INTERNATIONAL HARDWOOD AND VENEER COMPANY OF THE PHILIPPINES, PETITIONER-APPELLEE, VS. UNIVERSITY OF THE PHILIPPINES AND JOSE C. CAMPOS, JR., RESPONDENTS-APPELLANTS.

From an adverse decision of the then Court of First Instance (now
RTC) Laguna dated 3 June 1968
in a special civil action for declaratory relief with injunction, Civil Case
No. SC-650 entitled International Hardwood and Veneer Company of the Philippines
vs. University of the Philippines
and Jose Campos, the dispositive portion of which
reads:

“WHEREFORE, the Court hereby renders judgment in favor of
petitioner and against the respondents:

(a) Declaring that
Rep. Act No. 3990 does not empower the University of the Philippines, in lieu
of the Bureau of Internal Revenue and Bureau of Forestry, to scale, measure and
seal the timber cut by the petitioner within the tract of land referred to in
said Act, and collect the corresponding forest charges prescribed by the
National Internal Revenue Code therefor; and

(b) Dismissing the
respondents’ counterclaim.”

respondents appealed to the Court of
Appeals.  The appeal was docketed as
C.A.-G.R. No. 49409-R.

After the parties filed their respective Briefs in 1971, the Court
of Appeals (Sixth Division) promulgated on 28 December 1979 a resolution
elevating the case to this Court as the “entire case hinges on the
interpretation and construction of Republic Act 3990 as it applies to a set of
facts which are not disputed by the parties and therefore, is a legal
question.”^[1]

Civil Case No. SC-650 was filed by petitioner Hardwood before the
trial court on 28 June 1966.^[2]
Petitioner seeks therein a declaration that respondent University of the
Philippines (hereafter referred to as UP) does not have the right to supervise
and regulate the cutting and removal of timber and other forest products, to
scale, measure and seal the timber cut and/or to collect forest charges,
reforestation fees and royalties from petitioner and/or impose any other duty
or burden upon the latter in that portion of its concession, covered by License
Agreement No. 27-A issued on 1 February 1963, ceded in full ownership to the UP
by Republic Act No. 3990; asks that respondents be enjoined from committing the
acts complained of; and prays that respondents be required to pay petitioner
the sum of P100,000.00 as damages and costs of the suit.

Its motion to dismiss on the ground of improper venue having been
unfavorably acted upon, and pursuant to the order of the trial court of 26
August 1967, respondents filed their Answer on 13 September 1987,^[3]
wherein they interpose the affirmative defenses of, among others, improper
venue and that the petition states no cause of action; they further set up a
counterclaim for the payment to it by petitioner of forest charges on the
forest products cut and felled within the area ceded to UP under R.A. No. 3990
from 18 June 1964, with surcharges and interests as provided in the National
Internal Revenue Code.

Petitioner filed a Reply and Answer to Counterclaim.^[4]

On 18 October 1967,
the parties submitted a Joint Stipulation of Facts and Joint Submission of the
Case for Judgment,^[5]
which reads as follows:

“COME NOW the parties in the above-entitled case, by the
undersigned counsel, and respectfully submit the following JOINT STIPULATION OF
FACTS AND JOINT SUBMISSION OF THE CASE FOR JUDGMENT, without prejudice to the
presentation of evidence by either party:

x x x

2.  Plaintiff is, among others, engaged in the
manufacture, processing and exportation of plywood and was, for said purpose,
granted by the Government an exclusive license for a period of 25 years
expiring on February 1, 1985, to cut, collect and remove timber from that
portion of timber land located in the Municipalities of Infanta,
Mauban and Sampaloc
Province of Quezon and in the Municipalities of Siniloan, Pangil, Paete, Cavinti and Calauan, Province of Laguna under License Agreement No.
27-A (Amendment) issued and promulgated by the Government through the Secretary
of Agriculture and Natural Resources on January 11, 1960.  x x x;

3.  That aforementioned Timber License No. 27-A
(Amendment) is a renewal of the Timber License Agreement No. 27-A previously
granted by the Government to the plaintiff on June 4, 1953 to February
1, 1963.  x x x;

4.  Plaintiff, since June 4, 1953, continuously
up to the present, has been in peaceful possession of said timber concession
and had been felling, cutting and removing timber therefrom
pursuant to the aforementioned Timber License Agreement No. 27-A (Amendment) of
January 11, 1960;

5.  Plaintiff, on the strength of the License
Agreement executed by the Government on June 4, 1953 (License Agreement No.
27-A) and of the License Agreement No. 27-A (Amendment) of January 11, 1960,
has constructed roads and other improvements and installations of the
aforementioned area subject to the grant and purchased equipment in
implementation of the conditions contained in the aforementioned License
Agreement and has in connection therewith spent more than P7,000,000.00 as
follows:  x x x;

6.  Sometime on September 25, 1961, during the effectivity
of License Agreement No. 27-A (Amendment) of January 11, 1960, the President of the Philippines
issued Executive Proclamation No. 791 which reads as follows:

x   x   x

RESERVING FOR THE COLLEGE OF AGRICULTURE, UNIVERSITY OF THE
PHILIPPINES, AS EXPERIMENT STATION FOR THE PROPOSED DAIRY RESEARCH AND TRAINING
INSTITUTE AND FOR AGRICULTURAL RESEARCH AND PRODUCTION STUDIES OF THIS COLLEGE
A CERTAIN PARCEL OF LAND OF THE PUBLIC DOMAIN, SITUATED PARTLY IN THE
MUNICIPALITIES OF PAETE AND PAKIL PROVINCE OF LAGUNA, AND PARTLY IN THE
MUNICIPALITY OF INFANTA, PROVINCE OF QUEZON, ISLAND OF LUZON

Upon the recommendation of the Secretary of Agriculture and Natural
Resources and pursuant to the authority vested in me by law, I, Carlos P.
Garcia, President of the Philippines, do hereby withdraw from sale or
settlement and reserve for the College of Agriculture, University of the
Philippines, as experiment station for the proposed Dairy Research and
production studies of this College, a certain parcel of land of the Public
domain situated partly in the municipalities of Paete
and Pakil, province of Laguna, and partly in the
municipality of Infanta, Province of Quezon, Island of Luzon, subject to private rights, if any
there be, and to the condition that the disposition of timber and other forest
products found therein shall be subject to the forestry laws and regulations,
which parcel of land is more particularly described as follows, to wit:

x   x   x

IN WITNESS WHEREOF, I have hereunto set my hand and caused the seal
of the Republic of the Philippines
to be affixed.

Done in the City of Manila,
this 25th day of September, in the year of Our Lord, nineteen hundred and
sixty-one, and of the Independence
of the Philippines,
the sixteenth.

(SGD.) CARLOS P.
GARCIA

President of the Philippines

x   x   x

7.  That on or about June 18, 1964, during the effectivity of the aforementioned License Agreement No.
27-A (Amendment) of July 11, 1960, Republic Act No. 3990 was enacted by the
Congress of the Philippines and approved by the President of the Philippines,
which Republic Act provides as follows:

AN ACT TO ESTABLISH A CENTRAL EXPERIMENT STATION FOR THE UNIVERSITY
OF THE PHILIPPINES.

Be it enacted by the
Senate and the House of Representatives of the Philippines
in Congress assembled:

SECTION 1.  There is hereby
established a central experiment station for the use of the University of the Philippines
in connection with its research and extension functions, particularly by the College
of Agriculture, College
of Veterinary Medicine and College
of Arts and Sciences.

SEC. 2.  For this purpose,
the parcel of the public domain consisting of three thousand hectares, more or
less, located in the Municipality of Paete, Province
of Laguna, the precise boundaries of which are stated in Executive Proclamation
791, Series of 1961, is hereby ceded and transferred in full ownership to the
University of the Philippines, subject to any existing concessions, if any.

SEC. 3.  All operations and
activities carried on in the central experiment station shall be exempt from
taxation, local or general, any provision of law to the contrary
notwithstanding, and any incidental receipts or income therefrom
shall pertain to the general fund of the University of the Philippines.

SEC. 4.  This Act shall take
effect upon its approval.

Approved, June 18, 1964.

8.  That on the strength of the provisions of
Republic Act No. 3990, and prior to the institution of the present suit,
defendants have demanded, verbally as well as in writing to plaintiff:

(a) That the forest
charges due and payable by plaintiff under the License Agreement 27-A
(Amendment) referred to in paragraph 2 hereof be paid to the University of the Philippines,
instead of the Bureau of Internal Revenue; and

(b) That the selling
of any timber felled or cut by plaintiff within the boundaries of the Central
Experiment Station as defined in Republic Act No. 3990 be performed by
personnel of the University of the Philippines.

9.  That the position of the plaintiff on the
demand of the defendants was fully discussed in the letter dated April 29, 1966
of plaintiff’s lawyer addressed to the President of the University of the
Philippines, copy of which is hereto attached as Annex “A” hereof.

10. That in line
with its position as stated in paragraph 9 hereof, plaintiff has refused to
allow entry to personnel of the University of the Philippines to the Central
Experiment Station area assigned thereto for the purpose of supervising the
felling, cutting and removal of timber therein and scaling any such timber cut
and felled prior to removal;

11. That in view of
the stand taken, by plaintiff and in relation to the implementation of Republic
Act No. 3990 the defendant Business Executive sent the letter quoted below to
the Commissioner of Internal Revenue:

x   x   x

February 8, 1966

Commissioner of
Internal Revenue

Manila

Re:  Forest Charges of U.P.

Paete
Land Grant

Dear Sir:

Under Republic Act 3990 approved in June, 1964 a parcel of forest
land approximately 3,500 hectares in area was ceded in full ownership by the
government to the University of the Philippines.  This area is known as Paete
Land Grant, the title to which is presently issued in the name of the
University of the Philippines.  The law transferring the ownership to the
University of the Philippines
gives the University full rights of dominion and ownership, subject to the
existing concession of International Hardwood and Veneer Company of the Philippines.  Under the terms of this law all forest
charges due from the concessionaire should now be paid to the University of the
Philippines.  The purpose of giving this land grant to the
University is to enable us to generate income out of the land grant and
establish a research and experimental station for the Colleges of Agriculture,
Forestry, Arts and Sciences and Veterinary Medicine.

I would like, therefore, to inform you and to secure your approval
of the following matters:

1.  All forest charges paid by Interwood to the District Forester of Laguna from June,
1964 up to the present should be remitted in favor of the University of the Philippines;

2.  All forest charges presently due from Interwood shall hereafter be paid to the University of the Philippines
and lastly

3.  Hereafter the University of the Philippines
shall receive all forest charges and royalties due from any logging concession
at the land grant.

May we request that proper instructions be issued by the District
Forester of Laguna about this matter. 
Thank you.

Very truly yours,

(Sgd.)
JOSE C. CAMPOS, JR.

Business Executive

12.  That in reply to the above letter of
defendant Business Executive dated February
8, 1966, the Commissioner of Internal Revenue issued the following
letter-ruling dated March 11, 1966:

x   x   x

March 11, 1966

U.P.
Paete Land
Grant

University of the Philippines

Diliman,
Quezon City

Attn:  Jose C. Campos, Jr.

Business Executive

Gentlemen:

This has reference to your letter dated February 8, 1966 stating as follows:

x   x   x

In reply thereto, I have the honor to inform you as follows:

In accordance with Section 266 of the Tax Code as amplified by
Section 15(a) of Revenue Regulations No. 85, the Forest Products Regulations,
forest products, cut, gathered and removed from registered private woodlands are
not subject to forest charges, but they must be invoiced when removed to
another municipality or for commercial purposes in the manner prescribed by the
regulations.  As the Paete
Land Grant was ceded by law to the U.P. in full private ownership and as the
grant is manifestly to be considered registered, no forest charges are actually
due and payable on the timber cut and removed therefrom.  The forest charges purportedly to be paid by
any concessionaire under any licensing agreement entered or to be entered into
by the U.P. are, therefore, to be considered not as the charges contemplated by
the National Internal Revenue Code but as part of the royalties payable by the
concessionaires for the exploitation of the timber resources of the land grant.

Accordingly, your queries are answered viz:

1.  The University may directly collect the
supposed forest charges payable by concessionaires of the land grant.

2.  The forest charges paid by International
Hardwood and Veneer Company of the Philippines
may be refunded provided that a formal claim for the refund thereof is made
within two years from the date of payment. 
The proper claimant shall be International Hardwood and not the
University.

Very truly yours,

(Sgd.)
MISAEL P. VERA

Commissioner of
Internal Revenue

13.  That subsequently, defendant Business
Executive sent the letter quoted below to the District Forester of the province
of Laguna dated April 18, 1966:

April 18, 1966

The District Forester

Bureau of Forestry

Sta. Cruz, Laguna

Dear Sir:

Enclosed is a copy of a letter to the Commissioner of Internal
Revenue concerning the right of the University of the Philippines
to collect forest charges from the existing logging concessionaire at the
Laguna Land Grant (formerly Paete Land Grant).  This tract of forest land containing some
3,500 hectares was ceded to the University of the Philippines
in full ownership by Republic Act No. 3990, approved in June, 1964.  In view thereof, the University of the Philippines
requested that its authority over said land be recognized and that the existing
concessionaire, Interna­tional Hardwood and Veneer Company of the Philippines,
in turn pay its forest charges directly to the University instead of to the
national government.

Please take note of page ‘2’ of the enclosed letter of the
Commissioner of Internal Revenue on the official ruling of the Bureau of
Internal Revenue to the following points raised by the University:

1.  That the University of the Philippines
may now directly collect forest charges from INTERWOOD, the existing logging
concessionaire.

2.  That forest charges paid by INTERWOOD to the
Bureau of Forestry from June, 1964 up to April, 1966 shall be refunded to the
University of the Philippines.  In this manner, INTERWOOD is requested to
file a claim for the refund in the amount heretofore paid by it to be remitted
to the University of the Philippines.

On the basis of this letter to the Commissioner of Internal
Revenue, it is understood that forest charges on timber cut from the Laguna
Land Grant as scaled by scalers of the University of
the Philippines
shall now be paid directly to the University of the Philippines.  In another ruling by the Commissioner of
Internal Revenue, the University, particularly the Laguna Land Grant, is
exempted from all kinds of Internal Revenue taxes.

Very truly yours,

(Sgd.)
Jose C. Campos, Jr.

Business Executive

14.  That the above quoted letter of defendant
Business Executive dated April 18,
1966 was duly endorsed by the District Forester of the province
of Laguna to the Director of Forestry;

15.  That on or about June 7, 1966, the Assistant Director of Forestry addressed
to plaintiff the letter dated June 7,
1966, which states as follows:

Sirs:

This is in connection with your request for this Office to comment on
your reply to the letter of Mr. Jose C. Campos, Jr. of the University of the Philippines.

In your reply to the letter of Mr. Campos, it is stated that the
University of the Philippines
is claiming the right:

(a) To scale,
measure and seal the timber cut inside the areas covered by the U.P.
Land Grant at Paete,
Laguna;

(b) To collect the
corre­sponding forest charges;

(c) To collect
royalties aside from the forest charges; and

(d) To exercise in
effect all the authority vested by law upon the Bureau of Forestry in the
cutting, removal and disposition of the timber from said area, and the
authority of the Bureau of Internal Revenue respecting the measurement and
scaling of the logs and the collection of the corresponding forest charges and
other fees in connection therewith.

This office is in full accord with your arguments against the claim
of the University of the Philippines
to have acquired the above rights.  We
believe that the right vested the INTERWOOD by virtue of Timber License
Agreement No. 27-A (Amendment) to utilize the timber inside subject area is
still binding and should therefore, be respected.  It is on the basis of this acknowledgment
that we sent your client our letter of November
4, 1965 requesting him to comment on the application of the State
University for a Special Timber
License over the said area.

16.  That acting on the endorsement referred to in
paragraph 14, the Director of Bureau of Forestry issued the letter ruling
quoted below, dated June 30, 1966:

x   x   x

June 30, 1966

District Forester

Sta. Cruz, Laguna

(Thru the
Regional Director

of Forestry, Manila)

Sir:

This concerns your inquiry contained in the 3rd paragraph of your
letter dated April 26, 1966,
designated as above, as to whether or not you shall turn over the scaling work
for logs cut from the area of the International Hardwood & Veneer Company
of the Philippines
in the Paete Land Grant to Scalers
of the University of the Philippines.

In view of the ruling of the Commissioner of Internal Revenue that
the Paete Land Grant, which embraces the area of the
International Hardwood & Veneer Company of the Philippines, is considered a
registered private woodland of the University of the Philippines and therefore
no forest charges are actually due and payable on the timber cut and removed therefrom, and in view further of the ruling of said
Commissioner that the forest charges purportedly to be paid by any
concessionaire under any licensing agreement entered or to be entered into by
the U.P. are to be considered not as the charges contemplated by the National
Internal Revenue Code but as part of the royalties payable by the
concessionaires for the exploitation of the timber resources of the land grant,
you may turn over the scaling work therein to the scalers
of the U.P.

However, you should guard against the use of such licensing
agreements entered or to be entered into by the U.P. as a means of smuggling
forest products from the neighboring public forests.

Very truly yours,

(SGD.) ANTONIO A.
QUEJADA

x   x   x

On the basis of the above JOINT STIPULATION OF FACTS, the pleadings
filed in the case, and whatever additional evidence may be presented by the
parties, the parties hereto, through counsel, jointly move and pray of this
Honorable Court that judgment be rendered granting full and appropriate relief,
on the following issues:

1.  Whether plaintiff, as of the date of present
case was filed, should pay forest charges due and payable under its Timber
License Agreement No. 27-A (Amendment) as set forth in paragraph 2 hereof, to
the Bureau of Internal Revenue, or to the University of the Philippines; and

2.  In the event that it be found by this
Honorable Court that said forest charges are to be paid to the University of
the Philippines, whether or not the University of the Philippines is entitled
to supervise, through its duly appointed personnel, the logging, felling and
removal of timber within the Central Experiment Station area as described in
Republic Act No. 3990, and to scale the timber thus felled and cut.

Manila for Laguna, September 29, 1967.”

Upon the foregoing Stipulation of Facts, the trial court rendered
its judgment on 3 June 1968
in favor of the petitioner, the dispositive portion
of which is quoted at the beginning of this decision.  In deciding the case against UP, it held:

“x x x the court finds that the respondents’ demand on
the petitioner has no legal basis.  In
the first place, the cession in full ownership of the tract of land referred to
in the Act was expressly made ‘subject to any existing concessions.’ Inasmuch
as at the time of the enactment of the Act, the petitioner’s timber concession
over the tract of land was existing and would continue to exist until February
1, 1985, the University of the Philippines will acquire ‘full ownership’ and
exclusive jurisdiction to control and administer the property only after
February 1, 1985.  The cession of the
property to the University of the Philippines
is akin to the donation of a parcel of land, subject to usufruct.  The donee acquires
full ownership thereof only upon the termination of the usufruct.  At the time of the donation, all what the donee acquires is the ‘naked’ ownership of the property
donated.  In the second place, the
respondents’ demand cannot be valid unless the provisions of Secs. 262 to 276 of the National Internal Revenue Code
regarding the measuring of timber cut from the forest and the collection of the
prescribed forest charges by the Bureau of Internal Revenue and Bureau of
Forestry are first amended.  In their
arguments, the respondents tried to stretch the scope of the provisions of
Republic Act No. 3990 in order to include therein such amendment of the
provisions of the National Internal Revenue Code and Revised Administrative
Code, but they failed to convince the Court, not only because of the first
reason above stated, but also because it clearly appears that such amendment is
not intended in Republic Act No. 3990, which does not contain even a remote
allusion thereto in its title or a general amendatory provision at the end.  In the third place, under Republic Act No.
3990, the University of the Philippines cannot legally use the tract of land
ceded to it for purposes other than those therein expressly provided, namely,
‘for the use of the University of the Philippines in connection with its
research and extension functions, particularly by the College of Agriculture,
College of Veterinary Medicine and College of Arts and Sciences.’ Hence, upon
the expiration of the petitioner’s timber concession, the University of the
Philippines cannot even legally renew it or grant timber concession over the
whole tract of land or over portions thereof to other private individuals and
exercise the functions of the Bureau of Internal Revenue and Bureau of Forestry
by scaling and measuring the timber cut within the area and collecting from
them the forest charges prescribed by the National Internal Revenue Code.”

Respondents claim in their Brief that the trial court erred:

“I

x x x WHEN IT
DID NOT DISMISS THE PETITION FOR DECLARATORY RELIEF WITH INJUNCTION INSPITE OF
ITS INHERENT JURISDICTIONAL DEFECTS THAT SHOULD WARRANT A DISMISSAL.

II

x x x WHEN IT
DECLARED THAT REPUBLIC ACT NO. 3990 DOES NOT EMPOWER THE RESPONDENT UNIVERSITY
OF THE PHILIPPINES, IN LIEU OF THE BUREAU OF INTERNAL REVENUE AND BUREAU OF
FORESTRY, TO SCALE, MEASURE AND SEAL THE TIMBER CUT BY THE PETITIONER WITHIN
THE TRACT OF LAND REFERRED TO IN SAID ACT, AND COLLECT THE CORRESPONDING FOREST
CHARGES PRESCRIBED BY THE NATIONAL INTERNAL REVENUE CODE.”

1. The first assigned error is without merit.  In the Joint Stipulation of Facts, the
parties jointly move and pray that the trial court render judgment “granting
full and appropriate remedy on the following
issues:

‘1.  Whether plaintiff, as of the date of present
case was filed, should pay forest charges due and payable under its Timber
License Agreement No. 27-A (Amendment) as set forth in paragraph 2 hereof, to
the Bureau of Internal Revenue, or to the University of the Philippines; and

2.   In the event that it be found by this Honorable
Court that said forest charges are to be paid to the University of the
Philippines, whether or not the University of the Philippines is entitled to
supervise, through its duly appointed personnel, the logging, felling and
removal of timber within the Central Experiment Station area as described in
Republic Act No. 3990, and to scale the timber thus felled.'”

These issues bring the matter within the scope of an action for
declaratory relief under Section 1, Rule 64 of the Rules of Court and render
meaningless the appeal to the rule laid down in Sarmiento,
et al. vs. Capapas, et
al.,^[6]
that declaratory relief cannot be joined by injunction, because herein
petitioner, for all legal intents and purposes, abandoned it by its failure to
raise it in the Stipulation of Facts. 
Thus, what attains is an amendment to both pleadings (the complaint and
the answer), which is authorized by Section 5, Rule 10 of the Rules of
Court.  Said section pertinently
provides:

“SEC. 5.  Amendment
to conform to or authorize presentation
of evidence. -? When issues not raised by the pleadings are
tried by express or implied consent of the parties, they shall be treated in
all respect, as if they had been raised in the pleadings.  Such amendment of the pleadings as may be
necessary to cause them to conform to the evidence and to raise these issues
may be made upon motion of any party at any time, even after judgment; but
failure to so amend does not affect the result of the trial by these
issues.  x x x.”

The stipulation of facts and the agreement as to the issues
unquestionably satisfy the requisites for declaratory relief:  (a) there must be a justiciable
controversy; (b) the controversy must be between persons whose interests are
adverse; (c) the party seeking declaratory relief must have a legal interest in
the controversy; and (d) the issue invoked must be ripe for judicial
determination.^[7]

There is a justiciable controversy
where there is an actual controversy, or the ripening seeds of
one exists between the parties, all of whom are sui juris and
before the court, and that the declaration sought will help in ending the
controversy.  A doubt becomes a justiciable controversy when it is translated into a claim
of right which is actually contested.^[8]

2. On the second assigned error, respondents assert that:  (a) Under R.A. No. 3990, the Republic of the
Philippines may effect collection of forest charges through the University of
the Philippines because the License Agreement does not expressly provide that
the forest charges shall be paid to the Bureau of Internal Revenue; in the
absence of a specific contractual provision limiting it to a particular agency
in collecting forest charges owing to it, the Republic may effect such
collection through another agency.  (b)
Having been vested with administrative jurisdiction over and being the owner of
the tract of land in question, the UP acquired full control and benefit of the
timber and other resources within the area. 
Timber areas within the ceded property but outside the concession of
petitioner can be fully exploited by UP. 
However, in respect to timber areas within the ceded property but
covered by the concession of petitioner, only forest charges (or more
appropriately, royalties) may be enjoyed by UP until the expiration of
petitioner’s license.  To deny it such
charges would render its “full ownership” empty and futile.  (c) The UP is clearly entitled to the income
derived from the tract of land ceded to it, for Section 3 of R.A. No. 3990
expressly provides:

“All operations and activities carried on
in the central experiment station shall be exempt from taxation, local or
general, any provision of law to the contrary notwithstanding, and any incidental
receipts or income therefrom shall pertain to the
general fund of the University of the Philippines.” (underscoring supplied
for emphasis).

(d)  As provided by R.A. No. 3990, the UP is duty
bound to operate and maintain a central experiment station; since this law does
not provide for appropriations for such purpose, it is clearly the legislative
intention that the establishment and maintenance thereof must be financed by
the earnings or income from the area, which can only come from the timber and
the royalties or charges payable therefrom.  This is in accordance with the general principle
that a grant of authority or jurisdiction extends to all incidents that may
arise in connection with the matter over which jurisdiction is exercised.  (e) Supervision of the License Agreement in
favor of petitioner by UP was intended by R.A. No. 3990.  (f) Finally, the two government agencies
affected by R.A. No. 3990 have issued specific rulings recognizing the
authority of UP to collect royalties or charges and to supervise petitioner’s
logging operations.

Petitioner refutes the foregoing arguments of respondents by
asserting that:  (a) The UP has not been
granted by R.A. No. 3990 the authority to collect forest charges or the
authority to supervise the operation by the petitioner of the timber concession
affected by said Act.

The rule is well-settled that legislative grants must be
construed strictly in favor of the public and most strongly against the
grantee, and nothing will be included in the grant except that which is granted
expressly or by clear implication.  Under
Section 262 of the Tax Code, as amended, the duties incident to the measuring
of forest products and the collection of the charges thereon shall be
discharged by the Bureau of Internal Revenue under the regulations of the
Department of Finance.  The reforestation
fee shall be collected by the Bureau of Forestry.^[9]
The supervision and regulation of the use of forest products and of the cutting
and removal of forest products are vested upon the Bureau of Forestry.^[10]
R.A. No. 3990 does not expressly, or even impliedly, grant the UP any authority
to collect from the holders of timber concessions on the area ceded to it
forest charges due and payable to the Government under the Tax Code, or to
enforce its provisions relating to charges on forest products or to supervise the
operations of the concessions by the holders thereof.  (b) The cession in full ownership of the land
in question was expressly made “subject to any concession, if any”,
and that petitioner’s concession would continue until 1 February 1985; the UP then would acquire full
ownership and exclusive jurisdiction to control and administer the property
only after 1 February 1985.  The position of UP is akin to that of a donee of a parcel of land subject to usufruct.  (c) The rulings of the Commissioner of
Internal Revenue and the Acting Director of the Bureau of Forestry are patently
incorrect; moreover, said agencies do not have the power to interpret the law,
which is primarily a function of the judiciary. 
(d) Finally, it has acquired a vested right to operate the timber
concession under the supervision and control of the Bureau of Forestry.

There is merit in the second assigned error.

Under Proclamation No. 791, dated 25 September 1961, a parcel of
land of the public domain described therein, with an area of 3,500 hectares,
which is the very parcel of land subject of R.A. No. 3990, was withdrawn from
sale or settlement and was reserved for the College of Agriculture of the UP as
experiment station for the proposed Dairy Research and Training Institute and
for research and production studies of said college, subject however to private
rights, if any, and to the condition that the disposition of timber and other
forest products found thereon shall be subject to forestry laws and
regulations.

The above reservation is within the area covered by petitioner’s
timber license.

Pursuant, however, to R.A. No. 3990 which establishes a central
experiment station for the use of the UP in connection with its research and
extension functions, particularly by the College of Agriculture, College of
Veterinary Medicine and College of Arts and Sciences, the above
“reserved” area was “ceded and transferred in
full ownership to the University of the
Philippines subject to any existing concessions,
if any.”

When it ceded and transferred the property
to UP, the Republic of the Philippines completely removed it from the public
domain and, more specifically, in respect to the areas covered by the timber
license of petitioner, removed and segregated it from a public forest; it
divested itself of its rights and title thereto and relinquished and conveyed
the same to the UP; and made the latter the absolute owner thereof, subject
only to the existing concession.  That
the law intended a transfer of the absolute ownership is unequivocally
evidenced by its use of the word “full” to describe it.  Full means entire, complete, or
possessing all particulars, or not wanting in any essential quality.^[11]
The proviso regarding existing concessions refers to the timber license of
petitioner.  All that it means, however,
is that the right of petitioner as a timber licensee must not be affected,
impaired or diminished; it must be respected. 
But, insofar as the Republic of the Philippines
is concerned, all its rights as grantor of the license were effectively assigned,
ceded and conveyed to UP as a consequence of the above transfer of full
ownership.  This is further borne out by
Section 3 of R.A. No. 3990 which provides, inter alia,
that “any incidental receipts or income therefrom
shall pertain to the general fund of the University of the Philippines.”
Having been effectively segregated and removed from the public domain or from a
public forest and, in effect, converted into a registered private woodland, the
authority and jurisdiction of the Bureau of Forestry over it were likewise
terminated.  This is obvious from the
fact that the condition in Proclamation No. 971 to the effect that the
disposition of timber shall be subject to forestry laws and regulations is not
reproduced in R.A. No. 3990.  The latter
does not likewise provide that it is subject to the conditions set forth in the
proclamation.  An owner has the right to
enjoy and dispose of a thing without other limitations than those established
by law.^[12]
The right to enjoy includes the jus utendi
or the right to receive from the thing what it produces, and the jus abutendi, or the right to consume the thing by its
use.^[13]
As provided for in Article 441 of the Civil Code, to the owner belongs the
natural fruits, the industrial fruits and the civil fruits.  There are, however, exceptions to this rule,
as where the property is subject to a usufruct, in which case the usufructuary gets the fruits.^[14]
In the instant case, that exception is made for the petitioner as licensee or
grantee of the concession, which has been given the license to cut, collect,
and remove timber from the area ceded and transferred to UP until 1 February
1985.  However, it has the correlative
duty and obligation to pay the forest charges, or royalties, to the new owner,
the UP, at the same rate as provided for in the Agreement.  The charges should not be paid anymore to the
Republic of the Philippines
through the Bureau of Internal Revenue because of the very nature of the
transfer as aforestated.  Consequently, even the Bureau of Internal
Revenue automatically lost its authority and jurisdiction to measure the timber
cut from the subject area and to collect forestry charges and other fees due
thereon.

The foregoing disposes of the contention of petitioner that R.A.
No. 3990 does not grant the UP the authority to collect forest charges and to
supervise the operations of its concession insofar as the property of the UP
within it is concerned.  Its argument
that it has acquired vested rights to operate its concession under the
supervision and control of the Bureau of Forestry is preposterous.  The grantor, Republic of the Philippines,
was by no means bound under the License to perpetuate the Bureau as its
agent.  Neither is there force to its
contention that legislative grants must be construed strictly in favor of the
public and most strongly against the grantee. 
The grant under R.A. No. 3990 is transfer of absolute, full and entire
ownership which leaves no room for a strict interpretation against the grantee,
the UP.  The reservation therein made is
in favor of the private party pursuant to the license, which is nevertheless
protected.  It is the concession in favor
of the petitioner which should, on the contrary, be bound by the rule.

It follows then that respondent UP is entitled to supervise, through
its duly appointed personnel, the logging, felling, and removal of timber
within the area covered by R.A. No. 3990.

IN THE LIGHT OF ALL THE FOREGOING, judgment is hereby
rendered REVERSING the decision of the trial court in Civil Case No. C-650,
rendered on 3 June 1968; DECLARING that forest charges due from and payable by
petitioner for timber cut pursuant to its License Agreement No. 27-A
(Amendment) within the area ceded and transferred to the University of the
Philippines pursuant to R.A. No. 3990 shall be paid to the University of the
Philippines; DECLARING that the University of the Philippines is entitled to
supervise, through its duly appointed personnel, the logging, felling, and
removal of timber within the aforesaid area covered by R.A. No. 3990.

Costs against petitioner.

SO ORDERED.

Fernan, C.J., Gutierrez, Jr.,
Feliciano, and Bidin,
JJ., concur.

---

^[1] Rollo, 47.

^[2]
Amended Record on Appeal, 1-14.

^[3]
Record on Appeal, 47-60.

^[4]
Amended Record on Appeal, 61-65.

^[5] Ibid.,
66-82.

^[6] 4
SCRA 816.

^[7] Delumen, et al. vs. Republic, 94 Phil. 287; Tolentino vs. Board of Accountancy, 90 Phil. 83.

^[8]
MORAN, M.V., Comments on the Rules of Court,
vol. III, 1980 ed., 153.

^[9]
Republic Act No. 115.

^[10]
Section 816 of the Revised Administrative Code.

^[11]
Black’s Law Dictionary, 5th ed., 604-605; Webster’s Third New International
Dictionary, 1986, 919.

^[12]
Article 428, Civil Code of the Philippines.

^[13]
TOLENTINO, A.M., Civil Code of the Philippines,
vol. II, 1983 ed., 42.

^[14] Op.
cit., 94.