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The evidence for the applicant [private respondent] who was 70 years old at the time he testified

FIRST DIVISION shows that he acquired the land from his father-in-law, Dongail, when he married his daughter;
that he was then 18 years old; that at the time of his acquisition, it was planted with camotes,
casava [sic], langka, gabi, coffee and avocados; that he lived on the land since his marriage up
to the present; that he has been paying the taxes during the Japanese occupation and even
[G.R. No. 63528. September 9, 1996] before it; that he was never disturbed in his possession. Supporting his oral testimony,
applicant [private respondent] submitted tax declarations x x x both dated March 20, 1948, the
former for a rural land and the latter for urban land and improvement therein. The receipt
showing payment of the taxes on such tax declarations is dated Feb. 8, 1949 x x x. The said tax
ATOK BIG-WEDGE MINING COMPANY, PETITIONER, VS. HON. INTERMEDIATE declarations x x x show that they cancel tax declaration No. 439 dated Feb. 10, 1947 which was
APPELLATE COURT and TUKTUKAN SAINGAN, respondents. presented by the Oppositor [petitioner] Atok Big Wedge Mining Company as its Exhibit 14, and
the land tax under Exh. 14 was paid by applicant [private respondent] in 1947 x x
DECISION x. Applicant [private respondent] has also submitted Exh. `C, which indicates that all pre-war
records of tax declarations and real property receipts of the municipality of Itogon where the
HERMOSISIMA, JR., J.: property is located were burned and destroyed during the last world war.

In the face of two sets of divergent rulings of the Supreme Court on the nature of the rights The Bureau of Lands and Bureau of Forestry, represented by the Provincial fiscal,
of mining claimants over the land where their claim is located, the parties herein seek a oppose [sic] application. The Atok Big Wedge Mining Company came in also as oppositor
definitive ruling on the issue: What is actually the right of a locator of a mining claim located claiming that the land in question is within its mineral claims - Sally, Evelyn and Ethel x x x Atok
and perfected under the Philippine Bill of 1902 over the land where the claim is found? Does he Big Wedge Mining Company submitted Exhibits 6, 7 and 8, all showing that the annual
have an absolute right of ownership thereof or does he have the mere right to possess and claim assessment work of these mineral claims were maintained from 1932 to 1967 for Sally and
the same? Whose right to the land should, therefore, prevail: the mining claimants or that of an Evelyn and from 1946 to 1967 for Ethel. It was likewise shown that these mineral claims were
applicant for land registration? Does the mere recording or location of a mining claim ipso recorded in the mining recorders office; Sally and Evelyn on Jan. 2, 1931 and Ethel on March
facto and irreversibly convert the land into mineral land, notwithstanding the fact that the mining 18, 1921 x x x.[6]
claimant failed to comply with the strict work requirement under the Philippine Bill of 1902?
Petitioner Atok Big Wedge Mining Company appeals from the decision[1] of the Court of The respondent appellate court additionally found that the tract of land in question
Appeals[2] which reversed the decision[3] of the then Court of First Instance of Baguio City[4] in a according to the evidence, Exh. 2, covers portion of mineral claims, Sally, Evelyn, and Ethel, the
land registration case.[5] The court a quo denied and correspondingly dismissed the application first two located by one Reynolds in 1931 and the last, also by Reynolds in 1921 [7] but Atok x x
for registration of title filed by private respondent Tuktukan Saingan, finding no merit in x has not even been shown how connected with locator Reynolds. [8] Private respondent reiterates
Saingans claim of adverse, open and continuous possession in concept of an owner of the tract of this fact in his Comment:
land applied for by him, which happened to be claimed by petitioner as part of its mining claim
duly recorded by the Mining Recorder of Benguet. Respondent appellate court found petitioner x x x (T)he mining claims have become vested rights and properties of the locators, Messrs. H. I.
to have abandoned its mining claim over the said tract of land and, on the other hand, adjudged Reynolds and E. J. Harrison.
private respondent to be the owner thereof by virtue of his having possessed the same under a
bona fide claim of ownership for at least thirty (30) years prior to the filing of his land However, the locators, Reynolds and Harrison, or the PETITIONERS herein, assuming that
registration application in 1965. there is any relation between Atok Big Wedge Mining Co., and the locators, Reynolds and
The court a quo made the following findings of fact: Harrison, have never shown that their rights have been preserved or remain vested.

Applicant [private respondent] seeks the registration of a parcel of land with an area of 41,296 xxx
square meters situated in the barrio of Lucnab, Itogon, Benguet, which is shown in survey plan
Psu-209851 x x x. Furthermore, when the land in question was registered in the office of the Mining Recorder in
1921, and 1931, respectively, the mineral claims covering the land in question namely: Sally,
Evelyn and Ethel were in the name of the Locators E. J. Harrison and H. I. Reynolds. No
evidence was ever presented as to how Petitioner herein obtained ownership over said claims The trial court having dismissed private respondents application for registration on the
during the hearing of this case in the Lower Court up to this time. It was not even shown how ground that petitioners had already acquired a vested right over the subject land, private
Petitioner herein, Atok Big Wedge Mining Co., is connected or related to locator Reynolds. x x respondent appealed to the respondent court. The Director of Lands, thru the Solicitor General,
x[9] adopted as his own, the appellees brief filed by petitioner.
The respondent appellate court, on its part, correctly considered inadequate, however, the
Significantly, nothing in the subsequent pleadings filed by petitioner rebuts, disputes or mere recording of petitioners mining claims in the Mining Recorder of Benguet and the
proves otherwise, the aforecited issue raised by private respondent with regard to its personality, corresponding, albeit religious, payment of annual assessment fees therefor, to vest in petitioner
interests and authority to oppose the application for registration filed by private respondent ownership rights over the land in question. Truly, under Executive Order No. 141 [11], the
respecting land to which petitioner claims rights but as to which it is not the duly recorded payment of annual assessment fees is only proof of compliance with the charges imposed by law
mining locator. and does not constitute proof of actual assessment work on the mining land
The Director of Lands, thru the Office of the Solicitor General, opposed private concerned.Respondent court ruled in this connection:
respondents application on the ground that the applicant did not have title in fee simple over the
questioned land and that he had not exercised continuous, exclusive and notorious possession x x x (I)t must be conceded that the same having been located and existing since 1921 and 1931,
and occupation over the said land for at least thirty (30) years immediately preceding the filing the rights of locator if correspondingly preserved, remained vested, - but as this Court also
of the application. However, the Solicitor General no longer joined petitioner in this ultimate examines the evidence, what has been shown is that affidavits of assessment work had been filed,
appeal, the Solicitor General later conceding existence of private respondents rights. yes, from 1932 in connection with claim Sally and from 1933 as to Evelyn, and from 1936 as to
claim Ethel, but tsn. would not show that in truth and in fact, there had been that assessment
Petitioners presentation of evidence proving registration of the mining claims of petitioner work on the claims, [sic] witness Pelayo of Atok admits that he had not gone over the area x x x
in the Mining Recorder of Benguet dating back to 1931, at the latest, notably about sixteen in fact he joined the company in 1962 only,[sic] in other words, all that Atok has shown as to
(16) years before private respondent declared the land in question for taxation purposes and assessment work is the affidavit thereon, but as Ex. Order 141 of 1 August, [sic] 1968 has said:
thirty four (34) years before private respondent filed the land registration proceedings in 1965,
apparently impressed the court a quo. And so it ruled in favor of petitioner as oppositor in the
land registration proceedings, the court a quo ratiocinating in this wise: (W)hat matters is [sic] maintaining and preserving possessory rights to the claims is the
continuous performance of the required assessment work, not the filing of an affidavit which
may be disproved by findings of [sic] the ground,'
x x x (T)he mining claims were recorded ahead of the time when the applicant [private
respondent] declared the land for taxation purposes based on his documentary exhibits. So the
evidence of the applicant [private respondent] cannot prevail over the documentary exhibits of and here, the very fact that applicant has possessed continuously apparently without protest
the oppositor Atok Big Wedge Mining Company. The government oppositors adopted the from Atok x x x must disprove the truth that locator or Atok had indeed done assessment work x
evidence of the mining company. x x.[12]

Moreover, if applicant [private respondent] was already in possession and occupation of the Private respondent, in support of respondent courts quoted findings, points out in his
land in the concept of owner, as claimed, it is strange that he did not oppose its survey when the pleadings that:
mining company surveyed the area preparatory to its recording in the mining recorders
office. The conclusion is that he was not yet there when the survey by the mining company was x x x The APPLICANT [private respondent] constructed various improvements on the land
conducted or if he was already there the nature of his occupation was not in the concept of consisting of his 3 residential houses, fruit trees, ricefields and other permanent improvements. x
owner for otherwise he could have asserted it at the time. xx

The foregoing facts show that the mining company had established its rights long before xxx
applicant [private respondent] asserted ownership over the land. The perfection of mining claims
over the mineral lands involved segregate [sic] them from the public domain and the beneficial On the other hand, the PETITIONER Mining company has not shown that it has introduced a
ownership thereof became vested in the locator.[10] single improvement (assessment work) on the property. It has only paid the minimum annual
assessment required by law of P200.00 a year. There was no evidence, whatsoever, of its alleged
`factual possession of the property. No assessment work was shown during the ocular inspection
ordered by the Honorable Trial Court neither during the ocular inspection conducted by the We find these arguments to be devoid of merit.
Bureau of Forestry.
The records bear out that private
respondent has been in possession of
THIS ritual of paying the uniform sum of P200.00 a year for alleged assessment work is not subject parcel of land in concept of owner
enough evidence that such assessment work was actually made. It is precisely for this reason for more than thirty (30) years
that Executive Order 141 dated August 1, 1968 was issued by the President of the
Philippines. This order made it mandatory that it is not enough to pay P200.00 a year but there ----------------------------------------------------
must be actual continuous assessment work done on the surface of the mineral claims. x x
x [Underscoring supplied by private respondent.][13] The court a quo made the following factual findings based on the testimony of private
respondent:
Also, private respondent also additionally informs this court that:
The evidence x x x shows that he [private respondent] acquired the land from his father-in-law,
Dongail, when he married his daughter; that he was then 18 years old; that at the time of his
x x x PETITIONER Atok Big Wedge Mining Company has, on October 12, 1978, converted its
acquisition, it was planted with camotes, casava [sic], langka, gabi, coffee and avocados; that he
application on mineral claims in question (SALLY, EVELYN and ETHEL) into mining lease only
lived on the land since his marriage up to the present; that he has been paying the taxes during
in compliance with Presidential Decree 1214. PETITIONER mining company is now a mere
the Japanese occupation and even before it; that he was never disturbed in his
lessee of the mining claims. And as such lessee, it has no right on the surface rights of such
possession. Supporting his oral testimony, applicant submitted tax declarations x x x both dated
mineral claims. An official certification to that effect by the Bureau of Mines & Geo-Sciences,
March 20, 1948, the former for a rural land and the latter for urban land and improvement
Regional Office No. 1 of the City of Baguio is hereby attached as Annex `A and made integral
therein.[18]
part hereof. x x x.[14]
Substantiating the aforecited testimonial evidence of private respondents actual, adverse
an allegation which obviously clinches this case in his favor.
and continuous possession of the subject land for more than thirty (30) years are the observations
Respondent court having reversed the trial courts decision on the ground that private of the court commissioner during the ocular inspection of the subject land on February 1, 1969,
respondent had, by sufficient evidence, shown his right to registration over the contested parcel pertinent transcribed portions of which read as follows:
of land, petitioner elevated its cause to this court. The Director of Lands, however, did not join in
petitioners appeal. Thus, in a Manifestation and Motion, dated June 21, 1983, [15] the Director of Upon verification of the extent of the area applied for by the applicant which tallies with the
Lands, thru the Solicitor General, acknowledged that the respondent Courts decision has become plan on record, we find the following improvements;
final with respect to the Director of Lands.[16]
Petitioner, left to its own by the Director of Lands, cites the following grounds for the grant The land applied for is almost 90% improved with numerous irrigated rice terraces newly
of the instant petition: planted to palay at the time of the ocular inspection and others planted to vegetables such as
potatoes, banana plants, flowering plants and fruit trees such as mangoes, jackfruits, coffee
I plants, avocados and citrus - all fruit bearing.

THAT THE LAND IN QUESTION HAD LONG BEEN SEGREGATED FROM THE PUBLIC Most of the fruit trees such as the mango trees are about one half (1/2) meter in diameter.
DOMAIN AND OWNERSHIP THERETO HAD LONG BECOME VESTED IN HEREIN
PETITIONER WHEN ITS MINING CLAIMS IN QUESTION WERE REGISTERED IN THE There are four houses owned by the applicant [private respondent] and his children.
OFFICE OF THE MINING RECORDER IN 1921 AND 1931 RESPECTIVELY.
There is a creek traversing the middle portion of the land which serves as irrigation for the
II numerous rice paddies.

THAT THE COURT OF APPEALS COMMITTED A GRAVE ABUSE OF DISCRETION IN Upon verification of the surrounding area which we did by hiking all the way, there are no
FINDING THAT THE APPLICANT WAS IN CONTINUOUS OPEN AND ADVERSE assessment tunnels or any sign of mining activities.
POSSESSION OF THE LAND IN QUESTION.[17]
xxx Around the yard of the houses of the applicant are numerous coffee trees, jackfruits, pomelos,
papaya, pineapples, banana plants, guava trees and carrots.
There are earthen dikes and fences surrounding the property applied for.
The orchard is fully planted to coffee trees. The area is estimated to be more than one hectare
It also appears that the surrounding area of the land applied for is also fully cultivated which is planted to coffee trees and other plants.[19]
especially on the western portion, southern portion and also on the northern portion.
Private respondent, it must be emphasized, offered in evidence in the land registration
On the northwestern ridge are numerous terraces planted to various vegetables and on the edges proceedings before the court a quo, tax declarations, dated March 20, 1948, and tax payment
of the property is a plantation of tiger grass used for brooms. receipts, dated February 8, 1949.
Significantly, petitioner did not present any evidence in rebuttal of private respondents
On the eastern slope are also numerous terraces planted to flowering plants and numerous aforestated claims of having acquired the subject land from his wifes father and having lived on
banana plants. the land since his marriage at the age of eighteen (18). Neither has petitioner taken exception to
the aforecited observations of the court commissioner during the ocular inspection of the subject
There are only two (2) pine trees growing situated on the eastern slope of the land in question. land. There is nary a showing in petitioners numerous pleadings filed before us that there exists
substantial basis for us not to believe petitioners claims, and this is understandable, for petitioner
On the northern portion are terraces and ricefields and mango tree as well as banana plants. largely anchored its cause on its alleged vested rights to its mining claims under the mandate of
the Philippine Bill of 1902 and our rulings in McDaniel vs. Apacible and Cuisia[20] and the
catena of cases subsequent thereto.
At the northern slope of the land applied for is [sic] fully cultivated with the exception of
whatever portions are planted to bananas and tiger grass. Considering the aforestated evidence borne out by the records of the instant case, their
credibleness and the lack of adequate opposition thereto, we agree with respondent Court of
The terraces at the time of the ocular inspection is planted to vegetables and flowering plants Appeals that a reading of tsn. would rather persuade that applicant [private respondent] had
such as African dishes [sic]. shown quite well that subject property had been in (the) continuous and adverse possession, first,
of his predecessor-in-interest, Dongail and, after the death of the latter, (by respondent) himself,
On the northwestern portion of the land are numerous terraces planted to seasonal vegetable years before, that is, long before the outbreak of the last war.[21]
crops. The rest are planted to banana except the small steep portion planted to tiger grass to Petitioner is deemed to have abandoned
prevent the land from eroding. his mining claims under E.O. No. 141 and
P.D. No. 1214
On the western portion is a big irrigation canal with plenty of water which serve [sic] as a water
supply to irrigate the ricefields which are found around the property. -------------------------------------------
All mineral lands, as part of the countrys natural resources, belong to the Philippine
An estimate of around 90 to 120 big and small trees are scattered all over the property. Around State. This concept of jura regalia enshrined in past and present Philippine constitutions, has not
the houses are full of fruit trees. always been the prevailing principle in this jurisdiction, however, the abundant resources within
our coastal frontiers having in the past filled not just one colonizers booty haul. Indeed, there
xxx was a time in our history when the mining laws prevailing in this jurisdiction were
compromising, to say the least, of the Filipino peoples inherent rights to their natural wealth.
The mining compound of Itogon is very far from this place and this land is at the boundary of Before the cession of the Philippine Islands to the United States under the Treaty of Paris,
Baguio City and Itogon. That is why it is more suitable for residential and agricultural the prevailing mining law in the colony was the Royal Decree of May, 1867, otherwise known as
purposes. Nowhere do we find any mining work done, any cable or anything that would show The Spanish Mining Law.
any mining operation in this area.
In the advent of American occupation, the Philippines was governed by means of organic
acts which were in the nature of charters serving as a Constitution of the occupied territory from
1900 to 1935.[22] Among the principal organic acts of the Philippines was the Act of Congress of On November 7, 1936, the First National Assembly enacted Commonwealth Act No. 137,
July 1, 1902 through which the United States Congress assumed the administration of the otherwise known as the Mining Act. In contradistinction with the Philippine Bill of 1902 which
Philippine Islands. was patterned after the United States Federal Mining Acts which rejected the regalian doctrine,
the Mining Act expressly adopted the regalian doctrine following the provisions of the 1935
The Philippine Bill of 1902 contained provisions for, among many other things, the open Constitution. Since said Constitution necessarily prohibits the alienation of mining lands, the
and free exploration, occupation and purchase of mineral deposits and the land where they may Mining Act granted only lease rights to mining claimants who are proscribed from purchasing
be found. It declared all valuable mineral deposits in public lands in the Philippine Islands, both the mining claim itself. These provisions of the Mining Act, however, were expressly
surveyed and unsurveyed x x x to be free and open to exploration, occupation, and purchase, and inapplicable to mining claimants who had located and recorded their claims under the Philippine
the land in which they are found to occupation and purchase, by citizens of the United States, or Bill of 1902.
of said Islands x x x.[23]
The nationalism underlying the adoption of the regalian doctrine in the 1935 Constitution
Any qualified person desiring to locate a mineral claim may enter upon the same and locate was further eroded by the amendment thereto which was adopted by the First Congress on
a plot of ground measuring, where possible, but not exceeding, one thousand feet in length by September 18, 1946 and approved by a majority at the elections held on March 11, 1947. This
one thousand feet in breadth, in as nearly as possible a rectangular form. [24] Under the Philippine amendment which came in the form of an Ordinance Appended to the Constitution is what is
Bill of 1902, the holder of the mineral claim so located is entitled to all the minerals which may known as the Parity Rights amendment. It provided that, notwithstanding the adoption in the
lie within his claim, but he may not mine outside the boundary lines of his claim. [25] The mine Constitution of the regalian doctrine and the proscription against aliens participating in the
claim locator must have his claim recorded in the mining recorder within thirty (30) days after natural wealth of the nation, excepted therefrom were the citizens of the United States and its
the location thereof; otherwise, he will be deemed to have abandoned the same. [26] business enterprises which would have the equal right in the disposition, exploitation,
One of the continuing requirements for the subsistence of the mining claim is performance development and utilization of our natural resources, among them, our mining lands and
of not less than one hundred dollars worth of labor or undertaking of improvements of the same minerals for the period from July 4, 1946 to July 3, 1974.
value every year.[27] This is a strict requisite, the locators failure to comply with which shall In the meantime, the provisions of the Philippine Bill of 1902 regarding mining claims,
operate to open the claim or mine to relocation in the same manner as if no location of the same insofar as the mining lands and mining claims acquired before the effectivity of the 1935
had even been made.[28] Unequivocal is the mandatory nature of the work or labor requirement Constitution are concerned, continued to be in effect. Annual performance of labor or
on the mine that the Philippine Bill specifically designates the time when the work or labor undertaking of improvements on the mine remained an annual requirement, non-compliance
required to be done annually on all unpatented mineral claims, shall commence. [29] with which resulted in the mine becoming again open to relocation but now subject to the lease
Subsequently, among a few laws passed amending the Philippine Bill of 1902 was Act No. provisions of the Mining Act. The intention for this annual work requirement to be a strict
624 passed by the United States Philippine Commission and approved on February 7, 1903.Said prerequisite to maintenance of a claimants rights under the Philippine Bill of 1902 apparently not
Act prescribed regulations to govern the location and the manner of recording mining claims and lost on subsequent legislators, they took the same as an absolute prerequisite with grave
the amount of work necessary to hold possession thereof. Such regulations reinforced the annual consequences and believed it necessary to expressly enact a law[31] waiving this requirement
work or labor requirement of not less than one hundred dollars worth as provided for in the during the period from January 1, 1952 to January 1, 1954 as the circumstances then necessitated
Philippine Bill of 1902, in accordance with Section 36 thereof which limits the power of the the same.
United States Philippine Commission to make regulations but not in conflict with the provision The Philippine Bill of 1902 clearly required the annual performance of work on the mine or
of this Act [i.e., the Philippine Bill of 1902], governing the location, manner of recording, and the undertaking of improvements thereon in order for the mine claim locator to continue
amount of work necessary to hold possession of a mining claim x x x. enjoying all the rights accruing to him as such under the said Bill. This and nothing short of this
On November 15, 1935, the Constitution of the Commonwealth took effect. The 1935 was the requirement. The filing of affidavits of annual assessment work, which procedure is not
Constitution declared all natural resources of the Philippines, including mineral lands and even provided for in the Philippine Bill of 1902, is required only for purposes of proving that
minerals, to be property belonging to the State.[30] However, as it turned out, not really all of the there had actually been work or improvements done. Such filing could not have been intended to
Philippines natural resources were considered part of the public domain. Those natural replace the actual work requirement, and nary is there a basis in law to support any conclusion to
resources, and for that matter, those mineral lands and minerals with respect to which there the contrary, notwithstanding what was appearing to be the practice of mine claim locators of
already was any existing right, grant, lease, or concession at the time of the inauguration of the annually filing affidavits of annual assessment but willfully not undertaking actual work or
Government established under this Constitution, were then considered outside the application of tangible improvement on the mine site.
the jura regalia doctrine or at least not unconditionally or totally within the contemplation of
said doctrine.
On August 1, 1968, then President Marcos issued Executive Order (E.O.) No. rights to the issuance of mining patents for their claims. [35] Corollarily, non-filing of applications
141. Whereas mining claim holders under the Philippine Bill of 1902 x x x are of the impression for mining lease by the holders thereof within the one-year period would cause the forfeiture of
that they may hold on to their claims indefinitely by the mere filing of affidavits of annual all their rights to their claims.[36]
assessment work x x x, E.O. No. 141 precisely declared that such impression is not correct, for
what matters in maintaining and preserving possessory title to the claim is the continuous Against the backdrop of the afore-chronicled evolution of the pertinent mining laws, past
performance of the required assessment work, not the filing of an affidavit which may be and present, in this jurisdiction, we now proceed to resolve the controlling issue in this
disproved by findings on the ground. Consequently, E.O. No. 141 established the status of such case:Whether or not the ownership of subject land had long been vested on petitioner after it had
unpatented mining claims which have not complied with the annual work requirement, as having allegedly located and recorded its mining claim in accordance with the pertinent provisions of
been abandoned and open for relocation, their declarations of location being accordingly the Philippine Bill of 1902.
cancelled. This issue is certainly not a novel one. It has been first ruled upon by this court in the 1922
On January 17, 1973, the 1973 Constitution came into force and effect. Unlike the former case of McDaniel vs. Apacible and Cuisia.[37] There, applying American precedents, we stated:
Charter, the 1973 Constitution did not expressly qualify the application of the regalian doctrine
as being subject to any right granted before the effectivity of the 1935 Constitution or the 1973 The moment the locator discovered a valuable mineral deposit on the lands located, and
Constitution for that matter. It provided: perfected his location in accordance with law, the power of the United States Government to
deprive him of the exclusive right to the possession and enjoyment of the located claim was gone,
SEC. 8. All lands of the public domain, waters, minerals, coal, petroleum and other mineral oils, the lands had become mineral lands and they were exempted from lands that could be granted to
all forces of potential energy, fisheries, wildlife, and other natural resources of the Philippines any other person. The reservations of public lands cannot be made so as to include prior
belong to the State. x x x.[32] mineral perfected located locations; and of course, if a valid mining location is made upon
public lands afterward included in a reservation, such inclusion or reservation does not affect
the validity of the former location. By such location and perfection, the land located is
But the conditional application of the regalian doctrine under the 1973 Constitution could segregated from the public domain even as against the Government. x x x.[38]
be found in Presidential Decree (P.D.) No. 463, enacted on May 17, 1974, which revised the
Mining Act (C.A. No. 137). While the said decree declares that x x x all mineral deposits in
public or private lands x x x belong to the State, inalienably and imprescriptively x x x, it also We reiterated this ruling in the subsequent cases of Gold Creek Mining vs. Rodriguez
recognizes whatever rights or reservations had already been existing with respect to certain (1938),[39] Salacot Mining Company vs. Abadilla (1939),[40] Salacot Mining Company vs.
mining lands,[33] apparently alluding to the rights of mining claim holders under the Philippine Rodriguez (1939),[41] Bambao vs. Lednicky (1961),[42] Comilang vs. Buendia (1967),[43] Benguet
Bill of 1902. Consolidated, Inc. vs. Republic (1986),[44] Republic vs. Court of Appeals (1988)[45] and Atok-Big
Wedge Mining Co., Inc. vs. Court of Appeals (1991).[46]
Under the Philippine Bill of 1902, the procedure was that a mining claim locator need not
apply for a patent soon after locating the mine. The patent may come later, and the said locator, Notwithstanding our ruling in the aforecited cases, however, there came about thereafter a
for as long as he complies with the annual actual work requirement, enjoyed possessory rights catena of cases where we declared that the rights of the holder of a mining claim located under
with respect to such mining claim with or without a patent therefor. It has already been stated the Philippine Bill of 1902, are not absolute or are not strictly of ownership. This declaration was
that under E.O. No. 141, unpatented mining claims shall be deemed abandoned upon a finding a necessary premise in our affirmation of the constitutionality of P.D. No. 1214 in the 1987 case
that the holders thereof had not been actually performing any work or labor or undertaking any of Santa Rosa Mining Co., Inc. vs. Leido, Jr.[47] where we stated:
improvement at the mine site notwithstanding their having religiously filed annual affidavits of
assessment. Mere location does not mean absolute ownership over the affected land or mining claim. It
merely segregates the located land or area from the public domain by barring other would-be
Even under P.D. 463 which was enacted in 1974, the possessory rights of mining claim locators from locating the same and appropriating for themselves the minerals found therein. To
holders under the Philippine Bill of 1902 remained effective for as long as said holders complied rule otherwise would imply that location is all that is needed to acquire and maintain rights over
with the annual actual work requirement. But on October 14, 1977, P.D. No. 1214 required all a located mining claim. This, we cannot approve or sanction because it is contrary to the
the holders of unpatented mining claims to secure mining lease contracts under P.D. No. intention of the lawmaker that the locator should faithfully and consistently comply with the
463.Faced with the grave consequence of forfeiture of all their rights to their claims, holders of requirements for annual work and improvements in the located mining claim.[48]
subsisting and valid patentable mining claims located under the Philippine Bill of 1902 were to
file mining lease applications therefor within one (1) year from the effectivity of the said
decree.[34] The filing of such mining lease applications was considered a waiver of the holders
And our ruling there was upheld in the tradition of stare decisis in the subsequent cases of Under the Philippine Bill of 1902, the mining claim holder, upon locating and recording of
Director of Lands vs. Kalahi Investments, Inc. (1989),[49] Zambales Chromite Mining Company, his claim, has the right to acquire for himself all mineral deposits found within his claim to the
Inc. vs. Leido, Jr. (1989),[50] Poe Mining Association vs. Garcia (1991),[51] United Paracale exclusion of everyone, including the Government. Such rights are necessarily possessory as they
Mining Company, Inc. vs. De la Rosa (1993),[52] and Manuel vs. Intermediate Appellate Court are essentially utilitarian and exploitative. Such rights accruing to the mining claim locator are
(1995).[53] personal to him in the sense that no conclusion as to the nature of the land may definitively be
made based solely on the fact that a mining claim has been recorded as regards a particular
While petitioner adamantly insists that there is only one construction of the provisions of land. However, insofar as his rights are exclusive and no other person may undertake mining
the Philippine Bill of 1902 as regards his mining claim rights, and this is that the same are activities on a recorded mining claim, unless the same has been abandoned or the works thereon
absolute and in the nature of ownership, private respondent posits the ultimate question of which not done, the mining locators rights are also protected against adverse mining claims of third
between the aforecited seemingly inconsistent rulings is the correct interpretation of the persons. He also has the right to immediately or eventually secure a patent on his mining claim
Philippine Bill of 1902 in relation to E.O. No. 141 and P.D. 1214 insofar as the rights of mining and in the event that he postpones securing a patent, his rights to exclusive possession and
claim holders under the said Bill are concerned. exploitation of his mining claim subsist for as long as he complies with the continuing
This is not the first time either that we are asked to, in all awareness of the precedents, requirement of annually performing work or undertaking improvements at the mine site. Insofar
resolve these postulations of this court that are perceived to be contradictory. In the 1994 case of as the Philippine Bill of 1902 does not provide a specific time within which the mining claim
United Paracale Mining Company vs. Court of Appeals,[54] posed before us by petitioner therein holder must secure a patent, his rights to possession and use of the mining land appear to be
was the same question that herein private respondent asks us to resolve in the ultimate.We noted unconditional, the option not at all to secure a patent being available to him in the absence of a
in that case: deadline or ultimatum therefor. The Philippine Bill of 1902, however, did not foreclose a
subsequent act on the part of the State to limit the time within which the said patent must be
secured under threat of forfeiture of rights provided for under the Philippine Bill of 1902. Thus,
"The query of petitioner: What is actually the right of a locator of mining claim located and
in the sense that the rights of a mining claim holder may in the future be curtailed by failure to
perfected under the Philippine Bill of 1902. Does he have an absolute right of ownership, or
obtain a patent, especially if we recall that Section 36 of the said Bill itself foretold the
merely a right to possess and claim?
subsequent promulgation of regulations regarding mining claims, such rights cannot also be said
to be truly unconditional or absolute.
Petitioner contends that there are two (2) conflicting rulings made by this Court on the same
issue. In Director of Lands vs. Kalahi Investments, Inc. (169 SCRA 683), a locator of mining We also learn from our reading of our past and present mining laws in their proper
claims perfected under the Philippine Bill of 1902 has been held not to have an absolute right of historical perspectives, that the process of recording mining claims could not have been intended
ownership over said claims but merely a possessory right thereto. In Atok-Big Wedge Mining to be the operative act of classifying lands into mineral lands. The recording of a mining claim
Company, Inc. vs. Court of Appeals and Liwan Consi (193 SCRA 71), however, a locator of only operates to reserve to the registrant exclusive rights to undertake mining activities upon the
mining claim perfected under the Philippine Bill of 1902, the Court has ruled, does have an land subject of the claim. The power to classify lands into mineral lands could not have been
absolute right of ownership over his claim being thereby removed from the public domain.[55] intended under the Philippine Bill of 1902 to be vested in just anyone who records a mining
claim. In fact, this strengthens our holding that the rights of a mining claimant are confined to
In that case of United Paracale Mining, it would have been premature for us to rule on the possessing the land for purposes of extracting therefrom minerals in exclusion of any or all other
query, not all indispensable parties therein having been joined. That is not the situation in this persons whose claims are subsequent to the original mining locator. Thus, if no minerals are
present controversy, however, and so we shall forthwith resolve the matter at hand once and for extracted therefrom, notwithstanding the recording of the claim, the land is not mineral land and
all. registration thereof is not precluded by such recorded claim. Thus, in the case at bench, the
mining claimant, who had failed to comply with the annual minimum labor requirement, could
The earlier chronicle of the evolution of the mining laws, past and present, in this not, all the more, be expected to have extracted minerals from the mining location. Utter lack of
jurisdiction was not without a predetermined purpose. The detailing of the provisions of those proof of even its potential deposits on the part of the petitioner, thus, does not surprise us at all.
laws, especially of the Philippine Bill of 1902, was certainly deliberate. It is undeniable at this
point that the determination of the rights of a mining claim holder under the said Bill is best Thus, it can be said (1) that the rights under the Philippine Bill of 1902 of a mining claim
undertaken on the basis of the very source of those rights, that is, the Bill itself. And any holder over his claim has been made subject by the said Bill itself to the strict requirement that
alteration or change in the nature of those rights must be conceded for as long as such is he actually performs work or undertakes improvements on the mine every year and does not
statutorily and constitutionally sanctioned, for even vested rights may be taken away by the State merely file his affidavit of annual assessment, which requirement was correctly identified and
in the exercise of its absolute police power. declared in E.O. No. 141; and (2) that the same rights have been terminated by P.D. No. 1214, a
police power enactment, under which non-application for mining lease amounts to waiver of all
rights under the Philippine Bill of 1902 and application for mining lease amounts to waiver of
the right under said Bill to apply for patent. In the light of these substantial conditions upon the
rights of a mining claim holder under the Philippine Bill of 1902, there should remain no doubt
now that such rights were not, in the first place, absolute or in the nature of ownership, and
neither were they intended to be so.
Applying the aforecited ruling to the facts of this case, we find that, not only has petitioner
failed to sufficiently show compliance with actual annual work requirement on its mining claims
but also that credible are the transcribed observations of the trial commissioner that nowhere on
the subject land could be found tangible works or improvements of an extent that would have
existed had petitioner really complied with the annual work requirement from 1931 when it
allegedly first located said mining claims. In fact, no mining infrastructure or equipment of any
sort can be found on the area. Understandable thus is the action of the Director of Lands not to
further appeal from respondent courts decision, Director of Lands eventually conceding the
subject land to be registrable, considering petitioners non-performance of mining works thereon,
private respondents adverse possession of the subject land more than thirty (30) years and its use
thereof for as many years solely for agricultural purposes.
Equally borne out by the records is the fact that petitioner has indeed applied for a mining
lease under P.D. No. 1214. For that reason, it has, in effect, waived its right to secure a patent
and it shall have been governed, if private respondents claim of adverse and open possession of
the subject land for more than 30 years were not established, by P.D. No. 463 in its activities
respecting its mining lease.
WHEREFORE, the petition is HEREBY DISMISSED, with costs against petitioner.
SO ORDERED.
Padilla (Chairman), Bellosillo, Vitug, and Kapunan, JJ., concur.
EN BANC (WLB); CENTER FOR ALTERNATIVE DEVELOPMENT INITIATIVES, INC.
(CADI); UPLAND DEVELOPMENT INSTITUTE (UDI); KINAIYAHAN
FOUNDATION, INC.; SENTRO NG ALTERNATIBONG LINGAP PANLIGAL
(SALIGAN); and LEGAL RIGHTS AND NATURAL RESOURCES CENTER,
[G.R. No. 127882. December 1, 2004] INC. (LRC), petitioners, vs. VICTOR O. RAMOS, Secretary, Department of
Environment and Natural Resources (DENR); HORACIO RAMOS, Director,
Mines and Geosciences Bureau (MGB-DENR); RUBEN TORRES, Executive
Secretary; and WMC (PHILIPPINES), INC.,[4] respondents.
LA BUGAL-BLAAN TRIBAL ASSOCIATION, INC., Represented by its Chairman
FLONG MIGUEL M. LUMAYONG; WIGBERTO E. TAADA; PONCIANO RESOLUTION
BENNAGEN; JAIME TADEO; RENATO R. CONSTANTINO JR.; FLONG
AGUSTIN M. DABIE; ROBERTO P. AMLOY; RAQIM L. DABIE; SIMEON H. PANGANIBAN, J.:
DOLOJO; IMELDA M. GANDON; LENY B. GUSANAN; MARCELO L.
GUSANAN; QUINTOL A. LABUAYAN; LOMINGGES D. LAWAY; BENITA P. All mineral resources are owned by the State. Their exploration, development and
TACUAYAN; Minors JOLY L. BUGOY, Represented by His Father UNDERO D. utilization (EDU) must always be subject to the full control and supervision of the State. More
BUGOY and ROGER M. DADING; Represented by His Father ANTONIO L. specifically, given the inadequacy of Filipino capital and technology in large-scale EDU
DADING; ROMY M. LAGARO, Represented by His Father TOTING A. activities, the State may secure the help of foreign companies in all relevant matters -- especially
LAGARO; MIKENY JONG B. LUMAYONG, Represented by His Father financial and technical assistance -- provided that, at all times, the State maintains its right of full
MIGUEL M. LUMAYONG; RENE T. MIGUEL, Represented by His Mother control. The foreign assistor or contractor assumes all financial, technical and entrepreneurial
EDITHA T. MIGUEL; ALDEMAR L. SAL, Represented by His Father DANNY risks in the EDU activities; hence, it may be given reasonable management, operational,
M. SAL; DAISY RECARSE, Represented by Her Mother LYDIA S. SANTOS; marketing, audit and other prerogatives to protect its investments and to enable the business to
EDWARD M. EMUY; ALAN P. MAMPARAIR; MARIO L. MANGCAL; succeed.
ALDEN S. TUSAN; AMPARO S. YAP; VIRGILIO CULAR; MARVIC M.V.F.
Full control is not anathematic to day-to-day management by the contractor, provided that
LEONEN; JULIA REGINA CULAR, GIAN CARLO CULAR, VIRGILIO
the State retains the power to direct overall strategy; and to set aside, reverse or modify plans
CULAR JR., Represented by Their Father VIRGILIO CULAR; PAUL
and actions of the contractor. The idea of full control is similar to that which is exercised by the
ANTONIO P. VILLAMOR, Represented by His Parents JOSE VILLAMOR and
board of directors of a private corporation: the performance of managerial, operational, financial,
ELIZABETH PUA-VILLAMOR; ANA GININA R. TALJA, Represented by Her
marketing and other functions may be delegated to subordinate officers or given to contractual
Father MARIO JOSE B. TALJA; SHARMAINE R. CUNANAN, Represented by
entities, but the board retains full residual control of the business.
Her Father ALFREDO M. CUNANAN; ANTONIO JOSE A. VITUG III,
Represented by His Mother ANNALIZA A. VITUG, LEAN D. NARVADEZ, Who or what organ of government actually exercises this power of control on behalf of the
Represented by His Father MANUEL E. NARVADEZ JR.; ROSERIO State? The Constitution is crystal clear: the President. Indeed, the Chief Executive is the official
MARALAG LINGATING, Represented by Her Father RIO OLIMPIO A. constitutionally mandated to enter into agreements with foreign owned corporations. On the
LINGATING; MARIO JOSE B. TALJA; DAVID E. DE VERA; MARIA other hand, Congress may review the action of the President once it is notified of every contract
MILAGROS L. SAN JOSE; Sr. SUSAN O. BOLANIO, OND; LOLITA G. entered into in accordance with this [constitutional] provision within thirty days from its
DEMONTEVERDE; BENJIE L. NEQUINTO;[1] ROSE LILIA S. ROMANO; execution. In contrast to this express mandate of the President and Congress in the EDU of
ROBERTO S. VERZOLA; EDUARDO AURELIO C. REYES; LEAN LOUEL A. natural resources, Article XII of the Constitution is silent on the role of the judiciary. However,
PERIA, Represented by His Father ELPIDIO V. PERIA;[2] GREEN FORUM should the President and/or Congress gravely abuse their discretion in this regard, the courts may
PHILIPPINES; GREEN FORUM WESTERN VISAYAS (GF-WV); -- in a proper case -- exercise their residual duty under Article VIII. Clearly then, the judiciary
ENVIRONMENTAL LEGAL ASSISTANCE CENTER (ELAC); KAISAHAN should not inordinately interfere in the exercise of this presidential power of control over the
TUNGO SA KAUNLARAN NG KANAYUNAN AT REPORMANG EDU of our natural resources.
PANSAKAHAN (KAISAHAN);[3] PARTNERSHIP FOR AGRARIAN REFORM
and RURAL DEVELOPMENT SERVICES, INC. (PARRDS); PHILIPPINE The Constitution should be read in broad, life-giving strokes. It should not be used to
PARTNERSHIP FOR THE DEVELOPMENT OF HUMAN RESOURCES IN strangulate economic growth or to serve narrow, parochial interests. Rather, it should be
THE RURAL AREAS, INC. (PHILDHRRA); WOMENS LEGAL BUREAU construed to grant the President and Congress sufficient discretion and reasonable leeway to
enable them to attract foreign investments and expertise, as well as to secure for our people and of the Philippines, Inc. (CMP) and was in fact joining and adopting the latters Motion for
our posterity the blessings of prosperity and peace. Reconsideration.
On the basis of this control standard, this Court upholds the constitutionality of the Philippine Memoranda were accordingly filed by the intervenor as well as by petitioners, public
Mining Law, its Implementing Rules and Regulations -- insofar as they relate to financial and respondents, and private respondent, dwelling at length on the three issues discussed below.
technical agreements -- as well as the subject Financial and Technical Assistance Agreement Later, WMCP submitted its Reply Memorandum, while the OSG -- in obedience to an Order of
(FTAA).[5] this Court -- filed a Compliance submitting copies of more FTAAs entered into by the
government.

Background
Three Issues Identified by the Court

The Petition for Prohibition and Mandamus before the Court challenges the
constitutionality of (1) Republic Act No. [RA] 7942 (The Philippine Mining Act of 1995); (2) its During the Oral Argument, the Court identified the three issues to be resolved in the
Implementing Rules and Regulations (DENR Administrative Order No. [DAO] 96-40); and (3) present controversy, as follows:
the FTAA dated March 30, 1995,[6] executed by the government with Western Mining
Corporation (Philippines), Inc. (WMCP).[7] 1. Has the case been rendered moot by the sale of WMC shares in WMCP to Sagittarius
(60 percent of Sagittarius equity is owned by Filipinos and/or Filipino-owned corporations while
On January 27, 2004, the Court en banc promulgated its Decision[8] granting the Petition and 40 percent is owned by Indophil Resources NL, an Australian company) and by the subsequent
declaring the unconstitutionality of certain provisions of RA 7942, DAO 96-40, as well as of the entire transfer and registration of the FTAA from WMCP to Sagittarius?
FTAA executed between the government and WMCP, mainly on the finding that FTAAs are service
contracts prohibited by the 1987 Constitution. 2. Assuming that the case has been rendered moot, would it still be proper to resolve the
constitutionality of the assailed provisions of the Mining Law, DAO 96-40 and the WMCP
The Decision struck down the subject FTAA for being similar to service contracts,[9] which, FTAA?
though permitted under the 1973 Constitution,[10] were subsequently denounced for being antithetical to
the principle of sovereignty over our natural resources, because they allowed foreign control over the 3. What is the proper interpretation of the phrase Agreements Involving Either Technical or
exploitation of our natural resources, to the prejudice of the Filipino nation. Financial Assistance contained in paragraph 4 of Section 2 of Article XII of the Constitution?

The Decision quoted several legal scholars and authors who had criticized service contracts Should the Motion for Reconsideration
for, inter alia, vesting in the foreign contractor exclusive management and control of the Be Granted?
enterprise, including operation of the field in the event petroleum was discovered; control of Respondents and intervenors Motions for Reconsideration should be granted, for the
production, expansion and development; nearly unfettered control over the disposition and sale reasons discussed below. The foregoing three issues identified by the Court shall now be taken
of the products discovered/extracted; effective ownership of the natural resource at the point of up seriatim.
extraction; and beneficial ownership of our economic resources. According to the Decision, the
1987 Constitution (Section 2 of Article XII) effectively banned such service contracts. First Issue:
Mootness
Subsequently, respondents filed separate Motions for Reconsideration. In a Resolution
dated March 9, 2004, the Court required petitioners to comment thereon. In the Resolution of In declaring unconstitutional certain provisions of RA 7942, DAO 96-40, and the WMCP
June 8, 2004, it set the case for Oral Argument on June 29, 2004. FTAA, the majority Decision agreed with petitioners contention that the subject FTAA had been
executed in violation of Section 2 of Article XII of the 1987 Constitution. According to
After hearing the opposing sides, the Court required the parties to submit their respective petitioners, the FTAAs entered into by the government with foreign-owned corporations are
Memoranda in amplification of their arguments. In a Resolution issued later the same day, June limited by the fourth paragraph of the said provision to agreements involving only technical or
29, 2004, the Court noted, inter alia, the Manifestation and Motion (in lieu of comment) filed by financial assistance for large-scale exploration, development and utilization of minerals,
the Office of the Solicitor General (OSG) on behalf of public respondents. The OSG said that it petroleum and other mineral oils. Furthermore, the foreign contractor is allegedly permitted by
was not interposing any objection to the Motion for Intervention filed by the Chamber of Mines the FTAA in question to fully manage and control the mining operations and, therefore, to
acquire beneficial ownership of our mineral resources.
The Decision merely shrugged off the Manifestation by WMPC informing the Court (1) Petitioners claim, first, that the alleged invalidity of the transfer of the WMCP shares to
that on January 23, 2001, WMC had sold all its shares in WMCP to Sagittarius Mines, Inc., 60 Sagittarius violates the fourth paragraph of Section 2 of Article XII of the
percent of whose equity was held by Filipinos; and (2) that the assailed FTAA had likewise been Constitution; second,that it is contrary to the provisions of the WMCP FTAA itself;
transferred from WMCP to Sagittarius.[11] The ponencia declared that the instant case and third, that the sale of the shares is suspect and should therefore be the subject of a case in
had not been rendered moot by the transfer and registration of the FTAA to a Filipino-owned which its validity may properly be litigated.
corporation, and that the validity of the said transfer remained in dispute and awaited final
judicial determination.[12] Patently therefore, the Decision is anchored on the assumption that On the first ground, petitioners assert that paragraph 4 of Section 2 of Article XII permits
WMCP had remained a foreign corporation. the government to enter into FTAAs only with foreign-owned corporations. Petitioners insist
that the first paragraph of this constitutional provision limits the participation of Filipino
The crux of this issue of mootness is the fact that WMCP, at the time it entered into the corporations in the exploration, development and utilization of natural resources to only three
FTAA, happened to be wholly owned by WMC Resources International Pty., Ltd. (WMC), species of contracts -- production sharing, co-production and joint venture -- to the exclusion of
which in turn was a wholly owned subsidiary of Western Mining Corporation Holdings Ltd., a all other arrangements or variations thereof, and the WMCP FTAA may therefore not be validly
publicly listed major Australian mining and exploration company. assumed and implemented by Sagittarius. In short, petitioners claim that a Filipino corporation
is not allowed by the Constitution to enter into an FTAA with the government.
The nullity of the FTAA was obviously premised upon the contractor being
a foreign corporation. Had the FTAA been originally issued to a Filipino-owned corporation, However, a textual analysis of the first paragraph of Section 2 of Article XII does not
there would have been no constitutionality issue to speak of. Upon the other hand, the support petitioners argument. The pertinent part of the said provision states: Sec. 2. x x x The
conveyance of the WMCP FTAA to a Filipino corporation can be likened to the sale of land to a exploration, development and utilization of natural resources shall be under the full control and
foreigner who subsequently acquires Filipino citizenship, or who later resells the same land to a supervision of the State. The State may directly undertake such activities, or it may enter into co-
Filipino citizen. The conveyance would be validated, as the property in question would no longer production, joint venture, or production-sharing agreements with Filipino citizens, or
be owned by a disqualified vendee. corporations or associations at least sixty per centum of whose capital is owned by such citizens.
x x x. Nowhere in the provision is there any express limitation or restriction insofar as
And, inasmuch as the FTAA is to be implemented now by a Filipino corporation, it is no arrangements other than the three aforementioned contractual schemes are concerned.
longer possible for the Court to declare it unconstitutional. The case pending in the Court of
Appeals is a dispute between two Filipino companies (Sagittarius and Lepanto), both claiming Neither can one reasonably discern any implied stricture to that effect. Besides, there is no
the right to purchase the foreign shares in WMCP. So, regardless of which side eventually wins, basis to believe that the framers of the Constitution, a majority of whom were obviously
the FTAA would still be in the hands of a qualified Filipino company. Considering that there is concerned with furthering the development and utilization of the countrys natural resources,
no longer any justiciable controversy, the plea to nullify the Mining Law has become a virtual could have wanted to restrict Filipino participation in that area. This point is clear, especially in
petition for declaratory relief, over which this Court has no original jurisdiction. the light of the overarching constitutional principle of giving preference and priority to Filipinos
and Filipino corporations in the development of our natural resources.
In their Final Memorandum, however, petitioners argue that the case has not become moot,
considering the invalidity of the alleged sale of the shares in WMCP from WMC to Sagittarius, Besides, even assuming (purely for arguments sake) that a constitutional limitation barring
and of the transfer of the FTAA from WMCP to Sagittarius, resulting in the change of contractor Filipino corporations from holding and implementing an FTAA actually exists, nevertheless,
in the FTAA in question. And even assuming that the said transfers were valid, there still exists such provision would apply only to the transfer of the FTAA to Sagittarius, but definitely not to
an actual case predicated on the invalidity of RA 7942 and its Implementing Rules and the sale of WMCs equity stake in WMCP to Sagittarius. Otherwise, an unreasonable curtailment
Regulations (DAO 96-40). Presently, we shall discuss petitioners objections to the transfer of of property rights without due process of law would ensue. Petitioners argument must therefore
both the shares and the FTAA. We shall take up the alleged invalidity of RA 7942 and DAO 96- fail.
40 later on in the discussion of the third issue.

FTAA Not Intended


No Transgression of the Constitution Solely for Foreign Corporation
by the Transfer of the WMCP Shares

Equally barren of merit is the second ground cited by petitioners -- that the FTAA was
intended to apply solely to a foreign corporation, as can allegedly be seen from the provisions
therein. They manage to cite only one WMCP FTAA provision that can be regarded as clearly the debt-to-equity ratio of the transferee was over 9:1 -- hardly ideal for an FTAA contractor,
intended to apply only to a foreign contractor: Section 12, which provides for international according to petitioners.
commercial arbitration under the auspices of the International Chamber of Commerce, after local
remedies are exhausted. This provision, however, does not necessarily imply that the WMCP However, private respondents counter that the Deed of Sale specifically provides that the
FTAA cannot be transferred to and assumed by a Filipino corporation like Sagittarius, in which payment of the purchase price would take place only after Sagittarius commencement of
event the said provision should simply be disregarded as a superfluity. commercial production from mining operations, if at all. Consequently, under the circumstances,
we believe it would not be reasonable to conclude, as petitioners did, that the transferees high
debt-to-equity ratio per se necessarily carried negative implications for the enterprise; and it
would certainly be improper to invalidate the sale on that basis, as petitioners propose.
No Need for a Separate
Litigation of the Sale of Shares
FTAA Not Void,
Petitioners claim as third ground the suspicious sale of shares from WMC to Sagittarius; Thus Transferrable
hence, the need to litigate it in a separate case. Section 40 of RA 7942 (the Mining Law)
allegedly requires the Presidents prior approval of a transfer.
To bolster further their claim that the case is not moot, petitioners insist that the FTAA is
A re-reading of the said provision, however, leads to a different conclusion. Sec. void and, hence cannot be transferred; and that its transfer does not operate to cure the
40. Assignment/Transfer -- A financial or technical assistance agreement may be assigned or constitutional infirmity that is inherent in it; neither will a change in the circumstances of one of
transferred, in whole or in part, to a qualified person subject to the prior approval of the the parties serve to ratify the void contract.
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) While the discussion in their Final Memorandum was skimpy, petitioners in their Comment
days from the date of the approval thereof. (on the MR) did ratiocinate that this Court had declared the FTAA to be void because, at the
time it was executed with WMCP, the latter was a fully foreign-owned corporation, in which the
Section 40 expressly applies to the assignment or transfer of the FTAA, not to the sale and former vested full control and management with respect to the exploration, development and
transfer of shares of stock in WMCP. Moreover, when the transferee of an FTAA is utilization of mineral resources, contrary to the provisions of paragraph 4 of Section 2 of Article
another foreign corporation, there is a logical application of the requirement of prior approval by XII of the Constitution. And since the FTAA was per se void, no valid right could be transferred;
the President of the Republic and notification to Congress in the event of assignment or transfer neither could it be ratified, so petitioners conclude.
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. Petitioners have assumed as fact that which has yet to be established. First and foremost,
the Decision of this Court declaring the FTAA void has not yet become final. That was precisely
On the other hand, when the transferee of the FTAA happens to be a Filipino corporation, the reason the Court still heard Oral Argument in this case. Second, the FTAA does not vest in
the need for such safeguard is not critical; hence, the lack of prior approval and notification may the foreign corporation full control and supervision over the exploration, development and
not be deemed fatal as to render the transfer invalid. Besides, it is not as if approval by the utilization of mineral resources, to the exclusion of the government. This point will be dealt with
President is entirely absent in this instance. As pointed out by private respondent in its in greater detail below; but for now, suffice it to say that a perusal of the FTAA provisions will
Memorandum,[13] the issue of approval is the subject of one of the cases brought by Lepanto prove that the government has effective overall direction and control of the mining operations,
against Sagittarius in GR No. 162331. That case involved the review of the Decision of the including marketing and product pricing, and that the contractors work programs and budgets are
Court of Appeals dated November 21, 2003 in CA-GR SP No. 74161, which affirmed the DENR subject to its review and approval or disapproval.
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. As will be detailed later on, the government does not have to micro-manage the mining
operations and dip its hands into the day-to-day management of the enterprise in order to be
Petitioners also question the sale price and the financial capacity of the transferee. considered as having overall control and direction. Besides, for practical and pragmatic reasons,
According to the Deed of Absolute Sale dated January 23, 2001, executed between WMC and there is a need for government agencies to delegate certain aspects of the management work to
Sagittarius, the price of the WMCP shares was fixed at US$9,875,000, equivalent to P553 the contractor. Thus the basis for declaring the FTAA void still has to be revisited, reexamined
million at an exchange rate of 56:1. Sagittarius had an authorized capital stock of P250 million and reconsidered.
and a paid up capital of P60 million. Therefore, at the time of approval of the sale by the DENR,
Petitioners sniff at the citation of Chavez v. Public Estates Authority,[14] and Halili v. FTAAs totally overturns the entire basis of the Petition -- preference for the Filipino in the
[15]
CA, claiming that the doctrines in these cases are wholly inapplicable to the instant case. exploration, development and utilization of our natural resources. It does not take deep
knowledge of law and logic to understand that what the Constitution grants to foreigners should
Chavez clearly teaches: Thus, the Court has ruled consistently that where a Filipino citizen be equally available to Filipinos.
sells land to an alien who later sells the land to a Filipino, the invalidity of the first transfer is
corrected by the subsequent sale to a citizen. Similarly, where the alien who buys the land
subsequently acquires Philippine citizenship, the sale is validated since the purpose of the
constitutional ban to limit land ownership to Filipinos has been achieved. In short, the law Second Issue:
disregards the constitutional disqualification of the buyer to hold land if the land is subsequently Whether the Court Can Still Decide the Case,
transferred to a qualified party, or the buyer himself becomes a qualified party. [16] Even Assuming It Is Moot
In their Comment, petitioners contend that in Chavez and Halili, the object of the transfer
(the land) was not what was assailed for alleged unconstitutionality. Rather, it was the All the protagonists are in agreement that the Court has jurisdiction to decide this
transaction that was assailed; hence subsequent compliance with constitutional provisions would controversy, even assuming it to be moot.
cure its infirmity. In contrast, in the instant case it is the FTAA itself, the object of the transfer,
that is being assailed as invalid and unconstitutional. So, petitioners claim that the subsequent Petitioners stress the following points. First, while a case becomes moot and academic
transfer of a void FTAA to a Filipino corporation would not cure the defect. when there is no more actual controversy between the parties or no useful purpose can be
served in passing upon the merits,[18] what is at issue in the instant case is not only the validity of
Petitioners are confusing themselves. The present Petition has been filed, precisely because the WMCP FTAA, but also the constitutionality of RA 7942 and its Implementing Rules and
the grantee of the FTAA was a wholly owned subsidiary of a foreign corporation. It cannot be Regulations. Second, the acts of private respondent cannot operate to cure the law of its alleged
gainsaid that anyone would have asserted that the same FTAA was void if it had at the outset unconstitutionality or to divest this Court of its jurisdiction to decide. Third, the Constitution
been issued to a Filipino corporation. The FTAA, therefore, is not per se defective or imposes upon the Supreme Court the duty to declare invalid any law that offends the
unconstitutional. It was questioned only because it had been issued to an allegedly non-qualified, Constitution.
foreign-owned corporation.
Petitioners also argue that no amendatory laws have been passed to make the Mining Act of
We believe that this case is clearly analogous to Halili, in which the land acquired by a 1995 conform to constitutional strictures (assuming that, at present, it does not); that public
non-Filipino was re-conveyed to a qualified vendee and the original transaction was thereby respondents will continue to implement and enforce the statute until this Court rules otherwise;
cured. Paraphrasing Halili, the same rationale applies to the instant case: assuming arguendo the and that the said law continues to be the source of legal authority in accepting, processing and
invalidity of its prior grant to a foreign corporation, the disputed FTAA -- being now held by a approving numerous applications for mining rights.
Filipino corporation -- can no longer be assailed; the objective of the constitutional provision --
to keep the exploration, development and utilization of our natural resources in Filipino hands -- Indeed, it appears that as of June 30, 2002, some 43 FTAA applications had been filed with
has been served. the Mines and Geosciences Bureau (MGB), with an aggregate area of 2,064,908.65 hectares --
spread over Luzon, the Visayas and Mindanao[19] -- applied for. It may be a bit far-fetched to
More accurately speaking, the present situation is one degree better than that obtaining assert, as petitioners do, that each and every FTAA that was entered into under the provisions of
in Halili, in which the original sale to a non-Filipino was clearly and indisputably violative of the the Mining Act invites potential litigation for as long as the constitutional issues are not resolved
constitutional prohibition and thus void ab initio. In the present case, the issuance/grant of the with finality. Nevertheless, we must concede that there exists the distinct possibility that one or
subject FTAA to the then foreign-owned WMCP was not illegal, void or unconstitutional at the more of the future FTAAs will be the subject of yet another suit grounded on constitutional
time. The matter had to be brought to court, precisely for adjudication as to whether the FTAA issues.
and the Mining Law had indeed violated the Constitution. Since, up to this point, the decision of
this Court declaring the FTAA void has yet to become final, to all intents and purposes, the But of equal if not greater significance is the cloud of uncertainty hanging over the mining
FTAA must be deemed valid and constitutional.[17] industry, which is even now scaring away foreign investments. Attesting to this climate of
anxiety is the fact that the Chamber of Mines of the Philippines saw the urgent need to intervene
At bottom, we find completely outlandish petitioners contention that an FTAA could be in the case and to present its position during the Oral Argument; and that Secretary General
entered into by the government only with a foreign corporation, never with a Filipino enterprise. Romulo Neri of the National Economic Development Authority (NEDA) requested this Court to
Indeed, the nationalistic provisions of the Constitution are all anchored on the protection of allow him to speak, during that Oral Argument, on the economic consequences of the Decision
Filipino interests. How petitioners can now argue that foreigners have the exclusive right to of January 27, 2004.[20]
We are convinced. We now agree that the Court must recognize the exceptional character abuse of discretion brought before it in appropriate cases, committed by any officer, agency,
of the situation and the paramount public interest involved, as well as the necessity for a ruling instrumentality or department of the government.[30]
to put an end to the uncertainties plaguing the mining industry and the affected communities as a
result of doubts cast upon the constitutionality and validity of the Mining Act, the subject FTAA Additionally, the entry of CMP into this case has also effectively forestalled any possible
and future FTAAs, and the need to avert a multiplicity of suits. Paraphrasing Gonzales v. objections arising from the standing or legal interest of the original parties.
Commission on Elections,[21] it is evident that strong reasons of public policy demand that the
constitutionality issue be resolved now.[22] For all the foregoing reasons, we believe that the Court should proceed to a resolution of
the constitutional issues in this case.
In further support of the immediate resolution of the constitutionality issue, public
respondents cite Acop v. Guingona,[23] to the effect that the courts will decide a question --
otherwise moot and academic -- if it is capable of repetition, yet evading review.[24] Public
respondents ask the Court to avoid a situation in which the constitutionality issue may again Third Issue:
arise with respect to another FTAA, the resolution of which may not be achieved until after it The Proper Interpretation of the Constitutional Phrase
has become too late for our mining industry to grow out of its infancy. They also recall Salonga Agreements Involving Either Technical or Financial Assistance
v. Cruz Pao,[25] in which this Court declared that (t)he Court also has the duty to formulate
guiding and controlling constitutional principles, precepts, doctrines or rules. It has the
The constitutional provision at the nucleus of the controversy is paragraph 4 of Section 2 of
symbolic function of educating the bench and bar on the extent of protection given by
Article XII of the 1987 Constitution. In order to appreciate its context, Section 2 is reproduced in
constitutional guarantees. x x x.
full:
The mootness of the case in relation to the WMCP FTAA led the undersigned ponente to
state in his dissent to the Decision that there was no more justiciable controversy and the plea to Sec. 2. All lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils,
nullify the Mining Law has become a virtual petition for declaratory relief. [26] The entry of the all forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other
Chamber of Mines of the Philippines, Inc., however, has put into focus the seriousness of the natural resources are owned by the State. With the exception of agricultural lands, all other
allegations of unconstitutionality of RA 7942 and DAO 96-40 which converts the case to one for natural resources shall not be alienated. The exploration, development and utilization of natural
prohibition[27] in the enforcement of the said law and regulations. 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
Indeed, this CMP entry brings to fore that the real issue in this case is whether paragraph 4
agreements with Filipino citizens or corporations or associations at least sixty per centum of
of Section 2 of Article XII of the Constitution is contravened by RA 7942 and DAO 96-40, not
whose capital is owned by such citizens. Such agreements may be for a period not exceeding
whether it was violated by specific acts implementing RA 7942 and DAO 96-40. [W]hen an act
twenty-five years, renewable for not more than twenty-five years, and under such terms and
of the legislative department is seriously alleged to have infringed the Constitution, settling the
conditions as may be provided by law. In cases of water rights for irrigation, water supply,
controversy becomes the duty of this Court. By the mere enactment of the questioned law or the
fisheries, or industrial uses other than the development of water power, beneficial use may be
approval of the challenged action, the dispute is said to have ripened into a judicial controversy
the measure and limit of the grant.
even without any other overt act.[28] This ruling can be traced from Taada v. Angara,[29] in which
the Court said:
The State shall protect the nations marine wealth in its archipelagic waters, territorial sea, and
exclusive economic zone, and reserve its use and enjoyment exclusively to Filipino citizens.
In seeking to nullify an act of the Philippine Senate on the ground that it contravenes the
Constitution, the petition no doubt raises a justiciable controversy. Where an action of the
legislative branch is seriously alleged to have infringed the Constitution, it becomes not only the The Congress may, by law, allow small-scale utilization of natural resources by Filipino
right but in fact the duty of the judiciary to settle the dispute. citizens, as well as cooperative fish farming, with priority to subsistence fishermen and fish-
workers in rivers, lakes, bays and lagoons.
xxxxxxxxx
The President may enter into agreements with foreign-owned corporations involving either
technical or financial assistance for large-scale exploration, development, and utilization of
As this Court has repeatedly and firmly emphasized in many cases, it will not shirk, digress from
minerals, petroleum, and other mineral oils according to the general terms and conditions
or abandon its sacred duty and authority to uphold the Constitution in matters that involve grave
provided by law, based on real contributions to the economic growth and general welfare of the
country. In such agreements, the State shall promote the development and use of local scientific 1. All natural resources are owned by the State. Except for agricultural lands, natural resources
and technical resources. cannot be alienated by the State.

The President shall notify the Congress of every contract entered into in accordance with this 2. The exploration, development and utilization (EDU) of natural resources shall be under the
provision, within thirty days from its execution.[31] full control and supervision of the State.

3. The State may undertake these EDU activities through either of the following:
No Restriction of Meaning by
a Verba Legis Interpretation (a) By itself directly and solely

(b) By (i) co-production; (ii) joint venture; or (iii) production sharing agreements with Filipino
To interpret the foregoing provision, petitioners adamantly assert that the language of the citizens or corporations, at least 60 percent of the capital of which is owned by such citizens
Constitution should prevail; that the primary method of interpreting it is to seek the ordinary
meaning of the words used in its provisions. They rely on rulings of this Court, such as the
4. Small-scale utilization of natural resources may be allowed by law in favor of Filipino
following:
citizens.
The fundamental principle in constitutional construction however is that the primary source
5. For large-scale EDU of minerals, petroleum and other mineral oils, the President may enter
from which to ascertain constitutional intent or purpose is the language of the provision itself.
into agreements with foreign-owned corporations involving either technical or financial
The presumption is that the words in which the constitutional provisions are couched express the
assistance according to the general terms and conditions provided by law x x x.
objective sought to be attained. In other words, verba legis prevails. Only when the meaning of
the words used is unclear and equivocal should resort be made to extraneous aids of
construction and interpretation, such as the proceedings of the Constitutional Commission or Note that in all the three foregoing mining activities -- exploration, development and
Convention to shed light on and ascertain the true intent or purpose of the provision being utilization -- the State may undertake such EDU activities by itself or in tandem with Filipinos or
construed.[32] Filipino corporations, except in two instances: first, in small-scale utilization of natural
resources, which Filipinos may be allowed by law to undertake; and second, in large-scale EDU
of minerals, petroleum and mineral oils, which may be undertaken by the State
Very recently, in Francisco v. The House of Representatives,[33] this Court indeed had the
via agreements with foreign-owned corporations involving either technical or financial
occasion to reiterate the well-settled principles of constitutional construction:
assistance as provided by law.

First, verba legis, that is, wherever possible, the words used in the Constitution must be given Petitioners claim that the phrase agreements x x x involving either technical or financial
their ordinary meaning except where technical terms are employed. x x x. 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
xxxxxxxxx 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
Second, where there is ambiguity, ratio legis est anima. The words of the Constitution should be
utilization of minerals, petroleum and other mineral oils; such a limitation, they argue, excludes
interpreted in accordance with the intent of its framers. x x x.
foreign management and operation of a mining enterprise. [35]

xxxxxxxxx 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
Finally, ut magis valeat quam pereat. The Constitution is to be interpreted as a whole.[34] enjoyment of the countrys natural resources. They maintain that this Courts Decision[36] 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
For ease of reference and in consonance with verba legis, we reconstruct and stratify the
mining enterprise. Allowing such a privilege not only runs counter to the full control and
aforequoted Section 2 as follows:
supervision that the State is constitutionally mandated to exercise over the exploration, Second, if the real intention of the drafters was to confine foreign corporations to financial
development and utilization of the countrys natural resources; doing so also vests in the foreign or technical assistance and nothing more, their language would have certainly been
company beneficial ownership of our mineral resources. It will be recalled that the Decision of so unmistakably restrictive and stringent as to leave no doubt in anyones mind about their
January 27, 2004 zeroed in on management or other forms of assistance or other activities true intent. For example, they would have used the sentence foreign corporations are absolutely
associated with the service contracts of the martial law regime, since the management or prohibited from involvement in the management or operation of mining or similar ventures or
operation of mining activities by foreign contractors, which is the primary feature of service words of similar import. A search for such stringent wording yields negative results. Thus, we
contracts, was precisely the evil that the drafters of the 1987 Constitution sought to eradicate. 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
On the other hand, the intervenor[37] and public respondents argue that the FTAA allowed x involving either technical or financial assistance in an exclusionary and limiting manner.
by paragraph 4 is not merely an agreement for supplying limited and specific financial or
technical services to the State. Rather, such FTAA is a comprehensive agreement for the foreign-
owned corporations integrated exploration, development and utilization of mineral, petroleum or
other mineral oils on a large-scale basis. The agreement, therefore, authorizes the foreign Deletion of Service Contracts to
contractors rendition of a whole range of integrated and comprehensive services, ranging from Avoid Pitfalls of Previous Constitutions,
the discovery to the development, utilization and production of minerals or petroleum products. Not to Ban Service Contracts Per Se
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 Third, we do not see how a verba legis approach leads to the conclusion that the
words -- their use of the phrase agreements x x x involving either technical or financial management or operation of mining activities by foreign contractors, which is the primary
assistance -- does not indicate the intent to exclude other modes of assistance. The drafters opted feature of service contracts, was precisely the evil that the drafters of the 1987 Constitution
to use involving when they could have simply said agreements for financial or technical sought to eradicate. Nowhere in the above-quoted Section can be discerned the objective to keep
assistance, if that was their intention to begin with. In this case, the limitation would be very out of foreign hands the management or operation of mining activities or the plan to eradicate
clear and no further debate would ensue. service contracts as these were understood in the 1973 Constitution. Still, petitioners maintain
that the deletion or omission from the 1987 Constitution of the term service contracts found in
In contrast, the use of the word involving signifies the possibility of the inclusion of other
the 1973 Constitution sufficiently proves the drafters intent to exclude foreigners from the
forms of assistance or activities having to do with, otherwise related to or compatible with
management of the affected enterprises.
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 To our mind, however, such intent cannot be definitively and conclusively established from
affecting; two, entailing, requiring, implying or necessitating; and three, including, containing or the mere failure to carry the same expression or term over to the new Constitution, absent a more
comprising.[38] 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
Plainly, none of the three connotations convey a sense of exclusivity. Moreover, the word
earlier Constitutions) is nothing short of bringing about a momentous sea change in the
involving, when understood in the sense of including, as in including technical or financial
economic and developmental policies; and the fundamentally capitalist, free-enterprise
assistance, necessarily implies that there are activities other than those that are being included.
philosophy of our government. We cannot imagine such a radical shift being undertaken by our
In other words, if an agreement includes technical or financial assistance, there is apart from
government, to the great prejudice of the mining sector in particular and our economy in general,
such assistance -- something else already in, and covered or may be covered by, the said
merely on the basis of the omission of the terms service contract from or the failure to carry
agreement.
them over to the new Constitution. There has to be a much more definite and even unarguable
In short, it allows for the possibility that matters, other than those explicitly mentioned, basis for such a drastic reversal of policies.
could be made part of the agreement. Thus, we are now led to the conclusion that the use of the
Fourth, a literal and restrictive interpretation of paragraph 4, such as that proposed by
word involving implies that these agreements with foreign corporations are not limited to mere
petitioners, suffers from certain internal logical inconsistencies that generate ambiguities in the
financial or technical assistance. The difference in sense becomes very apparent when we
understanding of the provision. As the intervenor pointed out, there has never been any
juxtapose agreements for technical or financial assistance against
constitutional or statutory provision that reserved to Filipino citizens or corporations, at least 60
agreements including technical or financial assistance. This much is unalterably clear in a verba
percent of which is Filipino-owned, the rendition of financial or technical assistance to
legis approach.
companies engaged in mining or the development of any other natural resource. The taking out
of foreign-currency or peso-denominated loans or any other kind of financial assistance, as well argument begs the question To whom or for whom would it be rendered? or Who is being
as the rendition of technical assistance -- whether to the State or to any other entity in the assisted? If the answer is The State, then it necessarily implies that the State itself is the
Philippines -- has never been restricted in favor of Filipino citizens or corporations having a one directly and solely undertaking the large-scale exploration, development and utilization of a
certain minimum percentage of Filipino equity. Such a restriction would certainly be mineral resource, so it follows that the State must itself bear the liability and cost of repaying the
preposterous and unnecessary. As a matter of fact, financial, and even technical financing sourced from the foreign lender and/or of paying compensation to the foreign entity
assistance, regardless of the nationality of its source, would be welcomed in the mining industry rendering technical assistance.
anytime with open arms, on account of the dearth of local capital and the need to continually
update technological know-how and improve technical skills. However, it is of common knowledge, and of judicial notice as well, that the government is
and has for many many years been financially strapped, to the point that even the most essential
There was therefore no need for a constitutional provision specifically allowing foreign- services have suffered serious curtailments -- education and health care, for instance, not to
owned corporations to render financial or technical assistance, whether in respect of mining or mention judicial services -- have had to make do with inadequate budgetary allocations. Thus,
some other resource development or commercial activity in the Philippines. The last point government has had to resort to build-operate-transfer and similar arrangements with the private
needs to be emphasized: if merely financial or technical assistance agreements are allowed, sector, in order to get vital infrastructure projects built without any governmental outlay.
there would be no need to limit them to large-scale mining operations, as there would be far
greater need for them in the smaller-scale mining activities (and even in non-mining areas). The very recent brouhaha over the gargantuan fiscal crisis or budget deficit merely
Obviously, the provision in question was intended to refer to agreements other than those confirms what the ordinary citizen has suspected all along. After the reality check, one will have
for mere financial or technical assistance. to admit the implausibility of a direct undertaking -- by the State itself -- of large-
scale exploration, development and utilization of minerals, petroleum and other mineral oils.
In like manner, there would be no need to require the President of the Republic to report to Such an undertaking entails not only humongous capital requirements, but also the attendant risk
Congress, if only financial or technical assistance agreements are involved. Such agreements are of never finding and developing economically viable quantities of minerals, petroleum and other
in the nature of foreign loans that -- pursuant to Section 20 of Article VII[39] of the 1987 mineral oils.[40]
Constitution -- the President may contract or guarantee, merely with the prior concurrence of the
Monetary Board. In turn, the Board is required to report to Congress within thirty days from the It is equally difficult to imagine that such a provision restricting foreign companies to the
end of every quarter of the calendar year, not thirty days after the agreement is entered into. rendition of only financial or technical assistance to the government was deliberately crafted by
the drafters of the Constitution, who were all well aware of the capital-intensive and technology-
And if paragraph 4 permits only agreements for loans and other forms of financial, or oriented nature of large-scale mineral or petroleum extraction and the countrys deficiency in
technical assistance, what is the point of requiring that they be based on real contributions to the precisely those areas.[41] To say so would be tantamount to asserting that the provision was
economic growth and general welfare of the country? For instance, how is one to measure and purposely designed to ladle the large-scale development and utilization of mineral, petroleum
assess the real contributions to the economic growth and general welfare of the country that may and related resources with impossible conditions; and to remain forever and permanently
ensue from a foreign-currency loan agreement or a technical-assistance agreement for, say, the reserved for future generations of Filipinos.
refurbishing of an existing power generating plant for a mining operation somewhere in
Mindanao? Such a criterion would make more sense when applied to a major business
investment in a principal sector of the industry.
A More Reasonable Look
The conclusion is clear and inescapable -- a verba legis construction shows that paragraph at the Charters Plain Language
4 is not to be understood as one limited only to foreign loans (or other forms of financial
support) and to technical assistance. There is definitely more to it than that. These are
provisions permitting participation by foreign companies; requiring the Presidents report Sixth, we shall now look closer at the plain language of the Charter and examining the
to Congress; and using, as yardstick, contributions based on economic growth and general logical inferences. The drafters chose to emphasize and highlight agreements x x x involving
welfare. These were neither accidentally inserted into the Constitution nor carelessly either technical or financial assistance in relation to foreign corporations participation in large-
cobbled together by the drafters in lip service to shallow nationalism. The provisions scale EDU. The inclusion of this clause on technical or financial assistance recognizes the fact
patently have significance and usefulness in a context that allows agreements with foreign that foreign business entities and multinational corporations are the ones with the resources and
companies to include more than mere financial or technical assistance. know-how to provide technical and/or financial assistance of the magnitude and type required
for large-scale exploration, development and utilization of these resources.
Fifth, it is argued that Section 2 of Article XII authorizes nothing more than a rendition of
specific and limited financial service or technical assistance by a foreign company. This
The drafters -- whose ranks included many academicians, economists, businessmen, the contractors for compensation for their investments, lost opportunities, and so on, if not for
lawyers, politicians and government officials -- were not unfamiliar with the practices of foreign the recovery thereof.
corporations and multinationals.
If the framers had intended to put an end to service contracts, they would have at least left
Neither were they so nave as to believe that these entities would provide assistance without specific instructions to Congress to deal with these closing-out issues, perhaps by way of general
conditionalities or some quid pro quo. Definitely, as business persons well know and as a matter guidelines and a timeline within which to carry them out. The following are some extant
of judicial notice, this matter is not just a question of signing a promissory note or executing a examples of such transitory guidelines set forth in Article XVIII of our Constitution:
technology transfer agreement. Foreign corporations usually require that they be given a say in
the management, for instance, of day-to-day operations of the joint venture. They would demand Section 23. Advertising entities affected by paragraph (2), Section 11 of Article XVI of this
the appointment of their own men as, for example, operations managers, technical experts, Constitution shall have five years from its ratification to comply on a graduated and
quality control heads, internal auditors or comptrollers. Furthermore, they would probably proportionate basis with the minimum Filipino ownership requirement therein.
require seats on the Board of Directors -- all these to ensure the success of the enterprise and the
repayment of the loans and other financial assistance and to make certain that the funding and
xxxxxxxxx
the technology they supply would not go to waste. Ultimately, they would also want to protect
their business reputation and bottom lines.[42]
Section 25. After the expiration in 1991 of the Agreement between the Republic of the
In short, the drafters will have to be credited with enough pragmatism and savvy to know Philippines and the United States of America concerning military bases, foreign military bases,
that these foreign entities will not enter into such agreements involving assistance without troops, or facilities shall not be allowed in the Philippines except under a treaty duly concurred
requiring arrangements for the protection of their investments, gains and benefits. in by the Senate and, when the Congress so requires, ratified by a majority of the votes cast by
the people in a national referendum held for that purpose, and recognized as a treaty by the
Thus, by specifying such agreements involving assistance, the drafters necessarily gave other contracting State.
implied assent to everything that these agreements necessarily entailed; or that could reasonably
be deemed necessary to make them tenable and effective, including management authority with
respect to the day-to-day operations of the enterprise and measures for the protection of the Section 26. The authority to issue sequestration or freeze orders under Proclamation No. 3 dated
interests of the foreign corporation, PROVIDED THAT Philippine sovereignty over natural March 25, 1986 in relation to the recovery of ill-gotten wealth shall remain operative for not
resources and full control over the enterprise undertaking the EDU activities remain firmly in the more than eighteen months after the ratification of this Constitution. However, in the national
State. interest, as certified by the President, the Congress may extend such period.

A sequestration or freeze order shall be issued only upon showing of a prima facie case. The
order and the list of the sequestered or frozen properties shall forthwith be registered with the
Petitioners Theory Deflated by the proper court. For orders issued before the ratification of this Constitution, the corresponding
Absence of Closing-Out Rules or Guidelines judicial action or proceeding shall be filed within six months from its ratification. For those
issued after such ratification, the judicial action or proceeding shall be commenced within six
months from the issuance thereof.
Seventh and final point regarding the plain-language approach, one of the practical
difficulties that results from it is the fact that there is nothing by way of transitory provisions that
would serve to confirm the theory that the omission of the term service contract from the 1987 The sequestration or freeze order is deemed automatically lifted if no judicial action or
Constitution signaled the demise of service contracts. proceeding is commenced as herein provided. [43]

The framers knew at the time they were deliberating that there were various service It is inconceivable that the drafters of the Constitution would leave such an important
contracts extant and in force and effect, including those in the petroleum industry. Many of these matter -- an expression of sovereignty as it were -- indefinitely hanging in the air in a formless
service contracts were long-term (25 years) and had several more years to run. If they had meant and ineffective state. Indeed, the complete absence of even a general framework only serves to
to ban service contracts altogether, they would have had to provide for the termination or further deflate petitioners theory, like a childs balloon losing its air.
pretermination of the existing contracts. Accordingly, they would have supplied the specifics and
the when and how of effecting the extinguishment of these existing contracts (or at least the
mechanics for determining them); and of putting in place the means to address the just claims of
Under the circumstances, the logical inconsistencies resulting from petitioners literal and MR. JAMIR. Yes, Madam President.
purely verba legis approach to paragraph 4 of Section 2 of Article XII compel a resort to other
aids to interpretation. MR. SUAREZ. This particular portion of the section has reference to what was
popularly known before as service contracts, among other things, is that
correct?

Petitioners Posture Also Negated MR. JAMIR. Yes, Madam President.


by Ratio Legis Et Anima MR. SUAREZ. As it is formulated, the President may enter into service contracts but
subject to the guidelines that may be promulgated by Congress?
Thus, in order to resolve the inconsistencies, incongruities and ambiguities encountered MR. JAMIR. That is correct.
and to supply the deficiencies of the plain-language approach, there is a need for recourse to the
proceedings of the 1986 Constitutional Commission. There is a need for ratio legis et anima. MR. SUAREZ. Therefore, that aspect of negotiation and consummation will fall on
the President, not upon Congress?
MR. JAMIR. That is also correct, Madam President.
Service Contracts Not
MR. SUAREZ. Except that all of these contracts, service or otherwise, must be
Deconstitutionalized
made strictly in accordance with guidelines prescribed by Congress?
MR. JAMIR. That is also correct.
Pertinent portions of the deliberations of the members of the Constitutional Commission
(ConCom) conclusively show that they discussed agreements involving either technical or MR. SUAREZ. And the Gentleman is thinking in terms of a law that uniformly
financial assistance in the same breadth as service contracts and used the terms interchangeably. covers situations of the same nature?
The following exchange between Commissioner Jamir (sponsor of the provision) and
MR. JAMIR. That is 100 percent correct.
Commissioner Suarez irrefutably proves that the agreements involving technical or financial
assistance were none other than service contracts. MR. SUAREZ. I thank the Commissioner.
THE PRESIDENT. Commissioner Jamir is recognized. We are still on Section 3. MR. JAMIR. Thank you very much.[44]
MR. JAMIR. Yes, Madam President. With respect to the second paragraph of Section The following exchange leaves no doubt that the commissioners knew exactly what they
3, my amendment by substitution reads: THE PRESIDENT MAY ENTER were dealing with: service contracts.
INTO AGREEMENTS WITH FOREIGN-OWNED CORPORATIONS
INVOLVING EITHER TECHNICAL OR FINANCIAL ASSISTANCE FOR THE PRESIDENT. Commissioner Gascon is recognized.
LARGE-SCALE EXPLORATION, DEVELOPMENT AND UTILIZATION MR. GASCON. Commissioner Jamir had proposed an amendment with regard to
OF NATURAL RESOURCES ACCORDING TO THE TERMS AND special service contracts which was accepted by the Committee. Since the
CONDITIONS PROVIDED BY LAW. Committee has accepted it, I would like to ask some questions.
MR. VILLEGAS. The Committee accepts the amendment. Commissioner Suarez will THE PRESIDENT. Commissioner Gascon may proceed.
give the background.
MR. GASCON. As it is proposed now, such service contracts will be entered into by
MR. JAMIR. Thank you. the President with the guidelines of a general law on service contract to be
THE PRESIDENT. Commissioner Suarez is recognized. enacted by Congress. Is that correct?

MR. SUAREZ. Thank you, Madam President. MR. VILLEGAS. The Commissioner is right, Madam President.

Will Commissioner Jamir answer a few clarificatory questions? MR. GASCON. According to the original proposal, if the President were to enter into
a particular agreement, he would need the concurrence of Congress. Now that it
has been changed by the proposal of Commissioner Jamir in that Congress will Now, to answer the Commissioners apprehension, by general law, we do not mean statements of
set the general law to which the President shall comply, the President will, motherhood. Congress can build all the restrictions that it wishes into that general law so that
therefore, not need the concurrence of Congress every time he enters every contract entered into by the President under that specific area will have to be uniform. The
into service contracts. Is that correct? President has no choice but to follow all the guidelines that will be provided by law.
MR. VILLEGAS. That is right.
MR. GASCON. But my basic problem is that we do not know as of yet the contents
MR. GASCON. The proposed amendment of Commissioner Jamir is in indirect of such a general law as to how much constraints there will be in it. And to my
contrast to my proposed amendment, so I would like to object and present my mind, although the Committees contention that the regular concurrence from
proposed amendment to the body. Congress would subject Congress to extensive lobbying, I think that is a risk we
will have to take since Congress is a body of representatives of the people whose
xxxxxxxxx membership will be changing regularly as there will be changing circumstances
every time certain agreements are made. It would be best then to keep in tab and
attuned to the interest of the Filipino people, whenever the President enters into
MR. GASCON. Yes, it will be up to the body.
any agreement with regard to such an important matter as technical or financial
I feel that the general law to be set by Congress as regard service contract assistance for large-scale exploration, development and utilization of
agreements which the President will enter into might be too general or since we natural resources or service contracts, the peoples elected representatives
do not know the content yet of such a law, it might be that certain agreements should be on top of it.
will be detrimental to the interest of the Filipinos. This is in direct contrast to my
proposal which provides that there be effective constraints in the implementation xxxxxxxxx
of service contracts.
So instead of a general law to be passed by Congress to serve as a guideline to the MR. OPLE. Madam President, we do not need to suspend the session. If
President when entering into service contract agreements, I propose that Commissioner Gascon needs a few minutes, I can fill up the remaining time
every service contract entered into by the President would need the concurrence while he completes his proposed amendment. I just wanted to ask Commissioner
of Congress, so as to assure the Filipinos of their interests with regard to the Jamir whether he would entertain a minor amendment to his amendment, and it
issue in Section 3 on all lands of the public domain. My alternative amendment, reads as follows: THE PRESIDENT SHALL SUBSEQUENTLY NOTIFY
which we will discuss later, reads: THAT THE PRESIDENT SHALL ENTER CONGRESS OF EVERY SERVICE CONTRACT ENTERED INTO IN
INTO SUCH AGREEMENTS ONLY WITH THE CONCURRENCE OF ACCORDANCE WITH THE GENERAL LAW. I think the reason is, if I may
TWO-THIRDS VOTE OF ALL THE MEMBERS OF CONGRESS SITTING state it briefly, as Commissioner Bengzon said, Congress can always change the
SEPARATELY. general law later on to conform to new perceptions of standards that should be
built into service contracts. But the only way Congress can do this is if there
were a notification requirement from the Office of the President that
xxxxxxxxx
such service contracts had been entered into, subject then to the scrutiny of the
Members of Congress. This pertains to a situation where the service
MR. BENGZON. The reason we made that shift is that we realized the original contracts are already entered into, and all that this amendment seeks is the
proposal could breed corruption. By the way, this is not just confined to service reporting requirement from the Office of the President. Will Commissioner
contracts but also to financial assistance. If we are going to make every single Jamir entertain that?
contract subject to the concurrence of Congress which, according to the
Commissioners amendment is the concurrence of two-thirds of Congress voting MR. JAMIR. I will gladly do so, if it is still within my power.
separately then (1) there is a very great chance that each contract will be
MR. VILLEGAS. Yes, the Committee accepts the amendment.
different from another; and (2) there is a great temptation that it would breed
corruption because of the great lobbying that is going to happen. And we do not
want to subject our legislature to that. xxxxxxxxx

SR. TAN. Madam President, may I ask a question?


THE PRESIDENT. Commissioner Tan is recognized. As far as I am concerned, if I should have my own way, I am for the complete deletion of this
provision. However, we are presenting a compromise in the sense that we are requiring a two-
SR. TAN. Am I correct in thinking that the only difference between these thirds vote of all the Members of Congress as a safeguard. I think we should not mistrust the
future service contracts and the past service contracts under Mr. Marcos is the future Members of Congress by saying that the purpose of this provision is to avoid corruption.
general law to be enacted by the legislature and the notification of Congress by We cannot claim that they are less patriotic than we are. I think the Members of this Commission
the President? That is the only difference, is it not? should know that entering into service contracts is an exception to the rule on protection of
MR. VILLEGAS. That is right. natural resources for the interest of the nation, and therefore, being an exception it should be
subject, whenever possible, to stringent rules. It seems to me that we are liberalizing the rules in
SR. TAN. So those are the safeguards. favor of aliens.
MR. VILLEGAS. Yes. There was no law at all governing service contracts before.
I say these things with a heavy heart, Madam President. I do not claim to be a nationalist, but I
SR. TAN. Thank you, Madam President.[45] love my country. Although we need investments, we must adopt safeguards that are truly
reflective of the sentiments of the people and not mere cosmetic safeguards as they now appear
in the Jamir amendment. (Applause)
More Than Mere Financial
and Technical Assistance Thank you, Madam President.[46]
Entailed by the Agreements
Another excerpt, featuring then Commissioner (now Chief Justice) Hilario G. Davide Jr.,
indicates the limitations of the scope of such service contracts -- they are valid only in regard to
The clear words of Commissioner Jose N. Nolledo quoted below explicitly and eloquently minerals, petroleum and other mineral oils, not to all natural resources.
demonstrate that the drafters knew that the agreements with foreign corporations were going to
entail not mere technical or financial assistance but, rather, foreign investment in and THE PRESIDENT. Commissioner Davide is recognized.
management of an enterprise involved in large-scale exploration, development and utilization of MR. DAVIDE. Thank you, Madam President. This is an amendment to the Jamir
minerals, petroleum, and other mineral oils. amendment and also to the Ople amendment. I propose to delete NATURAL
THE PRESIDENT. Commissioner Nolledo is recognized. RESOURCES and substitute it with the following: MINERALS, PETROLEUM
AND OTHER MINERAL OILS. On the Ople amendment, I propose to add:
MR. NOLLEDO. Madam President, I have the permission of the Acting Floor Leader THE NOTIFICATION TO CONGRESS SHALL BE WITHIN THIRTY DAYS
to speak for only two minutes in favor of the amendment of Commissioner FROM THE EXECUTION OF THE SERVICE CONTRACT.
Gascon.
THE PRESIDENT. What does the Committee say with respect to the first amendment
THE PRESIDENT. Commissioner Nolledo may proceed. in lieu of NATURAL RESOURCES?
MR. NOLLEDO. With due respect to the members of the Committee and MR. VILLEGAS. Could Commissioner Davide explain that?
Commissioner Jamir, I am in favor of the objection of Commissioner Gascon.
MR. DAVIDE. Madam President, with the use of NATURAL RESOURCES here, it
would necessarily include all lands of the public domain, our marine resources,
Madam President, I was one of those who refused to sign the 1973 Constitution, and one of the
forests, parks and so on. So we would like to limit the scope of these service
reasons is that there were many provisions in the Transitory Provisions therein that favored
contracts to those areas really where these may be needed, the exploitation,
aliens. I was shocked when I read a provision authorizing service contracts while we, in this
development and exploration of minerals, petroleum and other mineral oils. And
Constitutional Commission, provided for Filipino control of the economy. We are, therefore,
so, we believe that we should really, if we want to grant service contracts at all,
providing for exceptional instances where aliens may circumvent Filipino control of our
limit the same to only those particular areas where Filipino capital may not
economy. And one way of circumventing the rule in favor of Filipino control of the economy is
be sufficient, and not to all natural resources.
to recognize service contracts.
MR. SUAREZ. Just a point of clarification again, Madam President. When the natural resources for the benefit of foreign interests.[50] Likewise, Mr. Tadeo cited inter alia the
Commissioner made those enumerations and specifications, I suppose he fact that service contracts continued to subsist, enabling foreign interests to benefit from our
deliberately did not include agricultural land? natural resources.[51] It was hardly likely that these gentlemen would have objected so
strenuously, had the provision called for mere technical or financial assistance and nothing
MR. DAVIDE. That is precisely the reason we have to enumerate what these more.
resources are into which service contracts may enter. So, beyond the reach of
any service contract will be lands of the public domain, timberlands, forests, The deliberations of the ConCom and some commissioners explanation of their votes leave
marine resources, fauna and flora, wildlife and national parks. [47] no room for doubt that the service contract concept precisely underpinned the commissioners
understanding of the agreements involving either technical or financial assistance.
After the Jamir amendment was voted upon and approved by a vote of 21 to 10 with 2
abstentions, Commissioner Davide made the following statement, which is very relevant to our
quest:
Summation of the
THE PRESIDENT. Commissioner Davide is recognized. Concom Deliberations
MR. DAVIDE. I am very glad that Commissioner Padilla emphasized minerals,
petroleum and mineral oils. The Commission has just approved the possible
At this point, we sum up the matters established, based on a careful reading of the ConCom
foreign entry into the development, exploration and utilization of these minerals,
deliberations, as follows:
petroleum and other mineral oils by virtue of the Jamir amendment. I voted in
favor of the Jamir amendment because it will eventually give way to vesting in In their deliberations on what was to become paragraph 4, the framers used
exclusively Filipino citizens and corporations wholly owned by Filipino citizens the term service contracts in referring to agreements x x x involving either
the right to utilize the other natural resources. This means that as a matter of technical or financial assistance.
policy, natural resources should be utilized and exploited only by Filipino
citizens or corporations wholly owned by such citizens. But by virtue of the They spoke of service contracts as the concept was understood in the 1973
Jamir amendment, since we feel that Filipino capital may not be enough for the Constitution.
development and utilization of minerals, petroleum and other mineral oils, the It was obvious from their discussions that they were not about to ban or
President can enter into service contracts with foreign corporations precisely eradicate service contracts.
for the development and utilization of such resources. And so, there is nothing to
fear that we will stagnate in the development of minerals, petroleum and Instead, they were plainly crafting provisions to put in place safeguards that
mineral oils because we now allow service contracts. x x x. [48] would eliminate or minimize the abuses prevalent during the marital law
regime. In brief, they were going to permit service contracts with foreign
The foregoing are mere fragments of the framers lengthy discussions of the provision corporations as contractors, but with safety measures to prevent abuses, as
dealing with agreements x x x involving either technical or financial assistance, which an exception to the general norm established in the first paragraph of Section
ultimately became paragraph 4 of Section 2 of Article XII of the Constitution. Beyond any 2 of Article XII. This provision reserves or limits to Filipino citizens -- and
doubt, the members of the ConCom were actually debating about the martial-law-era service corporations at least 60 percent of which is owned by such citizens -- the
contracts for which they were crafting appropriate safeguards. exploration, development and utilization of natural resources.
In the voting that led to the approval of Article XII by the ConCom, the explanations given This provision was prompted by the perceived insufficiency of Filipino
by Commissioners Gascon, Garcia and Tadeo indicated that they had voted to reject this capital and the felt need for foreign investments in the EDU of minerals and
provision on account of their objections to the constitutionalization of the service contract petroleum resources.
concept.
The framers for the most part debated about the sort of safeguards that
Mr. Gascon said, I felt that if we would constitutionalize any provision on service would be considered adequate and reasonable. But some of them, having
contracts, this should always be with the concurrence of Congress and not guided only by a more radical leanings, wanted to ban service contracts altogether; for them,
general law to be promulgated by Congress.[49] Mr. Garcia explained, Service contracts are the provision would permit aliens to exploit and benefit from the nations
given constitutional legitimization in Sec. 3, even when they have been proven to be inimical to natural resources, which they felt should be reserved only for Filipinos.
the interests of the nation, providing, as they do, the legal loophole for the exploitation of our
In the explanation of their votes, the individual commissioners were heard ConCom to Ascertain Intent
by the entire body. They sounded off their individual opinions, openly
enunciated their philosophies, and supported or attacked the provisions with
fervor. Everyones viewpoint was heard. At this juncture, we shall address, rather than gloss over, the use of the framers intent
approach, and the criticism hurled by petitioners who quote a ruling of this Court:
In the final voting, the Article on the National Economy and Patrimony --
including paragraph 4 allowing service contracts with foreign corporations
While it is permissible in this jurisdiction to consult the debates and proceedings of the
as an exception to the general norm in paragraph 1 of Section 2 of the same
constitutional convention in order to arrive at the reason and purpose of the resulting
article -- was resoundingly approved by a vote of 32 to 7, with 2 abstentions.
Constitution, resort thereto may be had only when other guides fail as said proceedings are
powerless to vary the terms of the Constitution when the meaning is clear. Debates in the
constitutional convention are of value as showing the views of the individual members, and as
Agreements Involving Technical indicating the reason for their votes, but they give us no light as to the views of the large
or Financial Assistance Are majority who did not talk, much less the mass of our fellow citizens whose votes at the polls
Service Contracts With Safeguards gave that instrument the force of fundamental law. We think it safer to construe the constitution
from what appears upon its face. The proper interpretation therefore depends more on how it
was understood by the people adopting it than in the framers understanding thereof. [52]
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 The notion that the deliberations reflect only the views of those members who spoke out
contracts.But unlike those of the 1973 variety, the new ones are between foreign corporations and not the views of the majority who remained silent should be clarified. We must never forget
acting as contractors on the one hand; and on the other, the government as principal or owner of that those who spoke out were heard by those who remained silent and did not react. If the latter
the works. In the new service contracts, the foreign contractors provide capital, technology and were silent because they happened not to be present at the time, they are presumed to have read
technical know-how, and managerial expertise in the creation and operation of large-scale the minutes and kept abreast of the deliberations. By remaining silent, they are deemed to have
mining/extractive enterprises; and the government, through its agencies (DENR, MGB), actively signified their assent to and/or conformity with at least some of the views propounded or their
exercises control and supervision over the entire operation. lack of objections thereto. It was incumbent upon them, as representatives of the entire Filipino
Such service contracts may be entered into only with respect to minerals, petroleum and people, to follow the deliberations closely and to speak their minds on the matter if they did not
other mineral oils. The grant thereof is subject to several safeguards, among which are these see eye to eye with the proponents of the draft provisions.
requirements: In any event, each and every one of the commissioners had the opportunity to speak out
and to vote on the matter. Moreover, the individual explanations of votes are on record, and they
(1) The service contract shall be crafted in accordance with a general law that will set standard or show where each delegate stood on the issues. In sum, we cannot completely denigrate the
uniform terms, conditions and requirements, presumably to attain a certain uniformity in value or usefulness of the record of the ConCom, simply because certain members chose
provisions and avoid the possible insertion of terms disadvantageous to the country. not to speak out.
It is contended that the deliberations therein did not necessarily reflect the thinking of the
(2) The President shall be the signatory for the government because, supposedly before an
voting population that participated in the referendum and ratified the Constitution. Verily,
agreement is presented to the President for signature, it will have been vetted several times over
whether we like it or not, it is a bit too much to assume that every one of those who voted to
at different levels to ensure that it conforms to law and can withstand public scrutiny.
ratify the proposed Charter did so only after carefully reading and mulling over it, provision by
provision.
(3) Within thirty days of the executed agreement, the President shall report it to Congress to give
that branch of government an opportunity to look over the agreement and interpose timely Likewise, it appears rather extravagant to assume that every one of those who did in fact
objections, if any. bother to read the draft Charter actually understood the import of its provisions, much less
analyzed it vis--vis the previous Constitutions. We believe that in reality, a good percentage of
those who voted in favor of it did so more out of faith and trust. For them, it was the product of
the hard work and careful deliberation of a group of intelligent, dedicated and trustworthy men
Use of the Record of the
and women of integrity and conviction, whose love of country and fidelity to duty could not be Ultimate Test: States Control
questioned. Determinative of Constitutionality
In short, a large proportion of the voters voted yes because the drafters, or a majority of
them, endorsed the proposed Constitution. What this fact translates to is the inescapable But we are not yet at the end of our quest. Far from it. It seems that we are confronted with
conclusion that many of the voters in the referendum did not form their own isolated judgment a possible collision of constitutional provisions. On the one hand, paragraph 1 of Section 2 of
about the draft Charter, much less about particular provisions therein. They only relied or fell Article XII explicitly mandates the State to exercise full control and supervision over the
back and acted upon the favorable endorsement or recommendation of the framers as a group. In exploration, development and utilization of natural resources. On the other hand, paragraph 4
other words, by voting yes, they may be deemed to have signified their voluntary adoption of the permits safeguarded service contracts with foreign contractors. Normally, pursuant thereto, the
understanding and interpretation of the delegates with respect to the proposed Charter and its contractors exercise management prerogatives over the mining operations and the enterprise as a
particular provisions. If its good enough for them, its good enough for me; or, in many instances, whole. There is thus a legitimate ground to be concerned that either the States full control and
If its good enough for President Cory Aquino, its good enough for me. supervision may rule out any exercise of management authority by the foreign contractor; or, the
And even for those who voted based on their own individual assessment of the proposed other way around, allowing the foreign contractor full management prerogatives may ultimately
Charter, there is no evidence available to indicate that their assessment or understanding of its negate the States full control and supervision.
provisions was in fact different from that of the drafters. This unwritten assumption seems to be
petitioners as well. For all we know, this segment of voters must have read and understood the
provisions of the Constitution in the same way the framers had, an assumption that would Ut Magis Valeat
account for the favorable votes. Quam Pereat
Fundamentally speaking, in the process of rewriting the Charter, the members of the
ConCom as a group were supposed to represent the entire Filipino people. Thus, we cannot but Under the third principle of constitutional construction laid down in Francisco -- ut magis
regard their views as being very much indicative of the thinking of the people with respect to the valeat quam pereat -- every part of the Constitution is to be given effect, and the Constitution is
matters deliberated upon and to the Charter as a whole. to be read and understood as a harmonious whole. Thus, full control and supervision by the State
It is therefore reasonable and unavoidable to make the following conclusion, based on must be understood as one that does not preclude the legitimate exercise of management
the above arguments. As written by the framers and ratified and adopted by the people, prerogatives by the foreign contractor. Before any further discussion, we must stress the
the Constitution allows the continued use of service contracts with foreign corporations -- primacy and supremacy of the principle of sovereignty and State control and supervision over all
as contractors who would invest in and operate and manage extractive enterprises, subject aspects of exploration, development and utilization of the countrys natural resources, as
to the full control and supervision of the State -- sans the abuses of the past regime. The mandated in the first paragraph of Section 2 of Article XII.
purpose is clear: to develop and utilize our mineral, petroleum and other resources on a But in the next breadth we have to point out that full control and supervision cannot be
large scale for the immediate and tangible benefit of the Filipino people. taken literally to mean that the State controls and supervises everything involved, down to the
In view of the foregoing discussion, we should reverse the Decision of January 27, 2004, minutest details, and makes all decisions required in the mining operations. This strained
and in fact now hold a view different from that of the Decision, which had these findings: (a) concept of control and supervision over the mining enterprise would render impossible the
paragraph 4 of Section 2 of Article XII limits foreign involvement in the local mining industry to legitimate exercise by the contractors of a reasonable degree of management prerogative and
agreements strictly for either financial or technical assistance only; (b) the same paragraph authority necessary and indispensable to their proper functioning.
precludes agreements that grant to foreign corporations the management of local mining For one thing, such an interpretation would discourage foreign entry into large-scale
operations, as such agreements are purportedly in the nature of service contracts as these were exploration, development and utilization activities; and result in the unmitigated stagnation of
understood under the 1973 Constitution; (c) these service contracts were supposedly de- this sector, to the detriment of our nations development. This scenario renders paragraph 4
constitutionalized and proscribed by the omission of the term service contracts from the 1987 inoperative and useless. And as respondents have correctly pointed out, the government does not
Constitution; (d) since the WMCP FTAA contains provisions permitting the foreign contractor have to micro-manage the mining operations and dip its hands into the day-to-day affairs of the
to manage the concern, the said FTAA is invalid for being a prohibited service contract; and (e) enterprise in order for it to be considered as having full control and supervision.
provisions of RA 7942 and DAO 96-40, which likewise grant managerial authority to the foreign
contractor, are also invalid and unconstitutional. The concept of control[53] adopted in Section 2 of Article XII must be taken to mean less
than dictatorial, all-encompassing control; but nevertheless sufficient to give the State the power
to direct, restrain, regulate and govern the affairs of the extractive enterprises. Control by the Sec. 2. Declaration of Policy. All mineral resources in public and private lands within the
State may be on a macro level, through the establishment of policies, guidelines, regulations, territory and exclusive economic zone of the Republic of the Philippines are owned by the State.
industry standards and similar measures that would enable the government to control the conduct It shall be the responsibility of the State to promote their rational exploration, development,
of affairs in various enterprises and restrain activities deemed not desirable or beneficial. utilization and conservation through the combined efforts of the Government and private sector
in order to enhance national growth in a way that effectively safeguards the environment and
The end in view is ensuring that these enterprises contribute to the economic development protects the rights of affected communities.
and general welfare of the country, conserve the environment, and uplift the well-being of the
affected local communities. Such a concept of control would be compatible with permitting the
foreign contractor sufficient and reasonable management authority over the enterprise it invested
in, in order to ensure that it is operating efficiently and profitably, to protect its investments and Sufficient Control Over Mining
to enable it to succeed. Operations Vested in the State
by RA 7942 and DAO 96-40
The question to be answered, then, is whether RA 7942 and its Implementing Rules
enable the government to exercise that degree of control sufficient to direct and regulate
the conduct of affairs of individual enterprises and restrain undesirable activities. 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
On the resolution of these questions will depend the validity and constitutionality of certain
mining operations and institute reportorial requirements in this manner:
provisions of the Philippine Mining Act of 1995 (RA 7942) and its Implementing Rules and
Regulations (DAO 96-40), as well as the WMCP FTAA.
1. Sec. 8 which provides for the DENRs power of over-all supervision and periodic
Indeed, petitioners charge[54] that RA 7942, as well as its Implementing Rules and review for the conservation, management, development and proper use of the
Regulations, makes it possible for FTAA contracts to cede full control and management of States mineral resources;
mining enterprises over to fully foreign-owned corporations, with the result that the State is
allegedly reduced to a passive regulator dependent on submitted plans and reports, with weak 2. Sec. 9 which authorizes the Mines and Geosciences Bureau (MGB) under the
review and audit powers. The State does not supposedly act as the owner of the natural resources DENR to exercise direct charge in the administration and disposition of
for and on behalf of the Filipino people; it practically has little effective say in the decisions mineral resources, and empowers the MGB to monitor the compliance by the
made by the enterprise. Petitioners then conclude that the law, the implementing regulations, and contractor of the terms and conditions of the mineral agreements, confiscate
the WMCP FTAA cede beneficial ownership of the mineral resources to the foreign contractor. surety and performance bonds, and deputize whenever necessary any member
A careful scrutiny of the provisions of RA 7942 and its Implementing Rules belies or unit of the Phil. National Police, barangay, duly registered non-
petitioners claims. Paraphrasing the Constitution, Section 4 of the statute clearly affirms the governmental organization (NGO) or any qualified person to police mining
States control thus: activities;

Sec. 4. Ownership of Mineral Resources. Mineral resources are owned by the State and the 3. Sec. 66 which vests in the Regional Director exclusive jurisdiction over safety
exploration, development, utilization and processing thereof shall be under its full control and inspections of all installations, whether surface or underground, utilized in
supervision. The State may directly undertake such activities or it may enter into mineral mining operations.
agreements with contractors.
4. Sec. 35, which incorporates into all FTAAs the following terms, conditions and
The State shall recognize and protect the rights of the indigenous cultural communities to their warranties:
ancestral lands as provided for by the Constitution.
(g) Mining operations shall be conducted in accordance with the
The aforequoted provision is substantively reiterated in Section 2 of DAO 96-40 as provisions of the Act and its IRR.
follows:
(h) Work programs and minimum expenditures commitments.
xxxxxxxxx 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
(k) Requiring proponent to effectively use appropriate anti-pollution the Philippine National Police, the barangay or a DENR-accredited
technology and facilities to protect the environment and restore nongovernmental organization to police mining activities (Section 7-d and -f,
or rehabilitate mined-out areas. DAO 96-40).
An FTAA cannot be transferred or assigned without prior approval by the
(l) The contractors shall furnish the Government records of geologic, President (Section 40, RA 7942; Section 66, DAO 96-40).
accounting and other relevant data for its mining operation,
and that books of accounts and records shall be open for A mining project under an FTAA cannot proceed to the
inspection by the government. x x x. construction/development/utilization stage, unless its Declaration of Mining
Project Feasibility has been approved by government (Section 24, RA 7942).
(m) Requiring the proponent to dispose of the minerals at the highest The Declaration of Mining Project Feasibility filed by the contractor cannot be
price and more advantageous terms and conditions. approved without submission of the following documents:

(n) x x x x x x x x x 1. Approved mining project feasibility study (Section 53-d,


DAO 96-40)
2. Approved three-year work program (Section 53-a-4, DAO
(o) Such other terms and conditions consistent with the Constitution 96-40)
and with this Act as the Secretary may deem to be for the best 3. Environmental compliance certificate (Section 70, RA 7942)
interest of the State and the welfare of the Filipino people. 4. Approved environmental protection and enhancement
program (Section 69, RA 7942)
The foregoing provisions of Section 35 of RA 7942 are also reflected and implemented in 5. Approval by the Sangguniang Panlalawigan/Bayan/Barangay
Section 56 (g), (h), (l), (m) and (n) of the Implementing Rules, DAO 96-40. (Section 70, RA 7942; Section 27, RA 7160)
Moreover, RA 7942 and DAO 96-40 also provide various stipulations confirming the 6. Free and prior informed consent by the indigenous peoples
governments control over mining enterprises: concerned, including payment of royalties through a
Memorandum of Agreement (Section 16, RA 7942;
The contractor is to relinquish to the government those portions of the contract Section 59, RA 8371)
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 FTAA contractor is obliged to assist in the
development of its mining community, promotion of the general welfare of its
The contractor must comply with the provisions pertaining to mine safety, health inhabitants, and development of science and mining technology (Section 57, RA
and environmental protection (Chapter XI, RA 7942; Chapters XV and XVI, DAO 7942).
96-40).
The FTAA contractor is obliged to submit reports
For violation of any of its terms and conditions, government may cancel an (on quarterly, semi-annual or annual basis as the case may be; per Section 270,
FTAA. (Chapter XVII, RA 7942; Chapter XXIV, DAO 96-40). DAO 96-40), pertaining to the following:
An FTAA contractor is obliged to open its books of accounts and records for 1. Exploration
inspection by the government (Section 56-m, DAO 96-40). 2. Drilling
3. Mineral resources and reserves
An FTAA contractor has to dispose of the minerals and by-products at the highest 4. Energy consumption
market price and register with the MGB a copy of the sales agreement (Section 5. Production
56-n, DAO 96-40). 6. Sales and marketing
7. Employment
8. Payment of taxes, royalties, fees and other Government The State may likewise compel the contractors compliance with mandatory requirements
Shares on mine safety, health and environmental protection, and the use of anti-pollution technology
9. Mine safety, health and environment and facilities. Moreover, the contractor is also obligated to assist in the development of the
10. Land use mining community and to pay royalties to the indigenous peoples concerned.
11. Social development
12. Explosives consumption 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,
An FTAA pertaining to areas within government multipurpose sanction is no trifling matter, especially to a contractor who may have yet to
reservations cannot be granted without a written clearance from the government recover the tens or hundreds of millions of dollars sunk into a mining project.
agencies concerned (Section 19, RA 7942; Section 54, DAO 96-40).
Overall, considering the provisions of the statute and the regulations just discussed, we
An FTAA contractor is required to post a financial believe that the State definitely possesses the means by which it can have the ultimate word in
guarantee bond in favor of the government in an amount equivalent to its the operation of the enterprise, set directions and objectives, and detect deviations and
expenditures obligations for any particular year. This requirement is apart from noncompliance by the contractor; likewise, it has the capability to enforce compliance and to
the representations and warranties of the contractor that it has access to all the impose sanctions, should the occasion therefor arise.
financing, managerial and technical expertise and technology necessary to carry
out the objectives of the FTAA (Section 35-b, -e, and -f, RA 7942). 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
Other reports to be submitted by the contractor, as the enterprise. Ineluctably then, RA 7942 and DAO 96-40 vest in the government more
required under DAO 96-40, are as follows: an environmental report on the than a sufficient degree of control and supervision over the conduct of mining operations.
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
Section 3(aq) of RA 7942
progress reports and final report of exploration activities (Section 56-2).
Not Unconstitutional
Other programs required to be submitted by the
contractor, pursuant to DAO 96-40, are the following: a safety and health
program (Section 144); an environmental work program (Section 168); an annual An objection has been expressed that Section 3(aq)[55] of RA 7942 -- which allows a
environmental protection and enhancement program (Section 171). foreign contractor to apply for and hold an exploration permit -- is unconstitutional. The
reasoning is that Section 2 of Article XII of the Constitution does not allow foreign-owned
The foregoing gamut of requirements, regulations, restrictions and limitations imposed corporations to undertake mining operations directly. They may act only as contractors of the
upon the FTAA contractor by the statute and regulations easily overturns petitioners contention. State under an FTAA; and the State, as the party directly undertaking exploitation of its natural
The setup under RA 7942 and DAO 96-40 hardly relegates the State to the role of a passive resources, must hold through the government all exploration permits and similar authorizations.
regulator dependent on submitted plans and reports. On the contrary, the government agencies Hence, Section 3(aq), in permitting foreign-owned corporations to hold exploration permits, is
concerned are empowered to approve or disapprove -- hence, to influence, direct and change -- unconstitutional.
the various work programs and the corresponding minimum expenditure commitments for each
of the exploration, development and utilization phases of the mining enterprise. The objection, however, is not well-founded. While the Constitution mandates the State to
exercise full control and supervision over the exploitation of mineral resources, nowhere does it
Once these plans and reports are approved, the contractor is bound to comply with its require the government to hold all exploration permits and similar authorizations. In fact, there
commitments therein. Figures for mineral production and sales are regularly monitored and is no prohibition at all against foreign or local corporations or contractors holding exploration
subjected to government review, in order to ensure that the products and by-products are permits. The reason is not hard to see.
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 Pursuant to Section 20 of RA 7942, an exploration permit merely grants to a qualified
records for scrutiny, so as to enable the State to determine if the government share has been fully person the right to conduct exploration for all minerals in specified areas. Such a permit does not
paid. amount to an authorization to extract and carry off the mineral resources that may be
discovered. This phase involves nothing but expenditures for exploring the contract area and
locating the mineral bodies. As no extraction is involved, there are no revenues or incomes to 2. The contractors work program, activities and budgets must be approved by/on
speak of. In short, the exploration permit is an authorization for the grantee to spend its own behalf of the State (Clause 2.1).
funds on exploration programs that are pre-approved by the government, without any right to
recover anything should no minerals in commercial quantities be discovered. The State risks 3. The DENR secretary has the power to extend the exploration period (Clause 3.2-a).
nothing and loses nothing by granting these permits to local or foreign firms; in fact, it stands to 4. Approval by the State is necessary for incorporating lands into the FTAA contract
gain in the form of data generated by the exploration activities. area (Clause 4.3-c).
Pursuant to Section 24 of RA 7942, an exploration permit grantee who determines the 5. The Bureau of Forest Development is vested with discretion in regard to approving
commercial viability of a mining area may, within the term of the permit, file with the MGB a the inclusion of forest reserves as part of the FTAA contract area (Clause 4.5).
declaration of mining project feasibility accompanied by a work program for development. The
approval of the mining project feasibility and compliance with other requirements of RA 7942 6. The contractor is obliged to relinquish periodically parts of the contract area not
vests in the grantee the exclusive right to an MPSA or any other mineral agreement, or to an needed for exploration and development (Clause 4.6).
FTAA.
7. A Declaration of Mining Feasibility must be submitted for approval by the State
Thus, the permit grantee may apply for an MPSA, a joint venture agreement, a co- (Clause 4.6-b).
production agreement, or an FTAA over the permit area, and the application shall be approved if
8. The contractor is obligated to report to the State its exploration activities (Clause
the permit grantee meets the necessary qualifications and the terms and conditions of any such
4.9).
agreement. Therefore, the contractor will be in a position to extract minerals and earn revenues
only when the MPSA or another mineral agreement, or an FTAA, is granted. At that point, the 9. The contractor is required to obtain State approval of its work programs for the
contractors rights and obligations will be covered by an FTAA or a mineral agreement. succeeding two-year periods, containing the proposed work activities and
expenditures budget related to exploration (Clause 5.1).
But prior to the issuance of such FTAA or mineral agreement, the exploration permit
grantee (or prospective contractor) cannot yet be deemed to have entered into any contract or 10. The contractor is required to obtain State approval for its proposed expenditures
agreement with the State, and the grantee would definitely need to have some document or for exploration activities (Clause 5.2).
instrument as evidence of its right to conduct exploration works within the specified area. This
need is met by the exploration permit issued pursuant to Sections 3(aq), 20 and 23 of RA 7942. 11. The contractor is required to submit an annual report on geological, geophysical,
geochemical and other information relating to its explorations within the FTAA
In brief, the exploration permit serves a practical and legitimate purpose in that it area (Clause 5.3-a).
protects the interests and preserves the rights of the exploration permit grantee (the would-
be contractor) -- foreign or local -- during the period of time that it is spending heavily on 12. The contractor is to submit within six months after expiration of exploration
exploration works, without yet being able to earn revenues to recoup any of its investments period a final report on all its findings in the contract area (Clause 5.3-b).
and expenditures. Minus this permit and the protection it affords, the exploration works and 13. The contractor, after conducting feasibility studies, shall submit a declaration of
expenditures may end up benefiting only claim-jumpers. Such a possibility tends to discourage mining feasibility, along with a description of the area to be developed and
investors and contractors. Thus, Section 3(aq) of RA 7942 may not be deemed unconstitutional. mined, a description of the proposed mining operations and the technology to be
employed, and a proposed work program for the development phase, for
approval by the DENR secretary (Clause 5.4).
The Terms of the WMCP FTAA
14. The contractor is obliged to complete the development of the mine, including
A Deference to State Control
construction of the production facilities, within the period stated in the approved
work program (Clause 6.1).
A perusal of the WMCP FTAA also reveals a slew of stipulations providing for State 15. The contractor is obligated to submit for approval of the DENR secretary a work
control and supervision: program covering each period of three fiscal years (Clause 6.2).
1. The contractor is obligated to account for the value of production and sale of
minerals (Clause 1.4).
16. The contractor is to submit reports to the DENR secretary on the production, ore Following its exploration activities or feasibility studies, if the contractor believes that any
reserves, work accomplished and work in progress, profile of its work force and part of the contract area is likely to contain an economic mineral resource, it shall submit to the
management staff, and other technical information (Clause 6.3). DENR secretary a declaration of mining feasibility (per Clause 5.4 of the FTAA), together with
a technical description of the area delineated for development and production, a description of
17. Any expansions, modifications, improvements and replacements of mining the proposed mining operations including the technology to be used, a work program for
facilities shall be subject to the approval of the secretary (Clause 6.4). development, an environmental impact statement, and a description of the contributions to the
18. The State has control with respect to the amount of funds that the contractor may economic and general welfare of the country to be generated by the mining operations (pursuant
borrow within the Philippines (Clause 7.2). to Clause 5.5).

19. The State has supervisory power with respect to technical, financial and marketing The work program for development is subject to the approval of the DENR secretary. Upon
issues (Clause 10.1-a). its approval, the contractor must comply with it and complete the development of the mine,
including the construction of production facilities and installation of machinery and equipment,
20. The contractor is required to ensure 60 percent Filipino equity in the contractor, within the period provided in the approved work program for development (per Clause 6.1).
within ten years of recovering specified expenditures, unless not so required by
subsequent legislation (Clause 10.1). Thus, notably, the development phase of the project is likewise subject to the control and
supervision of the government. It cannot be emphasized enough that the proper and timely
21. The State has the right to terminate the FTAA for the contractors unremedied construction and deployment of the production facilities and the development of the mine are of
substantial breach thereof (Clause 13.2); pivotal significance to the success of the mining venture. Any missteps here will potentially be
very costly to remedy. Hence, the submission of the work program for development to the
22. The States approval is needed for any assignment of the FTAA by the contractor
DENR secretary for approval is particularly noteworthy, considering that so many millions of
to an entity other than an affiliate (Clause 14.1).
dollars worth of investments -- courtesy of the contractor -- are made to depend on the States
We should elaborate a little on the work programs and budgets, and what they mean with consideration and action.
respect to the States ability to exercise full control and effective supervision over the enterprise.
Throughout the operating period, the contractor is required to submit to the DENR
For instance, throughout the initial five-year exploration and feasibility phase of the project, the
secretary for approval, copy furnished the director of MGB, work programs covering each period
contractor is mandated by Clause 5.1 of the WMCP FTAA to submit a series of work programs
of three fiscal years (per Clause 6.2). During the same period (per Clause 6.3), the contractor is
(copy furnished the director of MGB) to the DENR secretary for approval. The programs will
mandated to submit various quarterly and annual reports to the DENR secretary, copy furnished
detail the contractors proposed exploration activities and budget covering each subsequent
the director of MGB, on the tonnages of production in terms of ores and concentrates, with
period of two fiscal years.
corresponding grades, values and destinations; reports of sales; total ore reserves, total tonnage
In other words, the concerned government officials will be informed beforehand of the of ores, work accomplished and work in progress (installations and facilities related to mining
proposed exploration activities and expenditures of the contractor for each succeeding two-year operations), investments made or committed, and so on and so forth.
period, with the right to approve/disapprove them or require changes or adjustments therein if
Under Section VIII, during the period of mining operations, the contractor is also required
deemed necessary.
to submit to the DENR secretary (copy furnished the director of MGB) the work program and
Likewise, under Clause 5.2(a), the amount that the contractor was supposed to spend for corresponding budget for the contract area, describing the mining operations that are proposed to
exploration activities during the first contract year of the exploration period was fixed at not less be carried out during the period covered. The secretary is, of course, entitled to grant or deny
than P24 million; and then for the succeeding years, the amount shall be as agreed between the approval of any work program or budget and/or propose revisions thereto. Once the
DENR secretary and the contractor prior to the commencement of each subsequent fiscal year. If program/budget has been approved, the contractor shall comply therewith.
no such agreement is arrived upon, the previous years expenditure commitment shall apply.
In sum, the above provisions of the WMCP FTAA taken together, far from constituting a
This provision alone grants the government through the DENR secretary a very big say in surrender of control and a grant of beneficial ownership of mineral resources to the contractor
the exploration phase of the project. This fact is not something to be taken lightly, considering in question, bestow upon the State more than adequate control and supervision over the
that the government has absolutely no contribution to the exploration expenditures or work activities of the contractor and the enterprise.
activities and yet is given veto power over such a critical aspect of the project. We cannot but
construe as very significant such a degree of control over the project and, resultantly, over the
mining enterprise itself.
No Surrender of Control that proper grounds for objecting thereto, if any exist, cannot be discovered within a period of
Under the WMCP FTAA two months.
On the other hand, Clause 8.3 seeks to provide a temporary, stop-gap solution in the event a
Petitioners, however, take aim at Clause 8.2, 8.3, and 8.5 of the WMCP FTAA which, they disagreement over the submitted work program or budget arises between the State and the
say, amount to a relinquishment of control by the State, since it cannot truly impose its own contractor and results in a stalemate or impasse, in order that there will be no unreasonably long
discretion in respect of the submitted work programs. delays in the performance of the works.

8.2. The Secretary shall be deemed to have approved any Work Programme or Budget These temporary or stop-gap solutions are not necessarily evil or wrong. Neither does it
or variation thereof submitted by the Contractor unless within sixty (60) days follow that the government will inexorably be aggrieved if and when these temporary remedies
after submission by the Contractor the Secretary gives notice declining such come into play. First, avoidance of long delays in these situations will undoubtedly redound to
approval or proposing a revision of certain features and specifying its the benefit of the State as well as the contractor. Second, who is to say that the work program or
reasons therefor (the Rejection Notice). budget proposed by the contractor and deemed approved under Clause 8.3 would not be the
better or more reasonable or more effective alternative? The contractor, being the insider, as it
8.3. If the Secretary gives a Rejection Notice, the Parties shall promptly meet and were, may be said to be in a better position than the State -- an outsider looking in -- to
endeavor to agree on amendments to the Work Programme or Budget. If the determine what work program or budget would be appropriate, more effective, or more suitable
Secretary and the Contractor fail to agree on the proposed revision within 30 under the circumstances.
days from delivery of the Rejection Notice then the Work Programme or
Budget or variation thereof proposed by the Contractor shall be deemed All things considered, we take exception to the characterization of the DENR secretary as a
approved, so as not to unnecessarily delay the performance of the Agreement. subservient nonentity whom the contractor can overrule at will, on account of Clause 8.3. And
neither is it true that under the same clause, the DENR secretary has no authority whatsoever to
8.4. x x x x x x x x x disapprove the work program. As Respondent WMCP reasoned in its Reply-Memorandum, the
State -- despite Clause 8.3 -- still has control over the contract area and it may, as sovereign
8.5. So far as is practicable, the Contractor shall comply with any approved Work
authority, prohibit work thereon until the dispute is resolved. And ultimately, the State may
Programme and Budget. It is recognized by the Secretary and the Contractor
terminate the agreement, pursuant to Clause 13.2 of the same FTAA, citing substantial breach
that the details of any Work Programmes or Budgets may require changes in
thereof. Hence, it clearly retains full and effective control of the exploitation of the mineral
the light of changing circumstances. The Contractor may make such changes
resources.
without approval of the Secretary provided they do not change the general
objective of any Work Programme, nor entail a downward variance of more On the other hand, Clause 8.5 is merely an acknowledgment of the parties need for
than twenty per centum (20percent) of the relevant Budget. All other flexibility, given that no one can accurately forecast under all circumstances, or predict how
variations to an approved Work Programme or Budget shall be submitted for situations may change. Hence, while approved work programs and budgets are to be followed
approval of the Secretary. and complied with as far as practicable, there may be instances in which changes will have to be
effected, and effected rapidly, since events may take shape and unfold with suddenness and
From the provisions quoted above, petitioners generalize by asserting that the government
urgency. Thus, Clause 8.5 allows the contractor to move ahead and make changes without the
does not participate in making critical decisions regarding the operations of the mining firm.
express or implicit approval of the DENR secretary. Such changes are, however, subject to
Furthermore, while the State can require the submission of work programs and budgets, the
certain conditions that will serve to limit or restrict the variance and prevent the contractor from
decision of the contractor will still prevail, if the parties have a difference of opinion with regard
straying very far from what has been approved.
to matters affecting operations and management.
Clause 8.5 provides the contractor a certain amount of flexibility to meet unexpected
We hold, however, that the foregoing provisions do not manifest a relinquishment of
situations, while still guaranteeing that the approved work programs and budgets are not
control. For instance, Clause 8.2 merely provides a mechanism for preventing the business or
abandoned altogether. Clause 8.5 does not constitute proof that the State has relinquished
mining operations from grinding to a complete halt as a result of possibly over-long and
control. And ultimately, should there be disagreement with the actions taken by the contractor in
unjustified delays in the governments handling, processing and approval of submitted work
this instance as well as under Clause 8.3 discussed above, the DENR secretary may resort to
programs and budgets. Anyway, the provision does give the DENR secretary more than
cancellation/termination of the FTAA as the ultimate sanction.
sufficient time (60 days) to react to submitted work programs and budgets. It cannot be supposed
Discretion to Select Contract However, private respondent has proffered a logical explanation for the
Area Not an Abdication of Control provision.[58] Section 10.2(e) contemplates a situation applicable to foreign-owned corporations.
WMCP, at the time of the execution of the FTAA, was a foreign-owned corporation and
therefore not qualified to own land. As contractor, it has at some future date to construct the
Next, petitioners complain that the contractor has full discretion to select -- and the infrastructure -- the mine processing plant, the camp site, the tailings dam, and other
government has no say whatsoever as to -- the parts of the contract area to be relinquished infrastructure -- needed for the large-scale mining operations. It will then have to identify and
pursuant to Clause 4.6 of the WMCP FTAA.[56] This clause, however, does not constitute pinpoint, within the FTAA contract area, the particular surface areas with favorable topography
abdication of control. Rather, it is a mere acknowledgment of the fact that the contractor will deemed ideal for such infrastructure and will need to acquire the surface rights. The State owns
have determined, after appropriate exploration works, which portions of the contract area do not the mineral deposits in the earth, and is also qualified to own land.
contain minerals in commercial quantities sufficient to justify developing the same and ought
therefore to be relinquished. The State cannot just substitute its judgment for that of the Section 10.2(e) sets forth the mechanism whereby the foreign-owned contractor,
contractor and dictate upon the latter which areas to give up. disqualified to own land, identifies to the government the specific surface areas within the FTAA
contract area to be acquired for the mine infrastructure. The government then acquires ownership
Moreover, we can be certain that the contractors self-interest will propel proper and efficient of the surface land areas on behalf of the contractor, in order to enable the latter to proceed to
relinquishment. According to private respondent,[57] a mining company tries to relinquish as much fully implement the FTAA.
non-mineral areas as soon as possible, because the annual occupation fees paid to the government are
based on the total hectarage of the contract area, net of the areas relinquished. Thus, the larger the The contractor, of course, shoulders the purchase price of the land. Hence, the provision
remaining area, the heftier the amount of occupation fees to be paid by the contractor. Accordingly, allows it, after termination of the FTAA, to be reimbursed from proceeds of the sale of the
relinquishment is not an issue, given that the contractor will not want to pay the annual occupation surface areas, which the government will dispose of through public bidding. It should be noted
fees on the non-mineral parts of its contract area. Neither will it want to relinquish promising sites, that this provision will not be applicable to Sagittarius as the present FTAA contractor, since it is
which other contractors may subsequently pick up. a Filipino corporation qualified to own and hold land. As such, it may therefore freely negotiate
with the surface rights owners and acquire the surface property in its own right.
Clearly, petitioners have needlessly jumped to unwarranted conclusions, without being
Government Not aware of the rationale for the said provision. That provision does not call for the exercise of the
a Subcontractor 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.

Petitioners further maintain that the contractor can compel the government to exercise its Rather than having the foreign contractor act through a dummy corporation, having the
power of eminent domain to acquire surface areas within the contract area for the contractors State do the purchasing is a better alternative. This will at least cause the government to be
use. Clause 10.2 (e) of the WMCP FTAA provides that the government agrees that the contractor aware of such transaction/s and foster transparency in the contractors dealings with the local
shall (e) have the right to require the Government at the Contractors own cost, to purchase or property owners. The government, then, will not act as a subcontractor of the contractor; rather,
acquire surface areas for and on behalf of the Contractor at such price and terms as may be it will facilitate the transaction and enable the parties to avoid a technical violation of the Anti-
acceptable to the contractor. At the termination of this Agreement such areas shall be sold by Dummy Law.
public auction or tender and the Contractor shall be entitled to reimbursement of the costs of
acquisition and maintenance, adjusted for inflation, from the proceeds of sale.
Absence of Provision
According to petitioners, government becomes a subcontractor to the contractor and may,
Requiring Sale at Posted
on account of this provision, be compelled to make use of its power of eminent domain, not for
Prices Not Problematic
public purposes but on behalf of a private party, i.e., the contractor. Moreover, the power of the
courts to determine the amount corresponding to the constitutional requirement of just
compensation has allegedly also been contracted away by the government, on account of the The supposed absence of any provision in the WMCP FTAA directly and explicitly
latters commitment that the acquisition shall be at such terms as may be acceptable to the requiring the contractor to sell the mineral products at posted or market prices is not a problem.
contractor. Apart from Clause 1.4 of the FTAA obligating the contractor to account for the total value of
mineral production and the sale of minerals, we can also look to Section 35 of RA 7942, which mortgage the minerals does not negate the States right to receive its share of net mining
incorporates into all FTAAs certain terms, conditions and warranties, including the following: revenues.
(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 Shareholders Free
to Sell Their Stocks
(m) Requiring the proponent to dispose of the minerals at the highest price and more
advantageous terms and conditions.
Petitioners likewise criticize Clause 10.2(k), which gives the contractor authority to change
For that matter, Section 56(n) of DAO 99-56 specifically obligates an FTAA contractor to
its equity structure at any time. This provision may seem somewhat unusual, but considering that
dispose of the minerals and by-products at the highest market price and to register with the MGB
WMCP then was 100 percent foreign-owned, any change would mean that such percentage
a copy of the sales agreement. After all, the provisions of prevailing statutes as well as rules and
would either stay unaltered or be decreased in favor of Filipino ownership. Moreover, the
regulations are deemed written into contracts.
foreign-held shares may change hands freely. Such eventuality is as it should be.
We believe it is not necessary for government to attempt to limit or restrict the freedom of
Contractors Right to Mortgage the shareholders in the contractor to freely transfer, dispose of or encumber their shareholdings,
Not Objectionable Per Se consonant with the unfettered exercise of their business judgment and discretion. Rather, what is
critical is that, regardless of the identity, nationality and percentage ownership of the various
shareholders of the contractor -- and regardless of whether these shareholders decide to take the
Petitioners also question the absolute right of the contractor under Clause 10.2 (l) to company public, float bonds and other fixed-income instruments, or allow the creditor-banks to
mortgage and encumber not only its rights and interests in the FTAA and the infrastructure and take an equity position in the company -- the foreign-owned contractor is always in a position to
improvements introduced, but also the mineral products extracted. Private respondents do not render the services required under the FTAA, under the direction and control of the government.
touch on this matter, but we believe that this provision may have to do with the conditions
imposed by the creditor-banks of the then foreign contractor WMCP to secure the lendings made
or to be made to the latter. Ordinarily, banks lend not only on the security of mortgages on fixed Contractors Right to Ask
assets, but also on encumbrances of goods produced that can easily be sold and converted into For Amendment Not Absolute
cash that can be applied to the repayment of loans. Banks even lend on the security of accounts
receivable that are collectible within 90 days.[59]
With respect to Clauses 10.4(e) and (i), petitioners complain that these provisions bind
It is not uncommon to find that a debtor corporation has executed deeds of assignment by
government to allow amendments to the FTAA if required by banks and other financial
way of security over the production for the next twelve months and/or the proceeds of the sale
institutions as part of the conditions for new lendings. However, we do not find anything wrong
thereof -- or the corresponding accounts receivable, if sold on terms -- in favor of its creditor-
with Clause 10.4(e), which only states that if the Contractor seeks to obtain financing
banks. Such deeds may include authorizing the creditors to sell the products themselves and to
contemplated herein from banks or other financial institutions, (the Government shall)
collect the sales proceeds and/or the accounts receivable.
cooperate with the Contractor in such efforts provided that such financing arrangements will in
Seen in this context, Clause 10.2(l) is not something out of the ordinary or objectionable. In no event reduce the Contractors obligations or the Governments rights
any case, as will be explained below, even if it is allowed to mortgage or encumber the mineral hereunder. The colatilla obviously safeguards the States interests; if breached, it will give the
end-products themselves, the contractor is not freed of its obligation to pay the government its government cause to object to the proposed amendments.
basic and additional shares in the net mining revenue, which is the essential thing to consider.
On the other hand, Clause 10.4(i) provides that the Government shall favourably consider
In brief, the alarum raised over the contractors right to mortgage the minerals is simply any request from [the] Contractor for amendments of this Agreement which are necessary in
unwarranted. Just the same, the contractor must account for the value of mineral production and order for the Contractor to successfully obtain the financing. Petitioners see in this provision a
the sales proceeds therefrom. Likewise, under the WMCP FTAA, the government remains complete renunciation of control. We disagree.
entitled to its sixty percent share in the net mining revenues of the contractor. The latters right to
The proviso does not say that the government shall grant any request for amendment. An assiduous examination of the WMCP FTAA uncovers no indication that it confers upon
Clause 10.4(i) only obliges the State to favorably consider any such request, which is not at all WMCP ownership, beneficial or otherwise, of the mining property it is to develop, the minerals
unreasonable, as it is not equivalent to saying that the government must automatically consent to to be produced, or the proceeds of their sale, which can be legally asserted and enforced as
it. This provision should be read together with the rest of the FTAA provisions instituting against the State.
government control and supervision over the mining enterprise. The clause should not be given
an interpretation that enables the contractor to wiggle out of the restrictions imposed upon it by As public respondents correctly point out, any interest the contractor may have in the
merely suggesting that certain amendments are requested by the lenders. proceeds of the mining operation is merely the equivalent of the consideration the government
has undertaken to pay for its services. All lawful contracts require such mutual prestations, and
Rather, it is up to the contractor to prove to the government that the requested changes to the WMCP FTAA is no different. The contractor commits to perform certain services for the
the FTAA are indispensable, as they enable the contractor to obtain the needed financing; that government in respect of the mining operation, and in turn it is to be compensated out of the net
without such contract changes, the funders would absolutely refuse to extend the loan; that there mining revenues generated from the sale of mineral products. What would be objectionable is a
are no other sources of financing available to the contractor (a very unlikely scenario); and that contractual provision that unduly benefits the contractor far in excess of the service rendered or
without the needed financing, the execution of the work programs will not proceed. But the value delivered, if any, in exchange therefor.
bottom line is, in the exercise of its power of control, the government has the final say on
whether to approve or disapprove such requested amendments to the FTAA. In short, approval A careful perusal of the statute itself and its implementing rules reveals that neither RA
thereof is not mandatory on the part of the government. 7942 nor DAO 99-56 can be said to convey beneficial ownership of any mineral resource or
product to any foreign FTAA contractor.
In fine, the foregoing evaluation and analysis of the aforementioned FTAA provisions
sufficiently overturns petitioners litany of objections to and criticisms of the States alleged
lack of control.
Equitable Sharing
of Financial Benefits

Financial Benefits Not


Surrendered to the Contractor On the contrary, DAO 99-56, entitled Guidelines Establishing the Fiscal Regime of
Financial or Technical Assistance Agreements aims to ensure an equitable sharing of the
benefits derived from mineral resources. These benefits are to be equitably shared among the
One of the main reasons certain provisions of RA 7942 were struck down was the finding government (national and local), the FTAA contractor, and the affected communities. The
mentioned in the Decision that beneficial ownership of the mineral resources had been conveyed purpose is to ensure sustainable mineral resources development; and a fair, equitable,
to the contractor. This finding was based on the underlying assumption, common to the said competitive and stable investment regime for the large-scale exploration, development and
provisions, that the foreign contractor manages the mineral resources in the same way that commercial utilization of minerals. The general framework or concept followed in crafting the
foreign contractors in service contracts used to. By allowing foreign contractors to manage or fiscal regime of the FTAA is based on the principle that the government expects real
operate all the aspects of the mining operation, the above-cited provisions of R.A. No. 7942 have contributions to the economic growth and general welfare of the country, while the contractor
in effect conveyed beneficial ownership over the nations mineral resources to these contractors, expects a reasonable return on its investments in the project. [63]
leaving the State with nothing but bare title thereto. [60] As the WMCP FTAA contained similar
provisions deemed by the ponente to be abhorrent to the Constitution, the Decision struck down Specifically, under the fiscal regime, the governments expectation is, inter alia, the receipt
the Contract as well. of its share from the taxes and fees normally paid by a mining enterprise. On the other hand, the
FTAA contractor is granted by the government certain fiscal and non-fiscal incentives[64] to help
Beneficial ownership has been defined as ownership recognized by law and capable of support the formers cash flow during the most critical phase (cost recovery) and to make the
being enforced in the courts at the suit of the beneficial owner.[61] Blacks Law Philippines competitive with other mineral-producing countries. After the contractor has
Dictionary indicates that the term is used in two senses: first, to indicate the interest of a recovered its initial investment, it will pay all the normal taxes and fees comprising the basic
beneficiary in trust property (also called equitable ownership); and second, to refer to the power share of the government, plus an additional share for the government based on the options and
of a corporate shareholder to buy or sell the shares, though the shareholder is not registered in formulae set forth in DAO 99-56.
the corporations books as the owner.[62] Usually, beneficial ownership is distinguished from
naked ownership, which is the enjoyment of all the benefits and privileges of ownership, as
against possession of the bare title to property.
The said DAO spells out the financial benefits the government will receive from an FTAA, Local business tax - a maximum of 2 percent of gross sales or receipts (the
referred to as the Government Share, composed of a basic government share and an additional rate varies among local government units)
government share.
Real property tax - 2 percent of the fair market value of the property, based
The basic government share is comprised of all direct taxes, fees and royalties, as well as on an assessment level set by the local government
other payments made by the contractor during the term of the FTAA. These are amounts paid
directly to (i) the national government (through the Bureau of Internal Revenue, Bureau of Special education levy - 1 percent of the basis used for the real property tax
Customs, Mines & Geosciences Bureau and other national government agencies imposing taxes Occupation fees - PhP50 per hectare per year; PhP100 per hectare per year
or fees), (ii) the local government units where the mining activity is conducted, and (iii) persons if located in a mineral reservation
and communities directly affected by the mining project. The major taxes and other payments
constituting the basic government share are enumerated below:[65] Community tax - maximum of PhP10,500 per year

Payments to the National Government: All other local government taxes, fees and imposts as of the effective date
of the FTAA - the rate and the type depend on the local government
Excise tax on minerals - 2 percent of the gross output of mining operations
Other Payments:
Contractor income tax - maximum of 32 percent of taxable income for
corporations Royalty to indigenous cultural communities, if any 1 percent of gross
output from mining operations
Customs duties and fees on imported capital equipment -the rate is set by
the Tariff and Customs Code (3-7 percent for chemicals; 3-10 percent for Special allowance - payment to claim owners and surface rights holders
explosives; 3-15 percent for mechanical and electrical equipment; and 3-10
Apart from the basic share, an additional government share is also collected from the
percent for vehicles, aircraft and vessels
FTAA contractor in accordance with the second paragraph of Section 81 of RA 7942, which
VAT on imported equipment, goods and services 10 percent of value provides that the government share shall be comprised of, among other things, certain taxes,
duties and fees. The subject proviso reads:
Royalties due the government on minerals extracted from mineral
reservations, if applicable 5 percent of the actual market value of the
The Government share in a financial or technical assistance agreement shall consist of, among
minerals produced
other things, the contractors corporate income tax, excise tax, special allowance, withholding
Documentary stamp tax - the rate depends on the type of transaction tax due from the contractors foreign stockholders arising from dividend or interest payments to
the said foreign stockholder in case of a foreign national, and all such other taxes, duties and
Capital gains tax on traded stocks - 5 to 10 percent of the value of the fees as provided for under existing laws. (Bold types supplied.)
shares
Withholding tax on interest payments on foreign loans -15 percent of the The government, through the DENR and the MGB, has interpreted the insertion of the
amount of interest phrase among other things as signifying that the government is entitled to an additional
government share to be paid by the contractor apart from the basic share, in order to attain a
Withholding tax on dividend payments to foreign stockholders 15 percent fifty-fifty sharing of net benefits from mining.
of the dividend
The additional government share is computed by using one of three options or schemes
Wharfage and port fees presented in DAO 99-56: (1) a fifty-fifty sharing in the cumulative present value of cash flows;
(2) the share based on excess profits; and (3) the sharing based on the cumulative net mining
Licensing fees (for example, radio permit, firearms permit, professional
revenue. The particular formula to be applied will be selected by the contractor, with a written
fees)
notice to the government prior to the commencement of the development and construction phase
Other national taxes and fees. of the mining project.[66]
Payments to Local Governments: Proceeds from the government shares arising from an FTAA contract are distributed to and
received by the different levels of government in the following proportions:
National Government 50 percent DAO 99-56. Had due care been taken by the OSG, the Court would have been duly apprised of
Provincial Government 10 percent the real nature and particulars of the additional share.
Municipal Government 20 percent
Affected Barangays 20 percent But, perhaps, on account of the esoteric discussion in the Ramos-DeVera paper, and the
even more abstruse mathematical jargon employed in DAO 99-56, the OSG omitted any mention
The portion of revenues remaining after the deduction of the basic and additional of the three options. Instead, the OSG skipped to a side discussion of the effect of indirect
government shares is what goes to the contractor. taxes, which had nothing at all to do with the additional government share, to begin
with. Unfortunately, this move created the wrong impression, pointed out in Justice Antonio T.
Carpios Opinion, that the OSG had taken the position that the additional government share
consisted of indirect taxes.
Governments Share in an
FTAA Not Consisting Solely In any event, what is quite evident is the fact that the additional government share, as
of Taxes, Duties and Fees formulated, has nothing to do with taxes -- direct or indirect -- or with duties, fees or charges. To
repeat, it is over and above the basic government share composed of taxes and duties. Simply
put, the additional share may be (a) an amount that will result in a 50-50 sharing of the
In connection with the foregoing discussion on the basic and additional cumulative present value of the cash flows[69] of the enterprise; (b) an amount equivalent to 25
government shares, it is pertinent at this juncture to mention the criticism leveled at the second percent of the additional or excess profits of the enterprise, reckoned against a benchmark return
paragraph of Section 81 of RA 7942, quoted earlier. The said proviso has been denounced, on investments; or (c) an amount that will result in a fifty-fifty sharing of the cumulative net
because, allegedly, the States share in FTAAs with foreign contractors has been limited to taxes, mining revenue from the end of the recovery period up to the taxable year in question. The
fees and duties only; in effect, the State has been deprived of a share in the after-tax income of contractor is required to select one of the three options or formulae for computing the additional
the enterprise. In the face of this allegation, one has to consider that the law does not define the share, an option it will apply to all of its mining operations.
term among other things; and the Office of the Solicitor General, in its Motion for
Reconsideration, appears to have erroneously claimed that the phrase refers to indirect taxes. As used above, net mining revenue is defined as the gross output from mining operations
for a calendar year, less deductible expenses (inclusive of taxes, duties and fees). Such revenue
The law provides no definition of the term among other things, for the reason that Congress would roughly be equivalent to taxable income or income before income tax. Definitely, as
deliberately avoided setting unnecessary limitations as to what may constitute compensation to compared with, say, calculating the additional government share on the basis of net income
the State for the exploitation and use of mineral resources. But the inclusion of that phrase (after income tax), the net mining revenue is a better and much more reasonable basis for such
clearly and unmistakably reveals the legislative intent to have the State collect more than just the computation, as it gives a truer picture of the profitability of the company.
usual taxes, duties and fees. Certainly, there is nothing in that phrase -- or in the second
paragraph of Section 81 -- that would suggest that such phrase should be interpreted as referring To demonstrate that the three options or formulations will operate as intended, Messrs.
only to taxes, duties, fees and the like. Ramos and de Vera also performed some quantifications of the government share via a financial
modeling of each of the three options discussed above. They found that the government would
Precisely for that reason, to fulfill the legislative intent behind the inclusion of the get the highest share from the option that is based on the net mining revenue, as compared with
phrase among other things in the second paragraph of Section 81,[67] the DENR structured and the other two options, considering only the basic and the additional shares; and that, even though
formulated in DAO 99-56 the said additional government share. Such a share was to consist production rate decreases, the government share will actually increase when the net mining
not of taxes, but of a share in the earnings or cash flows of the mining enterprise. The revenue and the additional profit-based options are used.
additional government share was to be paid by the contractor on top of the basic share, so as to
achieve a fifty-fifty sharing -- between the government and the contractor -- of net benefits from Furthermore, it should be noted that the three options or formulae do not yet take into
mining. In the Ramos-DeVera paper, the explanation of the three options or formulas[68] -- account the indirect taxes[70] and other financial contributions[71] of mining projects. These
presented in DAO 99-56 for the computation of the additional government share -- serves to indirect taxes and other contributions are real and actual benefits enjoyed by the Filipino people
debunk the claim that the governments take from an FTAA consists solely of taxes, fees and and/or government. Now, if some of the quantifiable items are taken into account in the
duties. computations, the financial modeling would show that the total government share increases to 60
percent or higher -- in one instance, as much as 77 percent and even 89 percent -- of the net
Unfortunately, the Office of the Solicitor General -- although in possession of the relevant present value of total benefits from the project. As noted in the Ramos-DeVera paper, these
data -- failed to fully replicate or echo the pertinent elucidation in the Ramos-DeVera paper results are not at all shabby, considering that the contractor puts in all the capital requirements
regarding the three schemes or options for computing the additional government share presented in and assumes all the risks, without the government having to contribute or risk anything.
Despite the foregoing explanation, Justice Carpio still insisted during the Courts peculiar to the mining industry. Besides, with developments and advances in technology and in
deliberations that the phrase among other things refers only to taxes, duties and fees. We are the geosciences, we cannot discount the possibility of shorter recovery periods. At any rate, the
bewildered by his position. On the one hand, he condemns the Mining Law for allegedly limiting concerned agencies have not been remiss in this area. The 1995 and 1996 Implementing Rules
the governments benefits only to taxes, duties and fees; and on the other, he refuses to allow the and Regulations of RA 7942 specify that the period of recovery, reckoned from the date of
State to benefit from the correct and proper interpretation of the DENR/MGB. To remove all commercial operation, shall be for a period not exceeding five years, or until the date
doubts then, we hold that the States share is not limited to taxes, duties and fees only and that the of actual recovery, whichever comes earlier.
DENR/MGB interpretation of the phrase among other things is correct. Definitely, this
DENR/MGB interpretation is not only legally sound, but also greatly advantageous to the
government.
Approval of Pre-Operating
One last point on the subject. The legislature acted judiciously in not defining the Expenses Required by RA 7942
terms among other things and, instead, leaving it to the agencies concerned to devise and
develop the various modes of arriving at a reasonable and fair amount for the additional
government share. As can be seen from DAO 99-56, the agencies concerned did an admirable Still, RA 7942 is criticized for allegedly not requiring government approval of pre-
job of conceiving and developing not just one formula, but three different formulae for arriving operating, exploration and development expenses of the foreign contractors, who are in effect
at the additional government share. Each of these options is quite fair and reasonable; and, as given unfettered discretion to determine the amounts of such expenses. Supposedly, nothing
Messrs. Ramos and De Vera stated, other alternatives or schemes for a possible improvement of prevents the contractors from recording such expenses in amounts equal to the mining revenues
the fiscal regime for FTAAs are also being studied by the government. anticipated for the first 10 or 15 years of commercial production, with the result that the share of
the State will be zero for the first 10 or 15 years. Moreover, under the circumstances, the
Besides, not locking into a fixed definition of the term among other things will ultimately government would be unable to say when it would start to receive its share under the FTAA.
be more beneficial to the government, as it will have that innate flexibility to adjust to and cope
with rapidly changing circumstances, particularly those in the international markets. Such We believe that the argument is based on incorrect information as well as speculation.
flexibility is especially significant for the government in terms of helping our mining enterprises Obviously, certain crucial provisions in the Mining Law were overlooked. Section 23, dealing
remain competitive in world markets despite challenging and shifting economic scenarios. with the rights and obligations of the exploration permit grantee, states: The permittee shall
undertake exploration work on the area as specified by its permit based on an approved work
In conclusion, we stress that we do not share the view that in FTAAs with foreign program. The next proviso reads: Any expenditure in excess of the yearly budget of the approved
contractors under RA 7942, the governments share is limited to taxes, fees and duties. work program may be carried forward and credited to the succeeding years covering the
Consequently, we find the attacks on the second paragraph of Section 81 of RA 7942 totally duration of the permit. x x x. (underscoring supplied)
unwarranted.
Clearly, even at the stage of application for an exploration permit, the applicant is required
to submit -- for approval by the government -- a proposed work program for exploration,
containing a yearly budget of proposed expenditures. The State has the opportunity to pass upon
Collections Not Made Uncertain (and approve or reject) such proposed expenditures, with the foreknowledge that -- if approved --
by the Third Paragraph of Section 81 these will subsequently be recorded as pre-operating expenses that the contractor will have to
recoup over the grace period. That is not all.
The third or last paragraph of Section 81[72] provides that the government share in FTAAs Under Section 24, an exploration permit holder who determines the commercial viability of
shall be collected when the contractor shall have recovered its pre-operating expenses and a project covering a mining area may, within the term of the permit, file with the Mines and
exploration and development expenditures. The objection has been advanced that, on account of Geosciences Bureau a declaration of mining project feasibility. This declaration is to be
the proviso, the collection of the States share is not even certain, as there is no time limit in RA accompanied by a work program for development for the Bureaus approval, the necessary
7942 for this grace period or recovery period. prelude for entering into an FTAA, a mineral production sharing agreement (MPSA), or some
other mineral agreement. At this stage, too, the government obviously has the opportunity to
We believe that Congress did not set any time limit for the grace period, preferring to leave approve or reject the proposed work program and budgeted expenditures for development
it to the concerned agencies, which are, on account of their technical expertise and training, in a works on the project. Such expenditures will ultimately become the pre-operating and
better position to determine the appropriate durations for such recovery periods. After all, these development costs that will have to be recovered by the contractor.
recovery periods are determined, to a great extent, by technical and technological factors
Naturally, with the submission of approved work programs and budgets for the exploration within the issues that were defined and delineated by this Court during the Oral Argument --
and the development/construction phases, the government will be able to scrutinize and approve particularly the third issue, which pertained exclusively to FTAAs. Neither did the parties argue
or reject such expenditures. It will be well-informed as to the amounts of pre-operating and other upon them in their pleadings. Hence, this Court cannot make any pronouncement in this
expenses that the contractor may legitimately recover and the approximate period of time needed case regarding the constitutionality of Sections 80 and 84 without violating the fundamental
to effect such a recovery. There is therefore no way the contractor can just randomly post any rules of due process. Indeed, the two provisos will have to await another case specifically
amount of pre-operating expenses and expect to recover the same. placing them in issue.
The aforecited provisions on approved work programs and budgets have counterparts in On the other hand, Section 112[74] is disparaged for allegedly reverting FTAAs and all
Section 35, which deals with the terms and conditions exclusively applicable to FTAAs. The mineral agreements to the old and discredited license, concession or lease system. This Section
said provision requires certain terms and conditions to be incorporated into FTAAs; among states in relevant part that the provisions of Chapter XIV [which includes Sections 80 to 82] on
them, a firm commitment x x x of an amount corresponding to the expenditure obligation that government share in mineral production-sharing agreement x x x shall immediately govern
will be invested in the contract area and representations and warranties x x x to timely deploy and apply to a mining lessee or contractor. (underscoring supplied) This provision is construed
these [financing, managerial and technical expertise and technological] resources under its as signifying that the 2 percent excise tax which, pursuant to Section 80, comprises the
supervision pursuant to the periodic work programs and related budgets x x x, as well as work government share in MPSAs shall now also constitute the government share in FTAAs -- as well
programs and minimum expenditures commitments. (underscoring supplied) as in co-production agreements and joint venture agreements -- to the exclusion of revenues of
any other nature or from any other source.
Unarguably, given the provisions of Section 35, the State has every opportunity to pass
upon the proposed expenditures under an FTAA and approve or reject them. It has access to all Apart from the fact that Section 112 likewise does not come within the issues delineated by
the information it may need in order to determine in advance the amounts of pre-operating and this Court during the Oral Argument, and was never touched upon by the parties in their
developmental expenses that will have to be recovered by the contractor and the amount of time pleadings, it must also be noted that the criticism hurled against this Section is rooted in
needed for such recovery. unwarranted conclusions made without considering other relevant provisions in the statute.
Whether Section 112 may properly apply to co-production or joint venture agreements, the fact
In summary, we cannot agree that the third or last paragraph of Section 81 of RA of the matter is that it cannot be made to apply to FTAAs.
7942 is in any manner unconstitutional.
First, Section 112 does not specifically mention or refer to FTAAs; the only reason it is
being applied to them at all is the fact that it happens to use the word contractor. Hence, it is a bit
of a stretch to insist that it covers FTAAs as well. Second, mineral agreements, of which there
No Deprivation of
are three types -- MPSAs, co-production agreements, and joint venture agreements -- are covered
Beneficial Rights
by Chapter V of RA 7942. On the other hand, FTAAs are covered by and in fact are the subject
of Chapter VI, an entirely different chapter altogether. The law obviously intends to treat them as
It is also claimed that aside from the second and the third paragraphs of Section 81 a breed apart from mineral agreements, since Section 35 (found in Chapter VI) creates a long list
(discussed above), Sections 80, 84 and 112 of RA 7942 also operate to deprive the State of of specific terms, conditions, commitments, representations and warranties -- which have not
beneficial rights of ownership over mineral resources; and give them away for free to private been made applicable to mineral agreements -- to be incorporated into FTAAs.
business enterprises (including foreign owned corporations). Likewise, the said provisions have Third, under Section 39, the FTAA contractor is given the option to downgrade -- to
been construed as constituting, together with Section 81, an ingenious attempt to resurrect the convert the FTAA into a mineral agreement at any time during the term if the economic viability
old and discredited system of license, concession or lease. of the contract area is inadequate to sustain large-scale mining operations. Thus, there is no
Specifically, Section 80 is condemned for limiting the States share in a mineral production- reason to think that the law through Section 112 intends to exact from FTAA contractors merely
sharing agreement (MPSA) to just the excise tax on the mineral product. Under Section 151(A) the same government share (a 2 percent excise tax) that it apparently demands from contractors
of the Tax Code, such tax is only 2 percent of the market value of the gross output of the under the three forms of mineral agreements. In brief, Section 112 does not apply to FTAAs.
minerals. The colatilla in Section 84, the portion considered offensive to the Constitution, Notwithstanding the foregoing explanation, Justices Carpio and Morales maintain that the
reiterates the same limitation made in Section 80.[73] Court must rule now on the constitutionality of Sections 80, 84 and 112, allegedly because the
It should be pointed out that Section 80 and the colatilla in Section 84 pertain only to WMCP FTAA contains a provision which grants the contractor unbridled and automatic
MPSAs and have no application to FTAAs. These particular statutory provisions do not come authority to convert the FTAA into an MPSA; and should such conversion happen, the State
would be prejudiced since its share would be limited to the 2 percent excise tax. Justice Carpio
adds that there are five MPSAs already signed just awaiting the judgment of this Court on Foreign contractors do not just waltz into town one day and leave the next, taking away
respondents and intervenors Motions for Reconsideration. We hold however that, at this point, mineral resources without paying anything. In order to get at the minerals, they have to invest
this argument is based on pure speculation. The Court cannot rule on mere surmises and huge sums of money (tens or hundreds of millions of dollars) in exploration works first. If the
hypothetical assumptions, without firm factual anchor. We repeat: basic due process requires exploration proves unsuccessful, all the cash spent thereon will not be returned to the foreign
that we hear the parties who have a real legal interest in the MPSAs (i.e. the parties who investors; rather, those funds will have been infused into the local economy, to remain there
executed them) before these MPSAs can be reviewed, or worse, struck down by the Court. permanently. The benefits therefrom cannot be simply ignored. And assuming that the foreign
Anything less than that requirement would be arbitrary and capricious. contractors are successful in finding ore bodies that are viable for commercial exploitation, they
do not just pluck out the minerals and cart them off. They have first to build camp sites and
In any event, the conversion of the present FTAA into an MPSA is problematic. First, the roadways; dig mine shafts and connecting tunnels; prepare tailing ponds, storage areas and
contractor must comply with the law, particularly Section 39 of RA 7942; inter alia, it must vehicle depots; install their machinery and equipment, generator sets, pumps, water tanks and
convincingly show that the economic viability of the contract is found to be inadequate to justify sewer systems, and so on.
large-scale mining operations; second, it must contend with the Presidents exercise of the power
of State control over the EDU of natural resources; and third, it will have to risk a possible In short, they need to expend a great deal more of their funds for facilities, equipment and
declaration of the unconstitutionality (in a proper case) of Sections 80, 84 and 112. supplies, fuel, salaries of local labor and technical staff, and other operating expenses. In the
meantime, they also have to pay taxes,[75] duties, fees, and royalties. All told, the exploration,
The first requirement is not as simple as it looks. Section 39 contemplates a situation in pre-feasibility, feasibility, development and construction phases together add up to as many as
which an FTAA has already been executed and entered into, and is presumably being eleven years.[76] The contractors have to continually shell out funds for the duration of over a
implemented, when the contractor discovers that the mineral ore reserves in the contract area are not decade, before they can commence commercial production from which they would eventually
sufficient to justify large-scale mining, and thus the contractor requests the conversion of the derive revenues. All that money translates into a lot of pump-priming for the local economy.
FTAA into an MPSA. The contractor in effect needs to explain why, despite its exploration
activities, including the conduct of various geologic and other scientific tests and procedures in Granted that the contractors are allowed subsequently to recover their pre-operating
the contract area, it was unable to determine correctly the mineral ore reserves and the economic expenses, still, that eventuality will happen only after they shall have first put out the cash and
viability of the area. The contractor must explain why, after conducting such exploration fueled the economy. Moreover, in the process of recouping their investments and costs, the
activities, it decided to file a declaration of mining feasibility, and to apply for an FTAA, thereby foreign contractors do not actually pull out the money from the economy. Rather, they recover or
leading the State to believe that the area could sustain large-scale mining. The contractor must recoup their investments out of actual commercial production by not paying a portion of the
justify fully why its earlier findings, based on scientific procedures, tests and data, turned out to basic government share corresponding to national taxes, along with the additional government
be wrong, or were way off. It must likewise prove that its new findings, also based on scientific share, for a period of not more than five years[77] counted from the commencement of
tests and procedures, are correct. Right away, this puts the contractors technical capabilities and commercial production.
expertise into serious doubt. We wonder if anyone would relish being in this situation. The State
could even question and challenge the contractors qualification and competence to continue the It must be noted that there can be no recovery without commencing actual commercial
activity under an MPSA. production. In the meantime that the contractors are recouping costs, they need to continue
operating; in order to do so, they have to disburse money to meet their various needs. In short,
All in all, while there may be cogent grounds to assail the aforecited Sections, this money is continually infused into the economy.
Court -- on considerations of due process -- cannot rule upon them here. Anyway, if later
on these Sections are declared unconstitutional, such declaration will not affect the other The foregoing discussion should serve to rid us of the mistaken belief that, since the
portions since they are clearly separable from the rest. foreign contractors are allowed to recover their investments and costs, the end result is that they
practically get the minerals for free, which leaves the Filipino people none the better for it.

Our Mineral Resources Not


Given Away for Free by RA 7942 All Businesses Entitled
to Cost Recovery

Nevertheless, if only to disabuse our minds, we should address the contention that our
mineral resources are effectively given away for free by the law (RA 7942) in general and by Let it be put on record that not only foreign contractors, but all businessmen and all
Sections 80, 81, 84 and 112 in particular. business entities in general, have to recoup their investments and costs. That is one of the first
things a student learns in business school. Regardless of its nationality, and whether or not a their home countries, thereby resulting in no real contribution to the economic growth of this
business entity has a five-year cost recovery period, it will -- must -- have to recoup its country. Clearly, this contention is premised on erroneous assumptions.
investments, one way or another. This is just common business sense. Recovery of investments
is absolutely indispensable for business survival; and business survival ensures soundness of the First, as already discussed in detail hereinabove, the concerned agencies have correctly
economy, which is critical and contributory to the general welfare of the people. Even interpreted the second paragraph of Section 81 of RA 7942 to mean that the government is
government corporations must recoup their investments in order to survive and continue in entitled to an additional share, to be computed based on any one of the following factors: net
operation. And, as the preceding discussion has shown, there is no business that gets ahead or mining revenues, the present value of the cash flows, or excess profits reckoned against a
earns profits without any cost to it. benchmark rate of return on investments. So it is not correct to say that all of the after-tax
income will accrue to the foreign FTAA contractor, as the government effectively receives a
It must also be stressed that, though the State owns vast mineral wealth, such wealth is not significant portion thereof.
readily accessible or transformable into usable and negotiable currency without the intervention
of the credible mining companies. Those untapped mineral resources, hidden beneath tons of Second, the foreign contractors can hardly repatriate the entire after-tax income to their
earth and rock, may as well not be there for all the good they do us right now. They have first to home countries. Even a bit of knowledge of corporate finance will show that it will be
be extracted and converted into marketable form, and the country needs the foreign contractors impossible to maintain a business as a going concern if the entire net profit earned in any
funds, technology and know-how for that. particular year will be taken out and repatriated. The net income figure reflected in the bottom
line is a mere accounting figure not necessarily corresponding to cash in the bank, or other quick
After about eleven years of pre-operation and another five years for cost recovery, the assets. In order to produce and set aside cash in an amount equivalent to the bottom line figure,
foreign contractors will have just broken even. Is it likely that they would at that point stop their one may need to sell off assets or immediately collect receivables or liquidate short-term
operations and leave? Certainly not. They have yet to make profits. Thus, for the remainder of investments; but doing so may very likely disrupt normal business operations.
the contract term, they must strive to maintain profitability. During this period, they pay the
whole of the basic government share and the additional government share which, taken together In terms of cash flows, the funds corresponding to the net income as of a particular point in
with indirect taxes and other contributions, amount to approximately 60 percent or more of the time are actually in use in the normal course of business operations. Pulling out such net
entire financial benefits generated by the mining venture. income disrupts the cash flows and cash position of the enterprise and, depending on the amount
being taken out, could seriously cripple or endanger the normal operations and financial health
In sum, we can hardly talk about foreign contractors taking our mineral resources for free. of the business enterprise. In short, no sane business person, concerned with maintaining the
It takes a lot of hard cash to even begin to do what they do. And what they do in this country mining enterprise as a going concern and keeping a foothold in its market, can afford to
ultimately benefits the local economy, grows businesses, generates employment, and creates repatriate the entire after-tax income to the home country.
infrastructure, as discussed above. Hence, we definitely disagree with the sweeping claim that
no FTAA under Section 81 will ever make any real contribution to the growth of the economy or
to the general welfare of the country. This is not a plea for foreign contractors. Rather, this is a
The States Receipt of Sixty
question of focusing the judicial spotlight squarely on all the pertinent facts as they bear upon
Percent of an FTAA Contractors
the issue at hand, in order to avoid leaping precipitately to ill-conceived conclusions not solidly
After-Tax Income Not Mandatory
grounded upon fact.

We now come to the next objection which runs this way: In FTAAs with a foreign
Repatriation of contractor, the State must receive at least 60 percent of the after-tax income from the
After-Tax Income exploitation of its mineral resources. This share is the equivalent of the constitutional
requirement that at least 60 percent of the capital, and hence 60 percent of the income, of mining
companies should remain in Filipino hands.
Another objection points to the alleged failure of the Mining Law to ensure real
contributions to the economic growth and general welfare of the country, as mandated by First, we fail to see how we can properly conclude that the Constitution mandates the State
Section 2 of Article XII of the Constitution. Pursuant to Section 81 of the law, the entire after-tax to extract at least 60 percent of the after-tax income from a mining company run by a foreign
income arising from the exploitation of mineral resources owned by the State supposedly contractor. The argument is that the Charter requires the States partner in a co-production
belongs to the foreign contractors, which will naturally repatriate the said after-tax income to agreement, joint venture agreement or MPSA to be a Filipino corporation (at least 60 percent
owned by Filipino citizens).
We question the logic of this reasoning, premised on a supposedly parallel or analogous The Mining and the Oil Industries
situation. We are, after all, dealing with an essentially different equation, one that involves Different From Each Other
different elements. The Charter did not intend to fix an iron-clad rule on the 60 percent
share, applicable to all situations at all times and in all circumstances. If ever such was the
intention of the framers, they would have spelt it out in black and white. Verba legis will serve to To stress, there is no independent showing that the taking of at least a 60 percent share in
dispel unwarranted and untenable conclusions. the after-tax income of a mining company operated by a foreign contractor is fair and
reasonable under most if not all circumstances. The fact that some petroleum companies like
Second, if we would bother to do the math, we might better appreciate the impact (and Shell acceded to such percentage of sharing does not ipso facto mean that it is per se reasonable
reasonableness) of what we are demanding of the foreign contractor. Let us use and applicable to non-petroleum situations (that is, mining companies) as well. We can take
a simplifiedillustration. Let us base it on gross revenues of, say, P500. After deducting operating judicial notice of the fact that there are, after all, numerous intrinsic differences involved in their
expenses, but prior to income tax, suppose a mining firm makes a taxable income of P100. A respective operations and equipment or technological requirements, costs structures and capital
corporate income tax of 32 percent results in P32 of taxable income going to the government, investment needs, and product pricing and markets.
leaving the mining firm with P68. Government then takes 60 percent thereof, equivalent
to P40.80, leaving only P27.20 for the mining firm. There is no showing, for instance, that mining companies can readily cope with a 60
percent government share in the same way petroleum companies apparently can. What we have
At this point the government has pocketed P32.00 plus P40.80, or a total of P72.80 for is a suggestion to enforce the 60 percent quota on the basis of a disjointed analogy. The only
every P100 of taxable income, leaving the mining firm with only P27.20. But that is not all. The factor common to the two disparate situations is the extraction of natural resources.
government has also taken 2 percent excise tax off the top, equivalent to another P10. Under the
minimum 60 percent proposal, the government nets around P82.80 (not counting other taxes, Indeed, we should take note of the fact that Congress made a distinction between mining
duties, fees and charges) from a taxable income of P100 (assuming gross revenues of P500, for firms and petroleum companies. In Republic Act No. 7729 -- An Act Reducing the Excise Tax
purposes of illustration). On the other hand, the foreign contractor, which provided all the Rates on Metallic and Non-Metallic Minerals and Quarry Resources, Amending for the Purpose
capital, equipment and labor, and took all the entrepreneurial risks -- receives P27.20. One Section 151(a) of the National Internal Revenue Code, as amended -- the lawmakers fixed the
cannot but wonder whether such a distribution is even remotely equitable and reasonable, excise tax rate on metallic and non-metallic minerals at two percent of the actual market value of
considering the nature of the mining business. The amount of P82.80 out of P100.00 is really a the annual gross output at the time of removal. However, in the case of petroleum, the
lot it does not matter that we call part of it excise tax or income tax, and another portion lawmakers set the excise tax rate for the first taxable sale at fifteen percent of the fair
thereof income from exploitation of mineral resources. Some might think it wonderful to be able international market price thereof.
to take the lions share of the benefits. But we have to ask ourselves if we are really serious in
There must have been a very sound reason that impelled Congress to impose two very
attracting the investments that are the indispensable and key element in generating the monetary
dissimilar excise tax rate. We cannot assume, without proof, that our honorable legislators acted
benefits of which we wish to take the lions share. Fairness is a credo not only in law, but also
arbitrarily, capriciously and whimsically in this instance. We cannot just ignore the reality of two
in business.
distinctly different situations and stubbornly insist on going minimum 60 percent.
Third, the 60 percent rule in the petroleum industry cannot be insisted upon at all times in
To repeat, the mere fact that gas and oil exploration contracts grant the State 60 percent of
the mining business. The reason happens to be the fact that in petroleum operations, the bulk of
the net revenues does not necessarily imply that mining contracts should likewise yield a
expenditures is in exploration, but once the contractor has found and tapped into the deposit,
minimum of 60 percent for the State. Jumping to that erroneous conclusion is like comparing
subsequent investments and expenditures are relatively minimal. The crude (or gas) keeps
apples with oranges. The exploration, development and utilization of gas and oil are simply
gushing out, and the work entailed is just a matter of piping, transporting and storing. Not so in
different from those of mineral resources.
mineral mining. The ore body does not pop out on its own. Even after it has been located, the
contractor must continually invest in machineries and expend funds to dig and build tunnels in To stress again, the main risk in gas and oil is in the exploration. But once oil in
order to access and extract the minerals from underneath hundreds of tons of earth and rock. commercial quantities is struck and the wells are put in place, the risk is relatively over and
black gold simply flows out continuously with comparatively less need for fresh investments and
As already stated, the numerous intrinsic differences involved in their respective operations
technology.
and requirements, cost structures and investment needs render it highly inappropriate to use
petroleum operations FTAAs as benchmarks for mining FTAAs. Verily, we cannot just ignore On the other hand, even if minerals are found in viable quantities, there is still need
the realities of the distinctly different situations and stubbornly insist on the minimum 60 for continuous fresh capital and expertise to dig the mineral ores from the mines. Just because
percent. deposits of mineral ores are found in one area is no guarantee that an equal amount can be found
in the adjacent areas. There are simply continuing risks and need for more capital, expertise and such minimum is to wade into judicial legislation, and thereby inordinately impinge on
industry all the time. the control power of the State. Let it be clear: the Court is not against the grant of more benefits
to the State; in fact, the more the better. If during the FTAA negotiations, the President can
Note, however, that the indirect benefits -- apart from the cash revenues -- are much more secure 60 percent,[78] or even 90 percent, then all the better for our people. But, if under
in the mineral industry. As mines are explored and extracted, vast employment is created, roads the peculiar circumstances of a specific contract, the President could secure only 50 percent or
and other infrastructure are built, and other multiplier effects arise. On the other hand, once oil 55 percent, so be it. Needless to say, the President will have to report (and be responsible for) the
wells start producing, there is less need for employment. Roads and other public works need not specific FTAA to Congress, and eventually to the people.
be constructed continuously. In fine, there is no basis for saying that government revenues from
the oil industry and from the mineral industries are to be identical all the time. Finally, if it should later be found that the share agreed to is grossly disadvantageous to the
government, the officials responsible for entering into such a contract on its behalf will have to
Fourth, to our mind, the proffered minimum 60 percent suggestion tends to limit the answer to the courts for their malfeasance. And the contract provision voided. But this Court
flexibility and tie the hands of government, ultimately hampering the countrys competitiveness in would abuse its own authority should it force the governments hand to adopt the 60 percent
the international market, to the detriment of the Filipino people. This you-have-to-give-us-60- demand of some of our esteemed colleagues.
percent-of-after-tax-income-or-we-dont-do- business-with-you approach is quite perilous. True, this
situation may not seem too unpalatable to the foreign contractor during good years, when
international market prices are up and the mining firm manages to keep its costs in check.
However, under unfavorable economic and business conditions, with costs spiraling skywards Capital and Expertise Provided,
and minerals prices plummeting, a mining firm may consider itself lucky to make just minimal Yet All Risks Assumed by Contractor
profits.
The inflexible, carved-in-granite demand for a 60 percent government share may spell the Here, we will repeat what has not been emphasized and appreciated enough: the fact that
end of the mining venture, scare away potential investors, and thereby further worsen the already the contractor in an FTAA provides all the needed capital, technical and managerial expertise,
dismal economic scenario. Moreover, such an unbending or unyielding policy prevents the and technology required to undertake the project.
government from responding appropriately to changing economic conditions and shifting market
forces. This inflexibility further renders our country less attractive as an investment option In regard to the WMCP FTAA, the then foreign-owned WMCP as contractor committed, at
compared with other countries. the very outset, to make capital investments of up to US$50 million in that single mining project.
WMCP claims to have already poured in well over P800 million into the country as of February
And fifth, for this Court to decree imperiously that the governments share should be not 1998, with more in the pipeline. These resources, valued in the tens or hundreds of millions of
less than 60 percent of the after-tax income of FTAA contractors at all times is nothing short of dollars, are invested in a mining project that provides no assurance whatsoever that any part of
dictating upon the government. The result, ironically, is that the State ends up losing control. To the investment will be ultimately recouped.
avoid compromising the States full control and supervision over the exploitation of mineral
resources, this Court must back off from insisting upon a minimum 60 percent rule. It is At the same time, the contractor must comply with legally imposed environmental
sufficient that the State has the power and means, should it so decide, to get a 60 percent share standards and the social obligations, for which it also commits to make significant expenditures
(or more) in the contractors net mining revenues or after-tax income, or whatever other basis the of funds. Throughout, the contractor assumes all the risks[79] of the business, as mentioned
government may decide to use in reckoning its share. It is not necessary for it to do so in every earlier. These risks are indeed very high, considering that the rate of success in exploration is
case, regardless of circumstances. extremely low. The probability of finding any mineral or petroleum in commercially viable
quantities is estimated to be about 1:1,000 only. On that slim chance rides the contractors hope
In fact, the government must be trusted, must be accorded the liberty and the utmost of recouping investments and generating profits. And when the contractor has recouped its initial
flexibility to deal, negotiate and transact with contractors and third parties as it sees fit; and upon investments in the project, the government share increases to sixty percent of net benefits --
terms that it ascertains to be most favorable or most acceptable under the circumstances, even if without the State ever being in peril of incurring costs, expenses and losses.
it means agreeing to less than 60 percent. Nothing must prevent the State from agreeing to a
share less than that, should it be deemed fit; otherwise the State will be deprived of full control And even in the worst possible scenario -- an absence of commercial quantities of minerals
over mineral exploitation that the Charter has vested in it. to justify development -- the contractor would already have spent several million pesos for
exploration works, before arriving at the point in which it can make that determination and
To stress again, there is simply no constitutional or legal provision fixing the minimum decide to cut its losses. In fact, during the first year alone of the exploration period, the
share of the government in an FTAA at 60 percent of the net profit. For this Court to decree
contractor was already committed to spend not less than P24 million. The FTAA therefore corporation, the State loses its right to receive its 60 percent share in net mining revenues under
clearly ensures benefits for the local economy, courtesy of the contractor. Section 7.7.
All in all, this setup cannot be regarded as disadvantageous to the State or the Filipino Section 7.9 provides:
people; it certainly cannot be said to convey beneficial ownership of our mineral resources
to foreign contractors. The percentage of Net Mining Revenues payable to the Government pursuant to Clause 7.7 shall
be reduced by 1percent of Net Mining Revenues for every 1percent ownership interest in the
Contractor (i.e., WMCP) held by a Qualified Entity.[83]
Deductions Allowed by the
WMCP FTAA Reasonable Evidently, what Section 7.7 grants to the State is taken away in the next breath by Section
7.9 without any offsetting compensation to the State. Thus, in reality, the State has no vested
right to receive any income from the FTAA for the exploitation of its mineral resources. Worse,
Petitioners question whether the States weak control might render the sharing arrangements it would seem that what is given to the State in Section 7.7 is by mere tolerance of WMCPs
ineffective. They cite the so-called suspicious deductions allowed by the WMCP FTAA in foreign stockholders, who can at any time cut off the governments entire 60 percent share. They
arriving at the net mining revenue, which is the basis for computing the government share. The can do so by simply selling 60 percent of WMCPs outstanding capital stock to a Philippine
WMCP FTAA, for instance, allows expenditures for development within and outside the citizen or corporation. Moreover, the proceeds of such sale will of course accrue to the foreign
Contract Area relating to the Mining Operations,[80] consulting fees incurred both inside stockholders of WMCP, not to the State.
and outside the Philippines for work related directly to the Mining Operations,[81] and the
establishment and administration of field offices including administrative overheads incurred The sale of 60 percent of WMCPs outstanding equity to a corporation that is 60 percent
within and outside the Philippines which are properly allocatable to the Mining Operations and Filipino-owned and 40 percent foreign-owned will still trigger the operation of Section 7.9.
reasonably related to the performance of the Contractors obligations and exercise of its rights Effectively, the State will lose its right to receive all 60 percent of the net mining revenues of
under this Agreement.[82] WMCP; and foreign stockholders will own beneficially up to 64 percent of WMCP, consisting of
the remaining 40 percent foreign equity therein, plus the 24 percent pro-rata share in the buyer-
It is quite well known, however, that mining companies do perform some marketing corporation.[84]
activities abroad in respect of selling their mineral products and by-products. Hence, it would not
be improper to allow the deduction of reasonable consulting fees incurred abroad, as well as In fact, the January 23, 2001 sale by WMCPs foreign stockholder of the entire outstanding
administrative expenses and overheads related to marketing offices also located abroad -- equity in WMCP to Sagittarius Mines, Inc. -- a domestic corporation at least 60 percent Filipino
provided that these deductions are directly related or properly allocatable to the mining owned -- may be deemed to have automatically triggered the operation of Section 7.9, without
operations and reasonably related to the performance of the contractors obligations and exercise need of further action by any party, and removed the States right to receive the 60 percent share
of its rights. In any event, more facts are needed. Until we see how these provisions actually in net mining revenues.
operate, mere suspicions will not suffice to propel this Court into taking action. At bottom, Section 7.9 has the effect of depriving the State of its 60 percent share in the net
mining revenues of WMCP without any offset or compensation whatsoever. It is possible that
the inclusion of the offending provision was initially prompted by the desire to provide some
Section 7.9 of the WMCP FTAA form of incentive for the principal foreign stockholder in WMCP to eventually reduce its equity
Invalid and Disadvantageous position and ultimately divest in favor of Filipino citizens and corporations. However, as finally
structured, Section 7.9 has the deleterious effect of depriving government of the entire 60
percent share in WMCPs net mining revenues, without any form of compensation whatsoever.
Having defended the WMCP FTAA, we shall now turn to two defective provisos. Let us Such an outcome is completely unacceptable.
start with Section 7.9 of the WMCP FTAA. While Section 7.7 gives the government a 60 percent
The whole point of developing the nations natural resources is to benefit the Filipino
share in the net mining revenues of WMCP from the commencement of commercial production,
people, future generations included. And the State as sovereign and custodian of the nations
Section 7.9 deprives the government of part or all of the said 60 percent. Under the latter
natural wealth is mandated to protect, conserve, preserve and develop that part of the national
provision, should WMCPs foreign shareholders -- who originally owned 100 percent of the
patrimony for their benefit. Hence, the Charter lays great emphasis on real contributions to the
equity -- sell 60 percent or more of its outstanding capital stock to a Filipino citizen or
economic growth and general welfare of the country[85] as essential guiding principles to be kept government fully protected, while the business operations of the contractor are not needlessly
in mind when negotiating the terms and conditions of FTAAs. disrupted.
Earlier, we held (1) that the State must be accorded the liberty and the utmost flexibility to
deal, negotiate and transact with contractors and third parties as it sees fit, and upon terms that it
ascertains to be most favorable or most acceptable under the circumstances, even if that should Section 7.8(e) of the WMCP FTAA
mean agreeing to less than 60 percent; (2) that it is not necessary for the State to extract a 60 Also Invalid and Disadvantageous
percent share in every case and regardless of circumstances; and (3) that should the State be
prevented from agreeing to a share less than 60 percent as it deems fit, it will be deprived of the
full control over mineral exploitation that the Charter has vested in it. Section 7.8(e) of the WMCP FTAA is likewise invalid. It provides thus:

That full control is obviously not an end in itself; it exists and subsists precisely because of 7.8 The Government Share shall be deemed to include all of the following sums:
the need to serve and protect the national interest. In this instance, national interest finds
particular application in the protection of the national patrimony and the development and
(a) all Government taxes, fees, levies, costs, imposts, duties and
exploitation of the countrys mineral resources for the benefit of the Filipino people and the
royalties including excise tax, corporate income tax,
enhancement of economic growth and the general welfare of the country. Undoubtedly, such
customs duty, sales tax, value added tax, occupation and
full control can be misused and abused, as we now witness.
regulatory fees, Government controlled price stabilization
Section 7.9 of the WMCP FTAA effectively gives away the States share of net mining schemes, any other form of Government backed schemes,
revenues (provided for in Section 7.7) without anything in exchange. Moreover, this outcome any tax on dividend payments by the Contractor or its
constitutes unjust enrichment on the part of the local and foreign stockholders of WMCP. By Affiliates in respect of revenues from the Mining
their mere divestment of up to 60 percent equity in WMCP in favor of Filipino citizens and/or Operations and any tax on interest on domestic and
corporations, the local and foreign stockholders get a windfall. Their share in the net mining foreign loans or other financial arrangements or
revenues of WMCP is automatically increased, without their having to pay the government accommodations, including loans extended to the
anything for it. In short, the provision in question is without a doubt grossly disadvantageous to Contractor by its stockholders;
the government, detrimental to the interests of the Filipino people, and violative of public policy. (b) any payments to local and regional government, including taxes,
fees, levies, costs, imposts, duties, royalties, occupation
Moreover, it has been reiterated in numerous decisions[86] that the parties to a contract may and regulatory fees and infrastructure contributions;
establish any agreements, terms and conditions that they deem convenient; but these should not (c) any payments to landowners, surface rights holders, occupiers,
be contrary to law, morals, good customs, public order or public policy. [87] Being precisely indigenous people or Claimowners;
violative of anti-graft provisions and contrary to public policy, Section 7.9 must therefore be (d) costs and expenses of fulfilling the Contractors obligations to
stricken off as invalid. contribute to national development in accordance with
Whether the government officials concerned acceded to that provision by sheer mistake or Clause 10.1(i) (1) and 10.1(i) (2);
with full awareness of the ill consequences, is of no moment. It is hornbook doctrine that the (e) an amount equivalent to whatever benefits that may be extended in
principle of estoppel does not operate against the government for the act of its agents, [88] and that the future by the Government to the Contractor or to
it is never estopped by any mistake or error on their part. [89] It is therefore possible and proper to financial or technical assistance agreement contractors in
rectify the situation at this time. Moreover, we may also say that the FTAA in question does not general;
involve mere contractual rights; being impressed as it is with public interest, the contractual (f) all of the foregoing items which have not previously been offset
provisions and stipulations must yield to the common good and the national interest. against the Government Share in an earlier Fiscal Year,
adjusted for inflation. (underscoring supplied)
Since the offending provision is very much separable[90] from Section 7.7 and the rest of the
FTAA, the deletion of Section 7.9 can be done without affecting or requiring the invalidation of Section 7.8(e) is out of place in the FTAA. It makes no sense why, for instance, money
the WMCP FTAA itself. Such a deletion will preserve for the government its due share of the spent by the government for the benefit of the contractor in building roads leading to the mine
benefits. This way, the mandates of the Constitution are complied with and the interests of the site should still be deductible from the States share in net mining revenues. Allowing this
deduction results in benefiting the contractor twice over. It constitutes unjust enrichment on the
part of the contractor at the expense of the government, since the latter is effectively being made
to pay twice for the same item.[91] For being grossly disadvantageous and prejudicial to the Section 3.3 of the WMCP
government and contrary to public policy, Section 7.8(e) is undoubtedly invalid and must be FTAA Constitutional
declared to be without effect. Fortunately, this provision can also easily be stricken off without
affecting the rest of the FTAA.
Section 3.3 of the WMCP FTAA is assailed for violating supposed constitutional
restrictions on the term of FTAAs. The provision in question reads:
Nothing Left Over
After Deductions? 3.3 This Agreement shall be renewed by the Government for a further period of
twenty-five (25) years under the same terms and conditions provided that the
Contractor lodges a request for renewal with the Government not less than
In connection with Section 7.8, an objection has been raised: Specified in Section 7.8 are sixty (60) days prior to the expiry of the initial term of this Agreement and
numerous items of deduction from the States 60 percent share. After taking these into account, provided that the Contractor is not in breach of any of the requirements of this
will the State ever receive anything for its ownership of the mineral resources? Agreement.

We are confident that under normal circumstances, the answer will be yes. If we examine Allegedly, the above provision runs afoul of Section 2 of Article XII of the 1987
the various items of deduction listed in Section 7.8 of the WMCP FTAA, we will find that they Constitution, which states:
correspond closely to the components or elements of the basic government share established in
DAO 99-56, as discussed in the earlier part of this Opinion.
Sec. 2. All lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils,
Likewise, the balance of the governments 60 percent share -- after netting out the items of all forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other
deduction listed in Section 7.8 --corresponds closely to the additional government natural resources are owned by the State. With the exception of agricultural lands, all other
shareprovided for in DAO 99-56 which, we once again stress, has nothing at all to do with natural resources shall not be alienated. The exploration, development and utilization of natural
indirect taxes. The Ramos-DeVera paper[92] concisely presents the fiscal contribution of an resources shall be under the full control and supervision of the State. The State may directly
FTAA under DAO 99-56 in this equation: 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
Receipts from an FTAA = basic govt share + addl govt share whose capital is owned by such citizens. Such agreements may be for a period not exceeding
Transposed into a similar equation, the fiscal payments system from the WMCP FTAA twenty-five years, renewable for not more than twenty-five years, and under such terms and
assumes the following formulation: 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.
Governments 60 percent share in net mining revenues of WMCP = items listed in Sec. 7.8 of the
FTAA + balance of Govt share, payable 4 months from the end of the fiscal year
The State shall protect the nations marine wealth in its archipelagic waters, territorial sea, and
exclusive economic zone, and reserve its use and enjoyment exclusively to Filipino citizens.
It should become apparent that the fiscal arrangement under the WMCP FTAA is very
similar to that under DAO 99-56, with the balance of government share payable 4 months from
end of fiscal year being the equivalent of the additional government share computed in The Congress may, by law, allow small-scale utilization of natural resources by Filipino
accordance with the net-mining-revenue-based option under DAO 99-56, as discussed above. As citizens, as well as cooperative fish farming, with priority to subsistence fishermen and fish-
we have emphasized earlier, we find each of the three options for computing the additional workers in rivers, lakes, bays and lagoons.
government share -- as presented in DAO 99-56 -- to be sound and reasonable.
The President may enter into agreements with foreign-owned corporations involving either
We therefore conclude that there is nothing inherently wrong in the fiscal regime of technical or financial assistance for large-scale exploration, development, and utilization of
the WMCP FTAA, and certainly nothing to warrant the invalidation of the FTAA in its minerals, petroleum, and other mineral oils according to the general terms and conditions
entirety. provided by law, based on real contributions to the economic growth and general welfare of the
country. In such agreements, the State shall promote the development and use of local scientific
and technical resources.
The President shall notify the Congress of every contract entered into in accordance with this Financial Benefits for Foreigners
provision, within thirty days from its execution.[93] Not Forbidden by the Constitution

We hold that the term limitation of twenty-five years does not apply to FTAAs. The reason
is that the above provision is found within paragraph 1 of Section 2 of Article XII, which refers Before leaving this subject matter, we find it necessary for us to rid ourselves of the false
to mineral agreements -- co-production agreements, joint venture agreements and mineral belief that the Constitution somehow forbids foreign-owned corporations from deriving financial
production-sharing agreements -- which the government may enter into with Filipino citizens benefits from the development of our natural or mineral resources.
and corporations, at least 60 percent owned by Filipino citizens. The word such clearly refers to The Constitution has never prohibited foreign corporations from acquiring and enjoying
these three mineral agreements -- CPAs, JVAs and MPSAs -- not to FTAAs. beneficial interest in the development of Philippine natural resources. The State itself need not
Specifically, FTAAs are covered by paragraphs 4 and 5 of Section 2 of Article XII of the directly undertake exploration, development, and utilization activities. Alternatively, the
Constitution. It will be noted that there are no term limitations provided for in the said Constitution authorizes the government to enter into joint venture agreements (JVAs), co-
paragraphs dealing with FTAAs. This shows that FTAAs are sui generis, in a class of their own. production agreements (CPAs) and mineral production sharing agreements (MPSAs) with
This omission was obviously a deliberate move on the part of the framers. They probably contractors who are Filipino citizens or corporations that are at least 60 percent Filipino-owned.
realized that FTAAs would be different in many ways from MPSAs, JVAs and CPAs. The They may do the actual dirty work -- the mining operations.
reason the framers did not fix term limitations applicable to FTAAs is that they preferred to In the case of a 60 percent Filipino-owned corporation, the 40 percent individual and/or
leave the matter to the discretion of the legislature and/or the agencies involved in implementing corporate non-Filipino stakeholders obviously participate in the beneficial interest derived from
the laws pertaining to FTAAs, in order to give the latter enough flexibility and elbow room to the development and utilization of our natural resources. They may receive by way of dividends,
meet changing circumstances. up to 40 percent of the contractors earnings from the mining project. Likewise, they may have a
Note also that, as previously stated, the exploratory phrases of an FTAA lasts up to eleven say in the decisions of the board of directors, since they are entitled to representation therein to
years. Thereafter, a few more years would be gobbled up in start-up operations. It may take the extent of their equity participation, which the Constitution permits to be up to 40 percent of
fifteen years before an FTAA contractor can start earning profits. And thus, the period of 25 the contractors equity. Hence, the non-Filipino stakeholders may in that manner also participate
years may really be short for an FTAA. Consider too that in this kind of agreement, the in the management of the contractors natural resource development work. All of this is permitted
contractor assumes all entrepreneurial risks. If no commercial quantities of minerals are found, by our Constitution, for any natural resource, and without limitation even in regard to the
the contractor bears all financial losses. To compensate for this long gestation period and extra magnitude of the mining project or operations (see paragraph 1 of Section 2 of Article XII).
business risks, it would not be totally unreasonable to allow it to continue EDU activities for It is clear, then, that there is nothing inherently wrong with or constitutionally
another twenty five years. objectionable about the idea of foreign individuals and entities having or enjoying beneficial
In any event, the complaint is that, in essence, Section 3.3 gives the contractor the power to interest in -- and participating in the management of operations relative to -- the exploration,
compel the government to renew the WMCP FTAA for another 25 years and deprives the State development and utilization of our natural resources.
of any say on whether to renew the contract.
While we agree that Section 3.3 could have been worded so as to prevent it from favoring
FTAA More Advantageous
the contractor, this provision does not violate any constitutional limits, since the said term
Than Other Schemes
limitation does not apply at all to FTAAs. Neither can the provision be deemed in any manner to
Like CPA, JVA and MPSA
be illegal, as no law is being violated thereby. It is certainly not illegal for the government to
waive its option to refuse the renewal of a commercial contract.
Verily, the government did not have to agree to Section 3.3. It could have said No to the A final point on the subject of beneficial interest. We believe the FTAA is a more
stipulation, but it did not. It appears that, in the process of negotiations, the other contracting advantageous proposition for the government as compared with other agreements permitted by
party was able to convince the government to agree to the renewal terms. Under the the Constitution. In a CPA that the government enters into with one or more contractors, the
circumstances, it does not seem proper for this Court to intervene and step in to undo what might government shall provide inputs to the mining operations other than the mineral resource
have perhaps been a possible miscalculation on the part of the State. If government believes that itself.[94]
it is or will be aggrieved by the effects of Section 3.3, the remedy is the renegotiation of the
provision in order to provide the State the option to not renew the FTAA.
In a JVA, a JV company is organized by the government and the contractor, with both on the Mining Industry
parties having equity shares (investments); and the contractor is granted the exclusive right to
conduct mining operations and to extract minerals found in the area. [95] On the other hand, in an
MPSA, the government grants the contractor the exclusive right to conduct mining operations During the Oral Argument and in their Final Memorandum, petitioners repeatedly urged
within the contract area and shares in the gross output; and the contractor provides the necessary the Court to consider whether mining as an industry and economic activity deserved to be
financing, technology, management and manpower. accorded priority, preference and government support as against, say, agriculture and other
activities in which Filipinos and the Philippines may have an economic advantage. For instance,
The point being made here is that, in two of the three types of agreements under a recent US study[96] reportedly examined the economic performance of all local US counties
consideration, the government has to ante up some risk capital for the enterprise. In other words, that were dependent on mining and 20 percent of whose labor earnings between 1970 and 2000
government funds (public moneys) are withdrawn from other possible uses, put to work in the came from mining enterprises.
venture and placed at risk in case the venture fails. This notwithstanding, management and
control of the operations of the enterprise are -- in all three arrangements -- in the hands of the The study -- covering 100 US counties in 25 states dependent on mining -- showed that per
contractor, with the government being mainly a silent partner. The three types of agreement capita income grew about 30 percent less in mining-dependent communities in the 1980s and 25
mentioned above apply to any natural resource, without limitation and regardless of the size or percent less for the entire period 1980 to 2000; the level of per capita income was also lower.
magnitude of the project or operations. Therefore, given the slower rate of growth, the gap between these and other local counties
increased.
In contrast to the foregoing arrangements, and pursuant to paragraph 4 of Section 2 of
Article XII, the FTAA is limited to large-scale projects and only for minerals, petroleum and Petitioners invite attention to the OXFAM America Reports warning to developing nations
other mineral oils. Here, the Constitution removes the 40 percent cap on foreign ownership and that mining brings with it serious economic problems, including increased regional inequality,
allows the foreign corporation to own up to 100 percent of the equity. Filipino capital may not be unemployment and poverty. They also cite the final report[97] of the Extractive Industries Review
sufficient on account of the size of the project, so the foreign entity may have to ante up all the project commissioned by the World Bank (the WB-EIR Report), which warns of environmental
risk capital. degradation, social disruption, conflict, and uneven sharing of benefits with local communities
that bear the negative social and environmental impact. The Report suggests that countries need
Correlatively, the foreign stakeholder bears up to 100 percent of the risk of loss if the to decide on the best way to exploit their natural resources, in order to maximize the value added
project fails. In respect of the particular FTAA granted to it, WMCP (then 100 percent foreign from the development of their resources and ensure that they are on the path to sustainable
owned) was responsible, as contractor, for providing the entire equity, including all the inputs for development once the resources run out.
the project. It was to bear 100 percent of the risk of loss if the project failed, but its maximum
potential beneficial interest consisted only of 40 percent of the net beneficial interest, because Whatever priority or preference may be given to mining vis--vis other economic or non-
the other 60 percent is the share of the government, which will never be exposed to any risk of economic activities is a question of policy that the President and Congress will have to address;
loss whatsoever. it is not for this Court to decide. This Court declares what the Constitution and the laws say,
interprets only when necessary, and refrains from delving into matters of policy.
In consonance with the degree of risk assumed, the FTAA vested in WMCP the day-to-day
management of the mining operations. Still such management is subject to the overall control Suffice it to say that the State control accorded by the Constitution over mining activities
and supervision of the State in terms of regular reporting, approvals of work programs and assures a proper balancing of interests. More pointedly, such control will enable the President to
budgets, and so on. demand the best mining practices and the use of the best available technologies to protect the
environment and to rehabilitate mined-out areas. Indeed, under the Mining Law, the government
So, one needs to consider in relative terms, the costs of inputs for, degree of risk attendant can ensure the protection of the environment during and after mining. It can likewise provide for
to, and benefits derived or to be derived from a CPA, a JVA or an MPSA vis--vis those the mechanisms to protect the rights of indigenous communities, and thereby mold a more
pertaining to an FTAA. It may not be realistically asserted that the foreign grantee of an FTAA socially-responsive, culturally-sensitive and sustainable mining industry.
is being unduly favored or benefited as compared with a foreign stakeholder in a corporation
holding a CPA, a JVA or an MPSA. Seen the other way around, the government is definitely Early on during the launching of the Presidential Mineral Industry Environmental Awards
better off with an FTAA than a CPA, a JVA or an MPSA. on February 6, 1997, then President Fidel V. Ramos captured the essence of balanced and
sustainable mining in these words:

Developmental Policy Long term, high profit mining translates into higher revenues for government, more decent jobs
for the population, more raw materials to feed the engines of downstream and allied industries,
and improved chances of human resource and countryside development by creating self-reliant But, as Justice Carpio himself pointed out during the Oral Argument, the disjunctive
communities away from urban centers. phrase either technical or financial assistance would, strictly speaking, literally mean that a
foreign contractor may provide only one or the other, but not both. And if both technical and
xxxxxxxxx financial assistance were required for a project, the State would have to deal with at least two
different foreign contractors -- one for financial and the other for technical assistance. And
following on that, a foreign contractor, though very much qualified to provide both kinds of
Against a fragile and finite environment, it is sustainability that holds the key. In sustainable
assistance, would nevertheless be prohibited from providing one kind as soon as it shall have
mining, we take a middle ground where both production and protection goals are balanced, and
where parties-in-interest come to terms. agreed to provide the other.
But if the Court should follow this restrictive and literal construction, can we really find
Neither has the present leadership been remiss in addressing the concerns of sustainable two (or more) contractors who are willing to participate in one single project -- one to provide
mining operations. Recently, on January 16, 2004 and April 20, 2004, President Gloria the financial assistance only and the other the technical assistance exclusively; it would be
Macapagal Arroyo issued Executive Orders Nos. 270 and 270-A, respectively, to excellent if these two or more contractors happen to be willing and are able to cooperate and
promote responsible mineral resources exploration, development and utilization, in order to work closely together on the same project (even if they are otherwise competitors). And it would
enhance economic growth, in a manner that adheres to the principles of sustainable development be superb if no conflicts would arise between or among them in the entire course of the contract.
and with due regard for justice and equity, sensitivity to the culture of the Filipino people and But what are the chances things will turn out this way in the real world? To think that the
respect for Philippine sovereignty.[98] framers deliberately imposed this kind of restriction is to say that they were either exceedingly
optimistic, or incredibly nave. This begs the question -- What laudable objective or purpose
could possibly be served by such strict and restrictive literal interpretation?
REFUTATION OF DISSENTS 3. Citing Oposa v. Factoran Jr., Justice Morales claims that a service contract is not a
contract or property right which merits protection by the due process clause of the
Constitution, but merely a license or privilege which may be validly revoked, rescinded or
The Court will now take up a number of other specific points raised in the dissents of withdrawn by executive action whenever dictated by public interest or public welfare.
Justices Carpio and Morales.
Oposa cites Tan v. Director of Forestry and Ysmael v. Deputy Executive Secretary as
1. Justice Morales introduced us to Hugh Morgan, former president and chief executive authority. The latter cases dealt specifically with timber licenses only. Oposa allegedly
officer of Western Mining Corporation (WMC) and former president of the Australian Mining reiterated that a license is merely a permit or privilege to do what otherwise would be unlawful,
Industry Council, who spearheaded the vociferous opposition to the filing by aboriginal peoples and is not a contract between the authority, federal, state or municipal, granting it and the
of native title claims against mining companies in Australia in the aftermath of the person to whom it is granted; neither is it property or a property right, nor does it create a
landmark Mabo decision by the Australian High Court. According to sources quoted by our vested right; nor is it taxation. Thus this Court held that the granting of license does not create
esteemed colleague, Morgan was also a racist and a bigot. In the course of irrevocable rights, neither is it property or property rights.
protesting Mabo, Morgan allegedly uttered derogatory remarks belittling the aboriginal culture
and race. Should Oposa be deemed applicable to the case at bar, on the argument that natural
resources are also involved in this situation? We do not think so. A grantee of a timber license,
An unwritten caveat of this introduction is that this Court should be careful not to permit permit or license agreement gets to cut the timber already growing on the surface; it need not dig
the entry of the likes of Hugh Morgan and his hordes of alleged racist-bigots at WMC. With all up tons of earth to get at the logs. In a logging concession, the investment of the licensee is not
due respect, such scare tactics should have no place in the discussion of this case. We are as substantial as the investment of a large-scale mining contractor. If a timber license were
deliberating on the constitutionality of RA 7942, DAO 96-40 and the FTAA originally granted revoked, the licensee packs up its gear and moves to a new area applied for, and starts over; what
to WMCP, which had been transferred to Sagittarius Mining, a Filipino corporation. We are not it leaves behind are mainly the trails leading to the logging site.
discussing the apparition of white Anglo-Saxon racists/bigots massing at our gates.
In contrast, the mining contractor will have sunk a great deal of money (tens of millions of
2. On the proper interpretation of the phrase agreements involving either technical or dollars) into the ground, so to speak, for exploration activities, for development of the mine site
financial assistance, Justice Morales points out that at times we conveniently omitted the use of and infrastructure, and for the actual excavation and extraction of minerals, including the
the disjunctive eitheror, which according to her denotes restriction; hence the phrase must be extensive tunneling work to reach the ore body. The cancellation of the mining contract will
deemed to connote restriction and limitation.
utterly deprive the contractor of its investments (i.e., prevent recovery of investments), most of it is not really realistic to say that we will borrow on our own terms. Maybe we can say that we
which cannot be pulled out. inherited unjust loans, and we would like to repay these on terms that are not prejudicial to our
own growth. But the general statement that we should only borrow on our own terms is a bit
To say that an FTAA is just like a mere timber license or permit and does not involve unrealistic. Comm. Monsod is one who knew whereof he spoke.
contract or property rights which merit protection by the due process clause of the Constitution,
and may therefore be revoked or cancelled in the blink of an eye, is to adopt a well-nigh 7. Justice Morales also declares that the optimal time for the conversion of an FTAA into
confiscatory stance; at the very least, it is downright dismissive of the property rights of an MPSA is after completion of the exploration phase and just before undertaking the
businesspersons and corporate entities that have investments in the mining industry, whose development and construction phase, on account of the fact that the requirement for a minimum
investments, operations and expenditures do contribute to the general welfare of the people, the investment of $50 million is applicable only during the development, construction and utilization
coffers of government, and the strength of the economy. Such a pronouncement will surely phase, but not during the exploration phase, when the foreign contractor need merely comply
discourage investments (local and foreign) which are critically needed to fuel the engine of with minimum ground expenditures. Thus by converting, the foreign contractor maximizes its
economic growth and move this country out of the rut of poverty. In sum, Oposa is not profits by avoiding its obligation to make the minimum investment of $50 million.
applicable.
This argument forgets that the foreign contractor is in the game precisely to make money.
4. Justice Morales adverts to the supposedly clear intention of the framers of the In order to come anywhere near profitability, the contractor must first extract and sell the
Constitution to reserve our natural resources exclusively for the Filipino people. She then quoted mineral ore. In order to do that, it must also develop and construct the mining facilities, set up its
from the records of the ConCom deliberations a passage in which then Commissioner Davide machineries and equipment and dig the tunnels to get to the deposit. The contractor is thus
explained his vote, arguing in the process that aliens ought not be allowed to participate in the compelled to expend funds in order to make profits. If it decides to cut back on investments and
enjoyment of our natural resources. One passage does not suffice to capture the tenor or expenditures, it will necessarily sacrifice the pace of development and utilization; it will
substance of the entire extensive deliberations of the commissioners, or to reveal the clear necessarily sacrifice the amount of profits it can make from the mining operations. In fact, at
intention of the framers as a group. A re-reading of the entire deliberations (quoted here earlier) certain less-than-optimal levels of operation, the stream of revenues generated may not even be
is necessary if we are to understand the true intent of the framers. enough to cover variable expenses, let alone overhead expenses; this is a dismal situation anyone
would want to avoid. In order to make money, one has to spend money. This truism applies to
5. Since 1935, the Filipino people, through their Constitution, have decided that the the mining industry as well.
retardation or delay in the exploration, development or utilization of the nations natural
resources is merely secondary to the protection and preservation of their ownership of the natural 8. Mortgaging the minerals to secure a foreign FTAA contractors obligations is anomalous,
resources, so says Justice Morales, citing Aruego. If it is true that the framers of the 1987 according to Justice Morales since the contractor was from the beginning obliged to provide all
Constitution did not care much about alleviating the retardation or delay in the development and financing needed for the mining operations. However, the mortgaging of minerals by the
utilization of our natural resources, why did they bother to write paragraph 4 at all? Were they contractor does not necessarily signify that the contractor is unable to provide all financing
merely paying lip service to large-scale exploration, development and utilization? They could required for the project, or that it does not have the financial capability to undertake large-scale
have just completely ignored the subject matter and left it to be dealt with through a future operations. Mortgaging of mineral products, just like the assignment (by way of security) of
constitutional amendment. But we have to harmonize every part of the Constitution and to manufactured goods and goods in inventory, and the assignment of receivables, is an ordinary
interpret each provision in a manner that would give life and meaning to it and to the rest of the requirement of banks, even in the case of clients with more than sufficient financial resources.
provisions. It is obvious that a literal interpretation of paragraph 4 will render it utterly inutile And nowadays, even the richest and best managed corporations make use of bank credit facilities
and inoperative. -- it does not necessarily signify that they do not have the financial resources or are unable to
provide the financing on their own; it is just a manner of maximizing the use of their funds.
6. According to Justice Morales, the deliberations of the Constitutional Commission do not
support our contention that the framers, by specifying such agreements involving financial or 9. Does the contractor in reality acquire the surface rights for free, by virtue of the fact that
technical assistance, necessarily gave implied assent to everything that these agreements it is entitled to reimbursement for the costs of acquisition and maintenance, adjusted for
implicitly entailed, or that could reasonably be deemed necessary to make them tenable and inflation? We think not. The reimbursement is possible only at the end of the term of the
effective, including management authority in the day-to-day operations. As proof thereof, she contract, when the surface rights will no longer be needed, and the land previously acquired will
quotes one single passage from the ConCom deliberations, consisting of an exchange among have to be disposed of, in which case the contractor gets reimbursement from the sales proceeds.
Commissioners Tingson, Garcia and Monsod. The contractor has to pay out the acquisition price for the land. That money will belong to the
seller of the land. Only if and when the land is finally sold off will the contractor get any
However, the quoted exchange does not serve to contradict our argument; it even bolsters reimbursement. In other words, the contractor will have been cash-out for the entire duration of
it. Comm. Christian Monsod was quoted as saying: xxx I think we have to make a distinction that
the term of the contract -- 25 or 50 years, depending. If we calculate the cost of money at say 12 The issuance of DAO 99-56 did not involve the exercise of delegated legislative power. The
percent per annum, that is the cost or opportunity loss to the contractor, in addition to the amount legislature did not delegate the power to determine the nature, extent and composition of the
of the acquisition price. 12 percent per annum for 50 years is 600 percent; this, without any items that would come under the phrase among other things. The legislatures power pertains to
compounding yet. The cost of money is therefore at least 600 percent of the original acquisition the imposition of taxes, duties and fees. This power was not delegated to the DENR secretary.
cost; it is in addition to the acquisition cost. For free? Not by a long shot. But the power to negotiate and enter into FTAAs was withheld from Congress, and reserved for
the President. In determining the sharing of mining benefits, i.e., in specifying what the
10. The contractor will acquire and hold up to 5,000 hectares? We doubt it. The acquisition phrase among other things include, the President (through the secretary acting in his/her behalf)
by the State of land for the contractor is just to enable the contractor to establish its mine site, was not determining the amount or rate of taxes, duties and fees, but rather the amount of
build its facilities, establish a tailings pond, set up its machinery and equipment, and dig mine INCOME to be derived from minerals to be extracted and sold, income which belongs to the
shafts and tunnels, etc. It is impossible that the surface requirement will aggregate 5,000 State as owner of the mineral resources. We may say that, in the second paragraph of Section 81,
hectares. Much of the operations will consist of the tunneling and digging underground, which the legislature in a sense intruded partially into the Presidents sphere of authority when the
will not require possessing or using any land surface. 5,000 hectares is way too much for the former provided that
needs of a mining operator. It simply will not spend its cash to acquire property that it will not
need; the cash may be better employed for the actual mining operations, to yield a profit.
The Government share in financial or technical assistance agreement shall consist of, among
11. Justice Carpio claims that the phrase among other things (found in the second other things, the contractors corporate income tax, excise tax, special allowance, withholding
paragraph of Section 81 of the Mining Act) is being incorrectly treated as a delegation of tax due from the contractors foreign stockholders arising from dividend or interest payments to
legislative power to the DENR secretary to issue DAO 99-56 and prescribe the formulae therein the said foreign stockholder in case of a foreign national and all such other taxes, duties and
on the States share from mining operations. He adds that the phrase among other things was not fees as provided for under existing laws. (Italics supplied)
intended as a delegation of legislative power to the DENR secretary, much less could it be
deemed a valid delegation of legislative power, since there is nothing in the second paragraph of But it did not usurp the Presidents authority since the provision merely included the
Section 81 which can be said to grant any delegated legislative power to the DENR secretary. enumerated items as part of the government share, without foreclosing or in any way preventing
And even if there were, such delegation would be void, for lack of any standards by which the (as in fact Congress could not validly prevent) the President from determining what constitutes
delegated power shall be exercised. the States compensation derived from FTAAs. In this case, the President in effect directed the
inclusion or addition of other things, viz., INCOME for the owner of the resources, in the
While there is nothing in the second paragraph of Section 81 which can directly be
governments share, while adopting the items enumerated by Congress as part of the government
construed as a delegation of legislative power to the DENR secretary, it does not mean that DAO
share also.
99-56 is invalid per se, or that the secretary acted without any authority or jurisdiction in issuing
DAO 99-56. As we stated earlier in our Prologue, Who or what organ of government actually 12. Justice Carpios insistence on applying the ejusdem generis rule of statutory
exercises this power of control on behalf of the State? The Constitution is crystal clear: construction to the phrase among other things is therefore useless, and must fall by the wayside.
the President. Indeed, the Chief Executive is the official constitutionally mandated to enter into There is no point trying to construe that phrase in relation to the enumeration of taxes, duties and
agreements with foreign owned corporations. On the other hand, Congress may review the fees found in paragraph 2 of Section 81, precisely because the constitutional power to prescribe
action of the President once it is notified of every contract entered into in accordance with this the sharing of mining income between the State and mining companies, to quote Justice
[constitutional] provision within thirty days from its execution. It is the President who is Carpio pursuant to an FTAA is constitutionally lodged with the President, not with
constitutionally mandated to enter into FTAAs with foreign corporations, and in doing so, it is Congress. It thus makes no sense to persist in giving the phrase among other things a restricted
within the Presidents prerogative to specify certain terms and conditions of the FTAAs, for meaning referring only to taxes, duties and fees.
example, the fiscal regime of FTAAs -- i.e., the sharing of the net mining revenues between the
contractor and the State. 13. Strangely, Justice Carpio claims that the DENR secretary can change the formulae in
DAO 99-56 any time even without the approval of the President, and the secretary is the sole
Being the Presidents alter ego with respect to the control and supervision of the mining authority to determine the amount of consideration that the State shall receive in an FTAA,
industry, the DENR secretary, acting for the President, is necessarily clothed with the requisite because Section 5 of the DAO states that xxx any amendment of an FTAA other than the
authority and power to draw up guidelines delineating certain terms and conditions, and provision on fiscal regime shall require the negotiation with the Negotiation Panel and the
specifying therein the terms of sharing of benefits from mining, to be applicable to FTAAs in recommendation of the Secretary for approval of the President xxx. Allegedly, because of that
general. It is important to remember that DAO 99-56 has been in existence for almost six years, provision, if an amendment in the FTAA involves non-fiscal matters, the amendment requires
and has not been amended or revoked by the President. approval of the President, but if the amendment involves a change in the fiscal regime, the
DENR secretary has the final authority, and approval of the President may be dispensed with; For that very reason, we have never said that DAO 99-56 is the basis for claiming that the
hence the secretary is more powerful than the President. WMCP FTAA has a consideration. Hence, we find quite out of place Justice Carpios statement
that ironically, DAO 99-56, the very authority cited to support the claim that the WMCP FTAA
We believe there is some distortion resulting from the quoted provision being taken out of has a consideration, does not apply to the WMCP FTAA. By its own express terms, DAO 99-56
context. Section 5 of DAO 99-56 reads as follows: does not apply to FTAAs executed before the issuance of DAO 99-56, like the WMCP FTAA. The
majoritys position has allegedly no leg to stand on since even DAO 99-56, assuming it is valid,
Section 5. Status of Existing FTAAs. All FTAAs approved prior to the effectivity of this cannot save the WMCP FTAA from want of consideration. Even assuming arguendo that DAO
Administrative Order shall remain valid and be recognized by the Government: Provided, That 99-56 does not apply to the WMCP FTAA, nevertheless, the WMCP FTAA has its own fiscal
should a Contractor desire to amend its FTAA, it shall do so by filing a Letter of Intent (LOI) to regime, found in Section 7.7 thereof. Hence, there is no such thing as want of consideration here.
the Secretary thru the Director. Provided, further, That if the Contractor desires to amend the
fiscal regime of its FTAA, it may do so by seeking for the amendment of its FTAAs whole fiscal Still more startling is this claim: The majority supposedly agrees that the provisions of the
regime by adopting the fiscal regime provided hereof: Provided, finally, That any amendment of WMCP FTAA, which grant a sham consideration to the State, are void. Since the majority
an FTAA other than the provision on fiscal regime shall require the negotiation with the agrees that the WMCP FTAA has a sham consideration, the WMCP FTAA thus lacks the third
Negotiating Panel and the recommendation of the Secretary for approval of the President of the element of a valid contract. The Decision should declare the WMCP FTAA void for want of
Republic of the Philippines. (underscoring supplied) consideration unless it treats the contract as an MPSA under Section 80. Indeed the only
recourse of WMCP to save the validity of its contract is to convert it into an MPSA.
It looks like another case of misapprehension. The proviso being objected to by Justice To clarify, we said that Sections 7.9 and 7.8(e) of the WMCP FTAA are provisions grossly
Carpio is actually preceded by a phrase that requires a contractor desiring to amend the fiscal disadvantageous to government and detrimental to the interests of the Filipino people, as well as
regime of its FTAA, to amend the same by adopting the fiscal regime prescribed in DAO 99-56 - violative of public policy, and must therefore be stricken off as invalid. Since the offending
- i.e., solely in that manner, and in no other. Obviously, since DAO 99-56 was issued by the provisions are very much separable from Section 7.7 and the rest of the FTAA, the deletion of
secretary under the authority and with the presumed approval of the President, the Sections 7.9 and 7.8(e) can be done without affecting or requiring the invalidation of the WMCP
amendment of an FTAA by merely adopting the fiscal regime prescribed in said DAO 99-56 FTAA itself, and such deletion will preserve for government its due share of the 60 percent
(and nothing more) need not have the express clearance of the President anymore. It is as if benefits. Therefore, the WMCP FTAA is NOT bereft of a valid consideration (assuming for the
the same had been pre-approved. We cannot fathom the complaint that that makes the secretary nonce that indeed this is the consideration of the FTAA).
more powerful than the President, or that the former is trying to hide things from the President or
Congress.
14. Based on the first sentence of Section 5 of DAO 99-56, which states [A]ll FTAAs SUMMATION
approved prior to the effectivity of this Administrative Order shall remain valid and be
recognized by the Government, Justice Carpio concludes that said Administrative Order
allegedly exempts FTAAs approved prior to its effectivity -- like the WMCP FTAA -- from To conclude, a summary of the key points discussed above is now in order.
having to pay the State any share from their mining income, apart from taxes, duties and fees.
We disagree. What we see in black and white is the statement that the FTAAs approved
before the DAO came into effect are to continue to be valid and will be recognized by the The Meaning of Agreements Involving
State.Nothing is said about their fiscal regimes. Certainly, there is no basis to claim that the Either Technical or Financial Assistance
contractors under said FTAAs were being exempted from paying the government a share in their
mining incomes.
Applying familiar principles of constitutional construction to the phrase agreements
For the record, the WMCP FTAA is NOT and has never been exempt from paying the involving either technical or financial assistance, the framers choice of words does not indicate
government share. The WMCP FTAA has its own fiscal regime -- Section 7.7 -- which gives the intent to exclude other modes of assistance, but rather implies that there are other
the government a 60 percent share in the net mining revenues of WMCP from the things being included or possibly being made part of the agreement, apart from financial or
commencement of commercial production. technical assistance. The drafters avoided the use of restrictive and stringent phraseology;
a verba legis scrutiny of Section 2 of Article XII of the Constitution discloses not even a hint of
a desire to prohibit foreign involvement in the management or operation of mining activities, or
to eradicate service contracts. Such moves would necessarily imply an underlying drastic shift in investments, loans and other financial assistance, and ultimately to protect the business
fundamental economic and developmental policies of the State. That change requires a much reputation of the foreign corporations. The drafters, by specifying such agreements involving
more definite and irrefutable basis than mere omission of the words service contract from the assistance, necessarily gave implied assent to everything that these agreements entailed or that
new Constitution. could reasonably be deemed necessary to make them tenable and effective -- including
management authority with respect to the day-to-day operations of the enterprise, and measures
Furthermore, a literal and restrictive interpretation of this paragraph leads to logical for the protection of the interests of the foreign corporation, at least to the extent that they are
inconsistencies. A constitutional provision specifically allowing foreign-owned corporations to consistent with Philippine sovereignty over natural resources, the constitutional requirement of
render financial or technical assistance in respect of mining or any other commercial activity was State control, and beneficial ownership of natural resources remaining vested in the State.
clearly unnecessary; the provision was meant to refer to more than mere financial or technical
assistance. From the foregoing, it is clear that agreements involving either technical or financial
assistance referred to in paragraph 4 are in fact service contracts, but such new service contracts
Also, if paragraph 4 permits only agreements for financial or technical assistance, there are between foreign corporations acting as contractors on the one hand, and on the other hand
would be no point in requiring that they be based on real contributions to the economic growth government as principal or owner (of the works), whereby the foreign contractor provides the
and general welfare of the country. And considering that there were various long-term service capital, technology and technical know-how, and managerial expertise in the creation and
contracts still in force and effect at the time the new Charter was being drafted, the absence of operation of the large-scale mining/extractive enterprise, and government through its agencies
any transitory provisions to govern the termination and closing-out of the then existing service (DENR, MGB) actively exercises full control and supervision over the entire enterprise.
contracts strongly militates against the theory that the mere omission of service contracts
signaled their prohibition by the new Constitution. Such service contracts may be entered into only with respect to minerals, petroleum and
other mineral oils. The grant of such service contracts is subject to several safeguards, among
Resort to the deliberations of the Constitutional Commission is therefore unavoidable, and them: (1) that the service contract be crafted in accordance with a general law setting standard or
a careful scrutiny thereof conclusively shows that the ConCom members discussed agreements uniform terms, conditions and requirements; (2) the President be the signatory for the
involving either technical or financial assistance in the same sense as service contracts and used government; and (3) the President report the executed agreement to Congress within thirty days.
the terms interchangeably. The drafters in fact knew that the agreements with foreign
corporations were going to entail not mere technical or financial assistance but, rather, foreign
investment in and management of an enterprise for large-scale exploration, development and
utilization of minerals. Ultimate Test:
Full State Control
The framers spoke about service contracts as the concept was understood in the 1973
Constitution. It is obvious from their discussions that they did not intend to ban or eradicate service
contracts. Instead, they were intent on crafting provisions to put in place safeguards that would To repeat, the primacy of the principle of the States sovereign ownership of all mineral
eliminate or minimize the abuses prevalent during the martial law regime. In brief, they were going resources, and its full control and supervision over all aspects of exploration, development and
to permit service contracts with foreign corporations as contractors, but with safety measures utilization of natural resources must be upheld. But full control and supervision cannot be taken
to prevent abuses, as an exception to the general norm established in the first paragraph of literally to mean that the State controls and supervises everything down to the minutest details
Section 2 of Article XII, which reserves or limits to Filipino citizens and corporations at least 60 and makes all required actions, as this would render impossible the legitimate exercise by the
percent owned by such citizens the exploration, development and utilization of mineral or contractor of a reasonable degree of management prerogative and authority, indispensable to the
petroleum resources. This was prompted by the perceived insufficiency of Filipino capital and the proper functioning of the mining enterprise. Also, government need not micro-manage mining
felt need for foreign expertise in the EDU of mineral resources. operations and day-to-day affairs of the enterprise in order to be considered as exercising full
control and supervision.
Despite strong opposition from some ConCom members during the final voting, the Article
on the National Economy and Patrimony -- including paragraph 4 allowing service contracts Control, as utilized in Section 2 of Article XII, must be taken to mean a degree of control
with foreign corporations as an exception to the general norm in paragraph 1 of Section 2 of the sufficient to enable the State to direct, restrain, regulate and govern the affairs of the extractive
same Article -- was resoundingly and overwhelmingly approved. enterprises. Control by the State may be on a macro level, through the establishment of policies,
guidelines, regulations, industry standards and similar measures that would enable government
The drafters, many of whom were economists, academicians, lawyers, businesspersons and
to regulate the conduct of affairs in various enterprises, and restrain activities deemed not
politicians knew that foreign entities will not enter into agreements involving assistance without
desirable or beneficial, with the end in view of ensuring that these enterprises contribute to the
requiring measures of protection to ensure the success of the venture and repayment of their
economic development and general welfare of the country, conserve the environment, and uplift
the well-being of the local affected communities. Such a degree of control would be compatible and enforce compliance and impose sanctions should the occasion arise. Hence, RA 7942 and
with permitting the foreign contractor sufficient and reasonable management authority over the DAO 96-40 vest in government more than a sufficient degree of control and supervision over the
enterprise it has invested in, to ensure efficient and profitable operation. conduct of mining operations.
Section 3(aq) of RA 7942 was objected to as being unconstitutional for allowing a foreign
contractor to apply for and hold an exploration permit. During the exploration phase, the permit
Government Granted Full Control grantee (and prospective contractor) is spending and investing heavily in exploration activities
by RA 7942 and DAO 96-40 without yet being able to extract minerals and generate revenues. The exploration permit issued
under Sections 3(aq), 20 and 23 of RA 7942, which allows exploration but not extraction, serves
to protect the interests and rights of the exploration permit grantee (and would-be contractor),
Baseless are petitioners sweeping claims that RA 7942 and its Implementing Rules and foreign or local. Otherwise, the exploration works already conducted, and expenditures already
Regulations make it possible for FTAA contracts to cede full control and management of mining made, may end up only benefiting claim-jumpers. Thus, Section 3(aq) of RA 7942 is not
enterprises over to fully foreign owned corporations. Equally wobbly is the assertion that the unconstitutional.
State is reduced to a passive regulator dependent on submitted plans and reports, with weak
review and audit powers and little say in the decision-making of the enterprise, for which
reasons beneficial ownership of the mineral resources is allegedly ceded to the foreign
contractor. WMCP FTAA Likewise Gives the
State Full Control and Supervision
As discussed hereinabove, the States full control and supervision over mining operations
are ensured through the following provisions in RA 7942: Sections 8, 9, 16, 19, 24, 35[(b), (e),
(f), (g), (h), (k), (l), (m) and (o)], 40, 57, 66, 69, 70, and Chapters XI and XVII; as well as the The WMCP FTAA obligates the contractor to account for the value of production and sale
following provisions of DAO 96-40: Sections7[(d) and (f)], 35(a-2), 53[(a-4) and (d)], 54, of minerals (Clause 1.4); requires that the contractors work program, activities and budgets be
56[(g), (h), (l), (m) and (n)], 56(2), 60, 66, 144, 168, 171 and 270, and also Chapters XV, XVI approved by the State (Clause 2.1); gives the DENR secretary power to extend the exploration
and XXIV. period (Clause 3.2-a); requires approval by the State for incorporation of lands into the contract
area (Clause 4.3-c); requires Bureau of Forest Development approval for inclusion of forest
Through the foregoing provisions, the government agencies concerned are empowered to reserves as part of the FTAA contract area (Clause 4.5); obligates the contractor to periodically
approve or disapprove -- hence, in a position to influence, direct, and change -- the various work relinquish parts of the contract area not needed for exploration and development (Clause 4.6);
programs and the corresponding minimum expenditure commitments for each of the exploration, requires submission of a declaration of mining feasibility for approval by the State (Clause 4.6-
development and utilization phases of the enterprise. Once they have been approved, the b); obligates the contractor to report to the State the results of its exploration activities (Clause
contractors compliance with its commitments therein will be monitored. Figures for mineral 4.9); requires the contractor to obtain State approval for its work programs for the succeeding
production and sales are regularly monitored and subjected to government review, to ensure that two year periods, containing the proposed work activities and expenditures budget related to
the products and by-products are disposed of at the best prices; copies of sales agreements have exploration (Clause 5.1); requires the contractor to obtain State approval for its proposed
to be submitted to and registered with MGB. expenditures for exploration activities (Clause 5.2); requires the contractor to submit an annual
The contractor is mandated to open its books of accounts and records for scrutiny, to enable report on geological, geophysical, geochemical and other information relating to its explorations
the State to determine that the government share has been fully paid. The State may likewise within the FTAA area (Clause 5.3-a); requires the contractor to submit within six months after
compel compliance by the contractor with mandatory requirements on mine safety, health and expiration of exploration period a final report on all its findings in the contract area (Clause 5.3-
environmental protection, and the use of anti-pollution technology and facilities. The contractor b); requires the contractor after conducting feasibility studies to submit a declaration of mining
is also obligated to assist the development of the mining community, and pay royalties to the feasibility, along with a description of the area to be developed and mined, a description of the
indigenous peoples concerned. And violation of any of the FTAAs terms and conditions, and/or proposed mining operations and the technology to be employed, and the proposed work program
non-compliance with statutes or regulations, may be penalized by cancellation of the FTAA. for the development phase, for approval by the DENR secretary (Clause 5.4); obligates the
Such sanction is significant to a contractor who may have yet to recover the tens or hundreds of contractor to complete the development of the mine, including construction of the production
millions of dollars sunk into a mining project. facilities, within the period stated in the approved work program (Clause 6.1); requires the
contractor to submit for approval a work program covering each period of three fiscal years
Overall, the State definitely has a pivotal say in the operation of the individual enterprises, (Clause 6.2); requires the contractor to submit reports to the secretary on the production, ore
and can set directions and objectives, detect deviations and non-compliances by the contractor, reserves, work accomplished and work in progress, profile of its work force and management
staff, and other technical information (Clause 6.3); subjects any expansions, modifications, Clause 10.2(e) of the WMCP FTAA does not mean that the contractor can compel
improvements and replacements of mining facilities to the approval of the secretary (Clause 6.4); government to use its power of eminent domain. It contemplates a situation in which the
subjects to State control the amount of funds that the contractor may borrow within the contractor is a foreign-owned corporation, hence, not qualified to own land. The contractor
Philippines (Clause 7.2); subjects to State supervisory power any technical, financial and identifies the surface areas needed for it to construct the infrastructure for mining operations, and
marketing issues (Clause 10.1-a); obligates the contractor to ensure 60 percent Filipino equity in the State then acquires the surface rights on behalf of the former. The provision does not call for
the contractor within ten years of recovering specified expenditures unless not so required by the exercise of the power of eminent domain (or determination of just compensation); it seeks to
subsequent legislation (Clause 10.1); gives the State the right to terminate the FTAA for avoid a violation of the anti-dummy law.
unremedied substantial breach thereof by the contractor (Clause 13.2); requires State approval
for any assignment of the FTAA by the contractor to an entity other than an affiliate (Clause Clause 10.2(l) of the WMCP FTAA giving the contractor the right to mortgage and
14.1). encumber the mineral products extracted may have been a result of conditions imposed by
creditor-banks to secure the loan obligations of WMCP. Banks lend also upon the security of
In short, the aforementioned provisions of the WMCP FTAA, far from constituting a encumbrances on goods produced, which can be easily sold and converted into cash and applied
surrender of control and a grant of beneficial ownership of mineral resources to the contractor in to the repayment of loans. Thus, Clause 10.2(l) is not something out of the ordinary. Neither is it
question, vest the State with control and supervision over practically all aspects of the operations objectionable, because even though the contractor is allowed to mortgage or encumber the
of the FTAA contractor, including the charging of pre-operating and operating expenses, and the mineral end-products themselves, the contractor is not thereby relieved of its obligation to pay
disposition of mineral products. the government its basic and additional shares in the net mining revenue. The contractors ability
to mortgage the minerals does not negate the States right to receive its share of net mining
There is likewise no relinquishment of control on account of specific provisions of the revenues.
WMCP FTAA. Clause 8.2 provides a mechanism to prevent the mining operations from
grinding to a complete halt as a result of possible delays of more than 60 days in the Clause 10.2(k) which gives the contractor authority to change its equity structure at any
governments processing and approval of submitted work programs and budgets. Clause 8.3 time, means that WMCP, which was then 100 percent foreign owned, could permit Filipino
seeks to provide a temporary, stop-gap solution in case a disagreement between the State and the equity ownership. Moreover, what is important is that the contractor, regardless of its ownership,
contractor (over the proposed work program or budget submitted by the contractor) should result is always in a position to render the services required under the FTAA, under the direction and
in a deadlock or impasse, to avoid unreasonably long delays in the performance of the works. control of the government.
The State, despite Clause 8.3, still has control over the contract area, and it may, as Clauses 10.4(e) and (i) bind government to allow amendments to the FTAA if required by
sovereign authority, prohibit work thereon until the dispute is resolved, or it may terminate the banks and other financial institutions as part of the conditions of new lendings. There is nothing
FTAA, citing substantial breach thereof. Hence, the State clearly retains full and effective objectionable here, since Clause 10.4(e) also provides that such financing arrangements should
control. in no event reduce the contractors obligations or the governments rights under the FTAA. Clause
10.4(i) provides that government shall favourably consider any request for amendments of this
Clause 8.5, which allows the contractor to make changes to approved work programs and agreement necessary for the contractor to successfully obtain financing. There is no renunciation
budgets without the prior approval of the DENR secretary, subject to certain limitations with of control, as the proviso does not say that government shall automatically grant any such
respect to the variance/s, merely provides the contractor a certain amount of flexibility to meet request. Also, it is up to the contractor to prove the need for the requested changes. The
unexpected situations, while still guaranteeing that the approved work programs and budgets are government always has the final say on whether to approve or disapprove such requests.
not abandoned altogether. And if the secretary disagrees with the actions taken by the contractor
in this instance, he may also resort to cancellation/termination of the FTAA as the ultimate In fine, the FTAA provisions do not reduce or abdicate State control.
sanction.
Clause 4.6 of the WMCP FTAA gives the contractor discretion to select parts of the
contract area to be relinquished. The State is not in a position to substitute its judgment for that No Surrender of
of the contractor, who knows exactly which portions of the contract area do not contain minerals Financial Benefits
in commercial quantities and should be relinquished. Also, since the annual occupation fees paid
to government are based on the total hectarage of the contract area, net of the areas relinquished,
the contractors self-interest will assure proper and efficient relinquishment. The second paragraph of Section 81 of RA 7942 has been denounced for allegedly limiting
the States share in FTAAs with foreign contractors to just taxes, fees and duties, and depriving
the State of a share in the after-tax income of the enterprise. However, the inclusion of the
phrase among other things in the second paragraph of Section 81 clearly and unmistakably subsequently be recorded as pre-operating expenses that the contractor will have to recoup over
reveals the legislative intent to have the State collect more than just the usual taxes, duties and the grace period.
fees.
Under Section 24, when an exploration permittee files with the MGB a declaration of
Thus, DAO 99-56, the Guidelines Establishing the Fiscal Regime of Financial or mining project feasibility, it must submit a work program for development, with corresponding
Technical Assistance Agreements, spells out the financial benefits government will receive from budget, for approval by the Bureau, before government may grant an FTAA or MPSA or other
an FTAA, as consisting of not only a basic government share, comprised of all direct taxes, mineral agreements; again, government has the opportunity to approve or reject the proposed
fees and royalties, as well as other payments made by the contractor during the term of the work program and budgeted expenditures for development works, which will become the pre-
FTAA, but also an additional government share, being a share in the earnings or cash flows operating and development costs that will have to be recovered. Government is able to know
of the mining enterprise, so as to achieve a fifty-fifty sharing of net benefits from ahead of time the amounts of pre-operating and other expenses to be recovered, and the
miningbetween the government and the contractor. approximate period of time needed therefor. The aforecited provisions have counterparts in
Section 35, which deals with the terms and conditions exclusively applicable to FTAAs. In sum,
The additional government share is computed using one of three (3) options or schemes the third or last paragraph of Section 81 of RA 7942 cannot be deemed defective.
detailed in DAO 99-56, viz., (1) the fifty-fifty sharing of cumulative present value of cash flows;
(2) the excess profit-related additional government share; and (3) the additional sharing based on Section 80 of RA 7942 allegedly limits the States share in a mineral production-sharing
the cumulative net mining revenue. Whichever option or computation is used, the additional agreement (MPSA) to just the excise tax on the mineral product, i.e., only 2 percent of market
government share has nothing to do with taxes, duties, fees or charges. The portion of revenues value of the minerals. The colatilla in Section 84 reiterates the same limitation in Section
remaining after the deduction of the basic and additional government shares is what goes to the 80. However, these two provisions pertain only to MPSAs, and have no application to
contractor. FTAAs. These particular provisions do not come within the issues defined by this Court.
Hence, on due process grounds, no pronouncement can be made in this case in respect of
The basic government share and the additional government share do not yet take into the constitutionality of Sections 80 and 84.
account the indirect taxes and other financial contributions of mining projects, which are real and
actual benefits enjoyed by the Filipino people; if these are taken into account, total government Section 112 is disparaged for reverting FTAAs and all mineral agreements to the old
share increases to 60 percent or higher (as much as 77 percent, and 89 percent in one instance) of license, concession or lease system, because it allegedly effectively reduces the government
the net present value of total benefits from the project. share in FTAAs to just the 2 percent excise tax which pursuant to Section 80 comprises the
government share in MPSAs. However, Section 112 likewise does not come within the issues
The third or last paragraph of Section 81 of RA 7942 is slammed for deferring the payment delineated by this Court, and was never touched upon by the parties in their pleadings.
of the government share in FTAAs until after the contractor shall have recovered its pre- Moreover, Section 112 may not properly apply to FTAAs. The mining law obviously meant to
operating expenses, exploration and development expenditures. Allegedly, the collection of the treat FTAAs as a breed apart from mineral agreements. There is absolutely no basis to believe
States share is rendered uncertain, as there is no time limit in RA 7942 for this grace period or that the law intends to exact from FTAA contractors merely the same government share (i.e., the
recovery period. But although RA 7942 did not limit the grace period, the concerned agencies 2 percent excise tax) that it apparently demands from contractors under the three forms of
(DENR and MGB) in formulating the 1995 and 1996 Implementing Rules and Regulations mineral agreements.
provided that the period of recovery, reckoned from the date of commercial operation, shall be
for a period not exceeding five years, or until the date of actual recovery, whichever comes While there is ground to believe that Sections 80, 84 and 112 are indeed unconstitutional,
earlier. they cannot be ruled upon here. In any event, they are separable; thus, a later finding of nullity
will not affect the rest of RA 7942.
And since RA 7942 allegedly does not require government approval for the pre-operating,
exploration and development expenses of the foreign contractors, it is feared that such expenses In fine, the challenged provisions of RA 7942 cannot be said to surrender financial
could be bloated to wipe out mining revenues anticipated for 10 years, with the result that the benefits from an FTAA to the foreign contractors.
States share is zero for the first 10 years. However, the argument is based on incorrect
information. Moreover, there is no concrete basis for the view that, in FTAAs with a foreign contractor,
the State must receive at least 60 percent of the after-tax income from the exploitation of its
Under Section 23 of RA 7942, the applicant for exploration permit is required to submit a mineral resources, and that such share is the equivalent of the constitutional requirement that at
proposed work program for exploration, containing a yearly budget of proposed expenditures, least 60 percent of the capital, and hence 60 percent of the income, of mining companies should
which the State passes upon and either approves or rejects; if approved, the same will remain in Filipino hands. Even if the State is entitled to a 60 percent share from other mineral
agreements (CPA, JVA and MPSA), that would not create a parallel or analogous situation for
FTAAs. We are dealing with an essentially different equation. Here we have the old apples and FTAA in question does not involve mere contractual rights but, being impressed as it is with
oranges syndrome. public interest, the contractual provisions and stipulations must yield to the common good and
the national interest. Since the offending provision is very much separable from the rest of the
The Charter did not intend to fix an iron-clad rule of 60 percent share, applicable to all FTAA, the deletion of Section 7.9 can be done without affecting or requiring the invalidation of
situations, regardless of circumstances. There is no indication of such an intention on the part of the entire WMCP FTAA itself.
the framers. Moreover, the terms and conditions of petroleum FTAAs cannot serve as standards
for mineral mining FTAAs, because the technical and operational requirements, cost Section 7.8(e) of the WMCP FTAA likewise is invalid, since by allowing the sums spent
structures and investment needs of off-shore petroleum exploration and drilling companies by government for the benefit of the contractor to be deductible from the States share in net
do not have the remotest resemblance to those of on-shore mining companies. mining revenues, it results in benefiting the contractor twice over. This constitutes unjust
enrichment on the part of the contractor, at the expense of government. For being grossly
To take the position that governments share must be not less than 60 percent of after-tax disadvantageous and prejudicial to government and contrary to public policy, Section 7.8(e)
income of FTAA contractors is nothing short of this Court dictating upon the government. The must also be declared without effect. It may likewise be stricken off without affecting the rest of
State resultantly ends up losing control. To avoid compromising the States full control and the FTAA.
supervision over the exploitation of mineral resources, there must be no attempt to impose a
minimum 60 percent rule. It is sufficient that the State has the power and means, should it so
decide, to get a 60 percent share (or greater); and it is not necessary that the State does so
in every case. EPILOGUE

AFTER ALL IS SAID AND DONE, it is clear that there is unanimous agreement in the
Invalid Provisions of Court upon the key principle that the State must exercise full control and supervision over the
the WMCP FTAA exploration, development and utilization of mineral resources.
The crux of the controversy is the amount of discretion to be accorded the Executive
Section 7.9 of the WMCP FTAA clearly renders illusory the States 60 percent share of Department, particularly the President of the Republic, in respect of negotiations over the terms
WMCPs revenues. Under Section 7.9, should WMCPs foreign stockholders (who originally of FTAAs, particularly when it comes to the government share of financial benefits from
owned 100 percent of the equity) sell 60 percent or more of their equity to a Filipino citizen or FTAAs. The Court believes that it is not unconstitutional to allow a wide degree of discretion to the
corporation, the State loses its right to receive its share in net mining revenues under Section Chief Executive, given the nature and complexity of such agreements, the humongous amounts of
7.7, without any offsetting compensation to the State. And what is given to the State in Section capital and financing required for large-scale mining operations, the complicated technology
7.7 is by mere tolerance of WMCPs foreign stockholders, who can at any time cut off the needed, and the intricacies of international trade, coupled with the States need to maintain
governments entire share by simply selling 60 percent of WMCPs equity to a Philippine citizen flexibility in its dealings, in order to preserve and enhance our countrys competitiveness in world
or corporation. markets.
In fact, the sale by WMCPs foreign stockholder on January 23, 2001 of the entire We are all, in one way or another, sorely affected by the recently reported scandals
outstanding equity in WMCP to Sagittarius Mines, Inc., a domestic corporation at least 60 involving corruption in high places, duplicity in the negotiation of multi-billion peso government
percent Filipino owned, can be deemed to have automatically triggered the operation of Section contracts, huge payoffs to government officials, and other malfeasances; and perhaps, there is
7.9 and removed the States right to receive its 60 percent share. Section 7.9 of the WMCP FTAA the desire to see some measures put in place to prevent further abuse. However, dictating upon
has effectively given away the States share without anything in exchange. the President what minimum share to get from an FTAA is not the solution. It sets a bad
precedent since such a move institutionalizes the very reduction if not deprivation of the States
Moreover, it constitutes unjust enrichment on the part of the local and foreign stockholders control. The remedy may be worse than the problem it was meant to address. In any event,
in WMCP, because by the mere act of divestment, the local and foreign stockholders get a provisions in such future agreements which may be suspected to be grossly disadvantageous or
windfall, as their share in the net mining revenues of WMCP is automatically increased, without detrimental to government may be challenged in court, and the culprits haled before the bar of
having to pay anything for it. justice.
Being grossly disadvantageous to government and detrimental to the Filipino people, as Verily, under the doctrine of separation of powers and due respect for co-equal and
well as violative of public policy, Section 7.9 must therefore be stricken off as invalid. The coordinate branches of government, this Court must restrain itself from intruding into policy
matters and must allow the President and Congress maximum discretion in using the resources Verily, the mineral wealth and natural resources of this country are meant to benefit not
of our country and in securing the assistance of foreign groups to eradicate the grinding poverty merely a select group of people living in the areas locally affected by mining activities, but the
of our people and answer their cry for viable employment opportunities in the country. entire Filipino nation, present and future, to whom the mineral wealth really belong. This Court
has therefore weighed carefully the rights and interests of all concerned, and decided for the
The judiciary is loath to interfere with the due exercise by coequal branches of government of greater good of the greatest number. JUSTICE FOR ALL, not just for some; JUSTICE FOR
their official functions.[99] As aptly spelled out seven decades ago by Justice George Malcolm, Just THE PRESENT AND THE FUTURE, not just for the here and now.
as the Supreme Court, as the guardian of constitutional rights, should not sanction usurpations
by any other department of government, so should it as strictly confine its own sphere of WHEREFORE, the Court RESOLVES to GRANT the respondents and the intervenors
influence to the powers expressly or by implication conferred on it by the Organic Act.[100] Let Motions for Reconsideration; to REVERSE and SET ASIDE this Courts January 27, 2004
the development of the mining industry be the responsibility of the political branches of Decision; to DISMISS the Petition; and to issue this new judgment
government. And let not this Court interfere inordinately and unnecessarily. declaring CONSTITUTIONAL (1) Republic Act No. 7942 (the Philippine Mining Law), (2) its
Implementing Rules and Regulations contained in DENR Administrative Order (DAO) No. 9640
The Constitution of the Philippines is the supreme law of the land. It is the repository of all -- insofar as they relate to financial and technical assistance agreements referred to in paragraph
the aspirations and hopes of all the people. We fully sympathize with the plight of Petitioner La 4 of Section 2 of Article XII of the Constitution; and (3) the Financial and Technical Assistance
Bugal Blaan and other tribal groups, and commend their efforts to uplift their communities. Agreement (FTAA) dated March 30, 1995 executed by the government and Western Mining
However, we cannot justify the invalidation of an otherwise constitutional statute along with its Corporation Philippines Inc. (WMCP), except Sections 7.8 and 7.9 of the subject FTAA which
implementing rules, or the nullification of an otherwise legal and binding FTAA contract. are hereby INVALIDATED for being contrary to public policy and for being grossly
We must never forget that it is not only our less privileged brethren in tribal and cultural disadvantageous to the government.
communities who deserve the attention of this Court; rather, all parties concerned -- including SO ORDERED.
the State itself, the contractor (whether Filipino or foreign), and the vast majority of our citizens
-- equally deserve the protection of the law and of this Court. To stress, the benefits to be derived Davide Jr., C.J., Sandoval-Gutierrez, Austria-Martinez, and Garcia, JJ., concur.
by the State from mining activities must ultimately serve the great majority of our fellow Puno, J., in the result and votes to invalidate sections 3.3; 7.8 and 7.9 of the WMC FTAA.
citizens. They have as much right and interest in the proper and well-ordered development and Quisumbing, J., in the result.
utilization of the countrys mineral resources as the petitioners. Ynares-Santiago, J., joins dissenting opinion of J. Antonio Carpio & J. Conchita C.
Morales.
Whether we consider the near term or take the longer view, we cannot overemphasize the Carpio, and Carpio-Morales, JJ., see dissenting opinion.
need for an appropriate balancing of interests and needs -- the need to develop our stagnating Corona, J., certifies he voted affirmatively with the majority and he was allowed to do so
mining industry and extract what NEDA Secretary Romulo Neri estimates is some US$840 although he is on leave.
billion (approx. PhP47.04 trillion) worth of mineral wealth lying hidden in the ground, in order Callejo, Sr., J., concurs to the dissenting opinion of J. Carpio.
to jumpstart our floundering economy on the one hand, and on the other, the need to enhance our Azcuna, J., took no part-same reason.
nationalistic aspirations, protect our indigenous communities, and prevent irreversible ecological Tinga, and Chico-Nazario, JJ., concur with a separate opinion.
damage.
This Court cannot but be mindful that any decision rendered in this case will ultimately
impact not only the cultural communities which lodged the instant Petition, and not only the
larger community of the Filipino people now struggling to survive amidst a fiscal/budgetary [1]
Spelled as Nequito in the caption of the Petition, but Nequinto in the body. Rollo, p. 12.
deficit, ever increasing prices of fuel, food, and essential commodities and services, the
[2]
shrinking value of the local currency, and a government hamstrung in its delivery of basic As spelled in the body of the Petition. Id., p. 13. The caption of the Petition does not include
services by a severe lack of resources, but also countless future generations of Filipinos. Louel A. Peria as one of the petitioners; only the name of his father, Elpidio V. Peria,
appears therein.
For this latter group of Filipinos yet to be born, their eventual access to education, health
[3]
care and basic services, their overall level of well-being, the very shape of their lives are even Stated as Kaisahan Tungo sa Kaunlaran at Repormang Pansakahan (KAISAHAN) in the
now being determined and affected partly by the policies and directions being adopted and caption of the Petition, but Philippine Kaisahan Tungo sa Kaunlaran at Repormang
implemented by government today. And in part by the this Resolution rendered by this Court Pansakahan (KAISAHAN) in the body. Id., p. 14.
today. [4]
Erroneously designated in the Petition as Western Mining Philippines Corporation. Id., p. 212.
[5]
This is dependent upon the discussion, infra, of the invalidity of Sections 7.8(e) and 7.9 of the Under PD 87, the service contractor undertook and managed the petroleum operations subject
subject FTAA, for violation of the Civil Code and the Anti-Graft Law -- these to government oversight. The service contractor was required to be technically competent and
provisions being contrary to public policy and grossly disadvantageous to the financially capable to undertake the necessary operations, as it provided all needed services,
government. technology and financing; performed the exploration work obligations; and assumed all related
[6]
risks. It could not recover any of its expenditures, if no petroleum was produced. In the event
The FTAA is for the exploration, development and commercial exploitation of mineral petroleum is discovered in commercial quantity, the contractor operated the field for the
deposits in South Cotabato, Sultan Kudarat, Davao del Sur and North Cotabato, government. Proceeds of sale of the petroleum produced under the contract were then applied
covering an area of 99,387 hectares. to pay the service fee due the contractor and reimburse it for its operating expenses incurred.
[7]
At the time of execution of the subject FTAA in 1995, WMCP was owned by WMC [10]
Sec. 9 of Art. XIV (National Economy and Patrimony) of the 1973 Constitution allowed
Resources International Pty., Ltd. (WMC) -- a wholly owned subsidiary of Western Filipino citizens, with the approval of the Batasang Pambansa, to enter into service
Mining Corporation Holdings Limited, a publicly listed major Australian mining and contracts with any person or entity for the exploration and utilization of natural
exploration company. See WMCP FTAA, p. 2. resources.
On Jan. 23, 2001, WMC sold all its shares in WMCP to Sagittarius Mines, Inc. (Sagittarius), a Sec. 9. The disposition, exploration, development, exploitation, or utilization of any of
corporation organized under Philippine laws, 60% the equity of which is owned by the natural resources of the Philippines shall be limited to citizens, or to corporations
Filipino citizens or Filipino-owned corporations and 40% by Indophil Resources, NL, or associations at least sixty per centum of which is owned by such citizens. The
an Australian company. WMCP was then renamed Tampakan Mineral Resources Batasang Pambansa, in the national interest, may allow such citizens, corporations or
Corporation, and now it claims that by virtue of the sale and transfer of shares, it has associations to enter into service contracts for financial, technical, management or
ceased to be connected in any way with WMC. On account of such sale and transfer of other forms of assistance with any person or entity for the exploration or utilization of
shares, the then DENR Secretary approved by Order dated Dec. 18, 2001 the transfer any of the natural resources. Existing valid and binding service contracts for financial,
and registration of the subject FTAA from WMCP to Sagittarius (Tampakan). Lepanto technical, management or other forms of assistance are hereby recognized as such.
Consolidated Mining Co., which was interested in acquiring the shares in WMCP,
appealed this Order of the DENR Secretary, but the Office of the President, and The intention behind the provision, according to a delegate, was to promote proper
subsequently, the Court of Appeals (CA), upheld said Order. development of the natural resources, given the lack of Filipino capital and technical
[8]
skills needed therefor. The original proposal was to authorize government to enter into
Penned by the esteemed Justice Conchita Carpio Morales, the Decision was promulgated on a such service contracts with foreign entities, but as finally approved, the provision
vote of 8-5-1. Chief Justice Davide and Justices Puno, Quisumbing, Carpio, Corona, permitted the Batasang Pambansa to authorize a citizen or private entity to be party to
Callejo, and Tinga concurred. Justices Santiago, Gutierrez, and Martinez joined the such contract. Following the ratification of the 1973 Charter, PD Nos. 151, 463, 704,
Dissent of Justice Panganiban, while Justice Vitug wrote a separate Dissent. Justice 705, 1442 were promulgated, authorizing service contracts for exploration,
Azcuna took no part. development, exploitation or utilization of lands of the public domain; exploration,
[9]
Promulgated on Dec. 31, 1972, Presidential Decree No. 87 (PD 87, otherwise known as The development, etc. of a lessees mining claims and the processing and marketing of the
Oil Exploration and Development Act of 1972 in 1 thereof) permitted the government products thereof; production, storage, marketing and processing of fish and
to explore for and produce indigenous petroleum through service contracts. A service fishery/aquatic products; exploration, development, and utilization of forest resources;
contract has been defined as a contractual arrangement for engaging in the exploitation and exploration, development, and exploitation of geothermal resources, respectively.
and development of petroleum, mineral, energy, land and other natural resources, [11]
Renamed Tampakan Mineral Resources Corporation.
whereby a government or an agency thereof, or a private person granted a right or
[12]
privilege by said government, authorizes the other party -- the service contractor -- to That is, the Court of Appeals resolution of the petition for review -- docketed as CA-GR No.
engage or participate in the exercise of such right or the enjoyment of the privilege, by 74161 and lodged by Lepanto Consolidated Mining -- of the decision of the Office of
providing financial or technical resources, undertaking the exploitation or production of the President which upheld the order of the DENR Secretary approving the transfer and
a given resource, or directly managing the productive enterprise, operations of the registration of the FTAA to Sagittarius Mines, Inc.
exploration and exploitation of the resources, or the disposition or marketing of said [13]
resources. See Prof. M. Magallona, Service Contracts in Philippine Natural At p. 68.
Resources, 9 World Bulletin 1, 4 (1993). [14]
433 Phil. 506, July 9, 2002; 403 SCRA 1, May 6, 2003; and 415 SCRA 403, November 11,
2003.
[15]
300 Phil. 906, March 12, 1998. from further proceedings in the action or matter specified therein, or otherwise granting
[16]
such incidental reliefs as law and justice may require.
Chavez v. Public Estates Authority, 403 SCRA, 1, 28-29, supra, per Carpio, J.
[28]
[17]
Pimentel Jr. v. Aguirre, 391 Phil. 84, 107, July 19, 2000, per Panganiban, J.
The pendency of a motion for reconsideration shall stay the final resolution sought to be
[29]
reconsidered. 4 of Rule 52, and 4 of Rule 56B of the Rules of Court. 338 Phil. 546, May 2, 1997.
[18] [30]
See Enrile v. Senate Electoral Tribunal, GR No. 132986, May 19, 2004. Taada v. Angara, pp. 47-49, per Panganiban, J. Italics supplied.
[19] [31]
Per the List of Financial/Technical Assistance Agreement (FTAA applications) as of June 30, Emphasis supplied.
2002 prepared by the Mines and Geosciences Bureaus (MGB) Mining Tenements [32]
Management Division, cited in petitioners Final Memorandum. Ang Bagong Bayani v. COMELEC, 412 Phil. 308, 338-339, June 26, 2001, per
Panganiban, J., citing JM Tuason & Co., Inc. v. LTA, 31 SCRA 413, 422-423, February
[20]
Instead of allowing Sec. Gen. Neri to speak during the Oral Argument, the Court in its 18, 1970, as cited in Agpalo, Statutory Construction (1990), pp. 311 and 313.
Resolution of June 29, 2004 required him to submit his Position Paper through the [33]
Office of the Solicitor General. Said paper was made part of the Memorandum of the GR Nos. 160261, 160262, 160263, 160277, 160292, 160295, 160310, 160318, 160342,
public respondents. 160343, 160360, 160365, 160370, 160376, 160392, 160397, 160403, and 160405,
November 10, 2003, per Carpio Morales, J.
[21]
27 SCRA 853, April 18, 1969. [34]
Francisco v. The House of Representatives, 415 SCRA 44, 126-127, November 10, 2003, per
[22]
Gonzales v. COMELEC, 137 Phil. 471, 489, April 18, 1969, per Fernando, J. (later CJ.), Carpio Morales, J. Citations omitted.
citing People v. Vera, 65 Phil. 56, 94, November 16, 1937, per Laurel, J. [35]
During the Oral Argument, petitioners counsel, Atty. Marvic Leonen conceded that the
[23]
433 Phil. 62, 68, July 2, 2002, citing Alunan III v. Mirasol, 342 Phil. 467, 477, July 31, 1997 foreign contractor may exercise limited management prerogatives to the extent of the
and Viola v. Alunan III, 343 Phil. 184, 191, August 15, 1997. financial or technical assistance given. TSN, pp. 181-186. How such limited
[24]
management can be operationalized was not explained.
Southern Pacific Terminal Co. v. ICC, 219 US 498, 31 S.Ct. 279, 283, February 20, 1911, per
[36]
McKenna, J. In the January 27, 2004 Decision, this Court held that the fourth paragraph of Section 2 of
[25]
Art. XII limits foreign involvement in the local mining industry to agreements strictly
134 SCRA 438, 463-464, February 18, 1985, per Gutierrez Jr., J. for financial and/or technical assistance only, and precludes agreements which grant to
[26]
1 of Rule 63 of the Rules of Court: foreign corporations the management of local mining operations, since the latter
agreements are purportedly in the nature of service contracts, as this concept was
Section 1. Who may file petition. Any person interested under a deed, will, understood under the 1973 Constitution. Such contracts were supposedly
contract or other written instrument, whose rights are affected by a statute, executive deconstitutionalized and proscribed by the omission of the phrase service contracts
order or regulation, ordinance, or any other governmental regulation may, before breach from the 1987 Constitution. Since the WMCP FTAA contains provisions that permit the
or violation thereof, bring an action in the appropriate Regional Trial Court to contractors management of the concern, the Decision struck down the FTAA for being
determine any question of construction or validity arising, and for a declaration of his a prohibited service contract. Provisions of RA 7942 which granted managerial
rights or duties, thereunder. authority to the foreign contractor were also declared unconstitutional.
[27]
2 of Rule 65 of the Rules of Court: [37]
Intervenors Memorandum, pp. 7, 11 and 12.
Section 2. Petition for prohibition. When the proceedings of any tribunal, [38]
www.dictionary.com provides the following meanings for involving:
corporation, board, officer or person, whether exercising judicial, quasi-judicial or
ministerial functions, are without or in excess of its or his jurisdiction, or with grave 1. To contain as a part; include.
abuse of discretion amounting to lack or excess of jurisdiction, and there is no appeal or 2. To have as a necessary feature or consequence; entail: was told that the job would
any other plain, speedy, and adequate remedy in the ordinary course of law, a person involve travel.
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 to desist
[43]
3. To engage as a participant; embroil: involved the bystanders in his dispute with the Art. XVIII, Transitory Provisions, of the 1987 Constitution.
police. [44]
III Record of the Constitutional Commission, p. 348. Emphasis supplied.
4. a. To connect closely and often incriminatingly; implicate: evidence that involved the [45]
governor in the scandal. Id., pp. 349-352. Emphasis supplied.
[46]
b. To influence or affect: The matter is serious because it involves your reputation. Id., p. 354. Emphasis supplied.
[47]
5. To occupy or engage the interest of: a story that completely involved me for the rest Id., pp. 355-356. Emphasis supplied.
of the evening. [48]
Id., p. 361. Emphasis supplied.
6. To make complex or intricate; complicate. [49]
V Records of the Constitutional Commission, p. 845.
7. To wrap; envelop: a castle that was involved in mist. [50]
Id., p. 841.
8. Archaic. To wind or coil about. [51]
Id., p. 844.
[39]
It reads as follows: Section 20. The President may contract or guarantee foreign loans on [52]
Civil Liberties Union v. Executive Secretary, 194 SCRA 317, 337-338, February 22, 1991,
behalf of the Republic of the Philippines with the prior concurrence of the Monetary per Fernan, CJ.
Board, and subject to such limitations as may be provided by law. The Monetary Board
[53]
shall, within thirty days from the end of every quarter of the calendar year, submit to The transitive verb control has the following meanings -- to exercise restraining or directing
the Congress a complete report of its decision on applications for loans to be influence over; to regulate; to have power over; to rule; to govern. The noun control
contracted or guaranteed by the Government or government-owned and controlled refers to an act or instance of controlling; the power or authority to guide or manage;
corporations which would have the effect of increasing the foreign debt, and containing and the regulation of economic activity especially by government directive (as in price
other matters as may be provided by law. controls). From Merriam-Webster Online, Online Dictionary, www.m-w.com.
[54]
[40]
According to estimates by the MGB, the success-to-failure ratio of large-scale mining or On p. 2 of the Final Memorandum for Petitioners.
hydrocarbon projects is about 1:1,000. It goes without saying that such a miniscule [55]
Sec. 3(aq) of RA 7942 reads as follows: aq. Qualified person means any citizen of the
success ratio hardly encourages the investment of tremendous amounts of risk capital
Philippines with capacity to contract, or a corporation, partnership, association, or
and modern technology required for the discovery, extraction and treatment of mineral
cooperative organized or authorized for the purpose of engaging in miring, with
ores, and oil and gas deposits.
technical and financial capability to undertake mineral resources development and duly
[41]
The Constitutional Commission (ConCom) began its work in 1986, three short years after the registered in accordance with law at least sixty per centum (60 percent) of the capital
assassination in August 21, 1983 of former Senator Benigno Ninoy Aquino, Jr. During of which is owned by citizens of the Philippines: Provided, That a legally organized
the early part of this three-year period, the country underwent a wracking economic foreign-owned corporation shall be deemed a qualified person for purposes of granting
crisis characterized by scarcity of funds, capital flight, stringent import controls, grave an exploration permit, financial or technical assistance agreement or mineral
lack of foreign exchange needed to fund critical importations of raw materials, panic- processing permit. Underscoring supplied.
buying, hoarding of commodities, and grave lack of foreign exchange needed to fund [56]
Per Clause 4.6 of the WMCP FTAA, the contractor is required to relinquish each year during
critical importations of raw materials. Many businesses were on the verge of failure and
the exploration period at least ten percent (10%) of the original contract area, by
collapse, and many in fact did. The members of the ConCom were unlikely to forget the
identifying and dropping from the FTAA coverage those areas which do not have
critical condition of the Philippine economy and the penury of its government.
mineral potentials, in order that by the time actual mining operations commence, the
[42]
The management of every business has two primary objectives. The first is to earn profit. The FTAA contract area shall have been reduced to only 5,000 hectares.
second is to stay solvent, that is, to have on hand sufficient cash to pay debts as they fall [57]
Memorandum (in support of WMCPs Motion and Supplemental Motion for
due. Other objectives may be targeted, but a business cannot hope to accomplish them,
Reconsideration), p. 61.
unless it meets these two basic tests of survival -- operating profitably and staying
solvent. Meigs and Meigs, Accounting: The Basis for Business Decisions (5thed., 1982), [58]
Id., pp. 63-64.
p. 11.
[59] [65]
Accounts receivable may be converted to cash in one of three ways: (1) assignment of See 3(g), DAO 99-56. According to the paper by Messrs. Ramos and De Vera, supra, who are,
receivables, which is a borrowing arrangement with receivables pledged as security on respectively, the director of the MGB and chief of the Mineral Economics, Information and
the loan; (2) factoring receivables, which is a sale of receivables without recourse for Publication Division of the MGB, majority of the payments listed under Sec. 3(g) are relatively
cash to a third party, usually a bank or other financial institution; and (3) the transfer of small in value. The most significant payments in terms of amount are the excise tax, royalties
receivables with recourse, which is a hybrid of the other two forms of receivable to mineral reservations and indigenous cultural communities, income tax and real property tax.
financing. Smith and Skousen, Intermediate Accounting, (1992, 11th ed.), pp. 317-321. [66]
Per Messrs. Ramos and De Vera, supra, (t)he term of a successful FTAA may be divided into
Banks usually prefer lending against the security of accounts receivable backed up a pre-operating period, a cost recovery period and a post recovery period. The pre-
by postdated checks. They refer to these facilities as bills discounting lines. operating period consists of the exploration, pre-feasibility, feasibility, development
[60]
and construction phases. The aggregate of this period is a maximum of eleven (11)
Decision, p. 83; bold types supplied. years. The cost recovery period, on the other hand, consists of the initial years of
[61]
Beneficial interest has been defined as the profit, benefit, or advantage resulting from a commercial operation where the contractor is allowed to recover its pre-operating
contract, or the ownership of an estate as distinct from the legal ownership or expenses. The end of this period is when the aggregate of the net cash flow from the
control. Christiansen v. Department of Social Security, 131 P. 2d 189, 191, 15 Wash. 2d mining operation becomes equal to the total pre-operating expenses or a maximum of
465, 467, November 25, 1942, per Driver, J. five (5) years from commencement of commercial production, whichever comes first.
The post recovery period is the remaining term of the FTAA immediately following the
Beneficial use, ownership or interest in property means such a right to its cost recovery period. The additional government share from an FTAA is collected after
enjoyment as exists where the legal title is in one person and the right to such beneficial the cost recovery period.
use or interest is in another x x x. Montana Catholic Missions v. Missoula County, 26 S
[67]
Ct. 197, 200, 200 U.S. 118, 127-128, January 2, 1906, per Peckham, J. Ramos and De Vera, supra, pp. 3-4.
[68]
[62]
See p. 1138 thereof. The discussion on pp. 4-7 of the Ramos-DeVera report, focusing on the modes of
computation of the additional government share as spelled out in DAO 99-56, is
[63]
Ramos and De Vera, The Fiscal Regime of Financial or Technical Assistance Agreements, p. significant:
2. A photocopy of their paper is attached as Annex 2 to the Motion for
Reconsideration of public respondents. The phrase among other things demands that Government is entitled to additional share
aside from the normal taxes and fees paid during operation. Simple as it was
[64]
These incentives consist principally of the waiver of national taxes during the cost recovery formulated, the phrase is another challenging task to operationalize. In 1997, the
period of the FTAA. During such period, the contractor pays only part of the basic Philippine government conducted several consultative meetings with various investor
governments share in taxes consisting of local government taxes and fees. These are the groups, national government agencies concerned with taxation and incentives and other
local business tax, real property tax, community tax, occupation fees, regulatory fees, stakeholders of the mining industry to formulate the possible modes of determining the
all other local taxes and fees in force, and royalty payments to indigenous cultural additional government share for FTAA. The negotiation took into consideration the
communities, if any. following:
These national taxes, however, are not to be paid by the contractor: (i) excise Capital investment in the project;
tax on minerals; (ii) contractors income tax; (iii) customs duties and fees on imported
capital equipment; (iv) value added tax on purchases of imported equipment, goods and Risks involved;
services; (v) withholding tax on interest payments on foreign loans; (vi) withholding tax Contribution of the project to the economy;
on dividends to foreign stockholders; and (vii) royalties due the government on mineral
reservations. Contribution of the project to community and local government;
Other incentives to the contractor include those under the Omnibus Investment Technical complexity of the project; and
Code of 1997; those for the use of pollution control devices and facilities; income tax
carry-forward of losses (five-year net loss carry forward); and income tax accelerated Other factors that will provide for a fair and equitable sharing between the
depreciation. government and the contractor.
During these consultations, some investor groups have repeatedly expressed their Government taxes, duties and fees.
objections to the imposition of an additional government share. However, since
Government is firmly committed to adhere to its interpretation of Section 81 of the The additional government share from this option for any year i is the difference between
mining law on government share in an FTAA, it decided to push through with the 50% of the cumulative annual net mining revenues CNi and the cumulative total
collection of this additional government share by formally making part of the mining government share CGi (basic and additional). The intention is to distribute the
regulation through the issuance by the Department of Environment and Natural cumulative net mining revenue equally between the Government and the contractor. It
Resources of Administrative Order No. 99-56 providing for the guidelines in can be expressed through the following formula:
establishing the fiscal regime of Financial or Technical Assistance Agreements. If 50% of CNi < CGi
There were three schemes for computing the additional government share presented in Additional Government Share = 0
the administrative order.
Else, if 50% of CNi > CGi
5.1 Net Mining Revenue-Based Option
Additional Govt Share = (50% x CNi) - CGi
Net mining revenue means the gross output from mining operations during a calendar year
less deductible expenses. These deductible expenses consist of expenses incurred by the 5.2 Cash Flow-Based Option
Contractor directly, reasonably and necessarily related to mining operations in the
Project cash flow before financing and tax (CFi) is calculated as follows:
contract area during a calendar year, namely:
CFi = GO - DE + I - PE - OC
Mining, milling, transport and handling expenses together with smelting and refining
costs other than smelting and refining costs paid to third parties; In this formula, GO is the gross output; DE are the deductible expenses; I is the interest
expense; PE is unrecovered pre-operating expense; and OC is on-going capital
General and administrative expenses actually incurred by the Contractor in the
expenditures. This option provides that Government gets an additional share from the
Philippines;
project cash flow if the cumulative present value of the previous total government share
Consulting fees incurred for work related to the project; provided that those expenses collected (basic and additional) is less than 50% of the cumulative present value of the
incurred outside of the Philippines are justifiable and allowable subject to the approval project cash flows. The additional government share AGS is therefore the difference
of the Director of Mines and Geosciences Bureau; between 50% and the percentage of the cumulative present value of total government
shares CGA over the cumulative present value of the project cash flows CP. The
Environmental expenses of the Contractor including such expenses necessary to fully cumulative present value of project cash flow for any year i is given by the following
comply with its environmental obligations; formula:
Expenses for the development of host and neighboring communities and for the CPi = CPi-1 x (1.10) + CFi
development of geoscience and mining technology together with training costs and
expenses; The factor 1.10 is a future value factor based on the cost of borrowed money with
allowance for inflation of the US dollar. The cumulative present value of the total
Royalty payments to claim owners or surface land owners relating to the Contract government share before additional government share CGB for year i is:
Area during the Operating Phase;
CGBi = CGAi-1 x (1 + Cost of Capital) + BGSi
Continuing exploration and mine development expenses within the Contract Area after
the pre-operating period; and where CGAi is the cumulative present value of total government share inclusive of the
additional government share during the year is CGAi = CGBi + AGSi.
Interest expenses charged on loans or such other financing-related expenses incurred
by the Contractor subject to limitations in debt/equity ratio as given in the contract and If CGBi > 50% of CPi :
which shall not be more than the prevailing international rates charged for similar types
Additional Government Share = 0
of transactions at the time the financing was arranged, and where such loans are
necessary for the operations; and Else, if CGBi < 50% of CPi :
Additional Government Share = (50% x CPi) CGBi the total pre-operating expenses or a maximum of five (5) years from commencement
of commercial production, whichever comes first. The post recovery period is the
5.3 Profit-Based Option remaining term of the FTAA immediately following the cost recovery period. The
This third option provides that Government shall receive an additional share of twenty- additional government share from an FTAA is collected after the cost recovery period.
five percent (25%) of the additional or excess profits during a taxable year when the (underscoring supplied)
two-year average ratio of the net income after tax (NIAT) to gross output (GO) is 0.40 [69]
The cash flows of a business concern tend to be more accurate and realistic indicia of the
or better. The trigger level of 0.40 ratio is approximately equivalent to a 20% return on financial capacity of the enterprise, rather than net income or taxable income, which are
investment when computed based on the life of the project. Investors have indicated arrived at after netting out non-cash items like depreciation, doubtful accounts expense
that their minimum return on investment before they would invest on a mining project for probable losses, and write-offs of bad debts.
in the Philippine is 15%. It was agreed upon that a return on investment below 20% but
not lower than 15% is normal profit. If the project reaches 20% or better, there is then Cash flows provide relevant information about the cash effects of an entitys operations,
an additional or excess profits. The computation of the 0.40 trigger shall be based on a and its investing and financing transactions. Smith and Skousen, supra, p. 184.
2-year moving average which is the average of the previous years ratio and the current [70]
years ratio. The additional or excess profit is computed using the following formula: Some of these indirect taxes are: fuel taxes; withholding tax on payrolls, on royalty payments
to claim owners and surface owners and on royalty payments for technology transfer;
Additional Profits = [NIAT - (0.40 x GO)] / (1 - ITR) value added tad on local equipment, supplies and services.
[71]
In the above formula, ITR refers to the prevailing income tax rate applied by the Bureau Other contributions of mining projects include: infrastructure (hospitals, roads, schools,
of Internal Revenue in computing the income tax of the contractor during a taxable public markets, churches, and the like) and social development projects; payroll and
year. fringe benefits (direct and indirect employment); expenditures by the contractor for
development of host and neighboring communities; expenditures for the development
If the two-year average ratio is less than 0.40: of geosciences/mining technology; expenditures for social infrastructures; and the
Additional Government Share = 0 resulting multiplier effects of mining operations.
[72]
Else, if the two-year average ratio is 0.40 or better: The third paragraph of 81, RA 7942 states: The collection of Government share in financial
or technical assistance agreement shall commence after the financial or technical
Additional Government Share = 25% x Excess Profits assistance agreement contractor has fully recovered its pre-operating expenses,
exploration, and development expenditures, inclusive.
The government shares 25% of any marginal profit derived by the contractor at 20% or
higher return on investment. [73]
80 and 84 of RA 7942 are reproduced below:
In all of these three options, the basis of computation are all in US dollars based on Sec. 80. Government Share in Mineral Production Sharing Agreement. The total
prevailing foreign exchange rate at the time the expenses were incurred. Alternatives or government share in a mineral production sharing agreement shall be the excise tax on
options aside from these three schemes are studied by Government for possible mineral products as provided in Republic Act No. 7729, amending Section 151(a) of the
improvement of the current fiscal system. The basic guideline, however, is that the total National Internal Revenue Code, as amended.
government share should not be less than fifty percent of the sharing.
Sec. 84. Excise Tax on Mineral Products. The contractor shall be liable to pay the
6. Collection of the Additional Government Share excise tax on mineral products as provided for under Section 151 of the National
Internal Revenue Code: Provided, however, That with respect to a mineral production
The term of a successful FTAA may be divided into a pre-operating period, a cost
sharing agreement, the excise tax on mineral products shall be the government share
recovery period and a post recovery period. The pre-operating period consists of the
under said agreement. (Underscoring supplied)
exploration, pre-feasibility, feasibility, development and construction phases. The
aggregate of this period is a maximum of eleven (11) years. The cost recovery period, [74]
112 of RA 7942 is reproduced below:
on the other hand, consists of the initial years of commercial operation where the
contractor is allowed to recover its pre-operating expenses. The end of this period is Sec. 112. Non-impairment of Existing Mining/Quarrying Rights. All valid and existing
when the aggregate of the net cash flow from the mining operation becomes equal to mining lease contracts, permits/licenses, leases pending renewal, mineral production-
sharing agreements granted under Exec. Order No. 279, at the date of effectivity of this
[84]
Act, shall remain valid, shall not be impaired, and shall be recognized by the Since we assume that the buyer-corporation, which buys up 60% equity in WMCP, is 60%
Government: Provided, That the provisions of Chapter XIV on government share in Filipino-owned and 40% foreign-owned, therefore, the foreign stockholders in such
mineral production sharing agreement and of Chapter XVI on incentives of this buyer-corporation hold 24% beneficial interest in WMCP.
Act shall immediately govern and apply to a mining lessee or contractor unless the [85]
mining lessee or contractor indicates his intention to the Secretary, in writing, not to Fourth paragraph of Sec. 2, Art. XII of the 1987 Constitution.
avail of such provisions: Provided, further, That no renewal of mining lease contracts [86]
See, for instance, Maestrado v. CA, 327 SCRA 678, 692, March 9, 2000 and Philippine Telegraph
shall be made after the expiration of its term: Provided, finally, That such leases, and Telephone Co. v. NLRC, 338 Phil. 1093, 1111, May 23, 1997.
production-sharing agreements, financial or technical assistance agreements shall
[87]
comply with the applicable provisions of this Act and its implementing rules and Art. 1306 of the Civil Code provides: The contracting parties may establish such
regulations. (Underscoring supplied) stipulations, clauses, terms and conditions as they may deem convenient, provided they
are not contrary to law, morals, good customs, public order, or public policy..
[75]
Even during the cost recovery period, the contractor will still have to pay a portion of
[88]
the basic government share consisting of local government taxes and fees, such as local Republic v. CA, 354 SCRA 148, March 9, 2001, per Ynares-Santiago, J.
business taxes, real property taxes, community taxes, occupation fees, regulatory fees, [89]
Philippine Basketball Association v. CA, 337 SCRA 358, 369, August 8, 2000. Likewise, 11
and all other local taxes and fees, plus royalty payments to indigenous cultural
of Book I of Chapter 3 of Exec. Order No. 292, otherwise known as The Administrative
communities, if any.
Code of 1987, states: Sec. 11. The States Responsibility for Acts of Agents. (1) The
[76]
Ramos and DeVera, supra, p. 7. State shall be legally bound and responsible only through the acts performed in
accordance with the Constitution and the laws by its duly authorized representatives.
[77]
Ibid., p. 11. See also 3e of DAO 99-56. (2) The State shall not be bound by the mistakes or errors of its officers or agents in the
[78]
Justice Carpio argues thus: The WMCP FTAA grants the State 60 percent of net profit; CMP exercise of their functions.
likewise agrees to 60 percent; the Malampaya-Shell FTAA provides for 60 percent also; [90]
Art. 1420 of the Civil Code provides: In case of a divisible contract, if the illegal terms can
so the Court should decree a minimum of 60 percent. Our answer: no law authorizes be separated from the legal ones, the latter may be enforced.
this Court to issue such a decree. It is up to the State to negotiate the most advantageous
[91]
percentage. This Court cannot be stampeded into the realm of legislation. Sarmiento v. CA, 353 Phil. 834, 853, July 2, 1998.
[92]
[79]
Clause 1.2 thereof states: All financing, technology, management and personnel necessary for Ramos-DeVera, supra, p. 2.
the Mining Operations shall be provided by the Contractor in accordance with the [93]
Bold types supplied.
provisions of this Agreement. If no Minerals in commercial quantity are developed and
produced, the Contractor acknowledges that it will not be entitled to reimbursement of [94]
3[h] in relation to 26[b] of RA 7942.
its expenses incurred in conducting the Mining Operations.
[95]
26[c] of RA 7942.
[80]
WMCP FTAA Clause 2.1 (iv), p. 6.
[96]
OXFAM America Research Report, September 2002.
[81]
Id., Clause 2.1 (v), p. 6.
[97]
Dated December 2003.
[82]
Id., Clause 2.1 (vii), p. 6.
[98]
1 of EO 270.
[83]
Qualified Entity is defined as an entity that at the relevant time is qualified to enter into
[99]
a mineral production sharing agreement with the Government under the laws Decena v. Malayaon, AM No. RTJ-02-1669, April 14, 2004, per Tinga, J.
restricting foreign ownership and equity in natural resource projects. 2 -- Definitions, [100]
Manila Electric Company v. Pasay Transportation, 57 Phil. 600, 605, November 25, 1932,
WMCP FTAA, p. 10. (Underscoring supplied.) per Malcolm, J.
Pursuant to 26a in relation to 3g and 3aq of RA 7942, a contractor in an MPSA should
be a citizen of the Philippines or a corporation at least 60 percent of the capital of which
is owned by citizens of the Philippines.
SECOND DIVISION On 15 October 1990, the lower court issued an order of general default as against the whole
world, with the exception of the Office of the Solicitor General, and proceeded with the hearing
G.R. No. 134209 January 24, 2006 of this registration case.

REPUBLIC OF THE PHILIPPINES, Petitioner, After she had presented and formally offered her evidence . . . applicant rested her case. The
vs. Solicitor General, thru the Provincial Prosecutor, interposed no objection to the admission of the
CELESTINA NAGUIAT, Respondent. exhibits. Later . . . the Provincial Prosecutor manifest (sic) that the Government had no evidence
to adduce. 3
DECISION
In a decision4 dated September 30, 1991, the trial court rendered judgment for herein respondent
Celestina Naguiat, adjudicating unto her the parcels of land in question and decreeing the
GARCIA, J.:
registration thereof in her name, thus:
Before the Court is this petition for review under Rule 45 of the Rules of Court seeking the
WHEREFORE, premises considered, this Court hereby adjudicates the parcels of land situated
reversal of the Decision1dated May 29, 1998 of the Court of Appeals (CA) in CA-G.R. CV No.
in Panan, Botolan, Zambales, appearing on Plan AP-03-003447 containing an area of 3,131
37001 which affirmed an earlier decision2 of the Regional Trial Court at Iba, Zambales, Branch
square meters, appearing on Plan AP-03-003446 containing an area of 15,322 containing an area
69 in Land Registration Case No. N-25-1.
of 15,387 square meters to herein applicant Celestina T. Naguiat, of legal age, Filipino citizen,
married to Rommel Naguiat and a resident of Angeles City, Pampanga together with all the
The decision under review recites the factual backdrop, as follows: improvements existing thereon and orders and decrees registration in her name in accordance
with Act No. 496, Commonwealth Act No. 14, [should be 141] as amended, and Presidential
This is an application for registration of title to four (4) parcels of land located in Panan, Decree No. 1529. This adjudication, however, is subject to the various easements/reservations
Botolan, Zambales, more particularly described in the amended application filed by Celestina provided for under pertinent laws, presidential decrees and/or presidential letters of instructions
Naguiat on 29 December 1989 with the Regional Trial Court of Zambales, Branch 69. Applicant which should be annotated/ projected on the title to be issued. And once this decision becomes
[herein respondent] alleges, inter alia, that she is the owner of the said parcels of land having final, let the corresponding decree of registration be immediately issued. (Words in bracket
acquired them by purchase from the LID Corporation which likewise acquired the same from added)
Demetria Calderon, Josefina Moraga and Fausto Monje and their predecessors-in-interest who
have been in possession thereof for more than thirty (30) years; and that to the best of her With its motion for reconsideration having been denied by the trial court, petitioner Republic
knowledge, said lots suffer no mortgage or encumbrance of whatever kind nor is there any went on appeal to the CA in CA-G.R. CV No. 37001.
person having any interest, legal or equitable, or in possession thereof.
As stated at the outset hereof, the CA, in the herein assailed decision of May 29, 1998, affirmed
On 29 June 1990, the Republic of the Philippines [herein petitioner]. . . filed an opposition to the that of the trial court, to wit:
application on the ground that neither the applicant nor her predecessors-in interest have been in
open, continuous, exclusive and notorious possession and occupation of the lands in question
WHEREFORE, premises considered, the decision appealed from is hereby AFFIRMED.
since 12 June 1945 or prior thereto; that the muniments of title and tax payment receipts of
applicant do not constitute competent and sufficient evidence of a bona-fide acquisition of the
lands applied for or of his open, continuous, exclusive and notorious possession and occupation SO ORDERED.
thereof in the concept of (an) owner; that the applicant’s claim of ownership in fee simple on the
basis of Spanish title or grant can no longer be availed of . . .; and that the parcels of land applied Hence, the Republic’s present recourse on its basic submission that the CA’s decision "is not in
for are part of the public domain belonging to the Republic of the Philippines not subject to accordance with law, jurisprudence and the evidence, since respondent has not established with
private appropriation. the required evidence her title in fee simple or imperfect title in respect of the subject lots which
would warrant their registration under … (P.D. 1529 or Public Land Act (C.A.) 141." In
particular, petitioner Republic faults the appellate court on its finding respecting the length of
respondent’s occupation of the property subject of her application for registration and for not
considering the fact that she has not established that the lands in question have been declassified The principal reason for the appellate court’s disposition, finding a registerable title for
from forest or timber zone to alienable and disposable property. respondent, is her and her predecessor-in-interest’s open, continuous and exclusive occupation of
the subject property for more than 30 years. Prescinding from its above assumption and finding,
Public forest lands or forest reserves, unless declassified and released by positive act of the the appellate court went on to conclude, citing Director of Lands vs. Intermediate Appellate
Government so that they may form part of the disposable agricultural lands of the public domain, Court (IAC)16 and Herico vs. DAR,17 among other cases, that, upon the completion of the
are not capable of private appropriation.5 As to these assets, the rules on confirmation of requisite period of possession, the lands in question cease to be public land and become private
imperfect title do not apply.6 Given this postulate, the principal issue to be addressed turns on the property.
question of whether or not the areas in question have ceased to have the status of forest or other
inalienable lands of the public domain. Director of Lands, Herico and the other cases cited by the CA are not, however, winning cards
for the respondent, for the simple reason that, in said cases, the disposable and alienable nature
Forests, in the context of both the Public Land Act7 and the Constitution8 classifying lands of the of the land sought to be registered was established, or, at least, not put in issue. And there lies the
public domain into "agricultural, forest or timber, mineral lands and national parks," do not difference.
necessarily refer to a large tract of wooded land or an expanse covered by dense growth of trees
and underbrush. As we stated in Heirs of Amunategui 9- Here, respondent never presented the required certification from the proper government agency
or official proclamation reclassifying the land applied for as alienable and disposable. Matters of
A forested area classified as forest land of the public domain does not lose such classification land classification or reclassification cannot be assumed. It calls for proof. 18 Aside from tax
simply because loggers or settlers have stripped it of its forest cover. Parcels of land classified as receipts, respondent submitted in evidence the survey map and technical descriptions of the
forest land may actually be covered with grass or planted to crops by kaingin cultivators or other lands, which, needless to state, provided no information respecting the classification of the
farmers. "Forest lands" do not have to be on mountains or in out of the way places. xxx. The property. As the Court has held, however, these documents are not sufficient to overcome the
classification is merely descriptive of its legal nature or status and does not have to be presumption that the land sought to be registered forms part of the public domain. 19
descriptive of what the land actually looks like. xxx
It cannot be overemphasized that unwarranted appropriation of public lands has been a notorious
Under Section 2, Article XII of the Constitution,10 which embodies the Regalian doctrine, all practice resorted to in land registration cases.20 For this reason, the Court has made it a point to
lands of the public domain belong to the State – the source of any asserted right to ownership of stress, when appropriate, that declassification of forest and mineral lands, as the case may be,
land.11 All lands not appearing to be clearly of private dominion presumptively belong to the and their conversion into alienable and disposable lands need an express and positive act from
State.12 Accordingly, public lands not shown to have been reclassified or released as alienable the government.21
agricultural land or alienated to a private person by the State remain part of the inalienable
public domain.13 Under Section 6 of the Public Land Act, the prerogative of classifying or The foregoing considered, the issue of whether or not respondent and her predecessor-in-interest
reclassifying lands of the public domain, i.e., from forest or mineral to agricultural and vice have been in open, exclusive and continuous possession of the parcels of land in question is now
versa, belongs to the Executive Branch of the government and not the court. 14 Needless to stress, of little moment. For, unclassified land, as here, cannot be acquired by adverse occupation or
the onus to overturn, by incontrovertible evidence, the presumption that the land subject of an possession; occupation thereof in the concept of owner, however long, cannot ripen into private
application for registration is alienable or disposable rests with the applicant. 15 ownership and be registered as title.22

In the present case, the CA assumed that the lands in question are already alienable and WHEREFORE, the instant petition is GRANTED and the assailed decision dated May 29,
disposable. Wrote the appellate court: 1998 of the Court of Appeals in CA-G.R. CV No. 37001 is REVERSED and SET ASIDE.
Accordingly, respondent’s application for original registration of title in Land Registration Case
The theory of [petitioner] that the properties in question are lands of the public domain cannot be No. N-25-1 of the Regional Trial Court at Iba, Zambales, Branch 69, is DENIED.
sustained as it is directly against the above doctrine. Said doctrine is a reaffirmation of the
principle established in the earlier cases . . . that open, exclusive and undisputed possession of No costs.
alienable public land for period prescribed by law creates the legal fiction whereby the land,
upon completion of the requisite period, ipso jure and without the need of judicial or other SO ORDERED.
sanction, ceases to be public land and becomes private property …. (Word in bracket and
underscoring added.)
2
CANCIO C. GARCIA Rollo, pp. 28-38.
Associate Justice
3
Ibid., pp. 22-23.
WE CONCUR:
4
Id., pp. 28-38.
REYNATO S. PUNO
Associate Justice 5
Heirs of Amunategui vs. Director of Forestry, 126 SCRA 69 (1983); Director of
Chairperson Forestry vs. Munoz, 126 SCRA 1148 (1983).

6
ANGELINA SANDOVAL-GUTIERREZ RENATO C. CORONA Ibid.
Associate Justice Asscociate Justice
7
Commonwealth Act No. 141, as amended.
ADOLFO S. AZCUNA
Associate Justice 8
Art. XII, Sec. 3.

ATTESTATION 9
See Note # 5, supra.

I attest that the conclusions in the above decision were reached in consultation before the case 10
Sec. 2 – All lands of the public domain, waters, minerals, coal, petroleum, and other
was assigned to the writer of the opinion of the Court’s Division. mineral oils, all forces of potential energy, fisheries, forests or timber, wildlife, flora
and fauna, and other resources are owned by the State. xxx
REYNATO S. PUNO
Associate Justice 11
Seville vs. NDC, 351 SCRA 112 (2001).
Chairperson, Second Division
12
Bracewell vs. CA, 323 SCRA 193 (2000).
CERTIFICATION
13
Menguito vs. Republic, 348 SCRA 128 (2000).
Pursuant to Article VIII, Section 13 of the Constitution, and the Division Chairman's Attestation,
it is hereby certified that the conclusions in the above decision were reached in consultation 14
Bilog LAND TITLES and DEEDS, 2005 ed., p. 59, citing Director of Lands vs. CA,
before the case was assigned to the writer of the opinion of the Court. 178 SCRA 708 (1989).

ARTEMIO V. PANGANIBAN 15
Pagkatipunan vs. CA, 379 SCRA 621 (2000).
Chief Justice
16
146 SCRA 509 (1986).

17
95 SCRA 437 (1980).

Footnotes 18
Director of Lands vs. Funtilar, 142 SCRA 57 (1986); Republic vs. CA, 154 SCRA
476 (1987).
1
Penned by Associate Justice Buenaventura J. Guerrero (ret.), with Associate Justices
Arturo B. Buena (ret.) and Portia Aliño-Hormachuelos, concurring; Rollo, pp. 22-27. 19
Republic vs. Lao, 405 SCRA 291 (2003).
20
Director of Lands vs. Court of Appeals, 133 SCRA 701 (1984).

21
Heirs of Amunategui vs. Director of Forestry; supra; Republic vs. CA 201 SCRA 1
(1991).

22
De Ocampo vs. Arlos, 343 SCRA 716 (2000); Republic vs. Animas, 56 SCRA 499
[1974). Lacson vs. Del Rosario, 151 SCRA 714 (1987).
Republic of the Philippines 9 lots and covered by plan Psu-225009. According to the application, Lots 1-5 were sold to Jose
SUPREME COURT de la Rosa and Lots 6-9 to his children by Mamaya Balbalio and Jaime Alberto, respectively, in
Manila 1964. 2

FIRST DIVISION The application was separately opposed by Benguet Consolidated, Inc. as to Lots 1-5, Atok Big
Wedge Corporation, as to Portions of Lots 1-5 and all of Lots 6-9, and by the Republic of the
G.R. No. L-43938 April 15, 1988 Philippines, through the Bureau of Forestry Development, as to lots 1-9. 3

REPUBLIC OF THE PHILIPPINES (DIRECTOR OF FOREST In support of the application, both Balbalio and Alberto testified that they had acquired the
DEVELOPMENT), petitioner, subject land by virtue of prescription Balbalio claimed to have received Lots 1-5 from her father
vs. shortly after the Liberation. She testified she was born in the land, which was possessed by her
HON. COURT OF APPEALS (THIRD DIVISION) and JOSE Y. DE LA parents under claim of ownership. 4 Alberto said he received Lots 6-9 in 1961 from his mother,
ROSA, respondents. Bella Alberto, who declared that the land was planted by Jaime and his predecessors-in-interest
to bananas, avocado, nangka and camote, and was enclosed with a barbed-wire fence. She was
corroborated by Felix Marcos, 67 years old at the time, who recalled the earlier possession of the
G.R. No. L-44081 April 15, 1988
land by Alberto's father. 5 Balbalio presented her tax declaration in 1956 and the realty tax
receipts from that year to 1964, 6 Alberto his tax declaration in 1961 and the realty tax receipts
BENGUET CONSOLIDATED, INC., petitioner, from that year to 1964. 7
vs.
HON. COURT OF APPEALS, JOSE Y. DE LA ROSA, VICTORIA, BENJAMIN and
Benguet opposed on the ground that the June Bug mineral claim covering Lots 1-5 was sold to it
EDUARDO, all surnamed DE LA ROSA, represented by their father JOSE Y. DE LA
on September 22, 1934, by the successors-in-interest of James Kelly, who located the claim in
ROSA, respondents.
September 1909 and recorded it on October 14, 1909. From the date of its purchase, Benguet had
been in actual, continuous and exclusive possession of the land in concept of owner, as
G.R. No. L-44092 April 15, 1988 evidenced by its construction of adits, its affidavits of annual assessment, its geological
mappings, geological samplings and trench side cuts, and its payment of taxes on the land. 8
ATOK-BIG WEDGE MINING COMPANY, petitioner,
vs. For its part, Atok alleged that a portion of Lots 1-5 and all of Lots 6-9 were covered by the
HON. COURT OF APPEALS, JOSE Y. DE LA ROSA, VICTORlA, BENJAMIN and Emma and Fredia mineral claims located by Harrison and Reynolds on December 25, 1930, and
EDUARDO, all surnamed DE LA ROSA, represented by their father, JOSE Y. DE LA recorded on January 2, 1931, in the office of the mining recorder of Baguio. These claims were
ROSA, respondents. purchased from these locators on November 2, 1931, by Atok, which has since then been in
open, continuous and exclusive possession of the said lots as evidenced by its annual assessment
work on the claims, such as the boring of tunnels, and its payment of annual taxes thereon. 9

CRUZ, J.: The location of the mineral claims was made in accordance with Section 21 of the Philippine
Bill of 1902 which provided that:
The Regalian doctrine reserves to the State all natural wealth that may be found in the bowels of
the earth even if the land where the discovery is made be private. 1 In the cases at bar, which SEC. 21. All valuable mineral deposits in public lands in the philippine Islands
have been consolidated because they pose a common issue, this doctrine was not correctly both surveyed and unsurveyed are hereby declared to be free and open to
applied. exploration, occupation and purchase and the land in which they are found to
occupation and purchase by the citizens of the United States, or of said islands.
These cases arose from the application for registration of a parcel of land filed on February 11,
1965, by Jose de la Rosa on his own behalf and on behalf of his three children, Victoria,
Benjamin and Eduardo. The land, situated in Tuding, Itogon, Benguet Province, was divided into
The Bureau of Forestry Development also interposed its objection, arguing that the land sought of the Philippines of 1935, they were removed from the public domain and had
to be registered was covered by the Central Cordillera Forest Reserve under Proclamation No. become private properties of Benguet and Atok.
217 dated February 16, 1929. Moreover, by reason of its nature, it was not subject to alienation
under the Constitutions of 1935 and 1973. 10 It is not disputed that the location of the mining claim under
consideration was perfected prior to November 15, 1935,
The trial court * denied the application, holding that the applicants had failed to prove their when the Government of the Commonwealth was
claim of possession and ownership of the land sought to be registered. 11 The applicants appealed inaugurated; and according to the laws existing at that time,
to the respondent court, * which reversed the trial court and recognized the claims of the as construed and applied by this court in McDaniel v.
applicant, but subject to the rights of Benguet and Atok respecting their mining claims. 12 In Apacible and Cuisia (42 Phil. 749), a valid location of a
other words, the Court of Appeals affirmed the surface rights of the de la Rosas over the land mining claim segregated the area from the public domain.
while at the same time reserving the sub-surface rights of Benguet and Atok by virtue of their Said the court in that case: The moment the locator
mining claims. discovered a valuable mineral deposit on the lands located,
and perfected his location in accordance with law, the power
Both Benguet and Atok have appealed to this Court, invoking their superior right of ownership. of the United States Government to deprive him of the
The Republic has filed its own petition for review and reiterates its argument that neither the exclusive right to the possession and enjoyment of the
private respondents nor the two mining companies have any valid claim to the land because it is located claim was gone, the lands had become mineral lands
not alienable and registerable. and they were exempted from lands that could be granted to
any other person. The reservations of public lands cannot be
It is true that the subject property was considered forest land and included in the Central made so as to include prior mineral perfected locations; and,
Cordillera Forest Reserve, but this did not impair the rights already vested in Benguet and Atok of course, if a valid mining location is made upon public
lands afterwards included in a reservation, such inclusion or
at that time. The Court of Appeals correctly declared that:
reservation does not affect the validity of the former
location. By such location and perfection, the land located is
There is no question that the 9 lots applied for are within the June Bug mineral segregated from the public domain even as against the
claims of Benguet and the "Fredia and Emma" mineral claims of Atok. The Government. (Union Oil Co. v. Smith, 249 U.S. 337; Van
June Bug mineral claim of plaintiff Benguet was one of the 16 mining claims Mess v. Roonet, 160 Cal. 131; 27 Cyc. 546).
of James E. Kelly, American and mining locator. He filed his declaration of
the location of the June Bug mineral and the same was recorded in the Mining
"The legal effect of a valid location of a mining claim is not
Recorder's Office on October 14, 1909. All of the Kelly claims ha
subsequently been acquired by Benguet Consolidated, Inc. Benguet's evidence only to segregate the area from the public domain, but to
is that it had made improvements on the June Bug mineral claim consisting of grant to the locator the beneficial ownership of the claim and
the right to a patent therefor upon compliance with the terms
mine tunnels prior to 1935. It had submitted the required affidavit of annual
and conditions prescribed by law. Where there is a valid
assessment. After World War II, Benguet introduced improvements on mineral
location of a mining claim, the area becomes segregated
claim June Bug, and also conducted geological mappings, geological sampling
from the public domain and the property of the locator." (St.
and trench side cuts. In 1948, Benguet redeclared the "June Bug" for taxation
and had religiously paid the taxes. Louis Mining & Milling Co. v. Montana Mining Co., 171
U.S. 650; 655; 43 Law ed., 320, 322.) "When a location of a
mining claim is perfected it has the effect of a grant by the
The Emma and Fredia claims were two of the several claims of Harrison United States of the right of present and exclusive
registered in 1931, and which Atok representatives acquired. Portions of Lots possession, with the right to the exclusive enjoyment of all
1 to 5 and all of Lots 6 to 9 are within the Emma and Fredia mineral claims of the surface ground as well as of all the minerals within the
Atok Big Wedge Mining Company. lines of the claim, except as limited by the extralateral right
of adjoining locators; and this is the locator's right before as
The June Bug mineral claim of Benguet and the Fredia and Emma mineral well as after the issuance of the patent. While a lode locator
claims of Atok having been perfected prior to the approval of the Constitution acquires a vested property right by virtue of his location
made in compliance with the mining laws, the fee remains in within lands set apart as forest reserve under Sec. 1826 of the Revised
the government until patent issues."(18 R.C.L. 1152) (Gold Administrative Code which would be valid and subsisting location except to
Creek Mining Corporation v. Hon. Eulogio Rodriguez, Sec. the existence of said reserve are hereby declared to be valid and subsisting
of Agriculture and Commerce, and Quirico Abadilla, locations as of the date of their respective locations.
Director of the Bureau of Mines, 66 Phil. 259, 265-266)
The perfection of the mining claim converted the property to mineral land and under the laws
It is of no importance whether Benguet and Atok had secured a patent for as then in force removed it from the public domain. 14 By such act, the locators acquired exclusive
held in the Gold Creek Mining Corp. Case, for all physical purposes of rights over the land, against even the government, without need of any further act such as the
ownership, the owner is not required to secure a patent as long as he complies purchase of the land or the obtention of a patent over it. 15As the land had become the private
with the provisions of the mining laws; his possessory right, for all practical property of the locators, they had the right to transfer the same, as they did, to Benguet and Atok.
purposes of ownership, is as good as though secured by patent.
It is true, as the Court of Appeals observed, that such private property was subject to the
We agree likewise with the oppositors that having complied with all the "vicissitudes of ownership," or even to forfeiture by non-user or abandonment or, as the private
requirements of the mining laws, the claims were removed from the public respondents aver, by acquisitive prescription. However, the method invoked by the de la Rosas is
domain, and not even the government of the Philippines can take away this not available in the case at bar, for two reasons.
right from them. The reason is obvious. Having become the private properties
of the oppositors, they cannot be deprived thereof without due process of First, the trial court found that the evidence of open, continuous, adverse and exclusive
law. 13 possession submitted by the applicants was insufficient to support their claim of ownership.
They themselves had acquired the land only in 1964 and applied for its registration in 1965,
Such rights were not affected either by the stricture in the Commonwealth Constitution against relying on the earlier alleged possession of their predecessors-in-interest. 16The trial judge, who
the alienation of all lands of the public domain except those agricultural in nature for this was had the opportunity to consider the evidence first-hand and observe the demeanor of the
made subject to existing rights. Thus, in its Article XIII, Section 1, it was categorically provided witnesses and test their credibility was not convinced. We defer to his judgment in the absence
that: of a showing that it was reached with grave abuse of discretion or without sufficient basis. 17

SEC. 1. All agricultural, timber and mineral lands of the public domain, Second, even if it be assumed that the predecessors-in-interest of the de la Rosas had really been
waters, minerals, coal, petroleum and other mineral oils, all forces of potential in possession of the subject property, their possession was not in the concept of owner of
energy and other natural resources of the Philipppines belong to the State, and the mining claim but of the property as agricultural land, which it was not. The property was
their disposition, exploitation, development, or utilization shall be limited to mineral land, and they were claiming it as agricultural land. They were not disputing the lights of
citizens of the Philippines or to corporations or associations at least 60% of the the mining locators nor were they seeking to oust them as such and to replace them in the mining
capital of which is owned by such citizens, subject to any existing right, grant, of the land. In fact, Balbalio testified that she was aware of the diggings being undertaken "down
lease or concession at the time of the inauguration of the government below" 18 but she did not mind, much less protest, the same although she claimed to be the owner
established under this Constitution. Natural resources with the exception of of the said land.
public agricultural lands, shall not be alienated, and no license, concession, or
lease for the exploitation, development or utilization of any of the natural The Court of Appeals justified this by saying there is "no conflict of interest" between the
resources shall be granted for a period exceeding 25 years, except as to water owners of the surface rights and the owners of the sub-surface rights. This is rather doctrine, for
rights for irrigation, water supply, fisheries, or industrial uses other than the it is a well-known principle that the owner of piece of land has rights not only to its surface but
development of water power, in which case beneficial use may be the measure also to everything underneath and the airspace above it up to a reasonable height. 19 Under the
and the limit of the grant. aforesaid ruling, the land is classified as mineral underneath and agricultural on the surface,
subject to separate claims of title. This is also difficult to understand, especially in its practical
Implementing this provision, Act No. 4268, approved on November 8, 1935, declared: application.

Any provision of existing laws, executive order, proclamation to the contrary Under the theory of the respondent court, the surface owner will be planting on the land while
notwithstanding, all locations of mining claim made prior to February 8, 1935 the mining locator will be boring tunnels underneath. The farmer cannot dig a well because he
may interfere with the operations below and the miner cannot blast a tunnel lest he destroy the extract or utilize the said minerals without the permission of the State to which such minerals
crops above. How deep can the farmer, and how high can the miner, go without encroaching on belong.
each other's rights? Where is the dividing line between the surface and the sub-surface rights?
The flaw in the reasoning of the respondent court is in supposing that the rights over the land
The Court feels that the rights over the land are indivisible and that the land itself cannot be half could be used for both mining and non-mining purposes simultaneously. The correct
agricultural and half mineral. The classification must be categorical; the land must be either interpretation is that once minerals are discovered in the land, whatever the use to which it is
completely mineral or completely agricultural. In the instant case, as already observed, the land being devoted at the time, such use may be discontinued by the State to enable it to extract the
which was originally classified as forest land ceased to be so and became mineral — and minerals therein in the exercise of its sovereign prerogative. The land is thus converted to
completely mineral — once the mining claims were perfected. 20 As long as mining operations mineral land and may not be used by any private party, including the registered owner thereof,
were being undertaken thereon, or underneath, it did not cease to be so and become agricultural, for any other purpose that will impede the mining operations to be undertaken therein, For the
even if only partly so, because it was enclosed with a fence and was cultivated by those who loss sustained by such owner, he is of course entitled to just compensation under the Mining
were unlawfully occupying the surface. Laws or in appropriate expropriation proceedings. 21

What must have misled the respondent court is Commonwealth Act No. 137, providing as Our holding is that Benguet and Atok have exclusive rights to the property in question by virtue
follows: of their respective mining claims which they validly acquired before the Constitution of 1935
prohibited the alienation of all lands of the public domain except agricultural lands, subject to
Sec. 3. All mineral lands of the public domain and minerals belong to the vested rights existing at the time of its adoption. The land was not and could not have been
State, and their disposition, exploitation, development or utilization, shall be transferred to the private respondents by virtue of acquisitive prescription, nor could its use be
limited to citizens of the Philippines, or to corporations, or associations, at shared simultaneously by them and the mining companies for agricultural and mineral purposes.
least 60% of the capital of which is owned by such citizens, subject to any
existing right, grant, lease or concession at the time of the inauguration of WHEREFORE, the decision of the respondent court dated April 30, 1976, is SET ASIDE and
government established under the Constitution. that of the trial court dated March 11, 1969, is REINSTATED, without any pronouncement as to
costs.
SEC. 4. The ownership of, and the right to the use of land for agricultural,
industrial, commercial, residential, or for any purpose other than mining does SO ORDERED.
not include the ownership of, nor the right to extract or utilize, the minerals
which may be found on or under the surface. Teehankee, C.J., Narvasa, Gancayco and Griño-Aquino, JJ., concur.

SEC. 5. The ownership of, and the right to extract and utilize, the minerals
included within all areas for which public agricultural land patents are granted
are excluded and excepted from all such patents.
Footnotes

SEC. 6. The ownership of, and the right to extract and utilize, the minerals
1 Sec. 4, Commonwealth Act No. 137.
included within all areas for which Torrens titles are granted are excluded and
excepted from all such titles.
2 Original Records, Land Registration Case No. 146, pp. 1-4.
This is an application of the Regalian doctrine which, as its name implies, is intended for the
benefit of the State, not of private persons. The rule simply reserves to the State all minerals that 3 Ibid., pp. 33, 68, 241.
may be found in public and even private land devoted to "agricultural, industrial, commercial,
residential or (for) any purpose other than mining." Thus, if a person is the owner of agricultural 4 TSN, May 5, 1966, p. 61.
land in which minerals are discovered, his ownership of such land does not give him the right to
5 TSN, May 3, 1967, pp. 89-115.
6 Original Records, Exhs. "J," p. 24, "K," p. 26. 18 TSN, Oct. 18, 1966, p. 79.

7 Original Record, Exhs. "I," p. 22, "K," p. 26. 19 Article 437, new Civil Code.

8 Exhs. "8 (a-e)," "9 (a-e)," "9 (f-g)," "7," and "11." 20 Sec. 1, Presidential Legislative Act No. 4268.

9 Exh. "5," Atok; Exh. "6," Atok, Rollo (G.R. No. 44081), Annex "B," pp. 76- 21 Consolidated Mines Administrative Order, May 17, 1975, Secs. 10 & 11, as
82. amended by Mines Adrministrative Order No. MRD-15.

10 Original Records, Land Registration Case No. 146, p, 291.

* Judge Feliciano Belmonte, CFI of Baguio, Benguet.

11 Ibid., p. 325.

** Leuterio J., ponente, with Vasquez and Escolin, JJ.

12 Rollo (GR No. 43938), pp. 38-51.

13 Ibid., pp. 40-42.

14 McDaniel v. Apacible, 42 Phil. 749; Salacot Mining Co. v. Rodriguez, 67


Phil. 97; Salacot Mining v. Apacible, 67 Phil. 110; Benguet, Inc. v. Republic,
143 SCRA 466.

15 The respondents may claim, however, that inasmuch as a patent has not
been issued to the petitioner, he has acquired no property right in said mineral
claims. But the Supreme Court of the United States, in the cases of Union Oil
Co. v. Smith (249 U.S. 337), and St. Louis Mining & Milling Co. v. Montana
Mining Co. (171 U.S. 650), held that even without a patent, the possessory
right of a locator after discovery of minerals upon the claim is a property right
in the fullest sense, unaffected by the fact that the paramount title to the land is
in the United State. McDaniel v. Apacible, supra; Salacot Mining Co. v.
Rodriguez, supra.

16 Original Records, pp. 1-4.

17 Tan Hong v. Hon. Parades, G.R. No. 78627, Jan. 29, 1988; Pio Padilla v.
CA, G.R. No. 75577, Jan. 29, 1988; Verdant Acres v. Ponciano Hernandez,
G.R. No. 51352, Jan. 29, 1988; People v. Ancheta, 148 SCRA 178; People v.
Delavin, 148 SCRA 257; People v. Alcantara, 151 SCRA 326.
EN BANC ROSENDO VILLAFLOR, DAVAO UNITED
MINERS COOPERATIVE, ANTONIO
DACUDAO, PUTING-BATO GOLD MINERS
APEX MINING CO., INC., G.R. Nos. 152613 & 152628 COOPERATIVE, ROMEO ALTAMERA,
Petitioner, THELMA CATAPANG, LUIS GALANG,
RENATO BASMILLO, FRANCISCO YOBIDO,
- versus - EDUARDO GLORIA, EDWIN ASION, MACARIO
HERNANDEZ, REYNALDO CARUBIO,
SOUTHEAST MINDANAO GOLD MINING ROBERTO BUNIALES, RUDY ESPORTONO,
CORP., THE MINES ADJUDICATION BOARD, ROMEO CASTILLO, JOSE REA, GIL GANADO,
PROVINCIAL MINING REGULATORY BOARD PRIMITIVA LICAYAN, LETICIA
(PMRB-DAVAO), MONKAYO INTEGRATED ALQUEZA and JOEL BRILLANTES
SMALL SCALE MINERS ASSOCIATION, INC., MANAGEMENT MINING CORPORATION,
ROSENDO VILLAFLOR, BALITE COMMUNAL Respondents.
PORTAL MINING COOPERATIVE, DAVAO x------------------------x
UNITED MINERS COOPERATIVE, ANTONIO THE MINES ADJUDICATION BOARD AND ITS
DACUDAO, PUTING-BATO GOLD MINERS MEMBERS, THE HON. VICTOR O. RAMOS
COOPERATIVE, ROMEO ALTAMERA, (Chairman), UNDERSECRETARY VIRGILIO
THELMA CATAPANG, LUIS GALANG, MARCELO (Member) and DIRECTOR HORACIO
RENATO BASMILLO, FRANCISCO YOBIDO, RAMOS (Member),
EDUARDO GLORIA, EDWIN ASION, Petitioners,
MACARIO HERNANDEZ, REYNALDO
CARUBIO, ROBERTO BUNIALES, RUDY
ESPORTONO, ROMEO CASTILLO, JOSE REA,
GIL GANADO, PRIMITIVA LICAYAN,
LETICIA ALQUEZA and JOEL BRILLANTES
MANAGEMENT MINING CORPORATION, - versus -
Respondents.

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

BALITE COMMUNAL PORTAL MINING SOUTHEAST MINDANAO GOLD MINING


COOPERATIVE, CORPORATION,
Petitioner, Respondent. G.R. No. 152870-71

- versus - Present:

SOUTHEAST MINDANAO GOLD MINING PUNO, C.J.,


CORP., APEX MINING CO., INC., THE MINES CARPIO,
ADJUDICATION BOARD, PROVINCIAL CORONA,*
MINING REGULATORY BOARD (PMRB- CARPIO MORALES,
DAVAO), MONKAYO INTEGRATED SMALL G.R. No. 152619-20 CHICO-NAZARIO,
SCALE MINERS ASSOCIATION, INC., VELASCO, JR.,*
NACHURA,** the issue of ownership of priority right over the contested Diwalwal Gold Rush Area as having
LEONARDO-DE CASTRO,
BRION, been overtaken by the said proclamation. Thus, it was held in the Assailed Decision that it is
PERALTA,* now within the prerogative of the Executive Department to undertake directly the mining
BERSAMIN, operations of the disputed area or to award the operations to private entities including petitioners
DEL CASTILLO,
Apex and Balite, subject to applicable laws, rules and regulations, and provided that these
ABAD, and
VILLARAMA, JR., JJ. private entities are qualified.

Promulgated:
SEM also filed a Motion for Referral of Case to the Court En Banc and for Oral
November 20, 2009 Arguments dated 22 August 2006.
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
Apex, for its part, filed a Motion for Clarification of the Assailed Decision, praying that
RESOLUTION the Court elucidate on the Decisions pronouncement that mining operations, are now, therefore
within the full control of the State through the executive branch. Moreover, Apex asks this Court
to order the Mines and Geosciences Board (MGB) to accept its application for an exploration
CHICO-NAZARIO, J.:
permit.

This resolves the motion for reconsideration dated 12 July 2006, filed by Southeast Mindanao In its Manifestation and Motion dated 28 July 2006, Balite echoes the same concern as
Gold Mining Corporation (SEM), of this Courts Decision dated 23 June 2006(Assailed that of Apex on the actual takeover by the State of the mining industry in the disputed area to the
Decision). The Assailed Decision held that the assignment of Exploration Permit (EP) 133 in exclusion of the private sector. In addition, Balite prays for this Court to direct MGB to accept
favor of SEM violated one of the conditions stipulated in the permit, i.e., that the same shall be its application for an exploration permit.
for the exclusive use and benefit of Marcopper Mining Corporation (MMC) or its duly
authorized agents. Since SEM did not claim or submit evidence that it was a designated agent of Camilo Banad, et al., likewise filed a motion for reconsideration and prayed that the
MMC, the latter cannot be considered as an agent of the former that can use EP 133 and benefit disputed area be awarded to them.
from it. It also ruled that the transfer of EP 133 violated Presidential Decree No. 463, which
requires that the assignment of a mining right be made with the prior approval of the Secretary of In the Resolution dated 15 April 2008, the Court En Banc resolved to accept the instant
the Department of Environment and Natural Resources (DENR). Moreover, the Assailed cases. The Court, in a resolution dated 29 April 2008, resolved to set the cases for Oral
Decision pointed out that EP 133 expired by non-renewal since it was not renewed before or Argument on 1 July 2008.
after its expiration.
During the Oral Argument, the Court identified the following principal issues to be discussed by
The Assailed Decision likewise upheld the validity of Proclamation No. 297 absent any the parties:
question against its validity. In view of this, and considering that under Section 5 of Republic
1. Whether the transfer or assignment of Exploration Permit (EP) 133 by MMC to
Act No. 7942, otherwise known as the Mining Act of 1995, mining operations in mineral
SEM was validly made without violating any of the terms and conditions set forth in
reservations may be undertaken directly by the State or through a contractor, the Court deemed Presidential Decree No. 463 and EP 133 itself.
2. Whether Southeast Mindanao Mining Corp. acquired a vested right over the disputed therefore do not expire with the permit. SEM insists that a mining right is a vested property right
area, which constitutes a property right protected by the Constitution.
that not even the government can take away. To support this thesis, SEM cites this Courts ruling
3. Whether the assailed Decision dated 23 June 2006 of the Third Division in this case in McDaniel v. Apacible and Cuisia[2] and in Gold Creek Mining Corporation v.
is contrary to and overturns the earlier Decision of this Court in Apex v. Garcia (G.R. Rodriguez, [3]
which were decided in 1922 and 1938, respectively.
No. 92605, 16 July 1991, 199 SCRA 278).

4. Whether the issuance of Proclamation No. 297 declaring the disputed area as McDaniel and Gold Creek Mining Corporation are not in point.
mineral reservation outweighs the claims of SEM, Apex Mining Co. Inc. and Balite
Communal Portal Mining Cooperative over the Diwalwal Gold Rush Area.
In 1916, McDaniel, petitioner therein, located minerals, i.e., petroleum, on an
5. Whether the issue of the legality/constitutionality of Proclamation No. 297 was unoccupied public land and registered his mineral claims with the office of the mining recorder
belatedly raised. pursuant to the Philippine Bill of 1902, where a mining claim locator, soon after locating the
mine, enjoyed possessory rights with respect to such mining claim with or without a patent
6. Assuming that the legality/constitutionality of Proclamation No. 297 was timely
raised, whether said proclamation violates any of the following: therefor. In that case, the Agriculture Secretary, by virtue of Act No. 2932, approved in 1920,
which provides that all public lands may be leased by the then Secretary of Agriculture and
a. Article XII, Section 4 of the Constitution; Natural Resources, was about to grant the application for lease of therein respondent,
b. Section 1 of Republic Act No. 3092;
c. Section 14 of the Administrative Code of 1987; overlapping the mining claims of the subject petitioner.Petitioner argued that, being a valid
d. Section 5(a) of Republic Act No. 7586; locator, he had vested right over the public land where his mining claims were located. There,
e. Section 4(a) of Republic Act No. 6657; and the Court ruled that the mining claim perfected under the Philippine Bill of 1902, is property in
f. Section 2, Subsection 2.1.2 of Executive Order No. 318 dated 9 June 2004.
the highest sense of that term, which may be sold and conveyed, and will pass by descent, and is
not therefore subject to the disposal of the Government. The Court then declared that since
After hearing the arguments of the parties, the Court required them to submit their petitioner had already perfected his mining claim under the Philippine Bill of 1902, a subsequent
respective memoranda. Memoranda were accordingly filed by SEM, Apex, Balite and Mines statute, i.e., Act No. 2932, could not operate to deprive him of his already perfected mining
Adjudication Board (MAB). claim, without violating his property right.

We shall resolve the second issue before dwelling on the first, third and the rest of the Gold Creek Mining reiterated the ruling in McDaniel that a perfected mining claim
issues. under the Philippine Bill of 1902 no longer formed part of the public domain; hence, such
mining claim does not come within the prohibition against the alienation of natural resources
MMC or SEM Did Not Have Vested Rights Over under Section 1, Article XII of the 1935 Constitution.
the Diwalwal Gold Rush Area
Gleaned from the ruling on the foregoing cases is that for this law to apply, it must be
Petitioner SEM vigorously argues that Apex Mining Co., Inc. v. Garcia[1] vested in established that the mining claim must have been perfected when the Philippine Bill of 1902 was
MMC mining rights over the disputed area. It claims that the mining rights that MMC acquired still in force and effect. This is so because, unlike the subsequent laws that prohibit the alienation
under the said case were the ones assigned to SEM, and not the right to explore under MMCs EP of mining lands, the Philippine Bill of 1902 sanctioned the alienation of mining lands to private
133. It insists that mining rights, once obtained, continue to subsist regardless of the validity of individuals. The Philippine Bill of 1902 contained provisions for, among many other things, the
the exploration permit; thus, mining rights are independent of the exploration permit and open and free exploration, occupation and purchase of mineral deposits and the land where they
may be found. It declared all valuable mineral deposits in public lands in the Philippine impossible for SEM to successfully assert that it acquired mining rights over the disputed area in
Islands, both surveyed and unsurveyed x x x to be free and open to exploration, accordance with the same bill, since it was only in 1984 that MMC, SEMs predecessor-in-
occupation, and purchase, and the land in which they are found to occupation and interest, filed its declaration of locations and its prospecting permit application in compliance
purchase, by citizens of the United States, or of said Islands x x x.[4] Pursuant to this law, the with Presidential Decree No. 463. It was on 1 July 1985 and 10 March 1986 that a Prospecting
holder of the mineral claim is entitled to all the minerals that may lie within his claim, provided Permit and EP 133, respectively, were issued to MMC. Considering these facts, there is no
he does three acts: First, he enters the mining land and locates a plot of ground measuring, where possibility that MMC or SEM could have acquired a perfected mining claim under the auspices
possible, but not exceeding, one thousand feet in length by one thousand feet in breadth, in as of the Philippine Bill of 1902. Whatever mining rights MMC had that it invalidly transferred to
[5]
nearly a rectangular form as possible. Second, the mining locator has to record the mineral SEM cannot, by any stretch of imagination, be considered mining rights as contemplated under
claim in the mining recorder within thirty (30) days after the location thereof. [6]Lastly, he must the Philippine Bill of 1902 and immortalized in McDaniel and Gold Creek Mining.
[7]
comply with the annual actual work requirement. Complete mining rights, namely, the rights
to explore, develop and utilize, are acquired by a mining locator by simply following the SEM likens EP 133 with a building permit. SEM likewise equates its supposed rights
foregoing requirements. attached to the exploration permit with the rights that a private property land owner has to said
landholding. This analogy has no basis in law. As earlier discussed, under the 1935, 1973 and
With the effectivity of the 1935 Constitution, where the regalian doctrine was adopted, 1987 Constitutions, national wealth, such as mineral resources, are owned by the State and not
it was declared that all natural resources of the Philippines, including mineral lands and by their discoverer. The discoverer or locator can only develop and utilize said minerals for his
[8]
minerals, were property belonging to the State. Excluded, however, from the property of public own benefit if he has complied with all the requirements set forth by applicable laws and if the
domain were the mineral lands and minerals that were located and perfected by virtue of the State has conferred on him such right through permits, concessions or agreements. In other
[9]
Philippine Bill of 1902, since they were already considered private properties of the locators. words, without the imprimatur of the State, any mining aspirant does not have any definitive
right over the mineral land because, unlike a private landholding, mineral land is owned by the
Commonwealth Act No. 137 or the Mining Act of 1936, which expressly adopted State, and the same cannot be alienated to any private person as explicitly stated in Section 2,
the regalian doctrine following the provision of the 1935 Constitution, also proscribed the Article XIV of the 1987 Constitution:
alienation of mining lands and granted only lease rights to mining claimants, who were
prohibited from purchasing the mining claim itself. All lands of public domain, waters, minerals x x x and all other
natural resources are owned by the State. With the exception of agricultural
lands, all other natural resources shall not be alienated. (Emphases
When Presidential Decree No. 463, which revised Commonwealth Act No. 137, was in supplied.)
force in 1974, it likewise recognized the regalian doctrine embodied in the 1973 Constitution. It
declared that all mineral deposits and public and private lands belonged to the state while,
Further, a closer scrutiny of the deed of assignment in favor of SEM reveals that MMC
nonetheless, recognizing mineral rights that had already been existing under the Philippine Bill
assigned to the former the rights and interests it had in EP 133, thus:
of 1902 as being beyond the purview of the regalian doctrine.[10] The possessory rights of
mining claim holders under the Philippine Bill of 1902 remained intact and effective, and such
1. That for ONE PESO (P1.00) and other valuable consideration received by
rights were recognized as property rights that the holders could convey or pass by descent. [11] the ASSIGNOR from the ASSIGNEE, the ASSIGNOR hereby ASSIGNS,
TRANSFERS and CONVEYS unto the ASSIGNEE whatever rights or
In the instant cases, SEM does not aver or prove that its mining rights had been interest the ASSIGNOR may have in the area situated in Monkayo, Davao
del Norte and Cateel, Davao Oriental, identified as Exploration Permit
perfected and completed when the Philippine Bill of 1902 was still the operative law.Surely, it is
No. 133 and Application for a Permit to Prospect in Bunawan, Agusan del Sur
respectively. (Emphasis supplied.) In La Bugal-Blaan Tribal Association, Inc. v. Ramos,[12] this Court emphasized:

Pursuant to Section 20 of RA 7942, an exploration permit merely


It is evident that what MMC had over the disputed area during the assignment was an grants to a qualified person the right to conduct exploration for all minerals in
exploration permit. Clearly, the right that SEM acquired was limited to exploration, only because specified areas. Such a permit does not amount to an authorization to
MMC was a mere holder of an exploration permit. As previously explained, SEM did not extract and carry off the mineral resources that may be discovered. x x x.
acquire the rights inherent in the permit, as the assignment by MMC to SEM was done in Pursuant to Section 24 of RA 7942, an exploration permit grantee
violation of the condition stipulated in the permit, and the assignment was effected without the who determines the commercial viability of a mining area may, within the
approval of the proper authority in contravention of the provision of the mining law governing at term of the permit, file with the MGB a declaration of mining project
feasibility accompanied by a work program for development. The approval of
that time. In addition, the permit expired on 6 July 1994. It is, therefore, quite clear that SEM has
the mining project feasibility and compliance with other requirements of
no right over the area. RA 7942 vests in the grantee the exclusive right to an MPSA or any other
mineral agreement, or to an FTAA. (Underscoring ours.)
Even assuming arguendo that SEM obtained the rights attached in EP 133, said rights
cannot be considered as property rights protected under the fundamental law.
The non-acquisition by MMC or SEM of any vested right over the disputed area is
supported by this Courts ruling in Southeast Mindanao Gold Mining Corporation v. Balite
An exploration permit does not automatically ripen into a right to extract and utilize the
Portal Mining Cooperative[13]:
minerals; much less does it develop into a vested right. The holder of an exploration permit only
has the right to conduct exploration works on the area awarded. Presidential Decree No. 463 Clearly then, the Apex Mining case did not invest petitioner with
defined exploration as the examination and investigation of lands supposed to contain any definite right to the Diwalwal mines which it could now set up against
valuable minerals, by drilling, trenching, shaft sinking, tunneling, test pitting and other respondent BCMC and other mining groups.
means, for the purpose of probing the presence of mineral deposits and the extent Incidentally, it must likewise be pointed out that under no
thereof. Exploration does not include development and exploitation of the minerals circumstances may petitioners rights under EP No. 133 be regarded as total
found. Development is defined by the same statute as the steps necessarily taken to reach an and absolute. As correctly held by the Court of Appeals in its challenged
decision, EP No. 133 merely evidences a privilege granted by the State, which
ore body or mineral deposit so that it can be mined, whereas exploitation is defined as the may be amended, modified or rescinded when the national interest so
extraction and utilization of mineral deposits. An exploration permit is nothing more than a requires. x x x.(Underscoring supplied.)
mere right accorded to its holder to be given priority in the governments consideration in the
granting of the right to develop and utilize the minerals over the area. An exploration permit is
Unfortunately, SEM cannot be given priority to develop and exploit the area covered by EP 133
merely inchoate, in that the holder still has to comply with the terms and conditions embodied in
because, as discussed in the assailed Decision, EP 133 expired by non-renewal on 6 July
the permit. This is manifest in the language of Presidential Decree No. 463, thus:
1994. Also, as already mentioned, the transfer of the said permit to SEM was without legal effect
Sec. 8. x x x The right to exploit therein shall be awarded by the because it was done in contravention of Presidential Decree No. 463 which requires prior
President under such terms and conditions as recommended by the Director approval from the proper authority. Simply told, SEM holds nothing for it to be entitled to
and approved by the Secretary Provided, That the persons or corporations who
conduct mining activities in the disputed mineral land.
undertook prospecting and exploration of said area shall be given priority.
SEM wants to impress on this Court that its alleged mining rights, by virtue of its being More importantly, assuming arguendo that SEM has a valid exploration permit, it
a transferee of EP 133, is similar to a Financial and Technical Assistance Agreement (FTAA) of cannot assert any mining right over the disputed area, since the State has taken over the mining
a foreign contractor, which merits protection by the due process clause of the Constitution. SEM operations therein, pursuant to Proclamation No. 297 issued by the President on 25 November
[14]
cites La Bugal-Blaan Tribal Association, Inc. v. Ramos, as follows: 2002. The Court has consistently ruled that the nature of a natural resource exploration permit is
analogous to that of a license. In Republic v. Rosemoor Mining and Development Corporation,
To say that an FTAA is just like a mere timber license or permit and this Court articulated:
does not involve contract or property rights which merit protection by the due
process clause of the Constitution, and may therefore be revoked or cancelled
in the blink of an eye, is to adopt a well-nigh confiscatory stance; at the very Like timber permits, mining exploration permits do not vest in the grantee
least, it is downright dismissive of the property rights of businesspersons and any permanent or irrevocable right within the purview of the non-
corporate entities that have investments in the mining industry, whose impairment of contract and due process clauses of the Constitution, since
investments, operations and expenditures do contribute to the general welfare the State, under its all-encompassing police power, may alter, modify or
of the people, the coffers of government, and the strength of the economy. x x amend the same, in accordance with the demands of the general
x. welfare.[17](Emphasis supplied.)

Again, this argument is not meritorious. SEM did not acquire the rights attached to EP As a mere license or privilege, an exploration permit can be validly amended by the
133, since their transfer was without legal effect. Granting for the sake of argument that SEM President of the Republic when national interests suitably necessitate. The Court instructed thus:
was a valid transferee of the permit, its right is not that of a mining contractor. An exploration
Timber licenses, permits and license agreements are the principal instruments
permit grantee is vested with the right to conduct exploration only, while an FTAA or by which the State regulates the utilization and disposition of forest resources
MPSA contractor is authorized to extract and carry off the mineral resources that may be to the end that the public welfare is promoted. x x x They may be validly
discovered in the area.[15] An exploration permit holder still has to comply with the mining amended, modified, replaced or rescinded by the Chief Executive when
national interests so require.[18]
project feasibility and other requirements under the mining law. It has to obtain approval of such
accomplished requirements from the appropriate government agencies. Upon obtaining this
approval, the exploration permit holder has to file an application for an FTAA or an MPSA and Recognizing the importance of the countrys natural resources, not only for national
have it approved also. Until the MPSA application of SEM is approved, it cannot lawfully claim economic development, but also for its security and national defense, Section 5 of Republic Act
that it possesses the rights of an MPSA or FTAA holder, thus: No. 7942 empowers the President, when the national interest so requires, to establish mineral
reservations where mining operations shall be undertaken directly by the State or through a
x x x prior to the issuance of such FTAA or mineral agreement, the contractor, viz:
exploration permit grantee (or prospective contractor) cannot yet be deemed to
have entered into any contract or agreement with the State x x x.[16]
SEC 5. Mineral Reservations. When the national interest so requires, such as
when there is a need to preserve strategic raw materials for industries critical
to national development, or certain minerals for scientific, cultural or
But again, SEM is not qualified to apply for an FTAA or any mineral agreement, ecological value, the President may establish mineral reservations upon the
considering that it is not a holder of a valid exploration permit, since EP 133 expired by non- recommendation of the Director through the Secretary. Mining operations in
renewal and the transfer to it of the same permit has no legal value. existing mineral reservations and such other reservations as may
thereafter be established, shall be undertaken by the Department or
through a contractor x x x. (Emphasis supplied.)
The Assignment of EP No. 133 by MMC in
Favor of SEM Violated Section 97 of
Due to the pressing concerns in the Diwalwal Gold Rush Area brought about by Presidential Decree No. 463 and the Terms and
Conditions Set Forth in the Permit
unregulated small to medium-scale mining operations causing ecological, health and peace and
order problems, the President, on 25 November 2002, issued Proclamation No. 297, which
declared the area as a mineral reservation and as an environmentally critical area.This executive SEM claims that the approval requirement under Section 97 of Presidential Decree No. 463 is
fiat was aimed at preventing the further dissipation of the natural environment and rationalizing not applicable to this case, because MMC neither applied for nor was granted a mining lease
the mining operations in the area in order to attain an orderly balance between socio-economic contract. The said provision states:
growth and environmental protection. The area being a mineral reservation, the Executive
Department has full control over it pursuant to Section 5 of Republic Act No. 7942. It can either SEC. 97. Assignment of Mining Rights. A mining lease contract or any
interest therein shall not be transferred, assigned, or subleased without
directly undertake the exploration, development and utilization of the minerals found therein, or
the prior approval of the Secretary:Provided, that such transfer, assignment
it can enter into agreements with qualified entities. Since the Executive Department now has or sublease may be made only to a qualified person possessing the resources
control over the exploration, development and utilization of the resources in the disputed area, and capability to continue the mining operations of the lessee and that the
assignor has complied with all the obligations of the lease: Provided, further,
SEMs exploration permit, assuming that it is still valid, has been effectively withdrawn. The
That such transfer or assignment shall be duly registered with the office of the
exercise of such power through Proclamation No. 297 is in accord with jura regalia, where the mining recorder concerned.(Emphasis supplied.)
State exercises its sovereign power as owner of lands of the public domain and the mineral
deposits found within. Thus, Article XII, Section 2 of the 1987 Constitution emphasizes:
Exploration Permit 133 was issued in favor of MMC on 10 March 1986, when
SEC. 2. All lands of the public domain, water, minerals, coal, petroleum, and Presidential Decree No. 463 was still the governing law. Presidential Decree No. 463 pertains to
other mineral oils, all forces of potential energy, fisheries, forests or timber, the old system of exploration, development and utilization of natural resources through license,
wildlife, flora and fauna, and other natural resources are owned by the
State. With the exception of agricultural lands, all other natural resources shall concession or lease.[20]
not be alienated. The exploration, development, and utilization of natural
resources shall be under the full control and supervision of the State. The Pursuant to this law, a mining lease contract confers on the lessee or his successors the
State may directly undertake such activities, or it may enter into co-
right to extract, to remove, process and utilize the mineral deposits found on or underneath the
production, joint venture, or product-sharing agreements with Filipino
citizens, or corporations or associations at least sixty per centum of whose surface of his mining claims covered by the lease. The lessee may also enter into a service
capital is owned by such citizens. (Emphasis supplied.) contract for the exploration, development and exploitation of the minerals from the lands
covered by his lease, to wit:
SEC. 44. A mining lease contract shall grant to the lessee, his heirs,
Furthermore, said proclamation cannot be denounced as offensive to the fundamental law successors, and assigns the right to extract all mineral deposits found on or
because the State is sanctioned to do so in the exercise of its police power. [19] The issues on underneath the surface of his mining claims covered by the lease, continued
vertically downward; to remove, process, and otherwise utilize the mineral
health and peace and order, as well the decadence of the forest resources brought about by
deposits for his own benefit; and to use the lands covered by the lease for the
unregulated mining in the area, are matters of national interest. The declaration of the Chief purpose or purposes specified therein x x x That a lessee may on his own or
Executive making the area a mineral reservation, therefore, is sanctioned by Section 5 of through the Government, enter into a service contract for
the exploration, development and exploitation of his claims and the
Republic Act No. 7942.
processing and marketing of the product thereof, subject to the rules and
regulations that shall be promulgated by the Director, with the approval of the develop and utilize the minerals within the contract area, is prohibited from transferring his
Secretary x x x. (Emphases supplied.)
mining rights (rights to explore, develop and utilize), with more reason will this proscription
apply with extra force to a mere exploration permit holder who is yet to exhibit his qualifications
In other words, the lessees interests are not only limited to the extraction or utilization in conducting mining operations. The rationale for the approval requirement under Section 97 of
of the minerals in the contract area, but also to include the right to explore and develop the Presidential Decree No. 463 is not hard to see. Exploration permits are strictly granted to entities
same. This right to explore the mining claim or the contract area is derived from the exploration or individuals possessing the resources and capability to undertake mining operations. Mining
permit duly issued by the proper authority. An exploration permit is, thus, covered by the industry is a major support of the national economy and the continuous and intensified
term any other interest therein. Section 97 is entitled, Assignment of Mining Rights. This alone exploration, development and wise utilization of mining resources is vital for national
gives a hint that before mining rights -- namely, the rights to explore, develop and utilize -- are development. For this reason, Presidential Decree No. 463 makes it imperative that in awarding
transferred or assigned, prior approval must be obtained from the DENR Secretary. An mining operations, only persons possessing the financial resources and technical skill for modern
exploration permit, thus, cannot be assigned without the imprimatur of the Secretary of the exploratory and development techniques are encouraged to undertake the exploration,
DENR. development and utilization of the countrys natural resources. The preamble of Presidential
Decree No. 463 provides thus:
It is instructive to note that under Section 13 of Presidential Decree No. 463, the
prospecting and exploration of minerals in government reservations, such as forest reservations, WHEREAS, effective and continuous mining operations require
considerable outlays of capital and resources, and make it imperative that
are prohibited, except with the permission of the government agency concerned. It is the persons possessing the financial resources and technical skills for modern
government agency concerned that has the prerogative to conduct prospecting, exploration and exploratory and development techniques be encouraged to undertake the
exploitation of such reserved lands.[21] It is only in instances wherein said government agency, in exploration, development and exploitation of our mineral resources;
this case the Bureau of Mines, cannot undertake said mining operations that qualified persons
may be allowed by the government to undertake such operations. PNOC-EDC v. Veneracion, The Court has said that a preamble is the key to understanding the statute, written to open the
Jr.[22] outlines the five requirements for acquiring mining rights in reserved lands under minds of the makers to the mischiefs that are to be remedied, and the purposes that are to be
Presidential Decree No. 463: (1) a prospecting permit from the agency that has jurisdiction over accomplished, by the provisions of the statute.[23] As such, when the statute itself is ambiguous
the land; (2) an exploration permit from the Bureau of Mines and Geo-Sciences (BMGS); (3) if and difficult to interpret, the preamble may be resorted to as a key to understanding the statute.
the exploration reveals the presence of commercial deposit, application to BMGS by the permit
holder for the exclusion of the area from the reservation; (4) a grant by the President of the Indubitably, without the scrutiny by the government agency as to the qualifications of
application to exclude the area from the reservation; and (5) a mining agreement (lease, license the would-be transferee of an exploration permit, the same may fall into the hands of non-
or concession) approved by the DENR Secretary. qualified entities, which would be counter-productive to the development of the mining
industry. It cannot be overemphasized that the exploration, development and utilization of the
Here, MMC met the first and second requirements and obtained an exploration permit countrys natural resources are matters vital to the public interest and the general welfare; hence,
over the disputed forest reserved land. Although MMC still has to prove to the government that their regulation must be of utmost concern to the government, since these natural resources are
it is qualified to develop and utilize the subject mineral land, as it has yet to go through the not only critical to the nations security, but they also ensure the countrys survival as a viable and
remaining process before it can secure a lease agreement, nonetheless, it is bound to follow sovereign republic.[24]
Section 97 of Presidential Decree No. 463. The logic is not hard to discern. If a lease holder,
who has already demonstrated to the government his capacity and qualifications to further
The approval requirement of the Secretary of the DENR for the assignment of Not only did the assignment of EP 133 to SEM violate Section 97 of Presidential
exploration permits is bolstered by Section 25 of Republic Act No. 7942 (otherwise known as Decree No. 463, it likewise transgressed one of the conditions stipulated in the grant of the said
the Philippine Mining Act of 1995), which provides that: permit. The following terms and conditions attached to EP 133 are as follows: [27]

Sec. 25. Transfer or Assignment. An exploration permit may be 1. That the permittee shall abide by the work program submitted with
transferred or assigned to a qualified person subject to the approval of the the application or statements made later in support thereof, and which shall be
Secretary upon the recommendation of the Director. considered as conditions and essential parts of this permit;

2. That permittee shall maintain a complete record of all activities and


SEM further posits that Section 97 of Presidential Decree No. 463, which requires the accounting of all expenditures incurred therein subject to periodic inspection
and verification at reasonable intervals by the Bureau of Mines at the expense
prior approval of the DENR when there is a transfer of mining rights, cannot be applied to the of the applicant;
assignment of EP 133 executed by MMC in favor of SEM because during the execution of the
Deed of Assignment on 16 February 1994, Executive Order No. 279 [25] became the governing 3. That the permittee shall submit to the Director of Mines within 15
days after the end of each calendar quarter a report under oath of a full and
statute, inasmuch as the latter abrogated the old mining system -- i.e., license, concession or
complete statement of the work done in the area covered by the permit;
lease -- which was espoused by the former.
4. That the term of this permit shall be for two (2) years to be
effective from this date, renewable for the same period at the discretion of the
This contention is not well taken. While Presidential Decree No. 463 has already been repealed
Director of Mines and upon request of the applicant;
by Executive Order No. 279, the administrative aspect of the former law nonetheless remains
applicable. Hence, the transfer or assignment of exploration permits still needs the prior approval 5. That the Director of Mines may at any time cancel this permit for
of the Secretary of the DENR. As ruled in Miners Association of the Philippines, Inc. v. violation of its provision or in case of trouble or breach of peace arising in the
area subject hereof by reason of conflicting interests without any responsibility
Factoran, Jr.[26]: on the part of the government as to expenditures for exploration that might
have been incurred, or as to other damages that might have been suffered by
Presidential Decree No. 463, as amended, pertains to the old system of the permittee;
exploration, development and utilization of natural resources through license,
concession or lease which, however, has been disallowed by Article XII, 6. That this permit shall be for the exclusive use and benefit of the
Section 2 of the 1987 Constitution. By virtue of the said constitutional permittee or his duly authorized agents and shall be used for mineral
mandate and its implementing law, Executive Order No. 279, which exploration purposes only and for no other purpose.
superseded Executive Order No. 211, the provisions dealing on license,
concession, or lease of mineral resources under Presidential Decree No. 463,
as amended, and other existing mining laws are deemed repealed and, It must be noted that under Section 90[28] of Presidential Decree No. 463, which was the
therefore, ceased to operate as the governing law. In other words, in all other
areas of administration and management of mineral lands, the provisions applicable statute during the issuance of EP 133, the DENR Secretary, through the Director of
of Presidential Decree No. 463, as amended, and other existing mining the Bureau of Mines and Geosciences, was charged with carrying out the said law. Also, under
laws, still govern. (Emphasis supplied.) Commonwealth Act No. 136, also known as An Act Creating the Bureau of Mines, which was
approved on 7 November 1936, the Director of Mines had the direct charge of the administration
of the mineral lands and minerals; and of the survey, classification, lease or any other form of
concession or disposition thereof under the Mining Act. [29] This power of administration
included the power to prescribe terms and conditions in granting exploration permits to qualified SEM asserts that the 23 June 2006 Decision reversed the 16 July 1991 Decision of the
entities. Court en banc entitled, Apex Mining Co., Inc. v. Garcia.[32]

Thus, in the grant of EP 133 in favor of the MMC, the Director of the BMG acted The assailed Decision DID NOT overturn the 16 July 1991 Decision in Apex Mining
within his power in laying down the terms and conditions attendant thereto. MMC and SEM did Co., Inc. v. Garcia.
not dispute the reasonableness of said conditions. It must be pointed out that what Apex Mining Co., Inc. v. Garcia resolved was the issue
of which, between Apex and MMC, availed itself of the proper procedure in acquiring the
Quite conspicuous is the fact that neither MMC nor SEM denied that they were right to prospect and to explore in the Agusan-Davao-Surigao Forest Reserve. Apex registered
unaware of the terms and conditions attached to EP 133. MMC and SEM did not present any its Declarations of Location (DOL) with the then BMGS, while MMC was granted a permit to
evidence that they objected to these conditions. Indubitably, MMC wholeheartedly accepted prospect by the Bureau of Forest Development (BFD) and was subsequently granted an
these terms and conditions, which formed part of the grant of the permit. MMC agreed to abide exploration permit by the BMGS. Taking into consideration Presidential Decree No. 463, which
by these conditions. It must be accentuated that a party to a contract cannot deny its validity, provides that mining rights within forest reservation can be acquired by initially applying for a
without outrage to ones sense of justice and fairness, after enjoying its benefits. [30] Where parties permit to prospect with the BFD and subsequently for a permit to explore with the BMGS, the
have entered into a well-defined contractual relationship, it is imperative that they should honor Court therein ruled that MMC availed itself of the proper procedure to validly operate within the
and adhere to their rights and obligations as stated in their contracts, because obligations arising forest reserve or reservation.
from these have the force of law between the contracting parties and should be complied with in
good faith.[31] Condition Number 6 categorically states that the permit shall be for the exclusive While it is true that Apex Mining Co., Inc. v. Garcia settled the issue of which between
use and benefit of MMC or its duly authorized agents. While it may be true that SEM, the Apex and MMC was legally entitled to explore in the disputed area, such rights, though, were
assignee of EP 133, is a 100% subsidiary corporation of MMC, records are bereft of any extinguished by subsequent events that transpired after the decision was promulgated. These
evidence showing that the former is the duly authorized agent of the latter. This Court cannot subsequent events, which were not attendant in Apex Mining Co., Inc. v. Garcia[33] dated 16 July
condone such utter disregard on the part of MMC to honor its obligations under the permit. 1991, are the following:
Undoubtedly, having violated this condition, the assignment of EP 133 to SEM is void and has
no legal effect. (1) the expiration of EP 133 by non-renewal on 6 July 1994;

(2) the transfer/assignment of EP 133 to SEM on 16 February 1994 which was


To boot, SEM squandered whatever rights it assumed it had under EP 133. On 6 July done in violation to the condition of EP 133 proscribing its transfer;
1993, EP 133 was extended for twelve more months or until 6 July 1994. MMC or SEM,
(3) the transfer/assignment of EP 133 to SEM is without legal effect for
however, never renewed EP 133 either prior to or after its expiration. Thus, EP 133 expired by
violating PD 463 which mandates that the assignment of mining
non-renewal on 6 July 1994. With the expiration of EP 133 on 6 July 1994, MMC lost any right rights must be with the prior approval of the Secretary of the DENR.
to the Diwalwal Gold Rush Area.

The Assailed Decision Resolved Facts and Issues Moreover, in Southeast Mindanao Gold Mining Corporation v. Balite Portal Mining
That Transpired after the Promulgation of Apex Cooperative,[34] the Court, through Associate Justice Consuelo Ynares-Santiago (now retired),
Mining Co., Inc. v. Garcia
declared that Apex Mining Co., Inc. v. Garcia did not deal with the issues of the expiration of EP
133 and the validity of the transfer of EP 133 to SEM, viz:
Neither can the Apex Mining case foreclose any question It is well-settled that when questions of constitutionality are raised, the court can
pertaining to the continuing validity of EP No. 133 on grounds
which arose after the judgment in said case was promulgated. exercise its power of judicial review only if the following requisites are present: (1) an actual
While it is true that the Apex Mining case settled the issue of who and appropriate case exists; (2) there is a personal and substantial interest of the party raising the
between Apex and Marcopper validly acquired mining rights constitutional question; (3) the exercise of judicial review is pleaded at the earliest opportunity;
over the disputed area by availing of the proper procedural
and (4) the constitutional question is the lis mota of the case.
requisites mandated by law, it certainly did not deal with the
question raised by the oppositors in the Consolidated Mines
cases, i.e., whether EP No. 133 had already expired and remained Taking into consideration the foregoing requisites of judicial review, it is readily clear
valid subsequent to its transfer by Marcopper to that the third requisite is absent. The general rule is that the question of constitutionality must be
petitioner. (Emphasis supplied.)
raised at the earliest opportunity, so that if it is not raised in the pleadings, ordinarily it may not
be raised at the trial; and if not raised in the trial court, it will not be considered on appeal. [35]
What is more revealing is that in the Resolution dated 26 November 1992, resolving the In the instant case, it must be pointed out that in the Reply to Respondent SEMs
motion for reconsideration of Apex Mining Co., Inc. v. Garcia, the Court clarified that the ruling Consolidated Comment filed on 20 May 2003, MAB mentioned Proclamation No. 297, which
on the said decision was binding only between Apex and MMC and with respect the particular was issued on 25 November 2002. This proclamation, according to the MAB, has rendered
issue raised therein. Facts and issues not attendant to the said decision, as in these cases, are not SEMs claim over the contested area moot, as the President has already declared the same as a
settled by the same. A portion of the disposition of the Apex Mining Co., Inc. v. mineral reservation and as an environmentally critical area. SEM did not put to issue the validity
Garcia Resolution dated 26 November 1992 decrees: of said proclamation in any of its pleadings despite numerous opportunities to question the
same. It was only after the assailed Decision was promulgated -- i.e., in SEMs Motion for
x x x The decision rendered in this case is conclusive only between Reconsideration of the questioned Decision filed on 13 July 2006 and its Motion for Referral of
the parties with respect to the particular issue herein raised and under the
set of circumstances herein prevailing. In no case should the decision be the Case to the Court En Banc and for Oral Arguments filed on 22 August 2006 -- that it assailed
considered as a precedent to resolve or settle claims of persons/entities not the validity of said proclamation.
parties hereto. Neither is it intended to unsettle rights of persons/entities Certainly, posing the question on the constitutionality of Proclamation No. 297 for the
which have been acquired or which may have accrued upon reliance on laws
passed by the appropriate agencies. (Emphasis supplied.) first time in its Motion for Reconsideration is, indeed, too late. [36]

In fact, this Court, when it rendered the Decision it merely recognized that the
The Issue of the Constitutionality of
questioned proclamation came from a co-equal branch of government, which entitled it to a
Proclamation Is Raised Belatedly
strong presumption of constitutionality.[37] The presumption of its constitutionality stands
inasmuch as the parties in the instant cases did not question its validity, much less present any
In its last-ditch effort to salvage its case, SEM contends that Proclamation No. 297, evidence to prove that the same is unconstitutional. This is in line with the precept that
issued by President Gloria Macapagal-Arroyo and declaring the Diwalwal Gold Rush Area as a administrative issuances have the force and effect of law and that they benefit from the same
mineral reservation, is invalid on the ground that it lacks the concurrence of Congress as presumption of validity and constitutionality enjoyed by statutes. [38]
mandated by Section 4, Article XII of the Constitution; Section 1 of Republic Act No. 3092;
Section 14 of Executive Order No. 292, otherwise known as the Administrative Code of 1987; Proclamation No. 297 Is in Harmony with
Article XII, Section 4, of the Constitution
Section 5(a) of Republic Act No. 7586, and Section 4(a) of Republic Act No. 6657.
there can be no occasion that could give rise to a violation of the
constitutional provision.
At any rate, even if this Court were to consider the arguments belatedly raised by SEM,
said arguments are not meritorious. Section 4, Article XII of the Constitution, addresses the concern of the drafters of the
1987 Constitution about forests and the preservation of national parks. This was brought about
SEM asserts that Article XII, Section 4 of the Constitution, bars the President from by the drafters awareness and fear of the continuing destruction of this countrys forests. [40] In
excluding forest reserves/reservations and proclaiming the same as mineral reservations, since view of this concern, Congress is tasked to fix by law the specific limits of forest lands and
the power to de-classify them resides in Congress. national parks, after which the trees in these areas are to be taken care of. [41] Hence, these forest
lands and national parks that Congress is to delimit through a law could be changed only by
Section 4, Article XII of the Constitution reads: Congress.

The Congress shall as soon as possible, determine by law the specific In addition, there is nothing in the constitutional provision that prohibits the President
limits of forest lands and national parks, marking clearly their boundaries on
the ground. Thereafter, such forest lands and national parks shall be conserved from declaring a forest land as an environmentally critical area and from regulating the mining
and may not be increased nor diminished, except by law. The Congress shall operations therein by declaring it as a mineral reservation in order to prevent the further
provide, for such periods as it may determine, measures to prohibit logging in degradation of the forest environment and to resolve the health and peace and order problems
endangered forests and in watershed areas.
that beset the area.

The above-quoted provision says that the area covered by forest lands and national A closer examination of Section 4, Article XII of the Constitution and Proclamation No.
parks may not be expanded or reduced, unless pursuant to a law enacted by Congress.Clear in 297 reveals that there is nothing contradictory between the two. Proclamation No. 297, a
the language of the constitutional provision is its prospective tenor, since it speaks in this measure to attain and maintain a rational and orderly balance between socio-economic growth
manner: Congress shall as soon as possible. It is only after the specific limits of the forest lands and environmental protection, jibes with the constitutional policy of preserving and protecting
shall have been determined by the legislature will this constitutional restriction apply. SEM does the forest lands from being further devastated by denudation. In other words, the proclamation in
not allege nor present any evidence that Congress had already enacted a statute determining with question is in line with Section 4, Article XII of the Constitution, as the former fosters the
specific limits forest lands and national parks. Considering the absence of such law, preservation of the forest environment of the Diwalwal area and is aimed at preventing the
Proclamation No. 297 could not have violated Section 4, Article XII of the 1987 further degradation of the same. These objectives are the very same reasons why the subject
Constitution. In PICOP Resources, Inc. v. Base Metals Mineral Resources Corporation, [39]
the constitutional provision is in place.
Court had the occasion to similarly rule in this fashion:
What is more, jurisprudence has recognized the policy of multiple land use in our laws
x x x Sec. 4, Art. XII of the 1987 Constitution, on the other hand, provides that towards the end that the countrys precious natural resources may be rationally explored,
Congress shall determine the specific limits of forest lands and national parks,
developed, utilized and conserved.[42] It has been held that forest reserves or reservations can at
marking clearly their boundaries on the ground. Once this is done, the area
thus covered by said forest lands and national parks may not be expanded or the same time be open to mining operations, provided a prior written clearance by the
reduced except also by congressional legislation. Since Congress has yet to government agency having jurisdiction over such reservation is obtained. In other words mineral
enact a law determining the specific limits of the forest lands covered by lands can exist within forest reservations. These two terms are not anti-thetical. This is made
Proclamation No. 369 and marking clearly its boundaries on the ground,
manifest if we read Section 47 of Presidential Decree No. 705 or the Revised Forestry Code of Upon the recommendation of the Director of Forestry, with the
approval of the Department Head, the President of the Philippines shall set
the Philippines, which provides: apart forest reserves which shall include denuded forest lands from the
public lands and he shall by proclamation declare the establishment of such
Mining operations in forest lands shall be regulated and conducted forest reserves and the boundaries thereof, and thereafter such forest reserves
with due regard to protection, development and utilization of other surface shall not be entered, or otherwise disposed of, but shall remain indefinitely as
resources. Location, prospecting, exploration, utilization or exploitation of such for forest uses.
mineral resources in forest reservations shall be governed by mining laws,
rules and regulations. (Emphasis supplied.) The President of the Philippines may, in like manner upon the
recommendation of the Director of Forestry, with the approval of the
Department head, by proclamation, modify the boundaries of any such
Also, Section 6 of Republic Act No. 7942 or the Mining Act of 1995, states that mining forest reserve to conform with subsequent precise survey but not to
exclude any portion thereof except with the concurrence of
operations in reserved lands other than mineral reservations, such as forest reserves/reservations,
Congress. (Underscoring supplied.)
are allowed, viz:

Mining operations in reserved lands other than mineral reservations may SEM submits that the foregoing provision is the governing statute on the exclusion of areas
be undertaken by the Department, subject to limitations as herein provided. In
already declared as forest reserves. Thus, areas already set aside by law as forest reserves are no
the event that the Department cannot undertake such activities, they may be
undertaken by a qualified person in accordance with the rules and regulations longer within the proclamation powers of the President to modify or set aside for any other
promulgated by the Secretary. (Emphasis supplied.) purposes such as mineral reservation.

To bolster its contention that the President cannot disestablish forest reserves into
Since forest reservations can be made mineral lands where mining operations are conducted,
mineral reservations, SEM makes reference to Section 14, Chapter 4, Title I, Book III of the
then there is no argument that the disputed land, which lies within a forest reservation, can be
Administrative Code of 1987, which partly recites:
declared as a mineral reservation as well.
The President shall have the power to reserve for settlement or
Republic Act No. 7942 Otherwise Known as the public use, and for specific public purposes, any of the lands of the public
Philippine Mining Act of 1995, is the Applicable domain, the use of which is not otherwise directed by law. The reserved
Law land shall thereafter remain subject to the specific public purpose indicated
until otherwise provided by law or proclamation. (Emphases supplied.)

Determined to rivet its crumbling cause, SEM then argues that Proclamation No. 297 is
invalid, as it transgressed the statutes governing the exclusion of areas already declared as forest SEM further contends that Section 7 of Republic Act No. 7586,[46] which declares that
reserves, such as Section 1 of Republic Act No. 3092, [43] Section 14 of the Administrative Code the disestablishment of a protected area shall be done by Congress, and Section 4(a) of Republic
of 1987, Section 5(a) of Republic Act No. 7586, [44] and Section 4(a) of Republic Act No. Act No. 6657,[47] which in turn requires a law passed by Congress before any forest reserve can
[45]
6657. be reclassified, militate against the validity of Proclamation No. 297.

Citing Section 1 of Republic Act No. 3092, which provides as follows: Proclamation No. 297, declaring a certain portion of land located in Monkayo,
Compostela Valley, with an area of 8,100 hectares, more or less, as a mineral reservation, was
issued by the President pursuant to Section 5 of Republic Act No. 7942, also known as the the general act or provision, especially when such general and special acts or provisions are
Philippine Mining Act of 1995. contemporaneous, as the Legislature is not to be presumed to have intended a conflict.

Proclamation No. 297 did not modify the boundaries of the Agusan-Davao-Surigao Hence, it has become an established rule of statutory construction that where one statute
Forest Reserve since, as earlier discussed, mineral reservations can exist within forest reserves deals with a subject in general terms, and another deals with a part of the same subject in a more
because of the multiple land use policy. The metes and bounds of a forest reservation remain detailed way, the two should be harmonized if possible; but if there is any conflict, the latter
intact even if, within the said area, a mineral land is located and thereafter declared as a mineral shall prevail regardless of whether it was passed prior to the general statute. Or where two
reservation. statutes are of contrary tenor or of different dates but are of equal theoretical application to a
particular case, the one specially designed therefor should prevail over the other.
More to the point, a perusal of Republic Act No. 3092, An Act to Amend Certain
Sections of the Revised Administrative Code of 1917, which was approved on 17 August 1961, It must be observed that Republic Act No. 3092, An Act to Amend Certain Sections of
and the Administrative Code of 1987, shows that only those public lands declared by the the Revised Administrative Code of 1917, and the Administrative Code of 1987, are general
President as reserved pursuant to these two statutes are to remain subject to the specific purpose. laws. Section 1 of Republic Act No. 3092 and Section 14 of the Administrative Code of 1987
The tenor of the cited provisions, namely: the President of the Philippines shall set apart forest require the concurrence of Congress before any portion of a forest reserve can be validly
reserves and the reserved land shall thereafter remain, speaks of future public reservations to be excluded therefrom. These provisions are broad since they deal with all kinds of exclusion or
declared, pursuant to these two statutes. These provisions do not apply to forest reservations reclassification relative to forest reserves, i.e., forest reserve areas can be transformed into all
earlier declared as such, as in this case, which was proclaimed way back on 27 February 1931, kinds of public purposes, not only the establishment of a mineral reservation. Section 5 of
by Governor General Dwight F. Davis under Proclamation No. 369. Republic Act No. 7942 is a special provision, as it specifically treats of the establishment of
mineral reservations only. Said provision grants the President the power to proclaim a mineral
Over and above that, Section 5 of Republic Act No. 7942 authorizes the President to land as a mineral reservation, regardless of whether such land is also an existing forest
establish mineral reservations, to wit: reservation.

Sec. 5. Mineral Reservations. - When the national interest so requires, Sec. 5(a) of Republic Act No. 7586 provides:
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 Sec. 5. Establishment and Extent of the System. The establishment and
the recommendation of the Director through the Secretary. Mining operationalization of the System shall involve the following:
operations in existing mineral reservations and such other reservations as may
thereafter be established, shall be undertaken by the Department or through a (a) All areas or islands in the Philippines proclaimed, designated or
contractor x x x. (Emphasis supplied.) set aside, pursuant to a law, presidential decree, presidential proclamation or
executive order as national park, game refuge, bird and wildlife sanctuary,
wilderness area, strict nature reserve, watershed, mangrove reserve, fish
It is a rudimentary principle in legal hermeneutics that where there are two acts or sanctuary, natural and historical landmark, protected and managed
landscape/seascape as well as identified virgin forests before the effectivity of
provisions, one of which is special and particular and certainly involves the matter in question, this Act are hereby designated as initial components of the System. The initial
the other general, which, if standing alone, would include the matter and thus conflict with the components of the System shall be governed by existing laws, rules and
special act or provision, the special act must as intended be taken as constituting an exception to regulations, not inconsistent with this Act.
Camilo Banad, et al., Cannot Seek Relief from
Glaring in the foregoing enumeration of areas comprising the initial component of the NIPAS This Court
System under Republic Act No. 7586 is the absence of forest reserves. Only protected areas
enumerated under said provision cannot be modified. Since the subject matter of Proclamation
Camilo Banad and his group admit that they are members of the Balite Cooperative. They,
No. 297 is a forest reservation proclaimed as a mineral reserve, Republic Act No. 7586 cannot
however, claim that they are distinct from Balite and move that this Court recognize them as
possibly be made applicable. Neither can Proclamation No. 297 possibly violate said law.
prior mining locators.
Unfortunately for them, this Court cannot grant any relief they seek. Records reveal that
Similarly, Section 4(a) of Republic Act No. 6657 cannot be made applicable to the
although they were parties to the instant cases before the Court of Appeals, they did not file a
instant case.
petition for review before this Court to contest the decision of the appellate court. The only
petitioners in the instant cases are the MAB, SEM, Balite and Apex.Consequently, having no
Section 4(a) of Republic Act No. 6657 reads:
personality in the instant cases, they cannot seek any relief from this Court.
All alienable and disposable lands of the public domain devoted to or
suitable for agriculture. No reclassification of forest or mineral lands to Apexs Motion for Clarification and Balites
agricultural lands shall be undertaken after the approval of this Act until Manifestation and Motion
Congress, taking into account ecological, developmental and equity
considerations, shall have determined by law, the specific limits of the
public domain. (Underscoring supplied.) In its Motion for Clarification, Apex desires that the Court elucidate the assailed
Decisions pronouncement that mining operations, are now, therefore within the full control of
the State through the executive branch and place the said pronouncement in the proper
Section 4(a) of Republic Act No. 6657 prohibits the reclassification of forest or mineral
perspective as the declaration in La Bugal-BLaan, which states that
lands into agricultural lands until Congress shall have determined by law the specific limits of
the public domain. A cursory reading of this provision will readily show that the same is not The concept of control adopted in Section 2 of Article XII must be
relevant to the instant controversy, as there has been no reclassification of a forest or mineral taken to mean less than dictatorial, all-encompassing control; but nevertheless
land into an agricultural land. sufficient to give the State the power to direct, restrain, regulate and govern the
affairs of the extractive enterprise.[50]

Furthermore, the settled rule of statutory construction is that if two or more laws of
different dates and of contrary tenors are of equal theoretical application to a particular case, the Apex states that the subject portion of the assailed Decision could send a chilling effect to
statute of later date must prevail being a later expression of legislative will. [48] potential investors in the mining industry, who may be of the impression that the State has taken
over the mining industry, not as regulator but as an operator. It is of the opinion that the State
In the case at bar, there is no question that Republic Act No. 7942 was signed into law cannot directly undertake mining operations.
[49]
later than Republic Act No. 3092, the Administrative Code of 1987, Republic Act No. 7586 Moreover, Apex is apprehensive of the following portion in the questioned Decision
and Republic Act No. 6657. Applying the cited principle, the provisions of Republic Act No. The State can also opt to award mining operations in the mineral reservation to private entities
3092, the Administrative Code of 1987, Republic Act No. 7586 and Republic Act No. 6657 cited including petitioner Apex and Balite, if it wishes. It avers that the phrase if it wishes may
by SEM must yield to Section 5 of Republic Act No. 7942. whimsically be interpreted to mean a blanket authority of the administrative authority to reject
the formers application for an exploration permit even though it complies with the prescribed refer to the fourth sentence of Section 2, Article XII of the Constitution, but to the third sentence
policies, rules and regulations. of the said provision, which states:
Apex likewise asks this Court to order the MGB to accept its application for an
exploration permit. SEC. 2. x x x The exploration, development, and utilization of natural
resources shall be under the full control and supervision of the State. x x x.

Balite echoes the same concern as that of Apex on the actual take-over by the State of
the mining industry in the disputed area to the exclusion of the private sector. In addition, Balite Pursuant to Section 5 of Republic Act No. 7942, the executive department has the
prays that this Court direct MGB to accept Balites application for an exploration permit. option to undertake directly the mining operations in the Diwalwal Gold Rush Area or to award
mining operations therein to private entities. The phrase if it wishes must be understood within
Contrary to the contention of Apex and Balite, the fourth paragraph of Section 2, Article XII of the context of this provision. Hence, the Court cannot dictate this co-equal branch to choose
the Constitution and Section 5 of Republic Act No. 7942 sanctions the State, through the which of the two options to select. It is the sole prerogative of the executive department to
executive department, to undertake mining operations directly, as an operator and not as a mere undertake directly or to award the mining operations of the contested area.
regulator of mineral undertakings. This is made clearer by the fourth paragraph of Section 2,
Article XII of the 1987 Constitution, which provides in part: Even assuming that the proper authority may decide to award the mining operations of
the disputed area, this Court cannot arrogate unto itself the task of determining who, among the
SEC. 2. x x x The State may directly undertake such activities, or it may applicants, is qualified. It is the duty of the appropriate administrative body to determine the
enter into co-production, joint venture, or production-sharing agreements
with Filipino citizens, or corporations or associations at least sixty per qualifications of the applicants. It is only when this administrative body whimsically denies the
centum of whose capital is owned by such citizens. x x x. (Emphasis applications of qualified applicants that the Court may interfere. But until then, the Court has no
supplied.) power to direct said administrative body to accept the application of any qualified applicant.

Also, Section 5 of Republic Act No. 7942 states that the mining operations in mineral In view of this, the Court cannot grant the prayer of Apex and Balite asking the Court to
reservations shall be undertaken by the Department of Environment and Natural Resources or a direct the MGB to accept their applications pending before the MGB.
contractor, to wit:
SEMs Manifestation and Motion dated 25 January 2007
SEC. 5. Mineral Reservations. When the national interest so requires,
such as when there is a need to preserve strategic raw materials for industries SEM wants to emphasize that its predecessor-in-interest, Marcopper or MMC,
critical to national development, or certain minerals for scientific, cultural or
complied with the mandatory exploration work program, required under EP 133, by attaching
ecological value, the President may establish mineral reservations upon the
recommendation of the Director through the Secretary. Mining operations in therewith quarterly reports on exploration work from 20 June 1986 to March 1994.
existing mineral reservations and such other reservations as may
thereafter be established, shall be undertaken by the Department or It must be observed that this is the very first time at this very late stage that SEM has
through a contractor x x x. (Emphasis supplied.)
presented the quarterly exploration reports. From the early phase of this controversy, SEM did
not disprove the arguments of the other parties that Marcopper violated the terms under EP 133,
Undoubtedly, the Constitution, as well as Republic Act No. 7942, allows the executive among other violations, by not complying with the mandatory exploration work
department to undertake mining operations. Besides, La Bugal-BLaan, cited by Apex, did not program. Neither did it present evidence for the appreciation of the lower tribunals. Hence, the
non-compliance with the mandatory exploration work program was not made an issue in any 5. The motion for reconsideration of Camilo Banad, et al. cannot be passed
stage of the proceedings. The rule is that an issue that was not raised in the lower court or upon because they are not parties to the instant cases;
tribunal cannot be raised for the first time on appeal, as this would violate the basic rules of fair
play, justice and due process.[51] Thus, this Court cannot take cognizance of the issue of whether 6. The prayers of Apex and Balite asking the Court to direct the MGB to
or not MMC complied with the mandatory work program. accept their applications for exploration permits cannot be granted, since it is
the Executive Department that has the prerogative to accept such applications,
In sum, this Court finds: if ever it decides to award the mining operations in the disputed area to a
private entity;
1. The assailed Decision did not overturn the 16 July 1991 Decision in Apex
Mining Co., Inc. v. Garcia. The former was decided on facts and issues that 7. The Court cannot pass upon the issue of whether or not MMC complied
were not attendant in the latter, such as the expiration of EP 133, the violation with the mandatory exploration work program, as such was a non-issue and
of the condition embodied in EP 133 prohibiting its assignment, and the was not raised before the Court of Appeals and the lower tribunals.
unauthorized and invalid assignment of EP 133 by MMC to SEM, since this
assignment was effected without the approval of the Secretary of DENR; WHEREFORE, premises considered, the Court holds:

2. SEM did not acquire vested right over the disputed area because its 1. The Motions for Reconsideration filed by Camilo Banad, et al. and Southeast
supposed right was extinguished by the expiration of its exploration permit and Mindanao Gold Mining Corporation are DENIED for lack of merit;
by its violation of the condition prohibiting the assignment of EP 133 by MMC
to SEM. In addition, even assuming that SEM has a valid exploration permit, 2. The Motion for Clarification of Apex Mining Co., Inc. and the Manifestation and
such is a mere license that can be withdrawn by the State. In fact, the same has Motion of the Balite Communal Portal Mining Cooperative, insofar as these
been withdrawn by the issuance of Proclamation No. 297, which places the motions/manifestation ask the Court to direct the Mines and Geo-Sciences Bureau to accept their
disputed area under the full control of the State through the Executive respective applications for exploration permits, are DENIED;
Department;
3. The Manifestation and Urgent Motion dated 25 January 2007 of Southeast Mindanao
3. The approval requirement under Section 97 of Presidential Decree No. 463 Gold Mining Corporation is DENIED.
applies to the assignment of EP 133 by MMC to SEM, since the exploration
permit is an interest in a mining lease contract; 4. The State, through the Executive Department, should it so desire, may now award
mining operations in the disputed area to any qualified entities it may determine. The Mines and
4. The issue of the constitutionality and the legality of Proclamation No. 297 Geosciences Bureau may process exploration permits pending before it, taking into
was raised belatedly, as SEM questions the same for the first time in its consideration the applicable mining laws, rules and regulations relative thereto.
Motion for Reconsideration. Even if the issue were to be entertained, the said
proclamation is found to be in harmony with the Constitution and other SO ORDERED.
existing statutes;
On official leave
MINITA V. CHICO-NAZARIO ARTURO D. BRION DIOSDADO M. PERALTA
Associate Justice Associate Justice Associate Justice

WE CONCUR:

REYNATO S. PUNO
Chief Justice LUCAS P. BERSAMIN MARIANO C. DEL CASTILLO
Associate Justice Associate Justice

On official leave
ANTONIO T. CARPIO RENATO C. CORONA
Associate Justice Associate Justice ROBERTO A. ABAD MARTIN S. VILLARAMA, JR.
Associate Justice Associate Justice

CERTIFICATION
On official leave
CONCHITA CARPIO MORALES PRESBITERO J. VELASCO, JR.
Associate Justice Associate Justice Pursuant to Article VIII, Section 13 of the Constitution, it is hereby certified that the conclusions
in the above Decision were reached in consultation before the case was assigned to the writer of
the opinion of the Court.

REYNATO S. PUNO
(No Part) Chief Justice
ANTONIO EDUARDO B. NACHURA TERESITA J. LEONARDO-DE CASTRO
Associate Justice Associate Justice

*
On official leave.
**
No part.
[1]
G.R. No. 92605, 16 July 1991, 199 SCRA 278.
[2] [41]
42 Phil. 749 (1922). Id.
[3] [42]
66 Phil. 259 (1938). PICOP Resources, Inc. v. Base Metals Mineral Resources Corporation, supra note 39 at 419.
[4] [43]
Atok Big-Wedge Mining Co. v. Intermediate Appellate Court, 330 Phil. 244, 262 (1996). Approved on 17 August 1961.
[5] [44]
Id. at 262. Approved on 1 June 1992, this statute is known as the National Integrated Protected Areas
[6]
Id. System Act of 1992.
[7] [45]
Id. at 263. This Act is known as the Comprehensive Agrarian Reform Law of 1998. It took effect on 15
[8]
Id. June 1988.
[9] [46]
Id. at 264. Disestablishment as Protected Area. When in the opinion of the DENR a certain protected
[10]
Id. area should be withdrawn or disestablished, or its boundaries modified as warranted by
[11]
Id. at 267-268. a study and sanctioned by the majority of the members of the respective boards for the
[12]
486 Phil. 754, 828-829 (2004). protected area as herein established in Section 11, it shall, in turn, advise
[13]
429 Phil. 668, 682 (2002). Congress. Disestablishment of a protected area under the System or modification
[14]
Supra note 12 at 895. of its boundary shall take effect pursuant to an act of Congress.
[15] [47]
Southeast Mindanao Gold Mining Corporation v. Balite Portal Mining Cooperative, supra All alienable and disposable lands of the public domain devoted to or suitable for
note 13 at 682-683. agriculture. No reclassification of forest or mineral lands to agricultural lands shall
[16]
Id. be undertaken after the approval of this Act until Congress, taking into account
[17]
G.R. No. 149927, 30 March 2004, 426 SCRA 517, 530. ecological, developmental and equity considerations, shall have determined by law,
[18]
Id. the specific limits of the public domain.
[19]
Id at 531.
[20] [48]
Miners Association of the Philippines, Inc. v. Factoran, Jr., 310 Phil. 113, 130 (1995). Philippine National Bank v. Cruz, G.R. No. 80593, 18 December 1989, 180 SCRA 206, 213.
[49]
This law is dated 25 July 1987.
[21] [50]
PNOC-Energy Development Corporation (PNOC-EDC) v. Veneracion, Jr., G.R. No. Supra note 12 at 1093.
[51]
129820, 30 November 2006, 509 SCRA 93, 106. Multi-Realty Development Corporation v. Makati Tuscany Condominium Corporation, G.R.
[22]
Id. at 107-110. No. 146726, 16 June 2006, 491 SCRA 9, 23.
[23]
Estrada v. Escritor, 455 Phil. 411, 569 (2003).
[24]
Miners Association of the Philippines, Inc. v. Factoran, Jr., 310 Phil. 113, 130-131 (1995).
[25]
Promulgated on 25 July 1987.
[26]
Supra note 24 at 130.
[27]
Records, Vol. 2, pp. 84-85.
[28]
Executive Officer. - The Secretary, through the Director, shall be the Executive Officer
charged with carrying out the provisions of this Decree. x x x.
[29]
Section 3, Commonwealth Act No. 136.
[30]
Premiere Development Bank v. Court of Appeals, 471 Phil. 704, 716 (2004).
[31]
Id.
[32]
Supra note 1 at 284.
[33]
Supra note 1 at 283-284.
[34]
Supra note 13 at 681.
[35]
Matibag v. Benipayo, 429 Phil. 554, 578-579 (2002).
[36]
Umali v. Exececutive Secretary Guingona, Jr., 365 Phil. 77, 87 (1999).
[37]
Senate of the Philippines v. Ermita, G.R. No. 169777, 20 April 2006, 488 SCRA 1, 66.
[38]
Mirasol v. Department of Public Works and Highways, G.R. No. 158793, 8 June 2006, 490
SCRA 318, 347-348.
[39]
G.R. No. 163509, 6 December 2006, 510 SCRA 400, 416.
[40]
Records of the Constitutional Commission, Vol. III, pp. 592-593.
Republic of the Philippines Sec. 2. All lands of the public domain, waters, minerals, coal, petroleum, and
SUPREME COURT other mineral oils, all forces of potential energy, fisheries, forests or timber,
Manila 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
EN BANC alienated. The exploration, development, and utilization of natural resources
shall be under the full control and supervision of the State. The State may
directly undertake such activities, or it may enter into co-production, joint
venture, or product-sharing agreements with Filipino citizens, or corporations
or associations at least sixty per centum of whose capital is owned by such
G.R. No. 98332 January 16, 1995 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
MINERS ASSOCIATION OF THE PHILIPPINES, INC., petitioner, conditions as may be provided by law. In cases of water rights for irrigation,
vs. water supply, fisheries, or industrial uses other than the development of water
HON. FULGENCIO S. FACTORAN, JR., Secretary of Environment and Natural power, beneficial use may be the measure and limit of the grant.
Resources, and JOEL D. MUYCO, Director of Mines and Geosciences Bureau, respondents.
xxx xxx xxx

The President may enter into agreements with foreign-owned corporations


ROMERO, J.: involving either technical or financial assistance for large-scale exploration,
development, and utilization of minerals, petroleum, and other mineral oils
The instant petition seeks a ruling from this Court on the validity of two Administrative Orders according to the general terms and conditions provided by law, based on real
issued by the Secretary of the Department of Environment and Natural Resources to carry out contributions to the economic growth and general welfare of the country. In
the provisions of certain Executive Orders promulgated by the President in the lawful exercise of such agreements, the State shall promote the development and use of local
legislative powers. scientific and technical resources.

Herein controversy was precipitated by the change introduced by Article XII, Section 2 of the The President shall notify the Congress of every contract entered into in
1987 Constitution on the system of exploration, development and utilization of the country's accordance with this provision, within thirty days from its execution.
natural resources. No longer is the utilization of inalienable lands of public domain through (Emphasis supplied)
"license, concession or lease" under the 1935 and 1973 Constitutions1allowed under the 1987
Constitution. Pursuant to the mandate of the above-quoted provision, legislative acts4 were successively issued
by the President in the exercise of her legislative
The adoption of the concept of jura regalia2 that all natural resources are owned by the State power.5
embodied in the 1935, 1973 and 1987 Constitutions, as well as the recognition of the importance
of the country's natural resources, not only for national economic development, but also for its To implement said legislative acts, the Secretary of the Department of Environment and Natural
security and national Resources (DENR) in turn promulgated Administrative Order Nos. 57 and 82, the validity and
defense,3 ushered in the adoption of the constitutional policy of "full control and supervision by constitutionality of which are being challenged in this petition.
the State" in the exploration, development and utilization of the country's natural resources. The
options open to the State are through direct undertaking or by entering into co-production, joint On July 10, 1987, President Corazon C. Aquino, in the exercise of her then legislative powers
venture; or production-sharing agreements, or by entering into agreement with foreign-owned under Article II, Section 1 of the Provisional Constitution and Article XIII, Section 6 of the 1987
corporations for large-scale exploration, development and utilization. Constitution, promulgated Executive Order No. 211 prescribing the interim procedures in the
processing and approval of applications for the exploration, development and utilization of
Article XII, Section 2 of the 1987 Constitution provides: minerals pursuant to the 1987 Constitution in order to ensure the continuity of mining operations
and activities and to hasten the development of mineral resources. The pertinent provisions read including the Government, may consolidate two or more contiguous or
as follows: geologically — related mining claims or leases and consider them as one
contract area for purposes of determining the subject of the joint venture, co-
Sec. 1. Existing mining permits, licenses, leases and other mining grants issued production, or production-sharing agreement.
by the Department of Environment and Natural Resources and Bureau of
Mines and Geo-Sciences, including existing operating agreements and mining xxx xxx xxx
service contracts, shall continue and remain in full force and effect, subject to
the same terms and conditions as originally granted and/or approved. Sec. 6. The Secretary shall promulgate such supplementary rules and
regulations as may be necessary to effectively implement the provisions of this
Sec. 2. Applications for the exploration, development and utilization of Executive Order.
mineral resources, including renewal applications for approval of operating
agreements and mining service contracts, shall be accepted and processed and Sec. 7. All provisions of Presidential Decree No. 463, as amended, other
may be approved; concomitantly thereto, declarations of locations and all other existing mining laws, and their implementing rules and regulations, or parts
kinds of mining applications shall be accepted and registered by the Bureau of thereof, which are not inconsistent with the provisions of this Executive Order,
Mines and Geo-Sciences. shall continue in force and effect.

Sec. 3. The processing, evaluation and approval of all mining applications, Pursuant to Section 6 of Executive Order No. 279, the DENR Secretary issued on June 23, 1989
declarations of locations, operating agreements and service contracts as DENR Administrative Order No. 57, series of 1989, captioned "Guidelines of Mineral
provided for in Section 2 above, shall be governed by Presidential Decree No. Production Sharing Agreement under Executive Order No. 279." 6 Under the transitory provision
463, as amended, other existing mining laws and their implementing rules and of said DENR Administrative Order No. 57, embodied in its Article 9, all existing mining leases
regulations: Provided, however, that the privileges granted, as well as the or agreements which were granted after the effectivity of the 1987 Constitution pursuant to
terms and conditions thereof shall be subject to any and all modifications or Executive Order No. 211, except small scale mining leases and those pertaining to sand and
alterations which Congress may adopt pursuant to Section 2, Article XII of the gravel and quarry resources covering an area of twenty (20) hectares or less, shall be converted
1987 Constitution. into production-sharing agreements within one (1) year from the effectivity of these guidelines.

On July 25, 1987, President Aquino likewise promulgated Executive Order No. 279 authorizing On November 20, 1980, the Secretary of the DENR Administrative Order No. 82, series of 1990,
the DENR Secretary to negotiate and conclude joint venture, co-production, or production- laying down the "Procedural Guidelines on the Award of Mineral Production Sharing Agreement
sharing agreements for the exploration, development and utilization of mineral resources, and (MPSA) through Negotiation."7
prescribing the guidelines for such agreements and those agreements involving technical or
financial assistance by foreign-owned corporations for large-scale exploration, development, and
Section 3 of the aforementioned DENR Administrative Order No. 82 enumerates the persons or
utilization of minerals. The pertinent provisions relevant to this petition are as follows:
entities required to submit Letter of Intent (LOIs) and Mineral Production Sharing Agreement
(MPSAs) within two (2) years from the effectivity of DENR Administrative Order No. 57 or
Sec. 1. The Secretary of the Department of Environment and Natural until July 17, 1991. Failure to do so within the prescribed period shall cause the abandonment of
Resources (hereinafter referred to as "the Secretary") is hereby authorized to mining, quarry and sand and gravel claims. Section 3 of DENR Administrative Order No. 82
negotiate and enter into, for and in behalf of the Government, joint venture, provides:
co-production, or production-sharing agreements for the exploration,
development, and utilization of mineral resources with any Filipino citizens, or
Sec. 3. Submission of Letter of Intent (LOIs) and MPSAs). The following shall
corporation or association at least sixty percent (60%) of whose capital is submit their LOIs and MPSAs within two (2) years from the effectivity of
owned by Filipino citizens. Such joint venture, co-production, or production- DENR A.O. 57 or until July 17, 1991.
sharing agreements may be for a period not exceeding twenty-five years,
renewable for not more than twenty-five years, and shall include the minimum
terms and conditions prescribed in Section 2 hereof. In the execution of a joint i. Declaration of Location (DOL) holders, mining lease applicants, exploration
venture, co-production or production agreements, the contracting parties, permitees, quarry applicants and other mining applicants whose mining/quarry
applications have not been perfected prior to the effectivity of DENR that the DENR, Regional Office No. 3 be ordered to issue a Mines Temporary Permit in its favor
Administrative Order No. 57. to enable it to operate during the pendency of the suit.

ii. All holders of DOL acquired after the effectivity of DENR A.O. No. 57. Public respondents were acquired to comment on the Continental Marble Corporation's petition
for intervention in the resolution of November 28, 1991. 12
iii. Holders of mining leases or similar agreements which were granted after
(the) effectivity of 1987 Constitution. Now to the main petition. If its argued that Administrative Order Nos. 57 and 82 have the effect
of repealing or abrogating existing mining laws 13 which are not inconsistent with the provisions
Failure to submit letters of intent and MPSA applications/proposals within the of Executive Order No. 279. Invoking Section 7 of said Executive Order No. 279, 14 petitioner
prescribed period shall cause the abandonment of mining, quarry and sand and maintains that respondent DENR Secretary cannot provide guidelines such as Administrative
gravel claims. Order Nos. 57 and 82 which are inconsistent with the provisions of Executive Order No. 279
because both Executive Order Nos. 211 and 279 merely reiterated the acceptance and
The issuance and the impeding implementation by the DENR of Administrative Order Nos. 57 registration of declarations of location and all other kinds of mining applications by the Bureau
of Mines and Geo-Sciences under the provisions of Presidential Decree No. 463, as amended,
and 82 after their respective effectivity dates compelled the Miners Association of the
until Congress opts to modify or alter the same.
Philippines, Inc.8 to file the instant petition assailing their validity and constitutionality before
this Court.
In other words, petitioner would have us rule that DENR Administrative Order Nos. 57 and 82
In this petition for certiorari, petitioner Miners Association of the Philippines, Inc. mainly issued by the DENR Secretary in the exercise of his rule-making power are tainted with
invalidity inasmuch as both contravene or subvert the provisions of Executive Order Nos. 211
contends that respondent Secretary of DENR issued both Administrative Order Nos. 57 and 82
and 279 or embrace matters not covered, nor intended to be covered, by the aforesaid laws.
in excess of his rule-making power under Section 6 of Executive Order No. 279. On the
assumption that the questioned administrative orders do not conform with Executive Order Nos.
211 and 279, petitioner contends that both orders violate the We disagree.
non-impairment of contract provision under Article III, Section 10 of the 1987 Constitution on
the ground that Administrative Order No. 57 unduly pre-terminates existing mining agreements We reiterate the principle that the power of administrative officials to promulgate rules and
and automatically converts them into production-sharing agreements within one (1) year from its regulations in the implementation of a statute is necessarily limited only to carrying into effect
effectivity date. On the other hand, Administrative Order No. 82 declares that failure to submit what is provided in the legislative enactment. The principle was enunciated as early as 1908 in
Letters of Intent and Mineral Production-Sharing Agreements within two (2) years from the date the case of United States v. Barrias. 15 The scope of the exercise of such rule-making power was
of effectivity of said guideline or on July 17, 1991 shall cause the abandonment of their mining, clearly expressed in the case of United States v. Tupasi Molina, 16decided in 1914, thus: "Of
quarry and sand gravel permits. course, the regulations adopted under legislative authority by a particular department must be in
harmony with the provisions of the law, and for the sole purpose of carrying into effect its
On July 2, 1991, the Court, acting on petitioner's urgent ex-parte petition for issuance of a general provisions. By such regulations, of course, the law itself can not be extended. So long,
restraining order/preliminary injunction, issued a Temporary Restraining Order, upon posting of however, as the regulations relate solely to carrying into effect its general provisions. By such
a P500,000.00 bond, enjoining the enforcement and implementation of DENR Administrative regulations, of course, the law itself can not be extended. So long, however, as the regulations
Order Nos. 57 and 82, as amended, Series of 1989 and 1990, respectively. 9 relate solely to carrying into effect the provision of the law, they are valid."

On November 13, 1991, Continental Marble Corporation, 10 thru its President, Felipe A. David, Recently, the case of People v. Maceren 17 gave a brief delienation of the scope of said power of
sought to intervene 11in this case alleging that because of the temporary order issued by the administrative officials:
Court , the DENR, Regional Office No. 3 in San Fernando, Pampanga refused to renew its
Mines Temporary Permit after it expired on July 31, 1991. Claiming that its rights and interests Administrative regulations adopted under legislative authority by a particular
are prejudicially affected by the implementation of DENR Administrative Order Nos. 57 and 82, department must be in harmony with the provisions of the law, and should be
it joined petitioner herein in seeking to annul Administrative Order Nos. 57 and 82 and prayed for the sole purpose of carrying into effect its general provision. By such
regulations, of course, the law itself cannot be extended (U.S. v. Tupasi
Molina, supra). An administrative agency cannot amend an act of Congress concession or lease" of mineral resources under Presidential Decree No. 463, as amended, and
(Santos vs. Estenzo, 109 Phil. 419, 422; Teoxon vs. Members of the Board of other existing mining laws are deemed repealed and, therefore, ceased to operate as the
Administrators, L-25619, June 30, 1970, 33 SCRA 585; Manuel vs. General governing law. In other words, in all other areas of administration and management of mineral
Auditing Office, L-28952, December 29, 1971, 42 SCRA 660; Deluao v. lands, the provisions of Presidential Decree No. 463, as amended, and other existing mining
Casteel, L-21906, August 29, 1969, 29 SCRA 350). laws, still govern. Section 7 of Executive Order No. 279 provides, thus:

The rule-making power must be confined to details for regulating the mode or Sec. 7. All provisions of Presidential Decree No. 463, as amended, other
proceeding to carry into effect the law as it has been enacted. The power existing mining laws, and their implementing rules and regulations, or parts
cannot be extended to amending or expanding the statutory requirements or to thereof, which are not inconsistent with the provisions of this Executive Order,
embrace matters not covered by the statute. Rules that subvert the statute shall continue in force and effect.
cannot be sanctioned (University of Santo Tomas v. Board of Tax Appeals, 93
Phil. 376, 382, citing 12 C.J. 845-46. As to invalid regulations, see Collector Specifically, the provisions of Presidential Decree No. 463, as amended, on lease of mining
of Internal Revenue v. Villaflor, 69 Phil. 319; Wise & Co. v. Meer, 78 Phil. claims under Chapter VIII, quarry permits on privately-owned lands of quarry license on public
655, 676; Del Mar v. Phil. Veterans Administration, L-27299, June 27, 1973, lands under Chapter XIII and other related provisions on lease, license and permits are not only
51 SCRA 340, 349). inconsistent with the raison d'etre for which Executive Order No. 279 was passed, but
contravene the express mandate of Article XII, Section 2 of the 1987 Constitution. It force and
xxx xxx xxx effectivity is thus foreclosed.

. . . The rule or regulation should be within the scope of the statutory authority Upon the effectivity of the 1987 Constitution on February 2, 1987, 18 the State assumed a more
granted by the legislature to the administrative agency (Davis, Administrative dynamic role in the exploration, development and utilization of the natural resources of the
Law, p. 194, 197, cited in Victorias Milling Co., Inc. v. Social Security country. Article XII, Section 2 of the said Charter explicitly ordains that the exploration,
Commission, 114 Phil. 555, 558). development and utilization of natural resources shall be under the full control and supervision
of the State. Consonant therewith, the exploration, development and utilization of natural
In case of discrepancy between the basic law and a rule or regulation issued to resources may be undertaken by means of direct act of the State, or it may opt to enter into co-
implement said law, the basic prevails because said rule or regulations cannot production, joint venture, or production-sharing agreements, or it may enter into agreements with
go beyond the terms and provisions of the basic law (People v. Lim, 108 Phil. foreign-owned corporations involving either technical or financial assistance for large-scale
1091). 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
Considering that administrative rules draw life from the statute which they seek to implement, it economic growth and general welfare of the country.
is obvious that the spring cannot rise higher than its source. We now examine petitioner's
argument that DENR Administrative Order Nos. 57 and 82 contravene Executive Order Nos. Given these considerations, there is no clear showing that respondent DENR Secretary has
211 and 279 as both operate to repeal or abrogate Presidential Decree No. 463, as amended, and transcended the bounds demarcated by Executive Order No. 279 for the exercise of his rule-
other mining laws allegedly acknowledged as the principal law under Executive Order Nos. 211 making power tantamount to a grave abuse of discretion. Section 6 of Executive Order No. 279
and 279. specifically authorizes said official to promulgate such supplementary rules and regulations as
may be necessary to effectively implement the provisions thereof. Moreover, the subject sought
to be governed and regulated by the questioned orders is germane to the objects and purposes of
Petitioner's insistence on the application of Presidential Decree No. 463, as amended, as the
Executive Order No. 279 specifically issued to carry out the mandate of Article XII, Section 2 of
governing law on the acceptance and approval of declarations of location and all other kinds of
the 1987 Constitution.
applications for the exploration, development, and utilization of mineral resources pursuant to
Executive Order No. 211, is erroneous. Presidential Decree No. 463, as amended, pertains to the
old system of exploration, development and utilization of natural resources through "license, Petitioner likewise maintains that Administrative Order No. 57, in relation to Administrative
concession or lease" which, however, has been disallowed by Article XII, Section 2 of the 1987 Order No. 82, impairs vested rights as to violate the non-impairment of contract doctrine
Constitution. By virtue of the said constitutional mandate and its implementing law, Executive guaranteed under Article III, Section 10 of the 1987 Constitution because Article 9 of
Order No. 279 which superseded Executive Order No. 211, the provisions dealing on "license, Administrative Order No. 57 unduly pre-terminates and automatically converts mining leases
and other mining agreements into production-sharing agreements within one (1) year from MR. VILLEGAS: Would Commissioner Monsod like to
effectivity of said guideline, while Section 3 of Administrative Order No. 82, declares that comment on that? I think his answer is "yes."
failure to submit Letters of Intent (LOIs) and MPSAs within two (2) years from the effectivity of
Administrative Order No. 57 or until July 17, 1991 shall cause the abandonment of mining, MR. DAVIDE: So, what will happen now license or
quarry, and sand gravel permits. concessions earlier granted by the Philippine government to
private corporations or to Filipino citizens? Would they be
In Support of the above contention, it is argued by petitioner that Executive Order No. 279 does deemed repealed?
not contemplate automatic conversion of mining lease agreements into mining production-
sharing agreement as provided under Article 9, Administrative Order No. 57 and/or the MR. VILLEGAS: This is not applied retroactively. They
consequent abandonment of mining claims for failure to submit LOIs and MPSAs under Section will be respected.
3, Administrative Order No. 82 because Section 1 of said Executive Order No. 279 empowers
the DENR Secretary to negotiate and enter into voluntary agreements which must set forth the
MR. DAVIDE: In effect, they will be deemed repealed?
minimum terms and conditions provided under Section 2 thereof. Moreover, petitioner contends
that the power to regulate and enter into mining agreements does not include the power to
preterminate existing mining lease agreements. MR. VILLEGAS: No. (Emphasis supplied)

To begin with, we dispel the impression created by petitioner's argument that the questioned During the transition period or after the effectivity of the 1987 Constitution on February 2, 1987
administrative orders unduly preterminate existing mining leases in general. A distinction which until the first Congress under said Constitution was convened on July 27, 1987, two (2)
spells a real difference must be drawn. Article XII, Section 2 of the 1987 Constitution does not successive laws, Executive Order Nos. 211 and 279, were promulgated to govern the processing
apply retroactively to "license, concession or lease" granted by the government under the 1973 and approval of applications for the exploration, development and utilization of minerals. To
Constitution or before the effectivity of the 1987 Constitution on February 2, 1987. The intent to carry out the purposes of said laws, the questioned Administrative Order Nos. 57 and 82, now
apply prospectively said constitutional provision was stressed during the deliberations in the being assailed, were issued by the DENR Secretary.
Constitutional Commission, 19 thus:
Article 9 of Administrative Order No. 57 provides:
MR. DAVIDE: Under the proposal, I notice that except for
the [inalienable] lands of the public domain, all other natural ARTICLE 9
resources cannot be alienated and in respect to [alienable]
lands of the public domain, private corporations with the TRANSITORY PROVISION
required ownership by Filipino citizens can only lease the
same. Necessarily, insofar as other natural resources are 9.1. All existing mining leases or agreements which were granted after the
concerned, it would only be the State which can exploit, effectivity of the 1987 Constitution pursuant to Executive Order No. 211,
develop, explore and utilize the same. However, the State except small scale mining leases and those pertaining to sand and gravel and
may enter into a joint venture, co-production or production- quarry resources covering an area of twenty (20) hectares or less shall be
sharing. Is that not correct? subject to these guidelines. All such leases or agreements shall be converted
into production sharing agreement within one (1) year from the effectivity of
MR. VILLEGAS: Yes. these guidelines. However, any minimum firm which has established mining
rights under Presidential Decree 463 or other laws may avail of the provisions
MR. DAVIDE: Consequently, henceforth upon, the approval of EO 279 by following the procedures set down in this document.
of this Constitution, no timber or forest concession, permits
or authorization can be exclusively granted to any citizen of It is clear from the aforestated provision that Administrative Order No. 57 applies only to all
the Philippines nor to any corporation qualified to acquire existing mining leases or agreements which were granted after the effectivity of the 1987
lands of the public domain? Constitution pursuant to Executive Order No. 211. It bears mention that under the text of
Executive Order No. 211, there is a reservation clause which provides that the privileges as well
as the terms and conditions of all existing mining leases or agreements granted after the must yield to a proper exercise of the police power when such power is exercised to preserve the
effectivity of the 1987 Constitution pursuant to Executive Order No. 211, shall be subject to any security of the State and the means adopted are reasonably adapted to the accomplishment of that
and all modifications or alterations which Congress may adopt pursuant to Article XII, Section 2 end and are, therefore, not arbitrary or oppressive.
of the 1987 Constitution. Hence, the strictures of the
non-impairment of contract clause under Article III, Section 10 of the 1987 Constitution 20 do The economic policy on the exploration, development and utilization of the country's natural
not apply to the aforesaid leases or agreements granted after the effectivity of the 1987 resources under Article XII, Section 2 of the 1987 Constitution could not be any clearer. As
Constitution, pursuant to Executive Order No. 211. They can be amended, modified or altered by enunciated in Article XII, Section 1 of the 1987 Constitution, the exploration, development and
a statute passed by Congress to achieve the purposes of Article XII, Section 2 of the 1987 utilization of natural resources under the new system mandated in Section 2, is geared towards a
Constitution. more equitable distribution of opportunities, income, and wealth; a sustained increase in the
amount of goods and services produced by the nation for the benefit of the people; and an
Clearly, Executive Order No. 279 issued on July 25, 1987 by President Corazon C. Aquino in expanding productivity as the key to raising the quality of life for all, especially the
the exercise of her legislative power has the force and effect of a statute or law passed by underprivileged.
Congress. As such, it validly modified or altered the privileges granted, as well as the terms and
conditions of mining leases and agreements under Executive Order No. 211 after the effectivity The exploration, development and utilization of the country's natural resources are matters vital
of the 1987 Constitution by authorizing the DENR Secretary to negotiate and conclude joint to the public interest and the general welfare of the people. The recognition of the importance of
venture, co-production, or production-sharing agreements for the exploration, development and the country's natural resources was expressed as early as the 1984 Constitutional Convention. In
utilization of mineral resources and prescribing the guidelines for such agreements and those connection therewith, the 1986 U.P. Constitution Project observed: "The 1984 Constitutional
agreements involving technical or financial assistance by foreign-owned corporations for large- Convention recognized the importance of our natural resources not only for its security and
scale exploration, development, and utilization of minerals. national defense. Our natural resources which constitute the exclusive heritage of the Filipino
nation, should be preserved for those under the sovereign authority of that nation and for their
Well -settled is the rule, however, that regardless of the reservation clause, mining leases or prosperity. This will ensure the country's survival as a viable and sovereign republic."
agreements granted by the State, such as those granted pursuant to Executive Order No. 211
referred to this petition, are subject to alterations through a reasonable exercise of the police Accordingly, the State, in the exercise of its police power in this regard, may not be precluded by
power of the State. In the 1950 case of Ongsiako v. Gamboa, 21 where the constitutionality of the constitutional restriction on non-impairment of contract from altering, modifying and
Republic Act No. 34 changing the 50-50 sharecropping system in existing agricultural tenancy amending the mining leases or agreements granted under Presidential Decree No. 463, as
contracts to 55-45 in favor of tenants was challenged, the Court, upholding the constitutionality amended, pursuant to Executive Order No. 211. Police Power, being co-extensive with the
of the law, emphasized the superiority of the police power of the State over the sanctity of this necessities of the case and the demands of public interest; extends to all the vital public needs.
contract: The passage of Executive Order No. 279 which superseded Executive Order No. 211 provided
legal basis for the DENR Secretary to carry into effect the mandate of Article XII, Section 2 of
The prohibition contained in constitutional provisions against: impairing the obligation of the 1987 Constitution.
contracts is not an absolute one and it is not to be read with literal exactness like a mathematical
formula. Such provisions are restricted to contracts which respect property, or some object or Nowhere in Administrative Order No. 57 is there any provision which would lead us to conclude
value, and confer rights which may be asserted in a court of justice, and have no application to that the questioned order authorizes the automatic conversion of mining leases and agreements
statute relating to public subjects within the domain of the general legislative powers of the granted after the effectivity of the 1987 Constitution, pursuant to Executive Order No. 211, to
State, and involving the public rights and public welfare of the entire community affected by it. production-sharing agreements. The provision in Article 9 of Administrative Order No. 57 that
They do not prevent a proper exercise by the State of its police powers. By enacting regulations "all such leases or agreements shall be converted into production sharing agreements within one
reasonably necessary to secure the health, safety, morals, comfort, or general welfare of the (1) year from the effectivity of these guidelines" could not possibility contemplate a unilateral
community, even the contracts may thereby be affected; for such matter can not be placed by declaration on the part of the Government that all existing mining leases and agreements are
contract beyond the power of the State shall regulates and control them. 22 automatically converted into
production-sharing agreements. On the contrary, the use of the term "production-sharing
In Ramas v. CAR and Ramos 23 where the constitutionality of Section 14 of Republic Act No. agreement" if they are so minded. Negotiation negates compulsion or automatic conversion as
1199 authorizing the tenants to charge from share to leasehold tenancy was challenged on the suggested by petitioner in the instant petition. A mineral production-sharing agreement (MPSA)
ground that it impairs the obligation of contracts, the Court ruled that obligations of contracts
requires a meeting of the minds of the parties after negotiations arrived at in good faith and in Government established under this Constitution. Natural resources, with the
accordance with the procedure laid down in the subsequent Administrative Order No. 82. exception of public agricultural land, shall not be alienated, and no license,
concession, or lease for the exploitation, development, or utilization of any of
We, therefore, rule that the questioned administrative orders are reasonably directed to the the natural resources shall be granted for a period exceeding twenty-five years,
accomplishment of the purposes of the law under which they were issued and were intended to renewable for another twenty-five years, except as to water rights for
secure the paramount interest of the public, their economic growth and welfare. The validity and irrigation, water supply, fisheries, or industrial uses other than the
constitutionality of Administrative Order Nos. 57 and 82 must be sustained, and their force and development of water power, in which cases beneficial use may be the
effect upheld. measure and the limit of the grant.

We now, proceed to the petition-in-intervention. Under Section 2, Rule 12 of the Revised Rules xxx xxx xxx
of Court, an intervention in a case is proper when the intervenor has a "legal interest in the
matter in litigation, or in the success of either of the parties, or an interest against both, or when Article XIV, Section 8 of the 1973 Constitution provides:
he is so situated as to be adversely affected by a distribution or other disposition of property in
the custody of the court or of an officer thereof. "Continental Marble Corporation has not Section 8. All lands of the public domain, waters, minerals, coal, petroleum
sufficiently shown that it falls under any of the categories mentioned above. The refusal of the and other mineral oils, all forces of potential energy, fisheries, wildlife, and
DENR, Regional Office No. 3, San Fernando, Pampanga to renew its Mines Temporary Permit other natural resources of the Philippines belong to the State. With the
does not justify such an intervention by Continental Marble Corporation for the purpose of exception of agricultural, industrial or commercial, residential, and
obtaining a directive from this Court for the issuance of said permit. Whether or not Continental resettlement lands of the public domain, natural resources shall not be
Marble matter best addressed to the appropriate government body but certainly, not through this alienated, and no license, concession, or lease for the exploration,
Court. Intervention is hereby DENIED. development, exploitation, or utilization of any of the natural resources shall
be granted for a period exceeding twenty-five years, renewable for not more
WHEREFORE, the petition is DISMISSED for lack of merit. The Temporary Restraining Order than twenty-five years, except as to water rights for irrigation, water supply,
issued on July 2, 1991 is hereby LIFTED. fisheries, or industrial uses other than the development of water power, in
which cases, beneficial use may be the measure and the limit of the grant.
SO ORDERED.
2 Cariño v. Insular Government, 212 US 449 (1909); Valenton v. Mariano, 3
Narvasa, C.J., Feliciano, Padilla, Bidin, Regalado, Davide, Jr., Bellosillo, Melo, Quiason, Puno, Phil. 537 (1904); Lee Hung Hok v. David, G.R. No. L-30389, December 27,
Vitug, Kapunan and Mendoza, JJ., concur. 1972, 48 SCRA 372, 377.

3 1986 U.P. Law Constitution Project, Vol. I, pp. 8-11.

Footnotes 4 Executive Order No. 211 (July 10, 1987) and Executive Order No. 279 (July
25, 1987).
1 Article XIII, Section 1 of the 1935 Constitution provides:
5 Article II, Section 1, 1987 Provisional Constitution; Article XIII, Section 6,
Section 1. All agricultural, timber, and mineral lands of the public domain, 1987 Constitution; Tan v. Marquez, G.R. No. 93288, October 25, 1990,
waters, minerals, coal, petroleum and other mineral oils, all forces of potential Minute Resolution, En Banc.
energy, and other natural resources of the Philippines belong to the State, and
their disposition, exploitation, development, or utilization shall be limited to 6 Published in the July 3, 1989 issue of the Philippine Daily Inquirer, a
citizens of the Philippines, or to corporation or associations at least sixty per newspaper of general circulation, and became effective on July 18, 1989.
centum of the capital of which is owned by such citizens, subject to any
existing right, grant, lease or concession at the time of the inauguration of the
7 Published in the December 21, 1990 issue of the Philippine Daily Inquirer, a 19 Record of the Constitutional Commission, Proceedings and Debate, Vol.
newspaper of general circulation, and became effective on January 5, 1991. III, p. 260.

8 A non-stock and non-profit organization duly formed and existing under and 20 Article III, Section 10 of the 1987 Constitutions provides:
by virtue of the laws of the Philippines with principal office at Suite 609 Don
Santiago Building whose members include mining prospectors and No law impairing the obligation of contracts shall be passed.
claimowners or claimholders.
21 86 Phil. 50 (1950).
9 Rollo, pp. 46-48.
22 86 Phil. at 54-55.
10 A domestic corporation engaged in the business of marble mining with
factory processing plant at 24 General Luis St., Novaliches, Quezon City. It 23 120 Phil. 168 (1964).
has filed a Declaration of Location dated November 13, 1973 for a placer mine
known as "MARGEL" located at Matitic, Norzagaray, Bulacan. It has been
operating as a mining entity and exporting its finished products (marble tiles)
by virtue of a Mines Temporary Permit issued by the DENR.

11 Rollo, pp. 99-104.

12 Rollo, p. 114.

13 Presidential Decree No. 463, as amended, otherwise known as "The


Mineral Resources Development Decree of 1974" promulgated on May 17,
1974.

14 Section 7, Executive Order No. 279 provides:

All provisions of Presidential Decree No. 463, as amended, other existing


mining laws, and their implementing rules and regulations, or parts thereof,
which are not inconsistent with the provisions of this Executive Order, shall
continue in force and effect.

15 11 Phil. 327, 330 (1908).

16 29 Phil. 120, 124 (1914).

17 No. L-32166, October 18, 1977, 79 SCRA 450.

18 De Leon v. Esguerra, G.R. No. 78058, August 31, 187, 153 SCRA 602.
FIRST DIVISION 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.

[G.R. No. 149927. March 30, 2004] 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
REPUBLIC OF THE PHILIPPINES, Represented by the Department of Environment and conditions specified therein, with due process.
Natural Resources (DENR) Under then Minister ERNESTO R. MACEDA; and
Former Government Officials CATALINO MACARAIG, FULGENCIO S. 3. Making the Writ of preliminary injunction and the Writ of Preliminary Mandatory
FACTORAN, ANGEL C. ALCALA, BEN MALAYANG, ROBERTO Injunction issued as permanent.
PAGDANGANAN, MARIANO Z. VALERA and ROMULO SAN
JUAN, petitioners, vs. ROSEMOOR MINING AND DEVELOPMENT 4. Ordering the cancellation of the bond filed by the Petitioners in the sum of 1 Million.
CORPORATION, PEDRO DEL CONCHA, and ALEJANDRO and RUFO DE
GUZMAN, respondents.
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
DECISION pursuant to the agreement of the parties on such dates as maybe set by the Court; and
PANGANIBAN, J.:
6. Denying for lack of merit the motions for contempt, it appearing that actuations of
A mining license that contravenes a mandatory provision of the law under which it is the respondents were not contumacious and intended to delay the proceedings or
granted is void. Being a mere privilege, a license does not vest absolute rights in the undermine the integrity of the Court.
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. No pronouncement yet as to costs.[5]

The Case The Facts

Before us is a Petition for Review[1] under Rule 45 of the Rules of Court, seeking to nullify The CA narrated the facts as follows:
the May 29, 2001 Decision[2] and the September 6, 2001 Resolution[3] of the Court of Appeals
(CA) in CA-GR SP No. 46878. The CA disposed 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
WHEREFORE, premises considered, the appealed Decision is hereby AFFIRMED in toto.[4] 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
The questioned Resolution denied petitioners Motion for Reconsideration. of the Biak-na-Bato mountain range.

On the other hand, trial courts Decision, which was affirmed by the CA, had disposed as Having succeeded in discovering said marble deposits, and as a result of their tedious efforts and
follows: substantial expenses, the petitioners applied with the Bureau of Mines, now Mines and
WHEREFORE, judgment is hereby rendered as follows: Geosciences Bureau, for the issuance of the corresponding license to exploit said marble
deposits.
xxxxxxxxx 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
After compliance with numerous required conditions, License No. 33 was issued by the Bureau increased the mining areas allowed under PD 463.
of Mines in favor of the herein petitioners. 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
xxxxxxxxx clause in the Constitution dealing with the non-impairment of obligations and contracts,
respondents license must be respected by the State.
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 Hence, this Petition.[8]
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 Issues
August 21, 1991 to assail the same.

Also after due hearing, the prayer for injunctive relief was granted in the Order of this Court Petitioners submit the following issues for the Courts consideration:
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). (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
xxxxxxxxx valid. The corollary issue is whether or not the Constitutional prohibition against ex post facto
law applies to Proclamation No. 84[9]
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 The Courts Ruling
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 The Petition has merit.
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. First Issue:
On appeal to the Court of Appeals, herein petitioners asked whether PD 463 or the Mineral Validity of License
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
Respondents contend that the Petition has no legal basis, because PD 463 has already been
validity of the cancellation of respondents Quarry License/Permit (QLP) No. 33.
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
Ruling of the Court of Appeals utilization of natural resources through licenses, concessions or leases. [11] While these
arrangements were provided under the 1935 [12] and the 1973[13] Constitutions, they have been
omitted by Section 2 of Article XII of the 1987 Constitution. [14]
Sustaining the trial court in toto, the CA held that the grant of the quarry license covering With the shift of constitutional policy toward full control and supervision of the State over
330.3062 hectares to respondents was authorized by law, because the license was embraced by natural resources, the Court in Miners Association of the Philippines v. Factoran Jr. [15] declared
four (4) separate applications -- each for an area of 81 hectares. Moreover, it held that the 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 SECTION 19. Areas Closed to Mining Applications. -- Mineral agreement or financial or
licenses covering privately owned or public lands; and other related provisions on lease, licenses technical assistance agreement applications shall not be allowed:
and permits.
RA 7942 or the Philippine Mining Act of 1995 embodies the new constitutional mandate. It (a) In military and other government reservations, except upon prior written clearance by the
has repealed or amended all laws, executive orders, presidential decrees, rules and regulations -- government agency concerned;
or parts thereof -- that are inconsistent with any of its provisions.[16]
(b) Near or under public or private buildings, cemeteries, archeological and historic sites,
It is relevant to state, however, that Section 2 of Article XII of the 1987 Constitution does bridges, highways, waterways, railroads, reservoirs, dams or other infrastructure projects, public
not apply retroactively to a license, concession or lease granted by the government under the or private works including plantations or valuable crops, except upon written consent of the
1973 Constitution or before the effectivity of the 1987 Constitution on February 2, 1987.[17] As government agency or private entity concerned;
noted in Miners Association of the Philippines v. Factoran Jr., the deliberations of the
Constitutional Commission[18] emphasized the intent to apply the said constitutional provision (c) In areas covered by valid and existing mining rights;
prospectively.
While RA 7942 has expressly repealed provisions of mining laws that are inconsistent with (d) In areas expressly prohibited by law;
its own, it nonetheless respects previously issued valid and existing licenses, as follows:
(e) In areas covered by small-scale miners as defined by law unless with prior consent of the
SECTION 5. Mineral Reservations. When the national interest so requires, such as when there is small-scale miners, in which case a royalty payment upon the utilization of minerals shall be
a need to preserve strategic raw materials for industries critical to national development, or agreed upon by the parties, said royalty forming a trust fund for the socioeconomic development
certain minerals for scientific, cultural or ecological value, the President may establish mineral of the community concerned; and
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, (f) Old growth or virgin forests, proclaimed watershed forest reserves, wilderness areas,
shall be undertaken by the Department or through a contractor: Provided, That a small scale- mangrove forests, mossy forests, national parks, provincial/municipal forests, parks, greenbelts,
mining cooperative covered by Republic Act No. 7076 shall be given preferential right to apply game refuge and bird sanctuaries as defined by law and in areas expressly prohibited under the
for a small-scale mining agreement for a maximum aggregate area of twenty-five percent (25%) National Integrated Protected Areas System (NIPAS) under Republic Act No. 7586, Department
of such mineral reservation, subject to valid existing mining/quarrying rights as provided under Administrative Order No. 25, series of 1992 and other laws.
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. SECTION 112. Non-impairment of Existing Mining/ Quarrying Rights. All valid and existing
mining lease contracts, permits/licenses, leases pending renewal, mineral production-sharing
xxxxxxxxx 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
SECTION 7. Periodic Review of Existing Mineral Reservations. The Secretary shall periodically the provisions of Chapter XIV on government share in mineral production-sharing agreement
review existing mineral reservations for the purpose of determining whether their continued and of Chapter XVI on incentives of this Act shall immediately govern and apply to a mining
existence is consistent with the national interest, and upon his recommendation, the President lessee or contractor unless the mining lessee or contractor indicates his intention to the secretary,
may, by proclamation, alter or modify the boundaries thereof or revert the same to the public in writing, not to avail of said provisions: Provided, further, That no renewal of mining lease
domain without prejudice to prior existing rights. 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
SECTION 18. Areas Open to Mining Operations. Subject to any existing rights or reservations the applicable provisions of this Act and its implementing rules and regulations.
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 SECTION 113. Recognition of Valid and Existing Mining Claims and Lease/Quarry
financial or technical assistance agreement applications. Any conflict that may arise under this Application. Holders of valid and existing mining claims, lease/quarry applications shall be
provision shall be heard and resolved by the panel of arbitrators. 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 The interpretation adopted by the lower courts is contrary to the purpose of Section 69 of
implementing this Act. (Underscoring supplied) 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
Section 3(p) of RA 7942 defines an existing mining/quarrying right as a valid and provisions of Section 14 hereof x x x. The mandatory nature of the provision is also underscored
subsisting mining claim or permit or quarry permit or any mining lease contract or agreement by the use of the word shall. Hence, in the application of the 100-hectare-per-province limit, no
covering a mineralized area granted/issued under pertinent mining laws. Consequently, regard is given to the size or the number of mining claims under Section 14, which we quote:
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 SECTION 14. Size of Mining Claim. -- For purposes of registration of a mining claim under this
Petition has not been mooted. 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
Petitioners submit that the license clearly contravenes Section 69 of PD 463, because it containing area of eighty-one (81) hectares, more or less.
exceeds the maximum area that may be granted. This incipient violation, according to them,
renders the license void ab initio.
A mining claim shall cover one such block although a lesser area may be allowed if warranted
Respondents, on the other hand, argue that the license was validly granted, because it was by attendant circumstances, such as geographical and other justifiable considerations as may be
covered by four separate applications for areas of 81 hectares each. 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)
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
Clearly, the intent of the law would be brazenly circumvented by ruling that a license may
corporation to extract and dispose of marbleized limestone from a 330.3062-hectare land in San
cover an area exceeding the maximum by the mere expediency of filing several
Miguel, Bulacan. The license is, however, subject to the terms and conditions of PD 463, the
applications.Such ruling would indirectly permit an act that is directly prohibited by the law.
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] Second Issue:
Validity of Proclamation No. 84
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 Petitioners also argue that the license was validly declared a nullity and consequently
hereof, a quarry license shall cover an area of not more than one hundred (100) hectares in any withdrawn or terminated. In a letter dated September 15, 1986, respondents were informed by
one province and not more than one thousand (1,000) hectares in the entire Philippines. (Italics then Minister Ernesto M. Maceda that their license had illegally been issued, because it violated
supplied) 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
The language of PD 463 is clear. It states in categorical and mandatory terms that a quarry of Proclamation No. 84. According to this law, public interest would be served by reverting the
license, like that of respondents, should cover a maximum of 100 hectares in any given parcel of land that was excluded by Proclamation No. 2204 to the former status of that land as
province. This law neither provides any exception nor makes any reference to the number of part of the Biak-na-Bato national park.
applications for a license. Section 69 of PD 463 must be taken to mean exactly what it
They also contend that Section 74 of PD 463 would not apply, because Minister Macedas
says.Where the law is clear, plain, and free from ambiguity, it must be given its literal meaning
letter did not cancel or revoke QLP No. 33, but merely declared the latters nullity. They further
and applied without attempted interpretation.[22]
argue that respondents waived notice and hearing in their application for the license.
Moreover, the lower courts ruling is evidently inconsistent with the fact that QLP No. 33
On the other hand, respondents submit that, as provided for in Section 74 of PD 463, their
was issued solely in the name of Rosemoor Mining and Development Corporation, rather than in
right to due process was violated when their license was cancelled without notice and
the names of the four individual stockholders who are respondents herein. It likewise brushes
hearing. They likewise contend that Proclamation No. 84 is not valid for the following
aside a basic postulate that a corporation has a separate personality from that of its
reasons: 1) it violates the clause on the non-impairment of contracts; 2) it is an ex post facto law
stockholders.[23]
and/or a bill of attainder; and 3) it was issued by the President after the effectivity of the 1987 The determination of what is in the public interest is necessarily vested in the State as
Constitution. 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,
This Court ruled on the nature of a natural resource exploration permit, which was akin to subsequently, by the President through Proclamation No. 84. As to the exercise of prerogative by
the present respondents license, in Southeast Mindanao Gold Mining Corporation v. Balite Maceda, suffice it to say that while the cancellation or revocation of the license is vested in the
Portal Mining Cooperative,[24] which held: 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
x x x. As correctly held by the Court of Appeals in its challenged decision, EP No. 133 merely consequent cancellation of licenses in the process of its formulation of policies with regard to
evidences a privilege granted by the State, which may be amended, modified or rescinded when their utilization. Courts will not interfere with the exercise of that discretion without any clear
the national interest so requires. This is necessarily so since the exploration, development and showing of grave abuse of discretion.[31]
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 Moreover, granting that respondents license is valid, it can still be validly revoked by the
permanent or irrevocable right within the purview of the non-impairment of contract and due State in the exercise of police power.[32] The exercise of such power through Proclamation No.
process clauses of the Constitution, since the State, under its all-encompassing police power, 84 is clearly in accord with jura regalia, which reserves to the State ownership of all natural
may alter, modify or amend the same, in accordance with the demands of the general welfare.[25] 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]
This same ruling had been made earlier in Tan v. Director of Forestry[26] with regard to a
timber license, a pronouncement that was reiterated in Ysmael v. Deputy Executive Proclamation No. 84 cannot be stigmatized as a violation of the non-impairment clause. As
Secretary,[27] the pertinent portion of which reads: 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
x x x. Timber licenses, permits and license agreements are the principal instruments by which existing laws and a reservation of police power are deemed read into it, because it concerns a
the State regulates the utilization and disposition of forest resources to the end that public subject impressed with public welfare.[36] As it is, the non-impairment clause must yield to the
welfare is promoted. And it can hardly be gainsaid that they merely evidence a privilege granted police power of the state.[37]
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, We cannot sustain the argument that Proclamation No. 84 is a bill of attainder; that is, a
modified, replaced or rescinded by the Chief Executive when national interests so require. Thus, legislative act which inflicts punishment without judicial trial.[38] Its declaration that QLP No. 33
they are not deemed contracts within the purview of the due process of law clause [See Sections is a patent nullity[39] is certainly not a declaration of guilt. Neither is the cancellation of the
3(ee) and 20 of Pres. Decree No. 705, as amended. Also, Tan v. Director of Forestry, G.R. No. license a punishment within the purview of the constitutional proscription against bills of
L-24548, October 27, 1983, 125 SCRA 302]. [28] (Italics supplied) attainder.
Too, there is no merit in the argument that the proclamation is an ex post facto law. There
In line with the foregoing jurisprudence, respondents license may be revoked or rescinded are six recognized instances when a law is considered as such: 1) it criminalizes and punishes an
by executive action when the national interest so requires, because it is not a contract, property action that was done before the passing of the law and that was innocent when it was done; 2) it
or a property right protected by the due process clause of the Constitution. [29] Respondents aggravates a crime or makes it greater than it was when it was committed; 3) it changes the
themselves acknowledge this condition of the grant under paragraph 7 of QLP No. 33, which we punishment and inflicts one that is greater than that imposed by the law annexed to the crime
quote: 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
7. This permit/license may be revoked or cancelled at any time by the Director of Mines and offense; 5) it assumes the regulation of civil rights and remedies only, but in effect imposes
Geo-Sciences when, in his opinion public interests so require or, upon failure of the a penalty or a deprivation of a right as a consequence of something that was considered
permittee/licensee to comply with the provisions of Presidential Decree No. 463, as amended, lawful when it was done; and 6) it deprives a person accused of a crime of some lawful
and the rules and regulations promulgated thereunder, as well as with the terms and conditions protection to which he or she become entitled, such as the protection of a former conviction or
specified herein; Provided, That if a permit/license is cancelled, or otherwise terminated, the an acquittal or the proclamation of an amnesty.[40] Proclamation No. 84 does not fall under any
permittee/licensee shall be liable for all unpaid rentals and royalties due up to the time of the of the enumerated categories; hence, it is not an ex post facto law.
termination or cancellation of the permit/license[.][30](Italics supplied)
[12]
It is settled that an ex post facto law is limited in its scope only to matters criminal in Section 1, Article XIII of the 1935 Constitution, reads:
nature.[41] Proclamation 84, which merely restored the area excluded from the Biak-na-Bato
national park by canceling respondents license, is clearly not penal in character. SECTION 1. All agricultural, timber, and mineral lands of the public domain, waters, minerals,
coal, petroleum, and other mineral oils, all forces of potential energy, and other natural
Finally, it is stressed that at the time President Aquino issued Proclamation No. 84 on resources of the Philippines belong to the State, and their disposition, exploitation,
March 9, 1987, she was still validly exercising legislative powers under the Provisional development, or utilization shall be limited to citizens of the Philippines, or to
Constitution of 1986.[42] Section 1 of Article II of Proclamation No. 3, which promulgated the corporations or associations at least sixty per centum of the capital of which is owned
Provisional Constitution, granted her legislative power until a legislature is elected and convened by such citizens, subject to any existing right, grant, lease, or concession at the time of
under a new Constitution. The grant of such power is also explicitly recognized and provided for the inauguration of the Government established under this Constitution. Natural
in Section 6 of Article XVII of the 1987 Constitution. [43] resources, with the exception of public agricultural land, shall not be alienated, and no
license, concession, or lease for the exploitation, development, or utilization of any of
WHEREFORE, this Petition is hereby GRANTED and the appealed Decision of the Court the natural resources shall be granted for a period exceeding twenty-five years, except
of Appeals SET ASIDE. No costs. as to water rights for irrigation, water supply, fisheries, or industrial uses other than the
SO ORDERED. development of water power, in which cases beneficial use may be the measure and
limit of the grant. (Italics supplied)
Davide, Jr., C.J., (Chairman), Ynares-Santiago, Carpio, and Azcuna, JJ., concur.
[13]
Section 8, Article XIV of the 1973 Constitution, is quoted thus:
SEC. 8. All lands of the public domain, waters, minerals, coal, petroleum and other mineral oils,
all forces of potential energy, fisheries, wildlife, and other natural resources of the
[1]
Rollo, pp. 17-59. Philippines belong to the State. With the exception of agricultural, industrial or
commercial, residential and resettlement lands of the public domain, natural resources
[2]
Penned by Justice Eliezer R. de Los Santos and concurred in by Justice Godardo A. Jacinto shall not be alienated, and no license, concession, or lease for the exploration,
(chairman, Special Eighth Division) and Justice Hilarion L. Aquino. development, exploitation, or utilization of any of the natural resources shall be granted
[3] for a period exceeding twenty-five years, renewable for not more than twenty-five
Rollo, p. 72.
years, except as to water rights for irrigation, water supply, fisheries, or industrial uses
[4]
CA Decision, p. 8; rollo, p. 69. other than the development of water power, in which cases beneficial use may be the
measure and limit of the grant. (Italics supplied)
[5]
RTC Decision, pp. 11-12; rollo, pp. 157-158; penned by Judge Pedro M. Areola.
[14]
The pertinent provision of Section 2 of Article XII of the 1987 Constitution provides:
[6]
CA Decision, pp. 3-4; rollo, pp. 64-65.
Sec. 2. All lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils,
[7]
The Mining Act of 1995, effective March 3, 1995. all forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and
[8]
The Petition was deemed submitted for decision on September 5, 2002, upon the Courts other natural resources are owned by the State. With the exception of agricultural lands,
receipt of the Manifestation of respondents, adopting as their Memorandum the all other natural resources shall not be alienated. The exploration, development, and
Comment to the Petition for Review they had filed on January 28, 2002. Their utilization of natural resources shall be under the full control and supervision of the
Manifestation was signed by Atty. Hector Reuben D. Feliciano. Petitioners State. The State may directly undertake such activities or it may enter into co-
Memorandum, which was received by the Court on July 26, 2002, was signed by production, joint venture, or production-sharing agreements with Filipino citizens, or
Assistant Solicitor General Cecilio O. Estoesta and Solicitor Evaristo M. Padilla. 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,
[9]
Petitioners Memorandum, p. 19; rollo, p. 319. renewable for not more than twenty-five years, and under such terms and conditions as
[10]
may be provided by law. In case of water rights for irrigation, water supply, fisheries, or
Respondents Comment to the Petition for Review, p. 22; rollo, p. 252. industrial uses other than the development of water power, beneficial use may be the
[11]
Miners Association of the Philippines, Inc., v. Factoran Jr., 240 SCRA 100, 113-114, measure and limit of the grant.
January 16, 1995. x x x x x x x x x. (Italics supplied)
[15] [36]
Supra, p. 114. JMM Production and Management, Inc. v. CA, 329 Phil. 87, 101, August 5, 1996.
[16] [37]
Section 115 of RA 7942. Bogo-Medellin Sugarcane Planters Association, Inc. v. National Labor Relations
[17]
Commission, 357 Phil. 110, 126, September 25, 1998; Republic Planters Bank v. Agana
Miners Association of the Philippines v. Factoran Jr., supra, p. 116. Sr., 336 Phil. 1, 12, March 3, 1997; JMM Production and Management, Inc. v. CA,
[18]
Ibid. supra, citing Philippine Association of Service Exporters, Inc. v. Drilon, 163 SCRA
386, 397, June 30, 1988. .
[19]
Rollo, pp. 86-89.
[38]
Misolas v. Panga, 181 SCRA 648, 659, January 30, 1990; Bataan Shipyard & Engineering
[20]
No. 1 of the terms and conditions of the license. Co., Inc. v. Presidential Commission on Good Government, 150 SCRA 181, 233, May
[21] 27, 1987.
Dispositive provision of Proclamation No. 2204.
[39]
[22] The second Whereas clause of Proclamation No. 84 provides:
Del Mar v. Philippine Amusement and Gaming Corporation, 411 Phil. 430, 463, June 19,
2001; Republic v. CA, 359 Phil. 530, 559, November 25, 1998; Land Bank of the WHEREAS, the award to Rosemoor Mining and Development Corporation under Proclamation
Philippines v. CA, 327 Phil. 1047, 1052, July 5, 1996. No. 2204 denominated as Quarry License No. 33 dated August 3, 1982, is a patent
[23] violation of the then, and presently, existing policy of the Government to limit quarry
Padilla v. CA, 421 Phil. 883, 894, November 22, 2001; Lim v. CA, 380 Phil. 61, 74, January
licenses or permits to cover only an area of not more than one hundred (100) hectares in
24, 2000; Complex Electronics Employees Association v. National Labor Relations
any one province as provided for in Section 69, Chapter XIII of Presidential Decree No.
Commission, 369 Phil. 666, 681, July 19, 1999.
463, as amended[.]
[24]
380 SCRA 145, April 3, 2002. [40]
Benedicto v. CA, 416 Phil. 722, 748, September 4, 2001, citing In the Matter of the Petition
[25]
Id., pp. 155-156, per Ynares-Santiago, J. for the Declaration of the Petitioners Rights and Duties under Sec. 8 of RA 6132, 146
Phil. 429, 432, October 22, 1970; Republic v. Desierto, 416 Phil. 59, 74, August 23,
[26]
210 Phil. 244, 265, October 27, 1983. 2001.
[27]
190 SCRA 673, October 18, 1990. [41]
Sevilleja v. Commission on Elections, 194 Phil. 132, 152, August 31, 1981, citing Santos v.
[28]
Id., p. 684, per Cortes, J. Commission on Elections, 191 Phil. 212, 221, March 31, 1981.
[42]
[29]
Oposa v. Factoran Jr., 224 SCRA 792, 811, July 30, 1993. The Provisional Constitution was promulgated under Proclamation No. 3. See JG Summit
Holdings, Inc. v. CA, 345 SCRA 143, 160, November 20, 2000; Roxas v. CA, 378 Phil.
[30]
Rollo, p. 87. 727, 745, December 17, 1999.
[31] [43]
Ysmael Jr. & Co., Inc. v. Deputy Executive Secretary, supra; as cited in C & M Timber Section 6 of the Transitory Provisions reads:
Corporation (CMTC) v. Alcala, 339 Phil. 589, 603, June 13, 1997.
SEC. 6. The incumbent President shall continue to exercise legislative powers until the first
[32]
Miners Association of the Philippines, Inc. v. Factoran, supra, p. 118; Surigao Electric Co., Congress is convened.
Inc. v. Municipality of Surigao, 133 Phil. 860, 866, August 30, 1968.
[33]
Supra; La Bugal-BLaan Tribal Association, Inc. v. Ramos, GR No. 127882, p. 46, January
27, 2004; United Paracale Mining Company, Inc. v. Dela Rosa, 221 SCRA 108, 116,
April 7, 1993.
[34]
United Paracale Mining Company, Inc. v. Dela Rosa, supra; Republic v. Court of Appeals,
160 SCRA 228, 239, April 15, 1988; Santa Rosa Mining Company, Inc. v. Leido, Jr.,
156 SCRA 1, pp. 8-9, December 1, 1987.
[35]
Oposa v. Factoran Jr., supra, p. 812.
Republic of the Philippines 4. That plaintiff, in the year 1917 and in each year thereafter, performed not less than
SUPREME COURT two hundred pesos (P200) worth of labor on each of the said three mineral claims;
Manila
5. That in the year 1918 plaintiff drilled five wells on the said three mineral claims, and
EN BANC by means of such wells in the said year (1918) made discoveries of petroleum on each
of the said three claims;
G.R. No. L-17597 February 7, 1922
6. That on or about the 18th day of June, 1921, the respondent Juan Cuisia made
E. W. McDANIEL, petitioner, application to the respondent Galicano Apacible, as Secretary of Agriculture and
vs. Natural Resources, under the provisions of Act No. 2932 of the Philippine Legislature,
Honorable GALICANO APACIBLE, Secretary of Agriculture and Natural Resources of for a lease of a parcel of petroleum land in the municipality of San Narciso, Province of
the Philippine Islands, and Tayabas, Philippine Islands, which said parcel of land included within its boundaries
JUAN CUISIA, respondents. the three said mineral claims "Maglihi No. 1," "Maglihi No. 2," and "Maglihi No. 3,"
which said three mineral placer claims had therefore been located as above indicated
and held by the plaintiff as above described;
Ross & Lawrence for petitioner.
Acting Attorney-General Tuason for respondents.
7. That upon the filing of the said application for lease, as described in the paragraph
immediately preceding, by the said Juan Cuisia, the petitioner herein protested in
JOHNSON, J.:
writing to the respondent Galicano Apacible against the inclusion in the said lease of
the said three mineral claims "Maglihi No. 1," "Maglihi No. 2," and "Maglihi No. 3,"
This is an original action commenced in the Supreme Court for the writ of prohibition. Its located and held by him as above recited;
purpose is to prohibit the respondent Honorable Galicano Apacible, as Secretary of Agriculture
and Natural Resources, from granting a lease of a parcel of petroleum land located in the
municipality of San Narciso, of the Province of Tayabas, Philippine Islands, which parcel of land 8. That the respondent Galicano Apacible, as Secretary of Agriculture and Natural
Resources, did on or about the 9th day of March, 1921, deny petitioner's said protest;
is particularly described in paragraph 6 of the petition. To the petition the respondent Galicano
and
Apacible demurred. The respondent Juan Cuisia neither demurred nor answered.

The facts upon which the petition is based are admitted and may be stated as follows: 9. That the plaintiff is informed and believed, and upon that information and belief
averred, that the respondent Galicano Apacible, as Secretary of Agriculture and Natural
Resources, under and by virtue of the supposed authority of Act No. 2932, is about to
1. That on or about the 7th day of June, 1916, the petitioner entered upon and located, grant the application for the said lease of the respondent Juan Cuisia, and to place him
in accordance with the provisions of Act of Congress of July 1, 1902, as well as the (Juan Cuisia) in possession of the said three mineral claims located and held by the
provisions of Act No. 624 of the Philippine Commission, three petroleum placer petitioner.
mineral claims, each of an area of 64 hectares, on an unoccupied public land in the
municipality of San Narciso, Province of Tayabas, Philippine Islands;
Upon the foregoing facts the petitioner contends that said Act No. 2932, in so far as it purports to
declare open to lease, lands containing petroleum oil on which mineral claims have been validly
2. That on or about the 15th day of July, 1916, the plaintiff recorded in the office of the located and held, and upon which discoveries of petroleum oil have been made, is void and
mining recorder in the municipality of Lucena, Province of Tayabas, Philippine Islands, unconstitutional, in that it deprives the petitioner of his property without due process of law and
notices of location of the aforesaid three placer claims under the names of "Maglihi No. without compensation, and that the defendant Galicano Apacible, as Secretary of Agriculture and
1," "Maglihi No. 2," and "Maglihi No. 3;" Natural Resources, is without jurisdiction to lease to the respondent Juan Cuisia the following
mineral claims "Maglihi No. 1," "Maglihi No. 2," and "Maglihi No. 3," and prays that the writ of
3. That the plaintiff, at all times since the 7th day of June, 1916, has remained in open prohibition be issued out of this court, directing and prohibiting the respondent Galicano
and continuous possession of said three mineral placer claims; Apacible to desist from issuing the lease of the mineral placer claims herein mentioned.
The respondent Galicano Apacible, as Secretary of Agriculture and Natural Resources, in present and exclusive possession of the lands located. And even though the locator may obtain a
support of his demurrer, contends: (a) That the acts complained of are in conformity with the patent to such lands, his patent adds but little to his security. (18 Ruling Case Law, p. 1152 and
authority given by Act No. 2932; (b) that the petitioner has no vested right in the three mineral cases cited.)
claims; and (c) that the demurrer puts squarely in issue the constitutionality of Act No. 2932.
The owner of a perfected valid appropriation of public mineral lands is entitled to the exclusive
Act No. 2932 was approved on the 31st day of August, 1920. Section 1 provides that "all public possession and enjoyment against every one, including the Government itself. Where there is a
lands containing petroleum or other mineral oils and gas, on which no patent, at the date this Act valid and perfected location of a mining claim, the area becomes segregated from the public
takes effect, has been issued, are hereby withdrawn from sale and are declared to be free and domain and the property of the locator.
open to exploration, location and lease," etc. Said section further provides, "that parties having
heretofore filed claims for any lands containing said minerals, shall be given preference to lease It was said by the Supreme Court of the State of Oregon, "The Government itself cannot abridge
their respective claims, provided they file a petition to that effect within six months from the date the rights of the miner to a perfected valid location of public mineral land. The Government may
of the approval of this Act." not destroy the locator's right by withdrawing the land from entry or placing it in a state of
reservation." (Belk vs. Meagher, 104 U.S., 279; Sullivan vs. Iron Silver Mining Co., 143 U.S.,
Section 2 provides that "all such lands (public lands) may be leased by the Secretary of 431.)
Agriculture and Natural Resources in the manner and subject to the rules prescribed by the
Council of State." A valid and subsisting location of mineral land, made and kept up in accordance with the
provisions of the statutes of the United States, has the effect of a grant by the United States of
It will be noted from the provisions of said Act No. 2932 that "all public lands containing the present and exclusive possession of the lands located, and this exclusive right of possession
petroleum, etc., on which no patent, at the date this Act takes effect (August 31, 1920), has been and enjoyment continues during the entire life of the location. There is no provision for, no
issued, are hereby withdrawn from sale and are declared to be free and open to exploration, suggestion of, a prior termination thereof. (Gwillim vs. Donnellan, 115 U.S., 45; Clipper Mining
location, and lease," with a preference, however, in favor of those who had therefore filed Co. vs. Eli Mining and Land Co., 194 U.S., 220.)
claims for such lands. It will be further noted, from the provisions of said Act, that "all public
lands containing petroleum, etc., are hereby withdrawn from sale and are declared to be free and There is no pretense in the present case that the petitioner has not complied with all the
open to exploration, location and lease," without any preference to any claim or right which requirements of the law in making the location of the mineral placer claims in question, or that
citizens of the Philippine Islands or the United States had therefore acquired in any public lands, the claims in question were ever abandoned or forfeited by him. The respondents may claim,
and that the only right left to them is one of "preference," and that even the preference was however, that inasmuch as a patent has not been issued to the petitioner, he has acquired no
limited for a period of six months from the 31st day of August, 1920. property right in said mineral claims. But the Supreme Court of the United States, in the cases of
Union Oil Co. vs. Smith (249 U.S., 337), and St. Louis Mining and Milling Co. vs. Montana
The petitioner contends, that, having located and held, and having discovered petroleum oil upon Mining Co. (171 U.S., 650), held that even without a patent, the possessory right of a locator
the said claims prior to the 31st day of August, 1920, he had acquired a property right in his after discovery of minerals upon the claim is a property right in the fullest sense, unaffected by
three claims; and that said Act No. 2932 had deprived him of that right without due process of the fact that the paramount title to the land is in the United States. There is no conflict in the
law, in contravention of paragraph 1 of section 3 of Act of Congress of August 29, 1916, and rulings of the Court upon that question. With one voice they affirm that when the right to a
that said Act was therefore unconstitutional and void. In support of the contention the petitioner patent exists, the full equitable title has passed to the purchaser or to the locator with all the
cites many authorities. benefits, immunities, and burdens of ownership, and that no third party can acquire from the
Government any interest as against him. (Manuel vs. Wulff, 152 U.S., 504, and cases cited.)
Mr. Lindlay, one of the highest authorities on Mining Law, has discussed extensively the
question now before us. (Lindlay on Mines, vol. I, sections 322, 539.) Even without a patent, the possessory right of a qualified locator after discovery of minerals
upon the claim is a property right in the fullest sense, unaffected by the fact that the paramount
The general rule is that a perfected, valid appropriation of public mineral lands operates as title to the land is in the Government, and it is capable of transfer by conveyance, inheritance, or
a withdrawal of the tract from the body of the public domain, and so long as such appropriation devise. (Union Oil Co. vs. Smith, 249 U.S., 337; Forbes vs. Jarcey, 94 U.S., 762; Belk vs.
remains valid and subsisting, the land covered thereby is deemed private property. A mining Meagher, 104 U.S., 279; Del Monte Mining Co. vs. Last Chance Mining Co., 171 U.S., 55;
claim perfected under the law is property in the highest sense, which may be sold and conveyed Elver vs. Wood, 208 U.S., 226, 232.)
and will pass by descent. It has the effect of a grant (patent) by the United States of the right of
Actual and continuous occupation of a valid mining location, based upon discovery, is not
essential to the preservation of the possessory right. The right is lost only by abandonment as by
nonperformance of the annual labor required. (Union Oil Co. vs. Smith, 249 U.S., 337; Farrell
vs. Lockhart, 210 U.S., 142; Bradford vs. Morrison, 212 U.S., 389.)

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

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

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

Araullo, C.J., Street, Malcolm, Avanceña, Villamor, Ostrand, Johns and Romualdez, JJ., concur.
THIRD DIVISION letter-manifestation dated February 5, 1987, MMC requested the NPCC for an extension of TPO
No. POW-86-454-EJ and the indefinite suspension of the condition in said permit until such time
that the NPCC shall have finally resolved the NPCC case entitled Msgr. Rolly Oliverio, et al. vs.
Marcopper Mining Corporation.
[G.R. No. 137174. July 10, 2000]
In the meantime, the NPCC was abolished by Executive Order No. 192 [7] dated June 10,
1987, and its powers and functions were integrated into the Environmental Management Bureau
and into the Pollution Adjudication Board (PAB).[8]
REPUBLIC OF THE PHILIPPINES, Represented by the POLLUTION ADJUDICATION On April 11, 1988, the Secretary of Environment and Natural Resources, in his capacity as
BOARD (DENR), petitioner, vs. MARCOPPER MINING Chairman of the PAB, issued an Order directing MMC to cease and desist from discharging
CORPORATION, respondent. mine tailings into Calancan Bay. The order reads:

DECISION The Temporary Permit to Operate issued to Marcopper Mining Corporation expired on February
10, 1987.
GONZAGA-REYES, J.:
Section 96 of the National Pollution Control Commission (NPCC) Rules and Regulations, which
In this petition for review on certiorari, petitioner REPUBLIC OF THE PHILIPPINES were adopted by the Board, provides that in no case can a permit be valid for more than one (1)
through the Pollution Adjudication Board of the Department of Environment and Natural year.
Resources seeks to annul the Decision[1] of the Court of Appeals[2] in CA-G.R. SP No. 44656
setting aside the Order[3] of the Pollution Adjudication Board[4] in DENR-PAB Case No. 04-
Records show that Marcopper Mining Corporation has not filed any application for renewal of
00597-96; as well as the Resolution[5] denying reconsideration of said Decision.
the permit.
The following antecedent facts are undisputed:
Marcopper Mining Corporation is hereby ordered to cease and desist from discharging mine
Respondent Marcopper Mining Corporation (MMC) was issued a temporary permit to
tailings into Calancan Bay immediately upon receipt of this Order.
operate a tailings[6] sea disposal system under TPO No. POW-85-454-EJ for the period October
31, 1985 to October 21, 1986. Before it expired, MMC filed an application for the renewal
thereof with the National Pollution Control Commission (NPCC). On September 20, 1986, SO ORDERED.[9]
MMC received a telegraphic order from the NPCC directing the former to (i)mmediately cease
and desist from discharging mine tailings into Calancan Bay. The directive was brought about Immediately thereafter, the DENR Undersecretary for Environment and Research issued a
through the efforts of certain religious groups which had been protesting MMCs tailings sea telegraphic order dated April 15, 1988, enjoining immediate compliance by MMC of the cease
disposal system. MMC requested the NPCC to refrain from implementing the aforesaid directive and desist order of April 11, 1988.
until its adoption of an alternative tailings disposal system. The NPCC granted MMCs request
MMC appealed the above orders of April 11, 1988 and April 15, 1988 to the Office of the
and called a conference to discuss possible alternative disposal systems. Consequently, an
President, docketed as O.P. Case No. 3802. In an Order dated May 2, 1988, the Office of the
Environmental Technical Committee, composed of representatives from the NPCC, the Bureau
President denied MMCs requests for issuance of restraining orders against the orders of the
of Mines and Geo-Sciences, and MMC was created to study the feasibility of various tailings
PAB. Consequently, MMC filed an Urgent Ex-Parte Partial Motion for Reconsideration dated
disposal systems that may be appropriate for utilization by MMC and to submit its findings and
May 6, 1988, seeking the reconsideration of the above Order. In an Order dated May 13, 1988,
recommendations thereon.
the Office of the President granted the above partial motion for reconsideration, thus:
Meanwhile, after the expiration of MMCs TPO No. POW-85-454-EJ on October 21, 1986,
the NPCC issued to MMC a new temporary permit, TPO No. POW-86-454-EJ dated November WHEREFORE, the instant Urgent Ex-Parte Motion for Reconsideration is hereby GRANTED,
11, 1986, to expire on February 10, 1987, with the condition that [t]he tailings disposal system and the Order of this Office, dated May 2, 1988, is hereby set aside insofar as it denies
shall be transferred to San Antonio Pond within two (2) months from the date of this respondent-appellants requests for issuance of restraining orders.
permit. MMC moved for the deletion of the condition stating that it needed to develop and mine
the ore deposits underneath the San Antonio pond for it to continue its mining operations. In a
Accordingly, the Pollution Adjudication Board, its agents, deputies or representatives are hereby Section 7(a) of P.D. No. 984, reads in part:
enjoined from enforcing its cease and desist order of April 15, 1988 pending resolution by this
Office of respondent-appellants appeal from said orders. Sec. 7(a) Public Hearing. Public hearing shall be conducted by the Commissioner, Deputy
Commissioner or any senior official duly designated by the Commissioner prior to issuance or
It is further directed that the status quo obtaining prior to the issuance of said cease and desist promulgation of any order or decision by the Commissioner requiring the discontinuance of
order be maintained until further orders from this Office. discharge of sewage, industrial wastes and other wastes into the water, air or land resources of
the Philippines as provided in the Decree: provided, that whenever the Commission finds
It is understood, however, that during the efficacy of this restraining order, respondent-appellant a prima facie evidence that the discharged sewage or wastes are of immediate threat to life,
shall immediately undertake, at a cost of not less than P30,000.00 a day, the building of artificial public health, safety or welfare, or to animal or plant life, or exceeds the allowable standards set
reefs and planting of sea grass, mangroves and vegetation on the causeway of Calancan Bay by the Commission, the Commissioner may issue an ex-parte order directing the discontinuance
under the supervision of the Pollution Adjudication Board and subject to such guidelines as the of the same or the temporary suspension or cessation of operation of the establishment or person
Board may impose. generating such sewage or wastes without the necessity of a prior public hearing. x x x .
(underscoring supplied).
SO ORDERED.[10]
Clearly then, it is self-indulgent nonsense to assume that the DENR Secretary, acting as PAB
Chairman, is absolutely without authority to issue an ex-parte order requiring the discontinuance
In line with the directive from the Office of the President, the Calancan Bay Rehabilitation
of discharge of sewage or other industrial wastes without public hearing. As can be gleaned from
Project (CBRP) was created, and MMC remitted the amount of P30,000.00 a day, starting from
May 13, 1988 to the Ecology Trust Fund (ETF) thereof. However, on June 30, 1991, MMC the afroequoted proviso, this authority to issue an ex-parte order suspending the discharge of
stopped discharging its tailings in the Bay, hence, it likewise ceased from making further industrial wastes is postulated upon his finding of prima-facie evidence of an imminent threat to
life, public health, safety or welfare, to animal or plant life or exceeds the allowable standards set
deposits to the ETF.
by the Commission.[11]
From the issuance of the Order on May 13, 1988 until the cessation of the tailings disposal
on June 30, 1991, MMC made its contribution to the ETF in the total amount of Thirty-Two In a letter dated January 22, 1997[12], Municipal Mayor Wilfredo A. Red of Sta. Cruz,
Million Nine Hundred and Seventy-Five Thousand Pesos (P32,975,000.00). Thereafter, MMC Marinduque informed the PAB that MMC stopped remitting the amount of 30,000.00 per day as
filed a Motion dated July 9, 1991 manifesting that it would discontinue its of July 1, 1991 to the ETF of the CBRP. This letter-complaint of Mayor Red was docketed as
contributions/deposits to the ETF since it had stopped dumping tailings in the Bay. MMC prayed DENR-PAB Case No. 04-00597-96, for violation of P.D. 984[13] and its implementing Rules and
that the Order issued by the Office of the President on May 13, 1988 be lifted. Regulations.
On February 5, 1993, the Office of the President rendered a decision in O.P. Case No. 3802 In an order dated April 23, 1997, the PAB ruled that the obligation of MMC to deposit
dismissing the appeal; affirming the cease and desist Order issued by the PAB; and lifting the P30,000.00 per day to the ETF of the CBRP subsists, as provided for in the Order of the Office
TRO dated May 13, 1988. The Office of the President resolved the appeal in this wise: of the President dated May 13, 1988, during the efficacy of said order restraining the PAB from
enforcing its cease and desist order against MMC. Since the Order was lifted only on February 5,
This brings to the fore the primordial issue of whether or not the Secretary of Environment and 1993, the obligation of MMC to remit was likewise extinguished only on said date and not
Natural Resources gravely erred in declaring the TPO No. POW-86-454-EJ issued to earlier as contended by MMC from the time it ceased dumping tailings into the Bay on July 1,
respondent-appellant MMC expired on February 10, 1987, and in ordering the latter to cease and 1991. We quote in part:
desist from discharging mine tailings into Calancan Bay.
The issue before this Board is whether Marcopper Mining Corporation is still obliged to remit
Respondent-appellant argues that the cease and desist orders were issued by the PAB ex-parte, in the amount of P30,000.00 to the CBRP. The answer by the Order from the Office of the
violation of its procedural and substantive rights provided for under Section 7 (a) of P.D. No. President dated 13 May 1988, which states that the obligation on the part of Marcopper Mining
984 requiring a public hearing before any order or decision for the discontinuance of discharge to pay the amount of P30,000.00 per day for the rehabilitation of Calancan Bay is binding only
of a sewage or industrial wastes into the water, air or land could be issued by the PAB. during the efficacy of the said Order.

We are not persuaded.


The record further shows that on 05 February 1993, the Office of the President lifted its Order Order. The injunctive bond filed by the petitioner in the amount of Five Hundred Thousand
dated 13 May 1988. This means that as of the date of the lifting, Marcopper Mining Corporation (P500,000.00) is hereby RELEASED.
no longer had any obligation to remit the amount of P30,000.00 to the CBRP. Thus, Marcoppers
obligation only runs from 13 May 1988 to 05 February 1993. Beyond the cut-off date of 05 The motion for reconsideration of the above decision was denied in a Resolution dated
February 1993, Marcopper is no longer obligated to remit the amount of P30,000.00 per day to January 13, 1999 of the Court of Appeals.
the CBRP.
Hence, the instant petition on the following grounds:
It does not matter whether Marcopper was no longer dumping its tail minings into the sea even I
before the cut-off date of 05 February 1993. The obligation of Marcopper to pay the amount of
P30,000.00 to the CBRP arises from the Office of the President Order dated 13 May 1988, not
The Court of Appeals erred in ruling that Republic Act No. 7942 (otherwise known as the
from it dumping of mine tailings.
Philippine Mining Act of 1995) repealed the provisions of Republic Act No. 3931, as amended
by Presidential Decree No. 984, (otherwise known as the National Pollution Control Decree of
WHEREFORE, Marcopper Mining Corporation is hereby ordered to pay the CBRP the amount 1976), with respect to the power and function of petitioner Pollution Adjudication Board to
of P30,000.00 per day, computed from the date Marcopper Mining Corporation stopped paying issue, renew or deny permits for the discharge of the mine tailings.
on 01 July 1991, up to the formal lifting of the subject Order from the Office of the President on
05 February 1993.
II
SO ORDERED.[14]
Respondent Marcopper Mining Corporation bound itself to pay the amount of P30,000.00 a day
for the duration of the period starting May 13, 1988 up to February 5, 1993.
MMC assailed the aforequoted Order dated April 23, 1997 of the PAB as null and void for
having been issued without jurisdiction or with grave abuse of discretion in a petition for
III
Certiorari and Prohibition (with prayer for temporary restraining order and preliminary
injunction) before the Court of Appeals which was docketed as CA-G.R. No. SP-44656. In a
Resolution dated July 15, 1997, the Court of Appeals required the PAB and its members to Respondent Marcopper Mining Corporation was not deprived of due process of law when
comment on said petition. petitioner Pollution Adjudication Board directed it to comply with its long-existing P30,000.00
per day obligation under the Order of the Office of the President dated May 13, 1988. [15]
On November 19, 1997, the Office of the Solicitor General, on behalf of the PAB and its
members, filed with the Court of Appeals the required comment. In setting aside the Order of the PAB dated April 23, 1997, requiring MMC to pay its
On September 15, 1997, for purposes of determining whether or not to grant MMCs prayer arrears in deposits, the Court of Appeals ruled that the PAB exceeded its power and authority in
for a temporary restraining order and preliminary injunction, the Court of Appeals conducted a issuing the subject Order for the following reasons:
hearing where counsel for the parties were heard on oral arguments.
The applicable and governing law in this petition is Republic Act No. 7942 otherwise known as
In a Resolution dated September 19, 1997, the Court of Appeals issued a writ of the Philippine Mining Act of 1995 (Mining Act, approved on March 3, 1995).
preliminary injunction, conditioned upon the filing of a bond by MMC in the amount of
P500,000.00 enjoining the PAB and its members to cease and desist from enforcing the assailed
Chapter XI of the Mining Act contains a series of provisions relating to safety and environmental
Order dated April 23, 1997, until it had made a full determination on the merits of the case.
protection on mining and quarrying operations. More specifically, Section 67 of the Mining
On January 7, 1998, the Court of Appeals promulgated a Decision in CA-G.R. SP No. Act in essence, grants the mines regional director the power to issue orders or to take appropriate
44656, the dispositive portion of which reads: measures to remedy any practice connected with mining or quarrying operations which is not in
accordance with safety and anti-pollution laws and regulations.
In view of the foregoing, the instant petition is hereby GRANTED and, accordingly, the
questioned Order of respondent Pollution Adjudication Board dated 23 April 1997 is hereby SET From a reading of that provision, it would appear therefore that prior to the passage of
ASIDE. Respondents are ordered to REFRAIN and DESIST from enforcing aforesaid the Mining Act, the Pollution Adjudication Board had jurisdiction to act on pollution-related
matters in the mining business. With the effectivity of the Mining Act and in congruence with its
Sec. 115 (i.e., Repealing and Amending Clause), the power to impose measures against This being the case, the questioned Order dated 23 April 1997 requiring MMC to pay its arrears
violations of environmental policies by mining operators is now vested on the mines regional in deposits was beyond the power and authority of the Pollution Adjudication Board to issue and
director. Be that as it may, we are constrained to enunciate that the PAB had no authority to as such, petitioner may seek appropriate injunctive relief from the court. Thus, certiorari lies
issue the challenged Order dated 23 April 1997. More so, respondent PAB as petitioner against public respondent PAB.[16]
argued and We note, had remained perplexingly silent on the matter for almost six (6) years from
July 1991 when MMC ceased to make its deposits up to April 1997 when respondent PAB The Court of Appeals likewise ruled that the obligation of MMC to contribute to the ETF
precipitately issued the Order requiring MMC to pay its arrears in deposits to the ETF. And of the CBRP ceased inasmuch as the latter discontinued dumping tailings into the Bay and the
PAB, apparently oblivious to MMCs economic quandary had issued said Order ex-parte without actual funds in the ETF are sufficient to rehabilitate the Bay. It ratiocinated thus:
hearing or notice.
In the instant case, it is of record that petitioner MMC undertakes its obligation to provide for the
xxx rehabilitation of the Bay waters. This obligation, through its monetary contribution to the ETF, is
however anchored on its continuing disposal of the mines tailings waste into the Bay. Hence,
As a general rule, the adjudication of pollution cases pertains to the Pollution Adjudication since it ceased its mining operations in the affected area as of July 1991 and had not been
Board (PAB), except in cases where the special law, expressly or impliedly, provides for another discharging any tailings wastes since then, its consequent duty to rehabilitate the polluted waters,
forum, as in the instant petition. if any, no longer exists.

Thus under Republic Act No. 7942 and its implementing rules and regulations, the mines xxx
regional director, in consultation with the Environmental Management Bureau (italics ours), is
specifically mandated to carry out and make effective the declared national policy that the State Be that as it may, this Court observes that out of the approximate sum of thirty-two (32) million
shall promote the rational exploration, development, utilization and conservation of all mineral pesos contributed by the petitioner to the ETF there is admittedly an existing estimated balance
resources in public and private lands within the territory and exclusive economic zone of the of fourteen (14) million pesos in the Fund. For its part, petitioner does not renege on its
Republic of the Philippines, through the combined efforts of government and the private sector obligation to rehabilitate and in fact undertakes to continue the rehabilitation process until its
in order to enhance national growth and protect the rights of affected communities. (Sec. 2, R.A. completion within two (2) years time and which would only cost six (6) million pesos. Thus, as
7942). petitioner convincingly argued and which respondent unsatisfactorily rebuked, the existing
fourteen (14) million pesos in the ETF is more than enough to complete the rehabilitation
Under this expansive authority, the Mines Regional Director, by virtue of this special law, has project. (TSN, Hearing dated 15 September 1997, at pp. 56 to 62, Rollo).
the primary responsibility to protect the communities surrounding a mining site from the
deleterious effects of pollutants emanating from the dumping of tailing wastes from the xxx. Without much ado, the Court concurs with the finding that to demand a daily deposit of
surrounding areas. Thus, in the exercise of its express powers under this special law, the thirty thousand (P30, 000.00) pesos even if the root of the obligation, that is, the dumping of
authority of the Mines Regional Director to impose appropriate protective and/or preventive tailings waste, had ceased to exist, is indubitably of a herculean and onerous burden on the part
measures with respect to pollution cases within mining operations is perforce, of petitioner amounting to a deprivation of its property and a denial of its right to due process.[17]
implied. Otherwise, the special law granting this authority may well be relegated to a mere paper
tiger talking protection but allowing pollution. Unsatisfied, the OSG argues that the Philippine Mining Act of 1995 did not amend or
repeal the provisions of Republic Act No. 3931, as amended by Presidential Decree No. 984
It bears mention that the Pollution Adjudication Board has the power to issue an ex-parte order (otherwise known as the National Pollution Control Decree of 1976); that the Mines Regional
when there is prima facie evidence of an establishment exceeding the allowable standards set by Director has no power over areas outside mining installations and over areas which are not part
the anti-pollution laws of the country. (Pollution Adjudication Board v. Court of Appeals, et al., of the mining or quarrying operations such as Calancan Bay; that the powers of the Mines
195 SCRA 112). However, with the passage of R.A. 7942, insofar as the regulation, monitoring Regional Director cannot be exercised to the exclusion of other government agencies; that the
and enforcement of anti-pollution laws are concerned with respect to mining establishments, the jurisdiction of a Mines Regional Director with respect to anti-pollution laws is limited to
Mines Regional Director has a broad grant of power and authority. Clearly, pollution-related practices committed within the confines of a mining or quarrying installation; that the dumping
issues in mining operations are addressed to the Mines Regional Director, not the Pollution of mine tailings into Calancan Bay occurred long before the effectivity of the Philippine Mining
Adjudication Board. Act and that MMC cannot hide under cover of this new law. The OSG further argues that
theportion of the Order of May 13, 1988, setting the period of time within which MMC shall pay
P30,000.00 per day, which is during the efficacy of the restraining order was never questioned or management, and three (3) others to be designated by the Secretary as members. The Board shall
appealed by MMC. Finally, the OSG argues that PAB did not violate MMCs right to due process assume the powers and functions of the Commission/Commissioners of the National Pollution
by the issuance of the Order dated April 23, 1988 without notice and hearing as it was simply Control Commission with respect to the adjudication of pollution cases under Republic Act 3931
requiring MMC to comply with an obligation in an Order which has long become final and and Presidential Decree 984, particularly with respect to Section 6 letters e, f, g, j, k, and p of
executory. P.D. 984. The Environmental Management Bureau shall serve as the Secretariat of the
Board. These powers and functions may be delegated to the regional offices of the Department
In the context of the established facts, the issue that actually emerges is: Has the PAB in accordance with rules and regulations to be promulgated by the Board. [20]
under RA 3931 as amended by PD 984 (National Pollution Control Decree of 1976) been
divested of its authority to try and hear pollution cases connected with mining operations by
virtue of the subsequent enactment of RA 7942 (Philippine Mining Act of 1995)? As mentioned Section 6 letters e, f, g, j, k, and p of PD 984 referred to above are quoted as follows:
earlier, the PAB took cognizance and ruled on the letter-complaint (for violation of PD 984 and SEC. 6. Powers and Functions. The Commission shall have the following powers and
its implementing rules and regulations) filed against MMC by Marinduque Mayor Wilfredo functions:
Red. In the subject Order dated April 23, 1997, the PAB ruled that MMC should pay its arrears
in deposits to the ETF of the CBRP computed from the day it stopped dumping and paying on (e) Issue orders or decision to compel compliance with the provisions of this Decree
July 1, 1991 up to the lifting of the Order of the Office of the President dated May 13, 1988 on and its implementing rules and regulations only after proper notice and hearing.
February 5, 1993.
(f) Make, alter or modify orders requiring the discontinuance of pollution specifying
The answer is in the negative. We agree with the Solicitor General that the Court of the conditions and the time within which such discontinuance must be
Appeals committed reversible error in ruling that the PAB had no authority to issue the Order accomplished.
dated April 23, 1997.
(g) Issue, renew, or deny permits, under such conditions as it may determine to be
Republic Act No. 3931 (An Act Creating The National Water And Air Pollution Control reasonable, for the prevention and abatement of pollution, for the discharge of
Commission) was passed in June 18, 1964 to maintain reasonable standards of purity for the sewage, industrial waste, or for the installation or operation of sewage works and
waters and air of the country with their utilization for domestic, agricultural, industrial and other industrial disposal system or parts thereof: Provided, however, That the
legitimate purposes. Said law was revised in 1976 by Presidential Decree No. 984 (Providing Commission, by rules and regulations, may require subdivisions, condominium,
For The Revision Of Republic Act No. 3931, Commonly Known As The Pollution Control Law, hospitals, public buildings and other similar human settlements to put up
And For Other Purposes) to strengthen the National Pollution Control Commission to best appropriate central sewerage system and sewage treatment works, except that no
protect the people from the growing menace of environmental pollution. Subsequently, permits shall be required to any sewage works or changes to or extensions of
Executive Order No. 192, s. 1987 (The Reorganization Act of the DENR) was passed. The existing works that discharge only domestic or sanitary wastes from a singles
internal structure, organization and description of the functions of the new DENR, particularly residential building provided with septic tanks or their equivalent. The
the Mines and Geosciences Bureau, reveals no provision pertaining to the resolution of cases Commission may impose reasonable fees and charges for the issuance or renewal
involving violations of the pollution laws.[18] The Mines and Geo-Sciences Bureau was created of all permits required herein.
under the said EO 192 to absorb the functions of the abolished Bureau of Mines and Geo-
(h)
Sciences, Mineral Reservations Development Board and the Gold Mining Industry Development
Board to, among others, recommend policies, regulations and programs pertaining to mineral (i)
resources development; assist in the monitoring and evaluation of the Bureaus programs and
projects; and to develop and promulgate standards and operating procedures on mineral (j) Serve as arbitrator for the determination of reparations, or restitution of the
resources development.[19] damages and losses resulting from pollution.

On the other hand, the PAB was created and granted under the same EO 192 broad powers (k) Deputize in writing or request assistance of appropriate government agencies or
to adjudicate pollution cases in general. Thus, instrumentalities for the purpose of enforcing this Decree and its implementing
rules and regulations and the orders and decisions of the Commission.
SEC. 19. Pollution Adjudication Board. There is hereby created a Pollution Adjudication Board (l)
under the Office of the Secretary. The Board shall be composed of the Secretary as Chairman,
two (2) Undersecretaries as may be designated by the Secretary, the Director of Environmental (m)
(n) communities affected by mining activities[21], without however, arrogating unto the mines
regional director any adjudicative responsibility.
(o)
From a careful reading of the foregoing provisions of law, we hold that the provisions
(p) Exercise such powers and perform such other functions as may be necessary to of RA 7942 do not necessarily repeal RA 3931, as amended by PD 984 and EO 192. RA 7942
carry out its duties and responsibilities under this Decree. does not contain any provision which categorically and expressly repeals the provisions of the
Pollution Control Law. Neither could there be an implied repeal. It is well-settled that repeals of
Section 7(a) of P.D. No. 984 further provides in part: laws by implication are not favored and that courts must generally assume their congruent
application. Thus, it has been held:
Sec. 7(a) Public Hearing. Public hearing shall be conducted by the Commissioner, Deputy
Commissioner or any senior official duly designated by the Commissioner prior to issuance or The two laws must be absolutely incompatible, and a clear finding thereof must surface, before
promulgation of any order or decision by the Commissioner requiring the discontinuance of the inference of implied repeal may be drawn. The rule is expressed in the maxim, interpretare
discharge of sewage, industrial wastes and other wastes into the water, air or land resources of et concordare leqibus est optimus interpretendi, i.e., every statute must be so interpreted and
the Philippines as provided in the Decree: provided, that whenever the Commission finds brought into accord with other laws aas to form a uniform system of jurisprudence.The
a prima facie evidence that the discharged sewage or wastes are of immediate threat to life, fundament is that the legislature should be presumed to have known the existing laws on the
public health, safety or Welfare, or to animal or plant life, or exceeds the allowable standards set subject and not have enacted conflicting statutes. Hence, all doubts must be resolved against any
by the Commission, the Commissioner may issue and ex-parte order directing the discontinuance implied repeal, and all efforts should be exerted in order to harmonize and give effect to all laws
of the same or the temporary suspension or cessation of operation of the establishment or person on the subject.[22]
generating such sewage or wastes without the necessity of a prior public hearing. x x x .
(underscoring supplied). There is no irreconcilable conflict between the two laws. Section 19 of EO 192 vested the
PAB with the specific power to adjudicate pollution cases in general. Sec. 2, par. (a) of PD 984
The ruling of the Court of Appeals that the PAB has been divested of authority to act on defines the term pollution as referring to any alteration of the physical, chemical and biological
pollution-related matters in mining operations is anchored on the following provisions of RA properties of any water, air and/or land resources of the Philippines , or any discharge thereto of
7942 (Philippine Mining Act of 1995): any liquid, gaseous or solid wastes as will or is likely to create or to render such water, air and
land resources harmful, detrimental or injurious to public health, safety or welfare or which will
SEC. 67. Power to Issue Orders. The mines regional director shall, in consultation with the adversely affect their utilization for domestic, commercial, industrial, agricultural, recreational
Environmental Management Bureau, forthwith or within such time as specified in his order, or other legitimate purposes.
require the contractor to remedy any practice connected with mining or quarrying operations,
On the other hand, the authority of the mines regional director is complementary to that of
which is not in accordance with safety and anti-pollution laws and regulations. In case of
the PAB. Section 66 of RA 7942 gives the mines regional director exclusive jurisdiction over the
imminent danger to life or property, the mines regional director may summarily suspend the
mining or quarrying operations until the danger is removed, or appropriate measures are taken by safety inspection of all installations, surface or underground in mining operations. Section 67
the contractor or permittee. thereof vests upon the regional director power to issue orders requiring a contractor to remedy
any practice connected with mining or quarrying operations which is not in accordance with
safety and anti-pollution laws and regulations; and to summarily suspend mining or quarrying
And operations in case of imminent danger to life or property. The law likewise requires every
contractor to undertake an environmental protection and enhancement program which shall be
SEC. 115. Repealing and Amending Clause. All laws, executive orders, presidential decrees, incorporated in the work program which the contractor shall submit as an accompanying
rules and regulations, or parts thereof which are inconsistent with any of the provisions of this document to the application for a mineral agreement or permit. In addition, an environmental
Act are hereby repealed or amended accordingly. clearance certificate is required based on an environment impact assessment. The law also
requires contractors and permittees to rehabilitate the mined-out areas, and set up a mine
The other provisions in Chapter XI on Safety and Environmental Protection found in RA 7942 rehabilitation fund. Significantly, the law allows and encourages peoples organizations and non-
promote the safe and sanitary upkeep of mining areas to achieve waste-free and efficient mine governmental organizations to participate in ensuring that contractors/permittees shall observe
development with particular concern for the physical and social rehabilitation of areas and all the requirements of environmental protection.
From the foregoing, it readily appears that the power of the mines regional director does That matter settled, we now go to the issue of whether the appellate court erred in ruling
not foreclose PABs authority to determine and act on complaints filed before it. The power that there is no basis for further payments by MMC to the Ecology Trust Fund of the Calancan
granted to the mines regional director to issue orders requiring the contractor to remedy any Bay Rehabilitation Project considering that MMC convincingly argued and which respondent
practice connected with mining or quarrying operations or to summarily suspend the same in unsatisfactorily rebuked, the existing fourteen (14) million pesos in the ETF is more than enough
cases of violation of pollution laws is for purposes of effectively regulating and monitoring to complete the rehabilitation project. Indeed, the records reveal that witness for PAB, Mr. Edel
activities within mining operations and installations pursuant to the environmental protection and Genato, who is the Technical Resource person of the PAB for the project admitted that the funds
enhancement program undertaken by contractors and permittees in procuring their mining in the ETF amounting to about Fourteen Million Pesos are more than sufficient to cover the costs
permit. While the mines regional director has express administrative and regulatory powers over of rehabilitation. Hereunder are excerpts from the transcript of stenographic notes taken during
mining operations and installations, it has no adjudicative powers over complaints for violation the hearing held on September 15, 1997:
of pollution control statutes and regulations.
ATTY. HERNANDEZ:[27]
[23]
True, in Laguna Lake Development Authority vs. Court of Appeals, this Court held that
adjudication of pollution cases generally pertains to the Pollution Adjudication Board (PAB) I would like your Honor, if the court will allow, our witness from the EBRB Your Honor
except where the special law provides for another forum. However, contrary to the ruling of the would attest to that . . .
Court of Appeals, RA 7942 does not provide for another forum inasmuch as RA 7942 does not JUSTICE JACINTO:
vest quasi-judicial powers in the Mines Regional Director. The authority is vested and remains
with the PAB. Is it not being taken from the 14 million?

Neither was such authority conferred upon the Panel of Arbitrators and the Mines ATTY. HERNANDEZ:
Adjudication Board which were created by the said law. The provisions creating the Panel of
Yes, Your Honor.
Arbitrators for the settlement of conflicts refers to disputes involving rights to mining areas,
mineral agreements or permits and those involving surface owners, occupants and claim- JUSTICE RASUL:
holders/concessionaires.[24] The scope of authority of the Panel of Arbitrators and the Mines
Adjudication Board conferred by RA 7942 clearly exclude adjudicative responsibility over What is his role?
pollution cases. Nowhere is there vested any authority to adjudicate cases involving violations of ATTY. HERNANDEZ:
pollution laws and regulations in general.
He is our Technical Resource person Your Honor, of the project.
Thus, there is no genuine conflict between RA 7942 and RA 3931 as amended by PD 984
that precludes their co-existence. Moreover, it has to be conceded that there was no intent on the JUSTICE RASUL:
part of the legislature to repeal the said law. There is nothing in the sponsorship speech[25] of the
laws proponent, Representative Renato Yap, and the deliberations that followed thereafter, to In other words, he has participated in the . . (inaudible)?
indicate a legislative intent to repeal the pollution law. Instead, it appears that the legislature ATTY. HERNANDEZ:
intended to maximize the exploration, development and utilization of the countrys mineral
resources to contribute to the achievement of national economic and social development with Yes, Your Honor.
due regard to the social and environmental cost implications relative thereto. The law intends to
JUSTICE RASUL:
increase the productivity of the countrys mineral resources while at the same time assuring its
sustainability through judicious use and systematic rehabilitation. Henceforth, the Department of Do you agree with him?
Environment and Natural Resources as the primary government agency responsible for the
conservation, management, development, and proper use of the States mineral resources, through MR. EDEL GENATO:
its Secretary, has the authority to enter into mineral agreements on behalf of the Government Yes, Your Honor, that the Calancan rehabilitation program is being funded by Marcopper
upon the recommendation of the Director, and to promulgate such rules and regulations as may through the Ecology Trust Fund.
be necessary to carry out the provisions of RA 7942.[26] The PAB and the Mines Regional
Director, with their complementary functions and through their combined efforts, serve JUSTICE RASUL:
to accomplish the mandate of RA 3931 (National Pollution Control Decree of 1976) as amended
by PD 984 and EO 192 and that of RA 7942 (Philippine Mining Act of 1995). Will the construction be finished in two years time?
MR. EDEL GENATO: My question is, do you agree with him that the 14 million fund will be enough to sustain the
construction up to the end?
Presently, under the Steering Committee of the Calancan Bay Rehabilitation, there is another
phase that is being proposed. Actually the two years time will definitely cover the other MR. EDEL GENATO:
phase of the . .(inaudible)
Two years?
JUSTICE RASUL:
JUSTICE RASUL:
Never mind that. Will the amount be sufficient to the end of the construction?
Yes.
MR. EDEL GENATO:
MR. EDEL GENATO:
Yes, Sir.
Your Honor. . .
JUSTICE RASUL:
JUSTICE AMIN:
Enough?
Categorical answer.
MR. EDEL GENATO:
JUSTICE RASUL:
Yes, Sir.
You just answer, is it enough, in your own honest way, on your honor?
JUSTICE RASUL:
MR. EDEL GENATO:
There is no more need for collecting the 30 thousand a day? . . . Do not . . . I will hold you
for contempt . . . I think so Your Honor.[28]

ATTY. HERNANDEZ: We must sustain the appellate court on this point on account of the testimony of Mr. Edel
Genato. Further, we note that the Office of the President never objected nor ruled on
Im sorry Your Honor. themanifestation dated July 9, 1991 filed by MMC that it would stop paying since it already
ceased dumping mine tailings into the bay. Still further, the order of the OP directing MMC to
JUSTICE RASUL: rehabilitate at a cost of P30,000.00 a day during the efficacy of the restraining order had
Again. become functus officio since MMC voluntarily stopped dumping mine tailings into the bay.

MR. EDEL GENATO: To sum up, PAB has jurisdiction to act and rule on the letter-complaint of Mayor Wilfredo
Red of Marinduque for violation of PD 984 and its implementing rules and regulations which
Well Your Honor, I cannot comment on the amount Your Honor. jurisdiction was not lost upon the passage of RA 7942 (the Philippine Mining Act of
1995). Nevertheless, MMC must be declared not to have arrears in deposits as admittedly, the
JUSTICE RASUL:
ETF already has more than sufficient funds to undertake the rehabilitation of Calancan Bay.
You have already made your comment, but you received some signal from your lawyer.
WHEREFORE, the petition is hereby partially GRANTED. The assailed Decision is
ATTY. HERNANDEZ: REVERSED insofar as the jurisdiction of the PAB to act on the complaint is concerned; but
AFFIRMED insofar as Marcopper Mining Corporation has no arrears in deposits with the
Your Honor . . . Ecology Trust Fund of the Calancan Bay Rehabilitation Project.
MR. EDEL GENATO: SO ORDERED.
No, no Your Honor. . . Melo, (Chairman), Vitug, Panganiban, and Purisima, JJ., concur.
JUSTICE RASUL:
(c) Offices of Assistant Secretaries
[1]
Dated January 7, 1998; Annex A, Rollo, pp. 33-43. (d) Public Affairs Office
[2]
Sixth Division composed of Associate Justices Omar U. Amin (ponente), Jesus M. Elbinias (e) Special Concerns Office
and Hector L. Hofilea.
(f) Pollution Adjudication Board
[3]
Dated April 23, 1997; Annex D, Rollo, pp. 61-62.
The staff sectoral bureaus, on the other hand, shall be composed of:
[4]
Composed of Victor O. Ramos (Chairman), Antonio G.M. La Via (Presiding Officer) and
Delfin Ganapin, Jr., Manuel S. Gaspay, Leonardo U. Sawal, Profirio C. Macatangay as (a) Forest Management Bureau
members. (b) Lands Management Bureau
[5]
Dated January 13, 1999, Rollo, p. 45. (c) Mines and Geo-Sciences Bureau
[6]
The Philippine Mining Act of 1995 defines Mine wastes and tailings as soil and rock (d) Environmental Management Bureau
materials from surface or underground mining and milling operations with no economic value to
the generator of the same. (e) Ecosystems Research and Development Bureau
[7]
Providing For The Reorganization Of The Department Of Environment, Energy And Natural (f) Protected Areas and Wildlife Bureau.
Resources, Renaming it As The Department of Environment and Natural Resources, And For
The field offices shall consist of all department regional offices, the provincial offices and the
Other Purposes.
community offices.
[8]
See Secs. 16 & 19. [19]
SEC. 15. Mines and Geo-Sciences Bureau. There is hereby created the Mines and Geo-
[9]
Original Records, Annex B, p. 20. Sciences Bureau which shall absorb the functions of the Bureau of Mines and Geo-Sciences
(BMGS), Mineral Reservations Development Board (MRDB) and the Gold Mining Industry
[10]
OR, Annex C, pp. 21-23. Development Board (GMIDB) all of which are hereby merged in accordance with Section 24
[11]
Rollo, pp. hereof except those line functions and powers which are transferred to the regional field
office. The Mines and Geo-Sciences Bureau, to be headed by a Director and assisted by an
[12]
OR, Annex D, pp. 24-25. Assistant Director shall advise the Secretary on matters pertaining to geology and mineral
[13]
resources exploration, development and conservation and shall have the following functions, but
Providing for the Revision of Republic Act No. 3931, commonly known as the Pollution not limited to:
Control Law and for Other Purposes.
[14]
(a) Recommend polices, regulations and programs pertaining to mineral resources development
Original Records, Annex A, pp. 18-19. and geology;
[15]
Rollo, pp. 15-16. (b) Recommend policies, regulations and oversee the development and exploitation of mineral
[16]
Rollo, pp. 39-42. resources of the sea within the countrys jurisdiction such as silica sand, gold placer,
magnetite and chromite sand, etc.
[17]
Rollo, pp. 40, 42.
(c) Advise the Secretary on the granting of mining rights and contracts over areas containing
[18]
SEC. 6. Structural Organization.- The Department shall consist of the Department proper, the metallic and non-metallic mineral resources;
staff offices, the staff bureaus and the regional/provincial/community natural resources offices.
(d) Advise the Regional Office on the effective implementation of mineral development and
The Department proper shall consist of the following: conservation programs as well as geological surveys;
(a) Office of the Secretary (e) Assist in the monitoring and evaluation of the Bureaus programs and projects to ensure
efficiency and effectiveness thereof;
(b) Offices of the Undersecretaries
(f) Develop and promulgate standards and operating procedures on mineral resources governmental organizations shall be allowed and encouraged to participate in ensuring that
development and geology; contractors/permittees shall observe all the requirements of environmental protection.
(g) Supervise and control the development and packaging of nationally applicable technologies SEC. 71. Rehabilitation.-Contractors and permittees shall technically and biologically
on geological survey, mineral resource assessment, mining and metallurgy; the provision of rehabilitate the excavated mined-out, tailings covered and disturbed areas to the condition of
geological, metallurgical, chemical and rock mechanics laboratory services; the conduct of environmental safety, as may be provided in the implementing rules and regulations of this
marine geological and geophysical survey and natural exploration drilling programs; Act. A mine rehabilitation fund shall be created, based on the contractors approved work
program, and shall be deposited as a trust fund in a government depository bank and used for
(h) Perform other functions as may be assigned by the Secretary and/or provided by law. physical and social rehabilitation of areas and communities affected by mining activities and for
[20]
Emphasis ours. research on the social, technical and preventive aspects of rehabilitation. Failure to fulfill the
above obligation shall mean immediate suspension or closure of the mining activities of the
[21]
SEC. 63. Mines Safety and Environmental Protection.-All contractors and permittees shall contractor/permittee concerned.
strictly comply with all the mines safety rules and regulations as may be promulgated by the
[22]
Secretary concerning the safe and sanitary upkeep of the mining operations and achieve waste- Hagad vs. Gozo-Dadole, 251 SCRA 242 (1995).
free and efficient mine development. Personnel of the Department involved in the [23]
231 SCRA 292 (1994).
implementation of mines safety, health and environmental rules and regulations shall be covered
[24]
under Republic Act No. 7305. Chapter XIII. Settlement of Conflicts
xxx SEC. 77. Panel of Arbitrators. -- There shall be a panel of arbitrators in the regional office of the
Department composed of three (3) members, two (2) of whom must be members of the
SEC. 66. Mine Inspection. The regional director shall have exclusive jurisdiction over the safety Philippine Bar in good standing and one a licensed mining engineer or a professional in a related
inspection of all installations, surface or underground, in mining operations at reasonable hours field, and duly designated by the Secretary as recommended by the Mines and Geosciences
of the day or night and as much as possible in a manner that will not impede or obstruct work in Bureau Director. Those designated as members of the panel shall serve as such in addition to
progress of a contractor or permittee. their work in the Department without receiving any additional compensation. As much as
xxx xxx xxx. practicable, said members shall come down from the different bureaus of the Department in the
region. The presiding officer thereof shall be selected by the drawing of lots. His tenure as
xxx xxx xxx. presiding officer shall be on a yearly basis. The members of the panel shall perform their duties
and obligations in hearing and deciding cases until their designation is withdrawn or revoked by
SEC. 69. Environmental Protection. Every contractor shall undertake an environmental
the Secretary. Within thirty (30) working days, after the submission of the case by the parties for
protection and enhancement program covering the period of the mineral agreement or
decision, the panel shall have exclusive and original jurisdiction to hear and decide on the
permit. Such environmental program shall be incorporated in the work program which the
following:
contractor or permittee shall submit as an accompanying document to the application for a
mineral agreement or permit. The work program shall include not only plans relative to mining (a) Disputes involving rights to mining areas;
operations but also to rehabilitation, regeneration, revegetation and reforestation of mineralized
areas, slope and stabilization of mined-out and tailings covered areas, aquaculture, watershed (b) Disputes involving mineral agreements or permits;
development and water conservation; and socioeconomic development. (c) Disputes involving surface owners, occupants and claim-holders/concessionaires; and
SEC. 70. Environmental Impact Assessment (EIA). Except during the exploration period of a (d) Disputes pending before the Bureau and the Department at the date of the effectivity of this
mineral agreement or financial or technical assistance agreement or an exploration permit, an Act.
environmental clearance certificate shall be required based on an environmental impact
assessment and procedures under the Philippine Environmental Impact Assessment system SEC. 78. Appellate Jurisdiction. -- the decision or order of the panel of arbitrators may be
including Sections 26 and 27 of the Local Government Code of 1991 which require national appealed by the party not satisfied thereto to the Mines Adjudication Board within fifteen (15)
government agencies to maintain ecological balance, and prior consultation with the local days from receipt thereof which must decide the case within thirty (30) days from submission
government units, non-governmental and peoples organizations and other concerned sectors of thereof for decision.
the community: Provided, That a completed ecological profile of the proposed mining area shall
also constitute part of the environmental impact assessment. Peoples organizations and non-
SEC. 79. Mines Adjudication Board. -- The Mines Adjudication Board shall be composed of As of 1990, the countrys total mineral ore reserves was 18 million metric tons. Metallic ores
three (3) members. The Secretary shall be the chairman with the Director of the Mines and such as primary gold, primary copper, chromite and iron, were pegged at 8.8 billion metric tons.
Geosciences Bureau and the Undersecretary for Operations of the Department as members Non-metallic ores, on the other hand, such as cement raw materials, magnesite and marble, were
thereof. The Board shall have the following powers and functions: placed at around 9.1 billion metric tons.
(a) To promulgate rules and regulations governing the hearing and disposition of cases before it, In the 1970s when the mining industry was contributing about 23% of the countrys total export
as well as those pertaining to its internal functions, and such rules and regulations as may be earnings, it had 32 metal producing firms.
necessary to carry out its functions;
The heydays of the mining industry was not to be sustained when world metal prices started to
(b) To administer oaths, summon the parties to a controversy, issue subpoenas requiring the decline in 1982.
attendance and testimony of witnesses or the production of such books, papers, contracts,
records, statement of accounts, agreements, and other documents as may be material to a just While there were 31 gold and copper mining firms in 1982, this dwindled to only 16 in 1987,
determination of the matter under investigation, and to testify in any investigation or hearing and to 12 as of this month.
conducted in pursuance of this Act; Today, almost all the remaining mining firms are declaring losses in millions and are laying off
(c ) To conduct hearings on all matters within its jurisdiction, proceed to hear and determine the thousands of workers.
disputes in the absence of any party thereto who has been summoned or served with notice to Where lies the problem? What needs to be done?
appear, conduct its proceedings or any part thereof in public or in private, adjourn its hearings at
any time and place, refer technical matters or accounts to an expert and to accept his report as While the most obvious explanation for the sorry state of the mining industry is the plummeting
evidence after hearing of the parties upon due notice, direct parties to be joined in or excluded worldwide market prices especially for metals, much blame is pointed at inconsistent and
from the proceedings, correct, amend, or waive any error, defect or irregularity, whether in changing laws that fail to optimize the use of our mineralresources and make the
substance or in form, give all such directions as it may be deem necessary or experiment in the industry incompetitive in the global market.
determination of the dispute before it, and dismiss the mining dispute as part thereof, where it is
The mining industry has also been hit by environmental groups. . . /ala
trivial or where further proceedings by the Board are not necessary or desirable;
xxx
(1) To hold any person in contempt, directly or indirectly, and impose appropriate penalties
therefor; and MR. YAP (R.) . . . by environmental groups who have been painting mining as a dirty,
unnecessary and ecologically devastating exercise.
(2) To enjoin any or all acts involving or arising from any case pending before it which, if not
restrained forthwith, may cause grave or irreparable damage to any of the parties to the case or In the past months, your Committees on Natural Resources, Ways and Means, and Local
seriously affect social and economic stability. Government have been working to resuscitate the mining industry by coming up with a most
practicable mining package. These measures are: Committee Report No. 294 on House Bill No.
In any proceeding before the Board, the rules of evidence prevailing in courts of law or equity
10816; Committee Report No. 289 on House Bill No. 10693 and Committee Report to be filed
shall not be controlling and it is the spirit and intention of this Act that shall govern. The Board
on House Bill No. 10694.
shall use every and all reasonable means to ascertain the facts in each case speedily and
objectively and without regard to technicalities of law or procedure, all in the interest of due This mining package seeks to address the three major concerns of the industry: the need for a
process. In any proceeding before the Board, the parties may be represented by legal comprehensive law to cover the exploration, development, utilization and conservation of
counsel. The findings of fact of the Board shall be conclusive and binding on the parties and its mineral resources; the need to address the mining safety and environmental protection concerns
decision or order shall be final and executory. in the mining operations; and the need to revitalize the mining industry for it to be able to
[25] compete in the world market through: (1) incentives under the Omnibus Investments Acts; (2)
It is an undisputed fact that the Philippines is one of the highly mineralized countries in the
the setting of the government share or excise tax under the National Internal Revenue Act at 2%
world with a wide range of economic minerals found in over 77 percent of its 76 provinces.
to make the mining industry competitive worldwide; and lastly, the exemption to tailings dam or
The country was estimated to have 30.8 billion metric tons, of which 11.5 billion metric tons pond and other pollution control devices from the real property tax under the Local Government
(37.3%) are metallic and 19.3 billion metric tons (62.3%) are non-metallic. Code.
xxx
On the aspect of mining safety and environmental protection, the Act mandates strict
compliance by the contractors and permittees with the mines safety rules and regulations that
shall be promulgated by the DENR Secretary.
Furthermore, Mr. Speaker, the Act also requires contractors, licensees and permittees to
rehabilitate technically and biologically the excavated mined-out, tailings covered and disturbed
areas.
[26]
See Sec. 8.
[27]
Counsel for PAB.
[28]
Rollo, pp. 246-254.
EN BANC On July 5, 1991, then HLURB Commissioner respondent TUNGPALAN issued Development
Permit No. 91-0216 for land development only for the entire land area of 12.1034 hectares
covered by TCT No. 35083 (now TCT 208837) and with 1,003 saleable lots/units with project
classification B. P. 220 Model A-Socialized Housing (p. 96, Records), with several conditions
[G.R. No. 145973. January 23, 2002] for its development.

Three (3) days thereafter or on July 8, 1991, respondent JASARENO, allowed/granted the
leveling/earth-moving operations of the development project of the area subject to certain
ANTONIO G. PRINCIPE, petitioner, vs. FACT-FINDING & INTELLIGENCE, BUREAU conditions.
(FFIB), OFFICE OF THE OMBUDSMAN, respondents.
On November 18, 1991, then HLURB Commissioner AMADO B. DELORIA issued Certificate
DECISION of Registration No. 91-11-0576 in favor of CHS, with License to Sell No. 91-11-0592 for the
1,007 lots/units in the subdivision.
PARDO, J.:
Eventually, on December 10, 1991, respondent POLLISCO issued Small Scale Mining Permit
(SSMP) No. IV-316 to Philjas to extract and remove 10,000 cu. meters of filling materials from
The Case the area where the CHS is located.

Thereafter, or on January 12, 1994, Philjas applied for a Small Scale Mining Permit (SSMP)
The case is a petition for review on certiorari seeking to reverse the decision of the Court under P. D. 1899 with the Rizal Provincial Government to extract and remove 50,000 metric
of Appeals[1] affirming the Ombudsmans dismissal of petitioner from the government service for tons of filling materials per annum on CHS 2.8 hectares.
gross neglect of duty in connection with the collapse of the housing project at the Cherry Hills
Subdivision, Antipolo City, on August 3, 1999.
Thus, on January 17, 1994, respondent MAGNO, informed ELIEZER I. RODRIGUEZ
of Philjas that CHS is within the EIS System and as such must secure ECC from the
DENR. Philjas was accordingly informed of the matter such that it applied for the issuance of
The Facts ECC from the DENR-Region IV, on February 3, 1994.

On March 12, 1994, an Inspection Report allegedly prepared by respondent BALICAS, attested
The facts, as found by the Court of Appeals, are as follows: by respondent RUTAQUIO and approved by respondent TOLENTINO re: field evaluation to the
issuance of ECC, was submitted.
August 28, 1990- Philjas Corporation, whose primary purposes, among others are: to own,
develop, subdivide, market and provide low-cost housing for the poor, was registered with the Consequently, on April 28, 1994, upon recommendation of respondent
Securities and Exchange Commission (SEC). TOLENTINO, Philjas application for ECC was approved by respondent PRINCIPE, then
Regional Executive Director, DENR under ECC-137-RI-212-94.
February 19, 1991 - then City Mayor Daniel S. Garcia, endorsed to the Housing and Land Use
Regulatory Board (HLURB) the proposed CHS. A Mining Field Report for SSMP dated May 10, 1994 was submitted pursuant to the inspection
report prepared by respondents CAYETANO, FELICIANO, HILADO and BURGOS, based on
Thereafter, or on 07 March 1991, based on the favorable recommendation of Mayor Garcia, their inspection conducted on April 25 to 29, 1994. The report recommended, among others, that
respondent TAN, issued the Preliminary Approval and Locational Clearance (PALC) for the the proposed extraction of materials would pose no adverse effect to the environment.
development of CHS.
Records further disclosed that on August 10, 1994, respondent BALICAS monitored the
implementation of the CHS Project Development to check compliance with the terms and
conditions in the ECC.Again, on August 23, 1995, she conducted another monitoring on the The issue raised is whether the Ombudsman may dismiss petitioner from the service on an
project for the same purpose. In both instances, she noted that the project was still in the administrative charge for gross neglect of duty, initiated, investigated and decided by the
construction stage hence, compliance with the stipulated conditions could not be fully assessed, Ombudsman himself without substantial evidence to support his finding of gross neglect of duty
and therefore, a follow-up monitoring inspection was the last one conducted by the DENR. because the duty to monitor and inspect the project was not vested in petitioner.

On September 24, 1994, GOV. CASIMIRO I. YNARES, JR., approved the SSMP applied for
by Philjas under SSMP No. RZL-012, allowing Philjas to extract and remove 50,000 metric tons The Court's Ruling
of filling materials from the area for a period of two (2) years from date of its issue until
September 6, 1996.[2]
Republic Act No. 6770, Section 15, prescribed the powers of the Ombudsman, as follows:
On November 15, 1999, the Ombudsman rendered a decision finding
petitioner Principe administratively liable for gross neglect of duty and imposing upon him the Section 15. Powers, Functions and Duties. - The Office of the Ombudsman shall have the
penalty of dismissal from office. The dispositive portion of the decision reads: following powers, functions and duties:

WHEREFORE, premises considered xxx (1) Investigate and prosecute on its own or on complaint by any person, any act or omission of
any public officer or employee, office or agency, when such act or omission appears to be
xxx illegal, unjust, improper or inefficient. It has primary jurisdiction over cases cognizable by
the Sandiganbayan and, in the exercise of this primary jurisdiction it may take over, at any stage,
x x x the following respondents are hereby found GUILTY as charged and meted the respective from any investigatory agency of Government, the investigation of such cases;
penalties provided under Section 22, Rule XIV of the Omnibus Rules, Implementing Book V of
Executive Order No. 292, otherwise known as the Administrative Code of 1987, viz,: (2) Direct, upon complaint or at its own instance, any officer or employee of the Government, or
of any subdivision, agency or instrumentality thereof, as well as any government-owned or
1. xxx controlled corporations with original charter, to perform and expedite any act or duty required by
law, or to stop, prevent, and correct any abuse or impropriety in the performance of duties;
5. Antonio G. Principe - Penalty of Dismissal from the Service for Gross Neglect of Duty.
(3) Direct the officer concerned to take appropriate action against a public officer or employee at
fault or who neglects to perform an act or discharge a duty required by law, and recommend his
xxx
removal, suspension, demotion, fine, censure, or prosecution, and ensure compliance therewith;
or enforce its disciplinary authority as provided in Section 21 [7] of this Act: Provided, That the
SO ORDERED.[3] refusal by any officer without just cause to comply with an order of the Ombudsman to remove,
suspend, demote, fine, censure, or prosecute an officer or employee who is at fault or who
On January 4, 2000, petitioner filed with the Court of Appeals a petition for review neglects to perform an act or discharge a duty required by law shall be a ground for disciplinary
assailing the decision of the Ombudsman.[4] action against said officer;
On August 25, 2000, the Court of Appeals promulgated a decision denying the petition and
affirming the decision of the Ombudsman.[5] (4) Direct the officer concerned, in any appropriate case, and subject to such limitations as it
may provide in its rules of procedure, to furnish it with copies of documents relating to contracts
Hence, this appeal.[6] or transactions entered into by his office involving the disbursement or use of public funds or
properties, and report any irregularity to the Commission on Audit for appropriate action;

The Issue (5) Request any government agency for assistance and information necessary in the discharge of
its responsibilities, and to examine, if necessary, pertinent records and documents;
(6) Publicize matters covered by its investigation of the matters mentioned in paragraphs (1), (2), 4. Environmental Management
(3) and (4) hereof, when circumstances so warrant and with due prudence: Provided, further, that
any publicity issued by the Ombudsman shall be balance, fair and true; 4.1 Issues authority to construct and permit to operate pollution control
equipment/devices including the collection of corresponding fees/charges.
(7) Determine the causes of inefficiency, red tape, mismanagement, fraud, and corruption in the
Government, and make recommendations for their elimination and the observance of high 4.2 Issues accreditation of pollution control office of industrial firms and
standards of ethics and efficiency; local government entities.

(8) Administer oaths, issue subpoena and subpoena duces tecum, and take testimony in any 4.3 Hears/gathers evidences or facts on pollution cases as delegated by the
investigation or inquiry, including the power to examine and have access to bank accounts and Pollution Adjudication Board.
records;
4.4. Approves plans and issues permit for mine tailings disposal, including
(9) Punish for contempt in accordance with the Rules of Court and under the same procedure and environmental rehabilitation plans.[9]
with the same penalties provided therein;
Clearly, there is no mention of the responsibility of a regional executive director to monitor
(10) Delegate to the Deputies, or its investigators or representatives such authority or duty as projects. More apropos is the description of the functions of a regional technical director, to wit:
shall ensure the effective exercise or performance of the powers, functions, and duties herein or
hereinafter provided;
E. REGIONAL TECHNICAL DIRECTOR

(11) Investigate and initiate the proper action for the recovery of ill-gotten and/or unexplained
1. Forest Management
wealth amassed after February 25, 1986 and the prosecution of the parties involved therein. [8]
2. Land Management
The Ombudsman without taking into consideration the lawfully mandated duties and
functions attached to petitioners position, immediately concluded that as the signing and
approving authority of the ECC issued to PHILJAS, it was incumbent upon petitioner to conduct 3. Mines and Geo-Sciences Development
actual monitoring and enforce strict compliance with the terms and conditions of the ECC.
4. Environmental Management
The applicable administrative orders provide that the function of monitoring environmental
programs, projects and activities in the region is lodged with the Regional Technical Director,
4.1 Issues clearance certificate to vehicles which have passed the smoke-
not with the Regional Executive Director, the position occupied by petitioner. Under DAO 38-
belching test.
1990, the following were the functions attached to the office of petitioner, to wit:
4.2 Issues pollution clearance and temporary permit to operate pollution control
I. REGULATORY MATTERS
devices including the collection of corresponding fees/charges.

D. REGIONAL EXECUTIVE DIRECTOR


4.3 Conducts monitoring and investigation of pollution sources and control
facilities.
1. Forest Management
4.4 Supervises, coordinates and monitors the implementation of
2. Land Management environmental programs, projects and activities in the
region.[10] [emphasis supplied]
3. Mines and Geo-Sciences Development
Furthermore, monitoring is defined in DAO No. 21, Series of 1992, as the activity designed objective of making the exploration, development and utilization of such natural resources
to gauge the level of compliance with the conditions stipulated in the ECC, [11] and in the equitably accessible to the different segments of the present as well as future generations.
EIS[12] or PD[13] submitted.[14] This is the function of the PENR and CENR offices as mandated
in DAO No. 37, Series of 1996.[15] Particularly, it provided that: (2) The State shall likewise recognize and apply a true value system that takes into account
social and environmental cost implications relative to the utilization, development and
Section 10. Compliance Monitoring conservation of our natural resources.

xxx Section 2. Mandate.- (1) The Department of Environment and Natural Resources shall be
primarily responsible for the implementation of the foregoing policy.
b. Monitoring of compliance with the proponents ECC issued pursuant to an IEE, [16] and
applicable laws, rules and regulations, shall be undertaken by the concerned PENRO and (2) It shall, subject to law and higher authority, be in charge of carrying out the States
CENRO with support from the Regional Office and/or EMB whenever necessary. constitutional mandate to control and supervise the exploration, development, utilization, and
conservation of the countrys natural resources.[19]
Hence, how could petitioner be guilty of neglecting a duty, which is not even his to begin
with? Administrative liability could not be based on the fact that petitioner was the person who However, pursuant to Executive Order No. 90, [20] the Human Settlements Regulatory
signed and approved the ECC, without proof of actual act or omission constituting neglect of Commission, which became the Housing and Land Use Regulatory Board (HLURB), is the sole
duty. regulatory body for housing and land development.[21]
In the absence of substantial evidence of gross neglect of petitioner, administrative liability
could not be based on the principle of command responsibility. [17] The negligence of petitioners
subordinates is not tantamount to his own negligence. The Fallo
It was not within the mandated responsibilities of petitioner to conduct actual monitoring of
projects. The principles governing public officers under the Revised Administrative Code of WHEREFORE, the Court REVERSES the decision of the Court of Appeals. [22] In lieu
1987 clearly provide that a head of a department or a superior officer shall not be civilly liable thereof, the Court annuls the decision of the Ombudsman in OMB-ADM-09-661,
for the wrongful acts, omissions of duty, negligence, or misfeasance of his subordinates, unless dated December 1, 1999, dismissing the petitioner from the government service, and orders his
he has actually authorized by written order the specific act or misconduct complained of. [18] reinstatement with back pay and without loss of seniority.
The investigation conducted by the Ombudsman refers to the tragic incident in Cherry Hills No costs.
Subdivision, Antipolo Rizal, where several families lost lives and homes. Despite the fact that
what was involved was a housing and land development project, petitioner, as the Regional SO ORDERED.
Executive Director for Region IV, Department of Environment and Natural Resources, was Davide, Jr., C.J., Bellosillo, Melo, Puno, Vitug, Kapunan,
found negligent because he was the one who signed and approved the ECC. Mendoza, Panganiban, Quisumbing, Buena, Ynares-Santiago, De Leon, Jr., Sandoval-
As heretofore stated, the responsibility of monitoring housing and land development Gutierrez, and Carpio, JJ., concur.
projects is not lodged with the office of petitioner. The Administrative Code of 1987 spelled out
the mandate of the Department of Environment and Natural Resources, the agency that has
authority over petitioner, which reads:
[1]
In CA-G. R. SP No. 56386, promulgated on August 25, 2000, Aquino, J., ponente, Guerrero,
Section 1. Declaration of Policy.- (1) The State shall ensure for the benefit of the Filipino and Gozo-Dadole, JJ., concurring (Petition, Annex A, Rollo, pp. 37-45).
people, the full exploration and development as well as the judicious disposition, utilization,
[2]
management, renewal and conservation of the countrys forest, mineral, land, waters, fisheries, Petition, Annex A, Rollo, pp. 37-45, at pp. 37-42.
wildlife, off-shore areas and other natural resources, consistent with the necessity of maintaining [3]
Comment filed by the Solicitor General, Rollo, pp. 80-103, at p. 89.
a sound ecological balance and protecting and enhancing the quality of the environment and the
[4]
Docketed as CA-G.R. SP No. 56386, CA Rollo, pp. 6-25.
[5]
Petition, Annex A, Rollo, pp. 37-45.
[6]
Filed on January 5, 2001, Petition, Rollo, pp. 9-35. We now give due course to the petition.
[7]
Republic Act No. 6770, Section 21. Officials Subject To Disciplinary authority; Exceptions. -
The Office of the Ombudsman shall have disciplinary authority over all elective and
appointive officials of the Government and its subdivisions, instrumentalities and
agencies, including Members of the Cabinet, local government, government-owned or
controlled corporations and their subsidiaries, except over officials who may be
removed only by impeachment or over Members of Congress, and the
Judiciary. [emphasis supplied]
[8]
Republic Act No. 6770, the Ombudsman Act of 1989.
[9]
Petitioners Memorandum, Rollo, pp. 110-153, at pp. 123-124.
[10]
Ibid., p. 124.
[11]
Environmental Compliance Certificate.
[12]
Environmental Impact Statement.
[13]
Project Description.
[14]
Sec. 3 (1.3.1.i), Article I, DAO No. 21, Series of 1992.
[15]
Sec. 10(b), Article IV, DAO No. 37, Series of 1996.
[16]
Initial Environmental Examination.
[17]
Quisumbing v. Lachica, 112 Phil. 110, 114 [1961].
[18]
Book I, Chapter 9, Section 38(3), Executive Order No. 292.
[19]
Sections 1 and 2, Chapter 1, Book IV, Title XIV, Executive Order No. 292.
[20]
Identifying the Government Agencies Essential for the National Shelter Program and
Defining their Mandates, Creating the Housing and Urban Development Coordinating
Council, Rationalizing Funding Sources and Lending Mechanisms for Home Mortgages
and for other Purposes.
[21]
Title 1, Section 1 (c) Human Settlements Regulatory Commission - The Human Settlements
Regulatory Commission, renamed as the Housing and Land Use Regulatory Board,
shall be the sole regulatory body for housing and land development. It is charged with
encouraging greater private sector participation in low-cost housing through
liberalization of development standards, simplification of regulations and
decentralization of approvals for permits and license. Executive Order No. 90.
[22]
In CA-G.R. SP No. 56386.

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