hose put up by multi-

billion-peso corporations. To construe t hese investments a s co ntract considerations w ould b e t o a bandon the

foregoing rule, which would mean that the State would be bound to all licensees, and lose its p ower t o revoke or

amend these l icenses w hen p ublic interest so d ictates.

The power to issue licenses sp rings f rom the State's p olice power, known as "t he most essential, insistent and least

limitable of powers, extending as i t does t o all the great public n eeds." [49] B usinesses a ffecting the public i nterest, such

as t he operation of public u tilities a nd those involving the exploitation of natural resources, are mandated by l aw to

acquire licenses. This i s s o in order that the State can regulate their operations a nd thereby protect the public i nterest.

Thus, while these licenses come in the form of "agreements," e.g., "Timber License A greements," they can not be

considered contracts u nder the non-impairment clause. [50]

PICOP found this ar gument "lame," arguing, thus:


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43. It is r espectfully su bmitted that the a foresaid p ronouncement in the D ecision is an egregious an d m onumental

error.

44. The D ecision co uld n ot dismiss a s "preposterous" the m utual covenants in the Presidential Warranty which c alls

for a h uge investment of Php500 m illion at that time in 1 969 o ut of which P hp268,440,000 raised from domesticforeign lending institution to establish the rst large scale integrated wood processing complex in the Philippines.

45. The D ecision p uts u p a lame e xplanation t hat "all licensees p ut up investments i n pursuing t heir business"

46. Now there are a bout a hundred timber licenses issued by the Government thru the DENR, but these a re ordinary

timber licenses w hich involve the m ere c utting of timber in t he concession a rea, and n othing e lse. Records i n the

DENR shows t hat no timber licensee has p ut up an integrated large wood processing complex i n the Philippines

except PICOP. [51]

PICOP thus argues o n t he basis o f quantity, and wants u s t o d istinguish between the investment of the tricycle driver

and that of the multi-billion corporation. However, not even billions o f pesos i n investment can change the fact that

natural resources a nd, therefore, public i nterest are involved in PICOP's v enture, consequently n ecessitating the full

control and s upervision b y the S tate a s m andated b y the C onstitution. Not even b illions o f pesos in investment can

buy forest lands, which is p ractically w hat PICOP is a sking for by interpreting the 1969 Document as a contract giving

it perpetual and exclusive possession over such lands. Among all TLA holders i n the Philippines, PICOP has, by far,

the largest concession area at 143,167 hectares, a l and a rea more t han the size of two Metro Manilas. [52] How can i t

not expect to also have the largest investment?

Investment Incentives A ct

PICOP then c laims that the contractual nature o f the 1969 Document was b rought about by its issuance i n

accordance w ith a nd pursuant to the Investment Incentives A ct. According to P ICOP:

The conclusion in the Decision that to construe PICOP's i nvestments a s a consideration in a contract would be to

stealthily ren der ineffective the principle that a license is n ot a contract between the sovereignty a nd the licensee is s o

awed since the contract with the warranty da ted 29 July 19 69 was issued b y the Government in a ccordance with and

pursuant to R epublic Act No. 5186, otherwise k nown a s "The Investment Incentives Act." [53]

PICOP then p roceeds to ci te S ections 2 a nd 4(d) and (e) of said a ct:

Section 2. Declaration of Policy - To accelerate the sound development of the national economy in consonance with

the principles a nd o bjectives o f economic n ationalism, and in p ursuance of a p lanned, economically feasible a nd

practicable d ispersal of industries, under conditions w hich will encourage c ompetition a nd d ischarge m onopolies, it is

hereby declared t o be the policy o f the s tate to encourage Filipino a nd foreign investments, as h ereinafter set out, in


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projects t o develop agricultural, mining and manufacturing industries w hich increase national income most at the least

cost, increase exports, bring a bout greater economic st ability, provide m ore o pportunities f or employment, raise the

standards o f living of the people, and provide for an equitable distribution of wealth. It is f urther declared to be the

policy of the state to welcome and encourage foreign capital to establish pioneer enterprises t hat are capital intensive

and would utilize a substantial amount of domestic raw materials, i n joint venture with substantial Filipino capital,whenever avai lable.

Section 4. Basic R ights a nd Guarantees . - All investors a nd enterprises a re entitled to the basic ri ghts a nd guarantees

provided in the constitution. Among other rights r ecognized by the Government of the Philippines a re the following:

x x x x

d) Freedom from Expropriation . - There s hall be n o e xpropriation b y the g overnment of the p roperty represented b y

investments o r of the property o f enterprises e xcept for public u se or in the interest of national welfare and defense

and upon payment of just compensation. x x x.

e) Requisition o f Investment . - There shall be no requisition of the property rep resented by the investment or of t he

property o f enterprises, except i n the event of war or national emergency and only f or the duration thereof. Just

compensation shall be determined and paid either at the time of requisition or i mmediately after cessation of the state

of war or national emergency. Payments r eceived as compensation for t he requisitioned property m ay be remitted in

the currency i n w hich the i nvestment was o riginally m ade a nd a t the e xchange rate prevailing at the t ime of

remittance, subject to t he provisions o f Section s eventy-four of republic Act Numbered Two hundred s ixty-ve.

Section 2 speaks o f the p olicy o f the State to e ncourage F ilipino and foreign investments. It does n ot speak o f howthis p olicy c an be implemented. Implementation of this p olicy i s t ackled in Sections 5 to 12 of the same law, [54] which

PICOP failed to mention, and for a g ood reason. None of the 24 incentives enumerated therein relates to, or even

remotely su ggests t hat, PICOP's p roposition that the 1969 Document is a contract.

PICOP could indeed argue that the enumeration is n ot excl usive. Certainly, granting incentives t o investors, whether

included in t he enumeration o r not, would be a n implementation of this p olicy. However, it is p resumed t hat whatever

incentives m ay b e g iven t o investors sh ould b e w ithin the b ounds of the laws a nd t he Constitution. The d eclaration of

policy i n S ection 2 cannot, by any st retch of the i magination, be rea d to provide a n e xception to either the laws o r,

heaven forbid, t he Constitution. Exceptions a re never pr esumed and should be convincingly p roven. S ection 2 of the

Investment Incentives Act cannot be read as e xempting investors from the Constitutional provisions (1) pr ohibiting

private ownership of forest lands; (2) providing for the complete control and supervision by the State of exploitation

activities; or (3) limiting exploitation agreements t o twenty-ve years, renewable for another t wenty-ve years.

Section 4(d) and (e), on the other hand, is a recognition of rights a lready g uaranteed under the Constitution. Freedom

from expropriation is g ranted under Section 9 of Article III [55] o f the Constitution, while the provision on requisition is a


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negative restatement of Section 6, Article XII. [56]

Refusal to g rant perpetual and exclusive p ossession to P ICOP of its co ncession a rea w ould n ot result in the

expropriation or requisition of PICOP's p roperty, as t hese forest lands b elong to the State, and not to PICOP. This i s

not changed by P ICOP's a llegation that:

Since it takes 3 5 years b efore the company can go back a nd harvest their residuals i n a logged-over ar ea, it must be

assured of tenure i n o rder to p rovide an inducement for the company to m anage a nd preserve t he residuals du ring

their growth period. This i s a commitment of resources o ver a span of 35 years f or each plot for each cycle. No

company w ill undertake the resp onsibility a nd cost involved in policing, preserving and managing residual

forest areasuntil it were s ure that i t had rm title to the timber .[57]

The requirement f or logging companies to prese rve and maintain forest areas, including the reforestation thereof, is

one of the prices a logging company must pay for t he exploitation thereof. Forest lands are meant to be enjoyed by

countless f uture generations o f Filipinos, and not just by one logging company. The requirements o f reforestation and

preservation o f the concession a reas a re m eant to p rotect them, the f uture g enerations, and n ot

PICOP. Reforestation and preservation of the c oncession areas are not required of logging companies so that

they would have something to cut again, but so that the forest would remain intact af ter t heir operations. That

PICOP would not accept the responsibility t o preserve its co ncession area if it is n ot assured of tenure thereto does

not speak well of its corporate policies.

Conclusion

In sum, PICOP was not able t o p rove either of the two t hings i t needed to prove to be entitled to a W rit of Mandamus

against the DENR Secretary. The 1969 Document is no t a co ntract recognized under the non-impairment clause a nd,

even if we a ssume for the sake of argument that it is, it did not enjoin t he g overnment to issue a n IFMA in 2002 e ither.

These are the essential elements i n PICOP's ca use of action, and the failure to prove t he same warrants a dismissal

of PICOP's P etition for M andamus, as not even PICOP's co mpliance with all the administrative and statutory

requirements ca n s ave its P etition n ow.

Whether PICOP Has C omplied with the Statutory and Administrative Requirements for the Conversion of the

TLA to an I FMA

In the assailed Decision, our ruling was b ased on two distinct grounds, each one being sufficient in itself for us t o rule

that PICOP was not entitled to a W rit of Mandamus: (1) the 1969 Document, on which P ICOP hinges i ts r ight to

compel the issuance of an IFMA, is n ot a contract; and (2) P ICOP has n ot complied with all administrative and

statutory r equirements f or t he issuance of an IFMA.

When a court bases i ts d ecision on two or m ore g rounds, each is a s a uthoritative as the other and neither is obiter

dictum .[58] Thus, both g rounds on which w e b ased o ur ruling in the assailed Decision would b ecome judicial dictum ,


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and would affect the rights a nd interests o f the parties t o this c ase unless c orrected in this R esolution on PICOP's

Motion for R econsideration. Therefore, although PICOP would n ot be entitled to a Writ of Mandamus even if the

second issue is r esolved in its f avor, we should nonetheless resolve t he same and determine whether PICOP has

indeed c omplied with a ll administrative and statutory requirements f or the issuance of an IFMA.

While t he rst issue (on t he n ature o f the 1 969 D ocument) is e ntirely legal, this se cond issue (on PICOP's co mpliance

with administrative and statutory requirements f or t he issuance of an IFMA) has b oth legal and factual sub-issues.

Legal sub-issues include w hether PICOP is l egally required to (1) consult with a nd a cquire a n a pproval from the

Sanggunian concerned u nder Sections 26 and 2 7 o f the Local Government Code; and (2) acquire a Certication from

the National Commission on Indigenous Peoples (NCIP) that the concession area does not overlap with any a ncestral

domain. Factual sub-issues include w hether, at the t ime it led its P etition for Mandamus, PICOP had su bmitted the

required Five-Year Fo rest Protection Plan and Seven-Year Reforestation Plan and whether PICOP had paid all forest

charges.

For the f actual sub-issues, PICOP invokes t he d octrine t hat factual ndings o f the t rial court, especially when u pheld

by the Court of A ppeals, deserve great weight. However, deserving of even greater w eight are the factual ndings o f

administrative agencies t hat have t he expertise in t he area o f concern. The c ontentious f acts i n t his ca se relate to t he

licensing, regulation and management of forest resources, the determination of which belongs e xclusively t o the

DENR:

SECTION 4. Mandate. - The Department shall be the primary government agency responsible for the

conservation, management, development and proper use of the c ountry's env ironment and natural

resources, specically forest and grazing lands , mineral resources, including those in reservation and watershed

areas, and lands o f the p ublic d omain, as well as the l icensing and regulation of all natural resources as may be provided for by law in order to ensure equitable sharing of the benets d erived therefrom for the welfare o f the

present and future generations o f Filipinos. [59]

When parties l e a Petition for Certiorari ag ainst judgments o f administrative agencies t asked w ith o verseeing the

implementation o f laws, the ndings o f such administrative agencies a re e ntitled t o g reat weight. In t he c ase at bar,

PICOP could not have led a Petition for Certiorari , as t he DENR Secretary ha d n ot yet even determined whether

PICOP should be issued an IFMA. As p reviously m entioned, when PICOP's a pplication was brought to a standstill

upon the evaluation that PICOP had ye t to co mply with the requirements for the issuance of an IFMA, PICOP refused

to attend further meetings w ith the DENR and instead led a Petition for M andamus against the latter. By jumping the

gun, PICOP did n ot diminish the weight of the D ENR Secretary's initial determination.

Forest P rotection and Reforestation Plans

The Performance E valuation Team tasked to a ppraise P ICOP's perf ormance o n its TLA No. 43 found that PICOP had

not sub mitted its F ive-Year Forest Protection Plan and its S even-Year Reforest ation Plan. [60]


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In its M otion for Reconsideration, PICOP asserts t hat, in its L etter of Intent dated 2 8 August 2000 a nd m arked a s

Exhibit L in the trial court, there was a reference to a Ten-Year Sustainable Forest Management Plan (SFMP), in

which a F ive-Year Forest Protection Plan and a S even-Year Reforestation Plan were a llegedly incorporated. PICOP

submitted a machine copy o f a certied photocopy o f pages 5 0-67 and 104-110 of this S FMP in its M otion forReconsideration. PICOP claims t hat the existence of this S FMP was repeatedly a sserted during the IFMA application

process. [61]

Upon e xamination of the portions of the SFMP submitted to u s, we ca nnot help b ut notice t hat PICOP's co ncept of

forest protection is t he security o f the area against "illegal" entrants a nd settlers. There is n o mention of the protection

of the wildlife therein, as t he focus o f the discussion of the silvicultural treatments a nd the SFMP itself is o n the

protection and generation of future timber harvests. We are particularly d isturbed by t he portions s tating that trees o f

undesirable q uality sh all be r emoved.

However, when we required the DENR Secretary to com ment on P ICOP's Motion for Reconsideration, the DENR

Secretary d id not dispute t he existence of this S FMP, or question PICOP's a ssertion that a Ten-Year Fo rest Protection

Plan and a Ten-Year R eforestation Plan are a lready incorporated therein. Hence, since the agency t asked to

determine compliance with IFMA administrative requirements c hose to remain silent in the face of allegations o f

compliance, we are constrained to withdraw our pronouncement in the assailed Decision that PICOP had not

submitted a Five-Year Forest Protection P lan a nd a Seven-Year Reforestation P lan for its T LA No. 43. As previ ously

mentioned, t he licensing, regulation and management of forest resources a re the primary resp onsibilities o f the

DENR. [62]

The compliance discussed above is, of course, only for t he purpose of determining PICOP's sa tisfactory pe rformanceas a TLA holder, and covers a period within the subsistence of PICOP's T LA No. 43. This d etermination, therefore,

cannot pr ohibit the DENR from requiring PICOP, in the future, t o submit proper forest protection and reforestation

plans cove ring the period of the proposed IFMA.

Forest Charges

In determining that PICOP did not have unpaid forest charges, the Court of Appeals r elied on the assumption that if it

were t rue that PICOP had u npaid forest charges, it should n ot have b een issued an approved Integrated Annual

Operation Plan (IAOP) for t he year 2001-2002 by S ecretary A lvarez himself. [63]

In the assailed Decision, we held that the Court of Appeals h ad been selective in its e valuation of the IAOP, as i t

disregarded the part thereof that shows t hat the IAOP was a pproved subject to several conditions, not the least of

which was the submission of proof of the updated payment of forest charges f rom April 2001 to June 2001. [64] We also

held that even if we considered for t he sake of argument that the IAOP should not have b een issued if PICOP had

existing forestry a ccounts, the issuance of the IAOP could not be considered proof that PICOP had paid the same.


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Firstly, the best evidence of payment is t he rece ipt thereof. PICOP has not prese nted any evidence that such receipts

were lost or de stroyed or cou ld not be produced in court. [65] Secondly, the government cannot be estopped b y the acts

of its officers. If PICOP has b een issued a n IAOP in v iolation of the l aw, allegedly b ecause it may not be i ssued if

PICOP had existing forestry a ccounts, the government cannot be estopped from collecting such amounts a nd

providing the necessary s anctions therefor, including the withholding of the IFMA until such amounts a re paid.

We t herefore found that, as o pposed to the Court of Appeals' ndings, which w ere b ased merely on estoppel of

government officers, the positive a nd categorical evidence presented by the DENR Secretary w as more convincing

with respect to the issue of payment of forestry ch arges:

1. Forest Management Bureau (FMB) Senior Forest Management Specialist (SFMS) Ignacio M. Evangelista

testied that PICOP had failed to pay i ts r egular f orest cha rges co vering the period from 22 September 2001 to 26

April 2002 in the t otal amount of P15,056,054.05 [66] P ICOP also allegedly p aid late most of its f orest charges f rom

1996 onwards, by r eason of which, PICOP is l iable for a surcharge of 25% per annum on the tax d ue and interest

of 20% per annum which now amounts to P150,169,485.02. [67] Likewise, PICOP allegedly ha d overdue a nd

unpaid silvicultural fees i n the amount of P2,366,901.00 as of 30 August 2002. [68] S umming up the testimony,

therefore, it was alleged that PICOP had u npaid a nd overdue forest charges in the sum of P167,592,440.90 as o f

10 August 2002. [69]

2. Collection letters were se nt to P ICOP, but no official receipts ar e e xtant in the DENR record in Bislig C ity

evidencing payment of the overdue amount stated in the said collection letters. [70] There w ere n o official receipts

for the period covering 22 September 2001 to 2 6 April 2002.

We a lso co nsidered these p ieces of evidence more co nvincing than the other ones p resented by P ICOP:

1. PICOP presented the certication of Community Environment and Natural Resources Office (CENRO)

Officer Philip A. Calunsag, which refers o nly t o PICOP's a lleged payment of regular f orest charges co vering the

period from 14 S eptember 2001 to 15 May 2002 . [71] We noted that it does not mention similar paym ent of the

penalties, surcharges a nd interests t hat PICOP incurred in paying late several forest charges, which fact was n ot

rebutted by P ICOP.

2. The 27 May 2002 C ertication by C ENRO Calunsag specied only the period covering 14 S eptember 2001

to 15 May 2 002 a nd the amount of P53,603,719.85 paid by PICOP without indicating the corresponding volume

and d ate of production o f the logs. This i s i n c ontrast to the ndings o f SFMS Evangelista, which cover the period

from CY 1996 to 3 0 August 2002 and includes penalties, interests, and surcharges f or l ate p ayment pursuant to

DAO 80, series of 1987.

3. The 2 1 August 2002 P ICOP-requested certication issued by Bill Collector Amelia D. Arayan, and attested to

by C ENRO Calunsag h imself, shows t hat PICOP paid o nly regular forest charges for its log production covering 1

July 2 001 to 21 September 2001. However, there were log productions a fter 21 September 2001, the regular


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forest charges for w hich h ave not been paid, amounting to P 15,056,054.05. [72] The same ce rtication shows

delayed payment of f orest cha rges, thereby c orroborating the testimony o f SFMS Evangelista and substantiating

the imposition o f penalties a nd surcharges.

In its M otion for R econsideration, PICOP claims t hat SFMS Evangelista is a ssigned to an office that has n othing to d owith the collection of forest charges , and that he based h is t estimony on the Memoranda o f Forest Management

Specialist II (FMS II) Teola O rlanes a nd DENR, Bislig C ity Bill Collector Amelia D . Arayan, neither of whom was

presented to testify o n h is or her Memorandum. PICOP also su bmitted an Addendum to Motion for R econsideration,

wherein it appended certied true copies o f CENRO Summaries w ith attached Official Receipts t ending to sh ow that

PICOP had paid a total of P81,184,747.70 in forest charges f or 10 Ja nuary 2 001 to 20 December 2002, including the

period during which S FMS Evangelista cl aims P ICOP did n ot pay forest charges ( 22 September 2001 to 2 6 April

2002).

Before proceeding any further, it is n ecessary for us t o point out that, as w ith our ruling on the forest protection and

reforestation plans, this d etermination of compliance with t he payment of forest charges i s e xclusively for the purpose

of determining P ICOP's sa tisfactory pe rformance on its T LA No. 43. This ca nnot bind e ither party in a possible

collection case that may e nsue.

An e valuation of the DENR Secretary's po sition on this m atter shows a h eavy reliance o n the testimony of SFMS

Evangelista, making i t imperative for us t o s trictly s crut inize the same w ith res pect to i ts c ontents a nd a dmissibility.

PICOP claims t hat SFMS Evangelista's o ffice has n othing to do with the collection of forest charges. According to

PICOP, the entity h aving a dministrative jurisdiction o ver it is C ENRO, Bislig C ity b y vi rtue o f DENR Administrative

Order N o. 96-36, dated 20 November 1996 , which st ates:

1. In o rder for t he DENR to b e a ble t o e xercise closer and m ore e ffective su pervision, management and c ontrol over

the forest resources w ithin the areas cover ed by TLA No. 43, PTLA No. 47 and IFMA No. 35 of the PICOP

Resources, Inc., (PRI) and, at the same time, provide greater facility i n the delivery of DENR services t o various

publics, the aforesaid forest holdings o f PRI are h ereby placed under the exclusive jurisdiction of DENR Region No.

XIII with the CENR Office at Bislig, Surigao del Sur, as d irectly r esponsible thereto. x x x.

We d isagree. Evangelista is an S FMS assigned a t the Natural Forest Management Division o f the F MB, DENR. In

Evangelista's a forementioned affidavit submitted a s p art of his d irect examination, Evangelista enumerated h is d uties

and functions as S FMS:

1. As S FMS, I have the following duties and functions:

a) To e valuate and act on cases p ertaining to forest management referred to in t he Natural forest Management

Division;

b) To monitor, verify a nd v alidate forest management and rel ated activities b y t imber licences a s t o t heir compliance to


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approved p lans and p rograms;

c) To conduct investigation and v erication o f compliance by timber l icenses/permittees t o e xisting DENR rules a nd

regulations;

d) To gather eld data and information to be used in the formulation of forest policies and regulations; and

e) To perform other duties a nd responsibilities a s m ay be directed by superiors.[73]

PICOP also a lleges t hat the testimony of SFMS Evangelista w as b ased 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 1 October 2002 Affidavit, [74] which w as o ffered as p art of

his t estimony, provides:

2. Sometime in S eptember, 2001 the DENR Secretary was f urnished a co py of forest Management Specialist II (FMS

II) Teola L. Orlanes' Memorandum dated September 24, 2001 concerning unopaid forest charges of PICOP.

Attached to the said Memorandum was a Memorandum dated September 19, 2001 o f 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 r eferred to the FMB Director for app ropriate a ction.

4. Thus, on August 5, 2002, I was directed by the FMB Director t o proceed to Region 13 to gather forestry-related

data a nd validate t he report contained in the Memoranda of Ms. Orlanes and Arayan.

5. On August 6, 2002, I proceeded to DENR Region 13 in Bislig C ity. A copy of my Travel Order is at tached as A nnex

3.

6. Upon my arr ival at CENRO, Bislig, surigao d el Sur, I coordinated with CENRO Officer P hilip A. Calunsag and

requested him to make available to me the records r egarding the forest products ass essments of PICOP.

7. After I was p rovided with the requested records, I evaluated and collected the data.

8. After the e valuation, I found that the u npaid forest charges a dverted to in the M emoranda o f Mr. Orlanes a nd

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 f orest charges c overing 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 a ugust 30, 2002, PICOP paid late some o f its forest charges in 1 996 a nd

consistently failed to pay late its f orest charges f rom 1997 up to the present time.

10. Under Section 7.4 o f DAO No. 80 Series o f 19787 a nd Paragraph (4a), Section 10 of BIR revenue R egulations

No. 2-81 dated November 18, 1980, PICOP is m andated to pay a surcharge of 25% per annum of the tax du e a nd


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interest of 20% per annum for l ate payment of forest charges.

11. The overdue u npaid forest charges of PICOP as sh own

76 Alvarez vs PICOP.docx

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