PAPER INDUSTRIES CORPORATION OF THE PHILIPPINES, PETITIONER, VS. THE HONORABLE DEPUTY EXECUTIVE SECRETARY, THE HONORABLE SECRETARY OF NATURAL RESOURCES AND DAVAO MAHOGANY PRODUC…

Paper Industries Corporation of the Philippines versus Deputy Executive Secretary

The Case

This is a petition for certiorari under Rule 65 of the Revised Rules of Court. The petitioner, Paper Industries Corporation of the Philippines, which we shall call PICOP, asks the Supreme Court to reverse the decision of the Deputy Executive Secretary dismissing its appeal from the decision of the Minister of Natural Resources, and to reverse the resolution denying its motion for reconsideration. At bottom, the case is a boundary dispute between two adjoining timber concessionaires over a strip of public forest land, and it matters because it fixes the rule that a timber license may be corrected when it was amended to enlarge the licensee's area without notice to the adjoining concessionaire, and because it restates the deference courts owe to administrative findings of fact.

Procedural History

The dispute began when PICOP complained to the Bureau of Forest Development of an alleged encroachment by Davao Mahogany Products, Incorporated, which we shall call DMPI, into its concession area. The Ministry of Natural Resources, through then Secretary Rodolfo del Rosario, rendered a decision on November 4, 1985, declaring that the true and correct common boundary between the two concessions is the line described in PICOP's Timber License Agreement Number 43-1 and in DMPI's Ordinary Timber License Number 1122-60, ordering the correction of PICOP's Timber License Agreement Number 43-3 to exclude the contested area and to include it in DMPI's concession, lifting the moratorium insofar as DMPI was concerned, and directing PICOP to refrain from logging within the excluded area. PICOP appealed to the Office of the President, assigning four errors. On November 24, 1986, the Office of the President, through then Deputy Executive Secretary Fulgencio S. Factoran, Jr., dismissed the appeal, and on June 17, 1987, then Deputy Executive Secretary Catalino Macaraig, Jr. denied PICOP's motion for reconsideration. PICOP then came to the Supreme Court on this petition for certiorari with a prayer for a temporary restraining order, which the Court issued on August 24, 1987, enjoining the respondents from enforcing the decision of November 4, 1985.

Facts

On May 24, 1952, the government granted the Bislig Bay Lumber Company, Incorporated, now PICOP, Timber License Agreement Number 43, covering parcels of forest land in Agusan and Surigao. The license was amended in 1953 and again in 1959. In 1960, the Bureau of Forestry, headed by Artemio Genio, established on the ground the boundary line of PICOP's concession, known as the Genio line, and in 1963 that line was monumented on the ground by a land classification party. On June 30, 1969, the western boundary of PICOP's timber license agreement was amended to conform with the western boundary line established by the Bureau of Forestry, and this amendment was reflected in Timber License Agreement Number 43-3. On July 29, 1969, upon the request of the Board of Investments, then President Marcos issued a warranty establishing the boundaries of PICOP's license as described under Timber License Agreement Number 43, as amended.

For its part, DMPI acquired Ordinary Timber License Number 2456 in 1955 from its original grantee, Romualdo Repaso. The license was renewed in 1960 under Ordinary Timber License Number 1122-60 and subsequently under another number. In 1967, DMPI's concession area was consolidated with those of three other companies under a single ordinary timber license in the name of DMPI, and on September 17, 1984, that license was converted to Timber License Agreement Number 17, covering a public forest area of 22.500 hectares. PICOP's and DMPI's concession areas are adjacent to each other, with the eastern boundary of DMPI common with the western boundary of PICOP.

In a letter dated December 2, 1983, PICOP complained to the Bureau of Forest Development of DMPI's alleged encroachment, claiming that its western boundary is the Genio line and that DMPI had recognized that boundary in a letter dated September 19, 1975. DMPI disputed the claim, insisting that its common boundary with PICOP is the line described under its Ordinary Timber License Number 1122-60 and PICOP's Timber License Agreement Number 43-1, not the line under the latter's Timber License Agreement Number 43-3. The Ministry found that the amendment in Timber License Agreement Number 43-3 moved PICOP's boundary 2,160 meters further west into DMPI's eastern boundary, diminishing DMPI's concession by about 2,058 hectares, and that this was done without notice to DMPI. The Ministry also found that DMPI's letter of September 29, 1975 recognized the boundary under Timber License Agreement Number 43-1, not that under Number 43-3.

Issues

• Whether or not the Deputy Executive Secretary gravely abused his discretion in affirming the finding that the true and correct boundary between the concessions is the line described in PICOP's Timber License Agreement Number 43-1 and DMPI's Ordinary Timber License Number 1122-60.
• Whether or not the correction of PICOP's Timber License Agreement Number 43-3, so as to exclude the contested area and include it in DMPI's concession, was a valid exercise of administrative authority.
• Whether or not DMPI was estopped from questioning the common boundary by reason of its letter recognizing PICOP's boundary.
• Whether or not DMPI had a valid timber license at the time the proceedings were commenced.

Applicable Provisions

Section 18, Book VII, Chapter 11 of the Administrative Code of 1987 provides:

Section 18. Non-Expiration of License. Where the licensee has made timely and sufficient application for the renewal of a license with reference to any activity of a continuing nature, the existing license shall not expire until the application shall have been finally determined by the agency.

This provision bears on the case because it defeats PICOP's claim that DMPI had no valid license when the dispute arose, since DMPI's license subsisted until its application for a timber license agreement was finally determined and Timber License Agreement Number 17 was executed.

Ruling

The Court held that the petition is not meritorious, and that the public respondents did not commit grave abuse of discretion and acted within their jurisdiction. On the first issue, the Court found that the true and correct boundaries are those embodied in the technical descriptions of PICOP's Timber License Agreement Number 43-1, not Number 43-3, because the adjustment in Number 43-3 moved PICOP's boundary 2,160 meters further west into DMPI's eastern boundary, diminishing DMPI's concession by about 2,058 hectares, and this was accomplished without notice to the adjoining concessionaire. The Presidential warranty of July 29, 1969 could not have referred to Number 43-3, because the total area warranted referred only to 121,587 hectares of permanent forest land and 21,580 hectares of alienable and disposable land, which was the original area under the earlier licenses, while Number 43-3 exceeded PICOP's authorized total concession area by 2,058 hectares.

On the second issue, the Court held that after finding an unauthorized increase in PICOP's concession area, the correction of its license was a necessary consequence, and that the respondents did not abuse their discretion in ordering the amendment. On the third issue, the Court held that DMPI was not estopped, because its letter of September 29, 1975 expressly recognized the boundary described in the warranty of Timber License Agreement Number 43-1, not the boundary under Number 43-3. On the fourth issue, the Court held that DMPI's license did not terminate upon the expiration of its earlier ordinary timber license, since it had a pending application that was later granted under Timber License Agreement Number 17, and there was in effect a continuity in the license granted to DMPI. The Court added that even if DMPI's license had expired, this did not grant PICOP any vested right over the portion it erroneously included in its amended license. Throughout, the Court stressed that findings of fact of administrative bodies must be respected so long as they are supported by substantial evidence, even if not overwhelming or preponderant, and that purely administrative and discretionary functions may not be interfered with by the courts.

Doctrine

A timber license that is amended to enlarge the licensee's concession area without notice to the adjoining concessionaire is void as to the enlargement, and the administrative agency may correct the license to exclude the unauthorized area. The correction of a license after a finding of unauthorized increase is a necessary consequence of that finding, not an abuse of discretion. A letter recognizing a boundary under one license does not amount to recognition of a boundary under a later, amended license, so estoppel does not arise. Under Section 18, Book VII, Chapter 11 of the Administrative Code of 1987, where a licensee has made timely and sufficient application for renewal with reference to an activity of a continuing nature, the existing license does not expire until the application is finally determined. And findings of fact of administrative agencies, supported by substantial evidence, are binding on the courts, which may not substitute their own judgment on the sufficiency of the evidence.

Disposition

The petition was dismissed, the decision of the Deputy Executive Secretary affirming the decision of the Minister of Natural Resources was affirmed, and the temporary restraining order issued on August 24, 1987 was lifted.

Remember This

The single line worth memorizing is that an amendment enlarging a timber concession without notice to the adjoining licensee is unauthorized, and its correction is a necessary consequence, not an abuse of discretion. Examiners like to use this case on the deference courts give to administrative findings of fact supported by substantial evidence, and on the non-expiration of a license under Section 18 of the Administrative Code where a timely renewal application is pending.