G.R. No. 52518 - International Hardwood and Veneer Co. of the Philippines vs. University of the Philippines

On June 28, 1966, International Hardwood and Veneer Company of the Philippines (“petitioner”) filed Civil Case No. SC-650 in the CFI Laguna seeking declaratory relief and injunction against the University of the Philippines (“UP”) and Jose C. Campos, Jr. (“respondents”), praying that UP be declared without power to supervise, scale, measure, seal timber or collect forest charges in the area covered by Republic Act No. 3990, and for damages of ₱100,000.
Respondents filed an answer on September 13, 1967, raising affirmative defenses (including improper venue) and counterclaiming for forest charges due under the National Internal Revenue Code (NIRC).
By order of August 26, 1967, the trial court set the case for pre-trial. On October 18, 1967, the parties submitted a Joint Stipulation of Facts and Joint Submission of the Case for Judgment.
On June 3, 1968, the trial court rendered judgment in favor of petitioner, declaring that RA 3990 did not empower UP to supervise or collect forest charges, and dismissed respondents’ counterclaim.
Respondents appealed to the Court of Appeals (docketed C.A.-G.R. No. 49409-R), which on December 28, 1979 elevated the case to the Supreme Court as it presented a purely legal question on the interpretation of RA 3990.

Petitioner held Timber License Agreement No. 27-A (Amendment) (Jan. 11, 1960), renewable from the original June 4, 1953 license, granting exclusive rights to cut, collect and remove timber from a 3,500-hectare tract in Quezon and Laguna, expiring February 1, 1985. Petitioner continuously possessed and developed the concession, spending over ₱7,000,000 on improvements.
Executive Proclamation No. 791 (Sept. 25, 1961) reserved for UP’s College of Agriculture a parcel of public domain (partly overlapping petitioner’s concession) as an experiment station, “subject to private rights, if any, and to the condition that the disposition of timber and other forest products found therein shall be subject to the forestry laws and regulations.”
Republic Act No. 3990 (June 18, 1964) “cedes and transfers in full ownership” to UP a 3,000-hectare parcel defined in Proclamation 791, “subject to any existing concessions, if any,” exempts station operations from all taxation, and provides that “any incidental receipts or income therefrom shall pertain to the general fund of the University of the Philippines.”
UP (through Campos) thereafter demanded that petitioner pay forest charges and royalties to UP (instead of BIR and Bureau of Forestry) and that UP personnel supervise scaling, measuring and selling of timber within the ceded area. Petitioner refused.
Inquiries and rulings followed:

A February 8, 1966 letter from Campos to the Commissioner of Internal Revenue, requesting recognition of UP’s right to forest charges;
A March 11, 1966 BIR ruling (Comm’r Vera) that the ceded land is a registered private woodland owned by UP and that “forest charges” under licensing agreements are part of royalties payable to UP, and refund claimable by petitioner to International Hardwood;
An April 18, 1966 letter from Campos to the Laguna District Forester forwarding the BIR ruling;
A June 7, 1966 letter from the Assistant Director of Forestry endorsing petitioner’s position against UP’s claim;
A June 30, 1966 letter-ruling by the Director of Forestry (Quejada) permitting turnover of scaling work to UP scalers, subject to guarding against smuggling.

Whether forest charges due under Timber License Agreement No. 27-A (Amendment) must, as of the filing of the case, be paid to the Bureau of Internal Revenue or to the University of the Philippines.
If forest charges are to be paid to UP, whether UP is entitled to supervise, through its duly appointed personnel, the logging, felling, removal and scaling of timber within the area covered by Republic Act No. 3990.