Republic v Pagadian City Timber | Sept 16, 2008 | G.R. No. 159308 | Nachura, J.

Doctrine
- License agreements is a privilege granted by the State to a person, and are not contracts
within the purview of the due process and non-impairment of contracts clauses enshrined in the
Constitution
- Filipinos have the right to a balanced and healthful ecology, with the correlative duty to
refrain from impairing the environment
- The essence of due process is simply an opportunity to be heard, to explain ones side,
or to seek a reconsideration of the ruling complained of.
Summary
The Republic of the Philippines and Pagadian City Timber Co., Inc. executed Industrial Forest
Management Agreement (IFMA) No. R-9-040, authorizing PCT to utilize, develop, and manage 1,999.4
hectares of land in Zamboanga del Sur according to the Comprehensive Development and Management
Plan (CDMP) approved by the DENR. Some years passed, and in response to several complaints filed by
members of the Subanen tribe, the DENR decided to conduct an evaluation and assessment of the area.
The assessment revealed that PCT failed to comply with the CDMP and thus it was recommended that
the IFMA should be cancelled. This was done by the DENR, and affirmed by the Office of the President,
but the CA ruled that the IFMA was a contract that could not be unilaterally cancelled. However, the Court
held that license agreements are not contracts, and PCT was not denied due process.
FACTS
Oct. 14, 1994: Petitioner and respondent execute IFMA
Aug. 17, 1995: CDMP is approved by DENR
Oct. 8, 1998: DENR Region IX creates team to evaluate and assess IFMA in response to several
complaints filed by members of the Subanen tribe regarding PCTs failure to implement the CDMP,
disrespecting the IPs rights, and constant threat and harassment by armed men.
Oct. 22, 1998: DENR sends letter giving notice of the evaluation to be conducted
Oct. 23, 1998: DENR Evaluation Team go to IFMA site and conduct assessment, revealing the ff:
- only 98 out of 2,008 seedling hills survived
- some areas planted on belong to the Certificates of Stewardship Contracts (CSC)
- only 1 look-out tower, 1 bunkhouse, 1 stockroom, 1 dilapidated billboard poster, 1 multi-purpose
shed, 2 concrete monuments
- facilities generally below par
- only 28% of the target goal area planted
Oct. 29, 1998: DENR Evaluation Team holds exit conference, explaining findings, and asking Santiago
(the Operations Manager of PCT) if he had any questions. He had none, but only requested a copy of the
assessment.
The Evaluation Team recommended that PCT explain why they failed to develop IFMA according to the
CDMP, as well as hiring a full-time forester, and amending the boundary to exclude the areas covered by
the CSC. However, RED Mendoza submitted a memorandum to DENR Secretary Cerilles recommending
that IFMA be cancelled for PCTs failure to implement the CDMP and adopt agreements w/ communities
and relevant sectors. DENR Sec. Cerilles thus issued an Order canceling IFMA, which was affirmed by
the OP. Respondent went to the CA, which ruled in its favor, thus this petition.
ISSUES
1. W/N the CA erred in ruling that the IFMA is a contract and not a mere privilege granted by
the State

2. W/N the CA erred in ordaining that PCT can invoke prior resort to arbitration or the option
to mend its violations under IFMA
RATIO
1. YES. IFMA is a license agreement under PD 705, which defines a license as a privilege
granted by the State to a person and such is evident in the IFMA itself. Jurisprudence also
supports such a view (the various cases mentioned in Alvarez v PICOP Resources, Inc.). But
even assuming the IFMA could be a contract, the alleged property rights are not absolute.
Moreover, all Filipino citizens have the right to a balanced and healthful ecology, which has the
correlative duty to refrain from impairing the environment. The DENR is the instrumentality of the
State mandated to actualize the policy, and private rights must yield when they conflict with public
policy and common interest.
2. YES. Sec. 35 of the IFMA uses the word may which is interpreted to mean that
petitioner has the discretion whether or not to give notice and allow the option to remedy the
breach. PCT is not entitled to arbitration (under Sec. 36 of IFMA) as the cancellation was based
on Sec. 26 of DAO No. 97-04 (failure to implement CDMP and agreements w/ communities and
relevant sectors). Respondents were given the opportunity to contest the findings when the filed
the appeal and MR before the Office of the President. A party cannot feign denial of due process
where he had been afforded the opportunity to present his side.
HELD
The Court of Appeals Decision and Resolution are REVERSED and SET ASIDE;
and the DENR Order as well as the Resolutions of the Office of the President are REINSTATED and
AFFIRMED