R. B. INDUSTRIAL DEVELOPMENT COMPANY, LIMITED, AND RAY N. KITTILSTVEDT, PETITIONERS, VS. HON. MANUEL LOPEZ ENAGE, JUDGE OF THE COURT OF FIRST INSTANCE OF AGUSAN, BRANCH II, AND …

This original action for certiorari and prohibition asks us to
strike down the power of the Court of First Instance of Agusan
to proceed with its Civil Case 1087.^[1]
Petitioners R.B. Industrial Development Company, Limited (Industrial,
for short) and Ray N. Kittiltsvedt, with vehemence
say, inter alia, that private
respondent Eastern Timber Corporation (hereinafter referred to simply as Eastern)
has no cause of action against them; and, that the lower court is without
jurisdiction to take cognizance of said case. 
Petitioners expressed grave concern over the great probability that the
lower court would issue an injunction to prevent Industrial from logging within
the forest area covered by its concession. 
We, accordingly issued a cease-and-desist order upon petitioners’
application.

The present controversy has its roots in facts now to be recited.

Ray N. Kittilstvedt was granted by the
Bureau of Forestry a forest concession in Cabadbaran,
Agusan, with an area of 6,850 hectares under Ordinary
Timber License 1286-’59 (New) dated January 22, 1959 to expire on
June 30 1959.  Said
license was on its face non–transferable.  And yet, on December 22, 1959, i.e., five months and twenty-nine days
after the license expired, Eastern, at the time still in the process of
organization,^[2]
became Kittilstvedt assignee of the lapsed license
aforesaid in exchange for 400 shares with a par value of P40,000 of Eastern’s capital stock. 
Soon thereafter, that is, on March
30, 1960, Kittilstvedt sold his 400
shares in Eastern for the same consideration of P40,000 to Democrito O.
Plaza, now Eastern’s
stockholder.  Of interest is that
immediately after the transfer of the license, Kittilstvedt
was made vice-president of Eastern. 
Claim is now advanced that inspite of the fact
that Kittilstvedt is supposed to own 96.15% of the
paid-up, capital stock,^[3]
he (vice-president) did not share in the corporation’s management.

Kittilstvedt’s timber license was,
extended on March 6, 1963, denominated as Ordinary Timber License 878-’63 in
his name.  It was again renewed, likewise
in his name, on October 27, 1965,
this time as Ordinary Timber License 847-61566. 
While the license appears in Kittilstvedt’s
name, averment is made by Eastern that the expenses for the renewal of the
license such as application fees license fees, forestry bonds and other
incidental expenses were paid for by Eastern.

The day following the issuance of the last renewed license
(847-61566), or on October 28, 1965,
Kittilstvedt transferred the same to Industrial.

Industrial thus obtained its own Ordinary Timber License
981-103166 (New).

On December 21, 1965, Eastern lodged a complaint with the
Director of Forestry against R. B. Mining Co., Ltd. (instead of Industrial) and
Kittilstvedt, praying for (1) the cancellation of the
ordinary timber license allegedly issued in the name of R.B. Mining Co., Ltd.,
and (2) the issuance in lieu thereof of another license in the name of Eastern;
and (3) in the meantime, for an order stopping R.B. Mining Co., Ltd. or any
person to conduct logging operations within the forest area covered by Ordinary
Timber License 981-103166 (New).  The
remedy pursued in the Bureau of Forestry was thereafter abandoned.

Came the court case (Civil Case 1087) filed on February 4, 1966 in the court of first
instance adverted to at the beginning of this opinion.^[4]
This time, Eastern sued Kittilstvedt and Industrial
asking for the following reliefs:  (1) preliminary injunction to stop logging
operations in the area under Industrial’s timber license; (2) nullification of
the transfer of Kittilstvedt to Industrial; (3) decla­ration
that plaintiff is the owner of the said timber license appearing in the name of
Industrial; (4) directing defendants to transfer said license in Eastern’s name; and, (5) accounting by defendants of logs
and forest products, damages, attorneys’ fees, and costs.

This complaint was met by defendants’ motion to dismiss mainly
upon the two grounds heretofore mentioned. 
The court held in abeyance resolution on the motion to dismiss.  Defendants moved to reconsider.

Then, on May 2, 1967,
the trial court issued an order^[5]
(1) denying the motion to reconsider; (2) denying plaintiff’s ex–parte motion to declare defendants in default; (3)
ordering defendants to answer the complaint within the reglementary
period; and (4) setting for hearing on June
5, 1967 plaintiff’s urgent motion for preliminary injunction.

On June 1, 1967,
defendants went to the Court of Appeals on certiorari (CA-G.R.
31431-R).  Since jurisdiction was the main question
involved therein, cognizable only by the Supreme Court, the Court of Appeals,
on June 14, 1967, dismissed
the petition.

Meanwhile, on June 5, 1967, at a time when the certiorari
petition was pending consideration by the Court of Appeals, respondent judge
issued two orders:  the first,
declaring defendants in default and denying their counsel’s request to defer
the proceed­ings, and giving leave to plaintiff to present evidence before the
deputy clerk of court; the second, authorizing the deputy clerk of court
to receive plaintiff’s evidence in connection with the latter’s (Eastern’s) application for a preliminary injunction.

Defendants below, Industrial and Kittilstvedt,
lost no time in coming to this Court on certiorari and prohibition aforesaid.

We will now proceed to discuss the legal issues tendered by the
petition and the return, and the written arguments of the parties.

1. The forefront question is whether or not Eastern, plaintiff
below (respondent here), has a cause of action against defendants (herein
petitioners) Industrial and Kttlilstvedt.  For, indeed, if Eastern did not have a cause
of action, it would be futile to proceed any further.

Eastern’s cause of action is anchored
on the deed of assign­ment and affidavit both executed by Kittilstvedt
on December 29, 1959 conveying to Eastern all his rights under Ordinary Timber
License 1286-’59 (New).  But did Eastern
acquire any right under these documents to entitle it to sue for the
performance of any prestation thereunder
by Kittilstvedt?

Our answer is No. First, the license had already
expired.  There was no license to
transfer.  Second, the license
itself says that such license is non-transferable.  And Eastern is duty bound to be guided by
that prohibition.  Third, the
conveyance was illegal.  Ex dolo malo non
oritur actio.  A party to an illegal contract cannot come to
court and ask to have his illegal objects carried out.^[6]
Forestry Administrative Order No. 21, dated September 18, 1954,^[7]
expressly prohibits such transfer.  This
order reads:

“The transfer, sale or conveyance of any license, permit or
lease issued by the Director of Forestry, now or hereafter authorized under the
forest laws, rules and regulations in favor of any individual, companies or
private corporations within the period of three years
after the issuance of such license,
permit or lease, or any transaction under any guise which will allow or permit
others to enjoy the privilege granted therein, is hereby prohibited.

After the period of three years from the issuance of the license,
permit or lease, the licensee, permittee or lessee
may, with the approval of the Secretary of
Agriculture and Natural Resources, be allowed to transfer,
sell or convey his license, permit or lease in favor of qualified persons,
companies or corporations provided that the licensee, permittee or lessee has fully complied with all the
requirements of the law and the rules and regulations thereunder
promulgated by the Director of Forestry; and provided further,
that there is no evidence that such transfer, sale or conveyance is being made
for purposes of speculation”.^[8]

Forestry administrative Order No. 21 was issued by the Secretary
of Agriculture and Natural Resources upon recommendation of the Director of
Forestry on authority of Sections 79(b) and 1817 of the Revised Administrative
Code.  Judicial test has since recognized
that administrative orders of this nature have the force and effect of law.^[9]

Why then should transfer of licenses be regulated by the Bureau
of Forestry?

We look at Forestry Administrative Order No. 21 just
transcribed.  We perceive that it is not
without reason.  By Section 1824 of the
Revised Administrative Code, the governing principle is that the public forests
of the Philippines
“shall be held and administered for the protection of the public
interests, the utility and safety of the forests, and the perpetuation thereof
in productive condition by wise use”. 
This is but an echo of Section 1817 of the same Code which, speaking of
regulations of the Bureau of Forestry, states that such “regulations of
the Bureau of Forestry, with the approval of the Department Head first had,
shall, among other things, contain provisions deemed expedient or necessary to
secure the protection and conservation of the public forests in such manner as
to insure a continued supply of valuable timber and other forest products for
the future, and regulating the use and occupancy of the forests and forest
reserves, to the same end”.

We have recently said that there is the pressing need for forest
preservation, conservation, protection, development and reforestation.^[10]
“And, it is to be observed that in the adminis­trative order heretofore
adverted to, there is a discernible purpose at once laudable.  With tremendous profits that logging
operations may bring, the probability of the government having to cope with
unscrupulous loggers is not altogether remote. 
The transfer, sale or conveyance of forest concessions, so the rule
says, should not be “made for purposes of
speculation“.  One without a
legitimate purpose to operate a logging concession may obtain a license to be
able to peddle it and thus make the proverbial quick peso.  There is the other concessionaire already
with a license covering a sufficient area, who may be driven by greed to
acquire more with detriment to public interests.  Is it then too far-fetched to say that it is
the bounden duty of those called upon to enforce our forest laws to minimize,
if not totally curb, the activities or emergence of those speculators and dummies?

It is within the area of the State’s concern to encourage the
exploitation of our natural resources by honest, qualified licensees who are
willing and able to exert their utmost efforts and dare the risks and
privations concomitant to the opening of frontiers.  Like­wise, it is the State’s responsibility
to see to it that benefits accrue both to the concessionaire and the country in
general.  It is not out of place then to
say that the law may grant or withhold the transfer of timber licenses.

To repeat, Eastern seeks relief in the court below upon a
deed of conveyance of a forest license eleven months and seven days after the
issuance thereof, and after its term has expired.  This is con­trary to the prohibition in
Forestry Administrative Order No. 21.  It
is illegal, Eastern acquired no rights therefrom.  Eastern cannot compel Kittilstvedt
to comply with the terms of that contract. 
For, there is no duty where the law forbids.^[11]
And even if we concede that the transfer were valid, the same would not produce
any effect until and unless approved by the Director of
Forestry and the Secretary of Agriculture and Natural Resources.

And the suit below being one for specific performance of an
illegal conveyance will not prosper for lack of cause of action.

2. Eastern may complain about its investment.  We are in no position to bring to the surface
what has actually transpired in the relations between Eastern and Kittilstvedt.  We
observe though that the consideration in shares of stock for P40,000 was purportedly
given on December 29, 1959.  Quite interesting to note is that there is in
the record a statement that the same shares of stock were transferred by Kittilstvedt to Democrito O.
Plaza on March 30, 1960 in consideration of P40,000.  And yet, surprisingly enough, the first
payment of P10,000 (on the P40,000) was made by Democrito O.
Plaza on December 4, 1959 in cash, which according to the
receipt signed by Kittilstvedt was for “partial
payment of the purchase price of my 400 shares of stock with the Eastern Timber
Corporation”.  That payment to Kittilstvedt of P10,000, it thus appears, preceded even
the transfer of the license and the acquisition by Kittilstvedt
the stocks sold.  Not escaping our notice
also is the fact that for five years, Eastern made no Move to transfer to its
name Kittilstvedt license.  But, by its own representations to the Bureau
of Forestry and to this Court, Eastern says that it spent “for the renewal
of the license such as application fees, license fees, forestry bonds and other
incidental expenses involved in the renewal of the O. T. License issued to Kittilstvedt“.^[12]
It is a wonder, too, why, despite his clear majority in stockholdings, Kittilstvedt would complain of being shut off from Eastern’s management, when he can easily dispose of the
other directors or whip them into line.

The conduct observed by the parties but emphasizes the unique
relationship between Kittilstvedt and Eastern and the
latter’s stockholders.

Those are matters that should first
be looked into by the Bureau of
Forestry.  Then the Bureau of
Forestry, on the basis of its findings of act, must first rule on whether or
not transfer license should be allowed, and its conclusions if favorable must
be approved by the Secretary of Agriculture and Natural Resources.  It is only after all these shall have happened
– and they have not that Eastern can lay claim, if any it has, to the transfer
of the license in its name.

And again we say that Eastern has no cause of action.

3. We now come to the jurisdictional issue.  The thrust of the reliefs
sought by Eastern is that it be declared owner of the timber license now in the
name of Industrial, and that, in consequence, the transfer thereof; ay Kittilstvedt to Industrial be annulled.  But the question of whether or not Industrial’s
timber license should be cancelled and a new one issue in Eastern’s
name in lieu thereof is one, upon the facts of record,
beyond the reach of the courts.  Such a
prerogative is vested Bureau of Forestry by Section 1816 of the Revised
administrative Code.   This codal provision reads:

SEC. 1816. Jurisdiction of Bureau of Forestry.  – The Bureau of Forestry shall have
jurisdiction and authority over the demarcation, protection, manage­ment,
reproduction, reforestation, occupancy, and use of all public forests and
forest reserves and over the granting of licenses for game, and fish, and for
the taking of forest products, including stone and earth, therefrom“.

A doctrine long recognized is that where the law confines in an
administrative office the power to determine particular questions or matters,
upon the facts to be presented, the jurisdiction of such office shall prevail
over the courts.^[13]
Respondent Eastern had gone to the Bureau of Forestry.  It withdrew its complaint.  Eastern may not go to the courts of justice
which have no jurisdiction in the first instance to approve the alleged
transfer and to direct the issuance of the license in favor of Eastern.  At this stage, the jurisdiction of the court
may not be invoked.

Absent a cause of action and the lower court’s jurisdiction,
there was grave abuse of discretion in that court’s refusal to dismiss the case
under review.

For the reasons given, the petition for certiorari and prohi­bition
is hereby granted; the writ of preliminary injunction heretofore issued is made
permanent; and the respondent judge or whoever takes his place is hereby
directed to dismiss Civil Case 1087 of the Court of First Instance of Agusan, entitled “Eastern Timber Corporation,
Plaintiff, vs. Ray Kittilstvedt and R.B. Industrial
Development Company, Limited, Defendants”.

Costs against private respondent Eastern Timber Corporation.

SO ORDERED.

Concepcion, C.J., Reyes, JBL, Dizon, Makalintal, Zaldivar, Ruiz Castro, Angeles, and Fernando, JJ., concur.

^[1]
Entitled “Eastern Timber Corporation, Plaintiff, vs. Ray N. Kittilstvedt and R.B. Industrial Development Company,
Limited, Defendants”.

^[2]
It was only registered with the Securities and Exchange Commission on November 22, 1962.

^[3]
Total paid-up capital stock is P10,400.00 distributed as follows:  P10,000.00 – Ray N. Kittilstvedt;
P100.00 – Valentina D. Plaza; P100.00 – Felipe
B. Plaza;
P100.00 – Ursula A. Galido; and P100.00 – Alfredo A. Cayas.

^[4]
Civil Case 1087, entitled “Eastern Timber Corporation, Plaintiff vs. Ray
N. Kittilstvedt and R.B. Industrial Development
Company Limited, Defendants”.

^[5]
Order dated May 2, 1967 was
allegedly received by defendants on May
25, 1967.

^[6]
Bough and Bough vs Cantiveros
and Hanopol, 40 Phil. 209, 216; Rellosa
vs. Gaw Chee Hun, 93
Phil. 827, 831.

^[7]
50 O.G. No. 11, pp. 5244-5245.

^[8]
Emphasis supplied.

^[9]
Director of Forestry vs. Muñoz, L-24796, June 23, 1968, and cases
cited therein.

^[10]
Director of Forestry vs. Muñoz supra.

^[11] Gonzaga vs. Crown Life Insurance Co., 91 Phil. 10,
14.

^[12]
Complaint filed with the Bureau of Forestry, par. 9; Rollo,
p. 12, Annex A of the Petition. 
Respondents’ Answer, par. 6; Rollo, p.
56.

^[13]
See:  Pacis vs.
Averia, ????, November 29, 1966 and Romual vs.
Arca, L-20516, November 15, 1967, 1967D Phild.
373, 375, where we held that, by the rule of primacy of administrative
jurisdiction courts of first instance possess no jurisdiction over replevin cases involving property subject of seizure and
forfeiture proceedings in the Bureau of Customs.