INTERNATIONAL HARDWOOD AND VENEER COMPANY OF THE PHILIPPINES v.

UP
August 13, 1991

FACTS: International Hardwood is engaged in the manufacture, processing, and exportation of plywood.
It was granted by the Government an exclusive license for 25 years expiring on Feb 1985 to cut, collect
and remove timber from a timber land in the provinces of Quezon and Laguna.

Sometime on 1961, during the effectivity of the License Agreement, the President issued Executive
Proclamation No. 791. Under this proclamation, certain parcels of land of the public domain in Quezon
and Laguna were withdrawn from sale or settlement and were reserved for the UP College of Agriculture
as experiment station for the college.

On 1964, still during the effectivity of the License Agreement, RA 3990 was enacted establishing a
central experiment station for UP for the colleges of agriculture, veterinary medicine, arts and sciences.
Under RA 3990 the land described in Proc. 791 was fully cede to UP, subject to any existing concessions,
if any.

On the strength of RA 3990, UP demanded from Hardwood:

1. Payment of forest charges due and demandable under the License Agreement to UP, instead of
the BIR
2. That the sale of any timber felled or cut by Hardwood within the land described in RA 3990 be
performed by UP personnel

However, despite repeated demands, Hardwood refused to accede to UPs demands.

International Hardwood filed before the CFI a petition for declaratory relief seeking a declaration that UP
does NOT have the right to:
1. Supervise and regulate the cutting and removal of timber and other forest products,
2. Scale, measure and seal the timber cut and/or
3. Collect forest charges, reforestation fees and royalties from Hardwood and/or
4. Impose any other duty or burden upon the latter in that portion of its concession covered by a
License Agreement, ceded in full ownership to UP by RA 3990

UP filed its Answer:

1. Interposed affirmative defenses of improper venue and that the petition states no cause of action
2. Set up counterclaim for payment of forest charges on the forest products cut and felled within the
area ceded to UP under RA 3990

ISSUE: WON UP as owner had the right to scale, measure, and seal the timber cut by Hardwood and
collect forestry charges thereon.

HELD: YES, by virtue of the full cession of ownership to UP.

As owner, UP has the right to enjoy and dispose of the thing without other limitations than those
established by law. In this case, that exception is made for Hardwood 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 February 1985.

However, Hardwood has the correlative duty and obligation to pay the forest charges or royalties to the
new owner, UP. Thus, the charges should not be paid to the Government but to UP. 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.

Judgment is rendered reversing the decision of the trial court. Thus:

1. Forest charges due from and payable by petitioner for timber cut pursuant to its License
Agreement within the area ceded and transferred to UP pursuant to R.A. No. 3990 shall be paid to
UP;
2. UP 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.