Executive when national interests so require, Thus, they are not deemed contracts within
the purview of the due process of law clause [See section 3(ee) and 20 of Pres. Decree
No. 705, as amended, “Also, Tan vs. Director of Forestry, G.R. No. L-24548, October 27,
1983, 125 SCRA 302].”Since timber licenses are not contracts, the non-impairment clause, which reads:
“SEC. 10, No law impairing the obligation of contracts shall be passed.” 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 a 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 Aba
vs. Foster Wheeler Corp., this court stated:
“The freedom of contract, under our system of government, is not meant to be absolute.
The same is understood to be subject to reasonable legislative regulation aimed at the
promotion of public health, moral, safety and welfare. In other words, the constitutional
guaranty of non-impairment of obligations of contract is limited by the exercise of the
police power of the State, in the interest of public health, safety, moral and general
welfare.”The reason for this is emphatically set forth in Nebia vs. New York, quoted in Philippine
American Life Insurance Co. vs. Auditor General, 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.
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 for 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