Quezon City Regional Trial Court Judge Jose Paneda said the Paper Industries Corp. of the Philippines (Picop) had established a clear and well-defined legal right to the completion of the automatic conversion of its Timber License Agreement (TLA) No. 43 upon compliance with legal requirements.
He ordered Alvarez to sign, execute and deliver the Integrated Forest Management Agreement (IFMA) and to issue the corresponding assignment number for the area covered by TLA No. 43.
Paneda said it was clear that the law imposed a duty upon the DENR secretary, the discharge of which requires neither the exercise of official discretion or judgment.
He ruled that the presidential warranty signed by the government and Picop was a valid and subsisting contractual obligation and that there was no reason for Alvarez not to honor it.
Paneda cited Article III, Section 10 of the 1987 Constitution which provides that "no law impairing the obligation of contracts shall be passed."
In compelling Alvarez to honor contracts, the judge said that to allow him to subvert the terms of the government warranty would be to allow an arbitrary and capricious nullification of an agreement which has serious implications on the national economy.
Paneda debunked Alvarez’s claim that the warranty was an output of the martial law regime and smacked of cronyism, noting that it was entered into on July 29, 1969, long before the declaration of martial law on Sept. 21, 1972.
"A private undertaking of the nature and magnitude of the project cannot be summarily disregarded by whim and caprice of a government official," Paneda said.
Picop’s pulp and paper mill project was registered in 1968 with the Board of Investments as a preferred pioneer enterprise under Republic Act No. 5186, with warranty assuring Picop of its tenurial rights and source of raw materials as incentive for the multibillion-peso investment required for the project.
Investors hailed the court’s decision, saying the present government should honor contracts entered into and signed by its predecessors so that contracts it has signed would also be honored by its successors.