1. MARCOS B. COMILANG, petitioner-appellant, vs. HON. GENEROSO A.

BUENDIA, Judge
of the City Court of Baguio; ABDON DELENELA, GUILLERMO PEREZ and THE
PROVINCIAL SHERIFF OF BAGUIO AND BENGUET, Mountain Province, respondents-
appellees.

Bienvenido L. Garcia for petitioner-appellant.

Daniel M. Zarate for respondents-appellees.

ANGELES, J.:

On appeal from an order of the Court of First Instance of Baguio City, in Civil Case No. 1440, denying
the petition of Marcos Comilang to annul the order of the Municipal Court of Baguio City, in Civil Case
No. 1433, dated August 11, 1964, directing the sheriff of Mountain Province to place Abdon Delenela
and Guillermo Perez in possession of a parcel of land occupied by the petitioner.

The antecedents of the controversy which culminated in this appeal are as follows:

About the year 1908, Nicolas Comilang staked a mining claim known as the "Bua Fraction Mineral
Claim" over a parcel of land in Tuding, Benguet, Mountain Province, with an area of 76,809 square
meters, more or less. His exploration works in the mining claim did not last for long, for he abandoned
it, and stopped the exploration, but he continued to live in the house he built on a portion of the land
with his wife, brothers and sisters.

In the year 1918, Macario Comilang also settled on a portion of the land with an area of about one (1)
hectare, for residential and agricultural purposes. After his death, his daughter, Fabiana Comilang
Perez remained to live in the house built by her father on the land. Still later, other relatives of the old
Nicolas Comilang settled and built their own houses over other portions of the land, one of which
houses was acquired by Abdon Delenela who now resides on the land with the other Comilang heirs.

Surface rights over the area embraced in the original Bua Fraction Mineral Claim of Nicolas Comilang
soon became the subject of litigation in the Court of First Instance of Baguio City (Civil Case No. 250
— Action to Quiet Title), instituted by the heirs of Guillerma, Marcelina, Julian, Timoteo, Melecio and
Macario, all surnamed Comilang, against appellant herein Marcos Comilang who claimed to have
bought the rights and interest of Nicolas Comilang in the old mining claim. In a decision rendered in
said case No. 250, dated November 26, 1952, the court dismissed both claims of ownership of the
plaintiffs and the defendant and declared the area public land. The court, however, recognized the
possession of the parties over certain specified portions of the area, among which was an area of
about one and one-half (1-1/2) hectares in possession of Marcos Comilang, which has been declared
for taxation purposes in his name. This decision was affirmed by the Court of Appeals in CA-G.R. No.
11157-R on October 29, 1955.

In the same year, the 1-1/2 hectares of land occupied by Marcos Comilang, then declared under Tax
Declaration No. 4771 in his name, was levied upon and sold at public auction by the sheriff of
Mountain Province to satisfy a judgment for a sum of money obtained by the spouses Jose Coloma and
Eugenia Rumbaoa against Marcos Comilang in the Court of First Instance of Baguio, in Civil Case No.
1433. The judgment creditors were the purchasers at the auction sale, and a certificate of sale was
executed in their favor by the sheriff on June 1, 1957.

In the meantime, an application for lode patent covering the Bua Fraction Mineral Claim was filed with
the Bureau of Mines. Abdon Delenela and his co-heirs filed their opposition to the application. Pending
the controversy before the Bureau of Mines, Delenela and his co-heirs instituted an action for
determination of their rights on the land in the Court of First Instance of Baguio City, docketed as Civil
Case No. 735. The parties submitted an amicable settlement recognizing co-ownership among
themselves of the Bua Mineral Claim. In a decision rendered in said Case No. 735, dated March 3,
1958, the court awarded one-half in undivided share in the mineral claim in favor of Marcos Comilang,
and the other half also in undivided share in favor of Abdon Delenela and co-heirs.
Later, in the exercise of their right as co-owners, Abdon Delenela and Guillermo Perez, with the
knowledge and conformity of Marcos Comilang, redeemed and bought from the Coloma spouses, the
latter's rights, title, interest and claim to the 1-1/2 hectares of land acquired under the certificate of
sale thereof executed in the latter's favor by the sheriff on June 1, 1957. This redemption sale took
place on June 11, 1958.

On February 9, 1959, the Director of Mines recommended the issuance of a lode patent over the Bua
Mineral Claim in favor of Marcos Comilang, Delenela, and the other claimants in the proportion of one-
half (1/2) in undivided share in favor of Marcos Comilang, and the other one-half (1/2) also in
undivided share in favor of Delenela and the other heirs pursuant to the decision of March 3, 1958,
aforementioned, in Civil Case No. 735.

On August 12, 1959, upon motion of Abdon Delenela and Perez, who have thus acquired and
succeeded to the rights of the Coloma spouses on the 1-1/2 hectares, the Municipal Court of Baguio
City issued a writ of possession in their favor directing the sheriff of Mountain Province to evict Marcos
Comilang and his wife from the 1-1/2 hectares of land sold in the execution sale.

In a petition for certiorari with preliminary injunction filed in the Court of First Instance of Baguio City,
docketed as Civil Case No. 897, Maxima Nieto de Comilang, wife of Marcos Comilang, questioned the
power of the Municipal Court to issue said writ of possession on two grounds, namely: (1) that
conjugal property had been levied upon and sold in the execution sale, and her share therein is
affected; and (2) that there can be no severance of surface rights over a mineral claim located under
the Philippine Bill of 1902, and petitioner argued that the sheriff could not have validly sold the surface
rights in the execution sale of June 1, 1957. On February 23, 1961, the court rendered a decision in
said case, holding that the writ of possession issued by the respondent Municipal Judge was within his
competence and jurisdiction. On appeal to the Supreme Court, docketed as G. R. No. L-18897, a
decision was rendered on March 31, 1964, the dispositive portion of which is as follows:

For the foregoing considerations the judgment appealed from is hereby affirmed insofar as it
denies the petition of Maxima Nieto de Comilang to exclude from the sale, or annul the sale on
execution of the residential lot formerly owned by her husband, of 1-1/2 hectares covered in
the final certificate of sale; but that part of the appealed decision holding that the sale at
public auction included the 1/2 undivided share of Marcos Comilang to the Bua Mineral Claim,
is hereby set aside and said mineral rights of Marcos Comilang are hereby declared free from
the execution or sale on execution.

The decision having become final, Abdon Delenela and Guillermo Perez reiterated their motion in the
Municipal Court of Baguio City in Civil Case No. 1433, praying that an alias writ of possession be
issued to evict Marcos Comilang and his wife from the 1-1/2 hectares of land in question. On August
11, 1964, over the objection of Marcos Comilang, the court issued the writ prayed for.

For a second time, a petition for certiorari and mandamus with preliminary injunction was instituted by
Marcos Comilang in the Court of First Instance of Baguio City seeking the annulment of the order
granting the alias writ of possession in favor of Delenela and Perez, and again the Court of First
Instance of Baguio threw out the petition in its order dated October 22, 1964. The court expressed its
views in the following rationale:

The one and one-half hectares of land referred to therein (S.C. decision) is the same parcel of
land and house above-described which was already sold at public auction to the respondents,
Guillermo Perez and Abdon Delenela.

The said judgment is res adjudicata and the consequent execution, and the writ of possession
is but its necessary consequence.

All the authorities cited by the petitioner were no longer of any value because they were
necessarily passed upon and disposed of in the course of finally deciding the case.
 Wherefore, the petition for certiorari is hereby denied.

Marcos Comilang is now before Us on appeal from this last decision.

Appellant contends that the lower court erred in denying his petition on the ground of res adjudicata,
arguing that it was his wife Maxima Nieto de Comilang, and not be, the party in the former case
appealed to the Supreme Court in G. R. No. L-18897. Therefore, it is claimed, one of the requisites
of res adjudicata is lacking. We find no merit in the argument. As husband and wife and before the
dissolution of their marital union, their interest in the said property is one and the same. The fact that
the wife was the party in the former case while it is the husband who is the petitioner in the instant
case, when admittedly both actions were instituted for the protection of their common interest therein,
is no argument to the proposition that there is no identity of parties in these cases. Such identity of
interest is enough to hold that they are privy to one another, having a common interest in the
property. Neither is it tenable to contend that the issue involved in the two cases are not identical. It
cannot be disputed that in both cases, the main relief sought is the annulment of writs of possession
issued by the Municipal Court of Baguio City directing the sheriff concerned to evict the spouses
Comilang from the land, and the questions involved in both cases pertain to the legality or validity of
those writs aforementioned. In the decision in L-18897, this Court sustained the validity of the
execution sale. There can be no doubt, therefore, that the judgment in the former case is binding in
the instant proceeding.

It is argued further by the appellant that the final certificate of sale conveying the land described in
Tax Declaration No. 4771 to the purchasers in the execution sale is not a valid disposition of a portion
of the public domain, and specially in view of the subsequent issuance of a mineral lode patent over
the Bua Mineral Claim by the Director of Mines (Patent issued on November 7, 1966) whereby full
ownership not only of the minerals therein but also of the surface ground have been conveyed to the
patentee thereof, and, therefore, the Municipal Court of Baguio City may no longer eject them from
the land.

We do not agree with the contention of the appellant.

The Court has not overlooked the doctrines heavily relied upon by the appellant that the moment the
locator discovered a valuable mineral deposit on the land located, and perfected his location in
accordance with the provisions of the Philippine Bill of 1902, the power of the Government to deprive
him of the exclusive right to possession of the located claim was gone, the land had become mineral
land and they were excepted from the lands that could be granted to any other person (McDaniel v.
Apacible and Cuisia, 42 Phil. 749, 756); and that when a location of a mining claim is perfected under
said law, it has the effect of a grant by the United States of the right of present possession, with the
right to the exclusive enjoyment of all the surface ground as well as of all the minerals within the lines
of the claim (Gold Creek Mining Corporation v. Rodriguez, 66 Phil. 259). We are also cognizant of the
rule invoked by the appellant that when circumstances have arisen subsequent to the remanding of
the record from the Supreme Court to the trial court, a stay of execution may be allowed on grounds
which are in their nature peculiarly equitable, as for instance, to give defendant an opportunity to set
off a claim against plaintiff (Chua A. H. Lee v. Mapa, 51 Phil. 624); or when after judgment has been
rendered and it has become final, facts and circumstances transpire which rendered its execution
impossible and unjust, the interested party may ask the court to alter or modify the judgment to
harmonize the same with justice and the facts (De la Costa v. Cleopas, 67 Phil. 686; Realiza v.
Duarte, L-25027, L-20528 & L-20529, August 31, 1967); and this remains true, notwithstanding
affirmance of the judgment by the Supreme Court, which imparts no higher quality than to a final
judgment unappealed from, except that it cannot be questioned or reviewed (Chua A. H. Lee v.
Mapa, supra). However, these authorities, by no means, render the argument of herein appellant
unassailable . There are factual differences in the settings of the case cited and the one at bar, the
equities of which require the application of a different rule.

To begin with, the 1-½ hectares portions of the Bua Fraction Mineral Claim described in Tax
Declaration No. 4771 in the name of herein appellant was levied upon and sold at public auction to
satisfy the money judgment against him in Civil Case No. 1433 of the Municipal Court of Baguio City,
and the corresponding certificate of sale was issued in favor of the judgment creditors. Interest
acquired under like certificates of sale alone has been described as more than a lien on the property,
more than an equitable estate, an inchoate legal title to the property. (21 Am. Jur., section 264, p.
133). The validity of that sale was questioned when the Municipal Court ordered the eviction of
appellant from the land sold on execution, and the Supreme Court declared in L-18897 that the sale
was valid. The sale operated to divest appellant of his rights to the land which vested in the
purchasers at the auction sale. The parties herein subsequently litigated their rights to the mineral
claim in Civil Case No. 735 of the Court of First Instance of Baguio City, and on the basis of their
amicable agreement (appellant was a party in the case), the court declared the Bua Mineral Claim co-
ownership property of the parties thereto "except the improvements existing thereon" (p. 9,
appellant's petition). There is no room for doubt, therefore, that the right to possess or own the
surface ground is separate and distinct from the mineral rights over the same land. And when the
application for lode patent to the mineral claim was prosecuted in the Bureau of Mines, the said
application could not have legally included the surface ground sold to another in the execution sale.
Consequently, We have to declare that the patent procured thereunder, at least with respect to the 1-
½ hectares sold in execution pertains only to the mineral right and does not include the surface
ground of the land in question.

Viewed from another perspective, We have arrived at the same conclusion. In his letter to the
Secretary of Agriculture and Natural Resources, dated February 9, 1959, recommending the approval
of Mineral Lode Patent No. V-24, the Director of Mines said that applicants Marcos Comilang, et
al., had acquired vested rights on the Bua Fraction Mineral Claim before the Constitution of the
Philippines was approved on November 15, 1935. Under the doctrines laid down in McDaniel v.
Apacible, and in Gold Creek Mining v. Rodriguez, supra, said vested rights include the ownership of
both the minerals and the surface ground; that such was the locator's right before as well as after the
issuance of the patent; and that such was vested property although fee remains in the Government
until patent issues. Such vested right of herein appellant passed to the appellees under the sale on
execution aforementioned of the 1-½ hectares portion of the mineral claim. The subsequent issuance
of the Lode Patent to the entire area of the Bua Mineral Claim did not militate against that acquired
rights, for Sec. 45 of the Philippine Bill of 1902 expressly provides that nothing in said Act shall be
deemed to impair any lien which may have attached in any way whatever prior to the issuance of the
patent. Moreover, it is significant to note that the very Lode Patent No. V-24 aforementioned expressly
declares on its face that "the mining premises hereby conveyed shall be held subject to all vested
lights and accrued rights", the legal import of which is that the patentee Marcos Comilang, shall hold
the1½ hectares portion of the area embraced in the patent as described in the Tax Declaration No.
4771, in trust for the appellees.

Apart and independent of the statute, there is a rule in American Law known as the "Doctrine of
Relation", to the effect "that all parts and ceremonies necessary to complete a conveyance shall be
taken together as one act, and operate from the substantial part by relation." This "substantial part" is
recognized as the "original act" which is to be preferred, and to this all subsequent acts are to have
relation. This doctrine of relation appears to have been often applied to the adjudication of real actions
by American courts.

The case of Landes v. Brant, 10 How. 348, U. S. 13 Law ed., 449, broadly asserts this doctrine of
relation. In that case, a Spanish claim of land was acquired by Clamorgan under Dodier, the original
claimant, by virtue of ten consecutive years possession prior to December 20, 1903. Such claim was
authorized by the Act of Congress. Clamorgan was entitled to a patent by virtue of a certificate of
confirmation made by commissioners. His petition for such confirmation was filed in December, 1805.
In 1808 judgment was recovered against Clamorgan, the claim was sold and the sheriff's deed
executed to McNair. It was held that the execution sale passed to the purchaser all the title that could
have passed from Clamorgan to McNair by a quitclaim deed; that applying the doctrine of relation and
taking all the parts and ceremonies necessary to complete the title together as one act, then the
confirmation of 1811 and the patent of 1845 must be taken to relate to the first act; that of filing the
claim in 1805. On this assumption, intermediate conveyances made by the confirmed or by the sheriff
on his behalf, of a date after the first substantial act, are covered by the legal title and pass that title
to the alienee. And on this ground, the deed made by the sheriff to McNair is valid. This doctrine has
been applied in a great number of decisions.
Applying the same rule to the case before Us, it is seen that the original act that ripened into Mineral
Lode Patent No. V-24 was the location of the mineral claim and the recording thereof in the Mining
Recorder of Mt. Province sometime in 1922. Vested right to the property accrued to the locator before
1935, although patent was issued only recently (November 7, 1966). This Patent cannot nullify the
intermediate conveyance of that right in the execution sale of 1958 to herein appellees.

Finally, the argument that the proceedings for the issuance of a writ of possession, as has been
resorted to by the appellees, is not the proper court procedure, the appellant intimating that it should
be by a proper action. The contention does not deserve serious consideration. The corresponding
rights of the parties to the property in question had been ventilated in the various cases affecting it,
and the decisions in those cases have sustained the validity of the sale. It is now a matter of right on
the part of the appellees to be placed in possession of the land by clear mandate of Sec. 35, Rule 39
of the Rules of Court which requires that upon execution and delivery of the final deed of sale in
execution the possession of the property shall be given to the purchaser or last redemptioner unless a
third party is actually holding the property adversely to the judgment debtor. As this Court said in Tan
Soo Huat v. Ongwico, 63 Phil. 747:

There is no law in this jurisdiction whereby the purchaser at a sheriff's sale of real property is
obliged to bring a separate and independent suit for possession after the one-year period for
redemption has expired and after he has obtained the sheriff's final certificate of sale. There is
neither legal ground nor reason of public policy precluding the court from ordering the sheriff
in this case to yield possession of the property purchased at public auction where it appears
that the judgment debtor is the one in possession thereof and no rights of third persons are
involved.

WHEREFORE, the decision appealed from is affirmed. Costs against appellants.

2. APEX MINING CO., INC., petitioner, vs. SOUTHEAST MINDANAO GOLD MINING CORP

CHICO-NAZARIO, J.:

On 27 February 1931, Governor General Dwight F. Davis issued Proclamation No. 369, establishing
the Agusan-Davao-Surigao Forest Reserve consisting of approximately 1,927,400 hectares. 1

The disputed area, a rich tract of mineral land, is inside the forest reserve located at Monkayo, Davao
del Norte, and Cateel, Davao Oriental, consisting of 4,941.6759 hectares.2 This mineral land is
encompassed by Mt. Diwata, which is situated in the municipalities of Monkayo and Cateel. It later
became known as the "Diwalwal Gold Rush Area." It has since the early 1980’s been stormed by
conflicts brought about by the numerous mining claimants scrambling for gold that lies beneath its
bosom.

On 21 November 1983, Camilo Banad and his group, who claimed to have first discovered traces of
gold in Mount Diwata, filed a Declaration of Location (DOL) for six mining claims in the area.

Camilo Banad and some other natives pooled their skills and resources and organized the Balite
Communal Portal Mining Cooperative (Balite).3

On 12 December 1983, Apex Mining Corporation (Apex) entered into operating agreements with
Banad and his group.

From November 1983 to February 1984, several individual applications for mining locations over
mineral land covering certain parts of the Diwalwal gold rush area were filed with the Bureau of Mines
and Geo-Sciences (BMG).
On 2 February 1984, Marcopper Mining Corporation (MMC) filed 16 DOLs or mining claims for areas
adjacent to the area covered by the DOL of Banad and his group. After realizing that the area
encompassed by its mining claims is a forest reserve within the coverage of Proclamation No. 369
issued by Governor General Davis, MMC abandoned the same and instead applied for a prospecting
permit with the Bureau of Forest Development (BFD).

On 1 July 1985, BFD issued a Prospecting Permit to MMC covering an area of 4,941.6759 hectares
traversing the municipalities of Monkayo and Cateel, an area within the forest reserve under
Proclamation No. 369. The permit embraced the areas claimed by Apex and the other individual
mining claimants.

On 11 November 1985, MMC filed Exploration Permit Application No. 84-40 with the BMG. On 10
March 1986, the BMG issued to MCC Exploration Permit No. 133 (EP 133).

Discovering the existence of several mining claims and the proliferation of small-scale miners in the
area covered by EP 133, MMC thus filed on 11 April 1986 before the BMG a Petition for the
Cancellation of the Mining Claims of Apex and Small Scale Mining Permit Nos. (x-1)-04 and (x-1)-05
which was docketed as MAC No. 1061. MMC alleged that the areas covered by its EP 133 and the
mining claims of Apex were within an established and existing forest reservation (Agusan-Davao-
Surigao Forest Reserve) under Proclamation No. 369 and that pursuant to Presidential Decree No.
463,4 acquisition of mining rights within a forest reserve is through the application for a permit to
prospect with the BFD and not through registration of a DOL with the BMG.

On 23 September 1986, Apex filed a motion to dismiss MMC’s petition alleging that its mining claims
are not within any established or proclaimed forest reserve, and as such, the acquisition of mining
rights thereto must be undertaken via registration of DOL with the BMG and not through the filing of
application for permit to prospect with the BFD.

On 9 December 1986, BMG dismissed MMC’s petition on the ground that the area covered by the Apex
mining claims and MMC’s permit to explore was not a forest reservation. It further declared null and
void MMC’s EP 133 and sustained the validity of Apex mining claims over the disputed area.

MMC appealed the adverse order of BMG to the Department of Environment and Natural Resources
(DENR).

On 15 April 1987, after due hearing, the DENR reversed the 9 December 1996 order of BMG and
declared MMC’s EP 133 valid and subsisting.

Apex filed a Motion for Reconsideration with the DENR which was subsequently denied. Apex then filed
an appeal before the Office of the President. On 27 July 1989, the Office of the President, through
Assistant Executive Secretary for Legal Affairs, Cancio C. Garcia,5 dismissed Apex’s appeal and
affirmed the DENR ruling.

Apex filed a Petition for Certiorari before this Court. The Petition was docketed as G.R. No. 92605
entitled, "Apex Mining Co., Inc. v. Garcia."6 On 16 July 1991, this Court rendered a Decision against
Apex holding that the disputed area is a forest reserve; hence, the proper procedure in acquiring
mining rights therein is by initially applying for a permit to prospect with the BFD and not through a
registration of DOL with the BMG.

On 27 December 1991, then DENR Secretary Fulgencio Factoran, Jr. issued Department Administrative
Order No. 66 (DAO No. 66) declaring 729 hectares of the areas covered by the Agusan-Davao-Surigao
Forest Reserve as non-forest lands and open to small-scale mining purposes.

As DAO No. 66 declared a portion of the contested area open to small scale miners, several mining
entities filed applications for Mineral Production Sharing Agreement (MPSA).
On 25 August 1993, Monkayo Integrated Small Scale Miners Association (MISSMA) filed an MPSA
application which was denied by the BMG on the grounds that the area applied for is within the area
covered by MMC EP 133 and that the MISSMA was not qualified to apply for an MPSA under DAO No.
82,7 Series of 1990.

On 5 January 1994, Rosendo Villaflor and his group filed before the BMG a Petition for Cancellation of
EP 133 and for the admission of their MPSA Application. The Petition was docketed as RED Mines Case
No. 8-8-94. Davao United Miners Cooperative (DUMC) and Balite intervened and likewise sought the
cancellation of EP 133.

On 16 February 1994, MMC assigned EP 133 to Southeast Mindanao Gold Mining Corporation (SEM), a
domestic corporation which is alleged to be a 100% -owned subsidiary of MMC.

On 14 June 1994, Balite filed with the BMG an MPSA application within the contested area that was
later on rejected.

On 23 June 1994, SEM filed an MPSA application for the entire 4,941.6759 hectares under EP 133,
which was also denied by reason of the pendency of RED Mines Case No. 8-8-94. On 1 September
1995, SEM filed another MPSA application.

On 20 October 1995, BMG accepted and registered SEM’s MPSA application and the Deed of
Assignment over EP 133 executed in its favor by MMC. SEM’s application was designated MPSA
Application No. 128 (MPSAA 128). After publication of SEM’s application, the following filed before the
BMG their adverse claims or oppositions:

a) MAC Case No. 004 (XI) – JB Management Mining Corporation;

b) MAC Case No. 005(XI) – Davao United Miners Cooperative;

c) MAC Case No. 006(XI) – Balite Integrated Small Scale Miner’s Cooperative;

d) MAC Case No. 007(XI) – Monkayo Integrated Small Scale Miner’s Association, Inc.
(MISSMA);

e) MAC Case No. 008(XI) – Paper Industries Corporation of the Philippines;

f) MAC Case No. 009(XI) – Rosendo Villafor, et al.;

g) MAC Case No. 010(XI) – Antonio Dacudao;

h) MAC Case No. 011(XI) – Atty. Jose T. Amacio;

i) MAC Case No. 012(XI) – Puting-Bato Gold Miners Cooperative;

j) MAC Case No. 016(XI) – Balite Communal Portal Mining Cooperative;

k) MAC Case No. 97-01(XI) – Romeo Altamera, et al.8

To address the matter, the DENR constituted a Panel of Arbitrators (PA) to resolve the following:

(a) The adverse claims on MPSAA No. 128; and

(b) The Petition to Cancel EP 133 filed by Rosendo Villaflor docketed as RED Case No. 8-8-94.9
On 13 June 1997, the PA rendered a resolution in RED Mines Case No. 8-8-94. As to the Petition for
Cancellation of EP 133 issued to MMC, the PA relied on the ruling in Apex Mining Co., Inc. v.
Garcia,10 and opined that EP 133 was valid and subsisting. It also declared that the BMG Director,
under Section 99 of the Consolidated Mines Administrative Order implementing Presidential Decree
No. 463, was authorized to issue exploration permits and to renew the same without limit.

With respect to the adverse claims on SEM’s MPSAA No. 128, the PA ruled that adverse claimants’
petitions were not filed in accordance with the existing rules and regulations governing adverse claims
because the adverse claimants failed to submit the sketch plan containing the technical description of
their respective claims, which was a mandatory requirement for an adverse claim that would allow the
PA to determine if indeed there is an overlapping of the area occupied by them and the area applied
for by SEM. It added that the adverse claimants were not claim owners but mere occupants
conducting illegal mining activities at the contested area since only MMC or its assignee SEM had valid
mining claims over the area as enunciated in Apex Mining Co., Inc. v. Garcia.11 Also, it maintained
that the adverse claimants were not qualified as small-scale miners under DENR Department
Administrative Order No. 34 (DAO No. 34),12 or the Implementing Rules and Regulation of Republic
Act No. 7076 (otherwise known as the "People’s Small-Scale Mining Act of 1991"), as they were not
duly licensed by the DENR to engage in the extraction or removal of minerals from the ground, and
that they were large-scale miners. The decretal portion of the PA resolution pronounces:

VIEWED IN THE LIGHT OF THE FOREGOING, the validity of Expoloration Permit No. 133 is hereby
reiterated and all the adverse claims against MPSAA No. 128 are DISMISSED.13

Undaunted by the PA ruling, the adverse claimants appealed to the Mines Adjudication Board (MAB).
In a Decision dated 6 January 1998, the MAB considered erroneous the dismissal by the PA of the
adverse claims filed against MMC and SEM over a mere technicality of failure to submit a sketch plan.
It argued that the rules of procedure are not meant to defeat substantial justice as the former are
merely secondary in importance to the latter. Dealing with the question on EP 133’s validity, the MAB
opined that said issue was not crucial and was irrelevant in adjudicating the appealed case because EP
133 has long expired due to its non-renewal and that the holder of the same, MMC, was no longer a
claimant of the Agusan-Davao-Surigao Forest Reserve having relinquished its right to SEM. After it
brushed aside the issue of the validity of EP 133 for being irrelevant, the MAB proceeded to treat
SEM’s MPSA application over the disputed area as an entirely new and distinct application. It approved
the MPSA application, excluding the area segregated by DAO No. 66, which declared 729 hectares
within the Diwalwal area as non-forest lands open for small-scale mining. The MAB resolved:

WHEREFORE, PREMISES CONSIDERED, the decision of the Panel of Arbitrators dated 13 June 1997 is
hereby VACATED and a new one entered in the records of the case as follows:

1. SEM’s MPSA application is hereby given due course subject to the full and strict compliance
of the provisions of the Mining Act and its Implementing Rules and Regulations;

2. The area covered by DAO 66, series of 1991, actually occupied and actively mined by the
small-scale miners on or before August 1, 1987 as determined by the Provincial Mining
Regulatory Board (PMRB), is hereby excluded from the area applied for by SEM;

3. A moratorium on all mining and mining-related activities, is hereby imposed until such time
that all necessary procedures, licenses, permits, and other requisites as provided for by RA
7076, the Mining Act and its Implementing Rules and Regulations and all other pertinent laws,
rules and regulations are complied with, and the appropriate environmental protection
measures and safeguards have been effectively put in place;

4. Consistent with the spirit of RA 7076, the Board encourages SEM and all small-scale miners
to continue to negotiate in good faith and arrive at an agreement beneficial to all. In the event
of SEM’s strict and full compliance with all the requirements of the Mining Act and its
Implementing Rules and Regulations, and the concurrence of the small-scale miners actually
occupying and actively mining the area, SEM may apply for the inclusion of portions of the
 areas segregated under paragraph 2 hereof, to its MPSA application. In this light, subject to
the preceding paragraph, the contract between JB [JB Management Mining Corporation] and
SEM is hereby recognized.14

Dissatisfied, the Villaflor group and Balite appealed the decision to this Court. SEM, aggrieved by the
exclusion of 729 hectares from its MPSA application, likewise appealed. Apex filed a Motion for Leave
to Admit Petition for Intervention predicated on its right to stake its claim over the Diwalwal gold rush
which was granted by the Court. These cases, however, were remanded to the Court of Appeals for
proper disposition pursuant to Rule 43 of the 1997 Rules of Civil Procedure. The Court of Appeals
consolidated the remanded cases as CA-G.R. SP No. 61215 and No. 61216.

In the assailed Decision15 dated 13 March 2002, the Court of Appeals affirmed in toto the decision of
the PA and declared null and void the MAB decision.

The Court of Appeals, banking on the premise that the SEM is the agent of MMC by virtue of its
assignment of EP 133 in favor of SEM and the purported fact that SEM is a 100% subsidiary of MMC,
ruled that the transfer of EP 133 was valid. It argued that since SEM is an agent of MMC, the
assignment of EP 133 did not violate the condition therein prohibiting its transfer except to MMC’s duly
designated agent. Thus, despite the non-renewal of EP 133 on 6 July 1994, the Court of Appeals
deemed it relevant to declare EP 133 as valid since MMC’s mining rights were validly transferred to
SEM prior to its expiration.

The Court of Appeals also ruled that MMC’s right to explore under EP 133 is a property right which the
1987 Constitution protects and which cannot be divested without the holder’s consent. It stressed that
MMC’s failure to proceed with the extraction and utilization of minerals did not diminish its vested right
to explore because its failure was not attributable to it.

Reading Proclamation No. 369, Section 11 of Commonwealth Act 137, and Sections 6, 7, and 8 of
Presidential Decree No. 463, the Court of Appeals concluded that the issuance of DAO No. 66 was
done by the DENR Secretary beyond his power for it is the President who has the sole power to
withdraw from the forest reserve established under Proclamation No. 369 as non-forest land for
mining purposes. Accordingly, the segregation of 729 hectares of mining areas from the coverage of
EP 133 by the MAB was unfounded.

The Court of Appeals also faulted the DENR Secretary in implementing DAO No. 66 when he awarded
the 729 hectares segregated from the coverage area of EP 133 to other corporations who were not
qualified as small-scale miners under Republic Act No. 7076.

As to the petitions of Villaflor and company, the Court of Appeals argued that their failure to submit
the sketch plan to the PA, which is a jurisdictional requirement, was fatal to their appeal. It likewise
stated the Villaflor and company’s mining claims, which were based on their alleged rights under DAO
No. 66, cannot stand as DAO No. 66 was null and void. The dispositive portion of the Decision
decreed:

WHEREFORE, premises considered, the Petition of Southeast Mindanao Gold Mining Corporation is
GRANTED while the Petition of Rosendo Villaflor, et al., is DENIED for lack of merit. The Decision of the
Panel of Arbitrators dated 13 June 1997 is AFFIRMED in toto and the assailed MAB Decision is hereby
SET ASIDE and declared as NULL and VOID.16

Hence, the instant Petitions for Review on Certiorari under Rule 45 of the Rules of Court filed by Apex,
Balite and MAB.

During the pendency of these Petitions, President Gloria Macapagal-Arroyo issued Proclamation No.
297 dated 25 November 2002. This proclamation excluded an area of 8,100 hectares located in
Monkayo, Compostela Valley, and proclaimed the same as mineral reservation and as environmentally
critical area. Subsequently, DENR Administrative Order No. 2002-18 was issued declaring an
emergency situation in the Diwalwal gold rush area and ordering the stoppage of all mining operations
therein. Thereafter, Executive Order No. 217 dated 17 June 2003 was issued by the President creating
the National Task Force Diwalwal which is tasked to address the situation in the Diwalwal Gold Rush
Area.

In G.R. No. 152613 and No. 152628, Apex raises the following issues:

WHETHER OR NOT SOUTHEAST MINDANAO GOLD MINING’S [SEM] E.P. 133 IS NULL AND VOID DUE
TO THE FAILURE OF MARCOPPER TO COMPLY WITH THE TERMS AND CONDITIONS PRESCRIBED IN EP
133.

II

WHETHER OR NOT APEX HAS A SUPERIOR AND PREFERENTIAL RIGHT TO STAKE IT’S CLAIM OVER
THE ENTIRE 4,941 HECTARES AGAINST SEM AND THE OTHER CLAIMANTS PURSUANT TO THE TIME-
HONORED PRINCIPLE IN MINING LAW THAT "PRIORITY IN TIME IS PRIORITY IN RIGHT."17

In G.R. No. 152619-20, Balite anchors its petition on the following grounds:

WHETHER OR NOT THE MPSA OF SEM WHICH WAS FILED NINE (9) DAYS LATE (JUNE 23, 1994) FROM
THE FILING OF THE MPSA OF BALITE WHICH WAS FILED ON JUNE 14, 1994 HAS A PREFERENTIAL
RIGHT OVER THAT OF BALITE.

II

WHETHER OR NOT THE DISMISSAL BY THE PANEL OF ARBITRATORS OF THE ADVERSE CLAIM OF
BALITE ON THE GROUND THAT BALITE FAILED TO SUBMIT THE REQUIRED SKETCH PLAN DESPITE
THE FACT THAT BALITE, HAD IN FACT SUBMITTED ON TIME WAS A VALID DISMISSAL OF BALITE’S
ADVERSE CLAIM.

III

WHETHER OR NOT THE ACTUAL OCCUPATION AND SMALL-MINING OPERATIONS OF BALITE

PURSUANT TO DAO 66 IN THE 729 HECTARES WHICH WAS PART OF THE 4,941.6759 HECTARES
COVERED BY ITS MPSA WHICH WAS REJECTED BY THE BUREAU OF MINES AND GEOSCIENCES WAS
ILLEGAL.18

In G.R. No. 152870-71, the MAB submits two issues, to wit:

WHETHER OR NOT EP NO. 133 IS STILL VALID AND SUBSISTING.

II

WHETHER OR NOT THE SUBSEQUENT ACTS OF THE GOVERNMENT SUCH AS THE ISSUANCE OF DAO
NO. 66, PROCLAMATION NO. 297, AND EXECUTIVE ORDER 217 CAN OUTWEIGH EP NO. 133 AS WELL
AS OTHER ADVERSE CLAIMS OVER THE DIWALWAL GOLD RUSH AREA.19

The common issues raised by petitioners may be summarized as follows:

 I. Whether or not the Court of Appeals erred in upholding the validity and continuous
existence of EP 133 as well as its transfer to SEM;

II. Whether or not the Court of Appeals erred in declaring that the DENR Secretary has no
authority to issue DAO No. 66; and

III. Whether or not the subsequent acts of the executive department such as the issuance of
Proclamation No. 297, and DAO No. 2002-18 can outweigh Apex and Balite’s claims over the
Diwalwal Gold Rush Area.

On the first issue, Apex takes exception to the Court of Appeals’ ruling upholding the validity of MMC’s
EP 133 and its subsequent transfer to SEM asserting that MMC failed to comply with the terms and
conditions in its exploration permit, thus, MMC and its successor-in-interest SEM lost their rights in the
Diwalwal Gold Rush Area. Apex pointed out that MMC violated four conditions in its permit. First, MMC
failed to comply with the mandatory work program, to complete exploration work, and to declare a
mining feasibility. Second, it reneged on its duty to submit an Environmental Compliance Certificate.
Third, it failed to comply with the reportorial requirements. Fourth, it violated the terms of EP 133
when it assigned said permit to SEM despite the explicit proscription against its transfer.

Apex likewise emphasizes that MMC failed to file its MPSA application required under DAO No.
8220 which caused its exploration permit to lapse because DAO No. 82 mandates holders of
exploration permits to file a Letter of Intent and a MPSA application not later than 17 July 1991. It
said that because EP 133 expired prior to its assignment to SEM, SEM’s MPSA application should have
been evaluated on its own merit.

As regards the Court of Appeals recognition of SEM’s vested right over the disputed area, Apex bewails
the same to be lacking in statutory bases. According to Apex, Presidential Decree No. 463 and
Republic Act No. 7942 impose upon the claimant the obligation of actually undertaking exploration
work within the reserved lands in order to acquire priority right over the area. MMC, Apex claims,
failed to conduct the necessary exploration work, thus, MMC and its successor-in-interest SEM lost any
right over the area.

In its Memorandum, Balite maintains that EP 133 of MMC, predecessor-in-interest of SEM, is an

expired and void permit which cannot be made the basis of SEM’s MPSA application.

Similarly, the MAB underscores that SEM did not acquire any right from MMC by virtue of the transfer
of EP 133 because the transfer directly violates the express condition of the exploration permit stating
that "it shall be for the exclusive use and benefit of the permittee or his duly authorized agents." It
added that while MMC is the permittee, SEM cannot be considered as MMC’s duly designated agent as
there is no proof on record authorizing SEM to represent MMC in its business dealings or undertakings,
and neither did SEM pursue its interest in the permit as an agent of MMC. According to the MAB, the
assignment by MMC of EP 133 in favor of SEM did not make the latter the duly authorized agent of
MMC since the concept of an agent under EP 133 is not equivalent to the concept of assignee. It finds
fault in the assignment of EP 133 which lacked the approval of the DENR Secretary in contravention of
Section 25 of Republic Act No. 794221 requiring his approval for a valid assignment or transfer of
exploration permit to be valid.

SEM, on the other hand, counters that the errors raised by petitioners Apex, Balite and the MAB relate
to factual and evidentiary matters which this Court cannot inquire into in an appeal by certiorari.

The established rule is that in the exercise of the Supreme Court’s power of review, the Court not
being a trier of facts, does not normally embark on a re-examination of the evidence presented by the
contending parties during the trial of the case considering that the findings of facts of the Court of
Appeals are conclusive and binding on the Court.22 This rule, however, admits of exceptions as
recognized by jurisprudence, to wit:
(1) [w]hen the findings are grounded entirely on speculation, surmises or conjectures; (2) when the
inference made is manifestly mistaken, absurd or impossible; (3) when there is grave abuse of
discretion; (4) when the judgment is based on misapprehension of facts; (5) when the findings of
facts are conflicting; (6) when in making its findings the Court of Appeals went beyond the issues of
the case, or its findings are contrary to the admissions of both the appellant and the appellee; (7)
when the findings are contrary to the trial court; (8) when the findings are conclusions without citation
of specific evidence on which they are based; (9) when the facts set forth in the petition as well as in
the petitioner’s main and reply briefs are not disputed by the respondent; (10) when the findings of
fact are premised on the supposed absence of evidence and contradicted by the evidence on record;
and (11) when the Court of Appeals manifestly overlooked certain relevant facts not disputed by the
parties, which, if properly considered, would justify a different conclusion.23

Also, in the case of Manila Electric Company v. Benamira,24 the Court in a Petition for Review on
Certiorari, deemed it proper to look deeper into the factual circumstances of the case since the Court
of Appeal’s findings are at odds to those of the National Labor Relations Commission (NLRC). Just like
in the foregoing case, it is this Court’s considered view that a re-evaluation of the attendant facts
surrounding the present case is appropriate considering that the findings of the MAB are in conflict
with that of the Court of Appeals.

At the threshold, it is an undisputed fact that MMC assigned to SEM all its rights under EP 133
pursuant to a Deed of Assignment dated 16 February 1994.25

EP 133 is subject to the following terms and conditions26 :

1. That the permittee shall abide by the work program submitted with the application or
statements made later in support thereof, and which shall be considered as conditions and
essential parts of this permit;

2. That permittee shall maintain a complete record of all activities and accounting of all
expenditures incurred therein subject to periodic inspection and verification at reasonable
intervals by the Bureau of Mines at the expense of the applicant;

3. That the permittee shall submit to the Director of Mines within 15 days after the end of
each calendar quarter a report under oath of a full and complete statement of the work done
in the area covered by the permit;

4. That the term of this permit shall be for two (2) years to be effective from this date,
renewable for the same period at the discretion of the Director of Mines and upon request of
the applicant;

5. That the Director of Mines may at any time cancel this permit for violation of its provision or
in case of trouble or breach of peace arising in the area subject hereof by reason of conflicting
interests without any responsibility on the part of the government as to expenditures for
exploration that might have been incurred, or as to other damages that might have been
suffered by the permittee; and

6. That this permit shall be for the exclusive use and benefit of the permittee or his duly
authorized agents and shall be used for mineral exploration purposes only and for no other
purpose.

Under Section 9027 of Presidential Decree No. 463, the applicable statute during the issuance of EP
133, the DENR Secretary, through Director of BMG, is charged with carrying out the said law. Also,
under Commonwealth Act No. 136, also known as "An Act Creating The Bureau of Mines," which was
approved on 7 November 1936, the Director of Mines has the direct charge of the administration of
the mineral lands and minerals, and of the survey, classification, lease or any other form of concession
or disposition thereof under the Mining Act.28 This power of administration includes the power to
prescribe terms and conditions in granting exploration permits to qualified entities. Thus, in the grant
of EP 133 in favor of the MMC, the Director of the BMG acted within his power in laying down the
terms and conditions attendant thereto.

Condition number 6 categorically states that the permit shall be for the exclusive use and benefit of
MMC or its duly authorized agents. While it may be true that SEM, the assignee of EP 133, is a 100%
subsidiary corporation of MMC, records are bereft of any evidence showing that the former is the duly
authorized agent of the latter. For a contract of agency to exist, it is essential that the principal
consents that the other party, the agent, shall act on its behalf, and the agent consents so as to
act.29 In the case of Yu Eng Cho v. Pan American World Airways, Inc.,30this Court had the occasion to
set forth the elements of agency, viz:

(1) consent, express or implied, of the parties to establish the relationship;

(2) the object is the execution of a juridical act in relation to a third person;

(3) the agent acts as a representative and not for himself;

(4) the agent acts within the scope of his authority.

The existence of the elements of agency is a factual matter that needs to be established or proven by
evidence. The burden of proving that agency is extant in a certain case rests in the party who sets
forth such allegation. This is based on the principle that he who alleges a fact has the burden of
proving it.31 It must likewise be emphasized that the evidence to prove this fact must be clear,
positive and convincing.32

In the instant Petitions, it is incumbent upon either MMC or SEM to prove that a contract of agency
actually exists between them so as to allow SEM to use and benefit from EP 133 as the agent of MMC.
SEM did not claim nor submit proof that it is the designated agent of MMC to represent the latter in its
business dealings or undertakings. SEM cannot, therefore, be considered as an agent of MMC which
can use EP 133 and benefit from it. Since SEM is not an authorized agent of MMC, it goes without
saying that the assignment or transfer of the permit in favor of SEM is null and void as it directly
contravenes the terms and conditions of the grant of EP 133.

Furthermore, the concept of agency is distinct from assignment. In agency, the agent acts not on his
own behalf but on behalf of his principal.33 While in assignment, there is total transfer or
relinquishment of right by the assignor to the assignee.34 The assignee takes the place of the assignor
and is no longer bound to the latter. The deed of assignment clearly stipulates:

1. That for ONE PESO (P1.00) and other valuable consideration received by the ASSIGNOR from the
ASSIGNEE, the ASSIGNOR hereby ASSIGNS, TRANSFERS and CONVEYS unto the ASSIGNEE whatever
rights or interest the ASSIGNOR may have in the area situated in Monkayo, Davao del Norte and
Cateel, Davao Oriental, identified as Exploration Permit No. 133 and Application for a Permit to
Prospect in Bunawan, Agusan del Sur respectively.35

Bearing in mind the just articulated distinctions and the language of the Deed of Assignment, it is
readily obvious that the assignment by MMC of EP 133 in favor of SEM did not make the latter the
former’s agent. Such assignment involved actual transfer of all rights and obligations MMC have under
the permit in favor of SEM, thus, making SEM the permittee. It is not a mere grant of authority to
SEM, as an agent of MMC, to use the permit. It is a total abdication of MMC’s rights over the permit.
Hence, the assignment in question did not make SEM the authorized agent of MMC to make use and
benefit from EP 133.
The condition stipulating that the permit is for the exclusive use of the permittee or its duly authorized
agent is not without any reason. Exploration permits are strictly granted to entities or individuals
possessing the resources and capability to undertake mining operations. Without such a condition,
non-qualified entities or individuals could circumvent the strict requirements under the law by the
simple expediency acquiring the permit from the original permittee.

We cannot lend recognition to the Court of Appeals’ theory that SEM, being a 100% subsidiary of
MMC, is automatically an agent of MMC.

A corporation is an artificial being created by operation of law, having the right of succession and the
powers, attributes, and properties expressly authorized by law or incident to its existence.36 It is an
artificial being invested by law with a personality separate and distinct from those of the persons
composing it as well as from that of any other legal entity to which it may be related.37 Resultantly,
absent any clear proof to the contrary, SEM is a separate and distinct entity from MMC.

The Court of Appeals pathetically invokes the doctrine of piercing the corporate veil to legitimize the
prohibited transfer or assignment of EP 133. It stresses that SEM is just a business conduit of MMC,
hence, the distinct legal personalities of the two entities should not be recognized. True, the corporate
mask may be removed when the corporation is just an alter ego or a mere conduit of a person or of
another corporation.38 For reasons of public policy and in the interest of justice, the corporate veil will
justifiably be impaled only when it becomes a shield for fraud, illegality or inequity committed against
a third person.39 However, this Court has made a caveat in the application of the doctrine of piercing
the corporate veil. Courts should be mindful of the milieu where it is to be applied. Only in cases
where the corporate fiction was misused to such an extent that injustice, fraud or crime was
committed against another, in disregard of its rights may the veil be pierced and removed. Thus, a
subsidiary corporation may be made to answer for the liabilities and/or illegalities done by the parent
corporation if the former was organized for the purpose of evading obligations that the latter may
have entered into. In other words, this doctrine is in place in order to expose and hold liable a
corporation which commits illegal acts and use the corporate fiction to avoid liability from the said
acts. The doctrine of piercing the corporate veil cannot therefore be used as a vehicle to commit
prohibited acts because these acts are the ones which the doctrine seeks to prevent.

To our mind, the application of the foregoing doctrine is unwarranted. The assignment of the permit in
favor of SEM is utilized to circumvent the condition of non-transferability of the exploration permit. To
allow SEM to avail itself of this doctrine and to approve the validity of the assignment is tantamount to
sanctioning illegal act which is what the doctrine precisely seeks to forestall.

Quite apart from the above, a cursory consideration of the mining law pertinent to the case, will,
indeed, demonstrate the infraction committed by MMC in its assignment of EP 133 to SEM.

Presidential Decree No. 463, enacted on 17 May 1974, otherwise known as the Mineral Resources
Development Decree, which governed the old system of exploration, development, and utilization of
mineral resources through "license, concession or lease" prescribed:

SEC. 97. Assignment of Mining Rights. – A mining lease contract or any interest therein shall not be
transferred, assigned, or subleased without the prior approval of the Secretary: Provided, That such
transfer, assignment or sublease may be made only to a qualified person possessing the resources
and capability to continue the mining operations of the lessee and that the assignor has complied with
all the obligations of the lease: Provided, further, That such transfer or assignment shall be duly
registered with the office of the mining recorder concerned. (Emphasis supplied.)

The same provision is reflected in Republic Act No. 7942, otherwise known as the Philippine Mining Act
of 1995, which is the new law governing the exploration, development and utilization of the natural
resources, which provides:
SEC. 25. Transfer or Assignment. - An exploration permit may be transferred or assigned to a qualified
person subject to the approval of the Secretary upon the recommendation of the Director.

The records are bereft of any indication that the assignment bears the imprimatur of the Secretary of
the DENR. Presidential Decree No. 463, which is the governing law when the assignment was
executed, explicitly requires that the transfer or assignment of mining rights, including the right to
explore a mining area, must be with the prior approval of the Secretary of DENR. Quite conspicuously,
SEM did not dispute the allegation that the Deed of Assignment was made without the prior approval
of the Secretary of DENR. Absent the prior approval of the Secretary of DENR, the assignment of EP
133, was, therefore, without legal effect for violating the mandatory provision of Presidential Decree
No. 463.

An added significant omission proved fatal to MMC/SEM’s cause. While it is true that the case of Apex
Mining Co., Inc. v. Garcia40 settled the issue of which between Apex and MMC validly acquired mining
rights over the disputed area, such rights, though, had been extinguished by subsequent events.
Records indicate that on 6 July 1993, EP 133 was extended for 12 months or until 6 July 1994. 41 MMC
never renewed its permit prior and after its expiration. Thus, EP 133 expired by non-renewal.

With the expiration of EP 133 on 6 July 1994, MMC lost any right to the Diwalwal Gold Rush Area.
SEM, on the other hand, has not acquired any right to the said area because the transfer of EP 133 in
its favor is invalid. Hence, both MMC and SEM have not acquired any vested right over the 4,941.6759
hectares which used to be covered by EP 133.

II

The Court of Appeals theorizes that DAO No. 66 was issued beyond the power of the DENR Secretary
since the power to withdraw lands from forest reserves and to declare the same as an area open for
mining operation resides in the President.

Under Proclamation No. 369 dated 27 February 1931, the power to convert forest reserves as non-
forest reserves is vested with the DENR Secretary. Proclamation No. 369 partly states:

From this reserve shall be considered automatically excluded all areas which had already been
certified and which in the future may be proclaimed as classified and certified lands and approved by
the Secretary of Agriculture and Natural Resources.42

However, a subsequent law, Commonwealth Act No. 137, otherwise known as "The Mining Act" which
was approved on 7 November 1936 provides:

Sec. 14. Lands within reservations for purposes other than mining, which, after such reservation is
made, are found to be more valuable for their mineral contents than for the purpose for which the
reservation was made, may be withdrawn from such reservations by the President with the
concurrence of the National Assembly, and thereupon such lands shall revert to the public domain and
be subject to disposition under the provisions of this Act.

Unlike Proclamation No. 369, Commonwealth Act No. 137 vests solely in the President, with the
concurrence of the National Assembly, the power to withdraw forest reserves found to be more
valuable for their mineral contents than for the purpose for which the reservation was made and
convert the same into non-forest reserves. A similar provision can also be found in Presidential Decree
No. 463 dated 17 May 1974, with the modifications that (1) the declaration by the President no longer
requires the concurrence of the National Assembly and (2) the DENR Secretary merely exercises the
power to recommend to the President which forest reservations are to be withdrawn from the
coverage thereof. Section 8 of Presidential Decree No. 463 reads:

SEC. 8. Exploration and Exploitation of Reserved Lands. – When lands within reservations, which have
been established for purposes other than mining, are found to be more valuable for their mineral
contents, they may, upon recommendation of the Secretary be withdrawn from such reservation by
the President and established as a mineral reservation.

Against the backdrop of the applicable statutes which govern the issuance of DAO No. 66, this Court is
constrained to rule that said administrative order was issued not in accordance with the laws.
Inescapably, DAO No. 66, declaring 729 hectares of the areas covered by the Agusan-Davao-Surigao
Forest Reserve as non-forest land open to small-scale mining operations, is null and void as, verily,
the DENR Secretary has no power to convert forest reserves into non-forest reserves.

III

It is the contention of Apex that its right over the Diwalwal gold rush area is superior to that of MMC
or that of SEM because it was the first one to occupy and take possession of the area and the first to
record its mining claims over the area.

For its part, Balite argues that with the issuance of DAO No. 66, its occupation in the contested area,
particularly in the 729 hectares small-scale mining area, has entitled it to file its MPSA. Balite claims
that its MPSA application should have been given preference over that of SEM because it was filed
ahead.

The MAB, on the other hand, insists that the issue on who has superior right over the disputed area
has become moot and academic by the supervening events. By virtue of Proclamation No. 297 dated
25 November 2002, the disputed area was declared a mineral reservation.

Proclamation No. 297 excluded an area of 8,100 hectares located in Monkayo, Compostela Valley, and
proclaimed the same as mineral reservation and as environmentally critical area, viz:

WHEREAS, by virtue of Proclamation No. 369, series of 1931, certain tracts of public land situated in
the then provinces of Davao, Agusan and Surigao, with an area of approximately 1,927,400 hectares,
were withdrawn from settlement and disposition, excluding, however, those portions which had been
certified and/or shall be classified and certified as non-forest lands;

WHEREAS, gold deposits have been found within the area covered by Proclamation No. 369, in the
Municipality of Monkayo, Compostela Valley Province, and unregulated small to medium-scale mining
operations have, since 1983, been undertaken therein, causing in the process serious environmental,
health, and peace and order problems in the area;

WHEREAS, it is in the national interest to prevent the further degradation of the environment and to
resolve the health and peace and order problems spawned by the unregulated mining operations in
the said area;

WHEREAS, these problems may be effectively addressed by rationalizing mining operations in the area
through the establishment of a mineral reservation;

WHEREAS, after giving due notice, the Director of Mines and Geoxciences conducted public hearings
on September 6, 9 and 11, 2002 to allow the concerned sectors and communities to air their views
regarding the establishment of a mineral reservation in the place in question;

WHEREAS, pursuant to the Philippine Mining Act of 1995 (RA 7942), the President may, upon the
recommendation of the Director of Mines and Geosciences, through the Secretary of Environment and
Natural Resources, and when the national interest so requires, establish mineral reservations where
mining operations shall be undertaken by the Department directly or thru a contractor;
WHEREAS, as a measure to attain and maintain a rational and orderly balance between socio-
economic growth and environmental protection, the President may, pursuant to Presidential Decree
No. 1586, as amended, proclaim and declare certain areas in the country as environmentally critical;

NOW, THEREFORE, I, GLORIA MACAPAGAL-ARROYO, President of the Philippines, upon

recommendation of the Secretary of the Department of Environment and Natural Resources (DENR),
and by virtue of the powers vested in me by law, do hereby exclude certain parcel of land located in
Monkayo, Compostela Valley, and proclaim the same as mineral reservation and as environmentally
critical area, with metes and bound as defined by the following geographical coordinates;

xxxx

with an area of Eight Thousand One Hundred (8,100) hectares, more or less. Mining operations in the
area may be undertaken either by the DENR directly, subject to payment of just compensation that
may be due to legitimate and existing claimants, or thru a qualified contractor, subject to existing
rights, if any.

The DENR shall formulate and issue the appropriate guidelines, including the establishment of an
environmental and social fund, to implement the intent and provisions of this Proclamation.

Upon the effectivity of the 1987 Constitution, the State assumed a more dynamic role in the
exploration, development and utilization of the natural resources of the country.43 With this policy, the
State may pursue full control and supervision of the exploration, development and utilization of the
country’s natural mineral 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.44 Thus, Article XII, Section 2, of the 1987 Constitution, specifically states:

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 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. x x x

xxxx

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. x x x (Underscoring
supplied.)

Recognizing the importance of the country’s natural resources, not only for national economic
development, but also for its security and national defense, Section 5 of Republic Act No. 7942
empowers the President, when the national interest so requires, to establish mineral reservations
where mining operations shall be undertaken directly by the State or through a contractor.

To implement the intent and provisions of Proclamation No. 297, the DENR Secretary issued DAO No.
2002-18 dated 12 August 2002 declaring an emergency situation in the Diwalwal Gold Rush Area and
ordering the stoppage of all mining operations therein.
The issue on who has priority right over the disputed area is deemed overtaken by the above
subsequent developments particularly with the issuance of Proclamation 297 and DAO No. 2002-18,
both being constitutionally-sanctioned acts of the Executive Branch. Mining operations in the Diwalwal
Mineral Reservation are now, therefore, within the full control of the State through the executive
branch. Pursuant to Section 5 of Republic Act No. 7942, the State can either directly undertake the
exploration, development and utilization of the area or it can enter into agreements with qualified
entities, viz:

SEC 5. Mineral Reservations. – When the national interest so requires, such as when there is a need to
preserve strategic raw materials for industries critical to national development, or certain minerals for
scientific, cultural or ecological value, the President may establish mineral reservations upon the
recommendation of the Director through the Secretary. Mining operations in existing mineral
reservations and such other reservations as may thereafter be established, shall be undertaken by the
Department or through a contractor x x x .

It is now up to the Executive Department whether to take the first option, i.e., to undertake directly
the mining operations of the Diwalwal Gold Rush Area. As already ruled, the State may not be
precluded from considering a direct takeover of the mines, if it is the only plausible remedy in sight to
the gnawing complexities generated by the gold rush. The State need be guided only by the demands
of public interest in settling on this option, as well as its material and logistic feasibility. 45 The State
can also opt to award mining operations in the mineral reservation to private entities including
petitioners Apex and Balite, if it wishes. The exercise of this prerogative lies with the Executive
Department over which courts will not interfere.

WHEREFORE, premises considered, the Petitions of Apex, Balite and the MAB are PARTIALLY
GRANTED, thus:

1. We hereby REVERSE and SET ASIDE the Decision of the Court of Appeals, dated 13 March
2002, and hereby declare that EP 133 of MMC has EXPIRED on 7 July 1994 and that its
subsequent transfer to SEM on 16 February 1994 is VOID.

2. We AFFIRM the finding of the Court of Appeals in the same Decision declaring DAO No. 66
illegal for having been issued in excess of the DENR Secretary’s authority.

Consequently, the State, should it so desire, may now award mining operations in the disputed area to
any qualified entity it may determine. No costs.

SO ORDERED.

3. SOUTHEAST MINDANAO GOLD MINING CORPORATION, Petitioner, vs. BALITE

PORTAL MINING COOPERATIVE

YNARES-SANTIAGO, J.:

This is a petition for review of the March 19, 1998 decision of the Court of Appeals in CA-G.R. SP No.
44693, dismissing the special civil action for certiorari, prohibition and mandamus, and the resolution
dated August 19, 1998 denying petitioners motion for reconsideration.

The instant case involves a rich tract of mineral land situated in the Agusan-Davao-Surigao Forest
Reserve known as the Diwalwal Gold Rush Area. Located at Mt. Diwata in the municipalities of
Monkayo and Cateel in Davao Del Norte, the land has been embroiled in controversy since the mid-
80s due to the scramble over gold deposits found within its bowels.
From 1985 to 1991, thousands of people flocked to Diwalwal to stake their respective claims. Peace
and order deteriorated rapidly, with hundreds of people perishing in mine accidents, man-made or
otherwise, brought about by unregulated mining activities. The multifarious problems spawned by the
gold rush assumed gargantuan proportions, such that finding a win-win solution became a veritable
needle in a haystack.

On March 10, 1988, Marcopper Mining Corporation (Marcopper) was granted Exploration Permit No.
133 (EP No. 133) over 4,491 hectares of land, which included the hotly-contested Diwalwal
area. 1 Marcoppers acquisition of mining rights over Diwalwal under its EP No. 133 was subsequently
challenged before this Court in Apex Mining Co., Inc., et al. v. Hon. Cancio C. Garcia, et al., 2 where
Marcoppers claim was sustained over that of another mining firm, Apex Mining Corporation (Apex).
The Court found that Apex did not comply with the procedural requisites for acquiring mining rights
within forest reserves.

Not long thereafter, Congress enacted on June 27, 1991 Republic Act No. 7076, or the Peoples Small-
Scale Mining Act. The law established a Peoples Small-Scale Mining Program to be implemented by the
Secretary of the DENR 3 and created the Provincial Mining Regulatory Board (PMRB) under the DENR
Secretarys direct supervision and control. 4 The statute also authorized the PMRB to declare and set
aside small-scale mining areas subject to review by the DENR Secretary 5 and award mining contracts
to small-scale miners under certain conditions. 6cräläwvirtualibräry

On December 21, 1991, DENR Secretary Fulgencio S. Factoran issued Department Administrative
Order (DAO) No. 66, declaring 729 hectares of the Diwalwal area as non-forest land open to small-
scale mining. 7 The issuance was made pursuant to the powers vested in the DENR Secretary by
Proclamation No. 369, which established the Agusan-Davao-Surigao Forest Reserve.

Subsequently, a petition for the cancellation of EP No. 133 and the admission of a Mineral Production
Sharing Arrangement (MPSA) proposal over Diwalwal was filed before the DENR Regional Executive
Director, docketed as RED Mines Case No. 8-8-94 entitled, Rosendo Villaflor, et al. v. Marcopper
Mining Corporation.

On February 16, 1994, while the RED Mines case was pending, Marcopper assigned its EP No. 133 to
petitioner Southeast Mindanao Gold Mining Corporation (SEM), 8 which in turn applied for an
integrated MPSA over the land covered by the permit.

In due time, the Mines and Geosciences Bureau Regional Office No. XI in Davao City (MGB-XI)
accepted and registered the integrated MPSA application of petitioner. After publication of the
application, the following filed their oppositions:

a) MAC Case No. 004(XI) - JB Management Mining Corporation;

b) MAC Case No. 005(XI) - Davao United Miners Cooperative;

c) MAC Case No. 006(XI) - Balite Integrated Small Scale Miners Cooperative;
d) MAC Case No. 007(XI) - Monkayo Integrated Small Scale Miners Association, Inc.;
e) MAC Case No. 008(XI) - Paper Industries Corporation of the Philippines;
f) MAC Case No. 009(XI) - Rosendo Villaflor, et al.;

g) MAC Case No. 010(XI) - Antonio Dacudao;

h) MAC Case No. 011(XI) - Atty. Jose T. Amacio;

i) MAC Case No. 012(XI) - Puting-Bato Gold Miners Cooperative;

j) MAC Case No. 016(XI) - Balite Communal Portal Mining Cooperative; and
k) MAC Case No. 97-01(XI) - Romeo Altamera, et al.

In the meantime, on March 3, 1995, Republic Act No. 7942, the Philippine Mining Act, was enacted.
Pursuant to this statute, the above-enumerated MAC cases were referred to a Regional Panel of
Arbitrators (RPA) tasked to resolve disputes involving conflicting mining rights. The RPA subsequently
took cognizance of the RED Mines case, which was consolidated with the MAC cases.

On April 1, 1997, Provincial Mining Regulatory Board of Davao passed Resolution No. 26, Series of
1997, authorizing the issuance of ore transport permits (OTPs) to small-scale miners operating in the
Diwalwal mines.

Thus, on May 30, 1997, petitioner filed a complaint for damages before the Regional Trial Court of
Makati City, Branch 61, against the DENR Secretary and PMRB-Davao. SEM alleged that the illegal
issuance of the OTPs allowed the extraction and hauling of P60,000.00 worth of gold ore per truckload
from SEMs mining claim.

Meanwhile, on June 13, 1997, the RPA resolved the Consolidated Mines cases and decreed in an
Omnibus Resolution as follows:

VIEWED IN THE LIGHT OF THE FOREGOING, the validity of Exploration Permit No. 133 is hereby
reiterated and all the adverse claims against MPSAA No. 128 are DISMISSED.9cräläwvirtualibräry

On June 24, 1997, the DENR Secretary issued Memorandum Order No. 97-03 10 which provided,
among others, that:

1. The DENR shall study thoroughly and exhaustively the option of direct state utilization of the
mineral resources in the Diwalwal Gold-Rush Area.Such study shall include, but shall not be limited to,
studying and weighing the feasibility of entering into management agreements or operating
agreements, or both, with the appropriate government instrumentalities or private entities, or both, in
carrying out the declared policy of rationalizing the mining operations in the Diwalwal Gold Rush Area;
such agreements shall include provisions for profit-sharing between the state and the said
parties, including profit-sharing arrangements with small-scale miners, as well as the payment of
royalties to indigenous cultural communities, among others. The Undersecretary for Field Operations,
as well as the Undersecretary for Legal and Legislative Affairs and Attached Agencies, and the Director
of the Mines and Geo-sciences Bureau are hereby ordered to undertake such studies. x x
x11cräläwvirtualibräry

On July 16, 1997, petitioner filed a special civil action for certiorari, prohibition and mandamus before
the Court of Appeals against PMRB-Davao, the DENR Secretary and Balite Communal Portal Mining
Cooperative (BCPMC), which represented all the OTP grantees. It prayed for the nullification of the
above-quoted Memorandum Order No. 97-03 on the ground that the direct state utilization espoused
therein would effectively impair its vested rights under EP No. 133; that the DENR Secretary unduly
usurped and interfered with the jurisdiction of the RPA which had dismissed all adverse claims against
SEM in the Consolidated Mines cases; and that the memorandum order arbitrarily imposed the
unwarranted condition that certain studies be conducted before mining and environmental laws are
enforced by the DENR.

Meanwhile, on January 6, 1998, the MAB rendered a decision in the Consolidated Mines cases, setting
aside the judgment of the RPA. 12 This MAB decision was then elevated to this Court by way of a
consolidated petition, docketed as G.R. Nos. 132475 and 132528.

On March 19, 1998, the Court of Appeals, through a division of five members voting 3-2, 13 dismissed
the petition in CA-G.R. SP No. 44693. It ruled that the DENR Secretary did not abuse his discretion in
issuing Memorandum Order No. 97-03 since the same was merely a directive to conduct studies on
the various options available to the government for solving the Diwalwal conflict. The assailed
memorandum did not conclusively adopt direct state utilization as official government policy on the
matter, but was simply a manifestation of the DENRs intent to consider it as one of its options, after
determining its feasibility through studies. MO 97-03 was only the initial step in the ladder of
administrative process and did not, as yet, fix any obligation, legal relationship or right. It was thus
premature for petitioner to claim that its constitutionally-protected rights under EP No. 133 have been
encroached upon, much less, violated by its issuance.

Additionally, the appellate court pointed out that petitioners rights under EP No. 133 are not
inviolable, sacrosanct or immutable. Being in the nature of a privilege granted by the State, the permit
can be revoked, amended or modified by the Chief Executive when the national interest so requires.
The Court of Appeals, however, declined to rule on the validity of the OTPs, reasoning that said issue
was within the exclusive jurisdiction of the RPA.

Petitioner filed a motion for reconsideration of the above decision, which was denied for lack of merit
on August 19, 1998. 14cräläwvirtualibräry

Hence this petition, raising the following errors:

I. THE COURT OF APPEALS COMMITTED GRAVE AND REVERSIBLE ERROR, AND HAS DECIDED A
QUESTION OF SUBSTANCE NOT THERETOFORE DETERMINED BY THIS HONORABLE SUPREME COURT,
OR HAS DECIDED IT IN A WAY PROBABLY NOT IN ACCORD WITH LAW OR WITH APPLICABLE
DECISIONS OF THIS HONORABLE COURT IN UPHOLDING THE QUESTIONED ACTS OF RESPONDENT
DENR SECRETARY WHICH ARE IN VIOLATION OF MINING LAWS AND IN DEROGATION OF
PETITIONERS VESTED RIGHTS OVER THE AREA COVERED BY ITS EP NO. 133;

II. THE COURT OF APPEALS COMMITTED GRAVE AND REVERSIBLE ERROR IN HOLDING THAT AN
ACTION ON THE VALIDITY OF ORE TRANSPORT PERMIT (OTP) IS VESTED IN THE REGIONAL PANEL
OF ARBITRATORS.15cräläwvirtualibräry

In a resolution dated September 11, 2000, the appealed Consolidated Mines cases, docketed as G.R.
Nos. 132475 and 132528, were referred to the Court of Appeals for proper disposition pursuant to
Rule 43 of the 1997 Rules of Civil Procedure. 16 These cases, which were docketed as CA-G.R. SP Nos.
61215 and 61216, are still pending before the Court of Appeals.

In the first assigned error, petitioner insists that the Court of Appeals erred when it concluded that the
assailed memorandum order did not adopt the direct state utilization scheme in resolving the Diwalwal
dispute. On the contrary, petitioner submits, said memorandum order dictated the said recourse and,
in effect, granted management or operating agreements as well as provided for profit sharing
arrangements to illegal small-scale miners.

According to petitioner, MO 97-03 was issued to preempt the resolution of the Consolidated Mines
cases. The direct state utilization scheme espoused in the challenged memorandum is nothing but a
legal shortcut, designed to divest petitioner of its vested right to the gold rush area under its EP No.
133.

We are not persuaded.

We agree with the Court of Appeals ruling that the challenged MO 97-03 did not conclusively adopt
direct state utilization as a policy in resolving the Diwalwal dispute. The terms of the memorandum
clearly indicate that what was directed thereunder was merely a study of this option and nothing else.
Contrary to petitioners contention, it did not grant any management/operating or profit-sharing
agreement to small-scale miners or to any party, for that matter, but simply instructed the DENR
officials concerned to undertake studies to determine its feasibility. As the Court of Appeals
extensively discussed in its decision:

x x x under the Memorandum Order, the State still had to study prudently and exhaustively the
various options available to it in rationalizing the explosive and ever perilous situation in the area, the
 debilitating adverse effects of mining in the community and at the same time, preserve and enhance
the safety of the mining operations and ensure revenues due to the government from the
development of the mineral resources and the exploitation thereof. The government was still in
earnest search of better options that would be fair and just to all parties concerned, including, notably,
the Petitioner. The direct state utilization of the mineral resources in the area was only one of the
options of the State. Indeed, it is too plain to see, x x x that before the State will settle on an option,
x x x an extensive and intensive study of all the facets of a direct state exploitation was directed by
the Public Respondent DENR Secretary. And even if direct state exploitation was opted by the
government, the DENR still had to promulgate rules and regulations to implement the same x x x, in
coordination with the other concerned agencies of the government.17cräläwvirtualibräry

Consequently, the petition was premature. The said memorandum order did not impose any obligation
on the claimants or fix any legal relation whatsoever between and among the parties to the dispute. At
this stage, petitioner can show no more than a mere apprehension that the State, through the DENR,
would directly take over the mines after studies point to its viability. But until the DENR actually does
so and petitioners fears turn into reality, no valid objection can be entertained against MO 97-03 on
grounds which are purely speculative and anticipatory. 18cräläwvirtualibräry

With respect to the alleged vested rights claimed by petitioner, it is well to note that the same is
invariably based on EP No. 133, whose validity is still being disputed in the Consolidated Mines cases.
A reading of the appealed MAB decision reveals that the continued efficacy of EP No. 133 is one of the
issues raised in said cases, with respondents therein asserting that Marcopper cannot legally assign
the permit which purportedly had expired. In other words, whether or not petitioner actually has a
vested right over Diwalwal under EP No. 133 is still an indefinite and unsettled matter. And until a
positive pronouncement is made by the appellate court in the Consolidated Mines cases, EP No. 133
cannot be deemed as a source of any conclusive rights that can be impaired by the issuance of MO 97-
03.

Similarly, there is no merit in petitioners assertion that MO 97-03 sanctions violation of mining laws by
allowing illegal miners to enter into mining agreements with the State. Again, whether or not
respondent BCMC and the other mining entities it represents are conducting illegal mining activities is
a factual matter that has yet to be finally determined in the Consolidated Mines cases. We cannot
rightfully conclude at this point that respondent BCMC and the other mining firms are illegitimate
mining operators. Otherwise, we would be preempting the resolution of the cases which are still
pending before the Court of Appeals. 19cräläwvirtualibräry

Petitioners reliance on the Apex Mining case to justify its rights under E.P. No. 133 is misplaced. For
one, the said case was litigated solely between Marcopper and Apex Mining Corporation and cannot
thus be deemed binding and conclusive on respondent BCMC and the other mining entities presently
involved. While petitioner may be regarded as Marcoppers successor to EP No. 133 and therefore
bound by the judgment rendered in the Apex Mining case, the same cannot be said of respondent
BCMC and the other oppositor mining firms, who were not impleaded as parties therein.

Neither can the Apex Mining case foreclose any question pertaining to the continuing validity of EP No.
133 on grounds which arose after the judgment in said case was promulgated. While it is true that
the Apex Mining case settled the issue of who between Apex and Marcopper validly acquired mining
rights over the disputed area by availing of the proper procedural requisites mandated by law, it
certainly did not deal with the question raised by the oppositors in the Consolidated Mines
cases, i.e. whether EP No. 133 had already expired and remained valid subsequent to its transfer by
Marcopper to petitioner. Besides, as clarified in our decision in the Apex Mining case:

x x x is conclusive only between the parties with respect to the particular issue herein raised and
under the set of circumstances herein prevailing. In no case should the decision be considered as a
precedent to resolve or settle claims of persons/entities not parties hereto. Neither is it intended to
unsettle rights of persons/entities which have been acquired or which may have accrued upon reliance
on laws passed by appropriate agencies.20cräläwvirtualibräry
Clearly then, the Apex Mining case did not invest petitioner with any definite right to the Diwalwal
mines which it could now set up against respondent BCMC and the other mining groups.

Incidentally, it must likewise be pointed out that under no circumstances may petitioners rights under
EP No. 133 be regarded as total and absolute. As correctly held by the Court of Appeals in its
challenged decision, EP No. 133 merely evidences a privilege granted by the State, which may be
amended, modified or rescinded when the national interest so requires. This is necessarily so since the
exploration, development and utilization of the countrys natural mineral resources are matters
impressed with great public interest. Like timber permits, mining exploration permits do not vest in
the grantee any permanent or irrevocable right within the purview of the non-impairment of contract
and due process clauses of the Constitution, 21 since the State, under its all-encompassing police
power, may alter, modify or amend the same, in accordance with the demands of the general
welfare. 22cräläwvirtualibräry

Additionally, there can be no valid opposition raised against a mere study of an alternative which the
State, through the DENR, is authorized to undertake in the first place. Worth noting is Article XII,
Section 2, of the 1987 Constitution, which specifically 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 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. (Underscoring ours)

Likewise, Section 4, Chapter II of the Philippine Mining Act of 1995 states:

SEC. 4. Ownership of Mineral Resources. - Mineral Resources are owned by the State and the
exploration, development, utilization, and processing thereof shall be under its full control and
supervision. The State may directly undertake such activities or it may enter into mineral agreements
with contractors. (Underscoring ours)

Thus, the State may pursue the constitutional policy of full control and supervision of the exploration,
development and utilization of the countrys natural mineral resources, by either directly undertaking
the same or by entering into agreements with qualified entities. The DENR Secretary acted within his
authority when he ordered a study of the first option, which may be undertaken consistently in
accordance with the constitutional policy enunciated above. Obviously, the State may not be precluded
from considering a direct takeover of the mines, if it is the only plausible remedy in sight to the
gnawing complexities generated by the gold rush. As implied earlier, the State need be guided only by
the demands of public interest in settling for this option, as well as its material and logistic feasibility.

In this regard, petitioners imputation of bad faith on the part of the DENR Secretary when the latter
issued MO 97-03 is not well-taken. The avowed rationale of the memorandum order is clearly and
plainly stated in its whereas clauses. 23 In the absence of any concrete evidence that the DENR
Secretary violated the law or abused his discretion, as in this case, he is presumed to have regularly
issued the memorandum with a lawful intent and pursuant to his official functions.

Given these considerations, petitioners first assigned error is baseless and premised on tentative
assumptions. Petitioner cannot claim any absolute right to the Diwalwal mines pending resolution of
the Consolidated Mines cases, much less ask us to assume, at this point, that respondent BCMC and
the other mining firms are illegal miners. These factual issues are to be properly threshed out in CA
G.R. SP Nos. 61215 and 61216, which have yet to be decided by the Court of Appeals. Any objection
raised against MO 97-03 is likewise premature at this point, inasmuch as it merely ordered a study of
an option which the State is authorized by law to undertake.

We see no need to rule on the matter of the OTPs, considering that the grounds invoked by petitioner
for invalidating the same are inextricably linked to the issues raised in the Consolidated Mines cases.

WHEREFORE , in view of the foregoing, the instant petition is DENIED. The decision of the Court of
Appeals in CA-G.R. SP No. 44693 is AFFIRMED.

SO ORDERED.

4. MINERS ASSOCIATION OF THE PHILIPPINES, INC., petitioner, vs. HON. FULGENCIO S.

FACTORAN

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.
 5. REPUBLIC vs. ROSEMOOR MINING AND DEVELOPMENT CORPORATION

PANGANIBAN, J.:

A mining license that contravenes a mandatory provision of the law under which it is granted is void.
Being a mere privilege, a license does not vest absolute rights in the holder. Thus, without offending
the due process and the non-impairment clauses of the Constitution, it can be revoked by the State in
the public interest.

The Case

Before us is a Petition for Review1 under Rule 45 of the Rules of Court, seeking to nullify the May 29,
2001 Decision2 and the September 6, 2001 Resolution3 of the Court of Appeals (CA) in CA-GR SP No.
46878. The CA disposed as follows:

"WHEREFORE, premises considered, the appealed Decision is hereby AFFIRMED in toto."4

The questioned Resolution denied petitioners’ Motion for Reconsideration.

On the other hand, trial court’s Decision, which was affirmed by the CA, had disposed as follows:

"WHEREFORE, judgment is hereby rendered as follows:

‘1. Declaring that the cancellation of License No. 33 was done without jurisdiction and in gross
violation of the Constitutional right of the petitioners against deprivation of their property
rights without due process of law and is hereby set aside.

‘2. Declaring that the petitioners’ right to continue the exploitation of the marble deposits in
the area covered by License No. 33 is maintained for the duration of the period of its life of
twenty-five (25) years, less three (3) years of continuous operation before License No. 33 was
cancelled, unless sooner terminated for violation of any of the conditions specified therein,
with due process.

‘3. Making the Writ of preliminary injunction and the Writ of Preliminary Mandatory Injunction
issued as permanent.

‘4. Ordering the cancellation of the bond filed by the Petitioners in the sum of 1 Million.

‘5. Allowing the petitioners to present evidence in support of the damages they claim to have
suffered from, as a consequence of the summary cancellation of License No. 33 pursuant to
the agreement of the parties on such dates as maybe set by the Court; and

‘6. Denying for lack of merit the motions for contempt, it appearing that actuations of the
respondents were not contumacious and intended to delay the proceedings or undermine the
integrity of the Court.

‘No pronouncement yet as to costs.’"5

The Facts

The CA narrated the facts as follows:

"The four (4) petitioners, namely, Dr. Lourdes S. Pascual, Dr. Pedro De la Concha, Alejandro De La
Concha, and Rufo De Guzman, after having been granted permission to prospect for marble deposits
in the mountains of Biak-na-Bato, San Miguel, Bulacan, succeeded in discovering marble deposits of
high quality and in commercial quantities in Mount Mabio which forms part of the Biak-na-Bato
mountain range.

"Having succeeded in discovering said marble deposits, and as a result of their tedious efforts and
substantial expenses, the petitioners applied with the Bureau of Mines, now Mines and Geosciences
Bureau, for the issuance of the corresponding license to exploit said marble deposits.

xxxxxxxxx

"After compliance with numerous required conditions, License No. 33 was issued by the Bureau of
Mines in favor of the herein petitioners.

xxxxxxxxx

"Shortly after Respondent Ernesto R. Maceda was appointed Minister of the Department of Energy and
Natural Resources (DENR), petitioners’ License No. 33 was cancelled by him through his letter to
ROSEMOOR MINING AND DEVELOPMENT CORPORATION dated September 6, 1986 for the reasons
stated therein. Because of the aforesaid cancellation, the original petition was filed and later
substituted by the petitioners’ AMENDED PETITION dated August 21, 1991 to assail the same.

"Also after due hearing, the prayer for injunctive relief was granted in the Order of this Court dated
February 28, 1992. Accordingly, the corresponding preliminary writs were issued after the petitioners
filed their injunction bond in the amount of ONE MILLION PESOS (₱1,000,000.00).

xxxxxxxxx

"On September 27, 1996, the trial court rendered the herein questioned decision." 6

The trial court ruled that the privilege granted under respondents’ license had already ripened into a
property right, which was protected under the due process clause of the Constitution. Such right was
supposedly violated when the license was cancelled without notice and hearing. The cancellation was
said to be unjustified, because the area that could be covered by the four separate applications of
respondents was 400 hectares. Finally, according to the RTC, Proclamation No. 84, which confirmed
the cancellation of the license, was an ex post facto law; as such, it violated Section 3 of Article XVIII
of the 1987 Constitution.

On appeal to the Court of Appeals, herein petitioners asked whether PD 463 or the Mineral Resources
Development Decree of 1974 had been violated by the award of the 330.3062 hectares to respondents
in accordance with Proclamation No. 2204. They also questioned the validity of the cancellation of
respondents’ Quarry License/Permit (QLP) No. 33.

Ruling of the Court of Appeals

Sustaining the trial court in toto, the CA held that the grant of the quarry license covering 330.3062
hectares to respondents was authorized by law, because the license was embraced by four (4)
separate applications -- each for an area of 81 hectares. Moreover, it held that the limitation under
Presidential Decree No. 463 -- that a quarry license should cover not more than 100 hectares in any
given province -- was supplanted by Republic Act No. 7942,7 which increased the mining areas allowed
under PD 463.

It also ruled that the cancellation of respondents’ license without notice and hearing was tantamount
to a deprivation of property without due process of law. It added that under the clause in the
Constitution dealing with the non-impairment of obligations and contracts, respondents’ license must
be respected by the State.

Hence, this Petition.8

Issues

Petitioners submit the following issues for the Court’s consideration:

"(1) [W]hether or not QLP No. 33 was issued in blatant contravention of Section 69, P.D. No. 463; and
(2) whether or not Proclamation No. 84 issued by then President Corazon Aquino is valid. The corollary
issue is whether or not the Constitutional prohibition against ex post facto law applies to Proclamation
No. 84"9

The Court’s Ruling

The Petition has merit.

First Issue:
Validity of License

Respondents contend that the Petition has no legal basis, because PD 463 has already been
repealed.10 In effect, they ask for the dismissal of the Petition on the ground of mootness.

PD 463, as amended, pertained to the old system of exploration, development and utilization of
natural resources through licenses, concessions or leases.11 While these arrangements were provided
under the 193512 and the 197313 Constitutions, they have been omitted by Section 2 of Article XII of
the 1987 Constitution.14

With the shift of constitutional policy toward "full control and supervision of the State" over natural
resources, the Court in Miners Association of the Philippines v. Factoran Jr. 15 declared the provisions
of PD 463 as contrary to or violative of the express mandate of the 1987 Constitution. The said
provisions dealt with the lease of mining claims; quarry permits or licenses covering privately owned
or public lands; and other related provisions on lease, licenses and permits.

RA 7942 or the Philippine Mining Act of 1995 embodies the new constitutional mandate. It has
repealed or amended all laws, executive orders, presidential decrees, rules and regulations -- or parts
thereof -- that are inconsistent with any of its provisions.16

It is relevant to state, however, that Section 2 of Article XII of the 1987 Constitution does not apply
retroactively to a "license, concession or lease" granted by the government under the 1973
Constitution or before the effectivity of the 1987 Constitution on February 2, 1987. 17 As noted in
Miners Association of the Philippines v. Factoran Jr., the deliberations of the Constitutional
Commission18 emphasized the intent to apply the said constitutional provision prospectively.

While RA 7942 has expressly repealed provisions of mining laws that are inconsistent with its own, it
nonetheless respects previously issued valid and existing licenses, as follows:

"SECTION 5. Mineral Reservations. — When the national interest so requires, such as when
there is a need to preserve strategic raw materials for industries critical to national
development, or certain minerals for scientific, cultural or ecological value, the President may
establish mineral reservations upon the recommendation of the Director through the
Secretary. Mining operations in existing mineral reservations and such other reservations as
may thereafter be established, shall be undertaken by the Department or through a
contractor: Provided, That a small scale-mining cooperative covered by Republic Act No. 7076
shall be given preferential right to apply for a small-scale mining agreement for a maximum
aggregate area of twenty-five percent (25%) of such mineral reservation, subject to valid
existing mining/quarrying rights as provided under Section 112 Chapter XX hereof. All
submerged lands within the contiguous zone and in the exclusive economic zone of the
Philippines are hereby declared to be mineral reservations.

"x x x x x x x x x

"SECTION 7. Periodic Review of Existing Mineral Reservations. — The Secretary shall

periodically review existing mineral reservations for the purpose of determining whether their
continued existence is consistent with the national interest, and upon his recommendation, the
President may, by proclamation, alter or modify the boundaries thereof or revert the same to
the public domain without prejudice to prior existing rights."

"SECTION 18. Areas Open to Mining Operations. — Subject to any existing rights or
reservations and prior agreements of all parties, all mineral resources in public or private
lands, including timber or forestlands as defined in existing laws, shall be open to mineral
agreements or financial or technical assistance agreement applications. Any conflict that may
arise under this provision shall be heard and resolved by the panel of arbitrators."

"SECTION 19. Areas Closed to Mining Applications. -- Mineral agreement or financial or

technical assistance agreement applications shall not be allowed:

(a) In military and other government reservations, except upon prior written clearance
by the government agency concerned;

(b) Near or under public or private buildings, cemeteries, archeological and historic
sites, bridges, highways, waterways, railroads, reservoirs, dams or other infrastructure
projects, public or private works including plantations or valuable crops, except upon
written consent of the government agency or private entity concerned;

(c) In areas covered by valid and existing mining rights;

(d) In areas expressly prohibited by law;

(e) In areas covered by small-scale miners as defined by law unless with prior consent
of the small-scale miners, in which case a royalty payment upon the utilization of
minerals shall be agreed upon by the parties, said royalty forming a trust fund for the
socioeconomic development of the community concerned; and

(f) Old growth or virgin forests, proclaimed watershed forest reserves, wilderness
areas, mangrove forests, mossy forests, national parks, provincial/municipal forests,
parks, greenbelts, game refuge and bird sanctuaries as defined by law and in areas
expressly prohibited under the National Integrated Protected Areas System (NIPAS)
under Republic Act No. 7586, Department Administrative Order No. 25, series of 1992
and other laws."

"SECTION 112. Non-impairment of Existing Mining/ Quarrying Rights. — All valid and existing
mining lease contracts, permits/licenses, leases pending renewal, mineral production-sharing
agreements granted under Executive Order No. 279, at the date of effectivity of this Act, shall
remain valid, shall not be impaired, and shall be recognized by the Government: Provided,
That the provisions of Chapter XIV on government share in mineral production-sharing
agreement and of Chapter XVI on incentives of this Act shall immediately govern and apply to
a mining lessee or contractor unless the mining lessee or contractor indicates his intention to
the secretary, in writing, not to avail of said provisions: Provided, further, That no renewal of
mining lease contracts shall be made after the expiration of its term: Provided, finally, That
 such leases, production-sharing agreements, financial or technical assistance agreements shall
comply with the applicable provisions of this Act and its implementing rules and regulations.

"SECTION 113. Recognition of Valid and Existing Mining Claims and Lease/Quarry Application.
— Holders of valid and existing mining claims, lease/quarry applications shall be given
preferential rights to enter into any mode of mineral agreement with the government within
two (2) years from the promulgation of the rules and regulations implementing this Act."
(Underscoring supplied)

Section 3(p) of RA 7942 defines an existing mining/quarrying right as "a valid and subsisting mining
claim or permit or quarry permit or any mining lease contract or agreement covering a mineralized
area granted/issued under pertinent mining laws." Consequently, determining whether the license of
respondents falls under this definition would be relevant to fixing their entitlement to the rights and/or
preferences under RA 7942. Hence, the present Petition has not been mooted.

Petitioners submit that the license clearly contravenes Section 69 of PD 463, because it exceeds the
maximum area that may be granted. This incipient violation, according to them, renders the license
void ab initio.

Respondents, on the other hand, argue that the license was validly granted, because it was covered
by four separate applications for areas of 81 hectares each.

The license in question, QLP No. 33,19 is dated August 3, 1982, and it was issued in the name of
Rosemoor Mining Development Corporation. The terms of the license allowed the corporation to
extract and dispose of marbleized limestone from a 330.3062-hectare land in San Miguel, Bulacan.
The license is, however, subject to the terms and conditions of PD 463, the governing law at the time
it was granted; as well as to the rules and regulations promulgated thereunder.20 By the same token,
Proclamation No. 2204 -- which awarded to Rosemoor the right of development, exploitation, and
utilization of the mineral site -- expressly cautioned that the grant was subject to "existing policies,
laws, rules and regulations."21

The license was thus subject to Section 69 of PD 463, which reads:

"Section 69. Maximum Area of Quarry License – Notwithstanding the provisions of Section 14
hereof, a quarry license shall cover an area of not more than one hundred (100) hectares in
any one province and not more than one thousand (1,000) hectares in the entire Philippines."
(Italics supplied)

The language of PD 463 is clear. It states in categorical and mandatory terms that a quarry license,
like that of respondents, should cover a maximum of 100 hectares in any given province. This law
neither provides any exception nor makes any reference to the number of applications for a license.
Section 69 of PD 463 must be taken to mean exactly what it says. Where the law is clear, plain, and
free from ambiguity, it must be given its literal meaning and applied without attempted
interpretation.22

Moreover, the lower courts’ ruling is evidently inconsistent with the fact that QLP No. 33 was issued
solely in the name of Rosemoor Mining and Development Corporation, rather than in the names of the
four individual stockholders who are respondents herein. It likewise brushes aside a basic postulate
that a corporation has a separate personality from that of its stockholders.23

The interpretation adopted by the lower courts is contrary to the purpose of Section 69 of PD 463.
Such intent to limit, without qualification, the area of a quarry license strictly to 100 hectares in any
one province is shown by the opening proviso that reads: "Notwithstanding the provisions of Section
14 hereof x x x." The mandatory nature of the provision is also underscored by the use of the word
shall. Hence, in the application of the 100-hectare-per-province limit, no regard is given to the size or
the number of mining claims under Section 14, which we quote:
 "SECTION 14. Size of Mining Claim. -- For purposes of registration of a mining claim under this
Decree, the Philippine territory and its shelf are hereby divided into meridional blocks or
quadrangles of one-half minute (1/2) of latitude and longitude, each block or quadrangle
containing area of eighty-one (81) hectares, more or less.

"A mining claim shall cover one such block although a lesser area may be allowed if warranted
by attendant circumstances, such as geographical and other justifiable considerations as may
be determined by the Director: Provided, That in no case shall the locator be allowed to
register twice the area allowed for lease under Section 43 hereof." (Italics supplied)

Clearly, the intent of the law would be brazenly circumvented by ruling that a license may cover an
area exceeding the maximum by the mere expediency of filing several applications. Such ruling would
indirectly permit an act that is directly prohibited by the law.

Second Issue:
Validity of Proclamation No. 84

Petitioners also argue that the license was validly declared a nullity and consequently withdrawn or
terminated. In a letter dated September 15, 1986, respondents were informed by then Minister
Ernesto M. Maceda that their license had illegally been issued, because it violated Section 69 of PD
463; and that there was no more public interest served by the continued existence or renewal of the
license. The latter reason, they added, was confirmed by the language of Proclamation No. 84.
According to this law, public interest would be served by reverting the parcel of land that was
excluded by Proclamation No. 2204 to the former status of that land as part of the Biak-na-Bato
national park.

They also contend that Section 74 of PD 463 would not apply, because Minister Maceda’s letter did not
cancel or revoke QLP No. 33, but merely declared the latter’s nullity. They further argue that
respondents waived notice and hearing in their application for the license.

On the other hand, respondents submit that, as provided for in Section 74 of PD 463, their right to
due process was violated when their license was cancelled without notice and hearing. They likewise
contend that Proclamation No. 84 is not valid for the following reasons: 1) it violates the clause on the
non-impairment of contracts; 2) it is an ex post facto law and/or a bill of attainder; and 3) it was
issued by the President after the effectivity of the 1987 Constitution.

This Court ruled on the nature of a natural resource exploration permit, which was akin to the present
respondents’ license, in Southeast Mindanao Gold Mining Corporation v. Balite Portal Mining
Cooperative,24 which held:

"x x x. As correctly held by the Court of Appeals in its challenged decision, EP No. 133 merely
evidences a privilege granted by the State, which may be amended, modified or rescinded
when the national interest so requires. This is necessarily so since the exploration,
development and utilization of the country’s natural mineral resources are matters impressed
with great public interest. Like timber permits, mining exploration permits do not vest in the
grantee any permanent or irrevocable right within the purview of the non-impairment of
contract and due process clauses of the Constitution, since the State, under its all-
encompassing police power, may alter, modify or amend the same, in accordance with the
demands of the general welfare."25

This same ruling had been made earlier in Tan v. Director of Forestry26 with regard to a timber license,
a pronouncement that was reiterated in Ysmael v. Deputy Executive Secretary,27 the pertinent portion
of which reads:

"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]."28 (Italics
supplied)

In line with the foregoing jurisprudence, respondents’ license may be revoked or rescinded by
executive action when the national interest so requires, because it is not a contract, property or a
property right protected by the due process clause of the Constitution.29 Respondents themselves
acknowledge this condition of the grant under paragraph 7 of QLP No. 33, which we quote:

"7. This permit/license may be revoked or cancelled at any time by the Director of Mines and
Geo-Sciences when, in his opinion public interests so require or, upon failure of the
permittee/licensee to comply with the provisions of Presidential Decree No. 463, as amended,
and the rules and regulations promulgated thereunder, as well as with the terms and
conditions specified herein; Provided, That if a permit/license is cancelled, or otherwise
terminated, the permittee/licensee shall be liable for all unpaid rentals and royalties due up to
the time of the termination or cancellation of the permit/license[.]"30 (Italics supplied)

The determination of what is in the public interest is necessarily vested in the State as owner of all
mineral resources. That determination was based on policy considerations formally enunciated in the
letter dated September 15, 1986, issued by then Minister Maceda and, subsequently, by the President
through Proclamation No. 84. As to the exercise of prerogative by Maceda, suffice it to say that while
the cancellation or revocation of the license is vested in the director of mines and geo-sciences, the
latter is subject to the former’s control as the department head. We also stress the clear prerogative
of the Executive Department in the evaluation and the consequent cancellation of licenses in the
process of its formulation of policies with regard to their utilization. Courts will not interfere with the
exercise of that discretion without any clear showing of grave abuse of discretion.31

Moreover, granting that respondents’ license is valid, it can still be validly revoked by the State in the
exercise of police power.32 The exercise of such power through Proclamation No. 84 is clearly in accord
with jura regalia, which reserves to the State ownership of all natural resources.33 This Regalian
doctrine is an exercise of its sovereign power as owner of lands of the public domain and of the
patrimony of the nation, the mineral deposits of which are a valuable asset.34

Proclamation No. 84 cannot be stigmatized as a violation of the non-impairment clause. As pointed out
earlier, respondents’ license is not a contract to which the protection accorded by the non-impairment
clause may extend.35Even if the license were, it is settled that provisions of existing laws and a
reservation of police power are deemed read into it, because it concerns a subject impressed with
public welfare.36 As it is, the non-impairment clause must yield to the police power of the state.37

We cannot sustain the argument that Proclamation No. 84 is a bill of attainder; that is, a "legislative
act which inflicts punishment without judicial trial."38 Its declaration that QLP No. 33 is a patent
nullity39 is certainly not a declaration of guilt. Neither is the cancellation of the license a punishment
within the purview of the constitutional proscription against bills of attainder.

Too, there is no merit in the argument that the proclamation is an ex post facto law. There are six
recognized instances when a law is considered as such: 1) it criminalizes and punishes an action that
was done before the passing of the law and that was innocent when it was done; 2) it aggravates a
crime or makes it greater than it was when it was committed; 3) it changes the punishment and
inflicts one that is greater than that imposed by the law annexed to the crime when it was committed;
4) it alters the legal rules of evidence and authorizes conviction upon a less or different testimony
than that required by the law at the time of the commission of the offense; 5) it assumes the
regulation of civil rights and remedies only, but in effect imposes a penalty or a deprivation of a right
as a consequence of something that was considered lawful when it was done; and 6) it deprives a
person accused of a crime of some lawful protection to which he or she become entitled, such as the
protection of a former conviction or an acquittal or the proclamation of an amnesty. 40 Proclamation
No. 84 does not fall under any of the enumerated categories; hence, it is not an ex post facto law.

It is settled that an ex post facto law is limited in its scope only to matters criminal in
nature.41 Proclamation 84, which merely restored the area excluded from the Biak-na-Bato national
park by canceling respondents’ license, is clearly not penal in character.

Finally, it is stressed that at the time President Aquino issued Proclamation No. 84 on March 9, 1987,
she was still validly exercising legislative powers under the Provisional Constitution of 1986. 42 Section
1 of Article II of Proclamation No. 3, which promulgated the Provisional Constitution, granted her
legislative power "until a legislature is elected and convened under a new Constitution." The grant of
such power is also explicitly recognized and provided for in Section 6 of Article XVII of the 1987
Constitution.43

WHEREFORE, this Petition is hereby GRANTED and the appealed Decision of the Court of Appeals SET
ASIDE. No costs.

SO ORDERED.

6. YINLU BICOL MINING CORPORATION, Petitioner, v. TRANS-ASIA OIL AND ENERGY

DEVELOPMENT CORPORATION, Respondent.

BERSAMIN, J.:

Rights pertaining to mining patents issued pursuant to the Philippine Bill of 1902 and existing prior to
November 15, 1935 are vested rights that cannot be impaired.cralawred

Antecedents

This case involves 13 mining claims over the area located in Barrio Larap, Municipality of Jose
Panganiban, Camarines Norte, a portion of which was owned and mined by Philippine Iron Mines, Inc.
(PIMI), which ceased operations in 1975 due to financial losses. PIMI’s portion (known as the PIMI
Larap Mines) was sold in a foreclosure sale to the Manila Banking Corporation (MBC) and Philippine
Commercial and Industrial Bank (PCIB, later Banco De Oro, or BDO).1chanRoblesvirtualLawlibrary

In 1976, the Gold Mining Development Project Team, Mining Technology Division, The Mining Group of
the Bureau of Mines prepared a so-called Technical Feasibility Study on the Possible Re-Opening of the
CPMI Project of PIM (Mining Aspect) and the Exploration Program (Uranium Project) at Larap, Jose
Panganiban, Camarines Norte, which discussed in detail, among others, an evaluation of the ore
reserve and a plan of operation to restore the mine to normal commercial mining production and
budgetary estimate should the Bureau of Mines take over and run the PIMI Larap Mines. The
Government then opened the area for exploration. In November 1978, the Benguet Corporation-Getty
Oil Consortium began exploration for uranium under an Exploration Permit of the area, but withdrew
in 1982 after four years of sustained and earnest exploration.2chanRoblesvirtualLawlibrary

Trans-Asia Oil and Energy Development Corporation (Trans-Asia) then explored the area from 1986
onwards. In 1996, it entered into an operating agreement with Philex Mining Corporation over the
area, their agreement being duly registered by the Mining Recorder Section of Regional Office No. V of
the Department of Environment and Natural Resources (DENR). In 1997, Trans-Asia filed an
application for the approval of Mineral Production Sharing Agreement (MPSA)3 over the area in that
Regional Office of the DENR, through the Mines and Geosciences Bureau (MGB), in Daraga, Albay. The
application, which was amended in 1999, was granted on July 28, 2007 under MPSA No. 252-2007-V,
by which Trans-Asia was given the exclusive right to explore, develop and utilize the mineral deposits
in the portion of the mineral lands.4chanRoblesvirtualLawlibrary

On August 31, 2007, Yinlu Bicol Mining Corporation (Yinlu) informed the DENR by letter that it had
acquired the mining patents of PIMI from MBC/BDO by way of a deed of absolute sale, stating that the
areas covered by its mining patents were within the areas of Trans-Asia’s MPSA. Based on the
documents submitted by Yinlu, four of the six transfer certificates of title (TCTs) it held covered four
mining claims under Patent Nos. 15, 16, 17 and 18 respectively named as Busser, Superior,
Bussamer and Rescue Placer Claims, with an aggregate area of 192 hectares. The areas covered
occupied more than half of the MPSA area of Trans-Asia.5chanRoblesvirtualLawlibrary

On September 14, 2007, Trans-Asia informed Yinlu by letter that it would commence exploration
works in Yinlu’s areas pursuant to the MPSA, and requested Yinlu to allow its personnel to access the
areas for the works to be undertaken. On September 23, 2007, Yinlu replied that Trans-Asia could
proceed with its exploration works on its own private property in the Calambayungan area, not in the
areas covered by its (Yinlu) mining patents.6 This response of Yinlu compelled Trans-Asia to seek the
assistance of the MGB Regional Office V in resolving the issues between the parties. It was at that
point that Trans-Asia learned that the registration of its MPSA had been put on hold because of Yinlu’s
request to register the deed of absolute sale in its favor.7chanRoblesvirtualLawlibrary

The matter was ultimately referred to the DENR Secretary, who directed the MGB Regional Office V to
verify the validity of the mining patents of Yinlu. On November 29, 2007, the MGB Regional Office V
informed the Office of the DENR Secretary that there was no record on file showing the existence of
the mining patents of Yinlu. Accordingly, the parties were required to submit their respective position
papers.8chanRoblesvirtualLawlibrary

The issues presented for consideration and resolution by the DENR Secretary were: (1) whether the
mining patents held by Yinlu were issued prior to the grant of the MPSA; and (2) whether the mining
patents were still valid and subsisting.9chanRoblesvirtualLawlibrary

On May 21, 2009, DENR Secretary Jose L. Atienza, Jr. issued his order resolving the issues in Yinlu’s
favor,10 finding that the mining patents had been issued to PIMI in 1930 as evidenced by and indicated
in PIMI’s certificates of title submitted by Yinlu; and that the patents were validly transferred to and
were now owned by Yinlu.11 He rejected Trans-Asia’s argument that Yinlu’s patents had no effect and
were deemed abandoned because Yinlu had failed to register them pursuant to Section 101 of
Presidential Decree No. 463, as amended. He declared that the DENR did not issue any specific order
cancelling such patents. He refuted Trans-Asia’s contention that there was a continuing requirement
under the Philippine Bill of 1902 for the mining patent holder to undertake improvements in order to
have the patents subsist, and that Yinlu failed to perform its obligation to register and to undertake
the improvement, observing that the requirement was not an absolute imposition. He noted that the
suspension of PIMI’s operation in 1974 due to financial losses and the foreclosure of its mortgaged
properties by the creditor banks (MBC/PCIB) constituted force majeure that justified PIMI’s failure in
1974 to comply with the registration requirement under P.D. No. 463; that the Philippine Bill of 1902,
which was the basis for issuing the patents, allowed the private ownership of minerals, rendering the
minerals covered by the patents to be segregated from the public domain and be considered private
property; and that the Regalian doctrine, under which the State owned all natural resources, was
adopted only by the 1935, 1973 and 1987 Constitutions.12chanRoblesvirtualLawlibrary

Consequently, DENR Secretary Atienza, Jr. ordered the amendment of Trans-Asia’s MPSA by excluding
therefrom the mineral lands covered by Yinlu’s mining patents, to wit:chanroblesvirtuallawlibrary

WHEREFORE, premises considered, the Mineral Production Sharing Agreement No. 252-2007-V is
hereby ordered amended, to excise therefrom the areas covered by the mining patents of Yinlu Bicol
Mining Corporation as described and defined in the Transfer Certificates of Title concerned: Provided,
That the consequent conduct of mining operations in the said mining patents shall be undertaken in
accordance with all the pertinent requirements of Republic Act No. 7942, the Philippine Mining Act of
1995, and its implementing rules and regulations.

SO ORDERED.13
Trans-Asia moved for reconsideration,,14 but the DENR Secretary denied the motion on November 27,
2009, holding in its resolution that the arguments raised by the motion only rehashed matters already
decided.15chanRoblesvirtualLawlibrary

Trans-Asia appealed to the Office of the President (OP).

On May 4, 2010, the OP rendered its decision in O.P. Case No. 09-L-638 affirming in toto the assailed
order and resolution of the DENR Secretary,16 to wit:chanroblesvirtuallawlibrary

The first contention of appellee is untenable. It is conceded that Presidential Decree (PD) No. 463,
otherwise known as the Mineral Resources Development Decree, prescribed requirements for the
registration of all mining patents with the Director of Mines within a certain period, among others. The
existence of the mining claims were in fact registered in the Office of the Register of Deeds for the
Camarines Norte prior to the issuance of PD 463, as found in the 4 TCT’s issued to PIMI that were
foreclosed by MBC, and eventually purchased by appellee through an Absolute Deed of Sale. The
existence of the mining patents, therefore, subsists. Under the Philippine Constitution, there is an
absolute prohibition against alienation of natural resources. Mining locations may only be subject to
concession or lease. The only exception is where a location of a mining claim was perfected prior to
November 15, 1935, when the government under the 1935 Constitution was inaugurated, and
according to the laws existing at that time a valid location of a mining claim segregated the area from
the public domain, and the locator is entitled to a grant of the beneficial ownership of the claim and
the right to a patent therefore (Gold Creek Mining Corporation vs. Rodriguez, 66 Phil 259). The
right of the locator to the mining patent is a vested right, and the Constitution recognizes such right
as an exception to the prohibition against alienation of natural resources. The right of the appellee as
the beneficial owner of the subject mining patents in this case, therefore, is superior to the claims of
appellant.

The existence of the TCT’s in the name of appellee further bolsters the existence of the mining
patents. Under PD 1529, also known as the Property Registration Decree, once a title is cleared of all
claims or where none exists, the ownership over the real property covered by the Torrens title
becomes conclusive and indefeasible even as against the government. Noteworthy is the fact that the
title trace backs of the said TCTs show that the titles were executed in favour of the appellee’s
predecessors-in-interest pursuant to Act No. 496, otherwise known as the Land Registration Act of
1902, in relation to the Philippine Bill of 1902, which govern the registration of mineral patents.

xxxx

After a careful and thorough evaluation and study of the records of this case, this Office agrees with
the DENR, as the assailed decisions are in accord with facts, law and jurisprudence relevant to the
case.chanrobleslaw

WHEREFORE, premises considered, the assailed Order and Resolution of the DENR dated May 21,
2009 and November 27, 2009, respectively, are hereby AFFIRMED in toto.

SO ORDERED.17

Trans-Asia filed a first and a second motion for reconsideration.

Trans-Asia stated in its first motion for reconsideration that the OP erred: (1) in resurrecting Yinlu’s
mining patents despite failure to comply with the requirements of Presidential Decree No. 463; (2) in
holding that Yinlu’s predecessors-in-interest had continued to assert their rights to the mining patents;
and (3) in not holding that the mining patent had been abandoned due to laches. The OP denied the
first motion through the resolution dated June 29, 2010,18 emphasizing that there was no cogent
reason to disturb the decision because the grounds were mere reiterations of arguments already
passed upon and resolved.

Nothing daunted, Trans-Asia presented its second motion for reconsideration, but this motion was
similarly denied in the resolution of March 31, 2011,19 the OP disposing
thusly:chanroblesvirtuallawlibrary

xxxx

After a second thorough evaluation and study of the records of this case, this Office finds no cogent
reason to disturb its earlier Decision. The second paragraph of Section 7, Administrative Order No. 18
dated February 12, 1987 provides that “[o]nly one motion for reconsideration by any one party shall
be allowed and entertained, save in exceptionally meritorious cases.” This second motion is clearly
unmeritorious.

WHEREFORE, premises considered, the instant motion is hereby DENIED. The Decision and Resolution
of this Office dated May 4, 2010 and June 29, 2010, respectively, affirming the DENR decisions, are
hereby declared final. Let the records of the case be transmitted to the DENR for its appropriate
disposition.

SO ORDERED.20

Trans-Asia then appealed to the Court of Appeals (CA).

On October 30, 2012, the CA promulgated the assailed decision reversing and setting aside the rulings
of the DENR Secretary and the OP.21 It agreed with the DENR Secretary and the OP that Yinlu held
mining patents over the disputed mining areas, but ruled that Yinlu was required to register the
patents under PD No. 463 in order for the patents to be recognized in its favor. It found that Yinlu and
its predecessors-in-interest did not register the patents pursuant to PD No. 463; hence, the patents
lapsed and had no more effect,22viz:chanroblesvirtuallawlibrary

WHEREFORE, premises considered, the petition is hereby GRANTED. The Decision dated May 4,
2010, as well as the Resolutions dated June 29, 2010 and March 31, 2011, respectively, rendered by
the Office of the President in OP Case No. 09-L-638, and the Order dated May 21, 2009 as well as the
Resolution dated November 27, 2009 issued by the DENR Secretary in DENR Case No. 8766
are REVERSED and SET ASIDE.

SO ORDERED.23

Yinlu sought reconsideration of the decision. On June 27, 2013, the CA denied the motion for
reconsideration.24chanRoblesvirtualLawlibrary

Issues

In its appeal, Yinlu raises the following issues, namely:chanroblesvirtuallawlibrary

I.

WHETHER OR NOT THE PETITION FOR CERTIORARI FILED BEFORE THE COURT OF APPEALS WAS
FILED BEYOND THE REGLEMENTARY PERIOD.cralawred

II.

WHETHER OR NOT PETITIONER YINLU’S MINING PATENTS ARE VALID, EXISTING AND IMPERVIOUS
TO THE MINERAL PRODUCTION SHARING AGREEMENT SUBSEQUENTLY GRANTED TO THE
RESPONDENT TRANS-ASIA.cralawred

III.

WHETHER OR NOT PETITIONER YINLU’S TITLES BASED ON “PATENTS” WERE MINING PATENTS OR
SOME OTHER PATENT.cralawred
 IV.

WHETHER OR NOT PETITIONER YINLU’S PURCHASE OF ITS TITLES INCLUDED PURCHASE OF THE
MINERALS FOUND THEREIN.cralawred

V.

WHETHER OR NOT THE COURT OF APPEALS DISREGARDED CONSTITUTIONAL RIGHT OF PETITIONER

YINLU THAT IT’S PRIVATE PROPERTY SHALL NOT BE TAKEN FOR PUBLIC USE WITHOUT JUST
COMPENSATION.cralawred

VI.

WHETHER OR NOT THE PRINCIPLE OF LACHES APPLY TO TITLED PROPERTY.cralawred

VII.

WHETHER OR NOT THE SHARE OF THE REPUBLIC OF THE PHILIPPINES IN ITS NATURAL RESOURCES
WAS AFFECTED BY THE MINING PATENTS OF PETITIONER YINLU.25

Ruling

The petition is meritorious.cralawred

I
Procedural Issue:
Tardiness of Trans-Asia’s Appeal

Yinlu contends that the CA should have outrightly dismissed Trans-Asia’s appeal for being taken
beyond the required period for appealing; and that Trans-Asia’s filing of the second motion for
reconsideration was improper inasmuch as the motion did not cite any exceptional circumstances or
reasons as required by Section 7 of the OP’s Administrative Order No. 18 Series of
1987.26chanRoblesvirtualLawlibrary

The contention of Yinlu is correct.

Section 1,27 Rule 43 of the Rules of Court provides that a judgment rendered by the OP in the exercise
of its quasi-judicial function is appealable to the CA. Section 428 of the Rule states that the appeal
must be taken within 15 days “from notice of the award, judgment, final order or resolution, or from
the date of its last publication, if publication is required by law for its effectivity, or of the denial of
petitioner’s motion for new trial or reconsideration x x x.”

Trans-Asia received a copy of the OP resolution dated June 29, 2010 denying the first motion for
reconsideration on July 14, 2010.29 Hence, it had until July 29, 2010 to appeal to the CA by petition
for review. However, it filed the petition for review only on May 11, 2011,30 or nearly 10 months from
its receipt of the denial. Under the circumstances, its petition for review was filed way beyond the
prescribed 15-day period.

The CA opined that Trans-Asia’s petition for review was timely filed, citing the fact that Trans-Asia
filed its second motion for reconsideration dated July 20, 2010 which the OP denied through the
resolution dated March 31, 2011. It pointed out that Trans-Asia received a copy of the resolution
dated March 31, 2011 on April 26, 2011; hence, the 15-day appeal period should be reckoned from
April 26, 2011, rendering its filing of the petition for review in the CA on May 11, 2011 timely and
within the required period. It observed that Trans-Asia’s filing of the second motion for reconsideration
was allowed under Section 7 of Administrative Order No. 18 of the OP Rules on Appeal because the
second motion was exceptionally meritorious, not pro forma, for, even if the motion reiterated issues
already passed upon by the OP, that alone did not render the motion pro forma if it otherwise
complied with the rules.31chanRoblesvirtualLawlibrary
It is true that Section 7 of Administrative Order No. 18 of the OP Rules on Appeal authorizes the filing
of a second motion for reconsideration. But that authority is conditioned upon the second motion
being upon a highly meritorious ground.32 The rule remains to be only one motion for reconsideration
is allowed. In that regard, the Court stresses that the determination of whether or not the ground
raised in the second motion for reconsideration was exceptionally meritorious lies solely belonged to
the OP.33 The CA could not usurp the OP’s determination in order to make its own.

As earlier indicated, the OP found and declared the second motion for reconsideration of Trans-Asia
“clearly unmeritorious” when it denied the motion on March 31, 2011. Consequently, the filing of the
second motion for reconsideration on July 20, 2010 did not stop the running of the appeal period that
had commenced on July 14, 2010, the date of receipt by Trans-Asia of the OP resolution denying the
first motion for reconsideration. The decision of the OP inevitably became final and immutable as a
matter of law by July 29, 2010, the last day of the reglementary period under Section 4 of Rule 43.

In taking cognizance of Trans-Asia’s appeal despite its tardiness, therefore, the CA gravely erred.
Under Section 4 of Rule 43, the reckoning of the 15-day period to perfect the appeal starts from the
receipt of the resolution denying the motion for reconsideration. Section 4 specifically allows only one
motion for reconsideration to an appealing party; as such, the reckoning is from the date of notice of
the denial of the first motion for reconsideration.34 With Trans-Asia having received the denial on July
14, 2010, its 15-day appeal period was until July 29, 2010. The filing of the petition for review only on
May 11, 2011 was too late.

Verily, an appeal should be taken in accordance with the manner and within the period set by the law
establishing the right to appeal. To allow Trans-Asia to transgress the law would be to set at naught
procedural rules that were generally mandatory and inviolable. This is because appeal, being neither a
constitutional right nor part of due process, is a mere statutory privilege to be enjoyed by litigants
who comply with the law allowing the appeal. Failure to comply will cause the loss of the privilege.
Moreover, procedural rules prescribing the time within which certain acts must be done are
indispensable to the prevention of needless delays and to the orderly and speedy discharge of judicial
business. Among such rules is that regulating the perfection of an appeal, which is mandatory as well
as jurisdictional. The consequence of the failure to perfect an appeal within the limited time allowed is
to preclude the appellate court from acquiring jurisdiction over the case in order to review and revise
the judgment that meanwhile became final and immutable by operation of
law.35chanRoblesvirtualLawlibrary

Although procedural rules may be relaxed in the interest of substantial justice, there are no reasons to
relax them in Trans-Asia’s favor. As noted, the OP found the ground for the second motion for
reconsideration “clearly unmeritorious.” To ignore such finding without justification is to unduly
deprive the OP of its authority and autonomy to enforce its own rules of procedure. On the other
hand, Trans-Asia could have easily avoided its dire situation by appealing within the period instead of
rehashing its already-discarded arguments in the OP.cralawred

II
Substantive Issues:
Yinlu’s mining patents constituted
vested rights that could not be disregarded

The finality and immutability of the decision of the OP are not the only reasons for turning down
Trans-Asia’s appeal. Trans-Asia’s cause also failed the tests of substance and validity.

Yinlu claims that its mining patents, being evidenced by its TCTs that were registered pursuant to Act
No. 496 (Land Registration Act of 1902) in relation to the Philippine Bill of 1902 (Act of Congress of
July 1 , 1902), the governing law on the registration of mineral patents, were valid, existing and
indefeasible; that it was the absolute owner of the lands the TCTs covered; that the TCTs were issued
pursuant to mineral patents based on Placer Claims36 named Busser, Superior, Bussamer and Rescue;
that the TCTs were presented to and confirmed by the DENR and the OP; that Section 21 of the
Philippine Bill of 1902 allowed citizens of the United States and of the Philippine Islands to explore,
occupy and purchase mineral lands; that after the exploration and claim of the mineral land, the
owner of the claim and of the mineral patents was entitled to all the minerals found in the area subject
of the claim as stated in Section 27 of the Philippine Bill of 1902; that the person holding even a mere
mineral claim was already entitled to all the minerals found in such area; that, as such, the mineral
claims that had been patented and perfected by registration still enjoyed the same privilege of
exclusivity in exploiting the minerals within the patent; that aside from being entitled to the minerals
found within the mineral claim and patent, it was also entitled to the exclusive possession of the land
covered by the claim; that its mining patents are property rights that the Government should not
appropriate for itself or for others; that its registered mineral patents, being valid and existing, could
not be defeated by adverse, open and notorious possession and prescription; that its substantive
rights over mineral claims perfected under the Philippine Bill of 1902 subsisted despite the changes of
the Philippine Constitution and of the mining laws; that the Constitution could not impair vested
rights; that Section 100 and Section 101 of PD No. 463 would impair its vested rights under its
mineral patents if said provisions were applied to it; and that Section 99 of PD No. 463 expressly
prohibited the application of Section 100 and Section 101 to vested
rights.37chanRoblesvirtualLawlibrary

Yinlu asserts that contrary to the claim of Trans-Asia, the titles issued to it were mining patents, not
homestead patents.38 It stresses that the TCTs from which it derived its own TCTs were issued
pursuant to Patents 15, 16, 17 and 18; that under the Philippine Bill of 1902, there was no mineral
patent separate from the original certificate of title issued pursuant thereto; that the mineral patent
applied for under the procedure outlined in the Philippine Bill of 1902 resulted to an original certificate
of title issued under Act No. 496; that the beginning statements mentioned in Yinlu’s title stated
“pursuant to Patent No._____,________Placer Claim;” that as such, its mineral patents were part of
its actual titles; that Section 21 of the Philippine Bill of 1902 allowed the titling of the land and the
exploration of both the surface and the minerals beneath the surface; and that its TCTs were already
inclusive of the minerals located in the properties by virtue of the Philippine Bill of 1902, and thus
could not be separately sold or mortgaged from each other.39chanRoblesvirtualLawlibrary

The decision of the OP was actually unassailable in point of law and history.

During the period of Spanish colonization, the disposition and exploration of mineral lands in the
Philippines were governed by the Royal Decree of May 14, 1867,40 otherwise known as The Spanish
Mining Law.41 The Regalian doctrine was observed, to the effect that minerals belonged to the State
wherever they could be found, whether in public or private lands. During the American occupation, the
fundamental law on mining was incorporated in the Philippine Bill of 1902, whose Section
2142 declared: That all valuable mineral deposits in public lands in the Philippine Islands, both
surveyed and unsurveyed, are hereby declared to be free and open to exploration, occupation, and
purchase, and the land in which they are found to occupation and purchase, by citizens of the United
States, or of said Islands. Its Section 27 provided that a holder of the mineral claim so located was
entitled to all the minerals that lie within his claim, but he could not mine outside the boundary lines
of his claim. Pursuant to the Philippine Bill of 1902, therefore, once a mining claim was made or a
mining patent was issued over a parcel of land in accordance with the relative provisions of the
Philippine Bill of 1902, such land was considered private property and no longer part of the public
domain. The claimant or patent holder was the owner of both the surface of the land and of the
minerals found underneath.

The term mining claim connotes a parcel of land containing a precious metal in its soil or rock. It is
usually used in mining jargon as synonymous with the term location, which means the act of
appropriating a mining claim on the public domain according to the established law or rules.43 A
mining patent pertains to a title granted by the government for the said mining claim.

Under the 1935 Constitution, which took effect on November 15 1935, the alienation of natural
resources, with the exception of public agricultural land, was expressly prohibited. The natural
resources being referred therein included mineral lands of public domain, but not mineral lands that at
the time the 1935 Constitution took effect no longer formed part of the public domain.

Consequently, such prohibition against the alienation of natural resources did not apply to a mining
claim or patent existing prior to November 15, 1935. Jurisprudence has enlightened us on this point.
In McDaniel v. Apacible,44 the petitioner sought to prohibit the Secretary of Agriculture and Natural
Resources from leasing a parcel of petroleum land in San Narciso in Province of Tayabas. He claimed
that on June 7, 1916 he entered an unoccupied land in San Narciso and located therein three
petroleum mineral claims in accordance with the Philippine Bill of 1902; that on July 15, 1916, he
recorded the three mineral claims with the mining office of the Municipality of Lucena through notices
of location under the names Maglihi No. 1, Maglihi No. 2, and Maglihi No. 3; that he had been in open
and continuous possession of the claims since June 7, 1916; that in 1918, he drilled five wells on said
claims and made discoveries of petroleum on them; that on June 18, 1921, respondent Juan Cuisia
applied with respondent Galicano Apacible, as the Secretary of Agriculture and Natural Resources, for
the lease of a land whose boundaries included his three claims; that he protested in writing to
Secretary Apacible the inclusion in the Cuisia lease application of his three mineral claims; that
Secretary Apacible denied his protest, and was about to grant the lease application by virtue of Act
No. 2932; that said law, in so far as it purported to declare open to lease lands containing petroleum
oil on which mineral claims had been validly located and held, and upon which discoveries of
petroleum oil had been made, was void and unconstitutional for it deprived him of his property without
due process of law and without compensation; and that Secretary Apacible was without jurisdiction to
lease to Cuisia his mining claims. The Court granted the petition, ruling as
follows:chanroblesvirtuallawlibrary

Mr. Lindlay, one of the highest authorities on Mining Law, has discussed extensively the question now
before us. (Lindlay on Mines, vol. I, sections 322, 539.)

The general rule is that a perfected, valid appropriation of public mineral lands operates as
a withdrawal of the tract from the body of the public domain, and so long as such appropriation
remains valid and subsisting, the land covered thereby is deemed private property. A mining claim
perfected under the law is property in the highest sense, which may be sold and conveyed and will
pass by descent. It has the effect of a grant (patent) by the United States of the right of present and
exclusive possession of the lands located. And even though the locator may obtain a patent to such
lands, his patent adds but little to his security. (18 Ruling Case Law, p. 1152 and cases cited.)

The owner of a perfected valid appropriation of public mineral lands is entitled to the exclusive
possession and enjoyment against everyone, including the Government itself. Where there is a valid
and perfected location of a mining claim, the area becomes segregated from the public domain and
the property of the locator.

It was said by the Supreme Court of the State of Oregon, "The Government itself cannot abridge the
rights of the miner to a perfected valid location of public mineral land. The Government may not
destroy the locator's right by withdrawing the land from entry or placing it in a state of reservation."
(Belk vs. Meagher, 104 U. S., 279; Sullivan vs. Iron Silver Mining Co., 143 U. S., 431.)

A valid and subsisting location of mineral land, made and kept up in accordance with the provisions of
the statutes of the United States, has the effect of a grant by the United States of the present and
exclusive possession of the lands located, and this exclusive right of possession and enjoyment
continues during the entire life of the location. There is no provision for, nor suggestion of, a prior
termination thereof. (Gwillim vs. Donnellan, 115 U. S., 45; Clipper Mining Co. vs. Eli Mining & Land
Co., 194 U. S., 220.)

There is no pretense in the present case that the petitioner has not complied with all the requirements
of the law in making the location of the mineral placer claims in question, or that the claims in
question were ever abandoned or forfeited by him. The respondents may claim, however, that
inasmuch as a patent has not been issued to the petitioner, he has acquired no property right in said
mineral claims. But the Supreme Court of the United States, in the cases of Union Oil Co, vs. Smith
(249 U. S., 337), and St. Louis Mining & Milling Co, vs. Montana Mining Co. (171 U. S., 650), held that
even without a patent, the possessory right of a locator after discovery of minerals upon the claim is a
property right in the fullest sense, unaffected by the fact that the paramount title to the land is in the
United States. There is no conflict in the rulings of the Court upon that question. With one voice they
affirm that when the right to a patent exists, the full equitable title has passed to the purchaser or to
the locator with all the benefits, immunities, and burdens of ownership, and that no third party can
acquire from the Government any interest as against him. (Manuel vs. Wulff, 152 U. S., 504, and
cases cited.)

Even without a patent, the possessory right of a qualified locator after discovery of minerals upon the
claim is a property right in the fullest sense, unaffected by the fact that the paramount title to the land
is in the Government, and it is capable of transfer by conveyance, inheritance, or devise. (Union Oil
Co. vs. Smith, 249 U. S., 337; Forbes vs. Jarcey, 94 U. 4S., 762; Belk vs. Meagher, 104 U. S., 279;
Del Monte Mining Co. vs. Last Chance Mining Co., 171 U. S., 55; Elver vs. Wood, 208 U. S., 226, 232.)

Actual and continuous occupation of a valid mining location, based upon discovery, is not essential to
the preservation of the possessory right. The right is lost only by abandonment as by nonperformance
of the annual labor required. (Union Oil Co. vs. Smith, 249 U. S., 337; Farrell vs. Lockhart, 210 U. S.,
142; Bradford vs. Morrison, 212 U. S., 389.)

The discovery of minerals in the ground by one who has a valid mineral location perfects his claim and
his location not only against third persons, but also against the Government. A mining claim perfected
under the law is property in the highest sense of that term, which may be sold and conveyed, and will
pass by descent, and is not therefore subject to the disposal of the Government. (Belk vs. Meagher,
104 U. S., 279, 283; Sullivan vs. Iron Silver Mining Co., 143 U. S., 431; Consolidated Mutual Oil Co.
vs. United States, 245 Fed. Rep., 521; Van Ness vs. Rooney, 160 Cal., 131, 136, 137.)

The moment the locator discovered a valuable mineral deposit on the lands located, and perfected his
location in accordance with law, the power of the United States Government to deprive him of the
exclusive right to the possession and enjoyment of the located claim was gone, the lands had become
mineral lands and they were exempted from lands that could be granted to any other person. The
reservations of public lands cannot be made so as to include prior mineral perfected locations; and, of
course, if a valid mining location is made upon public lands afterward included in a reservation, such
inclusion or reservation does not affect the validity of the former location. By such location and
perfection, the land located is segregated from the public domain even as against the Government.
(Union Oil Co. vs. Smith, 249 U. S., 337; Van Ness vs. Rooney, 160 Cal., 131; 27 Cyc, 546.)

From all of the foregoing arguments and authorities we must conclude that, inasmuch as the
petitioner had located, held and perfected his location of the mineral lands in question, and had
actually discovered petroleum oil therein, he had acquired a property right in said claims; that said Act
No. 2932, which deprives him of such right, without due process of law, is in conflict with section 3 of
the Jones Law, and is therefore unconstitutional and void. Therefore the demurrer herein is hereby
overruled, and it is hereby ordered and decreed that, unless the respondents answer the petition
herein within a period of five days from notice hereof, that a final judgment be entered, granting the
remedy prayed for in the petition. So ordered.45

In Gold Creek Mining Corporation v. Rodriguez,46 the petitioner prayed that Eulogio Rodriguez as the
Secretary of Agriculture and Commerce, and Quirico Abadilla, as the Director of the Bureau of Mines,
be compelled to approve its application for patent on a certain mining claim. It alleged that it owned
the Nob Fraction mineral claim situated in Itogon, Mountain Province, and located on public lands by
C. L. O’Dowd in accordance with the provisions of the Philippine Bill of 1902; that said claim was
located on January 1, 1929, and was registered in the office of the mining recorder of Mountain
Province on January 7, 1929; that by itself and its predecessor-in-interest it had been in continuous
and exclusive possession of the claim from the date of location thereof; and that prior to November
15, 1935, it filed an application for patent but both respondents failed and refused to grant the
application despite its having complied with all the requirements of the law for the issuance of such
patent. On the other hand, the respondents contended that the petitioner was not entitled as a matter
of right to a patent to said mineral claim because the 1935 Constitution provided that “natural
resources, with the exception of public agricultural land, shall not be alienated.” The Court ordered the
respondents to dispose of the application for patent on its merits, unaffected by the prohibition against
the alienation of natural resources provided in Section 1, Article XII of the 1935 Constitution and in
Commonwealth Act No. 137, explaining:chanroblesvirtuallawlibrary

This is one of several cases now pending in this court which call for an interpretation, a determination
of the meaning and scope, of section 1 of Article XII of the Constitution, with reference to mining
claims. The cases have been instituted as test cases, with a view to determining the status, under the
Constitution and the Mining Act (Commonwealth Act No. 137), of the holders of unpatented mining
claims which were located under the provisions of the Act of Congress of July 1, 1902, as amended.

In view of the importance of the matter, we deem it conducive to the public interest to meet squarely
the fundamental question presented, disregarding for that purpose certain discrepancies found in the
pleadings filed in this case. This is in accord with the view expressed by the Solicitor-General in his
memorandum where he says that "the statements of facts in both briefs of the petitioners may be
accepted for the purpose of the legal issues raised. We deny some of the allegations in the petitions
and allege new ones in our answers, but these discrepancies are not of such a nature or importance as
should necessitate introduction of evidence before the cases are submitted for decision. From our view
of the cases, these may be submitted on the facts averred in the complaints, leaving out the
difference between the allegations in the pleadings to be adjusted or ironed out by the parties later,
which, we are confident, can be accomplished without much difficulty.

Section 1 of Article XII of the Constitution reads as follows:

“Section 1. All agricultural, timber, and mineral lands of the public domain, waters, minerals, coal,
petroleum, and other mineral oils, all forces of potential energy, and other natural resources of the
Philippines belong to the State, and their disposition, exploitation, development, or utilization shall be
limited to citizens of the Philippines, or to corporations or associations at least sixty per centum of the
capital of which is owned by such citizens, subject to any existing right, grant, lease, or concession at
the time of the inauguration of the Government established under this Constitution. Natural resources,
with the exception of public agricultural land, shall not be alienated, and no license, concession, or
lease for the exploitation, development, or utilization of any of the natural resources shall be granted
for a period exceeding twenty-five years, renewable for another twenty-five years, except as to water
rights for irrigation, water supply, fisheries, or industrial uses other than the development of water
power, in which cases beneficial use may be the measure and the limit of the grant.”

The fundamental principle of constitutional construction is to give effect to the intent of the framers of
the organic law and of the people adopting it. The intention to which force is to be given is that which
is embodied and expressed in the constitutional provisions themselves. It is clear that the foregoing
constitutional provision prohibits the alienation of natural resources, with the exception of public
agricultural land. It seems likewise clear that the term "natural resources," as used therein, includes
mineral lands of the public domain, but not mineral lands which at the time the provision took effect
no longer formed part of the public domain. The reason for this conclusion is found in the terms of the
provision itself. It first declares that all agricultural, timber, and mineral lands of the public
domain, etc., and other natural resources of the Philippines, belong to the State. It then provides that
"their disposition, exploitation, development, or utilization shall be limited to citizens of the
Philippines, or to corporations or associations at least sixty per centum of the capital of which is owned
by such citizens, subject to any existing right, grant, lease, or concession at the time of the
inauguration of the Government established under this Constitution." Next comes the prohibition
against the alienation of natural resources. This prohibition is directed against
the alienation of such

natural resources as were declared to be the property of the State. And as only "agricultural, timber,
and mineral lands of the public domain" were declared property of the State, it is fair to conclude that
mineral lands which at the time the constitutional provision took effect no longer formed part of the
public domain, do not come within the prohibition.

This brings us to the inquiry of whether the mining claim involved in the present proceeding formed
part of the public domain on November 15, 1935, when the provisions of Article XII of the Constitution
became effective in accordance with section 6 of Article XV thereof. In deciding this point, it should be
borne in mind that a constitutional provision must be presumed to have been framed and adopted in
the light and understanding of prior and existing laws and with reference to them. "Courts are bound
to presume that the people adopting a constitution are familiar with the previous and existing laws
upon the subjects to which its provisions relate, and upon which they express their judgment and
opinion in its adoption." (Barry vs. Truax, 13 N. D., 181; 99 N. W., 769; 65 L. R. A., 762.)
It is not disputed that the location of the mining claim under consideration was perfected prior to
November 15, 1935, when the Government of the Commonwealth was inaugurated; and according to
the laws existing at that time, as construed and applied by this court in McDaniel vs. Apacible and
Cuisia (42 Phil., 749), a valid location of a mining claim segregated the area from the public domain.
Said the court in that case: "The moment the locator discovered a valuable mineral deposit on the
lands located, and perfected his location in accordance with law, the power of the United States
Government to deprive him of the exclusive right to the possession and enjoyment of the located
claim was gone, the lands had become mineral lands and they were exempted from lands that could
be granted to any other person. The reservations of public lands cannot be made so as to include prior
mineral perfected locations; and, of course, if a valid mining location is made upon public lands
afterward included in a reservation, such inclusion or reservation does not affect the validity of the
former location. By such location and perfection, the land located is segregated from the public
domain even as against the Government. (Union Oil Co. vs. Smith, 249 U. S., 337; Van Ness vs.
Rooney, 160 Cal., 131; 27 Cyc., 546.)"

The legal effect of a valid location of a mining claim is not only to segregate the area from the public
domain, but to grant to the locator the beneficial ownership of the claim and the right to a patent
therefor upon compliance with the terms and conditions prescribed by law. "Where there is a valid
location of a mining claim, the area becomes segregated from the public domain and the property of
the locator." (St. Louis Mining & Milling Co. vs. Montana Mining Co., 171 U. S., 650, 655; 43 Law. ed.,
320, 322.) "When a location of a mining claim is perfected it has the effect of a grant by the United
States of the right of present and exclusive possession, with the right to the exclusive enjoyment of all
the surface ground as well as of all the minerals within the lines of the claim, except as limited by the
extralateral rights of adjoining locators; and this is the locator's right before as well as after the
issuance of the patent. While a lode locator acquires a vested property right by virtue of his location,
made in compliance with the mining laws, the fee remains in the government until patent issues” (18
R. C. L., 1152.) In Noyes vs. Mantle (127 U. S., 348, 351; 32 Law. ed., 168, 170), the court said:

"There is no pretense in this case that the original locators did not comply-with all the requirements of
the 1aw in making the location of the Pay Streak Lode Mining claim, or that the claim was ever
abandoned or forfeited. They were the discoverers of the claim. They marked its boundaries by stakes,
so that they could be readily traced. They posted the required notice, which was duly recorded in
compliance with the regulations of the district. They had thus done all that was necessary under the
law for the acquisition of an exclusive right to the possession and enjoyment of the ground. The claim
was thenceforth their property. They needed only a patent of the United States to render their title
perfect, and that they could obtain at any time upon proof what they had done in locating the claim,
and of subsequent expenditures to a specified amount in developing it. Until the patent issued the
government held the title in trust for the locators or their vendees. The ground itself was not
afterwards open to sale."

In a recent case decided by the Supreme Court of the United States, it was said:

"The rule is established by innumerable decisions of this court, and of state and lower Federal courts,
that when the location of a mining claim is perfected under the law, it has the effect of a grant by the
United States of the right of present and exclusive possession. The claim is property in the fullest
sense of that term; and may be sold, transferred, mortgaged, and inherited without infringing any
right or title of the United States. The right of the owner is taxable by the state; and is 'real property,'
subject to the lien of a judgment recovered against the owner in a state or territorial court. (Belk vs.
Neagher, 104 U. S., 279, 283; 26 L. ed., 735, 737; 1 Mor. Min. Rep., 510; Manuel vs. Wulff, 152 U.
S., 505, 510, 511; 38 L. ed., 532-534; 14, Sup. Ct. Rep., 651; 18 Mor. Min. Rep., 85; Elder vs. Wood,
208 U. S., 226, 317 232; 52 L. ed., 464, 466; 28 Sup. Ct. Rep., 263; Bradford vs. Morrison, 212 U. S.,
389; 53 L. ed., 564; 29 Sup. Ct. Rep., 349.) The owner is not required to purchase the claim or secure
patent from the United States; but so long as he complies with the provisions of the mining laws, his
possessory right, for all practical purposes of ownership, is as good as though secured by patent."
(Wilbur vs. United States ex rel. Krushnic, 280 U. S., 306; 74 Law. ed., 445.)

The Solicitor-General admits in his memorandum that the decision in the McDaniel case is
determinative, of the fundamental question involved in the instant case. But he maintains "that this
decision is based on a misapprehension of the authorities on which the court relied," and that it "is not
well founded and should be abandoned." We do not deem it necessary to belabor this point. Whether
well-founded or not, the decision in that case was the law when section 1 of Article XII of the
Constitution became effective; and even if we were disposed to overrule that decision now, our action
could not affect rights already fixed under it.

Our conclusion is that, as the mining claim under consideration no longer formed part of the public
domain when the provisions of Article XII of the Constitution became effective, it does not come within
the prohibition against the alienation of natural resources; and the petitioner has the right to a patent
therefor upon compliance with the terms and conditions prescribed by law.

It remains to consider whether mandamus is the proper remedy in this case. In Wilbur vs. United
States ex rel. Krushnic, supra, the Supreme Court of the United States held that "mandamus will lie to
compel the Secretary of the Interior to dispose of an application for a patent for a mining claim on its
merits, where his refusal to do so is based on his misinterpretation of a statute." In the course of its
decision the court said: "While the decisions of this court exhibit a reluctance to direct a writ of
mandamus against an executive officer, they recognize the duty to do so by settled principles of law in
some cases. (Lane vs. Hoglund, 244 U. S., 174, 181; 61 L. ed., 1066, 1069; 37 Sup. Ct. Rep., 552;
and case cited.) In Roberts vs. United States (176 U. S., 221, 231; 44 L. ed., 443, 447; 20 Sup. Ct.
Rep., 376), referred to and quoted in the Hoglund case, this court said:

" 'Every statute to some extent requires construction by the public officer whose duties may be
defined therein. Such officer must read the law, and he must therefore, in a certain sense, construe it,
in order to form a judgment from its language what duty he is directed by the statute to perform. But
that does not necessarily and in all cases make the duty of the officer anything other than a purely
ministerial one. If the law direct him to perform an act in regard to which no discretion is committed
to him, and which, upon the facts existing, he is bound to perform, then that act is ministerial,
although depending upon a statute which requires, in some degree a construction of its language by
the officer. Unless this be so, the value of this writ is very greatly impaired. Every executive officer
whose duty is plainly devolved upon him by a statute might refuse to perform it, and when his refusal
is brought before the court he might successfully plead that the performance of the duty involved the
construction of a statute by him, and therefore it was not ministerial, and the court would on that
account be powerless to give relief. Such a limitation of the powers of the court, we think, would be
most unfortunate, as it would relieve from judicial supervision all executive officers in the performance
of their duties, whenever they should plead that the duty required of them arose upon the
construction of a statute, no matter how plain its language, nor how plainly they violated their duty in
refusing to perform the act required.' "

In the instant case, we are not justified, upon the state of the pleadings, to grant the relief sought by
the petitioner. Considering, however, that the refusal of the respondents to act on the application for a
patent on its merits was due to their misinterpretation of certain constitutional and statutory
provisions, following the precedent established by the Supreme Court of the United States in Wilbur
vs. United States ex rel. Krushnic, supra, a writ of mandamus should issue directing the respondents
to dispose of the application for patent on its merits, unaffected by the prohibition against the
alienation of natural resources contained in section 1 of Article XII of the Constitution and in
Commonwealth Act No. 137. So ordered.47

The foregoing rulings were applied and cited in Salacot Mining Company v. Rodriguez,48Republic v.
Court of Appeals49 and Atok-Big Wedge Mining Co., Inc. v. Court of
Appeals.50chanRoblesvirtualLawlibrary

Here, the records show that TCT Nos. 93, 94, 95, 96, 97 and 98 involved six parcels of land with an
area of 248.342 hectares situated in Barrio Larap and Santa Elena, Municipality of Jose Panganiban,
Camarines Norte.51 The TCTs were transferred to the MBC and PCIB after PIMI’s properties were sold
in the foreclosure sale conducted on December 20, 1975.52 Consequently, new TCTs, namely: TCT
Nos. 14565, 14566, 14567, 14568, 14569 and 14570, were issued to MBC and PCIB cancelling TCT
Nos. 93, 94, 95, 96, 97 and 98.53 MBC and BDO, as registered owners of said lands, subsequently sold
the same to Yinlu by virtue of a Deed of Absolute Sale.54 Hence, TCT Nos. 72336, 72337, 72338,
72339, 72340 and 72341 were issued to Yinlu as the new registered
owner.55chanRoblesvirtualLawlibrary

It also appears that TCT Nos. 94, 95, 96 and 97 covered mining lands with an aggregate area of 192
hectares. The lands were originally registered in 1925, and the TCTs were issued to PIMI in 1930.
These TCTs of PIMI corresponded to more than half of the areas involved in Trans-Asia’s MPSA.
However, the TCTs of PIMI constituted mining patents and mining claims of the lands they covered.
TCT No. 94 was issued pursuant to Patent No. 15 under the Busser Placer Claim; TCT No. 95, Patent
No. 16 under the Superior Placer Claim; TCT No. 96, Patent No. 17 under the Bussemer Placer
Claim; and TCT No. 97, Patent No. 18 under the Rescue Placer Claim.56 Considering that these TCTs
were validly transferred to Yinlu by virtue of the deed of absolute sale, and with the consequent
issuance of TCT Nos. 72336, 72337, 72338 and 72339 in its name, Yinlu was the owner and holder of
the mining patents entitled not only to whatever was on the surface but also to the minerals found
underneath the surface.

The lands and minerals covered by Yinlu’s mining patents are private properties. The Government,
whether through the DENR or the MGB, could not alienate or dispose of the lands or mineral through
the MPSA granted to Trans-Asia or any other person or entity. Yinlu had the exclusive right to explore,
develop and utilize the minerals therein, and it could legally transfer or assign such exclusive right. We
uphold the rulings of the DENR Secretary and the OP to exclude the disputed areas that had been
established to belong exclusively to Yinlu as registered owner to be taken out of the coverage of
Trans-Asia’s MPSA.

Still, Trans-Asia insists that Yinlu’s mining patents should no longer be recognized because they were
not registered pursuant to Section 100 and Section 101 of PD No. 463, which
read:chanroblesvirtuallawlibrary

Section 100. Old Valid Mining Rights May Come Under This Decree. Holders of valid and subsisting
mining locations and other rights under other laws, irrespective of the areas covered, may avail of the
rights and privileges granted under this Decree by making the necessary application therefor and
approval thereof by the Director within a period of two (2) years from the date of approval of this
Decree.

Section 101. Recognition and Survey of Old Subsisting Mining Claims. All mining grants patents,
locations, leases and permits subsisting at the time of the approval of this Decree shall be recognized
if registered pursuant to Section 100 hereof: Provided, That Spanish Royal Grants and unpatented
mining claims located and registered under the Act of the United States Congress of July 1, 1902, as
amended, otherwise known as the "Philippine Bill", as shall be surveyed within one (1) year from the
approval of this Decree: Provided, further, That no such mining rights shall be recognized if there is
failure to comply with the fundamental requirements of the respective grants: And provided, finally,
That such grants, patents, locations, leases or permits as may be recognized by the Director after
proper investigation shall comply with the applicable provisions of this Decree, more particularly with
the annual work obligations, submittal of reports, fiscal provisions and other obligations.

Trans-Asia submits that because MBC/BDO did not comply with the requirement for the registration of
the patents, Yinlu’s mining rights should now be deemed abandoned because no title or right was
passed to it. In that sense, Trans-Asia maintains that Yinlu had no vested right.

We disagree with Trans-Asia.

Although Section 100 and Section 101 of PD No. 463 require registration and annual work obligations,
Section 99 of PD No. 463 nevertheless expressly provides that the provisions of PD No. 463 shall not
apply if their application will impair vested rights under other mining
laws, viz:chanroblesvirtuallawlibrary

Section 99. Non-impairment of Vested or Acquired Substantive Rights. Changes made and new
provisions and rules laid down by this Decree which may prejudice or impair vested or acquired rights
in accordance with order mining laws previously in force shall have no retroactive effect. Provided,
That the provisions of this Decree which are procedural in nature shall prevail.
The concept of a vested right was discussed and applied in Ayog v. Cusi Jr. 57 Therein, the Director of
Lands awarded on January 21, 1953 to Biñan Development Co, Inc. (BDCI) a parcel of land on the
basis of its 1951 Sales Application. BDCI filed an ejectment suit against the occupants of the land who
had refused to vacate. In its judgment, the trial court ordered the occupants to vacate the land. The
judgment was affirmed by the Court of Appeals and by this Court. BDCI then moved for the execution
of the trial court’s judgment, but the occupants opposed on the ground that the adoption of the 1973
Constitution, which took effect on January 17, 1973, was a supervening event that rendered it legally
impossible to execute the trial court’s judgment. They invoked the constitutional prohibition that “no
private corporation or association may hold alienable lands of the public domain except by lease not to
exceed one thousand hectares in the area.” The Court rejected the invocation, and ruled that BDCI
had a vested right in the land, to wit:chanroblesvirtuallawlibrary

We hold that the said constitutional prohibition has no retroactive application to the sales application
of Biñan Development Co., Inc. because it already acquired a vested right to the land applied for at
the time the 1973 Constitution took effect.

That vested right has to be respected. It could not be abrogated by the new Constitution. Section 2,
Article XIII of the 1935 Constitution allows private corporation to purchase public lands not exceeding
one thousand and twenty-four hectares. Petitioners’ prohibition action is barred by the doctrine of
vested rights in constitutional law.

A right is vested when the right to enjoyment has become the property of some particular person or
persons as a present interest.’ (16 C.J.S. 1173). It is “the privilege to enjoy property legally vested,
to enforce contracts, and enjoy the rights of property conferred by existing law” (12 C.J. 955, Note 46,
No. 6) or “some right or interest in property which has become fixed and established and is no longer
open to doubt or controversy” (Downs vs. Blount, 170 Fed. 15, 20, cited in Balboa vs. Farrales, 51
Phil. 498, 502).

The due process clause prohibits the annihilation of vested rights. ‘A state may not impair vested
rights by legislative enactment, by the enactment or by the subsequent repeal of a municipal
ordinance, or by a change in the constitution of the State, except in a legitimate exercise of the police
power’ (16 C.J.S. 1177-78).

It has been observed that, generally, the term “vested right” expresses the concept of present fixed
interest, which in right reason and natural justice should be protected against arbitrary State action,
or an innately just an imperative right which an enlightened free society,

sensitive to inherent and irrefragable individual rights, cannot deny (16 C.J.S. 1174, Note 71, No. 5,
citing Pennsylvania Greyhound Lines, Inc. vs. Rosenthal, 192 Atl. 2nd 587).58

In Republic v. Court of Appeals,59 we stated that mining rights acquired under the Philippine Bill of
1902 and prior to the effectivity of the 1935 Constitution were vested rights that could not be
impaired even by the Government. Indeed, the mining patents of Yinlu were issued pursuant to the
Philippine Bill of 1902 and were subsisting prior to the effectivity of the 1935 Constitution.
Consequently, Yinlu and its predecessors-in-interest had acquired vested rights in the disputed
mineral lands that could not and should not be impaired even in light of their past failure to comply
with the requirement of registration and annual work obligations.

Relevantly, we advert to the DENR’s finding that PIMI’s failure to register the patents in 1974 pursuant
to PD No. 463 was excusable because of its suffering financial losses at that time, which eventually led
to the foreclosure of the mortgages on its assets by the MBC and PCIB as its creditors.60 The failure of
Yinlu’s predecessors-in-interest to register and perform annual work obligations did not automatically
mean that they had already abandoned their mining rights, and that such rights had already lapsed.
For one, the DENR itself declared that it had not issued any specific order cancelling the mining
patents.61 Also, the tenets of due process required that Yinlu and its predecessors-in-interest be given
written notice of their non-compliance with PD No. 463 and the ample opportunity to comply. If they
still failed to comply despite such notice and opportunity, then written notice must further be given
informing them of the cancellation of their mining patents. In the absence of any showing that the
DENR had provided the written notice and opportunity to Yinlu and its predecessors-in-interest to that
effect, it would really be inequitable to consider them to have abandoned their patents, or to consider
the patents as having lapsed. Verily, as held in McDaniel and Gold Creek, supra, a mining patent
obtained under the Philippine Bill of 1902 was a protected private property. The protection should be
basic and guaranteed, for no less than Section 1, Article III of the 1987 Constitution decrees that no
person shall be deprived of property without due process of law.

Nonetheless, we deem it significant to remind that Yinlu has been directed by the DENR to henceforth
conduct its mining operations in accordance with Republic Act No. 7942 (Philippine Mining Act of 1995)
and its implementing rules and regulations.chanrobleslaw

WHEREFORE, we REVERSE and SET ASIDE the decision promulgated on October 30, 2012 by the
Court of Appeals; REINSTATE the decision issued on May 4, 2010 and resolutions dated June 29,
2010 and March 31, 2011 by the Office of the President in O.P. Case No. 09-L-638; and DIRECT the
respondents to pay the costs of suit.

SO ORDERED.cralawlawlibrary

7. ZAMBALES CHROMITE MINING COMPANY, INC., petitioner, vs. HON. MINISTER OF

NATURAL RESOURCES JOSE J. LEIDO JR

PARAS, J.:

This is a petition for certiorari and prohibition with preliminary injunction seeking to enjoin the Minister
(now Secretary) of Natural Resources and the Director of Mines from enforcing Presidential Decree No.
1214 dated October 14,1977 requiring all locators under the Act of Congress of July 1, 1902, as
amended, to apply for mining lease contracts under the provision of Presidential Decree No. 463
better known as the Mineral Development Resources Decree of 1974 and to declare Presidential
Decree No. 1214 unconstitutional since its enforcement would deprive petitioners of its property
without due process and without just compensation.

Petitioner Zambales Chromite Mining Company, Inc. is a mining corporation duly organized and
existing under and by virtue of the laws of the Philippines.

Petitioner claims that it is the owner and holder of sixty (60) mineral claims which it acquired through
purchase in good faith and for value 43 years ago. Said claims situated at the Municipality of Sta.
Cruz, Zambales, were located and registered in 1934 under the Act of U.S. Congress of July 1, 1902
(known as the Philippine Bill of 1902). (Petition, p. 2; Rollo, p. 3); that from 1934 to 1977 it has to its
credit a total investment of over Pl,222,640.00 for the mining exploration, development and operation
of its said sixty mining claims (Petition, p. 3; Rollo, p. 4); that on June 14, 1977 it actually and duly
flied its application for patent for each claim of said sixty (60) mineral claims (Petition, p. 4; Rollo, p.
5); that respondent Director of Mines issued an order dated July 13,1977 approving the application of
petitioner for availment of rights on said claims under Presidential Decree No. 463 (Petition, p. 5;
Rollo, p. 6); that the aforesaid sixty (60) lode mineral claims are already private property of
petitioner, following the doctrinal rule laid down in McDaniel v. Apacible and Cuisia (42 Phil. 749; 753-
754) and Gold Creek Mining Corporation v. Rodriguez, et al. (66 Phil. 259) which had already been
segregated from the public domain to which petitioner is entitled to the exclusive possession and
enjoyment against everyone; that the issuance of Presidential Decree No. 1214 on October 14, 1977
which declared open to lease subsisting and valid patentable mining claims, lode or placer, located
under the provisions of the Act of U.S. Congress of July 1, 1902, as amended, already segregated
from the public domain and owned and held by it for over 43 years and requiring it without fail and
against their will to file a mining lease application with the Mines Regional Office concerned within a
period of one year from October 14, 1977 is a deprivation of petitioner's rights to the ownership of
said claims without due process of law nor or just compensation and therefore, unconstitutional.
The Court in its resolution dated November 3,1978, gave due course to the petition and required
respondents to comment (Rollo, p. 33).lâwphî1.ñèt The Solicitor General as counsel for public
respondent, flied his comment on March 26,1979 (Rollo, pp. 58-71-A).

On May 10, 1979, petitioner filed a reply (Rollo, p. 83) to the comment in compliance with the
resolution of April 10, 1979. But on May 9, 1979, Baguio Gold Mining Company, Philex Mining and
Regalian Mining Corporation filed with the Court two separate motions for leave to intervene (Rollo, p.
120).

On February 10, 1981, Baguio Gold Mining Company, Philex Mining Company and Regalian Mining
Corporation filed with the court a Joint Petition for Intervention (Rollo, p. 171) raising the same issues
brought up by petitioner Zambales Chromite Mining Company regarding the constitutionality of P.D.
No. 1214 based on the doctrinal mandates of the ruling cases of McDaniel v. Apacible, 42 Phil. 749
[1922] and Gold Creek Mining Corporation v. Rodriguez, 66 Phil. 259 (1939); Salazar Mining Co. v.
Rodriguez, et al., 67 Phil. 97, insofar as it invests inter alia, private ownership in patentable mining
claims to have survived to date due to a faithful compliance with the various requirements of
applicable mining laws to include the land surface of said mining claims. Petitionees memorandum was
adopted by intervenors as to the factual and legal showing of the unconstitutionality of Presidential
Decree No. 1214 (Rollo, pp. 455-456).

The Solicitor General as counsel for public respondent submitted his memorandum on February
12,1982 (Rollo, pp. 468499) while petitioner filed its reply to said memorandum on April 3, 1982
(Rollo, pp. 505-560).

Counsel for petitioner on August 20, 1982 filed a motion to refer this case to the Court En Bane for
action and decision (Rollo, p. 536) and on September 8,1982, the Court resolved to issue a temporary
restraining order, effective as of said date and continuing until otherwise ordered by the Court (Rollo,
p. 562).

On February 11, 1988 the Court acting on the motion for intervention filed by counsel for intervenor
Francisco N. Calinisan dated January 6,1988, and considering that this case has long been submitted
for decision, resolved to deny the aforesaid motion for having been filed late (Reno, p. 597).

The principal issue raised by the petitioner and by the erstwhile intervenors, is: whether or not under
the provision of P.D. No. 1214 there was deprivation of property without due process of law and just
compensation which makes said decree unconstitutional.

Their contention that a perfected and valid appropriation of public mineral lands operates as a
withdrawal of the tract of land from the public domain and is deemed to be already private property, is
without basis in fact and in law (Comment, Rollo, p. 61)

This issue has been resolved in a recent decision of this Court in Sta. Rosa Mining Co., Inc. vs. Leido
Jr. (156 SCRA 1 [1987]) where it was held that while rulings in McDaniel v. Apacible (42 Phil. 749
[1922]). and Gold Creek Mining Corp. v. Rodriguez (66 Phil. 259 [1938]) cited by the petitioner, true
enough, recognize the right of a locator of a mining claim as a property right; such right is not
absolute. It is merely a possessory right more so if petitioner's claims are still unpatented. It can be
lost through abandonment or forfeiture or they may be revoked on valid legal grounds.

In the case at bar, there is no showing that petitioner has complied with all the terms and conditions
prescribed by law prior to November 1, 1935; that there should be not only a valid and subsisting
location of the mineral land but that there should be, thereafter, continuous compliance with all the
requirements of law such as the performance of annual assessment works and payment of real estate
taxes. In fact, petitioner filed its application only in 1977 for a patent, or 43 years after it allegedly
located and registered the mining claims (Rollo, p. 63).lâwphî1.ñèt
As to the issue of constitutionality, the Court categorically stated that P.D. No. 1214 is constitutional.
The Court ruled:

...It is a valid exercise of the sovereign power of the State, as owner, over lands of the
public domain, of which petitioner's mining claims still form a part, and over the
patrimony of the nation, of which mineral deposits are a valuable asset. It may be
underscored, in this connection, that the Decree does not cover all mining claims
located under the Phil. Bill of 1902, but only those claims over which their locators had
failed to obtain a patent. And even then, such locators may still avail of the renewable
twenty-five year (25) lease prescribed by Pres. Decree No. 463, the Mineral
Development Resources Decree of 1974.

Mere location does not mean absolute ownership over the affected land or the mining
claim. It merely segregates the located land or area from the public domain by barring
other would be locators from locating the same and appropriate for themselves the
minerals found therein. To rule otherwise would imply that location is all that is
needed to acquire and maintain rights over a located mining claim. This, we cannot
approve or sanction because it is contrary to the intention of the lawmaker that the
locator should faithfully and consistently comply with the requirements for annual
work and improvements in the located mining claim. (Santa Rosa Mining Co., Inc. vs.
Leido Jr., supra, pp. 8-9)

P.D. No. 1214 is in accord with Section 8, Article XIV of the 1973 Constitution and presently in Section
2, Article XII of the 1987 Constitution where the same constitutional mandate is restated.

On June 2,1988, the Court granted a motion filed by counsel for petitioner dated May 20,1988 to
admit a manifestation and motion wherein petitioner prayed that the "Court allow the petitioner to
change the original prayer in its petition dated October 10, 1978 with a new prayer directing public
respondents to dispose of petitioner's application on its own merit unaffected and without regard to
the provision of P.D. 1214 . . ." (p. 631, Rollo)

Records show that petitioner Zambales Chromite filed its patent application over its 60 mining claims
on June 14,1977 and to order such disposal of said "application on its own merit" is not within the
scope of the jurisdiction of the Court. For, even assuming claimant to be a holder of a subsisting and
valid patentable mining claim, this Court has held that it can no longer proceed with the acquisition of
a mining patent in view of P.D. No. 1214, issued on October 14, 1977, directing holder of subsisting
and patentable mining claims, lode or placer, located under the provisions of the Act of Congress on
July 1, 1902, as amended, to file a mining lease application . . . within one year from the approval of
the Decree and upon the filing thereof, holders of said claims shall be considered to have waived their
rights to the issuance of mining patents therefor: Provided, however, that the non-filing of the
application for mining lease by the holders thereby within the period herein prescribed shall cause the
forfeiture of all his rights to the claim." (Director of Lands v. Kalahi Investments, Inc., G.R. No. L-
48066, January 31, 1989). (Emphasis supplied)

PREMISES CONSIDERED, the instant petition is DENIED for lack of merit.

SO ORDERED

8. PNOC-ENERGY DEVELOPMENT CORPORATION (PNOC-EDC), Petitioner, vs. EMILIANO

G. VENERACION, JR

CHICO-NAZARIO, J.:
This is a Petition for Review on Certiorari, under Rule 45 of the Rules of Court, seeking to set aside the
Order, dated 21 May 1997 issued by the Mines Adjudication Board (MAB) of the Department of
Environmental and Natural Resources (DENR),1 declaring that the respondent Emiliano Veneracion has
a preferential right over the contested Block 159.

This case involves the conflicting claims of the petitioner Philippine National Oil Corporation-Energy
Development Corporation and the respondent over the mining rights over Block 159 of the Malangas
Coal Reservation, Alicia, Zamboanga del Sur.

On 31 January 1989, respondent applied with the Mines and Geo-Sciences Development Services,
DENR, Region IX, Zamboanga City for a Declaration of Location (DOL) over Block 159 of the Malangas
Coal Reservation, situated at Barangays Payongan and Kauswagan, Alicia, Zamboanga del Sur. On 18
May 1989, the Office of the Regional Executive Director (RED) of the DENR informed the respondent
that his DOL cannot be registered since Block 159 was part of the Malangas Coal Reservation, as
provided under Proclamation No. 284, issued by the President on 19 July 1938.2 With the
endorsement of the Office of Energy Affairs (OEA) and the DENR Secretary, the respondent petitioned
the Office of the President for the withdrawal of Block 159 from the coal reservation and its conversion
into a mineral reservation.3

The petitioner applied for a mineral prospecting permit over Block 159 (and Blocks 120 and 160) with
the OEA, which the latter granted on 4 September 1989. The Malangas Coal Reservation was, at that
time, under the administration of the OEA.4 When it had initially applied for a mineral prospecting
permit over lands within the Malangas Coal Reservation, the OEA advised it to obtain the permission of
the Bureau of Mines and Geo-Sciences (BMGS).5

On 18 October 1991, petitioner submitted to the DENR an application/proposal for a Mineral

Production Sharing Agreement (MPSA) over Blocks 120, 159 and 160 of the Malangas Coal
Reservation.6

On 21 February 1992, the Officer-In-Charge Regional Technical Director Dario R. Miñoza of the Mines
and Geo-Sciences Developmental Service (MGDS) advised the petitioner to amend its application for
MPSA by excluding Block 159 as the same is covered by the application of the
respondent.7 Nevertheless, the petitioner did not exclude Block 159 from its MPSA. Records also show
that it had not applied for nor was it able to obtain an Exploration Permit from the BMGS over Block
159.

On 13 April 1992, Presidential Proclamation No. 890 was issued, which effectively excluded Block 159
from the operation of Proclamation No. 284, and declared Block No. 159 as government mineral
reservation open for disposition to qualified mining applicants, pursuant to Executive Order No. 279.8

On 26 May 1992, petitioner’s application for MPSA covering Coal Block Nos. 120, 159 and 160 was
accepted for filing.9 Respondent immediately filed, on 28 May 1992, a protest to the petitioner’s
inclusion of Block 159 in its application for MPSA before the RED of the DENR Office in Zamboanga
City.10

After the parties were heard, the RED, in an Order, dated 12 April 1993, ruled in favor of the
respondent and ordered the petitioner to amend its MPSA by excluding therefrom Block 159.11 On 18
May 1993, petitioner filed a Motion for Reconsideration of the Order dated 12 April 1993, 12 which the
RED denied in an Order dated 5 July 1993.13

On 30 July 1993, petitioner filed an appeal with the DENR Secretary questioning the Orders issued by
the RED.14

While the case was pending, respondent applied for a MPSA. On 31 July 1992, he paid the processing
fee for a MPSA covering Block 159 and was able to comply with all other requirements of the MPSA
application.15
On 4 October 1994, the Office of the Secretary dismissed the appeal on the ground that petitioner’s
right to appeal had already prescribed.16 Section 50 of Presidential Decree No. 463 provides therefore
for a five-day reglementary period from the receipt of the order or decision of the Director. 17 Petitioner
received its copy of the assailed Order dated 12 April 1993 on 7 May 1993, but filed its Motion for
Reconsideration only on 18 May 1993, or eleven days after its receipt thereof. Thereafter, petitioner
received a copy of the Order dated 5 July 1993 on 16 July 1993, but filed its appeal only on 30 July
1993 or nine days after the allowable period to appeal.

On 25 October 1994, petitioner, through a letter addressed to the DENR Secretary, sought the
reconsideration of the Decision, dated 4 October 1994.18 In a Resolution, dated 21 December 1994,
the then DENR Secretary Angel C. Alcala reversed the Decision, dated 4 October 1994, and gave due
course to the MPSA of the petitioner.19

On 1 February 1995, respondent filed a Motion for Reconsideration of the Resolution, dated 21
December 1994.20The now DENR Secretary Victor O. Ramos issued an Order, dated 5 August 1996,
reversing the Resolution, dated 21 December 1994 and reinstating the Decision, dated 4 October
1994. It ruled that the Orders issued by the RED have already become final and executory when the
petitioner failed to file its appeal five days after it had received the Orders. As a result, the DENR
Secretary no longer had the jurisdiction to issue the assailed Resolution, dated 21 December 1994. It
added that after looking into the merits of the case, the Orders of the RED were in accordance with
the evidence on record and the pertinent laws on the matter.21

On 20 August 1996, petitioner filed a Motion for Reconsideration of the Order, dated 5 August 1996.
On 21 May 1997, the MAB resolved the motion in favor of the respondent and affirmed the assailed
Order, dated 5 August 1996.22 It took cognizance of the appeal filed by petitioner, in accordance with
Section 78 of Republic Act No 7942, otherwise known as The Philippine Mining Act of 1995. 23 The MAB
ruled that the petitioner filed its appeal beyond the five-day prescriptive period provided under
Presidential Decree No. 463, which was then the governing law on the matter.

The MAB also decreed that the respondent had preferential mining rights over Block 159. It ruled that
the proper procedure with respect to the mining rights application over Block 159 when it was still part
of the Malangas Coal Reservation required the following: (1) application for prospecting permit with
the OEA or other office having jurisdiction over said reservation; (2) application for exploration
permit; (3) application for exclusion of the land from such reservation; (4) Presidential Declaration on
exclusion as recommended by the Secretary; and (5) application for Lease thereof with priority given
to holder of exploration Permit.

The MAB noted that petitioner did not file for an exploration permit nor applied for the exclusion of
Block 159. Moreover, petitioner filed a MPSA on 18 October 1991, or almost six (6) months prior to
the issuance of Proclamation No. 890 excluding Block 159 from the Malangas Coal Reservation and
allowing its disposition. Thus, the application for a MPSA over Block 159, while it was still part of a
government reservation other than a mineral reservation, was erroneous and improper and could not
have been legally accepted. And, since the records show that only one MPSA was filed after the
issuance of Proclamation 890 – that of the respondent’s, the preferential right over Block 159 was
acquired by the respondent. The MAB, nevertheless, pointed out that the said preferential right does
not necessarily lead to the granting of the respondent’s MPSA, but merely consists of the right to have
his application evaluated and the prohibition against accepting other mining applications over Block
159 pending the processing of his MPSA.

Hence, this Petition for Review on Certiorari.

The correct mode of appeal would have been to file a petition for review under Rule 43, before the
Court of Appeals. Petitioner’s reliance on Section 79 of the Philippine Mining Act of 1995 is
misplaced.24 Republic Act No. 7902 expanded the appellate jurisdiction of the Court of Appeals to
include:
Exclusive appellate jurisdiction over all final judgments, decisions, resolutions, orders or awards of
Regional Trial Courts and quasi-judicial agencies, instrumentalities, boards or commissions x x x
except those falling within the appellate jurisdiction of the Supreme Court in accordance with the
Constitution, the Labor Code of the Philippines under Presidential Decree No. 442, as amended, the
provisions of this Act, and of subparagraph (1) of the third paragraph and subparagraph (4) of the
fourth paragraph of Section 17 of the Judiciary Act of 1948.

With the enactment of Republic Act No. 7902, this Court issued Circular No. 1-95 dated 16 May 1995
governing appeals from all quasi-judicial bodies to the Court of Appeals by petition for review,
regardless of the nature of the question raised. Said circular was incorporated in Rule 43 of the Rules
of Civil Procedure.25 In addition, this Court held in a line of cases that appeals from judgments and
final orders of quasi-judicial bodies are required to be brought to the Court of Appeals, under the
requirements and conditions set forth in Rule 43 of the Rules of Civil Procedure.26 Nevertheless, this
Court has taken into account the fact that these cases were promulgated after the petitioner filed this
appeal on 4 August 1997, and decided to take cognizance of the present case.

There are two main issues that need to be resolved in this case: (1) whether or not the petitioner has
already lost its right to appeal the RED’s Order dated 12 April 1993; and (2) whether or not the
petitioner acquired a preferential right on mining rights over Block 159.

This Court finds no merit in this Petition.

Petitioner alleges that Section 61 of Commonwealth Act No. 137 27 governs the petitioner’s appeal of
the Orders, dated 12 April 1993 and 5 July 1993, and not Section 50 of Presidential Decree No. 463.
He further adds that even if Presidential Decree No. 463 was applicable in this case, his appeal should
have been allowed on grounds of substantial justice.

When Presidential Decree No. 463 was enacted in 1974, Section 50 of the law had clearly intended to
repeal the corresponding provision found in Section 61 of Commonwealth Act No. 137, and to shorten
the 30-day period within which to file an appeal from the Decision of the Director of Mines and Geo-
Sciences to five days. Section 61 of Commonwealth Act No. 137, as amended, provides that:

SEC. 61. - Conflicts and disputes arising out of mining locations shall be submitted to the Director of
Mines for decision: Provided, That the decision or order of the Director of Mines may be appealed to
the Secretary of Agriculture and Natural Resources within thirty days from receipt of such decision or
order. In case any one of the parties should disagree from the decision or order of the Secretary of
Agriculture and Natural Resources, the matter may be taken to the Court of Appeals or the Supreme
Court, as the case may be, within thirty days from the receipt of such decision or order, otherwise the
said decision or order shall be final and binding upon the parties concerned. x x x.

Section 50 of Presidential Decree No. 463 reads:

Sec. 50. Appeals. - Any party not satisfied with the decision or order of the Director, may, within five
(5) days from receipt thereof, appeal to the Minister [now Secretary]. Decisions of the Minister [now
Secretary] are likewise appealable within five (5) days from receipt thereof by the affected party to
the President whose decision shall be final and executory.

Petitioner’s insistence that the 30-day reglementary period provided by Section 61 of Commonwealth
Act No. 137, as amended, applies, cannot be sustained by this Court. By providing a five-day period
within which to file an appeal on the decisions of the Director of Mines and Geo-Sciences, Presidential
Decree No. 463 unquestionably repealed Section 61 of Commonwealth Act No. 137.

In Pearson v. Intermediate Appellate Court,28 this Court extensively discussed the development of the
law on the adjudication of mining claims, as seen in the provisions of Commonwealth Act No. 137,
Presidential Decree No. 463, until its present state under Republic Act No. 7942. It was noted that
there was a clear effort to modernize the system of administration and disposition of mineral lands
and that the procedure of adjudicating mining claims had become increasingly administrative in
character.

[W]ith the issuance of Presidential Decree Nos. 99-A, 309, and 463, the procedure of adjudicating
conflicting mining claims has been made completely administrative in character, with the President as
the final appeal authority. Section 50 of P.D. 463, providing for a modernized system of administration
and disposition of mineral lands, to promote and encourage the development and exploitation thereof,
mandates on the matter of "Protests, Adverse Claims and Appeals," the following procedure:

Appeals — Any party not satisfied with the decision or order of the Director may, within five (5) days
from receipt thereof appeal, to the Secretary. Decisions of the Secretary are likewise appealable within
five (5) days from receipt thereof by the affected party to the President of the Philippines whose
decision shall be final and executory.

It should be noted that before its amendment, the Mining Law (C.A. No. 137) required that after the
filing of adverse claim with the Bureau of Mines, the adverse claimant had to go to a court of
competent jurisdiction for the settlement of the claim. With the amendment seeking to expedite the
resolution of mining conflicts, the Director of Mines became the mandatory adjudicator of adverse
claims, instead of the Court of First instance. Thus, it cannot escape notice that under Section 61 of
the Mining Law, as amended by Republic Act Nos. 746 and 4388, appeals from the decision of the
Secretary of Agriculture and Natural Resources (then Minister of Natural Resources) on conflicts and
disputes arising out of mining locations may be made to the Court of Appeals or the Supreme Court as
the case may be. In contrast, under the decrees issued at the onset of martial law, it has been
expressly provided that the decisions of the same Secretary in mining cases are appealable to the
President of the Philippines under Section 50 of the Mineral Resources Development Decree of 1974
(P.D. No. 463) and Section 7 of P.D. No. 1281 in relation to P.D. No. 309.

The trend at present is to make the adjudication of mining cases a purely administrative matter. This
does not mean that administrative bodies have complete rein over mining disputes. The very terms of
Section 73 of the Mining Law, as amended by R.A. No. 4388, in requiring that the adverse claim must
"state in full detail the nature, boundaries and extent of the adverse claim" show that the conflicts to
be decided by reason of such adverse claim refer primarily to questions of fact. The controversies to
be submitted and resolved by the Director of Mines under the sections referred only to the overlapping
of claims and administrative matters incidental thereto. Questions and controversies that are judicial,
not administrative, in nature can be resolved only by the regular courts in whom is vested the judicial
power to resolve and adjudicate such civil disputes and controversies between litigants in accordance
with the established norms of law and justice. Decisions of the Supreme Court on mining disputes
have recognized a distinction between (1) the primary powers granted by pertinent provisions of law
to the then Secretary of Agriculture and Natural Resources (and the bureau directors) of an executive
or administrative nature, such as "granting of license, permits, lease and contracts, or approving,
rejecting, reinstating or cancelling applications, or deciding conflicting applications," and (2)
controversies or disagreements of civil or contractual nature between litigants which are questions of a
judicial nature that may be adjudicated only by the courts of justice.

This distinction is carried on even under the present law. Findings of fact by the Mines Adjudication
Board, which exercises appellate jurisdiction over decisions or orders of the panel of arbitrators, shall
be conclusive and binding on the parties, and its decision or order shall be final and executory. But
resort to the appropriate court, through a petition for review by certiorari, involving questions of law,
may be made within thirty days from the receipt of the order or decision of the Mines Adjudication
Board.

Nor can petitioner invoke the doctrine that rules of technicality must yield to the broader interest of
substantial justice. While every litigant must be given the amplest opportunity for the proper and just
determination of his cause, free from the constraints of technicalities, the failure to perfect an appeal
within the reglementary period is not a mere technicality. It raises a jurisdictional problem as it
deprives the appellate court of jurisdiction over the appeal. 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 the provisions of the law.29

Petitioner invokes the judicial policy of allowing appeals, although filed late, when the interest of
justice so requires. Procedural law has its own rationale in the orderly administration of justice,
namely, to ensure the effective enforcement of substantive rights by providing for a system that
obviates arbitrariness, caprice, despotism, or whimsicality in the settlement of disputes. Hence, rules
of procedure must be faithfully followed except only when for persuasive reasons, they may be
relaxed to relieve a litigant of an injustice not commensurate with his failure to comply with the
prescribed procedure. Concomitant to a liberal application of the rules of procedure should be an effort
on the part of the party invoking liberality to explain his failure to abide by the rules. 30 In the instant
case, petitioner failed to state any compelling reason for not filing its appeal within the mandated
period. Instead, the records show that after failing to comply with the period within which to file their
motion for reconsideration on time, they again failed to file their appeal before the Office of the DENR
Secretary within the time provided by law.

Even if petitioner had not lost its right to appeal, it cannot claim any mining rights over Block 159 for
failure to comply with the legal requirements. Petitioner applied for an MPSA with the DENR on 18
October 1991, prior to the release of Block 159 from the Malangas Coal Reservation under
Proclamation No. 890 on 13 April 1992. Thus, the provisions on the acquisition of mining rights within
a government reservation other than a mineral reservation under Presidential Decree No. 463 and the
Consolidated Mines Administrative Order (CMAO) should apply.

As a general rule, prospecting and exploration of minerals in a government reservation is prohibited

under Section 13 of Presidential Decree No. 463. However, the same rule provides an exception
involving instances when the government agency concerned allows it.

Section 13. Areas Closed to Mining Location. – No prospecting and exploration shall be allowed:

(a) In military, and other Government reservations except when authorized by the proper Government
agency concerned.

Section 8 of Presidential Decree No. 463 reiterates the rule and clarifies it further by stating that
prospecting, exploration and exploitation of minerals on reserved lands other than mineral
reservations may be undertaken by the proper government agency. As an exception to this rule,
qualified persons may undertake the said prospecting, exploration and exploitation when the said
agencies cannot undertake them.

Section 8. Prospecting, Exploration and Exploitation of Minerals in Reserved Lands. – Prospecting,

exploration and exploitation of minerals in reserved lands other than mineral reservations may be
undertaken by the proper government agency. In the event that the said agencies cannot undertake
the prospecting, exploration and exploitation of minerals in reserved lands, qualified persons may be
permitted to undertake such prospecting, exploration and exploitation in accordance with the rules
and regulations promulgated by the Secretary [Minister]. The right to exploit the minerals found
therein shall be awarded by the President under such terms and conditions as recommended by the
Director and approved by the Secretary [Minister]: Provided, That the party who undertook
prospecting, exploration and exploitation of said are shall be given priority.

Notwithstanding the provisions of the preceding paragraph, a special permit may be issued by the
Director to the exploration permitee to extract, remove and dispose of minerals in limited quantities as
verified by the Bureau of Mines [Director of Mines and Geo-Sciences].

Section 15 of the CMAO is more straightforward when it states that government reserved lands are
open for prospecting, subject to the rules and regulations provided therein.
SEC. 15. Government Reserved Land. – Lands reserved by the Government for purposes other than
mining are open to prospecting. Any interested party may file an application therefore with the head
of the agency administering said land, subject always to compliance with pertinent laws and rules and
regulations covering such reserved land. Such application shall be acted upon within thirty (30) days.
In such cases, the compensation due the surface owner shall accrue equally to the agency
administering the reserved land and the Bureau of Mines.

The law enumerates the following requirements: (1) a prospecting permit from the agency that has
jurisdiction over the area, in this case, the OEA;31 (2) an exploration permit from the BMGS;32 (3) if
the exploration reveals the presence of commercial deposit, the permitee applies before the BMGS for
the exclusion of the area from the reservation;33 (4) granting by the president of the application to
exclude the area from the reservation;34 and (5) a mining agreement approved by the DENR
Secretary.

In this case, petitioner complied with the first requirement and obtained a prospecting permit from the
OEA.1âwphi1 In its correspondence with the petitioner, the OEA, however, advised the petitioner on
two separate occasions to obtain a "prospecting permit" from the BMGS, although the OEA was
probably referring to an exploration permit.35 The petitioner did not apply for an exploration permit
with the BMGS, nor would the BMGS have granted petitioner an exploration permit because when
petitioner wrote to the BMGS informing the latter of its intention to enter into an MPSA with the DENR
over Block 159, the BMGS informed the petitioner that the respondent’s claim over Block 159 had
already preceded that of the petitioner.36 The advice given by the BMGS was justified since at that
time, the respondent already had a pending application for the exclusion of Block 159 from the
Malangas Coal Reservation. Thereafter, the petitioner filed his MPSA application, without complying
with the second, third and fourth requisites. Since it ignored the sound advice of the OEA and the
BMGS, the government agencies concerned, and stubbornly insisted on its incorrect procedure,
petitioner cannot complain now that its MPSA was revoked for failure to comply with the legal
requirements.

In contrast, the respondent applied for a DOL as early as 30 January 1989. The DENR Regional Office
refused to register the respondent’s DOL since Block 159 was still part of the Malangas Coal
Reservation and advised the respondent to apply for the exclusion of the area from the reservation.
The respondent followed this advice. The BMGS then treated the respondent’s application for a DOL as
an application for an exploration permit and caused a verification report of the area applied for, as
provided under Section 99 of the CMAO.37 Upon the application of the respondent, the OEA and
thereafter the DENR Secretary endorsed the respondent’s application for the exclusion of the area
from the reservation.38 This application was granted by the President, through Proclamation No. 890,
which provided that the mining rights to Block 159 will be disposed of in accordance with Executive
Order No. 279. On 30 July 1992, respondent filed his MPSA.39 On 12 April 1993, the RED of
Zamboanga City ordered that the respondent’s MPSA be given due course.40 Although the
respondent’s applications may not follow the strict letter of the law, there was substantial compliance
with the requirements of the law. Hence, the respondent was able to acquire a preferential right on
the mining claims over Block 159, as provided under Section 101 of the CMAO.1âwphi1

Even if it were to be assumed that the respondent failed to comply with these requirements, this
would not be fatal to his cause since he filed his MPSA on 31 July 1992, after the issuance of
Proclamation No. 890; therefore, the provisions on the application of mining rights over government
reservations would no longer apply to him because Block 159 was already converted into a mineral
reservation, wherein a different set of rules would apply. The only effect of his failure to comply with
the requirements CMAO on government reservations is that he loses the preferential right over the
area involved. In this case, the respondent was the only applicant to the mining rights over Block 159,
apart from the petitioner who was not qualified for failure to comply with the legal requirements.
Proclamation No. 890 specifically provides that Executive Order No. 279 should be applied. Records
indicate that the provisions of Executive Order No. 279 have been complied with.41

IN VIEW OF THE FOREGOING, the instant Petition is DENIED. The assailed Decision of the Mines
Adjudication Board is hereby AFFIRMED. No costs.
SO ORDERED.

9. NARRA NICKEL MINING AND DEVELOPMENT CORP vs. REDMONT CONSOLIDATED

MINES CORP

VELASCO, JR., J.:

Before this Court is a Petition for Review on Certiorari under Rule 45 filed by Narra Nickel and Mining
Development Corp. (Narra), Tesoro Mining and Development, Inc. (Tesoro), and McArthur Mining Inc.
(McArthur), which seeks to reverse the October 1, 2010 Decision1 and the February 15, 2011
Resolution of the Court of Appeals (CA).

The Facts

Sometime in December 2006, respondent Redmont Consolidated Mines Corp. (Redmont), a domestic
corporation organized and existing under Philippine laws, took interest in mining and exploring certain
areas of the province of Palawan. After inquiring with the Department of Environment and Natural
Resources (DENR), it learned that the areas where it wanted to undertake exploration and mining
activities where already covered by Mineral Production Sharing Agreement (MPSA) applications of
petitioners Narra, Tesoro and McArthur.

Petitioner McArthur, through its predecessor-in-interest Sara Marie Mining, Inc. (SMMI), filed an
application for an MPSA and Exploration Permit (EP) with the Mines and Geo-Sciences Bureau (MGB),
Region IV-B, Office of the Department of Environment and Natural Resources (DENR).

Subsequently, SMMI was issued MPSA-AMA-IVB-153 covering an area of over 1,782 hectares in
Barangay Sumbiling, Municipality of Bataraza, Province of Palawan and EPA-IVB-44 which includes an
area of 3,720 hectares in Barangay Malatagao, Bataraza, Palawan. The MPSA and EP were then
transferred to Madridejos Mining Corporation (MMC) and, on November 6, 2006, assigned to petitioner
McArthur.2

Petitioner Narra acquired its MPSA from Alpha Resources and Development Corporation and Patricia
Louise Mining & Development Corporation (PLMDC) which previously filed an application for an MPSA
with the MGB, Region IV-B, DENR on January 6, 1992. Through the said application, the DENR issued
MPSA-IV-1-12 covering an area of 3.277 hectares in barangays Calategas and San Isidro, Municipality
of Narra, Palawan. Subsequently, PLMDC conveyed, transferred and/or assigned its rights and
interests over the MPSA application in favor of Narra.

Another MPSA application of SMMI was filed with the DENR Region IV-B, labeled as MPSA-AMA-IVB-
154 (formerly EPA-IVB-47) over 3,402 hectares in Barangays Malinao and Princesa Urduja,
Municipality of Narra, Province of Palawan. SMMI subsequently conveyed, transferred and assigned its
rights and interest over the said MPSA application to Tesoro.

On January 2, 2007, Redmont filed before the Panel of Arbitrators (POA) of the DENR three (3)
separate petitions for the denial of petitioners’ applications for MPSA designated as AMA-IVB-153,
AMA-IVB-154 and MPSA IV-1-12.

In the petitions, Redmont alleged that at least 60% of the capital stock of McArthur, Tesoro and Narra
are owned and controlled by MBMI Resources, Inc. (MBMI), a 100% Canadian corporation. Redmont
reasoned that since MBMI is a considerable stockholder of petitioners, it was the driving force behind
petitioners’ filing of the MPSAs over the areas covered by applications since it knows that it can only
participate in mining activities through corporations which are deemed Filipino citizens. Redmont
argued that given that petitioners’ capital stocks were mostly owned by MBMI, they were likewise
disqualified from engaging in mining activities through MPSAs, which are reserved only for Filipino
citizens.

In their Answers, petitioners averred that they were qualified persons under Section 3(aq) of Republic
Act No. (RA) 7942 or the Philippine Mining Act of 1995 which provided:

Sec. 3 Definition of Terms. As used in and for purposes of this Act, the following terms, whether in
singular or plural, shall mean:

xxxx

(aq) "Qualified person" means any citizen of the Philippines with capacity to contract, or a corporation,
partnership, association, or cooperative organized or authorized for the purpose of engaging in
mining, with technical and financial capability to undertake mineral resources development and duly
registered in accordance with law at least sixty per cent (60%) of the capital of which is owned by
citizens of the Philippines: Provided, That a legally organized foreign-owned corporation shall be
deemed a qualified person for purposes of granting an exploration permit, financial or technical
assistance agreement or mineral processing permit.

Additionally, they stated that their nationality as applicants is immaterial because they also applied for
Financial or Technical Assistance Agreements (FTAA) denominated as AFTA-IVB-09 for McArthur,
AFTA-IVB-08 for Tesoro and AFTA-IVB-07 for Narra, which are granted to foreign-owned corporations.
Nevertheless, they claimed that the issue on nationality should not be raised since McArthur, Tesoro
and Narra are in fact Philippine Nationals as 60% of their capital is owned by citizens of the
Philippines. They asserted that though MBMI owns 40% of the shares of PLMC (which owns 5,997
shares of Narra),3 40% of the shares of MMC (which owns 5,997 shares of McArthur)4 and 40% of the
shares of SLMC (which, in turn, owns 5,997 shares of Tesoro),5 the shares of MBMI will not make it
the owner of at least 60% of the capital stock of each of petitioners. They added that the best tool
used in determining the nationality of a corporation is the "control test," embodied in Sec. 3 of RA
7042 or the Foreign Investments Act of 1991. They also claimed that the POA of DENR did not have
jurisdiction over the issues in Redmont’s petition since they are not enumerated in Sec. 77 of RA
7942. Finally, they stressed that Redmont has no personality to sue them because it has no pending
claim or application over the areas applied for by petitioners.

On December 14, 2007, the POA issued a Resolution disqualifying petitioners from gaining MPSAs. It
held:

[I]t is clearly established that respondents are not qualified applicants to engage in mining activities.
On the other hand, [Redmont] having filed its own applications for an EPA over the areas earlier
covered by the MPSA application of respondents may be considered if and when they are qualified
under the law. The violation of the requirements for the issuance and/or grant of permits over mining
areas is clearly established thus, there is reason to believe that the cancellation and/or revocation of
permits already issued under the premises is in order and open the areas covered to other qualified
applicants.

xxxx

WHEREFORE, the Panel of Arbitrators finds the Respondents, McArthur Mining Inc., Tesoro Mining and
Development, Inc., and Narra Nickel Mining and Development Corp. as, DISQUALIFIED for being
considered as Foreign Corporations. Their Mineral Production Sharing Agreement (MPSA) are hereby x
x x DECLARED NULL AND VOID.6

The POA considered petitioners as foreign corporations being "effectively controlled" by MBMI, a 100%
Canadian company and declared their MPSAs null and void. In the same Resolution, it gave due course
to Redmont’s EPAs. Thereafter, on February 7, 2008, the POA issued an Order7 denying the Motion for
Reconsideration filed by petitioners.
Aggrieved by the Resolution and Order of the POA, McArthur and Tesoro filed a joint Notice of
Appeal8 and Memorandum of Appeal9 with the Mines Adjudication Board (MAB) while Narra separately
filed its Notice of Appeal10 and Memorandum of Appeal.11

In their respective memorandum, petitioners emphasized that they are qualified persons under the
law. Also, through a letter, they informed the MAB that they had their individual MPSA applications
converted to FTAAs. McArthur’s FTAA was denominated as AFTA-IVB-0912 on May 2007, while Tesoro’s
MPSA application was converted to AFTA-IVB-0813 on May 28, 2007, and Narra’s FTAA was converted
to AFTA-IVB-0714 on March 30, 2006.

Pending the resolution of the appeal filed by petitioners with the MAB, Redmont filed a
Complaint15 with the Securities and Exchange Commission (SEC), seeking the revocation of the
certificates for registration of petitioners on the ground that they are foreign-owned or controlled
corporations engaged in mining in violation of Philippine laws. Thereafter, Redmont filed on September
1, 2008 a Manifestation and Motion to Suspend Proceeding before the MAB praying for the suspension
of the proceedings on the appeals filed by McArthur, Tesoro and Narra.

Subsequently, on September 8, 2008, Redmont filed before the Regional Trial Court of Quezon City,
Branch 92 (RTC) a Complaint16 for injunction with application for issuance of a temporary restraining
order (TRO) and/or writ of preliminary injunction, docketed as Civil Case No. 08-63379. Redmont
prayed for the deferral of the MAB proceedings pending the resolution of the Complaint before the
SEC.

But before the RTC can resolve Redmont’s Complaint and applications for injunctive reliefs, the MAB
issued an Order on September 10, 2008, finding the appeal meritorious. It held:

WHEREFORE, in view of the foregoing, the Mines Adjudication Board hereby REVERSES and SETS
ASIDE the Resolution dated 14 December 2007 of the Panel of Arbitrators of Region IV-B (MIMAROPA)
in POA-DENR Case Nos. 2001-01, 2007-02 and 2007-03, and its Order dated 07 February 2008
denying the Motions for Reconsideration of the Appellants. The Petition filed by Redmont Consolidated
Mines Corporation on 02 January 2007 is hereby ordered DISMISSED.17

Belatedly, on September 16, 2008, the RTC issued an Order18 granting Redmont’s application for a
TRO and setting the case for hearing the prayer for the issuance of a writ of preliminary injunction on
September 19, 2008.

Meanwhile, on September 22, 2008, Redmont filed a Motion for Reconsideration19 of the September
10, 2008 Order of the MAB. Subsequently, it filed a Supplemental Motion for Reconsideration 20 on
September 29, 2008.

Before the MAB could resolve Redmont’s Motion for Reconsideration and Supplemental Motion for
Reconsideration, Redmont filed before the RTC a Supplemental Complaint 21 in Civil Case No. 08-
63379.

On October 6, 2008, the RTC issued an Order22 granting the issuance of a writ of preliminary
injunction enjoining the MAB from finally disposing of the appeals of petitioners and from resolving
Redmont’s Motion for Reconsideration and Supplement Motion for Reconsideration of the MAB’s
September 10, 2008 Resolution.

On July 1, 2009, however, the MAB issued a second Order denying Redmont’s Motion for
Reconsideration and Supplemental Motion for Reconsideration and resolving the appeals filed by
petitioners.

Hence, the petition for review filed by Redmont before the CA, assailing the Orders issued by the MAB.
On October 1, 2010, the CA rendered a Decision, the dispositive of which reads:
WHEREFORE, the Petition is PARTIALLY GRANTED. The assailed Orders, dated September 10, 2008
and July 1, 2009 of the Mining Adjudication Board are reversed and set aside. The findings of the
Panel of Arbitrators of the Department of Environment and Natural Resources that respondents
McArthur, Tesoro and Narra are foreign corporations is upheld and, therefore, the rejection of their
applications for Mineral Product Sharing Agreement should be recommended to the Secretary of the
DENR.

With respect to the applications of respondents McArthur, Tesoro and Narra for Financial or Technical
Assistance Agreement (FTAA) or conversion of their MPSA applications to FTAA, the matter for its
rejection or approval is left for determination by the Secretary of the DENR and the President of the
Republic of the Philippines.

SO ORDERED.23

In a Resolution dated February 15, 2011, the CA denied the Motion for Reconsideration filed by
petitioners.

After a careful review of the records, the CA found that there was doubt as to the nationality of
petitioners when it realized that petitioners had a common major investor, MBMI, a corporation
composed of 100% Canadians. Pursuant to the first sentence of paragraph 7 of Department of Justice
(DOJ) Opinion No. 020, Series of 2005, adopting the 1967 SEC Rules which implemented the
requirement of the Constitution and other laws pertaining to the exploitation of natural resources, the
CA used the "grandfather rule" to determine the nationality of petitioners. It provided:

Shares belonging to corporations or partnerships at least 60% of the capital of which is owned by
Filipino citizens shall be considered as of Philippine nationality, but if the percentage of Filipino
ownership in the corporation or partnership is less than 60%, only the number of shares
corresponding to such percentage shall be counted as of Philippine nationality. Thus, if 100,000 shares
are registered in the name of a corporation or partnership at least 60% of the capital stock or capital,
respectively, of which belong to Filipino citizens, all of the shares shall be recorded as owned by
Filipinos. But if less than 60%, or say, 50% of the capital stock or capital of the corporation or
partnership, respectively, belongs to Filipino citizens, only 50,000 shares shall be recorded as
belonging to aliens.24(emphasis supplied)

In determining the nationality of petitioners, the CA looked into their corporate structures and their
corresponding common shareholders. Using the grandfather rule, the CA discovered that MBMI in
effect owned majority of the common stocks of the petitioners as well as at least 60% equity interest
of other majority shareholders of petitioners through joint venture agreements. The CA found that
through a "web of corporate layering, it is clear that one common controlling investor in all mining
corporations involved x x x is MBMI."25 Thus, it concluded that petitioners McArthur, Tesoro and Narra
are also in partnership with, or privies-in-interest of, MBMI.

Furthermore, the CA viewed the conversion of the MPSA applications of petitioners into FTAA
applications suspicious in nature and, as a consequence, it recommended the rejection of petitioners’
MPSA applications by the Secretary of the DENR.

With regard to the settlement of disputes over rights to mining areas, the CA pointed out that the POA
has jurisdiction over them and that it also has the power to determine the of nationality of petitioners
as a prerequisite of the Constitution prior the conferring of rights to "co-production, joint venture or
production-sharing agreements" of the state to mining rights. However, it also stated that the POA’s
jurisdiction is limited only to the resolution of the dispute and not on the approval or rejection of the
MPSAs. It stipulated that only the Secretary of the DENR is vested with the power to approve or reject
applications for MPSA.
Finally, the CA upheld the findings of the POA in its December 14, 2007 Resolution which considered
petitioners McArthur, Tesoro and Narra as foreign corporations. Nevertheless, the CA determined that
the POA’s declaration that the MPSAs of McArthur, Tesoro and Narra are void is highly improper.

While the petition was pending with the CA, Redmont filed with the Office of the President (OP) a
petition dated May 7, 2010 seeking the cancellation of petitioners’ FTAAs. The OP rendered a
Decision26 on April 6, 2011, wherein it canceled and revoked petitioners’ FTAAs for violating and
circumventing the "Constitution x x x[,] the Small Scale Mining Law and Environmental Compliance
Certificate as well as Sections 3 and 8 of the Foreign Investment Act and E.O. 584."27 The OP, in
affirming the cancellation of the issued FTAAs, agreed with Redmont stating that petitioners
committed violations against the abovementioned laws and failed to submit evidence to negate them.
The Decision further quoted the December 14, 2007 Order of the POA focusing on the alleged
misrepresentation and claims made by petitioners of being domestic or Filipino corporations and the
admitted continued mining operation of PMDC using their locally secured Small Scale Mining Permit
inside the area earlier applied for an MPSA application which was eventually transferred to Narra. It
also agreed with the POA’s estimation that the filing of the FTAA applications by petitioners is a clear
admission that they are "not capable of conducting a large scale mining operation and that they need
the financial and technical assistance of a foreign entity in their operation, that is why they sought the
participation of MBMI Resources, Inc."28 The Decision further quoted:

The filing of the FTAA application on June 15, 2007, during the pendency of the case only demonstrate
the violations and lack of qualification of the respondent corporations to engage in mining. The filing of
the FTAA application conversion which is allowed foreign corporation of the earlier MPSA is an
admission that indeed the respondent is not Filipino but rather of foreign nationality who is disqualified
under the laws. Corporate documents of MBMI Resources, Inc. furnished its stockholders in their head
office in Canada suggest that they are conducting operation only through their local counterparts.29

The Motion for Reconsideration of the Decision was further denied by the OP in a Resolution 30 dated
July 6, 2011. Petitioners then filed a Petition for Review on Certiorari of the OP’s Decision and
Resolution with the CA, docketed as CA-G.R. SP No. 120409. In the CA Decision dated February 29,
2012, the CA affirmed the Decision and Resolution of the OP. Thereafter, petitioners appealed the
same CA decision to this Court which is now pending with a different division.

Thus, the instant petition for review against the October 1, 2010 Decision of the CA. Petitioners put
forth the following errors of the CA:

I.

The Court of Appeals erred when it did not dismiss the case for mootness despite the fact that
the subject matter of the controversy, the MPSA Applications, have already been converted
into FTAA applications and that the same have already been granted.

II.

The Court of Appeals erred when it did not dismiss the case for lack of jurisdiction considering
that the Panel of Arbitrators has no jurisdiction to determine the nationality of Narra, Tesoro
and McArthur.

III.

The Court of Appeals erred when it did not dismiss the case on account of Redmont’s willful
forum shopping.

IV.
 The Court of Appeals’ ruling that Narra, Tesoro and McArthur are foreign corporations based
on the "Grandfather Rule" is contrary to law, particularly the express mandate of the Foreign
Investments Act of 1991, as amended, and the FIA Rules.

V.

The Court of Appeals erred when it applied the exceptions to the res inter alios acta rule.

VI.

The Court of Appeals erred when it concluded that the conversion of the MPSA Applications
into FTAA Applications were of "suspicious nature" as the same is based on mere conjectures
and surmises without any shred of evidence to show the same.31

We find the petition to be without merit.

This case not moot and academic

The claim of petitioners that the CA erred in not rendering the instant case as moot is without merit.

Basically, a case is said to be moot and/or academic when it "ceases to present a justiciable
controversy by virtue of supervening events, so that a declaration thereon would be of no practical
use or value."32 Thus, the courts "generally decline jurisdiction over the case or dismiss it on the
ground of mootness."33

The "mootness" principle, however, does accept certain exceptions and the mere raising of an issue of
"mootness" will not deter the courts from trying a case when there is a valid reason to do so. In David
v. Macapagal-Arroyo (David), the Court provided four instances where courts can decide an otherwise
moot case, thus:

1.) There is a grave violation of the Constitution;

2.) The exceptional character of the situation and paramount public interest is involved;

3.) When constitutional issue raised requires formulation of controlling principles to guide the
bench, the bar, and the public; and

4.) The case is capable of repetition yet evading review.34

All of the exceptions stated above are present in the instant case. We of this Court note that a grave
violation of the Constitution, specifically Section 2 of Article XII, is being committed by a foreign
corporation right under our country’s nose through a myriad of corporate layering under different,
allegedly, Filipino corporations. The intricate corporate layering utilized by the Canadian company,
MBMI, is of exceptional character and involves paramount public interest since it undeniably affects
the exploitation of our Country’s natural resources. The corresponding actions of petitioners during the
lifetime and existence of the instant case raise questions as what principle is to be applied to cases
with similar issues. No definite ruling on such principle has been pronounced by the Court; hence, the
disposition of the issues or errors in the instant case will serve as a guide "to the bench, the bar and
the public."35 Finally, the instant case is capable of repetition yet evading review, since the Canadian
company, MBMI, can keep on utilizing dummy Filipino corporations through various schemes of
corporate layering and conversion of applications to skirt the constitutional prohibition against foreign
mining in Philippine soil.

Conversion of MPSA applications to FTAA applications

We shall discuss the first error in conjunction with the sixth error presented by petitioners since both
involve the conversion of MPSA applications to FTAA applications. Petitioners propound that the CA
erred in ruling against them since the questioned MPSA applications were already converted into FTAA
applications; thus, the issue on the prohibition relating to MPSA applications of foreign mining
corporations is academic. Also, petitioners would want us to correct the CA’s finding which deemed the
aforementioned conversions of applications as suspicious in nature, since it is based on mere
conjectures and surmises and not supported with evidence.

We disagree.

The CA’s analysis of the actions of petitioners after the case was filed against them by respondent is
on point. The changing of applications by petitioners from one type to another just because a case
was filed against them, in truth, would raise not a few sceptics’ eyebrows. What is the reason for such
conversion? Did the said conversion not stem from the case challenging their citizenship and to have
the case dismissed against them for being "moot"? It is quite obvious that it is petitioners’ strategy to
have the case dismissed against them for being "moot."

Consider the history of this case and how petitioners responded to every action done by the court or
appropriate government agency: on January 2, 2007, Redmont filed three separate petitions for denial
of the MPSA applications of petitioners before the POA. On June 15, 2007, petitioners filed a
conversion of their MPSA applications to FTAAs. The POA, in its December 14, 2007 Resolution,
observed this suspect change of applications while the case was pending before it and held:

The filing of the Financial or Technical Assistance Agreement application is a clear admission that the
respondents are not capable of conducting a large scale mining operation and that they need the
financial and technical assistance of a foreign entity in their operation that is why they sought the
participation of MBMI Resources, Inc. The participation of MBMI in the corporation only proves the fact
that it is the Canadian company that will provide the finances and the resources to operate the mining
areas for the greater benefit and interest of the same and not the Filipino stockholders who only have
a less substantial financial stake in the corporation.

xxxx

x x x The filing of the FTAA application on June 15, 2007, during the pendency of the case only
demonstrate the violations and lack of qualification of the respondent corporations to engage in
mining. The filing of the FTAA application conversion which is allowed foreign corporation of the earlier
MPSA is an admission that indeed the respondent is not Filipino but rather of foreign nationality who is
disqualified under the laws. Corporate documents of MBMI Resources, Inc. furnished its stockholders
in their head office in Canada suggest that they are conducting operation only through their local
counterparts.36

On October 1, 2010, the CA rendered a Decision which partially granted the petition, reversing and
setting aside the September 10, 2008 and July 1, 2009 Orders of the MAB. In the said Decision, the
CA upheld the findings of the POA of the DENR that the herein petitioners are in fact foreign
corporations thus a recommendation of the rejection of their MPSA applications were recommended to
the Secretary of the DENR. With respect to the FTAA applications or conversion of the MPSA
applications to FTAAs, the CA deferred the matter for the determination of the Secretary of the DENR
and the President of the Republic of the Philippines.37

In their Motion for Reconsideration dated October 26, 2010, petitioners prayed for the dismissal of the
petition asserting that on April 5, 2010, then President Gloria Macapagal-Arroyo signed and issued in
their favor FTAA No. 05-2010-IVB, which rendered the petition moot and academic. However, the CA,
in a Resolution dated February 15, 2011 denied their motion for being a mere "rehash of their claims
and defenses."38 Standing firm on its Decision, the CA affirmed the ruling that petitioners are, in fact,
foreign corporations. On April 5, 2011, petitioners elevated the case to us via a Petition for Review on
Certiorari under Rule 45, questioning the Decision of the CA. Interestingly, the OP rendered a Decision
dated April 6, 2011, a day after this petition for review was filed, cancelling and revoking the FTAAs,
quoting the Order of the POA and stating that petitioners are foreign corporations since they needed
the financial strength of MBMI, Inc. in order to conduct large scale mining operations. The OP Decision
also based the cancellation on the misrepresentation of facts and the violation of the "Small Scale
Mining Law and Environmental Compliance Certificate as well as Sections 3 and 8 of the Foreign
Investment Act and E.O. 584."39 On July 6, 2011, the OP issued a Resolution, denying the Motion for
Reconsideration filed by the petitioners.

Respondent Redmont, in its Comment dated October 10, 2011, made known to the Court the fact of
the OP’s Decision and Resolution. In their Reply, petitioners chose to ignore the OP Decision and
continued to reuse their old arguments claiming that they were granted FTAAs and, thus, the case was
moot. Petitioners filed a Manifestation and Submission dated October 19, 2012,40 wherein they
asserted that the present petition is moot since, in a remarkable turn of events, MBMI was able to
sell/assign all its shares/interest in the "holding companies" to DMCI Mining Corporation (DMCI), a
Filipino corporation and, in effect, making their respective corporations fully-Filipino owned.

Again, it is quite evident that petitioners have been trying to have this case dismissed for being
"moot." Their final act, wherein MBMI was able to allegedly sell/assign all its shares and interest in the
petitioner "holding companies" to DMCI, only proves that they were in fact not Filipino corporations
from the start. The recent divesting of interest by MBMI will not change the stand of this Court with
respect to the nationality of petitioners prior the suspicious change in their corporate structures. The
new documents filed by petitioners are factual evidence that this Court has no power to verify.

The only thing clear and proved in this Court is the fact that the OP declared that petitioner
corporations have violated several mining laws and made misrepresentations and falsehood in their
applications for FTAA which lead to the revocation of the said FTAAs, demonstrating that petitioners
are not beyond going against or around the law using shifty actions and strategies. Thus, in this
instance, we can say that their claim of mootness is moot in itself because their defense of conversion
of MPSAs to FTAAs has been discredited by the OP Decision.

Grandfather test

The main issue in this case is centered on the issue of petitioners’ nationality, whether Filipino or
foreign. In their previous petitions, they had been adamant in insisting that they were Filipino
corporations, until they submitted their Manifestation and Submission dated October 19, 2012 where
they stated the alleged change of corporate ownership to reflect their Filipino ownership. Thus, there
is a need to determine the nationality of petitioner corporations.

Basically, there are two acknowledged tests in determining the nationality of a corporation: the control
test and the grandfather rule. Paragraph 7 of DOJ Opinion No. 020, Series of 2005, adopting the 1967
SEC Rules which implemented the requirement of the Constitution and other laws pertaining to the
controlling interests in enterprises engaged in the exploitation of natural resources owned by Filipino
citizens, provides:

Shares belonging to corporations or partnerships at least 60% of the capital of which is owned by
Filipino citizens shall be considered as of Philippine nationality, but if the percentage of Filipino
ownership in the corporation or partnership is less than 60%, only the number of shares
corresponding to such percentage shall be counted as of Philippine nationality. Thus, if 100,000 shares
are registered in the name of a corporation or partnership at least 60% of the capital stock or capital,
respectively, of which belong to Filipino citizens, all of the shares shall be recorded as owned by
Filipinos. But if less than 60%, or say, 50% of the capital stock or capital of the corporation or
partnership, respectively, belongs to Filipino citizens, only 50,000 shares shall be counted as owned
by Filipinos and the other 50,000 shall be recorded as belonging to aliens.

The first part of paragraph 7, DOJ Opinion No. 020, stating "shares belonging to corporations or
partnerships at least 60% of the capital of which is owned by Filipino citizens shall be considered as of
Philippine nationality," pertains to the control test or the liberal rule. On the other hand, the second
part of the DOJ Opinion which provides, "if the percentage of the Filipino ownership in the corporation
or partnership is less than 60%, only the number of shares corresponding to such percentage shall be
counted as Philippine nationality," pertains to the stricter, more stringent grandfather rule.

Prior to this recent change of events, petitioners were constant in advocating the application of the
"control test" under RA 7042, as amended by RA 8179, otherwise known as the Foreign Investments
Act (FIA), rather than using the stricter grandfather rule. The pertinent provision under Sec. 3 of the
FIA provides:

SECTION 3. Definitions. - As used in this Act:

a.) The term Philippine national shall mean a citizen of the Philippines; or a domestic partnership or
association wholly owned by the citizens of the Philippines; a corporation organized under the laws of
the Philippines of which at least sixty percent (60%) of the capital stock outstanding and entitled to
vote is wholly owned by Filipinos or a trustee of funds for pension or other employee retirement or
separation benefits, where the trustee is a Philippine national and at least sixty percent (60%) of the
fund will accrue to the benefit of Philippine nationals: Provided, That were a corporation and its non-
Filipino stockholders own stocks in a Securities and Exchange Commission (SEC) registered enterprise,
at least sixty percent (60%) of the capital stock outstanding and entitled to vote of each of both
corporations must be owned and held by citizens of the Philippines and at least sixty percent (60%) of
the members of the Board of Directors, in order that the corporation shall be considered a Philippine
national. (emphasis supplied)

The grandfather rule, petitioners reasoned, has no leg to stand on in the instant case since the
definition of a "Philippine National" under Sec. 3 of the FIA does not provide for it. They further claim
that the grandfather rule "has been abandoned and is no longer the applicable rule."41 They also
opined that the last portion of Sec. 3 of the FIA admits the application of a "corporate layering"
scheme of corporations. Petitioners claim that the clear and unambiguous wordings of the statute
preclude the court from construing it and prevent the court’s use of discretion in applying the law.
They said that the plain, literal meaning of the statute meant the application of the control test is
obligatory.

We disagree. "Corporate layering" is admittedly allowed by the FIA; but if it is used to circumvent the
Constitution and pertinent laws, then it becomes illegal. Further, the pronouncement of petitioners
that the grandfather rule has already been abandoned must be discredited for lack of basis.

Art. XII, Sec. 2 of the 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 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.

xxxx

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. (emphasis
supplied)
The emphasized portion of Sec. 2 which focuses on the State entering into different types of
agreements for the exploration, development, and utilization of natural resources with entities who are
deemed Filipino due to 60 percent ownership of capital is pertinent to this case, since the issues are
centered on the utilization of our country’s natural resources or specifically, mining. Thus, there is a
need to ascertain the nationality of petitioners since, as the Constitution so provides, such agreements
are only allowed corporations or associations "at least 60 percent of such capital is owned by such
citizens." The deliberations in the Records of the 1986 Constitutional Commission shed light on how a
citizenship of a corporation will be determined:

Mr. BENNAGEN: Did I hear right that the Chairman’s interpretation of an independent national
economy is freedom from undue foreign control? What is the meaning of undue foreign control?

MR. VILLEGAS: Undue foreign control is foreign control which sacrifices national sovereignty and the
welfare of the Filipino in the economic sphere.

MR. BENNAGEN: Why does it have to be qualified still with the word "undue"? Why not simply freedom
from foreign control? I think that is the meaning of independence, because as phrased, it still allows
for foreign control.

MR. VILLEGAS: It will now depend on the interpretation because if, for example, we retain the 60/40
possibility in the cultivation of natural resources, 40 percent involves some control; not total control,
but some control.

MR. BENNAGEN: In any case, I think in due time we will propose some amendments.

MR. VILLEGAS: Yes. But we will be open to improvement of the phraseology.

Mr. BENNAGEN: Yes.

Thank you, Mr. Vice-President.

xxxx

MR. NOLLEDO: In Sections 3, 9 and 15, the Committee stated local or Filipino equity and foreign
equity; namely, 60-40 in Section 3, 60-40 in Section 9, and 2/3-1/3 in Section 15.

MR. VILLEGAS: That is right.

MR. NOLLEDO: In teaching law, we are always faced with the question: ‘Where do we base the equity
requirement, is it on the authorized capital stock, on the subscribed capital stock, or on the paid-up
capital stock of a corporation’? Will the Committee please enlighten me on this?

MR. VILLEGAS: We have just had a long discussion with the members of the team from the UP Law
Center who provided us with a draft. The phrase that is contained here which we adopted from the UP
draft is ‘60 percent of the voting stock.’

MR. NOLLEDO: That must be based on the subscribed capital stock, because unless declared
delinquent, unpaid capital stock shall be entitled to vote.

MR. VILLEGAS: That is right.

MR. NOLLEDO: Thank you.

With respect to an investment by one corporation in another corporation, say, a corporation with 60-
40 percent equity invests in another corporation which is permitted by the Corporation Code, does the
Committee adopt the grandfather rule?

MR. VILLEGAS: Yes, that is the understanding of the Committee.

MR. NOLLEDO: Therefore, we need additional Filipino capital?

MR. VILLEGAS: Yes.42 (emphasis supplied)

It is apparent that it is the intention of the framers of the Constitution to apply the grandfather rule in
cases where corporate layering is present.

Elementary in statutory construction is when there is conflict between the Constitution and a statute,
the Constitution will prevail. In this instance, specifically pertaining to the provisions under Art. XII of
the Constitution on National Economy and Patrimony, Sec. 3 of the FIA will have no place of
application. As decreed by the honorable framers of our Constitution, the grandfather rule prevails and
must be applied.

Likewise, paragraph 7, DOJ Opinion No. 020, Series of 2005 provides:

The above-quoted SEC Rules provide for the manner of calculating the Filipino interest in a corporation
for purposes, among others, of determining compliance with nationality requirements (the ‘Investee
Corporation’). Such manner of computation is necessary since the shares in the Investee Corporation
may be owned both by individual stockholders (‘Investing Individuals’) and by corporations and
partnerships (‘Investing Corporation’). The said rules thus provide for the determination of nationality
depending on the ownership of the Investee Corporation and, in certain instances, the Investing
Corporation.

Under the above-quoted SEC Rules, there are two cases in determining the nationality of the Investee
Corporation. The first case is the ‘liberal rule’, later coined by the SEC as the Control Test in its 30 May
1990 Opinion, and pertains to the portion in said Paragraph 7 of the 1967 SEC Rules which states,
‘(s)hares belonging to corporations or partnerships at least 60% of the capital of which is owned by
Filipino citizens shall be considered as of Philippine nationality.’ Under the liberal Control Test, there is
no need to further trace the ownership of the 60% (or more) Filipino stockholdings of the Investing
Corporation since a corporation which is at least 60% Filipino-owned is considered as Filipino.

The second case is the Strict Rule or the Grandfather Rule Proper and pertains to the portion in said
Paragraph 7 of the 1967 SEC Rules which states, "but if the percentage of Filipino ownership in the
corporation or partnership is less than 60%, only the number of shares corresponding to such
percentage shall be counted as of Philippine nationality." Under the Strict Rule or Grandfather Rule
Proper, the combined totals in the Investing Corporation and the Investee Corporation must be traced
(i.e., "grandfathered") to determine the total percentage of Filipino ownership.

Moreover, the ultimate Filipino ownership of the shares must first be traced to the level of the
Investing Corporation and added to the shares directly owned in the Investee Corporation x x x.

xxxx

In other words, based on the said SEC Rule and DOJ Opinion, the Grandfather Rule or the second part
of the SEC Rule applies only when the 60-40 Filipino-foreign equity ownership is in doubt (i.e., in
cases where the joint venture corporation with Filipino and foreign stockholders with less than 60%
Filipino stockholdings [or 59%] invests in other joint venture corporation which is either 60-40%
Filipino-alien or the 59% less Filipino). Stated differently, where the 60-40 Filipino- foreign equity
ownership is not in doubt, the Grandfather Rule will not apply. (emphasis supplied)
After a scrutiny of the evidence extant on record, the Court finds that this case calls for the application
of the grandfather rule since, as ruled by the POA and affirmed by the OP, doubt prevails and persists
in the corporate ownership of petitioners. Also, as found by the CA, doubt is present in the 60-40
Filipino equity ownership of petitioners Narra, McArthur and Tesoro, since their common investor, the
100% Canadian corporation––MBMI, funded them. However, petitioners also claim that there is
"doubt" only when the stockholdings of Filipinos are less than 60%.43

The assertion of petitioners that "doubt" only exists when the stockholdings are less than 60% fails to
convince this Court. DOJ Opinion No. 20, which petitioners quoted in their petition, only made an
example of an instance where "doubt" as to the ownership of the corporation exists. It would be
ludicrous to limit the application of the said word only to the instances where the stockholdings of
non-Filipino stockholders are more than 40% of the total stockholdings in a corporation. The
corporations interested in circumventing our laws would clearly strive to have "60% Filipino
Ownership" at face value. It would be senseless for these applying corporations to state in their
respective articles of incorporation that they have less than 60% Filipino stockholders since the
applications will be denied instantly. Thus, various corporate schemes and layerings are utilized to
circumvent the application of the Constitution.

Obviously, the instant case presents a situation which exhibits a scheme employed by stockholders to
circumvent the law, creating a cloud of doubt in the Court’s mind. To determine, therefore, the actual
participation, direct or indirect, of MBMI, the grandfather rule must be used.

McArthur Mining, Inc.

To establish the actual ownership, interest or participation of MBMI in each of petitioners’ corporate
structure, they have to be "grandfathered."

As previously discussed, McArthur acquired its MPSA application from MMC, which acquired its
application from SMMI. McArthur has a capital stock of ten million pesos (PhP 10,000,000) divided into
10,000 common shares at one thousand pesos (PhP 1,000) per share, subscribed to by the
following:44

Name Nationality Number of Amount Amount Paid

Shares Subscribed

Madridejos Mining Filipino 5,997 PhP 5,997,000.00 PhP 825,000.00

Corporation

MBMI Resources, Canadian 3,998 PhP 3,998,000.0 PhP 1,878,174.60

Inc.

Lauro L. Salazar Filipino 1 PhP 1,000.00 PhP 1,000.00

Fernando B. Filipino 1 PhP 1,000.00 PhP 1,000.00

Esguerra

Manuel A. Agcaoili Filipino 1 PhP 1,000.00 PhP 1,000.00

Michael T. Mason American 1 PhP 1,000.00 PhP 1,000.00

Kenneth Cawkell Canadian 1 PhP 1,000.00 PhP 1,000.00

Total 10,000 PhP 10,000,000.00 PhP 2,708,174.60

(emphasis supplied)

Interestingly, looking at the corporate structure of MMC, we take note that it has a similar structure
and composition as McArthur. In fact, it would seem that MBMI is also a major investor and
"controls"45 MBMI and also, similar nominal shareholders were present, i.e. Fernando B. Esguerra
(Esguerra), Lauro L. Salazar (Salazar), Michael T. Mason (Mason) and Kenneth Cawkell (Cawkell):
Madridejos Mining Corporation

Name Nationality Number of Amount Amount Paid

Shares Subscribed

Olympic Mines Filipino 6,663 PhP 6,663,000.00 PhP 0

&

Development

Corp.

MBMI Canadian 3,331 PhP 3,331,000.00 PhP 2,803,900.00

Resources,

Inc.

Amanti Limson Filipino 1 PhP 1,000.00 PhP 1,000.00

Fernando B. Filipino 1 PhP 1,000.00 PhP 1,000.00

Esguerra

Lauro Salazar Filipino 1 PhP 1,000.00 PhP 1,000.00

Emmanuel G. Filipino 1 PhP 1,000.00 PhP 1,000.00

Hernando

Michael T. American 1 PhP 1,000.00 PhP 1,000.00

Mason

Kenneth Canadian 1 PhP 1,000.00 PhP 1,000.00

Cawkell

Total 10,000 PhP 10,000,000.00 PhP 2,809,900.00

(emphasis supplied)

Noticeably, Olympic Mines & Development Corporation (Olympic) did not pay any amount with respect
to the number of shares they subscribed to in the corporation, which is quite absurd since Olympic is
the major stockholder in MMC. MBMI’s 2006 Annual Report sheds light on why Olympic failed to pay
any amount with respect to the number of shares it subscribed to. It states that Olympic entered into
joint venture agreements with several Philippine companies, wherein it holds directly and indirectly a
60% effective equity interest in the Olympic Properties.46 Quoting the said Annual report:

On September 9, 2004, the Company and Olympic Mines & Development Corporation ("Olympic")
entered into a series of agreements including a Property Purchase and Development Agreement (the
Transaction Documents) with respect to three nickel laterite properties in Palawan, Philippines (the
"Olympic Properties"). The Transaction Documents effectively establish a joint venture between the
Company and Olympic for purposes of developing the Olympic Properties. The Company holds directly
and indirectly an initial 60% interest in the joint venture. Under certain circumstances and upon
achieving certain milestones, the Company may earn up to a 100% interest, subject to a 2.5% net
revenue royalty.47 (emphasis supplied)

Thus, as demonstrated in this first corporation, McArthur, when it is "grandfathered," company

layering was utilized by MBMI to gain control over McArthur. It is apparent that MBMI has more than
60% or more equity interest in McArthur, making the latter a foreign corporation.
Tesoro Mining and Development, Inc.

Tesoro, which acquired its MPSA application from SMMI, has a capital stock of ten million pesos (PhP
10,000,000) divided into ten thousand (10,000) common shares at PhP 1,000 per share, as
demonstrated below:

[[reference
= http://sc.judiciary.gov.ph/pdf/web/viewer.html?file=/jurisprudence/2014/april2014/195580.pdf]]

Name Nationality Number of Amount Amount Paid

Shares Subscribed

Sara Marie Filipino 5,997 PhP 5,997,000.00 PhP 825,000.00

Mining, Inc.

MBMI Canadian 3,998 PhP 3,998,000.00 PhP 1,878,174.60

Resources, Inc.

Lauro L. Salazar Filipino 1 PhP 1,000.00 PhP 1,000.00

Fernando B. Filipino 1 PhP 1,000.00 PhP 1,000.00

Esguerra

Manuel A. Filipino 1 PhP 1,000.00 PhP 1,000.00

Agcaoili

Michael T. Mason American 1 PhP 1,000.00 PhP 1,000.00

Kenneth Cawkell Canadian 1 PhP 1,000.00 PhP 1,000.00

Total 10,000 PhP PhP 2,708,174.60

10,000,000.00
(emphasis supplied)

Except for the name "Sara Marie Mining, Inc.," the table above shows exactly the same figures as the
corporate structure of petitioner McArthur, down to the last centavo. All the other shareholders are the
same: MBMI, Salazar, Esguerra, Agcaoili, Mason and Cawkell. The figures under "Nationality,"
"Number of Shares," "Amount Subscribed," and "Amount Paid" are exactly the same. Delving deeper,
we scrutinize SMMI’s corporate structure:

Sara Marie Mining, Inc.

[[reference
= http://sc.judiciary.gov.ph/pdf/web/viewer.html?file=/jurisprudence/2014/april2014/195580.pdf]]

Name Nationality Number of Amount Amount Paid

 Shares Subscribed

Olympic Mines & Filipino 6,663 PhP 6,663,000.00 PhP 0

Development

Corp.

MBMI Resources, Canadian 3,331 PhP 3,331,000.00 PhP 2,794,000.00

Inc.

Amanti Limson Filipino 1 PhP 1,000.00 PhP 1,000.00

Fernando B. Filipino 1 PhP 1,000.00 PhP 1,000.00

Esguerra

Lauro Salazar Filipino 1 PhP 1,000.00 PhP 1,000.00

Emmanuel G. Filipino 1 PhP 1,000.00 PhP 1,000.00

Hernando

Michael T. Mason American 1 PhP 1,000.00 PhP 1,000.00

Kenneth Cawkell Canadian 1 PhP 1,000.00 PhP 1,000.00

Total 10,000 PhP PhP 2,809,900.00

10,000,000.00
(emphasis supplied)

After subsequently studying SMMI’s corporate structure, it is not farfetched for us to spot the glaring
similarity between SMMI and MMC’s corporate structure. Again, the presence of identical stockholders,
namely: Olympic, MBMI, Amanti Limson (Limson), Esguerra, Salazar, Hernando, Mason and Cawkell.
The figures under the headings "Nationality," "Number of Shares," "Amount Subscribed," and "Amount
Paid" are exactly the same except for the amount paid by MBMI which now reflects the amount of two
million seven hundred ninety four thousand pesos (PhP 2,794,000). Oddly, the total value of the
amount paid is two million eight hundred nine thousand nine hundred pesos (PhP 2,809,900).

Accordingly, after "grandfathering" petitioner Tesoro and factoring in Olympic’s participation in SMMI’s
corporate structure, it is clear that MBMI is in control of Tesoro and owns 60% or more equity interest
in Tesoro. This makes petitioner Tesoro a non-Filipino corporation and, thus, disqualifies it to
participate in the exploitation, utilization and development of our natural resources.

Narra Nickel Mining and Development Corporation

Moving on to the last petitioner, Narra, which is the transferee and assignee of PLMDC’s MPSA
application, whose corporate structure’s arrangement is similar to that of the first two petitioners
discussed. The capital stock of Narra is ten million pesos (PhP 10,000,000), which is divided into ten
thousand common shares (10,000) at one thousand pesos (PhP 1,000) per share, shown as follows:

[[reference
= http://sc.judiciary.gov.ph/pdf/web/viewer.html?file=/jurisprudence/2014/april2014/195580.pdf]]
 Name Nationality Number of Amount Amount Paid

Shares Subscribed

Patricia Louise Filipino 5,997 PhP 5,997,000.00 PhP 1,677,000.00

Mining &

Development

Corp.

MBMI Canadian 3,998 PhP 3,996,000.00 PhP 1,116,000.00

Resources, Inc.

Higinio C. Filipino 1 PhP 1,000.00 PhP 1,000.00

Mendoza, Jr.

Henry E. Filipino 1 PhP 1,000.00 PhP 1,000.00

Fernandez

Manuel A. Filipino 1 PhP 1,000.00 PhP 1,000.00

Agcaoili

Ma. Elena A. Filipino 1 PhP 1,000.00 PhP 1,000.00

Bocalan

Bayani H. Agabin Filipino 1 PhP 1,000.00 PhP 1,000.00

Robert L. American 1 PhP 1,000.00 PhP 1,000.00

McCurdy

Kenneth Cawkell Canadian 1 PhP 1,000.00 PhP 1,000.00

Total 10,000 PhP PhP 2,800,000.00

10,000,000.00 (emphasis supplied)

Again, MBMI, along with other nominal stockholders, i.e., Mason, Agcaoili and Esguerra, is present in
this corporate structure.

Patricia Louise Mining & Development Corporation

Using the grandfather method, we further look and examine PLMDC’s corporate structure:

Name Nationality Number of Amount Amount Paid

Shares Subscribed
 Palawan Alpha South Filipino 6,596 PhP PhP 0
Resources Development 6,596,000.00
Corporation

MBMI Resources, Canadian 3,396 PhP PhP

3,396,000.00 2,796,000.00
Inc.

Higinio C. Mendoza, Jr. Filipino 1 PhP 1,000.00 PhP 1,000.00

Fernando B. Esguerra Filipino 1 PhP 1,000.00 PhP 1,000.00

Henry E. Fernandez Filipino 1 PhP 1,000.00 PhP 1,000.00

Lauro L. Salazar Filipino 1 PhP 1,000.00 PhP 1,000.00

Manuel A. Agcaoili Filipino 1 PhP 1,000.00 PhP 1,000.00

Bayani H. Agabin Filipino 1 PhP 1,000.00 PhP 1,000.00

Michael T. Mason American 1 PhP 1,000.00 PhP 1,000.00

Kenneth Cawkell Canadian 1 PhP 1,000.00 PhP 1,000.00

Total 10,000 PhP PhP

10,000,000.00 2,708,174.60
(emphasis
supplied)

Yet again, the usual players in petitioners’ corporate structures are present. Similarly, the amount of
money paid by the 2nd tier majority stock holder, in this case, Palawan Alpha South Resources and
Development Corp. (PASRDC), is zero.

Studying MBMI’s Summary of Significant Accounting Policies dated October 31, 2005 explains the
reason behind the intricate corporate layering that MBMI immersed itself in:

JOINT VENTURES The Company’s ownership interests in various mining ventures engaged in the
acquisition, exploration and development of mineral properties in the Philippines is described as
follows:

(a) Olympic Group

The Philippine companies holding the Olympic Property, and the ownership and interests therein, are
as follows:

Olympic- Philippines (the "Olympic Group")

Sara Marie Mining Properties Ltd. ("Sara Marie") 33.3%

Tesoro Mining & Development, Inc. (Tesoro) 60.0%

Pursuant to the Olympic joint venture agreement the Company holds directly and indirectly an
effective equity interest in the Olympic Property of 60.0%. Pursuant to a shareholders’ agreement, the
Company exercises joint control over the companies in the Olympic Group.

(b) Alpha Group

The Philippine companies holding the Alpha Property, and the ownership interests therein, are as
follows:

Alpha- Philippines (the "Alpha Group")

Patricia Louise Mining Development Inc. ("Patricia") 34.0%

Narra Nickel Mining & Development Corporation (Narra) 60.4%

Under a joint venture agreement the Company holds directly and indirectly an effective equity interest
in the Alpha Property of 60.4%. Pursuant to a shareholders’ agreement, the Company exercises joint
control over the companies in the Alpha Group.48 (emphasis supplied)

Concluding from the above-stated facts, it is quite safe to say that petitioners McArthur, Tesoro and
Narra are not Filipino since MBMI, a 100% Canadian corporation, owns 60% or more of their equity
interests. Such conclusion is derived from grandfathering petitioners’ corporate owners, namely: MMI,
SMMI and PLMDC. Going further and adding to the picture, MBMI’s Summary of Significant Accounting
Policies statement– –regarding the "joint venture" agreements that it entered into with the "Olympic"
and "Alpha" groups––involves SMMI, Tesoro, PLMDC and Narra. Noticeably, the ownership of the
"layered" corporations boils down to MBMI, Olympic or corporations under the "Alpha" group wherein
MBMI has joint venture agreements with, practically exercising majority control over the corporations
mentioned. In effect, whether looking at the capital structure or the underlying relationships between
and among the corporations, petitioners are NOT Filipino nationals and must be considered foreign
since 60% or more of their capital stocks or equity interests are owned by MBMI.

Application of the res inter alios acta rule

Petitioners question the CA’s use of the exception of the res inter alios acta or the "admission by co-
partner or agent" rule and "admission by privies" under the Rules of Court in the instant case, by
pointing out that statements made by MBMI should not be admitted in this case since it is not a party
to the case and that it is not a "partner" of petitioners.

Secs. 29 and 31, Rule 130 of the Revised Rules of Court provide:

Sec. 29. Admission by co-partner or agent.- The act or declaration of a partner or agent of the party
within the scope of his authority and during the existence of the partnership or agency, may be given
in evidence against such party after the partnership or agency is shown by evidence other than such
act or declaration itself. The same rule applies to the act or declaration of a joint owner, joint debtor,
or other person jointly interested with the party.

Sec. 31. Admission by privies.- Where one derives title to property from another, the act, declaration,
or omission of the latter, while holding the title, in relation to the property, is evidence against the
former.

Petitioners claim that before the above-mentioned Rule can be applied to a case, "the partnership
relation must be shown, and that proof of the fact must be made by evidence other than the
admission itself."49 Thus, petitioners assert that the CA erred in finding that a partnership relationship
exists between them and MBMI because, in fact, no such partnership exists.

Partnerships vs. joint venture agreements

Petitioners claim that the CA erred in applying Sec. 29, Rule 130 of the Rules by stating that "by
entering into a joint venture, MBMI have a joint interest" with Narra, Tesoro and McArthur. They
challenged the conclusion of the CA which pertains to the close characteristics of
"partnerships" and "joint venture agreements." Further, they asserted that before this particular
partnership can be formed, it should have been formally reduced into writing since the capital involved
is more than three thousand pesos (PhP 3,000). Being that there is no evidence of written agreement
to form a partnership between petitioners and MBMI, no partnership was created.

We disagree.

A partnership is defined as two or more persons who bind themselves to contribute money, property,
or industry to a common fund with the intention of dividing the profits among themselves. 50 On the
other hand, joint ventures have been deemed to be "akin" to partnerships since it is difficult to
distinguish between joint ventures and partnerships. Thus:

[T]he relations of the parties to a joint venture and the nature of their association are so similar and
closely akin to a partnership that it is ordinarily held that their rights, duties, and liabilities are to be
tested by rules which are closely analogous to and substantially the same, if not exactly the same, as
those which govern partnership. In fact, it has been said that the trend in the law has been to blur the
distinctions between a partnership and a joint venture, very little law being found applicable to one
that does not apply to the other.51

Though some claim that partnerships and joint ventures are totally different animals, there are very
few rules that differentiate one from the other; thus, joint ventures are deemed "akin" or similar to a
partnership. In fact, in joint venture agreements, rules and legal incidents governing partnerships are
applied.52

Accordingly, culled from the incidents and records of this case, it can be assumed that the
relationships entered between and among petitioners and MBMI are no simple "joint venture
agreements." As a rule, corporations are prohibited from entering into partnership agreements;
consequently, corporations enter into joint venture agreements with other corporations or
partnerships for certain transactions in order to form "pseudo partnerships."

Obviously, as the intricate web of "ventures" entered into by and among petitioners and MBMI was
executed to circumvent the legal prohibition against corporations entering into partnerships, then the
relationship created should be deemed as "partnerships," and the laws on partnership should be
applied. Thus, a joint venture agreement between and among corporations may be seen as similar to
partnerships since the elements of partnership are present.

Considering that the relationships found between petitioners and MBMI are considered to be
partnerships, then the CA is justified in applying Sec. 29, Rule 130 of the Rules by stating that "by
entering into a joint venture, MBMI have a joint interest" with Narra, Tesoro and McArthur.

Panel of Arbitrators’ jurisdiction

We affirm the ruling of the CA in declaring that the POA has jurisdiction over the instant case. The POA
has jurisdiction to settle disputes over rights to mining areas which definitely involve the petitions filed
by Redmont against petitioners Narra, McArthur and Tesoro. Redmont, by filing its petition against
petitioners, is asserting the right of Filipinos over mining areas in the Philippines against alleged
foreign-owned mining corporations. Such claim constitutes a "dispute" found in Sec. 77 of RA 7942:

Within thirty (30) days, after the submission of the case by the parties for the decision, the panel shall
have exclusive and original jurisdiction to hear and decide the following:

(a) Disputes involving rights to mining areas

(b) Disputes involving mineral agreements or permits

We held in Celestial Nickel Mining Exploration Corporation v. Macroasia Corp.:53

The phrase "disputes involving rights to mining areas" refers to any adverse claim, protest, or
opposition to an application for mineral agreement. The POA therefore has the jurisdiction to resolve
any adverse claim, protest, or opposition to a pending application for a mineral agreement filed with
the concerned Regional Office of the MGB. This is clear from Secs. 38 and 41 of the DENR AO 96-40,
which provide:

Sec. 38.

xxxx

Within thirty (30) calendar days from the last date of publication/posting/radio announcements, the
authorized officer(s) of the concerned office(s) shall issue a certification(s) that the
publication/posting/radio announcement have been complied with. Any adverse claim, protest,
opposition shall be filed directly, within thirty (30) calendar days from the last date of
publication/posting/radio announcement, with the concerned Regional Office or through any concerned
PENRO or CENRO for filing in the concerned Regional Office for purposes of its resolution by the Panel
of Arbitrators pursuant to the provisions of this Act and these implementing rules and regulations.
Upon final resolution of any adverse claim, protest or opposition, the Panel of Arbitrators shall likewise
issue a certification to that effect within five (5) working days from the date of finality of resolution
thereof. Where there is no adverse claim, protest or opposition, the Panel of Arbitrators shall likewise
issue a Certification to that effect within five working days therefrom.

xxxx

No Mineral Agreement shall be approved unless the requirements under this Section are fully complied
with and any adverse claim/protest/opposition is finally resolved by the Panel of Arbitrators.

Sec. 41.

xxxx

Within fifteen (15) working days form the receipt of the Certification issued by the Panel of Arbitrators
as provided in Section 38 hereof, the concerned Regional Director shall initially evaluate the Mineral
Agreement applications in areas outside Mineral reservations. He/She shall thereafter endorse his/her
findings to the Bureau for further evaluation by the Director within fifteen (15) working days from
receipt of forwarded documents. Thereafter, the Director shall endorse the same to the secretary for
consideration/approval within fifteen working days from receipt of such endorsement.

In case of Mineral Agreement applications in areas with Mineral Reservations, within fifteen (15)
working days from receipt of the Certification issued by the Panel of Arbitrators as provided for in
Section 38 hereof, the same shall be evaluated and endorsed by the Director to the Secretary for
consideration/approval within fifteen days from receipt of such endorsement. (emphasis supplied)

It has been made clear from the aforecited provisions that the "disputes involving rights to mining
areas" under Sec. 77(a) specifically refer only to those disputes relative to the applications for a
mineral agreement or conferment of mining rights.

The jurisdiction of the POA over adverse claims, protest, or oppositions to a mining right application is
further elucidated by Secs. 219 and 43 of DENR AO 95-936, which read:

Sec. 219. Filing of Adverse Claims/Conflicts/Oppositions.- Notwithstanding the provisions of Sections

28, 43 and 57 above, any adverse claim, protest or opposition specified in said sections may also be
filed directly with the Panel of Arbitrators within the concerned periods for filing such claim, protest or
opposition as specified in said Sections.

Sec. 43. Publication/Posting of Mineral Agreement.-

xxxx

The Regional Director or concerned Regional Director shall also cause the posting of the application on
the bulletin boards of the Bureau, concerned Regional office(s) and in the concerned province(s) and
municipality(ies), copy furnished the barangays where the proposed contract area is located once a
week for two (2) consecutive weeks in a language generally understood in the locality. After forty-five
(45) days from the last date of publication/posting has been made and no adverse claim, protest or
opposition was filed within the said forty-five (45) days, the concerned offices shall issue a certification
that publication/posting has been made and that no adverse claim, protest or opposition of whatever
nature has been filed. On the other hand, if there be any adverse claim, protest or opposition, the
same shall be filed within forty-five (45) days from the last date of publication/posting, with the
Regional Offices concerned, or through the Department’s Community Environment and Natural
Resources Officers (CENRO) or Provincial Environment and Natural Resources Officers (PENRO), to be
filed at the Regional Office for resolution of the Panel of Arbitrators. However previously published
valid and subsisting mining claims are exempted from posted/posting required under this Section.

No mineral agreement shall be approved unless the requirements under this section are fully complied
with and any opposition/adverse claim is dealt with in writing by the Director and resolved by the
Panel of Arbitrators. (Emphasis supplied.)

It has been made clear from the aforecited provisions that the "disputes involving rights to mining
areas" under Sec. 77(a) specifically refer only to those disputes relative to the applications for a
mineral agreement or conferment of mining rights.

The jurisdiction of the POA over adverse claims, protest, or oppositions to a mining right application is
further elucidated by Secs. 219 and 43 of DENRO AO 95-936, which reads:

Sec. 219. Filing of Adverse Claims/Conflicts/Oppositions.- Notwithstanding the provisions of Sections

28, 43 and 57 above, any adverse claim, protest or opposition specified in said sections may also be
filed directly with the Panel of Arbitrators within the concerned periods for filing such claim, protest or
opposition as specified in said Sections.

Sec. 43. Publication/Posting of Mineral Agreement Application.-

xxxx

The Regional Director or concerned Regional Director shall also cause the posting of the application on
the bulletin boards of the Bureau, concerned Regional office(s) and in the concerned province(s) and
municipality(ies), copy furnished the barangays where the proposed contract area is located once a
week for two (2) consecutive weeks in a language generally understood in the locality. After forty-five
(45) days from the last date of publication/posting has been made and no adverse claim, protest or
opposition was filed within the said forty-five (45) days, the concerned offices shall issue a certification
that publication/posting has been made and that no adverse claim, protest or opposition of whatever
nature has been filed. On the other hand, if there be any adverse claim, protest or opposition, the
same shall be filed within forty-five (45) days from the last date of publication/posting, with the
Regional offices concerned, or through the Department’s Community Environment and Natural
Resources Officers (CENRO) or Provincial Environment and Natural Resources Officers (PENRO), to be
filed at the Regional Office for resolution of the Panel of Arbitrators. However, previously published
valid and subsisting mining claims are exempted from posted/posting required under this Section.
No mineral agreement shall be approved unless the requirements under this section are fully complied
with and any opposition/adverse claim is dealt with in writing by the Director and resolved by the
Panel of Arbitrators. (Emphasis supplied.)

These provisions lead us to conclude that the power of the POA to resolve any adverse claim,
opposition, or protest relative to mining rights under Sec. 77(a) of RA 7942 is confined only to adverse
claims, conflicts and oppositions relating to applications for the grant of mineral rights.

POA’s jurisdiction is confined only to resolutions of such adverse claims, conflicts and oppositions and
it has no authority to approve or reject said applications. Such power is vested in the DENR Secretary
upon recommendation of the MGB Director. Clearly, POA’s jurisdiction over "disputes involving rights
to mining areas" has nothing to do with the cancellation of existing mineral agreements. (emphasis
ours)

Accordingly, as we enunciated in Celestial, the POA unquestionably has jurisdiction to resolve disputes
over MPSA applications subject of Redmont’s petitions. However, said jurisdiction does not include
either the approval or rejection of the MPSA applications, which is vested only upon the Secretary of
the DENR. Thus, the finding of the POA, with respect to the rejection of petitioners’ MPSA applications
being that they are foreign corporation, is valid.

Justice Marvic Mario Victor F. Leonen, in his Dissent, asserts that it is the regular courts, not the POA,
that has jurisdiction over the MPSA applications of petitioners.

This postulation is incorrect.

It is basic that the jurisdiction of the court is determined by the statute in force at the time of the
commencement of the action.54

Sec. 19, Batas Pambansa Blg. 129 or "The Judiciary Reorganization

Act of 1980" reads:

Sec. 19. Jurisdiction in Civil Cases.—Regional Trial Courts shall exercise exclusive original jurisdiction:

1. In all civil actions in which the subject of the litigation is incapable of pecuniary estimation.

On the other hand, the jurisdiction of POA is unequivocal from Sec. 77 of RA 7942:

Section 77. Panel of Arbitrators.—

x x x Within thirty (30) days, after the submission of the case by the parties for the decision,
the panel shall have exclusive and original jurisdiction to hear and decide the following:

(c) Disputes involving rights to mining areas

(d) Disputes involving mineral agreements or permits

It is clear that POA has exclusive and original jurisdiction over any and all disputes involving rights to
mining areas. One such dispute is an MPSA application to which an adverse claim, protest or
opposition is filed by another interested applicant.1âwphi1 In the case at bar, the dispute arose or
originated from MPSA applications where petitioners are asserting their rights to mining areas subject
of their respective MPSA applications. Since respondent filed 3 separate petitions for the denial of said
applications, then a controversy has developed between the parties and it is POA’s jurisdiction to
resolve said disputes.
Moreover, the jurisdiction of the RTC involves civil actions while what petitioners filed with the DENR
Regional Office or any concerned DENRE or CENRO are MPSA applications. Thus POA has jurisdiction.

Furthermore, the POA has jurisdiction over the MPSA applications under the doctrine of primary
jurisdiction. Euro-med Laboratories v. Province of Batangas55 elucidates:

The doctrine of primary jurisdiction holds that if a case is such that its determination requires the
expertise, specialized training and knowledge of an administrative body, relief must first be obtained
in an administrative proceeding before resort to the courts is had even if the matter may well be
within their proper jurisdiction.

Whatever may be the decision of the POA will eventually reach the court system via a resort to the CA
and to this Court as a last recourse.

Selling of MBMI’s shares to DMCI

As stated before, petitioners’ Manifestation and Submission dated October 19, 2012 would want us to
declare the instant petition moot and academic due to the transfer and conveyance of all the
shareholdings and interests of MBMI to DMCI, a corporation duly organized and existing under
Philippine laws and is at least 60% Philippine-owned.56 Petitioners reasoned that they now cannot be
considered as foreign-owned; the transfer of their shares supposedly cured the "defect" of their
previous nationality. They claimed that their current FTAA contract with the State should stand since
"even wholly-owned foreign corporations can enter into an FTAA with the State."57Petitioners stress
that there should no longer be any issue left as regards their qualification to enter into FTAA contracts
since they are qualified to engage in mining activities in the Philippines. Thus, whether the
"grandfather rule" or the "control test" is used, the nationalities of petitioners cannot be doubted since
it would pass both tests.

The sale of the MBMI shareholdings to DMCI does not have any bearing in the instant case and said
fact should be disregarded. The manifestation can no longer be considered by us since it is being
tackled in G.R. No. 202877 pending before this Court.1âwphi1 Thus, the question of whether
petitioners, allegedly a Philippine-owned corporation due to the sale of MBMI's shareholdings to DMCI,
are allowed to enter into FTAAs with the State is a non-issue in this case.

In ending, the "control test" is still the prevailing mode of determining whether or not a corporation is
a Filipino corporation, within the ambit of Sec. 2, Art. II of the 1987 Constitution, entitled to undertake
the exploration, development and utilization of the natural resources of the Philippines. When in the
mind of the Court there is doubt, based on the attendant facts and circumstances of the case, in the
60-40 Filipino-equity ownership in the corporation, then it may apply the "grandfather rule."

WHEREFORE, premises considered, the instant petition is DENIED. The assailed Court of Appeals
Decision dated October 1, 2010 and Resolution dated February 15, 2011 are hereby AFFIRMED.

SO ORDERED.

10. DIDIPIO v. GOZUN

CHICO-NAZARIO, J.:

This petition for prohibition and mandamus under Rule 65 of the Rules of Court assails the
constitutionality of Republic Act No. 7942 otherwise known as the Philippine Mining Act of 1995,
together with the Implementing Rules and Regulations issued pursuant thereto, Department of
Environment and Natural Resources (DENR) Administrative Order No. 96-40, s. 1996 (DAO 96-40) and
of the Financial and Technical Assistance Agreement (FTAA) entered into on 20 June 1994 by the
Republic of the Philippines and Arimco Mining Corporation (AMC), a corporation established under the
laws of Australia and owned by its nationals.

On 25 July 1987, then President Corazon C. Aquino promulgated Executive Order No. 279 which
authorized the DENR Secretary to accept, consider and evaluate proposals from foreign-owned
corporations or foreign investors for contracts of agreements involving either technical or financial
assistance for large-scale exploration, development, and utilization of minerals, which, upon
appropriate recommendation of the Secretary, the President may execute with the foreign proponent.

On 3 March 1995, then President Fidel V. Ramos signed into law Rep. Act No. 7942 entitled, "An Act
Instituting A New System of Mineral Resources Exploration, Development, Utilization and
Conservation," otherwise known as the Philippine Mining Act of 1995.

On 15 August 1995, then DENR Secretary Victor O. Ramos issued DENR Administrative Order (DAO)
No. 23, Series of 1995, containing the implementing guidelines of Rep. Act No. 7942. This was soon
superseded by DAO No. 96-40, s. 1996, which took effect on 23 January 1997 after due publication.

Previously, however, or specifically on 20 June 1994, President Ramos executed an FTAA with AMC
over a total land area of 37,000 hectares covering the provinces of Nueva Vizcaya and Quirino.
Included in this area is Barangay Dipidio, Kasibu, Nueva Vizcaya.

Subsequently, AMC consolidated with Climax Mining Limited to form a single company that now goes
under the new name of Climax-Arimco Mining Corporation (CAMC), the controlling 99% of
stockholders of which are Australian nationals.

On 7 September 2001, counsels for petitioners filed a demand letter addressed to then DENR
Secretary Heherson Alvarez, for the cancellation of the CAMC FTAA for the primary reason that Rep.
Act No. 7942 and its Implementing Rules and Regulations DAO 96-40 are unconstitutional. The Office
of the Executive Secretary was also furnished a copy of the said letter. There being no response to
both letters, another letter of the same content dated 17 June 2002 was sent to President Gloria
Macapagal Arroyo. This letter was indorsed to the DENR Secretary and eventually referred to the Panel
of Arbitrators of the Mines and Geosciences Bureau (MGB), Regional Office No. 02, Tuguegarao,
Cagayan, for further action.

On 12 November 2002, counsels for petitioners received a letter from the Panel of Arbitrators of the
MGB requiring the petitioners to comply with the Rules of the Panel of Arbitrators before the letter
may be acted upon.

Yet again, counsels for petitioners sent President Arroyo another demand letter dated 8 November
2002. Said letter was again forwarded to the DENR Secretary who referred the same to the MGB,
Quezon City.

In a letter dated 19 February 2003, the MGB rejected the demand of counsels for petitioners for the
cancellation of the CAMC FTAA.1avvphil.net

Petitioners thus filed the present petition for prohibition and mandamus, with a prayer for a temporary
restraining order. They pray that the Court issue an order:

1. enjoining public respondents from acting on any application for FTAA;

2. declaring unconstitutional the Philippine Mining Act of 1995 and its Implementing Rules and
Regulations;

3. canceling the FTAA issued to CAMC.

In their memorandum petitioners pose the following issues:

Whether or not Republic Act No. 7942 and the CAMC FTAA are void because they allow the unjust and
unlawful taking of property without payment of just compensation , in violation of Section 9, Article III
of the Constitution.

II

Whether or not the Mining Act and its Implementing Rules and Regulations are void and
unconstitutional for sanctioning an unconstitutional administrative process of determining just
compensation.

III

Whether or not the State, through Republic Act No. 7942 and the CAMC FTAA, abdicated its primary
responsibility to the full control and supervision over natural resources.

IV

Whether or not the respondents’ interpretation of the role of wholly foreign and foreign-owned
corporations in their involvement in mining enterprises, violates paragraph 4, section 2, Article XII of
the Constitution.

WHETHER OR NOT THE 1987 CONSTITUTION PROHIBITS SERVICE CONTRACTS.1

Before going to the substantive issues, the procedural question raised by public respondents shall first
be dealt with. Public respondents are of the view that petitioners’ eminent domain claim is not ripe for
adjudication as they fail to allege that CAMC has actually taken their properties nor do they allege that
their property rights have been endangered or are in danger on account of CAMC’s FTAA. In effect,
public respondents insist that the issue of eminent domain is not a justiciable controversy which this
Court can take cognizance of.

A justiciable controversy is defined as a definite and concrete dispute touching on the legal relations of
parties having adverse legal interests which may be resolved by a court of law through the application
of a law.2 Thus, courts have no judicial power to review cases involving political questions and as a
rule, will desist from taking cognizance of speculative or hypothetical cases, advisory opinions and
cases that have become moot.3 The Constitution is quite explicit on this matter.4 It provides that
judicial power includes the duty of the courts of justice to settle actual controversies involving rights
which are legally demandable and enforceable. Pursuant to this constitutional mandate, courts,
through the power of judicial review, are to entertain only real disputes between conflicting parties
through the application of law. For the courts to exercise the power of judicial review, the following
must be extant (1) there must be an actual case calling for the exercise of judicial power; (2) the
question must be ripe for adjudication; and (3) the person challenging must have the "standing." 5

An actual case or controversy involves a conflict of legal rights, an assertion of opposite legal claims,
susceptible of judicial resolution as distinguished from a hypothetical or abstract difference or
dispute.6 There must be a contrariety of legal rights that can be interpreted and enforced on the basis
of existing law and jurisprudence.
Closely related to the second requisite is that the question must be ripe for adjudication. A question is
considered ripe for adjudication when the act being challenged has had a direct adverse effect on the
individual challenging it.7

The third requisite is legal standing or locus standi. It is defined as a personal or substantial interest in
the case such that the party has sustained or will sustain direct injury as a result of the governmental
act that is being challenged, alleging more than a generalized grievance.8 The gist of the question of
standing is whether a party alleges "such personal stake in the outcome of the controversy as to
assure that concrete adverseness which sharpens the presentation of issues upon which the court
depends for illumination of difficult constitutional questions."9 Unless a person is injuriously affected in
any of his constitutional rights by the operation of statute or ordinance, he has no standing. 10

In the instant case, there exists a live controversy involving a clash of legal rights as Rep. Act No.
7942 has been enacted, DAO 96-40 has been approved and an FTAAs have been entered into. The
FTAA holders have already been operating in various provinces of the country. Among them is CAMC
which operates in the provinces of Nueva Vizcaya and Quirino where numerous individuals including
the petitioners are imperiled of being ousted from their landholdings in view of the CAMC FTAA. In
light of this, the court cannot await the adverse consequences of the law in order to consider the
controversy actual and ripe for judicial intervention.11 Actual eviction of the land owners and
occupants need not happen for this Court to intervene. As held in Pimentel, Jr. v. Hon. Aguirre12:

By the mere enactment of the questioned law or the approval of the challenged act, the dispute is said
to have ripened into a judicial controversy even without any other overt act. Indeed, even a singular
violation of the Constitution and/or the law is enough to awaken judicial duty.13

Petitioners embrace various segments of the society. These include Didipio Earth-Savers’ Multi-
Purpose Association, Inc., an organization of farmers and indigenous peoples organized under
Philippine laws, representing a community actually affected by the mining activities of CAMC, as well
as other residents of areas affected by the mining activities of CAMC. These petitioners have the
standing to raise the constitutionality of the questioned FTAA as they allege a personal and substantial
injury.14 They assert that they are affected by the mining activities of CAMC. Likewise, they are under
imminent threat of being displaced from their landholdings as a result of the implementation of the
questioned FTAA. They thus meet the appropriate case requirement as they assert an interest adverse
to that of respondents who, on the other hand, claim the validity of the assailed statute and the FTAA
of CAMC.

Besides, the transcendental importance of the issues raised and the magnitude of the public interest
involved will have a bearing on the country’s economy which is to a greater extent dependent upon
the mining industry. Also affected by the resolution of this case are the proprietary rights of numerous
residents in the mining contract areas as well as the social existence of indigenous peoples which are
threatened. Based on these considerations, this Court deems it proper to take cognizance of the
instant petition.

Having resolved the procedural question, the constitutionality of the law under attack must be
addressed squarely.

First Substantive Issue: Validity of Section 76 of Rep. Act No. 7942 and DAO 96-40

In seeking to nullify Rep. Act No. 7942 and its implementing rules DAO 96-40 as unconstitutional,
petitioners set their sight on Section 76 of Rep. Act No. 7942 and Section 107 of DAO 96-40 which
they claim allow the unlawful and unjust "taking" of private property for private purpose in
contradiction with Section 9, Article III of the 1987 Constitution mandating that private property shall
not be taken except for public use and the corresponding payment of just compensation. They assert
that public respondent DENR, through the Mining Act and its Implementing Rules and Regulations,
cannot, on its own, permit entry into a private property and allow taking of land without payment of
just compensation.
Interpreting Section 76 of Rep. Act No. 7942 and Section 107 of DAO 96-40, juxtaposed with the
concept of taking of property for purposes of eminent domain in the case of Republic v. Vda. de
Castellvi,15 petitioners assert that there is indeed a "taking" upon entry into private lands and
concession areas.

Republic v. Vda. de Castellvi defines "taking" under the concept of eminent domain as entering upon
private property for more than a momentary period, and, under the warrant or color of legal authority,
devoting it to a public use, or otherwise informally appropriating or injuriously affecting it in such a
way as to substantially oust the owner and deprive him of all beneficial enjoyment thereof.

From the criteria set forth in the cited case, petitioners claim that the entry into a private property by
CAMC, pursuant to its FTAA, is for more than a momentary period, i.e., for 25 years, and renewable
for another 25 years; that the entry into the property is under the warrant or color of legal authority
pursuant to the FTAA executed between the government and CAMC; and that the entry substantially
ousts the owner or possessor and deprives him of all beneficial enjoyment of the property. These
facts, according to the petitioners, amount to taking. As such, petitioners question the exercise of the
power of eminent domain as unwarranted because respondents failed to prove that the entry into
private property is devoted for public use.

Petitioners also stress that even without the doctrine in the Castellvi case, the nature of the mining
activity, the extent of the land area covered by the CAMC FTAA and the various rights granted to the
proponent or the FTAA holder, such as (a) the right of possession of the Exploration Contract Area,
with full right of ingress and egress and the right to occupy the same; (b) the right not to be
prevented from entry into private lands by surface owners and/or occupants thereof when
prospecting, exploring and exploiting for minerals therein; (c) the right to enjoy easement rights, the
use of timber, water and other natural resources in the Exploration Contract Area; (d) the right of
possession of the Mining Area, with full right of ingress and egress and the right to occupy the same;
and (e) the right to enjoy easement rights, water and other natural resources in the Mining Area,
result in a taking of private property.

Petitioners quickly add that even assuming arguendo that there is no absolute, physical taking, at the
very least, Section 76 establishes a legal easement upon the surface owners, occupants and
concessionaires of a mining contract area sufficient to deprive them of enjoyment and use of the
property and that such burden imposed by the legal easement falls within the purview of eminent
domain.

To further bolster their claim that the legal easement established is equivalent to taking, petitioners
cite the case of National Power Corporation v. Gutierrez16 holding that the easement of right-of-way
imposed against the use of the land for an indefinite period is a taking under the power of eminent
domain.

Traversing petitioners’ assertion, public respondents argue that Section 76 is not a taking provision
but a valid exercise of the police power and by virtue of which, the state may prescribe regulations to
promote the health, morals, peace, education, good order, safety and general welfare of the people.
This government regulation involves the adjustment of rights for the public good and that this
adjustment curtails some potential for the use or economic exploitation of private property. Public
respondents concluded that "to require compensation in all such circumstances would compel the
government to regulate by purchase."

Public respondents are inclined to believe that by entering private lands and concession areas, FTAA
holders do not oust the owners thereof nor deprive them of all beneficial enjoyment of their properties
as the said entry merely establishes a legal easement upon surface owners, occupants and
concessionaires of a mining contract area.

Taking in Eminent Domain Distinguished from Regulation in Police Power

The power of eminent domain is the inherent right of the state (and of those entities to which the
power has been lawfully delegated) to condemn private property to public use upon payment of just
compensation.17 On the other hand, police power is the power of the state to promote public welfare
by restraining and regulating the use of liberty and property.18 Although both police power and the
power of eminent domain have the general welfare for their object, and recent trends show a
mingling19 of the two with the latter being used as an implement of the former, there are still
traditional distinctions between the two.

Property condemned under police power is usually noxious or intended for a noxious purpose; hence,
no compensation shall be paid.20 Likewise, in the exercise of police power, property rights of private
individuals are subjected to restraints and burdens in order to secure the general comfort, health, and
prosperity of the state. Thus, an ordinance prohibiting theaters from selling tickets in excess of their
seating capacity (which would result in the diminution of profits of the theater-owners) was upheld
valid as this would promote the comfort, convenience and safety of the customers.21 In U.S. v.
Toribio,22 the court upheld the provisions of Act No. 1147, a statute regulating the slaughter of
carabao for the purpose of conserving an adequate supply of draft animals, as a valid exercise of
police power, notwithstanding the property rights impairment that the ordinance imposed on cattle
owners. A zoning ordinance prohibiting the operation of a lumber yard within certain areas was
assailed as unconstitutional in that it was an invasion of the property rights of the lumber yard owners
in People v. de Guzman.23 The Court nonetheless ruled that the regulation was a valid exercise of
police power. A similar ruling was arrived at in Seng Kee S Co. v. Earnshaw and Piatt 24 where an
ordinance divided the City of Manila into industrial and residential areas.

A thorough scrutiny of the extant jurisprudence leads to a cogent deduction that where a property
interest is merely restricted because the continued use thereof would be injurious to public welfare, or
where property is destroyed because its continued existence would be injurious to public interest,
there is no compensable taking.25 However, when a property interest is appropriated and applied to
some public purpose, there is compensable taking.26

According to noted constitutionalist, Fr. Joaquin Bernas, SJ, in the exercise of its police power
regulation, the state restricts the use of private property, but none of the property interests in the
bundle of rights which constitute ownership is appropriated for use by or for the benefit of the
public.27 Use of the property by the owner was limited, but no aspect of the property is used by or for
the public.28 The deprivation of use can in fact be total and it will not constitute compensable taking if
nobody else acquires use of the property or any interest therein.29

If, however, in the regulation of the use of the property, somebody else acquires the use or interest
thereof, such restriction constitutes compensable taking. Thus, in City Government of Quezon City v.
Ericta,30 it was argued by the local government that an ordinance requiring private cemeteries to
reserve 6% of their total areas for the burial of paupers was a valid exercise of the police power under
the general welfare clause. This court did not agree in the contention, ruling that property taken under
the police power is sought to be destroyed and not, as in this case, to be devoted to a public use. It
further declared that the ordinance in question was actually a taking of private property without just
compensation of a certain area from a private cemetery to benefit paupers who are charges of the
local government. Being an exercise of eminent domain without provision for the payment of just
compensation, the same was rendered invalid as it violated the principles governing eminent domain.

In People v. Fajardo,31 the municipal mayor refused Fajardo permission to build a house on his own
land on the ground that the proposed structure would destroy the view or beauty of the public plaza.
The ordinance relied upon by the mayor prohibited the construction of any building that would destroy
the view of the plaza from the highway. The court ruled that the municipal ordinance under the guise
of police power permanently divest owners of the beneficial use of their property for the benefit of the
public; hence, considered as a taking under the power of eminent domain that could not be
countenanced without payment of just compensation to the affected owners. In this case, what the
municipality wanted was to impose an easement on the property in order to preserve the view or
beauty of the public plaza, which was a form of utilization of Fajardo’s property for public benefit.32
While the power of eminent domain often results in the appropriation of title to or possession of
property, it need not always be the case. Taking may include trespass without actual eviction of the
owner, material impairment of the value of the property or prevention of the ordinary uses for which
the property was intended such as the establishment of an easement.33 In Ayala de Roxas v. City of
Manila,34 it was held that the imposition of burden over a private property through easement was
considered taking; hence, payment of just compensation is required. The Court declared:

And, considering that the easement intended to be established, whatever may be the object thereof, is
not merely a real right that will encumber the property, but is one tending to prevent the exclusive
use of one portion of the same, by expropriating it for public use which, be it what it may, can not be
accomplished unless the owner of the property condemned or seized be previously and duly
indemnified, it is proper to protect the appellant by means of the remedy employed in such cases, as
it is only adequate remedy when no other legal action can be resorted to, against an intent which is
nothing short of an arbitrary restriction imposed by the city by virtue of the coercive power with which
the same is invested.

And in the case of National Power Corporation v. Gutierrez,35 despite the NPC’s protestation that the
owners were not totally deprived of the use of the land and could still plant the same crops as long as
they did not come into contact with the wires, the Court nevertheless held that the easement of right-
of-way was a taking under the power of eminent domain. The Court said:

In the case at bar, the easement of right-of-way is definitely a taking under the power of eminent
domain. Considering the nature and effect of the installation of 230 KV Mexico-Limay transmission
lines, the limitation imposed by NPC against the use of the land for an indefinite period deprives
private respondents of its ordinary use.

A case exemplifying an instance of compensable taking which does not entail transfer of title is
Republic v. Philippine Long Distance Telephone Co.36 Here, the Bureau of Telecommunications, a
government instrumentality, had contracted with the PLDT for the interconnection between the
Government Telephone System and that of the PLDT, so that the former could make use of the lines
and facilities of the PLDT. In its desire to expand services to government offices, the Bureau of
Telecommunications demanded to expand its use of the PLDT lines. Disagreement ensued on the
terms of the contract for the use of the PLDT facilities. The Court ruminated:

Normally, of course, the power of eminent domain results in the taking or appropriation of title to, and
possession of, the expropriated property; but no cogent reason appears why said power may not be
availed of to impose only a burden upon the owner of the condemned property, without loss of title
and possession. It is unquestionable that real property may, through expropriation, be subjected to an
easement right of way.37

In Republic v. Castellvi,38 this Court had the occasion to spell out the requisites of taking in eminent
domain, to wit:

(1) the expropriator must enter a private property;

(2) the entry must be for more than a momentary period.

(3) the entry must be under warrant or color of legal authority;

(4) the property must be devoted to public use or otherwise informally appropriated or
injuriously affected;

(5) the utilization of the property for public use must be in such a way as to oust the owner
and deprive him of beneficial enjoyment of the property.
As shown by the foregoing jurisprudence, a regulation which substantially deprives the owner of his
proprietary rights and restricts the beneficial use and enjoyment for public use amounts to
compensable taking. In the case under consideration, the entry referred to in Section 76 and the
easement rights under Section 75 of Rep. Act No. 7942 as well as the various rights to CAMC under its
FTAA are no different from the deprivation of proprietary rights in the cases discussed which this Court
considered as taking. Section 75 of the law in question reads:

Easement Rights. - When mining areas are so situated that for purposes of more convenient mining
operations it is necessary to build, construct or install on the mining areas or lands owned, occupied or
leased by other persons, such infrastructure as roads, railroads, mills, waste dump sites, tailing ponds,
warehouses, staging or storage areas and port facilities, tramways, runways, airports, electric
transmission, telephone or telegraph lines, dams and their normal flood and catchment areas, sites for
water wells, ditches, canals, new river beds, pipelines, flumes, cuts, shafts, tunnels, or mills, the
contractor, upon payment of just compensation, shall be entitled to enter and occupy said mining
areas or lands.

Section 76 provides:

Entry into private lands and concession areas – Subject to prior notification, holders of mining rights
shall not be prevented from entry into private lands and concession areas by surface owners,
occupants, or concessionaires when conducting mining operations therein.

The CAMC FTAA grants in favor of CAMC the right of possession of the Exploration Contract Area, the
full right of ingress and egress and the right to occupy the same. It also bestows CAMC the right not
to be prevented from entry into private lands by surface owners or occupants thereof when
prospecting, exploring and exploiting minerals therein.

The entry referred to in Section 76 is not just a simple right-of-way which is ordinarily allowed under
the provisions of the Civil Code. Here, the holders of mining rights enter private lands for purposes of
conducting mining activities such as exploration, extraction and processing of minerals. Mining right
holders build mine infrastructure, dig mine shafts and connecting tunnels, prepare tailing ponds,
storage areas and vehicle depots, install their machinery, equipment and sewer systems. On top of
this, under Section 75, easement rights are accorded to them where they may build warehouses, port
facilities, electric transmission, railroads and other infrastructures necessary for mining operations. All
these will definitely oust the owners or occupants of the affected areas the beneficial ownership of
their lands. Without a doubt, taking occurs once mining operations commence.

Section 76 of Rep. Act No. 7942 is a Taking Provision

Moreover, it would not be amiss to revisit the history of mining laws of this country which would help
us understand Section 76 of Rep. Act No. 7942.

This provision is first found in Section 27 of Commonwealth Act No. 137 which took effect on 7
November 1936, viz:

Before entering private lands the prospector shall first apply in writing for written permission of the
private owner, claimant, or holder thereof, and in case of refusal by such private owner, claimant, or
holder to grant such permission, or in case of disagreement as to the amount of compensation to be
paid for such privilege of prospecting therein, the amount of such compensation shall be fixed by
agreement among the prospector, the Director of the Bureau of Mines and the surface owner, and in
case of their failure to unanimously agree as to the amount of compensation, all questions at issue
shall be determined by the Court of First Instance.

Similarly, the pertinent provision of Presidential Decree No. 463, otherwise known as "The Mineral
Resources Development Decree of 1974," provides:
SECTION 12. Entry to Public and Private Lands. — A person who desires to conduct prospecting or
other mining operations within public lands covered by concessions or rights other than mining shall
first obtain the written permission of the government official concerned before entering such lands. In
the case of private lands, the written permission of the owner or possessor of the land must be
obtained before entering such lands. In either case, if said permission is denied, the Director, at the
request of the interested person may intercede with the owner or possessor of the land. If the
intercession fails, the interested person may bring suit in the Court of First Instance of the province
where the land is situated. If the court finds the request justified, it shall issue an order granting the
permission after fixing the amount of compensation and/or rental due the owner or possessor:
Provided, That pending final adjudication of such amount, the court shall upon recommendation of the
Director permit the interested person to enter, prospect and/or undertake other mining operations on
the disputed land upon posting by such interested person of a bond with the court which the latter
shall consider adequate to answer for any damage to the owner or possessor of the land resulting
from such entry, prospecting or any other mining operations.

Hampered by the difficulties and delays in securing surface rights for the entry into private lands for
purposes of mining operations, Presidential Decree No. 512 dated 19 July 1974 was passed into law in
order to achieve full and accelerated mineral resources development. Thus, Presidential Decree No.
512 provides for a new system of surface rights acquisition by mining prospectors and claimants.
Whereas in Commonwealth Act No. 137 and Presidential Decree No. 463 eminent domain may only be
exercised in order that the mining claimants can build, construct or install roads, railroads, mills,
warehouses and other facilities, this time, the power of eminent domain may now be invoked by
mining operators for the entry, acquisition and use of private lands, viz:

SECTION 1. Mineral prospecting, location, exploration, development and exploitation is hereby

declared of public use and benefit, and for which the power of eminent domain may be invoked and
exercised for the entry, acquisition and use of private lands. x x x.

The evolution of mining laws gives positive indication that mining operators who are qualified to own
lands were granted the authority to exercise eminent domain for the entry, acquisition, and use of
private lands in areas open for mining operations. This grant of authority extant in Section 1 of
Presidential Decree No. 512 is not expressly repealed by Section 76 of Rep. Act No. 7942; and neither
are the former statutes impliedly repealed by the former. These two provisions can stand together
even if Section 76 of Rep. Act No. 7942 does not spell out the grant of the privilege to exercise
eminent domain which was present in the old law.

It is an established rule in statutory construction that in order that one law may operate to repeal
another law, the two laws must be inconsistent.39 The former must be so repugnant as to be
irreconciliable with the latter act. Simply because a latter enactment may relate to the same subject
matter as that of an earlier statute is not of itself sufficient to cause an implied repeal of the latter,
since the new law may be cumulative or a continuation of the old one. As has been the ruled, repeals
by implication are not favored, and will not be decreed unless it is manifest that the legislature so
intended.40 As laws are presumed to be passed with deliberation and with full knowledge of all existing
ones on the subject, it is but reasonable to conclude that in passing a statute it was not intended to
interfere with or abrogate any former law relating to the same matter, unless the repugnancy between
the two is not only irreconcilable, but also clear and convincing, and flowing necessarily from the
language used, unless the later act fully embraces the subject matter of the earlier, or unless the
reason for the earlier act is beyond peradventure removed.41 Hence, every effort must be used to
make all acts stand and if, by any reasonable construction, they can be reconciled, the latter act will
not operate as a repeal of the earlier.

Considering that Section 1 of Presidential Decree No. 512 granted the qualified mining operators the
authority to exercise eminent domain and since this grant of authority is deemed incorporated in
Section 76 of Rep. Act No. 7942, the inescapable conclusion is that the latter provision is a taking
provision.
While this Court declares that the assailed provision is a taking provision, this does not mean that it is
unconstitutional on the ground that it allows taking of private property without the determination of
public use and the payment of just compensation.

The taking to be valid must be for public use.42 Public use as a requirement for the valid exercise of
the power of eminent domain is now synonymous with public interest, public benefit, public welfare
and public convenience.43 It includes the broader notion of indirect public benefit or advantage. Public
use as traditionally understood as "actual use by the public" has already been abandoned.44

Mining industry plays a pivotal role in the economic development of the country and is a vital tool in
the government’s thrust of accelerated recovery.45 The importance of the mining industry for national
development is expressed in Presidential Decree No. 463:

WHEREAS, mineral production is a major support of the national economy, and therefore the
intensified discovery, exploration, development and wise utilization of the country’s mineral resources
are urgently needed for national development.

Irrefragably, mining is an industry which is of public benefit.

That public use is negated by the fact that the state would be taking private properties for the benefit
of private mining firms or mining contractors is not at all true. In Heirs of Juancho Ardona v.
Reyes,46 petitioners therein contended that the promotion of tourism is not for public use because
private concessionaires would be allowed to maintain various facilities such as restaurants, hotels,
stores, etc., inside the tourist area. The Court thus contemplated:

The rule in Berman v. Parker [348 U.S. 25; 99 L. ed. 27] of deference to legislative policy even if such
policy might mean taking from one private person and conferring on another private person applies as
well in the Philippines.

". . . Once the object is within the authority of Congress, the means by which it will be attained is also
for Congress to determine. Here one of the means chosen is the use of private enterprise for
redevelopment of the area. Appellants argue that this makes the project a taking from one
businessman for the benefit of another businessman. But the means of executing the project are for
Congress and Congress alone to determine, once the public purpose has been established. x x x"47

Petitioners further maintain that the state’s discretion to decide when to take private property is
reduced contractually by Section 13.5 of the CAMC FTAA, which reads:

If the CONTRACTOR so requests at its option, the GOVERNMENT shall use its offices and legal powers
to assist in the acquisition at reasonable cost of any surface areas or rights required by the
CONTRACTOR at the CONTRACTOR’s cost to carry out the Mineral Exploration and the Mining
Operations herein.

All obligations, payments and expenses arising from, or incident to, such agreements or acquisition of
right shall be for the account of the CONTRACTOR and shall be recoverable as Operating Expense.

According to petitioners, the government is reduced to a sub-contractor upon the request of the
private respondent, and on account of the foregoing provision, the contractor can compel the
government to exercise its power of eminent domain thereby derogating the latter’s power to
expropriate property.

The provision of the FTAA in question lays down the ways and means by which the foreign-owned
contractor, disqualified to own land, identifies to the government the specific surface areas within the
FTAA contract area to be acquired for the mine infrastructure.48 The government then acquires
ownership of the surface land areas on behalf of the contractor, through a voluntary transaction in
order to enable the latter to proceed to fully implement the FTAA. Eminent domain is not yet called for
at this stage since there are still various avenues by which surface rights can be acquired other than
expropriation. The FTAA provision under attack merely facilitates the implementation of the FTAA
given to CAMC and shields it from violating the Anti-Dummy Law. Hence, when confronted with the
same question in La Bugal-B’Laan Tribal Association, Inc. v. Ramos,49 the Court answered:

Clearly, petitioners have needlessly jumped to unwarranted conclusions, without being aware of the
rationale for the said provision. That provision does not call for the exercise of the power of eminent
domain -- and determination of just compensation is not an issue -- as much as it calls for a qualified
party to acquire the surface rights on behalf of a foreign-owned contractor.

Rather than having the foreign contractor act through a dummy corporation, having the State do the
purchasing is a better alternative. This will at least cause the government to be aware of such
transaction/s and foster transparency in the contractor’s dealings with the local property owners. The
government, then, will not act as a subcontractor of the contractor; rather, it will facilitate the
transaction and enable the parties to avoid a technical violation of the Anti-Dummy Law.

There is also no basis for the claim that the Mining Law and its implementing rules and regulations do
not provide for just compensation in expropriating private properties. Section 76 of Rep. Act No. 7942
and Section 107 of DAO 96-40 provide for the payment of just compensation:

Section 76. xxx Provided, that any damage to the property of the surface owner, occupant, or
concessionaire as a consequence of such operations shall be properly compensated as may be
provided for in the implementing rules and regulations.

Section 107. Compensation of the Surface Owner and Occupant- Any damage done to the property of
the surface owners, occupant, or concessionaire thereof as a consequence of the mining operations or
as a result of the construction or installation of the infrastructure mentioned in 104 above shall be
properly and justly compensated.

Such compensation shall be based on the agreement entered into between the holder of mining rights
and the surface owner, occupant or concessionaire thereof, where appropriate, in accordance with
P.D. No. 512. (Emphasis supplied.)

Second Substantive Issue: Power of Courts to Determine Just Compensation

Closely-knit to the issue of taking is the determination of just compensation. It is contended that Rep.
Act No. 7942 and Section 107 of DAO 96-40 encroach on the power of the trial courts to determine
just compensation in eminent domain cases inasmuch as the same determination of proper
compensation are cognizable only by the Panel of Arbitrators.

The question on the judicial determination of just compensation has been settled in the case of Export
Processing Zone Authority v. Dulay50 wherein the court declared that the determination of just
compensation in eminent domain cases is a judicial function. Even as the executive department or the
legislature may make the initial determinations, the same cannot prevail over the court’s findings.

Implementing Section 76 of Rep. Act No. 7942, Section 105 of DAO 96-40 states that holder(s) of
mining right(s) shall not be prevented from entry into its/their contract/mining areas for the purpose
of exploration, development, and/or utilization. That in cases where surface owners of the lands,
occupants or concessionaires refuse to allow the permit holder or contractor entry, the latter shall
bring the matter before the Panel of Arbitrators for proper disposition. Section 106 states that
voluntary agreements between the two parties permitting the mining right holders to enter and use
the surface owners’ lands shall be registered with the Regional Office of the MGB. In connection with
Section 106, Section 107 provides that the compensation for the damage done to the surface owner,
occupant or concessionaire as a consequence of mining operations or as a result of the construction or
installation of the infrastructure shall be properly and justly compensated and that such compensation
shall be based on the agreement between the holder of mining rights and surface owner, occupant or
concessionaire, or where appropriate, in accordance with Presidential Decree No. 512. In cases where
there is disagreement to the compensation or where there is no agreement, the matter shall be
brought before the Panel of Arbitrators. Section 206 of the implementing rules and regulations
provides an aggrieved party the remedy to appeal the decision of the Panel of Arbitrators to the Mines
Adjudication Board, and the latter’s decision may be reviewed by the Supreme Court by filing a
petition for review on certiorari.51

An examination of the foregoing provisions gives no indication that the courts are excluded from
taking cognizance of expropriation cases under the mining law. The disagreement referred to in
Section 107 does not involve the exercise of eminent domain, rather it contemplates of a situation
wherein the permit holders are allowed by the surface owners entry into the latters’ lands and
disagreement ensues as regarding the proper compensation for the allowed entry and use of the
private lands. Noticeably, the provision points to a voluntary sale or transaction, but not to an
involuntary sale.

The legislature, in enacting the mining act, is presumed to have deliberated with full knowledge of all
existing laws and jurisprudence on the subject. Thus, it is but reasonable to conclude that in passing
such statute it was in accord with the existing laws and jurisprudence on the jurisdiction of courts in
the determination of just compensation and that it was not intended to interfere with or abrogate any
former law relating to the same matter. Indeed, there is nothing in the provisions of the assailed law
and its implementing rules and regulations that exclude the courts from their jurisdiction to determine
just compensation in expropriation proceedings involving mining operations. Although Section 105
confers upon the Panel of Arbitrators the authority to decide cases where surface owners, occupants,
concessionaires refuse permit holders entry, thus, necessitating involuntary taking, this does not
mean that the determination of the just compensation by the Panel of Arbitrators or the Mines
Adjudication Board is final and conclusive. The determination is only preliminary unless accepted by all
parties concerned. There is nothing wrong with the grant of primary jurisdiction by the Panel of
Arbitrators or the Mines Adjudication Board to determine in a preliminary matter the reasonable
compensation due the affected landowners or occupants.52 The original and exclusive jurisdiction of
the courts to decide determination of just compensation remains intact despite the preliminary
determination made by the administrative agency. As held in Philippine Veterans Bank v. Court of
Appeals53:

The jurisdiction of the Regional Trial Courts is not any less "original and exclusive" because the
question is first passed upon by the DAR, as the judicial proceedings are not a continuation of the
administrative determination.

Third Substantive Issue: Sufficient Control by the State Over Mining Operations

Anent the third issue, petitioners charge that Rep. Act No. 7942, as well as its Implementing Rules
and Regulations, makes it possible for FTAA contracts to cede over to a fully foreign-owned
corporation full control and management of mining enterprises, with the result that the State is
allegedly reduced to a passive regulator dependent on submitted plans and reports, with weak review
and audit powers. The State is not acting as the supposed owner of the natural resources for and on
behalf of the Filipino people; it practically has little effective say in the decisions made by the
enterprise. In effect, petitioners asserted that the law, the implementing regulations, and the CAMC
FTAA cede beneficial ownership of the mineral resources to the foreign contractor.

It must be noted that this argument was already raised in La Bugal-B’Laan Tribal Association, Inc. v.
Ramos,54where the Court answered in the following manner:

RA 7942 provides for the state’s control and supervision over mining operations. The following
provisions thereof establish the mechanism of inspection and visitorial rights over mining operations
and institute reportorial requirements in this manner:
 1. Sec. 8 which provides for the DENR’s power of over-all supervision and periodic review for
"the conservation, management, development and proper use of the State’s mineral
resources";

2. Sec. 9 which authorizes the Mines and Geosciences Bureau (MGB) under the DENR to
exercise "direct charge in the administration and disposition of mineral resources", and
empowers the MGB to "monitor the compliance by the contractor of the terms and conditions
of the mineral agreements", "confiscate surety and performance bonds", and deputize
whenever necessary any member or unit of the Phil. National Police, barangay, duly registered
non-governmental organization (NGO) or any qualified person to police mining activities;

3. Sec. 66 which vests in the Regional Director "exclusive jurisdiction over safety inspections
of all installations, whether surface or underground", utilized in mining operations.

4. Sec. 35, which incorporates into all FTAAs the following terms, conditions and warranties:

"(g) Mining operations shall be conducted in accordance with the provisions of the Act and its IRR.

"(h) Work programs and minimum expenditures commitments.

xxxx

"(k) Requiring proponent to effectively use appropriate anti-pollution technology and facilities to
protect the environment and restore or rehabilitate mined-out areas.

"(l) The contractors shall furnish the Government records of geologic, accounting and other relevant
data for its mining operation, and that books of accounts and records shall be open for inspection by
the government. x x x.

"(m) Requiring the proponent to dispose of the minerals at the highest price and more advantageous
terms and conditions.

xxxx

"(o) Such other terms and conditions consistent with the Constitution and with this Act as the
Secretary may deem to be for the best interest of the State and the welfare of the Filipino people."

The foregoing provisions of Section 35 of RA 7942 are also reflected and implemented in Section 56
(g), (h), (l), (m) and (n) of the Implementing Rules, DAO 96-40.

Moreover, RA 7942 and DAO 96-40 also provide various stipulations confirming the government’s
control over mining enterprises:

o The contractor is to relinquish to the government those portions of the contract area not
needed for mining operations and not covered by any declaration of mining feasibility (Section
35-e, RA 7942; Section 60, DAO 96-40).
o The contractor must comply with the provisions pertaining to mine safety, health and
environmental protection (Chapter XI, RA 7942; Chapters XV and XVI, DAO 96-40).
o For violation of any of its terms and conditions, government may cancel an FTAA. (Chapter
XVII, RA 7942; Chapter XXIV, DAO 96-40).
o An FTAA contractor is obliged to open its books of accounts and records for 0inspection by the
government (Section 56-m, DAO 96-40).
o An FTAA contractor has to dispose of the minerals and by-products at the highest market price
and register with the MGB a copy of the sales agreement (Section 56-n, DAO 96-40).
o MGB is mandated to monitor the contractor’s compliance with the terms and conditions of the
FTAA; and to deputize, when necessary, any member or unit of the Philippine National Police,
the barangay or a DENR-accredited nongovernmental organization to police mining activities
(Section 7-d and -f, DAO 96-40).
o An FTAA cannot be transferred or assigned without prior approval by the President (Section
40, RA 7942; Section 66, DAO 96-40).
o A mining project under an FTAA cannot proceed to the construction/development/utilization
stage, unless its Declaration of Mining Project Feasibility has been approved by government
(Section 24, RA 7942).
o The Declaration of Mining Project Feasibility filed by the contractor cannot be approved without
submission of the following documents:

1. Approved mining project feasibility study (Section 53-d, DAO 96-40)

2. Approved three-year work program (Section 53-a-4, DAO 96-40)

3. Environmental compliance certificate (Section 70, RA 7942)

4. Approved environmental protection and enhancement program (Section 69, RA

7942)

5. Approval by the Sangguniang Panlalawigan/Bayan/Barangay (Section 70, RA 7942;

Section 27, RA 7160)

6. Free and prior informed consent by the indigenous peoples concerned, including
payment of royalties through a Memorandum of Agreement (Section 16, RA 7942;
Section 59, RA 8371)

o The FTAA contractor is obliged to assist in the development of its mining community,
promotion of the general welfare of its inhabitants, and development of science and mining
technology (Section 57, RA 7942).
o The FTAA contractor is obliged to submit reports (on quarterly, semi-annual or annual basis as
the case may be; per Section 270, DAO 96-40), pertaining to the following:

1. Exploration

2. Drilling

3. Mineral resources and reserves

4. Energy consumption

5. Production

6. Sales and marketing

7. Employment

8. Payment of taxes, royalties, fees and other Government Shares

9. Mine safety, health and environment

10. Land use

 11. Social development

12. Explosives consumption

o An FTAA pertaining to areas within government reservations cannot be granted without a

written clearance from the government agencies concerned (Section 19, RA 7942; Section 54,
DAO 96-40).
o An FTAA contractor is required to post a financial guarantee bond in favor of the government
in an amount equivalent to its expenditures obligations for any particular year. This
requirement is apart from the representations and warranties of the contractor that it has
access to all the financing, managerial and technical expertise and technology necessary to
carry out the objectives of the FTAA (Section 35-b, -e, and -f, RA 7942).
o Other reports to be submitted by the contractor, as required under DAO 96-40, are as follows:
an environmental report on the rehabilitation of the mined-out area and/or mine waste/tailing
covered area, and anti-pollution measures undertaken (Section 35-a-2); annual reports of the
mining operations and records of geologic accounting (Section 56-m); annual progress reports
and final report of exploration activities (Section 56-2).
o Other programs required to be submitted by the contractor, pursuant to DAO 96-40, are the
following: a safety and health program (Section 144); an environmental work program
(Section 168); an annual environmental protection and enhancement program (Section 171).

The foregoing gamut of requirements, regulations, restrictions and limitations imposed upon the FTAA
contractor by the statute and regulations easily overturns petitioners’ contention. The setup under RA
7942 and DAO 96-40 hardly relegates the State to the role of a "passive regulator" dependent on
submitted plans and reports. On the contrary, the government agencies concerned are empowered to
approve or disapprove -- hence, to influence, direct and change -- the various work programs and the
corresponding minimum expenditure commitments for each of the exploration, development and
utilization phases of the mining enterprise.

Once these plans and reports are approved, the contractor is bound to comply with its commitments
therein. Figures for mineral production and sales are regularly monitored and subjected to government
review, in order to ensure that the products and by-products are disposed of at the best prices
possible; even copies of sales agreements have to be submitted to and registered with MGB. And the
contractor is mandated to open its books of accounts and records for scrutiny, so as to enable the
State to determine if the government share has been fully paid.

The State may likewise compel the contractor’s compliance with mandatory requirements on mine
safety, health and environmental protection, and the use of anti-pollution technology and facilities.
Moreover, the contractor is also obligated to assist in the development of the mining community and
to pay royalties to the indigenous peoples concerned.

Cancellation of the FTAA may be the penalty for violation of any of its terms and conditions and/or
noncompliance with statutes or regulations. This general, all-around, multipurpose sanction is no
trifling matter, especially to a contractor who may have yet to recover the tens or hundreds of millions
of dollars sunk into a mining project.

Overall, considering the provisions of the statute and the regulations just discussed, we believe that
the State definitely possesses the means by which it can have the ultimate word in the operation of
the enterprise, set directions and objectives, and detect deviations and noncompliance by the
contractor; likewise, it has the capability to enforce compliance and to impose sanctions, should the
occasion therefor arise.

In other words, the FTAA contractor is not free to do whatever it pleases and get away with it; on the
contrary, it will have to follow the government line if it wants to stay in the enterprise. Ineluctably
then, RA 7942 and DAO 96-40 vest in the government more than a sufficient degree of control and
supervision over the conduct of mining operations.
Fourth Substantive Issue: The Proper Interpretation of the Constitutional Phrase "Agreements
Involving Either Technical or Financial Assistance

In interpreting the first and fourth paragraphs of Section 2, Article XII of the Constitution, petitioners
set forth the argument that foreign corporations are barred from making decisions on the conduct of
operations and the management of the mining project. The first paragraph of Section 2, Article XII
reads:

x x x 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 percentum 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 x x x.

The fourth paragraph of Section 2, Article XII provides:

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 x x x.

Petitioners maintain that the first paragraph bars aliens and foreign-owned corporations from entering
into any direct arrangement with the government including those which involve co-production, joint
venture or production sharing agreements. They likewise insist that the fourth paragraph allows
foreign-owned corporations to participate in the large-scale exploration, development and utilization of
natural resources, but such participation, however, is merely limited to an agreement for either
financial or technical assistance only.

Again, this issue has already been succinctly passed upon by this Court in La Bugal-B’Laan Tribal
Association, Inc. v. Ramos.55 In discrediting such argument, the Court ratiocinated:

Petitioners claim that the phrase "agreements x x x involving either technical or financial
assistance" simply means technical assistance or financial assistance agreements, nothing more and
nothing else. They insist that there is no ambiguity in the phrase, and that a plain reading of
paragraph 4 quoted above leads to the inescapable conclusion that what a foreign-owned corporation
may enter into with the government is merely an agreement for eitherfinancial or technical
assistance only, for the large-scale exploration, development and utilization of minerals, petroleum
and other mineral oils; such a limitation, they argue, excludes foreign management and operation of a
mining enterprise.

This restrictive interpretation, petitioners believe, is in line with the general policy enunciated by the
Constitution reserving to Filipino citizens and corporations the use and enjoyment of the country’s
natural resources. They maintain that this Court’s Decision of January 27, 2004 correctly declared the
WMCP FTAA, along with pertinent provisions of RA 7942, void for allowing a foreign contractor to have
direct and exclusive management of a mining enterprise. Allowing such a privilege not only runs
counter to the "full control and supervision" that the State is constitutionally mandated to exercise
over the exploration, development and utilization of the country’s natural resources; doing so also
vests in the foreign company "beneficial ownership" of our mineral resources. It will be recalled that
the Decision of January 27, 2004 zeroed in on "management or other forms of assistance" or other
activities associated with the "service contracts" of the martial law regime, since "the management or
operation of mining activities by foreign contractors, which is the primary feature of service contracts,
was precisely the evil that the drafters of the 1987 Constitution sought to eradicate."

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We do not see how applying a strictly literal or verba legis interpretation of paragraph 4 could
inexorably lead to the conclusions arrived at in the ponencia. First, the drafters’ choice of words --
their use of the phrase agreements x x x involving either technical or financial assistance -- does not
indicate the intent to exclude other modes of assistance. The drafters opted to use involving when
they could have simply said agreements for financial or technical assistance, if that was their intention
to begin with. In this case, the limitation would be very clear and no further debate would ensue.

In contrast, the use of the word "involving" signifies the possibility of the inclusion of other forms
of assistance or activities having to do with, otherwise related to or compatible with financial or
technical assistance. The word "involving" as used in this context has three connotations that can be
differentiated thus: one, the sense of "concerning," "having to do with," or "affecting"; two,
"entailing," "requiring," "implying" or "necessitating"; and three, "including," "containing" or
"comprising."

Plainly, none of the three connotations convey a sense of exclusivity. Moreover, the word "involving,"
when understood in the sense of "including," as in including technical or financial
assistance, necessarily implies that there are activities other than those that are being included. In
other words, if an agreement includes technical or financial assistance, there is apart from such
assistance -- something else already in, and covered or may be covered by, the said agreement.

In short, it allows for the possibility that matters, other than those explicitly mentioned, could be
made part of the agreement. Thus, we are now led to the conclusion that the use of the word
"involving" implies that these agreements with foreign corporations are not limited to mere financial or
technical assistance. The difference in sense becomes very apparent when we juxtapose
"agreements for technical or financial assistance" against "agreements including technical or
financial assistance." This much is unalterably clear in a verba legis approach.

Second, if the real intention of the drafters was to confine foreign corporations to financial or technical
assistance and nothing more, their language would have certainly been so unmistakably restrictive
and stringent as to leave no doubt in anyone’s mind about their true intent. For example, they would
have used the sentence foreign corporations are absolutely prohibited from involvement in the
management or operation of mining or similar ventures or words of similar import. A search for such
stringent wording yields negative results. Thus, we come to the inevitable conclusion that there
was a conscious and deliberate decision to avoid the use of restrictive wording that
bespeaks an intent not to use the expression "agreements x x x involving either technical
or financial assistance" in an exclusionary and limiting manner.

Fifth Substantive Issue: Service Contracts Not Deconstitutionalized

Lastly, petitioners stress that the service contract regime under the 1973 Constitution is expressly
prohibited under the 1987 Constitution as the term service contracts found in the former was deleted
in the latter to avoid the circumvention of constitutional prohibitions that were prevalent in the 1987
Constitution. According to them, the framers of the 1987 Constitution only intended for foreign-owned
corporations to provide either technical assistance or financial assistance. Upon perusal of the CAMC
FTAA, petitioners are of the opinion that the same is a replica of the service contract agreements that
the present constitution allegedly prohibit.

Again, this contention is not well-taken. The mere fact that the term service contracts found in the
1973 Constitution was not carried over to the present constitution, sans any categorical statement
banning service contracts in mining activities, does not mean that service contracts as understood in
the 1973 Constitution was eradicated in the 1987 Constitution.56 The 1987 Constitution allows the
continued use of service contracts with foreign corporations as contractors who would invest in and
operate and manage extractive enterprises, subject to the full control and supervision of the State;
this time, however, safety measures were put in place to prevent abuses of the past regime.57 We
ruled, thus:
To our mind, however, such intent cannot be definitively and conclusively established from the mere
failure to carry the same expression or term over to the new Constitution, absent a more specific,
explicit and unequivocal statement to that effect. What petitioners seek (a complete ban on foreign
participation in the management of mining operations, as previously allowed by the earlier
Constitutions) is nothing short of bringing about a momentous sea change in the economic and
developmental policies; and the fundamentally capitalist, free-enterprise philosophy of our
government. We cannot imagine such a radical shift being undertaken by our government, to the
great prejudice of the mining sector in particular and our economy in general, merely on the basis of
the omission of the terms service contract from or the failure to carry them over to the new
Constitution. There has to be a much more definite and even unarguable basis for such a drastic
reversal of policies.

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The foregoing are mere fragments of the framers’ lengthy discussions of the provision dealing
with agreements x x x involving either technical or financial assistance, which ultimately became
paragraph 4 of Section 2 of Article XII of the Constitution. Beyond any doubt, the members of the
ConCom were actually debating about the martial-law-era service contracts for which they were
crafting appropriate safeguards.

In the voting that led to the approval of Article XII by the ConCom, the explanations given by
Commissioners Gascon, Garcia and Tadeo indicated that they had voted to reject this provision on
account of their objections to the "constitutionalization" of the "service contract" concept.

Mr. Gascon said, "I felt that if we would constitutionalize any provision on service contracts, this
should always be with the concurrence of Congress and not guided only by a general law to be
promulgated by Congress." Mr. Garcia explained, "Service contracts are given constitutional
legitimization in Sec. 3, even when they have been proven to be inimical to the interests of the nation,
providing, as they do, the legal loophole for the exploitation of our natural resources for the benefit of
foreign interests." Likewise, Mr. Tadeo cited inter alia the fact that service contracts continued to
subsist, enabling foreign interests to benefit from our natural resources. It was hardly likely that
these gentlemen would have objected so strenuously, had the provision called for mere
technical or financial assistance and nothing more.

The deliberations of the ConCom and some commissioners’ explanation of their votes leave no room
for doubt that the service contract concept precisely underpinned the commissioners’ understanding of
the "agreements involving either technical or financial assistance."

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From the foregoing, we are impelled to conclude that the phrase agreements involving either technical
or financial assistance, referred to in paragraph 4, are in fact service contracts. But unlike those of the
1973 variety, the new ones are between foreign corporations acting as contractors on the one hand;
and on the other, the government as principal or "owner" of the works. In the new service contracts,
the foreign contractors provide capital, technology and technical know-how, and managerial expertise
in the creation and operation of large-scale mining/extractive enterprises; and the government,
through its agencies (DENR, MGB), actively exercises control and supervision over the entire
operation.

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It is therefore reasonable and unavoidable to make the following conclusion, based on the above
arguments. As written by the framers and ratified and adopted by the people, the Constitution allows
the continued use of service contracts with foreign corporations -- as contractors who would invest in
and operate and manage extractive enterprises, subject to the full control and supervision of the State
-- sans the abuses of the past regime. The purpose is clear: to develop and utilize our mineral,
petroleum and other resources on a large scale for the immediate and tangible benefit of the Filipino
people.58

WHEREFORE, the instant petition for prohibition and mandamus is hereby DISMISSED. Section 76 of
Republic Act No. 7942 and Section 107 of DAO 96-40; Republic Act No. 7942 and its Implementing
Rules and Regulations contained in DAO 96-40 – insofar as they relate to financial and technical
assistance agreements referred to in paragraph 4 of Section 2 of Article XII of the Constitution are
NOT UNCONSTITUTIONAL.

SO ORDERED.