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SUPREME COURT
Manila
THIRD DIVISION
x----------------------------------------------------x
DECISION
Before us are two consolidated cases docketed as G.R. No. 168557 and G.R. No. 170628,
which were filed by petitioners FELS Energy, Inc. (FELS) and National Power Corporation
(NPC), respectively. The first is a petition for review on certiorari assailing the August 25, 2004
Decision1 of the Court of Appeals (CA) in CA-G.R. SP No. 67490 and its Resolution2 dated June
20, 2005; the second, also a petition for review on certiorari, challenges the February 9, 2005
Decision3 and November 23, 2005 Resolution4 of the CA in CA-G.R. SP No. 67491. Both
petitions were dismissed on the ground of prescription.
On January 18, 1993, NPC entered into a lease contract with Polar Energy, Inc. over 3x30 MW
diesel engine power barges moored at Balayan Bay in Calaca, Batangas. The contract,
denominated as an Energy Conversion Agreement5 (Agreement), was for a period of five years.
Article 10 reads:
10.1 RESPONSIBILITY. NAPOCOR shall be responsible for the payment of (a) all taxes, import
duties, fees, charges and other levies imposed by the National Government of the Republic of
the Philippines or any agency or instrumentality thereof to which POLAR may be or become
subject to or in relation to the performance of their obligations under this agreement (other than
(i) taxes imposed or calculated on the basis of the net income of POLAR and Personal Income
Taxes of its employees and (ii) construction permit fees, environmental permit fees and other
similar fees and charges) and (b) all real estate taxes and assessments, rates and other
charges in respect of the Power Barges.6
Subsequently, Polar Energy, Inc. assigned its rights under the Agreement to FELS. The NPC
initially opposed the assignment of rights, citing paragraph 17.2 of Article 17 of the Agreement.
On August 7, 1995, FELS received an assessment of real property taxes on the power barges
from Provincial Assessor Lauro C. Andaya of Batangas City. The assessed tax, which likewise
covered those due for 1994, amounted to ₱56,184,088.40 per annum. FELS referred the matter
to NPC, reminding it of its obligation under the Agreement to pay all real estate taxes. It then
gave NPC the full power and authority to represent it in any conference regarding the real
property assessment of the Provincial Assessor.
In a letter7 dated September 7, 1995, NPC sought reconsideration of the Provincial Assessor’s
decision to assess real property taxes on the power barges. However, the motion was denied
on September 22, 1995, and the Provincial Assessor advised NPC to pay the assessment.8 This
prompted NPC to file a petition with the Local Board of Assessment Appeals (LBAA) for the
setting aside of the assessment and the declaration of the barges as non-taxable items; it also
prayed that should LBAA find the barges to be taxable, the Provincial Assessor be directed to
make the necessary corrections.9
In its Answer to the petition, the Provincial Assessor averred that the barges were real property
for purposes of taxation under Section 199(c) of Republic Act (R.A.) No. 7160.
Before the case was decided by the LBAA, NPC filed a Manifestation, informing the LBAA that
the Department of Finance (DOF) had rendered an opinion10 dated May 20, 1996, where it is
clearly stated that power barges are not real property subject to real property assessment.
On August 26, 1996, the LBAA rendered a Resolution11 denying the petition. The fallo reads:
WHEREFORE, the Petition is DENIED. FELS is hereby ordered to pay the real estate tax in the
amount of ₱56,184,088.40, for the year 1994.
SO ORDERED.12
The LBAA ruled that the power plant facilities, while they may be classified as movable or
personal property, are nevertheless considered real property for taxation purposes because
they are installed at a specific location with a character of permanency. The LBAA also pointed
out that the owner of the barges–FELS, a private corporation–is the one being taxed, not NPC.
A mere agreement making NPC responsible for the payment of all real estate taxes and
assessments will not justify the exemption of FELS; such a privilege can only be granted to NPC
and cannot be extended to FELS. Finally, the LBAA also ruled that the petition was filed out of
time.
Aggrieved, FELS appealed the LBAA’s ruling to the Central Board of Assessment Appeals
(CBAA).
On August 28, 1996, the Provincial Treasurer of Batangas City issued a Notice of Levy and
Warrant by Distraint13over the power barges, seeking to collect real property taxes amounting to
₱232,602,125.91 as of July 31, 1996. The notice and warrant was officially served to FELS on
November 8, 1996. It then filed a Motion to Lift Levy dated November 14, 1996, praying that the
Provincial Assessor be further restrained by the CBAA from enforcing the disputed assessment
during the pendency of the appeal.
On November 15, 1996, the CBAA issued an Order14 lifting the levy and distraint on the
properties of FELS in order not to preempt and render ineffectual, nugatory and illusory any
resolution or judgment which the Board would issue.
Meantime, the NPC filed a Motion for Intervention15 dated August 7, 1998 in the proceedings
before the CBAA. This was approved by the CBAA in an Order16 dated September 22, 1998.
During the pendency of the case, both FELS and NPC filed several motions to admit bond to
guarantee the payment of real property taxes assessed by the Provincial Assessor (in the event
that the judgment be unfavorable to them). The bonds were duly approved by the CBAA.
On April 6, 2000, the CBAA rendered a Decision17 finding the power barges exempt from real
property tax. The dispositive portion reads:
WHEREFORE, the Resolution of the Local Board of Assessment Appeals of the Province of
Batangas is hereby reversed. Respondent-appellee Provincial Assessor of the Province of
Batangas is hereby ordered to drop subject property under ARP/Tax Declaration No. 018-00958
from the List of Taxable Properties in the Assessment Roll. The Provincial Treasurer of
Batangas is hereby directed to act accordingly.
SO ORDERED.18
Ruling in favor of FELS and NPC, the CBAA reasoned that the power barges belong to NPC;
since they are actually, directly and exclusively used by it, the power barges are covered by the
exemptions under Section 234(c) of R.A. No. 7160.19 As to the other jurisdictional issue, the
CBAA ruled that prescription did not preclude the NPC from pursuing its claim for tax exemption
in accordance with Section 206 of R.A. No. 7160. The Provincial Assessor filed a motion for
reconsideration, which was opposed by FELS and NPC.
In a complete volte face, the CBAA issued a Resolution20 on July 31, 2001 reversing its earlier
decision. The fallo of the resolution reads:
(a) The decision of the Board dated 6 April 2000 is hereby reversed.
(c) The resolution of the Local Board of Assessment Appeals of Batangas is hereby
affirmed,
(d) The real property tax assessment on FELS by the Provincial Assessor of Batangas is
likewise hereby affirmed.
SO ORDERED.21
FELS and NPC filed separate motions for reconsideration, which were timely opposed by the
Provincial Assessor. The CBAA denied the said motions in a Resolution22 dated October 19,
2001.
Dissatisfied, FELS filed a petition for review before the CA docketed as CA-G.R. SP No. 67490.
Meanwhile, NPC filed a separate petition, docketed as CA-G.R. SP No. 67491.
On January 17, 2002, NPC filed a Manifestation/Motion for Consolidation in CA-G.R. SP No.
67490 praying for the consolidation of its petition with CA-G.R. SP No. 67491. In a
Resolution23 dated February 12, 2002, the appellate court directed NPC to re-file its motion for
consolidation with CA-G.R. SP No. 67491, since it is the ponente of the latter petition who
should resolve the request for reconsideration.
NPC failed to comply with the aforesaid resolution. On August 25, 2004, the Twelfth Division of
the appellate court rendered judgment in CA-G.R. SP No. 67490 denying the petition on the
ground of prescription. The decretal portion of the decision reads:
WHEREFORE, the petition for review is DENIED for lack of merit and the assailed Resolutions
dated July 31, 2001 and October 19, 2001 of the Central Board of Assessment Appeals are
AFFIRMED.
SO ORDERED.24
On September 20, 2004, FELS timely filed a motion for reconsideration seeking the reversal of
the appellate court’s decision in CA-G.R. SP No. 67490.
Thereafter, NPC filed a petition for review dated October 19, 2004 before this Court, docketed
as G.R. No. 165113, assailing the appellate court’s decision in CA-G.R. SP No. 67490. The
petition was, however, denied in this Court’s Resolution25 of November 8, 2004, for NPC’s
failure to sufficiently show that the CA committed any reversible error in the challenged decision.
NPC filed a motion for reconsideration, which the Court denied with finality in a
Resolution26 dated January 19, 2005.
Meantime, the appellate court dismissed the petition in CA-G.R. SP No. 67491. It held that the
right to question the assessment of the Provincial Assessor had already prescribed upon the
failure of FELS to appeal the disputed assessment to the LBAA within the period prescribed by
law. Since FELS had lost the right to question the assessment, the right of the Provincial
Government to collect the tax was already absolute.
NPC filed a motion for reconsideration dated March 8, 2005, seeking reconsideration of the
February 5, 2005 ruling of the CA in CA-G.R. SP No. 67491. The motion was denied in a
Resolution27 dated November 23, 2005.
The motion for reconsideration filed by FELS in CA-G.R. SP No. 67490 had been earlier denied
for lack of merit in a Resolution28 dated June 20, 2005.
On August 3, 2005, FELS filed the petition docketed as G.R. No. 168557 before this Court,
raising the following issues:
A.
Whether power barges, which are floating and movable, are personal properties and therefore,
not subject to real property tax.
B.
Assuming that the subject power barges are real properties, whether they are exempt from real
estate tax under Section 234 of the Local Government Code ("LGC").
C.
Assuming arguendo that the subject power barges are subject to real estate tax, whether or not
it should be NPC which should be made to pay the same under the law.
D.
Assuming arguendo that the subject power barges are real properties, whether or not the same
is subject to depreciation just like any other personal properties.
E.
Whether the right of the petitioner to question the patently null and void real property tax
assessment on the petitioner’s personal properties is imprescriptible.29
On January 13, 2006, NPC filed its own petition for review before this Court (G.R. No. 170628),
indicating the following errors committed by the CA:
THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT THE APPEAL TO THE
LBAA WAS FILED OUT OF TIME.
II
THE COURT OF APPEALS GRAVELY ERRED IN NOT HOLDING THAT THE POWER
BARGES ARE NOT SUBJECT TO REAL PROPERTY TAXES.
III
THE COURT OF APPEALS GRAVELY ERRED IN NOT HOLDING THAT THE ASSESSMENT
ON THE POWER BARGES WAS NOT MADE IN ACCORDANCE WITH LAW.30
Considering that the factual antecedents of both cases are similar, the Court ordered the
consolidation of the two cases in a Resolution31 dated March 8, 2006.1awphi1.net
In an earlier Resolution dated February 1, 2006, the Court had required the parties to submit
their respective Memoranda within 30 days from notice. Almost a year passed but the parties
had not submitted their respective memoranda. Considering that taxes—the lifeblood of our
economy—are involved in the present controversy, the Court was prompted to dispense with
the said pleadings, with the end view of advancing the interests of justice and avoiding further
delay.
In both petitions, FELS and NPC maintain that the appeal before the LBAA was not time-barred.
FELS argues that when NPC moved to have the assessment reconsidered on September 7,
1995, the running of the period to file an appeal with the LBAA was tolled. For its part, NPC
posits that the 60-day period for appealing to the LBAA should be reckoned from its receipt of
the denial of its motion for reconsideration.
Section 226 of R.A. No. 7160, otherwise known as the Local Government Code of 1991,
provides:
SECTION 226. Local Board of Assessment Appeals. – Any owner or person having legal
interest in the property who is not satisfied with the action of the provincial, city or municipal
assessor in the assessment of his property may, within sixty (60) days from the date of receipt
of the written notice of assessment, appeal to the Board of Assessment Appeals of the province
or city by filing a petition under oath in the form prescribed for the purpose, together with copies
of the tax declarations and such affidavits or documents submitted in support of the appeal.
We note that the notice of assessment which the Provincial Assessor sent to FELS on August 7,
1995, contained the following statement:
If you are not satisfied with this assessment, you may, within sixty (60) days from the date of
receipt hereof, appeal to the Board of Assessment Appeals of the province by filing a petition
under oath on the form prescribed for the purpose, together with copies of ARP/Tax Declaration
and such affidavits or documents submitted in support of the appeal.32
Instead of appealing to the Board of Assessment Appeals (as stated in the notice), NPC opted
to file a motion for reconsideration of the Provincial Assessor’s decision, a remedy not
sanctioned by law.
The remedy of appeal to the LBAA is available from an adverse ruling or action of the provincial,
city or municipal assessor in the assessment of the property. It follows then that the
determination made by the respondent Provincial Assessor with regard to the taxability of the
subject real properties falls within its power to assess properties for taxation purposes subject to
appeal before the LBAA.33
We fully agree with the rationalization of the CA in both CA-G.R. SP No. 67490 and CA-G.R. SP
No. 67491. The two divisions of the appellate court cited the case of Callanta v. Office of the
Ombudsman,34 where we ruled that under Section 226 of R.A. No 7160,35 the last action of the
local assessor on a particular assessment shall be the notice of assessment; it is this last action
which gives the owner of the property the right to appeal to the LBAA. The procedure likewise
does not permit the property owner the remedy of filing a motion for reconsideration before the
local assessor. The pertinent holding of the Court in Callanta is as follows:
x x x [T]he same Code is equally clear that the aggrieved owners should have brought their
appeals before the LBAA. Unfortunately, despite the advice to this effect contained in their
respective notices of assessment, the owners chose to bring their requests for a
review/readjustment before the city assessor, a remedy not sanctioned by the law. To allow this
procedure would indeed invite corruption in the system of appraisal and assessment. It
conveniently courts a graft-prone situation where values of real property may be initially set
unreasonably high, and then subsequently reduced upon the request of a property owner. In the
latter instance, allusions of a possible covert, illicit trade-off cannot be avoided, and in fact can
conveniently take place. Such occasion for mischief must be prevented and excised from our
system.36
For its part, the appellate court declared in CA-G.R. SP No. 67491:
x x x. The Court announces: Henceforth, whenever the local assessor sends a notice to the
owner or lawful possessor of real property of its revised assessed value, the former shall no
longer have any jurisdiction to entertain any request for a review or readjustment. The
appropriate forum where the aggrieved party may bring his appeal is the LBAA as provided by
law. It follows ineluctably that the 60-day period for making the appeal to the LBAA runs without
interruption. This is what We held in SP 67490 and reaffirm today in SP 67491.37
To reiterate, if the taxpayer fails to appeal in due course, the right of the local government to
collect the taxes due with respect to the taxpayer’s property becomes absolute upon the
expiration of the period to appeal.38 It also bears stressing that the taxpayer’s failure to question
the assessment in the LBAA renders the assessment of the local assessor final, executory and
demandable, thus, precluding the taxpayer from questioning the correctness of the assessment,
or from invoking any defense that would reopen the question of its liability on the merits.39
In fine, the LBAA acted correctly when it dismissed the petitioners’ appeal for having been filed
out of time; the CBAA and the appellate court were likewise correct in affirming the dismissal.
Elementary is the rule that the perfection of an appeal within the period therefor is both
mandatory and jurisdictional, and failure in this regard renders the decision final and
executory.40
In the Comment filed by the Provincial Assessor, it is asserted that the instant petition is barred
by res judicata; that the final and executory judgment in G.R. No. 165113 (where there was a
final determination on the issue of prescription), effectively precludes the claims herein; and that
the filing of the instant petition after an adverse judgment in G.R. No. 165113 constitutes forum
shopping.
FELS maintains that the argument of the Provincial Assessor is completely misplaced since it
was not a party to the erroneous petition which the NPC filed in G.R. No. 165113. It avers that it
did not participate in the aforesaid proceeding, and the Supreme Court never acquired
jurisdiction over it. As to the issue of forum shopping, petitioner claims that no forum shopping
could have been committed since the elements of litis pendentia or res judicata are not present.
We do not agree.
Res judicata pervades every organized system of jurisprudence and is founded upon two
grounds embodied in various maxims of common law, namely: (1) public policy and necessity,
which makes it to the interest of the
State that there should be an end to litigation – republicae ut sit litium; and (2) the hardship on
the individual of being vexed twice for the same cause – nemo debet bis vexari et eadem causa.
A conflicting doctrine would subject the public peace and quiet to the will and dereliction of
individuals and prefer the regalement of the litigious disposition on the part of suitors to the
preservation of the public tranquility and happiness.41 As we ruled in Heirs of Trinidad De Leon
Vda. de Roxas v. Court of Appeals:42
x x x An existing final judgment or decree – rendered upon the merits, without fraud or collusion,
by a court of competent jurisdiction acting upon a matter within its authority – is conclusive on
the rights of the parties and their privies. This ruling holds in all other actions or suits, in the
same or any other judicial tribunal of concurrent jurisdiction, touching on the points or matters in
issue in the first suit.
xxx
Courts will simply refuse to reopen what has been decided. They will not allow the same parties
or their privies to litigate anew a question once it has been considered and decided with finality.
Litigations must end and terminate sometime and somewhere. The effective and efficient
administration of justice requires that once a judgment has become final, the prevailing party
should not be deprived of the fruits of the verdict by subsequent suits on the same issues filed
by the same parties.
This is in accordance with the doctrine of res judicata which has the following elements: (1) the
former judgment must be final; (2) the court which rendered it had jurisdiction over the subject
matter and the parties; (3) the judgment must be on the merits; and (4) there must be between
the first and the second actions, identity of parties, subject matter and causes of action. The
application of the doctrine of res judicata does not require absolute identity of parties but merely
substantial identity of parties. There is substantial identity of parties when there is community of
interest or privity of interest between a party in the first and a party in the second case even if
the first case did not implead the latter.43
To recall, FELS gave NPC the full power and authority to represent it in any proceeding
regarding real property assessment. Therefore, when petitioner NPC filed its petition for review
docketed as G.R. No. 165113, it did so not only on its behalf but also on behalf of FELS.
Moreover, the assailed decision in the earlier petition for review filed in this Court was the
decision of the appellate court in CA-G.R. SP No. 67490, in which FELS was the petitioner.
Thus, the decision in G.R. No. 165116 is binding on petitioner FELS under the principle of privity
of interest. In fine, FELS and NPC are substantially "identical parties" as to warrant the
application of res judicata. FELS’s argument that it is not bound by the erroneous petition filed
by NPC is thus unavailing.
On the issue of forum shopping, we rule for the Provincial Assessor. Forum shopping exists
when, as a result of an adverse judgment in one forum, a party seeks another and possibly
favorable judgment in another forum other than by appeal or special civil action or certiorari.
There is also forum shopping when a party institutes two or more actions or proceedings
grounded on the same cause, on the gamble that one or the other court would make a favorable
disposition.44
Petitioner FELS alleges that there is no forum shopping since the elements of res judicata are
not present in the cases at bar; however, as already discussed, res judicata may be properly
applied herein. Petitioners engaged in forum shopping when they filed G.R. Nos. 168557 and
170628 after the petition for review in G.R. No. 165116. Indeed, petitioners went from one court
to another trying to get a favorable decision from one of the tribunals which allowed them to
pursue their cases.
It must be stressed that an important factor in determining the existence of forum shopping is
the vexation caused to the courts and the parties-litigants by the filing of similar cases to claim
substantially the same reliefs.45 The rationale against forum shopping is that a party should not
be allowed to pursue simultaneous remedies in two different fora. Filing multiple petitions or
complaints constitutes abuse of court processes, which tends to degrade the administration of
justice, wreaks havoc upon orderly judicial procedure, and adds to the congestion of the heavily
burdened dockets of the courts.46
Thus, there is forum shopping when there exist: (a) identity of parties, or at least such parties as
represent the same interests in both actions, (b) identity of rights asserted and relief prayed for,
the relief being founded on the same facts, and (c) the identity of the two preceding particulars
is such that any judgment rendered in the pending case, regardless of which party is successful,
would amount to res judicata in the other.47
Having found that the elements of res judicata and forum shopping are present in the
consolidated cases, a discussion of the other issues is no longer necessary. Nevertheless, for
the peace and contentment of petitioners, we shall shed light on the merits of the case.
As found by the appellate court, the CBAA and LBAA power barges are real property and are
thus subject to real property tax. This is also the inevitable conclusion, considering that G.R. No.
165113 was dismissed for failure to sufficiently show any reversible error. Tax assessments by
tax examiners are presumed correct and made in good faith, with the taxpayer having the
burden of proving otherwise.48 Besides, factual findings of administrative bodies, which have
acquired expertise in their field, are generally binding and conclusive upon the Court; we will not
assume to interfere with the sensible exercise of the judgment of men especially trained in
appraising property. Where the judicial mind is left in doubt, it is a sound policy to leave the
assessment undisturbed.49 We find no reason to depart from this rule in this case.
In Consolidated Edison Company of New York, Inc., et al. v. The City of New York, et al.,50 a
power company brought an action to review property tax assessment. On the city’s motion to
dismiss, the Supreme Court of New York held that the barges on which were mounted gas
turbine power plants designated to generate electrical power, the fuel oil barges which supplied
fuel oil to the power plant barges, and the accessory equipment mounted on the barges were
subject to real property taxation.
Moreover, Article 415 (9) of the New Civil Code provides that "[d]ocks and structures which,
though floating, are intended by their nature and object to remain at a fixed place on a river,
lake, or coast" are considered immovable property. Thus, power barges are categorized as
immovable property by destination, being in the nature of machinery and other implements
intended by the owner for an industry or work which may be carried on in a building or on a
piece of land and which tend directly to meet the needs of said industry or work.51
Petitioners maintain nevertheless that the power barges are exempt from real estate tax under
Section 234 (c) of R.A. No. 7160 because they are actually, directly and exclusively used by
petitioner NPC, a government- owned and controlled corporation engaged in the supply,
generation, and transmission of electric power.
We affirm the findings of the LBAA and CBAA that the owner of the taxable properties is
petitioner FELS, which in fine, is the entity being taxed by the local government. As stipulated
under Section 2.11, Article 2 of the Agreement:
OWNERSHIP OF POWER BARGES. POLAR shall own the Power Barges and all the fixtures,
fittings, machinery and equipment on the Site used in connection with the Power Barges which
have been supplied by it at its own cost. POLAR shall operate, manage and maintain the Power
Barges for the purpose of converting Fuel of NAPOCOR into electricity.52
It follows then that FELS cannot escape liability from the payment of realty taxes by invoking its
exemption in Section 234 (c) of R.A. No. 7160, which reads:
SECTION 234. Exemptions from Real Property Tax. – The following are exempted from
payment of the real property tax:
xxx
(c) All machineries and equipment that are actually, directly and exclusively used by local water
districts and government-owned or controlled corporations engaged in the supply and
distribution of water and/or generation and transmission of electric power; x x x
Indeed, the law states that the machinery must be actually, directly and exclusively used by the
government owned or controlled corporation; nevertheless, petitioner FELS still cannot find
solace in this provision because Section 5.5, Article 5 of the Agreement provides:
OPERATION. POLAR undertakes that until the end of the Lease Period, subject to the supply of
the necessary Fuel pursuant to Article 6 and to the other provisions hereof, it will operate the
Power Barges to convert such Fuel into electricity in accordance with Part A of Article 7.53
It is a basic rule that obligations arising from a contract have the force of law between the
parties. Not being contrary to law, morals, good customs, public order or public policy, the
parties to the contract are bound by its terms and conditions.54
Time and again, the Supreme Court has stated that taxation is the rule and exemption is the
exception.55 The law does not look with favor on tax exemptions and the entity that would seek
to be thus privileged must justify it by words too plain to be mistaken and too categorical to be
misinterpreted.56 Thus, applying the rule of strict construction of laws granting tax exemptions,
and the rule that doubts should be resolved in favor of provincial corporations, we hold that
FELS is considered a taxable entity.
The mere undertaking of petitioner NPC under Section 10.1 of the Agreement, that it shall be
responsible for the payment of all real estate taxes and assessments, does not justify the
exemption. The privilege granted to petitioner NPC cannot be extended to FELS. The covenant
is between FELS and NPC and does not bind a third person not privy thereto, in this case, the
Province of Batangas.
It must be pointed out that the protracted and circuitous litigation has seriously resulted in the
local government’s deprivation of revenues. The power to tax is an incident of sovereignty and
is unlimited in its magnitude, acknowledging in its very nature no perimeter so that security
against its abuse is to be found only in the responsibility of the legislature which imposes the tax
on the constituency who are to pay for it.57 The right of local government units to collect taxes
due must always be upheld to avoid severe tax erosion. This consideration is consistent with the
State policy to guarantee the autonomy of local governments58 and the objective of the Local
Government Code that they enjoy genuine and meaningful local autonomy to empower them to
achieve their fullest development as self-reliant communities and make them effective partners
in the attainment of national goals.59
In conclusion, we reiterate that the power to tax is the most potent instrument to raise the
needed revenues to finance and support myriad activities of the local government units for the
delivery of basic services essential to the promotion of the general welfare and the
enhancement of peace, progress, and prosperity of the people.60
WHEREFORE, the Petitions are DENIED and the assailed Decisions and Resolutions
AFFIRMED.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
LABRADOR, J.:
This is a petition for the review of the decision of the Court of Tax Appeals in C.T.A. Case No.
710 holding that the petitioner Mindanao Bus Company is liable to the payment of the realty tax
on its maintenance and repair equipment hereunder referred to.
Respondent City Assessor of Cagayan de Oro City assessed at P4,400 petitioner's above-
mentioned equipment. Petitioner appealed the assessment to the respondent Board of Tax
Appeals on the ground that the same are not realty. The Board of Tax Appeals of the City
sustained the city assessor, so petitioner herein filed with the Court of Tax Appeals a petition for
the review of the assessment.
In the Court of Tax Appeals the parties submitted the following stipulation of facts:
Petitioner and respondents, thru their respective counsels agreed to the following
stipulation of facts:
2. That petitioner has its main office and shop at Cagayan de Oro City. It maintains
Branch Offices and/or stations at Iligan City, Lanao; Pagadian, Zamboanga del Sur;
Davao City and Kibawe, Bukidnon Province;
3. That the machineries sought to be assessed by the respondent as real properties are
the following:
(c) Lathe machine with motor, appearing in the attached photograph, marked
Annex "C";
(d) Black and Decker Grinder, appearing in the attached photograph, marked
Annex "D";
4. That these machineries are sitting on cement or wooden platforms as may be seen in
the attached photographs which form part of this agreed stipulation of facts;
5. That petitioner is the owner of the land where it maintains and operates a garage for
its TPU motor trucks; a repair shop; blacksmith and carpentry shops, and with these
machineries which are placed therein, its TPU trucks are made; body constructed; and
same are repaired in a condition to be serviceable in the TPU land transportation
business it operates;
6. That these machineries have never been or were never used as industrial equipments
to produce finished products for sale, nor to repair machineries, parts and the like
offered to the general public indiscriminately for business or commercial purposes for
which petitioner has never engaged in, to date.1awphîl.nèt
The Court of Tax Appeals having sustained the respondent city assessor's ruling, and having
denied a motion for reconsideration, petitioner brought the case to this Court assigning the
following errors:
1. The Honorable Court of Tax Appeals erred in upholding respondents' contention that
the questioned assessments are valid; and that said tools, equipments or machineries
are immovable taxable real properties.
2. The Tax Court erred in its interpretation of paragraph 5 of Article 415 of the New Civil
Code, and holding that pursuant thereto the movable equipments are taxable realties, by
reason of their being intended or destined for use in an industry.
3. The Court of Tax Appeals erred in denying petitioner's contention that the respondent
City Assessor's power to assess and levy real estate taxes on machineries is further
restricted by section 31, paragraph (c) of Republic Act No. 521; and
Note that the stipulation expressly states that the equipment are placed on wooden or cement
platforms. They can be moved around and about in petitioner's repair shop. In the case of B. H.
Berkenkotter vs. Cu Unjieng, 61 Phil. 663, the Supreme Court said:
Article 344 (Now Art. 415), paragraph (5) of the Civil Code, gives the character of real
property to "machinery, liquid containers, instruments or implements intended by the
owner of any building or land for use in connection with any industry or trade being
carried on therein and which are expressly adapted to meet the requirements of such
trade or industry."
If the installation of the machinery and equipment in question in the central of the
Mabalacat Sugar Co., Inc., in lieu of the other of less capacity existing therein, for its
sugar and industry, converted them into real property by reason of their purpose, it
cannot be said that their incorporation therewith was not permanent in character
because, as essential and principle elements of a sugar central, without them the sugar
central would be unable to function or carry on the industrial purpose for which it was
established. Inasmuch as the central is permanent in character, the necessary
machinery and equipment installed for carrying on the sugar industry for which it has
been established must necessarily be permanent. (Emphasis ours.)
Similarly, the tools and equipments in question in this instant case are, by their nature, not
essential and principle municipal elements of petitioner's business of transporting passengers
and cargoes by motor trucks. They are merely incidentals — acquired as movables and used
only for expediency to facilitate and/or improve its service. Even without such tools and
equipments, its business may be carried on, as petitioner has carried on, without such
equipments, before the war. The transportation business could be carried on without the repair
or service shop if its rolling equipment is repaired or serviced in another shop belonging to
another.
The law that governs the determination of the question at issue is as follows:
Aside from the element of essentiality the above-quoted provision also requires that the industry
or works be carried on in a building or on a piece of land. Thus in the case of Berkenkotter vs.
Cu Unjieng, supra, the "machinery, liquid containers, and instruments or implements" are found
in a building constructed on the land. A sawmill would also be installed in a building on land
more or less permanently, and the sawing is conducted in the land or building.
But in the case at bar the equipments in question are destined only to repair or service the
transportation business, which is not carried on in a building or permanently on a piece of land,
as demanded by the law. Said equipments may not, therefore, be deemed real property.
Resuming what we have set forth above, we hold that the equipments in question are not
absolutely essential to the petitioner's transportation business, and petitioner's business is not
carried on in a building, tenement or on a specified land, so said equipment may not be
considered real estate within the meaning of Article 415 (c) of the Civil Code.
WHEREFORE, the decision subject of the petition for review is hereby set aside and the
equipment in question declared not subject to assessment as real estate for the purposes of the
real estate tax. Without costs.
So ordered.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
EN BANC
JUAN ANTONIO, ANNA ROSARIO and JOSE ALFONSO, all surnamed OPOSA, minors,
and represented by their parents ANTONIO and RIZALINA OPOSA, ROBERTA NICOLE
SADIUA, minor, represented by her parents CALVIN and ROBERTA SADIUA, CARLO,
AMANDA SALUD and PATRISHA, all surnamed FLORES, minors and represented by their
parents ENRICO and NIDA FLORES, GIANINA DITA R. FORTUN, minor, represented by
her parents SIGRID and DOLORES FORTUN, GEORGE II and MA. CONCEPCION, all
surnamed MISA, minors and represented by their parents GEORGE and MYRA MISA,
BENJAMIN ALAN V. PESIGAN, minor, represented by his parents ANTONIO and ALICE
PESIGAN, JOVIE MARIE ALFARO, minor, represented by her parents JOSE and MARIA
VIOLETA ALFARO, MARIA CONCEPCION T. CASTRO, minor, represented by her parents
FREDENIL and JANE CASTRO, JOHANNA DESAMPARADO,
minor, represented by her parents JOSE and ANGELA DESAMPRADO, CARLO JOAQUIN
T. NARVASA, minor, represented by his parents GREGORIO II and CRISTINE CHARITY
NARVASA, MA. MARGARITA, JESUS IGNACIO, MA. ANGELA and MARIE GABRIELLE, all
surnamed SAENZ, minors, represented by their parents ROBERTO and AURORA SAENZ,
KRISTINE, MARY ELLEN, MAY, GOLDA MARTHE and DAVID IAN, all surnamed KING,
minors, represented by their parents MARIO and HAYDEE KING, DAVID, FRANCISCO and
THERESE VICTORIA, all surnamed ENDRIGA, minors, represented by their parents
BALTAZAR and TERESITA ENDRIGA, JOSE MA. and REGINA MA., all surnamed ABAYA,
minors, represented by their parents ANTONIO and MARICA ABAYA, MARILIN, MARIO,
JR. and MARIETTE, all surnamed CARDAMA, minors, represented by their parents
MARIO and LINA CARDAMA, CLARISSA, ANN MARIE, NAGEL, and IMEE LYN, all
surnamed OPOSA, minors and represented by their parents RICARDO and MARISSA
OPOSA, PHILIP JOSEPH, STEPHEN JOHN and ISAIAH JAMES, all surnamed QUIPIT,
minors, represented by their parents JOSE MAX and VILMI QUIPIT, BUGHAW CIELO,
CRISANTO, ANNA, DANIEL and FRANCISCO, all surnamed BIBAL, minors, represented
by their parents FRANCISCO, JR. and MILAGROS BIBAL, and THE PHILIPPINE
ECOLOGICAL NETWORK, INC., petitioners,
vs.
THE HONORABLE FULGENCIO S. FACTORAN, JR., in his capacity as the Secretary of
the Department of Environment and Natural Resources, and THE HONORABLE
ERIBERTO U. ROSARIO, Presiding Judge of the RTC, Makati, Branch 66, respondents.
In a broader sense, this petition bears upon the right of Filipinos to a balanced and healthful
ecology which the petitioners dramatically associate with the twin concepts of "inter-generational
responsibility" and "inter-generational justice." Specifically, it touches on the issue of whether
the said petitioners have a cause of action to "prevent the misappropriation or impairment" of
Philippine rainforests and "arrest the unabated hemorrhage of the country's vital life support
systems and continued rape of Mother Earth."
The controversy has its genesis in Civil Case No. 90-77 which was filed before Branch 66
(Makati, Metro Manila) of the Regional Trial Court (RTC), National Capital Judicial Region. The
principal plaintiffs therein, now the principal petitioners, are all minors duly represented and
joined by their respective parents. Impleaded as an additional plaintiff is the Philippine
Ecological Network, Inc. (PENI), a domestic, non-stock and non-profit corporation organized for
the purpose of, inter alia, engaging in concerted action geared for the protection of our
environment and natural resources. The original defendant was the Honorable Fulgencio S.
Factoran, Jr., then Secretary of the Department of Environment and Natural Resources (DENR).
His substitution in this petition by the new Secretary, the Honorable Angel C. Alcala, was
subsequently ordered upon proper motion by the petitioners.1 The complaint2 was instituted as a
taxpayers' class suit3 and alleges that the plaintiffs "are all citizens of the Republic of the
Philippines, taxpayers, and entitled to the full benefit, use and enjoyment of the natural resource
treasure that is the country's virgin tropical forests." The same was filed for themselves and
others who are equally concerned about the preservation of said resource but are "so numerous
that it is impracticable to bring them all before the Court." The minors further asseverate that
they "represent their generation as well as generations yet unborn."4 Consequently, it is prayed
for that judgment be rendered:
and granting the plaintiffs ". . . such other reliefs just and equitable under the premises."5
The complaint starts off with the general averments that the Philippine archipelago of 7,100
islands has a land area of thirty million (30,000,000) hectares and is endowed with rich, lush
and verdant rainforests in which varied, rare and unique species of flora and fauna may be
found; these rainforests contain a genetic, biological and chemical pool which is irreplaceable;
they are also the habitat of indigenous Philippine cultures which have existed, endured and
flourished since time immemorial; scientific evidence reveals that in order to maintain a
balanced and healthful ecology, the country's land area should be utilized on the basis of a ratio
of fifty-four per cent (54%) for forest cover and forty-six per cent (46%) for agricultural,
residential, industrial, commercial and other uses; the distortion and disturbance of this balance
as a consequence of deforestation have resulted in a host of environmental tragedies, such as
(a) water shortages resulting from drying up of the water table, otherwise known as the
"aquifer," as well as of rivers, brooks and streams, (b) salinization of the water table as a result
of the intrusion therein of salt water, incontrovertible examples of which may be found in the
island of Cebu and the Municipality of Bacoor, Cavite, (c) massive erosion and the
consequential loss of soil fertility and agricultural productivity, with the volume of soil eroded
estimated at one billion (1,000,000,000) cubic meters per annum — approximately the size of
the entire island of Catanduanes, (d) the endangering and extinction of the country's unique,
rare and varied flora and fauna, (e) the disturbance and dislocation of cultural communities,
including the disappearance of the Filipino's indigenous cultures, (f) the siltation of rivers and
seabeds and consequential destruction of corals and other aquatic life leading to a critical
reduction in marine resource productivity, (g) recurrent spells of drought as is presently
experienced by the entire country, (h) increasing velocity of typhoon winds which result from the
absence of windbreakers, (i) the floodings of lowlands and agricultural plains arising from the
absence of the absorbent mechanism of forests, (j) the siltation and shortening of the lifespan of
multi-billion peso dams constructed and operated for the purpose of supplying water for
domestic uses, irrigation and the generation of electric power, and (k) the reduction of the
earth's capacity to process carbon dioxide gases which has led to perplexing and catastrophic
climatic changes such as the phenomenon of global warming, otherwise known as the
"greenhouse effect."
Plaintiffs further assert that the adverse and detrimental consequences of continued and
deforestation are so capable of unquestionable demonstration that the same may be submitted
as a matter of judicial notice. This notwithstanding, they expressed their intention to present
expert witnesses as well as documentary, photographic and film evidence in the course of the
trial.
CAUSE OF ACTION
8. Twenty-five (25) years ago, the Philippines had some sixteen (16) million
hectares of rainforests constituting roughly 53% of the country's land mass.
9. Satellite images taken in 1987 reveal that there remained no more than 1.2
million hectares of said rainforests or four per cent (4.0%) of the country's land
area.
10. More recent surveys reveal that a mere 850,000 hectares of virgin old-growth
rainforests are left, barely 2.8% of the entire land mass of the Philippine
archipelago and about 3.0 million hectares of immature and uneconomical
secondary growth forests.
11. Public records reveal that the defendant's, predecessors have granted timber
license agreements ('TLA's') to various corporations to cut the aggregate area of
3.89 million hectares for commercial logging purposes.
A copy of the TLA holders and the corresponding areas covered is hereto
attached as Annex "A".
12. At the present rate of deforestation, i.e. about 200,000 hectares per annum or
25 hectares per hour — nighttime, Saturdays, Sundays and holidays included —
the Philippines will be bereft of forest resources after the end of this ensuing
decade, if not earlier.
13. The adverse effects, disastrous consequences, serious injury and irreparable
damage of this continued trend of deforestation to the plaintiff minor's generation
and to generations yet unborn are evident and incontrovertible. As a matter of
fact, the environmental damages enumerated in paragraph 6 hereof are already
being felt, experienced and suffered by the generation of plaintiff adults.
14. The continued allowance by defendant of TLA holders to cut and deforest the
remaining forest stands will work great damage and irreparable injury to plaintiffs
— especially plaintiff minors and their successors — who may never see, use,
benefit from and enjoy this rare and unique natural resource treasure.
15. Plaintiffs have a clear and constitutional right to a balanced and healthful
ecology and are entitled to protection by the State in its capacity as the parens
patriae.
16. Plaintiff have exhausted all administrative remedies with the defendant's
office. On March 2, 1990, plaintiffs served upon defendant a final demand to
cancel all logging permits in the country.
A copy of the plaintiffs' letter dated March 1, 1990 is hereto attached as Annex
"B".
17. Defendant, however, fails and refuses to cancel the existing TLA's to the
continuing serious damage and extreme prejudice of plaintiffs.
18. The continued failure and refusal by defendant to cancel the TLA's is an act
violative of the rights of plaintiffs, especially plaintiff minors who may be left with
a country that is desertified (sic), bare, barren and devoid of the wonderful flora,
fauna and indigenous cultures which the Philippines had been abundantly
blessed with.
(a) to create, develop, maintain and improve conditions under which man and
nature can thrive in productive and enjoyable harmony with each other;
(b) to fulfill the social, economic and other requirements of present and future
generations of Filipinos and;
c. "conserve and promote the nation's cultural heritage and resources (sic)"
(Section 14, Article XIV, id.);
d. "protect and advance the right of the people to a balanced and healthful
ecology in accord with the rhythm and harmony of nature." (Section 16, Article
II, id.)
21. Finally, defendant's act is contrary to the highest law of humankind — the
natural law — and violative of plaintiffs' right to self-preservation and
perpetuation.
22. There is no other plain, speedy and adequate remedy in law other than the
instant action to arrest the unabated hemorrhage of the country's vital life support
systems and continued rape of Mother Earth. 6
On 22 June 1990, the original defendant, Secretary Factoran, Jr., filed a Motion to Dismiss the
complaint based on two (2) grounds, namely: (1) the plaintiffs have no cause of action against
him and (2) the issue raised by the plaintiffs is a political question which properly pertains to the
legislative or executive branches of Government. In their 12 July 1990 Opposition to the Motion,
the petitioners maintain that (1) the complaint shows a clear and unmistakable cause of action,
(2) the motion is dilatory and (3) the action presents a justiciable question as it involves the
defendant's abuse of discretion.
On 18 July 1991, respondent Judge issued an order granting the aforementioned motion to
dismiss.7 In the said order, not only was the defendant's claim — that the complaint states no
cause of action against him and that it raises a political question — sustained, the respondent
Judge further ruled that the granting of the relief prayed for would result in the impairment of
contracts which is prohibited by the fundamental law of the land.
Plaintiffs thus filed the instant special civil action for certiorari under Rule 65 of the Revised
Rules of Court and ask this Court to rescind and set aside the dismissal order on the ground
that the respondent Judge gravely abused his discretion in dismissing the action. Again, the
parents of the plaintiffs-minors not only represent their children, but have also joined the latter in
this case.8
On 14 May 1992, We resolved to give due course to the petition and required the parties to
submit their respective Memoranda after the Office of the Solicitor General (OSG) filed a
Comment in behalf of the respondents and the petitioners filed a reply thereto.
Petitioners contend that the complaint clearly and unmistakably states a cause of action as it
contains sufficient allegations concerning their right to a sound environment based on Articles
19, 20 and 21 of the Civil Code (Human Relations), Section 4 of Executive Order (E.O.) No. 192
creating the DENR, Section 3 of Presidential Decree (P.D.) No. 1151 (Philippine Environmental
Policy), Section 16, Article II of the 1987 Constitution recognizing the right of the people to a
balanced and healthful ecology, the concept of generational genocide in Criminal Law and the
concept of man's inalienable right to self-preservation and self-perpetuation embodied in natural
law. Petitioners likewise rely on the respondent's correlative obligation per Section 4 of E.O. No.
192, to safeguard the people's right to a healthful environment.
It is further claimed that the issue of the respondent Secretary's alleged grave abuse of
discretion in granting Timber License Agreements (TLAs) to cover more areas for logging than
what is available involves a judicial question.
Anent the invocation by the respondent Judge of the Constitution's non-impairment clause,
petitioners maintain that the same does not apply in this case because TLAs are not contracts.
They likewise submit that even if TLAs may be considered protected by the said clause, it is well
settled that they may still be revoked by the State when the public interest so requires.
On the other hand, the respondents aver that the petitioners failed to allege in their complaint a
specific legal right violated by the respondent Secretary for which any relief is provided by law.
They see nothing in the complaint but vague and nebulous allegations concerning an
"environmental right" which supposedly entitles the petitioners to the "protection by the state in
its capacity as parens patriae." Such allegations, according to them, do not reveal a valid cause
of action. They then reiterate the theory that the question of whether logging should be
permitted in the country is a political question which should be properly addressed to the
executive or legislative branches of Government. They therefore assert that the petitioners'
resources is not to file an action to court, but to lobby before Congress for the passage of a bill
that would ban logging totally.
As to the matter of the cancellation of the TLAs, respondents submit that the same cannot be
done by the State without due process of law. Once issued, a TLA remains effective for a
certain period of time — usually for twenty-five (25) years. During its effectivity, the same can
neither be revised nor cancelled unless the holder has been found, after due notice and hearing,
to have violated the terms of the agreement or other forestry laws and regulations. Petitioners'
proposition to have all the TLAs indiscriminately cancelled without the requisite hearing would
be violative of the requirements of due process.
Before going any further, We must first focus on some procedural matters. Petitioners instituted
Civil Case No. 90-777 as a class suit. The original defendant and the present respondents did
not take issue with this matter. Nevertheless, We hereby rule that the said civil case is indeed a
class suit. The subject matter of the complaint is of common and general interest not just to
several, but to all citizens of the Philippines. Consequently, since the parties are so numerous,
it, becomes impracticable, if not totally impossible, to bring all of them before the court. We
likewise declare that the plaintiffs therein are numerous and representative enough to ensure
the full protection of all concerned interests. Hence, all the requisites for the filing of a valid class
suit under Section 12, Rule 3 of the Revised Rules of Court are present both in the said civil
case and in the instant petition, the latter being but an incident to the former.
This case, however, has a special and novel element. Petitioners minors assert that they
represent their generation as well as generations yet unborn. We find no difficulty in ruling that
they can, for themselves, for others of their generation and for the succeeding generations, file a
class suit. Their personality to sue in behalf of the succeeding generations can only be based on
the concept of intergenerational responsibility insofar as the right to a balanced and healthful
ecology is concerned. Such a right, as hereinafter expounded, considers
the "rhythm and harmony of nature." Nature means the created world in its entirety.9 Such
rhythm and harmony indispensably include, inter alia, the judicious disposition, utilization,
management, renewal and conservation of the country's forest, mineral, land, waters, fisheries,
wildlife, off-shore areas and other natural resources to the end that their exploration,
development and utilization be equitably accessible to the present as well as future
generations. 10Needless to say, every generation has a responsibility to the next to preserve
that rhythm and harmony for the full enjoyment of a balanced and healthful ecology. Put a little
differently, the minors' assertion of their right to a sound environment constitutes, at the same
time, the performance of their obligation to ensure the protection of that right for the generations
to come.
The locus standi of the petitioners having thus been addressed, We shall now proceed to the
merits of the petition.
After a careful perusal of the complaint in question and a meticulous consideration and
evaluation of the issues raised and arguments adduced by the parties, We do not hesitate to
find for the petitioners and rule against the respondent Judge's challenged order for having
been issued with grave abuse of discretion amounting to lack of jurisdiction. The pertinent
portions of the said order reads as follows:
After a careful and circumspect evaluation of the Complaint, the Court cannot
help but agree with the defendant. For although we believe that plaintiffs have
but the noblest of all intentions, it (sic) fell short of alleging, with sufficient
definiteness, a specific legal right they are seeking to enforce and protect, or a
specific legal wrong they are seeking to prevent and redress (Sec. 1, Rule 2,
RRC). Furthermore, the Court notes that the Complaint is replete with vague
assumptions and vague conclusions based on unverified data. In fine, plaintiffs
fail to state a cause of action in its Complaint against the herein defendant.
Furthermore, the Court firmly believes that the matter before it, being impressed
with political color and involving a matter of public policy, may not be taken
cognizance of by this Court without doing violence to the sacred principle of
"Separation of Powers" of the three (3) co-equal branches of the Government.
The Court is likewise of the impression that it cannot, no matter how we stretch
our jurisdiction, grant the reliefs prayed for by the plaintiffs, i.e., to cancel all
existing timber license agreements in the country and to cease and desist from
receiving, accepting, processing, renewing or approving new timber license
agreements. For to do otherwise would amount to "impairment of contracts"
abhored (sic) by the fundamental law. 11
We do not agree with the trial court's conclusions that the plaintiffs failed to allege with sufficient
definiteness a specific legal right involved or a specific legal wrong committed, and that the
complaint is replete with vague assumptions and conclusions based on unverified data. A
reading of the complaint itself belies these conclusions.
The complaint focuses on one specific fundamental legal right — the right to a balanced and
healthful ecology which, for the first time in our nation's constitutional history, is solemnly
incorporated in the fundamental law. Section 16, Article II of the 1987 Constitution explicitly
provides:
Sec. 16. The State shall protect and advance the right of the people to a
balanced and healthful ecology in accord with the rhythm and harmony of nature.
This right unites with the right to health which is provided for in the preceding
section of the same article:
Sec. 15. The State shall protect and promote the right to health of the people and
instill health consciousness among them.
While the right to a balanced and healthful ecology is to be found under the Declaration of
Principles and State Policies and not under the Bill of Rights, it does not follow that it is less
important than any of the civil and political rights enumerated in the latter. Such a right belongs
to a different category of rights altogether for it concerns nothing less than self-preservation and
self-perpetuation — aptly and fittingly stressed by the petitioners — the advancement of which
may even be said to predate all governments and constitutions. As a matter of fact, these basic
rights need not even be written in the Constitution for they are assumed to exist from the
inception of humankind. If they are now explicitly mentioned in the fundamental charter, it is
because of the well-founded fear of its framers that unless the rights to a balanced and healthful
ecology and to health are mandated as state policies by the Constitution itself, thereby
highlighting their continuing importance and imposing upon the state a solemn obligation to
preserve the first and protect and advance the second, the day would not be too far when all
else would be lost not only for the present generation, but also for those to come — generations
which stand to inherit nothing but parched earth incapable of sustaining life.
The right to a balanced and healthful ecology carries with it the correlative duty to refrain from
impairing the environment. During the debates on this right in one of the plenary sessions of the
1986 Constitutional Commission, the following exchange transpired between Commissioner
Wilfrido Villacorta and Commissioner Adolfo Azcuna who sponsored the section in question:
MR. VILLACORTA:
MR. AZCUNA:
The said right implies, among many other things, the judicious management and conservation of
the country's forests.
This policy declaration is substantially re-stated it Title XIV, Book IV of the Administrative Code
of 1987,15 specifically in Section 1 thereof which reads:
Sec. 1. Declaration of Policy. — (1) The State shall ensure, for the benefit of the
Filipino people, the full exploration and development as well as the judicious
disposition, utilization, management, renewal and conservation of the country's
forest, mineral, land, waters, fisheries, wildlife, off-shore areas and other natural
resources, consistent with the necessity of maintaining a sound ecological
balance and protecting and enhancing the quality of the environment and the
objective of making the exploration, development and utilization of such natural
resources equitably accessible to the different segments of the present as well as
future generations.
(2) The State shall likewise recognize and apply a true value system that takes
into account social and environmental cost implications relative to the utilization,
development and conservation of our natural resources.
The above provision stresses "the necessity of maintaining a sound ecological balance and
protecting and enhancing the quality of the environment." Section 2 of the same Title, on the
other hand, specifically speaks of the mandate of the DENR; however, it makes particular
reference to the fact of the agency's being subject to law and higher authority. Said section
provides:
Both E.O. NO. 192 and the Administrative Code of 1987 have set the objectives which will serve
as the bases for policy formulation, and have defined the powers and functions of the DENR.
It may, however, be recalled that even before the ratification of the 1987 Constitution, specific
statutes already paid special attention to the "environmental right" of the present and future
generations. On 6 June 1977, P.D. No. 1151 (Philippine Environmental Policy) and P.D. No.
1152 (Philippine Environment Code) were issued. The former "declared a continuing policy of
the State (a) to create, develop, maintain and improve conditions under which man and nature
can thrive in productive and enjoyable harmony with each other, (b) to fulfill the social, economic
and other requirements of present and future generations of Filipinos, and (c) to insure the
attainment of an environmental quality that is conducive to a life of dignity and well-being." 16 As
its goal, it speaks of the "responsibilities of each generation as trustee and guardian of the
environment for succeeding generations." 17 The latter statute, on the other hand, gave flesh to
the said policy.
Thus, the right of the petitioners (and all those they represent) to a balanced and healthful
ecology is as clear as the DENR's duty — under its mandate and by virtue of its powers and
functions under E.O. No. 192 and the Administrative Code of 1987 — to protect and advance
the said right.
A denial or violation of that right by the other who has the corelative duty or obligation to respect
or protect the same gives rise to a cause of action. Petitioners maintain that the granting of the
TLAs, which they claim was done with grave abuse of discretion, violated their right to a
balanced and healthful ecology; hence, the full protection thereof requires that no further TLAs
should be renewed or granted.
. . . an act or omission of one party in violation of the legal right or rights of the
other; and its essential elements are legal right of the plaintiff, correlative
obligation of the defendant, and act or omission of the defendant in violation of
said legal right. 18
It is settled in this jurisdiction that in a motion to dismiss based on the ground that the complaint
fails to state a cause of action, 19 the question submitted to the court for resolution involves the
sufficiency of the facts alleged in the complaint itself. No other matter should be considered;
furthermore, the truth of falsity of the said allegations is beside the point for the truth thereof is
deemed hypothetically admitted. The only issue to be resolved in such a case is: admitting such
alleged facts to be true, may the court render a valid judgment in accordance with the prayer in
the complaint? 20 In Militante vs. Edrosolano, 21 this Court laid down the rule that the judiciary
should "exercise the utmost care and circumspection in passing upon a motion to dismiss on the
ground of the absence thereof [cause of action] lest, by its failure to manifest a correct
appreciation of the facts alleged and deemed hypothetically admitted, what the law grants or
recognizes is effectively nullified. If that happens, there is a blot on the legal order. The law itself
stands in disrepute."
After careful examination of the petitioners' complaint, We find the statements under the
introductory affirmative allegations, as well as the specific averments under the sub-heading
CAUSE OF ACTION, to be adequate enough to show, prima facie, the claimed violation of their
rights. On the basis thereof, they may thus be granted, wholly or partly, the reliefs prayed for. It
bears stressing, however, that insofar as the cancellation of the TLAs is concerned, there is the
need to implead, as party defendants, the grantees thereof for they are indispensable parties.
The foregoing considered, Civil Case No. 90-777 be said to raise a political question. Policy
formulation or determination by the executive or legislative branches of Government is not
squarely put in issue. What is principally involved is the enforcement of a right vis-a-vis policies
already formulated and expressed in legislation. It must, nonetheless, be emphasized that the
political question doctrine is no longer, the insurmountable obstacle to the exercise of judicial
power or the impenetrable shield that protects executive and legislative actions from judicial
inquiry or review. The second paragraph of section 1, Article VIII of the Constitution states that:
Judicial power includes the duty of the courts of justice to settle actual
controversies involving rights which are legally demandable and enforceable, and
to determine whether or not there has been a grave abuse of discretion
amounting to lack or excess of jurisdiction on the part of any branch or
instrumentality of the Government.
Commenting on this provision in his book, Philippine Political Law, 22 Mr. Justice Isagani A.
Cruz, a distinguished member of this Court, says:
The first part of the authority represents the traditional concept of judicial power,
involving the settlement of conflicting rights as conferred as law. The second part
of the authority represents a broadening of judicial power to enable the courts of
justice to review what was before forbidden territory, to wit, the discretion of the
political departments of the government.
As worded, the new provision vests in the judiciary, and particularly the Supreme
Court, the power to rule upon even the wisdom of the decisions of the executive
and the legislature and to declare their acts invalid for lack or excess of
jurisdiction because tainted with grave abuse of discretion. The catch, of course,
is the meaning of "grave abuse of discretion," which is a very elastic phrase that
can expand or contract according to the disposition of the judiciary.
In Daza vs. Singson, 23 Mr. Justice Cruz, now speaking for this Court, noted:
In the case now before us, the jurisdictional objection becomes even less tenable
and decisive. The reason is that, even if we were to assume that the issue
presented before us was political in nature, we would still not be precluded from
revolving it under the expanded jurisdiction conferred upon us that now covers, in
proper cases, even the political question. Article VII, Section 1, of the
Constitution clearly provides: . . .
The last ground invoked by the trial court in dismissing the complaint is the non-impairment of
contracts clause found in the Constitution. The court a quo declared that:
The Court is likewise of the impression that it cannot, no matter how we stretch
our jurisdiction, grant the reliefs prayed for by the plaintiffs, i.e., to cancel all
existing timber license agreements in the country and to cease and desist from
receiving, accepting, processing, renewing or approving new timber license
agreements. For to do otherwise would amount to "impairment of contracts"
abhored (sic) by the fundamental law. 24
We are not persuaded at all; on the contrary, We are amazed, if not shocked, by such a
sweeping pronouncement. In the first place, the respondent Secretary did not, for obvious
reasons, even invoke in his motion to dismiss the non-impairment clause. If he had done so, he
would have acted with utmost infidelity to the Government by providing undue and unwarranted
benefits and advantages to the timber license holders because he would have forever bound
the Government to strictly respect the said licenses according to their terms and conditions
regardless of changes in policy and the demands of public interest and welfare. He was aware
that as correctly pointed out by the petitioners, into every timber license must be read Section
20 of the Forestry Reform Code (P.D. No. 705) which provides:
. . . Provided, That when the national interest so requires, the President may
amend, modify, replace or rescind any contract, concession, permit, licenses or
any other form of privilege granted herein . . .
Needless to say, all licenses may thus be revoked or rescinded by executive action. It is
not a contract, property or a property right protested by the due process clause of the
Constitution. In Tan vs. Director of Forestry, 25 this Court held:
We reiterated this pronouncement in Felipe Ysmael, Jr. & Co., Inc. vs. Deputy Executive
Secretary: 26
Since timber licenses are not contracts, the non-impairment clause, which reads:
cannot be invoked.
In the second place, even if it is to be assumed that the same are contracts, the instant case
does not involve a law or even an executive issuance declaring the cancellation or modification
of existing timber licenses. Hence, the non-impairment clause cannot as yet be invoked.
Nevertheless, granting further that a law has actually been passed mandating cancellations or
modifications, the same cannot still be stigmatized as a violation of the non-impairment clause.
This is because by its very nature and purpose, such as law could have only been passed in the
exercise of the police power of the state for the purpose of advancing the right of the people to a
balanced and healthful ecology, promoting their health and enhancing the general welfare.
In Abe vs. Foster Wheeler
Corp. 28 this Court stated:
The reason for this is emphatically set forth in Nebia vs. New York, 29 quoted in Philippine
American Life Insurance Co. vs. Auditor General,30 to wit:
Under our form of government the use of property and the making of contracts
are normally matters of private and not of public concern. The general rule is that
both shall be free of governmental interference. But neither property rights nor
contract rights are absolute; for government cannot exist if the citizen may at will
use his property to the detriment of his fellows, or exercise his freedom of
contract to work them harm. Equally fundamental with the private right is that of
the public to regulate it in the common interest.
In short, the non-impairment clause must yield to the police power of the state. 31
Finally, it is difficult to imagine, as the trial court did, how the non-impairment clause could apply
with respect to the prayer to enjoin the respondent Secretary from receiving, accepting,
processing, renewing or approving new timber licenses for, save in cases of renewal, no
contract would have as of yet existed in the other instances. Moreover, with respect to renewal,
the holder is not entitled to it as a matter of right.
WHEREFORE, being impressed with merit, the instant Petition is hereby GRANTED, and the
challenged Order of respondent Judge of 18 July 1991 dismissing Civil Case No. 90-777 is
hereby set aside. The petitioners may therefore amend their complaint to implead as defendants
the holders or grantees of the questioned timber license agreements.
No pronouncement as to costs.
SO ORDERED.