SUPREME COURT RESOLUTION

G.R. No. 194239, June 16, 2015

WEST TOWER CONDOMINIUM CORPORATION, ON BEHALF OF THE

RESIDENTS OF WEST TOWER CONDOMINIUM AND IN REPRESENTATION OF
BARANGAY BANGKAL, AND OTHERS, INCLUDING MINORS AND GENERATIONS
YET UNBORN, Petitioners, v. FIRST PHILIPPINE INDUSTRIAL CORPORATION,
FIRST GEN CORPORATION AND THEIR RESPECTIVE BOARD OF DIRECTORS
AND OFFICERS, JOHN DOES, AND RICHARD DOES, Respondents.

DECISION

VELASCO JR., J.:

Nature of the Case

Before the Court is the Petition for the Issuance of a Writ of Kalikasan filed following the leak in
the oil pipeline owned by First Philippine Industrial Corporation (FPIC) in Makati City.

The Facts

Respondent FPIC operates two pipelines since 1969, viz: (1) the White Oil Pipeline (WOPL)
System, which covers a 117-kilometer stretch from Batangas to the Pandacan Terminal in Manila
and transports diesel, gasoline, jet fuel and kerosene; and (b) the Black Oil Pipeline (BOPL)
System, which extends 105 kilometers and transports bunker fuel from Batangas to a depot in
Sucat, Paraaque. These systems transport nearly 60% of the petroleum requirements of Metro
Manila and parts of the provinces of Bulacan, Laguna, and Rizal.

The two pipelines were supposedly designed to provide more than double the standard safety
allowance against leakage, considering that they are made out of heavy duty steel that can
withstand more than twice the current operating pressure and are buried at a minimum depth of
1.5 meters, which is deeper than the US Department of Transportation standard of 0.9 meters.

In May 2010, however, a leakage from one of the pipelines was suspected after the residents of
West Tower Condominium (WestTower) started to smell gas within the condominium. A search
made on July 10, 2010 within the condominium premises led to the discovery of a fuel leak from
the wall of its Basement 2. Owing to its inability to control the flow, WestTowers management
reported the matter to the Police Department of Makati City, which in turn called the citys
Bureau of Fire Protection.

What started as a two-drum leak at the initial stages became a 15-20 drum a day affair.
Eventually, the sump pit of the condominium was ordered shut down by the City of Makati to
prevent the discharge of contaminated water into the drainage system of Barangay Bangkal.
Eventually, the fumes compelled the residents of WestTower to abandon their respective units on
July 23, 2010 and the condos power was shut down.

Petitioner FPIC initially disowned any leak from its oil pipeline. Thus, the residents of
WestTower shouldered the expenses of hauling the waste water from its basement, which
eventually required the setting up of a treatment plant in the area to separate fuel from the waste
water.

On October 28, 2010, the University of the Philippines-National Institute of Geological Sciences
(UP-NIGS), which the City of Makati invited to determine the source of the fuel, found a leak in
FPICs WOPL about 86 meters from West Tower.

A day after, or on October 29, 2010, FPIC admitted that indeed the source of the fuel leak is the
WOPL, which was already closed since October 24, 2010, but denied liability by placing blame
on the construction activities on the roads surrounding West Tower.

On November 15, 2010, West Tower Condominium Corporation (West Tower Corp.) interposed
the present Petition for the Issuance of a Writ of Kalikasan on behalf of the residents of West
Tower and in representation of the surrounding communities in Barangay Bangkal, Makati City.
West Tower Corp. also alleged that it is joined by the civil society and several peoples
organizations, non-governmental organizations and public interest groups who have expressed
their intent to join the suit because of the magnitude of the environmental issues involved.1 chanrobleslaw

In their petition, petitioners prayed that respondents FPIC and its board of directors and officers,
and First Gen Corporation (FGC) and its board of directors and officers be directed to: (1)
permanently cease and desist from committing acts of negligence in the performance of their
functions as a common carrier; (2) continue to check the structural integrity of the whole 117-
kilometer pipeline and to replace the same; (3) make periodic reports on their findings with
regard to the 117-kilometer pipeline and their replacement of the same; (4) rehabilitate and
restore the environment, especially Barangay Bangkal and West Tower, at least to what it was
before the signs of the leak became manifest; and (5) to open a special trust fund to answer for
similar and future contingencies in the future. Furthermore, petitioners pray that respondents be
prohibited from opening the pipeline and allowing the use thereof until the same has been
thoroughly checked and replaced, and be temporarily restrained from operating the pipeline until
the final resolution of the case.

To bolster their petition, petitioners argued that FPICs omission or failure to timely replace its
pipelines and to observe extraordinary diligence caused the petroleum spill in the City of Makati.
Thus, for petitioners, the continued use of the now 47-year old pipeline would not only be a
hazard or a threat to the lives, health, and property of those who live or sojourn in all the
municipalities in which the pipeline is laid, but would also affect the rights of the generations yet
unborn to live in a balanced and healthful ecology, guaranteed under Section 16, Article II of
the 1987 Constitution.

On November 19, 2010, the Court issued the Writ of Kalikasan2 with a Temporary
Environmental Protection Order (TEPO) requiring respondents FPIC, FGC, and the members of
their Boards of Directors to file their respective verified returns. The TEPO enjoined FPIC and
FGC to: (a) cease and desist from operating the WOPL until further orders; (b) check the
structural integrity of the whole span of the 117-kilometer WOPL while implementing sufficient
measures to prevent and avert any untoward incident that may result from any leak of the
pipeline; and (c) make a report thereon within 60 days from receipt thereof.
In compliance with the writ, FPIC directors Edgar Chua, Dennis Javier, Dennis Gamab and
Willie Sarmiento submitted a Joint Return3 praying for the dismissal of the petition and the
denial of the privilege of the Writ of Kalikasan. They alleged that: petitioners had no legal
capacity to institute the petition; there is no allegation that the environmental damage affected
the inhabitants of two (2) or more cities or provinces; and the continued operation of the pipeline
should be allowed in the interest of maintaining adequate petroleum supply to the public.

Respondents FPIC and its directors and officers, other than the aforementioned four (4) directors,
also filed a Verified Return4 claiming that not all requirements for the issuance of the Writ of
Kalikasan are present and there is no showing that West Tower Corp. was authorized by all those
it claimed to represent. They further averred that the petition contains no allegation that
respondents FPIC directors and officers acted in such a manner as to allow the piercing of the
corporate veil.

Meanwhile, on January 18, 2011, FGC and the members of its Board of Directors and Officers
filed a Joint Compliance5 submitting the report required by the Writ of Kalikasan/TEPO. They
contended that they neither own nor operate the pipelines, adding that it is impossible for them to
report on the structural integrity of the pipelines, much less to cease and desist from operating
them as they have no capability, power, control or responsibility over the pipelines. They, thus,
prayed that the directives of the Writ of Kalikasan/TEPO be considered as sufficiently
performed, as to them.

On January 21, 2011, FPIC, in compliance with the writ, submitted its 4-page Report on
Pipeline Integrity Check and Preventive Maintenance Program.6 In gist, FPIC reported the
following:chanRob lesvirtualLawlibrary

(I) For the structural integrity of the 117-kilometer pipeline, (a) the DOE engaged the services
of UP-NIGS to do borehole testing on 81 pre-identified critical areas of the WOPL in eight cities
and municipalitiesall the boreholes showed negative presence of petroleum vapors; (b)
pressure tests were conducted after the repair of the leak and results showed negative leaks and
the DOEs pipeline expert, Societe General de Surveillance, New Zealand, has developed a
pressure test protocol requiring a 24-hour operation of running a scraper pig through the pipeline
to eliminate air gap; (c) In-Line Inspection Test, was conducted by NDT through MFL and
ultrasonic. The NDT later cleared the WOPL from any damage or corrosion.

(II) For preventive maintenance measures, (a) Cathodic Protection Systems are installed
involving the use of anode materials and the introduction of electric current in the pipeline to
enhance prevention of corrosion; (b) Regular Scraper Runs through the pipeline to maintain
cleanliness and integrity of the pipelines internal surface; (c) Daily Patrols every two hours of
the pipeline route to deter unauthorized diggings in the vicinity of the pipeline segments; (d)
Regular coordination meetings with DPWH, MMDA and utility companies to monitor projects
that might involve digging or excavation in the vicinity of the pipeline segments; (e) Installation
of Security Warning Signs along the pipeline route with toll free number which can be called in
the event of an accident or emergency; (f) Emergency Response Procedure of the ERT is
activated by a call-out procedure; (g) Maintenance of Emergency Equipment and Repair Kit
which are always on standby; and, (h) Remotely controlled Isolation Valves are in place to shut
the pipeline when necessary. chanroblesvirtuallawlibrary

On February 9, 2011, petitioners filed, and the Court eventually granted, their Motion to Set the
Case for Preliminary Conference and Hearing7 pursuant to Sec. 11, Rule 7 of the Rules of
Procedure for Environmental Cases.

On April 15, 2011, the Court conducted an ocular inspection of the WOPL in the vicinity of
West Tower to determine the veracity of the claim that there were two (2) additional leaks on
FPICs pipeline. Results of the ocular inspection belied the claim.

In the meantime, petitioners also filed civil and criminal complaints against respondents arising
from the same incident or leakage from the WOPL.8 chanrobleslaw

Since after the Courts issuance of the Writ of Kalikasan and the TEPO on November 19, 2010,
FPIC has ceased operations on both the WOPL and the BOPL. On May 31, 2011, however, the
Court, answering a query of the DOE, clarified and confirmed that what is covered by the Writ
of Kalikasan and TEPO is only the WOPL System of FPIC; thus, FPIC can resume operation of
its BOPL System.9 chanrobleslaw

On July 7, 2011, petitioners filed an Omnibus Motion10 assailing the Courts May 31, 2011
Resolution, praying for the conduct of oral argument on the issue of reopening the BOPL
System. This was followed, on September 9, 2011, by a Manifestation (Re: Current
Developments) with Omnibus Motion11 wherein petitioners invoked the precautionary
principle12 and asserted that the possibility of a leak in the BOPL System leading to catastrophic
environmental damage is enough reason to order the closure of its operation. They likewise
alleged that the entities contracted by FPIC to clean and remediate the environment are illegally
discharging waste water, which had not undergone proper treatment, into the Paraaque River.
Petitioners, thus, prayed that respondents be directed to comply with environmental laws in
rehabilitating the surroundings affected by the oil leak and to submit a copy of their work plan
and monthly reports on the progress thereof. To these omnibus motions, respondents were
directed to file their respective comments.

On September 28, 2011, respondent FPIC filed an Urgent Motion for Leave (To Undertake
Bangkal Realignment Project)13 in order to reduce stress on the WOPL System. FPIC sought
to construct a new realigned segment to replace the old pipe segment under the Magallanes
Interchange, which covers the portion that leaked. Petitioners were directed to file their comment
on FPICs motion.

Report and Recommendation of the Court of Appeals

To expedite the resolution of the controversy, the Court remanded the case to the Court of
Appeals (CA). By this Courts Resolution dated November 22, 2011,14 the appellate court was
required to conduct hearings and, thereafter, submit a report and recommendation within 30 days
after the receipt of the parties memoranda.

On March 21, 2012, the preliminary conference was continued before the CA wherein the parties
made admissions and stipulations of facts and defined the issues for resolution. In view of the
technical nature of the case, the CA also appointed15 several amici curiae,16but only four (4) filed
their reports.17
chanrobleslaw

On December 26, 2012, the CA Former 11th Division submitted to the Court its well-crafted and
exhaustive 156-page Report and Recommendation18 dated December 21, 2012 (CA Report).
Some highlights of the Report:

1. Anent petitioners June 28, 2011 Omnibus Motion assailing the reopening of the BOPL
System, the CA directed respondent FPIC to submit the appropriate certification from the
DOE as to the safe commercial operation of the BOPL; otherwise, the operation of the
BOPL must also be enjoined.

2. On petitioners September 9, 2011 Manifestation (Re: Current Developments) with

Omnibus Motion, the CA directed the Inter-Agency Committee on Health to submit its
evaluation of the remediation plan prepared by CH2M Hill Philippines, Inc. for FPIC.
Further, the appellate court directed FPIC to strictly comply with the stipulations
contained in the permits issued by the Department of Environment and Natural Resources
(DENR) for its remediation activities in Barangay Bangkal, Makati City. The DENR was
in turn directed by the CA to: ChanRob lesVirtualawlibrary

(a) monitor compliance by respondent FPIC with applicable environmental laws and
regulations and conditions set forth in the permits issued;
(b) conduct independent analysis of end-products of the Multi-Phase Extraction System;
(c) conduct regular consultative meetings with the City of Makati, residents of Barangay
Bangkal and other stakeholders concerning the remediation activities; and,
(d) evaluate the viability of the recommendation of amicus Dr. Benjamin R. De Jesus, Jr. to
include the use of surfactants and oxygen-releasing compounds (ORCs) in the middle and
terminal portions of the remediation plan.

3. Respondents September 27, 2011 Urgent Motion for Leave (To Undertake Bangkal
Realignment Project) was denied.

4. With regard to the March 29, 2012 Supplemental Manifestation (Re: List of Amici Curiae
and Recent Possible Leak in the Pipeline) filed by petitioners, the CA found that the
existence of another possible leak alleged by petitioners was not established.
Nonetheless, to prevent such event, the CA ordered FPIC to: (i) review, adopt and strictly
observe appropriate safety and precautionary measures; (ii) closely monitor the conduct
of its maintenance and repair works; and (iii) submit to the DOE regular monthly reports
on the structural integrity and safe commercial operation of the pipeline.

5. As to the merits of the case, the CA submitted the following recommendations: ChanRob lesVirtualawlibrary

(a) That the peoples organizations, non-governmental organizations, and public interest
groups that indicated their intention to join the petition and submitted proof of juridical
personality (namely: the Catholic Bishops Conference of the Philippines; Kilusang
 Makabansang Ekonomiya, Inc.; Womens Business Council of the Philippines, Inc.;
Junior Chambers International Philippines, Inc. San Juan Chapter; Zonta Club of
Makati Ayala Foundations; and the Consolidated Mansions Condominium Corporation)
be allowed to be formally impleaded as petitioners.

(b) That respondent FPIC be ordered to submit a certification from the DOE Secretary
that the WOPL is already safe for commercial operation. The certification should take
into consideration the adoption by FPIC of the appropriate leak detection system to be
used in monitoring the entire pipelines mass input versus mass output. The certification
must also consider the necessity of replacing the pipes with existing patches and sleeves.
In case of failure of respondent FPIC to submit the required certification from the DOE
Secretary within sixty (60) days from notice of the Honorable Supreme Courts approval
of this recommendation, the TEPO must be made permanent.

(c) That petitioners prayer for the creation of a special trust fund to answer for similar
contingencies in the future be denied for lack of sufficient basis.

(d) That respondent FGC be not held solidarily liable under the TEPO.

(e) That without prejudice to the outcome of the civil and criminal cases filed against
respondents, the individual directors and officers of FPIC and FGC be not held liable in
their individual capacities.

On January 11, 2013, petitioners filed their Motion for Partial Reconsideration19 of the CAs
Report praying that (a) instead of the DOE, the required certification should be issued by the
DOST-Metal Industry Research and Development Center; (b) a trust fund be created to answer
for future contingencies; and (c) the directors and officers of FPIC and FGC be held accountable.

On January 25, 2013, FPIC filed its Compliance (Re: Department of Energy Certification on the
Black Oil Pipeline)20 and submitted the required DOE Certification21 issued on January 22, 2013
by DOE Secretary Carlos Jericho L. Petilla (Secretary Petilla). On March 14, 2013, petitioners
countered with a Manifestation with Motion22 asserting that FPICs certification is not compliant
with the CAs requirement. Hence, petitioners moved that the certification should be
disregarded, the 30-day period be deemed to have lapsed, and FPIC be permanently enjoined
from operating the BOPL.

On July 30, 2013, the Court issued a Resolution adopting the recommendation of the CA in its
Report and Recommendation that FPIC be ordered to secure a certification from the DOE
Secretary before the WOPL may resume its operations. The pertinent portion of said Resolution
reads:
chanRob lesvirtualLawlibrary

[FPIC] is hereby ORDERED to submit a certification from the DOE Secretary that the pipeline
is already safe for commercial operation. The certification should take into consideration the
adoption by FPIC of the appropriate leak detection system to be used in monitoring the entire
pipelines mass input versus mass output. The certification must also consider the necessity of
replacing the pipes with existing patches and sleeves xxx.23 chanrobleslaw
The DOE Secretary is DIRECTED to consult the [DOST] regarding the adoption of the
appropriate leak detection system and the necessity of replacing the pipes with existing patches
and sleeves.chanroblesv irtuallawlibrary

On October 2, 2013, petitioners, in a Motion for Reconsideration with Motion for Clarification,
emphasized that the CA found FPICs tests and maintenance program to be insufficient and
inconclusive to establish the WOPLs structural integrity for continued commercial operation.24
Furthermore, petitioners point out that the DOE is biased and incapable of determining the
WOPLs structural integrity.

Respondents, for their part, maintain that the DOE has the technical competence and expertise to
assess the structural integrity of the WOPL and to certify the systems safety for commercial
operation.25 Respondents further allege that the DOE is the agency empowered to regulate the
transportation and distribution of petroleum products, and to regulate and monitor downstream
oil industry activities, including product distribution through pipelines.26 chanrobleslaw

In compliance with the Courts July 30, 2013 Resolution, the DOE Secretary issued on October
25, 2013 a Certification,27 attesting that the WOPL is safe to resume commercial operations,
subject to monitoring or inspection requirements, and imposing several conditions that FPIC
must comply with. The Certification, in its entirety, reads: chanRob lesvirtualLawlibrary

This is to certify that based on the Pipeline Integrity Management Systems (PIMS) being
implemented by [FPIC] for its [WOPL] facility, the same is safe to resume commercial
operations. This certification is being issued after consultation with the [DOST] and on the basis
of the following considerations, to wit: chanRoblesvirtualLawlibrary

1. DOE noted the adoption by FPIC of the appropriate leak detection system
to be used in monitoring the pipelines mass input versus mass output, as
well as the other measures of leak detection and prevention adopted by the
latter;

2. DOE further noted that FPIC has already undertaken realignment and
reinforcement works on the current pipeline to remove majority of the
patches. FPIC has likewise presented substantial and adequate
documentation showing that the remaining patches and sleeves are safe,
and that the use of such is recognized by the industry and complies with
existing standards;

3. DOE finally noted the results of various tests and inspections done on the
pipeline as indicated in the Manifestation submitted by the DOE on March
31, 2012, in the civil case docketed as CA GR SP No. 00008 and entitled
West Tower Condominium, et al. [v.] First Philippine Industrial
Corporation, et al.

This certification is being issued subject to the condition that FPIC will submit itself to regular
monitoring and validation by the Oil Industry Management Bureau (OIMB) of the
implementation of its PIMS, particularly on the following: (a) mass or volume input versus mass
or volume output loss/gain accounting; (b) results of borehole monitoring, (c) inspection of the
pipeline cathodic protection and (d) pressure test.

Further, FPIC shall submit itself to any test or inspection that the DOE and DOST may deem
appropriate for purposes of monitoring the operations of the WOPL facility. chanroblesvirtuallawlibrary

The Court is fully cognizant of the WOPLs value in commerce and the adverse effects of a
prolonged closure thereof. Nevertheless, there is a need to balance the necessity of the immediate
reopening of the WOPL with the more important need to ensure that it is sound for continued
operation, since the substances it carries pose a significant hazard to the surrounding population
and to the environment.28 A cursory review of the most recent oil pipeline tragedies around the
world will readily show that extreme caution should be exercised in the monitoring and operation
of these common carriers: ChanRob lesVirtualawlibrary

(1) On August 1, 2014, a series of powerful explosions from underground pipeline systems
ripped up the streets of Kaohsiung, Taiwan, killing at least 28 people and injuring 299 more.
Further, 23,600, 2,268 and 6,000 households were left without gas, power and water,
respectively, in the 2-3 square kilometer blast area.29
(2) On November 22, 2013, an oil pipeline leaked, caught fire, and exploded in Qingdao,
Shangdao Province in China, killing 55 people and injuring more than a hundred more.30
(3) On September 14, 2011, a fuel pipeline exploded in Kenyas capital city, Nairobi, reducing
bodies to dust and flattening homes. At least 75 people died in the explosion, while more
than a hundred people were injured.31
(4) In September 2010, a natural gas pipeline ruptured and set off a fireball, killing eight (8)
people and leveling 38 homes in San Bruno, California in the United States.32
(5) On July 30, 2004, a rupture of an underground natural gas pipeline buried six (6) meters in
Ghislenghien, Belgium resulted in 24 deaths and over 120 injuries.33

On April 29 and 30, 2014, the DOE organized a dialogue between said government agencies and
the FPIC. There it was stated that during the dialogue, the division heads and a high profile
team from FPIC, both from operation and management made presentations and answered
questions on pipeline pumping operation and product delivery, and a detailed explanation of the
FPIC PIMS control measures, condition monitoring measures, and emergency measures, as well
as its various activities and projects implemented since 2010 such as pipeline replacement and
realignment in Pandacan and Bangkal, inspection and reinforcement of all patches in the WOPL,
inspection and reinforcement of a number of reported dents in the WOPL, conduct of successful
leak tests, and installation of boreholes that are gas-tested on a weekly basis, and the safety
systems that go with the daily pipeline operation and maintenance and project execution.34 chanrobleslaw

On August 5, 2014, Secretary Carlos Jericho L. Petilla of the DOE submitted a letter35
recommending activities and timetable for the resumption of the WOPL operations, to wit: chanRoblesvirtualLawlibrary

A. Preparatory to the Test Run

I. FPIC Tasks:

a. Continue submission of monitoring charts, data/reading, accomplishment reports,

and project status for all related activities/works. Respond to comments and
prepare for site inspection.
 b. Continue gas testing along the right-of-way using the monitoring wells or
boreholes. Prepare for inspection of right-of-way and observation of gas testing
activities on monitoring wells and boreholes.

c. Expound on the selection of borehole location. For example, identify those

located in pipeline bends, bodies of water, residential areas, repaired portions of
the pipelines, dents and welded joints.

d. Continue submitting status report relating to Project Mojica (an ongoing

pipeline segment realignment activity undertaken by FPIC to give way to a flood
control project of MMDA in the vicinity of Mojica St. and Pres. Osmea
Highway in Makati City). Prepare for site inspection.

II. Inter-agency undertaking:

a. Conduct onsite inspection of right-of-way

b. Review/check remaining 22 patches that were already inspected and reinforced

with Clockspring sleeves.

i. Determine location of sleeves.

ii. Review of procedures on repair of sleeves.

iii. Random visual inspection of areas easily accessible.

c. Cathodic protections onsite inspection on rectifier to check readings

i. Old readings

ii. Current Readings

iii. Segment covered

iv. Criteria for prioritization for corrective action

d. Observe and witness the running/operation of the cleaning pig.

e. Check and validate all calibration certificate of instruments

i. Instrument verification and calibration.

B. Actual Test Run (to be undertaken both by FPIC and inter-agency)

a. Perform Cleaning Pig Run

i. Witness launching and receiving of the cleaning pig.

 ii. Handling of the residuals after cleaning.

b. Demonstrate Various Pressure Tests (already being conducted by FPIC)

i. Blocked-in pressure test (Leak Test, not in operation)

ii. In-operation (hourly reading)

c. Continue Current Gas Monitoring (boreholes)

i. Ocular inspection of selected areas

d. Demonstrate mass or volume balance computation during WOPL test run (already
being implemented in the BOPL)

i. 30 days baseline data generation

ii. 30 days computational analysis and monitoring

C. Commissioning or Return to Commercial Operation

I. FPIC Tasks:

a. Continue implementation of the PIMS. Review recommendations from DOE.

b. Continue monthly reporting of operations and maintenance activities with DOE.

c. Continue reporting and coordination with DOE and other government agencies
for implementation of projects.36

Secretary Petilla also recounted to the Court in his August 5, 2014 letter that the DOE, together
with the DPWH and the Metropolitan Manila Development Authority (MMDA), observed the
different milestones of the realignment project being undertaken by FPIC in support of the
MMDA Flood Control Project and stated that the new line segment as laid was coated with
corrosion protection prior to the backfilling of the excavated portion.

On February 3, 2015, the Court required the parties to submit their comment on Sec. Petillas
letter within ten (10) days from receipt of the Resolution. On various dates, respondents First
Gen Corporation, FPIC, and petitioner West Tower filed their respective comments37 in
compliance with the Courts resolution. The intervenorswere unable to comply with the Courts
directive; hence, they are deemed to have waived their right to file their respective comments.

The Issues

Having received the October 25, 2013 Certification and the August 5, 2014 Letter from the DOE
on the state of the WOPL, as well as the parties comments thereon, the following issues defined
by the parties during the March 21, 2012 preliminary conference are now ripe for adjudication: chanRoblesvir tualLawlibrary

1. Whether petitioner West Tower Corp. has the legal capacity to represent the other
petitioners and whether the other petitioners, apart from the residents of West
Tower and Barangay Bangkal, are real parties-in-interest;

2. Whether a Permanent Environmental Protection Order should be issued to direct

the respondents to perform or to desist from performing acts in order to protect,
preserve, and rehabilitate the affected environment;

3. Whether a special trust fund should be opened by respondents to answer for future
similar contingencies; and

4. Whether FGC and the directors and officers of respondents FPIC and FGC may
be held liable under the environmental protection order.38

The Courts Ruling

We adopt, with modifications, the recommendations of the CA and discuss the foregoing issues
in seriatim.

I.

Petitioners as Real Parties-in-Interest

On the procedural aspect, We agree with the CA that petitioners who are affected residents of
West Tower and Barangay Bangkal have the requisite concern to be real parties-in-interest to
pursue the instant petition.

Residents of West Tower and Barangay Bangkal

As defined, a real party-in-interest is the party who stands to be benefited or injured by the
judgment in the suit, or the party entitled to the avails of the suit.39 Generally, every action must
be prosecuted or defended in the name of the real parties-in-interest.40 In other words, the action
must be brought by the person who, by substantive law, possesses the right sought to be
enforced.41 Alternatively, one who has no right or interest to protect cannot invoke the
jurisdiction of the court as party-plaintiff-in-action for it is jurisprudentially ordained that every
action must be prosecuted or defended in the name of the real party-in-interest.42 chanrobleslaw

In the case at bar, there can be no quibble that the oil leak from the WOPL affected all the
condominium unit owners and residents of West Tower as, in fact, all had to evacuate their units
at the wee hours in the morning of July 23, 2010, when the condominiums electrical power was
shut down. Until now, the unit owners and residents of West Tower could still not return to their
condominium units. Thus, there is no gainsaying that the residents of West Tower are real
parties-in-interest.
There can also be no denying that West Tower Corp. represents the common interest of its unit
owners and residents, and has the legal standing to file and pursue the instant petition. While a
condominium corporation has limited powers under RA 4726, otherwise known as The
Condominium Act,43 it is empowered to pursue actions in behalf of its members. In the instant
case, the condominium corporation is the management body of West Tower and deals with
everything that may affect some or all of the condominium unit owners or users.

It is of no moment that only five residents of West Tower signed their acquiescence to the filing
of the petition for the issuance of the Writ of Kalikasan, as the merits of such petition is, as aptly
put by the CA, not measured by the number of persons who signified their assent thereto, but on
the existence of a prima facie case of a massive environmental disaster.

Moreover, the fact that no board resolution was submitted by West Tower Corp. authorizing
Manuel DyChuaunsu, Jr. to sign the Verification and Certification of Non-forum Shopping is
irrelevant. The records show that petitioners submitted a notarized Secretarys Certificate44
attesting that the authority of Chuaunsu to represent the condominium corporation in filing the
petition is from the resolution of the total membership of West Tower Corp. issued during their
November 9, 2010 meeting with the requisite quorum. It is, thus, clear that it was not the Board
of West Tower Corp. which granted Chuaunsu the authority but the full membership of the
condominium corporation itself.

As to the residents of Barangay Bangkal, they are similarly situated with the unit owners and
residents of West Tower and are real parties-in-interest to the instant case, i.e., if they so wish to
join the petitioners.

Organizations that indicated their intention to join the petition and submitted proof of
juridical personality

Anent the propriety of including the Catholic Bishops Conference of the Philippines, Kilusang
Makabansang Ekonomiya, Inc., Womens Business Council of the Philippines, Inc., Junior
Chambers International Philippines, Inc. San Juan Chapter, Zonta Club of Makati Ayala
Foundations, and the Consolidated Mansions Condominium Corporation, as petitioners in the
case, the Court already granted their intervention in the present controversy in the adverted July
30, 2013 Resolution.

This is so considering that the filing of a petition for the issuance of a writ of kalikasan under
Sec. 1, Rule 745 of the Rules of Procedure for Environmental Cases does not require that a
petitioner be directly affected by an environmental disaster. The rule clearly allows juridical
persons to file the petition on behalf of persons whose constitutional right to a balanced and
healthful ecology is violated, or threatened with violation.

Thus, as parties to the case, they are entitled to be furnished copies of all the submissions to the
Court, including the periodic reports of FPIC and the results of the evaluations and tests
conducted on the WOPL.

Having disposed of the procedural issue, We proceed to the bone of contention in the pending
motions. Suffice it to state in the outset that as regards the substantive issues presented, the
Court, likewise, concurs with the other recommendations of the CA, with a few modifications.

II.

Propriety of Converting the TEPO to PEPO or its Lifting in light of the DOE Certification
of the WOPLs Commercial Viability

To recall, petitioners persistent plea is for the conversion of the November 19, 2010 TEPO into
a Permanent Environmental Protection Order (PEPO) pursuant to Sec. 3,46 Rule 5 of the Rules of
Procedure for Environmental Cases. For its part, respondent FPIC asserts that regular testing, as
well as the measures that are already in place, will sufficiently address any concern of oil leaks
from the WOPL.

With respect to leak detection, FPIC claims that it has in place the following systems: (a) regular
cleaning scraper runs, which are done quarterly; (b) pipeline integrity gauge (PIG)
tests/Intelligent PIG, now known as in-line inspections (ILI), which is done every five years; (c)
pressure monitoring valves; and (d) 24-hour patrols. Additionally, FPIC asserted that it also
undertook the following: (a) monitoring of wells and borehole testing/vapor tests; (b) leak
tightness test, also known as segment pressure test; (c) pressure-controlled test; (d) inspection
and reinforcement of patches; (e) inspection and reinforcement of dents; and (f) Pandacan
segment replacement.47 Furthermore, in August 2010, with the oil leak hogging the headlines,
FPIC hired NDT Middle East FZE (NDT) to conduct ILI inspections through magnetic flux
leakage (MFL) and ultrasonic tests to, respectively, detect wall thinning of the pipeline and
check it for cracks.

The CA, however, observed that all of these tests and measures are inconclusive and insufficient
for purposes of leak detection and pipeline integrity maintenance. Hence, considering the
necessary caution and level of assurance required to ensure that the WOPL system is free from
leaks and is safe for commercial operation, the CA recommended that FPIC obtain from the
DOE a certification that the WOPL is already safe for commercial operation. This certification,
according to the CA, was to be issued with due consideration of the adoption by FPIC of the
appropriate leak detection systems to monitor sufficiently the entire WOPL and the need to
replace portions of the pipes with existing patches and sleeves. Sans the required certification,
use of the WOPL shall remain abated.

The Court found this recommendation of the appellate court proper. Hence, We required FPIC to
obtain the adverted DOE Certification in Our July 30, 2013 Resolution. We deemed it proper to
require said certification from the DOE considering that the core issue of this case requires the
specialized knowledge and special expertise of the DOE and various other administrative
agencies. On October 25, 2013, the DOE submitted the certification pursuant to the July 30,
2013 Resolution of the Court. Later, however, on August 5, 2014, DOE Secretary Carlos Jericho
I. Petilla submitted a letter recommending certain activities and the timetable for the resumption
of the WOPL operations after conducting a dialogue between the concerned government
agencies and FPIC.

After a perusal of the recommendations of the DOE and the submissions of the parties, the
Court adopts the activities and measures prescribed in the DOE letter dated August 5, 2014
to be complied with by FPIC as conditions for the resumption of the commercial operations
of the WOPL. The DOE should, therefore, proceed with the implementation of the tests
proposed in the said August 5, 2014 letter. Thereafter, if it is satisfied that the results
warrant the immediate reopening of the WOPL, the DOE shall issue an order allowing
FPIC to resume the operation of the WOPL. On the other hand, should the probe result in
a finding that the pipeline is no longer safe for continued use and that its condition is
irremediable, or that it already exceeded its serviceable life, among others, the closure of
the WOPL may be ordered.

The DOE is specially equipped to consider FPICs proper implementation and compliance with
its PIMS and to evaluate the result of the various tests conducted on the pipeline. The DOE is
empowered by Sec. 12(b)(1), RA 7638 to formulate and implement policies for the efficient and
economical distribution, transportation, and storage of petroleum, coal, natural gas.48 Thus, it
cannot be gainsaid that the DOE possesses technical knowledge and special expertise with
respect to practices in the transportation of oil through pipelines.

Moreover, it is notable that the DOE did not only limit itself to the knowledge and proficiency
available within its offices, it has also rallied around the assistance of pertinent bureaus of the
other administrative agencies: the ITDI49 of the DOST, which is mandated to undertake technical
services including standards, analytical and calibration services; the MIRDC,50 also of the
DOST, which is the sole government entity directly supporting the metals and engineering
industry;51 the EMB52 of the DENR, the agency mandated to implement, among others, RA 6969
(Toxic Substances and Hazardous and Nuclear Waste Control Act of 1990) and RA 9275
(Philippine Clean Water Act of 2004); and the BOD of the DPWH, which is mandated to
conduct, supervise, and review the technical design aspects of projects of government
agencies.53chanrobleslaw

The specialized knowledge and expertise of the foregoing agencies must, therefore, be availed of
to arrive at a judicious decision on the propriety of allowing the immediate resumption of the
WOPLs operation. In a host of cases, this Court held that when the adjudication of a controversy
requires the resolution of issues within the expertise of an administrative body, such issues must
be investigated and resolved by the administrative body equipped with the specialized
knowledge and the technical expertise.54 Hence, the courts, although they may have jurisdiction
and power to decide cases, can utilize the findings and recommendations of the administrative
agency on questions that demand the exercise of sound administrative discretion requiring the
special knowledge, experience, and services of the administrative tribunal to determine technical
and intricate matters of fact.55
chanrobleslaw

Justice Leonen, in his dissent, is of the view that the petition should be denied and the TEPO
immediately lifted in light of the DOEs issuance of a certification attesting to the safety of the
WOPL for continued commercial operations, thereby rendering the instant petition moot and
academic, seeking, as it does, the checking of the pipelines structural integrity. According to his
dissent, the writ of kalikasan issued by the Court has already served its functions and, therefore,
is functus officio. Moreover, he argues that directing the DOE and FPIC to repeat their previous
procedures is tantamount to doubting the agencys performance of its statutorily-mandated tasks,
over which they have the necessary expertise, and implies that said DOE certification is
improper, a breach, allegedly, of the principle of separation of powers.

He also contends that the majority ordered the repetition of the procedures and tests already
conducted on the WOPL because of the fear and uncertainty on its safeness despite the finding of
the DOE in favor of its reopening, taking into consideration the occurrence of numerous pipeline
incidents worldwide. The dissent argues that the precautionary principle should not be so strictly
applied as to unjustifiably deprive the public of the benefits of the activity to be inhibited, and to
unduly create other risks.

The dissents contentions that the case is already moot and academic, that the writ of kalikasan
has already served its function, and that the delay in the lifting of the TEPO may do more harm
than good are anchored on the mistaken premise that the precautionary principle was applied in
order to justify the order to the DOE and the FPIC for the conduct of the various tests anew. The
following reasons easily debunk these arguments:

1. The precautionary principle is not applicable to the instant case;

2. The DOE certification is not an absolute attestation as to the WOPLs structural integrity
and in fact imposes several conditions for FPICs compliance;

3. The DOE itself, in consultation with FPIC and the other concerned agencies, proposed
the activities to be conducted preparatory to the reopening of the pipeline; and

4. There are no conclusive findings yet on the WOPLs structural integrity.

Section 1, Rule 20 of A.M. No. 09-6-8-SC or the Rules of Procedure for Environmental Cases,
on the Precautionary Principle, provides that [w]hen there is lack of full scientific certainty in
establishing a causal link between human activity and environmental effect, the court shall apply
the precautionary principle in resolving the case before it.

According to the dissent, the directive for the repetition of the tests is based on speculations,
justified by the application of said principle. This, however, is not the case. Nowhere did We
apply the precautionary principle in deciding the issue on the WOPLs structural integrity.

The precautionary principle only applies when the link between the cause, that is the human
activity sought to be inhibited, and the effect, that is the damage to the environment, cannot be
established with full scientific certainty. Here, however, such absence of a link is not an issue.
Detecting the existence of a leak or the presence of defects in the WOPL, which is the issue in
the case at bar, is different from determining whether the spillage of hazardous materials into the
surroundings will cause environmental damage or will harm human health or that of other
organisms. As a matter of fact, the petroleum leak and the harm that it caused to the environment
and to the residents of the affected areas is not even questioned by FPIC.

It must be stressed that what is in issue in the instant petition is the WOPLs compliance with
pipeline structure standards so as to make it fit for its purpose, a question of fact that is to
be determined on the basis of the evidence presented by the parties on the WOPLs actual
state. Hence, Our consideration of the numerous findings and recommendations of the CA, the
DOE, and the amici curiae on the WOPLs present structure, and not the cited pipeline incidents
as the dissent propounds.

Consider also the fact that it is the DOE itself that imposed several conditions upon FPIC for the
resumption of the operations of the WOPL. This, coupled with the submission by the DOE of its
proposed activities and timetable, is a clear and unequivocal message coming from the DOE that
the WOPLs soundness for resumption of and continued commercial operations is not yet fully
determined. And it is only after an extensive determination by the DOE of the pipelines
actual physical state through its proposed activities, and not merely through a short-form
integrity audit,56 that the factual issue on the WOPLs viability can be settled. The issue,
therefore, on the pipelines structural integrity has not yet been rendered moot and remains to be
subject to this Courts resolution. Consequently, We cannot say that the DOEs issuance of the
certification adverted to equates to the writ of kalikasan being functus officio at this point.

The dissent is correct in emphasizing that We defer to the findings of fact of administrative
agencies considering their specialized knowledge in their field. And We, as a matter of fact,
acceded to the DOEs conclusions on the necessity of the conduct of the various activities and
tests enumerated in Sec. Petillas letter to this Court dated August 5, 2014. Hence, Our directive
for the DOE to immediately commence the activities enumerated in said Letter, to determine the
pipelines reliability, and to order its reopening should the DOE find that such is proper.

The dissent also loses sight of the fact that the petition not only seeks the checking of the
WOPLs structural integrity, but also prays for the rehabilitation of the areas affected by the leak,
the creation of a special trust fund, the imposition of liability upon the directors of FPIC, among
others. These issues, undoubtedly, are matters that are not addressed by the DOE certification
alone. Furthermore, these are issues that no longer relate to the WOPLs structure but to its
maintenance and operations, as well as to the residues of the incident. It will, thus, be improper
for Us to simply dismiss the petition on the basis solely of the alleged resolution of only one of
several issues, which purportedly renders the issue on the WOPLs soundness moot, without
disposing of the other issues presented.

Lastly, any delay in the reopening of the WOPL, if said delay is for the purpose of making sure
that the pipeline is commercially viable, is better than hastily allowing its reopening without an
extensive check on its structural integrity when experience shows that there were and may still
be flaws in the pipeline. Even the DOE, the agency tasked to oversee the supply and distribution
of petroleum in the country, is well aware of this and even recommended the checking of the
patched portions of the pipeline, among others. In this regard, the Court deems it best to take the
necessary safeguards, which are not similar to applying the precautionary principle as previously
explained, in order to prevent a similar incident from happening in the future.

III.

Propriety of the Creation of a Special Trust Fund

Anent petitioners prayer for the creation of a special trust fund, We note that under Sec. 1, Rule
5 of the Rules of Procedure for Environmental Cases, a trust fund is limited solely for the
purpose of rehabilitating or restoring the environment. Said proviso pertinently provides: chanRoblesv irtualLawlibrary

SEC. 1. Reliefs in a citizen suit. If warranted, the court may grant to the plaintiff proper reliefs
which shall include the protection, preservation or rehabilitation of the environment and the
payment of attorneys fees, costs of suit and other litigation expenses. It may also require the
violator to submit a program of rehabilitation or restoration of the environment, the costs of
which shall be borne by the violator, or to contribute to a special trust fund for that purpose
subject to the control of the court. (emphasis supplied)
Furthermore, Sec. 15(e), Rule 7 of the Rules of Procedure for Environmental Cases expressly
prohibits the grant of damages to petitioners in a petition for the issuance of a writ of kalikasan,
viz:
chanRoblesvirtualLawlibrary

Section 15. Judgment. - Within sixty (60) days from the time the petition is submitted for
decision, the court shall render judgment granting or denying the privilege of the writ of
kalikasan.

The reliefs that may be granted under the writ are the following: ChanRob lesVirtualawlibrary

xxxx

(e) Such other reliefs which relate to the right of the people to a balanced and healthful ecology
or to the protection, preservation, rehabilitation or restoration of the environment, except the
award of damages to individual petitioners. chanroblesvirtuallawlibrary

A reading of the petition and the motion for partial reconsideration readily reveals that the prayer
is for the creation of a trust fund for similar future contingencies.This is clearly outside the
limited purpose of a special trust fund under the Rules of Procedure for Environmental Cases,
which is to rehabilitate or restore the environment that has presumably already suffered.
Hence,the Court affirms with concurrence the observation of the appellate court that the prayer is
but a claim for damages, which is prohibited by the Rules of Procedure for Environmental Cases.
As such, the Court is of the considered view that the creation of a special trust fund is misplaced.

The present ruling on petitioners prayer for the creation of a special trust fund in the instant
recourse, however, is without prejudice to the judgment/s that may be rendered in the civil and/or
criminal cases filed by petitioners arising from the same incident if the payment of damages is
found warranted.

IV.

Liability of FPIC, FGC and their respective Directors and Officers

On the last issue of the liability of FPIC, FGC and their respective directors and officers, the CA
found FGC not liable under the TEPO and, without prejudice to the outcome of the civil case
(Civil Case No. 11-256, RTC, Branch 58 in Makati City) and criminal complaint (Complaint-
Affidavit for Reckless Imprudence, Office of the Provincial Prosecutor of Makati City) filed
against them, the individual directors and officers of FPIC and FGC are not liable in their
individual capacities.
The Court will refrain from ruling on the finding of the CA that the individual directors and
officers of FPIC and FGC are not liable due to the explicit rule in the Rules of Procedure for
Environmental cases that in a petition for a writ of kalikasan,the Court cannot grant the award of
damages to individual petitioners under Rule 7, Sec. 15(e) of the Rules of Procedure for
Environmental Cases. As duly noted by the CA, the civil case and criminal complaint filed by
petitioners against respondents are the proper proceedings to ventilate and determine the
individual liability of respondents, if any, on their exercise of corporate powers and the
management of FPIC relative to the dire environmental impact of the dumping of petroleum
products stemming from the leak in the WOPL in Barangay Bangkal, Makati City.

Hence, the Court will not rule on the alleged liability on the part of the FPIC and FGC officials
which can, however, be properly resolved in the civil and criminal cases now pending against
them.

Other Matters

The CAs resolution on petitioners September 9, 2011 Manifestation (Re: Current

Developments) with Omnibus Motion on the remediation plan in Barangay Bangkal by directing
the Inter-Agency Committee on Environmental Health to submit its evaluation of the said plan
prepared by CH2M Philippines, Inc., for FPIC to strictly comply with the stipulations embodied
in the permits issued by the DENR, and to get a certification from the DENR of its compliance
thereto is well taken. DENR is the government agency tasked to implement the state policy of
maintaining a sound ecological balance and protecting and enhancing the quality of the
environment57 and to promulgate rules and regulations for the control of water, air, and land
pollution.58 It is indubitable that the DENR has jurisdiction in overseeing and supervising the
environmental remediation of Barangay Bangkal, which is adversely affected by the leak in the
WOPL in 2010.

With regard to petitioners March 29, 2012 Supplemental Manifestation about a recent possible
leak in the pipeline, the CA appropriately found no additional leak. However, due to the
devastating effect on the environs in Barangay Bangkal due to the 2010 leak, the Court finds it
fitting that the pipeline be closely and regularly monitored to obviate another catastrophic event
which will prejudice the health of the affected people, and to preserve and protect the
environment not only for the present but also for the future generations to come.

Petitioners January 10, 2013 Motion for Partial Recommendation of the CAs Report need not
be discussed and given consideration. As the CAs Report contains but the appellate courts
recommendation on how the issues should be resolved, and not the adjudication by this Court,
there is nothing for the appellate court to reconsider.

As to petitioners October 2, 2013 Motion for Reconsideration with Motion for Clarification, the
matters contained therein have been considered in the foregoing discussion of the primary issues
of this case. With all these, We need not belabor the other arguments raised by the parties.

IN VIEW OF THE FOREGOING, the Motion for Partial Reconsideration is hereby DENIED.
The Motion for Reconsideration with Motion for Clarification is PARTLY GRANTED. The
Court of Appeals recommendations, embodied in its December 21, 2012 Report and
Recommendation, are hereby ADOPTED with the following MODIFICATIONS: ChanRoblesVirtualawlibrary

I. The Department of Energy (DOE) is hereby ORDERED to oversee the strict implementation
of the following activities:
chanRoblesvirtualLawlibrary

A. Preparatory to the Test Run of the entire stretch of the WOPL:Chan RoblesV irtualawlibrary

1) FPIC shall perform the following:

a. Continue submission of monitoring charts, data/reading, accomplishment reports,

and project status for all related activities/works. Respond to comments and
prepare for site inspection.

b. Continue gas testing along the right-of-way using the monitoring wells or
boreholes. Prepare for inspection of right-of-way and observation of gas testing
activities on monitoring wells and boreholes.

c. Explain the process of the selection of borehole location and identify those
located in pipeline bends, bodies of water, highways, residential areas, repaired
portions of the pipelines, dents and welded joints, as well other notable factors,
circumstances, or exposure to stresses.

d. Set up additional boreholes and monitoring wells sufficient to cover the entire
stretch of the WOPL, the number and location of which shall be determined by
the DOE.

e. Continue submitting status report to the concerned government agency/ies

relating to Project Mojica, or the on-going pipeline segment realignment
activity being undertaken by FPIC to give way to a flood control project of the
MMDA in the vicinity of Mojica St. and Pres. Osmea Highway, and prepare for
site inspection.

2) The DOE shall perform the following undertakings:

a. Conduct onsite inspection of the pipeline right-of-way, the area around the WOPL
and the equipment installed underground or aboveground.

b. Review and check the condition of the 22 patches reinforced with

Clockspringsleeves by performing the following:
i. Determine the location of the sleeves

ii. Review the procedure for the repair of the sleeves

iii. Inspect the areas where the affected portions of the WOPL are located and
which are easily accessible.
 c. Inspect onsite the cathodic protection rectifier to check the following:
i. old and current readings

ii. the segment/s covered by the cathodic protection system

iii. review the criteria for prioritization of corrective action.

d. Observe and witness the running/operation of the intelligent and cleaning pigs.

e. Check and calibrate the instruments that will be used for the actual tests on the
pipeline, and validate the calibration certificates of these instruments.

B. During the Actual Test Run: ChanRoblesVirtualawlibrary

1) FPIC shall perform the following:

a. Perform Cleaning Pig run and witness the launching and receiving of the
intelligent and cleaning pigs.

b. Demonstrate and observe the various pressure and leakage tests, including the
following:
i. Blocked-in pressure test or the pressure test conducted while all the
WOPLs openings are blocked or closed off; and

ii. In-operation test or the hourly monitoring of pressure rating after the
pipeline is filled with dyed water and pressurized at a specified rate.

c. Continue, inspect, and oversee the current gas monitoring system, or the
monitoring of gas flow from the boreholes and monitoring wells of the WOPL.

d. Check the mass or volume balance computation during WOPL test run by
conducting:
i. 30 days baseline data generation

ii. Computational analysis and monitoring of the data generated.

II. After FPIC has undertaken the activities prescribed in the preceding paragraph 1, the DOE
shall determine if the activities and the results of the test run warrant the re-opening of the
WOPL. In the event that the DOE is satisfied that the WOPL is safe for continued commercial
operations, it shall issue an order allowing FPIC to resume the operations of the pipeline.

III. Once the WOPL is re-opened, the DOE shall see to it that FPIC strictly complies with the
following directives: chanRoblesv irtualLawlibrary
 a. Continue implementation of its Pipeline Integrity Management System (PIMS), as
reviewed by the DOE, which shall include, but shall not be limited to:
1. the conduct of daily patrols on the entire stretch of the WOPL, every two
hours;

2. continued close monitoring of all the boreholes and monitoring wells of

the WOPL pipeline;

3. regular periodic testing and maintenance based on its PIMS; and

4. the auditing of the pipelines mass input versus mass output;

b. submit to the DOE, within ten (10) days of each succeeding month, monthly
reports on its compliance with the above directives and any other conditions that
the DOE may impose, the results of the monitoring, tests, and audit, as well as
any and all activities undertaken on the WOPL or in connection with its operation.
The concerned government agencies, namely: the Industrial Technology
Development Institute (ITDI) and the Metals Industry Research and Development
Center (MIRDC), both under the Department of Science and Technology
(DOST), the Environmental Management Bureau (EMB) of the Department of
Environment and Natural Resources (DENR), the Bureau of Design (BOD) of the
Department of Public Works and Highways (DPWH), the University of the
Philippines National Institute of Geological Science (UP-NIGS) and University
of the Philippines - Institute of Civil Engineering (UP-ICE), the petitioners,
intervenors and this Court shall likewise be furnished by FPIC with the monthly
reports. This shall include, but shall not be limited to: realignment, repairs, and
maintenance works; and

c. continue coordination with the concerned government agencies for the

implementation of its projects.

IV. Respondent FPIC is also DIRECTED to undertake and continue the remediation,
rehabilitation and restoration of the affected Barangay Bangkal environment until full restoration
of the affected area to its condition prior to the leakage is achieved. For this purpose, respondent
FPIC must strictly comply with the measures, directives and permits issued by the DENR for its
remediation activities in Barangay Bangkal, including but not limited to, the Wastewater
Discharge Permit and Permit to Operate. The DENR has the authority to oversee and supervise
the aforesaid activities on said affected barangay.

V. The Inter-Agency Committee on Environmental Health under the City Government of Makati
shall SUBMIT to the DENR its evaluation of the Remediation Plan prepared by CH2M Hill
Philippines, Inc. within thirty (30) days from receipt hereof.

VI. Petitioners prayer for the creation of a special trust fund to answer for similar contingencies
in the future is DENIED. SO ORDERED. cralawlawlibrary
CA VS MERALCO

CA junks petition for Writ of Kalikasan vs. Meralco

By Perfecto T. Raymundo Jr.

MANILA, Jan. 31 (PNA) - The Court of Appeals (CA) dismissed on Monday the petition filed by the
residents of the cities of Makati and Pasay seeking the issuance of a Writ of Kalikasan stopping the
Manila Electric Company (Meralco) from constructing a power substation and installing sub-
transmission lines in their areas because of health and security concerns.

In a 24-page decision penned by Associate Justice Stephen Cruz, the CA's former Seventeenth Division
ruled that contrary to the claim of the residents of Barangay 183 of Pasay City and Magallanes Village in
Makati City, Meralco's power lines "do not pose a threat, immediate or otherwise" to their health.

Concurring with the decision were Associate Justices Isaias Dicdican and Franchito Diamante.

In their petition, the residents asked the CA to order the respondents to cease and desist from
conducting excavation works, installing poles and transmission lines along the entire stretch of 10th,
12th and 27th Streets of Barangay 183 and from energizing and transmitting high voltage electric
current through the said power lines.

The 30-foot-high posts will hold the transmission lines which will supply more or less 115 kilovolts of
power to the Ninoy Aquino International Airport (NAIA) Centennial Terminal 3.

The petitioners claimed that the lines and electric posts are being erected very near their properties,
thus, putting their health and security at risk.

They noted that some of these posts, which will carry tremendous amount of electricity, have not been
erected properly while others are tilting in an apparently unstable position.

Nonetheless, the CA stressed that the data gathered and presented by the petitioners to support their
claim are "purely statistical in nature" and lack scientific evidence or conclusion that the high-tension
wires emit electromagnetic fields (EMFs) which cause leukemia to children.

It noted that scientists themselves are currently unable to establish the link between leukemia and
EMFs.

"As such, no bases may be culled from any of petitioners' evidence to warrant the issuance of a Writ of
Kalikasan... In the instance before us, the burden of proof lies with petitioners. In failing to prove the
causal link between the illnesses feared and the EMF generating from Meralco's power lines, petitioners
have, in fact, failed to discharge this evidentiary evidence," the CA ruled.

Likewise, the CA ruled that Meralco complied with all the environmental standards mandated under
existing laws, as shown in the clearances issued by the Department of Environment and Natural
Resources (DENR).
The power firm, the CA said, has also met the height and distance requirements under the Philippine
Electrical Code (PEC).

It noted that the horizontal clearance or the distance of the electric wire from the building followed by
Meralco in erecting electric posts is approximately three meters which is far wider than what is required
by the law, which is 2.87 meters.

On the other hand, the vertical clearance or the distance of the electric wires from ground is required
under the PEC to be 22.6 meters while those of Meralco are between 90 feet and 105 feet.

The CA did not give credence to the allegations of the petitioners that the electric wires are installed too
close to their houses while the posts tilted on the direction of their houses.

It explained that during the preliminary conference of the case, the petitioners failed to state with
certainty the distance of the electrical wire from the house of one of the petitioners or show the tilting
of the posts.

"We emphasize that Meralco's operation is not illegal or unlawful to begin with... More importantly,
Meralco's installations was undertaken in compliance firstly to the requisites under various statues,
environmental and otherwise," it said.

"Secondly, it (Meralco) obtained the necessary permits to realize its operations under close scrutiny
from government agencies concerned. Simply put, none of its operations is violative of any law and, as
such, may not be labelled unlawful," it added. (PNA)

G.R. No. 98332 January 16, 1995

MINERS ASSOCIATION OF THE PHILIPPINES, INC., petitioner,

vs.
HON. FULGENCIO S. FACTORAN, JR., Secretary of Environment and Natural Resources, and JOEL D. MUYCO, Director of Mines
and Geosciences Bureau, respondents.

ROMERO, J.:

The instant petition seeks a ruling from this Court on the validity of two Administrative Orders issued by the Secretary of the Department of
Environment and Natural Resources to carry out the provisions of certain Executive Orders promulgated by the President in the lawful
exercise of legislative powers.

Herein controversy was precipitated by the change introduced by Article XII, Section 2 of the 1987 Constitution on the system of exploration,
development and utilization of the country's natural resources. No longer is the utilization of inalienable lands of public domain through
"license, concession or lease" under the 1935 and 1973 Constitutions 1 allowed under the 1987 Constitution.

The adoption of the concept of jura regalia 2 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 acts 4 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 11 in 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, 16 decided 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.

DIDIPIO v GOZUN
GR No. 157882
March 30, 2006

FACTS:

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.

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 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.

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.

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.

ISSUES & RULINGS:

I
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.

NO.

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. 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.

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.

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.

NO.

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. 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.
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.

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.

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.

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.

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.

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.

WHETHER OR NOT THE 1987 CONSTITUTION PROHIBITS SERVICE CONTRACTS

NO. 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.

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.
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.

OBITER DICTA: ! justiciable controversy: 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. ! 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; - 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.

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.

(2) the question must be ripe for adjudication; and - A question is considered ripe for
adjudication when the act being challenged has had a direct adverse effect on the individual
challenging it. (3) the person challenging must have the standing" - 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.

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.

! 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.

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.

! 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.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.

Although both police power and the power of eminent domain have the general welfare for their
object, and recent trends show a mingling 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. 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.

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. However, when a property interest
is appropriated and applied to some public purpose, there is compensable taking.

! On different roles and responsibilities:

* DENR Secretary : 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.
(Executive Order No. 279, 1987)

! in re: easements and taking

In Ayala de Roxas v. City of Manila, 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.

! in order that one law may operate to repeal another law, the two laws must be inconsistent.The
former must be so repugnant as to be irreconciliable with the latter act.

APEX MINING CO., INC., v. Southeast Mindanao Gold Mining Corp. et al.
G.R. Nos. 152613 & 152628, November 20, 2009

FACTS

In its June 2006 decision, the Supreme Court held that

the assignment of Exploration Permit (EP) 133 in favor of SEM violated one of the
conditions stipulated in the permit, that the same shall be for the exclusive use and benefit
of Marcopper Mining Corporation (MMC) or its duly authorized agents. Because SEM
did not claim or submit evidence that it was a designated agent of MMC, the latter cannot
be considered as an agent of the former that can use EP 133 and benefit from it.
the transfer of EP 133 violated Presidential Decree No. 463, which requires that the
assignment of a mining right be made with the prior approval of the Secretary of the
Department of Environment and Natural Resources (DENR).
the EP 133 expired by non-renewal since it was not renewed before or after its expiration.
Proclamation No. 297 is valid absent any question against its validity. IN relation, under
Section 5 of Republic Act No. 7942, mining operations in mineral reservations may be
undertaken directly by the State or through a contractor, the Court deemed the issue of
ownership of priority right as having been overtaken by the said proclamation.
It is now within the prerogative of the Executive Department to undertake directly the
mining operations of the disputed area or to award the operations to private entities such
as Apex, subject to applicable laws, rules and regulations, and provided that these private
entities are qualified.

Southeast Mindanao Gold Mining Corporation (SEM) filed a motion for reconsideration of the
Supreme Courts assailed decision. Apex filed a Motion for Clarification asking that the Court
elucidate on the Decisions pronouncement that mining operations, are now, therefore within
the full control of the State through the executive branch. Moreover it asked the Court to order
the Mines and Geosciences Board (MGB) to accept its application for an exploration permit.
Balite echoes the same concern as that of Apex on the actual takeover by the State of the mining
industry in the disputed area to the exclusion of the private sector. In addition, Balite prayed that
the Court will direct MGB to accept its application for an exploration permit.

ISSUES
 1. Whether the transfer or assignment of Exploration Permit (EP) 133 by MMC to SEM was
validly made without violating any of the terms and conditions set forth in Presidential
Decree No. 463 and EP 133 itself.
2. Whether Southeast Mindanao Mining Corp. acquired a vested right over the disputed
area, which constitutes a property right protected by the Constitution.
3. Assuming that the legality/constitutionality of Proclamation No. 297 was timely raised,
whether said proclamation violates Article XII, Section 4 of the Constitution.
4. Whether RA 7942 is the applicable law.

RULING

1. No, the assignment of EP 133 violated its terms and conditions and Sec. 97, PD 463.
Section 97 is entitled, Assignment of Mining Rights. This hints that before mining
rights namely, the rights to explore, develop and utilize are transferred or assigned,
prior approval must be obtained from the DENR Secretary. An exploration permit, thus,
cannot be assigned without the imprimatur of the Secretary of the DENR.

While Presidential Decree No. 463 has already been repealed by Executive Order No. 279, the
administrative aspect of the former law nonetheless remains applicable. Hence, the transfer or
assignment of exploration permits still needs the prior approval of the Secretary of the DENR.

In addition, the terms of the permit was violated. 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.

2. No, SEM does not acquire aver or prove that its mining rights had been perfected and
completed when the Philippine Bill of 1902 was still the operative law.

It is impossible for SEM to successfully assert that it acquired mining rights over the disputed
area in accordance with the same bill, since it was only in 1984 that MMC, SEMs predecessor-
in-interest, filed its declaration of locations and its prospecting permit application in compliance
with Presidential Decree No. 463. It was on 1 July 1985 and 10 March 1986 that a Prospecting
Permit and EP 133, respectively, were issued to MMC. Considering these facts, there is no
possibility that MMC or SEM could have acquired a perfected mining claim under the auspices
of the Philippine Bill of 1902.

SEM likens EP 133 with a building permit. SEM likewise equates its supposed rights attached to
the exploration permit with the rights that a private property land owner has to said
landholding. This analogy has no basis in law.
In addition, national wealth, such as mineral resources, are owned by the State and not by their
discoverer. The discoverer or locator can only develop and utilize said minerals for his own
benefit if he has complied with all the requirements set forth by applicable laws and if the State
has conferred on him such right through permits, concessions or agreements. Without the
imprimatur of the State, any mining aspirant does not have any definitive right over the mineral
land because, unlike a private landholding, mineral land is owned by the State, and the same
cannot be alienated to any private person as explicitly stated in Section 2, Article XIV of the
1987 Constitution.

The right that SEM acquired was limited to exploration, only because MMC was a mere holder
of an exploration permit. As previously explained, SEM did not acquire the rights inherent in the
permit, as the assignment by MMC to SEM was done in violation of the condition stipulated in
the permit, and the assignment was effected without the approval of the proper authority in
contravention of the provision of the mining law governing at that time. In addition, the permit
expired on 6 July 1994. It is, therefore, quite clear that SEM has no right over the area.

An exploration permit does not automatically ripen into a right to extract and utilize the
minerals; much less does it develop into a vested right. The holder of an exploration permit only
has the right to conduct exploration works on the area awarded. Presidential Decree No. 463
defined exploration as the examination and investigation of lands supposed to contain
valuable minerals, by drilling, trenching, shaft sinking, tunneling, test pitting and other
means, for the purpose of probing the presence of mineral deposits and the extent
thereof. Exploration does not include development and exploitation of the minerals
found. Development is defined by the same statute as the steps necessarily taken to reach an
ore body or mineral deposit so that it can be mined, whereas exploitation is defined as the
extraction and utilization of mineral deposits. An exploration permit is nothing more than a
mere right accorded to its holder to be given priority in the governments consideration in the
granting of the right to develop and utilize the minerals over the area. An exploration permit is
merely inchoate, in that the holder still has to comply with the terms and conditions embodied in
the permit

SEM did not acquire the rights attached to EP 133, since their transfer was without legal
effect. Granting for the sake of argument that SEM was a valid transferee of the permit, its right
is not that of a mining contractor. An exploration permit grantee is vested with the right to
conduct exploration only, while an FTAA or MPSA contractor is authorized to extract and
carry off the mineral resources that may be discovered in the area. An exploration permit
holder still has to comply with the mining project feasibility and other requirements under the
mining law. It has to obtain approval of such accomplished requirements from the appropriate
government agencies. Upon obtaining this approval, the exploration permit holder has to file an
application for an FTAA or an MPSA and have it approved also. Until the MPSA application of
SEM is approved, it cannot lawfully claim that it possesses the rights of an MPSA or FTAA
holder. But again, SEM is not qualified to apply for an FTAA or any mineral agreement,
considering that it is not a holder of a valid exploration permit, since EP 133 expired by non-
renewal and the transfer to it of the same permit has no legal value.

3. No, Proclamation No. 297 does not violate the following:

 Article XII, Sec. 4: It is only after the specific limits of the forest lands shall have been
determined by the legislature will this constitutional restriction apply. SEM does not allege nor
present any evidence that Congress had already enacted a statute determining with specific limits
forest lands and national parks. In addition, there is nothing in the constitutional provision that
prohibits the President from declaring a forest land as an environmentally critical area and from
regulating the mining operations therein by declaring it as a mineral reservation in order to
prevent the further degradation of the forest environment and to resolve the health and peace and
order problems that beset the area.

There is nothing contradictory between the two. Proclamation No. 297, a measure to attain and
maintain a rational and orderly balance between socio-economic growth and environmental
protection, jibes with the constitutional policy of preserving and protecting the forest lands from
being further devastated by denudation. In other words, the proclamation in question is in line
with Section 4, Article XII of the Constitution, as the former fosters the preservation of the forest
environment of the Diwalwal area and is aimed at preventing the further degradation of the same.

4. Yes, RA 7942 is the applicable law. Proclamation No. 297, declaring a certain portion of
land located in Monkayo, Compostela Valley, with an area of 8,100 hectares, more or
less, as a mineral reservation, was issued by the President pursuant to Section 5 of
Republic Act No. 7942, also known as the Philippine Mining Act of 1995. Section 5 of
Republic Act No. 7942 authorizes the President to establish mineral reservations

DIAMOND DRILLING G.R. No. 183576

CORPORATION OF THE
PHILIPPINES,

Petitioner, Present:

CARPIO, J., Chairperson,

- versus - NACHURA,

PERALTA,

ABAD, and

MENDOZA, JJ.
NEWMONT PHILIPPINES
INCORPORATED,
Promulgated:
Respondent.

May 30, 2011

x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x

DECISION

CARPIO, J.:

The Case

Before the Court is a petition for review on certiorari assailing the Decision dated 16
1 2

January 2008 and Resolution dated 8 July 2008 of the Court of Appeals (CA) in CA-
3

G.R. SP No. 96093.

The Facts

On 20 December 1994, respondent Newmont Philippines Incorporated (Newmont)

(now known as the Cordillera Exploration Company Incorporated) filed eight
applications for Financial or Technical Assistance (FTAA) with the Central Office
4

Technical Secretariat of the Mines and Geosciences Bureau (MGB) in Quezon City
pursuant to Executive Order No. 279 (EO 279) and Department of Environment and
5

Natural Resources (DENR) Administrative Order No. 63 (DAO 63), series of 1991.
6

Newmont wanted to explore and develop large gold deposits in the Central Cordillera,
particularly the areas situated in Abra, Benguet, Cagayan, Ilocos Sur, Ilocos Norte,
Ifugao, Kalinga-Apayao, Mountain Province, Nueva Vizcaya and Pangasinan,
comprising a maximum contract area of 100,000 hectares of land for each
7 8

application.

On the same date, Newmont paid the corresponding filing and processing fees. MGB
9

registered Newmonts FTAA applications on the same day of filing. Thereafter,

Newmont furnished through fax transmission the MGB Regional Office in the
Cordillera Administrative Region (MGB-CAR) with its letter-application, sketch map
and coordinates defining the area of its FTAA applications. The MGB-CAR received
10

the fax machine copies of the letter and other pertinent documents on 21 December
1994.

Petitioner Diamond Drilling Corporation of the Philippines (Diamond Drilling)

likewise filed on 20 December 1994 an application for Mineral Production Sharing
Agreement (MPSA), covering 4,860 hectares of land in the areas situated in Benguet
and Mountain Province, with the MGB-CAR pursuant to EO 279, as implemented by
DENR Administrative Order No. 57. 11

Pending verification by the Survey Section of the MGB-CAR on the availability of

the area applied for, the Mining Recorder of the MGB-CAR advised Diamond
Drilling to first register its Articles of Incorporation, By-Laws and Secretarys
Certificate with the Securities and Exchange Commission. On 22 December 1994,
12

Diamond Drilling complied with the requirements. Since the area as checked by the
MGB-CAR in its records was open for mining location, Diamond Drilling paid for the
filing and processing fees on the same date. The MGB-CAR then registered
13

Diamond Drillings MPSA application. 14

Upon verification, however, the MGB-CAR found that Diamond Drillings MPSA
application was in conflict with a portion of one of Newmonts FTAA applications. 15

Meanwhile, on 14 April 1995, Republic Act No. 7942 (RA 7942) or the Philippine
16

Mining Act of 1995 took effect.

In a letter dated 4 October 1995, Newmont wrote the MGB requesting for an opinion
on the applicability of Section 8 of DAO 63, particularly the provision which requires
an FTAA applicant to furnish the MGB Regional Office with a copy of the FTAA
application within 72 hours from filing.

In a letter-opinion dated 25 October 1995, the Director of MGB-CAR replied:

17

In reply therewith, please be advised as follows:

 1. FTAA proposals/applications filed and accepted by MGB are closed to
subsequent mineral rights applications notwithstanding the the fact that the MGB
has not furnished a copy thereof to concerned DENR Regional Office within 72
hours. We feel that the inclusion of said period is not a mandatory provision but
merely intended to facilitate the processing of FTAA applications; and
2. While it appears that there is no obligation on the part of the FTAA applicant to
furnish said copy to concerned DENR Regional Office, yet, we likewise feel that
said applicant is not precluded from doing so for the same reason
abovementioned, that is, to facilitate the processing of the FTAA application. x x
x

However, in a letter-opinion dated 23 February 1996, the same Director of MGB-

18

CAR reversed his earlier opinion stating:

x x x Upon thorough study, we believe that when the regulations at that time
(DENR Administrative Order No. 63) requires that a copy of the FTAA proposal
be furnished to the DENR Regional Office concerned within 72 hours from filing
thereof, it is mandatory, notwithstanding our previous opinion on the matter, the
purpose being is to notify the said regional office of the existence of said
application and therefore they should no longer accept other applications that are
in conflict therewith. We cannot blame the Regional Office concerned in
accepting applications for MPSA and other applications because the FTAA
proponent failed to furnish them a copy of its FTAA proposal within the
prescribed hours. x x x

On 2 August 1996, Diamond Drilling filed a protest with the MGB-CAR. Diamond
19

Drilling sought to annul the eight FTAA applications of Newmont and asked that it be
granted preferential right over the areas covered by its MPSA application.
Meanwhile, due to the requirements of the new mining law, Newmont, in a letter
20 21

dated 10 September 1996, gave notice to the MGB-CAR that it was relinquishing
portions of the areas covered under its FTAA applications, reducing the total area
applied for to 81,000 hectares pursuant to Section 257 (now Section 272 ) of DENR
22

Administrative Order No. 96-40 or the Revised Implementing Rules and Regulations
of RA 7942.

In a Decision dated 22 October 1997, the Panel of Arbitrators of the MGB-CAR

23

decided the case in favor of Diamond Drilling. The Panel stated that the filing of the
MPSA application on 20 December 1994 up to the payment made on 22 December
1994 was an uninterrupted and continuing act. Since the filing is the preparatory act
and the registration is the conclusive act, then an MPSA application is considered
accepted and registered upon verification that the area is free and open for location.
The dispositive portion of the decision states:

IN LIGHT OF THE FOREGOING PREMISES, THE PANEL WEIGHED BOTH

ALLEGATIONS AND ARGUMENTS AND CONSIDERED THE EVIDENCE
AND FOUND THE SAME STRONGLY IN FAVOR OF THE PROTESTANT,
DDCP (Diamond Drilling). NPI (Newmont) is hereby ordered to limit its area to
81,000 has. per province and amend its technical description and plan to exclude
the area of DDCP. MPSA No. 48 is hereby declared valid, granting to DDCP the
preferential right over the area covered by its MPSA.

SO ORDERED. 24

Newmont appealed the decision of the MGB-CAR to the Mines Adjudication Board
(MAB). In a Decision dated 24 April 2000, the MAB reversed the decision of the
25 26

MGB-CAR and ruled in Newmonts favor. The MAB found that fax machine copies
sent to the MGB-CAR of Newmonts FTAA applications showing the essential
information, specifically the dates of filing and registration as well as technical
descriptions, are valid documents since the law is silent as to the mode of service. The
MAB added that since Newmonts FTAA applications were properly filed and
formally accepted two days earlier than the date of acceptance of Diamond Drillings
MPSA application, the area covered by Newmonts FTAA applications should be
considered closed to other mining applications. The dispositive portion states:

WHEREFORE, the foregoing premises considered, the appealed decision dated

October 22, 1997 of the Panel of Arbitrators, DENR-CAR is hereby REVERSED
and SET ASIDE and NPIs FTAA application is hereby SUSTAINED.
SO ORDERED. 27

Diamond Drilling filed a motion for reconsideration which the MAB denied in a
Resolution dated 11 August 2006. Diamond Drilling then filed a petition for review
28 29

with the CA.

In a Decision dated 16 January 2008, the CA affirmed the decision of the MAB.
30

Diamond Drilling filed a motion for reconsideration which the CA denied in a

Resolution dated 8 July 2008.
31

Hence, this petition.

The Issue
The main issue is whether the CA committed a reversible error in affirming the
decision of the MAB giving preferential right to Newmonts FTAA applications over
Diamond Drillings MPSA application.

The Courts Ruling

The petition lacks merit.

Petitioner Diamond Drilling insists that the requirement of furnishing the MGB
Regional Office a copy of the FTAA application within 72 hours is mandatory in
character. Diamond Drilling adds that the transmission by Newmont of fax machine
copies of its FTAA applications to the MGB Regional Office is not sufficient
compliance with Section 8 of DAO 63. Thus, Diamond Drilling asserts that it has
preferential rights over the area included in its MPSA application as against
respondent Newmont.

Section 8 of DENR Administrative Order No. 63 states:

SEC. 8. Acceptance and Evaluation of FTAA. All FTAA proposals shall be

filed with and accepted by the Central Office Technical
Secretariat (MGB) after payment of the requisite fees to the Mines
and Geosciences Bureau, copy furnished the Regional Office
concerned within 72 hours. The Regional Office shall verify the
area and declare the availability of the area for FTAA and shall
submit its recommendations within thirty (30) days from receipt.
In the event that there are two or more applicants over the same
area, priority shall be given to the applicant who first filed his
application. In any case, the Undersecretaries for Planning,
Policy and Natural Resources Management; Legal Services,
Legislative, Liaison and Management of FASPO; Field Operations and
Environment and Research, or its equivalent, shall be given ten
(10) days from receipt of FTAA proposal within which to submit
their comments/recommendations and the Regional Office, in the
 preparation of its recommendation shall consider the financial and
technical capabilities of the applicant, in addition to the
proposed Government share. Within five (5) working days from
receipt of said recommendations, the Technical Secretariat shall
consolidate all comments and recommendations thus received and
shall forward the same to the members of the FTAA Negotiating
Panel for evaluation at least within thirty (30) working days.
(Emphasis supplied)

It is clear from Section 8 of DAO 63 that the MGB Central Office processes all FTAA
applications after payment of the requisite fees. Section 8 requires the FTAA
applicant to furnish the MGB Regional Office a copy of the FTAA application within
72 hours from filing of the FTAA application. The Regional Office verifies the area
that an applicant intends to utilize, and declares the availability of the area for FTAA
application. The Regional Office will then submit its recommendation to the MGB
Central Office within thirty days from receipt by the Regional Office of a copy of the
FTAA application from the applicant. However, when there are two or more
applicants in the same area, priority shall be given to the applicant that first filed its
application.

In the present case, the records show that Newmont filed its FTAA applications with
the MGB Central Office in Quezon City on 20 December 1994. After Newmont paid
the filing and processing fees, the MGB Central Office registered Newmonts FTAA
applications on the same date. On the other hand, Diamond Drilling filed its MPSA
application with the MGB-CAR Regional Office in Baguio City on 20 December
1994. However, since the pertinent documents needed by the MGB-CAR Regional
Office were lacking, it took two more days for Diamond Drilling to complete the
requirements. Diamond Drilling paid its filing and processing fees only on 22
December 1994 or two days after Newmonts FTAA applications were registered with
the MGB Central Office. Thus, Diamond Drillings MPSA application was registered
by the MGB-CAR Regional Office only on 22 December 1994.

Since Newmonts FTAA applications preceded that of Diamond Drillings MPSA

application, priority should be given to Newmont. Section 8 of DAO 63 is clear. It
states that in the event there are two or more applicants over the same area, priority
shall be given to the applicant that first filed its application.

On the requirement that the applicant should furnish the proper MGB Regional Office
a copy of the FTAA application within 72 hours from filing, the CA, in its Decision
dated 16 January 2008, stated:

x x x We rule that the requirement of DAO No. 63 that the MGB Regional Office
concerned be furnished a copy of the FTAA application is merely directory in
character. The word shall, which seems to give the provision a mandatory
character, precedes the filing of an FTAA application and not the furnishing of a
copy of the same to the Regional office; hence to interpret the word shall as
giving the latter a mandatory character is far-fetched. A fortiori, the purpose of
said requirement is to notify the Regional Office concerned that an application for
FTAA was filed with the Central Office Technical Secretariat (COTS) of the
MGB so that the Regional Office may verify the area covered by the application
and submit its recommendation concerning its availability. It must be stressed that
the Regional Office concerned only has the authority to recommend; hence, its
findings are not conclusive with COTS-MGB. It only performs an allied function
to aid the COTS-MGB in arriving at the decision to grant or deny the application
for FTAA. The power to grant or deny FTAA applications remain in the hands of
the COTS-MGB. Accordingly, the 72-hour requirement must be construed as
directory and not mandatory in nature.

In any case, Newmont satisfied the 72-hour requirement. The MGB Regional
Office of CAR found as confirmed by the Board that on 21 December 1994, its
Regional Technical Director Office received a facsimile copy of the letter of
 Newmont with the latters FTAA application attached thereto. Based on this
finding, the Board ruled that Newmont satisfied the 72-hour requirement. The
Board explains:

A fax machine copy of an application showing therein the essential

information, specially the dates of filing and registration, and
technical description is a valid document. Thus, NPI has shown to
have complied with the required copy of furnishing
MGDS/DENR-CAR within 72 hours.

Indeed, the facsimile copy of Newmonts covering letter and FTAA application
satisfy the requirement of DAO No. 63, for said order did not specify the mode of
service and the kind of copy that must be furnished to the MGB Regional Office.
The order simply stated that the MGB Regional Office be furnished a copy of an
an applicants FTAA proposal. The order did not require personal service or
service via mail; neither did the order require that an original or a certified true
copy be furnished the Regional Office. Consistent with our ruling above, this is
so, because the Regional Office only performs an allied function, the result of
which is only recommendatory and conclusive with the COTS-MGB. In view of
this, Newmonts manner of furnishing the MGB-CAR Regional Office of a copy
of its FTAA application through facsimile cannot be validly questioned as
improper. And, in as much as MGB-CAR Regional Office received the copy of
Newmonts FTAA application on 21 December 1994, or approximately 24 hours
from the day the same was filed in COTS-MGB, Section 8 of DAO No. 63 was
satisfied. x x x
32

WHEREFORE, the petition is DISMISSED. The assailed Decision and

Resolution of the Mines Adjudication Board giving preferential right to Newmont
Philippines, Inc. over the area covered by its application for Financial or
Technical Assistance Agreement, and excluding the Mineral Production Sharing
Agreement of Diamond Drilling Corporation of the Philippines over the same
area, is AFFIRMED. 33

Thus, Newmont in fact furnished the MGB-CAR Regional Office with copies of its
FTAA applications, through fax transmission, within 72 hours from filing of the
FTAA applications. Considering the distance between Quezon City and Baguio City
where the MGB-CAR Regional Office is located, and the requirement to furnish the
proper Regional Office (some of which are located in Visayas and Mindanao) a copy
of the FTAA application within a short period of 72 hours, a fax machine copy is a
reasonable and sufficient mode of serving a copy of the FTAA application to the
proper Regional Office. We note that Section 8 of DAO 63 does not specify how a
copy of the FTAA application should be furnished to the proper Regional Office.

Newmont clearly satisfied the requirements for the acceptance and evaluation of its
FTAA applications with the MGB. Being the first to file its FTAA applications ahead
of Diamond Drillings MPSA application, and having furnished copies of its FTAA
applications to the MGB-CAR Regional Office within 72 hours from filing, Newmont
must be given preferential right to utilize the area included in its FTAA applications.

WHEREFORE, we DENY the petition. We AFFIRM the Decision dated 16 January

2008 and Resolution dated 8 July 2008 of the Court of Appeals in CA-G.R. SP No.
96093.

SO ORDERED.

G.R. No. 163509 December 6, 2006

PICOP RESOURCES, INC., petitioner,

vs.
BASE METALS MINERAL RESOURCES CORPORATION, and THE MINES
ADJUDICATION BOARD, respondents.
 DECISION

TINGA, J.:

PICOP Resources, Inc. (PICOP) assails the Decision1 of the Court of Appeals dated November
28, 2003 and its Resolution2 dated May 5, 2004, which respectively denied its petition for review
and motion for reconsideration.

The undisputed facts quoted from the appellate court's Decision are as follows:

In 1987, the Central Mindanao Mining and Development Corporation (CMMCI for
brevity) entered into a Mines Operating Agreement (Agreement for brevity) with
Banahaw Mining and Development Corporation (Banahaw Mining for brevity) whereby
the latter agreed to act as Mine Operator for the exploration, development, and eventual
commercial operation of CMMCI's eighteen (18) mining claims located in Agusan del
Sur.

Pursuant to the terms of the Agreement, Banahaw Mining filed applications for Mining
Lease Contracts over the mining claims with the Bureau of Mines. On April 29, 1988,
Banahaw Mining was issued a Mines Temporary Permit authorizing it to extract and
dispose of precious minerals found within its mining claims. Upon its expiration, the
temporary permit was subsequently renewed thrice by the Bureau of Mines, the last being
on June 28, 1991.

Since a portion of Banahaw Mining's mining claims was located in petitioner PICOP's
logging concession in Agusan del Sur, Banahaw Mining and petitioner PICOP entered
into a Memorandum of Agreement, whereby, in mutual recognition of each other's right
to the area concerned, petitioner PICOP allowed Banahaw Mining an access/right of way
to its mining claims.

In 1991, Banahaw Mining converted its mining claims to applications for Mineral
Production Sharing Agreements (MPSA for brevity).

While the MPSA were pending, Banahaw Mining, on December 18, 1996, decided to
sell/assign its rights and interests over thirty-seven (37) mining claims in favor of private
respondent Base Metals Mineral Resources Corporation (Base Metals for brevity). The
transfer included mining claims held by Banahaw Mining in its own right as claim owner,
as well as those covered by its mining operating agreement with CMMCI.

Upon being informed of the development, CMMCI, as claim owner, immediately

approved the assignment made by Banahaw Mining in favor of private respondent Base
Metals, thereby recognizing private respondent Base Metals as the new operator of its
claims.
On March 10, 1997, private respondent Base Metals amended Banahaw Mining's pending
MPSA applications with the Bureau of Mines to substitute itself as applicant and to
submit additional documents in support of the application. Area clearances from the
DENR Regional Director and Superintendent of the Agusan Marsh and Wildlife
Sanctuary were submitted, as required.

On October 7, 1997, private respondent Base Metals' amended MPSA applications were
published in accordance with the requirements of the Mining Act of 1995.

On November 18, 1997, petitioner PICOP filed with the Mines Geo-Sciences Bureau
(MGB), Caraga Regional Office No. XIII an Adverse Claim and/or Opposition to private
respondent Base Metals' application on the following grounds:

I. THE APPROVAL OF THE APPLICATION AND ISSUANCE OF THE

MPSA OF BASE METALS WILL VIOLATE THE CONSTITUTIONAL
MANDATE AGAINST IMPAIRMENT OF OBLIGATION IN A CONTRACT.

II. THE APPROVAL OF THE APPLICATION WILL DEFEAT THE RIGHTS

OF THE HEREIN ADVERSE CLAIMANT AND/OR OPPOSITOR.

In its Answer to the Adverse Claim and/or Opposition, private respondent Base Metals
alleged that:

a) the Adverse Claim was filed out of time;

b) petitioner PICOP has no rights over the mineral resources on their concession
area. PICOP is asserting a privilege which is not protected by the non-impairment
clause of the Constitution;

c) the grant of the MPSA will not impair the rights of PICOP nor create
confusion, chaos or conflict.

Petitioner PICOP's Reply to the Answer alleged that:

a) the Adverse Claim was filed within the reglementary period;

b) the grant of MPSA will impair the existing rights of petitioner PICOP;

c) the MOA between PICOP and Banahaw Mining provides for recognition by
Banahaw Mining of the Presidential Warranty awarded in favor of PICOP for the
exclusive possession and enjoyment of said areas.

As a Rejoinder, private respondent Base Metals stated that:

 1. it is seeking the right to extract the mineral resources in the applied areas. It is
not applying for any right to the forest resources within the concession areas of
PICOP;

2. timber or forest lands are open to Mining Applications;

3. the grant of the MPSA will not violate the so called "presidential fiat";

4. the MPSA application of Base Metals does not require the consent of PICOP;
and

5. it signified its willingness to enter into a voluntary agreement with PICOP on

the matter of compensation for damages. In the absence of such agreement, the
matter will be brought to the Panel of Arbitration in accordance with law.

In refutation thereto, petitioner PICOP alleged in its Rejoinder that:

a) the Adverse Claim filed thru registered mail was sent on time and as prescribed
by existing mining laws and rules and regulations;

b) the right sought by private respondent Base Metals is not absolute but is subject
to existing rights, such as those which the adverse claimant had, that have to be
recognized and respected in a manner provided and prescribed by existing laws as
will be expounded fully later;

c) as a general rule, mining applications within timber or forest lands are subject
to existing rights as provided in Section 18 of RA 7942 or the Philippine Mining
Act of 1995 and it is an admitted fact by the private respondent that petitioner
PICOP had forest rights as per Presidential Warranty;

d) while the Presidential Warranty did not expressly state exclusivity, P.D. 705
strengthened the right of occupation, possession and control over the concession
area;

e) the provisions of Section 19 of the Act and Section 15 of IRR expressly require
the written consent of the forest right holder, PICOP.

After the submission of their respective position paper, the Panel Arbitrator issued an
Order dated December 21, 1998, the dispositive portion of which reads as:

WHEREFORE, premises considered, Mineral Production Sharing Agreement

Application Nos. (XIII) 010, 011, 012 of Base Metal Resources Corporation
should be set aside.

The disapproval of private respondent Base Metals' MPSA was due to the following
reasons:
 Anent the first issue the Panel find (sic) and so hold (sic) that the adverse claim
was filed on time, it being mailed on November 19, 1997, at Metro Manila as
evidenced by Registry Receipt No. 26714. Under the law (sic) the date of mailing
is considered the date of filing.

As to whether or not an MPSA application can be granted on area subject of an

IFMA3 or PTLA4 which is covered by a Presidential Warranty, the panel believes
it can not, unless the grantee consents thereto. Without the grantee's consent, the
area is considered closed to mining location (sec. 19) (b) (No. 2), DAO No. 96-
40). The Panel believe (sic) that mining location in forest or timberland is allowed
only if such forest or timberland is not leased by the government to a qualified
person or entity. If it is leased the consent of the lessor is necessary, in addition to
the area clearance to be issued by the agency concerned before it is subjected to
mining operation.

Plantation is considered closed to mining locations because it is off tangent to

mining. Both are extremes. They can not exist at the same time. The other must
necessarily stop before the other operate.

On the other hand, Base Metals Mineral Resources Corporation can not insist the
MPSA application as assignee of Banahaw. PICOP did not consent to the
assignment as embodied in the agreement. Neither did it ratify the Deed of
Assignment. Accordingly, it has no force and effect. Thus, for lack of consent, the
MPSA must fall.

On January 11, 1999, private respondent Base Metals filed a Notice of Appeal with
public respondent MAB and alleged in its Appeal Memorandum the following
arguments:

1. THE CONSENT OF PICOP IS NOT NECESSARY FOR THE APPROVAL

OF BASE METALS' MPSA APPLICATION.

2. EVEN ASSUMING SUCH CONSENT IS NECESSARY, PICOP HAD

CONSENTED TO BASE METALS' MPSA APPLICATION.

In Answer thereto, petitioner PICOP alleged that:

1. Consent is necessary for the approval of private respondent's MPSA

application;

2. Provisions of Memorandum Order No. 98-03 and IFMA 35 are not applicable
to the instant case;

3. Provisions of PD 7055 connotes exclusivity for timber license holders; and

 4. MOA between private respondent's assignor and adverse claimant provided for
the recognition of the latter's rightful claim over the disputed areas.

Private respondent Base Metals claimed in its Reply that:

1. The withholding of consent by PICOP derogates the State's power to supervise

and control the exploration, utilization and development of all natural resources;

2. Memorandum Order No, 98-03, not being a statute but a mere guideline
imposed by the Secretary of the Department of Environment and Natural
Resources (DENR), can be applied retroactively to MPSA applications which
have not yet been finally resolved;

3. Even assuming that the consent of adverse claimant is necessary for the
approval of Base Metals' application (which is denied), such consent had already
been given; and

4. The Memorandum of Agreement between adverse claimant and Banahaw

Mining proves that the Agusan-Surigao area had been used in the past both for
logging and mining operations.

After the filing of petitioner PICOP's Reply Memorandum, public respondent rendered
the assailed decision setting aside the Panel Arbitrator's order. Accordingly, private
respondent Base Metals' MPSA's were reinstated and given due course subject to
compliance with the pertinent requirements of the existing rules and regulations.6

The Court of Appeals upheld the decision of the MAB, ruling that the Presidential Warranty of
September 25, 1968 issued by then President Ferdinand E. Marcos merely confirmed the timber
license granted to PICOP and warranted the latter's peaceful and adequate possession and
enjoyment of its concession areas. It was only given upon the request of the Board of
Investments to establish the boundaries of PICOP's timber license agreement. The Presidential
Warranty did not convert PICOP's timber license into a contract because it did not create any
obligation on the part of the government in favor of PICOP. Thus, the non-impairment clause
finds no application.

Neither did the Presidential Warranty grant PICOP the exclusive possession, occupation and
exploration of the concession areas covered. If that were so, the government would have
effectively surrendered its police power to control and supervise the exploration, development
and utilization of the country's natural resources.

On PICOP's contention that its consent is necessary for the grant of Base Metals' MPSA, the
appellate court ruled that the amendment to PTLA No. 47 refers to the grant of gratuitous
permits, which the MPSA subject of this case is not. Further, the amendment pertains to the
cutting and extraction of timber for mining purposes and not to the act of mining itself, the
intention of the amendment being to protect the timber found in PICOP's concession areas.
The Court of Appeals noted that the reinstatement of the MPSA does not ipso facto revoke,
amend, rescind or impair PICOP's timber license. Base Metals still has to comply with the
requirements for the grant of a mining permit. The fact, however, that Base Metals had already
secured the necessary Area Status and Clearance from the DENR means that the areas applied
for are not closed to mining operations.

In its Resolution7 dated May 5, 2004, the appellate court denied PICOP's Motion for
Reconsideration. It ruled that PICOP failed to substantiate its allegation that the area applied for
is a forest reserve and is therefore closed to mining operations because it did not identify the
particular law which set aside the contested area as one where mining is prohibited pursuant to
applicable laws.

The case is now before us for review.

In its Memorandum8 dated April 6, 2005, PICOP presents the following issues: (1) the 2,756
hectares subject of Base Metals' MPSA are closed to mining operations except upon PICOP's
written consent pursuant to existing laws, rules and regulations and by virtue of the Presidential
Warranty; (2) its Presidential Warranty is protected by the non-impairment clause of the
Constitution; and (3) it does not raise new issues in its petition.

PICOP asserts that its concession areas are closed to mining operations as these are within the
Agusan-Surigao-Davao forest reserve established under Proclamation No. 369 of then Gov. Gen.
Dwight Davis. The area is allegedly also part of permanent forest established under Republic Act
No. 3092 (RA 3092),9 and overlaps the wilderness area where mining applications are expressly
prohibited under RA 7586.10 Hence, the area is closed to mining operations under Sec. 19(f) of
RA 7942.11

PICOP further asserts that to allow mining over a forest or forest reserve would allegedly be
tantamount to changing the classification of the land from forest to mineral land in violation of
Sec. 4, Art. XII of the Constitution and Sec. 1 of RA 3092.

According to PICOP, in 1962 and 1963, blocks A, B and C within the Agusan-Surigao-Davao
forest reserve under Proclamation No. 369 were surveyed as permanent forest blocks in
accordance with RA 3092. These areas cover PICOP's PTLA No. 47, part of which later became
IFMA No. 35. In turn, the areas set aside as wilderness as in PTLA No. 47 became the initial
components of the NIPAS under Sec. 5(a) of RA 7586. When RA 7942 was signed into law, the
areas covered by the NIPAS were expressly determined as areas where mineral agreements or
financial or technical assistance agreement applications shall not be allowed. PICOP concludes
that since there is no evidence that the permanent forest areas within PTLA No. 47 and IFMA
No. 35 have been set aside for mining purposes, the MAB and the Court of Appeals gravely
erred in reinstating Base Metals' MPSA and, in effect, allowing mining exploration and mining-
related activities in the protected areas.

PICOP further argues that under DENR Administrative Order (DAO) No. 96-40 implementing
RA 7942, an exploration permit must be secured before mining operations in government
reservations may be undertaken. There being no exploration permit issued to Banahaw Mining or
appended to its MPSA, the MAB and the Court of Appeals should not have reinstated its
application.

PICOP brings to the Court's attention the case of PICOP Resources, Inc. v. Hon. Heherson T.
Alvarez,12 wherein the Court of Appeals ruled that the Presidential Warranty issued to PICOP for
its TLA No. 43 dated July 29, 1969, a TLA distinct from PTLA No. 47 involved in this case, is a
valid contract involving mutual prestations on the part of the Government and PICOP.

The Presidential Warranty in this case is allegedly not a mere confirmation of PICOP's timber
license but a commitment on the part of the Government that in consideration of PICOP's
investment in the wood-processing business, the Government will assure the availability of the
supply of raw materials at levels adequate to meet projected utilization requirements. The
guarantee that PICOP will have peaceful and adequate possession and enjoyment of its
concession areas is impaired by the reinstatement of Base Metals' MPSA in that the latter's
mining activities underneath the area in dispute will surely undermine PICOP's supply of raw
materials on the surface.

Base Metals' obtention of area status and clearance from the DENR is allegedly immaterial, even
misleading. The findings of the DENR Regional Disrector and the superintendent of the Agusan
Marsh and Wildlife Sanctuary are allegedly misplaced because the area applied for is not inside
the Agusan Marsh but in a permanent forest. Moreover, the remarks in the area status itself
should have been considered by the MAB and the appellate court as they point out that the
application encroaches on surveyed timberland projects declared as permanent forests/forest
reserves.

Finally, PICOP insists that it has always maintained that the forest areas of PTLA No. 47 and
IFMA No. 35 are closed to mining operations. The grounds relied upon in this petition are thus
not new issues but merely amplifications, clarifications and detailed expositions of the relevant
constitutional provisions and statutes regulating the use and preservation of forest reserves,
permanent forest, and protected wilderness areas given that the areas subject of the MPSA are
within and overlap PICOP's PTLA No. 47 and IFMA No. 35 which have been classified and
blocked not only as permanent forest but also as protected wilderness area forming an integral
part of the Agusan-Davao-Surigao Forest Reserve.

In its undated Memorandum,13 Base Metals contends that PICOP never made any reference to
land classification or the exclusion of the contested area from exploration and mining activities
except in the motion for reconsideration it filed with the Court of Appeals. PICOP's object to the
MPSA was allegedly based exclusively on the ground that the application, if allowed to proceed,
would constitute a violation of the constitutional proscription against impairment of the
obligation of contracts. It was upon this issue that the appellate court hinged its Decision in favor
of Base Metals, ruling that the Presidential Warranty merely confirmed PICOP's timber license.
The instant petition, which raises new issues and invokes RA 3092 and RA 7586, is an
unwarranted departure from the settled rule that only issues raised in the proceedings a quo may
be elevated on appeal.
Base Metals notes that RA 7586 expressly requires that there be a prior presidential decree,
presidential proclamation, or executive order issued by the President of the Philippines, expressly
proclaiming, designating, and setting aside the wilderness area before the same may be
considered part of the NIPAS as a protected area. Allegedly, PICOP has not shown that such an
express presidential proclamation exists setting aside the subject area as a forest reserve, and
excluding the same from the commerce of man.

PICOP also allegedly misquoted Sec. 19 of RA 7942 by placing a comma between the words
"watershed" and "forest" thereby giving an altogether different and misleading interpretation of
the cited provision. The cited provision, in fact, states that for an area to be closed to mining
applications, the same must be a watershed forest reserve duly identified and proclaimed by the
President of the Philippines. In this case, no presidential proclamation exists setting aside the
contested area as such.

Moreover, the Memorandum of Agreement between Banahaw Mining and PICOP is allegedly a
clear and tacit recognition by the latter that the area is open and available for mining activities
and that Banahaw Mining has a right to enter and explore the areas covered by its mining claims.

Base Metals reiterates that the non-impairment clause is a limit on the exercise of legislative
power and not of judicial or quasi-judicial power. The Constitution prohibits the passage of a law
which enlarges, abridges or in any manner changes the intention of the contracting parties. The
decision of the MAB and the Court of Appeals are not legislative acts within the purview of the
constitutional proscription. Besides, the Presidential Warranty is not a contract that may be
impaired by the reinstatement of the MPSA. It is a mere confirmation of PICOP's timber license
and draws its life from PTLA No. 47. Furthermore, PICOP fails to show how the reinstatement
of the MPSA will impair its timber license.

Following the regalian doctrine, Base Metals avers that the State may opt to enter into
contractual arrangements for the exploration, development, and extraction of minerals even it the
same should mean amending, revising, or even revoking PICOP's timber license. To require the
State to secure PICOP's prior consent before it can enter into such contracts allegedly constitutes
an undue delegation of sovereign power.

Base Metals further notes that Presidential Decree No. 705 (PD 705), under which PTLA No. 47,
IFMA No. 35 and the Presidential Warranty were issued, requires notice to PICOP rather than
consent before any mining activity can be commenced in the latter's concession areas.

The Office of the Solicitor General (OSG) filed a Memorandum14 dated April 21, 2005 on behalf
of the MAB, contending that PICOP's attempt to raise new issues, such as its argument that the
contested area is classified as a permanent forest and hence, closed to mining activities, is
offensive to due process and should not be allowed.

The OSG argues that a timber license is not a contract within the purview of the due process and
non-impairment clauses. The Presidential Warranty merely guarantees PICOP's tenure over its
concession area and covers only the right to cut, collect and remove timber therein. It is a mere
collateral undertaking and cannot amplify PICOP's rights under its PTLA No. 47 and IFMA No.
35. To hold that the Presidential Warranty is a contract separate from PICOP's timber license
effectively gives the latter PICOP an exclusive, perpetual and irrevocable right over its
concession area and impairs the State's sovereign exercise of its power over the exploration,
development, and utilization of natural resources.

The case of PICOP Resources, Inc. v. Hon. Heherson T. Alvarez, supra, cited by PICOP cannot
be relied upon to buttress the latter's claim that a presidential warranty is a valid and subsisting
contract between PICOP and the Government because the decision of the appellate court in that
case is still pending review before the Court's Second Division.

The OSG further asserts that mining operations are legally permissible over PICOP's concession
areas. Allegedly, what is closed to mining applications under RA 7942 are areas proclaimed as
watershed forest reserves. The law does not totally prohibit mining operations over forest
reserves. On the contrary, Sec. 18 of RA 7942 permits mining over forest lands subject to
existing rights and reservations, and PD 705 allows mining over forest lands and forest
reservations subject to State regulation and mining laws. Sec. 19(a) of RA 7942 also provides
that mineral activities may be allowed even over military and other government reservations as
long as there is a prior written clearance by the government agency concerned.

The area status clearances obtained by Base Metals also allegedly show that the area covered by
the MPSA is within timberland, unclassified public forest, and alienable and disposable land.
Moreover, PICOP allegedly chose to cite portions of Apex Mining Corporation v. Garcia,15 to
make it appear that the Court in that case ruled that mining is absolutely prohibited in the
Agusan-Surigao-Davao Forest Reserve. In fact, the Court held that the area is not open to mining
location because the proper procedure is to file an application for a permit to prospect with the
Bureau of Forest and Development.

In addition, PICOP's claimed wilderness area has not been designated as a protected area that
would operate to bar mining operations therein. PICOP failed to prove that the alleged
wilderness area has been designated as an initial component of the NIPAS pursuant to a law,
presidential decree, presidential proclamation or executive order. Hence, it cannot correctly
claim that the same falls within the coverage of the restrictive provisions of RA 7586.

The OSG points out that the Administrative Code of 1917 which RA 3092 amended has been
completely repealed by the Administrative Code of 1978. Sec. 4, Art. XII of the 1987
Constitution, on the other hand, provides that Congress shall determine the specific limits of
forest lands and national parks, marking clearly their boundaries on the ground. Once this is
done, the area thus covered by said forest lands and national parks may not be expanded or
reduced except also by congressional legislation. Since Congress has yet to enact a law
determining the specific limits of the forest lands covered by Proclamation No. 369 and marking
clearly its boundaries on the ground, there can be no occasion that could give rise to a violation
of the constitutional provision.

Moreover, Clauses 10 and 14 of PICOP's IFMA No. 35 specifically provides that the area
covered by the agreement is open for mining if public interest so requires. Likewise, PTLA No.
47 provides that the area covered by the license agreement may be opened for mining purposes.
Finally, the OSG maintains that pursuant to the State's policy of multiple land use, R.A. No.
7942 provides for appropriate measures for a harmonized utilization of the forest resources and
compensation for whatever damage done to the property of the surface owner or concessionaire
as a consequence of mining operations. Multiple land use is best demonstrated by the
Memorandum of Agreement between PICOP and Banahaw Mining.

First, the procedural question of whether PICOP is raising new issues in the instant petition. It is
the contention of the OSG and Base Metals that PICOP's argument that the area covered by the
MPSA is classified as permanent forest and therefore closed to mining activities was raised for
the first time in PICOP's motion for reconsideration with the Court of Appeals.

Our own perusal of the records of this case reveals that this is not entirely true.

In its Adverse Claim and/or Opposition16 dated November 19, 1997 filed with the MGB Panel of
Arbitrators, PICOP already raised the argument that the area applied for by Base Metals is
classified as a permanent forest determined to be needed for forest purposes pursuant to par. 6,
Sec. 3 of PD 705, as amended. PICOP then proceeded to claim that the area should remain forest
land if the purpose of the presidential fiat were to be followed. It stated:

Technically, the areas applied for by Base Metals are classified as a permanent forest
being land of the public domain determined to be needed for forest purposes (Paragraph
6, Section 3 of Presidential Decree No. 705, as amended) If these areas then are classified
and determined to be needed for forest purpose then they should be developed and should
remain as forest lands. Identifying, delineating and declaring them for other use or uses
defeats the purpose of the aforecited presidential fiats. Again, if these areas would be
delineated from Oppositor's forest concession, the forest therein would be destroyed and
be lost beyond recovery.17

Base Metals met this argument head on in its Answer18 dated December 1, 1997, in which it
contended that PD 705 does not exclude mining operations in forest lands but merely requires
that there be proper notice to the licensees of the area.

Again in its Petition19 dated January 25, 2003 assailing the reinstatement of Base Metals' MPSA,
PICOP argued that RA 7942 expressly prohibits mining operations in plantation areas such as
PICOP's concession area. Hence, it posited that the MGB Panel of Arbitrators did not commit
grave abuse of discretion when it ruled that without PICOP's consent, the area is closed to
mining location.

It is true though that PICOP expounded on the applicability of RA 3092, RA 7586, and RA 7942
for the first time in its motion for reconsideration of the appellate court's Decision. It was only in
its motion for reconsideration that PICOP argued that the area covered by PTLA No. 47 and
IFMA No. 35 are permanent forest lands covered by RA 7586 which cannot be entered for
mining purposes, and shall remain indefinitely as such for forest uses and cannot be excluded or
diverted for other uses except after reclassification through a law enacted by Congress.
Even so, we hold that that the so-called new issues raised by PICOP are well within the issues
framed by the parties in the proceedings a quo. Thus, they are not, strictly speaking, being raised
for the first time on appeal.20 Besides, Base Metals and the OSG have been given ample
opportunity, by way of the pleadings filed with this Court, to respond to PICOP's arguments. It is
in the best interest of justice that we settle the crucial question of whether the concession area in
dispute is open to mining activities.

We should state at this juncture that the policy of multiple land use is enshrined in our laws
towards the end that the country's natural resources may be rationally explored, developed,
utilized and conserved. The Whereas clauses and declaration of policies of PD 705 state:

WHEREAS, proper classification, management and utilization of the lands of the public
domain to maximize their productivity to meet the demands of our increasing population
is urgently needed;

WHEREAS, to achieve the above purpose, it is necessary to reassess the multiple uses of
forest lands and resources before allowing any utilization thereof to optimize the benefits
that can be derived therefrom;

Sec. 2. Policies.The State hereby adopts the following policies:

a) The multiple uses of forest lands shall be oriented to the development and
progress requirements of the country, the advancement of science and technology,
and the public welfare;

In like manner, RA 7942, recognizing the equiponderance between mining and timber rights,
gives a mining contractor the right to enter a timber concession and cut timber therein provided
that the surface owner or concessionaire shall be properly compensated for any damage done to
the property as a consequence of mining operations. The pertinent provisions on auxiliary mining
rights state:

Sec. 72. Timber Rights.Any provision of law to the contrary notwithstanding, a

contractor may be granted a right to cut trees or timber within his mining areas as may be
necessary for his mining operations subject to forestry laws, rules and regulations:
Provided, That if the land covered by the mining area is already covered by existing
timber concessions, the volume of timber needed and the manner of cutting and removal
thereof shall be determined by the mines regional director, upon consultation with the
contractor, the timber concessionair/permittee and the Forest Management Bureau of the
Department: Provided, further, That in case of disagreement between the contractor and
the timber concessionaire, the matter shall be submitted to the Secretary whose decision
shall be final. The contractor shall perform reforestation work within his mining area in
accordance with forestry laws, rules and regulations.

 Sec. 76. 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: Provided, That any damage done 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:
Provided, further, That to guarantee such compensation, the person authorized to conduct
mining operation shall, prior thereto, post a bond with the regional director based on the
type of properties, the prevailing prices in and around the area where the mining
operations are to be conducted, with surety or sureties satisfactory to the regional
director.

With the foregoing predicates, we shall now proceed to analyze PICOP's averments.

PICOP contends that its concession area is within the Agusan-Surigao-Davao Forest Reserve
established under Proclamation No. 369 and is closed to mining application citing several
paragraphs of Sec. 19 of RA 7942.

The cited provision states:

Sec. 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;

(d) In areas expressly prohibited by law;

(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 in areas expressly
prohibited under the National Ingrated Protected Areas System (NIPAS) under Republic
Act No. 7586, Department Administrative Order No. 25, series of 1992 and other laws.
[emphasis supplied]

We analyzed each of the categories under which PICOP claims that its concession area is closed
to mining activities and conclude that PICOP's contention must fail.

Firstly, assuming that the area covered by Base Metals' MPSA is a government reservation,
defined as proclaimed reserved lands for specific purposes other than mineral reservations,21
such does not necessarily preclude mining activities in the area. Sec. 15(b) of DAO 96-40
provides that government reservations may be opened for mining applications upon prior written
clearance by the government agency having jurisdiction over such reservation.

Sec. 6 of RA 7942 also provides that mining operations in reserved lands other than mineral
reservations may be undertaken by the DENR, subject to certain limitations. It provides:

Sec. 6. Other Reservations.Mining operations in reserved lands other than mineral

reservations may be undertaken by the Department, subject to limitations as herein
provided. In the event that the Department cannot undertake such activities, they may be
undertaken by a qualified person in accordance with the rules and regulations
promulgated by the Secretary. The right to develop and utilize 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: Provided, That the party who undertook the
exploration of said reservations shall be given priority. The mineral land so awarded shall
be automatically excluded from the reservation during the term of the agreement:
Provided, further, That the right of the lessee of a valid mining contract existing within
the reservation at the time of its establishment shall not be prejudiced or impaired.

Secondly, RA 7942 does not disallow mining applications in all forest reserves but only those
proclaimed as watershed forest reserves. There is no evidence in this case that the area covered
by Base Metals' MPSA has been proclaimed as watershed forest reserves.

Even granting that the area covered by the MPSA is part of the Agusan-Davao-Surigao Forest
Reserve, such does not necessarily signify that the area is absolutely closed to mining activities.
Contrary to PICOP's obvious misreading of our decision in Apex Mining Co., Inc. v. Garcia,
supra, to the effect that mineral agreements are not allowed in the forest reserve established
under Proclamation 369, the Court in that case actually ruled that pursuant to PD 463 as
amended by PD 1385, one can acquire mining rights within forest reserves, such as the Agusan-
Davao-Surigao Forest Reserve, by initially applying for a permit to prospect with the Bureau of
Forest and Development and subsequently for a permit to explore with the Bureau of Mines and
Geosciences.

Moreover, Sec. 18 RA 7942 allows mining even in timberland or forestty subject to existing
rights and reservations. It provides:

Sec. 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.

Similarly, Sec. 47 of PD 705 permits mining operations in forest lands which include the public
forest, the permanent forest or forest reserves, and forest reservations.22 It states:

Sec. 47. Mining Operations.Mining operations in forest lands shall be regulated and
conducted with due regard to protection, development and utilization of other surface
 resources. Location, prospecting, exploration, utilization or exploitation of mineral
resources in forest reservations shall be governed by mining laws, rules and regulations.
No location, prospecting, exploration, utilization, or exploitation of mineral resources
inside forest concessions shall be allowed unless proper notice has been served upon the
licensees thereof and the prior approval of the Director, secured.

Significantly, the above-quoted provision does not require that the consent of existing licensees
be obtained but that they be notified before mining activities may be commenced inside forest
concessions.

DENR Memorandum Order No. 03-98, which provides the guidelines in the issuance of area
status and clearance or consent for mining applications pursuant to RA 7942, provides that
timber or forest lands, military and other government reservations, forest reservations, forest
reserves other than critical watershed forest reserves, and existing DENR Project Areas within
timber or forest lands, reservations and reserves, among others, are open to mining applications
subject to area status and clearance.

To this end, area status clearances or land status certifications have been issued to Base Metals
relative to its mining right application, to wit:

II. MPSA No. 010

1. Portion colored green is the area covered by the aforestated Timberland Project
No. 31-E, Block A and Project No. 59-C, Block A, L.C. Map No. 2466 certified
as such on June 30, 1961; and

2. Shaded brown represent CADC claim.23

III. MPSA No. 011

1. The area applied covers the Timberland, portion of Project No. 31-E, Block-E,
L.C. Map No. 2468 and Project No. 36-A Block II, Alienable and Disposable
Land, L.C. Map No. 1822, certified as such on June 30, 1961 and January 1,
1955, respectively;

2. The green shade is the remaining portion of Timber Land Project;

3. The portion colored brown is an applied and CADC areas;

4. Red shade denotes alienable and disposable land.24

IV. MPSA No. 012

 Respectfully returned herewith is the folder of Base Metals Mineral Resources
Corporation, applied under Mineral Production Sharing Agreement (MPSA (XIII)
012), referred to this office per memorandum dated August 5, 1997 for Land
status certification and the findings based on available references file this office,
the site is within the unclassified Public Forest of the LGU, Rosario, Agusan del
Sur. The shaded portion is the wilderness area of PICOP Resources Incorporated
(PRI), Timber License Agreement.25

V. MPSA No. 013

1. The area status shaded green falls within Timber Land, portion of Project No.
31-E, Block-A, Project No. 59-C, Block-A, L.C. Map No. 2468 certified as such
on June 30, 1961;

2. Colored brown denotes a portion claimed as CADC areas;

3. Violet shade represent a part of reforestation project of PRI concession; and

4. The yellow color is identical to unclassified Public Forest of said LGU and the
area inclosed in Red is the wilderness area of PICOP Resources, Inc. (PRI),
Timber License Agreement.26

Thirdly, PICOP failed to present any evidence that the area covered by the MPSA is a protected
wilderness area designated as an initial component of the NIPAS pursuant to a law, presidential
decree, presidential proclamation or executive order as required by RA 7586.

Sec. 5(a) of RA 7586 provides:

Sec. 5. Establishment and Extent of the System.The establishment and

operationalization of the System shall involve the following:

(a) All areas or islands in the Philippines proclaimed, designated or set aside, pursuant
to a law, presidential decree, presidential proclamation or executive order as
national park, game refuge, bird and wildlife sanctuary, wilderness area, strict nature
reserve, watershed, mangrove reserve, fish sanctuary, natural and historical landmark,
protected and managed landscape/seascape as well as identified virgin forests before the
effectivity of this Act are hereby designated as initial components of the System. The
initial components of the System shall be governed by existing laws, rules and
regulations, not inconsistent with this Act.

Although the above-cited area status and clearances, particularly those pertaining to MPSA Nos.
012 and 013, state that portions thereof are within the wilderness area of PICOP, there is no
showing that this supposed wilderness area has been proclaimed, designated or set aside as such,
pursuant to a law, presidential decree, presidential proclamation or executive order. It should be
emphasized that it is only when this area has been so designated that Sec. 20 of RA 7586, which
prohibits mineral locating within protected areas, becomes operational.
From the foregoing, there is clearly no merit to PICOP's contention that the area covered by Base
Metals' MPSA is, by law, closed to mining activities.

Finally, we do not subscribe to PICOP's argument that the Presidential Warranty dated
September 25, 1968 is a contract protected by the non-impairment clause of the 1987
Constitution.

An examination of the Presidential Warranty at once reveals that it simply reassures PICOP of
the government's commitment to uphold the terms and conditions of its timber license and
guarantees PICOP's peaceful and adequate possession and enjoyment of the areas which are the
basic sources of raw materials for its wood processing complex. The warranty covers only the
right to cut, collect, and remove timber in its concession area, and does not extend to the
utilization of other resources, such as mineral resources, occurring within the concession.

The Presidential Warranty cannot be considered a contract distinct from PTLA No. 47 and IFMA
No. 35. We agree with the OSG's position that it is merely a collateral undertaking which cannot
amplify PICOP's rights under its timber license. Our definitive ruling in Oposa v. Factoran27 that
a timber license is not a contract within the purview of the non-impairment clause is edifying.
We declared:

Needless to say, all licenses may thus be revoked or rescinded by executive action. It is
not a contract, property or a property right protected by the due process clause of the
Constitution. In Tan vs. Director of Forestry, this Court held:

"x x x A timber license is an instrument by which the State regulates the

utilization and disposition of forest resources to the end that public welfare is
promoted. A timber license is not a contract within the purview of the due
process clause; it is only a license or a privilege, which can be validly
withdrawn whenever dictated by public interest or public welfare as in this
case.

'A license is merely a permit or privilege to do what otherwise would be

unlawful, and is not a contract between the authority, federal, state, or
municipal, granting it and the person to whom it is granted; neither is it a
property or a property right, nor does it create a vested right; nor is it
taxation' (C.J. 168). Thus, this Court held that the granting of license does
not create irrevocable rights, neither is it property or property rights
(People vs. Ong Tin, 54 O.G. 7576). x x x"

We reiterated this pronouncement in Felipe Ysmael, Jr. & Co., Inc. vs. Deputy Executive
Secretary:

"x x x Timber licenses, permits and license agreements are the principal
instruments by which the State regulates the utilization and disposition of forest
resources to the end that public welfare is promoted. And it can hardly be
gainsaid that they merely evidence a privilege granted by the State to
 qualified entities, and do not vest in the latter a permanent or irrevocable
right to the particular concession area and the forest products therein. They
may be validly amended, modified, replaced or rescinded by the Chief
Executive when national interests so require. Thus, they are not deemed
contracts within the purview of the due process of law clause [See Sections 3(ee)
and 20 of Pres. Decree No. 705, as amended. Also, Tan v. Director of Forestry,
G.R. No. L-24548, October 27, 1983, 125 SCRA 302]."

Since timber licenses are not contracts, the non-impairment clause, which reads:

"Sec. 10. No law impairing the obligation of contracts shall be passed."

cannot be invoked.28 [emphasis supplied]

The Presidential Warranty cannot, in any manner, be construed as a contractual undertaking

assuring PICOP of exclusive possession and enjoyment of its concession areas. Such an
interpretation would result in the complete abdication by the State in favor of PICOP of the
sovereign power to control and supervise the exploration, development and utilization of the
natural resources in the area.

In closing, we should lay emphasis on the fact that the reinstatement of Base Metals' MPSA does
not automatically result in its approval. Base Metals still has to comply with the requirements
outlined in DAO 96-40, including the publication/posting/radio announcement of its mineral
agreement application.

IN VIEW OF THE FOREGOING, the instant petition is DENIED. The Decision of the Court of
Appeals November 28, 2003 is AFFIRMED. No pronouncement as to costs.

SO ORDERED.

Quisumbing, J., Chairperson, Carpio, Carpio Morales, and Velasco, Jr., JJ., concur.

BENGUET CORPORATION v DENR-MAB (Natural Resources)

BENGUET CORPORATION v DENR-MAB

G.R. No. 163101
February 13, 2008

FACTS:

On June 1, 1987, Benguet and J.G. Realty entered into a RAWOP, wherein J.G. Realty was
acknowledged as the owner of four mining claims respectively named as Bonito-I, Bonito-II,
Bonito-III, and Bonito-IV, with a total area of 288.8656 hectares, situated in Barangay
Luklukam, Sitio Bagong Bayan, Municipality of Jose Panganiban, Camarines Norte.

Thus, on August 9, 1989, the Executive Vice-President of Benguet, Antonio N. Tachuling,

issued a letter informing J.G. Realty of its intention to develop the mining claims. However, on
February 9, 1999, J.G. Realty, through its President, Johnny L. Tan, then sent a letter to the
President of Benguet informing the latter that it was terminating the RAWOP on the following
grounds:

a. The fact that your company has failed to perform the obligations set forth in the RAWOP,
i.e., to undertake development works within 2 years from the execution of the
Agreement; b. Violation of the Contract by allowing high graders to operate on our
claim. c. No stipulation was provided with respect to the term limit of the
RAWOP. d. Non-payment of the royalties thereon as provided in the RAWOP.

On June 7, 2000, J.G. Realty filed a Petition for Declaration of Nullity/Cancellation of the
RAWOP with the Legaspi City POA, Region V, docketed as DENR Case No. 2000-01 and
entitled J.G. Realty v. Benguet.

DECISION OF LOWER COURTS: *POA: declared the RAWOP cancelled. *MAB: affirmed
POA.

ISSUES: (1) Should the controversy have first been submitted to arbitration before the POA took
cognizance of the case?; (2) Was the cancellation of the RAWOP supported by evidence?;
and (3) Did the cancellation of the RAWOP amount to unjust enrichment of J.G. Realty at the
expense of Benguet?

HELD: On correctness of appeal: Petitioner having failed to properly appeal to the CA under
Rule 43, the decision of the MAB has become final and executory. On this ground alone, the
instant petition must be denied.

(1) YES, the case should have first been brought to voluntary arbitration before the POA.

Secs. 11.01 and 11.02 of the RAWOP pertinently provide:

11.01 Arbitration

Any disputes, differences or disagreements between BENGUET and the OWNER with reference
to anything whatsoever pertaining to this Agreement that cannot be amicably settled by them
shall not be cause of any action of any kind whatsoever in any court or administrative agency but
shall, upon notice of one party to the other, be referred to a Board of Arbitrators consisting of
three (3) members, one to be selected by BENGUET, another to be selected by the OWNER and
the third to be selected by the aforementioned two arbitrators so appointed.

xxxx
11.02 Court Action

No action shall be instituted in court as to any matter in dispute as hereinabove stated, except to
enforce the decision of the majority of the Arbitrators

A contractual stipulation that requires prior resort to voluntary arbitration before the parties can
go directly to court is not illegal and is in fact promoted by the State.

To reiterate, availment of voluntary arbitration before resort is made to the courts or quasi-
judicial agencies of the government is a valid contractual stipulation that must be adhered to by
the parties.

In other words, in the event a case that should properly be the subject of voluntary arbitration is
erroneously filed with the courts or quasi-judicial agencies, on motion of the defendant, the court
or quasi-judicial agency shall determine whether such contractual provision for arbitration is
sufficient and effective. If in affirmative, the court or quasi-judicial agency shall then order the
enforcement of said provision.

In sum, on the issue of whether POA should have referred the case to voluntary arbitration, we
find that, indeed, POA has no jurisdiction over the dispute which is governed by RA 876, the
arbitration law.

HOWEVER, ESTOPPEL APPLIES. the Court rules that the jurisdiction of POA and that of
MAB can no longer be questioned by Benguet at this late hour. What Benguet should have done
was to immediately challenge the POA's jurisdiction by a special civil action for certiorari when
POA ruled that it has jurisdiction over the dispute. To redo the proceedings fully participated in
by the parties after the lapse of seven years from date of institution of the original action with the
POA would be anathema to the speedy and efficient administration of justice.

(2) The cancellation of the RAWOP was supported by evidence.

(3) There is no unjust enrichment in the instant case. There is no unjust enrichment when the
person who will benefit has a valid claim to such benefit.

The principle of unjust enrichment under Article 22 requires two conditions: (1) that a person is
benefited without a valid basis or justification, and (2) that such benefit is derived at another's
expense or damage.

Clearly, there is no unjust enrichment in the instant case as the cancellation of the RAWOP,
which left Benguet without any legal right to participate in further developing the mining claims,
was brought about by its violation of the RAWOP. Hence, Benguet has no one to blame but itself
for its predicament.

OBITER DICTA:
(1) Difference between compulsory & voluntary arbitration --
In Reformist Union of R.B. Liner, Inc. vs. NLRC, compulsory arbitration has been defined both
as the process of settlement of labor disputes by a government agency which has the authority
to investigate and to make an award which is binding on all the parties, and as a mode of
arbitration where the parties are compelled to accept the resolution of their dispute through
arbitration by a third party. While a voluntary arbitrator is not part of the governmental unit or
labor department's personnel, said arbitrator renders arbitration services provided for under labor
laws.

There is a clear distinction between compulsory and voluntary arbitration. The arbitration
provided by the POA is compulsory, while the nature of the arbitration provision in the RAWOP
is voluntary, not involving any government agency.

14. YINLU BICOL MINING CORPORATION, Petitioner, v. TRANS-ASIA OIL AND ENERGY DEVELOPMENT
CORPORATION, Respondent.
[G.R. No. 207942, January 12, 2015, BERSAMIN, J.:]

TOPIC: PERSONS EFFECT AND APPLICATION OF LAWS REPEAL OF LAWS

DOCTRINE: 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.
FACTS:
1. 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.
a. PIMIs 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).
2. The Government then opened the area for exploration.
a. Trans-Asia Oil and Energy Development Corporation (Trans-Asia) then explored the area
from 1986 onwards.
i. 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).
3. 1997: Trans-Asia filed an application for the approval of Mineral Production Sharing Agreement
(MPSA) over the area in that Regional Office of the DENR, through the Mines and Geosciences
Bureau (MGB), in Daraga, Albay.
a. 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.
4. 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-Asias MPSA
5. September 14, 2007: Trans-Asia informed Yinlu by letter that it would commence exploration
works in Yinlus areas pursuant to the MPSA, and requested Yinlu to allow its personnel to
access the areas for the works to be undertaken.
 a. 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. TransAsia found out that the registration of its MPSA had been put on hold because of Yinlus
request to register the deed of absolute sale in its favor.
7. DENR Secretary directed MGB Regional Office V to verify the validity of the mining patents of
Yinlu.
a. 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
8. DENR Sec Atienza ordered the amendment of Trans-Asias MPSA by excluding therefrom the
mineral lands covered by Yinlus mining patents
a. DENR Sec. Jose L. Atienza, Jr in his order found that the mining patents had been issued
to PIMI in 1930 as evidenced by and indicated in PIMIs certificates of title submitted by
Yinlu; and that the patents were validly transferred to and were now owned by Yinlu.
b. He rejected Trans-Asias argument that Yinlus 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.
c. He refuted Trans-Asias 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.
i. He noted that the suspension of PIMIs 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 PIMIs failure in 1974 to
comply with the registration requirement under P.D. No. 463;
ii. 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
iii. that the Regalian doctrine, under which the State owned all natural resources,
was adopted only by the 1935, 1973 and 1987 Constitutions
9. Office of the President affirmed the DENR Secs Order.
a. Under the Philippine Constitution, there is an absolute prohibition against alienation of
natural resources. Mining locations may only be subject to concession or lease.
i. 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.
b. 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.
i. 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
 ii. The existence of the TCTs 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.
10. CA: 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.
a. 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
11. Yinlu asserts the following:
a. The mining patents of Yinlu 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.
i. 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
ii. Section 27 of the Philippine Bill of 1902: 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
iii. its registered mineral patents, being valid and existing, could not be defeated by
adverse, open and notorious possession and prescription;
b. 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
i. Constitution could not impair vested rights;
ii. 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;
iii. Section 99 of PD No. 463 expressly prohibited the application of Section 100
and Section 101 to vested rights.

ISSUE: Whether Yinlus mining patents constitute vested rights and could not be disregarded.

HELD: YES
1. A mining patent pertains to a title granted by the government for the said mining claim.
2. 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.
a. 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.
b. Prohibition against the alienation of natural resources did not apply to a mining claim
or patent existing prior to November 15, 1935.
c. McDaniel v. Apacible: 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.
d. 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.
e. 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.
3. 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.
a. 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.
4. 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
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.
a. A right is vested when the right to enjoyment has become the property of some particular
person or persons as a present interest.
i. It is the privilege to enjoy property legally vested, to enforce contracts, and
enjoy the rights of property conferred by existing law or some right or interest
in property which has become fixed and established and is no longer open to
doubt or controversy
b. 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
c. 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
d. Republic v. Court of Appeals: 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.
In the present case: 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.
 G.R. No. 169080
CELESTIAL NICKEL MINING EXPLORATION CORPORATION,
vs. MACROASIA CORPORATION(formerly INFANTA MINERAL AND
INDUSTRIAL CORPORATION),
BLUE RIDGE MINERAL CORPORATION, and LEBACH MINING
CORPORATION,

FACTS:

The Secretary of Agriculture and Natural Resources and Infanta Mineral and
Industrial Corporation (Infanta) entered into a Mining Lease Contract V-1050.

Infantas corporate name was then changed to Cobertson Holdings

Corporation and subsequently to its present name, Macroasia Corporation.

After sometime, Celestial filed a Petition to cancel the subject mining lease
contracts and other mining claims of Macroasia including those covered by Mining
Lease Contract No. V-1050, before the Panel of Arbitrators (POA) of the Mines and
Geo-Sciences Bureau (MGB) of the DENR.

Blue Ridge, in an earlier letter-petition, also wrote the Director of Mines to

seek cancellation of mining lease contracts and other mining rights of Macroasia and
another entity, Lebach Mining Corporation (Lebach), in mining areas in Brookes
Point.

Celestial is the assignee of 144 mining claims covering such areas contiguous
to Infantas (now Macroasia) mining lode claims. Celestial also holds an MPSA
with the government which covers 2,835 hectares located at Ipilan/Maasin, Brookes
Point, Palawan and two pending applications covering another 4,040 hectares in
Barangay Mainit also in Brookes Point.

Celestial sought the cancellation of Macroasias lease contracts.

Macroasia refuted the grounds for cancellation invoked by Celestial.

Based on the records of the Bureau of Mines and findings of the field
investigations, the POA granted the petition of Celestial to cancel the Mining Lease
Contracts of Macroasia; and found the claims of the others indubitably meritorious.
It gave Celestial the preferential right to Macroasias mining areas. It upheld Blue
Ridges petition, but only as against the Mining Lease Contract areas of Lebach, and
the said leased areas were declared automatically abandoned. It gave Blue Ridge
priority right to the aforesaid Lebachs areas/mining claims. Blue Ridge and
Macroasia appealed before the MAB.

Lebach did not file any notice of appeal with the required memorandum of
appeal; thus, with respect to Lebach, the above resolution became final and
executory.

The MAB made a decision upholding the Decision of the POA to cancel the
Mining Lode/Lease Contracts of Macroasia.

However, the MAB, subsequently issued a resolution vacating its previous

decision, holding that neither the POA nor the MAB had the power to revoke a
mineral agreement duly entered into by the DENR Secretary. The MAB further held
that the power to cancel or revoke a mineral agreement was exclusively lodged with
the DENR Secretary.

Celestial and Blue Ridge made an appeal.

The CA Special12th Division affirmed the MAB Resolution which upheld the
exclusive authority of the DENR Secretary to approve, cancel, and revoke mineral
agreements. The CA also denied Celestials Motion for Reconsideration.

While the CA Special 10th Division granted Blue Ridges petition; reversed
and set aside the Resolutions of the MAB; and treated the cancellation of a mining
lease agreement as a mining dispute within the exclusive jurisdiction of the POA
under Sec. 77 of RA 7942, explaining that the power to resolve mining disputes,
which is the greater power, necessarily includes the lesser power to cancel mining
agreements.

ISSUE:

Whether or not it is only the Secretary of the DENR who has the jurisdiction
to cancel mining contracts and privileges?

HELD:

YES. It is only the Secretary of the DENR who has jurisdiction to cancel
mining contracts and privileges.
After a scrutiny of the provisions of PD 463, EO 211, EO 279, RA 7942 and its
implementing rules and regulations, executive issuances, and case law, we rule that
the DENR Secretary, not the POA, has the jurisdiction to cancel existing mineral
lease contracts or mineral agreements based on the following reasons:

The power of the DENR Secretary to cancel mineral agreements emanates

from his administrative authority, supervision, management, and control over
mineral resources under Chapter I, Title XIV of Book IV of the Revised
Administrative Code of 1987.

It is the DENR, through the Secretary, that manages, supervises, and regulates
the use and development of all mineral resources of the country. It has exclusive
jurisdiction over the management of all lands of public domain, which covers
mineral resources and deposits from said lands. It has the power to oversee,
supervise, and police our natural resources which include mineral resources.
Derived from the broad and explicit powers of the DENR and its Secretary under the
Administrative Code of 1987 is the power to approve mineral agreements and
necessarily to cancel or cause to cancel said agreements.

Under RA 7942, the power of control and supervision of the DENR Secretary
over the MGB to cancel or recommend cancellation of mineral rights clearly
demonstrates the authority of the DENR Secretary to cancel or approve the
cancellation of mineral agreements.

The DENR Secretarys power to cancel mining rights or agreements through

the MGB can be inferred from Sec. 230, Chapter XXIV of DENR AO 96-40 on
cancellation, revocation, and termination of a permit/mineral agreement/FTAA.
Narra Nickel Mining and Devt Corp., et al. v. Redmont Consolidated Mines Corp., G.R.
No. 195580, 21 April 2014
18 Apr

[VELASCO, JR., J.]

FACTS

Redmont Consolidated Mines, Inc. (Redmont) filed before the Panel of Arbitrators (POA) of the
DENR separate petitions for denial of McArthur Mining, Inc. (McArthur), Tesoro and Mining and
Development, Inc. (Tesoro), and Narra Nickel Mining and Development Corporation (Narra)
applications Mineral Production Sharing Agreement (MPSA) on the ground that they are not
qualified persons and thus disqualified from engaging in mining activities through MPSAs
reserved only for Filipino citizens.

McArthur Mining, Inc., is composed, among others, by Madridejos Mining Corporation (Filipino)
owning 5,997 out of 10,000 shares, and MBMI Resources, Inc. (Canadian) owning 3,998 out of
10,000 shares; MBMI also owns 3,331 out of 10,000 shares of Madridejos Mining Corporation;

Tesoro and Mining and Development, Inc., is composed, among others, by Sara Marie Mining,
Inc. (Filipino) owning 5,997 out of 10,000 shares, and MBMI Resources, Inc. (Canadian) owning
3,998 out of 10,000 shares; MBMI also owns 3,331 out of 10,000 shares of Sara Marie Mining,
Inc.;

Narra Nickel Mining and Development Corporation, is composed, among others, by Patricia
Louise Mining & Development Corporation (Filipino) owning 5,997 out of 10,000 shares, and
MBMI Resources, Inc. (Canadian) owning 3,998 out of 10,000 shares; MBMI also owns 3,396 out
of 10,000 shares of Patricia Louise Mining & Development Corporation;

ISSUES

(1) Is the Grandfather Rule applicable?

(2) Whether McArthur, Tesoro and Narra are Filipino nationals.

RULINGS

(1) YES.

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

The Strict Rule or the Grandfather Rule pertains to the portion in 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.

(2) NO.

[P]etitioners 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. xxx Noticeably, the ownership of the layered
corporations boils down to xxx 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.