G.R. No.

162243
ALVAREZ vs. PICOP

December 3, 2009

The cause of action of PICOP Resources, Inc. (PICOP) in its Petition for Mandamus with
the trial court is clear: the government is bound by contract, a 1969 Document signed by
then President Ferdinand Marcos, to enter into an Integrated Forest Management
Agreement (IFMA) with PICOP. Since the remedy of mandamus lies only to compel an
officer to perform a ministerial duty, and since the 1969 Document itself has a proviso
requiring compliance with the laws and the Constitution, the issues in this Motion for
Reconsideration are the following: (1) firstly, is the 1969 Document a contract
enforceable under the Non-Impairment Clause of the Constitution, so as to make the
signing of the IFMA a ministerial duty? (2) secondly, did PICOP comply with all the legal
and constitutional requirements for the issuance of an IFMA?
To recall, PICOP filed with the Department of Environment and Natural Resources
(DENR) an application to have its Timber License Agreement (TLA) No. 43 converted
into an IFMA. In the middle of the processing of PICOPs application, however, PICOP
refused to attend further meetings with the DENR. Instead, on 2 September 2002,
PICOP filed before the Regional Trial Court (RTC) of Quezon City a Petition for
Mandamus1 against then DENR Secretary Heherson T. Alvarez. PICOP seeks the
issuance of a privileged writ of mandamus to compel the DENR Secretary to sign,
execute and deliver an IFMA to PICOP, as well as to
[I]ssue the corresponding IFMA assignment number on the area covered by the IFMA,
formerly TLA No. 43, as amended; b) to issue the necessary permit allowing petitioner to
act and harvest timber from the said area of TLA No. 43, sufficient to meet the raw
material requirements of petitioners pulp and paper mills in accordance with the
warranty and agreement of July 29, 1969 between the government and PICOPs
predecessor-in-interest; and c) to honor and respect the Government Warranties and
contractual obligations to PICOP strictly in accordance with the warranty and agreement
dated July 29, [1969] between the government and PICOPs predecessor-in-interest. x x
x.2
On 11 October 2002, the RTC rendered a Decision granting PICOPs Petition for
Mandamus, thus:
WHEREFORE, premises considered, the Petition for Mandamus is hereby GRANTED.

2. to issue the necessary permit allowing petitioner to act and harvest timber from
the said area of TLA No. 43, sufficient to meet the raw material requirements of
petitioners pulp and paper mills in accordance with the warranty and agreement
of July 29, 1969 between the government and PICOPs predecessor-in-interest;
and
3. to honor and respect the Government Warranties and contractual obligations
to PICOP strictly in accordance with the warranty and agreement dated July 29,
1999 (sic) between the government and PICOPs predecessor-in-interest
(Exhibits "H", "H-1" to "H-5", particularly the following:
a) the area coverage of TLA No. 43, which forms part and parcel of the
government warranties;
b) PICOP tenure over the said area of TLA No. 43 and exclusive right to
cut, collect and remove sawtimber and pulpwood for the period ending on
April 26, 1977; and said period to be renewable for [an]other 25 years
subject to compliance with constitutional and statutory requirements as
well as with existing policy on timber concessions; and
c) The peaceful and adequate enjoyment by PICOP of the area as
described and specified in the aforesaid amended Timber License
Agreement No. 43.
The Respondent Secretary Alvarez is likewise ordered to pay petitioner the sum of P10
million a month beginning May 2002 until the conversion of TLA No. 43, as amended, to
IFMA is formally effected and the harvesting from the said area is granted. 3
On 25 October 2002, the DENR Secretary filed a Motion for Reconsideration. 4 In a 10
February 2003 Order, the RTC denied the DENR Secretarys Motion for Reconsideration
and granted PICOPs Motion for the Issuance of Writ of Mandamus and/or Writ of
Mandatory Injunction.5 The fallo of the 11 October 2002 Decision was practically copied
in the 10 February 2003 Order, although there was no mention of the damages imposed
against then DENR Secretary Alvarez.6 The DENR Secretary filed a Notice of
Appeal7 from the 11 October 2002 Decision and the 10 February 2003 Order.
On 19 February 2004, the Seventh Division of the Court of Appeals affirmed 8 the
Decision of the RTC, to wit:

The Respondent DENR Secretary Hon. Heherson Alvarez is hereby ordered:

1. to sign, execute and deliver the IFMA contract and/or documents to PICOP
and issue the corresponding IFMA assignment number on the area covered by
the IFMA, formerly TLA No. 43, as amended;

WHEREFORE, the appealed Decision is hereby AFFIRMED with modification that the
order directing then DENR Secretary Alvarez "to pay petitioner-appellee the sum of P10
million a month beginning May, 2002 until the conversion to IFMA of TLA No. 43, as

amended, is formally effected and the harvesting from the said area is granted" is hereby
deleted. 9
Challenging the deletion of the damages awarded to it, PICOP filed a Motion for Partial
Reconsideration10 of this Decision, which was denied by the Court of Appeals in a 20 July
2004 Resolution.11

III.
WITH DUE RESPECT, THE HONORABLE COURT, IN REVERSING THE FINDINGS OF
FACTS OF THE TRIAL COURT AND THE COURT OF APPEALS, MISAPPRECIATED
THE EVIDENCE, TESTIMONIAL AND DOCUMENTARY, WHEN IT RULED THAT:
i.

The DENR Secretary and PICOP filed with this Court separate Petitions for Review of
the 19 February 2004 Court of Appeals Decision. These Petitions were docketed as G.R.
No. 162243 and No. 164516, respectively. These cases were consolidated with G.R. No.
171875, which relates to the lifting of a Writ of Preliminary Injunction enjoining the
execution pending appeal of the foregoing Decision.

PICOP FAILED TO SUBMIT A FIVE-YEAR FOREST PROTECTION PLAN AND A

SEVEN-YEAR REFORESTATION PLAN FOR THE YEARS UNDER REVIEW.

On 29 November 2006, this Court rendered the assailed Decision on the Consolidated
Petitions:

PICOP FAILED TO COMPLY WITH THE PAYMENT OF FOREST CHARGES.

WHEREFORE, the Petition in G.R. No. 162243 is GRANTED. The Decision of the Court
of Appeals insofar as it affirmed the RTC Decision granting the Petition for Mandamus
filed by Paper Industries Corp. of the Philippines (PICOP) is hereby REVERSED and
SET ASIDE. The Petition in G.R. No. 164516 seeking the reversal of the same Decision
insofar as it nullified the award of damages in favor of PICOP is DENIED for lack of
merit. The Petition in G.R. No. 171875, assailing the lifting of the Preliminary Mandatory
Injunction in favor of the Secretary of Environment and Natural Resources is
DISMISSED on the ground of mootness.12
On 18 January 2006, PICOP filed the instant Motion for Reconsideration, based on the
following grounds:
I.
THE HONORABLE COURT ERRED IN HOLDING THAT THE CONTRACT WITH
PRESIDENTIAL WARRANTY SIGNED BY THE PRESIDENT OF THE REPUBLIC ON
29 JUNE 1969 ISSUED TO PICOP IS A MERE PERMIT OR LICENSE AND IS NOT A
CONTRACT, PROPERTY OR PROPERTY RIGHT PROTECTED BY THE DUE
PROCESS CLAUSE OF THE CONSTITUTION
II.
THE EVALUATION OF PICOPS MANAGEMENT OF THE TLA 43 NATURAL FOREST
CLEARLY SHOWED SATISFACTORY PERFORMANCE FOR KEEPING THE NATURAL
FOREST GENERALLY INTACT AFTER 50 YEARS OF FOREST OPERATIONS. THIS
COMPLETES THE REQUIREMENT FOR AUTOMATIC CONVERSION UNDER
SECTION 9 OF DAO 99-53.

ii.

iii.
PICOP DID NOT COMPLY WITH THE REQUIREMENT FOR A CERTIFICATION FROM
THE NCIP THAT THE AREA OF TLA 43 DOES NOT OVERLAP WITH ANY ANCESTRAL
DOMAIN.
iv.
PICOP FAILED TO HAVE PRIOR CONSULTATION WITH AND APPROVAL FROM THE
SANGUNIAN CONCERNED, AS REQUIRED BY SECTION 27 OF THE REPUBLIC ACT
NO. 7160, OTHERWISE KNOWN AS THE LOCAL GOVERNMENT CODE OF 1991.
v.
PCIOP FAILED TO SECURE SOCIAL ACCEPTABILITY UNDER PRESIDENTIAL
DECREE NO. 1586.
IV
THE MOTIVATION OF ALVAREZ IN RECALLING THE CLEARANCE FOR AUTOMATIC
CONVERSION HE ISSUED ON 25 OCTOBER 2001 WAS NOT DUE TO ANY
SHORTCOMING FROM PICOP BUT DUE TO HIS DETERMINATION TO EXCLUDE
28,125 HECTARES FROM THE CONVERSION AND OTHER THINGS.
On 15 December 2008, on Motion by PICOP, the Third Division of this Court resolved to
refer the consolidated cases at bar to the Court en banc. On 16 December 2008, this

Court sitting en banc resolved to accept the said cases and set them for oral arguments.
Oral arguments were conducted on 10 February 2009.
PICOPs Cause of Action: Matters PICOP Should Have Proven to Be Entitled to a Writ of
Mandamus
In seeking a writ of mandamus to compel the issuance of an IFMA in its favor, PICOP
relied on a 29 July 1969 Document, the so-called Presidential Warranty approved by
then President Ferdinand E. Marcos in favor of PICOPs predecessor-in-interest, Bislig
Bay Lumber Company, Inc. (BBLCI). PICOPs cause of action is summarized in
paragraphs 1.6 and 4.19 of its Petition for Mandamus:
1.6 Respondent Secretary impaired the obligation of contract under the said Warranty
and Agreement of 29 July 1969 by refusing to respect the tenure; and its renewal for
another twenty five (25) years, of PICOP over the area covered by the said Agreement
which consists of permanent forest lands with an aggregate area of 121,587 hectares
and alienable and disposable lands with an aggregate area of approximately 21,580
hectares, and petitioners exclusive right to cut, collect and remove sawtimber and
pulpwood therein and the peaceful and adequate enjoyment of the said area as
described and specified in petitioners Timber License Agreement (TLA) No. 43
guaranteed by the Government, under the Warranty and Agreement of 29 July 1969. 13
4.19 Respondent is in violation of the Constitution and has impaired the obligation of
contract by his refusal to respect: a) the tenurial rights of PICOP over the forest area
covered by TLA No. 43, as amended and its renewal for another twenty five (25) years;
b) the exclusive right of PICOP to cut, collect and remove sawtimber and pulpwood
therein; and c) PICOPs peaceful and adequate enjoyment of the said area which the
government guaranteed under the Warranty and Agreement of 29 July 1969. 14
The grounds submitted by PICOP in its Petition for Mandamus are as follows:
I
Respondent secretary has unlawfully refused and/or neglected to sign and execute the
IFMA contract of PICOP even as the latter has complied with all the legal requirements
for the automatic conversion of TLA No. 43, as amended, into an IFMA.
II
Respondent Secretary acted with grave abuse of discretion and/or in excess of
jurisdiction in refusing to sign and execute PICOPs IFMA contract, notwithstanding that
PICOP had complied with all the requirements for Automatic Conversion under DAO 99-

53, as in fact Automatic Conversion was already cleared in October, 2001, and was a
completed process.
III
Respondent Secretary has impaired the obligation of contract under a valid and binding
warranty and agreement of 29 July 1969 between the government and PICOPs
predecessor-in-interest, by refusing to respect: a) the tenure of PICOP, and its renewal
for another twenty five (25) years, over the TLA No.43 area covered by said agreement;
b) the exclusive right to cut, collect and remove sawtimber and pulpwood timber; and c)
the peaceful and adequate enjoyment of the said area.
IV
As a result of respondent Secretarys unlawful refusal and/or neglect to sign and deliver
the IFMA contract, and violation of the constitutional rights of PICOP against nonimpairment of the obligation of contract (Sec. 10, Art. III, 1997 [sic] Constitution), PICOP
suffered grave and irreparable damages.15
Petitions for Mandamus are governed by Rule 65 of the Rules of Court, Section 3 of
which provides:
SEC. 3. Petition for mandamus.When any tribunal, corporation, board, officer or
person unlawfully neglects the performance of an act which the law specifically enjoins
as a duty resulting from an office, trust, or station, or unlawfully excludes another from
the use and enjoyment of a right or office to which such other is entitled, and there is no
other plain, speedy and adequate remedy in the ordinary course of law, the person
aggrieved thereby may file a verified petition in the proper court, alleging the facts with
certainty and praying that judgment be rendered commanding the respondent,
immediately or at some other time to be specified by the court, to do the act required to
be done to protect the rights of the petitioner, and to pay the damages sustained by the
petitioner by reason of the wrongful acts of the respondent. (Emphasis supplied.)
PICOP is thus asking this Court to conclude that the DENR Secretary is specifically
enjoined by law to issue an IFMA in its favor. An IFMA, as defined by DENR
Administrative Order (DAO) No. 99-53,16 is [A] production-sharing contract entered into by and between the DENR and a qualified
applicant wherein the DENR grants to the latter the exclusive right to develop, manage,
protect and utilize a specified area of forestland and forest resource therein for a period
of 25 years and may be renewed for another 25-year period, consistent with the principle
of sustainable development and in accordance with an approved CDMP, and under
which both parties share in its produce.17

PICOP stresses the word "automatic" in Section 9 of this DAO No. 99-53:
Sec. 9. Qualifications of Applicants. The applicants for IFMA shall be:
(a) A Filipino citizen of legal age; or,
(b) Partnership, cooperative or corporation whether public or private, duly
registered under Philippine laws.
However, in the case of application for conversion of TLA into IFMA, an automatic
conversion after proper evaluation shall be allowed, provided the TLA holder shall have
signified such intention prior to the expiry of the TLA, PROVIDED further, that the TLA
holder has showed satisfactory performance and have complied in the terms of condition
of the TLA and pertinent rules and regulations. (Emphasis supplied.) 18
This administrative regulation provision allowing automatic conversion after proper
evaluation can hardly qualify as a law, much less a law specifically enjoining the
execution of a contract. To enjoin is "to order or direct with urgency; to instruct with
authority; to command."19 "Enjoin is a mandatory word, in legal parlance, always; in
common parlance, usually."20 The word "allow," on the other hand, is not equivalent to the
word "must," and is in no sense a command.21
As an extraordinary writ, the remedy of mandamus lies only to compel an officer to
perform a ministerial duty, not a discretionary one; mandamus will not issue to control the
exercise of discretion of a public officer where the law imposes upon him the duty to
exercise his judgment in reference to any manner in which he is required to act, because
it is his judgment that is to be exercised and not that of the court. 22
The execution of agreements, in itself, involves the exercise of discretion. Agreements
are products of negotiations and mutual concessions, necessitating evaluation of their
provisions on the part of both parties. In the case of the IFMA, the evaluation on the part
of the government is specifically mandated in the afore-quoted Section 3 of DAO No. 9953. This evaluation necessarily involves the exercise of discretion and judgment on the
part of the DENR Secretary, who is tasked not only to negotiate the sharing of the profit
arising from the IFMA, but also to evaluate the compliance with the requirements on the
part of the applicant.
Furthermore, as shall be discussed later, the period of an IFMA that was merely
automatically converted from a TLA in accordance with Section 9, paragraph 2 of DAO
No. 99-53 would only be for the remaining period of the TLA. Since the TLA of PICOP
expired on 26 April 2002, the IFMA that could have been granted to PICOP via the
automatic conversion provision in DAO No. 99-53 would have expired on the same date,
26 April 2002, and the PICOPs Petition for Mandamus would have become moot.

This is where the 1969 Document, the purported Presidential Warranty, comes into play.
When PICOPs application was brought to a standstill upon the evaluation that PICOP
had yet to comply with the requirements for such conversion, PICOP refused to attend
further meetings with the DENR and instead filed a Petition for Mandamus, insisting that
the DENR Secretary had impaired the obligation of contract by his refusal to respect: a)
the tenurial rights of PICOP over the forest area covered by TLA No. 43, as amended,
and its renewal for another twenty-five (25) years; b) the exclusive right of PICOP to cut,
collect and remove sawtimber and pulpwood therein; and c) PICOPs peaceful and
adequate enjoyment of the said area which the government guaranteed under the
Warranty and Agreement of 29 July 1969. 23
PICOP is, thus, insisting that the government is obligated by contract to issue an IFMA in
its favor because of the 1969 Document.
A contract, being the law between the parties, can indeed, with respect to the State when
it is a party to such contract, qualify as a law specifically enjoining the performance of an
act. Hence, it is possible that a writ of mandamus may be issued to PICOP, but only if it
proves both of the following:
1) That the 1969 Document is a contract recognized under the non-impairment
clause; and
2) That the 1969 Document specifically enjoins the government to issue the
IFMA.
If PICOP fails to prove any of these two matters, the grant of a privileged writ of
mandamus is not warranted. This was why we pronounced in the assailed Decision that
the overriding controversy involved in the Petition was one of law.24 If PICOP fails to
prove any of these two matters, more significantly its assertion that the 1969 Document
is a contract, PICOP fails to prove its cause of action.25 Not even the satisfactory
compliance with all legal and administrative requirements for an IFMA would save
PICOPs Petition for Mandamus.
The reverse, however, is not true. The 1969 Document expressly states that the warranty
as to the tenure of PICOP is "subject to compliance with constitutional and statutory
requirements as well as with existing policy on timber concessions." Thus, if PICOP
proves the two above-mentioned matters, it still has to prove compliance with statutory
and administrative requirements for the conversion of its TLA into an IFMA.
Exhaustion of Administrative Remedies
PICOP uses the same argument that the government is bound by contract to issue
the IFMA in its refusal to exhaust all administrative remedies by not appealing the

alleged illegal non-issuance of the IFMA to the Office of the President. PICOP claimed in
its Petition for Mandamus with the trial court that:
1.10 This petition falls as an exception to the exhaustion of administrative remedies. The
acts of respondent DENR Secretary complained of in this petition are patently illegal; in
derogation of the constitutional rights of petitioner against non-impairment of the
obligation of contracts; without jurisdiction, or in excess of jurisdiction or so capriciously
as to constitute an abuse of discretion amounting to excess or lack of jurisdiction; and
moreover, the failure or refusal of a high government official such as a Department head
from whom relief is brought to act on the matter was considered equivalent to exhaustion
of administrative remedies (Sanoy v. Tantuico, 50 SCRA 455 [1973]), and there are
compelling and urgent reasons for judicial intervention (Bagatsing v. Ramirez, 74 SCRA
306 [1976]).
Thus, if there has been no impairment of the obligation of contracts in the DENR
Secretarys non-issuance of the IFMA, the proper remedy of PICOP in claiming that it
has complied with all statutory and administrative requirements for the issuance of the
IFMA should have been with the Office of the President. This makes the issue of the
enforceability of the 1969 Document as a contract even more significant.
The Nature and Effects of the Purported 29 July 1969 Presidential Warranty

The Presidential Warranty cannot be considered a contract distinct from PTLA No. 47
and FMA No. 35. We agree with the OSGs position that it is merely a collateral
undertaking which cannot amplify PICOPs rights under its timber license. Our definitive
ruling in Oposa v. Factoran that a timber license is not a contract within the purview of
the non-impairment clause is edifying. We declared:
Needless to say, all licenses may thus be revoked or rescinded by executive action. It is
not a contract, property or a property right protected by the due process clause of the
Constitution. In Tan vs. Director of Forestry, this Court held:
"x x x A timber license is an instrument by which the State regulates the utilization and
disposition of forest resources to the end that public welfare is promoted. A timber license
is not a contract within the purview of the due process clause; it is only a license or a
privilege, which can be validly withdrawn whenever dictated by public interest or public
welfare as in this case.
A license is merely a permit or privilege to do what otherwise would be unlawful, and is
not a contract between the authority, federal, state, or municipal, granting it and the
person to whom it is granted; neither is it a property or a property right, nor does it create
a vested right; nor is it taxation' (C.J. 168). Thus, this Court held that the granting of
license does not create irrevocable rights, neither is it property or property rights (People
vs. Ong Tin, 54 O.G. 7576). x x x"

Base Metals Case

PICOP challenges our ruling that the 1969 Document is not a contract. Before we review
this finding, however, it must be pointed out that one week after the assailed Decision,
another division of this Court promulgated a Decision concerning the very same 1969
Document. Thus, in PICOP Resources, Inc. v. Base Metals Mineral Resources
Corporation,26 five other Justices who were still unaware of this Divisions
Decision,27 came up with the same conclusion as regards the same issue of whether
former President Marcoss Presidential Warranty is a contract:
Finally, we do not subscribe to PICOPs 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 governments commitment to uphold the terms and conditions of its timber
license and guarantees PICOPs 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.

We reiterated this pronouncement in Felipe Ysmael, Jr. & Co., Inc. vs. Deputy Executive
Secretary:
"x x x Timber licenses, permits and license agreements are the principal instruments by
which the State regulates the utilization and disposition of forest resources to the end
that public welfare is promoted. And it can hardly be gainsaid that they merely evidence a
privilege granted by the State to qualified entities, and do not vest in the latter a
permanent or irrevocable right to the particular concession area and the forest products
therein. They may be validly amended, modified, replaced or rescinded by the Chief
Executive when national interests so require. Thus, they are not deemed contracts within
the purview of the due process of law clause [See Sections 3(ee) and 20 of Pres. Decree
No. 705, as amended. Also, Tan v. Director of Forestry, G.R. No. L-24548, October 27,
1983, 125 SCRA 302]."
Since timber licenses are not contracts, the non-impairment clause, which reads:
"SEC. 10. No law impairing the obligation of contracts shall be passed."
cannot be invoked.

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

undertaking assuring PICOP of exclusive possession and enjoyment of its concession
areas. Such an interpretation would result in the complete abdication by the State in
favor of PICOP of the sovereign power to control and supervise the exploration,
development and utilization of the natural resources in the area. 28
The Motion for Reconsideration was denied with finality on 14 February 2007. A Second
Motion for Reconsideration filed by PICOP was denied on 23 May 2007.
PICOP insists that the pronouncement in Base Metals is a mere obiter dictum, which
would not bind this Court in resolving this Motion for Reconsideration. In the oral
arguments, however, upon questioning from the ponente himself of Base Metals, it was
agreed that the issue of whether the 1969 Document is a contract was necessary in the
resolution of Base Metals:
JUSTICE TINGA:
And do you confirm that one of the very issues raised by PICOP in that case [PICOP
Resources Inc. v. Base Metal Mineral Resources Corporation] revolves around its claim
that a Presidential Warranty is protected by the non-impairment c[l]ause of the
Constitution.
ATTY. AGABIN:
Yes, I believe that statement was made by the Court, your Honor.
JUSTICE TINGA:
Yes. And that claim on the part of PICOP necessarily implies that the Presidential
Warranty according to PICOP is a contract protected by the non-impairment clause.
ATTY. AGABIN:
Yes, Your Honor.
JUSTICE TINGA:
Essentially, the PICOP raised the issue of whether the Presidential Warranty is a contract
or not.
ATTY. AGABIN:

Yes, Your Honor.

JUSTICE TINGA:
And therefore any ruling on the part of the Court on that issue could not be an obiter
dictum.
ATTY. AGABIN:
Your Honor, actually we believe that the basic issue in that case was whether or not
Base Metals could conduct mining activities underneath the forest reserve allotted to
PICOP and the Honorable Court ruled that the Mining Act of 1995 as well as the
Department Order of DENR does not disallow mining activity under a forest reserve.
JUSTICE TINGA:
But it was PICOP itself which raised the claim that a Presidential Warranty is a contract.
And therefore be, should be protected on the under the non-impairment clause of the
Constitution.
ATTY. AGABIN:
Yes, Your Honor. Except that
JUSTICE TINGA:
So, how can you say now that the Court merely uttered, declared, laid down an obiter
dictum in saying that the Presidential Warranty is not a contract, and it is not being a
contract, it is not prohibited by the non-impairment clause.
ATTY. AGABIN:
This Honorable Court could have just ruled, held that the mining law allows mining
activities under a forest reserve without deciding on that issue that was raised by PICOP,
your Honor, and therefore we believe.
JUSTICE TINGA:
It could have been better if PICOP has not raised that issue and had not claimed that the
Presidential Warranty is not a contract.
ATTY. AGABIN:

Well, that is correct, your Honor except that the Court could have just avoided that
question. Because

It was.
ATTY. AGABIN:

JUSTICE TINGA:
Yes.
Why[?]
JUSTICE TINGA:
ATTY. AGABIN:
It already settled the issue, the basic issue.

And PICOP devoted quite a number of pages in [its] memorandum to that issue and so
did the Court [in its Decision].

JUSTICE TINGA:

ATTY. AGABIN:

Yes, because the Court in saying that merely reiterated a number of rulings to the effect
that the Presidential Warranty, a Timber License for that matter is not a contract
protected by the non-impairment laws.

Anyway, your Honor, we beg the Court to revisit, not to 29

ATTY. AGABIN:

Interpretation of the 1969 Document That Would Be in Harmony with the Constitution
To remove any doubts as to the contents of the 1969 Document, the purported
Presidential Warranty, below is a complete text thereof:

Well, it is our submission, your Honor, that it is obiter because, that issue even a phrase
by PICOP was not really fully argued by the parties for the Honorable Court and it seems
from my reading at least it was just an aside given by the Honorable Court to decide on
that issue raised by PICOP but it was not necessary to the decision of the court.

Republic of the Philippines

Department of Agriculture and Natural Resources
OFFICE OF THE SECRETARY
Diliman, Quezon City

JUSTICE TINGA:
It was not necessary[?]

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

Bislig Bay Lumber Co., Inc.
(Bislig, Surigao)

ATTY. AGABIN:
July 29, 1969
To the decision of the Court.
JUSTICE TINGA:
It was.
ATTY. AGABIN:
It was not necessary.
JUSTICE TINGA:

Bislig Bay Lumber Co., Inc.

[unreadable word] Bldg.
Makati, Rizal
S i r s:
This has reference to the request of the Board of Investments through its Chairman in a
letter dated July 16, 1969 for a warranty on the boundaries of your concession area
under Timber License Agreement No. 43, as amended.

We are made to understand that your company is committed to support the first large
scale integrated wood processing complex hereinafter called: "The Project") and that
such support will be provided not only in the form of the supply of pulpwood and other
wood materials from your concession but also by making available funds generated out
of your own operations, to supplement PICOPs operational sources of funds and other
financial arrangements made by him. In order that your company may provide such
support effectively, it is understood that you will call upon your stockholders to take such
steps as may be necessary to effect a unification of managerial, technical, economic and
manpower resources between your company and PICOP.
It is in the public interest to promote industries that will enhance the proper conservation
of our forest resources as well as insure the maximum utilization thereof to the benefit of
the national economy. The administration feels that the PICOP project is one such
industry which should enjoy priority over the usual logging operations hitherto practiced
by ordinary timber licensees: For this reason, we are pleased to consider favorably the
request.
We confirm that your Timber License Agreement No. 43, as amended (copy of which is
attached as Annex "A" hereof which shall form part and parcel of this warranty) definitely
establishes the boundary lines of your concession area which consists of permanent
forest lands with an aggregate area of 121,587 hectares and alienable or disposable
lands with an aggregate area of approximately 21,580 hectares.
We further confirm that your tenure over the area and exclusive right to cut, collect and
remove sawtimber and pulpwood shall be for the period ending on April 26, 1977; said
period to be renewable for other 25 years subject to compliance with constitutional and
statutory requirements as well as with existing policy on timber concessions.
The peaceful and adequate enjoyment by you of your area as described and specified in
your aforesaid amended Timber License Agreement No. 43 is hereby warranted provided
that pertinent laws, regulations and the terms and conditions of your license agreement
are observed.
Very truly yours,
(Sgd.) FERNANDO LOPEZ
Secretary of Agriculture
and Natural Resources
Encl.:
RECOMMENDED BY:

(Sgd.) JOSE VIADO

Acting Director of Forestry
APPROVED:
(Sgd.) FERDINAND E. MARCOS
President of the Philippines
ACCEPTED:
BISLIG BAY LBR. CO., INC.
By:
(Sgd.) JOSE E. SORIANO
President
PICOP interprets this document in the following manner:
6.1 It is clear that the thrust of the government warranty is to establish a particular area
defined by boundary lines of TLA No. 43 for the PICOP Project. In consideration for
PICOPs commitment to pursue and establish the project requiring huge
investment/funding from stockholders and lending institutions, the government provided
a warranty that ensures the continued and exclusive right of PICOP to source its raw
materials needs from the forest and renewable trees within the areas established.
6.2 As a long-term support, the warranty covers the initial twenty five (25) year period
and is renewable for periods of twenty five (25) years provided the project continues to
exist and operate. Very notably, the wording of the Presidential Warranty connotes that
for as long as the holder complies with all the legal requirements, the term of the
warranty is not limited to fifty (50) years but other twenty five (25) years.
6.3 Note must be made that the government warranted that PICOPs tenure over the
area and exclusive right to cut, collect and remove saw timber and pulpwood shall be for
the period ending on 26 April 1977 and said period to be renewable for other 25 years
subject to "compliance with constitutional and statutory requirements as well as existing
policy on timber requirements". It is clear that the renewal for other 25 years, not
necessarily for another 25 years is guaranteed. This explains why on 07 October 1977,
TLA No. 43, as amended, was automatically renewed for another period of twenty five
(25) years to expire on 26 April 2002.30

PICOPs interpretation of the 1969 Document cannot be sustained. PICOPs claim that
the term of the warranty is not limited to fifty years, but that it extends to other fifty years,
perpetually, violates Section 2, Article XII of the Constitution which provides:
Section 2. All lands of the public domain, waters, minerals, coal, petroleum, and other
mineral oils, all forces of potential energy, fisheries, forests or timber, wildlife, flora and
fauna, and other natural resources are owned by the State. With the exception of
agricultural lands, all other natural resources shall not be alienated. The exploration,
development, and utilization of natural resources shall be under the full control and
supervision of the State. The State may directly undertake such activities, or it may enter
into co-production, joint venture, or production-sharing agreements with Filipino citizens,
or corporations or associations at least sixty per centum of whose capital is owned by
such citizens. Such agreements may be for a period not exceeding twenty-five years,
renewable for not more than twenty-five years, and under such terms and conditions as
may be provided by law.In cases of water rights for irrigation, water supply fisheries, or
industrial uses other than the development of water power, beneficial use may be the
measure and limit of the grant.
Mr. Justice Dante O. Tingas interpretation of the 1969 Document is much more in accord
with the laws and the Constitution. What one cannot do directly, he cannot do indirectly.
Forest lands cannot be alienated in favor of private entities. Granting to private entities,
via a contract, a permanent, irrevocable, and exclusive possession of and right over
forest lands is tantamount to granting ownership thereof. PICOP, it should be noted,
claims nothing less than having exclusive, continuous and uninterrupted possession of
its concession areas,31 where all other entrants are illegal,32 and where so-called "illegal
settlers and squatters" are apprehended.33
IFMAs are production-sharing agreements concerning the development and utilization of
natural resources. As such, these 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." Any superior "contract" requiring the State to
issue TLAs and IFMAs whenever they expire clearly circumvents Section 2, Article XII of
the Constitution, which provides for the only permissible schemes wherein the full control
and supervision of the State are not derogated: co-production, joint venture, or
production-sharing agreements within the time limit of twenty-five years, renewable for
another twenty-five years.
On its face, the 1969 Document was meant to expire on 26 April 2002, upon the
expiration of the expected extension of the original TLA period ending on 26 April 1977:
We further confirm that your tenure over the area and exclusive right to cut, collect and
remove sawtimber and pulpwood shall be for the period ending on April 26, 1977; said

period to be renewable for other 25 years subject to compliance with constitutional and
statutory requirements as well as with existing policy on timber concessions.
1avvphi1

Any interpretation extending the application of the 1969 Document beyond 26 April 2002
and any concession that may be granted to PICOP beyond the said date would violate
the Constitution, and no amount of legal hermeneutics can change that. Attempts of
PICOP to explain its way out of this Constitutional provision only led to absurdities, as
exemplified in the following excerpt from the oral arguments:
JUSTICE CARPIO:
The maximum trend of agreement to develop and utilize natural resources like forest
products is 25 years plus another 25 years or a total of 50 years correct?
ATTY. AGABIN
Yes, Your Honor.
JUSTICE CARPIO:
That is true for the 1987, 1973, 1935 Constitution, correct?
ATTY. AGABIN:
Yes, Your Honor.
JUSTICE CARPIO:
The TLA here, TLA 43, expired, the first 25 years expired in 1977, correct?
ATTY. AGABIN:
Yes, Your Honor.
JUSTICE CARPIO:
And it was renewed for another 25 years until 2002, the 50th year?
ATTY. AGABIN:
Yes, Your Honor.

JUSTICE CARPIO:

ATTY. AGABIN:

Now, could PICOP before the end of the 50th year lets say in 2001, one year before the
expiration, could it have asked for an extension of another 25 years of its TLA
agreement[?]

The Constitution itself provides that vested rights should be .

ATTY. AGABIN:
I believe so, Your Honor.

If it is not in violation of specific provision of the Constitution. The Constitution says, 25

years plus another 25 years, thats the end of it. You mean to say that a President of the
Philippines can give somebody 1,000 years license?

JUSTICE CARPIO:

ATTY. AGABIN:

But the Constitution says, maximum of fifty years. How could you ask for another 25
years of its TLA.

Well, that is not our position, Your Honor. Because our position is that .

JUSTICE CARPIO:

JUSTICE CARPIO:
ATTY. AGABIN:
Well, your Honor, we believe on a question like this, this Honorable Court should balance
the interest.

My question is, what is the maximum term, you said 50 years. So, my next question is,
can PICOP apply for an extension of another 25 years after 2002, the 50th year?
ATTY. AGABIN:

JUSTICE CARPIO:
Yes, based on the contract of warranty, Your Honor, because the contract of warranty.
The Constitution is very clear, you have only a maximum of 50 years, 25 plus another 25.
PICOP could never have applied for an extension, for a third 25-year term whether under
the 1935 Constitution, the 1973 Constitution and the 1987 Constitution, correct?
ATTY. AGABIN:
Your Honor, except that we are invoking the warranty, the terms of the warranty.

JUSTICE CARPIO:
But in the PICOP license it is very clear, it says here, provision 28, it says the license
agreement is for a total of 50 years. I mean it is very simple, the President or even
Congress cannot pass a law extending the license, whatever kind of license to utilize
natural resources for more than fifty year[s]. I mean even the law cannot do that. It
cannot prevail over the Constitution. Is that correct, Counsel?

JUSTICE CARPIO:
ATTY. AGABIN:
Can the warranty prevail over the Constitution?
ATTY. AGABIN:

It is correct, Your Honor, except that in this case, what is actually our application is that
the law provides for the conversion of existing TLA into IFMA.

Well, it is a vested right, your Honor.

JUSTICE CARPIO:

JUSTICE CARPIO:

So, they file the petition for conversion before the end of the 50th year for IFMA.

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

ATTY. AGABIN:

Yes, Your Honor.

JUSTICE CARPIO:
But IFMA is the same, it is based on Section 2, Article 12 of the Constitution, develop and
utilize natural resources because as you said when the new constitution took effect we
did away with the old licensing regime, we have now co-production, a production sharing,
joint venture, direct undertaking but still the same developing and utilizing the natural
resources, still comes from section 2, Art. 12 of the Constitution. It is still a license but
different format now.
ATTY. AGABIN:
It is correct, Your Honor, except that the regimes of joint venture, co-production and
production sharing are what is referred to in the constitution, Your Honor, and still
covered
JUSTICE CARPIO:
Yes, but it is covered by same 25 year[s], you mean to say people now can circumvent
the 50 year maximum term by calling their TLA as IFMA and after fifty years calling it
ISMA, after another 50 years call it MAMA.
ATTY. AGABIN:
Yes, Your Honor. Because
JUSTICE CARPIO:
It can be done.
ATTY. AGABIN:
That is provided for by the department itself.34
PICOP is, in effect, arguing that the DENR issued DAO No. 99-53 in order to provide a
way to circumvent the provisions of the Constitution limiting agreements for the utilization
of natural resources to a maximum period of fifty years. Official duties are, however,
disputably considered to be regularly performed,35 and good faith is always presumed.
DAO No. 99-53 was issued to change the means by which the government enters into an
agreement with private entities for the utilization of forest products. DAO No. 99-53 is a

late response to the change in the constitutional provisions on natural resources from the
1973 Constitution, which allowed the granting of licenses to private entities, 36 to the
present Constitution, which provides for co-production, joint venture, or productionsharing agreements as the permissible schemes wherein private entities may participate
in the utilization of forest products. Since the granting of timber licenses ceased to be a
permissible scheme for the participation of private entities under the present Constitution,
their operations should have ceased upon the issuance of DAO No. 99-53, the rule
regulating the schemes under the present Constitution. This would be iniquitous to those
with existing TLAs that would not have expired yet as of the issuance of DAO No. 99-53,
especially those with new TLAs that were originally set to expire after 10 or even 20 or
more years. The DENR thus inserted a provision in DAO No. 99-53 allowing these TLA
holders to finish the period of their TLAs, but this time as IFMAs, without the rigors of
going through a new application, which they have probably just gone through a few years
ago.
Such an interpretation would not only make DAO No. 99-53 consistent with the
provisions of the Constitution, but would also prevent possible discrimination against new
IFMA applicants:
ASSOCIATE JUSTICE DE CASTRO:
I ask this question because of your interpretation that the period of the IFMA, if your TLA
is converted into IFMA, would cover a new a fresh period of twenty-five years renewable
by another period of twenty-five years.
DEAN AGABIN:
Yes, Your Honor.
ASSOCIATE JUSTICE DE CASTRO:
Dont you think that will, in effect, be invidious discrimination with respect to other
applicants if you are granted a fresh period of twenty-five years extendible to another
twenty-five years?
DEAN AGABIN:
I dont think it would be, Your Honor, considering that the IFMA is different regime from
the TLA. And not only that, there are considerations of public health and ecology which
should come into play in this case, and which we had explained in our opening statement
and, therefore the provision of the Constitution on the twenty-five limits for renewal of coproduction, joint venture and production sharing agreements, should be balanced with
other values stated in the Constitution, like the value of balanced ecology, which should

be in harmony with the rhythm of nature, or the policy of forest preservation in Article XII,
Section 14 of the Constitution. These are all important policy considerations which
should be balanced against the term limits in Article II of the Constitution.
ASSOCIATE JUSTICE DE CASTRO:
The provision of this Administrative Order regarding automatic conversion may be
reasonable, if, I want to know if you agree with me, if we limit this automatic conversion
to the remaining period of the TLA, because in that case there will be a valid ground to
make a distinction between those with existing TLA and those who are applying for the
first time for IFMA?
DEAN AGABIN:
Well, Your Honor, we beg to disagree, because as I said TLAs are completely different
from IFMA. The TLA has no production sharing or co-production agreement or condition.
All that the licensee has to do is, to pay forest charges, taxes and other impositions from
the local and national government. On the other hand, the IFMAs contained terms and
conditions which are completely different, and that they either impose co-production,
production sharing or joint venture terms. So its a completely different regime, Your
Honor.
ASSOCIATE JUSTICE DE CASTRO:
Precisely, that is the reason why there should be an evaluation of what you mentioned
earlier of the development plan.
DEAN AGABIN:
Yes, Your Honor.
ASSOCIATE JUSTICE DE CASTRO:
So it will be reasonable to convert a TLA into an IFMA without considering the
development plan submitted by other applicants or the development plan itself of one
seeking conversion into IFMA if it will only be limited to the period, the original period of
the TLA. But once you go beyond the period of the TLA, then you will be, the DENR is I
think should evaluate the different proposals of the applicants if we are thinking of a fresh
period of twenty-five years, and which is renewable under the Constitution by another
twenty-five years. So the development plan will be important in this case, the submission
of the development plan of the different applicants must be considered. So I dont
understand why you mentioned earlier that the development plan will later on be a
subject matter of negotiation between the IFMA grantee and the government. So it

seems that it will be too late in the day to discuss that if you have already converted the
TLA into IFMA or if the government has already granted the IFMA, and then it will later on
study the development plan, whether it is viable or not, or it is sustainable or not, and
whether the development plan of the different applicants are, are, which of the
development plan of the different applicants is better or more advantageous to the
government.37
PICOP insists that the alleged Presidential Warranty, having been signed on 29 July
1969, could not have possibly considered the limitations yet to be imposed by future
issuances, such as the 1987 Constitution. However, Section 3, Article XVIII of said
Constitution, provides:
Section 3. All existing laws, decrees, executive orders, proclamations, letters of
instructions, and other executive issuances not inconsistent with this Constitution shall
remain operative until amended, repealed, or revoked.
In the recent case Sabio v. Gordon,38 we ruled that "(t)he clear import of this provision is
that all existing laws, executive orders, proclamations, letters of instructions and other
executive issuances inconsistent or repugnant to the Constitution are repealed."
When a provision is susceptible of two interpretations, "the one that will render them
operative and effective and harmonious with other provisions of law" 39 should be
adopted. As the interpretations in the assailed Decision and in Mr. Justice Tingas
ponencia are the ones that would not make the subject Presidential Warranty
unconstitutional, these are what we shall adopt.
Purpose of the 1969 Document: Assurance That the Boundaries of Its Concession Area
Would Not Be Altered Despite the Provision in the TLA that the DENR Secretary Can
Amend Said Boundaries
In the assailed Decision, we ruled that the 1969 Document cannot be considered a
contract that would bind the government regardless of changes in policy and the
demands of public interest and social welfare. PICOP claims this conclusion "did not take
into consideration that PICOP already had a valid and current TLA before the contract
with warranty was signed in 1969."40 PICOP goes on: "The TLA is a license that equips
any TLA holder in the country for harvesting of timber. A TLA is signed by the Secretary
of the DANR now DENR. The Court ignored the significance of the need for another
contract with the Secretary of the DANR but this time with the approval of the President
of the Republic."41 PICOP then asks us: "If PICOP/BBLCI was only an ordinary TLA
holder, why will it go through the extra step of securing another contract just to harvest
timber when the same can be served by the TLA signed only by the Secretary and not
requiring the approval of the President of the Republic(?)" 42

The answer to this query is found in TLA No. 43 itself wherein, immediately after the
boundary lines of TLA No. 43 were established, the following conditions were given:
This license is granted to the said party of the second part upon the following express
conditions:
I. That authority is granted hereunder to the party of the second part43 to cut,
collect or remove firewood or other minor forest products from the area
embraced in this license agreement except as hereinafter provided.
II. That the party of the first part44 may amend or alter the description of the
boundaries of the area covered by this license agreement to conform with official
surveys and that the decision of the party of the first part as to the exact location
of the said boundaries shall be final.
III. That if the party of the first part deems it necessary to establish on the ground
the boundary lines of the area granted under this license agreement, the party of
the second part shall furnish to the party of the first part or its representatives as
many laborers as it needs and all the expenses to be incurred on the work
including the wages of such laborers shall be paid by the party of the second
part.45
Thus, BBLCI needed an assurance that the boundaries of its concession area, as
established in TLA No. 43, as amended, would not be altered despite this
provision. Hence, BBLCI endeavored to obtain the 1969 Document, which provides:

In Koa v. Court of Appeals,47 we ruled that a warranty is a collateral undertaking and is

merely part of a contract. As a collateral undertaking, it follows the principal wherever it
goes. When this was pointed out by the Solicitor General, PICOP changed its
designation of the 1969 Document from "Presidential Warranty" or "government
warranty" in all its pleadings prior to our Decision, to "contract with warranty" in its Motion
for Reconsideration. This, however, is belied by the statements in the 29 July 1969
Document, which refers to itself as "this warranty."
Re: Allegation That There Were Mutual Contract Considerations
Had the 29 July 1969 Document been intended as a contract, it could have easily said
so. More importantly, it could have clearly defined the mutual considerations of the
parties thereto. It could have also easily provided for the sanctions for the breach of the
mutual considerations specified therein. PICOP had vigorously argued that the 1969
Document was a contract because of these mutual considerations, apparently referring
to the following paragraph of the 1969 Document:
We are made to understand that your company is committed to support the first large
scale integrated wood processing complex hereinafter called: "The Project") and that
such support will be provided not only in the form of the supply of pulpwood and other
wood materials from your concession but also by making available funds generated out
of your own operations, to supplement PICOPs operational surces (sic) of funds and
other financial arrangements made by him. In order that your company may provide such
support effectively, it is understood that you will call upon your stockholders to take such
steps as may be necessary to effect a unification of managerial, technical, economic and
manpower resources between your company and PICOP.
1avvphi1

We confirm that your Timber License Agreement No. 43, as amended (copy of which is
attached as Annex "A" hereof which shall form part and parcel of this warranty) definitely
establishes the boundary lines of your concession area which consists of permanent
forest lands with an aggregate area of 121,587 hectares and alienable or disposable
lands with an aggregate area of approximately 21,580 hectares.
We further confirm that your tenure over the area and exclusive right to cut, collect and
remove sawtimber and pulpwood shall be for the period ending on April 26, 1977; said
period to be renewable for other 25 years subject to compliance with constitutional and
statutory requirements as well as with existing policy on timber concessions.
The peaceful and adequate enjoyment by you of your area as described and specified in
your aforesaid amended Timber License Agreement No. 43 is hereby warranted provided
that pertinent laws, regulations and the terms and conditions of your license agreement
are observed.46

This provision hardly evinces a contract consideration (which, in PICOPs interpretation,

is in exchange for the exclusive and perpetual tenure over 121,587 hectares of forest
land and 21,580 hectares of alienable and disposable lands). As elucidated by PICOP
itself in bringing up the Investment Incentives Act which we shall discuss later, and as
shown by the tenor of the 1969 Document, the latter document was more of a
conferment of an incentive for BBLCIs investment rather than a contract creating mutual
obligations on the part of the government, on one hand, and BBLCI, on the other. There
was no stipulation providing for sanctions for breach if BBLCIs being "committed to
support the first large scale integrated wood processing complex" remains a
commitment. Neither did the 1969 Document give BBLCI a period within which to pursue
this commitment.
According to Article 1350 of the Civil Code, "(i)n onerous contracts the cause is
understood to be, for each contracting party, the prestation or promise of a thing or
service by the other."48 Private investments for ones businesses, while indeed eventually
beneficial to the country and deserving to be given incentives, are still principally and

predominantly for the benefit of the investors. Thus, the "mutual" contract considerations
by both parties to this alleged contract would be both for the benefit of one of the parties
thereto, BBLCI, which is not obligated by the 1969 Document to surrender a share in its
proceeds any more than it is already required by its TLA and by the tax laws.
PICOPs argument that its investments can be considered as contract consideration
derogates the rule that "a license or a permit is not a contract between the sovereignty
and the licensee or permittee, and is not a property in the constitutional sense, as to
which the constitutional proscription against the impairment of contracts may extend." All
licensees obviously put up investments, whether they are as small as a tricycle unit or as
big as those put up by multi-billion-peso corporations. To construe these investments as
contract considerations would be to abandon the foregoing rule, which would mean that
the State would be bound to all licensees, and lose its power to revoke or amend these
licenses when public interest so dictates.
The power to issue licenses springs from the States police power, known as "the most
essential, insistent and least limitable of powers, extending as it does to all the great
public needs."49 Businesses affecting the public interest, such as the operation of public
utilities and those involving the exploitation of natural resources, are mandated by law to
acquire licenses. This is so in order that the State can regulate their operations and
thereby protect the public interest. Thus, while these licenses come in the form of
"agreements," e.g., "Timber License Agreements," they cannot be considered contracts
under the non-impairment clause.50

PICOP thus argues on the basis of quantity, and wants us to distinguish between the
investment of the tricycle driver and that of the multi-billion corporation. However, not
even billions of pesos in investment can change the fact that natural resources and,
therefore, public interest are involved in PICOPs venture, consequently necessitating the
full control and supervision by the State as mandated by the Constitution. Not even
billions of pesos in investment can buy forest lands, which is practically what PICOP is
asking for by interpreting the 1969 Document as a contract giving it perpetual and
exclusive possession over such lands. Among all TLA holders in the Philippines, PICOP
has, by far, the largest concession area at 143,167 hectares, a land area more than the
size of two Metro Manilas.52 How can it not expect to also have the largest investment?
Investment Incentives Act
PICOP then claims that the contractual nature of the 1969 Document was brought about
by its issuance in accordance with and pursuant to the Investment Incentives Act.
According to PICOP:
The conclusion in the Decision that to construe PICOPs investments as a consideration
in a contract would be to stealthily render ineffective the principle that a license is not a
contract between the sovereignty and the licensee is so flawed since the contract with
the warranty dated 29 July 1969 was issued by the Government in accordance with and
pursuant to Republic Act No. 5186, otherwise known as "The Investment Incentives
Act."53

PICOP found this argument "lame," arguing, thus:

PICOP then proceeds to cite Sections 2 and 4(d) and (e) of said act:

43. It is respectfully submitted that the aforesaid pronouncement in the Decision is an

egregious and monumental error.

Section 2. Declaration of Policy To accelerate the sound development of the national

economy in consonance with the principles and objectives of economic nationalism, and
in pursuance of a planned, economically feasible and practicable dispersal of industries,
under conditions which will encourage competition and discharge monopolies, it is
hereby declared to be the policy of the state to encourage Filipino and foreign
investments, as hereinafter set out, in projects to develop agricultural, mining and
manufacturing industries which increase national income most at the least cost, increase
exports, bring about greater economic stability, provide more opportunities for
employment, raise the standards of living of the people, and provide for an equitable
distribution of wealth. It is further declared to be the policy of the state to welcome and
encourage foreign capital to establish pioneer enterprises that are capital intensive and
would utilize a substantial amount of domestic raw materials, in joint venture with
substantial Filipino capital, whenever available.

44. The Decision could not dismiss as "preposterous" the mutual covenants in the
Presidential Warranty which calls for a huge investment of Php500 million at that time in
1969 out of which Php268,440,000 raised from domestic foreign lending institution to
establish the first large scale integrated wood processing complex in the Philippines.
45. The Decision puts up a lame explanation that "all licensees put up investments in
pursuing their business"
46. Now there are about a hundred timber licenses issued by the Government thru the
DENR, but these are ordinary timber licenses which involve the mere cutting of timber in
the concession area, and nothing else. Records in the DENR shows that no timber
licensee has put up an integrated large wood processing complex in the Philippines
except PICOP.51

Section 4. Basic Rights and Guarantees. All investors and enterprises are entitled to
the basic rights and guarantees provided in the constitution. Among other rights
recognized by the Government of the Philippines are the following:

xxxx
d) Freedom from Expropriation. There shall be no expropriation by the government of
the property represented by investments or of the property of enterprises except for
public use or in the interest of national welfare and defense and upon payment of just
compensation. x x x.
e) Requisition of Investment. There shall be no requisition of the property represented
by the investment or of the property of enterprises, except in the event of war or national
emergency and only for the duration thereof. Just compensation shall be determined and
paid either at the time of requisition or immediately after cessation of the state of war or
national emergency. Payments received as compensation for the requisitioned property
may be remitted in the currency in which the investment was originally made and at the
exchange rate prevailing at the time of remittance, subject to the provisions of Section
seventy-four of republic Act Numbered Two hundred sixty-five.
Section 2 speaks of the policy of the State to encourage Filipino and foreign investments.
It does not speak of how this policy can be implemented. Implementation of this policy is
tackled in Sections 5 to 12 of the same law,54which PICOP failed to mention, and for a
good reason. None of the 24 incentives enumerated therein relates to, or even remotely
suggests that, PICOPs proposition that the 1969 Document is a contract.
PICOP could indeed argue that the enumeration is not exclusive. Certainly, granting
incentives to investors, whether included in the enumeration or not, would be an
implementation of this policy. However, it is presumed that whatever incentives may be
given to investors should be within the bounds of the laws and the Constitution. The
declaration of policy in Section 2 cannot, by any stretch of the imagination, be read to
provide an exception to either the laws or, heaven forbid, the Constitution. Exceptions
are never presumed and should be convincingly proven. Section 2 of the Investment
Incentives Act cannot be read as exempting investors from the Constitutional provisions
(1) prohibiting private ownership of forest lands; (2) providing for the complete control
and supervision by the State of exploitation activities; or (3) limiting exploitation
agreements to twenty-five years, renewable for another twenty-five years.
Section 4(d) and (e), on the other hand, is a recognition of rights already guaranteed
under the Constitution. Freedom from expropriation is granted under Section 9 of Article
III55 of the Constitution, while the provision on requisition is a negative restatement of
Section 6, Article XII.56
Refusal to grant perpetual and exclusive possession to PICOP of its concession area
would not result in the expropriation or requisition of PICOPs property, as these forest
lands belong to the State, and not to PICOP. This is not changed by PICOPs allegation
that:

Since it takes 35 years before the company can go back and harvest their residuals in a
logged-over area, it must be assured of tenure in order to provide an inducement for the
company to manage and preserve the residuals during their growth period. This is a
commitment of resources over a span of 35 years for each plot for each cycle. No
company will undertake the responsibility and cost involved in policing, preserving and
managing residual forest areas until it were sure that it had firm title to the timber.57
The requirement for logging companies to preserve and maintain forest areas, including
the reforestation thereof, is one of the prices a logging company must pay for the
exploitation thereof. Forest lands are meant to be enjoyed by countless future
generations of Filipinos, and not just by one logging company. The requirements of
reforestation and preservation of the concession areas are meant to protect them, the
future generations, and not PICOP. Reforestation and preservation of the concession
areas are not required of logging companies so that they would have something to cut
again, but so that the forest would remain intact after their operations. That PICOP would
not accept the responsibility to preserve its concession area if it is not assured of tenure
thereto does not speak well of its corporate policies.
Conclusion
In sum, PICOP was not able to prove either of the two things it needed to prove to be
entitled to a Writ of Mandamus against the DENR Secretary. The 1969 Document is not a
contract recognized under the non-impairment clause and, even if we assume for the
sake of argument that it is, it did not enjoin the government to issue an IFMA in 2002
either. These are the essential elements in PICOPs cause of action, and the failure to
prove the same warrants a dismissal of PICOPs Petition for Mandamus, as not even
PICOPs compliance with all the administrative and statutory requirements can save its
Petition now.
Whether PICOP Has Complied with the Statutory and Administrative Requirements for
the Conversion of the TLA to an IFMA
In the assailed Decision, our ruling was based on two distinct grounds, each one being
sufficient in itself for us to rule that PICOP was not entitled to a Writ of Mandamus: (1)
the 1969 Document, on which PICOP hinges its right to compel the issuance of an IFMA,
is not a contract; and (2) PICOP has not complied with all administrative and statutory
requirements for the issuance of an IFMA.
When a court bases its decision on two or more grounds, each is as authoritative as the
other and neither is obiter dictum.58 Thus, both grounds on which we based our ruling in
the assailed Decision would become judicial dictum, and would affect the rights and
interests of the parties to this case unless corrected in this Resolution on PICOPs
Motion for Reconsideration. Therefore, although PICOP would not be entitled to a Writ of

Mandamus even if the second issue is resolved in its favor, we should nonetheless
resolve the same and determine whether PICOP has indeed complied with all
administrative and statutory requirements for the issuance of an IFMA.

The Performance Evaluation Team tasked to appraise PICOPs performance on its TLA
No. 43 found that PICOP had not submitted its Five-Year Forest Protection Plan and its
Seven-Year Reforestation Plan.60

While the first issue (on the nature of the 1969 Document) is entirely legal, this second
issue (on PICOPs compliance with administrative and statutory requirements for the
issuance of an IFMA) has both legal and factual sub-issues. Legal sub-issues include
whether PICOP is legally required to (1) consult with and acquire an approval from the
Sanggunian concerned under Sections 26 and 27 of the Local Government Code; and
(2) acquire a Certification from the National Commission on Indigenous Peoples (NCIP)
that the concession area does not overlap with any ancestral domain. Factual sub-issues
include whether, at the time it filed its Petition for Mandamus, PICOP had submitted the
required Five-Year Forest Protection Plan and Seven-Year Reforestation Plan and
whether PICOP had paid all forest charges.

In its Motion for Reconsideration, PICOP asserts that, in its Letter of Intent dated 28
August 2000 and marked as Exhibit L in the trial court, there was a reference to a TenYear Sustainable Forest Management Plan (SFMP), in which a Five-Year Forest
Protection Plan and a Seven-Year Reforestation Plan were allegedly incorporated.
PICOP submitted a machine copy of a certified photocopy of pages 50-67 and 104-110
of this SFMP in its Motion for Reconsideration. PICOP claims that the existence of this
SFMP was repeatedly asserted during the IFMA application process.61

For the factual sub-issues, PICOP invokes the doctrine that factual findings of the trial
court, especially when upheld by the Court of Appeals, deserve great weight. However,
deserving of even greater weight are the factual findings of administrative agencies that
have the expertise in the area of concern. The contentious facts in this case relate to the
licensing, regulation and management of forest resources, the determination of which
belongs exclusively to the DENR:
SECTION 4. Mandate. The Department shall be the primary government agency
responsible for the conservation, management, development and proper use of the
countrys environment and natural resources, specifically forest and grazing lands,
mineral resources, including those in reservation and watershed areas, and lands of the
public domain, as well as the licensing and regulation of all natural resources as may be
provided for by law in order to ensure equitable sharing of the benefits derived therefrom
for the welfare of the present and future generations of Filipinos.59
When parties file a Petition for Certiorari against judgments of administrative agencies
tasked with overseeing the implementation of laws, the findings of such administrative
agencies are entitled to great weight. In the case at bar, PICOP could not have filed a
Petition for Certiorari, as the DENR Secretary had not yet even determined whether
PICOP should be issued an IFMA. As previously mentioned, when PICOPs application
was brought to a standstill upon the evaluation that PICOP had yet to comply with the
requirements for the issuance of an IFMA, PICOP refused to attend further meetings with
the DENR and instead filed a Petition for Mandamus against the latter. By jumping the
gun, PICOP did not diminish the weight of the DENR Secretarys initial determination.
Forest Protection and Reforestation Plans

Upon examination of the portions of the SFMP submitted to us, we cannot help but
notice that PICOPs concept of forest protection is the security of the area against
"illegal" entrants and settlers. There is no mention of the protection of the wildlife therein,
as the focus of the discussion of the silvicultural treatments and the SFMP itself is on the
protection and generation of future timber harvests. We are particularly disturbed by the
portions stating that trees of undesirable quality shall be removed.
However, when we required the DENR Secretary to comment on PICOPs Motion for
Reconsideration, the DENR Secretary did not dispute the existence of this SFMP, or
question PICOPs assertion that a Ten-Year Forest Protection Plan and a Ten-Year
Reforestation Plan are already incorporated therein. Hence, since the agency tasked to
determine compliance with IFMA administrative requirements chose to remain silent in
the face of allegations of compliance, we are constrained to withdraw our
pronouncement in the assailed Decision that PICOP had not submitted a Five-Year
Forest Protection Plan and a Seven-Year Reforestation Plan for its TLA No. 43. As
previously mentioned, the licensing, regulation and management of forest resources are
the primary responsibilities of the DENR.62
The compliance discussed above is, of course, only for the purpose of determining
PICOPs satisfactory performance as a TLA holder, and covers a period within the
subsistence of PICOPs TLA No. 43. This determination, therefore, cannot prohibit the
DENR from requiring PICOP, in the future, to submit proper forest protection and
reforestation plans covering the period of the proposed IFMA.
Forest Charges
In determining that PICOP did not have unpaid forest charges, the Court of Appeals
relied on the assumption that if it were true that PICOP had unpaid forest charges, it
should not have been issued an approved Integrated Annual Operation Plan (IAOP) for
the year 2001-2002 by Secretary Alvarez himself.63

In the assailed Decision, we held that the Court of Appeals had been selective in its
evaluation of the IAOP, as it disregarded the part thereof that shows that the IAOP was
approved subject to several conditions, not the least of which was the submission of
proof of the updated payment of forest charges from April 2001 to June 2001. 64 We also
held that even if we considered for the sake of argument that the IAOP should not have
been issued if PICOP had existing forestry accounts, the issuance of the IAOP could not
be considered proof that PICOP had paid the same. Firstly, the best evidence of
payment is the receipt thereof. PICOP has not presented any evidence that such receipts
were lost or destroyed or could not be produced in court. 65 Secondly, the government
cannot be estopped by the acts of its officers. If PICOP has been issued an IAOP in
violation of the law, allegedly because it may not be issued if PICOP had existing forestry
accounts, the government cannot be estopped from collecting such amounts and
providing the necessary sanctions therefor, including the withholding of the IFMA until
such amounts are paid.
We therefore found that, as opposed to the Court of Appeals findings, which were based
merely on estoppel of government officers, the positive and categorical evidence
presented by the DENR Secretary was more convincing with respect to the issue of
payment of forestry charges:

September 2001 to 15 May 2002.71 We noted that it does not mention similar
payment of the penalties, surcharges and interests that PICOP incurred in paying
late several forest charges, which fact was not rebutted by PICOP.
2. The 27 May 2002 Certification by CENRO Calunsag specified only the period
covering 14 September 2001 to 15 May 2002 and the amount of P53,603,719.85
paid by PICOP without indicating the corresponding volume and date of
production of the logs. This is in contrast to the findings of SFMS Evangelista,
which cover the period from CY 1996 to 30 August 2002 and includes penalties,
interests, and surcharges for late payment pursuant to DAO 80, series of 1987.
3. The 21 August 2002 PICOP-requested certification issued by Bill Collector
Amelia D. Arayan, and attested to by CENRO Calunsag himself, shows that
PICOP paid only regular forest charges for its log production covering 1 July
2001 to 21 September 2001. However, there were log productions after 21
September 2001, the regular forest charges for which have not been paid,
amounting to P15,056,054.05.72The same certification shows delayed payment of
forest charges, thereby corroborating the testimony of SFMS Evangelista and
substantiating the imposition of penalties and surcharges.

1. Forest Management Bureau (FMB) Senior Forest Management Specialist

(SFMS) Ignacio M. Evangelista testified that PICOP had failed to pay its regular
forest charges covering the period from 22 September 2001 to 26 April 2002 in
the total amount of P15,056,054.0566 PICOP also allegedly paid late most of its
forest charges from 1996 onwards, by reason of which, PICOP is liable for a
surcharge of 25% per annum on the tax due and interest of 20% per annum
which now amounts to P150,169,485.02.67Likewise, PICOP allegedly had
overdue and unpaid silvicultural fees in the amount of P2,366,901.00 as of 30
August 2002.68 Summing up the testimony, therefore, it was alleged that PICOP
had unpaid and overdue forest charges in the sum of P167,592,440.90 as of 10
August 2002.69

In its Motion for Reconsideration, PICOP claims that SFMS Evangelista is assigned to an
office that has nothing to do with the collection of forest charges, and that he based his
testimony on the Memoranda of Forest Management Specialist II (FMS II) Teofila
Orlanes and DENR, Bislig City Bill Collector Amelia D. Arayan, neither of whom was
presented to testify on his or her Memorandum. PICOP also submitted an Addendum to
Motion for Reconsideration, wherein it appended certified true copies of CENRO
Summaries with attached Official Receipts tending to show that PICOP had paid a total
of P81,184,747.70 in forest charges for 10 January 2001 to 20 December 2002, including
the period during which SFMS Evangelista claims PICOP did not pay forest charges (22
September 2001 to 26 April 2002).

2. Collection letters were sent to PICOP, but no official receipts are extant in the
DENR record in Bislig City evidencing payment of the overdue amount stated in
the said collection letters.70 There were no official receipts for the period covering
22 September 2001 to 26 April 2002.

Before proceeding any further, it is necessary for us to point out that, as with our ruling
on the forest protection and reforestation plans, this determination of compliance with the
payment of forest charges is exclusively for the purpose of determining PICOPs
satisfactory performance on its TLA No. 43. This cannot bind either party in a possible
collection case that may ensue.

We also considered these pieces of evidence more convincing than the other ones
presented by PICOP:
1. PICOP presented the certification of Community Environment and Natural
Resources Office (CENRO) Officer Philip A. Calunsag, which refers only to
PICOPs alleged payment of regular forest charges covering the period from 14

An evaluation of the DENR Secretarys position on this matter shows a heavy reliance on
the testimony of SFMS Evangelista, making it imperative for us to strictly scrutinize the
same with respect to its contents and admissibility.
PICOP claims that SFMS Evangelistas office has nothing to do with the collection of
forest charges. According to PICOP, the entity having administrative jurisdiction over it is

CENRO, Bislig City by virtue of DENR Administrative Order No. 96-36, dated 20
November 1996, which states:

D. Arayan, Bill collector of the DENR R13-14, Bislig City. Copies of the said
Memoranda are attached as Annexes 1 and 2, respectively.

1. In order for the DENR to be able to exercise closer and more effective supervision,
management and control over the forest resources within the areas covered by TLA No.
43, PTLA No. 47 and IFMA No. 35 of the PICOP Resources, Inc., (PRI) and, at the same
time, provide greater facility in the delivery of DENR services to various publics, the
aforesaid forest holdings of PRI are hereby placed under the exclusive jurisdiction of
DENR Region No. XIII with the CENR Office at Bislig, Surigao del Sur, as directly
responsible thereto. x x x.

3. The said Memoranda were referred to the FMB Director for appropriate action.

We disagree. Evangelista is an SFMS assigned at the Natural Forest Management

Division of the FMB, DENR. In Evangelistas aforementioned affidavit submitted as part
of his direct examination, Evangelista enumerated his duties and functions as SFMS:
1. As SFMS, I have the following duties and functions:
a) To evaluate and act on cases pertaining to forest management referred
to in the Natural forest Management Division;
b) To monitor, verify and validate forest management and related
activities by timber licences as to their compliance to approved plans and
programs;
c) To conduct investigation and verification of compliance by timber
licenses/permittees to existing DENR rules and regulations;
d) To gather field data and information to be used in the formulation of
forest policies and regulations; and
e) To perform other duties and responsibilities as may be directed by
superiors.73
PICOP also alleges that the testimony of SFMS Evangelista was based on the
aforementioned Memoranda of Orlanes and Arayan and that, since neither
Orlanes nor Arayan was presented as a witness, SFMS Evangelistas testimony
should be deemed hearsay. SFMS Evangelistas 1 October 2002
Affidavit,74 which was offered as part of his testimony, provides:
2. Sometime in September, 2001 the DENR Secretary was furnished a copy of
forest Management Specialist II (FMS II) Teofila L. Orlanes Memorandum dated
September 24, 2001 concerning unopaid forest charges of PICOP. Attached to
the said Memorandum was a Memorandum dated September 19, 2001 of Amelia

4. Thus, on August 5, 2002, I was directed by the FMB Director to proceed to

Region 13 to gather forestry-related data and validate the report contained in the
Memoranda of Ms. Orlanes and Arayan.
5. On August 6, 2002, I proceeded to DENR Region 13 in Bislig City. A copy of
my Travel Order is attached as Annex 3.
6. Upon my arrival at CENRO, Bislig, surigao del Sur, I coordinated with CENRO
Officer Philip A. Calunsag and requested him to make available to me the
records regarding the forest products assessments of PICOP.
7. After I was provided with the requested records, I evaluated and collected the
data.
8. After the evaluation, I found that the unpaid forest charges adverted to in the
Memoranda of Mr. Orlanes and Arayan covering the period from May 8, 2001 to
July 7, 2001 had already been paid but late. I further found out that PICOP had
not paid its forest charges covering the period from September 22, 2001 to April
26, 2002 in the total amount of P15,056,054.05.
9. I also discovered that from 1996 up to august 30, 2002, PICOP paid late some
of its forest charges in 1996 and consistently failed to pay late its forest charges
from 1997 up to the present time.
10. Under Section 7.4 of DAO No. 80 Series of 197\87 and Paragraph (4a),
Section 10 of BIR revenue Regulations No. 2-81 dated November 18, 1980,
PICOP is mandated to pay a surcharge of 25% per annum of the tax due and
interest of 20% per annum for late payment of forest charges.
11. The overdue unpaid forest charges of PICOP as shown in the attached
tabulation marked as Annex 4 hereof is P150,169,485.02. Likewise, PICOP has
overdue and unpaid silvicultural fees in the amount ofP2,366,901.00 from 1996
to the present.
12. In all, PICOP has an outstanding and overdue total obligation
of P167,592,440.90 as of August 30, 2002 based on the attached tabulation
which is marked as Annex 5 hereof.75

Clearly, SFMS Evangelista had not relied on the Memoranda of Orlanes and Arayan. On
the contrary, he traveled to Surigao del Sur in order to verify the contents of these
Memoranda. SFMS Evangelista, in fact, revised the findings therein, as he discovered
that certain forest charges adverted to as unpaid had already been paid.
This does not mean, however, that SFMS Evangelistas testimony was not hearsay. A
witness may testify only on facts of which he has personal knowledge; that is, those
derived from his perception, except in certain circumstances allowed by the
Rules.76 Otherwise, such testimony is considered hearsay and, hence, inadmissible in
evidence.77
SFMS Evangelista, while not relying on the Memoranda of Orlanes and Arayan,
nevertheless relied on records, the preparation of which he did not participate in. 78 These
records and the persons who prepared them were not presented in court, either. As such,
SFMS Evangelistas testimony, insofar as he relied on these records, was on matters not
derived from his own perception, and was, therefore, hearsay.
Section 44, Rule 130 of the Rules of Court, which speaks of entries in official records as
an exception to the hearsay rule, cannot excuse the testimony of SFMS Evangelista.
Section 44 provides:
SEC. 44. Entries in official records. Entries in official records made in the performance
of his duty by a public officer of the Philippines, or by a person in the performance of a
duty specially enjoined by law, are prima facie evidence of the facts therein stated.
In Africa v. Caltex,79 we enumerated the following requisites for the admission of entries
in official records as an exception to the hearsay rule: (1) the entries were made by a
public officer or a private person in the performance of a duty; (2) the performance of the
duty is especially enjoined by law; (3) the public officer or the private person had
sufficient knowledge of the facts stated by him, which must have been acquired by him
personally or through official information.
The presentation of the records themselves would, therefore, have been admissible as
an exception to the hearsay rule even if the public officer/s who prepared them was/were
not presented in court, provided the above requisites could be adequately proven. In the
case at bar, however, neither the records nor the persons who prepared them were
presented in court. Thus, the above requisites cannot be sufficiently proven. Also, since
SFMS Evangelista merely testified based on what those records contained, his testimony
was hearsay evidence twice removed, which was one step too many to be covered by
the official-records exception to the hearsay rule.
SFMS Evangelistas testimony of nonpayment of forest charges was, furthermore, based
on his failure to find official receipts corresponding to billings sent to PICOP. As stated

above, PICOP attached official receipts in its Addendum to Motion for Reconsideration to
this Court. While this course of action is normally irregular in judicial proceedings, we
merely stated in the assailed Decision that "the DENR Secretary has adequately proven
that PICOP has, at this time, failed to comply with administrative and statutory
requirements for the conversion of TLA No. 43 into an IFMA," 80 and that "this disposition
confers another chance to comply with the foregoing requirements." 81
In view of the foregoing, we withdraw our pronouncement that PICOP has unpaid
forestry charges, at least for the purpose of determining compliance with the IFMA
requirements.
NCIP Certification
The Court of Appeals held that PICOP need not comply with Section 59 of Republic Act
No. 8371, which requires prior certification from the NCIP that the areas affected do not
overlap with any ancestral domain before any IFMA can be entered into by the
government. According to the Court of Appeals, Section 59 should be interpreted to refer
to ancestral domains that have been duly established as such by the continuous
possession and occupation of the area concerned by indigenous peoples since time
immemorial up to the present. The Court of Appeals held that PICOP had acquired
property rights over TLA No. 43 areas, being in exclusive, continuous and uninterrupted
possession and occupation of these areas since 1952 up to the present.
In the assailed Decision, we reversed the findings of the Court of Appeals. Firstly, the
Court of Appeals ruling defies the settled jurisprudence we have mentioned earlier, that a
TLA is neither a property nor a property right, and that it does not create a vested right. 82
Secondly, the Court of Appeals resort to statutory construction is misplaced, as Section
59 of Republic Act No. 8379 is clear and unambiguous:
SEC. 59. Certification Precondition. All departments and other governmental agencies
shall henceforth be strictly enjoined from issuing, renewing or granting any concession,
license or lease, or entering into any production-sharing agreement, without prior
certification from the NCIP that the area affected does not overlap with any ancestral
domain. Such certification shall only be issued after a field-based investigation is
conducted by the Ancestral Domains Office of the area concerned: Provided, That no
certification shall be issued by the NCIP without the free and prior informed and written
consent of the ICCs/IPs concerned: Provided, further, That no department, government
agency or government-owned or controlled corporation may issue new concession,
license, lease, or production sharing agreement while there is a pending application for a
CADT: Provided, finally, That the ICCs/IPs shall have the right to stop or suspend, in
accordance with this Act, any project that has not satisfied the requirement of this
consultation process.

PICOP had tried to put a cloud of ambiguity over Section 59 of Republic Act No. 8371 by
invoking the definition of Ancestral Domains in Section 3(a) thereof, wherein the
possesssion by Indigenous Cultural Communities/Indigenous Peoples (ICCs/IPs) must
have been continuous to the present. However, we noted the exception found in the very
same sentence invoked by PICOP:

PICOP rejects the entire disposition of this Court on the matter, relying on the following
theory:

a) Ancestral domains Subject to Section 56 hereof, refers to all areas generally

belonging to ICCs/IPs comprising lands, inland waters, coastal areas, and natural
resources therein, held under a claim of ownership, occupied or possessed by ICCs/IPs,
by themselves or through their ancestors, communally or individually since time
immemorial, continuously to the present except when interrupted by war, force majeure
or displacement by force, deceit, stealth or as a consequence of government projects or
any other voluntary dealings entered into by government and private
individuals/corporations, and which are necessary to ensure their economic, social and
cultural welfare. It shall include ancestral lands, forests, pasture, residential, agricultural,
and other lands individually owned whether alienable and disposable or otherwise,
hunting grounds, burial grounds, worship areas, bodies of water, mineral and other
natural resources, and lands which may no longer be exclusively occupied by ICCs/IPs
but from which they traditionally had access to for their subsistence and traditional
activities, particularly the home ranges of ICCs/IPs who are still nomadic and/or shifting
cultivators;

First, the automatic conversion of TLA 43 to an IFMA is not a new project. It is a mere
continuation of the harvesting process in an area that PICOP had been managing,
conserving and reforesting for the last 50 years since 1952. Hence any pending
application for a CADT within the area, cannot affect much less hold back the automatic
conversion. That the government now wishes to change the tenurial system to an IFMA
could not change the PICOP project, in existence and operating for the last 30 (sic)
years, into a new one.84

Ancestral domains, therefore, remain as such even when possession or occupation of

these areas has been interrupted by causes provided under the law, such as voluntary
dealings entered into by the government and private individuals/corporations.
Consequently, the issuance of TLA No. 43 in 1952 did not cause the ICCs/IPs to lose
their possession or occupation over the area covered by TLA No. 43.
Thirdly, we held that it was manifestly absurd to claim that the subject lands must first be
proven to be part of ancestral domains before a certification that the lands are not part of
ancestral domains can be required, and invoked the separate opinion of now Chief
Justice Reynato Puno in Cruz v. Secretary of DENR83:
As its subtitle suggests, [Section 59 of R.A. No. 8371] requires as a precondition for the
issuance of any concession, license or agreement over natural resources, that a
certification be issued by the NCIP that the area subject of the agreement does not lie
within any ancestral domain. The provision does not vest the NCIP with power over the
other agencies of the State as to determine whether to grant or deny any concession or
license or agreement. It merely gives the NCIP the authority to ensure that the ICCs/IPs
have been informed of the agreement and that their consent thereto has been obtained.
Note that the certification applies to agreements over natural resources that do not
necessarily lie within the ancestral domains. For those that are found within the said
domains, Sections 7(b) and 57 of the IPRA apply.

84. It is quite clear that Section 59 of R.A. 8371 does not apply to the automatic
conversion of TLA 43 to IFMA.

PICOPs position is anything but clear. What is clearly provided for in Section 59 is that it
covers "issuing, renewing or granting (of) any concession, license or lease, or entering
into any production sharing agreement." PICOP is implying that, when the government
changed the tenurial system to an IFMA, PICOPs existing TLA would just be upgraded
or modified, but would be the very same agreement, hence, dodging the inclusion in the
word "renewing." However, PICOP is conveniently leaving out the fact that its TLA
expired in 2002. If PICOP really intends to pursue the argument that the conversion of
the TLA into an IFMA would not create a new agreement, but would only be a
modification of the old one, then it should be willing to concede that the IFMA expired as
well in 2002. An automatic modification would not alter the terms and conditions of the
TLA except when they are inconsistent with the terms and conditions of an IFMA.
Consequently, PICOPs concession period under the renewed TLA No. 43, which is from
the year 1977 to 2002, would remain the same.
PICOP cannot rely on a theory of the case whenever such theory is beneficial to it, but
refute the same whenever the theory is damaging to it. In the same way, PICOP cannot
claim that the alleged Presidential Warranty is "renewable for other 25 years" and later
on claim that what it is asking for is not a renewal. Extensions of agreements must
necessarily be included in the term renewal. Otherwise, the inclusion of "renewing" in
Section 59 would be rendered inoperative.
PICOP further claims:
85. Verily, in interpreting the term "held under claim of ownership," the Supreme Court
could not have meant to include claims that had just been filed and not yet recognized
under the provisions of DENR Administrative Order No. 2 Series of 1993, nor to any
other community / ancestral domain program prior to R.A. 8371.
xxxx

87. One can not imagine the terrible damage and chaos to the country, its economy, its
people and its future if a mere claim filed for the issuance of a CADC or CADT will
already provide those who filed the application, the authority or right to stop the renewal
or issuance of any concession, license or lease or any production-sharing agreement.
The same interpretation will give such applicants through a mere application the right to
stop or suspend any project that they can cite for not satisfying the requirements of the
consultation process of R.A. 8371. If such interpretation gets enshrined in the statures of
the land, the unscrupulous and the extortionists can put any ongoing or future project or
activity to a stop in any part of the country citing their right from having filed an
application for issuance of a CADC or CADT claim and the legal doctrine established by
the Supreme Court in this PICOP case.85
We are not sure whether PICOPs counsels are deliberately trying to mislead us, or are
just plainly ignorant of basic precepts of law. The term "claim" in the phrase "claim of
ownership" is not a document of any sort. It is an attitude towards something. The phrase
"claim of ownership" means "the possession of a piece of property with the intention of
claiming it in hostility to the true owner."86 It is also defined as "a partys manifest intention
to take over land, regardless of title or right."87 Other than in Republic Act No. 8371, the
phrase "claim of ownership" is thoroughly discussed in issues relating to acquisitive
prescription in Civil Law.
Before PICOPs counsels could attribute to us an assertion that a mere attitude or
intention would stop the renewal or issuance of any concession, license or lease or any
production-sharing agreement, we should stress beforehand that this attitude or intention
must be clearly shown by overt acts and, as required by Section 3(a), should have been
in existence "since time immemorial, continuously to the present except when interrupted
by war, force majeure or displacement by force, deceit, stealth or as a consequence of
government projects or any other voluntary dealings entered into by government and
private individuals/corporations."
Another argument of PICOP involves the claim itself that there was no overlapping:
Second, there could be no overlapping with any Ancestral Domain as proven by the
evidence presented and testimonies rendered during the hearings in the Regional Trial
Court. x x x.
x x x x.
88. The DENR issued a total of 73 CADCs as of December 11, 1996. The DENR
Undersecretary for Field Operations had recommended another 11 applications for
issuance of CADCs. None of the CADCs overlap the TLA 43 area.

89. However former DENR Secretary Alvarez, in a memorandum dated 13 September,

2002 addressed to PGMA, insisted that PICOP had to comply with the requirement to
secure a Free and Prior Informed Concent because CADC 095 was issued covering
17,112 hectares of TLA 43.
90. This CADC 095 is a fake CADC and was not validly released by the DENR. While the
Legal Department of the DENR was still in the process of receiving the filings for
applicants and the oppositors to the CADC application, PICOP came across filed copies
of a CADC 095 with the PENRO of Davao Oriental as part of their application for a
Community Based Forest Management Agreement (CBFMA). Further research came
across the same group filing copies of the alleged CADC 095 with the Mines and
Geosciences Bureau in Davao City for a mining agreement application. The two
applications had two different versions of the CADCs second page. One had Mr. Romeo
T. Acosta signing as the Social reform Agenda Technical Action Officer, while the other
had him signing as the Head, Community-Based Forest Management Office. One had
the word "Eight" crossed out and "Seven" written to make it appear that the CADC was
issued on September 25, 1997, the other made it appear that there were no alterations
and the date was supposed to be originally 25 September 1997.
What is required in Section 59 of Republic Act No. 8379 is a Certification from the NCIP
that there was no overlapping with any Ancestral Domain. PICOP cannot claim that the
DENR gravely abused its discretion for requiring this Certification, on the ground that
there was no overlapping. We reiterate that it is manifestly absurd to claim that the
subject lands must first be proven to be part of ancestral domains before a certification
that they are not can be required. As discussed in the assailed Decision, PICOP did not
even seek any certification from the NCIP that the area covered by TLA No. 43, subject
of its IFMA conversion, did not overlap with any ancestral domain.88
Sanggunian Consultation and Approval
While PICOP did not seek any certification from the NCIP that the formers concession
area did not overlap with any ancestral domain, PICOP initially sought to comply with the
requirement under Sections 26 and 27 of the Local Government Code to procure prior
approval of the Sanggunians concerned. However, only one of the many provinces
affected approved the issuance of an IFMA to PICOP. Undaunted, PICOP nevertheless
submitted to the DENR the purported resolution89 of the Province of Surigao del Sur
indorsing the approval of PICOPs application for IFMA conversion, apparently hoping
either that the disapproval of the other provinces would go unnoticed, or that the Surigao
del Sur approval would be treated as sufficient compliance.
Surprisingly, the disapproval by the other provinces did go unnoticed before the RTC and
the Court of Appeals, despite the repeated assertions thereof by the Solicitor General.
When we pointed out in the assailed Decision that the approval must be by all the

Sanggunians concerned and not by only one of them, PICOP changed its theory of the
case in its Motion for Reconsideration, this time claiming that they are not required at all
to procure Sanggunian approval.

7.2 Joint Resolution (unnumbered), dated March 19, 2001 of the Barangay Council and
Barangay Tribal Council of Simulao, Boston, Davao Oriental (ANNEX F) opposing the
conversion of TLA No. 43 into IFMA over the 17,112 hectares allegedly covered with
CADC No. 095.

Sections 2(c), 26 and 27 of the Local Government Code provide:

SEC. 2. x x x.
xxxx
(c) It is likewise the policy of the State to require all national agencies and offices to
conduct periodic consultations with appropriate local government units, nongovernmental
and peoples organizations, and other concerned sectors of the community before any
project or program is implemented in their respective jurisdictions.
SEC. 26. Duty of National Government Agencies in the Maintenance of Ecological
Balance. It shall be the duty of every national agency or government-owned or
controlled corporation authorizing or involved in the planning and implementation of any
project or program that may cause pollution, climatic change, depletion of non-renewable
resources, loss of crop land, rangeland, or forest cover, and extinction of animal or plant
species, to consult with the local government units, nongovernmental organizations, and
other sectors concerned and explain the goals and objectives of the project or program,
its impact upon the people and the community in terms of environmental or ecological
balance, and the measures that will be undertaken to prevent or minimize the adverse
effects thereof.
SEC. 27. Prior Consultations Required. No project or program shall be implemented by
government authorities unless the consultations mentioned in Sections 2(c) and 26
hereof are complied with, and prior approval of the sanggunian concerned is obtained:
Provided, That occupants in areas where such projects are to be implemented shall not
be evicted unless appropriate relocation sites have been provided, in accordance with
the provisions of the Constitution.
As stated in the assailed Decision, the common evidence of the DENR Secretary and
PICOP, namely, the 31 July 2001 Memorandum of Regional Executive Director (RED)
Elias D. Seraspi, Jr., enumerated the local government units and other groups which had
expressed their opposition to PICOPs application for IFMA conversion:
7. During the conduct of the performance evaluation of TLA No. 43 issues complaints
against PRI were submitted thru Resolutions and letters. It is important that these are
included in this report for assessment of what are their worth, viz:
xxxx

7.3 Resolution Nos. 10, s-2001 and 05, s-2001 (ANNEXES G & H) of the Bunawan Tribal
Council of Elders (BBMTCE) strongly demanding none renewal of PICOP TLA. They
claim to be the rightful owner of the area it being their alleged ancestral land.
7.4 Resolution No. 4, S-2001 of Sitio Linao, San Jose, Bislig City (ANNEX I) requesting
not to renew TLA 43 over the 900 hectares occupied by them.
7.5 Resolution No. 22, S-2001 (ANNEX J) of the Sanguniang Bayan, Lingig, Surigao del
Sur not to grant the conversion of TLA 43 citing the plight of former employees of PRI
who were forced to enter and farm portion of TLA No. 43, after they were laid off.
7.6 SP Resolution No. 2001-113 and CDC Resolution Nos. 09-2001 of the Sanguniang
Panglungsod of Bislig City (ANNEXES K & L) requesting to exclude the area of TLA No.
43 for watershed purposes.
7.7 Resolution No. 2001-164, dated June 01, 2001 (ANNEX M) Sanguniang
Panglungsod of Bislig City opposing the conversion of TLA 43 to IFMA for the reason that
IFMA do not give revenue benefits to the City.90
PICOP had claimed that it complied with the Local Government Code requirement of
obtaining prior approval of the Sanggunian concerned by submitting a purported
resolution91 of the Province of Surigao del Sur indorsing the approval of PICOPs
application for IFMA conversion. We ruled that this cannot be deemed sufficient
compliance with the foregoing provision. Surigao del Sur is not the only province affected
by the area covered by the proposed IFMA. As even the Court of Appeals found,
PICOPs TLA No. 43 traverses the length and breadth not only of Surigao del Sur but
also of Agusan del Sur, Compostela Valley and Davao Oriental. 92
On Motion for Reconsideration, PICOP now argues that the requirement under Sections
26 and 27 does not apply to it:
97. PICOP is not a national agency. Neither is PICOP government owned or controlled.
Thus Section 26 does not apply to PICOP.
98. It is very clear that Section 27 refers to projects or programs to be implemented by
government authorities or government-owned and controlled corporations. PICOPs
project or the automatic conversion is a purely private endevour. First the PICOP project

has been implemented since 1969. Second, the project was being implemented by
private investors and financial institutions.
99. The primary government participation is to warrant and ensure that the PICOP
project shall have peaceful tenure in the permanent forest allocated to provide raw
materials for the project. To rule now that a project whose foundations were commenced
as early as 1969 shall now be subjected to a 1991 law is to apply the law retrospectively
in violation of Article 4 of the Civil Code that laws shall not be applied retroactively.
100. In addition, under DAO 30, Series of 1992, TLA and IFMA operations were not
among those devolved function from the National Government / DENR to the local
government unit. Under its Section 03, the devolved function cover only:
a) Community Based forestry projects.
b) Communal forests of less than 5000 hectares
c) Small watershed areas which are sources of local water supply.93
We have to remind PICOP again of the contents of Section 2, Article XII of the
Constitution:
Section 2. All lands of the public domain, waters, minerals, coal, petroleum, and other
mineral oils, all forces of potential energy, fisheries, forests or timber, wildlife, flora and
fauna, and other natural resources are owned by the State. With the exception of
agricultural lands, all other natural resources shall not be alienated. The exploration,
development, and utilization of natural resources shall be under the full control and
supervision of the State. The State may directly undertake such activities, or it may enter
into co-production, joint venture, or production-sharing agreements with Filipino citizens,
or corporations or associations at least sixty per centum of whose capital is owned by
such citizens. Such agreements may be for a period not exceeding twenty-five years,
renewable for not more than twenty-five years, and under such terms and conditions as
may be provided by law. In cases of water rights for irrigation, water supply, fisheries, or
industrial uses other than the development of water power, beneficial use may be the
measure and limit of the grant.
All projects relating to the exploration, development and utilization of natural resources
are projects of the State. While the State may enter into co-production, joint venture, or
production-sharing agreements with Filipino citizens, or corporations or associations at
least sixty per centum of whose capital is owned by these citizens, such as PICOP, the
projects nevertheless remain as State projects and can never be purely private
endeavors.

Also, despite entering into co-production, joint venture, or production-sharing

agreements, the State remains in full control and supervision over such projects. PICOP,
thus, cannot limit government participation in the project to being merely its bouncer,
whose primary participation is only to "warrant and ensure that the PICOP project shall
have peaceful tenure in the permanent forest allocated to provide raw materials for the
project."
PICOP is indeed neither a national agency nor a government-owned or controlled
corporation. The DENR, however, is a national agency and is the national agency
prohibited by Section 27 from issuing an IFMA without the prior approval of the
Sanggunian concerned. As previously discussed, PICOPs Petition for Mandamus can
only be granted if the DENR Secretary is required by law to issue an IFMA. We,
however, see here the exact opposite: the DENR Secretary was actually prohibited by
law from issuing an IFMA, as there had been no prior approval by all the other
Sanggunians concerned.
As regards PICOPs assertion that the application to them of a 1991 law is in violation of
the prohibition against the non-retroactivity provision in Article 4 of the Civil Code, we
have to remind PICOP that it is applying for an IFMA with a term of 2002 to 2027.
Section 2, Article XII of the Constitution allows exploitation agreements to last only "for a
period not exceeding twenty-five years, renewable for not more than twenty-five years."
PICOP, thus, cannot legally claim that the projects term started in 1952 and extends all
the way to the present.
Finally, the devolution of the project to local government units is not required before
Sections 26 and 27 would be applicable. Neither Section 26 nor 27 mentions such a
requirement. Moreover, it is not only the letter, but more importantly the spirit of Sections
26 and 27, that shows that the devolution of the project is not required. The approval of
the Sanggunian concerned is required by law, not because the local government has
control over such project, but because the local government has the duty to protect its
constituents and their stake in the implementation of the project. Again, Section 26 states
that it applies to projects that "may cause pollution, climatic change, depletion of nonrenewable resources, loss of crop land, rangeland, or forest cover, and extinction of
animal or plant species." The local government should thus represent the communities in
such area, the very people who will be affected by flooding, landslides or even climatic
change if the project is not properly regulated, and who likewise have a stake in the
resources in the area, and deserve to be adequately compensated when these
resources are exploited.
Indeed, it would be absurd to claim that the project must first be devolved to the local
government before the requirement of the national government seeking approval from
the local government can be applied. If a project has been devolved to the local
government, the local government itself would be implementing the project. That the

local government would need its own approval before implementing its own project is
patently silly.
EPILOGUE AND DISPOSITION
PICOPc cause of action consists in the allegation that the DENR Secretary, in not
issuing an IFMA, violated its constitutional right against non-impairment of contracts. We
have ruled, however, that the 1969 Document is not a contract recognized under the
non-impairment clause, much less a contract specifically enjoining the DENR Secretary
to issue the IFMA. The conclusion that the 1969 Document is not a contract recognized
under the non-impairment clause has even been disposed of in another case decided by
another division of this Court, PICOP Resources, Inc. v. Base Metals Mineral Resources
Corporation,94 the Decision in which case has become final and executory. PICOPs
Petition for Mandamus should, therefore, fail.
Furthermore, even if we assume for the sake of argument that the 1969 Document is a
contract recognized under the non-impairment clause, and even if we assume for the
sake of argument that the same is a contract specifically enjoining the DENR Secretary
to issue an IFMA, PICOPs Petition for Mandamus must still fail. The 1969 Document
expressly states that the warranty as to the tenure of PICOP is "subject to compliance
with constitutional and statutory requirements as well as with existing policy on timber
concessions." Thus, if PICOP proves the two above-mentioned matters, it still has to
prove compliance with statutory and administrative requirements for the conversion of its
TLA into an IFMA.
While we have withdrawn our pronouncements in the assailed Decision that (1) PICOP
had not submitted the required forest protection and reforestation plans, and that (2)
PICOP had unpaid forestry charges, thus effectively ruling in favor of PICOP on all
factual issues in this case, PICOP still insists that the requirements of an NCIP
certification and Sanggunian consultation and approval do not apply to it. To affirm
PICOPs position on these matters would entail nothing less than rewriting the
Indigenous Peoples Rights Act and the Local Government Code, an act simply beyond
our jurisdiction.
WHEREFORE, the Motion for Reconsideration of PICOP Resources, Inc. is DENIED.
SO ORDERED.
G.R. No. 157882
DIDIPIO vs. GOZUN

March 30, 2006

This petition for prohibition and mandamus under Rule 65 of the Rules of Court assails
the constitutionality of Republic Act No. 7942 otherwise known as the Philippine Mining

Act of 1995, together with the Implementing Rules and Regulations issued pursuant
thereto, Department of Environment and Natural Resources (DENR) Administrative
Order No. 96-40, s. 1996 (DAO 96-40) and of the Financial and Technical Assistance
Agreement (FTAA) entered into on 20 June 1994 by the Republic of the Philippines and
Arimco Mining Corporation (AMC), a corporation established under the laws of Australia
and owned by its nationals.
On 25 July 1987, then President Corazon C. Aquino promulgated Executive Order No.
279 which authorized the DENR Secretary to accept, consider and evaluate proposals
from foreign-owned corporations or foreign investors for contracts of agreements
involving either technical or financial assistance for large-scale exploration, development,
and utilization of minerals, which, upon appropriate recommendation of the Secretary,
the President may execute with the foreign proponent.
On 3 March 1995, then President Fidel V. Ramos signed into law Rep. Act No. 7942
entitled, "An Act Instituting A New System of Mineral Resources Exploration,
Development, Utilization and Conservation," otherwise known as the Philippine Mining
Act of 1995.
On 15 August 1995, then DENR Secretary Victor O. Ramos issued DENR Administrative
Order (DAO) No. 23, Series of 1995, containing the implementing guidelines of Rep. Act
No. 7942. This was soon superseded by DAO No. 96-40, s. 1996, which took effect on
23 January 1997 after due publication.
Previously, however, or specifically on 20 June 1994, President Ramos executed an
FTAA with AMC over a total land area of 37,000 hectares covering the provinces of
Nueva Vizcaya and Quirino. Included in this area is Barangay Dipidio, Kasibu, Nueva
Vizcaya.
Subsequently, AMC consolidated with Climax Mining Limited to form a single company
that now goes under the new name of Climax-Arimco Mining Corporation (CAMC), the
controlling 99% of stockholders of which are Australian nationals.
On 7 September 2001, counsels for petitioners filed a demand letter addressed to then
DENR Secretary Heherson Alvarez, for the cancellation of the CAMC FTAA for the
primary reason that Rep. Act No. 7942 and its Implementing Rules and Regulations DAO
96-40 are unconstitutional. The Office of the Executive Secretary was also furnished a
copy of the said letter. There being no response to both letters, another letter of the same
content dated 17 June 2002 was sent to President Gloria Macapagal Arroyo. This letter
was indorsed to the DENR Secretary and eventually referred to the Panel of Arbitrators
of the Mines and Geosciences Bureau (MGB), Regional Office No. 02, Tuguegarao,
Cagayan, for further action.

On 12 November 2002, counsels for petitioners received a letter from the Panel of
Arbitrators of the MGB requiring the petitioners to comply with the Rules of the Panel of
Arbitrators before the letter may be acted upon.
Yet again, counsels for petitioners sent President Arroyo another demand letter dated 8
November 2002. Said letter was again forwarded to the DENR Secretary who referred
the same to the MGB, Quezon City.
In a letter dated 19 February 2003, the MGB rejected the demand of counsels for
petitioners for the cancellation of the CAMC FTAA.
1avvphil.net

Petitioners thus filed the present petition for prohibition and mandamus, with a prayer for
a temporary restraining order. They pray that the Court issue an order:
1. enjoining public respondents from acting on any application for FTAA;
2. declaring unconstitutional the Philippine Mining Act of 1995 and its
Implementing Rules and Regulations;
3. canceling the FTAA issued to CAMC.
In their memorandum petitioners pose the following issues:
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.
II
Whether or not the Mining Act and its Implementing Rules and Regulations are void and
unconstitutional for sanctioning an unconstitutional administrative process of determining
just compensation.
III
Whether or not the State, through Republic Act No. 7942 and the CAMC FTAA,
abdicated its primary responsibility to the full control and supervision over natural
resources.
IV

Whether or not the respondents interpretation of the role of wholly foreign and foreignowned corporations in their involvement in mining enterprises, violates paragraph 4,
section 2, Article XII of the Constitution.
V
WHETHER OR NOT THE 1987 CONSTITUTION PROHIBITS SERVICE CONTRACTS.1
Before going to the substantive issues, the procedural question raised by public
respondents shall first be dealt with. Public respondents are of the view that petitioners
eminent domain claim is not ripe for adjudication as they fail to allege that CAMC has
actually taken their properties nor do they allege that their property rights have been
endangered or are in danger on account of CAMCs FTAA. In effect, public respondents
insist that the issue of eminent domain is not a justiciable controversy which this Court
can take cognizance of.
A justiciable controversy is defined as a definite and concrete dispute touching on the
legal relations of parties having adverse legal interests which may be resolved by a court
of law through the application of a law.2 Thus, courts have no judicial power to review
cases involving political questions and as a rule, will desist from taking cognizance of
speculative or hypothetical cases, advisory opinions and cases that have become
moot.3 The Constitution is quite explicit on this matter.4 It provides that judicial power
includes the duty of the courts of justice to settle actual controversies involving rights
which are legally demandable and enforceable. Pursuant to this constitutional mandate,
courts, through the power of judicial review, are to entertain only real disputes between
conflicting parties through the application of law. For the courts to exercise the power of
judicial review, the following must be extant (1) there must be an actual case calling for
the exercise of judicial power; (2) the question must be ripe for adjudication; and (3) the
person challenging must have the "standing."5
An actual case or controversy involves a conflict of legal rights, an assertion of opposite
legal claims, susceptible of judicial resolution as distinguished from a hypothetical or
abstract difference or dispute.6 There must be a contrariety of legal rights that can be
interpreted and enforced on the basis of existing law and jurisprudence.
Closely related to the second requisite is that the question must be ripe for adjudication.
A question is considered ripe for adjudication when the act being challenged has had a
direct adverse effect on the individual challenging it. 7
The third requisite is legal standing or locus standi. It is defined as a personal or
substantial interest in the case such that the party has sustained or will sustain direct
injury as a result of the governmental act that is being challenged, alleging more than a
generalized grievance.8 The gist of the question of standing is whether a party alleges

"such personal stake in the outcome of the controversy as to assure that concrete
adverseness which sharpens the presentation of issues upon which the court depends
for illumination of difficult constitutional questions."9 Unless a person is injuriously
affected in any of his constitutional rights by the operation of statute or ordinance, he has
no standing.10
In the instant case, there exists a live controversy involving a clash of legal rights as Rep.
Act No. 7942 has been enacted, DAO 96-40 has been approved and an FTAAs have
been entered into. The FTAA holders have already been operating in various provinces
of the country. Among them is CAMC which operates in the provinces of Nueva Vizcaya
and Quirino where numerous individuals including the petitioners are imperiled of being
ousted from their landholdings in view of the CAMC FTAA. In light of this, the court
cannot await the adverse consequences of the law in order to consider the controversy
actual and ripe for judicial intervention.11 Actual eviction of the land owners and
occupants need not happen for this Court to intervene. As held in Pimentel, Jr. v. Hon.
Aguirre12:
By the mere enactment of the questioned law or the approval of the challenged act, the
dispute is said to have ripened into a judicial controversy even without any other overt
act. Indeed, even a singular violation of the Constitution and/or the law is enough to
awaken judicial duty.13
Petitioners embrace various segments of the society. These include Didipio EarthSavers Multi-Purpose Association, Inc., an organization of farmers and indigenous
peoples organized under Philippine laws, representing a community actually affected by
the mining activities of CAMC, as well as other residents of areas affected by the mining
activities of CAMC. These petitioners have the standing to raise the constitutionality of
the questioned FTAA as they allege a personal and substantial injury.14 They assert that
they are affected by the mining activities of CAMC. Likewise, they are under imminent
threat of being displaced from their landholdings as a result of the implementation of the
questioned FTAA. They thus meet the appropriate case requirement as they assert an
interest adverse to that of respondents who, on the other hand, claim the validity of the
assailed statute and the FTAA of CAMC.
Besides, the transcendental importance of the issues raised and the magnitude of the
public interest involved will have a bearing on the countrys economy which is to a
greater extent dependent upon the mining industry. Also affected by the resolution of this
case are the proprietary rights of numerous residents in the mining contract areas as well
as the social existence of indigenous peoples which are threatened. Based on these
considerations, this Court deems it proper to take cognizance of the instant petition.
Having resolved the procedural question, the constitutionality of the law under attack
must be addressed squarely.

First Substantive Issue: Validity of Section 76 of Rep. Act No. 7942 and DAO 96-40
In seeking to nullify Rep. Act No. 7942 and its implementing rules DAO 96-40 as
unconstitutional, petitioners set their sight on Section 76 of Rep. Act No. 7942 and
Section 107 of DAO 96-40 which they claim allow the unlawful and unjust "taking" of
private property for private purpose in contradiction with Section 9, Article III of the 1987
Constitution mandating that private property shall not be taken except for public use and
the corresponding payment of just compensation. They assert that public respondent
DENR, through the Mining Act and its Implementing Rules and Regulations, cannot, on
its own, permit entry into a private property and allow taking of land without payment of
just compensation.
Interpreting Section 76 of Rep. Act No. 7942 and Section 107 of DAO 96-40, juxtaposed
with the concept of taking of property for purposes of eminent domain in the case of
Republic v. Vda. de Castellvi,15 petitioners assert that there is indeed a "taking" upon
entry into private lands and concession areas.
Republic v. Vda. de Castellvi defines "taking" under the concept of eminent domain as
entering upon private property for more than a momentary period, and, under the warrant
or color of legal authority, devoting it to a public use, or otherwise informally appropriating
or injuriously affecting it in such a way as to substantially oust the owner and deprive him
of all beneficial enjoyment thereof.
From the criteria set forth in the cited case, petitioners claim that the entry into a private
property by CAMC, pursuant to its FTAA, is for more than a momentary period, i.e., for
25 years, and renewable for another 25 years; that the entry into the property is under
the warrant or color of legal authority pursuant to the FTAA executed between the
government and CAMC; and that the entry substantially ousts the owner or possessor
and deprives him of all beneficial enjoyment of the property. These facts, according to
the petitioners, amount to taking. As such, petitioners question the exercise of the power
of eminent domain as unwarranted because respondents failed to prove that the entry
into private property is devoted for public use.
Petitioners also stress that even without the doctrine in the Castellvi case, the nature of
the mining activity, the extent of the land area covered by the CAMC FTAA and the
various rights granted to the proponent or the FTAA holder, such as (a) the right of
possession of the Exploration Contract Area, with full right of ingress and egress and the
right to occupy the same; (b) the right not to be prevented from entry into private lands by
surface owners and/or occupants thereof when prospecting, exploring and exploiting for
minerals therein; (c) the right to enjoy easement rights, the use of timber, water and other
natural resources in the Exploration Contract Area; (d) the right of possession of the
Mining Area, with full right of ingress and egress and the right to occupy the same; and

(e) the right to enjoy easement rights, water and other natural resources in the Mining
Area, result in a taking of private property.
Petitioners quickly add that even assuming arguendo that there is no absolute, physical
taking, at the very least, Section 76 establishes a legal easement upon the surface
owners, occupants and concessionaires of a mining contract area sufficient to deprive
them of enjoyment and use of the property and that such burden imposed by the legal
easement falls within the purview of eminent domain.
To further bolster their claim that the legal easement established is equivalent to taking,
petitioners cite the case of National Power Corporation v. Gutierrez 16 holding that the
easement of right-of-way imposed against the use of the land for an indefinite period is a
taking under the power of eminent domain.
Traversing petitioners assertion, public respondents argue that Section 76 is not a taking
provision but a valid exercise of the police power and by virtue of which, the state may
prescribe regulations to promote the health, morals, peace, education, good order, safety
and general welfare of the people. This government regulation involves the adjustment of
rights for the public good and that this adjustment curtails some potential for the use or
economic exploitation of private property. Public respondents concluded that "to require
compensation in all such circumstances would compel the government to regulate by
purchase."
Public respondents are inclined to believe that by entering private lands and concession
areas, FTAA holders do not oust the owners thereof nor deprive them of all beneficial
enjoyment of their properties as the said entry merely establishes a legal easement upon
surface owners, occupants and concessionaires of a mining contract area.
Taking in Eminent Domain Distinguished from Regulation in Police Power
The power of eminent domain is the inherent right of the state (and of those entities to
which the power has been lawfully delegated) to condemn private property to public use
upon payment of just compensation.17 On the other hand, police power is the power of
the state to promote public welfare by restraining and regulating the use of liberty and
property.18 Although both police power and the power of eminent domain have the
general welfare for their object, and recent trends show a mingling19 of the two with the
latter being used as an implement of the former, there are still traditional distinctions
between the two.
Property condemned under police power is usually noxious or intended for a noxious
purpose; hence, no compensation shall be paid.20 Likewise, in the exercise of police
power, property rights of private individuals are subjected to restraints and burdens in
order to secure the general comfort, health, and prosperity of the state. Thus, an

ordinance prohibiting theaters from selling tickets in excess of their seating capacity
(which would result in the diminution of profits of the theater-owners) was upheld valid as
this would promote the comfort, convenience and safety of the customers. 21 In U.S. v.
Toribio,22 the court upheld the provisions of Act No. 1147, a statute regulating the
slaughter of carabao for the purpose of conserving an adequate supply of draft animals,
as a valid exercise of police power, notwithstanding the property rights impairment that
the ordinance imposed on cattle owners. A zoning ordinance prohibiting the operation of
a lumber yard within certain areas was assailed as unconstitutional in that it was an
invasion of the property rights of the lumber yard owners in People v. de Guzman. 23 The
Court nonetheless ruled that the regulation was a valid exercise of police power. A similar
ruling was arrived at in Seng Kee S Co. v. Earnshaw and Piatt24 where an ordinance
divided the City of Manila into industrial and residential areas.
A thorough scrutiny of the extant jurisprudence leads to a cogent deduction that where a
property interest is merely restricted because the continued use thereof would be
injurious to public welfare, or where property is destroyed because its continued
existence would be injurious to public interest, there is no compensable
taking.25However, when a property interest is appropriated and applied to some public
purpose, there is compensable taking.26
According to noted constitutionalist, Fr. Joaquin Bernas, SJ, in the exercise of its police
power regulation, the state restricts the use of private property, but none of the property
interests in the bundle of rights which constitute ownership is appropriated for use by or
for the benefit of the public.27 Use of the property by the owner was limited, but no aspect
of the property is used by or for the public.28 The deprivation of use can in fact be total
and it will not constitute compensable taking if nobody else acquires use of the property
or any interest therein.29
If, however, in the regulation of the use of the property, somebody else acquires the use
or interest thereof, such restriction constitutes compensable taking. Thus, in City
Government of Quezon City v. Ericta,30 it was argued by the local government that an
ordinance requiring private cemeteries to reserve 6% of their total areas for the burial of
paupers was a valid exercise of the police power under the general welfare clause. This
court did not agree in the contention, ruling that property taken under the police power is
sought to be destroyed and not, as in this case, to be devoted to a public use. It further
declared that the ordinance in question was actually a taking of private property without
just compensation of a certain area from a private cemetery to benefit paupers who are
charges of the local government. Being an exercise of eminent domain without provision
for the payment of just compensation, the same was rendered invalid as it violated the
principles governing eminent domain.
In People v. Fajardo,31 the municipal mayor refused Fajardo permission to build a house
on his own land on the ground that the proposed structure would destroy the view or
beauty of the public plaza. The ordinance relied upon by the mayor prohibited the

construction of any building that would destroy the view of the plaza from the highway.
The court ruled that the municipal ordinance under the guise of police power
permanently divest owners of the beneficial use of their property for the benefit of the
public; hence, considered as a taking under the power of eminent domain that could not
be countenanced without payment of just compensation to the affected owners. In this
case, what the municipality wanted was to impose an easement on the property in order
to preserve the view or beauty of the public plaza, which was a form of utilization of
Fajardos property for public benefit.32
While the power of eminent domain often results in the appropriation of title to or
possession of property, it need not always be the case. Taking may include trespass
without actual eviction of the owner, material impairment of the value of the property or
prevention of the ordinary uses for which the property was intended such as the
establishment of an easement.33 In Ayala de Roxas v. City of Manila,34 it was held that the
imposition of burden over a private property through easement was considered taking;
hence, payment of just compensation is required. The Court declared:
And, considering that the easement intended to be established, whatever may be the
object thereof, is not merely a real right that will encumber the property, but is one
tending to prevent the exclusive use of one portion of the same, by expropriating it for
public use which, be it what it may, can not be accomplished unless the owner of the
property condemned or seized be previously and duly indemnified, it is proper to protect
the appellant by means of the remedy employed in such cases, as it is only adequate
remedy when no other legal action can be resorted to, against an intent which is nothing
short of an arbitrary restriction imposed by the city by virtue of the coercive power with
which the same is invested.
And in the case of National Power Corporation v. Gutierrez, despite the NPCs
protestation that the owners were not totally deprived of the use of the land and could still
plant the same crops as long as they did not come into contact with the wires, the Court
nevertheless held that the easement of right-of-way was a taking under the power of
eminent domain. The Court said:
35

In the case at bar, the easement of right-of-way is definitely a taking under the power of
eminent domain. Considering the nature and effect of the installation of 230 KV MexicoLimay transmission lines, the limitation imposed by NPC against the use of the land for
an indefinite period deprives private respondents of its ordinary use.
A case exemplifying an instance of compensable taking which does not entail transfer of
title is Republic v. Philippine Long Distance Telephone Co.36 Here, the Bureau of
Telecommunications, a government instrumentality, had contracted with the PLDT for the
interconnection between the Government Telephone System and that of the PLDT, so
that the former could make use of the lines and facilities of the PLDT. In its desire to

expand services to government offices, the Bureau of Telecommunications demanded to

expand its use of the PLDT lines. Disagreement ensued on the terms of the contract for
the use of the PLDT facilities. The Court ruminated:
Normally, of course, the power of eminent domain results in the taking or appropriation of
title to, and possession of, the expropriated property; but no cogent reason appears why
said power may not be availed of to impose only a burden upon the owner of the
condemned property, without loss of title and possession. It is unquestionable that real
property may, through expropriation, be subjected to an easement right of way.37
In Republic v. Castellvi,38 this Court had the occasion to spell out the requisites of taking
in eminent domain, to wit:
(1) the expropriator must enter a private property;
(2) the entry must be for more than a momentary period.
(3) the entry must be under warrant or color of legal authority;
(4) the property must be devoted to public use or otherwise informally
appropriated or injuriously affected;
(5) the utilization of the property for public use must be in such a way as to oust
the owner and deprive him of beneficial enjoyment of the property.
As shown by the foregoing jurisprudence, a regulation which substantially deprives the
owner of his proprietary rights and restricts the beneficial use and enjoyment for public
use amounts to compensable taking. In the case under consideration, the entry referred
to in Section 76 and the easement rights under Section 75 of Rep. Act No. 7942 as well
as the various rights to CAMC under its FTAA are no different from the deprivation of
proprietary rights in the cases discussed which this Court considered as taking. Section
75 of the law in question reads:
Easement Rights. - When mining areas are so situated that for purposes of more
convenient mining operations it is necessary to build, construct or install on the mining
areas or lands owned, occupied or leased by other persons, such infrastructure as roads,
railroads, mills, waste dump sites, tailing ponds, warehouses, staging or storage areas
and port facilities, tramways, runways, airports, electric transmission, telephone or
telegraph lines, dams and their normal flood and catchment areas, sites for water wells,
ditches, canals, new river beds, pipelines, flumes, cuts, shafts, tunnels, or mills, the
contractor, upon payment of just compensation, shall be entitled to enter and occupy said
mining areas or lands.

Section 76 provides:
Entry into private lands and concession areas Subject to prior notification, holders of
mining rights shall not be prevented from entry into private lands and concession areas
by surface owners, occupants, or concessionaires when conducting mining operations
therein.
The CAMC FTAA grants in favor of CAMC the right of possession of the Exploration
Contract Area, the full right of ingress and egress and the right to occupy the same. It
also bestows CAMC the right not to be prevented from entry into private lands by surface
owners or occupants thereof when prospecting, exploring and exploiting minerals
therein.
The entry referred to in Section 76 is not just a simple right-of-way which is ordinarily
allowed under the provisions of the Civil Code. Here, the holders of mining rights enter
private lands for purposes of conducting mining activities such as exploration, extraction
and processing of minerals. Mining right holders build mine infrastructure, dig mine
shafts and connecting tunnels, prepare tailing ponds, storage areas and vehicle depots,
install their machinery, equipment and sewer systems. On top of this, under Section 75,
easement rights are accorded to them where they may build warehouses, port facilities,
electric transmission, railroads and other infrastructures necessary for mining operations.
All these will definitely oust the owners or occupants of the affected areas the beneficial
ownership of their lands. Without a doubt, taking occurs once mining operations
commence.
Section 76 of Rep. Act No. 7942 is a Taking Provision
Moreover, it would not be amiss to revisit the history of mining laws of this country which
would help us understand Section 76 of Rep. Act No. 7942.
This provision is first found in Section 27 of Commonwealth Act No. 137 which took effect
on 7 November 1936, viz:
Before entering private lands the prospector shall first apply in writing for written
permission of the private owner, claimant, or holder thereof, and in case of refusal by
such private owner, claimant, or holder to grant such permission, or in case of
disagreement as to the amount of compensation to be paid for such privilege of
prospecting therein, the amount of such compensation shall be fixed by agreement
among the prospector, the Director of the Bureau of Mines and the surface owner, and in
case of their failure to unanimously agree as to the amount of compensation, all
questions at issue shall be determined by the Court of First Instance.

Similarly, the pertinent provision of Presidential Decree No. 463, otherwise known as
"The Mineral Resources Development Decree of 1974," provides:
SECTION 12. Entry to Public and Private Lands. A person who desires to conduct
prospecting or other mining operations within public lands covered by concessions or
rights other than mining shall first obtain the written permission of the government official
concerned before entering such lands. In the case of private lands, the written
permission of the owner or possessor of the land must be obtained before entering such
lands. In either case, if said permission is denied, the Director, at the request of the
interested person may intercede with the owner or possessor of the land. If the
intercession fails, the interested person may bring suit in the Court of First Instance of
the province where the land is situated. If the court finds the request justified, it shall
issue an order granting the permission after fixing the amount of compensation and/or
rental due the owner or possessor: Provided, That pending final adjudication of such
amount, the court shall upon recommendation of the Director permit the interested
person to enter, prospect and/or undertake other mining operations on the disputed land
upon posting by such interested person of a bond with the court which the latter shall
consider adequate to answer for any damage to the owner or possessor of the land
resulting from such entry, prospecting or any other mining operations.
Hampered by the difficulties and delays in securing surface rights for the entry into
private lands for purposes of mining operations, Presidential Decree No. 512 dated 19
July 1974 was passed into law in order to achieve full and accelerated mineral resources
development. Thus, Presidential Decree No. 512 provides for a new system of surface
rights acquisition by mining prospectors and claimants. Whereas in Commonwealth Act
No. 137 and Presidential Decree No. 463 eminent domain may only be exercised in
order that the mining claimants can build, construct or install roads, railroads, mills,
warehouses and other facilities, this time, the power of eminent domain may now be
invoked by mining operators for the entry, acquisition and use of private lands, viz:
SECTION 1. Mineral prospecting, location, exploration, development and exploitation is
hereby declared of public use and benefit, and for which the power of eminent domain
may be invoked and exercised for the entry, acquisition and use of private lands. x x x.
The evolution of mining laws gives positive indication that mining operators who are
qualified to own lands were granted the authority to exercise eminent domain for the
entry, acquisition, and use of private lands in areas open for mining operations. This
grant of authority extant in Section 1 of Presidential Decree No. 512 is not expressly
repealed by Section 76 of Rep. Act No. 7942; and neither are the former statutes
impliedly repealed by the former. These two provisions can stand together even if
Section 76 of Rep. Act No. 7942 does not spell out the grant of the privilege to exercise
eminent domain which was present in the old law.

It is an established rule in statutory construction that in order that one law may operate to
repeal another law, the two laws must be inconsistent. 39 The former must be so
repugnant as to be irreconciliable with the latter act. Simply because a latter enactment
may relate to the same subject matter as that of an earlier statute is not of itself sufficient
to cause an implied repeal of the latter, since the new law may be cumulative or a
continuation of the old one. As has been the ruled, repeals by implication are not favored,
and will not be decreed unless it is manifest that the legislature so intended. 40 As laws
are presumed to be passed with deliberation and with full knowledge of all existing ones
on the subject, it is but reasonable to conclude that in passing a statute it was not
intended to interfere with or abrogate any former law relating to the same matter, unless
the repugnancy between the two is not only irreconcilable, but also clear and convincing,
and flowing necessarily from the language used, unless the later act fully embraces the
subject matter of the earlier, or unless the reason for the earlier act is beyond
peradventure removed.41 Hence, every effort must be used to make all acts stand and if,
by any reasonable construction, they can be reconciled, the latter act will not operate as
a repeal of the earlier.
Considering that Section 1 of Presidential Decree No. 512 granted the qualified mining
operators the authority to exercise eminent domain and since this grant of authority is
deemed incorporated in Section 76 of Rep. Act No. 7942, the inescapable conclusion is
that the latter provision is a taking provision.
While this Court declares that the assailed provision is a taking provision, this does not
mean that it is unconstitutional on the ground that it allows taking of private property
without the determination of public use and the payment of just compensation.
The taking to be valid must be for public use.42 Public use as a requirement for the valid
exercise of the power of eminent domain is now synonymous with public interest, public
benefit, public welfare and public convenience.43It includes the broader notion of indirect
public benefit or advantage. Public use as traditionally understood as "actual use by the
public" has already been abandoned.44
Mining industry plays a pivotal role in the economic development of the country and is a
vital tool in the governments thrust of accelerated recovery.45 The importance of the
mining industry for national development is expressed in Presidential Decree No. 463:
WHEREAS, mineral production is a major support of the national economy, and therefore
the intensified discovery, exploration, development and wise utilization of the countrys
mineral resources are urgently needed for national development.
Irrefragably, mining is an industry which is of public benefit.

That public use is negated by the fact that the state would be taking private properties for
the benefit of private mining firms or mining contractors is not at all true. In Heirs of
Juancho Ardona v. Reyes,46 petitioners therein contended that the promotion of tourism is
not for public use because private concessionaires would be allowed to maintain various
facilities such as restaurants, hotels, stores, etc., inside the tourist area. The Court thus
contemplated:
The rule in Berman v. Parker [348 U.S. 25; 99 L. ed. 27] of deference to legislative policy
even if such policy might mean taking from one private person and conferring on another
private person applies as well in the Philippines.
". . . Once the object is within the authority of Congress, the means by which it will be
attained is also for Congress to determine. Here one of the means chosen is the use of
private enterprise for redevelopment of the area. Appellants argue that this makes the
project a taking from one businessman for the benefit of another businessman. But the
means of executing the project are for Congress and Congress alone to determine, once
the public purpose has been established. x x x"47
Petitioners further maintain that the states discretion to decide when to take private
property is reduced contractually by Section 13.5 of the CAMC FTAA, which reads:
If the CONTRACTOR so requests at its option, the GOVERNMENT shall use its offices
and legal powers to assist in the acquisition at reasonable cost of any surface areas or
rights required by the CONTRACTOR at the CONTRACTORs cost to carry out the
Mineral Exploration and the Mining Operations herein.
All obligations, payments and expenses arising from, or incident to, such agreements or
acquisition of right shall be for the account of the CONTRACTOR and shall be
recoverable as Operating Expense.
According to petitioners, the government is reduced to a sub-contractor upon the request
of the private respondent, and on account of the foregoing provision, the contractor can
compel the government to exercise its power of eminent domain thereby derogating the
latters power to expropriate property.
The provision of the FTAA in question lays down the ways and means by which the
foreign-owned contractor, disqualified to own land, identifies to the government the
specific surface areas within the FTAA contract area to be acquired for the mine
infrastructure.48 The government then acquires ownership of the surface land areas on
behalf of the contractor, through a voluntary transaction in order to enable the latter to
proceed to fully implement the FTAA. Eminent domain is not yet called for at this stage
since there are still various avenues by which surface rights can be acquired other than
expropriation. The FTAA provision under attack merely facilitates the implementation of

the FTAA given to CAMC and shields it from violating the Anti-Dummy Law. Hence, when
confronted with the same question in La Bugal-BLaan Tribal Association, Inc. v.
Ramos,49 the Court answered:
Clearly, petitioners have needlessly jumped to unwarranted conclusions, without being
aware of the rationale for the said provision. That provision does not call for the exercise
of the power of eminent domain -- and determination of just compensation is not an issue
-- as much as it calls for a qualified party to acquire the surface rights on behalf of a
foreign-owned contractor.
Rather than having the foreign contractor act through a dummy corporation, having the
State do the purchasing is a better alternative. This will at least cause the government to
be aware of such transaction/s and foster transparency in the contractors dealings with
the local property owners. The government, then, will not act as a subcontractor of the
contractor; rather, it will facilitate the transaction and enable the parties to avoid a
technical violation of the Anti-Dummy Law.
There is also no basis for the claim that the Mining Law and its implementing rules and
regulations do not provide for just compensation in expropriating private properties.
Section 76 of Rep. Act No. 7942 and Section 107 of DAO 96-40 provide for the payment
of just compensation:
Section 76. xxx Provided, that any damage to the property of the surface owner,
occupant, or concessionaire as a consequence of such operations shall be properly
compensated as may be provided for in the implementing rules and regulations.
Section 107. Compensation of the Surface Owner and Occupant- Any damage done to
the property of the surface owners, occupant, or concessionaire thereof as a
consequence of the mining operations or as a result of the construction or installation of
the infrastructure mentioned in 104 above shall be properly and justly compensated.
Such compensation shall be based on the agreement entered into between the holder of
mining rights and the surface owner, occupant or concessionaire thereof, where
appropriate, in accordance with P.D. No. 512. (Emphasis supplied.)
Second Substantive Issue: Power of Courts to Determine Just Compensation
Closely-knit to the issue of taking is the determination of just compensation. It is
contended that Rep. Act No. 7942 and Section 107 of DAO 96-40 encroach on the power
of the trial courts to determine just compensation in eminent domain cases inasmuch as
the same determination of proper compensation are cognizable only by the Panel of
Arbitrators.

The question on the judicial determination of just compensation has been settled in the
case of Export Processing Zone Authority v. Dulay50 wherein the court declared that the
determination of just compensation in eminent domain cases is a judicial function. Even
as the executive department or the legislature may make the initial determinations, the
same cannot prevail over the courts findings.
Implementing Section 76 of Rep. Act No. 7942, Section 105 of DAO 96-40 states that
holder(s) of mining right(s) shall not be prevented from entry into its/their contract/mining
areas for the purpose of exploration, development, and/or utilization. That in cases where
surface owners of the lands, occupants or concessionaires refuse to allow the permit
holder or contractor entry, the latter shall bring the matter before the Panel of Arbitrators
for proper disposition. Section 106 states that voluntary agreements between the two
parties permitting the mining right holders to enter and use the surface owners lands
shall be registered with the Regional Office of the MGB. In connection with Section 106,
Section 107 provides that the compensation for the damage done to the surface owner,
occupant or concessionaire as a consequence of mining operations or as a result of the
construction or installation of the infrastructure shall be properly and justly compensated
and that such compensation shall be based on the agreement between the holder of
mining rights and surface owner, occupant or concessionaire, or where appropriate, in
accordance with Presidential Decree No. 512. In cases where there is disagreement to
the compensation or where there is no agreement, the matter shall be brought before the
Panel of Arbitrators. Section 206 of the implementing rules and regulations provides an
aggrieved party the remedy to appeal the decision of the Panel of Arbitrators to the
Mines Adjudication Board, and the latters decision may be reviewed by the Supreme
Court by filing a petition for review on certiorari.51
An examination of the foregoing provisions gives no indication that the courts are
excluded from taking cognizance of expropriation cases under the mining law. The
disagreement referred to in Section 107 does not involve the exercise of eminent
domain, rather it contemplates of a situation wherein the permit holders are allowed by
the surface owners entry into the latters lands and disagreement ensues as regarding
the proper compensation for the allowed entry and use of the private lands. Noticeably,
the provision points to a voluntary sale or transaction, but not to an involuntary sale.
The legislature, in enacting the mining act, is presumed to have deliberated with full
knowledge of all existing laws and jurisprudence on the subject. Thus, it is but
reasonable to conclude that in passing such statute it was in accord with the existing
laws and jurisprudence on the jurisdiction of courts in the determination of just
compensation and that it was not intended to interfere with or abrogate any former law
relating to the same matter. Indeed, there is nothing in the provisions of the assailed law
and its implementing rules and regulations that exclude the courts from their jurisdiction
to determine just compensation in expropriation proceedings involving mining operations.
Although Section 105 confers upon the Panel of Arbitrators the authority to decide cases
where surface owners, occupants, concessionaires refuse permit holders entry, thus,

necessitating involuntary taking, this does not mean that the determination of the just
compensation by the Panel of Arbitrators or the Mines Adjudication Board is final and
conclusive. The determination is only preliminary unless accepted by all parties
concerned. There is nothing wrong with the grant of primary jurisdiction by the Panel of
Arbitrators or the Mines Adjudication Board to determine in a preliminary matter the
reasonable compensation due the affected landowners or occupants. 52 The original and
exclusive jurisdiction of the courts to decide determination of just compensation remains
intact despite the preliminary determination made by the administrative agency. As held
in Philippine Veterans Bank v. Court of Appeals53:
The jurisdiction of the Regional Trial Courts is not any less "original and exclusive"
because the question is first passed upon by the DAR, as the judicial proceedings are
not a continuation of the administrative determination.
Third Substantive Issue: Sufficient Control by the State Over Mining Operations
Anent the third issue, petitioners charge that Rep. Act No. 7942, as well as its
Implementing Rules and Regulations, makes it possible for FTAA contracts to cede over
to a fully foreign-owned corporation full control and management of mining enterprises,
with the result that the State is allegedly reduced to a passive regulator dependent on
submitted plans and reports, with weak review and audit powers. The State is not acting
as the supposed owner of the natural resources for and on behalf of the Filipino people;
it practically has little effective say in the decisions made by the enterprise. In effect,
petitioners asserted that the law, the implementing regulations, and the CAMC FTAA
cede beneficial ownership of the mineral resources to the foreign contractor.
It must be noted that this argument was already raised in La Bugal-BLaan Tribal
Association, Inc. v. Ramos,54where the Court answered in the following manner:
RA 7942 provides for the states control and supervision over mining operations. The
following provisions thereof establish the mechanism of inspection and visitorial rights
over mining operations and institute reportorial requirements in this manner:
1. Sec. 8 which provides for the DENRs power of over-all supervision and
periodic review for "the conservation, management, development and proper use
of the States mineral resources";
2. Sec. 9 which authorizes the Mines and Geosciences Bureau (MGB) under the
DENR to exercise "direct charge in the administration and disposition of mineral
resources", and empowers the MGB to "monitor the compliance by the contractor
of the terms and conditions of the mineral agreements", "confiscate surety and
performance bonds", and deputize whenever necessary any member or unit of

the Phil. National Police, barangay, duly registered non-governmental

organization (NGO) or any qualified person to police mining activities;
3. Sec. 66 which vests in the Regional Director "exclusive jurisdiction over safety
inspections of all installations, whether surface or underground", utilized in mining
operations.
4. Sec. 35, which incorporates into all FTAAs the following terms, conditions and
warranties:
"(g) Mining operations shall be conducted in accordance with the provisions of the Act
and its IRR.
"(h) Work programs and minimum expenditures commitments.
xxxx
"(k) Requiring proponent to effectively use appropriate anti-pollution technology and
facilities to protect the environment and restore or rehabilitate mined-out areas.
"(l) The contractors shall furnish the Government records of geologic, accounting and
other relevant data for its mining operation, and that books of accounts and records shall
be open for inspection by the government. x x x.
"(m) Requiring the proponent to dispose of the minerals at the highest price and more
advantageous terms and conditions.
xxxx
"(o) Such other terms and conditions consistent with the Constitution and with this Act as
the Secretary may deem to be for the best interest of the State and the welfare of the
Filipino people."
The foregoing provisions of Section 35 of RA 7942 are also reflected and implemented in
Section 56 (g), (h), (l), (m) and (n) of the Implementing Rules, DAO 96-40.
Moreover, RA 7942 and DAO 96-40 also provide various stipulations confirming the
governments control over mining enterprises:
o

The contractor is to relinquish to the government those portions of the contract

area not needed for mining operations and not covered by any declaration of
mining feasibility (Section 35-e, RA 7942; Section 60, DAO 96-40).

The contractor must comply with the provisions pertaining to mine safety, health
and environmental protection (Chapter XI, RA 7942; Chapters XV and XVI, DAO
96-40).

For violation of any of its terms and conditions, government may cancel an FTAA.
(Chapter XVII, RA 7942; Chapter XXIV, DAO 96-40).

An FTAA contractor is obliged to open its books of accounts and records for
0inspection by the government (Section 56-m, DAO 96-40).

An FTAA contractor has to dispose of the minerals and by-products at the highest
market price and register with the MGB a copy of the sales agreement (Section
56-n, DAO 96-40).

6. Free and prior informed consent by the indigenous peoples concerned,

including payment of royalties through a Memorandum of Agreement
(Section 16, RA 7942; Section 59, RA 8371)
o

The FTAA contractor is obliged to assist in the development of its mining

community, promotion of the general welfare of its inhabitants, and development
of science and mining technology (Section 57, RA 7942).

The FTAA contractor is obliged to submit reports (on quarterly, semi-annual or

annual basis as the case may be; per Section 270, DAO 96-40), pertaining to the
following:
1. Exploration

MGB is mandated to monitor the contractors compliance with the terms and
conditions of the FTAA; and to deputize, when necessary, any member or unit of
the Philippine National Police, the barangay or a DENR-accredited
nongovernmental organization to police mining activities (Section 7-d and -f,
DAO 96-40).

2. Drilling

An FTAA cannot be transferred or assigned without prior approval by the

President (Section 40, RA 7942; Section 66, DAO 96-40).

5. Production

A mining project under an FTAA cannot proceed to the

construction/development/utilization stage, unless its Declaration of Mining
Project Feasibility has been approved by government (Section 24, RA 7942).

3. Mineral resources and reserves

4. Energy consumption

6. Sales and marketing

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

The Declaration of Mining Project Feasibility filed by the contractor cannot be

approved without submission of the following documents:

9. Mine safety, health and environment

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

10. Land use

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

11. Social development

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

12. Explosives consumption

4. Approved environmental protection and enhancement program

(Section 69, RA 7942)
5. Approval by the Sangguniang Panlalawigan/Bayan/Barangay (Section
70, RA 7942; Section 27, RA 7160)

An FTAA pertaining to areas within government reservations cannot be granted

without a written clearance from the government agencies concerned (Section
19, RA 7942; Section 54, DAO 96-40).

An FTAA contractor is required to post a financial guarantee bond in favor of the

government in an amount equivalent to its expenditures obligations for any
particular year. This requirement is apart from the representations and warranties
of the contractor that it has access to all the financing, managerial and technical
expertise and technology necessary to carry out the objectives of the FTAA
(Section 35-b, -e, and -f, RA 7942).
Other reports to be submitted by the contractor, as required under DAO 96-40,
are as follows: an environmental report on the rehabilitation of the mined-out
area and/or mine waste/tailing covered area, and anti-pollution measures
undertaken (Section 35-a-2); annual reports of the mining operations and records
of geologic accounting (Section 56-m); annual progress reports and final report of
exploration activities (Section 56-2).
Other programs required to be submitted by the contractor, pursuant to DAO 9640, are the following: a safety and health program (Section 144); an
environmental work program (Section 168); an annual environmental protection
and enhancement program (Section 171).

The foregoing gamut of requirements, regulations, restrictions and limitations imposed

upon the FTAA contractor by the statute and regulations easily overturns petitioners
contention. The setup under RA 7942 and DAO 96-40 hardly relegates the State to the
role of a "passive regulator" dependent on submitted plans and reports. On the contrary,
the government agencies concerned are empowered to approve or disapprove -- hence,
to influence, direct and change -- the various work programs and the corresponding
minimum expenditure commitments for each of the exploration, development and
utilization phases of the mining enterprise.
Once these plans and reports are approved, the contractor is bound to comply with its
commitments therein. Figures for mineral production and sales are regularly monitored
and subjected to government review, in order to ensure that the products and byproducts are disposed of at the best prices possible; even copies of sales agreements
have to be submitted to and registered with MGB. And the contractor is mandated to
open its books of accounts and records for scrutiny, so as to enable the State to
determine if the government share has been fully paid.
The State may likewise compel the contractors compliance with mandatory
requirements on mine safety, health and environmental protection, and the use of antipollution technology and facilities. Moreover, the contractor is also obligated to assist in
the development of the mining community and to pay royalties to the indigenous peoples
concerned.

Cancellation of the FTAA may be the penalty for violation of any of its terms and
conditions and/or noncompliance with statutes or regulations. This general, all-around,
multipurpose sanction is no trifling matter, especially to a contractor who may have yet to
recover the tens or hundreds of millions of dollars sunk into a mining project.
Overall, considering the provisions of the statute and the regulations just discussed, we
believe that the State definitely possesses the means by which it can have the ultimate
word in the operation of the enterprise, set directions and objectives, and detect
deviations and noncompliance by the contractor; likewise, it has the capability to enforce
compliance and to impose sanctions, should the occasion therefor arise.
In other words, the FTAA contractor is not free to do whatever it pleases and get away
with it; on the contrary, it will have to follow the government line if it wants to stay in the
enterprise. Ineluctably then, RA 7942 and DAO 96-40 vest in the government more than
a sufficient degree of control and supervision over the conduct of mining operations.
Fourth Substantive Issue: The Proper Interpretation of the Constitutional Phrase
"Agreements Involving Either Technical or Financial Assistance
In interpreting the first and fourth paragraphs of Section 2, Article XII of the Constitution,
petitioners set forth the argument that foreign corporations are barred from making
decisions on the conduct of operations and the management of the mining project. The
first paragraph of Section 2, Article XII reads:
x x x The exploration, development, and utilization of natural resources shall be under
the full control and supervision of the State. The State may directly undertake such
activities, or it may enter into co-production, joint venture, or production sharing
agreements with Filipino citizens, or corporations or associations at least sixty percentum
of whose capital is owned by such citizens. Such agreements may be for a period not
exceeding twenty five years, renewable for not more than twenty five years, and under
such terms and conditions as may be provided by law x x x.
The fourth paragraph of Section 2, Article XII provides:
The President may enter into agreements with foreign-owned corporations involving
either technical or financial assistance for large scale exploration, development, and
utilization of minerals, petroleum, and other mineral oils according to the general terms
and conditions provided by law, based on real contributions to the economic growth and
general welfare of the country x x x.
Petitioners maintain that the first paragraph bars aliens and foreign-owned corporations
from entering into any direct arrangement with the government including those which
involve co-production, joint venture or production sharing agreements. They likewise

insist that the fourth paragraph allows foreign-owned corporations to participate in the
large-scale exploration, development and utilization of natural resources, but such
participation, however, is merely limited to an agreement for either financial or technical
assistance only.
Again, this issue has already been succinctly passed upon by this Court in La BugalBLaan Tribal Association, Inc. v. Ramos.55 In discrediting such argument, the Court
ratiocinated:
Petitioners claim that the phrase "agreements x x x involving either technical or financial
assistance" simply means technical assistance or financial assistance agreements,
nothing more and nothing else. They insist that there is no ambiguity in the phrase, and
that a plain reading of paragraph 4 quoted above leads to the inescapable conclusion
that what a foreign-owned corporation may enter into with the government is merely an
agreement for either financial or technical assistance only, for the large-scale
exploration, development and utilization of minerals, petroleum and other mineral oils;
such a limitation, they argue, excludes foreign management and operation of a mining
enterprise.
This restrictive interpretation, petitioners believe, is in line with the general policy
enunciated by the Constitution reserving to Filipino citizens and corporations the use and
enjoyment of the countrys natural resources. They maintain that this Courts Decision of
January 27, 2004 correctly declared the WMCP FTAA, along with pertinent provisions of
RA 7942, void for allowing a foreign contractor to have direct and exclusive management
of a mining enterprise. Allowing such a privilege not only runs counter to the "full control
and supervision" that the State is constitutionally mandated to exercise over the
exploration, development and utilization of the countrys natural resources; doing so also
vests in the foreign company "beneficial ownership" of our mineral resources. It will be
recalled that the Decision of January 27, 2004 zeroed in on "management or other forms
of assistance" or other activities associated with the "service contracts" of the martial law
regime, since "the management or operation of mining activities by foreign contractors,
which is the primary feature of service contracts, was precisely the evil that the drafters
of the 1987 Constitution sought to eradicate."

In contrast, the use of the word "involving" signifies the possibility of the inclusion of
other forms of assistance or activities having to do with, otherwise related to or
compatible with financial or technical assistance. The word "involving" as used in this
context has three connotations that can be differentiated thus:one, the sense of
"concerning," "having to do with," or "affecting"; two, "entailing," "requiring," "implying" or
"necessitating"; and three, "including," "containing" or "comprising."
Plainly, none of the three connotations convey a sense of exclusivity. Moreover, the word
"involving," when understood in the sense of "including," as in including technical or
financial assistance, necessarily implies that there are activities other than those that are
being included. In other words, if an agreement includes technical or financial assistance,
there is apart from such assistance -- something else already in, and covered or may be
covered by, the said agreement.
In short, it allows for the possibility that matters, other than those explicitly mentioned,
could be made part of the agreement. Thus, we are now led to the conclusion that the
use of the word "involving" implies that these agreements with foreign corporations are
not limited to mere financial or technical assistance. The difference in sense becomes
very apparent when we juxtapose "agreements for technical or financial assistance"
against "agreements including technical or financial assistance." This much is
unalterably clear in a verba legisapproach.
Second, if the real intention of the drafters was to confine foreign corporations to financial
or technical assistance and nothing more, their language would have certainly been so
unmistakably restrictive and stringent as to leave no doubt in anyones mind about their
true intent. For example, they would have used the sentence foreign corporations are
absolutely prohibited from involvement in the management or operation of mining or
similar ventures or words of similar import. A search for such stringent wording yields
negative results. Thus, we come to the inevitable conclusion that there was a
conscious and deliberate decision to avoid the use of restrictive wording that
bespeaks an intent not to use the expression "agreements x x x involving either
technical or financial assistance" in an exclusionary and limiting manner.
Fifth Substantive Issue: Service Contracts Not Deconstitutionalized

xxxx
We do not see how applying a strictly literal or verba legis interpretation of paragraph 4
could inexorably lead to the conclusions arrived at in the ponencia. First, the drafters
choice of words -- their use of the phraseagreements x x x involving either technical or
financial assistance -- does not indicate the intent to exclude other modes of assistance.
The drafters opted to use involving when they could have simply
said agreements forfinancial or technical assistance, if that was their intention to begin
with. In this case, the limitation would be very clear and no further debate would ensue.

Lastly, petitioners stress that the service contract regime under the 1973 Constitution is
expressly prohibited under the 1987 Constitution as the term service contracts found in
the former was deleted in the latter to avoid the circumvention of constitutional
prohibitions that were prevalent in the 1987 Constitution. According to them, the framers
of the 1987 Constitution only intended for foreign-owned corporations to provide either
technical assistance or financial assistance. Upon perusal of the CAMC FTAA,
petitioners are of the opinion that the same is a replica of the service contract
agreements that the present constitution allegedly prohibit.

Again, this contention is not well-taken. The mere fact that the term service contracts
found in the 1973 Constitution was not carried over to the present constitution, sans any
categorical statement banning service contracts in mining activities, does not mean that
service contracts as understood in the 1973 Constitution was eradicated in the 1987
Constitution.56 The 1987 Constitution allows the continued use of service contracts with
foreign corporations as contractors who would invest in and operate and manage
extractive enterprises, subject to the full control and supervision of the State; this time,
however, safety measures were put in place to prevent abuses of the past regime. 57 We
ruled, thus:
To our mind, however, such intent cannot be definitively and conclusively
established from the mere failure to carry the same expression or term over to the new
Constitution, absent a more specific, explicit and unequivocal statement to that effect.
What petitioners seek (a complete ban on foreign participation in the management of
mining operations, as previously allowed by the earlier Constitutions) is nothing short of
bringing about a momentous sea change in the economic and developmental policies;
and the fundamentally capitalist, free-enterprise philosophy of our government. We
cannot imagine such a radical shift being undertaken by our government, to the great
prejudice of the mining sector in particular and our economy in general, merely on the
basis of the omission of the terms service contract from or the failure to carry them over
to the new Constitution. There has to be a much more definite and even unarguable
basis for such a drastic reversal of policies.
xxxx
The foregoing are mere fragments of the framers lengthy discussions of the provision
dealing with agreements x x x involving either technical or financial assistance, which
ultimately became paragraph 4 of Section 2 of Article XII of the Constitution. Beyond any
doubt, the members of the ConCom were actually debating about the martial-lawera service contracts for which they were crafting appropriate safeguards.
In the voting that led to the approval of Article XII by the ConCom, the explanations given
by Commissioners Gascon, Garcia and Tadeo indicated that they had voted to reject this
provision on account of their objections to the "constitutionalization" of the "service
contract" concept.
Mr. Gascon said, "I felt that if we would constitutionalize any provision on service
contracts, this should always be with the concurrence of Congress and not guided only
by a general law to be promulgated by Congress." Mr. Garcia explained, "Service
contracts are given constitutional legitimization in Sec. 3, even when they have been
proven to be inimical to the interests of the nation, providing, as they do, the legal
loophole for the exploitation of our natural resources for the benefit of foreign
interests." Likewise, Mr. Tadeo cited inter alia the fact that service contracts continued to

subsist, enabling foreign interests to benefit from our natural resources. It was hardly
likely that these gentlemen would have objected so strenuously, had the provision
called for mere technical or financial assistance and nothing more.
The deliberations of the ConCom and some commissioners explanation of their votes
leave no room for doubt that the service contract concept precisely underpinned the
commissioners understanding of the "agreements involving either technical or financial
assistance."
xxxx
From the foregoing, we are impelled to conclude that the phrase agreements involving
either technical or financial assistance, referred to in paragraph 4, are in fact service
contracts. But unlike those of the 1973 variety, the new ones are between foreign
corporations acting as contractors on the one hand; and on the other, the government as
principal or "owner" of the works. In the new service contracts, the foreign contractors
provide capital, technology and technical know-how, and managerial expertise in the
creation and operation of large-scale mining/extractive enterprises; and the government,
through its agencies (DENR, MGB), actively exercises control and supervision over the
entire operation.
xxxx
It is therefore reasonable and unavoidable to make the following conclusion, based on
the above arguments. As written by the framers and ratified and adopted by the people,
the Constitution allows the continued use of service contracts with foreign corporations -as contractors who would invest in and operate and manage extractive enterprises,
subject to the full control and supervision of the State -- sans the abuses of the past
regime. The purpose is clear: to develop and utilize our mineral, petroleum and other
resources on a large scale for the immediate and tangible benefit of the Filipino people. 58
WHEREFORE, the instant petition for prohibition and mandamus is hereby DISMISSED.
Section 76 of Republic Act No. 7942 and Section 107 of DAO 96-40; Republic Act No.
7942 and its Implementing Rules and Regulations contained in DAO 96-40 insofar as
they relate to financial and technical assistance agreements referred to in paragraph 4 of
Section 2 of Article XII of the Constitution are NOT UNCONSTITUTIONAL.
SO ORDERED.
G.R. No. 149927
March 30, 2004
REPUBLIC vs. ROSEMOOR

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

6. Denying for lack of merit the motions for contempt, it appearing that actuations
of the respondents were not contumacious and intended to delay the
proceedings or undermine the integrity of the Court.
No pronouncement yet as to costs."5

The Case
The Facts
Before us is a Petition for Review1 under Rule 45 of the Rules of Court, seeking to nullify
the May 29, 2001 Decision2 and the September 6, 2001 Resolution3 of the Court of
Appeals (CA) in CA-GR SP No. 46878. The CA disposed as follows:
"WHEREFORE, premises considered, the appealed Decision is hereby AFFIRMED in
toto."4
The questioned Resolution denied petitioners Motion for Reconsideration.
On the other hand, trial courts Decision, which was affirmed by the CA, had disposed as
follows:
"WHEREFORE, judgment is hereby rendered as follows:
1. Declaring that the cancellation of License No. 33 was done without jurisdiction
and in gross violation of the Constitutional right of the petitioners against
deprivation of their property rights without due process of law and is hereby set
aside.
2. Declaring that the petitioners right to continue the exploitation of the marble
deposits in the area covered by License No. 33 is maintained for the duration of
the period of its life of twenty-five (25) years, less three (3) years of continuous
operation before License No. 33 was cancelled, unless sooner terminated for
violation of any of the conditions specified therein, with due process.
3. Making the Writ of preliminary injunction and the Writ of Preliminary
Mandatory Injunction issued as permanent.
4. Ordering the cancellation of the bond filed by the Petitioners in the sum of 1
Million.
5. Allowing the petitioners to present evidence in support of the damages they
claim to have suffered from, as a consequence of the summary cancellation of
License No. 33 pursuant to the agreement of the parties on such dates as maybe
set by the Court; and

The CA narrated the facts as follows:

"The four (4) petitioners, namely, Dr. Lourdes S. Pascual, Dr. Pedro De la Concha,
Alejandro De La Concha, and Rufo De Guzman, after having been granted permission to
prospect for marble deposits in the mountains of Biak-na-Bato, San Miguel, Bulacan,
succeeded in discovering marble deposits of high quality and in commercial quantities in
Mount Mabio which forms part of the Biak-na-Bato mountain range.
"Having succeeded in discovering said marble deposits, and as a result of their tedious
efforts and substantial expenses, the petitioners applied with the Bureau of Mines, now
Mines and Geosciences Bureau, for the issuance of the corresponding license to exploit
said marble deposits.
xxxxxxxxx
"After compliance with numerous required conditions, License No. 33 was issued by the
Bureau of Mines in favor of the herein petitioners.
xxxxxxxxx
"Shortly after Respondent Ernesto R. Maceda was appointed Minister of the Department
of Energy and Natural Resources (DENR), petitioners License No. 33 was cancelled by
him through his letter to ROSEMOOR MINING AND DEVELOPMENT CORPORATION
dated September 6, 1986 for the reasons stated therein. Because of the aforesaid
cancellation, the original petition was filed and later substituted by the petitioners
AMENDED PETITION dated August 21, 1991 to assail the same.
"Also after due hearing, the prayer for injunctive relief was granted in the Order of this
Court dated February 28, 1992. Accordingly, the corresponding preliminary writs were
issued after the petitioners filed their injunction bond in the amount of ONE MILLION
PESOS (P1,000,000.00).
xxxxxxxxx

"On September 27, 1996, the trial court rendered the herein questioned decision." 6
The trial court ruled that the privilege granted under respondents license had already
ripened into a property right, which was protected under the due process clause of the
Constitution. Such right was supposedly violated when the license was cancelled without
notice and hearing. The cancellation was said to be unjustified, because the area that
could be covered by the four separate applications of respondents was 400 hectares.
Finally, according to the RTC, Proclamation No. 84, which confirmed the cancellation of
the license, was an ex post facto law; as such, it violated Section 3 of Article XVIII of the
1987 Constitution.
On appeal to the Court of Appeals, herein petitioners asked whether PD 463 or the
Mineral Resources Development Decree of 1974 had been violated by the award of the
330.3062 hectares to respondents in accordance with Proclamation No. 2204. They also
questioned the validity of the cancellation of respondents Quarry License/Permit (QLP)
No. 33.
Ruling of the Court of Appeals
Sustaining the trial court in toto, the CA held that the grant of the quarry license covering
330.3062 hectares to respondents was authorized by law, because the license was
embraced by four (4) separate applications -- each for an area of 81 hectares. Moreover,
it held that the limitation under Presidential Decree No. 463 -- that a quarry license
should cover not more than 100 hectares in any given province -- was supplanted by
Republic Act No. 7942,7 which increased the mining areas allowed under PD 463.
It also ruled that the cancellation of respondents license without notice and hearing was
tantamount to a deprivation of property without due process of law. It added that under
the clause in the Constitution dealing with the non-impairment of obligations and
contracts, respondents license must be respected by the State.

The Petition has merit.

First Issue:
Validity of License
Respondents contend that the Petition has no legal basis, because PD 463 has already
been repealed.10 In effect, they ask for the dismissal of the Petition on the ground of
mootness.
PD 463, as amended, pertained to the old system of exploration, development and
utilization of natural resources through licenses, concessions or leases. 11 While these
arrangements were provided under the 193512 and the 197313 Constitutions, they have
been omitted by Section 2 of Article XII of the 1987 Constitution. 14
With the shift of constitutional policy toward "full control and supervision of the State"
over natural resources, the Court in Miners Association of the Philippines v. Factoran
Jr. 15 declared the provisions of PD 463 as contrary to or violative of the express mandate
of the 1987 Constitution. The said provisions dealt with the lease of mining claims; quarry
permits or licenses covering privately owned or public lands; and other related provisions
on lease, licenses and permits.
RA 7942 or the Philippine Mining Act of 1995 embodies the new constitutional mandate.
It has repealed or amended all laws, executive orders, presidential decrees, rules and
regulations -- or parts thereof -- that are inconsistent with any of its provisions. 16
It is relevant to state, however, that Section 2 of Article XII of the 1987 Constitution does
not apply retroactively to a "license, concession or lease" granted by the government
under the 1973 Constitution or before the effectivity of the 1987 Constitution on February
2, 1987.17 As noted in Miners Association of the Philippines v. Factoran Jr., the
deliberations of the Constitutional Commission18 emphasized the intent to apply the said
constitutional provision prospectively.

Hence, this Petition.8

Issues

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

Petitioners submit the following issues for the Courts consideration:

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

"SECTION 5. Mineral Reservations. When the national interest so requires,

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

Provided, That a small scale-mining cooperative covered by Republic Act No.

7076 shall be given preferential right to apply for a small-scale mining agreement
for a maximum aggregate area of twenty-five percent (25%) of such mineral
reservation, subject to valid existing mining/quarrying rights as provided under
Section 112 Chapter XX hereof. All submerged lands within the contiguous zone
and in the exclusive economic zone of the Philippines are hereby declared to be
mineral reservations.
"x x x x x x x x x
"SECTION 7. Periodic Review of Existing Mineral Reservations. The
Secretary shall periodically review existing mineral reservations for the purpose
of determining whether their continued existence is consistent with the national
interest, and upon his recommendation, the President may, by proclamation, alter
or modify the boundaries thereof or revert the same to the public domain without
prejudice to prior existing rights."
"SECTION 18. Areas Open to Mining Operations. Subject to any existing
rights or reservations and prior agreements of all parties, all mineral resources in
public or private lands, including timber or forestlands as defined in existing laws,
shall be open to mineral agreements or financial or technical assistance
agreement applications. Any conflict that may arise under this provision shall be
heard and resolved by the panel of arbitrators."
"SECTION 19. Areas Closed to Mining Applications. -- Mineral agreement or
financial or technical assistance agreement applications shall not be allowed:
(a) In military and other government reservations, except upon prior
written clearance by the government agency concerned;
(b) Near or under public or private buildings, cemeteries, archeological
and historic sites, bridges, highways, waterways, railroads, reservoirs,
dams or other infrastructure projects, public or private works including
plantations or valuable crops, except upon written consent of the
government agency or private entity concerned;
(c) In areas covered by valid and existing mining rights;
(d) In areas expressly prohibited by law;
(e) In areas covered by small-scale miners as defined by law unless with
prior consent of the small-scale miners, in which case a royalty payment
upon the utilization of minerals shall be agreed upon by the parties, said

royalty forming a trust fund for the socioeconomic development of the

community concerned; and
(f) Old growth or virgin forests, proclaimed watershed forest reserves,
wilderness areas, mangrove forests, mossy forests, national parks,
provincial/municipal forests, parks, greenbelts, game refuge and bird
sanctuaries as defined by law and in areas expressly prohibited under
the National Integrated Protected Areas System (NIPAS) under Republic
Act No. 7586, Department Administrative Order No. 25, series of 1992
and other laws."
"SECTION 112. Non-impairment of Existing Mining/ Quarrying Rights. All valid
and existing mining lease contracts, permits/licenses, leases pending renewal,
mineral production-sharing agreements granted under Executive Order No. 279,
at the date of effectivity of this Act, shall remain valid, shall not be impaired, and
shall be recognized by the Government: Provided, That the provisions of Chapter
XIV on government share in mineral production-sharing agreement and of
Chapter XVI on incentives of this Act shall immediately govern and apply to a
mining lessee or contractor unless the mining lessee or contractor indicates his
intention to the secretary, in writing, not to avail of said provisions: Provided,
further, That no renewal of mining lease contracts shall be made after the
expiration of its term: Provided, finally, That such leases, production-sharing
agreements, financial or technical assistance agreements shall comply with the
applicable provisions of this Act and its implementing rules and regulations.
"SECTION 113. Recognition of Valid and Existing Mining Claims and
Lease/Quarry Application. Holders of valid and existing mining claims,
lease/quarry applications shall be given preferential rights to enter into any mode
of mineral agreement with the government within two (2) years from the
promulgation of the rules and regulations implementing this Act." (Underscoring
supplied)
Section 3(p) of RA 7942 defines an existing mining/quarrying right as "a valid and
subsisting mining claim or permit or quarry permit or any mining lease contract or
agreement covering a mineralized area granted/issued under pertinent mining laws."
Consequently, determining whether the license of respondents falls under this definition
would be relevant to fixing their entitlement to the rights and/or preferences under RA
7942. Hence, the present Petition has not been mooted.
Petitioners submit that the license clearly contravenes Section 69 of PD 463, because it
exceeds the maximum area that may be granted. This incipient violation, according to
them, renders the license void ab initio.

Respondents, on the other hand, argue that the license was validly granted, because it
was covered by four separate applications for areas of 81 hectares each.
The license in question, QLP No. 33,19 is dated August 3, 1982, and it was issued in the
name of Rosemoor Mining Development Corporation. The terms of the license allowed
the corporation to extract and dispose of marbleized limestone from a 330.3062-hectare
land in San Miguel, Bulacan. The license is, however, subject to the terms and conditions
of PD 463, the governing law at the time it was granted; as well as to the rules and
regulations promulgated thereunder.20 By the same token, Proclamation No. 2204 -which awarded to Rosemoor the right of development, exploitation, and utilization of the
mineral site -- expressly cautioned that the grant was subject to "existing policies, laws,
rules and regulations."21
The license was thus subject to Section 69 of PD 463, which reads:
"Section 69. Maximum Area of Quarry License Notwithstanding the provisions
of Section 14 hereof, a quarry license shall cover an area of not more than one
hundred (100) hectares in any one province and not more than one thousand
(1,000) hectares in the entire Philippines." (Italics supplied)
The language of PD 463 is clear. It states in categorical and mandatory terms that a
quarry license, like that of respondents, should cover a maximum of 100 hectares in any
given province. This law neither provides any exception nor makes any reference to the
number of applications for a license. Section 69 of PD 463 must be taken to mean
exactly what it says. Where the law is clear, plain, and free from ambiguity, it must be
given its literal meaning and applied without attempted interpretation. 22
Moreover, the lower courts ruling is evidently inconsistent with the fact that QLP No. 33
was issued solely in the name of Rosemoor Mining and Development Corporation, rather
than in the names of the four individual stockholders who are respondents herein. It
likewise brushes aside a basic postulate that a corporation has a separate personality
from that of its stockholders.23
The interpretation adopted by the lower courts is contrary to the purpose of Section 69 of
PD 463. Such intent to limit, without qualification, the area of a quarry license strictly to
100 hectares in any one province is shown by the opening proviso that reads:
"Notwithstanding the provisions of Section 14 hereof x x x." The mandatory nature of the
provision is also underscored by the use of the word shall. Hence, in the application of
the 100-hectare-per-province limit, no regard is given to the size or the number of mining
claims under Section 14, which we quote:
"SECTION 14. Size of Mining Claim. -- For purposes of registration of a mining
claim under this Decree, the Philippine territory and its shelf are hereby divided

into meridional blocks or quadrangles of one-half minute (1/2) of latitude and

longitude, each block or quadrangle containing area of eighty-one (81) hectares,
more or less.
"A mining claim shall cover one such block although a lesser area may be
allowed if warranted by attendant circumstances, such as geographical and other
justifiable considerations as may be determined by the Director: Provided, That in
no case shall the locator be allowed to register twice the area allowed for lease
under Section 43 hereof." (Italics supplied)
Clearly, the intent of the law would be brazenly circumvented by ruling that a license may
cover an area exceeding the maximum by the mere expediency of filing several
applications. Such ruling would indirectly permit an act that is directly prohibited by the
law.
Second Issue:
Validity of Proclamation No. 84
Petitioners also argue that the license was validly declared a nullity and consequently
withdrawn or terminated. In a letter dated September 15, 1986, respondents were
informed by then Minister Ernesto M. Maceda that their license had illegally been issued,
because it violated Section 69 of PD 463; and that there was no more public interest
served by the continued existence or renewal of the license. The latter reason, they
added, was confirmed by the language of Proclamation No. 84. According to this law,
public interest would be served by reverting the parcel of land that was excluded by
Proclamation No. 2204 to the former status of that land as part of the Biak-na-Bato
national park.
They also contend that Section 74 of PD 463 would not apply, because Minister
Macedas letter did not cancel or revoke QLP No. 33, but merely declared the latters
nullity. They further argue that respondents waived notice and hearing in their application
for the license.
On the other hand, respondents submit that, as provided for in Section 74 of PD 463,
their right to due process was violated when their license was cancelled without notice
and hearing. They likewise contend that Proclamation No. 84 is not valid for the following
reasons: 1) it violates the clause on the non-impairment of contracts; 2) it is an ex post
facto law and/or a bill of attainder; and 3) it was issued by the President after the
effectivity of the 1987 Constitution.
This Court ruled on the nature of a natural resource exploration permit, which was akin to
the present respondents license, in Southeast Mindanao Gold Mining Corporation v.
Balite Portal Mining Cooperative,24which held:

"x x x. As correctly held by the Court of Appeals in its challenged decision, EP

No. 133 merely evidences a privilege granted by the State, which may be
amended, modified or rescinded when the national interest so requires. This is
necessarily so since the exploration, development and utilization of the countrys
natural mineral resources are matters impressed with great public interest. Like
timber permits, mining exploration permits do not vest in the grantee any
permanent or irrevocable right within the purview of the non-impairment of
contract and due process clauses of the Constitution, since the State, under its
all-encompassing police power, may alter, modify or amend the same, in
accordance with the demands of the general welfare."25
This same ruling had been made earlier in Tan v. Director of Forestry26 with regard to a
timber license, a pronouncement that was reiterated in Ysmael v. Deputy Executive
Secretary,27 the pertinent portion of which reads:
"x x x. Timber licenses, permits and license agreements are the principal
instruments by which the State regulates the utilization and disposition of forest
resources to the end that public welfare is promoted. And it can hardly be
gainsaid that they merely evidence a privilege granted by the State to qualified
entities, and do not vest in the latter a permanent or irrevocable right to the
particular concession area and the forest products therein. They may be validly
amended, modified, replaced or rescinded by the Chief Executive when national
interests so require. Thus, they are not deemed contracts within the purview of
the due process of law clause [See Sections 3(ee) and 20 of Pres. Decree No.
705, as amended. Also, Tan v. Director of Forestry, G.R. No. L-24548, October
27, 1983, 125 SCRA 302]."28 (Italics supplied)
In line with the foregoing jurisprudence, respondents license may be revoked or
rescinded by executive action when the national interest so requires, because it is not a
contract, property or a property right protected by the due process clause of the
Constitution.29 Respondents themselves acknowledge this condition of the grant under
paragraph 7 of QLP No. 33, which we quote:
"7. This permit/license may be revoked or cancelled at any time by the Director of
Mines and Geo-Sciences when, in his opinion public interests so require or, upon
failure of the permittee/licensee to comply with the provisions of Presidential
Decree No. 463, as amended, and the rules and regulations promulgated
thereunder, as well as with the terms and conditions specified herein; Provided,
That if a permit/license is cancelled, or otherwise terminated, the
permittee/licensee shall be liable for all unpaid rentals and royalties due up to the
time of the termination or cancellation of the permit/license[.]" 30 (Italics supplied)

The determination of what is in the public interest is necessarily vested in the State as
owner of all mineral resources. That determination was based on policy considerations
formally enunciated in the letter dated September 15, 1986, issued by then Minister
Maceda and, subsequently, by the President through Proclamation No. 84. As to the
exercise of prerogative by Maceda, suffice it to say that while the cancellation or
revocation of the license is vested in the director of mines and geo-sciences, the latter is
subject to the formers control as the department head. We also stress the clear
prerogative of the Executive Department in the evaluation and the consequent
cancellation of licenses in the process of its formulation of policies with regard to their
utilization. Courts will not interfere with the exercise of that discretion without any clear
showing of grave abuse of discretion.31
Moreover, granting that respondents license is valid, it can still be validly revoked by the
State in the exercise of police power.32 The exercise of such power through Proclamation
No. 84 is clearly in accord with jura regalia, which reserves to the State ownership of all
natural resources.33 This Regalian doctrine is an exercise of its sovereign power as
owner of lands of the public domain and of the patrimony of the nation, the mineral
deposits of which are a valuable asset.34
Proclamation No. 84 cannot be stigmatized as a violation of the non-impairment clause.
As pointed out earlier, respondents license is not a contract to which the protection
accorded by the non-impairment clause may extend. 35 Even if the license were, it is
settled that provisions of existing laws and a reservation of police power are deemed
read into it, because it concerns a subject impressed with public welfare. 36 As it is, the
non-impairment clause must yield to the police power of the state. 37
We cannot sustain the argument that Proclamation No. 84 is a bill of attainder; that is, a
"legislative act which inflicts punishment without judicial trial." 38 Its declaration that QLP
No. 33 is a patent nullity39 is certainly not a declaration of guilt. Neither is the cancellation
of the license a punishment within the purview of the constitutional proscription against
bills of attainder.
Too, there is no merit in the argument that the proclamation is an ex post facto law. There
are six recognized instances when a law is considered as such: 1) it criminalizes and
punishes an action that was done before the passing of the law and that was innocent
when it was done; 2) it aggravates a crime or makes it greater than it was when it was
committed; 3) it changes the punishment and inflicts one that is greater than that
imposed by the law annexed to the crime when it was committed; 4) it alters the legal
rules of evidence and authorizes conviction upon a less or different testimony than that
required by the law at the time of the commission of the offense; 5) it assumes the
regulation of civil rights and remedies only, but in effect imposes a penalty or a
deprivation of a right as a consequence of something that was considered lawful when it
was done; and 6) it deprives a person accused of a crime of some lawful protection to
which he or she become entitled, such as the protection of a former conviction or an

acquittal or the proclamation of an amnesty.40 Proclamation No. 84 does not fall under
any of the enumerated categories; hence, it is not an ex post facto law.
It is settled that an ex post facto law is limited in its scope only to matters criminal in
nature.41 Proclamation 84, which merely restored the area excluded from the Biak-naBato national park by canceling respondents license, is clearly not penal in character.

Philippines and the Tampakan Companies on 25 April 1991, as amended by Amendatory

Agreement dated 15 July 1994, for purposes of exploration of the mining claims in
Tampakan, South Cotabato. The Option Agreement, among other things, provides for the
grant of the right of first refusal to the Tampakan Companies in case WMC Philippines
desires to dispose of its rights and interests in the mining claims covering the area
subject of the agreement.

Finally, it is stressed that at the time President Aquino issued Proclamation No. 84 on
March 9, 1987, she was still validly exercising legislative powers under the Provisional
Constitution of 1986.42 Section 1 of Article II of Proclamation No. 3, which promulgated
the Provisional Constitution, granted her legislative power "until a legislature is elected
and convened under a new Constitution." The grant of such power is also explicitly
recognized and provided for in Section 6 of Article XVII of the 1987 Constitution. 43

WMC Resources subsequently divested itself of its rights and interests in the Columbio
FTAA, and on 12 July 2000 executed a Sale and Purchase Agreement with petitioner
Lepanto over its entire shareholdings in WMC Philippines, subject to the exercise of the
Tampakan Companies exercise of their right of first refusal to purchase the subject
shares. On 28 August 2000, petitioner sought the approval of the 12 July 2000
Agreement from the DENR Secretary.

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

In an Agreement dated 6 October 2000, however, the Tampakan Companies sought to

exercise its right of first refusal. Thus, in a letter dated 13 October 2000, petitioner
assailed the Tampakan Companies exercise of its right of first refusal, alleging that the
Tampakan Companies failed to match the terms and conditions set forth in the 12 July
2000 Agreement.

SO ORDERED.
G.R. No. 162331
November 20, 2006
LEPANTO vs. WMC RESOURCES
Before Us is a Petition for Review on Certiorari under Rule 45 of the Rules of Civil
Procedure, assailing the Decision1 of the Court of Appeals in CA-G.R. SP No. 74161,
dated 21 November 2003, which dismissed herein petitioners Petition for Review of the
Decision2 of the Office of the President dated 23 July 2002 affirming in totothe Order3 of
the Secretary of the Department of Environment and Natural Resources (DENR) dated
18 December 2001 approving the application for and the consequent registration of
FTAA No. 02-95-XI from WMC Philippines to Sagittarius Mines, Inc.
On 22 March 1995, the Philippine Government and WMC Philippines, the local whollyowned subsidiary of WMC Resources International Pty. Ltd. (WMC Resources) executed
a Financial and Technical Assistance Agreement, denominated as the Columbio FTAA
No. 02-95-XI (Columbio FTAA) for the purpose of large scale exploration, development,
and commercial exploration of possible mineral resources in an initial contract area of
99,387 hectares located in the provinces of South Cotabato, Sultan Kudarat, Davao del
Sur, and North Cotabato in accordance with Executive Order No. 279 and Department
Administrative Order No. 63, Series of 1991.
The Columbio FTAA is covered in part by 156 mining claims held under various Mineral
Production Sharing Agreements (MPSA) by Southcot Mining Corporation, Tampakan
Mining Corporation, and Sagittarius Mines, Inc. (collectively called the Tampakan
Companies), in accordance with the Tampakan Option Agreement entered into by WMC

Thereafter, petitioner filed a case4 for Injunction, Specific Performance, Annulment of

Contracts and Contractual Interference with the Regional Trial Court of Makati, Branch
135, against WMC Resources, WMC Philippines, and the Tampakan Companies. WMC
Philippines and the Tampakan Companies moved for the dismissal of said case. Said
Motion to Dismiss having been denied, WMC Philippines challenged the order dismissing
the Motion on appeal5 before the Court of Appeals which subsequently ordered the
dismissal of the case on the ground of forum shopping in this wise:
Nevertheless, the Court finds that private respondent is guilty of forum-shopping. There
is forum-shopping whenever, as a result of an adverse opinion in one forum, a party
seeks a favorable opinion (other than by appeal or certiorari) in another. The principle
applies not only with respect to suits filed in courts but also in connection with litigation
commenced in the courts while an administrative processes and in anticipation of an
unfavorable administrative ruling and a favorable court ruling.
In this case, petitioners argue that private respondent is guilty of forum shopping for
having lodged the complain before respondent Court pending action by the Secretary of
the DENR through the Mines and Geo-Sciences Bureau (MGB) on its approval of the
Sale and Purchase Agreement dated July 12, 2000. Private respondent on the other
hand, opposes the foregoing contention arguing that the MGB will be merely exercising
its administrative not quasi-judicial power.

The action before respondent court was filed by private respondent to compel petitioner
WMC Resources to convey its equity in WMC Phils. and Hillcrest to the former.
Meanwhile, in the case before the MGB, private respondent sought the approval of Sale
and that the MGBs authority over the case is purely administrative, but further review
shows that private respondent raised contentious issues which need resolution by the
MGB before it can recommend any approval to the Secretary of the DENR. Particularly,
in its letter dated October 13, 2000 to the Secretary of the DENR, private respondent
posed its objection to the approval of the Sales and Purchase agreements between
WMC Resources and the Tampakan Companies, asserting that the latter failed to validly
exercise its right of first refusal. Also, in its letter to the Director of the MGB dated
December 8, 2000, private respondent spelled out in detail its reasons for objecting to
the agreement between WMC Resources and the Tampakan Companies, and in the
same breath, argued for the approval of its own contract. And because of the opposing
claims posited by private respondent and petitioners, the MGB was constrained to
require the parties to submit their respective comments. At the juncture, the MGBs
authority ceased to be administrative. Evidently, the MGB has to review all these
opposing contentions and resolve the same. A resolution of the MGB on which contract
to recommend or endorse to the Secretary of the DENR for approval will necessarily
include a declaration on the validity of the different Sale and Purchase Agreements
executed between the disagreeing parties, as well as on the exercise of the Tampakan
Companies exercise of its right of first refusal and its qualification as a contractor under
the FTAA. Even the MGB is aware that the dispute revolves around these sales and
purchase agreements. Hence, it cannot be gainsaid that the MGB will be exercising its
quasi-judicial powers in resolving the conflict before it. Whether the MGB can validly
exercise such jurisdiction over the controversy is another issue but nonetheless
immaterial in determining whether private respondent is guilty of forum-shopping. What is
determinative is the filing of two (2) separate actions in different for a based principally on
the same cause on the supposition that one or the other court would make a favorable
disposition. Thus, it is not highly unlikely that respondent Court and MGB will come up
with conflicting pronouncements on the dispute, thereby creating a quandary as to which
one will prevail. Private respondents act undisputably constitutes a clear case of forumshopping, a ground for summary dismissal with prejudice of the action. The respondent
court committed grave abuse of discretion in refusing to dismiss Civil Case No. 01-087
on ground of forum-shopping.6
With the denial of petitioners Motion for Reconsideration, the case7 was elevated to this
Court. In a Decision dated 24 September 2003, the Court affirmed the Decision of the
appellate court and dismissed the petition. In said Decision, the Court elucidated that:
True, the questioned agreements of sale between petitioner and WMC on one hand and
between WMC and the Tampakan Companies on the other pertain to transfer of shares
of stock from one entity to another. But said shares of stock represent ownership of
mining rights or interest in mining agreements. Hence, the power of the MGB to rule on
the validity of the questioned agreements of sale, which was raised by petitioner before

the DENR, is inextricably linked to the very nature of such agreements over which the
MGB has jurisdiction under the law. Unavoidably, there is identity of reliefs that petitioner
seeks from both the MGB and the RTC.
Forum shopping exists when both actions involve the same transactions, same essential
facts and circumstances and raise identical causes of actions, subject matter, and
issues. Such elements are evidently present in both the proceedings before the MGB
and before the trial court. The case instituted with the RTC was thus correctly ordered
dismissed by the appellate court on the ground of forum shopping. Besides, not only did
petitioner commit forum shopping but it also failed to exhaust administrative remedies by
opting to go ahead in seeking reliefs from the court even while those same reliefs were
appropriately awaiting resolution by the MGB.8
In the interim, on 10 January 2001, contending that the 12 July Agreement between
petitioner and WMC Philippines had expired due to failure to meet the necessary
preconditions for its validity, WMC Resources and the Tampakan Companies executed
another Sale and Purchase Agreement, where Sagittarius Mines, Inc. was designated
assignee and corporate vehicle which would acquire the shareholdings and undertake
the Columbio FTAA activities. On 15 January 2001, Sagittarius Mines, Inc. increased its
authorized capitalization to P250 million. Subsequently, WMC Resources and Sagittarius
Mines, Inc. executed a Deed of Absolute Sale of Shares of Stocks on 23 January 2001.
After due consideration and evaluation of the financial and technical qualifications of
Sagittarius Mines, Inc., the DENR Secretary approved the transfer of the Columbio FTAA
from WMC Philippines to Sagittarius Mines, Inc. in the assailed Order. According to said
Order, pursuant to Section 66 of Department Administrative Order No. 96-40, as
amended, Sagittarius Mines, Inc. meets the qualification requirements as ContractorTransferee of FTAA No. 02-95-XI, and that the application for transfer of said FTAA went
thru the procedure and other requirements set forth under the law.
Aggrieved by the transfer of the Columbio FTAA in favor of Sagittarius Mines, Inc.,
petitioner filed a Petition for Review of the Order of the DENR Secretary with the Office
of the President. Petitioner assails the validity of the 18 December 2001 Order on the
ground that: 1) it violates the constitutional right of Lepanto to due process; 2) it
preempts the resolution of very crucial legal issues pending with the regular courts; and
3) it blatantly violates Section 40 of the Mining Act.
In a Decision dated 23 July 2002, the Office of the President dismissed the petition in this
wise:
At the outset, it bears emphasis that quite contrary to the argument of petitioner Lepanto,
the above Order of the DENR Secretary is not violative of the Mining Law. Since the
subject Columbio FTAA was granted in accordance with the pertinent provisions of

Executive Order No. 279 and Department Administrative Order No. 63 on 22 March
1995, or prior to the effectivity of the Philippine Mining Act of 1995, especially as it
highlights the non-impairment of existing mining and/or quarrying rights, under Section
14.1 (b) thereof, only the consent of DENR Secretary is required. To hold otherwise
would be to unduly impose a burden on transferor WMC and thereby restrict its freedom
to dispose of or alienate this property right without due process. Thus, under the Revised
Implementing Rules and Regulations of the Philippine Mining Act of 1995, Chapter XXX
thereof expressly echoes the guaranty:
"Section 272. Non-Impairment of Existing Mining/Quarrying Rights.- All valid and existing
mining lease contracts, permits/licenses, leases pending renewal, Mineral Production
Sharing Agreements, FTAA granted under Executive Order No. 279, at the date of the
Act shall remain valid, shall not be impaired and shall be recognized by the Government
x x x.
x x x Provided, finally, That this provision is applicable only to all FTAA/MPSA
applications filed under Department Administrative Order No. 63 prior to the effectivity of
the act and these implementing rules and regulations."
As correctly stated by the MGB Director and affirmed by the DENR Secretary, Section
14.1 of the Columbio FTAA provides that the FTAA may be transferred provided that the
Secretary consents to the same. Pursuant to Section 112 of the Mining Act and Section
272 of DAO No. 96-40, as amended, on non-impairment of existing mining rights, the
subject application for transfer of the Columbio FTAA to Sagittarius requires only the
approval of the DENR Secretary.
Moreover, there is no merit in petitioner Lepantos argument that the DENR Secretary
and consequently, this Office, has no jurisdiction over the subject matter in issue. The
assailed Order of the DENR Secretary was pursuant to the latters exercise of the wellentrenched doctrine of primary jurisdiction of administrative agencies.

By virtue of the operation of the doctrine of primary jurisdiction, "courts cannot and will
not determine a controversy involving a question which is within the jurisdiction of an
administrative tribunal, especially where the question demands the exercise of sound
administrative discretion requiring the special knowledge, experience and services of the
tribunal to determine technical and intricate matters of fact and where a uniformity of
ruling is essential to comply with the purposes regulatory statute administered."
(Province of Zamboanga del Norte v. Court of Appeals, 342 SCRA 549 [2000]; Factoran
v. Court of Appeals, 320 SCRA 530 [1999]; Brett v. Intermediate Appellate Court, 191
SCRA 687 [1990]; Qualitrans Limousine Service, Inc. v. Royal Class Limousine Service,
179 SCRA 569 [1989]). Thus, even though an action may be lodged in court that is
ostensibly for annulment or "rescission of what appears to be an ordinary civil contract
cognizable by a civil court," the doctrine of primary jurisdiction still applies. (Industrial
Enterprises, Inc. v. Court of Appeals, 184 SCRA 426 [1990]).
Section 4, Chapter 1, Title XIV, Book IV of the Administrative Code of 1987 specifies the
powers and functions of the DENR. Also, the Philippine Mining Act of 1995 provides that
the DENR "shall be the primary government agency responsible for the conservation,
management, development, and proper use of the States mineral resources including
those in reservations, watershed areas, and lands of the public domain. The Secretary
shall have the authority to enter into mineral agreements on behalf of the Government
upon the recommendation of the Director, promulgate such rules and regulations as may
be necessary to implement the intent and provisions of this Act." (Chapter II, Section 8).
Since an FTAA is "a contract involving financial or technical assistance for large-scale
exploration, development and utilization of mineral resources" (Ibid., Chapter 1, Section
3 [r]), any issue affecting the same is indubitably within the primary jurisdiction of the
DENR, as in fact, the government enters into FTAAs through the DENR (Ibid., Chapter
VI, Section 33).
There is no dispute that the instant case involves and requires the special technical
knowledge and expertise of the DENR. In the determination by the DENR of a "qualified
person" pursuant to the Philippine Mining Act of 1995, such person must possess the
technical and financial capability to undertake mineral resources development". (Chapter
I, Section 3 [aq]) Obviously, this determination peculiarly lies within the expertise of the
DENR.
The validity of the successive transfers is not a civil issue, contrary to the allegation of
petitioner Lepanto, because validity of transfer depends on technical qualifications of the
transferee and compliance with the DENR requirements on qualifications, all of which
require administrative expertise. Notably, petitioner Lepanto is estopped from
assailing the primary jurisdiction of the DENR since petitioner Lepanto itself
anchored its Petition (cf. pp. 4-5) on the contention that, allegedly, "the Tampakan
Companies failed to match the terms and conditions of the July 12 Agreement with
petitioner Lepanto in that they did not possess the financial and technical
qualifications under the Mining Act and its Implementing Rules". Petitioner

Lepantos objections therefore go into the very qualifications of a transferee which

is a technical issue.
This contention is a recognition by petitioner Lepanto itself of the fact that the crucial and
determinative issue in the instant case is grounded on the financial and technical
qualifications of a transferee, which issue, indisputably, is within the exclusive domain
and expertise of the DENR and not of the courts.
xxxx

However, the above provision does not apply to the Columbio FTAA which was entered
into by and between the Philippine Government and WMCP on 22 March 1995, or prior
to the effectivity of RA No. 7942. Section 14.1 of the Columbio FTAA, under which the
Tampakan Companies claim their rights to first refusal, reads:
"14.1 Assignment
"The Contractor may assign, transfer, convey or otherwise dispose of all or any part of its
interest in the Agreement provided that such assignment, transfer, conveyance or
disposition does not infringe any Philippine law applicable to foreign ownership:

Moreover, petitioner Lepanto, by its conduct, is again estopped from assailing the
DENRs jurisdiction after actively participating in the proceedings therein and
seeking affirmative relief. A party who invoked the jurisdiction [of] a tribunal and
actively participated in the proceedings therein cannot impugn such jurisdiction when
faced with an adverse decision. (cf. Briad Agro Development Corporation v. dela
Serna, 174 SCRA 524 [1989]).9 [Emphasis ours]
With the denial of its Motion for Reconsideration, petitioner lodged an appeal before the
Court of Appeals which was consequently dismissed by the appellate court in the herein
assailed Decision. According to the Court of Appeals:
Petitioner forcefully argues that the DENR Secretary had usurped the power of the
President of the Philippines to approve the transfer of FTAA, as under the provision of
Section 40 of the Philippine Mining Act of 1995, any transfer or assignment of an FTAA
has to be approved not by the DENR Secretary but by the President.

(a) to an Affiliate provided that it gives notice of such assignment to the Secretary
within 30 days after such assignment; or
(b) to any third party provided that the Secretary consents to the same, which
consent shall not be unreasonably withheld."
Section 10, Article III of the Philippine Constitution enjoins Congress from passing a law
impairing the obligation of contracts. It is axiomatic that a law that impairs an obligation of
contract also violates the due process clause. The obligation of an existing contract is
impaired when its terms and conditions are changed by law, ordinance, or any issuance
having the force of law, thereby weakening the position or diminishing the rights of a
party to the contract. The extent of the change is not material. It is not a question of
degree or manner or cause, but of encroaching in any respect on its obligations or
dispensing with any part of its force. Impairment has also been predicated on laws which,
without destroying contracts, derogate from substantial contractual rights.

The argument does not wash.

The issue hinges on the applicability of Section 40 of RA 7942 or the Philippine Mining
Act of 1995, which took force on 14 April 1995, on the transfer of FTAA from WMC to the
Tampakan Companies, particularly the Sagittarius Mines, Inc.
The said law provides:
"Sec. 40. Assignment/Transfer A financial or technical assistance agreement may be
assigned or transferred, in whole or in part, to a qualified person subject to the prior
approval of the President: Provided, that the President shall notify Congress of every
financial or technical assistance agreement assigned or converted in accordance with
this provision within thirty (30) days from the date of approval."

The condition of RA No. 7942 requiring the further approval of the President, if made to
apply retroactively to the Columbio FTAA, would impair the obligation of contracts simply
because it constitutes a restriction on the right of the contractor to assign or transfer its
interest in an FTAA. In other words, it diminished the vested rights of the contractor to
assign or transfer its interests on mere approval of the DENR Secretary. The restriction is
therefore substantive, and not merely procedural, contrary to the contention of petitioner.
xxxx
Likewise militating against the petitioners side is the doctrine that statutes are to be
construed as having only a prospective operation unless the purpose and intention of the
Legislature to give them a retrospective effect is expressly declared or is necessarily
implied from the language used. In case of doubt, the doubt must be resolved against the
retrospective effect. At any rate, even if RA No. 7942 be accorded a retroactive effect,
this does notipso facto permit the application of the requirement of securing a prior
presidential consent to the transfer of FTAA, for, to iterate, this would impair the

obligation of contract. In such a case, the correct application of RA No. 7942 is for the
provisions to [be] made to apply on existing FTAAs only if the same would not result in
impairment of obligation of contracts.
This is as it should be. To hold otherwise would be to unduly impose a burden on
transferor WMC and thereby restrict its freedom to dispose of or alienate its property
right without due process. It constitutes impairment of obligation of contracts, which the
Fundamental Law enjoins, and contravenes the doctrine of prospective application of
laws.10
Hence, the instant Petition.
The pivotal issue to be resolved herein involves the propriety of the application to the
Columbio FTAA of Republic Act No. 7942 or the Philippine Mining Act of 1995,
particularly Section 40 thereof requiring the approval of the President of the assignment
or transfer of financial or technical assistance agreements. Petitioner maintains that
respondents failed to comprehend the express language of Section 40 of the Philippine
Mining Act of 1995 requiring the approval of the President on the transfer or assignment
of a financial or technical assistance agreement.
To resolve this matter, it is imperative at this point to stress the fact that the Columbio
FTAA was entered into by the Philippine Government and WMC Philippines on 22 March
1995, undoubtedly before the Philippine Mining Act of 1995 took effect on 14 April 1995.
Furthermore, it is undisputed that said FTAA was granted in accordance with Executive
Order No. 279 and Department Administrative Order No. 63, Series of 1991, which does
not contain any similar condition on the transfer or assignment of financial or technical
assistance agreements. Thus, it would seem that what petitioner would want this Court to
espouse is the retroactive application of the Philippine Mining Act of 1995 to the
Columbio FTAA, a valid agreement concluded prior to the naissance of said piece of
legislation.

law.12 Furthermore, it must be borne in mind that a law is a rule established to guide our
actions without no binding effect until it is enacted, wherefore, it has no application to
past times but only to future time, and that is why it is said that the law looks to the future
only and has no retroactive effect unless the legislator may have formally given that
effect to some legal provisions.13
In the case at bar, there is an absence of either an express declaration or an implication
in the Philippine Mining Act of 1995 that the provisions of said law shall be made to apply
retroactively, therefore, any section of said law must be made to apply only prospectively,
in view of the rule that a statute ought not to receive a construction making it act
retroactively, unless the words used are so clear, strong, and imperative that no other
meaning can be annexed to them, or unless the intention of the legislature cannot be
otherwise satisfied.14
Be that as it may, assuming for the sake of argument that We are to apply the Philippine
Mining Act of 1995 retrospectively to the Columbio FTAA, the lack of presidential
approval will not be fatal as to render the transfer illegal, especially since, as in the
instant case, the alleged lack of presidential approval has been remedied when petitioner
appealed the matter to the Office of the President which approved the Order of the
DENR Secretary granting the application for transfer of the Columbio FTAA to Sagittarius
Mines, Inc. As expounded by the Court in the Resolution of the Motion for
Reconsideration in the La Bugal-BLaan Tribal Association, Inc. v. Ramos[15]case,
involving the same FTAA subject of the instant case:
x x x Moreover, when the transferee of an FTAA is another foreign corporation, there is a
logical application of the requirement of prior approval by the President of the Republic
and notification to Congress in the event of assignment or transfer of an FTAA. In this
situation, such approval and notification are appropriate safeguards, considering that the
new contractor is the subject of a foreign government.
1wphi1

This posture of petitioner would clearly contradict the established legal doctrine that
statutes are to be construed as having only a prospective operation unless the contrary
is expressly stated or necessarily implied from the language used in the law. As
reiterated in the case of Segovia v. Noel,11 a sound cannon of statutory construction is
that a statute operates prospectively only and never retroactively, unless the legislative
intent to the contrary is made manifest either by the express terms of the statute or by
necessary implication.

On the other hand, when the transferee of the FTAA happens to be a Filipino
corporation, the need for such safeguard is not critical; hence, the lack of prior
approval and notification may not be deemed fatal as to render the transfer invalid.
Besides, it is not as if approval by the President is entirely absent in this
instance. x x x That case involved the review of the Decision of the Court of Appeals
dated November 21, 2003 in CA G.R. SP No. 74161, which affirmed the DENR Order
dated December 31, 2001 and the Decision of the Office of the President dated July 23,
2002, both approving the assignment of the WMCP FTAA to Sagittarius.16 (Emphasis
ours.)

Article 4 of the Civil Code provides that: "Laws shall not have a retroactive effect unless
therein otherwise provided." According to this provision of law, in order that a law may
have retroactive effect it is necessary that an express provision to this effect be made in
the law, otherwise nothing should be understood which is not embodied in the

Furthermore, if petitioner was indeed of the mind that Section 40 of the Philippine Mining
Act of 1995 is applicable to the Columbio FTAA, thus necessitating the approval of the
President for the validity of its transfer or assignment, it would seem contradictory that

petitioner sought the approval of the DENR Secretary, and not that of the President, of its
12 July 2000 Sale and Purchase Agreement with WMC Resources. Hence, it may be
glimpsed from the very act of petitioner that it recognized that the provision of the
Columbio FTAA regarding the consent of the DENR Secretary with respect to the transfer
of said FTAA must be upheld.
It is engrained in jurisprudence that the constitutional prohibition on the impairment of the
obligation of contract does not prohibit every change in existing laws, 17 and to fall within
the prohibition, the change must not only impair the obligation of the existing contract,
but the impairment must be substantial.18 Substantial impairment as conceived in relation
to impairment of contracts has been explained in the case of Clemons v. Nolting, 19 which
stated that: a law which changes the terms of a legal contract between parties, either in
the time or mode of performance, or imposes new conditions, or dispenses with those
expressed, or authorizes for its satisfaction something different from that provided in its
terms, is law which impairs the obligation of a contract and is therefore null and void.
Section 40 of the Philippine Mining Act of 1995 requiring the approval of the President
with respect to assignment or transfer of FTAAs, if made applicable retroactively to the
Columbio FTAA, would be tantamount to an impairment of the obligations under said
contract as it would effectively restrict the right of the parties thereto to assign or transfer
their interests in the said FTAA.

By imposing a new condition apart from those already contained in the agreement,
before the parties to the Columbio FTAA may assign or transfer its rights and interest in
the said agreement, Section 40 of the Philippine Mining Act of 1995, if made to apply to
the Columbio FTAA,
will effectively modify the terms of the original contract and thus impair the obligations of
the parties thereto and restrict the exercise of their vested rights under the original
agreement. Such modification to the Columbio FTAA, particularly in the conditions
imposed for its valid transfer is equivalent to an impairment of said contract violative of
the Constitution.
WHEREFORE, premises considered, the instant petition is hereby DENIED. The
Decision of the Court of Appeals in CA G.R. SP No. 74161 dated 21 November 2003 is
hereby AFFIRMED. Costs against petitioner.
SO ORDERED.