Republic of the Philippines On October 19, 2004, DENR-MGB Director Horacio C.
SUPREME COURT Ramos, in response to MGB R-III Director Arnulfo V.
Manila
EN BANC
G.R. No. 175368 April 11, 2013
LEAGUE OF PROVINCES OF THE
PHILIPPINES, Petitioner,
vs.
DEPARTMENT OF ENVIRONMENT and NATURAL
RESOURCES and HON. ANGELO T. REYES, in his
capacity as Secretary of DENR, Respondents.
DECISION
PERALTA, J.:
This is a petition for certiorari, prohibition and
mandamus,1 praying that this Court order the following: ( 1)
declare as unconstitutional Section 17(b)(3)(iii) of Republic
Act (R.A.) No. 7160, otherwise known as The Local
Government Code of 1991 and Section 24 of Republic Act
(R.A.) No. 7076, otherwise known as the People's Small-
Scale Mining Act of 1991; (2) prohibit and bar respondents
from exercising control over provinces; and (3) declare as
illegal the respondent Secretary of the Department of Energy
and Natural Resources' (DENR) nullification, voiding and
cancellation of the Small-Scale Mining permits issued by the
Provincial Governor of Bulacan.
The Facts are as follows:
On March 28, 1996, Golden Falcon Mineral Exploration
Corporation (Golden Falcon) filed with the DENR Mines and
Geosciences Bureau Regional Office No. III (MGB R-III) an
Application for Financial and Technical Assistance Agreement
(FTAA) covering an area of 61,136 hectares situated in the
Municipalities of San Miguel, San Ildefonso, Norzagaray and
San Jose del Monte, Bulacan.2
On April 29, 1998, the MGB R-III issued an Order denying
Golden Falcon's Application for Financial and Technical
Assistance Agreement for failure to secure area clearances
from the Forest Management Sector and Lands Management
Sector of the DENR Regional Office No. III.3
On November 11, 1998, Golden Falcon filed an appeal with
the DENR Mines and Geosciences Bureau Central Office
(MGB-Central Office), and sought reconsideration of the
Order dated April 29, 1998.4
On February 10, 2004, while Golden Falcon's appeal was
pending, Eduardo D. Mercado, Benedicto S. Cruz, Gerardo R.
Cruz and Liberato Sembrano filed with the Provincial
Environment and Natural Resources Office (PENRO) of
Bulacan their respective Applications for Quarry Permit
(AQP), which covered the same area subject of Golden
Falcon's Application for Financial and Technical Assistance
Agreement.5
On July 16, 2004, the MGB-Central Office issued an Order
denying Golden Falcon's appeal and affirming the MGB R-III's
Order dated April 29, 1998.
On September 13, 2004, Atlantic Mines and Trading
Corporation (AMTC) filed with the PENRO of Bulacan an
Application for Exploration Permit (AEP) covering 5,281
hectares of the area covered by Golden Falcon's Application
for Financial and Technical Assistance Agreement.6
Cabantog's memorandum query dated September 8, 2004,
categorically stated that the MGB-Central Office's Order dated
July 16, 2004 became final on August 11, 2004, fifteen (15)
days after Golden Falcon received the said Order, per the
Certification dated October 8, 2004 issued by the Postmaster
II of the Philippine Postal Corporation of Cainta, Rizal.7
Through letters dated May 5 and May 10, 2005, AMTC notified
the PENRO of Bulacan and the MGB R-III Director,
respectively, that the subject Applications for Quarry Permit
fell within its (AMTC's) existing valid and prior Application for
Exploration Permit, and the the former area of Golden Falcon
was open to mining location only on August 11, 2004 per the
Memorandum dated October 19, 2004 of the MGB Director,
Central Office.8
On June 24, 2005, Ricardo Medina, Jr., PENRO of Bulacan,
indorsed AMTC's letter to the Provincial Legal Officer, Atty.
Eugenio F. Resurreccion, for his legal opinion on which date
of denial of Golden Falcon's application/appeal – April 29,
1998 or July 16, 2004 − is to be considered in the deliberation
of the Provincial Mining Regulatory Board (PMRB) for the
purpose of determining when the land subject of the
Applications for Quarry Permit could be considered open for
application.
On June 28, 2005, Provincial Legal Officer Eugenio
Resurreccion issued a legal opinion stating that the Order
dated July 16, 2004 of the MGB-Central Office was a mere
reaffirmation of the Order dated April 29, 1998 of the MGB R-
III; hence, the Order dated April 29, 1998 should be the
reckoning period of the denial of the application of Golden
Falcon.
On July 22, 2005, AMTC filed with the PMRB of Bulacan a
formal protest against the aforesaid Applications for Quarry
Permit on the ground that the subject area was already
covered by its Application for Exploration Permit.9
On August 8, 2005, MGB R-III Director Cabantog, who was
the concurrent Chairman of the PMRB, endorsed to the
Provincial Governor of Bulacan, Governor Josefina M. dela
Cruz, the aforesaid Applications for Quarry Permit that had
apparently been converted to Applications for Small-Scale
Mining Permit of Eduardo D. Mercado, Benedicto S. Cruz,
Gerardo R. Cruz and Lucila S. Valdez (formerly Liberato
Sembrano).10
On August 9, 2005, the PENRO of Bulacan issued four
memoranda recommending to Governor Dela Cruz the
approval of the aforesaid Applications for Small-Scale Mining
Permit.11
On August 10, 2005, Governor Dela Cruz issued the
corresponding Small-Scale Mining Permits in favor of
Eduardo D. Mercado, Benedicto S. Cruz, Gerardo R. Cruz and
Lucila S. Valdez.12
Subsequently, AMTC appealed to respondent DENR
Secretary the grant of the aforesaid Small-Scale Mining
Permits, arguing that: (1) The PMRB of Bulacan erred in giving
due course to the Applications for Small-Scale Mining Permit
without first resolving its formal protest; (2) The areas covered
by the Small-Scale Mining Permits fall within the area covered
by AMTC's valid prior Application for Exploration Permit; (3)
The Applications for Quarry Permit were illegally converted to
Applications for Small-Scale Mining Permit; (4) DENR-MGB
Director Horacio C. Ramos' ruling that the subject areas
became open for mining location only on August 11, 2004 was
controlling; (5) The Small-Scale Mining Permits were null and
void because they covered areas that were never declared
People's Small-Scale Mining Program sites as mandated by
Section 4 of the People's Small-Scale Mining Act of 1991; and
(6) Iron ore is not considered as one of the quarry resources,
as defined by Section 43 of the Philippine Mining Act of 1995,
which could be subjects of an Application for Quarry Permit.13
On August 8, 2006, respondent DENR Secretary rendered a
Decision14 in favor of AMTC. The DENR Secretary agreed
with MGB Director Horacio C. Ramos that the area was open
to mining location only on August 11, 2004, fifteen (15) days
after the receipt by Golden Falcon on July 27, 2004 of a copy
of the MGB-Central Office's Order dated July 16, 2004, which
Order denied Golden Falcon's appeal. According to the DENR
Secretary, the filing by Golden Falcon of the letter-appeal
suspended the finality of the Order of denial issued on April
29, 1998 by the Regional Director until the resolution of the
appeal on July 16, 2004 by the MGB-Central Office. He stated
that the Applications for Quarry Permit were filed on February
10, 2004 when the area was still closed to mining location;
hence, the Small-Scale Mining Permits granted by the PMRB
and the Governor were null and void. On the other hand, the
DENR Secretary declared that AMTC filed its Application for
Exploration Permit when the area was already open to other
mining applicants; thus, AMTC’s Application for Exploration
Permit was valid. Moreover, the DENR Secretary held that the
questioned Small-Scale Mining Permits were issued in
violation of Section 4 of R.A. No. 7076 and beyond the
authority of the Provincial Governor pursuant to Section 43 of
R.A. No. 7942, because the area was never proclaimed to be
under the People's Small-Scale Mining Program. Further, the
DENR Secretary stated that iron ore mineral is not considered
among the quarry resources.
The dispositive portion of the DENR Secretary’s Decision
reads:
WHEREFORE, the Application for Exploration Permit, AEP-
III-02-04 of Atlantic Mines and Trading Corp. is declared valid
and may now be given due course. The Small-Scale Mining
Permits, SSMP-B-002-05 of Gerardo Cruz, SSMP-B-003-05
of Eduardo D. Mercado, SSMP-B-004-05 of Benedicto S. Cruz
and SSMP-B-005-05 of Lucila S. Valdez are declared NULL
AND VOID. Consequently, the said permits are hereby
CANCELLED.15
Hence, petitioner League of Provinces filed this petition.
Petitioner is a duly organized league of local governments
incorporated under R.A. No. 7160. Petitioner declares that it
is composed of 81 provincial governments, including the
Province of Bulacan. It states that this is not an action of one
province alone, but the collective action of all provinces
through the League, as a favorable ruling will not only benefit
one province, but all provinces and all local governments.
Petitioner raises these issues:
I xxxx
WHETHER OR NOT SECTION 17(B)(3)(III) OF THE, 1991
LOCAL GOVERNMENT CODE AND SECTION 24 OF THE
PEOPLE'S SMALL-SCALE MINING ACT OF 1991 ARE
UNCONSTITUTIONAL FOR PROVIDING FOR EXECUTIVE
CONTROL AND INFRINGING UPON THE LOCAL
AUTONOMY OF PROVINCES.
II
WHETHER OR NOT THE ACT OF RESPONDENT [DENR]
IN NULLIFYING, VOIDING AND CANCELLING THE SMALL-
SCALE MINING PERMITS AMOUNTS TO EXECUTIVE
CONTROL, NOT MERELY SUPERVISION AND USURPS
THE DEVOLVED POWERS OF ALL PROVINCES.16
To start, the Court finds that petitioner has legal standing to
file this petition because it is tasked under Section 504 of the
Local Government Code of 1991 to promote local autonomy
at the provincial level;17 adopt measures for the promotion of
the welfare of all provinces and its officials and
employees;18 and exercise such other powers and perform
such other duties and functions as the league may prescribe
for the welfare of the provinces.19
Before this Court determines the validity of an act of a co-
equal and coordinate branch of the Government, it bears
emphasis that ingrained in our jurisprudence is the time-
honored principle that a statute is presumed to be valid.20This
presumption is rooted in the doctrine of separation of powers
which enjoins upon the three coordinate departments of the
Government a becoming courtesy for each other's acts.21 This
Court, however, may declare a law, or portions thereof,
unconstitutional where a petitioner has shown a clear and
unequivocal breach of the Constitution,22 leaving no doubt or
hesitation in the mind of the Court.23
In this case, petitioner admits that respondent DENR
Secretary had the authority to nullify the Small-Scale Mining
Permits issued by the Provincial Governor of Bulacan, as the
DENR Secretary has control over the PMRB, and the
implementation of the Small-Scale Mining Program is subject
to control by respondent DENR.
Control of the DENR/DENR Secretary over small-scale mining
in the provinces is granted by three statutes: (1) R.A. No. 7061
or The Local Government Code of 1991; (2) R.A. No. 7076 or
the People's Small Scale Mining Act of 1991; and (3) R.A. No.
7942, otherwise known as the Philippine Mining Act of
1995.24 The pertinent provisions of law sought to be declared
as unconstitutional by petitioner are as follows:
R.A. No. 7061 (The Local Government Code of 1991)
SEC. 17. Basic Services and Facilities. - (a) Local government
units shall endeavor to be self-reliant and shall continue
exercising the powers and discharging the duties and
functions currently vested upon them. They shall also
discharge the functions and responsibilities of national
agencies and offices devolved to them pursuant to this Code.
Local government units shall likewise exercise such other
powers and discharge such other functions and
responsibilities as are necessary, appropriate, or incidental to
efficient and effective provision of the basic services and
facilities enumerated herein.
(b) Such basic services and facilities include, but are not
limited to, the following:
(3) For a Province:c
xxxx
(iii) Pursuant to national policies and subject to supervision,
control and review of the DENR, enforcement of forestry laws
limited to community-based forestry projects, pollution control
law, small-scale mining law, and other laws on the protection
of the environment; and mini-hydro electric projects for local
purposes; x x x25
R.A. No. 7076 (People's Small-Scale Mining Act of 1991)
Sec. 24. Provincial/City Mining Regulatory Board. - There is
hereby created under the direct supervision and control of the
Secretary a provincial/city mining regulatory board, herein
called the Board, which shall be the implementing agency of
the Department, and shall exercise the following powers and
functions, subject to review by the Secretary:
(a) Declare and segregate existing gold-rush areas for small-
scale mining;
(b) Reserve future gold and other mining areas for small-scale
mining;
(c) Award contracts to small-scale miners;
(d) Formulate and implement rules and regulations related to
small-scale mining;
(e) Settle disputes, conflicts or litigations over conflicting
claims within a people’s small-scale mining area, an area that
is declared a small-mining; and
(f) Perform such other functions as may be necessary to
achieve the goals and objectives of this Act. 26
Petitioner contends that the aforecited laws and DENR
Administrative Order No. 9640 (the Implementing Rules and
Regulations of the Philippine Mining Act of 1995) did not
explicitly confer upon respondents DENR and the DENR
Secretary the power to reverse, abrogate, nullify, void, or
cancel the permits issued by the Provincial Governor or small-
scale mining contracts entered into by the PMRB. The statutes
are also silent as to the power of respondent DENR Secretary
to substitute his own judgment over that of the Provincial
Governor and the PMRB.
Moreover, petitioner contends that Section 17 (b)(3)(iii) of the
Local Government Code of 1991 and Section 24 of R.A. No.
7076, which confer upon respondents DENR and the DENR
Secretary the power of control are unconstitutional, as the
Constitution states that the President (and Executive
Departments and her alter-egos) has the power of supervision
only, not control, over acts of the local government units, and
grants the local government units autonomy, thus:
The 1987 Constitution:
Article X, Section 4. The President of the Philippines shall
exercise general supervision over local governments.
Provinces with respect to component cities and municipalities,
and cities and municipalities with respect to component
barangays, shall ensure that the acts of their component units
are within the scope of their prescribed powers and
functions.27
Petitioner contends that the policy in the above-cited
constitutional provision is mirrored in the Local Government
Code, which states:
SEC. 25. National Supervision over Local Government Units.
- (a) Consistent with the basic policy on local autonomy, the
President shall exercise general supervision over local
government units to ensure that their acts are within the scope
of their prescribed powers and functions.
The President shall exercise supervisory authority directly
over provinces, highly urbanized cities, and independent
component cities; through the province with respect to
component cities and municipalities; and through the city and
municipality with respect to barangays.28
Petitioner contends that the foregoing provisions of the
Constitution and the Local Government Code of 1991 show
that the relationship between the President and the Provinces
or respondent DENR, as the alter ego of the President, and
the Province of Bulacan is one of executive supervision, not
one of executive control. The term "control" has been defined
as the power of an officer to alter or modify or set aside what
a subordinate officer had done in the performance of his/her
duties and to substitute the judgment of the former for the
latter, while the term "supervision" is the power of a superior
officer to see to it that lower officers perform their function in
accordance with law.29
Petitioner argues that respondent DENR Secretary went
beyond mere executive supervision and exercised control
when he nullified the small-scale mining permits granted by
the Provincial Governor of Bulacan, as the former substituted
the judgment of the latter.
Petitioner asserts that what is involved here is a devolved
power.
Under the Local Government Code of 1991, the power to
regulate small-scale mining has been devolved to all
provinces. In the exercise of devolved powers, departmental
approval is not necessary.30
Petitioner contends that if the provisions in Section 24 of R.A.
No. 7076 and Section 17 (b)(3)(iii) of the Local Government
Code of 1991 granting the power of control to the
DENR/DENR Secretary are not nullified, nothing would stop
the DENR Secretary from nullifying, voiding and canceling the
small-scale mining permits that have been issued by a
Provincial Governor.
Petitioner submits that the statutory grant of power of control
to respondents is unconstitutional, as the Constitution only
allows supervision over local governments and proscribes
control by the executive departments.
In its Comment, respondents, represented by the Office of the
Solicitor General, stated that contrary to the assertion of
petitioner, the power to implement the small-scale mining law
is expressly limited in Section 17 (b)(3)(iii) of the Local
Government Code, which provides that it must be carried out
"pursuant to national policies and subject to supervision,
control and review of the DENR." Moreover, the fact that the
power to implement the small-scale mining law has not been
fully devolved to provinces is further amplified by Section 4 of
the People's Small-Scale Mining Act of 1991, which provides,
among others, that the People's Small-Scale Mining Program
shall be implemented by the DENR Secretary.
The petition lacks merit.
Paragraph 1 of Section 2, Article XII (National Economy and
Patrimony) of the Constitution31 provides that "the exploration,
development and utilization of natural resources shall be
under the full control and supervision of the State."
Moreover, paragraph 3 of Section 2, Article XII of the
Constitution provides that "the Congress may, by law, allow
small-scale utilization of natural resources by Filipino citizens
x x x."
Pursuant to Section 2, Article XII of the Constitution, R.A. No.
7076 or the People's Small-Scale Mining Act of 1991, was
enacted, establishing under Section 4 thereof a People's
Small-Scale Mining Program to be implemented by the DENR
Secretary in coordination with other concerned government
agencies.
The People's Small-Scale Mining Act of 1991 defines "small-
scale mining" as "refer[ring] to mining activities, which rely
heavily on manual labor using simple implement and methods
and do not use explosives or heavy mining equipment." 32
It should be pointed out that the Administrative Code of
198733 provides that the DENR is, subject to law and higher
authority, in charge of carrying out the State's constitutional
mandate, under Section 2, Article XII of the Constitution, to
control and supervise the exploration, development, utilization
and conservation of the country's natural resources. Hence,
the enforcement of small-scale mining law in the provinces is
made subject to the supervision, control and review of the
DENR under the Local Government Code of 1991, while the
People’s Small-Scale Mining Act of 1991 provides that the
People’s Small-Scale Mining Program is to be implemented
by the DENR Secretary in coordination with other concerned
local government agencies.
Indeed, Section 4, Article X (Local Government) of the
Constitution states that "[t]he President of the Philippines shall
exercise general supervision over local governments," and
Section 25 of the Local Government Code reiterates the
same. General supervision by the President means no more
than seeing to it that laws are faithfully executed or that
subordinate officers act within the law.34
The Court has clarified that the constitutional guarantee of
local autonomy in the Constitution Art. X, Sec. 2 refers to the
administrative autonomy of local government units or, cast in
more technical language, the decentralization of government
authority.35 It does not make local governments sovereign
within the State.36 Administrative autonomy may involve
devolution of powers, but subject to limitations like following
national policies or standards,37 and those provided by the
Local Government Code, as the structuring of local
governments and the allocation of powers, responsibilities,
and resources among the different local government units and
local officials have been placed by the Constitution in the
hands of Congress38 under Section 3, Article X of the
Constitution.
Section 3, Article X of the Constitution mandated Congress to
"enact a local government code which shall provide for a more
responsive and accountable local government structure
instituted through a system of decentralization with effective
mechanisms of recall, initiative, and referendum, allocate
among the different local government units their powers,
responsibilities, and resources, and provide for the
qualifications, election, appointment and removal, term,
salaries, powers and functions and duties of local officials, and
all other matters relating to the organization and operation of
the local units."
In connection with the enforcement of the small-scale mining
law in the province, Section 17 of the Local Government Code
provides:
SEC. 17. Basic Services and Facilities. - (a) Local government
units shall endeavor to be self-reliant and shall continue
exercising the powers and discharging the duties and
functions currently vested upon them. They shall also
discharge the functions and responsibilities of national
agencies and offices devolved to them pursuant to this Code.
Local government units shall likewise exercise such other
powers and discharge such other functions and
responsibilities as are necessary, appropriate, or incidental to
efficient and effective provision of the basic services and
facilities enumerated herein.
(b) Such basic services and facilities include, but are not
limited to, the following:
xxxx
(3) For a Province:c
xxxx
(iii) Pursuant to national policies and subject to supervision,
control and review of the DENR, enforcement of forestry laws
limited to community-based forestry projects, pollution control
law, small-scale mining law, and other laws on the protection
of the environment; and mini-hydro electric projects for local
purposes;39
Clearly, the Local Government Code did not fully devolve the
enforcement of the small-scale mining law to the provincial
government, as its enforcement is subject to the supervision,
control and review of the DENR, which is in charge, subject to
law and higher authority, of carrying out the State's
constitutional mandate to control and supervise the
exploration, development, utilization of the country's natural
resources.40
Section 17 (b)(3)(iii) of the Local Government Code of 1991 is
in harmony with R.A. No. 7076 or the People's Small-Scale
Mining Act of 1991,41 which established a People's Small-
Scale Mining Program to be implemented by the Secretary of
the DENR, thus:
Sec. 2. Declaration of Policy. – It is hereby declared of the
State to promote, develop, protect and rationalize viable
small-scale mining activities in order to generate more
employment opportunities and provide an equitable sharing of
the nation's wealth and natural resources, giving due regard
to existing rights as herein provided.
xxxx
Sec. 4. People's Small-Scale Mining Program. - For the
purpose of carrying out the declared policy provided in Section
2 hereof, there is hereby established a People's Small-Scale
Mining Program to be implemented by the Secretary of the
Department of Environment and Natural Resources,
hereinafter called the Department, in coordination with other
concerned government agencies, designed to achieve an
orderly, systematic and rational scheme for the small-scale
development and utilization of mineral resources in certain
mineral areas in order to address the social, economic,
technical, and environmental problems connected with small-
scale mining activities.
xxxx
Sec. 24. Provincial/City Mining Regulatory Board. – There is
hereby created under the direct supervision and control of the
Secretary a provincial/city mining regulatory board, herein
called the Board, which shall be the implementing agency of
the Department, and shall exercise the following powers and
functions, subject to review by the Secretary:
(a) Declare and segregate existing gold-rush areas for small-
scale mining;
(b) Reserve future gold and other mining areas for small-scale
mining;
(c) Award contracts to small-scale miners;
(d) Formulate and implement rules and regulations related to
small-scale mining;
(e) Settle disputes, conflicts or litigations over conflicting
claims within a people’s small-scale mining area, an area that
is declared a small-mining; and
(f) Perform such other functions as may be necessary to
achieve the goals and objectives of this Act. 42
DENR Administrative Order No. 34, series of 1992, containing
the Rules and Regulations to implement R.A. No. 7076,
provides:
SEC. 21. Administrative Supervision over the People's Small-
Scale Mining Program. − The following DENR officials shall
exercise the following supervisory functions in the
implementation of the Program:
21.1 DENR Secretrary – direct supervision and control over
the program and activities of the small-scale miners within the
people's small-scale mining area;
21.2 Director − the Director shall:
a. Recommend the depth or length of the tunnel or adit taking
into account the: (1) size of membership and capitalization of
the cooperative; (2) size of mineralized areas; (3) quantity of
mineral deposits; (4) safety of miners; and (5) environmental
impact and other considerations;
b. Determine the right of small-scale miners to existing
facilities in consultation with the operator, claimowner,
landowner or lessor of an affected area upon declaration of a
small-scale mining area;
c. Recommend to the Secretary the withdrawal of the status
of the people's small-scale mining area when it can no longer
be feasibly operated on a small-scale basis; and
d. See to it that the small-scale mining contractors abide by
small-scale mines safety rules and regulations.
xxxx
SEC. 22. Provincial/City Mining Regulatory Board. − The
Provincial/City Mining Regulatory Board created under R.A.
7076 shall exercise the following powers and functions,
subject to review by the Secretary:
22.1 Declares and segregates existing gold rush area for
small-scale mining;
22.2 Reserves for the future, mineralized areas/mineral lands
for people's small-scale mining;
22.3 Awards contracts to small-scale miners’ cooperative;
22.4 Formulates and implements rules and regulations related
to R.A. 7076;
22.5 Settles disputes, conflicts or litigations over conflicting
claims within ninety (90) days upon filing of protests or
complaints; Provided, That any aggrieved party may appeal
within five (5) days from the Board's decision to the Secretary
for final resolution otherwise the same is considered final and
executory; and
22.6 Performs such other functions as may be necessary to
achieve the goals and objectives of R.A. 7076.
SEC. 6. Declaration of People's Small-Scale Mining Areas. –
The Board created under R.A. 7076 shall have the authority
to declare and set aside People's Small-Scale Mining Areas
in sites onshore suitable for small-scale mining operations
subject to review by the DENR Secretary thru the Director. 43
DENR Administrative Order No. 23, otherwise known as the
Implementing Rules and Regulations of R.A. No. 7942,
otherwise known as the Philippine Mining Act of 1995,
adopted on August 15, 1995, provides under Section
12344thereof that small-scale mining applications should be
filed with the PMRB45 and the corresponding permits shall be
issued by the Provincial Governor, except small-scale mining
applications within the mineral reservations.
Thereafter, DENR Administrative Order No. 96-40, otherwise
known as the Revised Implementing Rules and Regulations
of R.A. No. 7942, otherwise known as the Philippine Mining
Act of 1995, adopted on December 19, 1996, provides that
applications for Small-Scale Mining Permits shall be filed with
the Provincial Governor/City Mayor through the concerned
Provincial/City Mining Regulatory Board for areas outside the
Mineral Reservations and with the Director though the Bureau
for areas within the Mineral Reservations.46 Moreover, it
provides that Local Government Units shall, in coordination
with the Bureau/ Regional Offices and subject to valid and
existing mining rights, "approve applications for small-scale
mining, sand and gravel, quarry x x x and gravel permits not
exceeding five (5) hectares."47
Petitioner contends that the Local Government Code of 1991,
R.A. No. 7076, DENR Administrative Orders Nos. 95-23 and
96-40 granted the DENR Secretary the broad statutory power
of control, but did not confer upon the respondents DENR and
DENR Secretary the power to reverse, abrogate, nullify, void,
cancel the permits issued by the Provincial Governor or small-
scale mining contracts entered into by the Board.
The contention does not persuade.
The settlement of disputes over conflicting claims in small-
scale mining is provided for in Section 24 of R.A. No. 7076,
thus:
Sec. 24. Provincial/City Mining Regulatory Board. − There is
hereby created under the direct supervision and control of the
Secretary a provincial/city mining regulatory board, herein
called the Board, which shall be the implementing agency of
the Department, and shall exercise the following powers and
functions, subject to review by the Secretary:
xxxx
(e) Settle disputes, conflicts or litigations over conflicting
claims within a people's small-scale mining area, an area that
is declared a small mining area; x x x
Section 24, paragraph (e) of R.A. No. 7076 cited above is
reflected in Section 22, paragraph 22.5 of the Implementing
Rules and Regulations of R.A. No. 7076, to wit:
SEC. 22. Provincial/City Mining Regulatory Board. – The
Provincial/City Mining Regulatory Board created under R.A.
No. 7076 shall exercise the following powers and functions,
subject to review by the Secretary:
xxxx
22.5 Settles disputes, conflicts or litigations over conflicting
claims within ninety (90) days upon filing of protests or
complaints; Provided, That any aggrieved party may appeal
within five (5) days from the Board's decision to the Secretary
for final resolution otherwise the same is considered final and
executory; x x x
In this case, in accordance with Section 22, paragraph 22.5 of
the Implementing Rules and Regulations of R.A. No. 7076, the
AMTC filed on July 22, 2005 with the PMRB of Bulacan a
formal protest against the Applications for Quarry Permits of
Eduardo Mercado, Benedicto Cruz, Liberato Sembrano
(replaced by Lucila Valdez) and Gerardo Cruz on the ground
that the subject area was already covered by its Application
for Exploration Permit.48 However, on August 8, 2005, the
PMRB issued Resolution Nos. 05-8, 05-9, 05-10 and 05-11,
resolving to submit to the Provincial Governor of Bulacan the
Applications for Small-Scale Mining Permits of Eduardo
Mercado, Benedicto Cruz, Lucila Valdez and Gerardo Cruz for
the granting/issuance of the said permits. 49 On August 10,
2005, the Provincial Governor of Bulacan issued the Small-
Scale Mining Permits to Eduardo Mercado, Benedicto Cruz,
Lucila Valdez and Gerardo Cruz based on the legal opinion of
the Provincial Legal Officer and the Resolutions of the PMRB
of Bulacan.
Hence, AMTC filed an appeal with respondent DENR
Secretary, appealing from Letter-Resolution No. 05-1317 and
Resolution Nos. 05-08, 05-09, 05-10 and 05-11, all dated
August 8, 2005, of the PMRB of Bulacan, which resolutions
gave due course and granted, on August 10, 2005, Small-
Scale Mining Permits to Eduardo D. Mercado, Benedicto S.
Cruz, Lucila Valdez and Gerardo Cruz involving parcels of
mineral land situated at Camachin, Doña Remedios Trinidad,
Bulacan.
The PMRB of Bulacan filed its Answer, stating that it is an
administrative body, created under R.A. No. 7076, which
cannot be equated with the court wherein a full-blown hearing
could be conducted, but it is enough that the parties were
given the opportunity to present evidence. It asserted that the
questioned resolutions it issued were in accordance with the
mining laws and that the Small-Scale Mining Permits granted
were registered ahead of AMTC's Application for Exploration
Permit. Further, the Board stated that the Governor of Bulacan
had the power to approve the Small-Scale Mining Permits
under R.A. No. 7160.
The DENR Secretary found the appeal meritorious, and
resolved these pivotal issues: (1) when is the subject mining
area open for mining location by other applicants; and (2) who
among the applicants have valid applications.1âwphi1 The
pertinent portion of the decision of the DENR Secretary reads:
We agree with the ruling of the MGB Director that the area is
open only to mining location on August 11, 2004, fifteen (15)
days after the receipt by Golden Falcon on July 27, 2004 of a
copy of the subject Order of July 16, 2004.1âwphi1The filing
by Golden Falcon of the letter-appeal suspended the finality
of the Order of Denial issued on April 29, 1998 by the Regional
Director until the Resolution thereof on July 16, 2004.
Although the subject AQPs/SSMPs were processed in
accordance with the procedures of the PMRB, however, the
AQPs were filed on February 10, 2004 when the area is still
closed to mining location. Consequently, the SSMPs granted
by the PMRB and the Governor are null and void making
thereby AEP No. III-02-04 of the AMTC valid, it having been
filed when the area is already open to other mining applicants.
Records also show that the AQPs were converted into
SSMPs. These are two (2) different applications. The
questioned SSMPs were issued in violation of Section 4 of RA
7076 and beyond the authority of the Provincial Governor
pursuant to Section 43 of RA 7942 because the area was
never proclaimed as "People's Small-Scale Mining Program."
Moreover, iron ore mineral is not considered among the quarry
resources.
xxxx
WHEREFORE, the Application for Exploration Permit, AEP-
III-02-04 of Atlantic Mines and Trading Corp. is declared valid
and may now be given due course. The Small-Scale Mining
Permits, SSMP-B-002-05 of Gerardo Cruz, SSMP-B-003-05
of Eduardo D. Mercado, SSMP-B-004-05 of Benedicto S. Cruz
and SSMP-B-005-05 of Lucila S. Valdez are declared NULL
AND VOID. Consequently, the said permits are hereby
CANCELLED.50
The Court finds that the decision of the DENR Secretary was
rendered in accordance with the power of review granted to
the DENR Secretary in the resolution of disputes, which is
provided for in Section 24 of R.A. No. 707651 and Section 22
of its Implementing Rules and Regulations.52 It is noted that
although AMTC filed a protest with the PMRB regarding its
superior and prior Application for Exploration Permit over the
Applications for Quarry Permit, which were converted to
Small-Scale Mining Permits, the PMRB did not resolve the
same, but issued Resolution Nos. 05-08 to 05-11 on August
8, 2005, resolving to submit to the Provincial Governor of
Bulacan the Applications for Small-Scale Mining Permits of
Eduardo Mercado, Benedicto Cruz, Lucila Valdez and
Gerardo Cruz for the granting of the said permits. After the
Provincial Governor of Bulacan issued the Small-Scale Mining
Permits on August 10, 2005, AMTC appealed the Resolutions
of the PMRB giving due course to the granting of the Small-
Scale Mining Permits by the Provincial Governor.
Hence, the decision of the DENR Secretary, declaring that the
Application for Exploration Permit of AMTC was valid and may
be given due course, and canceling the Small-Scale Mining
Permits issued by the Provincial Governor, emanated from the
power of review granted to the DENR Secretary under R.A.
No. 7076 and its Implementing Rules and Regulations. The
DENR Secretary's power to review and, therefore, decide, in
this case, the issue on the validity of the issuance of the Small-
Scale Mining Permits by the Provincial Governor as
recommended by the PMRB, is a quasi-judicial function, which
involves the determination of what the law is, and what the
legal rights of the contending parties are, with respect to the
matter in controversy and, on the basis thereof and the facts
obtaining, the adjudication of their respective rights. 53 The
DENR Secretary exercises quasi-judicial function under R.A.
No. 7076 and its Implementing Rules and Regulations to the
extent necessary in settling disputes, conflicts or litigations
over conflicting claims. This quasi-judicial function of the
DENR Secretary can neither be equated with "substitution of
judgment" of the Provincial Governor in issuing Small-Scale
Mining Permits nor "control" over the said act of the Provincial
Governor as it is a determination of the rights of AMTC over
conflicting claims based on the law.
In determining whether Section 17 (b)(3)(iii) of the Local
Government Code of 1991 and Section 24 of R.A. No. 7076
are unconstitutional, the Court has been guided by Beltran v.
The Secretary of Health, 54 which held:
The fundamental criterion is that all reasonable doubts should
be resolved in favor of the constitutionality of a statute. Every
law has in its favor the presumption of constitutionality. For a
law to be nullified, it must be shown that there is a clear and
unequivocal breach of the Constitution. The ground for nullity
must be clear and beyond reasonable doubt. Those who
petition this Court to declare a law, or parts thereof,
unconstitutional must clearly establish the basis therefor.
Otherwise, the petition must fail. 55
In this case, the Court finds that the grounds raised by
petitioner to challenge the constitutionality of Section 17 (b
)(3)(iii) of the Local Government Code of 1991 and Section 24
'of R.A. No.7076 failed to overcome the constitutionality of the
said provisions of law.
WHEREFORE, the petition is DISMISSED for lack of merit.
No costs.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. 98332 January 16, 1995
MINERS ASSOCIATION OF THE PHILIPPINES,
INC., petitioner,
vs.
HON. FULGENCIO S. FACTORAN, JR., Secretary of
Environment and Natural Resources, and JOEL D.
MUYCO, Director of Mines and Geosciences
Bureau, respondents.
ROMERO, J.:
The instant petition seeks a ruling from this Court on the
validity of two Administrative Orders issued by the Secretary
of the Department of Environment and Natural Resources to
carry out the provisions of certain Executive Orders
promulgated by the President in the lawful exercise of
legislative powers.
Herein controversy was precipitated by the change introduced
by Article XII, Section 2 of the 1987 Constitution on the system
of exploration, development and utilization of the country's
natural resources. No longer is the utilization of inalienable
lands of public domain through "license, concession or lease"
under the 1935 and 1973 Constitutions1allowed under the
1987 Constitution.
The adoption of the concept of jura regalia2 that all natural
resources are owned by the State embodied in the 1935, 1973
and 1987 Constitutions, as well as the recognition of the
importance of the country's natural resources, not only for
national economic development, but also for its security and
national
defense,3 ushered in the adoption of the constitutional policy
of "full control and supervision by the State" in the exploration,
development and utilization of the country's natural resources.
The options open to the State are through direct undertaking
or by entering into co-production, joint venture; or production-
sharing agreements, or by entering into agreement with
foreign-owned corporations for large-scale exploration,
development and utilization.
Article XII, Section 2 of the 1987 Constitution provides:
Sec. 2. All lands of the public domain,
waters, minerals, coal, petroleum, and
other mineral oils, all forces of potential
energy, fisheries, forests or timber, wildlife,
flora and fauna, and other natural resources
are owned by the State. With the exception
of agricultural lands, all other natural
resources shall not be alienated. The
exploration, development, and utilization of
natural resources shall be under the full
control and supervision of the State. The
State may directly undertake such
activities, or it may enter into co-production,
joint venture, or product-sharing
agreements with Filipino citizens, or
corporations or associations at least sixty
per centum of whose capital is owned by
such citizens. Such agreements may be for
a period not exceeding twenty-five years,
renewable for not more than twenty-five
years, and under such terms and conditions
as may be provided by law. In cases of
water rights for irrigation, water supply,
fisheries, or industrial uses other than the
development of water power, beneficial use
may be the measure and limit of the grant.
xxx xxx xxx
The President may enter into agreements
with foreign-owned corporations involving
either technical or financial assistance for
large-scale exploration, development, and
utilization of minerals, petroleum, and other
mineral oils according to the general terms
and conditions provided by law, based on
real contributions to the economic growth
and general welfare of the country. In such
agreements, the State shall promote the
development and use of local scientific and
technical resources.
The President shall notify the Congress of
every contract entered into in accordance
with this provision, within thirty days from its
execution. (Emphasis supplied)
Pursuant to the mandate of the above-quoted provision,
legislative acts4 were successively issued by the President in
the exercise of her legislative
power.5
To implement said legislative acts, the Secretary of the
Department of Environment and Natural Resources (DENR)
in turn promulgated Administrative Order Nos. 57 and 82, the
validity and constitutionality of which are being challenged in
this petition.
On July 10, 1987, President Corazon C. Aquino, in the
exercise of her then legislative powers under Article II, Section
1 of the Provisional Constitution and Article XIII, Section 6 of
the 1987 Constitution, promulgated Executive Order No. 211
prescribing the interim procedures in the processing and
approval of applications for the exploration, development and
utilization of minerals pursuant to the 1987 Constitution in
order to ensure the continuity of mining operations and
activities and to hasten the development of mineral resources.
The pertinent provisions read as follows:
Sec. 1. Existing mining permits, licenses,
leases and other mining grants issued by
the Department of Environment and Natural
Resources and Bureau of Mines and Geo-
Sciences, including existing operating
agreements and mining service contracts,
shall continue and remain in full force and
 effect, subject to the same terms and
conditions as originally granted and/or
approved.
Sec. 2. Applications for the exploration,
development and utilization of mineral
resources, including renewal applications
for approval of operating agreements and
mining service contracts, shall be accepted
and processed and may be approved;
concomitantly thereto, declarations of
locations and all other kinds of mining
applications shall be accepted and
registered by the Bureau of Mines and Geo-
Sciences.
Sec. 3. The processing, evaluation and
approval of all mining applications,
declarations of locations, operating
agreements and service contracts as
provided for in Section 2 above, shall be
governed by Presidential Decree No. 463,
as amended, other existing mining laws and
their implementing rules and
regulations: Provided, however, that the
privileges granted, as well as the terms and
conditions thereof shall be subject to any
and all modifications or alterations which
Congress may adopt pursuant to Section 2,
Article XII of the 1987 Constitution.
On July 25, 1987, President Aquino likewise promulgated
Executive Order No. 279 authorizing the DENR Secretary to
negotiate and conclude joint venture, co-production, or
production-sharing agreements for the exploration,
development and utilization of mineral resources, and
prescribing the guidelines for such agreements and those
agreements involving technical or financial assistance by
foreign-owned corporations for large-scale exploration,
development, and utilization of minerals. The pertinent
provisions relevant to this petition are as follows:
Sec. 1. The Secretary of the Department of
Environment and Natural Resources
(hereinafter referred to as "the Secretary")
is hereby authorized to negotiate and enter
into, for and in behalf of the Government,
joint venture, co-production, or production-
sharing agreements for the exploration,
development, and utilization of mineral
resources with any Filipino citizens, or
corporation or association at least sixty
percent (60%) of whose capital is owned by
Filipino citizens. Such joint venture, co-
production, or production-sharing
agreements may be for a period not
exceeding twenty-five years, renewable for
not more than twenty-five years, and shall
include the minimum terms and conditions
prescribed in Section 2 hereof. In the
execution of a joint venture, co-production
or production agreements, the contracting
parties, including the Government, may
consolidate two or more contiguous or
geologically — related mining claims or
leases and consider them as one contract
area for purposes of determining the
subject of the joint venture, co-production,
or production-sharing agreement.
xxx xxx xxx
Sec. 6. The Secretary shall promulgate
such supplementary rules and regulations
as may be necessary to effectively
implement the provisions of this Executive
Order.
Sec. 7. All provisions of Presidential Decree
No. 463, as amended, other existing mining
laws, and their implementing rules and
regulations, or parts thereof, which are not
inconsistent with the provisions of this
Executive Order, shall continue in force and
effect.
Pursuant to Section 6 of Executive Order No. 279, the DENR
Secretary issued on June 23, 1989 DENR Administrative
Order No. 57, series of 1989, captioned "Guidelines of Mineral
Production Sharing Agreement under Executive Order No.
279."6 Under the transitory provision of said DENR
Administrative Order No. 57, embodied in its Article 9, all
existing mining leases or agreements which were granted
after the effectivity of the 1987 Constitution pursuant to
Executive Order No. 211, except small scale mining leases
and those pertaining to sand and gravel and quarry resources
covering an area of twenty (20) hectares or less, shall be
converted into production-sharing agreements within one (1)
year from the effectivity of these guidelines.
On November 20, 1980, the Secretary of the DENR
Administrative Order No. 82, series of 1990, laying down the
"Procedural Guidelines on the Award of Mineral Production
Sharing Agreement (MPSA) through Negotiation."7
Section 3 of the aforementioned DENR Administrative Order
No. 82 enumerates the persons or entities required to submit
Letter of Intent (LOIs) and Mineral Production Sharing
Agreement (MPSAs) within two (2) years from the effectivity
of DENR Administrative Order No. 57 or until July 17, 1991.
Failure to do so within the prescribed period shall cause the
abandonment of mining, quarry and sand and gravel claims.
Section 3 of DENR Administrative Order No. 82 provides:
Sec. 3. Submission of Letter of Intent (LOIs)
and MPSAs). The following shall submit
their LOIs and MPSAs within two (2) years
from the effectivity of DENR A.O. 57 or until
July 17, 1991.
i. Declaration of Location (DOL) holders,
mining lease applicants, exploration
permitees, quarry applicants and other
mining applicants whose mining/quarry
applications have not been perfected prior
to the effectivity of DENR Administrative
Order No. 57.
ii. All holders of DOL acquired after the
effectivity of DENR A.O. No. 57.
iii. Holders of mining leases or similar
agreements which were granted after (the)
effectivity of 1987 Constitution.
Failure to submit letters of intent and MPSA
applications/proposals within the
prescribed period shall cause the
abandonment of mining, quarry and sand
and gravel claims.
The issuance and the impeding implementation by the DENR
of Administrative Order Nos. 57 and 82 after their respective
effectivity dates compelled the Miners Association of the
Philippines, Inc.8 to file the instant petition assailing their
validity and constitutionality before this Court.
In this petition for certiorari, petitioner Miners Association of
the Philippines, Inc. mainly contends that respondent
Secretary of DENR issued both Administrative Order Nos. 57
and 82 in excess of his rule-making power under Section 6 of
Executive Order No. 279. On the assumption that the
questioned administrative orders do not conform with
Executive Order Nos. 211 and 279, petitioner contends that
both orders violate the
non-impairment of contract provision under Article III, Section
10 of the 1987 Constitution on the ground that Administrative
Order No. 57 unduly pre-terminates existing mining
agreements and automatically converts them into production-
sharing agreements within one (1) year from its effectivity
date. On the other hand, Administrative Order No. 82 declares
that failure to submit Letters of Intent and Mineral Production-
Sharing Agreements within two (2) years from the date of
effectivity of said guideline or on July 17, 1991 shall cause the
abandonment of their mining, quarry and sand gravel permits.
On July 2, 1991, the Court, acting on petitioner's urgent ex-
parte petition for issuance of a restraining order/preliminary
injunction, issued a Temporary Restraining Order, upon
posting of a P500,000.00 bond, enjoining the enforcement
and implementation of DENR Administrative Order Nos. 57
and 82, as amended, Series of 1989 and 1990, respectively. 9
On November 13, 1991, Continental Marble
Corporation, 10 thru its President, Felipe A. David, sought to
intervene 11in this case alleging that because of the temporary
order issued by the Court , the DENR, Regional Office No. 3
in San Fernando, Pampanga refused to renew its Mines
Temporary Permit after it expired on July 31, 1991. Claiming
that its rights and interests are prejudicially affected by the
implementation of DENR Administrative Order Nos. 57 and
82, it joined petitioner herein in seeking to annul
Administrative Order Nos. 57 and 82 and prayed that the
DENR, Regional Office No. 3 be ordered to issue a Mines
Temporary Permit in its favor to enable it to operate during the
pendency of the suit.
Public respondents were acquired to comment on the
Continental Marble Corporation's petition for intervention in
the resolution of November 28, 1991.12
Now to the main petition. If its argued that Administrative
Order Nos. 57 and 82 have the effect of repealing or
abrogating existing mining laws 13 which are not inconsistent
with the provisions of Executive Order No. 279. Invoking
Section 7 of said Executive Order No. 279, 14 petitioner
maintains that respondent DENR Secretary cannot provide
guidelines such as Administrative Order Nos. 57 and 82 which
are inconsistent with the provisions of Executive Order No.
279 because both Executive Order Nos. 211 and 279 merely
reiterated the acceptance and registration of declarations of
location and all other kinds of mining applications by the
Bureau of Mines and Geo-Sciences under the provisions of
Presidential Decree No. 463, as amended, until Congress
opts to modify or alter the same.
In other words, petitioner would have us rule that DENR
Administrative Order Nos. 57 and 82 issued by the DENR
Secretary in the exercise of his rule-making power are tainted
with invalidity inasmuch as both contravene or subvert the
provisions of Executive Order Nos. 211 and 279 or embrace
matters not covered, nor intended to be covered, by the
aforesaid laws.
We disagree.
We reiterate the principle that the power of administrative
officials to promulgate rules and regulations in the
implementation of a statute is necessarily limited only to
carrying into effect what is provided in the legislative
enactment. The principle was enunciated as early as 1908 in
the case of United States v. Barrias. 15 The scope of the
exercise of such rule-making power was clearly expressed in
the case of United States v. Tupasi Molina, 16decided in 1914,
thus: "Of course, the regulations adopted under legislative
authority by a particular department must be in harmony with
the provisions of the law, and for the sole purpose of carrying
into effect its general provisions. By such regulations, of
course, the law itself can not be extended. So long, however,
as the regulations relate solely to carrying into effect its
general provisions. By such regulations, of course, the law
itself can not be extended. So long, however, as the
regulations relate solely to carrying into effect the provision of
the law, they are valid."
Recently, the case of People v. Maceren 17 gave a brief
delienation of the scope of said power of administrative
officials:
Administrative regulations adopted under
legislative authority by a particular
department must be in harmony with the
provisions of the law, and should be for the
sole purpose of carrying into effect its
general provision. By such regulations, of
course, the law itself cannot be extended
(U.S. v. Tupasi Molina, supra). An
administrative agency cannot amend an act
of Congress (Santos vs. Estenzo, 109 Phil.
419, 422; Teoxon vs. Members of the Board
of Administrators, L-25619, June 30, 1970,
33 SCRA 585; Manuel vs. General Auditing
Office, L-28952, December 29, 1971, 42
SCRA 660; Deluao v. Casteel, L-21906,
August 29, 1969, 29 SCRA 350).
The rule-making power must be confined to
details for regulating the mode or
proceeding to carry into effect the law as it
has been enacted. The power cannot be
extended to amending or expanding the
statutory requirements or to embrace
matters not covered by the statute. Rules
that subvert the statute cannot be
sanctioned (University of Santo Tomas v.
Board of Tax Appeals, 93 Phil. 376, 382,
citing 12 C.J. 845-46. As to invalid
regulations, see Collector of Internal
Revenue v. Villaflor, 69 Phil. 319; Wise &
Co. v. Meer, 78 Phil. 655, 676; Del Mar v.
Phil. Veterans Administration, L-27299,
June 27, 1973, 51 SCRA 340, 349).
xxx xxx xxx
. . . The rule or regulation should be within
the scope of the statutory authority granted
by the legislature to the administrative
agency (Davis, Administrative Law, p. 194,
197, cited in Victorias Milling Co., Inc. v.
Social Security Commission, 114 Phil. 555,
558).
In case of discrepancy between the basic
law and a rule or regulation issued to
 implement said law, the basic prevails
because said rule or regulations cannot go
beyond the terms and provisions of the
basic law (People v. Lim, 108 Phil. 1091).
Considering that administrative rules draw life from the statute
which they seek to implement, it is obvious that the spring
cannot rise higher than its source. We now examine
petitioner's argument that DENR Administrative Order Nos. 57
and 82 contravene Executive Order Nos. 211 and 279 as both
operate to repeal or abrogate Presidential Decree No. 463, as
amended, and other mining laws allegedly acknowledged as
the principal law under Executive Order Nos. 211 and 279.
Petitioner's insistence on the application of Presidential
Decree No. 463, as amended, as the governing law on the
acceptance and approval of declarations of location and all
other kinds of applications for the exploration, development,
and utilization of mineral resources pursuant to Executive
Order No. 211, is erroneous. Presidential Decree No. 463, as
amended, pertains to the old system of exploration,
development and utilization of natural resources through
"license, concession or lease" which, however, has been
disallowed by Article XII, Section 2 of the 1987 Constitution.
By virtue of the said constitutional mandate and its
implementing law, Executive Order No. 279 which
superseded Executive Order No. 211, the provisions dealing
on "license, concession or lease" of mineral resources under
Presidential Decree No. 463, as amended, and other existing
mining laws are deemed repealed and, therefore, ceased to
operate as the governing law. In other words, in all other areas
of administration and management of mineral lands, the
provisions of Presidential Decree No. 463, as amended, and
other existing mining laws, still govern. Section 7 of Executive
Order No. 279 provides, thus:
Sec. 7. All provisions of Presidential Decree
No. 463, as amended, other existing mining
laws, and their implementing rules and
regulations, or parts thereof, which are not
inconsistent with the provisions of this
Executive Order, shall continue in force and
effect.
Specifically, the provisions of Presidential Decree No. 463, as
amended, on lease of mining claims under Chapter VIII,
quarry permits on privately-owned lands of quarry license on
public lands under Chapter XIII and other related provisions
on lease, license and permits are not only inconsistent with
the raison d'etre for which Executive Order No. 279 was
passed, but contravene the express mandate of Article XII,
Section 2 of the 1987 Constitution. It force and effectivity is
thus foreclosed.
Upon the effectivity of the 1987 Constitution on February 2,
1987, 18 the State assumed a more dynamic role in the
exploration, development and utilization of the natural
resources of the country. Article XII, Section 2 of the said
Charter explicitly ordains that the exploration, development
and utilization of natural resources shall be under the full
control and supervision of the State. Consonant therewith, the
exploration, development and utilization of natural resources
may be undertaken by means of direct act of the State, or it
may opt to enter into co-production, joint venture, or
production-sharing agreements, or it may enter into
agreements with foreign-owned corporations involving either
technical or financial assistance for large-scale exploration,
development, and utilization of minerals, petroleum, and other
mineral oils according to the general terms and conditions
provided by law, based on real contributions to the economic
growth and general welfare of the country.
Given these considerations, there is no clear showing that
respondent DENR Secretary has transcended the bounds
demarcated by Executive Order No. 279 for the exercise of his
rule-making power tantamount to a grave abuse of discretion.
Section 6 of Executive Order No. 279 specifically authorizes
said official to promulgate such supplementary rules and
regulations as may be necessary to effectively implement the
provisions thereof. Moreover, the subject sought to be
governed and regulated by the questioned orders is germane
to the objects and purposes of Executive Order No. 279
specifically issued to carry out the mandate of Article XII,
Section 2 of the 1987 Constitution.
Petitioner likewise maintains that Administrative Order No. 57,
in relation to Administrative Order No. 82, impairs vested
rights as to violate the non-impairment of contract doctrine
guaranteed under Article III, Section 10 of the 1987
Constitution because Article 9 of Administrative Order No. 57
unduly pre-terminates and automatically converts mining
leases and other mining agreements into production-sharing
agreements within one (1) year from effectivity of said
guideline, while Section 3 of Administrative Order No. 82,
declares that failure to submit Letters of Intent (LOIs) and
MPSAs within two (2) years from the effectivity of
Administrative Order No. 57 or until July 17, 1991 shall cause
the abandonment of mining, quarry, and sand gravel permits.
In Support of the above contention, it is argued by petitioner
that Executive Order No. 279 does not contemplate automatic
conversion of mining lease agreements into mining
production-sharing agreement as provided under Article 9,
Administrative Order No. 57 and/or the consequent
abandonment of mining claims for failure to submit LOIs and
MPSAs under Section 3, Administrative Order No. 82 because
Section 1 of said Executive Order No. 279 empowers the
DENR Secretary to negotiate and enter into voluntary
agreements which must set forth the minimum terms and
conditions provided under Section 2 thereof. Moreover,
petitioner contends that the power to regulate and enter into
mining agreements does not include the power to
preterminate existing mining lease agreements.
To begin with, we dispel the impression created by petitioner's
argument that the questioned administrative orders unduly
preterminate existing mining leases in general. A distinction
which spells a real difference must be drawn. Article XII,
Section 2 of the 1987 Constitution does not apply retroactively
to "license, concession or lease" granted by the government
under the 1973 Constitution or before the effectivity of the
1987 Constitution on February 2, 1987. The intent to apply
prospectively said constitutional provision was stressed
during the deliberations in the Constitutional
Commission, 19 thus:
MR. DAVIDE: Under the
proposal, I notice that
except for the
[inalienable] lands of the
public domain, all other
natural resources cannot
be alienated and in
respect to [alienable]
lands of the public
domain, private
corporations with the
required ownership by
Filipino citizens can only
lease the same.
Necessarily, insofar as
other natural resources
are concerned, it would
only be the State which
 can exploit, develop,
explore and utilize the
same. However, the
State may enter into a
joint venture, co-
production or production-
sharing. Is that not
correct?
MR. VILLEGAS: Yes.
MR. DAVIDE:
Consequently,
henceforth upon, the
approval of this
Constitution, no timber or
forest concession,
permits or authorization
can be exclusively
granted to any citizen of
the Philippines nor to any
corporation qualified to
acquire lands of the
public domain?
MR. VILLEGAS: Would
Commissioner Monsod
like to comment on that?
I think his answer is
"yes."
MR. DAVIDE: So, what
will happen now license
or concessions earlier
granted by the Philippine
government to private
corporations or to Filipino
citizens? Would they be
deemed repealed?
MR. VILLEGAS: This is
not applied retroactively.
They will be respected.
MR. DAVIDE: In effect,
they will be deemed
repealed?
MR. VILLEGAS: No.
(Emphasis supplied)
During the transition period or after the effectivity of the 1987
Constitution on February 2, 1987 until the first Congress under
said Constitution was convened on July 27, 1987, two (2)
successive laws, Executive Order Nos. 211 and 279, were
promulgated to govern the processing and approval of
applications for the exploration, development and utilization of
minerals. To carry out the purposes of said laws, the
questioned Administrative Order Nos. 57 and 82, now being
assailed, were issued by the DENR Secretary.
Article 9 of Administrative Order No. 57 provides:
ARTICLE 9
TRANSITORY PROVISION
9.1. All existing mining leases or
agreements which were granted after the
effectivity of the 1987 Constitution pursuant
to Executive Order No. 211, except small
scale mining leases and those pertaining to
sand and gravel and quarry resources
covering an area of twenty (20) hectares or
less shall be subject to these guidelines. All
such leases or agreements shall be
converted into production sharing
agreement within one (1) year from the
effectivity of these guidelines. However,
any minimum firm which has established
mining rights under Presidential Decree
463 or other laws may avail of the
provisions of EO 279 by following the
procedures set down in this document.
It is clear from the aforestated provision that Administrative
Order No. 57 applies only to all existing mining leases or
agreements which were granted after the effectivity of the
1987 Constitution pursuant to Executive Order No. 211. It
bears mention that under the text of Executive Order No. 211,
there is a reservation clause which provides that the privileges
as well as the terms and conditions of all existing mining
leases or agreements granted after the effectivity of the 1987
Constitution pursuant to Executive Order No. 211, shall be
subject to any and all modifications or alterations which
Congress may adopt pursuant to Article XII, Section 2 of the
1987 Constitution. Hence, the strictures of the
non-impairment of contract clause under Article III, Section 10
of the 1987 Constitution 20 do not apply to the aforesaid leases
or agreements granted after the effectivity of the 1987
Constitution, pursuant to Executive Order No. 211. They can
be amended, modified or altered by a statute passed by
Congress to achieve the purposes of Article XII, Section 2 of
the 1987 Constitution.
Clearly, Executive Order No. 279 issued on July 25, 1987 by
President Corazon C. Aquino in the exercise of her legislative
power has the force and effect of a statute or law passed by
Congress. As such, it validly modified or altered the privileges
granted, as well as the terms and conditions of mining leases
and agreements under Executive Order No. 211 after the
effectivity of the 1987 Constitution by authorizing the DENR
Secretary to negotiate and conclude joint venture, co-
production, or production-sharing agreements for the
exploration, development and utilization of mineral resources
and prescribing the guidelines for such agreements and those
agreements involving technical or financial assistance by
foreign-owned corporations for large-scale exploration,
development, and utilization of minerals.
Well -settled is the rule, however, that regardless of the
reservation clause, mining leases or agreements granted by
the State, such as those granted pursuant to Executive Order
No. 211 referred to this petition, are subject to alterations
through a reasonable exercise of the police power of the
State. In the 1950 case of Ongsiako v. Gamboa, 21 where the
constitutionality of Republic Act No. 34 changing the 50-50
sharecropping system in existing agricultural tenancy
contracts to 55-45 in favor of tenants was challenged, the
Court, upholding the constitutionality of the law, emphasized
the superiority of the police power of the State over the
sanctity of this contract:
The prohibition contained in constitutional provisions against:
impairing the obligation of contracts is not an absolute one and
it is not to be read with literal exactness like a mathematical
formula. Such provisions are restricted to contracts which
respect property, or some object or value, and confer rights
which may be asserted in a court of justice, and have no
application to statute relating to public subjects within the
domain of the general legislative powers of the State, and
involving the public rights and public welfare of the entire
community affected by it. They do not prevent a proper
exercise by the State of its police powers. By enacting
regulations reasonably necessary to secure the health, safety,
morals, comfort, or general welfare of the community, even
the contracts may thereby be affected; for such matter can not
be placed by contract beyond the power of the State shall
regulates and control them. 22
In Ramas v. CAR and Ramos 23 where the constitutionality of
Section 14 of Republic Act No. 1199 authorizing the tenants
to charge from share to leasehold tenancy was challenged on
the ground that it impairs the obligation of contracts, the Court
ruled that obligations of contracts must yield to a proper
exercise of the police power when such power is exercised to
preserve the security of the State and the means adopted are
reasonably adapted to the accomplishment of that end and
are, therefore, not arbitrary or oppressive.
The economic policy on the exploration, development and
utilization of the country's natural resources under Article XII,
Section 2 of the 1987 Constitution could not be any clearer.
As enunciated in Article XII, Section 1 of the 1987
Constitution, the exploration, development and utilization of
natural resources under the new system mandated in Section
2, is geared towards a more equitable distribution of
opportunities, income, and wealth; a sustained increase in the
amount of goods and services produced by the nation for the
benefit of the people; and an expanding productivity as the
key to raising the quality of life for all, especially the
underprivileged.
The exploration, development and utilization of the country's
natural resources are matters vital to the public interest and
the general welfare of the people. The recognition of the
importance of the country's natural resources was expressed
as early as the 1984 Constitutional Convention. In connection
therewith, the 1986 U.P. Constitution Project observed: "The
1984 Constitutional Convention recognized the importance of
our natural resources not only for its security and national
defense. Our natural resources which constitute the exclusive
heritage of the Filipino nation, should be preserved for those
under the sovereign authority of that nation and for their
prosperity. This will ensure the country's survival as a viable
and sovereign republic."
Accordingly, the State, in the exercise of its police power in
this regard, may not be precluded by the constitutional
restriction on non-impairment of contract from altering,
modifying and amending the mining leases or agreements
granted under Presidential Decree No. 463, as amended,
pursuant to Executive Order No. 211. Police Power, being co-
extensive with the necessities of the case and the demands of
public interest; extends to all the vital public needs. The
passage of Executive Order No. 279 which superseded
Executive Order No. 211 provided legal basis for the DENR
Secretary to carry into effect the mandate of Article XII,
Section 2 of the 1987 Constitution.
Nowhere in Administrative Order No. 57 is there any provision
which would lead us to conclude that the questioned order
authorizes the automatic conversion of mining leases and
agreements granted after the effectivity of the 1987
Constitution, pursuant to Executive Order No. 211, to
production-sharing agreements. The provision in Article 9 of
Administrative Order No. 57 that "all such leases or
agreements shall be converted into production sharing
agreements within one (1) year from the effectivity of these
guidelines" could not possibility contemplate a unilateral
declaration on the part of the Government that all existing
mining leases and agreements are automatically converted
into
production-sharing agreements. On the contrary, the use of
the term "production-sharing agreement" if they are so
minded. Negotiation negates compulsion or automatic
conversion as suggested by petitioner in the instant petition.
A mineral production-sharing agreement (MPSA) requires a
meeting of the minds of the parties after negotiations arrived
at in good faith and in accordance with the procedure laid
down in the subsequent Administrative Order No. 82.
We, therefore, rule that the questioned administrative orders
are reasonably directed to the accomplishment of the
purposes of the law under which they were issued and were
intended to secure the paramount interest of the public, their
economic growth and welfare. The validity and
constitutionality of Administrative Order Nos. 57 and 82 must
be sustained, and their force and effect upheld.
We now, proceed to the petition-in-intervention. Under
Section 2, Rule 12 of the Revised Rules of Court, an
intervention in a case is proper when the intervenor has a
"legal interest in the matter in litigation, or in the success of
either of the parties, or an interest against both, or when he is
so situated as to be adversely affected by a distribution or
other disposition of property in the custody of the court or of
an officer thereof. "Continental Marble Corporation has not
sufficiently shown that it falls under any of the categories
mentioned above. The refusal of the DENR, Regional Office
No. 3, San Fernando, Pampanga to renew its Mines
Temporary Permit does not justify such an intervention by
Continental Marble Corporation for the purpose of obtaining a
directive from this Court for the issuance of said permit.
Whether or not Continental Marble matter best addressed to
the appropriate government body but certainly, not through
this Court. Intervention is hereby DENIED.
WHEREFORE, the petition is DISMISSED for lack of merit.
The Temporary Restraining Order issued on July 2, 1991 is
hereby LIFTED.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
SPECIAL SECOND DIVISION
G.R. No. 161957 January 22, 2007
JORGE GONZALES and PANEL OF
ARBITRATORS, Petitioners,
vs.
CLIMAX MINING LTD., CLIMAX-ARIMCO MINING CORP.,
and AUSTRALASIAN PHILIPPINES MINING
INC.,Respondents.
x-------------------------------------------------------------------------------
-- x
G.R. No. 167994 January 22, 2007
JORGE GONZALES, Petitioner,
vs.
HON. OSCAR B. PIMENTEL, in his capacity as PRESIDING
JUDGE of BR. 148 of the REGIONAL TRIAL COURT of
MAKATI CITY, and CLIMAX-ARIMCO MINING
CORPORATION, Respondents.
RESOLUTION
TINGA, J.:
This is a consolidation of two petitions rooted in the same
disputed Addendum Contract entered into by the parties. In
G.R. No. 161957, the Court in its Decision of 28 February
20051 denied the Rule 45 petition of petitioner Jorge Gonzales
(Gonzales). It held that the DENR Panel of Arbitrators had no
jurisdiction over the complaint for the annulment of the
Addendum Contract on grounds of fraud and violation of the
Constitution and that the action should have been brought
before the regular courts as it involved judicial issues. Both
parties filed separate motions for reconsideration. Gonzales
avers in his Motion for Reconsideration 2 that the Court erred
in holding that the DENR Panel of Arbitrators was bereft of
jurisdiction, reiterating its argument that the case involves a
mining dispute that properly falls within the ambit of the
Panel’s authority. Gonzales adds that the Court failed to rule
on other issues he raised relating to the sufficiency of his
complaint before the DENR Panel of Arbitrators and the
timeliness of its filing.
Respondents Climax Mining Ltd., et al., (respondents) filed
their Motion for Partial Reconsideration and/or
Clarification3 seeking reconsideration of that part of the
Decision holding that the case should not be brought for
arbitration under Republic Act (R.A.) No. 876, also known as
the Arbitration Law.4 Respondents, citing American
jurisprudence5 and the UNCITRAL Model Law,6 argue that the
arbitration clause in the Addendum Contract should be treated
as an agreement independent of the other terms of the
contract, and that a claimed rescission of the main contract
does not avoid the duty to arbitrate. Respondents add that
Gonzales’s argument relating to the alleged invalidity of the
Addendum Contract still has to be proven and adjudicated on
in a proper proceeding; that is, an action separate from the
motion to compel arbitration. Pending judgment in such
separate action, the Addendum Contract remains valid and
binding and so does the arbitration clause therein.
Respondents add that the holding in the Decision that "the
case should not be brought under the ambit of the Arbitration
Law" appears to be premised on Gonzales’s having
"impugn[ed] the existence or validity" of the addendum
contract. If so, it supposedly conveys the idea that Gonzales’s
unilateral repudiation of the contract or mere allegation of its
invalidity is all it takes to avoid arbitration. Hence, respondents
submit that the court’s holding that "the case should not be
brought under the ambit of the Arbitration Law" be understood
or clarified as operative only where the challenge to the
arbitration agreement has been sustained by final judgment.
Both parties were required to file their respective comments to
the other party’s motion for
reconsideration/clarification.7 Respondents filed their
Comment on 17 August 2005,8 while Gonzales filed his only
on 25 July 2006.9
On the other hand, G.R. No. 167994 is a Rule 65 petition filed
on 6 May 2005, or while the motions for reconsideration in
G.R. No. 16195710 were pending, wherein Gonzales
challenged the orders of the Regional Trial Court (RTC)
requiring him to proceed with the arbitration proceedings as
sought by Climax-Arimco Mining Corporation (Climax-
Arimco).
On 5 June 2006, the two cases, G.R. Nos. 161957 and
167994, were consolidated upon the recommendation of the
Assistant Division Clerk of Court since the cases are rooted in
the same Addendum Contract.
We first tackle the more recent case which is G.R. No.
167994. It stemmed from the petition to compel arbitration
filed by respondent Climax-Arimco before the RTC of Makati
City on 31 March 2000 while the complaint for the nullification
of the Addendum Contract was pending before the DENR
Panel of Arbitrators. On 23 March 2000, Climax-Arimco had
sent Gonzales a Demand for Arbitration pursuant to Clause
19.111 of the Addendum Contract and also in accordance with
Sec. 5 of R.A. No. 876. The petition for arbitration was
subsequently filed and Climax-Arimco sought an order to
compel the parties to arbitrate pursuant to the said arbitration
clause. The case, docketed as Civil Case No. 00-444, was
initially raffled to Br. 132 of the RTC of Makati City, with Judge
Herminio I. Benito as Presiding Judge. Respondent Climax-
Arimco filed on 5 April 2000 a motion to set the application to
compel arbitration for hearing.
On 14 April 2000, Gonzales filed a motion to dismiss which he
however failed to set for hearing. On 15 May 2000, he filed an
Answer with Counterclaim,12 questioning the validity of the
Addendum Contract containing the arbitration clause.
Gonzales alleged that the Addendum Contract containing the
arbitration clause is void in view of Climax-Arimco’s acts of
fraud, oppression and violation of the Constitution. Thus, the
arbitration clause, Clause 19.1, contained in the Addendum
Contract is also null and void ab initio and legally
inexistent.1awphi1.net
On 18 May 2000, the RTC issued an order declaring
Gonzales’s motion to dismiss moot and academic in view of
the filing of his Answer with Counterclaim.13
On 31 May 2000, Gonzales asked the RTC to set the case for
pre-trial.14 This the RTC denied on 16 June 2000, holding that
the petition for arbitration is a special proceeding that is
summary in nature.15 However, on 7 July 2000, the RTC
granted Gonzales’s motion for reconsideration of the 16 June
2000 Order and set the case for pre-trial on 10 August 2000,
it being of the view that Gonzales had raised in his answer the
issue of the making of the arbitration agreement.16
Climax-Arimco then filed a motion to resolve its pending
motion to compel arbitration. The RTC denied the same in its
24 July 2000 order.
On 28 July 2000, Climax-Arimco filed a Motion to Inhibit Judge
Herminio I. Benito for "not possessing the cold neutrality of an
impartial judge."17 On 5 August 2000, Judge Benito issued an
Order granting the Motion to Inhibit and ordered the re-raffling
of the petition for arbitration.18 The case was raffled to
the sala of public respondent Judge Oscar B. Pimentel of
Branch 148.
On 23 August 2000, Climax-Arimco filed a motion for
reconsideration of the 24 July 2000 Order.19 Climax-Arimco
argued that R.A. No. 876 does not authorize a pre-trial or trial
for a motion to compel arbitration but directs the court to hear
the motion summarily and resolve it within ten days from
hearing. Judge Pimentel granted the motion and directed the
parties to arbitration. On 13 February 2001, Judge Pimentel
issued the first assailed order requiring Gonzales to proceed
with arbitration proceedings and appointing retired CA Justice
Jorge Coquia as sole arbitrator.20
Gonzales moved for reconsideration on 20 March 2001 but
this was denied in the Order dated 7 March 2005.21
Gonzales thus filed the Rule 65 petition assailing the Orders
dated 13 February 2001 and 7 March 2005 of Judge Pimentel.
Gonzales contends that public respondent Judge Pimentel
acted with grave abuse of discretion in immediately ordering
the parties to proceed with arbitration despite the proper, valid,
and timely raised argument in his Answer with Counterclaim
that the Addendum Contract, containing the arbitration clause,
is null and void. Gonzales has also sought a temporary
restraining order to prevent the enforcement of the assailed
orders directing the parties to arbitrate, and to direct Judge
Pimentel to hold a pre-trial conference and the necessary
hearings on the determination of the nullity of the Addendum
Contract.
In support of his argument, Gonzales invokes Sec. 6 of R.A.
No. 876:
Sec. 6. Hearing by court.—A party aggrieved by the failure,
neglect or refusal of another to perform under an agreement
in writing providing for arbitration may petition the court for an
order directing that such arbitration proceed in the manner
provided for in such agreement. Five days notice in writing of
the hearing of such application shall be served either
personally or by registered mail upon the party in default. The
court shall hear the parties, and upon being satisfied that the
making of the agreement or such failure to comply therewith
is not in issue, shall make an order directing the parties to
proceed to arbitration in accordance with the terms of the
agreement. If the making of the agreement or default be in
issue the court shall proceed to summarily hear such issue. If
the finding be that no agreement in writing providing for
arbitration was made, or that there is no default in the
proceeding thereunder, the proceeding shall be dismissed. If
the finding be that a written provision for arbitration was made
and there is a default in proceeding thereunder, an order shall
be made summarily directing the parties to proceed with the
arbitration in accordance with the terms thereof.
The court shall decide all motions, petitions or applications
filed under the provisions of this Act, within ten (10) days after
such motions, petitions, or applications have been heard by it.
Gonzales also cites Sec. 24 of R.A. No. 9285 or the
"Alternative Dispute Resolution Act of 2004:"
Sec. 24. Referral to Arbitration.—A court before which an
action is brought in a matter which is the subject matter of an
arbitration agreement shall, if at least one party so requests
not later than the pre-trial conference, or upon the request of
both parties thereafter, refer the parties to arbitration unless it
finds that the arbitration agreement is null and void,
inoperative or incapable of being performed.
According to Gonzales, the above-quoted provisions of law
outline the procedure to be followed in petitions to compel
arbitration, which the RTC did not follow. Thus, referral of the
parties to arbitration by Judge Pimentel despite the timely and
properly raised issue of nullity of the Addendum Contract was
misplaced and without legal basis. Both R.A. No. 876 and R.A.
No. 9285 mandate that any issue as to the nullity,
inoperativeness, or incapability of performance of the
arbitration clause/agreement raised by one of the parties to
the alleged arbitration agreement must be determined by the
court prior to referring them to arbitration. They require that
the trial court first determine or resolve the issue of nullity, and
there is no other venue for this determination other than a pre-
trial and hearing on the issue by the trial court which has
jurisdiction over the case. Gonzales adds that the assailed 13
February 2001 Order also violated his right to procedural due
process when the trial court erroneously ruled on the
existence of the arbitration agreement despite the absence of
a hearing for the presentation of evidence on the nullity of the
Addendum Contract.
Respondent Climax-Arimco, on the other hand, assails the
mode of review availed of by Gonzales. Climax-Arimco cites
Sec. 29 of R.A. No. 876:
Sec. 29. Appeals.—An appeal may be taken from an order
made in a proceeding under this Act, or from a judgment
entered upon an award through certiorari proceedings, but
such appeals shall be limited to questions of law. The
proceedings upon such an appeal, including the judgment
thereon shall be governed by the Rules of Court in so far as
they are applicable.
Climax-Arimco mentions that the special civil action for
certiorari employed by Gonzales is available only where there
is no appeal or any plain, speedy, and adequate remedy in the
ordinary course of law against the challenged orders or acts.
Climax-Arimco then points out that R.A. No. 876 provides for
an appeal from such orders, which, under the Rules of Court,
must be filed within 15 days from notice of the final order or
resolution appealed from or of the denial of the motion for
reconsideration filed in due time. Gonzales has not denied that
the relevant 15-day period for an appeal had elapsed long
before he filed this petition for certiorari. He cannot use the
special civil action of certiorari as a remedy for a lost appeal.
Climax-Arimco adds that an application to compel arbitration
under Sec. 6 of R.A. No. 876 confers on the trial court only a
limited and special jurisdiction, i.e., a jurisdiction solely to
determine (a) whether or not the parties have a written
contract to arbitrate, and (b) if the defendant has failed to
comply with that contract. Respondent cites La Naval Drug
Corporation v. Court of Appeals,22 which holds that in a
proceeding to compel arbitration, "[t]he arbitration law
explicitly confines the court’s authority only to pass upon the
issue of whether there is or there is no agreement in writing
providing for arbitration," and "[i]n the affirmative, the statute
ordains that the court shall issue an order ‘summarily directing
the parties to proceed with the arbitration in accordance with
the terms thereof.’"23Climax-Arimco argues that R.A. No. 876
gives no room for any other issue to be dealt with in such a
proceeding, and that the court presented with an application
to compel arbitration may order arbitration or dismiss the
same, depending solely on its finding as to those two limited
issues. If either of these matters is disputed, the court is
required to conduct a summary hearing on it. Gonzales’s
proposition contradicts both the trial court’s limited jurisdiction
and the summary nature of the proceeding itself.
Climax-Arimco further notes that Gonzales’s attack on or
repudiation of the Addendum Contract also is not a ground to
deny effect to the arbitration clause in the Contract. The
arbitration agreement is separate and severable from the
contract evidencing the parties’ commercial or economic
transaction, it stresses. Hence, the alleged defect or failure of
the main contract is not a ground to deny enforcement of the
parties’ arbitration agreement. Even the party who has
repudiated the main contract is not prevented from enforcing
its arbitration provision. R.A. No. 876 itself treats the
arbitration clause or agreement as a contract separate from
the commercial, economic or other transaction to be
arbitrated. The statute, in particular paragraph 1 of Sec. 2
thereof, considers the arbitration stipulation an independent
contract in its own right whose enforcement may be prevented
only on grounds which legally make the arbitration agreement
itself revocable, thus:
Sec. 2. Persons and matters subject to arbitration.—Two or
more persons or parties may submit to the arbitration of one
or more arbitrators any controversy existing, between them at
the time of the submission and which may be the subject of
an action, or the parties to any contract may in such contract
agree to settle by arbitration a controversy thereafter arising
between them. Such submission or contract shall be valid,
enforceable and irrevocable, save upon such grounds as exist
at law for the revocation of any contract.
xxxx
The grounds Gonzales invokes for the revocation of the
Addendum Contract—fraud and oppression in the execution
thereof—are also not grounds for the revocation of the
arbitration clause in the Contract, Climax-Arimco notes. Such
grounds may only be raised by way of defense in the
arbitration itself and cannot be used to frustrate or delay the
conduct of arbitration proceedings. Instead, these should be
raised in a separate action for rescission, it continues.
Climax-Arimco emphasizes that the summary proceeding to
compel arbitration under Sec. 6 of R.A. No. 876 should not be
confused with the procedure in Sec. 24 of R.A. No. 9285. Sec.
6 of R.A. No. 876 refers to an application to compel arbitration
where the court’s authority is limited to resolving the issue of
whether there is or there is no agreement in writing providing
for arbitration, while Sec. 24 of R.A. No. 9285 refers to an
ordinary action which covers a matter that appears to be
arbitrable or subject to arbitration under the arbitration
agreement. In the latter case, the statute is clear that the court,
instead of trying the case, may, on request of either or both
parties, refer the parties to arbitration, unless it finds that the
arbitration agreement is null and void, inoperative or incapable
of being performed. Arbitration may even be ordered in the
same suit brought upon a matter covered by an arbitration
agreement even without waiting for the outcome of the issue
of the validity of the arbitration agreement. Art. 8 of the
UNCITRAL Model Law24 states that where a court before
which an action is brought in a matter which is subject of an
arbitration agreement refers the parties to arbitration, the
arbitral proceedings may proceed even while the action is
pending.
Thus, the main issue raised in the Petition for Certiorari is
whether it was proper for the RTC, in the proceeding to
compel arbitration under R.A. No. 876, to order the parties to
arbitrate even though the defendant therein has raised the
twin issues of validity and nullity of the Addendum Contract
and, consequently, of the arbitration clause therein as well.
The resolution of both Climax-Arimco’s Motion for Partial
Reconsideration and/or Clarification in G.R. No. 161957 and
Gonzales’s Petition for Certiorari in G.R. No. 167994
essentially turns on whether the question of validity of the
Addendum Contract bears upon the applicability or
enforceability of the arbitration clause contained therein. The
two pending matters shall thus be jointly resolved.
We address the Rule 65 petition in G.R. No. 167994 first from
the remedial law perspective. It deserves to be dismissed on
procedural grounds, as it was filed in lieu of appeal which is
the prescribed remedy and at that far beyond the
reglementary period. It is elementary in remedial law that the
use of an erroneous mode of appeal is cause for dismissal of
the petition for certiorari and it has been repeatedly stressed
that a petition for certiorari is not a substitute for a lost appeal.
As its nature, a petition for certiorari lies only where there is
"no appeal," and "no plain, speedy and adequate remedy in
the ordinary course of law."25 The Arbitration Law specifically
provides for an appeal by certiorari, i.e., a petition for review
under certiorari under Rule 45 of the Rules of Court that raises
pure questions of law.26 There is no merit to Gonzales’s
argument that the use of the permissive term "may" in Sec.
29, R.A. No. 876 in the filing of appeals does not prohibit nor
discount the filing of a petition for certiorari under Rule
65.27 Proper interpretation of the aforesaid provision of law
shows that the term "may" refers only to the filing of an appeal,
not to the mode of review to be employed. Indeed, the use of
"may" merely reiterates the principle that the right to appeal is
not part of due process of law but is a mere statutory privilege
to be exercised only in the manner and in accordance with
law.
Neither can BF Corporation v. Court of Appeals28 cited by
Gonzales support his theory. Gonzales argues that said case
recognized and allowed a petition for certiorari under Rule 65
"appealing the order of the Regional Trial Court disregarding
the arbitration agreement as an acceptable remedy."29 The BF
Corporation case had its origins in a complaint for collection
of sum of money filed by therein petitioner BF Corporation
against Shangri-la Properties, Inc. (SPI). SPI moved to
suspend the proceedings alleging that the construction
agreement or the Articles of Agreement between the parties
contained a clause requiring prior resort to arbitration before
judicial intervention. The trial court found that an arbitration
clause was incorporated in the Conditions of Contract
appended to and deemed an integral part of the Articles of
Agreement. Still, the trial court denied the motion to suspend
proceedings upon a finding that the Conditions of Contract
were not duly executed and signed by the parties. The trial
court also found that SPI had failed to file any written notice of
demand for arbitration within the period specified in the
arbitration clause. The trial court denied SPI's motion for
reconsideration and ordered it to file its responsive pleading.
Instead of filing an answer, SPI filed a petition for certiorari
under Rule 65, which the Court of Appeals, favorably acted
upon. In a petition for review before this Court, BF Corporation
alleged, among others, that the Court of Appeals should have
dismissed the petition for certiorari since the order of the trial
court denying the motion to suspend proceedings "is a
resolution of an incident on the merits" and upon the
continuation of the proceedings, the trial court would
eventually render a decision on the merits, which decision
could then be elevated to a higher court "in an ordinary
appeal."30
The Court did not uphold BF Corporation’s argument. The
issue raised before the Court was whether SPI had taken the
proper mode of appeal before the Court of Appeals. The
question before the Court of Appeals was whether the trial
court had prematurely assumed jurisdiction over the
controversy. The question of jurisdiction in turn depended on
the question of existence of the arbitration clause which is one
of fact. While on its face the question of existence of the
arbitration clause is a question of fact that is not proper in a
petition for certiorari, yet since the determination of the
question obliged the Court of Appeals as it did to interpret the
contract documents in accordance with R.A. No. 876 and
existing jurisprudence, the question is likewise a question of
law which may be properly taken cognizance of in a petition
for certiorari under Rule 65, so the Court held.31
The situation in B.F. Corporation is not availing in the present
petition. The disquisition in B.F. Corporation led to the
conclusion that in order that the question of jurisdiction may
be resolved, the appellate court had to deal first with a
question of law which could be addressed in a certiorari
proceeding. In the present case, Gonzales’s petition raises a
question of law, but not a question of jurisdiction. Judge
Pimentel acted in accordance with the procedure prescribed
in R.A. No. 876 when he ordered Gonzales to proceed with
arbitration and appointed a sole arbitrator after making the
determination that there was indeed an arbitration agreement.
It has been held that as long as a court acts within its
jurisdiction and does not gravely abuse its discretion in the
exercise thereof, any supposed error committed by it will
amount to nothing more than an error of judgment reviewable
by a timely appeal and not assailable by a special civil action
of certiorari.32 Even if we overlook the employment of the
wrong remedy in the broader interests of justice, the petition
would nevertheless be dismissed for failure of Gonzalez to
show grave abuse of discretion.
Arbitration, as an alternative mode of settling disputes, has
long been recognized and accepted in our jurisdiction. The
Civil Code is explicit on the matter.33 R.A. No. 876 also
expressly authorizes arbitration of domestic disputes. Foreign
arbitration, as a system of settling commercial disputes of an
international character, was likewise recognized when the
Philippines adhered to the United Nations "Convention on the
Recognition and the Enforcement of Foreign Arbitral Awards
of 1958," under the 10 May 1965 Resolution No. 71 of the
Philippine Senate, giving reciprocal recognition and allowing
enforcement of international arbitration agreements between
parties of different nationalities within a contracting
state.34 The enactment of R.A. No. 9285 on 2 April 2004
further institutionalized the use of alternative dispute
resolution systems, including arbitration, in the settlement of
disputes.
Disputes do not go to arbitration unless and until the parties
have agreed to abide by the arbitrator’s decision. Necessarily,
a contract is required for arbitration to take place and to be
binding. R.A. No. 876 recognizes the contractual nature of the
arbitration agreement, thus:
Sec. 2. Persons and matters subject to arbitration.—Two or
more persons or parties may submit to the arbitration of one
or more arbitrators any controversy existing, between them at
the time of the submission and which may be the subject of
an action, or the parties to any contract may in such contract
agree to settle by arbitration a controversy thereafter arising
between them. Such submission or contract shall be valid,
enforceable and irrevocable, save upon such grounds as exist
at law for the revocation of any contract.
Such submission or contract may include question arising out
of valuations, appraisals or other controversies which may be
collateral, incidental, precedent or subsequent to any issue
between the parties.
A controversy cannot be arbitrated where one of the parties to
the controversy is an infant, or a person judicially declared to
be incompetent, unless the appropriate court having
jurisdiction approve a petition for permission to submit such
controversy to arbitration made by the general guardian or
guardian ad litem of the infant or of the incompetent.
[Emphasis added.]
Thus, we held in Manila Electric Co. v. Pasay Transportation
Co.35 that a submission to arbitration is a contract. A clause in
a contract providing that all matters in dispute between the
parties shall be referred to arbitration is a contract,36 and in
Del Monte Corporation-USA v. Court of Appeals37 that "[t]he
provision to submit to arbitration any dispute arising therefrom
and the relationship of the parties is part of that contract and
is itself a contract. As a rule, contracts are respected as the
law between the contracting parties and produce effect as
between them, their assigns and heirs."38
The special proceeding under Sec. 6 of R.A. No. 876
recognizes the contractual nature of arbitration clauses or
agreements. It provides:
Sec. 6. Hearing by court.—A party aggrieved by the failure,
neglect or refusal of another to perform under an agreement
in writing providing for arbitration may petition the court for an
order directing that such arbitration proceed in the manner
provided for in such agreement. Five days notice in writing of
the hearing of such application shall be served either
personally or by registered mail upon the party in default. The
court shall hear the parties, and upon being satisfied that the
making of the agreement or such failure to comply therewith
is not in issue, shall make an order directing the parties to
proceed to arbitration in accordance with the terms of the
agreement. If the making of the agreement or default be in
issue the court shall proceed to summarily hear such issue. If
the finding be that no agreement in writing providing for
arbitration was made, or that there is no default in the
proceeding thereunder, the proceeding shall be dismissed. If
the finding be that a written provision for arbitration was made
and there is a default in proceeding thereunder, an order shall
be made summarily directing the parties to proceed with the
arbitration in accordance with the terms thereof.
The court shall decide all motions, petitions or applications
filed under the provisions of this Act, within ten days after such
motions, petitions, or applications have been heard by it.
[Emphasis added.]
This special proceeding is the procedural mechanism for the
enforcement of the contract to arbitrate. The jurisdiction of the
courts in relation to Sec. 6 of R.A. No. 876 as well as the
nature of the proceedings therein was expounded upon in La
Naval Drug Corporation v. Court of Appeals.39 There it was
held that R.A. No. 876 explicitly confines the court's authority
only to the determination of whether or not there is an
agreement in writing providing for arbitration. In the
affirmative, the statute ordains that the court shall issue an
order "summarily directing the parties to proceed with the
arbitration in accordance with the terms thereof." If the court,
upon the other hand, finds that no such agreement exists, "the
proceeding shall be dismissed."40 The cited case also
stressed that the proceedings are summary in nature. 41 The
same thrust was made in the earlier case of Mindanao
Portland Cement Corp. v. McDonough Construction Co. of
Florida42 which held, thus:
Since there obtains herein a written provision for arbitration as
well as failure on respondent's part to comply therewith, the
court a quo rightly ordered the parties to proceed to arbitration
in accordance with the terms of their agreement (Sec. 6,
Republic Act 876). Respondent's arguments touching upon
the merits of the dispute are improperly raised herein. They
should be addressed to the arbitrators. This proceeding is
merely a summary remedy to enforce the agreement to
arbitrate. The duty of the court in this case is not to resolve the
merits of the parties' claims but only to determine if they
should proceed to arbitration or not. x x x x43
Implicit in the summary nature of the judicial proceedings is
the separable or independent character of the arbitration
clause or agreement. This was highlighted in the cases of
Manila Electric Co. v. Pasay Trans. Co.44 and Del Monte
Corporation-USA v. Court of Appeals.45
The doctrine of separability, or severability as other writers call
it, enunciates that an arbitration agreement is independent of
the main contract. The arbitration agreement is to be treated
as a separate agreement and the arbitration agreement does
not automatically terminate when the contract of which it is
part comes to an end.46
The separability of the arbitration agreement is especially
significant to the determination of whether the invalidity of the
main contract also nullifies the arbitration clause. Indeed, the
doctrine denotes that the invalidity of the main contract, also
referred to as the "container" contract, does not affect the
validity of the arbitration agreement. Irrespective of the fact
that the main contract is invalid, the arbitration
clause/agreement still remains valid and enforceable.47
The separability of the arbitration clause is confirmed in Art.
16(1) of the UNCITRAL Model Law and Art. 21(2) of the
UNCITRAL Arbitration Rules.48
The separability doctrine was dwelt upon at length in the U.S.
case of Prima Paint Corp. v. Flood & Conklin Manufacturing
Co.49 In that case, Prima Paint and Flood and Conklin (F & C)
entered into a consulting agreement whereby F & C undertook
to act as consultant to Prima Paint for six years, sold to Prima
Paint a list of its customers and promised not to sell paint to
these customers during the same period. The consulting
agreement contained an arbitration clause. Prima Paint did
not make payments as provided in the consulting agreement,
contending that F & C had fraudulently misrepresented that it
was solvent and able for perform its contract when in fact it
was not and had even intended to file for bankruptcy after
executing the consultancy agreement. Thus, F & C served
Prima Paint with a notice of intention to arbitrate. Prima Paint
sued in court for rescission of the consulting agreement on the
ground of fraudulent misrepresentation and asked for the
issuance of an order enjoining F & C from proceeding with
arbitration. F & C moved to stay the suit pending arbitration.
The trial court granted F & C’s motion, and the U.S. Supreme
Court affirmed.
The U.S. Supreme Court did not address Prima Paint’s
argument that it had been fraudulently induced by F & C to
sign the consulting agreement and held that no court should
address this argument. Relying on Sec. 4 of the Federal
Arbitration Act—which provides that "if a party [claims to be]
aggrieved by the alleged failure x x x of another to arbitrate x
x x, [t]he court shall hear the parties, and upon being satisfied
that the making of the agreement for arbitration or the failure
to comply therewith is not in issue, the court shall make an
order directing the parties to proceed to arbitration x x x. If the
making of the arbitration agreement or the failure, neglect, or
refusal to perform the same be in issue, the court shall
proceed summarily to the trial thereof"—the U.S. High Court
held that the court should not order the parties to arbitrate if
the making of the arbitration agreement is in issue. The parties
should be ordered to arbitration if, and only if, they have
contracted to submit to arbitration. Prima Paint was not
entitled to trial on the question of whether an arbitration
agreement was made because its allegations of fraudulent
inducement were not directed to the arbitration clause itself,
but only to the consulting agreement which contained the
arbitration agreement.50 Prima Paint held that "arbitration
clauses are ‘separable’ from the contracts in which they are
embedded, and that where no claim is made that fraud was
directed to the arbitration clause itself, a broad arbitration
clause will be held to encompass arbitration of the claim that
the contract itself was induced by fraud."51
There is reason, therefore, to rule against Gonzales when he
alleges that Judge Pimentel acted with grave abuse of
discretion in ordering the parties to proceed with arbitration.
Gonzales’s argument that the Addendum Contract is null and
void and, therefore the arbitration clause therein is void as
well, is not tenable. First, the proceeding in a petition for
arbitration under R.A. No. 876 is limited only to the resolution
of the question of whether the arbitration agreement exists.
Second, the separability of the arbitration clause from the
Addendum Contract means that validity or invalidity of the
Addendum Contract will not affect the enforceability of the
agreement to arbitrate. Thus, Gonzales’s petition for certiorari
should be dismissed.
This brings us back to G.R. No. 161957. The adjudication of
the petition in G.R. No. 167994 effectively modifies part of the
Decision dated 28 February 2005 in G.R. No. 161957. Hence,
we now hold that the validity of the contract containing the
agreement to submit to arbitration does not affect the
applicability of the arbitration clause itself. A contrary ruling
would suggest that a party’s mere repudiation of the main
contract is sufficient to avoid arbitration. That is exactly the
situation that the separability doctrine, as well as
jurisprudence applying it, seeks to avoid. We add that when it
was declared in G.R. No. 161957 that the case should not be
brought for arbitration, it should be clarified that the case
referred to is the case actually filed by Gonzales before the
DENR Panel of Arbitrators, which was for the nullification of
the main contract on the ground of fraud, as it had already
been determined that the case should have been brought
before the regular courts involving as it did judicial issues.
The Motion for Reconsideration of Gonzales in G.R. No.
161957 should also be denied. In the motion, Gonzales raises
the same question of jurisdiction, more particularly that the
complaint for nullification of the Addendum Contract pertained
to the DENR Panel of Arbitrators, not the regular courts. He
insists that the subject of his complaint is a mining dispute
since it involves a dispute concerning rights to mining areas,
the Financial and Technical Assistance Agreement (FTAA)
between the parties, and it also involves claimowners. He
adds that the Court failed to rule on other issues he raised,
such as whether he had ceded his claims over the mineral
deposits located within the Addendum Area of Influence;
whether the complaint filed before the DENR Panel of
Arbitrators alleged ultimate facts of fraud; and whether the
action to declare the nullity of the Addendum Contract on the
ground of fraud has prescribed.1avvphi1.net
These are the same issues that Gonzales raised in his Rule
45 petition in G.R. No. 161957 which were resolved against
him in the Decision of 28 February 2005. Gonzales does not
raise any new argument that would sway the Court even a bit
to alter its holding that the complaint filed before the DENR
Panel of Arbitrators involves judicial issues which should
properly be resolved by the regular courts. He alleged fraud
or misrepresentation in the execution of the Addendum
Contract which is a ground for the annulment of a voidable
contract. Clearly, such allegations entail legal questions which
are within the jurisdiction of the courts.
The question of whether Gonzales had ceded his claims over
the mineral deposits in the Addendum Area of Influence is a
factual question which is not proper for determination before
this Court. At all events, moreover, the question is irrelevant
to the issue of jurisdiction of the DENR Panel of Arbitrators. It
should be pointed out that the DENR Panel of Arbitrators
made a factual finding in its Order dated 18 October 2001,
which it reiterated in its Order dated 25 June 2002, that
Gonzales had, "through the various agreements, assigned his
interest over the mineral claims all in favor of [Climax-Arimco]"
as well as that without the complainant [Gonzales] assigning
his interest over the mineral claims in favor of [Climax-Arimco],
there would be no FTAA to speak of." 52 This finding was
affirmed by the Court of Appeals in its Decision dated 30 July
2003 resolving the petition for certiorari filed by Climax-Arimco
in regard to the 18 October 2001 Order of the DENR Panel.53
The Court of Appeals likewise found that Gonzales’s
complaint alleged fraud but did not provide any particulars to
substantiate it. The complaint repeatedly mentioned fraud,
oppression, violation of the Constitution and similar
conclusions but nowhere did it give any ultimate facts or
particulars relative to the allegations.54
Sec. 5, Rule 8 of the Rules of Court specifically provides that
in all averments of fraud, the circumstances constituting fraud
must be stated with particularity. This is to enable the
opposing party to controvert the particular facts allegedly
constituting the same. Perusal of the complaint indeed shows
that it failed to state with particularity the ultimate facts and
circumstances constituting the alleged fraud. It does not state AND CELESTIAL NICKEL MINING EXPLORATION
what particulars about Climax-Arimco’s financial or technical CORPORATION, RESPONDENTS.
capability were misrepresented, or how the misrepresentation
was done. Incorporated in the body of the complaint are DECISION
verbatim reproductions of the contracts, correspondence and
government issuances that reportedly explain the allegations
of fraud and misrepresentation, but these are, at best, VELASCO JR., J.:
evidentiary matters that should not be included in the
pleading. The Case

As to the issue of prescription, Gonzales’s claims of fraud and Before us are four (4) petitions. The first is a Petition for
misrepresentation attending the execution of the Addendum Review on Certiorari[1] under Rule 45 docketed as G.R.
Contract are grounds for the annulment of a voidable contract No. 169080, wherein petitioner Celestial Nickel Mining
under the Civil Code.55 Under Art. 1391 of the Code, an action Exploration Corporation (Celestial) seeks to set aside the April
for annulment shall be brought within four years, in the case 15, 2005 Decision[2] of the Court of Appeals (CA) in CA-G.R.
of fraud, beginning from the time of the discovery of the same. SP No. 87931. The CA affirmed the November 26, 2004
However, the time of the discovery of the alleged fraud is not Resolution of the Mines Adjudication Board (MAB) in MAB
clear from the allegations of Gonzales’s complaint. That being Case Nos. 056-97 and 057-97 (DENR Case Nos. 97-01 and
the situation coupled with the fact that this Court is not a trier 97-02), upholding the authority of the Department of
of facts, any ruling on the issue of prescription would be Environment and Natural Resources (DENR) Secretary to
uncalled for or even unnecessary. grant and cancel mineral agreements. Also assailed is the
August 3, 2005 Resolution[3] of the CA denying the Motion for
WHEREFORE, the Petition for Certiorari in G.R. No. 167994 Reconsideration of the assailed Decision.
is DISMISSED. Such dismissal effectively renders
superfluous formal action on the Motion for Partial The second is a Petition for Certiorari[4] under Rule 65
Reconsideration and/or Clarification filed by Climax Mining docketed as G.R. No. 172936, wherein petitioner Blue Ridge
Ltd., et al. in G.R. No. 161957. Mineral Corporation (Blue Ridge) seeks to annul and set aside
the action of then Secretary Michael T. Defensor, in his
capacity as DENR Secretary, approving and signing two
The Motion for Reconsideration filed by Jorge Gonzales in Mineral Production Sharing Agreements (MPSAs) in favor of
G.R. No. 161957 is DENIED WITH FINALITY. Macroasia Corporation (Macroasia) denominated as MPSA
Nos. 220-2005-IVB and 221-2005-IVB.
SO ORDERED.
And the third and fourth are petitions for review on
certiorari[5] under Rule 45 docketed as G.R. No.
176226 and G.R. No. 176319, wherein petitioners Celestial
and Macroasia, respectively, seek to set aside the May 18,
SECOND DIVISION 2006 Decision[6] of the CA in CA-G.R. SP No. 90828. The CA
reversed and set aside the November 26, 2004 and July 12,
[ G.R. No. 169080, December 19, 2007 ] 2005 Resolutions of the MAB, and reinstated the October 24,
2000 Decision in MAB Case Nos. 056-97 and 057-97, granting
Blue Ridge the prior and preferential right to file its application
CELESTIAL NICKEL MINING EXPLORATION
over the mining claims of Macroasia. These petitions likewise
CORPORATION, PETITIONER, VS. MACROASIA
seek to set aside the January 19, 2007 Resolution[7] of the CA
CORPORATION (FORMERLY INFANTA MINERAL AND
denying petitioners' motions for reconsideration of the
INDUSTRIAL CORPORATION), CORPORATION, AND
assailed Decision.
LEBACH MINING CORPORATION, RESPONDENTS.
Through our July 5, 2006 Resolution,[8] we consolidated the
[G.R. No. 172936]
first two cases. While in our subsequent April 23, 2007 [9] and
July 11, 2007[10]Resolutions, we consolidated the four cases
BLUE RIDGE MINERAL CORPORATION, PETITIONER,
as they arose from the same facts.
VS. HON. ANGELO REYES IN HIS CAPACITY AS
SECRETARY OF THE DEPARTMENT OF ENVIRONMENT
The undisputed facts as found by the CA in CA-G.R. SP No.
AND NATURAL RESOURCES, HON. GUILLERMO
87931 are as follows:
ESTABILLO IN HIS CAPACITY AS REGIONAL DIRECTOR
OF THE MINES AND GEOSCIENCES BUREAU, REGION
On September 24, 1973, the then Secretary of Agriculture and
IV-B OF THE DEPARTMENT OF ENVIRONMENT AND
Natural Resources and Infanta Mineral and Industrial
NATURAL RESOURCES, AND MACROASIA
Corporation (Infanta) entered into a Mining Lease Contract (V-
CORPORATION (FORMERLY INFANTA MINERAL AND
1050) for a term of 25 years up to September 23, 1998 for
INDUSTRIAL CORPORATION), RESPONDENTS.
mining lode claims covering an area of 216 hectares at Sitio
Linao, Ipilan, Brooke's Point, Palawan. The mining claims of
[G.R. No. 176226]
Infanta covered by lode/lease contracts were as follows:
Contract No. Area Da
CELESTIAL NICKEL MINING EXPLORATION
CORPORATION, PETITIONER, VS. BLUE RIDGE
LLC-V-941 18 hectares Jan
MINERAL CORPORATION AND MACROASIA
LC-V-1050 216 hectares Se
CORPORATION (FORMERLY INFANTA MINERAL AND
LLC-V-1060 16 hectares Oc
INDUSTRIAL CORPORATION),RESPONDENTS.
LLC-V-1061 144 hectares Oc
LLC-V-1073 144 hectares Ap
[G.R. No. 176319]
MLC-MRD-52 306 hectares Ap
MLC-MRC-53 72 hectares Ap
MACROASIA CORPORATION (FORMERLY INFANTA
Infanta's corporate name was changed to Cobertson Holdings
MINERAL AND INDUSTRIAL CORPORATION),
Corporation on January 26, 1994 and subsequently to its
PETITIONER, VS. BLUE RIDGE MINERAL CORPORATION
present name, Macroasia Corporation, on November 6, 1995.

Sometime in 1997, Celestial filed a Petition to Cancel the
subject mining lease contracts and other mining claims of
Macroasia including those covered by Mining Lease Contract
No. V-1050, before the Panel of Arbitrators (POA) of the Mines
and Geo-Sciences Bureau (MGB) of the DENR. The petition
was docketed as DENR Case No. 97-01.
Blue Ridge, in an earlier letter-petition, also wrote the Director
of Mines to seek cancellation of mining lease contracts and
other mining rights of Macroasia and another entity, Lebach
Mining Corporation (Lebach), in mining areas in Brooke's
Point. The petition was eventually docketed as DENR Case
No. 97-02.
Celestial is the assignee of 144 mining claims covering such
areas contiguous to Infanta's (now Macroasia) mining lode
claims. Said area was involved in protracted administrative
disputes with Infanta (now Macroasia), Lecar & Sons, Inc.,
and Palawan Nickel Mining Corporation. Celestial also holds
an MPSA with the government which covers 2,835 hectares
located at Ipilan/Maasin, Brooke's Point, Palawan and two
pending applications covering another 4,040 hectares in
Barangay Mainit also in Brooke's Point.
Celestial sought the cancellation of Macroasia's lease
contracts on the following grounds: (1) the nonpayment of
Macroasia of required occupational fees and municipal taxes;
(2) the non-filing of Macroasia of Affidavits of Annual Work
Obligations; (3) the failure of Macroasia to provide
improvements on subject mining claims; (4) the concentration
of Macroasia on logging; (5) the encroachment, mining, and
extraction by Macroasia of nickel ore from Celestial's property;
(6) the ability of Celestial to subject the mining areas to
commercial production; and (7) the willingness of Celestial to
pay fees and back taxes of Macroasia.
In the later part of the proceedings, Macroasia intervened in
the case and submitted its position paper refuting the grounds
for cancellation invoked by Celestial.[11]
The Ruling of the Panel of Arbitrators in
DENR Case Nos. 97-01 and 97-02
Based on the records of the Bureau of Mines and findings of
the field investigations, the POA found that Macroasia and
Lebach not only automatically abandoned their areas/mining
claims but likewise had lost all their rights to the mining claims.
The POA granted the petition of Celestial to cancel the
following Mining Lease Contracts of Macroasia: LLC-V-941,
LLC-V-1050, LLC-V-1060, LLC-V-1061, LLC-V-1073, MLC-
MRD-52, and MLC-MRC-53; and found the claims of the
others indubitably meritorious. It gave Celestial the
preferential right to Macroasia's mining areas. [12] It upheld
Blue Ridge's petition regarding DENR Case No. 97-02, but
only as against the Mining Lease Contract areas of Lebach
(LLC-V-1153, LLC-V-1154, and LLC-V-1155), and the said
leased areas were declared automatically abandoned. It gave
Blue Ridge priority right to the aforesaid Lebach's
areas/mining claims.[13]
Blue Ridge and Macroasia appealed before the MAB, and the
cases were docketed as MAB Case Nos. 056-97 and 057-97,
respectively.
Lebach did not file any notice of appeal with the required
memorandum of appeal; thus, with respect to Lebach, the
above resolution became final and executory.
The Rulings of the Mines Adjudication Board in
MAB Case Nos. 056-97 and 057-97 (DENR Case Nos. 97-
01 and 97-02)
The MAB resolved the issues of timeliness and perfection of
Macroasia's appeal; Macroasia's abandonment of its mining
claims; and the preferential right over the abandoned mining
claims of Macroasia.
Conformably with Section 51 of Consolidated Mines
Administrative Order (CMAO)[14] implementing Presidential
Decree No. (PD) 463[15] and our ruling in Medrana v. Office of
the President (OP),[16] the MAB affirmed the POA findings that
Macroasia abandoned its mining claims. The MAB found that
Macroasia did not comply with its work obligations from 1986
to 1991. It based its conclusion on the field verifications
conducted by the MGB, Region IV and validated by the
Special Team tasked by the MAB.[17] However, contrary to the
findings of the POA, the MAB found that it was Blue Ridge that
had prior and preferential rights over the mining claims of
Macroasia, and not Celestial.
Thus, on October 24, 2000, the MAB promulgated its Decision
upholding the Decision of the POA to cancel the Mining
Lode/Lease Contracts of Macroasia; declaring abandoned the
subject mining claims; and opening the mining area with prior
and preferential rights to Blue Ridge for mining applications,
subject to strict compliance with the procedure and
requirements provided by law. In case Blue Ridge defaults,
Celestial could exercise the secondary priority and
preferential rights, and subsequently, in case Celestial also
defaults, other qualified applicants could file.[18]
Both Celestial and Macroasia moved for
reconsideration.[19] Celestial asserted that it had better rights
than Blue Ridge over the mining claims of Macroasia as it had
correctly filed its petition, and filed its MPSA application after
Macroasia's lease contract expired on January 17, 1997 and
after the POA's resolution was issued on September 1,
1997. Moreover, it argued that priority was not an issue when
the contested area had not yet been declared
abandoned. Thus, Blue Ridge's MPSA application filed on
June 17, 1996 had no effect and should not be considered
superior since Macroasia's lease contracts were still valid and
subsisting and could not have been canceled by Macroasia's
mere failure to perform annual work obligations and pay
corresponding royalties/taxes to the government.
Macroasia, in its Motion for Reconsideration, reiterated that it
did not abandon its mining claims, and even if mining was not
listed among its purposes in its amended Articles of
Incorporation, its mining activities were acts that were
only ultra vires but were ratified as a secondary purpose by its
stockholders in subsequent amendments of its Articles of
Incorporation.
Before the MAB could resolve the motions for reconsideration,
on March 16, 2001, Macroasia filed its Supplemental Motion
for Reconsideration[20] questioning the jurisdiction of the POA
in canceling mining lease contracts and mining
claims. Macroasia averred that the power and authority to
grant, cancel, and revoke mineral agreements is exclusively
lodged with the DENR Secretary. Macroasia further pointed
out that in arrogating upon itself such power, the POA
whimsically and capriciously discarded the procedure on
conferment of mining rights laid down in Republic Act No. (RA)
7942, The Philippine Mining Act of 1995, and DENR
Administrative Order No. (AO) 96-40,[21] and perfunctorily and
improperly awarded its mining rights to Blue Ridge and
Celestial.
Subsequently, on November 26, 2004, the MAB issued a
Resolution[22] vacating its October 24, 2000 Decision, holding
that neither the POA nor the MAB had the power to revoke a
mineral agreement duly entered into by the DENR Secretary,
ratiocinating that there was no provision giving the POA and
MAB the concurrent power to manage or develop mineral
resources. The MAB further held that the power to cancel or
revoke a mineral agreement was exclusively lodged with the
DENR Secretary; that a petition for cancellation is not a mining
dispute under the exclusive jurisdiction of the POA pursuant
to Sec. 77 of RA 7942; and that the POA could only adjudicate
claims or contests during the MPSA application and not when
the claims and leases were already granted and subsisting.
Moreover, the MAB held that there was no abandonment by
Macroasia because the DENR Secretary had not decided to
release Macroasia from its obligations. The Secretary may
choose not to release a contractor from its obligations on
grounds of public interest. Thus, through its said resolution,
the MAB rendered its disposition, as follows:
WHEREFORE, premises considered, the assailed Decision of
October 24, 2000 is hereby VACATED. The seven (7) mining
lease contracts of Macroasia Corporation (formerly Infanta
Mineral & Industrial Corporation) are DECLARED
SUBSISTING prior to their expirations without prejudice to any
Decision or Order that the Secretary may render on the
same. NO PREFERENTIAL RIGHT over the same mining
claims is accorded to Blue Ridge Mineral Corporation or
Celestial Nickel Mining Exploration Corporation also without
prejudice to the determination by the Secretary over the
matter at the proper time.[23]
After the issuance of the MAB Resolution, Celestial and Blue
Ridge went through divergent paths in their quest to protect
their individual interests.
On January 10, 2005, Celestial assailed the November 26,
2004 MAB Resolution before the CA in a petition for
review[24] under Rule 43 of the Rules of Court. The petition
entitled Celestial Nickel Mining Exploration Corporation v.
Macroasia Corporation, et al. was docketed as CA-G.R. SP
No. 87931.
On the other hand, Blue Ridge first filed a Motion for
Reconsideration[25] which was denied.[26] On August 26,
2005, Blue Ridge questioned the MAB's November 26, 2004
and July 12, 2005 Resolutions before the CA in a petition for
review[27] entitled Blue Ridge Mineral Corporation v. Mines
Adjudication Board, et al. docketed as CA-G.R. SP No. 90828.
CA-G.R. SP No. 87931 filed by Celestial was heard by the
12th Division of the CA; while Blue Ridge's CA-G.R. SP No.
90828 was heard by the Special 10th Division. Ironically, the
two divisions rendered two (2) diametrically opposing
decisions.
The Ruling of the Court of Appeals Twelfth Division
On April 15, 2005, in CA-G.R. SP No. 87931, the CA 12th
Division affirmed the November 26, 2004 MAB Resolution
which declared Macroasia's seven mining lease contracts as
subsisting; rejected Blue Ridge's claim for preferential right
over said mining claims; and upheld the exclusive authority of
the DENR Secretary to approve, cancel, and revoke mineral
agreements. The CA also denied Celestial's Motion for
Reconsideration[28] of the assailed August 3, 2005
Resolution.[29]
Hence, Celestial filed its Petition for Review on
Certiorari[30] docketed as G.R. No. 169080,before this Court.
The Ruling of the Court of Appeals Special Tenth Division
On May 18, 2006, the CA Special 10th Division in CA-G.R. SP
No. 90828 granted Blue Ridge's petition; reversed and set
aside the November 26, 2004 and July 12, 2005 Resolutions
of the MAB; and reinstated the October 24, 2000 Decision in
MAB Case Nos. 056-97 and 057-97. The Special Tenth
Division canceled Macroasia's lease contracts; granted Blue
Ridge prior and preferential rights; and treated the
cancellation of a mining lease agreement as a mining dispute
within the exclusive jurisdiction of the POA under Sec. 77 of
RA 7942, explaining that the power to resolve mining disputes,
which is the greater power, necessarily includes the lesser
power to cancel mining agreements.
On February 20, 2006, Celestial filed a Most Urgent Motion for
Issuance of a Temporary Restraining Order/Preliminary
Prohibitory Injunction/Mandatory Injunction[31] to defer and
preclude the issuance of MPSA to Macroasia by the MGB and
the DENR Secretary. We denied this motion in our February
22, 2006 Resolution.[32]
Upon inquiry with the DENR, Blue Ridge discovered that
sometime in December 2005 two MPSAs, duly approved and
signed by the DENR Secretary, had been issued in favor of
Macroasia. Thus, we have the instant Petition for
Certiorari[33] filed by Blue Ridge docketed as G.R. No.
172936 under Rule 65, seeking to invalidate the two MPSAs
issued to Macroasia.
In the meantime, on June 7, 2006, Celestial filed its Motion for
Partial Reconsideration[34] of the May 18, 2006 CA Decision in
CA-G.R. SP No. 90828, while Macroasia filed its motion for
reconsideration of the same CA decision on July 7, 2006. The
motions were denied in the assailed January 19, 2007 CA
Resolution. Hence, on March 8, 2007, Celestial filed the third
petition[35] docketed as G.R. No. 176226, assailing the CA's
May 18, 2006 Decision and January 19, 2007 Resolution,
insofar as these granted Blue Ridge's prior and preferential
rights. While on March 9, 2007, Macroasia filed the fourth
petition[36] docketed as G.R. No. 176319, also assailing the
CA's May 18, 2006 Decision and January 19, 2007
Resolution.
The Issues
In G.R. No. 169080, petitioner Celestial raises the following
issues for our consideration:
(1) Whether or not Macroasia, for reasons of public policy is
estopped from assailing the alleged lack of jurisdiction of
the Panel of Arbitrators and the Mines Adjudication Board
only after receiving an adverse judgment therefrom? [sic]
(2) Whether or not it is only the Secretary of the DENR who
has the jurisdiction to cancel mining contracts and
privileges? [sic]
(3) Whether or not a petition for the cancellation of a mining
lease contract or privilege is a mining dispute within the
meaning of the law? [sic]
(4) Whether or not Infanta's (Macroasia) mining lease contract
areas were deemed abandoned warranting the
cancellation of the lease contracts and the opening of the
areas to other qualified applicants? [sic]
(5) Whether or not Macroasia/Infanta had lost its right to
participate in this case after it failed to seasonably file its
appeal and after its lease contracts had been declared
abandoned and expired without having been renewed by
the government? [sic]
(6) Whether or not Celestial has the preferential right to apply
for the 23 DE LARA claims which were included in
Infanta's (Macroasia) expired lease contract (LLC-V-941)
and the other areas declared as lapsed or abandoned
by MGB-Region 4 and the Panel of Arbitrators?[37] [sic]
In G.R. No. 172936, petitioner Blue Ridge raises the following
grounds for the allowance of the petition:
I
At the outset, the instant petition must be given due course
and taken cognizance of by the Honorable Court considering
that exceptional and compelling circumstances justify the
availment of the instant petition and the call for the exercise of
the Honorable Court's primary jurisdiction.
A. The exploration, development and
utilization of minerals, petroleum and other
mineral oils are imbued with public
interest. The action of then Secretary
Defensor, maintained and continued by
public respondent Secretary Reyes, was
tainted with grave abuse of discretion, has
far-reaching consequences because of
the magnitude of the effect created thereby.
B. The issues in the instant petition have
already been put to fore by Celestial with
the First Division of the Honorable Court,
and hence, this circumstance justifies the
cognizance by the Honorable Court of the
instant petition.
II
It was grave abuse of discretion amounting to lack and/or
excess of jurisdiction for then Secretary Defensor to have
issued the subject MPSAs in favor of private respondent
Macroasia, considering that:
A. Non-compliance of the mandatory
requirements by private respondent
Macroasia prior to approval of the subject
MPSAs should have precluded then
Secretary Defensor from
approving subject MPSAs.
B. Petitioner Blue Ridge has the prior and
preferential right to file its mining application
over the mining claims covered by the
subject MPSAs, pursuant
the Decision dated 24 October 2000 of the
Board and as affirmed
the Decision dated 18 May 2006 of the
Court of Appeals in CA-G.R. SP No.
90828.[38]
In G.R. No. 176226, petitioner Celestial ascribes the following
errors to the CA for our consideration:
(1) That in reinstating and adopting as its own the Decision of
the Mine Adjudication Board affirming the abandonment and
cancellation of the mining areas/claims of Macroasia (Infanta)
but awarding the prior or preferential rights to Blue Ridge, the
Hon. Court of Appeals had decided a question of substance
in a way not in accord with the Law (RA 7942) or with the
applicable decisions of the Supreme Court; in other words,
errors of law had been committed by the Hon. Court of
Appeals in granting preferential rights to Blue Ridge;
(2) That the Hon. Court of Appeals has so far departed from
the accepted and usual course of judicial proceedings or so
far sanctioned such departure by the Mines Adjudication
Board in its Decision of May 18, 2006 and Resolution of
January 19, 2007 because:
(A) The findings of fact of the Hon. Court of Appeals are
contradictory or inconsistent with the findings of the Panel of
Arbitrators;
(B) There is grave abuse of discretion on the part of the Hon.
Court of Appeals in its appreciation of the facts, the evidence
and the law thereby leading it to make the erroneous
conclusion that Blue Ridge, not Celestial, is entitled to the
Award of prior/preferential rights over the mining areas
declared as abandoned by Macroasia;
(C) There is likewise, a grave abuse of discretion on the part
of the Hon. Court of Appeals in that the said Court did not even
consider some of the issues raised by Celestial;
(D) That the findings of the Hon. Court of Appeals are mere
conclusions not supported by substantial evidence and
without citation of the specific evidence upon which they are
based; they were arrived at arbitrarily or in disregard of
contradiction of the evidence on record and findings of the
Panel of Arbitrators in the Resolution of September 1, 1997;
(E) That the findings of the Hon. Court of Appeals are
premised on the absence of evidence but such findings are
contradicted by the evidence on record and are violative of the
provisions of RA 7942 and its Implementing Rules and
Regulations.[39]
In G.R. No. 176319, petitioner Macroasia raises the following
grounds for the allowance of the petition:
I.
The Court of Appeals (Special Tenth Division) should have
dismissed the Petition of Blue Ridge outright since the issues,
facts and matters involved in the said Petition are identical to
those which had already been painstakingly passed upon,
reviewed and resolved by the Court of Appeal's Twelfth
Division in CA-G.R. SP No. 87931
II.
The Court of Appeals (Special Tenth Division) gravely erred
in denying Macroasia's Motion to Inhibit Associate Justice
Rosmari Carandang from hearing and deciding the Petition
III.
There were no factual nor legal bases for the Court of Appeals
to rule that Macroasia had waived its right to question the
to jurisdiction of the Mines Adjudication Board
by
IV.
Republic Act No. 7942 contains provisions which
unequivocally indicate that only the Secretary of the
Department of Environment and Natural Resources has the
power and authority to cancel mining lease agreements
V.
The Court of Appeals (Special Tenth Division) gravely erred
in perfunctorily transferring Macroasia's mining lease
agreements to Blue Ridge without observing the required
procedure nor providing any basis therefor[40]
The Court's Ruling
The petitions under G.R. Nos. 169080, 172936, and 176226
are bereft of merit, while the petition under G.R. No. 176319
is meritorious.
The pith of the controversy, upon which the other issues are
hinged is, who has authority and jurisdiction to cancel existing
mineral agreements under RA 7942 in relation to PD 463 and
pertinent rules and regulations.
G.R. Nos. 169080, 176226 and 176319
We will jointly tackle G.R. Nos. 169080, 176266, and 176319
as the issues and arguments of these three are inextricably
intertwined.
Core Issue: Jurisdiction over Cancellation of Mineral
Agreements

Petitioner Celestial maintains that while the jurisdiction to
approve mining lease contracts or mineral agreements is
conferred on the DENR Secretary, Sec. 77(a) of RA 7942 by
implication granted to the POA and MAB the authority to
cancel existing mining lease contracts or mineral agreements.
On the other hand, respondent Macroasia strongly asserts
that it is the DENR Secretary who has the exclusive and
primary jurisdiction to grant and cancel existing mining lease
contracts; thus, the POA and MAB have no jurisdiction to
cancel much less to grant any preferential rights to other
mining firms.
Before we resolve this core issue of jurisdiction over
cancellation of mining lease contracts, we first need to look
back at previous mining laws pertinent to this issue.
Under PD 463, The Mineral Resources Development Decree
of 1974, which took effect on May 17, 1974, applications for
lease of mining claims were required to be filed with the
Director of the Bureau of Mines, within two (2) days from the
date of their recording.[41] Sec. 40 of PD 463 provided that if
no adverse claim was filed within (15) days after the first date
of publication, it was conclusively presumed that no adverse
claim existed and thereafter no objection from third parties to
the grant of the lease could be heard, except protests pending
at the time of publication. The Secretary would then approve
and issue the corresponding mining lease contract. In case of
any protest or adverse claim relating to any mining claim and
lease application, Secs. 48 and 50 of PD 463 prescribed the
procedure. Under Sec. 48, the protest should be filed with the
Bureau of Mines. Under Sec. 50, any party not satisfied with
the decision or order of the Director could, within five (5) days
from receipt of the decision or order, appeal to the Secretary.
The decisions of the Secretary were likewise appealable
within five (5) days from receipts by the affected party to the
President of the Philippines whose decision shall be final and
executory. PD 463 was, however, silent as to who was
authorized to cancel the mineral agreements.
On July 10, 1987, President Corazon C. Aquino issued
Executive Order No. (EO) 211. Under Sec. 2 of EO 211, the
processing, evaluation, and approval of all mining
applications, declarations of locations, operating agreements,
and service contracts were governed by PD 463, as amended.
EO 211 likewise did not contain any provision on the authority
to cancel operating agreements and service contracts.
On July 25, 1987, EO 279 was issued by President Aquino. It
authorized the DENR Secretary to negotiate and enter into,
for and in behalf of the Government, joint venture, co-
production, or production-sharing agreements for the
exploration, development, and utilization of mineral resources
with any Filipino citizen, corporation, or association, at least
60% of whose capital was owned by Filipino citizens. [42] The
contract or agreement was subject to the approval of the
President.[43] With respect to contracts of foreign-owned
corporations or foreign investors involving either technical or
financial assistance for large-scale exploration, development,
and utilization of minerals, the DENR Secretary could
recommend approval of said contracts to the President. [44] EO
279 provided that PD 463 and its implementing rules and
regulations, which were not inconsistent with EO 279,
continued in force and effect.[45] Again, EO 279 was silent on
the authority to cancel mineral agreements.
RA 7942, The Philippine Mining Act of 1995 enacted on March
3, 1995, repealed the provisions of PD 463 inconsistent with
RA 7942. Unlike PD 463, where the application was filed with
the Bureau of Mines Director, the applications for mineral
agreements are now required to be filed with the Regional
Director as provided by Sec. 29 of RA 7942. The proper filing
gave the proponent the prior right to be approved by the
Secretary and thereafter to be submitted to the President. The
President shall provide a list to Congress of every approved
mineral agreement within 30 days from its approval by the
Secretary. Again, RA 7942 is silent on who has authority to
cancel the agreement.
Compared to PD 463 where disputes were decided by the
Bureau of Mines Director whose decisions were appealable to
the DENR Secretary and then to the President, RA 7942 now
provides for the creation of quasi-judicial bodies (POA and
MAB) that would have jurisdiction over conflicts arising from
the applications and mineral agreements. Secs. 77, 78, and
79 lay down the procedure, thus:
SEC. 77. Panel of Arbitrators.—There shall be a panel of
arbitrators in the regional office of the Department composed
of three (3) members, two (2) of whom must be members of
the Philippine Bar in good standing and one [1] licensed mining
engineer or a professional in a related field, and duly
designated by the Secretary as recommended by the Mines
and Geosciences Bureau Director. Those designated as
members of the panel shall serve as such in addition to their
work in the Department without receiving any additional
compensation. As much as practicable, said members shall
come from the different bureaus of the Department in the
region. The presiding officer thereof shall be selected by the
drawing of lots. His tenure as presiding officer shall be on a
yearly basis. The members of the panel shall perform their
duties and obligations in hearing and deciding cases until their
designation is withdrawn or revoked by the Secretary. Within
thirty (30) working days, after the submission of the case by
the parties for decision, the panel shall have exclusive and
original jurisdiction to hear and decide on the following:
(a) Disputes involving rights to mining areas;
(b) Disputes involving mineral agreements or permits;
(c) Disputes involving surface owners, occupants and
claimholders/concessionaires; and
(d) Disputes pending before the Bureau and the Department
at the date of the effectivity of this Act.
SEC. 78. Appellate Jurisdiction.—The decision or order of the
panel of arbitrators may be appealed by the party not satisfied
thereto to the Mines Adjudication Board within fifteen (15)
days from receipt thereof which must decide the case within
thirty (30) days from submission thereof for decision.
SEC. 79. Mines Adjudication Board.—The Mines
Adjudication Board shall be composed of three (3) members.
The Secretary shall be the chairman with the Director of the
Mines and Geosciences Bureau and the Undersecretary for
Operations of the Department as members thereof.
x x x x
A petition for review by certiorari and question of law may be
filed by the aggrieved party with the Supreme Court within
thirty (30) days from receipt of the order or decision of the
Board.
RA 7942 is also silent as to who is empowered to cancel
existing lease contracts and mineral agreements.
Meanwhile, in Southeast Mindanao Gold Mining Corp. v.
MAB, we explained that the decision of the MAB can first be
appealed, via a petition for review, to the CA before elevating
the case to this Court.[46]
After a scrutiny of the provisions of PD 463, EO 211, EO 279,
RA 7942 and its implementing rules and regulations,
executive issuances, and case law, we rule that the DENR
Secretary, not the POA, has the jurisdiction to cancel existing
mineral lease contracts or mineral agreements based on the
following reasons: (4) Exercise supervision and control over all functions
and activities of the Department;
1. The power of the DENR Secretary to cancel mineral
agreements emanates from his administrative authority, (5) Delegate authority for the performance of any
supervision, management, and control over mineral resources administrative or substantive function to subordinate officials
under Chapter I, Title XIV of Book IV of the Revised of the Department x x x (Emphasis supplied.)
Administrative Code of 1987, viz:
It is the DENR, through the Secretary, that manages,
Chapter 1—General Provisions
supervises, and regulates the use and development of all
mineral resources of the country. It has exclusive jurisdiction
Section 1. Declaration of Policy.—(1) The State shall ensure,
over the management of all lands of public domain, which
for the benefit of the Filipino people, the full exploration and
covers mineral resources and deposits from said lands. It has
development as well as the judicious disposition, utilization,
the power to oversee, supervise, and police our natural
management, renewal and conservation of the
resources which include mineral resources. Derived from the
country'sforest, mineral, land, waters, fisheries, wildlife, off-
broad and explicit powers of the DENR and its Secretary
shore areas and other natural resources x x x
under the Administrative Code of 1987 is the power to approve
mineral agreements and necessarily to cancel or cause to
Sec. 2. Mandate.—(1) The Department of Environment
cancel said agreements.
and Natural Resources shall be primarily responsible for
the implementation of the foregoing policy. (2) It shall,
2. RA 7942 confers to the DENR Secretary specific authority
subject to law and higher authority, be in charge of
over mineral resources.
carrying out the State's constitutional mandate to control
and supervise the exploration, development, utilization,
Secs. 8 and 29 of RA 7942 pertinently provide:
and conservation of the country's natural resources.
SEC. 8. Authority of the Department.—The Department shall
be the primary government agency responsible for the
x x x x
conservation, management, development, and proper use of
the States mineral resources including those in reservations,
Sec. 4. Powers and Functions.—The Department shall:
watershed areas, and lands of the public domain. The
Secretary shall have the authority to enter into mineral
x x x x
agreements on behalf of the Government upon the
recommendation of the Director, promulgate such rules and
(2) Formulate, implement and supervise the
regulations as may be necessary to implement the intent and
implementation of the government's policies, plans, and
provisions of this Act.
programs pertaining to the management, conservation,
development, use and replenishment of the country's
SEC. 29. Filing and approval of Mineral Agreements.—x x x.
natural resources;
The filing of a proposal for a mineral agreement shall give the
x x x x
proponent the prior right to areas covered by the same. The
proposed mineral agreement will be approved by the
(4) Exercise supervision and control over forest lands,
Secretary and copies thereof shall be submitted to the
alienable and disposable public lands, mineral resources x x
President. Thereafter, the President shall provide a list to
x
Congress of every approved mineral agreement within thirty
(30) days from its approval by the Secretary. (Emphasis
x x x x
supplied.)
(12) Regulate the development, disposition, Sec. 29 is a carry over of Sec. 40 of PD 463 which granted
extraction, exploration and use of the country's forest, jurisdiction to the DENR Secretary to approve mining lease
land, water and mineral resources; contracts on behalf of the government, thus:
SEC. 40. Issuance of Mining Lease Contract.—If no adverse
(13) Assume responsibility for the assessment, claim is filed within fifteen (15) days after the first date of
development, protection, licensing and regulation as publication, it shall be conclusively presumed that no such
provided for by law, where applicable, of all energy and adverse claim exists and thereafter no objection from third
natural resources; the regulation and monitoring of parties to the grant of the lease shall be heard, except protest
service contractors, licensees, lessees, and permit for the pending at the time of publication, and the Secretary shall
extraction, exploration, development and use of natural approve and issue the corresponding mining lease x x x.
resources products; x x x
To enforce PD 463, the CMAO containing the rules and
regulations implementing PD 463 was issued. Sec. 44 of the
x x x x
CMAO provides:
SEC. 44. Procedure for Cancellation.—Before any mining
(15) Exercise exclusive jurisdiction on the
lease contract is cancelled for any cause enumerated in
management and disposition of all lands of the public
Section 43 above, the mining lessee shall first be notified in
domain x x x
writing of such cause or causes, and shall be given an
opportunity to be heard, and to show cause why the lease
Chapter 2—The Department Proper shall not be cancelled.
x x x x If, upon investigation, the Secretary shall find the lessee to
be in default, the former may warn the lessee, suspend
Sec. 8. The Secretary.—The Secretary shall: his operations or cancel the lease contract (emphasis
supplied).
x x x x
Sec. 4 of EO 279 provided that the provisions of PD 463 and
(3) Promulgate rules, regulations and other issuances its implementing rules and regulations, not inconsistent with
necessary in carrying out the Department's mandate, the executive order, continue in force and effect.
objectives, policies, plans, programs and projects.
When RA 7942 took effect on March 3, 1995, there was no
provision on who could cancel mineral agreements. However,
since the aforequoted Sec. 44 of the CMAO implementing PD
463 was not repealed by RA 7942 and DENR AO 96-40, not
being contrary to any of the provisions in them, then it follows
that Sec. 44 serves as basis for the DENR Secretary's
authority to cancel mineral agreements.
Since the DENR Secretary had the power to approve and
cancel mineral agreements under PD 463, and the power to
cancel them under the CMAO implementing PD 463, EO 211,
and EO 279, then there was no recall of the power of the
DENR Secretary under RA 7942. Historically, the DENR
Secretary has the express power to approve mineral
agreements or contracts and the implied power to cancel said
agreements.
It is a well-established principle that in the interpretation of an
ambiguous provision of law, the history of the enactment of
the law may be used as an extrinsic aid to determine the
import of the legal provision or the law. [47] History of the
enactment of the statute constitutes prior laws on the same
subject matter. Legislative history necessitates review of "the
origin, antecedents and derivation" of the law in question to
discover the legislative purpose or intent. [48] It can be
assumed "that the new legislation has been enacted as
continuation of the existing legislative policy or as a new effort
to perpetuate it or further advance it."[49]
We rule, therefore, that based on the grant of implied power
to terminate mining or mineral contracts under previous laws
or executive issuances like PD 463, EO 211, and EO 279, RA
7942 should be construed as a continuation of the legislative
intent to authorize the DENR Secretary to cancel mineral
agreements on account of violations of the terms and
conditions thereof.
3. Under RA 7942, the power of control and supervision of the
DENR Secretary over the MGB to cancel or recommend
cancellation of mineral rights clearly demonstrates the
authority of the DENR Secretary to cancel or approve the
cancellation of mineral agreements.
Under Sec. 9 of RA 7942, the MGB was given the power of
direct supervision of mineral lands and resources, thus:
Sec. 9. Authority of the Bureau.—The Bureau shall
have direct charge in the administration and disposition
of mineral lands and mineral resources and shall
undertake geological, mining, metallurgical, chemical,
and other researches as well as geological and mineral
exploration surveys. The Director shall recommend to
the Secretary the granting of mineral agreements to duly
qualified persons and shall monitor the compliance by
the contractor of the terms and conditions of the mineral
agreements. The Bureau may confiscate surety,
performance and guaranty bonds posted through an order to
be promulgated by the Director. The Director may deputize,
when necessary, any member or unit of the Philippine
National Police, barangay, duly registered nongovernmental
organization (NGO) or any qualified person to police all mining
activities. (Emphasis supplied.)
Corollary to the power of the MGB Director to recommend
approval of mineral agreements is his power to cancel or
recommend cancellation of mining rights covered by said
agreements under Sec. 7 of DENR AO 96-40, containing the
revised Implementing Rules and Regulations of RA
7942. Sec. 7 reads:
Sec. 7. Organization and Authority of the Bureau.
x x x x
The Bureau shall have the following authority, among others:
a. To have direct charge in the administration
and disposition of mineral land and mineral
resources;
xxxx
d. To recommend to the Secretary the
granting of mineral agreements or to
endorse to the Secretary for action by the
President the grant of FTAAs [Financial and
Technical Assistance Agreements], in favor
of qualified persons and to monitor
compliance by the Contractor with the
terms and conditions of the mineral
agreements and FTAAs.
e. To cancel or to recommend cancellation
after due process, mining rights, mining
applications and mining claims for non-
compliance with pertinent laws, rules and
regulations.
It is explicit from the foregoing provision that the DENR
Secretary has the authority to cancel mineral agreements
based on the recommendation of the MGB Director. As a
matter of fact, the power to cancel mining rights can even be
delegated by the DENR Secretary to the MGB
Director. Clearly, it is the Secretary, not the POA, that has
authority and jurisdiction over cancellation of existing mining
contracts or mineral agreements.
4. The DENR Secretary's power to cancel mining rights or
agreements through the MGB can be inferred from Sec. 230,
Chapter XXIV of DENR AO 96-40 on cancellation, revocation,
and termination of a permit/mineral agreement/FTAA. Sec.
230 provides:
Section 230. Grounds
The following grounds for cancellation revocation and
termination of a Mining Permit Mineral Agreement/FTAA.
a. Violation of any of the terms and conditions
of the Permits or Agreements;
b. Nonpayment of taxes and fees due the
government for two (2) consecutive years;
and
c. Falsehood or omission of facts in the
application for exploration [or Mining]
Permit Mineral Agreement/FTAA or other
permits which may later, change or affect
substantially the facts set forth in said
statements.
Though Sec. 230 is silent as to who can order the cancellation,
revocation, and termination of a permit/mineral
agreement/FTAA, it has to be correlated with the power of the
MGB under Sec. 7 of AO 96-40 "to cancel or to recommend
cancellation, after due process, mining rights, mining
applications and mining claims for noncompliance with
pertinent laws, rules and regulations." As the MGB is under
the supervision of the DENR Secretary, then the logical
conclusion is that it is the DENR Secretary who can cancel the
mineral agreements and not the POA nor the MAB.
5. Celestial and Blue Ridge are not unaware of the stipulations
in the Mining Lease Contract Nos. V-1050 and MRD-52,[50] the
cancellation of which they sought from the POA. It is clear
from said lease contracts that the parties are the Republic of
the Philippines represented by the Secretary of Agriculture
and Natural Resources (now DENR Secretary) as lessor, and
Infanta (Macroasia) as lessee. Paragraph 18 of said lease resolved by the Panel of Arbitrators.
contracts provides:
Whenever the LESSEE fails to comply with any provision of Sec. 41.
[PD 463, and] Commonwealth Acts Nos. 137, 466 and 470,
[both as amended,] and/or the rules and regulations x x x x
promulgated thereunder, or any of the covenants therein, the
LESSOR may declare this lease cancelled and, after Within fifteen (15) working days from the receipt of the
having given thirty (30) days' notice in writing to the LESSEE, Certification issued by the Panel of Arbitrators as
may enter and take possession of the said premises, and said provided in Section 38 hereof, the concerned Regional
lessee shall be liable for all unpaid rentals, royalties and taxes Director shall initially evaluate the Mineral Agreement
due the Government on the lease up to the time of the applications in areas outside Mineral
forfeiture or cancellation, in which event, the LESSEE hereby reservations. He/She shall thereafter endorse his/her
covenants and agrees to give up the possession of the findings to the Bureau for further evaluation by the
property leased. (Emphasis supplied.) Director within fifteen (15) working days from receipt of
forwarded documents. Thereafter, the Director shall
Thus, the government represented by the then Secretary of
endorse the same to the secretary for
Agriculture and Natural Resources (now the DENR Secretary)
consideration/approval within fifteen working days from
has the power to cancel the lease contracts for violations of
receipt of such endorsement.
existing laws, rules and regulations and the terms and
conditions of the contracts. Celestial and Blue Ridge are now
In case of Mineral Agreement applications in areas with
estopped from challenging the power and authority of the
Mineral Reservations, within fifteen (15) working days from
DENR Secretary to cancel mineral agreements.
receipt of the Certification issued by the Panel of
Arbitrators as provided for in Section 38 hereof, the same
However, Celestial and Blue Ridge insist that the power to
shall be evaluated and endorsed by the Director to the
cancel mineral agreements is also lodged with the POA under
Secretary for consideration/approval within fifteen days
the explicit provisions of Sec. 77 of RA 7942.
from receipt of such endorsement. (Emphasis supplied.)
This postulation is incorrect. It has been made clear from the aforecited provisions that the
"disputes involving rights to mining areas" under Sec. 77(a)
Sec. 77 of RA 7942 lays down the jurisdiction of POA, to wit: specifically refer only to those disputes relative to
Within thirty (30) days, after the submission of the case by the the applications for a mineral agreement or conferment of
parties for the decision, the panel shall have exclusive and mining rights.
original jurisdiction to hear and decide the following:
The jurisdiction of the POA over adverse claims, protest, or
(a) Disputes involving rights to mining areas oppositions to a mining right application is further elucidated
by Secs. 219 and 43 of DENR AO 95-936, which read:
(b) Disputes involving mineral agreements or permits Sec. 219. Filing of Adverse Claims/Conflicts/Oppositions.—
Notwithstanding the provisions of Sections 28, 43 and 57
The phrase "disputes involving rights to mining areas" refers
above, any adverse claim, protest or opposition specified
to any adverse claim, protest, or opposition to an application
in said sections may also be filed directly with the Panel
for mineral agreement. The POA therefore has the jurisdiction
of Arbitratorswithin the concerned periods for filing such
to resolve any adverse claim, protest, or opposition to a
claim, protest or opposition as specified in said Sections.
pending application for a mineral agreement filed with the
concerned Regional Office of the MGB. This is clear from
Sec. 43. Publication/Posting of Mineral Agreement
Secs. 38 and 41 of DENR AO 96-40, which provide:
Application.—
Sec. 38.
x x x x
x x x x
The Regional Director or concerned Regional Director shall
Within thirty (30) calendar days from the last date of
also cause the posting of the application on the bulletin boards
publication/posting/radio announcements, the authorized
of the Bureau, concerned Regional office(s) and in the
officer(s) of the concerned office(s) shall issue a
concerned province(s) and municipality(ies), copy furnished
certification(s) that the publication/posting/radio
the barangays where the proposed contract area is located
announcement have been complied with. Any adverse
once a week for two (2) consecutive weeks in a language
claim, protest or opposition shall be filed directly, within
generally understood in the locality. After forty-five (45) days
thirty (30) calendar days from the last date of
from the last date of publication/posting has been made and
publication/posting/radio announcement, with the
no adverse claim, protest or opposition was filed within the
concerned Regional Office or through any concerned
said forty-five (45) days, the concerned offices shall issue a
PENRO or CENRO for filing in the concerned Regional
certification that publication/posting has been made and that
Office for purposes of its resolution by the Panel of
no adverse claim, protest or opposition of whatever nature has
Arbitrators pursuant to the provisions of this Act and
been filed. On the other hand, if there be any adverse
these implementing rules and regulations. Upon final
claim, protest or opposition, the same shall be filed within
resolution of any adverse claim, protest or opposition, the
forty-five (45) days from the last date of
Panel of Arbitrators shall likewise issue a certification to
publication/posting, with the Regional Offices concerned,
that effect within five (5) working days from the date of
or through the Department's Community Environment
finality of resolution thereof. Where there is no adverse
and Natural Resources Officers (CENRO) or Provincial
claim, protest or opposition, the Panel of Arbitrators shall
Environment and Natural Resources Officers (PENRO), to
likewise issue a Certification to that effect within five
be filed at the Regional Office for resolution of the Panel
working days therefrom.
of Arbitrators. However previously published valid and
subsisting mining claims are exempted from posted/posting
x x x x
required under this Section.
No Mineral Agreement shall be approved unless the
No mineral agreement shall be approved unless the
requirements under this Section are fully complied with
requirements under this section are fully complied with
and any adverse claim/protest/opposition is finally
and any opposition/adverse claim is dealt with in writing Sec. 77 (b) of RA 7942. It does not pertain to a violation by a
by the Director and resolved by the Panel of party of the right of another. The applicant is not a real party-
Arbitrators. (Emphasis supplied.) in-interest as he does not have a material or substantial
interest in the mineral agreement but only a prospective or
These provisions lead us to conclude that the power of the
expectant right or interest in the mining area. He has no legal
POA to resolve any adverse claim, opposition, or protest
right to such mining claim and hence no dispute can arise
relative to mining rights under Sec. 77(a) of RA 7942 is
between the applicant and the parties to the mineral
confined only to adverse claims, conflicts and oppositions
agreement. The court rules therefore that a petition for
relating to applications for the grant of mineral rights. POA's
cancellation of a mineral agreement anchored on the breach
jurisdiction is confined only to resolutions of such adverse
thereof even if filed by an applicant to a mining claim, like
claims, conflicts and oppositions and it has no authority to
Celestial and Blue Ridge, falls within the jurisdiction of the
approve or reject said applications. Such power is vested in
DENR Secretary and not POA. Such petition is excluded from
the DENR Secretary upon recommendation of the MGB
the coverage of the POA's jurisdiction over disputes involving
Director. Clearly, POA's jurisdiction over "disputes involving
mineral agreements under Sec. 77 (b) of RA 7942.
rights to mining areas" has nothing to do with the cancellation
of existing mineral agreements.
Macroasia not estopped from raising the issue of
jurisdiction on appeal
On the other hand, Celestial and Blue Ridge contend that POA
has jurisdiction over their petitions for the cancellation of
On the related issue of estoppel, petitioner Celestial argues
Macroasia's lease agreements banking on POA's jurisdiction
that Macroasia is estopped from raising and questioning the
over "disputes involving mineral agreements or permits" under
issue of the jurisdiction of the POA and MAB over the petition
Sec. 77 (b) of RA 7942.
for cancellation of its mining lease contracts, when Macroasia
raised it only in its Supplemental Motion for Reconsideration.
Such position is bereft of merit.
We rule that the principle of estoppel does not apply.
As earlier discussed, the DENR Secretary, by virtue of his
powers as administrative head of his department in charge of
Indeed, Macroasia was not the one that initiated the instant
the management and supervision of the natural resources of
case before the POA, and thus was not the one that invoked
the country under the 1987 Administrative Code, RA 7942,
the jurisdiction of the POA. Hence, on appeal, Macroasia is
and other laws, rules, and regulations, can cancel a mineral
not precluded from raising the issue of jurisdiction as it may
agreement for violation of its terms, even without a petition or
be invoked even on appeal.[58] As a matter of fact, a party can
request filed for its cancellation, provided there is compliance
raise the issue of jurisdiction at any stage of the proceedings.
with due process. Since the cancellation of the mineral
agreement is approved by the DENR Secretary, then the
Petitioner Celestial's reliance on Villela v. Gozun[59] to support
recourse of the contractor is to elevate the matter to the OP
the contention that the POA has jurisdiction to hear and decide
pursuant to AO 18, Series of 1987 but not with the POA.
a petition to cancel existing mining lease contracts, is
misplaced. In said case, we dismissed the petition on the
Matched with the legal provisions empowering the DENR
ground of non-exhaustion of administrative remedies and
Secretary to cancel a mineral agreement is Sec. 77 (b) of RA
disregarded judicial hierarchy as no compelling reason was
7942 which grants POA jurisdiction over disputes involving
shown to warrant otherwise. While we pointed out the
mineral agreements.
authority of the POA, there was no categorical pronouncement
on the jurisdictional issue.
A dispute is defined as "a conflict or controversy; a conflict of
claims or rights; an assertion of a right, claim or demand on
No valid pronouncement of abandonment due to lack of
one side; met by contrary claims or allegations on the
jurisdiction over petition to cancel
other."[51] It is synonymous to a cause of action which is "an
act or omission by which a party violates a right of another." [52]
As we are not a trier of facts, we need not make any finding
on the various investigations done by the MGB and MAB on
A petition or complaint originating from a dispute can be filed
the issue of Macroasia's non-compliance with its work
or initiated only by a real party-in-interest. The rules of court
obligations and nonpayment of taxes and fees. Verily, the law
define a real party-in-interest as "the party who stands to be
does not impose automatic cancellation of an existing mining
benefited or injured by the judgment in the suit or the party
lease contract, as it is a question of fact which must be
entitled to the avails of the suit."[53] Every action, therefore,
determined by the MGB which can recommend the
can only be prosecuted in the name of the real party-in-
cancellation of the mineral or lease agreements to the DENR
interest.[54] It has been explained that "a real party-in-interest
Secretary. Be that as it may, since the POA and MAB have
plaintiff is one who has a legal right, while a real party-in-
no jurisdiction over the petition for cancellation of existing
interest-defendant is one who has a correlative legal
mining lease contracts of Macroasia, they could not have
obligation whose act or omission violates the legal right of the
made any binding pronouncement that Macroasia had indeed
former."[55]
abandoned the subject mining claims. Besides, it is the DENR
Secretary who has the authority to cancel Macroasia's existing
On the other hand, interest "means material interest, an
mining lease contracts whether on grounds of abandonment
interest in issue and to be affected by the decree, as
or any valid grounds for cancellation.
distinguished from mere interest in the question involved, or a
mere incidental interest." It is settled in this jurisdiction that
Decision in CA-G.R. SP No. 90828 not in accord with the
"one having no right or interest to protect cannot invoke the
law
jurisdiction of the court as a party-plaintiff in an
action."[56] Real interest is defined as "a present substantial
With our resolution of the issue on the lack of jurisdiction of
interest, as distinguished from a mere expectancy, or a future,
the POA and the MAB over petitions to cancel existing mining
contingent, subordinate or consequential interest." [57]
lease contracts or mineral agreements, it is thus clear that the
May 18, 2006 Decision in CA-G.R. SP No. 90828 must be
From the foregoing, a petition for the cancellation of an
nullified for being not in accord with the law and the April 15,
existing mineral agreement covering an area applied for by an
2005 Decision in CA-G.R. SP No. 87931 must be upheld.
applicant based on the alleged violation of any of the terms
thereof, is not a "dispute" involving a mineral agreement under
Notwithstanding the nullification of the May 18, 2006 Decision
of the Special Tenth Division in CA-G.R. SP No. 90828, the
rendition of two conflicting decisions of the two CA Divisions
over the same challenged resolutions of the MAB should be
avoided in the future as this is anathema to stability of judicial
decisions and orderly administration of justice.
The chronology of events reveals the following:
1. January 10, 2005 – petitioner Celestial filed its
petition docketed as CA-G.R. SP No. 87931 with the
CA.
2. April 15, 2005 – the CA through its Twelfth Division
rendered its Decision in CA-G.R. SP No. 87931
affirming the November 26, 2004 MAB Resolution.
3. July 12, 2005 – respondent Blue Ridge filed its
petition docketed as CA-G.R. SP No. 90828 with the
CA. It is clear that the Blue Ridge petition was filed
with the CA three months after the decision in CA-
G.R. SP No. 87931 was promulgated.
4. May 18, 2006 – the CA through its Special Tenth
Division rendered its Decision setting aside the
November 26, 2004 and July 12, 2005 Resolutions
of the MAB and reinstating the October 24, 2000
MAB Decision.
From these facts, the CA Special Tenth Division should have
ordered the consolidation of the petition in CA-G.R. SP No.
90828 by CA-G.R. SP No. 87931 pursuant to the Internal
Rules of the CA, the latter having the earlier docket
number. Had it done so, then the occurrence of the conflicting
decisions could have been prevented. The CA Special Tenth
Division should have abided by our ruling in Nacuray v. NLRC,
where we held, "Consequently, a division cannot and should
not review a case already passed upon by another Division of
this Court. It is only proper, to allow the case to take its rest
after having attained finality."[60]
The CA should take the appropriate steps, including the
adoption or amendment of the rules, to see to it that cases or
petitions arising from the same questioned decision, order, or
resolution are consolidated to steer clear of contrary or
opposing decisions of the different CA Divisions and ensure
that incidents of similar nature will not be replicated.
G.R. No. 172936
No showing that the DENR Secretary gravely abused his
discretion
Now, going to the substance of the petition in G.R. No.
172936. A scrutiny of the records shows that the DENR
Secretary did not gravely abuse his discretion in approving
and signing MPSA Nos. 220-2005-IVB and 221-2005-IVB in
favor of Macroasia.
Petitioner Blue Ridge anchors its rights on the May 18, 2006
Decision in CA-G.R. SP No. 90828, which we have
unfortunately struck down. Blue Ridge's argument in assailing
the approval and issuance of the subject MPSAs that it has
been accorded preferential right by the CA has no leg to stand
on.
The October 24, 2000 MAB Decision, nullified by the
subsequent November 26, 2004 Resolution, is unequivocal
that Blue Ridge was granted only "prior and preferential
rights to FILE its mining application over the same mining
claims."[61] What was accorded Blue Ridge was only the right
to file the mining application but with no assurance that the
application will be recommended for approval by the MGB and
finally approved by the DENR Secretary.
Moreover, a preferential right would at most be an inchoate
right to be given priority in the grant of a mining agreement. It
has not yet been transformed into a legal and vested right
unless approved by the MGB or DENR Secretary. Even if Blue
Ridge has a preferential right over the subject mining claims,
it is still within the competence and discretion of the DENR
Secretary to grant mineral agreements to whomever he
deems best to pursue the mining claims over and above the
preferential status given to Blue Ridge. Besides, being simply
a preferential right, it is ineffective to dissolve the pre-existing
or subsisting mining lease contracts of Macroasia.
The DENR Secretary has full discretion in the grant of
mineral agreements
Blue Ridge also argues that the Secretary gravely abused his
discretion in approving the subject MPSAs without Macroasia
complying with the mandatory requirements for mineral
agreement applications under Sec. 35 of DENR AO 96-40.
Petitioner specifically cited Sec. 36 of DENR AO 96-40 to the
effect that "no Mineral Agreement shall be approved unless
the requirements under this section are fully complied with and
any adverse claim/protest/opposition thereto is finally
resolved by the Panel of Arbitrators." Moreover, Blue Ridge
contends that the MPSAs were approved even prior to the
issuance of the Compliance Certificate[62] by the National
Commission on Indigenous Peoples under the OP, which is a
requisite pre-condition for the issuance of an MPSA.
We are not persuaded.
Blue Ridge cites Sec. 38 (not Sec. 36) of DENR AO 96-40 as
basis for claiming that then DENR Secretary Defensor
committed grave abuse of discretion in granting MPSA Nos.
220-2005-IVB and 221-2005-IVB to Macroasia. Petitioner's
postulation cannot be entertained for the reason that the
issuance of the mining agreements was not raised before the
MGB Director and DENR Secretary, nor was it amply
presented before the CA. There is even a counter-charge that
Blue Ridge has not complied with the legal requirements for a
mining application. The rule is established that questions
raised for the first time on appeal before this Court are not
proper and have to be rejected. Furthermore, the resolution
of these factual issues would relegate the Court to a trier of
facts. The Blue Ridge plea is hindered by the factual issue
bar rule where factual questions are proscribed under Rule
65. Lastly, there was no exhaustion of administrative remedies
before the MGB and DENR. Thus, Blue Ridge's petition must
fail.
Primary jurisdiction of the DENR Secretary in determining
whether to grant or not a mineral agreement
Verily, RA 7942, similar to PD 463, confers exclusive and
primary jurisdiction on the DENR Secretary to approve mineral
agreements, which is purely an administrative function within
the scope of his powers and authority. In exercising such
exclusive primary jurisdiction, the DENR Secretary, through
the MGB, has the best competence to determine to whom
mineral agreements are granted. Settled is the rule that the
courts will defer to the decisions of the administrative offices
and agencies by reason of their expertise and experience in
the matters assigned to them pursuant to the doctrine of
primary jurisdiction. Administrative decisions on matter within
the jurisdiction of administrative bodies are to be respected
and can only be set aside on proof of grave abuse of
discretion, fraud, or error of law.[63] Unless it is shown that the
then DENR Secretary has acted in a wanton, whimsical, or
oppressive manner, giving undue advantage to a party or for
an illegal consideration and similar reasons, this Court cannot
look into or review the wisdom of the exercise of such
discretion. Blue Ridge failed in this regard.
Delineation of powers and functions is accorded the three
branches of government for the smooth functioning of the
different governmental services. We will not disturb nor
interfere in the exercise of purely administrative functions of
the executive branch absent a clear showing of grave abuse
of discretion.
THE HON. ANGELO T. REYES (formerly Hon. Elisea G.
Gozun), in his capacity as Secretary of the Department of
Environment and Natural Resources (DENR), Petitioner,
vs.
PAPER INDUSTRIES CORP. OF THE PHILIPPINES
(PICOP), Respondent.

Without a restraining order or injunction, litigation will not RESOLUTION

deter
the DENR from exercising its functions
CHICO-NAZARIO, J.:
While it is true that the subject mining claims are under
litigation, this does not preclude the DENR and its Secretary The cause of action of PICOP Resources, Inc. (PICOP) in its
from carrying out their functions and duties without a Petition for Mandamus with the trial court is clear: the
restraining order or an injunctive writ. Otherwise, public government is bound by contract, a 1969 Document signed by
interest and public service would unduly suffer by mere then President Ferdinand Marcos, to enter into an Integrated
litigation of particular issues where government interests Forest Management Agreement (IFMA) with PICOP. Since
would be unduly affected. In the instant case, it must be borne the remedy of mandamus lies only to compel an officer to
in mind that the government has a stake in the subject mining perform a ministerial duty, and since the 1969 Document itself
claims. Also, Macroasia had various valid existing mining has a proviso requiring compliance with the laws and the
lease contracts over the subject mining lode claims issued by Constitution, the issues in this Motion for Reconsideration are
the DENR. Thus, Macroasia has an advantage over Blue the following: (1) firstly, is the 1969 Document a contract
Ridge and Celestial insofar as the administrative aspect of enforceable under the Non-Impairment Clause of the
pursuing the mineral agreements is concerned. Constitution, so as to make the signing of the IFMA a
ministerial duty? (2) secondly, did PICOP comply with all the
WHEREFORE, the petitions under G.R. Nos. 169080, legal and constitutional requirements for the issuance of an
172936, and 176229 are DISMISSED for lack of merit, while IFMA?
the petition under G.R. No. 176319 is
hereby GRANTED. The assailed April 15, 2005 Decision and To recall, PICOP filed with the Department of Environment
August 3, 2005 Resolution of the CA in CA-G.R. SP No. 87931 and Natural Resources (DENR) an application to have its
are hereby AFFIRMED IN TOTO. And the May 18, 2006
Timber License Agreement (TLA) No. 43 converted into an
Decision and January 19, 2007 Resolution of the CA in CA- IFMA. In the middle of the processing of PICOP’s application,
G.R. SP No. 90828 are hereby REVERSED and SET however, PICOP refused to attend further meetings with the
ASIDE. In view of the foregoing considerations, we find no DENR. Instead, on 2 September 2002, PICOP filed before the
grave abuse of discretion on the part of the then DENR Regional Trial Court (RTC) of Quezon City a Petition for
Secretary in the approval and issuance of MPSA Nos. 220- Mandamus1 against then DENR Secretary Heherson T.
2005-IVB and 221-2005-IVB. Costs against Celestial Nickel Alvarez. PICOP seeks the issuance of a privileged writ of
Mining Exploration Corporation and Blue Ridge Mineral mandamus to compel the DENR Secretary to sign, execute
Corporation. and deliver an IFMA to PICOP, as well as to –
SO ORDERED.
[I]ssue the corresponding IFMA assignment number on the
area covered by the IFMA, formerly TLA No. 43, as amended;
b) to issue the necessary permit allowing petitioner to act and
Republic of the Philippines harvest timber from the said area of TLA No. 43, sufficient to
SUPREME COURT meet the raw material requirements of petitioner’s pulp and
Manila paper mills in accordance with the warranty and agreement of
July 29, 1969 between the government and PICOP’s
EN BANC predecessor-in-interest; and c) to honor and respect the
Government Warranties and contractual obligations to PICOP
G.R. No. 162243 December 3, 2009 strictly in accordance with the warranty and agreement dated
July 29, [1969] between the government and PICOP’s
predecessor-in-interest. x x x.2
HON. HEHERSON ALVAREZ substituted by HON. ELISEA
G. GOZUN, in her capacity as Secretary of the Department
of Environment and Natural Resources, Petitioner, On 11 October 2002, the RTC rendered a Decision granting
vs. PICOP’s Petition for Mandamus, thus:
PICOP RESOURCES, INC., Respondent.
WHEREFORE, premises considered, the Petition for
x - - - - - - - - - - - - - - - - - - - - - - -x Mandamus is hereby GRANTED.

G.R. No. 164516 The Respondent DENR Secretary Hon. Heherson Alvarez is
hereby ordered:
PICOP RESOURCES, INC., Petitioner,
vs. 1. to sign, execute and deliver the IFMA contract
HON. HEHERSON ALVAREZ substituted by HON. ELISEA and/or documents to PICOP and issue the
G. GOZUN, in her capacity as Secretary of the Department corresponding IFMA assignment number on the area
of Environment and Natural Resources Respondent. covered by the IFMA, formerly TLA No. 43, as
amended;
x - - - - - - - - - - - - - - - - - - - - - - -x
2. to issue the necessary permit allowing petitioner
to act and harvest timber from the said area of TLA
G.R. No. 171875 No. 43, sufficient to meet the raw material
 requirements of petitioner’s pulp and paper mills in
accordance with the warranty and agreement of July
29, 1969 between the government and PICOP’s
predecessor-in-interest; and
3. to honor and respect the Government Warranties
and contractual obligations to PICOP strictly in
accordance with the warranty and agreement dated
July 29, 1999 (sic) between the government and
PICOP’s predecessor-in-interest (Exhibits "H", "H-1"
to "H-5", particularly the following:
a) the area coverage of TLA No. 43, which
forms part and parcel of the government
warranties;
b) PICOP tenure over the said area of TLA
No. 43 and exclusive right to cut, collect and
remove sawtimber and pulpwood for the
period ending on April 26, 1977; and said
period to be renewable for [an]other 25
years subject to compliance with
constitutional and statutory requirements as
well as with existing policy on timber
concessions; and
c) The peaceful and adequate enjoyment
by PICOP of the area as described and
specified in the aforesaid amended Timber
License Agreement No. 43.
The Respondent Secretary Alvarez is likewise ordered to pay
petitioner the sum of ₱10 million a month beginning May 2002
until the conversion of TLA No. 43, as amended, to IFMA is
formally effected and the harvesting from the said area is
granted.3
On 25 October 2002, the DENR Secretary filed a Motion for
Reconsideration.4 In a 10 February 2003 Order, the RTC
denied the DENR Secretary’s Motion for Reconsideration and
granted PICOP’s Motion for the Issuance of Writ of Mandamus
and/or Writ of Mandatory Injunction.5 The fallo of the 11
October 2002 Decision was practically copied in the 10
February 2003 Order, although there was no mention of the
damages imposed against then DENR Secretary
Alvarez.6 The DENR Secretary filed a Notice of Appeal7 from
the 11 October 2002 Decision and the 10 February 2003
Order.
On 19 February 2004, the Seventh Division of the Court of
Appeals affirmed8 the Decision of the RTC, to wit:
WHEREFORE, the appealed Decision is hereby AFFIRMED
with modification that the order directing then DENR Secretary
Alvarez "to pay petitioner-appellee the sum of P10 million a
month beginning May, 2002 until the conversion to IFMA of
TLA No. 43, as amended, is formally effected and the
harvesting from the said area is granted" is hereby deleted. 9
Challenging the deletion of the damages awarded to it, PICOP
filed a Motion for Partial Reconsideration10 of this Decision,
which was denied by the Court of Appeals in a 20 July 2004
Resolution.11
The DENR Secretary and PICOP filed with this Court separate
Petitions for Review of the 19 February 2004 Court of Appeals
Decision. These Petitions were docketed as G.R. No. 162243
and No. 164516, respectively. These cases were consolidated
with G.R. No. 171875, which relates to the lifting of a Writ of
Preliminary Injunction enjoining the execution pending appeal
of the foregoing Decision.
On 29 November 2006, this Court rendered the assailed
Decision on the Consolidated Petitions:
WHEREFORE, the Petition in G.R. No. 162243 is GRANTED.
The Decision of the Court of Appeals insofar as it affirmed the
RTC Decision granting the Petition for Mandamus filed by
Paper Industries Corp. of the Philippines (PICOP) is hereby
REVERSED and SET ASIDE. The Petition in G.R. No. 164516
seeking the reversal of the same Decision insofar as it nullified
the award of damages in favor of PICOP is DENIED for lack
of merit. The Petition in G.R. No. 171875, assailing the lifting
of the Preliminary Mandatory Injunction in favor of the
Secretary of Environment and Natural Resources is
DISMISSED on the ground of mootness.12
On 18 January 2006, PICOP filed the instant Motion for
Reconsideration, based on the following grounds:
I.
THE HONORABLE COURT ERRED IN HOLDING THAT THE
CONTRACT WITH PRESIDENTIAL WARRANTY SIGNED
BY THE PRESIDENT OF THE REPUBLIC ON 29 JUNE 1969
ISSUED TO PICOP IS A MERE PERMIT OR LICENSE AND
IS NOT A CONTRACT, PROPERTY OR PROPERTY RIGHT
PROTECTED BY THE DUE PROCESS CLAUSE OF THE
CONSTITUTION
II.
THE EVALUATION OF PICOP’S MANAGEMENT OF THE
TLA 43 NATURAL FOREST CLEARLY SHOWED
SATISFACTORY PERFORMANCE FOR KEEPING THE
NATURAL FOREST GENERALLY INTACT AFTER 50
YEARS OF FOREST OPERATIONS. THIS COMPLETES
THE REQUIREMENT FOR AUTOMATIC CONVERSION
UNDER SECTION 9 OF DAO 99-53.
III.
WITH DUE RESPECT, THE HONORABLE COURT, IN
REVERSING THE FINDINGS OF FACTS OF THE TRIAL
COURT AND THE COURT OF APPEALS,
MISAPPRECIATED THE EVIDENCE, TESTIMONIAL AND
DOCUMENTARY, WHEN IT RULED THAT:
i.
PICOP FAILED TO SUBMIT A FIVE-YEAR FOREST
PROTECTION PLAN AND A SEVEN-YEAR
REFORESTATION PLAN FOR THE YEARS UNDER
REVIEW.
ii.
PICOP FAILED TO COMPLY WITH THE PAYMENT OF
FOREST CHARGES.
iii.
PICOP DID NOT COMPLY WITH THE REQUIREMENT FOR
A CERTIFICATION FROM THE NCIP THAT THE AREA OF
TLA 43 DOES NOT OVERLAP WITH ANY ANCESTRAL
DOMAIN.
iv.
PICOP FAILED TO HAVE PRIOR CONSULTATION WITH
AND APPROVAL FROM THE SANGUNIAN CONCERNED,
AS REQUIRED BY SECTION 27 OF THE REPUBLIC ACT
NO. 7160, OTHERWISE KNOWN AS THE LOCAL
GOVERNMENT CODE OF 1991.
v.
PCIOP FAILED TO SECURE SOCIAL ACCEPTABILITY
UNDER PRESIDENTIAL DECREE NO. 1586.
IV
THE MOTIVATION OF ALVAREZ IN RECALLING THE
CLEARANCE FOR AUTOMATIC CONVERSION HE ISSUED
ON 25 OCTOBER 2001 WAS NOT DUE TO ANY
SHORTCOMING FROM PICOP BUT DUE TO HIS
DETERMINATION TO EXCLUDE 28,125 HECTARES FROM
THE CONVERSION AND OTHER THINGS.
On 15 December 2008, on Motion by PICOP, the Third
Division of this Court resolved to refer the consolidated cases
at bar to the Court en banc. On 16 December 2008, this Court
sitting en banc resolved to accept the said cases and set them
for oral arguments. Oral arguments were conducted on 10
February 2009.
PICOP’s Cause of Action: Matters PICOP Should Have
Proven to Be Entitled to a Writ of Mandamus
In seeking a writ of mandamus to compel the issuance of an
IFMA in its favor, PICOP relied on a 29 July 1969 Document,
the so-called Presidential Warranty approved by then
President Ferdinand E. Marcos in favor of PICOP’s
predecessor-in-interest, Bislig Bay Lumber Company, Inc.
(BBLCI). PICOP’s cause of action is summarized in
paragraphs 1.6 and 4.19 of its Petition for Mandamus:
1.6 Respondent Secretary impaired the obligation of contract
under the said Warranty and Agreement of 29 July 1969 by
refusing to respect the tenure; and its renewal for another
twenty five (25) years, of PICOP over the area covered by the
said Agreement which consists of permanent forest lands with
an aggregate area of 121,587 hectares and alienable and
disposable lands with an aggregate area of approximately
21,580 hectares, and petitioner’s exclusive right to cut, collect
and remove sawtimber and pulpwood therein and the
peaceful and adequate enjoyment of the said area as
described and specified in petitioner’s Timber License
Agreement (TLA) No. 43 guaranteed by the Government,
under the Warranty and Agreement of 29 July 1969. 13
4.19 Respondent is in violation of the Constitution and has
impaired the obligation of contract by his refusal to respect: a)
the tenurial rights of PICOP over the forest area covered by
TLA No. 43, as amended and its renewal for another twenty
five (25) years; b) the exclusive right of PICOP to cut, collect
and remove sawtimber and pulpwood therein; and c) PICOP’s
peaceful and adequate enjoyment of the said area which the
government guaranteed under the Warranty and Agreement
of 29 July 1969.14
The grounds submitted by PICOP in its Petition for Mandamus
are as follows:
I
Respondent secretary has unlawfully refused and/or
neglected to sign and execute the IFMA contract of PICOP
even as the latter has complied with all the legal requirements
for the automatic conversion of TLA No. 43, as amended, into
an IFMA.
II
Respondent Secretary acted with grave abuse of discretion
and/or in excess of jurisdiction in refusing to sign and execute
PICOP’s IFMA contract, notwithstanding that PICOP had
complied with all the requirements for Automatic Conversion
under DAO 99-53, as in fact Automatic Conversion was
already cleared in October, 2001, and was a completed
process.
III
Respondent Secretary has impaired the obligation of contract
under a valid and binding warranty and agreement of 29 July
1969 between the government and PICOP’s predecessor-in-
interest, by refusing to respect: a) the tenure of PICOP, and
its renewal for another twenty five (25) years, over the TLA
No.43 area covered by said agreement; b) the exclusive right
to cut, collect and remove sawtimber and pulpwood timber;
and c) the peaceful and adequate enjoyment of the said area.
IV
As a result of respondent Secretary’s unlawful refusal and/or
neglect to sign and deliver the IFMA contract, and violation of
the constitutional rights of PICOP against non-impairment of
the obligation of contract (Sec. 10, Art. III, 1997 [sic]
Constitution), PICOP suffered grave and irreparable
damages.15
Petitions for Mandamus are governed by Rule 65 of the Rules
of Court, Section 3 of which provides:
SEC. 3. Petition for mandamus.—When any tribunal,
corporation, board, officer or person unlawfully neglects the
performance of an act which the law specifically enjoins as a
duty resulting from an office, trust, or station, or unlawfully
excludes another from the use and enjoyment of a right or
office to which such other is entitled, and there is no other
plain, speedy and adequate remedy in the ordinary course of
law, the person aggrieved thereby may file a verified petition
in the proper court, alleging the facts with certainty and
praying that judgment be rendered commanding the
respondent, immediately or at some other time to be specified
by the court, to do the act required to be done to protect the
rights of the petitioner, and to pay the damages sustained by
the petitioner by reason of the wrongful acts of the respondent.
(Emphasis supplied.)
PICOP is thus asking this Court to conclude that the DENR
Secretary is specifically enjoined by law to issue an IFMA in
its favor. An IFMA, as defined by DENR Administrative Order
(DAO) No. 99-53,16 is -
[A] production-sharing contract entered into by and between
the DENR and a qualified applicant wherein the DENR grants
to the latter the exclusive right to develop, manage, protect
and utilize a specified area of forestland and forest resource
therein for a period of 25 years and may be renewed for
another 25-year period, consistent with the principle of
sustainable development and in accordance with an approved
CDMP, and under which both parties share in its produce. 17
PICOP stresses the word "automatic" in Section 9 of this DAO
No. 99-53:
Sec. 9. Qualifications of Applicants. – The applicants for IFMA
shall be:
(a) A Filipino citizen of legal age; or,
(b) Partnership, cooperative or corporation whether
public or private, duly registered under Philippine
laws.
However, in the case of application for conversion of TLA into
IFMA, an automatic conversion after proper evaluation shall
be allowed, provided the TLA holder shall have signified such
intention prior to the expiry of the TLA, PROVIDED further,
that the TLA holder has showed satisfactory performance and
have complied in the terms of condition of the TLA and
pertinent rules and regulations. (Emphasis supplied.) 18
This administrative regulation provision allowing automatic
conversion after proper evaluation can hardly qualify as a law,
much less a law specifically enjoining the execution of a
contract. To enjoin is "to order or direct with urgency; to
instruct with authority; to command."19 "‘Enjoin’ is a mandatory
word, in legal parlance, always; in common parlance,
usually."20 The word "allow," on the other hand, is not
equivalent to the word "must," and is in no sense a
command.21
As an extraordinary writ, the remedy of mandamus lies only to
compel an officer to perform a ministerial duty, not a
discretionary one; mandamus will not issue to control the
exercise of discretion of a public officer where the law imposes
upon him the duty to exercise his judgment in reference to any
manner in which he is required to act, because it is his
judgment that is to be exercised and not that of the court.22
The execution of agreements, in itself, involves the exercise
of discretion. Agreements are products of negotiations and
mutual concessions, necessitating evaluation of their
provisions on the part of both parties. In the case of the IFMA,
the evaluation on the part of the government is specifically
mandated in the afore-quoted Section 3 of DAO No. 99-53.
This evaluation necessarily involves the exercise of discretion
and judgment on the part of the DENR Secretary, who is
tasked not only to negotiate the sharing of the profit arising
from the IFMA, but also to evaluate the compliance with the
requirements on the part of the applicant.
Furthermore, as shall be discussed later, the period of an
IFMA that was merely automatically converted from a TLA in
accordance with Section 9, paragraph 2 of DAO No. 99-53
would only be for the remaining period of the TLA. Since the
TLA of PICOP expired on 26 April 2002, the IFMA that could
have been granted to PICOP via the automatic conversion
provision in DAO No. 99-53 would have expired on the same
date, 26 April 2002, and the PICOP’s Petition for Mandamus
would have become moot.
This is where the 1969 Document, the purported Presidential
Warranty, comes into play. When PICOP’s application was
brought to a standstill upon the evaluation that PICOP had yet
to comply with the requirements for such conversion, PICOP
refused to attend further meetings with the DENR and instead
filed a Petition for Mandamus, insisting that the DENR
Secretary had impaired the obligation of contract by his refusal
to respect: a) the tenurial rights of PICOP over the forest area
covered by TLA No. 43, as amended, and its renewal for
another twenty-five (25) years; b) the exclusive right of PICOP
to cut, collect and remove sawtimber and pulpwood therein;
and c) PICOP’s peaceful and adequate enjoyment of the said
area which the government guaranteed under the Warranty
and Agreement of 29 July 1969. 23
PICOP is, thus, insisting that the government is obligated by
contract to issue an IFMA in its favor because of the 1969
Document.
A contract, being the law between the parties, can indeed, with
respect to the State when it is a party to such contract, qualify
as a law specifically enjoining the performance of an act.
Hence, it is possible that a writ of mandamus may be issued
to PICOP, but only if it proves both of the following:
1) That the 1969 Document is a contract recognized
under the non-impairment clause; and
2) That the 1969 Document specifically enjoins the
government to issue the IFMA.
If PICOP fails to prove any of these two matters, the grant of
a privileged writ of mandamus is not warranted. This was why
we pronounced in the assailed Decision that the overriding
controversy involved in the Petition was one of law.24 If PICOP
fails to prove any of these two matters, more significantly its
assertion that the 1969 Document is a contract, PICOP fails
to prove its cause of action.25 Not even the satisfactory
compliance with all legal and administrative requirements for
an IFMA would save PICOP’s Petition for Mandamus.
The reverse, however, is not true. The 1969 Document
expressly states that the warranty as to the tenure of PICOP
is "subject to compliance with constitutional and statutory
requirements as well as with existing policy on timber
concessions." Thus, if PICOP proves the two above-
mentioned matters, it still has to prove compliance with
statutory and administrative requirements for the conversion
of its TLA into an IFMA.
Exhaustion of Administrative Remedies
PICOP uses the same argument –– that the government is
bound by contract to issue the IFMA –– in its refusal to exhaust
all administrative remedies by not appealing the alleged illegal
non-issuance of the IFMA to the Office of the President.
PICOP claimed in its Petition for Mandamus with the trial court
that:
1.10 This petition falls as an exception to the exhaustion of
administrative remedies. The acts of respondent DENR
Secretary complained of in this petition are patently illegal; in
derogation of the constitutional rights of petitioner against
non-impairment of the obligation of contracts; without
jurisdiction, or in excess of jurisdiction or so capriciously as to
constitute an abuse of discretion amounting to excess or lack
of jurisdiction; and moreover, the failure or refusal of a high
government official such as a Department head from whom
relief is brought to act on the matter was considered
equivalent to exhaustion of administrative remedies (Sanoy v.
Tantuico, 50 SCRA 455 [1973]), and there are compelling and
urgent reasons for judicial intervention (Bagatsing v. Ramirez,
74 SCRA 306 [1976]).
Thus, if there has been no impairment of the obligation of
contracts in the DENR Secretary’s non-issuance of the IFMA,
the proper remedy of PICOP in claiming that it has complied
with all statutory and administrative requirements for the
issuance of the IFMA should have been with the Office of the
President. This makes the issue of the enforceability of the
1969 Document as a contract even more significant.
The Nature and Effects of the Purported 29 July 1969
Presidential Warranty
Base Metals Case
PICOP challenges our ruling that the 1969 Document is not a
contract. Before we review this finding, however, it must be
pointed out that one week after the assailed Decision, another
division of this Court promulgated a Decision concerning the
very same 1969 Document. Thus, in PICOP Resources, Inc.
v. Base Metals Mineral Resources Corporation, 26 five other
Justices who were still unaware of this Division’s
Decision,27 came up with the same conclusion as regards the
same issue of whether former President Marcos’s Presidential
Warranty is a contract:
Finally, we do not subscribe to PICOP’s argument that the
Presidential Warranty dated September 25, 1968 is a contract
protected by the non-impairment clause of the 1987
Constitution.
An examination of the Presidential Warranty at once reveals
that it simply reassures PICOP of the government’s
commitment to uphold the terms and conditions of its timber
license and guarantees PICOP’s peaceful and adequate
possession and enjoyment of the areas which are the basic
sources of raw materials for its wood processing complex. The
warranty covers only the right to cut, collect, and remove
timber in its concession area, and does not extend to the
utilization of other resources, such as mineral resources,
occurring within the concession.
The Presidential Warranty cannot be considered a contract
distinct from PTLA No. 47 and FMA No. 35. We agree with the
OSG’s position that it is merely a collateral undertaking which
cannot amplify PICOP’s rights under its timber license. Our
definitive ruling in Oposa v. Factoran that a timber license is
not a contract within the purview of the non-impairment
clause is edifying. We declared:
Needless to say, all licenses may thus be revoked or
rescinded by executive action. It is not a contract, property or
a property right protected by the due process clause of the
Constitution. In Tan vs. Director of Forestry, this Court held:
"x x x A timber license is an instrument by which the State
regulates the utilization and disposition of forest resources to
the end that public welfare is promoted. A timber license is not
a contract within the purview of the due process clause; it is
only a license or a privilege, which can be validly withdrawn
whenever dictated by public interest or public welfare as in this
case.
‘A license is merely a permit or privilege to do what otherwise
would be unlawful, and is not a contract between the authority,
federal, state, or municipal, granting it and the person to whom
it is granted; neither is it a property or a property right, nor
does it create a vested right; nor is it taxation' (C.J. 168). Thus,
this Court held that the granting of license does not create
irrevocable rights, neither is it property or property rights
(People vs. Ong Tin, 54 O.G. 7576). x x x"
We reiterated this pronouncement in Felipe Ysmael, Jr. & Co.,
Inc. vs. Deputy Executive Secretary:
"x x x Timber licenses, permits and license agreements are
the principal instruments by which the State regulates the
utilization and disposition of forest resources to the end that
public welfare is promoted. And it can hardly be gainsaid that
they merely evidence a privilege granted by the State to
qualified entities, and do not vest in the latter a permanent or
irrevocable right to the particular concession area and the
forest products therein. They may be validly amended,
modified, replaced or rescinded by the Chief Executive when
national interests so require. Thus, they are not deemed
contracts within the purview of the due process of law clause
[See Sections 3(ee) and 20 of Pres. Decree No. 705, as
amended. Also, Tan v. 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.
The Presidential Warranty cannot, in any manner, be
construed as a contractual undertaking assuring PICOP of
exclusive possession and enjoyment of its concession areas.
Such an interpretation would result in the complete abdication
by the State in favor of PICOP of the sovereign power to
control and supervise the exploration, development and
utilization of the natural resources in the area.28
The Motion for Reconsideration was denied with finality on 14
February 2007. A Second Motion for Reconsideration filed by
PICOP was denied on 23 May 2007.
PICOP insists that the pronouncement in Base Metals is a
mere obiter dictum, which would not bind this Court in
resolving this Motion for Reconsideration. In the oral
arguments, however, upon questioning from the ponente
himself of Base Metals, it was agreed that the issue of whether
the 1969 Document is a contract was necessary in the
resolution of Base Metals:
JUSTICE TINGA:
And do you confirm that one of the very issues raised by
PICOP in that case [PICOP Resources Inc. v. Base Metal
Mineral Resources Corporation] revolves around its claim that
a Presidential Warranty is protected by the non-impairment
c[l]ause of the Constitution.
ATTY. AGABIN:
Yes, I believe that statement was made by the Court, your
Honor.
JUSTICE TINGA:
Yes. And that claim on the part of PICOP necessarily implies
that the Presidential Warranty according to PICOP is a
contract protected by the non-impairment clause.
ATTY. AGABIN:
Yes, Your Honor.
JUSTICE TINGA:
Essentially, the PICOP raised the issue of whether the
Presidential Warranty is a contract or not.
ATTY. AGABIN:
Yes, Your Honor. ATTY. AGABIN:

JUSTICE TINGA: Well, it is our submission, your Honor, that it is obiter because,
that issue even a phrase by PICOP was not really fully argued
And therefore any ruling on the part of the Court on that issue by the parties for the Honorable Court and it seems from my
could not be an obiter dictum. reading at least it was just an aside given by the Honorable
Court to decide on that issue raised by PICOP but it was not
necessary to the decision of the court.
ATTY. AGABIN:
JUSTICE TINGA:
Your Honor, actually we believe that the basic issue in that
case was whether or not Base Metals could conduct mining
activities underneath the forest reserve allotted to PICOP and It was not necessary[?]
the Honorable Court ruled that the Mining Act of 1995 as well
as the Department Order of DENR does not disallow mining ATTY. AGABIN:
activity under a forest reserve.
To the decision of the Court.
JUSTICE TINGA:
JUSTICE TINGA:
But it was PICOP itself which raised the claim that a
Presidential Warranty is a contract. And therefore be, should It was.
be protected on the under the non-impairment clause of the
Constitution.
ATTY. AGABIN:
ATTY. AGABIN:
It was not necessary.
Yes, Your Honor. Except that…
JUSTICE TINGA:
JUSTICE TINGA:
It was.
So, how can you say now that the Court merely uttered,
declared, laid down an obiter dictum in saying that the ATTY. AGABIN:
Presidential Warranty is not a contract, and it is not being a
contract, it is not prohibited by the non-impairment clause. Yes.

ATTY. AGABIN: JUSTICE TINGA:

This Honorable Court could have just ruled, held that the
mining law allows mining activities under a forest reserve
without deciding on that issue that was raised by PICOP, your
Honor, and therefore we believe….
JUSTICE TINGA:
It could have been better if PICOP has not raised that issue
and had not claimed that the Presidential Warranty is not a
contract.
And PICOP devoted quite a number of pages in [its]
memorandum to that issue and so did the Court [in its
Decision].
ATTY. AGABIN:
Anyway, your Honor, we beg the Court to revisit, not to…29
Interpretation of the 1969 Document That Would Be in
Harmony with the Constitution

ATTY. AGABIN: To remove any doubts as to the contents of the 1969

Document, the purported Presidential Warranty, below is a
Well, that is correct, your Honor except that the Court could complete text thereof:
have just avoided that question. Because…
Republic of the Philippines
JUSTICE TINGA: Department of Agriculture and Natural Resources
OFFICE OF THE SECRETARY
Why[?] Diliman, Quezon City

ATTY. AGABIN: D-53, Licenses (T.L.A. No. 43)

Bislig Bay Lumber Co., Inc.
(Bislig, Surigao)
It already settled the issue, the basic issue.
July 29, 1969
JUSTICE TINGA:
Bislig Bay Lumber Co., Inc.
Yes, because the Court in saying that merely reiterated a [unreadable word] Bldg.
number of rulings to the effect that the Presidential Warranty, Makati, Rizal
a Timber License for that matter is not a contract protected by
the non-impairment laws.
S i r s:
This has reference to the request of the Board of Investments
through its Chairman in a letter dated July 16, 1969 for a
warranty on the boundaries of your concession area under
Timber License Agreement No. 43, as amended.
We are made to understand that your company is committed
to support the first large scale integrated wood processing
complex hereinafter called: "The Project") and that such
support will be provided not only in the form of the supply of
pulpwood and other wood materials from your concession but
also by making available funds generated out of your own
operations, to supplement PICOP’s operational sources of
funds and other financial arrangements made by him. In order
that your company may provide such support effectively, it is
understood that you will call upon your stockholders to take
such steps as may be necessary to effect a unification of
managerial, technical, economic and manpower resources
between your company and PICOP.
It is in the public interest to promote industries that will
enhance the proper conservation of our forest resources as
well as insure the maximum utilization thereof to the benefit of
the national economy. The administration feels that the
PICOP project is one such industry which should enjoy priority
over the usual logging operations hitherto practiced by
ordinary timber licensees: For this reason, we are pleased to
consider favorably the request.
We confirm that your Timber License Agreement No. 43, as
amended (copy of which is attached as Annex "A" hereof
which shall form part and parcel of this warranty) definitely
establishes the boundary lines of your concession area which
consists of permanent forest lands with an aggregate area of
121,587 hectares and alienable or disposable lands with an
aggregate area of approximately 21,580 hectares.
We further confirm that your tenure over the area and
exclusive right to cut, collect and remove sawtimber and
pulpwood shall be for the period ending on April 26, 1977; said
period to be renewable for other 25 years subject to
compliance with constitutional and statutory requirements as
well as with existing policy on timber concessions.
The peaceful and adequate enjoyment by you of your area as
described and specified in your aforesaid amended Timber
License Agreement No. 43 is hereby warranted provided that
pertinent laws, regulations and the terms and conditions of
your license agreement are observed.
Very truly yours,
(Sgd.) FERNANDO LOPEZ
Secretary of Agriculture
and Natural Resources
Encl.:
RECOMMENDED BY:
(Sgd.) JOSE VIADO
Acting Director of Forestry
APPROVED:
(Sgd.) FERDINAND E. MARCOS
President of the Philippines
ACCEPTED:
BISLIG BAY LBR. CO., INC.
By:
(Sgd.) JOSE E. SORIANO
President
PICOP interprets this document in the following manner:
6.1 It is clear that the thrust of the government warranty is to
establish a particular area defined by boundary lines of TLA
No. 43 for the PICOP Project. In consideration for PICOP’s
commitment to pursue and establish the project requiring
huge investment/funding from stockholders and lending
institutions, the government provided a warranty that ensures
the continued and exclusive right of PICOP to source its raw
materials needs from the forest and renewable trees within the
areas established.
6.2 As a long-term support, the warranty covers the initial
twenty five (25) year period and is renewable for periods of
twenty five (25) years provided the project continues to exist
and operate. Very notably, the wording of the Presidential
Warranty connotes that for as long as the holder complies with
all the legal requirements, the term of the warranty is not
limited to fifty (50) years but other twenty five (25) years.
6.3 Note must be made that the government warranted that
PICOP’s tenure over the area and exclusive right to cut,
collect and remove saw timber and pulpwood shall be for the
period ending on 26 April 1977 and said period to be
renewable for other 25 years subject to "compliance with
constitutional and statutory requirements as well as existing
policy on timber requirements". It is clear that the renewal for
other 25 years, not necessarily for another 25 years is
guaranteed. This explains why on 07 October 1977, TLA No.
43, as amended, was automatically renewed for another
period of twenty five (25) years to expire on 26 April 2002. 30
PICOP’s interpretation of the 1969 Document cannot be
sustained. PICOP’s claim that the term of the warranty is not
limited to fifty years, but that it extends to other fifty years,
perpetually, violates Section 2, Article XII of the Constitution
which provides:
Section 2. All lands of the public domain, waters, minerals,
coal, petroleum, and other mineral oils, all forces of potential
energy, fisheries, forests or timber, wildlife, flora and
fauna, and other natural resources are owned by the State.
With the exception of agricultural lands, all other natural
resources shall not be alienated. The exploration,
development, and utilization of natural resources shall be
under the full control and supervision of the State. The State
may directly undertake such activities, or it may enter into co-
production, joint venture, or production-sharing agreements
with Filipino citizens, or corporations or associations at least
sixty per centum of whose capital is owned by such citizens.
Such agreements may be for a period not exceeding twenty-
five years, renewable for not more than twenty-five years, and
under such terms and conditions as may be provided by
law. In cases of water rights for irrigation, water supply
fisheries, or industrial uses other than the development of
water power, beneficial use may be the measure and limit of
the grant.
Mr. Justice Dante O. Tinga’s interpretation of the 1969
Document is much more in accord with the laws and the
Constitution. What one cannot do directly, he cannot do
indirectly. Forest lands cannot be alienated in favor of private JUSTICE CARPIO:
entities. Granting to private entities, via a contract, a
permanent, irrevocable, and exclusive possession of and right And it was renewed for another 25 years until 2002, the 50th
over forest lands is tantamount to granting ownership thereof. year?
PICOP, it should be noted, claims nothing less than having
exclusive, continuous and uninterrupted possession of its
concession areas,31 where all other entrants are illegal,32 and ATTY. AGABIN:
where so-called "illegal settlers and squatters" are
apprehended.33 Yes, Your Honor.

IFMAs are production-sharing agreements concerning the JUSTICE CARPIO:

development and utilization of natural resources. As such,
these agreements "may be for a period not exceeding twenty- Now, could PICOP before the end of the 50th year let’s say in
five years, renewable for not more than twenty-five years, and 2001, one year before the expiration, could it have asked for
under such terms and conditions as may be provided by law." an extension of another 25 years of its TLA agreement[?]
Any superior "contract" requiring the State to issue TLAs and
IFMAs whenever they expire clearly circumvents Section 2,
Article XII of the Constitution, which provides for the only ATTY. AGABIN:
permissible schemes wherein the full control and supervision
of the State are not derogated: co-production, joint venture, or I believe so, Your Honor.
production-sharing agreements within the time limit of twenty-
five years, renewable for another twenty-five years.
JUSTICE CARPIO:

On its face, the 1969 Document was meant to expire on 26

But the Constitution says, maximum of fifty years. How could
April 2002, upon the expiration of the expected extension of
you ask for another 25 years of its TLA.
the original TLA period ending on 26 April 1977:

ATTY. AGABIN:
We further confirm that your tenure over the area and
exclusive right to cut, collect and remove sawtimber and
pulpwood shall be for the period ending on April 26, 1977; said Well, your Honor, we believe on a question like this, this
period to be renewable for other 25 years subject to Honorable Court should balance the interest.
compliance with constitutional and statutory requirements as
well as with existing policy on timber concessions.1avvphi1 JUSTICE CARPIO:

Any interpretation extending the application of the 1969
Document beyond 26 April 2002 and any concession that may
be granted to PICOP beyond the said date would violate the
Constitution, and no amount of legal hermeneutics can
change that. Attempts of PICOP to explain its way out of this
Constitutional provision only led to absurdities, as exemplified
in the following excerpt from the oral arguments:
The Constitution is very clear, you have only a maximum of
50 years, 25 plus another 25. PICOP could never have applied
for an extension, for a third 25-year term whether under the
1935 Constitution, the 1973 Constitution and the 1987
Constitution, correct?
ATTY. AGABIN:

JUSTICE CARPIO:
Your Honor, except that we are invoking the warranty, the
terms of the warranty….
The maximum trend of agreement to develop and utilize
natural resources like forest products is 25 years plus another
JUSTICE CARPIO:
25 years or a total of 50 years correct?

Can the warranty prevail over the Constitution?

ATTY. AGABIN

ATTY. AGABIN:
Yes, Your Honor.

Well, it is a vested right, your Honor.

JUSTICE CARPIO:

JUSTICE CARPIO:
That is true for the 1987, 1973, 1935 Constitution, correct?

Yes, but whatever it is, can it prevail over the Constitution?

ATTY. AGABIN:

ATTY. AGABIN:
Yes, Your Honor.

The Constitution itself provides that vested rights should be

JUSTICE CARPIO:
….

The TLA here, TLA 43, expired, the first 25 years expired in
JUSTICE CARPIO:
1977, correct?

If it is not in violation of specific provision of the Constitution.

ATTY. AGABIN:
The Constitution says, 25 years plus another 25 years, that’s
the end of it. You mean to say that a President of the
Yes, Your Honor. Philippines can give somebody 1,000 years license?
ATTY. AGABIN:
Well, that is not our position, Your Honor. Because our
position is that ….
JUSTICE CARPIO:
My question is, what is the maximum term, you said 50 years.
So, my next question is, can PICOP apply for an extension of
another 25 years after 2002, the 50th year?
ATTY. AGABIN:
Yes, based on the contract of warranty, Your Honor, because
the contract of warranty….
JUSTICE CARPIO:
But in the PICOP license it is very clear, it says here, provision
28, it says the license agreement is for a total of 50 years. I
mean it is very simple, the President or even Congress cannot
pass a law extending the license, whatever kind of license to
utilize natural resources for more than fifty year[s]. I mean
even the law cannot do that. It cannot prevail over the
Constitution. Is that correct, Counsel?
ATTY. AGABIN:
It is correct, Your Honor, except that in this case, what is
actually our application is that the law provides for the
conversion of existing TLA into IFMA.
JUSTICE CARPIO:
So, they file the petition for conversion before the end of the
50th year for IFMA.
ATTY. AGABIN:
Yes, Your Honor.
JUSTICE CARPIO:
But IFMA is the same, it is based on Section 2, Article 12 of
the Constitution, develop and utilize natural resources
because as you said when the new constitution took effect we
did away with the old licensing regime, we have now co-
production, a production sharing, joint venture, direct
undertaking but still the same developing and utilizing the
natural resources, still comes from section 2, Art. 12 of the
Constitution. It is still a license but different format now.
ATTY. AGABIN:
It is correct, Your Honor, except that the regimes of joint
venture, co-production and production sharing are what is
referred to in the constitution, Your Honor, and still covered…
JUSTICE CARPIO:
Yes, but it is covered by same 25 year[s], you mean to say
people now can circumvent the 50 year maximum term by
calling their TLA as IFMA and after fifty years calling it ISMA,
after another 50 years call it MAMA.
ATTY. AGABIN:
Yes, Your Honor. Because…
JUSTICE CARPIO:
It can be done.
ATTY. AGABIN:
That is provided for by the department itself.34
PICOP is, in effect, arguing that the DENR issued DAO No.
99-53 in order to provide a way to circumvent the provisions
of the Constitution limiting agreements for the utilization of
natural resources to a maximum period of fifty years. Official
duties are, however, disputably considered to be regularly
performed,35 and good faith is always presumed.
DAO No. 99-53 was issued to change the means by which the
government enters into an agreement with private entities for
the utilization of forest products. DAO No. 99-53 is a late
response to the change in the constitutional provisions on
natural resources from the 1973 Constitution, which allowed
the granting of licenses to private entities,36 to the present
Constitution, which provides for co-production, joint venture,
or production-sharing agreements as the permissible
schemes wherein private entities may participate in the
utilization of forest products. Since the granting of timber
licenses ceased to be a permissible scheme for the
participation of private entities under the present Constitution,
their operations should have ceased upon the issuance of
DAO No. 99-53, the rule regulating the schemes under the
present Constitution. This would be iniquitous to those with
existing TLAs that would not have expired yet as of the
issuance of DAO No. 99-53, especially those with new TLAs
that were originally set to expire after 10 or even 20 or more
years. The DENR thus inserted a provision in DAO No. 99-53
allowing these TLA holders to finish the period of their TLAs,
but this time as IFMAs, without the rigors of going through a
new application, which they have probably just gone through
a few years ago.
Such an interpretation would not only make DAO No. 99-53
consistent with the provisions of the Constitution, but would
also prevent possible discrimination against new IFMA
applicants:
ASSOCIATE JUSTICE DE CASTRO:
I ask this question because of your interpretation that the
period of the IFMA, if your TLA is converted into IFMA, would
cover a new a fresh period of twenty-five years renewable by
another period of twenty-five years.
DEAN AGABIN:
Yes, Your Honor.
ASSOCIATE JUSTICE DE CASTRO:
Don’t you think that will, in effect, be invidious discrimination
with respect to other applicants if you are granted a fresh
period of twenty-five years extendible to another twenty-five
years?
DEAN AGABIN:
I don’t think it would be, Your Honor, considering that the IFMA
is different regime from the TLA. And not only that, there are
considerations of public health and ecology which should
come into play in this case, and which we had explained in our
opening statement and, therefore the provision of the
Constitution on the twenty-five limits for renewal of co-
production, joint venture and production sharing agreements,
should be balanced with other values stated in the
Constitution, like the value of balanced ecology, which should
be in harmony with the rhythm of nature, or the policy of forest
preservation in Article XII, Section 14 of the Constitution.
These are all important policy considerations which should be
balanced against the term limits in Article II of the Constitution.
ASSOCIATE JUSTICE DE CASTRO:
The provision of this Administrative Order regarding automatic
conversion may be reasonable, if, I want to know if you agree
with me, if we limit this automatic conversion to the remaining
period of the TLA, because in that case there will be a valid
ground to make a distinction between those with existing TLA
and those who are applying for the first time for IFMA?
DEAN AGABIN:
Well, Your Honor, we beg to disagree, because as I said TLA’s
are completely different from IFMA. The TLA has no
production sharing or co-production agreement or condition.
All that the licensee has to do is, to pay forest charges, taxes
and other impositions from the local and national government.
On the other hand, the IFMAs contained terms and conditions
which are completely different, and that they either impose co-
production, production sharing or joint venture terms. So it’s a
completely different regime, Your Honor.
ASSOCIATE JUSTICE DE CASTRO:
Precisely, that is the reason why there should be an evaluation
of what you mentioned earlier of the development plan.
DEAN AGABIN:
Yes, Your Honor.
ASSOCIATE JUSTICE DE CASTRO:
So it will be reasonable to convert a TLA into an IFMA without
considering the development plan submitted by other
applicants or the development plan itself of one seeking
conversion into IFMA if it will only be limited to the period, the
original period of the TLA. But once you go beyond the period
of the TLA, then you will be, the DENR is I think should
evaluate the different proposals of the applicants if we are
thinking of a fresh period of twenty-five years, and which is
renewable under the Constitution by another twenty-five
years. So the development plan will be important in this case,
the submission of the development plan of the different
applicants must be considered. So I don’t understand why you
mentioned earlier that the development plan will later on be a
subject matter of negotiation between the IFMA grantee and
the government. So it seems that it will be too late in the day
to discuss that if you have already converted the TLA into
IFMA or if the government has already granted the IFMA, and
then it will later on study the development plan, whether it is
viable or not, or it is sustainable or not, and whether the
development plan of the different applicants are, are, which of
the development plan of the different applicants is better or
more advantageous to the government.37
PICOP insists that the alleged Presidential Warranty, having
been signed on 29 July 1969, could not have possibly
considered the limitations yet to be imposed by future
issuances, such as the 1987 Constitution. However, Section
3, Article XVIII of said Constitution, provides:
Section 3. All existing laws, decrees, executive orders,
proclamations, letters of instructions, and other executive
issuances not inconsistent with this Constitution shall remain
operative until amended, repealed, or revoked.
In the recent case Sabio v. Gordon,38 we ruled that "(t)he clear
import of this provision is that all existing laws, executive
orders, proclamations, letters of instructions and other
executive issuances inconsistent or repugnant to the
Constitution are repealed."
When a provision is susceptible of two interpretations, "the
one that will render them operative and effective and
harmonious with other provisions of law"39 should be adopted.
As the interpretations in the assailed Decision and in Mr.
Justice Tinga’s ponencia are the ones that would not make
the subject Presidential Warranty unconstitutional, these are
what we shall adopt.
Purpose of the 1969 Document: Assurance That the
Boundaries of Its Concession Area Would Not Be Altered
Despite the Provision in the TLA that the DENR Secretary Can
Amend Said Boundaries
In the assailed Decision, we ruled that the 1969 Document
cannot be considered a contract that would bind the
government regardless of changes in policy and the demands
of public interest and social welfare. PICOP claims this
conclusion "did not take into consideration that PICOP already
had a valid and current TLA before the contract with warranty
was signed in 1969."40 PICOP goes on: "The TLA is a license
that equips any TLA holder in the country for harvesting of
timber. A TLA is signed by the Secretary of the DANR now
DENR. The Court ignored the significance of the need for
another contract with the Secretary of the DANR but this time
with the approval of the President of the Republic." 41 PICOP
then asks us: "If PICOP/BBLCI was only an ordinary TLA
holder, why will it go through the extra step of securing another
contract just to harvest timber when the same can be served
by the TLA signed only by the Secretary and not requiring the
approval of the President of the Republic(?)"42
The answer to this query is found in TLA No. 43 itself wherein,
immediately after the boundary lines of TLA No. 43 were
established, the following conditions were given:
This license is granted to the said party of the second part
upon the following express conditions:
I. That authority is granted hereunder to the party of
the second part43 to cut, collect or remove firewood
or other minor forest products from the area
embraced in this license agreement except as
hereinafter provided.
II. That the party of the first part44 may amend or alter
the description of the boundaries of the area covered
by this license agreement to conform with official
surveys and that the decision of the party of the first
part as to the exact location of the said boundaries
shall be final.
III. That if the party of the first part deems it
necessary to establish on the ground the boundary
lines of the area granted under this license
agreement, the party of the second part shall furnish
to the party of the first part or its representatives as
 many laborers as it needs and all the expenses to be
incurred on the work including the wages of such
laborers shall be paid by the party of the second
part.45
Thus, BBLCI needed an assurance that the boundaries of its
concession area, as established in TLA No. 43, as amended,
would not be altered despite this provision. Hence, BBLCI
endeavored to obtain the 1969 Document, which provides:
We confirm that your Timber License Agreement No. 43, as
amended (copy of which is attached as Annex "A" hereof
which shall form part and parcel of this warranty) definitely
establishes the boundary lines of your concession area which
consists of permanent forest lands with an aggregate area of
121,587 hectares and alienable or disposable lands with an
aggregate area of approximately 21,580 hectares.
We further confirm that your tenure over the area and
exclusive right to cut, collect and remove sawtimber and
pulpwood shall be for the period ending on April 26, 1977; said
period to be renewable for other 25 years subject to
compliance with constitutional and statutory requirements as
well as with existing policy on timber concessions.
The peaceful and adequate enjoyment by you of your area as
described and specified in your aforesaid amended Timber
License Agreement No. 43 is hereby warranted provided that
pertinent laws, regulations and the terms and conditions of
your license agreement are observed.46
In Koa v. Court of Appeals,47 we ruled that a warranty is a
collateral undertaking and is merely part of a contract. As a
collateral undertaking, it follows the principal wherever it goes.
When this was pointed out by the Solicitor General, PICOP
changed its designation of the 1969 Document from
"Presidential Warranty" or "government warranty" in all its
pleadings prior to our Decision, to "contract with warranty" in
its Motion for Reconsideration. This, however, is belied by the
statements in the 29 July 1969 Document, which refers to
itself as "this warranty."
Re: Allegation That There Were Mutual Contract
Considerations
Had the 29 July 1969 Document been intended as a contract,
it could have easily said so. More importantly, it could have
clearly defined the mutual considerations of the parties
thereto. It could have also easily provided for the sanctions for
the breach of the mutual considerations specified therein.
PICOP had vigorously argued that the 1969 Document was a
contract because of these mutual considerations, apparently
referring to the following paragraph of the 1969 Document:
We are made to understand that your company is committed
to support the first large scale integrated wood processing
complex hereinafter called: "The Project") and that such
support will be provided not only in the form of the supply of
pulpwood and other wood materials from your concession but
also by making available funds generated out of your own
operations, to supplement PICOP’s operational surces (sic) of
funds and other financial arrangements made by him. In order
that your company may provide such support effectively, it is
understood that you will call upon your stockholders to take
such steps as may be necessary to effect a unification of
managerial, technical, economic and manpower resources
between your company and PICOP.1avvphi1
This provision hardly evinces a contract consideration (which,
in PICOP’s interpretation, is in exchange for the exclusive and
perpetual tenure over 121,587 hectares of forest land and
21,580 hectares of alienable and disposable lands). As
elucidated by PICOP itself in bringing up the Investment
Incentives Act which we shall discuss later, and as shown by
the tenor of the 1969 Document, the latter document was
more of a conferment of an incentive for BBLCI’s investment
rather than a contract creating mutual obligations on the part
of the government, on one hand, and BBLCI, on the other.
There was no stipulation providing for sanctions for breach if
BBLCI’s being "committed to support the first large scale
integrated wood processing complex" remains a commitment.
Neither did the 1969 Document give BBLCI a period within
which to pursue this commitment.
According to Article 1350 of the Civil Code, "(i)n onerous
contracts the cause is understood to be, for each contracting
party, the prestation or promise of a thing or service by the
other."48 Private investments for one’s businesses, while
indeed eventually beneficial to the country and deserving to
be given incentives, are still principally and predominantly for
the benefit of the investors. Thus, the "mutual" contract
considerations by both parties to this alleged contract would
be both for the benefit of one of the parties thereto, BBLCI,
which is not obligated by the 1969 Document to surrender a
share in its proceeds any more than it is already required by
its TLA and by the tax laws.
PICOP’s argument that its investments can be considered as
contract consideration derogates the rule that "a license or a
permit is not a contract between the sovereignty and the
licensee or permittee, and is not a property in the
constitutional sense, as to which the constitutional
proscription against the impairment of contracts may extend."
All licensees obviously put up investments, whether they are
as small as a tricycle unit or as big as those put up by multi-
billion-peso corporations. To construe these investments as
contract considerations would be to abandon the foregoing
rule, which would mean that the State would be bound to all
licensees, and lose its power to revoke or amend these
licenses when public interest so dictates.
The power to issue licenses springs from the State’s police
power, known as "the most essential, insistent and least
limitable of powers, extending as it does to all the great public
needs."49 Businesses affecting the public interest, such as the
operation of public utilities and those involving the exploitation
of natural resources, are mandated by law to acquire licenses.
This is so in order that the State can regulate their operations
and thereby protect the public interest. Thus, while these
licenses come in the form of "agreements," e.g., "Timber
License Agreements," they cannot be considered contracts
under the non-impairment clause.50
PICOP found this argument "lame," arguing, thus:
43. It is respectfully submitted that the aforesaid
pronouncement in the Decision is an egregious and
monumental error.
44. The Decision could not dismiss as "preposterous" the
mutual covenants in the Presidential Warranty which calls for
a huge investment of Php500 million at that time in 1969 out
of which Php268,440,000 raised from domestic foreign
lending institution to establish the first large scale integrated
wood processing complex in the Philippines.
45. The Decision puts up a lame explanation that "all licensees
put up investments in pursuing their business"
46. Now there are about a hundred timber licenses issued by
the Government thru the DENR, but these are ordinary timber
licenses which involve the mere cutting of timber in the
concession area, and nothing else. Records in the DENR
shows that no timber licensee has put up an integrated large
wood processing complex in the Philippines except PICOP. 51
PICOP thus argues on the basis of quantity, and wants us to
distinguish between the investment of the tricycle driver and
that of the multi-billion corporation. However, not even billions
of pesos in investment can change the fact that natural
resources and, therefore, public interest are involved in
PICOP’s venture, consequently necessitating the full control
and supervision by the State as mandated by the Constitution.
Not even billions of pesos in investment can buy forest lands,
which is practically what PICOP is asking for by interpreting
the 1969 Document as a contract giving it perpetual and
exclusive possession over such lands. Among all TLA holders
in the Philippines, PICOP has, by far, the largest concession
area at 143,167 hectares, a land area more than the size of
two Metro Manilas.52 How can it not expect to also have the
largest investment?
Investment Incentives Act
PICOP then claims that the contractual nature of the 1969
Document was brought about by its issuance in accordance
with and pursuant to the Investment Incentives Act. According
to PICOP:
The conclusion in the Decision that to construe PICOP’s
investments as a consideration in a contract would be to
stealthily render ineffective the principle that a license is not a
contract between the sovereignty and the licensee is so
flawed since the contract with the warranty dated 29 July 1969
was issued by the Government in accordance with and
pursuant to Republic Act No. 5186, otherwise known as "The
Investment Incentives Act."53
PICOP then proceeds to cite Sections 2 and 4(d) and (e) of
said act:
Section 2. Declaration of Policy – To accelerate the sound
development of the national economy in consonance with the
principles and objectives of economic nationalism, and in
pursuance of a planned, economically feasible and
practicable dispersal of industries, under conditions which will
encourage competition and discharge monopolies, it is hereby
declared to be the policy of the state to encourage Filipino and
foreign investments, as hereinafter set out, in projects to
develop agricultural, mining and manufacturing industries
which increase national income most at the least cost,
increase exports, bring about greater economic stability,
provide more opportunities for employment, raise the
standards of living of the people, and provide for an equitable
distribution of wealth. It is further declared to be the policy of
the state to welcome and encourage foreign capital to
establish pioneer enterprises that are capital intensive and
would utilize a substantial amount of domestic raw materials,
in joint venture with substantial Filipino capital, whenever
available.
Section 4. Basic Rights and Guarantees. – All investors and
enterprises are entitled to the basic rights and guarantees
provided in the constitution. Among other rights recognized by
the Government of the Philippines are the following:
xxxx
d) Freedom from Expropriation. – There shall be no
expropriation by the government of the property represented
by investments or of the property of enterprises except for
public use or in the interest of national welfare and defense
and upon payment of just compensation. x x x.
e) Requisition of Investment. – There shall be no requisition of
the property represented by the investment or of the property
of enterprises, except in the event of war or national
emergency and only for the duration thereof. Just
compensation shall be determined and paid either at the time
of requisition or immediately after cessation of the state of war
or national emergency. Payments received as compensation
for the requisitioned property may be remitted in the currency
in which the investment was originally made and at the
exchange rate prevailing at the time of remittance, subject to
the provisions of Section seventy-four of republic Act
Numbered Two hundred sixty-five.
Section 2 speaks of the policy of the State to encourage
Filipino and foreign investments. It does not speak of how this
policy can be implemented. Implementation of this policy is
tackled in Sections 5 to 12 of the same law,54 which PICOP
failed to mention, and for a good reason. None of the 24
incentives enumerated therein relates to, or even remotely
suggests that, PICOP’s proposition that the 1969 Document
is a contract.
PICOP could indeed argue that the enumeration is not
exclusive. Certainly, granting incentives to investors, whether
included in the enumeration or not, would be an
implementation of this policy. However, it is presumed that
whatever incentives may be given to investors should be
within the bounds of the laws and the Constitution. The
declaration of policy in Section 2 cannot, by any stretch of the
imagination, be read to provide an exception to either the laws
or, heaven forbid, the Constitution. Exceptions are never
presumed and should be convincingly proven. Section 2 of the
Investment Incentives Act cannot be read as exempting
investors from the Constitutional provisions (1) prohibiting
private ownership of forest lands; (2) providing for the
complete control and supervision by the State of exploitation
activities; or (3) limiting exploitation agreements to twenty-five
years, renewable for another twenty-five years.
Section 4(d) and (e), on the other hand, is a recognition of
rights already guaranteed under the Constitution. Freedom
from expropriation is granted under Section 9 of Article III55 of
the Constitution, while the provision on requisition is a
negative restatement of Section 6, Article XII.56
Refusal to grant perpetual and exclusive possession to PICOP
of its concession area would not result in the expropriation or
requisition of PICOP’s property, as these forest lands belong
to the State, and not to PICOP. This is not changed by
PICOP’s allegation that:
Since it takes 35 years before the company can go back and
harvest their residuals in a logged-over area, it must be
assured of tenure in order to provide an inducement for the
company to manage and preserve the residuals during their
growth period. This is a commitment of resources over a span
of 35 years for each plot for each cycle. No company will
undertake the responsibility and cost involved in policing,
preserving and managing residual forest areas until it were
sure that it had firm title to the timber.57
The requirement for logging companies to preserve and
maintain forest areas, including the reforestation thereof, is
one of the prices a logging company must pay for the
exploitation thereof. Forest lands are meant to be enjoyed by
countless future generations of Filipinos, and not just by one
logging company. The requirements of reforestation and
preservation of the concession areas are meant to protect
them, the future generations, and not PICOP. Reforestation
and preservation of the concession areas are not required of
logging companies so that they would have something to cut
again, but so that the forest would remain intact after their
operations. That PICOP would not accept the responsibility to
preserve its concession area if it is not assured of tenure
thereto does not speak well of its corporate policies.
Conclusion
In sum, PICOP was not able to prove either of the two things
it needed to prove to be entitled to a Writ of Mandamus against
the DENR Secretary. The 1969 Document is not a contract
recognized under the non-impairment clause and, even if we
assume for the sake of argument that it is, it did not enjoin the
government to issue an IFMA in 2002 either. These are the
essential elements in PICOP’s cause of action, and the failure
to prove the same warrants a dismissal of PICOP’s Petition
for Mandamus, as not even PICOP’s compliance with all the
administrative and statutory requirements can save its Petition
now.
Whether PICOP Has Complied with the Statutory and
Administrative Requirements for the Conversion of the TLA to
an IFMA
In the assailed Decision, our ruling was based on two distinct
grounds, each one being sufficient in itself for us to rule that
PICOP was not entitled to a Writ of Mandamus: (1) the 1969
Document, on which PICOP hinges its right to compel the
issuance of an IFMA, is not a contract; and (2) PICOP has not
complied with all administrative and statutory requirements for
the issuance of an IFMA.
When a court bases its decision on two or more grounds, each
is as authoritative as the other and neither is obiter
dictum.58 Thus, both grounds on which we based our ruling in
the assailed Decision would become judicial dictum, and
would affect the rights and interests of the parties to this case
unless corrected in this Resolution on PICOP’s Motion for
Reconsideration. Therefore, although PICOP would not be
entitled to a Writ of Mandamus even if the second issue is
resolved in its favor, we should nonetheless resolve the same
and determine whether PICOP has indeed complied with all
administrative and statutory requirements for the issuance of
an IFMA.
While the first issue (on the nature of the 1969 Document) is
entirely legal, this second issue (on PICOP’s compliance with
administrative and statutory requirements for the issuance of
an IFMA) has both legal and factual sub-issues. Legal sub-
issues include whether PICOP is legally required to (1) consult
with and acquire an approval from the Sanggunian concerned
under Sections 26 and 27 of the Local Government Code; and
(2) acquire a Certification from the National Commission on
Indigenous Peoples (NCIP) that the concession area does not
overlap with any ancestral domain. Factual sub-issues include
whether, at the time it filed its Petition for Mandamus, PICOP
had submitted the required Five-Year Forest Protection Plan
and Seven-Year Reforestation Plan and whether PICOP had
paid all forest charges.
For the factual sub-issues, PICOP invokes the doctrine that
factual findings of the trial court, especially when upheld by
the Court of Appeals, deserve great weight. However,
deserving of even greater weight are the factual findings of
administrative agencies that have the expertise in the area of
concern. The contentious facts in this case relate to the
licensing, regulation and management of forest resources, the
determination of which belongs exclusively to the DENR:
SECTION 4. Mandate. – The Department shall be the primary
government agency responsible for the conservation,
management, development and proper use of the country’s
environment and natural resources, specifically forest and
grazing lands, mineral resources, including those in
reservation and watershed areas, and lands of the public
domain, as well as the licensing and regulation of all natural
resources as may be provided for by law in order to ensure
equitable sharing of the benefits derived therefrom for the
welfare of the present and future generations of Filipinos. 59
When parties file a Petition for Certiorari against judgments of
administrative agencies tasked with overseeing the
implementation of laws, the findings of such administrative
agencies are entitled to great weight. In the case at bar,
PICOP could not have filed a Petition for Certiorari, as the
DENR Secretary had not yet even determined whether PICOP
should be issued an IFMA. As previously mentioned, when
PICOP’s application was brought to a standstill upon the
evaluation that PICOP had yet to comply with the
requirements for the issuance of an IFMA, PICOP refused to
attend further meetings with the DENR and instead filed a
Petition for Mandamus against the latter. By jumping the gun,
PICOP did not diminish the weight of the DENR Secretary’s
initial determination.
Forest Protection and Reforestation Plans
The Performance Evaluation Team tasked to appraise
PICOP’s performance on its TLA No. 43 found that PICOP
had not submitted its Five-Year Forest Protection Plan and its
Seven-Year Reforestation Plan.60
In its Motion for Reconsideration, PICOP asserts that, in its
Letter of Intent dated 28 August 2000 and marked as Exhibit
L in the trial court, there was a reference to a Ten-Year
Sustainable Forest Management Plan (SFMP), in which a
Five-Year Forest Protection Plan and a Seven-Year
Reforestation Plan were allegedly incorporated. PICOP
submitted a machine copy of a certified photocopy of pages
50-67 and 104-110 of this SFMP in its Motion for
Reconsideration. PICOP claims that the existence of this
SFMP was repeatedly asserted during the IFMA application
process.61
Upon examination of the portions of the SFMP submitted to
us, we cannot help but notice that PICOP’s concept of forest
protection is the security of the area against "illegal" entrants
and settlers. There is no mention of the protection of the
wildlife therein, as the focus of the discussion of the
silvicultural treatments and the SFMP itself is on the protection
and generation of future timber harvests. We are particularly
disturbed by the portions stating that trees of undesirable
quality shall be removed.
However, when we required the DENR Secretary to comment
on PICOP’s Motion for Reconsideration, the DENR Secretary
did not dispute the existence of this SFMP, or question
PICOP’s assertion that a Ten-Year Forest Protection Plan and
a Ten-Year Reforestation Plan are already incorporated
therein. Hence, since the agency tasked to determine
compliance with IFMA administrative requirements chose to
remain silent in the face of allegations of compliance, we are
constrained to withdraw our pronouncement in the assailed
Decision that PICOP had not submitted a Five-Year Forest
Protection Plan and a Seven-Year Reforestation Plan for its
TLA No. 43. As previously mentioned, the licensing, regulation
and management of forest resources are the primary
responsibilities of the DENR.62
The compliance discussed above is, of course, only for the
purpose of determining PICOP’s satisfactory performance as
a TLA holder, and covers a period within the subsistence of
PICOP’s TLA No. 43. This determination, therefore, cannot
prohibit the DENR from requiring PICOP, in the future, to
submit proper forest protection and reforestation plans
covering the period of the proposed IFMA.
Forest Charges
In determining that PICOP did not have unpaid forest charges,
the Court of Appeals relied on the assumption that if it were
true that PICOP had unpaid forest charges, it should not have
been issued an approved Integrated Annual Operation Plan
(IAOP) for the year 2001-2002 by Secretary Alvarez himself.63
In the assailed Decision, we held that the Court of Appeals
had been selective in its evaluation of the IAOP, as it
disregarded the part thereof that shows that the IAOP was
approved subject to several conditions, not the least of which
was the submission of proof of the updated payment of forest
charges from April 2001 to June 2001.64 We also held that
even if we considered for the sake of argument that the IAOP
should not have been issued if PICOP had existing forestry
accounts, the issuance of the IAOP could not be considered
proof that PICOP had paid the same. Firstly, the best evidence
of payment is the receipt thereof. PICOP has not presented
any evidence that such receipts were lost or destroyed or
could not be produced in court.65 Secondly, the government
cannot be estopped by the acts of its officers. If PICOP has
been issued an IAOP in violation of the law, allegedly because
it may not be issued if PICOP had existing forestry accounts,
the government cannot be estopped from collecting such
amounts and providing the necessary sanctions therefor,
including the withholding of the IFMA until such amounts are
paid.
We therefore found that, as opposed to the Court of Appeals’
findings, which were based merely on estoppel of government
officers, the positive and categorical evidence presented by
the DENR Secretary was more convincing with respect to the
issue of payment of forestry charges:
1. Forest Management Bureau (FMB) Senior Forest
Management Specialist (SFMS) Ignacio M.
Evangelista testified that PICOP had failed to pay its
regular forest charges covering the period from 22
September 2001 to 26 April 2002 in the total amount
of ₱15,056,054.0566 PICOP also allegedly paid late
most of its forest charges from 1996 onwards, by
reason of which, PICOP is liable for a surcharge of
25% per annum on the tax due and interest of 20%
per annum which now amounts to
₱150,169,485.02.67 Likewise, PICOP allegedly had
overdue and unpaid silvicultural fees in the amount
of ₱2,366,901.00 as of 30 August 2002.68 Summing
up the testimony, therefore, it was alleged that
PICOP had unpaid and overdue forest charges in the
sum of ₱167,592,440.90 as of 10 August 2002.69
2. Collection letters were sent to PICOP, but no
official receipts are extant in the DENR record in
Bislig City evidencing payment of the overdue
amount stated in the said collection letters. 70 There
were no official receipts for the period covering 22
September 2001 to 26 April 2002.
We also considered these pieces of evidence more convincing
than the other ones presented by PICOP:
1. PICOP presented the certification of Community
Environment and Natural Resources Office
(CENRO) Officer Philip A. Calunsag, which refers
only to PICOP’s alleged payment of regular forest
charges covering the period from 14 September
2001 to 15 May 2002.71 We noted that it does not
mention similar payment of the penalties, surcharges
and interests that PICOP incurred in paying late
several forest charges, which fact was not rebutted
by PICOP.
2. The 27 May 2002 Certification by CENRO
Calunsag specified only the period covering 14
September 2001 to 15 May 2002 and the amount of
P53,603,719.85 paid by PICOP without indicating
the corresponding volume and date of production of
the logs. This is in contrast to the findings of SFMS
Evangelista, which cover the period from CY 1996 to
30 August 2002 and includes penalties, interests,
and surcharges for late payment pursuant to DAO
80, series of 1987.
3. The 21 August 2002 PICOP-requested
certification issued by Bill Collector Amelia D.
Arayan, and attested to by CENRO Calunsag
himself, shows that PICOP paid only regular forest
charges for its log production covering 1 July 2001 to
21 September 2001. However, there were log
productions after 21 September 2001, the regular
forest charges for which have not been paid,
amounting to ₱15,056,054.05.72 The same
certification shows delayed payment of forest
charges, thereby corroborating the testimony of
SFMS Evangelista and substantiating the imposition
of penalties and surcharges.
In its Motion for Reconsideration, PICOP claims that SFMS
Evangelista is assigned to an office that has nothing to do with
the collection of forest charges, and that he based his
testimony on the Memoranda of Forest Management
Specialist II (FMS II) Teofila Orlanes and DENR, Bislig City
Bill Collector Amelia D. Arayan, neither of whom was
presented to testify on his or her Memorandum. PICOP also
submitted an Addendum to Motion for Reconsideration,
wherein it appended certified true copies of CENRO
Summaries with attached Official Receipts tending to show
that PICOP had paid a total of ₱81,184,747.70 in forest
charges for 10 January 2001 to 20 December 2002, including
the period during which SFMS Evangelista claims PICOP did
not pay forest charges (22 September 2001 to 26 April 2002).
Before proceeding any further, it is necessary for us to point
out that, as with our ruling on the forest protection and
reforestation plans, this determination of compliance with the
payment of forest charges is exclusively for the purpose of
determining PICOP’s satisfactory performance on its TLA No.
43. This cannot bind either party in a possible collection case
that may ensue.
An evaluation of the DENR Secretary’s position on this matter
shows a heavy reliance on the testimony of SFMS
Evangelista, making it imperative for us to strictly scrutinize
the same with respect to its contents and admissibility.
PICOP claims that SFMS Evangelista’s office has nothing to
do with the collection of forest charges. According to PICOP,
the entity having administrative jurisdiction over it is CENRO,
Bislig City by virtue of DENR Administrative Order No. 96-36,
dated 20 November 1996, which states:
1. In order for the DENR to be able to exercise closer and
more effective supervision, management and control over the
forest resources within the areas covered by TLA No. 43,
PTLA No. 47 and IFMA No. 35 of the PICOP Resources, Inc.,
(PRI) and, at the same time, provide greater facility in the
delivery of DENR services to various publics, the aforesaid
forest holdings of PRI are hereby placed under the exclusive
jurisdiction of DENR Region No. XIII with the CENR Office at
Bislig, Surigao del Sur, as directly responsible thereto. x x x.
We disagree. Evangelista is an SFMS assigned at the Natural
Forest Management Division of the FMB, DENR. In
Evangelista’s aforementioned affidavit submitted as part of his
direct examination, Evangelista enumerated his duties and
functions as SFMS:
1. As SFMS, I have the following duties and
functions:
a) To evaluate and act on cases pertaining
to forest management referred to in the
Natural forest Management Division;
b) To monitor, verify and validate forest
management and related activities by
timber licences as to their compliance to
approved plans and programs;
c) To conduct investigation and verification
of compliance by timber
licenses/permittees to existing DENR rules
and regulations;
d) To gather field data and information to be
used in the formulation of forest policies
and regulations; and
e) To perform other duties and
responsibilities as may be directed by
superiors.73
PICOP also alleges that the testimony of SFMS
Evangelista was based on the aforementioned
Memoranda of Orlanes and Arayan and that, since
neither Orlanes nor Arayan was presented as a
witness, SFMS Evangelista’s testimony should be
deemed hearsay. SFMS Evangelista’s 1 October
2002 Affidavit,74 which was offered as part of his
testimony, provides:
2. Sometime in September, 2001 the DENR
Secretary was furnished a copy of forest
Management Specialist II (FMS II) Teofila L. Orlanes’
Memorandum dated September 24, 2001
concerning unopaid forest charges of PICOP.
Attached to the said Memorandum was a
Memorandum dated September 19, 2001 of Amelia
D. Arayan, Bill collector of the DENR R13-14, Bislig
City. Copies of the said Memoranda are attached as
Annexes 1 and 2, respectively.
3. The said Memoranda were referred to the FMB
Director for appropriate action.
4. Thus, on August 5, 2002, I was directed by the
FMB Director to proceed to Region 13 to gather
forestry-related data and validate the report
contained in the Memoranda of Ms. Orlanes and
Arayan.
5. On August 6, 2002, I proceeded to DENR Region
13 in Bislig City. A copy of my Travel Order is
attached as Annex 3.
6. Upon my arrival at CENRO, Bislig, surigao del Sur,
I coordinated with CENRO Officer Philip A. Calunsag
and requested him to make available to me the
records regarding the forest products assessments
of PICOP.
7. After I was provided with the requested records, I
evaluated and collected the data.
8. After the evaluation, I found that the unpaid forest
charges adverted to in the Memoranda of Mr.
Orlanes and Arayan covering the period from May 8,
2001 to July 7, 2001 had already been paid but late.
I further found out that PICOP had not paid its forest
charges covering the period from September 22,
2001 to April 26, 2002 in the total amount of
₱15,056,054.05.
9. I also discovered that from 1996 up to august 30,
2002, PICOP paid late some of its forest charges in
1996 and consistently failed to pay late its forest
charges from 1997 up to the present time.
10. Under Section 7.4 of DAO No. 80 Series of
197\87 and Paragraph (4a), Section 10 of BIR
revenue Regulations No. 2-81 dated November 18,
1980, PICOP is mandated to pay a surcharge of 25%
per annum of the tax due and interest of 20% per
annum for late payment of forest charges.
11. The overdue unpaid forest charges of PICOP as
shown in the attached tabulation marked as Annex 4
hereof is ₱150,169,485.02. Likewise, PICOP has
overdue and unpaid silvicultural fees in the amount
of ₱2,366,901.00 from 1996 to the present.
12. In all, PICOP has an outstanding and overdue
total obligation of ₱167,592,440.90 as of August 30,
2002 based on the attached tabulation which is
marked as Annex 5 hereof.75
Clearly, SFMS Evangelista had not relied on the Memoranda
of Orlanes and Arayan. On the contrary, he traveled to
Surigao del Sur in order to verify the contents of these
Memoranda. SFMS Evangelista, in fact, revised the findings
therein, as he discovered that certain forest charges adverted
to as unpaid had already been paid.
This does not mean, however, that SFMS Evangelista’s
testimony was not hearsay. A witness may testify only on facts
of which he has personal knowledge; that is, those derived
from his perception, except in certain circumstances allowed
by the Rules.76 Otherwise, such testimony is considered
hearsay and, hence, inadmissible in evidence.77
SFMS Evangelista, while not relying on the Memoranda of
Orlanes and Arayan, nevertheless relied on records, the
preparation of which he did not participate in.78 These records
and the persons who prepared them were not presented in
court, either. As such, SFMS Evangelista’s testimony, insofar
as he relied on these records, was on matters not derived from
his own perception, and was, therefore, hearsay.
Section 44, Rule 130 of the Rules of Court, which speaks of
entries in official records as an exception to the hearsay rule,
cannot excuse the testimony of SFMS Evangelista. Section 44
provides:
SEC. 44. Entries in official records. – Entries in official records
made in the performance of his duty by a public officer of the
Philippines, or by a person in the performance of a duty
specially enjoined by law, are prima facie evidence of the facts
therein stated.
In Africa v. Caltex,79 we enumerated the following requisites
for the admission of entries in official records as an exception
to the hearsay rule: (1) the entries were made by a public
officer or a private person in the performance of a duty; (2) the
performance of the duty is especially enjoined by law; (3) the
public officer or the private person had sufficient knowledge of
the facts stated by him, which must have been acquired by
him personally or through official information.
The presentation of the records themselves would, therefore,
have been admissible as an exception to the hearsay rule
even if the public officer/s who prepared them was/were not
presented in court, provided the above requisites could be
adequately proven. In the case at bar, however, neither the
records nor the persons who prepared them were presented
in court. Thus, the above requisites cannot be sufficiently
proven. Also, since SFMS Evangelista merely testified based
on what those records contained, his testimony was hearsay
evidence twice removed, which was one step too many to be
covered by the official-records exception to the hearsay rule.
SFMS Evangelista’s testimony of nonpayment of forest
charges was, furthermore, based on his failure to find official
receipts corresponding to billings sent to PICOP. As stated
above, PICOP attached official receipts in its Addendum to
Motion for Reconsideration to this Court. While this course of
action is normally irregular in judicial proceedings, we merely
stated in the assailed Decision that "the DENR Secretary has
adequately proven that PICOP has, at this time, failed to
comply with administrative and statutory requirements for the
conversion of TLA No. 43 into an IFMA," 80 and that "this
disposition confers another chance to comply with the
foregoing requirements."81
In view of the foregoing, we withdraw our pronouncement that
PICOP has unpaid forestry charges, at least for the purpose
of determining compliance with the IFMA requirements.
NCIP Certification
The Court of Appeals held that PICOP need not comply with
Section 59 of Republic Act No. 8371, which requires prior
certification from the NCIP that the areas affected do not
overlap with any ancestral domain before any IFMA can be
entered into by the government. According to the Court of
Appeals, Section 59 should be interpreted to refer to ancestral
domains that have been duly established as such by the
continuous possession and occupation of the area concerned
by indigenous peoples since time immemorial up to the
present. The Court of Appeals held that PICOP had acquired
property rights over TLA No. 43 areas, being in exclusive,
continuous and uninterrupted possession and occupation of
these areas since 1952 up to the present.
In the assailed Decision, we reversed the findings of the Court
of Appeals. Firstly, the Court of Appeals ruling defies the
settled jurisprudence we have mentioned earlier, that a TLA is
neither a property nor a property right, and that it does not
create a vested right.82
Secondly, the Court of Appeals’ resort to statutory
construction is misplaced, as Section 59 of Republic Act No.
8379 is clear and unambiguous:
SEC. 59. Certification Precondition. – All departments and
other governmental agencies shall henceforth be strictly
enjoined from issuing, renewing or granting any concession,
license or lease, or entering into any production-sharing
agreement, without prior certification from the NCIP that the
area affected does not overlap with any ancestral
domain. Such certification shall only be issued after a field-
based investigation is conducted by the Ancestral Domains
Office of the area concerned: Provided, That no certification
shall be issued by the NCIP without the free and prior informed
and written consent of the ICCs/IPs concerned: Provided,
further, That no department, government agency or
government-owned or controlled corporation may issue new
concession, license, lease, or production sharing agreement
while there is a pending application for a CADT: Provided,
finally, That the ICCs/IPs shall have the right to stop or
suspend, in accordance with this Act, any project that has not
satisfied the requirement of this consultation process.
PICOP had tried to put a cloud of ambiguity over Section 59
of Republic Act No. 8371 by invoking the definition of
Ancestral Domains in Section 3(a) thereof, wherein the
possesssion by Indigenous Cultural Communities/Indigenous
Peoples (ICCs/IPs) must have been continuous to the
present. However, we noted the exception found in the very
same sentence invoked by PICOP:
a) Ancestral domains – Subject to Section 56 hereof, refers to
all areas generally belonging to ICCs/IPs comprising lands,
inland waters, coastal areas, and natural resources
therein, held under a claim of ownership, occupied or
possessed by ICCs/IPs, by themselves or through their
ancestors, communally or individually since time immemorial,
continuously to the present except when interrupted by war,
force majeure or displacement by force, deceit, stealth or as a
consequence of government projects or any other voluntary
dealings entered into by government and private
individuals/corporations, and which are necessary to ensure
their economic, social and cultural welfare. It shall include
ancestral lands, forests, pasture, residential, agricultural, and
other lands individually owned whether alienable and
disposable or otherwise, hunting grounds, burial grounds,
worship areas, bodies of water, mineral and other natural
resources, and lands which may no longer be exclusively
occupied by ICCs/IPs but from which they traditionally had
access to for their subsistence and traditional activities,
particularly the home ranges of ICCs/IPs who are still nomadic
and/or shifting cultivators;
Ancestral domains, therefore, remain as such even when
possession or occupation of these areas has been interrupted
by causes provided under the law, such as voluntary dealings
entered into by the government and private
individuals/corporations. Consequently, the issuance of TLA
No. 43 in 1952 did not cause the ICCs/IPs to lose their
possession or occupation over the area covered by TLA No.
43.
Thirdly, we held that it was manifestly absurd to claim that the
subject lands must first be proven to be part of ancestral
domains before a certification that the lands are not part of
ancestral domains can be required, and invoked the separate
opinion of now Chief Justice Reynato Puno in Cruz v.
Secretary of DENR83:
As its subtitle suggests, [Section 59 of R.A. No. 8371] requires
as a precondition for the issuance of any concession, license
or agreement over natural resources, that a certification be
issued by the NCIP that the area subject of the agreement
does not lie within any ancestral domain. The provision does
not vest the NCIP with power over the other agencies of the
State as to determine whether to grant or deny any
concession or license or agreement. It merely gives the NCIP
the authority to ensure that the ICCs/IPs have been informed
of the agreement and that their consent thereto has been
obtained. Note that the certification applies to agreements
over natural resources that do not necessarily lie within the
ancestral domains. For those that are found within the said
domains, Sections 7(b) and 57 of the IPRA apply.
PICOP rejects the entire disposition of this Court on the
matter, relying on the following theory:
84. It is quite clear that Section 59 of R.A. 8371 does not apply
to the automatic conversion of TLA 43 to IFMA.
First, the automatic conversion of TLA 43 to an IFMA is not a
new project. It is a mere continuation of the harvesting process
in an area that PICOP had been managing, conserving and
reforesting for the last 50 years since 1952. Hence any
pending application for a CADT within the area, cannot affect
much less hold back the automatic conversion. That the
government now wishes to change the tenurial system to an
IFMA could not change the PICOP project, in existence and
operating for the last 30 (sic) years, into a new one. 84
PICOP’s position is anything but clear. What is clearly
provided for in Section 59 is that it covers "issuing, renewing
or granting (of) any concession, license or lease, or entering
into any production sharing agreement." PICOP is implying
that, when the government changed the tenurial system to an
IFMA, PICOP’s existing TLA would just be upgraded or
modified, but would be the very same agreement, hence,
dodging the inclusion in the word "renewing." However,
PICOP is conveniently leaving out the fact that its TLA expired
in 2002. If PICOP really intends to pursue the argument that
the conversion of the TLA into an IFMA would not create a
new agreement, but would only be a modification of the old
one, then it should be willing to concede that the IFMA expired
as well in 2002. An automatic modification would not alter the
terms and conditions of the TLA except when they are
inconsistent with the terms and conditions of an IFMA.
Consequently, PICOP’s concession period under the renewed
TLA No. 43, which is from the year 1977 to 2002, would
remain the same.
PICOP cannot rely on a theory of the case whenever such
theory is beneficial to it, but refute the same whenever the
theory is damaging to it. In the same way, PICOP cannot claim
that the alleged Presidential Warranty is "renewable for other
25 years" and later on claim that what it is asking for is not a
renewal. Extensions of agreements must necessarily be
included in the term renewal. Otherwise, the inclusion of
"renewing" in Section 59 would be rendered inoperative.
PICOP further claims:
85. Verily, in interpreting the term "held under claim of
ownership," the Supreme Court could not have meant to
include claims that had just been filed and not yet recognized
under the provisions of DENR Administrative Order No. 2
Series of 1993, nor to any other community / ancestral domain
program prior to R.A. 8371.
xxxx
87. One can not imagine the terrible damage and chaos to the
country, its economy, its people and its future if a mere claim
filed for the issuance of a CADC or CADT will already provide
those who filed the application, the authority or right to stop
the renewal or issuance of any concession, license or lease
or any production-sharing agreement. The same
interpretation will give such applicants through a mere
application the right to stop or suspend any project that they
can cite for not satisfying the requirements of the consultation
process of R.A. 8371. If such interpretation gets enshrined in
the statures of the land, the unscrupulous and the extortionists
can put any ongoing or future project or activity to a stop in
any part of the country citing their right from having filed an
application for issuance of a CADC or CADT claim and the
legal doctrine established by the Supreme Court in this PICOP
case.85
We are not sure whether PICOP’s counsels are deliberately
trying to mislead us, or are just plainly ignorant of basic
precepts of law. The term "claim" in the phrase "claim of
ownership" is not a document of any sort. It is an attitude
towards something. The phrase "claim of ownership" means
"the possession of a piece of property with the intention of
claiming it in hostility to the true owner."86 It is also defined as
"a party’s manifest intention to take over land, regardless of
title or right."87 Other than in Republic Act No. 8371, the
phrase "claim of ownership" is thoroughly discussed in issues
relating to acquisitive prescription in Civil Law.
Before PICOP’s counsels could attribute to us an assertion
that a mere attitude or intention would stop the renewal or
issuance of any concession, license or lease or any
production-sharing agreement, we should stress beforehand
that this attitude or intention must be clearly shown by overt
acts and, as required by Section 3(a), should have been in
existence "since time immemorial, continuously to the present
except when interrupted by war, force majeure or
displacement by force, deceit, stealth or as a consequence of
government projects or any other voluntary dealings entered
into by government and private individuals/corporations."
Another argument of PICOP involves the claim itself that there
was no overlapping:
Second, there could be no overlapping with any Ancestral
Domain as proven by the evidence presented and testimonies
rendered during the hearings in the Regional Trial Court. x x
x.
x x x x.
88. The DENR issued a total of 73 CADCs as of December
11, 1996. The DENR Undersecretary for Field Operations had
recommended another 11 applications for issuance of
CADCs. None of the CADCs overlap the TLA 43 area.
89. However former DENR Secretary Alvarez, in a
memorandum dated 13 September, 2002 addressed to
PGMA, insisted that PICOP had to comply with the
requirement to secure a Free and Prior Informed Concent
because CADC 095 was issued covering 17,112 hectares of
TLA 43.
90. This CADC 095 is a fake CADC and was not validly
released by the DENR. While the Legal Department of the
DENR was still in the process of receiving the filings for
applicants and the oppositors to the CADC application, PICOP
came across filed copies of a CADC 095 with the PENRO of
Davao Oriental as part of their application for a Community
Based Forest Management Agreement (CBFMA). Further
research came across the same group filing copies of the
alleged CADC 095 with the Mines and Geosciences Bureau
in Davao City for a mining agreement application. The two
applications had two different versions of the CADCs second
page. One had Mr. Romeo T. Acosta signing as the Social
reform Agenda Technical Action Officer, while the other had
him signing as the Head, Community-Based Forest
Management Office. One had the word "Eight" crossed out
and "Seven" written to make it appear that the CADC was
issued on September 25, 1997, the other made it appear that
there were no alterations and the date was supposed to be
originally 25 September 1997.
What is required in Section 59 of Republic Act No. 8379 is a
Certification from the NCIP that there was no overlapping with
any Ancestral Domain. PICOP cannot claim that the DENR
gravely abused its discretion for requiring this Certification, on
the ground that there was no overlapping. We reiterate that it
is manifestly absurd to claim that the subject lands must first
be proven to be part of ancestral domains before a certification
that they are not can be required. As discussed in the assailed
Decision, PICOP did not even seek any certification from the
NCIP that the area covered by TLA No. 43, subject of its IFMA
conversion, did not overlap with any ancestral domain. 88
Sanggunian Consultation and Approval
While PICOP did not seek any certification from the NCIP that
the former’s concession area did not overlap with any
ancestral domain, PICOP initially sought to comply with the
requirement under Sections 26 and 27 of the Local
Government Code to procure prior approval of the
Sanggunians concerned. However, only one of the many
provinces affected approved the issuance of an IFMA to
PICOP. Undaunted, PICOP nevertheless submitted to the
DENR the purported resolution89 of the Province of Surigao
del Sur indorsing the approval of PICOP’s application for IFMA
conversion, apparently hoping either that the disapproval of
the other provinces would go unnoticed, or that the Surigao
del Sur approval would be treated as sufficient compliance.
Surprisingly, the disapproval by the other provinces did go
unnoticed before the RTC and the Court of Appeals, despite
the repeated assertions thereof by the Solicitor General.
When we pointed out in the assailed Decision that the
approval must be by all the Sanggunians concerned and not
by only one of them, PICOP changed its theory of the case in
its Motion for Reconsideration, this time claiming that they are
not required at all to procure Sanggunian approval.
Sections 2(c), 26 and 27 of the Local Government Code
provide:
SEC. 2. x x x.
xxxx
(c) It is likewise the policy of the State to require all national
agencies and offices to conduct periodic consultations with
appropriate local government units, nongovernmental and
people’s organizations, and other concerned sectors of the
community before any project or program is implemented in
their respective jurisdictions.
SEC. 26. Duty of National Government Agencies in the
Maintenance of Ecological Balance. – It shall be the duty of
every national agency or government-owned or controlled
corporation authorizing or involved in the planning and
implementation of any project or program that may cause
pollution, climatic change, depletion of non-renewable
resources, loss of crop land, rangeland, or forest cover, and
extinction of animal or plant species, to consult with the local
government units, nongovernmental organizations, and other
sectors concerned and explain the goals and objectives of the
project or program, its impact upon the people and the
community in terms of environmental or ecological balance,
and the measures that will be undertaken to prevent or
minimize the adverse effects thereof.
SEC. 27. Prior Consultations Required. – No project or
program shall be implemented by government authorities
unless the consultations mentioned in Sections 2(c) and 26
hereof are complied with, and prior approval of the
sanggunian concerned is obtained: Provided, That occupants
in areas where such projects are to be implemented shall not
be evicted unless appropriate relocation sites have been
provided, in accordance with the provisions of the
Constitution.
As stated in the assailed Decision, the common evidence of
the DENR Secretary and PICOP, namely, the 31 July 2001
Memorandum of Regional Executive Director (RED) Elias D.
Seraspi, Jr., enumerated the local government units and other
groups which had expressed their opposition to PICOP’s
application for IFMA conversion:
7. During the conduct of the performance evaluation of TLA
No. 43 issues complaints against PRI were submitted thru
Resolutions and letters. It is important that these are included
in this report for assessment of what are their worth, viz:
xxxx
7.2 Joint Resolution (unnumbered), dated March 19, 2001 of
the Barangay Council and Barangay Tribal Council of
Simulao, Boston, Davao Oriental (ANNEX F) opposing the
conversion of TLA No. 43 into IFMA over the 17,112 hectares
allegedly covered with CADC No. 095.
7.3 Resolution Nos. 10, s-2001 and 05, s-2001 (ANNEXES G
& H) of the Bunawan Tribal Council of Elders (BBMTCE)
strongly demanding none renewal of PICOP TLA. They claim
to be the rightful owner of the area it being their alleged
ancestral land.
7.4 Resolution No. 4, S-2001 of Sitio Linao, San Jose, Bislig
City (ANNEX I) requesting not to renew TLA 43 over the 900
hectares occupied by them.
7.5 Resolution No. 22, S-2001 (ANNEX J) of the Sanguniang
Bayan, Lingig, Surigao del Sur not to grant the conversion of
TLA 43 citing the plight of former employees of PRI who were
forced to enter and farm portion of TLA No. 43, after they were
laid off.
7.6 SP Resolution No. 2001-113 and CDC Resolution Nos.
09-2001 of the Sanguniang Panglungsod of Bislig City
(ANNEXES K & L) requesting to exclude the area of TLA No.
43 for watershed purposes.
7.7 Resolution No. 2001-164, dated June 01, 2001 (ANNEX
M) Sanguniang Panglungsod of Bislig City opposing the
conversion of TLA 43 to IFMA for the reason that IFMA do not
give revenue benefits to the City.90
PICOP had claimed that it complied with the Local
Government Code requirement of obtaining prior approval of
the Sanggunian concerned by submitting a purported
resolution91 of the Province of Surigao del Sur indorsing the
approval of PICOP’s application for IFMA conversion. We
ruled that this cannot be deemed sufficient compliance with
the foregoing provision. Surigao del Sur is not the only
province affected by the area covered by the proposed IFMA.
As even the Court of Appeals found, PICOP’s TLA No. 43
traverses the length and breadth not only of Surigao del Sur
but also of Agusan del Sur, Compostela Valley and Davao
Oriental.92
On Motion for Reconsideration, PICOP now argues that the
requirement under Sections 26 and 27 does not apply to it:
97. PICOP is not a national agency. Neither is PICOP
government owned or controlled. Thus Section 26 does not
apply to PICOP.
98. It is very clear that Section 27 refers to projects or
programs to be implemented by government authorities or
government-owned and controlled corporations. PICOP’s
project or the automatic conversion is a purely private
endevour. First the PICOP project has been implemented
since 1969. Second, the project was being implemented by
private investors and financial institutions.
99. The primary government participation is to warrant and
ensure that the PICOP project shall have peaceful tenure in
the permanent forest allocated to provide raw materials for the
project. To rule now that a project whose foundations were
commenced as early as 1969 shall now be subjected to a
1991 law is to apply the law retrospectively in violation of
Article 4 of the Civil Code that laws shall not be applied
retroactively.
100. In addition, under DAO 30, Series of 1992, TLA and IFMA
operations were not among those devolved function from the
National Government / DENR to the local government unit.
Under its Section 03, the devolved function cover only:
a) Community Based forestry projects.
b) Communal forests of less than 5000 hectares
c) Small watershed areas which are sources of local
water supply.93
We have to remind PICOP again of the contents of Section 2,
Article XII of the Constitution:
Section 2. All lands of the public domain, waters, minerals,
coal, petroleum, and other mineral oils, all forces of potential
energy, fisheries, forests or timber, wildlife, flora and fauna,
and other natural resources are owned by the State. With the
exception of agricultural lands, all other natural resources
shall not be alienated. The exploration, development, and
utilization of natural resources shall be under the full control
and supervision of the State. The State may directly undertake
such activities, or it may enter into co-production, joint venture,
or production-sharing agreements with Filipino citizens, or
corporations or associations at least sixty per centum of
whose capital is owned by such citizens. Such agreements
may be for a period not exceeding twenty-five years,
renewable for not more than twenty-five years, and under
such terms and conditions as may be provided by law. In
cases of water rights for irrigation, water supply, fisheries, or
industrial uses other than the development of water power,
beneficial use may be the measure and limit of the grant.
All projects relating to the exploration, development and
utilization of natural resources are projects of the State. While
the State may enter into co-production, joint venture, or
production-sharing agreements with Filipino citizens, or
corporations or associations at least sixty per centum of
whose capital is owned by these citizens, such as PICOP, the
projects nevertheless remain as State projects and can never
be purely private endeavors.
Also, despite entering into co-production, joint venture, or
production-sharing agreements, the State remains in full
control and supervision over such projects. PICOP, thus,
cannot limit government participation in the project to being
merely its bouncer, whose primary participation is only to
"warrant and ensure that the PICOP project shall have
peaceful tenure in the permanent forest allocated to provide
raw materials for the project."
PICOP is indeed neither a national agency nor a government-
owned or controlled corporation. The DENR, however, is a
national agency and is the national agency prohibited by
Section 27 from issuing an IFMA without the prior approval of
the Sanggunian concerned. As previously discussed,
PICOP’s Petition for Mandamus can only be granted if the
DENR Secretary is required by law to issue an IFMA. We,
however, see here the exact opposite: the DENR Secretary
was actually prohibited by law from issuing an IFMA, as there
had been no prior approval by all the other Sanggunians
concerned.
As regards PICOP’s assertion that the application to them of
a 1991 law is in violation of the prohibition against the non-
retroactivity provision in Article 4 of the Civil Code, we have to
remind PICOP that it is applying for an IFMA with a term of
2002 to 2027. Section 2, Article XII of the Constitution allows
exploitation agreements to last only "for a period not
exceeding twenty-five years, renewable for not more than
twenty-five years." PICOP, thus, cannot legally claim that the
project’s term started in 1952 and extends all the way to the
present.
Finally, the devolution of the project to local government units
is not required before Sections 26 and 27 would be applicable.
Neither Section 26 nor 27 mentions such a requirement.
Moreover, it is not only the letter, but more importantly the
spirit of Sections 26 and 27, that shows that the devolution of
the project is not required. The approval of the Sanggunian
concerned is required by law, not because the local
government has control over such project, but because the
local government has the duty to protect its constituents and
their stake in the implementation of the project. Again, Section
26 states that it applies to projects that "may cause pollution,
climatic change, depletion of non-renewable resources, loss
of crop land, rangeland, or forest cover, and extinction of
animal or plant species." The local government should thus
represent the communities in such area, the very people who
will be affected by flooding, landslides or even climatic change
if the project is not properly regulated, and who likewise have
a stake in the resources in the area, and deserve to be
adequately compensated when these resources are
exploited.
Indeed, it would be absurd to claim that the project must first
be devolved to the local government before the requirement
of the national government seeking approval from the local
government can be applied. If a project has been devolved to
the local government, the local government itself would be
implementing the project. That the local government would
need its own approval before implementing its own project is
patently silly.
EPILOGUE AND DISPOSITION
PICOP’c cause of action consists in the allegation that the
DENR Secretary, in not issuing an IFMA, violated its
constitutional right against non-impairment of contracts. We
have ruled, however, that the 1969 Document is not a contract
recognized under the non-impairment clause, much less a
contract specifically enjoining the DENR Secretary to issue
the IFMA. The conclusion that the 1969 Document is not a
contract recognized under the non-impairment clause has
even been disposed of in another case decided by another
division of this Court, PICOP Resources, Inc. v. Base Metals
Mineral Resources Corporation,94 the Decision in which case
has become final and executory. PICOP’s Petition for
Mandamus should, therefore, fail.
Furthermore, even if we assume for the sake of argument that
the 1969 Document is a contract recognized under the non-
impairment clause, and even if we assume for the sake of
argument that the same is a contract specifically enjoining the
DENR Secretary to issue an IFMA, PICOP’s Petition for
Mandamus must still fail. The 1969 Document expressly
states that the warranty as to the tenure of PICOP is "subject
to compliance with constitutional and statutory requirements
as well as with existing policy on timber concessions." Thus,
if PICOP proves the two above-mentioned matters, it still has
to prove compliance with statutory and administrative
requirements for the conversion of its TLA into an IFMA.

While we have withdrawn our pronouncements in the assailed

Decision that (1) PICOP had not submitted the required forest
protection and reforestation plans, and that (2) PICOP had
unpaid forestry charges, thus effectively ruling in favor of
PICOP on all factual issues in this case, PICOP still insists
that the requirements of an NCIP certification and Sanggunian
consultation and approval do not apply to it. To affirm PICOP’s
position on these matters would entail nothing less than
rewriting the Indigenous Peoples’ Rights Act and the Local
Government Code, an act simply beyond our jurisdiction.

WHEREFORE, the Motion for Reconsideration of PICOP

Resources, Inc. is DENIED.

SO ORDERED.