CASE DIGEST: LA BUGAL B’LAAN TRIBAL ASSOCIATION INC., ET. AL. V. V. O.

RAMOS, SECRETARY
DEPARTMENT OF ENVIRONMENT AND NATURAL RESOURCES; H. RAMOS, DIRECTOR, MINES AND
GEOSCIENCES BUREAU (MGB-DENR); R. TORRES, EXECUTIVE SECRETARY; AND WMC (PHILIPPINES) INC.
Published by arce on September 7, 2013 | Leave a response
LA BUGAL B’LAAN TRIBAL ASSOCIATION INC., et. al. v. V. O. RAMOS, Secretary Department of
Environment and Natural Resources; H. RAMOS, Director, Mines and Geosciences Bureau (MGB-DENR);
R. TORRES, Executive Secretary; and WMC (PHILIPPINES) INC.
The constitutional provision allowing the President to enter into FTAA is a exception to the rule that
participation in the nation’s natural resources is reserved exclusively to Filipinos. Provision must be
construed strictly against their enjoyment by non-Filipinos.
RA 7942 (The Philippine Mining Act) took effect on April 9, 1995. Before the effectivity of RA 7942, or
on March 30, 1995, the President signed a Financial and Technical Assistance Agreement (FTAA) with
WMCP, a corporation organized under Philippine laws, covering close to 100,000 hectares of land in
South Cotabato, Sultan Kudarat, Davao del Sur and North Cotabato. On August 15, 1995, the
Environment Secretary Victor Ramos issued DENR Administrative Order 95-23, which was later
repealed by DENR Administrative Order 96-40, adopted on December 20, 1996.
Petitioners prayed that RA 7942, its implementing rules, and the FTAA between the government and
WMCP be declared unconstitutional on ground that they allow fully foreign owned corporations like
WMCP to exploit, explore and develop Philippine mineral resources in contravention of Article XII
Section 2 paragraphs 2 and 4 of the Charter.
In January 2001, WMC – a publicly listed Australian mining and exploration company – sold its whole
stake in WMCP to Sagittarius Mines, 60% of which is owned by Filipinos while 40% of which is owned
by Indophil Resources, an Australian company. DENR approved the transfer and registration of the FTAA
in Sagittarius‘ name but Lepanto Consolidated assailed the same. The latter case is still pending before
the Court of Appeals.
EO 279, issued by former President Aquino on July 25, 1987, authorizes the DENR to accept, consider
and evaluate proposals from foreign owned corporations or foreign investors for contracts or
agreements involving wither technical or financial assistance for large scale exploration, development
and utilization of minerals which upon appropriate recommendation of the (DENR) Secretary, the
President may execute with the foreign proponent. WMCP likewise contended that the annulment of
the FTAA would violate a treaty between the Philippines and Australia which provides for the protection
of Australian investments.
ISSUES:
1. Whether or not the Philippine Mining Act is unconstitutional for allowing fully foreign-owned
corporations to exploit the Philippine mineral resources. 2. Whether or not the FTAA between the
government and WMCP is a ―service contract that permits fully foreign owned companies to exploit
the Philippine mineral resources.
HELD:
First Issue: RA 7942 is Unconstitutional
RA 7942 or the Philippine Mining Act of 1995 is unconstitutional for permitting fully foreign owned
corporations to exploit the Philippine natural resources.
Article XII Section 2 of the 1987 Constitution retained the Regalian Doctrine which states that ―All
lands of the public domain, waters, minerals, coal, petroleum, and other minerals, coal, petroleum, and
other mineral oils, all forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna,
and other natural resources are owned by the State. The same section also states that, ―the
exploration and development and utilization of natural resources shall be under the full control and
supervision of the State.
Conspicuously absent in Section 2 is the provision in the 1935 and 1973 Constitution authorizing the
State to grant licenses, concessions, or leases for the exploration, exploitation, development, or
utilization of natural resources. By such omission, the utilization of inalienable lands of the public
domain through license, concession or lease is no longer allowed under the 1987 Constitution.
Under the concession system, the concessionaire makes a direct equity investment for the purpose of
exploiting a particular natural resource within a given area. The concession amounts
to complete control by the concessionaireover the country‘s natural resource, for it is given exclusive
and plenary rights to exploit a particular resource at the point of extraction.
The 1987 Constitution, moreover, has deleted the phrase ―management or other forms of assistance
in the 1973 Charter. The present Constitution now allows only ―technical and financial assistance. The
management and the operation of the mining activities by foreign contractors, the primary feature of
the service contracts was precisely the evil the drafters of the 1987 Constitution sought to avoid.
The constitutional provision allowing the President to enter into FTAAs is an exception to the rule that
participation in the nation‘s natural resources is reserved exclusively to Filipinos. Accordingly, such
provision must be construed strictly against their enjoyment by non-Filipinos. Therefore, RA 7942 is
invalid insofar as the said act authorizes service contracts. Although the statute employs the phrase
―financial and technical agreements in accordance with the 1987 Constitution, its pertinent provisions
actually treat these agreements as service contracts that grant beneficial ownership to foreign
contractors contrary to the fundamental law.
The underlying assumption in the provisions of the law is that the foreign contractor manages the
mineral resources just like the foreign contractor in a service contract. By allowing foreign contractors
to manage or operate all the aspects of the mining operation, RA 7942 has, in effect,
conveyed beneficialownership over the nation‘s mineral resources to these contractors, leaving the
State with nothing but bare title thereto.
The same provisions, whether by design or inadvertence, permit a circumvention of the constitutionally
ordained 60-40% capitalizationrequirement for corporations or associations engaged in the
exploitation, development and utilization of Philippine natural resources.
When parts of a statute are so mutually dependent and connected as conditions, considerations,
inducements or compensations for each other as to warrant a belief that the legislature intended them
as a whole, then if some parts are unconstitutional, all provisions that are thus dependent, conditional
or connected, must fail with them.
Under Article XII Section 2 of the 1987 Charter, foreign owned corporations are limited only to merely
technical or financial assistance to the State for large scale exploration, development and utilization of
minerals, petroleum and other mineral oils.
Second Issue: RP Government-WMCP FTAA is a Service Contract
The FTAA between he WMCP and the Philippine government is likewise unconstitutional since the
agreement itself is a service contract.
Section 1.3 of the FTAA grants WMCP a fully foreign owned corporation, the exclusive right to explore,
exploit, utilize and dispose of all minerals and by-products that may be produced from the contract
area. Section 1.2 of the same agreement provides that EMCP shall provide all financing, technology,
management, and personnel necessary for the Mining Operations.
These contractual stipulations and related provisions in the FTAA taken together, grant
WMCP beneficial ownership over natural resources that properly belong to the State and are intended
for the benefit of its citizens. These stipulations are abhorrent to the 1987 Constitution. They are
precisely the vices that the fundamental law seeks to avoid, the evils that it aims to suppress.
Consequently, the contract from which they spring must be struck down.

Republic vs Naguiat
Natural Resources and Environmental Laws

G.R. No. 134209; January 24, 2006

FACTS:
Celestina Naguiat filed an application for registration of title to four parcels of land located in Panan,
Botolan, Zambales. The applicant alleges that she is the owner of the said parcels of land having
acquired them by purchase from its previous owners and their predecessors-in-interest who have been
in possession thereof for more than thirty (30) years; and that to the best of her knowledge, said lots
suffer no mortgage or encumbrance of whatever kind nor is there any person having any interest, legal
or equitable, or in possession thereof.
Petitioner Republic opposed 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 since 12 June 1945 or prior thereto, considering the fact that she has not established that the
lands in question have been declassified from forest or timber zone to alienable and disposable
property.

ISSUE:
Did the areas in question cease to have the status of forest or other inalienable lands of the public
domain?

HELD:
No, the said areas are still classified as forest land.The issue of whether or not respondent and her
predecessors-in-interest have been in open, exclusive and continuous possession of the parcels of land
in question is of little moment. For, unclassified land cannot be acquired by adverse occupation or
possession; occupation thereof in the concept of owner, however long, cannot ripen into private
ownership and be registered as title.
A forested area classified as forest land of the public domain does not lose such classification simply
because loggers or settlers have stripped it of its forest cover. Parcels of land classified as forest land
may actually be covered with grass or planted to crops by kaingin cultivators or other farmers. "Forest
lands" do not have to be on mountains or in out of the way places. The classification is merely
descriptive of its legal nature or status and does not have to be descriptive of what the land actually
looks like.
REPUBLIC OF THE PHILIPPINES VS CELESTINA NAGUIAT
(GR.NO. 134209, Jan. 24, 2006)
Facts:
This is an application for registration of title to four parcels of land by CelestinaNuguiat located at
Botolan, Zambales. Applicant(respondent) alleges that she is theowner of the said parcels of land having
acquired them by purchase from the LIDCorporation which likewise acquired the same from Demetria
Calderon, JosefinaMoraga, and Fausto Monje and their predecessor
–
in-interest who have been inpossession thereof for more than 30 years.The Republic filed an opposition
to the application on the ground that neitherthe applicant nor her predecessors-in-interest have been
in open, continuous, exclusiveand notorious possession and occupation of the lands in question since
June12, 1945 orprior thereto; that the monuments of title and tax payment receipts of applicant do
notconstitute competent and sufficient evidence of a bonafide acquisition of the landsapplied for, and
that the parcels of land applied for are part of the public domainbelonging to the Republic of the
Philippines not subject to private appropriation.
Issue
:Whether or not the areas in question have ceased to have the status of forestor other inalienable lands
of the public domain and the applicants registration of titlewill prosper.
Held
:
Applicant’s registration of title for said parcels of land will not prosper because
the said land is a public forest lands. Forest lands unless declassified and released bypositive act of the
Government so that they may form part of the disposable andagricultural lands of the public domain,
are not capable of private appropriation.Forests, in the context of both Public Land act and the
Constitution classifyinglands of the public domain into agricultural, forest or timber, mineral lands and
nationalparks do not necessarily refer to a large tract of woodland or an expanse covered bydense
growth of trees and underbrush.Here, respondent never presented the required certification from the
propergovernment agency or official proclamation reclassifying the land applied for asalienable and
disposable. For unclassified land, as here, cannot be acquired by adverseoccupation thereof in the
concept of owner, however long, cannot ripen into privateownership and be registered as title.

MARCOS B. COMILANG vs. HON. GENEROSO A. BUENDIAG.R. No. L-24757 October 25, 1967F
acts:
•
Nicolas Comilang staked a mining claim known as the "Bua Fraction Mineral Claim"over a parcel of
land in Tuding, Benguet, Mountain Province, with an area of 76,809square meters, more or less. He
stopped the exploration but continue to live in the
house built on a portion of the land with his wife and other relatives. In 1918, MacarioComilang and
his relatives also settled on a portion of the land with an area of about one(1) hectare, for residential
and agricultural purposes.
•
Surface rights over the area embraced in the original Bua Fraction Mineral Claim of Nicolas
Comilang soon became the subject of litigation in an action to quiet title filed inRTC of Baguio by the
other heirs against Macario claiming that they bought the rightsand interest of Nicolas Comilang in the
old mining claim.
•
The court dismissed both claims of ownership of petitioner and respondent declaring thearea as a
public land, but recognized the possession of Macario Comilang over 1½hectares which was declared
for taxation purposes but later on levied and sold at a publicauction to satisfy a money judgment
obtained by spouses Jose Coloma and EugeniaRumbaoa against Macario filed in the RTC of Baguio. The
spouses were the purchasersin the auction and the certificate of sale was issued in favor of them.
•
In the meantime, an application for lode patent covering the Bua Fraction Mineral
Claimwas filed with the Bureau of Mines. Abdon Delenela and his co-
heirs filed their opposition to the application. Pending application, Delenela filed an action for thedete
rmination of their rights on the land in the RTC of Baguio to which the said courtawarded one-half in
undivided share in the mineral claim in favor of Marcos and theother half also in undivided share in
favor of Abdon Delenela and co-heirs. Delenela,with the knowledge and conformity of Marcos
Comilang, redeemed and bought from theColoma spouses, the latter's rights, title, interest
and claim to the 1-1/2 hectares of landacquired under the certificate of sale. A writ of possession was
issued in their favor.
•
In a petition for certiorari with PI filed in the RTC of Baguio, the wife of Marcosquestioned the power
of municipal court to issue said writ of possession on two grounds(1) that conjugal property had been
levied upon and sold in the execution sale, and her share therein is affected; and (2) that there can be
no severance of surface rights over amineral claim located under the Philippine Bill of 1902, and
petitioner argued that thesheriff could not have validly sold the surface rights in the execution sale of
June 1, 1957.The court rendered a decision in said case, holding that the writ of possession issued bythe
respondent Municipal Judge was within his competence and jurisdiction. On appeal,the decision
became final.
For a second time, a petition for certiorari and mandamus with PIwas instituted byMarcos Comilang in
the RTC of Baguio City seeking the annulment of the order grantingthe alias writ of possession in favor
of Delenela and Perez, and again the Court of FirstInstance of Baguio threw out the petition in its order
dated October 22, 1964. Hence the petition.Issue: whether or not the final certificate of sale conveying
the land described in Tax
Declaration No. 4771 to the purchasers in the execution sale is not a valid disposition of a portion of t
he public domain, and specially in view of the subsequent issuance of a mineral lode patent over theBua
Mineral Claim by the Director of Mines (Patent issued on November 7, 1966) whereby fullownership
not only of the minerals therein but also of the surface ground have been conveyed tothe patentee
thereof, and, therefore, the Municipal Court of Baguio City may no longer ejectthem from the
land.Held: no. The 1-½ hectares portions of the Bua Fraction Mineral Claim described in TaxDeclaration
No. 4771 in the name of herein appellant was levied upon and sold at public auctionto satisfy the money
judgment against him in Civil Case No. 1433 of the Municipal Court of Baguio City, and the
corresponding certificate of sale was issued in favor of the judgmentcreditors. Interest acquired under
like certificates of sale alone has been described as more than alien on the property, more than an
equitable estate, an inchoate legal title to the property.The validity of that sale was questioned when
the Municipal Court ordered the eviction of appellant from the land sold on execution, and the Supreme
Court declared in L-18897 that thesale was valid. The sale operated to divest appellant of his rights to
the land which vested in the purchasers at the auction sale. The parties herein subsequently litigated
their rights to the mineralclaim in Civil Case No. 735 of the Court of First Instance of Baguio City, and
on the basis of their amicable agreement (appellant was a party in the case), the court declared the Bua
MineralClaim co-ownership property of the parties thereto "
except the improvements existing thereon
".There is no room for doubt, therefore, that the right to possess or own the surface groundis separate
and distinct from the mineral rights over the same land. And when the application for lode patent to
the mineral claim was prosecuted in the Bureau of Mines, the said applicationcould not
have legally included the surface ground sold to another in the execution sale.Consequently, We have
to declare that the patent procured thereunder, at least with respect to the1-½ hectares sold in
execution pertains only to the mineral right and does not include the surfaceground of the land in
question.
petitioner are not being transferred to another miningcompany or to a public entity interested in the
claims assuch. The land where the mineral claims were located isneeded for the Philippine Military
Academy, a public usecompletely unrelated to mining. The fact that the locationof a mining claim has
been perfected does not bar theGovernment's exercise of its power of eminent domain.The right of
eminent domain covers all forms of privateproperty, tangible or intangible, and includes rights whichare
attached to land.The petitioner next raises a procedural point-whether ornot in expropriation
proceedings an order ofcondemnation may be entered by the court before amotion to dismiss is
denied. The petitioner claims thatthis cannot be done.In the instant case of Nieto, the ruling on the
motion todismiss was deferred by the trial court in view of apossible amicable settlement. Moreover,
after the trialcourt entered an order of condemnation over theobjection of the petitioner, the court
issued an order tothe effect that the trial court." At the hearing conducted by the Board
ofCommissioners, the counsel for the petitionermanifested that its motion to dismiss was still pending
incourt, and requested that the hearing for thepresentation of evidence for the petitioner be
cancelled. At this point, negotiations between the government andthe petitioner were still going on.In
its original decision, the lower court overlooked anaward of just compensation for the petitioner.
Thistriggered off the filing of the following motions by thepetitioner: (1) motion for clarification praying
that anorder be issued clarifying the decision insofar as thecompensation to be paid to the petitioner
is concerned;(2) motion for new trial and/or reconsideration on theground that the court did not award
just compensationfor the properties of the petitioner; (3) motion to re-opencase on the ground that
the issues insofar as thepetitioner is concerned have not been joined since itsmotion to dismiss has not
been resolved; and (4) asecond motion for clarification.Under these circumstances, the petitioner is
estoppedfrom questioning the proceedings of condemnationfollowed by the court. We cannot
condone theinconsistent positions of the petitioner. (See Republic v.Court of Appeals, 133 SCRA 505).
it is very clear fromthe statements of the petitioner that it had alreadyabandoned its earlier stand on
the propriety ofexpropriation and that its intent shifted to the justcompensation to be paid by the
plaintiff for itscondemned properties.The second issue centers on the amount of justcompensation
which should be paid by the respondentto the petitioner for the condemned properties.The petitioner
assails the appellate court's approval ofthe Commissioners' Report which fixed the amount ofP7,532.46
as just compensation for the mineral claims.The petitioner contends that this amount is by anystandard
ridiculously low and cannot be considered justand that in fact the commissioners' report was rejectedby
the trial court.The P7,532.46 just compensation for the petitioner wasbased on the findings of the
Board of Commissionerswhich conducted an ocular inspection of the miningclaims with prior notice to
all the parties.However, the exploration and/or development work onthese claims is not sufficient for
making any estimate ofthe value of these claims for mining purposes. Theproperty has possibilities; but,
with the limited work doneon these claims, no ore body has as yet been found.Consequently, the value
of these claims cannot bedetermined at the present time.The petitioner's mining claims were classified
as non-producing unpatented claims. It was established that thearea of the mineral claims belonging
to the petitioner andincluded in the Philippine Military Reservation was25.1082 hectares. Hence, the
commissioners arrived atthe total amount of P7,532.46 (25.1082 x P300.00) as just compensation to be
paid to the petitioner for itsmining claims.These findings negate the trial court's observation thatthe
commissioners only took into consideration thesurface value of the mineral claims. In fact, the
lowercourt affirmed the commissioners' report to the effectthat the petitioner herein is only entitled
to the surfacevalue of the mineral claims."Other claims" include the petitioner's mining claims.Thus,
the trial court computed the amount to be paid tothe petitioner as just compensation on the basis of
thesurface value of its mining claims.We find no reason to disturb the lower court's findings onthis
matter. The petitioner has not advanced any reasonfor us to reject such findings. As stated earlier, the
appellate court based its findingson the Commissioners' Report. The petitioner nowassails the approval
of the commissioners' reportregarding the P7,532.46 just compensation to be paid bythe government
for its four (4) mining claims.While it is true that a court may reject a Commissioners'Report on the
ground that the amount allowed ispalpably inadequate, it is to be noted that the petitionerherein has
not supported its stand that the P7,532.46 just compensation for its mining claims is by anystandard
ridiculously low and cannot be considered just.We are not inclined to reject these findings of facts of
theappellate court in the absence of any contrary evidencepointed to by the petitioner.Moreover, it is
to be noted that unlike the plaintiff andother defendants, the petitioner did not file anyopposition to
the Commissioners' Report in the lowercourt.The appellate court, however, should have provided
forthe payment of legal interest from the time thegovernment took over the petitioner's mining claims
untilpayment is made by the government.The appellate court's decision is, therefore, modified inthis
respect.WHEREFORE, the decision of the Intermediate Appellate Court is MODIFIED in that the
government isdirected to pay the petitioner the amount of SEVENTHOUSAND FIVE HUNDRED THIRTY-
TWO PESOS)and 46/100 (P7,532.46) plus 6% interest from May 6,1950 to July 29, 1974 and 12%
thereafter until fully paid,and AFFIRMED in all other respects.SO ORDERED.

Apex Mining Co., Inc. v. Southeast Mindanao Gold Mining Corp. (2006)

Facts:The case involves the “Diwalwal Gold Rush Area” (Diwalwal), a rich tract of mineral landlocated
inside the Agusan-Davao-Surigao Forest Reserve in Davao del Norte and Davao Oriental. Sincethe early
1980s, Diwalwal has been stormed by conflicts brought about by numerous mining claims over it.On
March 10, 1986, Marcopper Mining Corporation (MMC) was granted an Exploration Permit(EP 133) by
the Bureau of Mines and Geo-Sciences (BMG). A long battle ensued between Apex andMMC with the
latter seeking the cancellation of the mining claims of Apex on the ground that suchmining claims were
within a forest reservation (Agusan-Davao-Surigao Forest Reserve) and thus theacquisition on mining
rights should have been through an application for a permit to prospect with theBFD and not through
registration of a DOL with the BMG. When it reached the SC in 1991, the Courtruled against Apex
holding that the area is a forest reserve and thus it should have applied for a permit to prospect with
the BFD.On February 16 1994,
MMC assigned all its rights to EP 133 to Southeast Mindanao GoldMining Corporation (SEM)
, a domestic corporation which is alleged to be a 100%-owned subsidiary of MMC. Subsequently, BMG
registered SEM’s Mineral Production Sharing Agreement (MPSA)application and the Deed of
Assignment. Several oppositions were filed. The Panel of Arbitrators created by the DENR upheld the
validity of EP 133.
During the pendency of the case, DENR AO No. 2002-18 was issued declaring anemergency situation in
the Diwalwal Gold Rush Area and ordering the stoppage of all miningoperations therein.
Issues:1.

W/N EP 133 and its subsequent transfer to SEM is valid.2.

W/N the DENR Secretary has authority to issue DAO 66 declaring 729 hectares of the areascovered by
the Agusan-Davao-Surigao Forest Reserve as non-forest lands and open to small-scale mining
purposes.3.

Who (among petitioners Apex and Balite) has priority right over Diwalwal?Held/Ratio:1.

INVALID. One of the terms and conditions of EP 133 is: “That this permit shall be for the
exclusive use and benefit of the permittee or his duly authorized agents
and shall be used for mineral exploration purposes only and for no other purpose.” While it may be
true that SEM is a100% subsidiary corporation of MMC, there is no showing that the former is the duly
authorizedagent of the latter. As such, the
assignment is null and void
as it directly contravenes the termsand conditions of the grant of EP 133.a.

The Deed of Assignment was a total abdication of MMC’s rights over the permit.
It is not amere grant of authority to SEM as agent. b.

Reason for the stipulation.

Exploration permits are strictly granted to entities or
individuals possessing the resources and capability to undertake mining operations. Without such aco
ndition, non-qualified entities or individuals could circumvent the strict requirementsunder the law by
the simple expediency of acquiring the permit from the original permittee.c.
Separate personality.
The fact that SEM is a 100% subsidiary of MMC does notautomatically make it an agent of MMC. A
corporation is an artificial being invested by lawwith a personality separate and distinct from persons
composing it as well as from that of anyother legal entity to which it may be related. Absent any clear
proof to the contrary, SEM is aseparate and distinct entity from MMC.d.

Doctrine of piercing the corporate veil inapplicable.

Only in cases where the corporatefiction was used as a shield for fraud, illegality or inequity may the
veil be pierced andremoved. The doctrine of piercing the corporate veil cannot therefore be used as a
vehicle tocommit prohibited acts. The assignment of the permit in favor of SEM is utilized tocircumvent
the condition of nontransferability of the exploration permit. To allow SEM to
avail itself of this doctrine and to approve the validity of the assignment is tantamount tosanctioning
an illegal act which is what the doctrine precisely seeks to forestall.e.

PD 463 requires approval of Secretary of DENR.

Also, PD 463 (Mineral ResourcesDevelopment Decree), which is the governing law when the assignment
was executed,explicitly requires that the transfer or assignment of mining rights, including the right
toexplore a mining area, must be with the prior approval of the Secretary of DENR. Such is not present
in this case.f.

EP 133 expired by non-renewal.

Although EP 133 was extended for 12 months until July 6,1994, MMC never renewed its permit prior
and after its expiration.With the expiration of EP 133 on July 6, 1994, MMC lost any right to the Diwalwal
Gold RushArea. SEM, on the other hand, has not acquired any right to the said area because the transfer
of EP 133 in its favor is invalid. Hence, both MMC and SEM have not acquired any vested rightover the
area covered by EP 133.2.

NO. The DENR Secretary has no power to convert forest reserves into non-forest reserves.
Such power is
vested with the President. The DENR Secretary may only recommend to the Presidentwhich forest
reservations are to be withdrawn from the coverage thereof. Thus, DAO No. 66 isnull and void for
having been issued in excess of the DENR Secretary’s authority.3.

(Since it’s been held that neither MMC nor SEM has any right over Diwalwal, it is thusnecessary to make
a
determination
of the existing right of the remaining claimants, petitioners Apex and Balite, in the dispute.)
The issue on who has priority right over Diwalwal is deemedovertaken by the issuance of Proclamation
297 and DAO No. 2002-18, both beingconstitutionally-sanctioned acts of the Executive Branch
. Mining operations in the DiwalwalMineral Reservation are now, therefore, within the full control of
the State through theexecutive branch.
Pursuant to Sec. 5 of RA 7942, the State can either: (1) directly undertake theexploration, development
and utilization of the area or (2) opt to award mining operations in themineral reservation to private
entities including petitioners Apex and Balite, if it wishes. Theexercise of this prerogative lies with the
Executive Department over which courts will notinterfere.

MINERS ASSOCIATION OF THE PHILIPPINES, INC.,

petitioner,vs.
HON. FULGENCIO S. FACTORAN, JR., Secretary of Environment and NaturalResources, and JOEL D.
MUYCO, Director of Mines and Geosciences Bureau,
respondents
G.R. No. 98332 January 16, 1995 ROMERO,
J.:

Facts:Former President Cory Aquino, exercising legislative power, issued EO211 prescribing theinterim
procedures in the processing and approval of exploration, development and utilization ofminerals. To
implement the act, Secretary of DENR promulgated AO No. 57 and 82. On 25 July1987 the then
President Aquino issued EO279 authorizing the DENR SECRETARY tonegotiate and conclude joint
venture, co-production, production sharing, development and thoseagreements involving technical or
financial assistance by foreign owned corporations for largescale EDU.Pursuant to Sec 6 of EO 279, the
DENR issued AO No.57 which provides that all existingmining leases or agreements which were
granted AFTER the affectivity of the 1987 Constitution,except small scale mining leases and those
pertaining to sand and gravel and quarry resourcescovering an area of 20 hectares or less, shall be
converted into production sharing agreementwithin one year from the effectivity of the guidelines.On
20 November 1990, Sec of DENR issued EO No. 82 laying down the Procedural Guidelineson the award
of mineral Production sharing agreement. This order provides the person or entitiesrequired to submit
a LETTER OF INTENT and MINERAL PRODUCTION SHARINGAGREEMENT within 2 years from the
effectivity of AO No.57 or until 17 July 1991. Failure todo so within the prescribed period shall cause
the abandonment of mining, quarry, gravel andsand.The Miners Association Inc assailed the validity of
the above-mentioned issuances andalleged the following:1. Sec of DENR issued both AO57 and 82 in
excess of their rule-making power under Section 6of EO279.2. The orders violate the non-impairment
of contracts provision under the bill of rights on theground the AO57 unduly pre-terminates existing
mining leases and other mining agreements andautomatically converts them into production-sharing
agreements within one year from itseffectivity date.
3. AO No.82 declares that failure to submit the LETTER OF INTENT and Mineral ProductionSharing
Agreement within 2 years from the date of effectivity of said guidelines shall cause anabandonment of
their mining, quarry, sand and gravel permits.On 13 November 1991, Continental Marble Corp sought
to intervene in the cases alleging thatthe TRO issued by the Court, the DENR Regional Office in San
Fernando Pampanga refused torenew its Mines Temporary Permit and claimed further that its rights
and interest are prejudicially affected by AO No.57 and 82.Issue:1. Whether AO57 and 82 have the
effect of abrogating the existing mining laws and unduly preterminate the existing mining leases and
agreements.Held: No.PD No. 463, as amended, pertains to the old system of EDU of natural resources
through license,concession or lease which has been disallowed by Article XII, Sec 2 of the 1987
PhilippineConstitution. By virtue of this constitutional mandate and its implementing laws,
the provisionsdealing with license, concession or leases ceased to operate as the governing laws. In
otherwords, in all areas of administration and management of mineral lands, the provision of PD463,as
amended and other existing laws still govern.Upon the effectivity of the 1987 Consti on 2 February
1987, the State assumed a moredynamic role in EDU. Article XII, Section 2 explicitly ordains that EDU
shall under the fullcontrol and supervision of the State. Given these considerations, there is no clear
showing thatthe DENR Sec has transcended the bounds demarcated in the EO279 for the exercise of
his rule-making power.Article XII, Sec 2 of the 1987 Consti does not apply retroactively to license,
concessionor lease granted by the government under the 1973 Consti or before the effectivity of the
presentConstitution. The intent to apply prospectively was stressed during the deliberations in
theConstitutional Commission.AO No. 57 applies only to all existing mining leases or agreements which
were grantedafter the effectivity of the 1987 Consti pursuant to EO No. 211. It bears to mention that
under thetext of EO211, there is a reservation clause which provides that the privileges as well as
theterms and conditions of all existing mining leases or agreements granted after the effectiviyt ofthe
present constitution shall be subject to any and all modification or alterations which the
Congress may adopt. Hence, the strictures of the non-impairment of contract clause do not applyto the
aforesaid mining leased or agreements after the effectivity of the 1987 Consti.The State in the exercise
of police power may not be precluded by the constitutionalrestriction on non-impairment of contracts.
Police power being co-extensive with the necessitiesof the case and the demands of public interest.

Republic vs. RosemoorRepublic of the Philippines vs. Rosemoor Mining and DevelopmentCorporation,
et al.G.R. No. 149927 March 30, 2004
Panganiban, J.:
Facts:
Petitioner Rosemoor Mining and Development Corporation after having beengranted permission to
prospect for marble deposits in the mountains of Biak-na-Bato, San Miguel, Bulacan, succeeded
in discovering marble deposits of high qualityand in commercial quantities in Mount Mabio which forms
part of the Biak-na-Batomountain range. The petitioner then applied with the Bureau of Mines, now
Mines and GeosciencesBureau, for the issuance of the corresponding license to exploit said
marbledeposits.License No. 33 was issued by the Bureau of Mines in favor of the herein
petitioners.Shortly thereafter, Respondent Ernesto Maceda cancelled the petitioner’s licensestating
that their license had illegally been issued, because it violated Section 69 of PD 463; and that there was
no more public interest served by the continuedexistence or renewal of the license. The latter reason
was confirmed by thelanguage of Proclamation No. 84. According to this law, public interest would
beserved by reverting the parcel of land that was excluded by Proclamation No. 2204to the former
status of that land as part of the Biak-na-Bato national park.
Issue:
Whether or not Presidential Proclamation No. 84 is valid.
Held:
Yes. We cannot sustain the argument that Proclamation No. 84 is a bill of attainder; that is, a legislative
act which inflicts punishment without judicial trial.”Its declaration that QLP No. 33 is a patent nullity is
certainly not a declaration of guilt. Neither is the cancellation of the license a punishment within the
purview of the constitutional proscription against bills of attainder. Too, there is no merit in the
argument that the proclamation is an ex post facto law.It is settled that an ex post facto law is limited
in its scope only to matters criminalin nature. Proclamation 84, which merely restored the area
excluded from the Biak-na-Bato national park by canceling respondents’ license, is clearly not penal
incharacter.Also at the time President Aquino issued Proclamation No. 84 on March 9, 1987, shewas
still validly exercising legislative powers under the Provisional Constitution of 1986. Section 1 of Article
II of Proclamation No. 3, which promulgated theProvisional Constitution, granted her legislative power
until a legislature is electedand convened under a new Constitution. The grant of such power is
also explicitlyrecognized and provided for in Section 6 of Article XVII of the 1987 Constitution.

G.R. Nos. 152613 & 152628

APEX MINING CO., INC. v. SOUTHEAST MINDANAO GOLD MINING CORP., et al.

G.R. No. 152619-20

BALITE COMMUNAL PORTAL MINING COOPERATIVE v. SOUTHEAST MINDANAO GOLD MINING CORP.,
et al.

G.R. No. 152870-71

THE MINES ADJUDICATION BOARD AND ITS MEMBERS, et al. v. SOUTHEAST MINDANAO GOLD MINING
CORPORATION

FACTS:Southeast Mindanao Gold Mining Corporation (SEM) filed a motion for reconsideration to assail
the decision of the Court which held that the assignment of Exploration Permit (EP) 133 in favor of SEM
violated a condition in the permit which provides that the EP 133 shall be for the exclusive use and
benefit of Marcopper Mining Corporation (MMC) or its duly authorized agents. SEM did not submit any
evidence to prove that it was an agent of MCC. The Court also ruled that it violated Presidential Decree
No. 463 and that the EP 133 is already expired. Pursuant to Section 5 of Republic Act No. 7942 (Mining
Act of 1995), it further held that it is within the prerogative of the Executive Department to undertake
directly the mining operations of the disputed area or to award the operations to private entities
including petitioners Apex and Balite, subject to applicable laws, rules and regulations, and provided
that these private entities are qualified. Apex and Balite asked the Court to order the Mines and
Geosciences Board (MGB) to accept their application for exploration permit. CamiloBanad, et al., also
filed a motion for reconsideration and prayed that the disputed area be awarded to them.
ISSUES: (1) Whether the transfer or assignment of Exploration Permit (EP) 133 by MMC to SEM was
validly made without violating any of the terms and conditions set forth in Presidential Decree No. 463
and EP 133 itself;
(2) WhetherSoutheast Mindanao Mining Corp. acquired a vested right over the disputed area, which
constitutes a property right protected by the Constitution;
(3)Whether the assailed Decision dated 23 June 2006 of the Third Division in this case is contrary
to and overturns the earlier Decision of this Court in Apex v. Garcia (G.R. No. 92605, 16 July 1991, 199
SCRA 278);
(4)Whether the issuance of Proclamation No. 297 declaring the disputed area as mineral reservation
outweighs the claims of SEM, Apex Mining Co. Inc. and Balite Communal Portal Mining Cooperative
over the Diwalwal Gold Rush Area;
(5)Whether the issue of the legality/constitutionality of Proclamation No. 297 was belatedly raised.

HELD: (1) Exploration Permit 133 was issued in favor of MMC on 10 March 1986, when PD No. 463 was
still the governing law. An exploration permit cannot be assigned without the imprimatur of the
Secretary of the DENR. Exploration permits are strictly granted to entities or individuals possessing the
resources and capability to undertake mining operations. While PD No. 463 has already been repealed
by EO No. 279, the administrative aspect of the former law nonetheless remains applicable. Hence, the
transfer or assignment of exploration permits still needs the prior approval of the Secretary of the
DENR. Not only did the assignment of EP 133 to SEM violate Section 97 of Presidential Decree No. 463,
it likewise transgressed one of the conditions stipulated in the grant of the said permit. Furthermore,
with the expiration of EP 133 on 6 July 1994, MMC lost any right to the Diwalwal Gold Rush Area.
(2) SEM did not acquire vested right over the disputed area because its supposed right was extinguished
by the expiration of its exploration permit and 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, such is a mere license that can be withdrawn by the State. In fact, the same has been withdrawn
by the issuance of Proclamation No. 297, which places the disputed area under the full control of the
State through the Executive Department.
(3) 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 were not attendant in the latter, such as the expiration
of EP 133, the violation of the condition embodied in EP 133 prohibiting its assignment, and the
unauthorized and invalid assignment of EP 133 by MMC to SEM, since this assignment was effected
without the approval of the Secretary of DENR.
(4) Assuming that SEM has a valid exploration permit, it cannot assert any mining right over the disputed
area, since the State has taken over the mining operations therein, pursuant to Proclamation No. 297.
Since the Executive Department has control over the exploration, development and utilization of the
resources in the disputed area, SEM’s exploration permit, assuming that it is still valid, has been
effectively withdrawn. The exercise of such power through Proclamation No. 297 is in accord with jura
regalia, where the State exercises its sovereign power as owner of lands of the public domain and the
mineral deposits found within, pursuant to Article XII, Section 2 of the 1987 Constitution.
(5) The issue of the constitutionality and the legality of Proclamation No. 297 was raised belatedly, as
SEM questions the same for the first time in its 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
existing statutes.
The motion for reconsideration of CamiloBanad, et al. cannot be passed upon because they are not
parties to the instant cases. The prayers of Apex and Balite asking the Court to direct the MGB to accept
their applications for exploration permits cannot be granted, since it is the Executive Department that
has the prerogative to accept such applications, if ever it decides to award the mining operations in the
disputed area to a private entity. The Court cannot pass upon the issue of whether or not MMC
complied with the mandatory exploration work program, as such was a non-issue and was not raised
before the Court of Appeals and the lower tribunals.
The Motions for Reconsideration filed by CamiloBanad, et al. and Southeast Mindanao Gold Mining
Corporation are denied for lack of merit. The Motion for Clarification of Apex Mining Co., Inc. and the
Manifestation and Motion of the Balite Communal Portal Mining Cooperative, insofar as these
motions/manifestation ask the Court to direct the Mines and Geo-Sciences Bureau to accept their
respective applications for exploration permits, are denied. The Manifestation and Urgent Motion
dated 25 January 2007 of Southeast Mindanao Gold Mining Corporation is denied.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-17597 February 7, 1922
E. W. McDANIEL, petitioner,
vs.
Honorable GALICANO APACIBLE, Secretary of Agriculture and Natural Resources of the Philippine
Islands, and
JUAN CUISIA, respondents.
Ross & Lawrence for petitioner.
Acting Attorney-General Tuason for respondents.
JOHNSON, J.:
This is an original action commenced in the Supreme Court for the writ of prohibition. Its 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 is particularly described in
paragraph 6 of the petition. To the petition the respondent Galicano 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:
1. That on or about the 7th day of June, 1916, the petitioner entered upon and located, in accordance
with the provisions of Act of Congress of July 1, 1902, as well as the provisions of Act No. 624 of the
Philippine Commission, three petroleum placer 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;
2. That on or about the 15th day of July, 1916, the plaintiff recorded in the office of the mining recorder
in the municipality of Lucena, Province of Tayabas, Philippine Islands, notices of location of the
aforesaid three placer claims under the names of "Maglihi No. 1," "Maglihi No. 2," and "Maglihi No. 3;"
3. That the plaintiff, at all times since the 7th day of June, 1916, has remained in open and continuous
possession of said three mineral placer claims;
4. That plaintiff, in the year 1917 and in each year thereafter, performed not less than two hundred
pesos (P200) worth of labor on each of the said three mineral claims;
5. That in the year 1918 plaintiff drilled five wells on the said three mineral claims, and by means of
such wells in the said year (1918) made discoveries of petroleum on each of the said three claims;
6. That on or about the 18th day of June, 1921, the respondent Juan Cuisia made application to the
respondent Galicano Apacible, as Secretary of Agriculture and Natural Resources, under the provisions
of Act No. 2932 of the Philippine Legislature, for a lease of a parcel of petroleum land in the municipality
of San Narciso, Province of Tayabas, Philippine Islands, which said parcel of land included within its
boundaries 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;
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 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," located and held by him as above recited;
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; and
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 grant the application for the said lease of the
respondent Juan Cuisia, and to place him (Juan Cuisia) in possession of the said three mineral claims
located and held by the petitioner.
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
located and held, and upon which discoveries of petroleum oil have been made, is void and
unconstitutional, in that it deprives the petitioner of his property without due process of law and
without compensation, and that the defendant Galicano Apacible, as Secretary of Agriculture and
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 prohibition be
issued out of this court, directing and prohibiting the respondent Galicano 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 support of his
demurrer, contends: (a) That the acts complained of are in conformity with the authority given by Act
No. 2932; (b) that the petitioner has no vested right in the three mineral claims; and (c) that the
demurrer puts squarely in issue the constitutionality of Act No. 2932.
Act No. 2932 was approved on the 31st day of August, 1920. Section 1 provides that "all public
lands containing petroleum or other mineral oils and gas, on which no patent, at the date this Act takes
effect, has been issued, are hereby withdrawn from sale and are declared to be free and 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 their respective claims,
provided they file a petition to that effect within six months from the date of the approval of this Act."
Section 2 provides that "all such lands (public lands) may be leased by the Secretary of Agriculture and
Natural Resources in the manner and subject to the rules prescribed by the Council of State."
It will be noted from the provisions of said Act No. 2932 that "all public lands containing petroleum,
etc., on which no patent, at the date this Act takes effect (August 31, 1920), has been issued, are hereby
withdrawn from sale and are declared to be free and open to exploration, location, and lease," with a
preference, however, in favor of those who had therefore filed 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 open to exploration, location and lease," without
any preference to any claim or right which citizens of the Philippine Islands or the United States had
therefore acquired in any public lands, and that the only right left to them is one of "preference," and
that even the preference was limited for a period of six months from the 31st day of August, 1920.
The petitioner contends, that, having located and held, and having discovered petroleum oil upon the
said claims prior to the 31st day of August, 1920, he had acquired a property right in his three claims;
and that said Act No. 2932 had deprived him of that right without due process of law, in contravention
of paragraph 1 of section 3 of Act of Congress of August 29, 1916, and that said Act was therefore
unconstitutional and void. In support of the contention the petitioner cites many authorities.
Mr. Lindlay, one of the highest authorities on Mining Law, has discussed extensively the question now
before us. (Lindlay on Mines, vol. I, sections 322, 539.)
The general rule is that a perfected, valid appropriation of public mineral lands operates as
a withdrawal of the tract from the body of the public domain, and so long as such appropriation remains
valid and subsisting, the land covered thereby is deemed private property. A mining claim perfected
under the law is property in the highest sense, which may be sold and conveyed and will pass by
descent. It has the effect of a grant (patent) by the United States of the right of present and exclusive
possession of the lands located. And even though the locator may obtain a patent to such lands, his
patent adds but little to his security. (18 Ruling Case Law, p. 1152 and cases cited.)
The owner of a perfected valid appropriation of public mineral lands is entitled to the exclusive
possession and enjoyment against every one, including the Government itself. Where there is a valid
and perfected location of a mining claim, the area becomes segregated from the public domain and the
property of the locator.
It was said by the Supreme Court of the State of Oregon, "The Government itself cannot abridge the
rights of the miner to a perfected valid location of public mineral land. The Government may not
destroy the locator's right by withdrawing the land from entry or placing it in a state of reservation."
(Belk vs. Meagher, 104 U.S., 279; Sullivan vs. Iron Silver Mining Co., 143 U.S., 431.)
A valid and subsisting location of mineral land, made and kept up in accordance with the provisions of
the statutes of the United States, has the effect of a grant by the United States of the present and
exclusive possession of the lands located, and this exclusive right of possession and enjoyment
continues during the entire life of the location. There is no provision for, no suggestion of, a prior
termination thereof. (Gwillim vs. Donnellan, 115 U.S., 45; Clipper Mining Co. vs. Eli Mining and Land
Co., 194 U.S., 220.)
There is no pretense in the present case that the petitioner has not complied with all the requirements
of the law in making the location of the mineral placer claims in question, or that the claims in question
were ever abandoned or forfeited by him. The respondents may claim, however, that inasmuch as a
patent has not been issued to the petitioner, he has acquired no property right in said mineral claims.
But the Supreme Court of the United States, in the cases of Union Oil Co. vs. Smith (249 U.S., 337), and
St. Louis Mining and Milling Co. vs. Montana Mining Co. (171 U.S., 650), held that even without a patent,
the possessory right of a locator after discovery of minerals upon the claim is a property right in the
fullest sense, unaffected by the fact that the paramount title to the land is in the United States. There
is no conflict in the rulings of the Court upon that question. With one voice they affirm that when the
right to a patent exists, the full equitable title has passed to the purchaser or to the locator with all the
benefits, immunities, and burdens of ownership, and that no third party can acquire from the
Government any interest as against him. (Manuel vs. Wulff, 152 U.S., 504, and cases cited.)
Even without a patent, the possessory right of a qualified locator after discovery of minerals upon the
claim is a property right in the fullest sense, unaffected by the fact that the paramount title to the land
is in the Government, and it is capable of transfer by conveyance, inheritance, or devise. (Union Oil Co.
vs. Smith, 249 U.S., 337; Forbes vs. Jarcey, 94 U.S., 762; Belk vs. Meagher, 104 U.S., 279; Del Monte
Mining Co. vs. Last Chance Mining Co., 171 U.S., 55; Elver vs. Wood, 208 U.S., 226, 232.)
Actual and continuous occupation of a valid mining location, based upon discovery, is not essential to
the preservation of the possessory right. The right is lost only by abandonment as by nonperformance
of the annual labor required. (Union Oil Co. vs. Smith, 249 U.S., 337; Farrell vs. Lockhart, 210 U.S., 142;
Bradford vs. Morrison, 212 U.S., 389.)
The discovery of minerals in the ground by one who has a valid mineral location perfects his claim and
his location not only against third 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.
. YINLU BICOL MINING CORPORATION, Petitioner, v. TRANS-ASIA OIL AND ENERGY DEVELOPMENT
CORPORATION, Respondent.
[G.R. No. 207942, January 12, 2015, BERSAMIN, J.:]

TOPIC: PERSONS – EFFECT AND APPLICATION OF LAWS – REPEAL OF LAWS

DOCTRINE: Rights pertaining to mining patents issued pursuant to the Philippine Bill of 1902 and
existing prior to November 15, 1935 are vested rights that cannot be impaired.
FACTS:
This case involves 13 mining claims over the area located in Barrio Larap, Municipality of Jose
Panganiban, Camarines Norte, a portion of which was owned and mined by Philippine Iron Mines, Inc.
(PIMI), which ceased operations in 1975 due to financial losses.
PIMI’s portion (known as the PIMI Larap Mines) was sold in a foreclosure sale to the Manila Banking
Corporation (MBC) and Philippine Commercial and Industrial Bank (PCIB, later Banco De Oro, or BDO).
The Government then opened the area for exploration.
Trans-Asia Oil and Energy Development Corporation (Trans-Asia) then explored the area from 1986
onwards.
In 1996, it entered into an operating agreement with Philex Mining Corporation over the area, their
agreement being duly registered by the Mining Recorder Section of Regional Office No. V of the
Department of Environment and Natural Resources (DENR).
1997: Trans-Asia filed an application for the approval of Mineral Production Sharing Agreement
(MPSA) over the area in that Regional Office of the DENR, through the Mines and Geosciences Bureau
(MGB), in Daraga, Albay.
The application, which was amended in 1999, was granted on July 28, 2007 under MPSA No. 252-2007-
V, by which Trans-Asia was given the exclusive right to explore, develop and utilize the mineral deposits
in the portion of the mineral lands.
August 31 2007: Yinlu Bicol Mining Corporation (Yinlu) informed the DENR by letter that it had acquired
the mining patents of PIMI from MBC/BDO by way of a deed of absolute sale, stating that the areas
covered by its mining patents were within the areas of Trans-Asia’s MPSA
September 14, 2007: Trans-Asia informed Yinlu by letter that it would commence exploration works in
Yinlu’s areas pursuant to the MPSA, and requested Yinlu to allow its personnel to access the areas for
the works to be undertaken.
Yinlu replied that Trans-Asia could proceed with its exploration works on its own private property in
the Calambayungan area, not in the areas covered by its (Yinlu) mining patents.
TransAsia found out that the registration of its MPSA had been put on hold because of Yinlu’s request
to register the deed of absolute sale in its favor.
DENR Secretary directed MGB Regional Office V to verify the validity of the mining patents of Yinlu.
MGB Regional Office V informed the Office of the DENR Secretary that there was no record on file
showing the existence of the mining patents of Yinlu. Accordingly, the parties were required to submit
their respective position papers
DENR Sec Atienza ordered the amendment of Trans-Asia’s MPSA by excluding therefrom the mineral
lands covered by Yinlu’s mining patents
DENR Sec. Jose L. Atienza, Jr in his order found that the mining patents had been issued to PIMI in 1930
as evidenced by and indicated in PIMI’s certificates of title submitted by Yinlu; and that the patents
were validly transferred to and were now owned by Yinlu.
He rejected Trans-Asia’s argument that Yinlu’s patents had no effect and were deemed abandoned
because Yinlu had failed to register them pursuant to Section 101 of Presidential Decree No. 463, as
amended.
He refuted Trans-Asia’s contention that there was a continuing requirement under the Philippine Bill of
1902 for the mining patent holder to undertake improvements in order to have the patents subsist, and
that Yinlu failed to perform its obligation to register and to undertake the improvement, observing that
the requirement was not an absolute imposition.
He noted that the suspension of PIMI’s operation in 1974 due to financial losses and the foreclosure of
its mortgaged properties by the creditor banks (MBC/PCIB) constituted force majeure that justified
PIMI’s failure in 1974 to comply with the registration requirement under P.D. No. 463;
that the Philippine Bill of 1902, which was the basis for issuing the patents, allowed the private
ownership of minerals, rendering the minerals covered by the patents to be segregated from the public
domain and be considered private property; and
that the Regalian doctrine, under which the State owned all natural resources, was adopted only by the
1935, 1973 and 1987 Constitutions
Office of the President affirmed the DENR Sec’s Order.
Under the Philippine Constitution, there is an absolute prohibition against alienation of natural
resources. Mining locations may only be subject to concession or lease.
The only exception is where a location of a mining claim was perfected prior to November 15, 1935,
when the government under the 1935 Constitution was inaugurated, and according to the laws existing
at that time a valid location of a mining claim segregated the area from the public domain, and the
locator is entitled to a grant of the beneficial ownership of the claim and the right to a patent therefore.
The right of the locator to the mining patent is a vested right, and the Constitution recognizes such right
as an exception to the prohibition against alienation of natural resources.
The right of the appellee as the beneficial owner of the subject mining patents in this case, therefore,
is superior to the claims of appellant
The existence of the TCT’s in the name of appellee further bolsters the existence of the mining patents.
Under PD 1529, also known as the Property Registration Decree, once a title is cleared of all claims or
where none exists, the ownership over the real property covered by the Torrens title becomes
conclusive and indefeasible even as against the government.
CA: It agreed with the DENR Secretary and the OP that Yinlu held mining patents over the disputed
mining areas, but ruled that Yinlu was required to register the patents under PD No. 463 in order for
the patents to be recognized in its favor.
It found that Yinlu and its predecessors-in-interest did not register the patents pursuant to PD No. 463;
hence, the patents lapsed and had no more effect
Yinlu asserts the following:
The mining patents of Yinlu were registered pursuant to Act No. 496 (Land Registration Act of 1902) in
relation to the Philippine Bill of 1902 (Act of Congress of July 1 , 1902), the governing law on the
registration of mineral patents, were valid, existing and indefeasible.
Section 21 of the Philippine Bill of 1902: allowed citizens of the United States and of the Philippine
Islands to explore, occupy and purchase mineral lands
Section 27 of the Philippine Bill of 1902: after the exploration and claim of the mineral land, the owner
of the claim and of the mineral patents was entitled to all the minerals found in the area subject of the
claim
its registered mineral patents, being valid and existing, could not be defeated by adverse, open and
notorious possession and prescription;
substantive rights over mineral claims perfected under the Philippine Bill of 1902 subsisted despite the
changes of the Philippine Constitution and of the mining laws
Constitution could not impair vested rights;
Section 100 and Section 101 of PD No. 463 would impair its vested rights under its mineral patents if
said provisions were applied to it;
Section 99 of PD No. 463 expressly prohibited the application of Section 100 and Section 101 to vested
rights.

ISSUE: Whether Yinlu’s mining patents constitute vested rights and could not be disregarded.

HELD: YES
A mining patent pertains to a title granted by the government for the said mining claim.
Under the 1935 Constitution, which took effect on November 15 1935, the alienation of natural
resources, with the exception of public agricultural land, was expressly prohibited.
The natural resources being referred therein included mineral lands of public domain, but not mineral
lands that at the time the 1935 Constitution took effect no longer formed part of the public domain.
Prohibition against the alienation of natural resources did not apply to a mining claim or patent existing
prior to November 15, 1935.
McDaniel v. Apacible: A mining claim perfected under the law is property in the highest sense, which
may be sold and conveyed and will pass by descent. It has the effect of a grant (patent) by the United
States of the right of present and exclusive possession of the lands located.
The owner of a perfected valid appropriation of public mineral lands is entitled to the exclusive
possession and enjoyment against everyone, including the Government itself. Where there is a valid
and perfected location of a mining claim, the area becomes segregated from the public domain and the
property of the locator.
A valid and subsisting location of mineral land, made and kept up in accordance with the provisions of
the statutes of the United States, has the effect of a grant by the United States of the present and
exclusive possession of the lands located, and this exclusive right of possession and enjoyment
continues during the entire life of the location. There is no provision for, nor suggestion of, a prior
termination thereof.
Even without a patent, the possessory right of a qualified locator after discovery of minerals upon the
claim is a property right in the fullest sense, unaffected by the fact that the paramount title to the land
is in the Government, and it is capable of transfer by conveyance, inheritance, or devise.
the mining claim under consideration no longer formed part of the public domain when the provisions
of Article XII of the Constitution became effective, it does not come within the prohibition against the
alienation of natural resources; and the petitioner has the right to a patent therefor upon compliance
with the terms and conditions prescribed by law.
Although Section 100 and Section 101 of PD No. 463 require registration and annual work obligations,
Section 99 of PD No. 463 nevertheless expressly provides that the provisions of PD No. 463 shall not
apply if their application will impair vested rights under other mining laws
Section 99. Non-impairment of Vested or Acquired Substantive Rights. Changes made and new
provisions and rules laid down by this Decree which may prejudice or impair vested or acquired rights
in accordance with order mining laws previously in force shall have no retroactive effect. Provided, That
the provisions of this Decree which are procedural in nature shall prevail.
A right is vested when the right to enjoyment has become the property of some particular person or
persons as a present interest.
It is “the privilege to enjoy property legally vested, to enforce contracts, and enjoy the rights of property
conferred by existing law” or “some right or interest in property which has become fixed and
established and is no longer open to doubt or controversy”
The due process clause prohibits the annihilation of vested rights. ‘A state may not impair vested rights
by legislative enactment, by the enactment or by the subsequent repeal of a municipal ordinance, or
by a change in the constitution of the State, except in a legitimate exercise of the police power’
It has been observed that, generally, the term “vested right” expresses the concept of present fixed
interest, which in right reason and natural justice should be protected against arbitrary State action, or
an innately just an imperative right which an enlightened free society, sensitive to inherent and
irrefragable individual rights, cannot deny
Republic v. Court of Appeals: that mining rights acquired under the Philippine Bill of 1902 and prior to
the effectivity of the 1935 Constitution were vested rights that could not be impaired even by the
Government.
In the present case: the mining patents of Yinlu were issued pursuant to the Philippine Bill of 1902 and
were subsisting prior to the effectivity of the 1935 Constitution. Consequently, Yinlu and its
predecessors-in-interest had acquired vested rights in the disputed mineral lands that could not and
should not be impaired even in light of their past failure to comply with the requirement of registration
and annual work obligations.

ATOK-BIG WEDGE MINING COMPANY, INC. vs CA

G.R. No. 88883 January 18, 1991

FACTS:

Fredia Mineral claim of about nine (9) hectares situated in Tuding, Itogon, Benguet, was located
sometime between December 25, 1930 and December 31, 1930, a period of six (6) days, by A.I.
Reynolds in accordance with the provisions of the Act of Congress of July 1, 1902, better known as the
Philippine Bill of 1902, in a so-called Declaration of Location.

The said Declaration of Location of mineral claim was duly recorded in the Office of the Mining Recorder
sometime on January 2, 1931. Fredia mineral claim, together with other mineral claims, was sold by A.I.
Reynolds to Big Wedge Mining Company, the earlier corporate name of Atok Big Wedge Mining
Company, Inc. (Atok for short; herein petitioner) in a Deed of Sale executed on November 2, 1931. Since
then petitioner Atok has been in continuous and exclusive ownership and possession of said claim up
to the present .

Atok has paid the realty taxes and occupation fees for the Fredia mineral claim. The Fredia mineral
claim together with other mineral claims owned by Atok has been declared under Tax Declaration No.
9535 and that in view of Presidential Decree No. 1214 an application for lease was filed by Atok covering
the Fredia mineral claim.

On the other hand, private respondent Liwan Consi has a lot below the land of a certain Mr. Acay at
Tuding Slide, Itogon, Benguet. He constructed a house thereon sometime in 1964. The lot is covered by
Tax Declaration No. 9462. When he first constructed his house below the lot of Mr. Acay he was told
that it was not necessary for him to obtain a building permit as it was only a nipa hut. And no one
prohibited him from entering the land so he was constructing a house thereon. It was only in January
1984 when private respondent Consi repaired the said house that people came to take pictures and
told him that the lot belongs to Atok. Private respondent Consi has been paying taxes on said land which
his father before him had occupied .

On January 1984, the security guards of Atok informed Feliciano Reyes, Security Officer of Atok, that a
construction was being undertaken at the area of the Fredia mineral claim by private respondent Liwan
Consi. Feliciano Reyes instructed the cashier to go and take pictures of the construction. Feliciano Reyes
himself and other security guards went to the place of the construction to verify and then to the police
to report the matter.
On March 1, 1984, Atok filed a complaint for forcible entry and detainer against Liwan Consi , which
was dismissed after due hearing by the MTC of Itogon in favor of Liwan Consi. Petitioner ATOK appealed
to the RTC of Baguio, which reversed the decision of the MTC, ordering defendant Liwan Consi to vacate
the premises of the Fredia Mineral claim, restoring possession thereof to the plaintiff Atok Big Wedge
Mining Company. Defendant Liwan Cosi was further ordered to remove and demolish the house he
constructed in the premises of the land of Fredia Mineral claim.

In a petition for review filed by Liwan Consi with the CA, the CA rendered its decision dismissing the
subject forcible entry action, and further rule in part that: Liwan Consi had a possessory right over the
property which may mature into ownership on the basis of long-term possession under the Public Land
Law. Thus, it held that both Consi and ATOK are of equal footing with regards to the subject lot, holding
possessory titles to the land. The petitioner through its long term occupancy while respondent mining
firm being the claim locator and applicant for lease on the mineral claim.

ATOK filed a motion for reconsideration, which was denied by the CA. Hence, this petition.

ISSUE:
Whether or not an individual's long term occupation of land of the public domain vests him with such
rights over the same as to defeat the rights of the owner of that claim.

HELD:

It is of no importance whether Benguet and Atok had secured a patent for as held in the Gold Creek
Mining Corporation case, for all physical purposes of ownership, the owner is not required to secure a
patent as long as he complies with the provisions of the mining laws; his possessory right, for all
practical purposes of ownership, is as good as though secured by patent (Republic v. Court of Appeals,
160 SCRA 228 [1988]).

In the case at bar, the evidence on record pointed that the petitioner Atok has faithfully complied with
all the requirements of the law regarding the maintenance of the said Fredia Mineral Claim.

The perfection of the mining claim converted the property to mineral land and under the laws then in
force removed it from the public domain. By such act, the locators acquired exclusive rights over the
land, against even the government, without need of any further act such as the purchase of the land or
obtaining of a patent over it. As the land had become the private property of the locators, they had the
right to transfer the same, as they did, to Benguet and Atok .

As in the instant petition, the record shows that the lot in question was acquired through a Deed of Sale
executed between Atok and Fredia Mineral Claim.
It is, therefore, evident that Benguet and Atok have exclusive rights to the property in question by virtue
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 vested rights existing
at the time of its adoption. The land was not and could not have been transferred to the private
respondents by virtue of acquisitive prescription, nor could its use be shared simultaneously by them
and the mining companies for agricultural and mineral purposes (Ibid).

On the matter of possession, private respondent contends that his predecessor-in-interest has been in
possession of said lot even before the war and has in fact cultivated the same. Since the subject lot is
mineral land, private respondent's possession of the subject lot no matter how long did not confer upon
him possessory rights over the same.

Furthermore, Article 538 of the New Civil Code provides:

Art. 538. Possession as a fact cannot be recognized at the same time in two different personalities
except in the cases of co-possession. Should a question arise regarding the fact of possession, the
present possessor shall be preferred; if there are two possessors, the one longer in possession; if the
dates of the possession are the same, the one who presents a title; and if all these conditions are equal,
the thing shall be placed in judicial deposit pending determination of its possession or ownership
through proper proceedings.

Since 1931 up to the present, petitioner ATOK has been in continuous and exclusive possession of the
Fredia mineral claim while private respondent's possession started only sometime in 1964 when he
constructed a house thereon. Clearly, ATOK has superior possessory rights than private respondent,
Liwan Consi, the former being "the one longer in possession."

It is therefore clear that from the legal viewpoint it was really petitioner who was in actual physical
possession of the property. Having been deprived of this possession by the private respondent,
petitioner has every right to sue for ejectment.

With this ruling enunciated by the Court, it can further be declared and held that petitioner Atok has
the exclusive right to the property in question.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 85904 August 21, 1990
TEODORO MEDRANA, petitioner,
vs.
OFFICE OF THE PRESIDENT and SUPREME AGGREGATES CORPORATION, respondents.
Abelardo Albis, Jr. for petitioner.
Benigno Ignacio for Supreme Aggregates Corporation.
RESOLUTION

FELICIANO, J.:
In this Special Civil Action for Certiorari, petitioner Teodoro Medrana asks us to set aside the decision
of the Office of the President dated 20 September 1988 in O.P. Case No. 2143. In that decision, the Hon.
Magdangal B. Elma, Deputy Executive Secretary, acting "by authority of the President, set aside a
decision of the then Minister of Natural Resources dated 7 May 1982 and reinstated a decision of the
Director of Mines dated 13 March 1981.
This controversy, which began in 1979, relates to Mining Lease Contract ("MLC") No. V-754 which the
then Secretary of Agriculture and Natural Resources issued to private respondent Supreme Aggregates
Corporation ("Supreme Aggregates") on 30 June 1969. This Mining Lease Contract has a lifetime of
twenty-five (25) years and covers twenty-two (22) mining claims for volcanic cinder, etc., situated in
Calamba, Laguna Province and Sto. Tomas, Batangas Province.
On 17 May 1974, P.D. No. 463 known as "The Mineral Resources Development Decree of 1974" was
promulgated. Sections 100 and 101 of P.D. No. 463 provided as follows:
Sec. 100. Old Valid Mining Rights May Come Under This Decree. — Holders of valid and subsisting
mining locations and other rights under other laws, irrespective of the areas covered, may avail of the
rights and privileges granted under this Decree by making the necessary application therefor and
approval thereof by the Director within a period of two (2) years from the date of approval of this
Decree.
Sec. 101. Recognition and Survey of Old Subsisting Mining Claims. All mining grants, patents, locations,
leases and permits subsisting at the time of the approval of this Decree shall be recognized if registered
pursuant to Section 100 thereof-Provided, That Spanish Royal Grants and unpatented mining claims
located and registered under the Act of the United States Congress of July 1, 1902, as amended,
otherwise known as the 'Philippine Bill' shall be surveyed within one (1) year from the approval of this
Decree: Provided, further, That no such mining rights shall be recognized if there is failure to comply
with the fundamental requirements of the respective grants And provided, finally, That such grants,
patents, locations, leases or permits as may be recognized by the Director after proper investigation
shall comply with the applicable provisions of this Decree, more particularly with the annual work
obligations, submittal of reports, fiscal provisions and other obligations. (Emphasis supplied)
On 14 May 1976, within the period prescribed in Section 100 above, Supreme Aggregates filed with the
Bureau of Mines an Application to Avail of Rights and Privileges under P.D. No. 463 which application
was required by Sections 100 and 101, above, from all claimowners and lessees desirous of maintaining
their pre-existing rights under the regime inaugurated by that decree.
On 27 February 1979, the Director of the Bureau of Mines issued an order denying Supreme Aggregates'
Application on the ground that Supreme Aggregates had failed to submit Affidavits of Annual Work
Obligations.
On 15 June 1979, the Director of Mines issued Quarry Temporary Permits ("QTPs") Nos. 85, 86 and 87
to petitioner Teodoro Medrana. These permits covered areas within the territory leased to Supreme
Aggregates under MLC No. V-754.
Fourteen days later, on 29 June 1979, Supreme Aggregates filed a petition with the Director of Mines
praying for reinstatement of its rejected Application to Avail of Rights and Privileges and for cancellation
of Medrana's QTPs Nos. 85, 86 and 87. Medrana filed an answer to this petition.
After investigation, the Director of Mines rendered a decision dated 13 March 1981 ordering the
reinstatement of Supreme Aggregates' Application to Avail of Rights and Privileges and the cancellation
of Medrana's QTPs Nos. 85, 86 and 87 since these covered areas within Supreme Aggregates' valid and
subsisting MLC No. V-754.
On appeal by Medrana, the Ministry of Natural Resources reinstated Medrana's QTPs Nos. 85, 86 and
87, and declared that Supreme Aggregates' MLC No. V-754 had lapsed. In so deciding, former Minister
of Natural Resources Teodoro Q. Peña reasoned that the order of the Bureau of Mines which had
rejected Supreme Aggregates' Application to Avail of Rights and Privileges had already become final
when Supreme Aggregates filed its petition for reinstatement of its Application on 29 June 1979, that
is, one hundred and twenty (120) days after its receipt of the Bureau of Mines order of denial. Former
Minister Pena further held that the failure of Supreme Aggregates to file an Application to Avail of
Rights and Privileges under P.D. No. 463 caused its Mining Lease Contract to lapse and opened the
leased area to relocation. 1
Supreme Aggregates then filed an appeal with the Office of the President. The Office of the President,
as already noted, in a decision dated 20 September 1988, reversed the decision of the Minister of
Natural Resources and in essence held that the failure to submit Affidavits of Annual Work Obligations
for two (2) consecutive years did not, by itself and standing alone, result in the automatic cancellation
of MLC No. V-754.
In the instant Petition for Certiorari, petitioner Medrana submits that the Office of the President acted
with grave abuse of discretion, amounting to lack of jurisdiction, in reinstating Supreme Aggregates'
MLC No. V-754 and cancelling petitioner's QTPs for the following reasons:
1. Private respondent Supreme Aggregates had abandoned its Mining Lease Contract by failing to
comply with the mandatory requirements of Section 27 of P.D. No. 463.
2. The Bureau of Mines had declared the quarry covered by MLC No. V-754 as open for relocation of
claims by virtue of the cancellation of that MLC. Moreover, petitioner Medrana, being registered owner
of much of the land covered by MLC No. V-754, claims a preferential right to exploit the said quarry
under Section 67 of P.D. No. 463.
3. Even before the issuance of QTPs Nos. 85, 86 and 87 to petitioner, the order of the Director of Mines
denying Supreme Aggregates' Application had already become final and executory five (5) days from
receipt of that order by private respondent Supreme Aggregates.
We consider below petitioner's contentions seriatim. We note, preliminarily, that under Section 5 of
P.D. No. 309, from a decision of the Secretary of Natural Resources in cases involving conflicting mining
claims, an appeal may be taken within five (5) days to the President "whose decision shall be final and
executory". Clearly, therefore, further appeal from or review of the decision of the Office of the
President is not available to petitioner. To succeed, petitioner must show that the Office of the
President committed a grave abuse of discretion, or acted without or in excess of its jurisdiction, in
rendering the decision he assails.
1. In the form it existed at the relevant time i.e., February 1979-Section 27 of P.D. No. 463, as amended
by P.D. No. 1385, read as follows:
Sec. 27. Proof of Annual Work Obligations. — The claimowner/ lessee shall submit proof of compliance
with the annual work obligations by filing an affidavit therefor and the statement of expenditures and
technical report in the prescribed form in support thereof with the Mines Regional Officer within sixty
(60) days from the end of the year in which the work obligation is required: Provided, That failure of
the claimowner to comply therewith for two (2) consecutive years shall constitute automatic
abandonment of the mining claims: Provided, Further, That, if it is found upon field verification that no
such work was actually done on the mining claims, the claimowner/lessee shall likewise lose all his
rights thereto notwithstanding submission of the aforesaid documents. (Emphasis supplied)
Careful reading of the above-quoted Section 27 shows that abandonment of a mining claim or lease
results from failure to comply with the annual work obligations on the area covered by a mining claim
or lease for two (2) consecutive years. The precipitating event of the lapse of a mining claim or lease
contemplated in Section 27 is the failure to carry out actual work on a mining claim or lease,
and not simply the failure to submit in a timely manner the Affidavit of annual Work Obligations. That
Affidavit constitutes simply proof of compliance with the annual work obligations. 2 Execution and
submission of an Affidavit of Annual Work Obligations creates a presumption that the work obligation
was indeed carried out. This presumption is by no means a conclusive one, but is, on the contrary,
merely a prima facie one since Section 27 expressly prescribes that "if it is found upon field
verification that no such work was actually done on the mining claims, the claimowner/lessee shall
likewise lose his rights theretonotwithstanding submission of the aforesaid documents". It follows that,
conversely, failure to submit the Affidavit of Annual Work Obligations raises the presumption that no
work was actually done, but that this presumption too can be overturned by affirmative proof — e.g.
by "field verification — that the required annual work obligations had in fact been carried out on the
mining claim or leased area. To hold that the mere failure to submit the Affidavits resulted in automatic
abandonment of MLC No. V-754 notwithstanding the actual performance of work obligations, would
not only run counter to the express language of Section 27, but would also be to exalt form over
substance.
In Teodoro v. Macaraeg, 3 the Court elaborated on the notion of abandonment in the following, quite
definite, terms:
The word "abandon", in its ordinary sense, means to forsake entirely; to forsake or renounce utterly.
The dictionaries trace this word to the root Idea of "putting under a ban." The emphasis is on
the finalityand the publicity with which some thing or body is thus put in the control of another, and
hence the meaning of giving up absolutely, with intent never again to resume or claim one's rights or
interests. in other words the act of abandonment constitutes actual, absolute and irrevocable
desertion of one's right or property. In the case at bar, Macaraeg merely intended to vacate his
leasehold possession on the condition that a certain Claus be taken as his successor. Hence, his act did
not constitute desertion of his leasehold as it was a mere intended surrender of the same. And as
correctly espoused by the counsel for the respondent court, it is 'only through the actual surrender of
the land that tenancy relation terminates; no amount of intention to surrender severs the relationship'.
Furthermore, the said act of Macaraeg was not an absolute renunciation of his leasehold possession,
as it was in fact clearly conditional. 4 (Emphasis supplied)
Thus, abandonment may be said to result where there is concurrence of two (2) elements: the first
being the intent to abandon a right or claim and the second being the external act by which that
intention is expressed and carried into effect. There must, moreover, be an actual, as distinguished
from a merely projected, relinquishment of a claim or right; otherwise the right or claim is not vacated
or waived so as to be susceptible of being appropriated by the next owner. These two (2) requirements
are clearly lacking in the case at bar. The Director of Mines and public respondent Office of the President
had found that, in point of fact, private respondent Supreme Aggregates had performed its annual work
obligations. Supreme Aggregates could not therefore be said to have intended to abandon its mining
claim or lease, notwithstanding the fact that it had failed to submit the normal documentary proof of
performance of annual work obligations that is, the Affidavit of Annual Work Obligations. We agree,
therefore, with the conclusion of the Office of the President that in the instant case, there was no
abandonment, whether automatic or voluntary, of MLC No. V-754.
2. It is true that under Section 67 of P.D. No. 463, petitioner Medrana, as registered owner of
the superficies of the land here involved, had a "preferential right to exploit the quarry resources found
therein". That right, however, was simply a preferential right, and that right was ineffective to dissolve
the pre-existing or subsisting right of private respondent Supreme Aggregates. The order of 27 February
1979 of the Director of Mines, denying Supreme Aggregates' Application to Avail of Rights and
Privileges, did not have, nor did it purport to have, the effect of cancelling or declaring the automatic
abandonment of MLC No. V-754; as noted above, there simply was no legal basis for so cancelling or
declaring it as abandoned. It follows that the 27 February 1979 order did not produce the effect of
opening up the areas leased in MLC No. V-754 to location or new acquisition of lights by petitioner
Medrana, or by any other person for that matter. 5 It follows, furthermore, that petitioner's QTPs Nos.
85, 86 and 87 were not validly issued to begin with and that the express cancellation of the QTPs
decreed in the Director of Mines' decision of 13 March 1981, which formally rectified his error by
reinstating Supreme Aggregates' Application, was not even necessary being mere confirmatory of the
juridical situation.
3. We turn to the question of whether or not Supreme Aggregates' petition dated 29 June 1979 for
reinstatement of its rejected Application to Avail of Rights and Privileges and for cancellation of
Medrana's QTPs Nos. 85, 86 and 87, had been filed seasonably. It is claimed by petitioner Medrana that
that order of the Director of Mines had ipso facto cancelled Supreme Aggregates' MLC No. V-754 and
that in any case, that order of the Director of Mines had already become final and executory by the
time Supreme Aggregates filed its petition for reinstatement of its Application to Avail of Rights and
Privileges.
We have already pointed out above that the denial order of the Director of Mines did not have the
effect of ipso factocancelling MLC No. V-754. It remains only therefore to determine whether, as
petitioner contends and as the former Minister of Natural Resources held, the rejection order of the
Director of Mines became final and executory upon expiration of five (5) days from receipt thereof by
Supreme Aggregates, under Section 5 of P.D. No. 309. Section 5 of P.D. No. 309, entitled
Establishing Rules and Procedures for the Speedy Disposition or Settlement of Conflicting Mining
Claims", provides as follows:
Sec. 5. Any party not satisfied with the decision or order of the Director of Mines may, within five (5)
days from receipt thereof, appeal to the Secretary of Agriculture and Natural Resources who shall
render his decision within five (5) days from receipt of the appeal or submission of the report of the
Department panel of investigators, as the case may be. From the decision of the Secretary, an appeal
may be taken within five (5) days to the President whose decision shall be final and executory.
We agree with the Office of the President that Section 5 of P.D. No. 309 has no application to the case
at bar. As its title clearly indicates, P.D. No. 309 applies only to cases involving conflicting mining claims,
that is to say, to orders or decisions issued in adversarial or litigated proceedings involving mining claims
with conflicting or overlapping boundaries. Section 3 of P.D. No. 309 makes this clear —
Sec. 3 . ...
For the purpose of expediting the exploration and exploitation of our mineral
resources, theproceedings above-described will be so conducted so that the case so heard by the
Director of Mines and/or through the Panel of Investigators shall be a final adjudication of rights over
mining claim or claims subject to litigations and conflicts. including the exploration and exploitation
thereof.
xxx xxx xxx
(Emphasis supplied)
Section 5 of P.D. No. 309 quoted above and the five (5) days reglementary period can scarcely be made
to apply to situations where there are no opposing or contending parties, as in the case of private
respondent Supreme Aggregates' Application to Avail of Rights and Privileges with the Bureau of Mines.
It must also be recalled that when the Director of Mines on 27 February 1979 denied Supreme
Aggregates' Application to Avail of Rights and Privileges, there were as yet no conflicting claims asserted
in respect of Supreme Aggregates' leased area. Petitioner Medrana's QTPs were issued only three (3)
months after the Director of Mines had initially denied Supreme Aggregates' application.
We conclude that petitioner has entirely failed to show that Deputy Executive Secretary Magdangal
Elma had committed any error in rendering the decision of the Office of the President dated 20
September 1988. But even if petitioner had succeeded in showing that the Office of the President had
indeed misconstrued some provision of P.D. No. 463 as amended, or of the Rules and Regulations
implementing P.D. No. 463, or of P.D. No. 309, such error would still be merely an error of law or an
error of judgment and certainly not a grave abuse of discretion or an act without or in excess of
jurisdiction correctible by certiorari.
WHEREFORE, the Petition for certiorari must be, as it is hereby, DISMISSED for lack of merit and the
Decision dated 20 September 1988 of the Office of the President AFFIRMED in toto. Costs against
petitioner.
SO ORDERED.
G.R. No. 191705, March 07, 2016
BASIANA MINING EXPLORATION CORPORATION, BASIANA MINERALS DEVELOPMENT CORPORATION
AND RODNEY O. BASIANA, IN HIS OWN PERSONAL CAPACITY AS PRESIDENT AND DULY AUTHORIZED
REPRESENTATIVE OF BASIANA MINING EXPLORATION CORPORATION AND BASIANA MINING
DEVELOPMENT CORPORATION, Petitioners, v.HONORABLE SECRETARY OF THE DEPARTMENT OF
ENVIRONMENT AND NATURAL RESOURCES, AND SR METALS INC. (SRMI), Respondents.
DECISION
REYES, J.:
In this petition for review on certiorari1 under Rule 45 of the Rules of Basiana Mining Exploration
Corporation (BMEC), Basiana Mining Development Corporation (BMDC), and Rodney O. Basiana
(Basiana) (petitioners) assail the Amended Decision2 dated June 18, 2009 of the Court of Appeals (CA)
in CA-G.R. SP No. 103033, which granted the motions for reconsideration dated January 21, 20093 and
December 23, 20084 of the Honorable Secretary of the Department of Environment and Natural
Resources (DENR) and SR Metals, Inc. (SRMI), respectively, reversed and set aside the CA's
Decision5 dated December 10, 2008 and dismissed the petition for review filed by the petitioners,
among others.
The Facts

Petitioner BMEC, headed by its President Basiana, applied on July 31, 1997 for a Mineral Production
Sharing Agreement (MPSA) with the DENR for the extraction of nickel and other minerals covering an
area of 6,642 hectares in Tubay and Jabonga, Agusan del Norte, docketed as MPSA (XIII)-00014.6

Pending approval of its application, BMEC, on April 29, 2000, assigned to Manila Mining Corporation
(Manila Mining) all its rights and interest in MPSA (XIII)-00014, with the latter acknowledging BMEC as
the real and true owner of said application.7 Manila Mining, in turn, assigned on October 17, 2005, its
rights and interest to SRMI.8 A day after, or on October 18, 2005, Basiana and SRMI executed a
Memorandum of Agreement where SRMI agreed, among others, to undertake technical and geological
tests, exploration and small-scale mining operations of the site subject of MPSA (XIII)-
00014.9 Necessary permits and certificates were then issued by the DENR and the Provincial
Government of Agusan del Norte to SRMI, San R Construction Corporation (San R) and Galeo Equipment
Corporation (Galeo). Consequently, SRMI, using BMEC's application, applied for an MPSA for the
extraction of nickel, iron and cobalt on a 591-ha area in Tubay, Agusan del Norte. The application was
docketed as APSA-000014-XIII.10

On November 24, 2006, the DENR Secretary issued a cease and desist order against the mining
operations due to excess in annual production, maximum capitalization and labor cost to equipment
utilization. The Minerals Development Council, on December 7, 2006, also advised SRMI, San R and
Galeo to immediately stop all mining activities in Tubay, which were conducted under the pretext of
small-scale mining.11

Basiana then filed a complaint before the Regional Trial Court of Butuan City on May 15, 2007 for
rescission of contract, abuse of rights and damages against SRMI, docketed as Civil Case No. 5728.12 For
its part, BMEC, then already known as BMDC, also filed a complaint for breach of trust, accounting and
conveyance of proceeds, judicial confirmation of declaration of partial nullity of contract and
termination of trust, and abuse of rights with damages against SRMI, San R, Galeo, et al. on July 13,
2007, docketed as Civil Case No. 5746.13

Subsequently, the Director of the Mines and Geosciences Bureau (MGB), on January 10, 2008,
recommended the approval of APSA-000014-XIII filed by SRMI.14 Thus, BMEC and Basiana filed with
the MGB Panel of Arbitrators (MGB-POA) a petition to deny and/or disapprove and/or declare the
nullity of the application for MPSA and/or cancellation, revocation and termination of MPSA.15 Pending
resolution of the protest before the MGB-POA, the Republic of the Philippines, represented by the
DENR Secretary entered into MPSA No. 261-2008-XIII with SRMI for the development and commercial
utilization of nickel, cobalt, iron and other associated mineral deposits in the 572.64-ha area in Tubay,
Agusan del Norte.16

Hence, the herein petitioners filed a petition for review with the CA assailing the issuance of MPSA No.
261-2008-XIII on the grounds that (1) "there was clear violation of due process and the entire
proceedings was railroaded and suited for the benefit of [SRMI]," and that (2) the approval of the
application is a patent nullity and/or absolutely without any factual and legal basis.17
CA Decision dated December 10, 2008

The CA initially granted the petition and declared MPSA No. 261-2008-XIII null and void.18 According
to the CA, MPSA No. 261-2008-XIII should be stricken down for the reasons that the DENR Secretary
has no authority and jurisdiction to approve SRMI's application pending resolution by the MGB-POA of
the petitioners' protest. The CA ruled that the grounds raised by the petitioners in their protest, to wit:
(a) "the application of [SRMI] to extract mineral and dispose nickel, iron and cobalt for commercial
purposes is a falsified document;" and (b) "[SRMI] is not qualified to undertake the exploration,
development and utilization of minerals in Tubay, Agusan del Norte," involve a dispute on rights to
mining areas and fall within the jurisdiction of the MGB-POA.19

The CA also found that the petitioners adopted the wrong mode of appeal when it filed a petition for
review before it; nevertheless, it resolved to treat the petition as one for certiorari since it alleged grave
abuse of discretion on the part of the DENR Secretary in approving the application despite the pendency
of the petitioners' protest.20

SRMI filed a motion for reconsideration of the CA decision, which was granted by the CA.21
CA Amended Decision dated June 18, 2009

According to the CA, the petition for review filed by the petitioners cannot be treated as a special civil
action for certiorari for lack of jurisdictional grounds.22 The CA ruled that the approval by the DENR
Secretary of SRMFs application does not involve a quasi-judicial function since both the petitioners and
SRMI are still applicants and there was yet an adjudication of rights between them.23 The CA also ruled
that the petition for review was premature due to the absence of any decision or resolution rendered
by a competent body exercising a quasi-judicial function and the petitioners should have exhausted all
administrative remedies available before it filed the petition for review.24 The CA also stated that even
if it were to treat the petition as a special civil action for certiorari, it failed to show any grave abuse of
discretion committed by the DENR Secretary when it entered into MPSA No. 261-2008-
XIII.25 Citing Celestial Nickel Mining Exploration Corporation v. Macroasia Corporation,26 the CA ruled
that it is the DENR Secretary that has jurisdiction to cancel existing mining agreements.27 Finally, the
CA found the petitioners to have committed forum shopping as the petition for review was filed despite
the pendency of the protest with the MGB-POA.28
Petition before the Court

Hence, the present petition anchored on the ground that —

THE HONORABLE [CA], WITH DUE RESPECT, GRIEVOUSLY ERRED IN REVERSING ITS OWN RESOLUTION,
XXX, DECLARING THAT THE MPSA ISSUED BY THE [DENR] AS NULL AND VOID, BY GIVING THE
FOLLOWING SPECIOUS AND BASELESS LEGAL GROUNDS, WHICH ARE NOT IN ACCORD WITH EXISTING
LAWS AND JURISPRUDENCE: X X X.29ChanRoblesVirtualawlibrary
The petitioners insist that they made the proper recourse when they filed a petition for review with the
CA because the determination by the DENR Secretary as to the propriety of the MGB Director's
recommendation of approval and SRMFs qualification to undertake development and its compliance
with the law requires an exercise of its quasi-judicial function, and that the issue of whether the
petitioners failed to exhaust its administrative remedies when it did not await the MGB-POA's
resolution of its protest involves questions of law.30

The petitioners also take exception to the CA's use of the Celestial Nickel Mining31 case, citing alleged
differences. According to the petitioners, in Celestial Nickel Mining, the Court did not make an issue on
the remedy resorted to by Blue Ridge Mineral Corporation (Blue Ridge) and instead, delved on the
merits of the case thereby implying that the filing of a petition for certiorari resorted to by Blue Ridge
was proper. Also, Celestial Nickel Mining did not rule into the action of the DENR Secretary in entering
into the mining agreement because its issuance was not raised before the MGB Director and the DENR
Secretary and neither was it presented before the CA. This case, on the other hand, presents sufficient
grounds why the DENR Secretary's approval was illegal and tainted with grave abuse of discretion, that
is, despite that the DENR Secretary and the MGB Director knew of the existence of the protest before
the MGB-POA, the agreement was still entered into.32

SRMI, meanwhile, argues that the DENR Secretary's signing of MPSA No. 261-2008-XIII was within his
authority and that the grounds raised by the petitioners are mere rehash of the arguments raised in
the CA.33

On the other hand, the Office of the Solicitor General, who appeared for the DENR Secretary, maintains
that the CA properly dismissed the petition on ground of forum shopping.34
Ruling of the Court

Without stamping approval on the validity of MPSA No. 261-2008-XIII, the Court dismisses the petition
for the simple reason that the petitioners' recourse to the CA was erroneous.

First, the act of the DENR Secretary in approving SRMI's application and entering into MPSA No. 261-
2008-XIII is not an exercise of its quasi-judicial power; hence, it cannot be reviewed by the CA, whether
by a petition for review under Rule 43 or a special civil action for certiorari under Rule 65 of the Rules
of Court.

Depending on its enabling statute,35 administrative agencies possess distinct powers and functions -
administrative, quasi-legislative, and quasi-judicial. "Administrative power is concerned with the work
of applying policies and enforcing orders as determined by proper governmental organs."36 Quasi-
judicial or administrative adjudicator/ power, on the other hand, "is the power to hear and determine
questions of fact to which the legislative policy is to apply and to decide in accordance with the
standards laid down by the law itself in enforcing and administering the same law."37 "A government
agency performs adjudicator/ functions when it renders decisions or awards that determine the rights
of adversarial parties, which decisions or awards have the same effect as a judgment of the court."38

In the case of the DENR Secretary, its power to approve and enter into a MPSA is unmistakably
administrative in nature as it springs from the mandate of the DENR under the Revised Administrative
Code of 1987, which provides that "[t]he [DENR] shall x x x be in charge of carrying out the State's
constitutional mandate to control and supervise the exploration, development, utilization, and
conservation of the country's natural resources."39 Contrary to the petitioners' position, the
determination by the DENR Secretary as to (1) the propriety of the MGB Director's recommendation of
approval, and (2) the qualification of SRMI to undertake development and its compliance with the law,
does not involve the exercise of quasi-judicial power. Note that under Section 41 of DENR
Administrative Order (A.O.) No. 96-40, initial evaluation of an application for an MPSA is made by the
MGB Regional Office in the area covered by the application. Thereafter, the application will be reviewed
by the MGB Director for further evaluation.40 It is only after the MGB Director has evaluated the
application that the same will be forwarded to the DENR Secretary for final evaluation and approval. In
approving an MPSA, the DENR Secretary does not determine the legal rights and obligations of
adversarial parties, which are necessary in adjudication. In fact, it is only after an application is approved
that the right to undertake the project accrues on the applicant's part, and until then, no rights or
obligations can be enforced by or against any party.41 Neither does the DENR Secretary resolve
conflicting claims; rather, what is involved here is the determination whether a certain applicant
complied with the conditions required by the law, and is financially and technically capable to
undertake the contract, among others. Thus, in Republic of the Philippines v. Express
Telecommunication Co., Inc.,42 the Court stated that the powers granted to the Secretary of
Agriculture and Commerce (natural resources) by law such as granting of licenses, permits, leases and
contracts, or approving, rejecting, reinstating, or canceling applications, are all executive and
administrative in nature. It even further ruled that purely administrative and discretionary functions
may not be interfered with by the courts.43

Jurisprudence also emphasized the administrative nature of the grant by the DENR Secretary of license,
permits, lease and contracts, reiterating the distinction made in Pearson v. Intermediate Appellate
Court44 between the different mining claims/disputes, to wit:
chanRoblesvirtualLawlibrary
Decisions of the Supreme Court on mining disputes have recognized a distinction between (1) the
primary powers granted by pertinent provisions of law to the then Secretary of Agriculture and Natural
Resources (and the bureau directors) of an executive or administrative nature, such as "granting of
license, permits, lease and contracts, or approving, rejecting, reinstating or cancelling applications, or
deciding conflicting applications," and (2) controversies or disagreements of civil or contractual nature
between litigants which are questions of a judicial nature that may be adjudicated only by the courts
of justice.45 (Emphasis ours)
This distinction has been carried over under Republic Act No. 7942 (R.A. No. 7942) or the Philippine
Mining Act of 1995.46
Moreover, even assuming, for the sake of argument, that recourse to the courts may be had by the
petitioners, the circumstances of this case do not warrant its intervention at this point for the following
reasons:

For one, in their petition for review filed with the CA, the petitioners prayed that MPSA No. 261-2008-
XIII be set aside and its implementation enjoined.47 In effect, the petitioners seek a cancellation of
MPSA No. 261-2008-XIII. As earlier discussed, however, the power to approve and enter into
agreements or contracts rests primarily with the DENR Secretary. Perforce, the power to cancel an
MPSA likewise lies with the DENR Secretary. Such implied power of the DENR Secretary was upheld by
the Court in Celestial Nickel Mining.

Celestial Nickel Mining involved the cancellation of several mining lease contracts in favor of Macroasia
Corporation. The pivotal issue in said case was defined by the Court as: "who has authority and
jurisdiction to cancel existing mineral agreements under [R.A. No. 7942] in relation to [Presidential
Decree No.] 463 and pertinent rules and regulations."48 In acknowledging the DENR Secretary's power
to cancel mining agreements, the Court provided the reasons, as follows: (1) the DENR Secretary's
power to cancel mineral agreements emanates from his administrative authority, supervision,
management, and control over mineral resources under Chapter I, Title XIV of Book IV of the Revised
Administrative Code of 1987;49 (2) R.A. No. 7942 confers to the DENR Secretary specific authority over
mineral resources, which includes the authority to enter into mineral agreements on behalf of the
Government upon the recommendation of the Director and corollarily, the implied power to terminate
mining or mineral contracts;50 (3) the power of control and supervision of the DENR Secretary over the
MGB to cancel or recommend cancellation of mineral rights under R.A. No. 7942 demonstrates the
authority of the DENR Secretary to cancel or approve the cancellation of mineral agreements;51 and
(4) the DENR Secretary's power to cancel mining rights or agreements can be inferred from Section 230,
Chapter XXIV of DENR A.O. No. 96-40 on cancellation, revocation, and termination of a permit/mineral
agreement/Financial and Technical Assistance Agreement.52

Given that it is the DENR Secretary that has the primary jurisdiction to approve and cancel mining
agreements and contract, it is with the DENR Secretary that the petitioners should have sought the
cancellation of MPSA No. 261-2008-XIII, and not with the courts. The doctrine of primary jurisdiction
instructs that if a case is such that its determination requires the expertise, specialized training and
knowledge of an administrative body, relief must first be obtained in an administrative proceeding
before resort to the courts is had.53

For another, the doctrine of exhaustion of administrative remedies bars recourse to the courts at the
very first instance.
The doctrine of non-exhaustion of administrative remedies requires that resort be first made with the
administrative authorities in the resolution of a controversy falling under their jurisdiction before the
controversy may be elevated to a court of justice for review. A premature invocation of a court's
intervention renders the complaint without cause of action and dismissible.54 (Citations omitted)
The DENR Secretary, no doubt, is under the control of the President; thus, his decision is subject to
review of the latter.55 Consequently, the petitioners should have appealed its case to the Office of the
President under A.O. No. 18, series of 1987,56 instead of directly seeking review by the court.57
WHEREFORE, the petition is DENIED. The Amended Decision dated June 18, 2009 of the Court of
Appeals in CA-G.R. SP No. 103033 is AFFIRMED.

SO ORDERED.cralawlawlibrary

NARRA NICKEL MINING AND DEVELOPMENT CORP., TESORO MINING AND DEVELOPMENT, INC., and
MCARTHUR MINING, INC.,vs.REDMONT CONSOLIDATED MINES CORP.,
G.R. No. 195580 April 21, 2014
Facts: Sometime in December 2006, respondent Redmont Consolidated Mines Corp. (Redmont), a
domestic corporation organized and existing under Philippine laws, took interest in mining and
exploring certain areas of the province of Palawan. After inquiring with the Department of Environment
and Natural Resources (DENR), it learned that the areas where it wanted to undertake exploration and
mining activities where already covered by Mineral Production Sharing Agreement (MPSA) applications
of petitioners Narra, Tesoro and McArthur.

In the petitions, Redmont alleged that at least 60% of the capital stock of McArthur, Tesoro and Narra
are owned and controlled by MBMI Resources, Inc. (MBMI), a 100% Canadian corporation. Redmont
reasoned that since MBMI is a considerable stockholder of petitioners, it was the driving force behind
petitioners’ filing of the MPSAs over the areas covered by applications since it knows that it can only
participate in mining activities through corporations which are deemed Filipino citizens. Redmont
argued that given that petitioners’ capital stocks were mostly owned by MBMI, they were likewise
disqualified from engaging in mining activities through MPSAs, which are reserved only for Filipino
citizens.
On December 14, 2007, the POA issued a Resolution disqualifying petitioners from gaining MPSAs. It
held:

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

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

With respect to the applications of respondents McArthur, Tesoro and Narra for Financial or Technical
Assistance Agreement (FTAA) or conversion of their MPSA applications to FTAA, the matter for its
rejection or approval is left for determination by the Secretary of the DENR and the President of the
Republic of the Philippines.
After a careful review of the records, the CA found that there was doubt as to the nationality of
petitioners when it realized that petitioners had a common major investor, MBMI, a corporation
composed of 100% Canadians. Pursuant to the first sentence of paragraph 7 of Department of Justice
(DOJ) Opinion No. 020, Series of 2005, adopting the 1967 SEC Rules which implemented the
requirement of the Constitution and other laws pertaining to the exploitation of natural resources, the
CA used the "grandfather rule" to determine the nationality of petitioners.

Issues:

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

Held: We find the petition to be without merit.This case not moot and academic. We of this Court note
that a grave violation of the Constitution, specifically Section 2 of Article XII, is being committed by a
foreign corporation right under our country’s nose through a myriad of corporate layering under
different, allegedly, Filipino corporations. The intricate corporate layering utilized by the Canadian
company, MBMI, is of exceptional character and involves paramount public interest since it undeniably
affects the exploitation of our Country’s natural resources. The corresponding actions of petitioners
during the lifetime and existence of the instant case raise questions as what principle is to be applied
to cases with similar issues. No definite ruling on such principle has been pronounced by the Court;
hence, the disposition of the issues or errors in the instant case will serve as a guide "to the bench, the
bar and the public."35 Finally, the instant case is capable of repetition yet evading review, since the
Canadian company, MBMI, can keep on utilizing dummy Filipino corporations through various schemes
of corporate layering and conversion of applications to skirt the constitutional prohibition against
foreign mining in Philippine soil.
the Grandfather Rule or the second part of the SEC Rule applies only when the 60-40 Filipino-foreign
equity ownership is in doubt (i.e., in cases where the joint venture corporation with Filipino and foreign
stockholders with less than 60% Filipino stockholdings [or 59%] invests in other joint venture
corporation which is either 60-40% Filipino-alien or the 59% less Filipino). Stated differently, where the
60-40 Filipino- foreign equity ownership is not in doubt, the Grandfather Rule will not apply. (emphasis
supplied)
the Court finds that this case calls for the application of the grandfather rule since, as ruled by the POA
and affirmed by the OP, doubt prevails and persists in the corporate ownership of petitioners. Also, as
found by the CA, doubt is present in the 60-40 Filipino equity ownership of petitioners Narra, McArthur
and Tesoro, since their common investor, the 100% Canadian corporation––MBMI, funded them.
However, petitioners also claim that there is "doubt" only when the stockholdings of Filipinos are less
than 60%.43
The assertion of petitioners that "doubt" only exists when the stockholdings are less than 60% fails to
convince this Court. DOJ Opinion No. 20, which petitioners quoted in their petition, only made an
example of an instance where "doubt" as to the ownership of the corporation exists. It would be
ludicrous to limit the application of the said word only to the instances where the stockholdings of non-
Filipino stockholders are more than 40% of the total stockholdings in a corporation. The corporations
interested in circumventing our laws would clearly strive to have "60% Filipino Ownership" at face
value. It would be senseless for these applying corporations to state in their respective articles of
incorporation that they have less than 60% Filipino stockholders since the applications will be denied
instantly. Thus, various corporate schemes and layerings are utilized to circumvent the application of
the Constitution.
Obviously, the instant case presents a situation which exhibits a scheme employed by stockholders to
circumvent the law, creating a cloud of doubt in the Court’s mind. To determine, therefore, the actual
participation, direct or indirect, of MBMI, the grandfather rule must be used.

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

We affirm the ruling of the CA in declaring that the POA has jurisdiction over the instant case. The POA
has jurisdiction to settle disputes over rights to mining areas which definitely involve the petitions filed
by Redmont against petitioners Narra, McArthur and Tesoro. It is clear that POA has exclusive and
original jurisdiction over any and all disputes involving rights to mining areas. One such dispute is an
MPSA application to which an adverse claim, protest or opposition is filed by another interested
applicantn the case at bar, the dispute arose or originated from MPSA applications where petitioners
are asserting their rights to mining areas subject of their respective MPSA applications. Since
respondent filed 3 separate petitions for the denial of said applications, then a controversy has
developed between the parties and it is POA’s jurisdiction to resolve said disputes.

Furthermore, the POA has jurisdiction over the MPSA applications under the doctrine of primary
jurisdiction. Euro-med Laboratories v. Province of Batangas elucidates:The doctrine of primary
jurisdiction holds that if a case is such that its determination requires the expertise, specialized training
and knowledge of an administrative body, relief must first be obtained in an administrative proceeding
before resort to the courts is had even if the matter may well be within their proper jurisdiction.

IV.The Court of Appeals’ ruling that Narra, Tesoro and McArthur are foreign corporations based on the
"Grandfather Rule" is contrary to law, particularly the express mandate of the Foreign Investments Act
of 1991, as amended, and the FIA Rules.
We disagree. "Corporate layering" is admittedly allowed by the FIA; but if it is used to circumvent the
Constitution and pertinent laws, then it becomes illegal. Further, the pronouncement of petitioners
that the grandfather rule has already been abandoned must be discredited for lack of basis.

Art. XII, Sec. 2 of the Constitution provides:

Sec. 2. All lands of the public domain, waters, minerals, coal, petroleum and other mineral oils, all forces
of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural resources
are owned by the State. With the exception of agricultural lands, all other natural resources shall not
be alienated. The exploration, development, and utilization of natural resources shall be under the full
control and supervision of the State. The State may directly undertake such activities, or it may enter
into co-production, joint venture or production-sharing agreements with Filipino citizens, or
corporations or associations at least sixty per centum of whose capital is owned by such citizens. Such
agreements may be for a period not exceeding twenty-five years, renewable for not more than twenty-
five years, and under such terms and conditions as may be provided by law.

The President may enter into agreements with Foreign-owned corporations involving either technical
or financial assistance for large-scale exploration, development, and utilization of minerals, petroleum,
and other mineral oils according to the general terms and conditions provided by law, based on real
contributions to the economic growth and general welfare of the country. In such agreements, the State
shall promote the development and use of local scientific and technical resources. (emphasis supplied)

The emphasized portion of Sec. 2 which focuses on the State entering into different types of
agreements for the exploration, development, and utilization of natural resources with entities who
are deemed Filipino due to 60 percent ownership of capital is pertinent to this case, since the issues
are centered on the utilization of our country’s natural resources or specifically, mining. Thus, there is
a need to ascertain the nationality of petitioners since, as the Constitution so provides, such
agreements are only allowed corporations or associations "at least 60 percent of such capital is owned
by such citizens."

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

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

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

VI.The Court of Appeals erred when it concluded that the conversion of the MPSA Applications into
FTAA Applications were of "suspicious nature" as the same is based on mere conjectures and surmises
without any shred of evidence to show the same.
We disagree.
x x x The filing of the FTAA application on June 15, 2007, during the pendency of the case only
demonstrate the violations and lack of qualification of the respondent corporations to engage in
mining. The filing of the FTAA application conversion which is allowed foreign corporation of the earlier
MPSA is an admission that indeed the respondent is not Filipino but rather of foreign nationality who
is disqualified under the laws. Corporate documents of MBMI Resources, Inc. furnished its stockholders
in their head office in Canada suggest that they are conducting operation only through their local
counterparts.36
Respondent Redmont, in its Comment dated October 10, 2011, made known to the Court the fact of
the OP’s Decision and Resolution. In their Reply, petitioners chose to ignore the OP Decision and
continued to reuse their old arguments claiming that they were granted FTAAs and, thus, the case was
moot. Petitioners filed a Manifestation and Submission dated October 19, 2012,40 wherein they
asserted that the present petition is moot since, in a remarkable turn of events, MBMI was able to
sell/assign all its shares/interest in the "holding companies" to DMCI Mining Corporation (DMCI), a
Filipino corporation and, in effect, making their respective corporations fully-Filipino owned.

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

Selling of MBMI’s shares to DMCI -As stated before, petitioners’ Manifestation and Submission dated
October 19, 2012 would want us to declare the instant petition moot and academic due to the transfer
and conveyance of all the shareholdings and interests of MBMI to DMCI, a corporation duly organized
and existing under Philippine laws and is at least 60% Philippine-owned.56 Petitioners reasoned that
they now cannot be considered as foreign-owned; the transfer of their shares supposedly cured the
"defect" of their previous nationality. They claimed that their current FTAA contract with the State
should stand since "even wholly-owned foreign corporations can enter into an FTAA with the State."57
Petitioners stress that there should no longer be any issue left as regards their qualification to enter
into FTAA contracts since they are qualified to engage in mining activities in the Philippines. Thus,
whether the "grandfather rule" or the "control test" is used, the nationalities of petitioners cannot be
doubted since it would pass both tests.The sale of the MBMI shareholdings to DMCI does not have any
bearing in the instant case and said fact should be disregarded. The manifestation can no longer be
considered by us since it is being tackled in G.R. No. 202877 pending before this Court.1âwphi1 Thus,
the question of whether petitioners, allegedly a Philippine-owned corporation due to the sale of
MBMI's shareholdings to DMCI, are allowed to enter into FTAAs with the State is a non-issue in this
case.In ending, the "control test" is still the prevailing mode of determining whether or not a
corporation is a Filipino corporation, within the ambit of Sec. 2, Art. II of the 1987 Constitution, entitled
to undertake the exploration, development and utilization of the natural resources of the Philippines.
When in the mind of the Court there is doubt, based on the attendant facts and circumstances of the
case, in the 60-40 Filipino-equity ownership in the corporation, then it may apply the "grandfather
rule."WHEREFORE, premises considered, the instant petition is DENIED. The assailed Court of Appeals
Decision dated October 1, 2010 and Resolution dated February 15, 2011 are hereby AFFIRMED.

G.R. No. 169080

CELESTIAL NICKEL MINING EXPLORATION CORPORATION,
vs. MACROASIA CORPORATION(formerly INFANTA MINERAL AND INDUSTRIAL CORPORATION),
BLUE RIDGE MINERAL CORPORATION, and LEBACH MINING CORPORATION,

FACTS:

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

Infanta’s corporate name was then changed to Cobertson Holdings Corporation and
subsequently to its present name, Macroasia Corporation.

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

Blue Ridge, in an earlier letter-petition, also wrote the Director of Mines to seek cancellation of
mining lease contracts and other mining rights of Macroasia and another entity, Lebach Mining
Corporation (Lebach), in mining areas in Brooke’s Point.
 Celestial is the assignee of 144 mining claims covering such areas contiguous to Infanta’s (now
Macroasia) mining lode claims. Celestial also holds an MPSA with the government which covers 2,835
hectares located at Ipilan/Maasin, Brooke’s Point, Palawan and two pending applications covering
another 4,040 hectares in Barangay Mainit also in Brooke’s Point.

Celestial sought the cancellation of Macroasia’s lease contracts.

Macroasia refuted the grounds for cancellation invoked by Celestial.

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

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

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

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

Celestial and Blue Ridge made an appeal.

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

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

ISSUE:

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

HELD:

YES. It is only the Secretary of the DENR who has jurisdiction to cancel mining contracts and privileges.

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

The power of the DENR Secretary to cancel mineral agreements emanates from his administrative
authority, supervision, management, and control over mineral resources under Chapter I, Title XIV of
Book IV of the Revised Administrative Code of 1987.

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

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

The DENR Secretary’s power to cancel mining rights or agreements through the MGB can be inferred
from Sec. 230, Chapter XXIV of DENR AO 96-40 on cancellation, revocation, and termination of a
permit/mineral agreement/FTAA.
LEPANTO CONSOLIDATED MINING COMPANY v. WMC RESOURCES INTERNATIONAL PTY. LTD. and WMC
(PHILIPPINES), INC.
412 SCRA 101 (2003), THIRD DIVISION
In a contract denominated as “Tampakan Option Agreement”, respondent WMC Resources
International Pty. Ltd. (WMC), through its local subsidiary Western Mining Corporation (Philippines),
Inc. (WMCP), acquired the mining claims in Tampakan, South Cotabato of the Tampakan Companies.
The “Tampakan Option Agreement” was amended by subsequent agreements under which the
Tampakan Companies were given preferential option to acquire the shares of WMC in WMCP and
Hillcrest Inc. in the event WMC decided to sell them. WMC, by a Sale and Purchase Agreement, sold to
Lepanto Consolidated Mining Company (Lepanto) its shares of stock. As the Tampakan Companies later
availed of their preferential right under the “Tampakan Option Agreement,” a Sale and
Purchase Agreement was concluded between WMC and the Tampakan Companies over the same
shares of stock priorly purchased by Lepanto.
The Tampakan Companies notified the Director of the Mines and Geosciences Bureau (MGB) of the
DENR of the exercise of their preemptive right to buy WMC‘s equity in WMCP and Hillcrest, Inc. Lepanto
wrote the DENR Secretary about the invalidity of said agreement and reiterated its request for
the approval of its acquisition of the disputedshares.
Lepanto subsequently filed before the Regional Trial Court (RTC) of Makati a complaint against WMC,
WMCP, Tampakan Companies. WMC et al. filed before the RTC a Joint Motion to Dismiss on the ground
of forum shopping. The RTC denied WCM et al.‘s Motion to Dismiss. On appeal, the CA granted the
petition of respondents ruling that Lepanto is guilty of forum shopping. Petitioners filed a motion for
reconsideration with the CA. The CA denied said motion.
ISSUE:
Whether or not Lepanto is guilty of forum shopping
HELD:
It is clear from the proceedings before the DENR, specifically before the MGB, that the issue of which –
– between petitioner and respondent Tampakan Companies –– possesses the better right to acquire
the mining rights, claims and interests held by WMC through its local subsidiary WMCP, especially with
respect to the 1995 FTAA, had been brought to the fore. The MGB cannot just assess the qualifications
of petitioner and of the Tampakan Companies as potential transferee or assignee of the rights and
obligations of WMCP under the FTAA without also resolving the issue of which has priority of right to
become one.
True, the questioned agreements of sale between Lepanto and WMC on one hand and between WMC
and the Tampakan Companies on the other pertain to transfer of shares of stock from one entity to
another. But said shares of stock represent ownership of mining rights or interest in mining agreements.
Hence, the power of the MGB to rule on the validity of the questioned agreements of sale, which was
raised by Lepanti before the DENR, is inextricably linked to the very nature of such agreements over
which the MGB has jurisdiction under the law. Unavoidably, there is identity of reliefs that Lepanto
seeks from both the MGB and the RTC.
Forum shopping exists when both actions involve the same transactions, same essential facts and
circumstances and raise identical causes of actions, subject matter, and issues. Such elements are
evidently present in both the proceedings before the MGB and before the trial court. The case instituted
with the RTC was thus correctly ordered dismissed by the appellate court on the ground of forum
shopping. Besides, not only did Lepanto commit forum shopping but it also failed to exhaust
administrative remedies by opting to go ahead in seeking reliefs from the court even while those same
reliefs were appropriately awaiting resolution by the MGB.
Didipio Earth Savers Multipurpose Association et al vs DENR Sec Elisea Gozun et al
In 1987, Cory rolled out EO 279 w/c empowered DENR to stipulate with foreign companies when it
comes to either technical or financial large scale exploration or mining. In 1995, Ramos signed into law
RA 7942 or the Philippine Mining Act. In 1994, Ramos already signed an FTAA with Arimco Mining Co,
an Australian company. The FTAA authorized AMC (later CAMC) to explore 37,000 ha of land in Quirino
and N. Vizcaya including Brgy Didipio. After the passage of the law, DENR rolled out its implementing
RRs. Didipio petitioned to have the law and the RR to be annulled as it is unconstitutional and it
constitutes unlawful taking of property. In seeking to nullify Rep. Act No. 7942 and its implementing
rules DAO 96-40 as unconstitutional, petitioners set their sight on Section 76 of Rep. Act No. 7942 and
Section 107 of DAO 96-40 which they claim allow the unlawful and unjust “taking” of private property
for private purpose in contradiction with Section 9, Article III of the 1987 Constitution mandating that
private property shall not be taken except for public use and the corresponding payment of just
compensation. They assert that public respondent DENR, through the Mining Act and its Implementing
Rules and Regulations, cannot, on its own, permit entry into a private property and allow taking of land
without payment of just compensation.
Traversing petitioners’ assertion, public respondents argue that Section 76 is not a taking provision but
a valid exercise of the police power and by virtue of which, the state may prescribe regulations to
promote the health, morals, peace, education, good order, safety and general welfare of the
people. This government regulation involves the adjustment of rights for the public good and that this
adjustment curtails some potential for the use or economic exploitation of private property. Public
respondents concluded that “to require compensation in all such circumstances would compel the
government to regulate by purchase.”
ISSUE: Whether or not RA 7942 and the DENR RRs are valid.
HELD: The SC ruled against Didipio. The SC noted the requisites of eminent domain. They are;
(1) the expropriator must enter a private property;
(2) the entry must be for more than a momentary period.
(3) the entry must be under warrant or color of legal authority;
(4) the property must be devoted to public use or otherwise informally appropriated or
injuriously affected;
(5) the utilization of the property for public use must be in such a way as to oust the owner and
deprive him of beneficial enjoyment of the property.
In the case at bar, Didipio failed to show that the law is invalid. Indeed there is taking involved but it is
not w/o just compensation. Sec 76 of RA 7942 provides for just compensation as well as section 107 of
the DENR RR. To wit,
Section 76. xxx Provided, that any damage to the property of the surface owner, occupant, or
concessionaire as a consequence of such operations shall be properly compensated as may be provided
for in the implementing rules and regulations.
Section 107. Compensation of the Surface Owner and Occupant- Any damage done to the property of
the surface owners, occupant, or concessionaire thereof as a consequence of the mining operations or
as a result of the construction or installation of the infrastructure mentioned in 104 above shall be
properly and justly compensated.
Further, mining is a public policy and the government can invoke eminent domain to exercise entry,
acquisition and use of private lands.

JORGE GONZALES and PANEL OF ARBITRATORS vs. CLIMAX MINING LTD.,CLIMAX-ARIMCO MINING
CORP. and AUSTRALASIAN PHILIPPINES MINING INC.,G.R. No. 161957, January 22, 2007Facts: This is
a consolidation of two petitions rooted in the same disputed Addendum Contractentered into by the
parties.In one case, the Court held that the DENR Panel of Arbitrators had no jurisdiction over
thecomplaint for the annulment of the Addendum Contract on grounds of fraud and violation of
theConstitution and that the action should have been brought before the regular courts as it
involved judicial issues.Gonzales averred that the DENR Panel of Arbitrators Has jurisdiction because
the case involves a mining dispute that properly falls within the ambit of the Panel’s authority.
Respondents Climax Mining Ltd., et al., on the other hand, seek reconsideration/clarification onthe
decision holding that the case should not be brought for arbitration under R.A. No. 876.They argued
that the arbitration clause in the Addendum Contract should be treated as anagreement independent
of the other terms of the contract, and that a claimed rescission of themain contract does not avoid the
duty to arbitrate.On another case, Gonzales challenged the order of the RTC requiring him to proceed
with thearbitration proceedings while the complaint for the nullification of the Addendum Contract
was pending before the DENR Panel of Arbitrators. He contended that any issue as to the nullity,inope
rativeness, or incapability of performance of the arbitration clause/agreement raised by oneof the
parties to the alleged arbitration agreement must be determined by the court prior toreferring them
to arbitration.While Climax-Arimco contended that an application to compel arbitration under Sec. 6 of
R.A. No. 876 confers on the trial court only a limited and special jurisdiction,
i.e.
, a jurisdiction solelyto determine (a) whether or not the parties have a written contract to arbitrate,
and (b) if thedefendant has failed to comply with that contract.Issue: Whether or not arbitration is
proper even though issues of validity and nullity of theAddendum Contract and, consequently, of the
arbitration clause were raised.Ruling: Positive.In
La Naval Drug Corporation v. Court of Appeals,
the Court held that R.A. No. 876 explicitlyconfines the court's authority only to the determination of
whether or not there is an agreement inwriting providing for arbitration. In the affirmative, the statute
ordains that the court shall issuean order "summarily directing the parties to proceed with the
arbitration in accordance with theterms thereof." If the court, upon the other hand, finds that no such
agreement exists, "the proceeding shall be dismissed." The cited case also stressed that the
proceedings are summary innature.

Implicit in the summary nature of the judicial proceedings is the separable or independentcharacter of
the arbitration clause or agreement.The doctrine of separability or severability enunciates that an
arbitration agreement isindependent of the main contract. The arbitration agreement is to be treated
as a separateagreement and the arbitration agreement does not automatically terminate when the
contract ofwhich it is part comes to an end.The separability of the arbitration agreement is especially
significant to the determination ofwhether the invalidity of the main contract also nullifies the
arbitration clause. Indeed, thedoctrine denotes that the invalidity of the main contract, also referred to
as the “container” contract, does not affect the validity of the arbitration agreement. Irrespective of
the fact that themain contract is invalid, the arbitration clause/agreement still remains valid and
enforceable.The validity of the contract containing the agreement to submit to arbitration does not
affect theapplicability of the arbitration clause itself.
A contrary ruling would suggest that a party’s mere repudiation of the main contract is sufficient to
avoid arbitration. That is exactly the situationthat the separability doctrine, as well as jurisprudence
applying it, seeks to avoid.The Court added that when it declared that the case should not be brought
for arbitration, itshould be clarified that the case referred to is the case actually filed by Gonzales before
theDENR Panel of Arbitrators, which was for the nullification of the main contract on the ground
offraud, as it had already been determined that the case should have been brought before theregular
courts involving as it did judicial issues