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G.R. Nos. 171947-48, February 15, 2011 earliest possible time.

It is ordered to call regular


coordination meetings with concerned government
METROPOLITAN MANILA DEVELOPMENT departments and agencies to ensure the successful
AUTHORITY, DEPARTMENT OF ENVIRONMENT implementation of the aforesaid plan of action in
AND NATURAL RESOURCES, DEPARTMENT OF accordance with its indicated completion schedules.
EDUCATION, CULTURE AND
SPORTS, DEPARTMENT OF HEALTH, (2) Pursuant to Title XII (Local Government) of the
DEPARTMENT OF AGRICULTURE, DEPARTMENT Administrative Code of 1987 and Sec. 25 of the Local
OF PUBLIC WORKS AND HIGHWAYS, Government Code of 1991, the DILG, in exercising the
DEPARTMENT OF BUDGET AND MANAGEMENT, President's power of general supervision and its duty
PHILIPPINE COAST GUARD, PHILIPPINE to promulgate guidelines in establishing waste
NATIONAL POLICE MARITIME GROUP, AND management programs under Sec. 43 of the Philippine
DEPARTMENT OF THE INTERIOR AND LOCAL Environment Code (PD 1152), shall direct all LGUs in
GOVERNMENT, PETITIONERS, VS. CONCERNED Metro Manila, Rizal, Laguna, Cavite, Bulacan,
RESIDENTS OF MANILA BAY, REPRESENTED Pampanga, and Bataan to inspect all factories,
AND JOINED BY DIVINA V. ILAS, SABINIANO commercial establishments, and private homes along
ALBARRACIN, MANUEL SANTOS, JR., DINAH the banks of the major river systems in their respective
DELA PEÑA, PAUL DENNIS QUINTERO, MA. areas of jurisdiction, such as but not limited to the
VICTORIA LLENOS, DONNA CALOZA, FATIMA Pasig-Marikina-San Juan Rivers, the NCR
QUITAIN, VENICE SEGARRA, FRITZIE TANGKIA, (Parañaque-Zapote, Las Piñas) Rivers, the Navotas-
SARAH JOELLE LINTAG, HANNIBAL AUGUSTUS Malabon-Tullahan-Tenejeros Rivers, the Meycauayan-
BOBIS, FELIMON SANTIAGUEL, AND JAIME Marilao-Obando (Bulacan) Rivers, the Talisay (Bataan)
AGUSTIN R. OPOSA, RESPONDENTS. River, the Imus (Cavite) River, the Laguna De Bay,
and other minor rivers and waterways that eventually
RESOLUTION discharge water into the Manila Bay; and the lands
abutting the bay, to determine whether they have
VELASCO JR., J.: wastewater treatment facilities or hygienic septic tanks
as prescribed by existing laws, ordinances, and rules
and regulations. If none be found, these LGUs shall be
On December 18, 2008, this Court rendered a ordered to require non-complying establishments and
Decision in G.R. Nos. 171947-48 ordering petitioners homes to set up said facilities or septic tanks within a
to clean up, rehabilitate and preserve Manila Bay in reasonable time to prevent industrial wastes, sewage
their different capacities. The fallo reads: water, and human wastes from flowing into these
rivers, waterways, esteros, and the Manila Bay, under
WHEREFORE, the petition is DENIED. The pain of closure or imposition of fines and other
September 28, 2005 Decision of the CA in CA-G.R. sanctions.
CV No. 76528 and SP No. 74944 and the September
13, 2002 Decision of the RTC in Civil Case No. 1851- (3) As mandated by Sec. 8 of RA 9275, the MWSS is
99 are AFFIRMED but with MODIFICATIONS in view directed to provide, install, operate, and maintain the
of subsequent developments or supervening events in necessary adequate waste water treatment facilities in
the case. The fallo of the RTC Decision shall now Metro Manila, Rizal, and Cavite where needed at the
read: earliest possible time.

WHEREFORE, judgment is hereby rendered ordering (4) Pursuant to RA 9275, the LWUA, through the local
the abovenamed defendant-government agencies to water districts and in coordination with the DENR, is
clean up, rehabilitate, and preserve Manila Bay, and ordered to provide, install, operate, and maintain
restore and maintain its waters to SB level (Class B sewerage and sanitation facilities and the efficient and
sea waters per Water Classification Tables under safe collection, treatment, and disposal of sewage in
DENR Administrative Order No. 34 [1990]) to make the provinces of Laguna, Cavite, Bulacan, Pampanga,
them fit for swimming, skin-diving, and other forms of and Bataan where needed at the earliest possible
contact recreation. time.

In particular: (5) Pursuant to Sec. 65 of RA 8550, the DA, through


the BFAR, is ordered to improve and restore the
(1) Pursuant to Sec. 4 of EO 192, assigning the DENR marine life of the Manila Bay. It is also directed to
as the primary agency responsible for the assist the LGUs in Metro Manila, Rizal, Cavite,
conservation, management, development, and proper Laguna, Bulacan, Pampanga, and Bataan in
use of the country's environment and natural developing, using recognized methods, the fisheries
resources, and Sec. 19 of RA 9275, designating the and aquatic resources in the Manila Bay.
DENR as the primary government agency responsible
for its enforcement and implementation, the DENR is (6) The PCG, pursuant to Secs. 4 and 6 of PD 979,
directed to fully implement its Operational Plan for the and the PNP Maritime Group, in accordance with Sec.
Manila Bay Coastal Strategy for the rehabilitation, 124 of RA 8550, in coordination with each other, shall
restoration, and conservation of the Manila Bay at the apprehend violators of PD 979, RA 8550, and other
1
existing laws and regulations designed to prevent management, environmental protection, and like
marine pollution in the Manila Bay. subjects in the school curricula of all levels to inculcate
in the minds and hearts of students and, through them,
(7) Pursuant to Secs. 2 and 6-c of EO 513 and the their parents and friends, the importance of their duty
International Convention for the Prevention of Pollution toward achieving and maintaining a balanced and
from Ships, the PPA is ordered to immediately adopt healthful ecosystem in the Manila Bay and the entire
such measures to prevent the discharge and dumping Philippine archipelago.
of solid and liquid wastes and other ship-generated
wastes into the Manila Bay waters from vessels (11) The DBM shall consider incorporating an
docked at ports and apprehend the violators. adequate budget in the General Appropriations Act of
2010 and succeeding years to cover the expenses
(8) The MMDA, as the lead agency and implementor of relating to the cleanup, restoration, and preservation of
programs and projects for flood control projects and the water quality of the Manila Bay, in line with the
drainage services in Metro Manila, in coordination with country's development objective to attain economic
the DPWH, DILG, affected LGUs, PNP Maritime growth in a manner consistent with the protection,
Group, Housing and Urban Development Coordinating preservation, and revival of our marine waters.
Council (HUDCC), and other agencies, shall dismantle
and remove all structures, constructions, and other (12) The heads of petitioners-agencies MMDA, DENR,
encroachments established or built in violation of RA DepEd, DOH, DA, DPWH, DBM, PCG, PNP Maritime
7279, and other applicable laws along the Pasig- Group, DILG, and also of MWSS, LWUA, and PPA, in
Marikina-San Juan Rivers, the NCR (Parañaque- line with the principle of "continuing mandamus," shall,
Zapote, Las Piñas) Rivers, the Navotas-Malabon- from finality of this Decision, each submit to the Court
Tullahan-Tenejeros Rivers, and connecting waterways a quarterly progressive report of the activities
and esteros in Metro Manila. The DPWH, as the undertaken in accordance with this Decision.
principal implementor of programs and projects for
flood control services in the rest of the country more SO ORDERED.
particularly in Bulacan, Bataan, Pampanga, Cavite,
and Laguna, in coordination with the DILG, affected The government agencies did not file any motion for
LGUs, PNP Maritime Group, HUDCC, and other reconsideration and the Decision became final in
concerned government agencies, shall remove and January 2009.
demolish all structures, constructions, and other
encroachments built in breach of RA 7279 and other The case is now in the execution phase of the final and
applicable laws along the Meycauayan-Marilao- executory December 18, 2008 Decision. The Manila
Obando (Bulacan) Rivers, the Talisay (Bataan) River, Bay Advisory Committee was created to receive and
the Imus (Cavite) River, the Laguna De Bay, and other evaluate the quarterly progressive reports on the
rivers, connecting waterways, and esteros that activities undertaken by the agencies in accordance
discharge wastewater into the Manila Bay. with said decision and to monitor the execution phase.

In addition, the MMDA is ordered to establish, operate, In the absence of specific completion periods, the
and maintain a sanitary landfill, as prescribed by RA Committee recommended that time frames be set for
9003, within a period of one (1) year from finality of this the agencies to perform their assigned tasks. This
Decision. On matters within its territorial jurisdiction may be viewed as an encroachment over the powers
and in connection with the discharge of its duties on and functions of the Executive Branch headed by the
the maintenance of sanitary landfills and like President of the Philippines.
undertakings, it is also ordered to cause the
apprehension and filing of the appropriate criminal This view is misplaced.
cases against violators of the respective penal
provisions of RA 9003, Sec. 27 of RA 9275 (the Clean The issuance of subsequent resolutions by the Court is
Water Act), and other existing laws on pollution. simply an exercise of judicial power under Art. VIII of
the Constitution, because the execution of the
(9) The DOH shall, as directed by Art. 76 of PD 1067 Decision is but an integral part of the adjudicative
and Sec. 8 of RA 9275, within one (1) year from finality function of the Court. None of the agencies ever
of this Decision, determine if all licensed septic and questioned the power of the Court to implement the
sludge companies have the proper facilities for the December 18, 2008 Decision nor has any of them
treatment and disposal of fecal sludge and sewage raised the alleged encroachment by the Court over
coming from septic tanks. The DOH shall give the executive functions.
companies, if found to be non-complying, a reasonable
time within which to set up the necessary facilities While additional activities are required of the agencies
under pain of cancellation of its environmental like submission of plans of action, data or status
sanitation clearance. reports, these directives are but part and parcel of the
execution stage of a final decision under Rule 39 of the
(10) Pursuant to Sec. 53 of PD 1152, Sec. 118 of RA Rules of Court. Section 47 of Rule 39 reads:
8550, and Sec. 56 of RA 9003, the DepEd shall
integrate lessons on pollution prevention, waste
2
Section 47. Effect of judgments or final orders.--The progressive reports has shown that (1) there are
effect of a judgment or final order rendered by a court voluminous quarterly progressive reports that are
of the Philippines, having jurisdiction to pronounce the being submitted; (2) petitioner-agencies do not have a
judgment or final order, may be as follows: uniform manner of reporting their cleanup,
rehabilitation and preservation activities; (3) as yet no
x x x x definite deadlines have been set by petitioner DENR
as to petitioner-agencies' timeframe for their respective
(c) In any other litigation between the same parties of duties; (4) as of June 2010 there has been a change in
their successors in interest, that only is deemed to leadership in both the national and local levels; and (5)
have been adjudged in a former judgment or final some agencies have encountered difficulties in
order which appears upon its face to have been so complying with the Court's directives.
adjudged, or which was actually and necessarily
included therein or necessary thereto. (Emphasis In order to implement the afore-quoted Decision,
supplied.) certain directives have to be issued by the Court to
address the said concerns.
It is clear that the final judgment includes not only what
appears upon its face to have been so adjudged but Acting on the recommendation of the Manila Bay
also those matters "actually and necessarily included Advisory Committee, the Court hereby resolves
therein or necessary thereto." Certainly, any activity to ORDER the following:
that is needed to fully implement a final judgment is
necessarily encompassed by said judgment. (1) The Department of Environment and Natural
Resources (DENR), as lead agency in the Philippine
Moreover, the submission of periodic reports is Clean Water Act of 2004, shall submit to the Court on
sanctioned by Secs. 7 and 8, Rule 8 of the Rules of or before June 30, 2011 the updated Operational Plan
Procedure for Environmental cases: for the Manila Bay Coastal Strategy.

Sec. 7. Judgment.--If warranted, the court shall grant The DENR is ordered to submit summarized data on
the privilege of the writ of continuing mandamus the overall quality of Manila Bay waters for all four
requiring respondent to perform an act or series of acts quarters of 2010 on or before June 30, 2011.
until the judgment is fully satisfied and to grant such
other reliefs as may be warranted resulting from the The DENR is further ordered to submit the names and
wrongful or illegal acts of the respondent. The court addresses of persons and companies in Metro Manila,
shall require the respondent to submit periodic Rizal, Laguna, Cavite, Bulacan, Pampanga and
reports detailing the progress and execution of the Bataan that generate toxic and hazardous waste on or
judgment, and the court may, by itself or through a before September 30, 2011.
commissioner or the appropriate government
agency, evaluate and monitor compliance. The (2) On or before June 30, 2011, the Department of the
petitioner may submit its comments or observations on Interior and Local Government (DILG) shall order the
the execution of the judgment. Mayors of all cities in Metro Manila; the Governors of
Rizal, Laguna, Cavite, Bulacan, Pampanga and
Sec. 8. Return of the writ.--The periodic reports Bataan; and the Mayors of all the cities and towns in
submitted by the respondent detailing compliance with said provinces to inspect all factories, commercial
the judgment shall be contained in partial returns of the establishments and private homes along the banks of
writ. Upon full satisfaction of the judgment, a final the major river systems--such as but not limited to the
return of the writ shall be made to the court by the Pasig-Marikina-San Juan Rivers, the National Capital
respondent. If the court finds that the judgment has Region (Paranaque-Zapote, Las Pinas) Rivers, the
been fully implemented, the satisfaction of judgment Navotas-Malabon-Tullahan-Tenejeros Rivers, the
shall be entered in the court docket. (Emphasis Meycauayan-Marilao-Obando (Bulacan) Rivers, the
supplied.) Talisay (Bataan) River, the Imus (Cavite) River, and
the Laguna De Bay--and other minor rivers and
With the final and executory judgment in MMDA, the waterways within their jurisdiction that eventually
writ of continuing mandamus issued in MMDA means discharge water into the Manila Bay and the lands
that until petitioner-agencies have shown full abutting it, to determine if they have wastewater
compliance with the Court's orders, the Court treatment facilities and/or hygienic septic tanks, as
exercises continuing jurisdiction over them until full prescribed by existing laws, ordinances, rules and
execution of the judgment. regulations. Said local government unit (LGU) officials
are given up to September 30, 2011 to finish the
There being no encroachment over executive functions inspection of said establishments and houses.
to speak of, We shall now proceed to the
recommendation of the Manila Bay Advisory In case of non-compliance, the LGU officials shall take
Committee. appropriate action to ensure compliance by non-
complying factories, commercial establishments and
Several problems were encountered by the Manila Bay private homes with said law, rules and regulations
Advisory Committee.[2] An evaluation of the quarterly requiring the construction or installment of wastewater
3
treatment facilities or hygienic septic tanks. September 30, 2010 on the pollution loading into the
Manila Bay system from agricultural and livestock
The aforementioned governors and mayors shall sources.
submit to the DILG on or before December 31, 2011
their respective compliance reports which will contain (6) The Philippine Ports Authority (PPA) shall
the names and addresses or offices of the owners of incorporate in its quarterly reports the list of violators it
all the non-complying factories, commercial has apprehended and the status of their cases. The
establishments and private homes, copy furnished the PPA is further ordered to include in its report the
concerned environmental agency, be it the local DENR names, make and capacity of the ships that dock in
office or the Laguna Lake Development Authority. PPA ports. The PPA shall submit to the Court on or
before June 30, 2011 the measures it intends to
The DILG is required to submit a five-year plan of undertake to implement its compliance with paragraph
action that will contain measures intended to ensure 7 of the dispositive portion of the MMDA Decision and
compliance of all non-complying factories, commercial the completion dates of such measures.
establishments, and private homes.
The PPA should include in its report the activities of its
On or before June 30, 2011, the DILG and the mayors concessionaire that collects and disposes of the solid
of all cities in Metro Manila shall consider providing and liquid wastes and other ship-generated wastes,
land for the wastewater facilities of the Metropolitan which shall state the names, make and capacity of the
Waterworks and Sewerage System (MWSS) or its ships serviced by it since August 2003 up to the
concessionaires (Maynilad and Manila Water, Inc.) present date, the dates the ships docked at PPA ports,
within their respective jurisdictions. the number of days the ship was at sea with the
corresponding number of passengers and crew per
(3) The MWSS shall submit to the Court on or before trip, the volume of solid, liquid and other wastes
June 30, 2011 the list of areas in Metro Manila, Rizal collected from said ships, the treatment undertaken
and Cavite that do not have the necessary wastewater and the disposal site for said wastes.
treatment facilities. Within the same period, the
concessionaires of the MWSS shall submit their plans (7) The Philippine National Police (PNP) Maritime
and projects for the construction of wastewater Group shall submit on or before June 30, 2011 its five-
treatment facilities in all the aforesaid areas and the year plan of action on the measures and activities it
completion period for said facilities, which shall not go intends to undertake to apprehend the violators of
beyond 2037. Republic Act No. (RA) 8550 or the Philippine Fisheries
Code of 1998 and other pertinent laws, ordinances and
On or before June 30, 2011, the MWSS is further regulations to prevent marine pollution in Manila Bay
required to have its two concessionaires submit a and to ensure the successful prosecution of violators.
report on the amount collected as sewerage fees in
their respective areas of operation as of December 31, The Philippine Coast Guard shall likewise submit on or
2010. before June 30, 2011 its five-year plan of action on the
measures and activities they intend to undertake to
(4) The Local Water Utilities Administration is ordered apprehend the violators of Presidential Decree No. 979
to submit on or before September 30, 2011 its plan to or the Marine Pollution Decree of 1976 and RA 9993
provide, install, operate and maintain sewerage and or the Philippine Coast Guard Law of 2009 and other
sanitation facilities in said cities and towns and the pertinent laws and regulations to prevent marine
completion period for said works, which shall be fully pollution in Manila Bay and to ensure the successful
implemented by December 31, 2020. prosecution of violators.

(5) The Department of Agriculture (DA), through the (8) The Metropolitan Manila Development Authority
Bureau of Fisheries and Aquatic Resources, shall (MMDA) shall submit to the Court on or before June
submit to the Court on or before June 30, 2011 a 30, 2011 the names and addresses of the informal
report on areas in Manila Bay where marine life has to settlers in Metro Manila who, as of December 31,
be restored or improved and the assistance it has 2010, own and occupy houses, structures,
extended to the LGUs in Metro Manila, Rizal, Cavite, constructions and other encroachments established or
Laguna, Bulacan, Pampanga and Bataan in built along the Pasig-Marikina-San Juan Rivers, the
developing the fisheries and aquatic resources in NCR (Parañaque-Zapote, Las Piñas) Rivers, the
Manila Bay. The report shall contain monitoring data Navotas-Malabon-Tullahan-Tenejeros Rivers, and
on the marine life in said areas. Within the same connecting waterways and esteros, in violation of RA
period, it shall submit its five-year plan to restore and 7279 and other applicable laws. On or before June 30,
improve the marine life in Manila Bay, its future 2011, the MMDA shall submit its plan for the removal
activities to assist the aforementioned LGUs for that of said informal settlers and the demolition of the
purpose, and the completion period for said aforesaid houses, structures, constructions and
undertakings. encroachments, as well as the completion dates for
said activities, which shall be fully implemented not
The DA shall submit to the Court on or before later than December 31, 2015.
September 30, 2011 the baseline data as of
4
The MMDA is ordered to submit a status report, within 9275 and other laws on pollution for the said period.
thirty (30) days from receipt of this Resolution, on the
establishment of a sanitary landfill facility for Metro On or before June 30, 2011, the DPWH and the LGUs
Manila in compliance with the standards under RA in Rizal, Laguna, Cavite, Bulacan, Pampanga, and
9003 or the Ecological Solid Waste Management Act. Bataan shall submit the names and addresses of the
informal settlers in their respective areas who, as of
On or before June 30, 2011, the MMDA shall submit a September 30, 2010, own or occupy houses,
report of the location of open and controlled dumps in structures, constructions, and other encroachments
Metro Manila whose operations are illegal after built along the Meycauayan-Marilao-Obando (Bulacan)
February 21, 2006,[3] pursuant to Secs. 36 and 37 of Rivers, the Talisay (Bataan) River, the Imus (Cavite)
RA 9003, and its plan for the closure of these open River, the Laguna de Bay, and other rivers, connecting
and controlled dumps to be accomplished not later waterways and esteros that discharge wastewater into
than December 31, 2012. Also, on or before June 30, the Manila Bay, in breach of RA 7279 and other
2011, the DENR Secretary, as Chairperson of the applicable laws. On or before June 30, 2011, the
National Solid Waste Management Commission DPWH and the aforesaid LGUs shall jointly submit
(NSWMC), shall submit a report on the location of all their plan for the removal of said informal settlers and
open and controlled dumps in Rizal, Cavite, Laguna, the demolition of the aforesaid structures,
Bulacan, Pampanga and Bataan. constructions and encroachments, as well as the
completion dates for such activities which shall be
On or before June 30, 2011, the DENR Secretary, in implemented not later than December 31, 2012.
his capacity as NSWMC Chairperson, shall submit a
report on whether or not the following landfills strictly (9) The Department of Health (DOH) shall submit to
comply with Secs. 41 and 42 of RA 9003 on the the Court on or before June 30, 2011 the names and
establishment and operation of sanitary landfills, to wit: addresses of the owners of septic and sludge
companies including those that do not have the proper
National Capital Region facilities for the treatment and disposal of fecal sludge
and sewage coming from septic tanks.
1. Navotas SLF (PhilEco), Brgy. Tanza (New Site),
Navotas City The DOH shall implement rules and regulations on
2. Payatas Controlled Dumpsite, Barangay Payatas, Environmental Sanitation Clearances and shall require
Quezon City companies to procure a license to operate from the
DOH.
Region III
The DOH and DENR-Environmental Management
3. Sitio Coral, Brgy. Matictic, Norzagaray, Bulacan Bureau shall develop a toxic and hazardous waste
4. Sitio Tiakad, Brgy. San Mateo, Norzagaray, Bulacan management system by June 30, 2011 which will
5. Brgy. Minuyan, San Jose del Monte City, Bulacan implement segregation of hospital/toxic/hazardous
6. Brgy. Mapalad, Santa Rosa, Nueva Ecija wastes and prevent mixing with municipal solid waste.
7. Sub-zone Kalangitan, Clark Capas, Tarlac Special
Economic Zone On or before June 30, 2011, the DOH shall submit a
plan of action to ensure that the said companies have
Region IV-A proper disposal facilities and the completion dates of
compliance.
8. Kalayaan (Longos), Laguna
9. Brgy. Sto. Nino, San Pablo City, Laguna (10) The Department of Education (DepEd) shall
10. Brgy. San Antonio (Pilotage SLF), San Pedro, submit to the Court on or before May 31, 2011 a report
Laguna on the specific subjects on pollution prevention, waste
11. Morong, Rizal management, environmental protection, environmental
12. Sitio Lukutan, Brgy. San Isidro, Rodriguez laws and the like that it has integrated into the school
(Montalban), Rizal (ISWIMS) curricula in all levels for the school year 2011-2012.
13. Brgy. Pintong Bukawe, San Mateo, Rizal
(SMSLFDC) On or before June 30, 2011, the DepEd shall also
submit its plan of action to ensure compliance of all the
On or before June 30, 2011, the MMDA and the schools under its supervision with respect to the
seventeen (17) LGUs in Metro Manila are ordered to integration of the aforementioned subjects in the
jointly submit a report on the average amount of school curricula which shall be fully implemented by
garbage collected monthly per district in all the cities in June 30, 2012.
Metro Manila from January 2009 up to December 31,
2010 vis-à-vis the average amount of garbage (11) All the agencies are required to submit their
disposed monthly in landfills and dumpsites. In its quarterly reports electronically using the forms below.
quarterly report for the last quarter of 2010 and The agencies may add other key performance
thereafter, MMDA shall report on the apprehensions indicators that they have identified. SO ORDERED.
for violations of the penal provisions of RA 9003, RA

5
G.R. No. 148622, September 12, 2002 duty of the DENR, through the EMB-Region XI, to
issue a CNC in favor of respondent upon submission
REPUBLIC OF THE PHILIPPINES, REPRESENTED of the required documents.
BY HON. HEHERSON T. ALVAREZ, IN HIS
CAPACITY AS SECRETARY OF THE DEPARTMENT The Regional Trial Court rendered judgment in favor of
OF ENVIRONMENT AND NATURAL RESOURCES respondent, the dispositive portion of which reads as
(DENR), CLARENCE L. BAGUILAT, IN HIS follows:
CAPACITY AS THE REGIONAL EXECUTIVE
DIRECTOR OF DENR-REGION XI AND ENGR. WHEREFORE, finding the petition to be meritorious,
BIENVENIDO L. LIPAYON, IN HIS CAPACITY AS judgment granting the writ of mandamus and injunction
THE REGIONAL DIRECTOR OF THE DENR- is hereby rendered in favor of the petitioner City of
ENVIRONMENTAL MANAGEMENT BUREAU Davao and against respondents Department of
(DENR-EMB), REGION XI, PETITIONERS, VS. THE Environment and Natural Resources and the other
CITY OF DAVAO, REPRESENTED BY BENJAMIN C. respondents by:
DE GUZMAN, CITY MAYOR, RESPONDENT.
1) directing the respondents to issue in favor of the
DECISION
petitioner City of Davao a Certificate of Non-Coverage,
pursuant to Presidential Decree No. 1586 and related
YNARES-SANTIAGO, J.: laws, in connection with the construction by the City of
Davao of the Artica Sports Dome;
Before us is a petition for review[1] on certiorari
assailing the decision[2] dated May 28, 2001 of the 2) making the preliminary injunction issued on
Regional Trial Court of Davao City, Branch 33, which December 12, 2000 permanent.
granted the writ of mandamus and injunction in favor of
respondent, the City of Davao, and against petitioner,
Costs de oficio.
the Republic, represented by the Department of
Environment and Natural Resources (DENR). The trial
court also directed petitioner to issue a Certificate of SO ORDERED.[3]
Non-Coverage in favor of respondent.
The trial court ratiocinated that there is nothing in PD
The antecedent facts of the case are as follows: 1586, in relation to PD 1151 and Letter of Instruction
No. 1179 (prescribing guidelines for compliance with
the EIA system), which requires local government units
On August 11, 2000, respondent filed an application
(LGUs) to comply with the EIS law. Only agencies and
for a Certificate of Non-Coverage (CNC) for its
instrumentalities of the national government, including
proposed project, the Davao City Artica Sports Dome,
government owned or controlled corporations, as well
with the Environmental Management Bureau (EMB), as private corporations, firms and entities are
Region XI. Attached to the application were the
mandated to go through the EIA process for their
required documents for its issuance, namely, a)
proposed projects which have significant effect on the
detailed location map of the project site; b) brief project
quality of the environment. A local government unit,
description; and c) a certification from the City
not being an agency or instrumentality of the National
Planning and Development Office that the project is Government, is deemed excluded under the principle
not located in an environmentally critical area (ECA). of expressio unius est exclusio alterius.
The EMB Region XI denied the application after finding
that the proposed project was within an
environmentally critical area and ruled that, pursuant to The trial court also declared, based on the
Section 2, Presidential Decree No. 1586, otherwise certifications of the DENR-Community Environment
known as the Environmental Impact Statement and Natural Resources Office (CENRO)-West, and the
System, in relation to Section 4 of Presidential Decree data gathered from the Philippine Institute of
No, 1151, also known as the Philippine Environment Volcanology and Seismology (PHIVOLCS), that the
Policy, the City of Davao must undergo the site for the Artica Sports Dome was not within an
environmental impact assessment (EIA) process to environmentally critical area. Neither was the project
secure an Environmental Compliance Certificate an environmentally critical one. It therefore becomes
(ECC), before it can proceed with the construction of mandatory for the DENR, through the EMB Region XI,
its project. to approve respondent’s application for CNC after it
has satisfied all the requirements for its issuance.
Accordingly, petitioner can be compelled by a writ of
Believing that it was entitled to a Certificate of Non-
mandamus to issue the CNC, if it refuses to do so.
Coverage, respondent filed a petition for mandamus
and injunction with the Regional Trial Court of Davao,
docketed as Civil Case No. 28,133-2000. It alleged Petitioner filed a motion for reconsideration, however,
that its proposed project was neither an the same was denied. Hence, the instant petition for
environmentally critical project nor within an review.
environmentally critical area; thus it was outside the
scope of the EIS system. Hence, it was the ministerial
6
With the supervening change of administration, President of the Philippines may, on his own initiative
respondent, in lieu of a comment, filed a manifestation or upon recommendation of the National
expressing its agreement with petitioner that, indeed, it Environmental Protection Council, by proclamation
needs to secure an ECC for its proposed project. It declare certain projects, undertakings or areas in the
thus rendered the instant petition moot and academic. country as environmentally critical. No person,
However, for the guidance of the implementors of the partnership or corporation shall undertake or operate
EIS law and pursuant to our symbolic function to any such declared environmentally critical project or
educate the bench and bar,[4] we are inclined to area without first securing an Environmental
address the issue raised in this petition. Compliance Certificate issued by the President or his
duly authorized representative. For the proper
Section 15 of Republic Act 7160,[5] otherwise known as management of said critical project or area, the
the Local Government Code, defines a local President may by his proclamation reorganize such
government unit as a body politic and corporate government offices, agencies, institutions, corporations
endowed with powers to be exercised by it in or instrumentalities including the realignment of
conformity with law. As such, it performs dual government personnel, and their specific functions and
functions, governmental and proprietary. responsibilities.
Governmental functions are those that concern the
health, safety and the advancement of the public good Section 4 of PD 1586 clearly states that “no person,
or welfare as affecting the public partnership or corporation shall undertake or operate
generally.[6] Proprietary functions are those that seek any such declared environmentally critical project or
to obtain special corporate benefits or earn pecuniary area without first securing an Environmental
profit and intended for private advantage and Compliance Certificate issued by the President or his
benefit.[7] When exercising governmental powers and duly authorized representative.”[13] The Civil Code
performing governmental duties, an LGU is an agency defines a person as either natural or juridical. The
of the national government.[8] When engaged in state and its political subdivisions, i.e., the local
corporate activities, it acts as an agent of the government units[14] are juridical
community in the administration of local affairs.[9] [15]
persons. Undoubtedly therefore, local government
units are not excluded from the coverage of PD 1586.
Found in Section 16 of the Local Government Code is
the duty of the LGUs to promote the people’s right to a Lastly, very clear in Section 1 of PD 1586 that said law
balanced ecology.[10] Pursuant to this, an LGU, like the intends to implement the policy of the state to achieve
City of Davao, can not claim exemption from the a balance between socio-economic development and
coverage of PD 1586. As a body politic endowed with environmental protection, which are the twin goals of
governmental functions, an LGU has the duty to sustainable development. The above-quoted first
ensure the quality of the environment, which is the paragraph of the Whereas clause stresses that this
very same objective of PD 1586. can only be possible if we adopt a comprehensive and
integrated environmental protection program where all
Further, it is a rule of statutory construction that every the sectors of the community are involved, i.e., the
part of a statute must be interpreted with reference to government and the private sectors. The local
the context, i.e., that every part must be considered government units, as part of the machinery of the
with other parts, and kept subservient to the general government, cannot therefore be deemed as outside
intent of the enactment.[11] The trial court, in declaring the scope of the EIS system.[16]
local government units as exempt from the coverage of
the EIS law, failed to relate Section 2 of PD 1586[12] to The foregoing arguments, however, presuppose that a
the following provisions of the same law: project, for which an Environmental Compliance
Certificate is necessary, is environmentally critical or
WHEREAS, the pursuit of a comprehensive and within an environmentally critical area. In the case at
integrated environmental protection program bar, respondent has sufficiently shown that the Artica
necessitates the establishment and institutionalization Sports Dome will not have a significant negative
of a system whereby the exigencies of socio-economic environmental impact because it is not an
undertakings can be reconciled with the requirements environmentally critical project and it is not located in
of environmental quality; x x x. an environmentally critical area. In support of this
contention, respondent submitted the following:
Section 1. Policy. – It is hereby declared the policy of
the State to attain and maintain a rational and orderly 1. Certification from the City Planning and
balance between socio-economic growth and Development Office that the project is not located in an
environmental protection. environmentally critical area;

xxx xxx xxx 2. Certification from the Community Environment and


Natural Resources Office (CENRO-West) that the
Section 4. – Presidential Proclamation of project area is within the 18-30% slope, is outside the
Environmentally Critical Areas and Projects. – The scope of the NIPAS (R.A. 7586), and not within a
declared watershed area; and
7
3. Certification from PHILVOCS that the project site is as private corporations, firms and entities shall
thirty-seven (37) kilometers southeast of the prepare, file and include in every action, project or
southernmost extension of the Davao River Fault and undertaking which significantly affects the quality of the
forty-five (45) kilometers west of the Eastern Mindanao environment a detailed statement on–
Fault; and is outside the required minimum buffer zone
of five (5) meters from a fault zone. (a) the environmental impact of the proposed action,
project or undertaking
The trial court, after a consideration of the evidence,
found that the Artica Sports Dome is not within an (b) any adverse environmental effect which cannot be
environmentally critical area. Neither is it an avoided should the proposal be implemented
environmentally critical project. It is axiomatic that
factual findings of the trial court, when fully supported (c) alternative to the proposed action
by the evidence on record, are binding upon this Court
and will not be disturbed on appeal.[17] This Court is not
a trier of facts.[18] (d) a determination that the short-term uses of the
resources of the environment are consistent with the
maintenance and enhancement of the long-term
There are exceptional instances when this Court may
productivity of the same; and
disregard factual findings of the trial court, namely: a)
when the conclusion is a finding grounded entirely on
speculations, surmises, or conjectures; b) when the (e) whenever a proposal involves the use of depletable
inference made is manifestly mistaken, absurd, or or nonrenewable resources, a finding must be made
impossible; c) where there is a grave abuse of that such use and commitment are warranted.
discretion; d) when the judgment is based on a
misapprehension of facts; e) when the findings of fact Before an environmental impact statement is issued by
are conflicting; f) when the Court of Appeals, in making a lead agency, all agencies having jurisdiction over, or
its findings, went beyond the issues of the case and special expertise on, the subject matter involved shall
the same are contrary to the admissions of both comment on the draft environmental impact statement
appellant and appellee; g) when the findings of the made by the lead agency within thirty (30) days from
Court of Appeals are contrary to those of the trial court; receipt of the same.
h) when the findings of fact are conclusions without
citation of specific evidence on which they are based; Under Article II, Section 1, of the Rules and
i) when the finding of fact of the Court of Appeals is Regulations Implementing PD 1586, the declaration of
premised on the supposed absence of evidence but is certain projects or areas as environmentally critical,
contradicted by the evidence on record; and j) when and which shall fall within the scope of the
the Court of Appeals manifestly overlooked certain Environmental Impact Statement System, shall be by
relevant facts not disputed by the parties and which, if Presidential Proclamation, in accordance with Section
properly considered, would justify a different 4 of PD 1586 quoted above.
conclusion.[19] None of these exceptions, however,
obtain in this case. Pursuant thereto, Proclamation No. 2146 was issued
on December 14, 1981, proclaiming the following
The Environmental Impact Statement System, which areas and types of projects as environmentally critical
ensures environmental protection and regulates and within the scope of the Environmental Impact
certain government activities affecting the Statement System established under PD 1586:
environment, was established by Presidential Decree
No. 1586. Section 2 thereof states: A. Environmentally Critical Projects

There is hereby established an Environmental Impact I. Heavy Industries


Statement System founded and based on the
environmental impact statement required under
a. Non-ferrous metal industries
Section 4 of Presidential Decree No. 1151, of all
agencies and instrumentalities of the national
government, including government-owned or b. Iron and steel mills
controlled corporations, as well as private
corporations, firms and entities, for every proposed c. Petroleum and petro-chemical industries including
project and undertaking which significantly affect the oil and gas
quality of the environment.
d. Smelting plants
Section 4 of PD 1151, on the other hand, provides:
II. Resource Extractive Industries
Environmental Impact Statements. – Pursuant to the
above enunciated policies and goals, all agencies and a. Major mining and quarrying projects
instrumentalities of the national government, including
government-owned or controlled corporations, as well
8
b. Forestry projects 10. Water bodies characterized by one or any
combination of the following conditions;
1. Logging
a. tapped for domestic purposes
2. Major wood processing projects
b. within the controlled and/or protected areas
3. Introduction of fauna (exotic-animals) in declared by appropriate authorities
public/private forests
c. which support wildlife and fishery activities
4. Forest occupancy
11. Mangrove areas characterized by one or any
5. Extraction of mangrove products combination of the following conditions:

6. Grazing a. with primary pristine and dense young growth;

c. Fishery Projects b. adjoining mouth of major river systems;

1. Dikes for/and fishpond development projects c. near or adjacent to traditional productive fry or
fishing grounds;
III. Infrastructure Projects
d. which act as natural buffers against shore erosion,
a. Major dams strong winds and storm floods;

e. on which people are dependent for their livelihood.


b. Major power plants (fossil-fueled, nuclear fueled,
hydroelectric or geothermal)
12. Coral reefs, characterized by one or any
combinations of the following conditions:
c. Major reclamation projects

a. with 50% and above live coralline cover;


d. Major roads and bridges

B. Environmentally Critical Areas b. spawning and nursery grounds for fish;

c. which act as natural breakwater of coastlines.


1. All areas declared by law as national parks,
watershed reserves, wildlife preserves and
sanctuaries; In this connection, Section 5 of PD 1586 expressly
states:
2. Areas set aside as aesthetic potential tourist spots;
Environmentally Non-Critical Projects. — All other
3. Areas which constitute the habitat for any projects, undertakings and areas not declared by the
President as environmentally critical shall be
endangered or threatened species of indigenous
considered as non-critical and shall not be required to
Philippine Wildlife (flora and fauna);
submit an environmental impact statement. The
National Environmental Protection Council, thru the
4. Areas of unique historic, archaeological, or scientific Ministry of Human Settlements may however require
interests; non-critical projects and undertakings to provide
additional environmental safeguards as it may deem
5. Areas which are traditionally occupied by cultural necessary.
communities or tribes;
The Artica Sports Dome in Langub does not come
6. Areas frequently visited and/or hard-hit by natural close to any of the projects or areas enumerated
calamities (geologic hazards, floods, typhoons, above. Neither is it analogous to any of them. It is
volcanic activity, etc.); clear, therefore, that the said project is not classified
as environmentally critical, or within an
7. Areas with critical slopes; environmentally critical area. Consequently, the DENR
has no choice but to issue the Certificate of Non-
8. Areas classified as prime agricultural lands; Coverage. It becomes its ministerial duty, the
performance of which can be compelled by writ of
mandamus, such as that issued by the trial court in the
9. Recharged areas of aquifers;
case at bar.

9
WHEREFORE, in view of the foregoing, the instant REPRESENTED BY THEIR PARENTS JOSE MAX
petition is DENIED. The decision of the Regional Trial AND VILMI QUIPIT, BUGHAW CIELO, CRISANTO,
Court of Davao City, Branch 33, in Civil Case No. ANNA, DANIEL AND FRANCISCO, ALL SURNAMED
28,133-2000, granting the writ of mandamus and BIBAL, MINORS, REPRESENTED BY THEIR
directing the Department of Environment and Natural PARENTS FRANCISCO, JR. AND MILAGROS
Resources to issue in favor of the City of Davao a BIBAL, AND THE PHILIPPINE ECOLOGICAL
Certificate of Non-Coverage, pursuant to Presidential NETWORK, INC., PETITIONERS, VS. THE
Decree No. 1586 and related laws, in connection with HONORABLE FULGENCIO S. FACTORAN, JR., IN
the construction of the Artica Sports Dome, is HIS CAPACITY AS THE SECRETARY OF THE
AFFIRMED. DEPARTMENT OF ENVIRONMENT AND NATURAL
RESOURCES, AND THE HONORABLE ERIBERTO
SO ORDERED. U. ROSARIO, PRESIDING JUDGE OF THE RTC,
MAKATI, BRANCH 66, RESPONDENTS.
G.R. No. 101083, July 30, 1993
DECISION
JUAN ANTONIO, ANNA ROSARIO AND JOSE
ALFONSO, ALL SURNAMED OPOSA, MINORS, DAVIDE, JR., J.:
AND REPRESENTED BY THEIR PARENTS
ANTONIO AND RIZALINA OPOSA, ROBERTA In a broader sense, this petition bears upon the
NICOLE SADIUA, MINOR, REPRESENTED BY HER right of Filipinos to a balanced and healthful ecology
PARENTS, CALVIN AND ROBERTA SADIUA, which the petitioners dramatically associate with the
CARLO, AMANDA SALUD AND PATRISHA, ALL twin concepts of "inter-generational responsibility" and
SURNAMED FLORES, MINORS AND "inter-generational justice." Specifically, it touches on
REPRESENTED BY THEIR PARENTS ENRICO AND the issue of whether the said petitioners have a cause
NIDA FLORES, GIANINA DITA R. FORTUN, MINOR, of action to "prevent the misappropriation or
REPRESENTED BY HER PARENTS SIGFRID AND impairment" of Philippine rainforests and "arrest the
DOLORES FORTUN, GEORGE II AND MA. unabated hemorrhage of the country's vital life-support
CONCEPCION, ALL SURNAMED MISA, MINORS systems and continued rape of Mother Earth."
AND REPRESENTED BY THEIR PARENTS The controversy has its genesis in Civil Case No.
GEORGE AND MYRA MISA, BENJAMIN ALAN V. 90-777 which was filed before Branch 66 (Makati,
PESIGAN, MINOR, REPRESENTED BY HIS Metro Manila) of the Regional Trial Court (RTC),
PARENTS ANTONIO AND ALICE PESIGAN, JOVIE National Capital Judicial Region. The principal plaintiffs
MARIE ALFARO, MINOR, REPRESENTED BY HER therein, now the principal petitioners, are all minors
PARENTS JOSE AND MARIA VIOLETA ALFARO, duly represented and joined by their respective
MARIA CONCEPCION T. CASTRO, MINOR, parents. Impleaded as an additional plaintiff is the
REPRESENTED BY HER PARENTS FREDENIL AND Philippine Ecological Network, Inc. (PENI), a domestic,
JANE CASTRO, JOHANNA DESAMPARADO, non-stock and non-profit corporation organized for the
MINOR, REPRESENTED BY HER PARENTS JOSE purpose of, inter alia, engaging in concerted action
AND ANGELA DESAMPARADO, CARLO JOAQUIN geared for the protection of our environment and
T. NARVASA, MINOR, REPRESENTED BY HIS natural resources. The original defendant was the
PARENTS GREGORIO II AND CRISTINE CHARITY Honorable Fulgencio S. Factoran, Jr., then Secretary
NARVASA, MA. MARGARITA, JESUS IGNACIO, of the Department of Environment and Natural
MA. ANGELA AND MARIE GABRIELLE, ALL Resources (DENR). His substitution in this petition by
SURNAMED SAENZ, MINORS, REPRESENTED BY the new Secretary, the Honorable Angel C. Alcala, was
THEIR PARENTS ROBERTO AND AURORA SAENZ, subsequently ordered upon proper motion by the
KRISTINE, MARY ELLEN, MAY, GOLDA MARTHE petitioners.[1] The complaint[2] was instituted as a
AND DAVID IAN, ALL SURNAMED KING, MINORS, taxpayers’ class suit[3] and alleges that the plaintiffs
REPRESENTED BY THEIR PARENTS MARIO AND "are all citizens of the Republic of the Philippines,
HAYDEE KING, DAVID, FRANCISCO AND taxpayers, and entitled to the full benefit, use and
THERESE VICTORIA, ALL SURNAMED ENDRIGA, enjoyment of the natural resource treasure that is the
MINORS, REPRESENTED BY THEIR PARENTS country's virgin tropical rainforests." The same was
BALTAZAR AND TERESITA ENDRIGA, JOSE MA. filed for themselves and others who are equally
AND REGINA MA., ALL SURNAMED ABAYA, concerned about the preservation of said resource but
MINORS, REPRESENTED BY THEIR PARENTS are "so numerous that it is impracticable to bring them
ANTONIO AND MARICA ABAYA, MARILIN, MARIO, all before the Court." The minors further asseverate
JR. AND MARIETTE, ALL SURNAMED CARDAMA, that they "represent their generation as well as
MINORS, REPRESENTED BY THEIR PARENTS generations yet unborn."[4] Consequently, it is prayed
MARIO AND LINA CARDAMA, CLARISSA, ANN for that judgment be rendered:
MARIE, NAGEL AND IMEE LYN, ALL SURNAMED
OPOSA, MINORS AND REPRESENTED BY THEIR
PARENTS RICARDO AND MARISSA OPOSA, "x x x ordering defendant, his agents, representatives
PHILIP JOSEPH, STEPHEN JOHN AND ISAIAH and other persons acting in his behalf to --
JAMES, ALL SURNAMED QUIPIT, MINORS,
10
(1) Cancel all existing timber license agreements in the are so capable of unquestionable demonstration that
country; the same may be submitted as a matter of judicial
notice. This notwithstanding, they expressed their
(2) Cease and desist from receiving, accepting, intention to present expert witnesses as well as
processing, renewing or approving new timber license documentary, photographic and film evidence in the
agreements." course of the trial.
As their cause of action, they specifically allege
and granting the plaintiffs "x x x such other reliefs just that:
and equitable under the premises."[5]
"CAUSE OF ACTION
The complaint starts off with the general 7. Plaintiffs replead by reference the foregoing
averments that the Philippine archipelago of 7,100 allegations.
islands has a land area of thirty million (30,000,000) 8. Twenty-five (25) years ago, the Philippines had
hectares and is endowed with rich, lush and verdant some sixteen (16) million hectares of rainforests
rainforests in which varied, rare and unique species of constituting roughly 53% of the country's land mass.
flora and fauna may be found; these rainforests 9. Satellite images taken in 1987 reveal that there
contain a genetic, biological and chemical pool which remained no more than 1.2 million hectares of said
is irreplaceable; they are also the habitat of indigenous rainforests or four per cent (4.0%) of the country's land
Philippine cultures which have existed, endured and area.
flourished since time immemorial; scientific evidence 10. More recent surveys reveal that a mere 850,000
reveals that in order to maintain a balanced and hectares of virgin old-growth rainforests are left, barely
healthful ecology, the country's land area should be 2.8% of the entire land mass of the Philippine
utilized on the basis of a ratio of fifty-four per cent archipelago and about 3.0 million hectares of immature
(54%) for forest cover and forty-six per cent (46%) for and uneconomical secondary growth forests.
agricultural, residential, industrial, commercial and 11. Public records reveal that defendant's
other uses; the distortion and disturbance of this predecessors have granted timber license agreements
balance as a consequence of deforestation have (‘TLA's,’) to various corporations to cut the aggregate
resulted in a host of environmental tragedies, such as area of 3.89 million hectares for commercial logging
(a) water shortages resulting from the drying up of the purposes.
water table, otherwise known as the "aquifer," as well A copy of the TLA holders and the corresponding
as of rivers, brooks and streams, (b) salinization of the areas covered is hereto attached as Annex ‘A’.
water table as a result of the intrusion therein of salt 12. At the present rate of deforestation, i.e. about
water, incontrovertible examples of which may be 200,000 hectares per annum or 25 hectares per
found in the island of Cebu and the Municipality of annum or 25 hectares per hour -- nighttime, Saturdays,
Bacoor, Cavite, (c) massive erosion and the Sundays and holidays included -- the Philippines will
consequential loss of soil fertility and agricultural be bereft of forest resources after the end of this
productivity, with the volume of soil eroded estimated ensuing decade, if not earlier.
at one billion (1,000,000,000) cubic meters per annum 13. The adverse effects, disastrous consequences,
-- approximately the size of the entire island of serious injury and irreparable damage of this continued
Catanduanes, (d) the endangering and extinction of trend of deforestation to the plaintiff minors’ generation
the country's unique, rare and varied flora and fauna, and to generations yet unborn are evident and
(e) the disturbance and dislocation of cultural incontrovertible. As a matter of fact, the environmental
communities, including the disappearance of the damages enumerated in paragraph 6 hereof are
Filipino's indigenous cultures, (f) the siltation of rivers already being felt, experienced and suffered by the
and seabeds and consequential destruction of corals generation of plaintiff adults.
and other aquatic life leading to a critical reduction in 14. The continued allowance by defendant of TLA
marine resource productivity, (g) recurrent spells of holders to cut and deforest the remaining forest stands
drought as is presently experienced by the entire will work great damage and irreparable injury to
country, (h) increasing velocity of typhoon winds which plaintiffs -- especially plaintiff minors and their
result from the absence of windbreakers, (i) the successors -- who may never see, use, benefit from
flooding of lowlands and agricultural plains arising from and enjoy this rare and unique natural resource
the absence of the absorbent mechanism of forests, (j) treasure.
the siltation and shortening of the lifespan of multi- This act of defendant constitutes a misappropriation
billion peso dams constructed and operated for the and/or impairment of the natural resource property he
purpose of supplying water for domestic uses, holds in trust for the benefit of plaintiff minors and
irrigation and the generation of electric power, and (k) succeeding generations.
the reduction of the earth's capacity to process carbon 15. Plaintiffs have a clear and constitutional right to a
dioxide gases which has led to perplexing and balanced and healthful ecology and are entitled to
catastrophic climatic changes such as the protection by the State in its capacity as
phenomenon of global warming, otherwise known as the parens patriae.
the "greenhouse effect." 16. Plaintiffs have exhausted all administrative
remedies with the defendant's office. On March 2,
Plaintiffs further assert that the adverse and
1990, plaintiffs served upon defendant a final demand
detrimental consequences of continued deforestation
to cancel all logging permits in the country.
11
A copy of the plaintiffs’ letter dated March 1, 1990 is 22. There is no other plain, speedy and adequate
hereto attached as Annex ‘B’. remedy in law other than the instant action to arrest
17. Defendant, however, fails and refuses to cancel the unabated hemorrhage of the country's vital life-
the existing TLA's, to the continuing serious damage support systems and continued rape of Mother
and extreme prejudice of plaintiffs. Earth."[6]
18. The continued failure and refusal by defendant to
cancel the TLA's is an act violative of the rights of On 22 June 1990, the original defendant,
plaintiffs, especially plaintiff minors who may be left Secretary Factoran, Jr., filed a Motion to Dismiss the
with a country that is desertified (sic), bare, barren and complaint based on two (2) grounds, namely: (1) the
devoid of the wonderful flora, fauna and indigenous plaintiffs have no cause of action against him and (2)
cultures which the Philippines has been abundantly the issue raised by the plaintiffs is a political question
blessed with. which properly pertains to the legislative or executive
19. Defendant's refusal to cancel the aforementioned branches of Government. In their 12 July 1990
TLA's is manifestly contrary to the public policy Opposition to the Motion, the petitioners maintain that
enunciated in the Philippine Environmental Policy (1) the complaint shows a clear and unmistakable
which, in pertinent part, states that it is the policy of the cause of action, (2) the motion is dilatory and (3) the
State -- action presents a justiciable question as it involves the
defendant's abuse of discretion.
‘(a) to create, develop, maintain and On 18 July 1991, respondent Judge issued an
improve conditions under which order granting the aforementioned motion to
man and nature can thrive in dismiss.[7] In the said order, not only was the
productive and enjoyable harmony defendant's claim -- that the complaint states no cause
with each other; of action against him and that it raises a political
question -- sustained, the respondent Judge further
‘(b) to fulfill the social, economic and ruled that the granting of the reliefs prayed for would
other requirements of present and result in the impairment of contracts which is prohibited
future generations of Filipinos and; by the fundamental law of the land.
Plaintiffs thus filed the instant special civil action
‘(c) to ensure the attainment of an for certiorari under Rule 65 of the Revised Rules of
environmental quality that is Court and ask this Court to rescind and set aside the
conducive to a life of dignity and dismissal order on the ground that the respondent
well-being’. (P.D. 1151, 6 June Judge gravely abused his discretion in dismissing the
1977) action. Again, the parents of the plaintiffs-minors not
only represent their children, but have also joined the
20. Furthermore, defendant's continued refusal to latter in this case.[8]
cancel the aforementioned TLA's is contradictory to the
Constitutional policy of the State to -- On 14 May 1992, We resolved to give due course
to the petition and required the parties to submit their
respective Memoranda after the Office of the Solicitor
a. effect ‘a more equitable General (OSG) filed a Comment in behalf of the
distribution of opportunities, respondents and the petitioners filed a reply thereto.
income and wealth’ and 'make full
and efficient use of natural Petitioners contend that the complaint clearly and
resources (sic).' (Section 1, Article unmistakably states a cause of action as it contains
XII of the Constitution); sufficient allegations concerning their right to a sound
environment based on Articles 19, 20 and 21 of the
b. ‘protect the nation's marine Civil Code (Human Relations), Section 4 of Executive
wealth.' (Section 2, ibid); Order (E.O.) No. 192 creating the DENR, Section 3 of
Presidential Decree (P.D.) No. 1151 (Philippine
c. ‘conserve and promote the Environmental Policy), Section 16, Article II of the
nation's cultural heritage and 1987 Constitution recognizing the right of the people to
resources (sic).’ (Section 14, a balanced and healthful ecology, the concept of
Article XIV, id.); generational genocide in Criminal Law and the concept
of man's inalienable right to self-preservation and self-
perpetuation embodied in natural law. Petitioners
d. ‘protect and advance the right of likewise rely on the respondent's correlative obligation,
the people to a balanced and per Section 4 of E.O. No. 192, to safeguard the
healthful ecology in accord with people's right to a healthful environment.
the rhythm and harmony of
nature.’ (Section 16, Article II, id.). It is further claimed that the issue of the
respondent Secretary's alleged grave abuse of
21. Finally, defendant's act is contrary to the highest discretion in granting Timber License Agreements
law of humankind -- the natural law -- and violative of (TLAs) to cover more areas for logging than what is
plaintiffs' right to self-preservation and perpetuation. available involves a judicial question.
12
Anent the invocation by the respondent Judge of based on the concept of intergenerational
the Constitution's non-impairment clause, petitioners responsibility insofar as the right to a balanced and
maintain that the same does not apply in this case healthful ecology is concerned. Such a right, as
because TLAs are not contracts. They likewise submit hereinafter expounded, considers the "rhythm and
that even if TLAs may be considered protected by the harmony of nature." Nature means the created world in
said clause, it is well settled that they may still be its entirety.[9] Such rhythm and harmony indispensably
revoked by the State when public interest so requires. include, inter alia, the judicious disposition, utilization,
management, renewal and conservation of the
On the other hand, the respondents aver that the country's forest, mineral, land, waters, fisheries,
petitioners failed to allege in their complaint a specific wildlife, off-shore areas and other natural resources to
legal right violated by the respondent Secretary for the end that their exploration, development and
which any relief is provided by law. They see nothing utilization be equitably accessible to the present as
in the complaint but vague and nebulous allegations well as future generations.[10] Needless to say, every
concerning an "environmental right" which supposedly generation has a responsibility to the next to preserve
entitles the petitioners to the "protection by the state in that rhythm and harmony for the full enjoyment of a
its capacity as parens patriae." Such allegations, balanced and healthful ecology. Put a little differently,
according to them, do not reveal a valid cause of the minors' assertion of their right to a sound
action. They then reiterate the theory that the question environment constitutes, at the same time, the
of whether logging should be permitted in the country performance of their obligation to ensure the protection
is a political question which should be properly of that right for the generations to come.
addressed to the executive or legislative branches of
Government. They therefore assert that the petitioners’ The locus standi of the petitioners having thus
recourse is not to file an action in court, but to lobby been addressed, We shall now proceed to the merits
before Congress for the passage of a bill that would of the petition.
ban logging totally.
After a careful perusal of the complaint in question
As to the matter of the cancellation of the TLAs, and a meticulous consideration and evaluation of the
respondents submit that the same cannot be done by issues raised and arguments adduced by the parties,
the State without due process of law. Once issued, a We do not hesitate to find for the petitioners and rule
TLA remains effective for a certain period of time -- against the respondent Judge's challenged order for
usually for twenty-five (25) years. During its effectivity, having been issued with grave abuse of discretion
the same can neither be revised nor cancelled unless amounting to lack of jurisdiction. The pertinent portions
the holder has been found, after due notice and of the said order read as follows:
hearing, to have violated the terms of the agreement or
other forestry laws and regulations. Petitioners’ xxx
proposition to have all the TLAs indiscriminately
cancelled without the requisite hearing would be “After a careful and circumspect evaluation of the
violative of the requirements of due process. Complaint, the Court cannot help but agree with the
defendant. For although we believe that plaintiffs have
Before going any further, We must first focus on but the noblest of all intentions, it (sic) fell short of
some procedural matters. Petitioners instituted Civil alleging, with sufficient definiteness, a specific legal
Case No. 90-777 as a class suit. The original right they are seeking to enforce and protect, or a
defendant and the present respondents did not take specific legal wrong they are seeking to prevent and
issue with this matter. Nevertheless, We hereby rule redress (Sec. 1, Rule 2, RRC). Furthermore, the Court
that the said civil case is indeed a class suit. The notes that the Complaint is replete with vague
subject matter of the complaint is of common and assumptions and vague conclusions based on
general interest not just to several, but to all citizens of unverified data. In fine, plaintiffs fail to state a cause of
the Philippines. Consequently, since the parties are so action in its Complaint against the herein defendant.
numerous, it becomes impracticable, if not totally
impossible, to bring all of them before the court. We Furthermore, the Court firmly believes that the matter
likewise declare that the plaintiffs therein are
before it, being impressed with political color and
numerous and representative enough to ensure the full
involving a matter of public policy, may not be taken
protection of all concerned interests. Hence, all the
cognizance of by this Court without doing violence to
requisites for the filing of a valid class suit under
the sacred principle of 'Separation of Powers' of the
Section 12, Rule 3 of the Revised Rules of Court are three (3) co-equal branches of the Government.
present both in the said civil case and in the instant
petition, the latter being but an incident to the former.
The Court is likewise of the impression that it cannot,
This case, however, has a special and novel no matter how we stretch our jurisdiction, grant the
element. Petitioners minors assert that they represent reliefs prayed for by the plaintiffs, i.e., to cancel all
their generation as well as generations yet unborn. We existing timber license agreements in the country and
find no difficulty in ruling that they can, for themselves, to cease and desist from receiving, accepting,
for others of their generation and for the succeeding processing renewing or approving new timber license
generations, file class suit. Their personality to sue in agreements. For to do otherwise would amount to
behalf of the succeeding generations can only be

13
'impairment of contracts' abhored (sic) by the "MR. VILLACORTA:
fundamental law.”[11] Does this section mandate the State to provide
sanctions against all forms of pollution -- air, water and
We do not agree with the trial court's conclusion noise pollution?
that the plaintiffs failed to allege with sufficient MR. AZCUNA:
definiteness a specific legal right involved or a specific Yes, Madam President. The right to healthful (sic)
legal wrong committed, and that the complaint is environment necessarily carries with it the correlative
replete with vague assumptions and conclusions duty of not impairing the same and, therefore,
based on unverified data. A reading of the complaint sanctions may be provided for impairment of
itself belies these conclusions. environmental balance."[12]

The complaint focuses on one specific The said right implies, among many other things, the
fundamental legal right -- the right to a balanced and judicious management and conservation of the
healthful ecology which, for the first time in our nation's country's forests. Without such forests, the ecological
constitutional history, is solemnly incorporated in the or environmental balance would be irreversibly
fundamental law. Section 16, Article II of the 1987 disrupted.
Constitution explicitly provides: Conformably with the enunciated right to a
balanced and healthful ecology and the right to health,
"SEC. 16. The State shall protect and advance the as well as the other related provisions of the
right of the people to a balanced and healthful ecology Constitution concerning the conservation, development
in accord with the rhythm and harmony of nature." and utilization of the country's natural
resources,[13] then President Corazon C. Aquino
This right unites with the right to health which is promulgated on 10 June 1987 E.O. No. 192,[14] Section
provided for in the preceding section of the same 4 of which expressly mandates that the Department of
article: Environment and Natural Resources "shall be the
primary government agency responsible for the
"SEC. 15. The State shall protect and promote the conservation, management, development and proper
right to health of the people and instill health use of the country's environment and natural
consciousness among them." resources, specifically forest and grazing lands,
mineral resources, including those in reservation and
watershed areas, and lands of the public domain, as
While the right to a balanced and healthful
well as the licensing and regulation of all natural
ecology is to be found under the Declaration of
resources as may be provided for by law in order to
Principles and State Policies and not under the Bill of
ensure equitable sharing of the benefits derived
Rights, it does not follow that it is less important than
therefrom for the welfare of the present and future
any of the civil and political rights enumerated in the
generations of Filipinos." Section 3 thereof makes the
latter. Such a right belongs to a different category of
following statement of policy:
rights altogether for it concerns nothing less than self-
preservation and self-perpetuation -- aptly and fittingly
stressed by the petitioners -- the advancement of "SEC. 3. Declaration of Policy. -- It is hereby declared
which may even be said to predate all governments the policy of the State to ensure the sustainable use,
and constitutions. As a matter of fact, these basic development, management, renewal, and conservation
rights need not even be written in the Constitution for of the country's forest, mineral, land, off-shore areas
they are assumed to exist from the inception of and other natural resources, including the protection
humankind. If they are now explicitly mentioned in the and enhancement of the quality of the environment,
fundamental charter, it is because of the well-founded and equitable access of the different segments of the
fear of its framers that unless the rights to a balanced population to the development and use of the country's
and healthful ecology and to health are mandated as natural resources, not only for the present generation
state policies by the Constitution itself, thereby but for future generations as well. It is also the policy of
highlighting their continuing importance and imposing the state to recognize and apply a true value system
upon the state a solemn obligation to preserve the first including social and environmental cost implications
and protect and advance the second, the day would relative to their utilization, development and
not be too far when all else would be lost not only for conservation of our natural resources."
the present generation, but also for those to come --
generations which stand to inherit nothing but parched This policy declaration is substantially re-stated in
earth incapable of sustaining life. Title XIV, Book IV of the Administrative Code of
1987,[15] specifically in Section 1 thereof which reads:
The right to a balanced and healthful ecology
carries with it the correlative duty to refrain from
"SEC. 1. Declaration of Policy. -- (1) The State shall
impairing the environment. During the debates on this
ensure, for the benefit of the Filipino people, the full
right in one of the plenary sessions of the 1986
exploration and development as well as the judicious
Constitutional Commission, the following exchange
transpired between Commissioner Wilfrido Villacorta disposition, utilization, management, renewal and
and Commissioner Adolfo Azcuna who sponsored the conservation of the country's forest, mineral, land,
waters, fisheries, wildlife, off-shore areas and other
section in question:
14
natural resources, consistent with the necessity of 192 and the Administrative Code of 1987 -- to protect
maintaining a sound ecological balance and protecting and advance the said right.
and enhancing the quality of the environment and the
objective of making the exploration, development and A denial or violation of that right by the other who
utilization of such natural resources equitably has the correlative duty or obligation to respect or
accessible to the different segments of the present as protect the same gives rise to a cause of action.
well as future generations. Petitioners maintain that the granting of the TLAs,
which they claim was done with grave abuse of
discretion, violated their right to a balanced and
(2) The State shall likewise recognize and apply a true healthful ecology; hence, the full protection thereof
value system that takes into account social and requires that no further TLAs should be renewed or
environmental cost implications relative to the granted.
utilization, development and conservation of our
natural resources." A cause of action is defined as:

The above provision stresses "the necessity of "x x x an act or omission of one party in violation of the
maintaining a sound ecological balance and protecting legal right or rights of the other; and its essential
and enhancing the quality of the environment." Section elements are legal right of the plaintiff, correlative
2 of the same Title, on the other hand, specifically obligation of the defendant, and act or omission of the
speaks of the mandate of the DENR; however, it defendant in violation of said legal right."[18]
makes particular reference to the fact of the agency's
being subject to law and higher authority. Said section It is settled in this jurisdiction that in a motion to
provides: dismiss based on the ground that the complaint fails to
state a cause of action,[19] the question submitted to
"SEC. 2. Mandate. -- (1) The Department of the court for resolution involves the sufficiency of the
Environment and Natural Resources shall be primarily facts alleged in the complaint itself. No other matter
responsible for the implementation of the foregoing should be considered; furthermore, the truth or falsity
policy. of the said allegations is beside the point for the truth
thereof is deemed hypothetically admitted. The only
(2) It shall, subject to law and higher authority, be in issue to be resolved in such a case is: admitting such
charge of carrying out the State's constitutional alleged facts to be true, may the court render a valid
mandate to control and supervise the exploration, judgment in accordance with the prayer in the
development, utilization, and conservation of the complaint?[20] In Militante vs. Edrosolano,[21] this Court
country's natural resources." laid down the rule that the judiciary should "exercise
the utmost care and circumspection in passing upon a
Both E.O. No. 192 and the Administrative Code of motion to dismiss on the ground of the absence
1987 have set the objectives which will serve as the thereof [cause of action] lest, by its failure to manifest
bases for policy formulation, and have defined the a correct appreciation of the facts alleged and deemed
powers and functions of the DENR. hypothetically admitted, what the law grants or
recognizes is effectively nullified. If that happens, there
It may, however, be recalled that even before the is a blot on the legal order. The law itself stands in
ratification of the 1987 Constitution, specific statutes disrepute."
already paid special attention to the "environmental
right" of the present and future generations. On 6 June After a careful examination of the petitioners'
1977, P.D. No. 1151 (Philippine Environmental Policy) complaint, We find the statements under the
and P.D. No. 1152 (Philippine Environment Code) introductory affirmative allegations, as well as the
were issued. The former "declared a continuing policy specific averments under the subs-heading CAUSE
of the State (a) to create, develop, maintain and OF ACTION, to be adequate enough to show, prima
improve conditions under which man and nature can facie, the claimed violation of their rights. On the basis
thrive in productive and enjoyable harmony with each thereof, they may thus be granted, wholly of partly, the
other, (b) to fulfil the social, economic and other reliefs prayed for. It bears stressing, however, that
requirements of present and future generations of insofar as the cancellation of the TLAs is concerned,
Filipinos, and (c) to insure the attainment of an there is the need to implead, as party defendants, the
environmental quality that is conducive to a life of grantees thereof for they are indispensable parties.
dignity and well-being."[16] As its goal, it speaks of the The foregoing considered, Civil Case No. 90-777
"responsibilities of each generation as trustee and cannot be said to raise a political question. Policy
guardian of the environment for succeeding formulation or determination by the executive or
generations.”[17] The latter statute, on the other hand, legislative branches of Government is not squarely put
gave flesh to the said policy. in issue. What is principally involved is the
Thus, the right of the petitioners (and all those enforcement of a right vis-a-vis policies already
they represent) to a balanced and healthful ecology is formulated and expressed in legislation. It must,
as clear as the DENR's duty -- under its mandate and nonetheless, be emphasized that the political question
by virtue of its powers and functions under E.O. No. doctrine is no longer the insurmountable obstacle to
the exercise of judicial power or the impenetrable
15
shield that protects executive and legislative actions We are not persuaded at all; on the contrary, We
from judicial inquiry or review. The second paragraph are amazed, if not shocked, by such a sweeping
of section 1, Article VIII of the Constitution states that: pronouncement. In the first place, the respondent
Secretary did not, for obvious reasons, even invoke in
"Judicial power includes the duty of the courts of his motion to dismiss the non-impairment clause. If he
justice to settle actual controversies involving rights had done so, he would have acted with utmost
which are legally demandable and enforceable, and to infidelity to the Government by providing undue and
determine whether or not there has been a grave unwarranted benefits and advantages to the timber
abuse of discretion amounting to lack or excess of license holders because he would have forever bound
jurisdiction on the part of any branch or instrumentality the Government to strictly respect the said licenses
of the Government." according to their terms and conditions regardless of
changes in policy and the demands of public interest
and welfare. He was aware that as correctly pointed
Commenting on this provision in his
out by the petitioners, into every timber license must
book, Philippine Political Law,[22] Mr. Justice Isagani A.
be read Section 20 of the Forestry Reform Code (P.D.
Cruz, a distinguished member of his Court, says:
No. 705) which provides:
"The first part of the authority represents the traditional
"x x x Provided, That when the national interest so
concept of judicial power, involving the settlement of
requires, the President may amend, modify, replace or
conflicting rights as conferred by law. The second part
rescind any contract, concession, permit, licenses or
of the authority represents a broadening of judicial
any other form of privilege granted herein x x x."
power to enable the courts of justice to review what
was before forbidden territory, to wit, the discretion of
the political departments of the government. Needless to say, all licenses may thus be revoked or
rescinded by executive action. It is not a contract,
property or a property right protected by the due
As worded, the new provision vests in the judiciary,
process clause of the Constitution. In Tan vs. Director
and particularly the Supreme Court, the power to rule
of Forestry,[25] this Court held:
upon even the wisdom of the decisions of the
executive and the legislature and to declare their acts
invalid for lack or excess of jurisdiction because tainted "x x x A timber license is an instrument by which the
with grave abuse of discretion. The catch, of course, is State regulates the utilization and disposition of forest
the meaning of ‘grave abuse of discretion,’ which is a resources to the end that public welfare is promoted. A
very elastic phrase that can expand or contract timber license is not a contract within the purview of
according to the disposition of the judiciary." the due process clause; it is only a license or privilege,
which can be validly withdrawn whenever dictated by
In Daza vs. Singson,[23] Mr. Justice Cruz, now public interest or public welfare as in this case.
speaking for this Court, noted:
‘A license is merely a permit or privilege to do what
otherwise would be unlawful, and is not a contract
"In the case now before us, the jurisdictional objection
between the authority, federal, state, or municipal,
becomes even less tenable and decisive. The reason
granting it and the person to whom it is granted;
is that, even if we were to assume that the issue
neither is it property or a property right, nor does it
presented before us was political in nature, we would
still not be precluded from resolving it under the create a vested right; nor is it taxation’ (37 C.J. 168).
expanded jurisdiction conferred upon us that now Thus, this Court held that the granting of license does
not create irrevocable rights, neither is it property or
covers, in proper cases, even the political question.
property rights (People vs. Ong Tin, 54 O.G. 7576). x x
Article VII, Section 1, of the Constitution clearly
x"
provides: x x x."

We reiterated this pronouncement in Felipe


The last ground invoked by the trial court in
Ysmael, Jr. & Co., Inc. vs. Deputy Executive
dismissing the complaint is the non-impairment of
Secretary:[26]
contracts clause found in the Constitution. The court a
quo declared that:
"x x x Timber licenses, permits and license
agreements are the principal instruments by which the
"The Court is likewise of the impression that it cannot,
State regulates the utilization and disposition of forest
no matter how we stretch our jurisdiction, grant the
resources to the end that public welfare is promoted.
reliefs prayed for by the plaintiffs, i.e., to cancel all
And it can hardly be gainsaid that they merely
existing timber license agreements in the country and
evidence a privilege granted by the State to qualified
to cease and desist from receiving, accepting,
processing, renewing or approving new timber license entities, and do not vest in the latter a permanent or
irrevocable right to the particular concession area and
agreements. For to do otherwise would amount to
the forest products therein. They may be validly
'impairment of contracts' abhored (sic) by the
amended, modified, replaced or rescinded by the Chief
fundamental law."[24]
Executive when national interests so require. Thus,
they are not deemed contracts within the purview of
16
the due process of law clause [See Sections 3(ee) and cases of renewal, no contract would have as of yet
20 of Pres. Decree No. 705, as amended. Also, Tan v. existed in the other instances. Moreover, with respect
Director of Forestry, G.R. No. L-24548, October 27, to renewal, the holder is not entitled to it as a matter of
1983, 125 SCRA 302]." right.
WHEREFORE, being impressed with merit, the
Since timber licenses are not contracts, the non- instant Petition is hereby GRANTED, and the
impairment clause, which reads: challenged Order of respondent Judge of 18 July 1991
"SEC. 10. No law impairing the obligation of contracts dismissing Civil Case No. 90-777 is hereby set aside.
shall be passed."[27] The petitioners may therefore amend their complaint to
implead as defendants the holders or grantees of the
cannot be invoked. questioned timber license agreements.
In the second place, even if it is to be assumed No pronouncement as to costs. SO ORDERED.
that the same are contracts, the instant case does not
involve a law or even an executive issuance declaring
the cancellation or modification of existing timber
licenses. Hence, the non-impairment clause cannot as
yet be invoked. Nevertheless, granting further that a G.R. No. 112567, February 07, 2000
law has actually been passed mandating cancellations
or modifications, the same cannot still be stigmatized THE DIRECTOR, LANDS MANAGEMENT BUREAU,
as a violation of the non-impairment clause. This is PETITIONER VS. COURT OF APPEALS AND
because by its very nature and purpose, such a law AQUILINO L. CARIÑO, RESPONDENTS.
could have only been passed in the exercise of the
police power of the state for the purpose of advancing DECISION
the right of the people to a balanced and healthful
ecology, promoting their health and enhancing the PURISIMA, J.:
general welfare. In Abe vs. Foster Wheeler
Corp.,[28] this Court stated:
At bar is a Petition for Review on Certiorari under Rule
45 of the Rules of Court, seeking to set aside the
"The freedom of contract, under our system of decision of the Court of Appeals, dated November 11,
government, is not meant to be absolute. The same is
1993, in CA-G.R. No. 29218, which affirmed the
understood to be subject to reasonable legislative
decision, dated February 5, 1990, of Branch XXIV,
regulation aimed at the promotion of public health,
Regional Trial Court of Laguna, in LRC NO. B-467,
moral, safety and welfare. In other words, the
ordering the registration of Lot No. 6 in the name of the
constitutional guaranty of non-impairment of private respondent.
obligations of contract is limited by the exercise of the
police power of the State, in the interest of public
The facts that matter are as follows:
health, safety, moral and general welfare."
On May 15, 1975, the private respondent, Aquilino
The reason for this is emphatically set forth Cariño, filed with the then Branch I, Court of First
in Nebia vs. New York,[29] quoted in Philippine Instance of Laguna, a petition[1] for registration of Lot
American Life Insurance Co. vs. Auditor General,[30] to No. 6, a sugar land with an area of forty-three
wit: thousand six hundred fourteen (43,614) square
"’Under our form of government the use of property meters, more or less, forming part of a bigger tract of
and the making of contracts are normally matters of land surveyed as Psu-108952 and situated in Barrio
private and not of public concern. The general rule is Sala, Cabuyao, Laguna.
that both shall be free of governmental interference.
But neither property rights nor contract rights are Private respondent declared that subject land was
absolute; for government cannot exist if the citizen originally owned by his mother, Teresa Lauchangco,
may at will use his property to the detriment of his who died on February 15, 1911,[2] and later
fellows, or exercise his freedom of contract to work administered by him in behalf of his five brothers and
them harm. Equally fundamental with the private right sisters, after the death of their father in 1934.[3]
is that of the public to regulate it in the common
interest.’" In 1949, private respondent and his brother, Severino
Cariño, became co-owners of Lot No. 6 by virtue of an
In short, the non-impairment clause must yield to extra-judicial partition of the land embraced in Plan
the police power of the state.[31] Psu-108952, among the heirs of Teresa Lauchangco.
On July 26, 1963, through another deed of extrajudicial
Finally, it is difficult to imagine, as the trial court settlement, sole ownership of Lot No. 6 was
did, how the non-impairment clause could apply with adjudicated to the private respondent.[4]
respect to the prayer to enjoin the respondent
Secretary from receiving, accepting, processing, Pertinent report of the Land Investigator of the Bureau
renewing or approving new timber licenses for, save in

17
of Lands (now Bureau of Lands Management), From the aforesaid decision, petitioner (as oppositor)
disclosed: went to the Court of Appeals, which, on November 11,
"x x x 1993, affirmed the decision appealed from.

1. That the land subject for registration thru Undaunted, petitioner found his way to this Court via
judicial confirmation of imperfect title is the present Petition; theorizing that:
situated in the barrio of Sala, municipality of
Cabuyao, province of Laguna as described on I.
plan Psu-108952 and is identical to Lot No. THE COURT OF APPEALS ERRED IN NOT FINDING
3015, Cad. 455-D, Cabuyao Cadastre; and THAT PRIVATE RESPONDENT HAS NOT
that the same is agricultural in nature and the SUBMITTED PROOF OF HIS FEE SIMPLE TITLE OR
improvements found thereon are sugarcane, PROOF OF POSSESSION IN THE MANNER AND
bamboo clumps, chico and mango trees and FOR THE LENGTH OF TIME REQUIRED BY THE
one house of the tenant made of light LAW TO JUSTIFY CONFIRMATION OF AN
materials; IMPERFECT TITLE.

2. That the land subject for registration is outside


any civil or military reservation, riverbed, park II.
and watershed reservation and that same land
is free from claim and conflict; THE COURT OF APPEALS ERRED IN NOT
DECLARING THAT PRIVATE RESPONDENT HAS
3. That said land is neither inside the relocation NOT OVERTHROWN THE PRESUMPTION THAT
site earmarked for Metro Manila squatters nor THE LAND IS A PORTION OF THE PUBLIC DOMAIN
any pasture lease; it is not covered by any BELONGING TO THE REPUBLIC OF THE
existing public land application and no patent PHILIPPINES.[7]
or title has been issued therefor; The Petition is impressed with merit.

The petition for land registration[8] at bar is under the


4. That the herein petitioner has been in
Land Registration Act.[9] Pursuant to said Act, he who
continuous, open and exclusive possession of
alleges in his petition or application, ownership in fee
the land who acquired the same thru
simple, must present muniments of title since the
inheritance from his deceased mother, Teresa
Spanish times, such as a titulo real or royal grant,
Lauchangco as mentioned on the Extra judicial
a concession especial or special grant, a composicion
partition dated July 26, 1963 which applicant
con el estado or adjustment title, or a titulo de compra
requested that said instrument will be
or title through purchase; and ‘informacion
presented on the hearing of this case; and that
possessoria’ or ‘possessory information title’, which
said land is also declared for taxation
would become a ‘titulo gratuito’ or a gratuitous title.[10]
purposes under Tax Declaration No. 6359 in
the name of the petitioner;
In the case under consideration, the private
respondents (petitioner below) has not produced a
x x x"[5] single muniment of title to substantiate his claim of
With the private respondent as lone witness for his ownership.[11]The Court has therefore no other
petition, and the Director of Lands as the only recourse, but to dismiss private respondent's petition
oppositor, the proceedings below ended. On February for the registration of subject land under Act 496.
5, 1990, on the basis of the evidence on record, the
trial court granted private respondent's petition, Anyway, even if considered as petition for confirmation
disposing thus: of imperfect title under the Public land Act (CA No.
"WHEREFORE, the Court hereby orders and declares 141), as amended, private respondent’s petition would
the registration and confirmation of title to one (1) meet the same fate. For insufficiency of evidence, its
parcel of land identified as Lot 6, plan Psu-108952, denial is inevitable. The evidence adduced by the
identical to Cadastral Lot No. 3015, Cad. 455-D, private respondent is not enough to prove his
Cabuyao Cadastre, situated in the barrio of Sala, possession of subject lot in concept of owner, in the
municipality of Cabuyao, province of Laguna, manner and for the number of years required by law
containing an area of FORTY THREE THOUSAND for the confirmation of imperfect title.
SIX HUNDRED FOURTEEN (43,614) Square Meters,
more or less, in favor of applicant AQUILINO L. Section 48 (b) of Commonwealth Act No. 141,[12] as
CARINO, married to Francisca Alomia, of legal age, amended by R.A. No. 1942 and R.A. No. 3872, the law
Filipino with residence and postal address at Biñan, prevailing at the time the Petition of private respondent
Laguna. was filed on May 15, 1975, provides:
"Sec. 48. The following described citizens of the
After this decision shall have become final, let an order Philippines, occupying lands of the public domain or
for the issuance of decree of registration be issued. claiming to own any such lands or an interest therein,
but whose titles have not been perfected or completed,
SO ORDERED."[6]
18
may apply to the Court of first Instance of the province such claim with favor. It is a basic assumption of our
where the land is located for confirmation of their claim polity that lands of whatever classification belong to
and the issuance of title therefor, under the Land the state. Unless alienated in accordance with law, it
Registration Act, to wit: retains its right over the same as dominus. x x x"[18]
In order that a petition for registration of land may
x x x prosper and the petitioners may savor the benefit
resulting from the issuance of certificate of title for the
(b) Those who by themselves or through their land petitioned for, the burden is upon him (petitioner)
predecessors-in-interest have been in open, to show that he and/or his predecessor-in-interest has
continuous, exclusive, and notorious possession been in open, continuous, exclusive, and adverse
and occupation of agricultural lands of the public possession and occupation of the land sought for
domain, under a bona fide claim of acquisition or registration, for at least thirty (30) years immediately
ownership, for at least thirty years immediately preceding the filing of the petition for confirmation of
preceding the filing of the application for title.[19]
confirmation of title except when prevented by
war or force majeure. These shall be conclusively In the case under consideration, private respondent
presumed to have performed all the conditions can only trace his own possession of subject parcel of
essential to a Government grant and shall be land to the year 1949, when the same was adjudicated
entitled to a certificate of title under the to him by virtue of an extra-judicial settlement and
provisions of this chapter." (Emphasis supplied) partition. Assuming that such a partition was truly
effected, the private respondent has possessed the
Possession of public lands, however long, never property thus partitioned for only twenty-six (26) years
confers title upon the possessor, unless the occupant as of 1975, when he filed his petition for the
can prove possession or occupation of the same under registration thereof. To bridge the gap, he proceeded
claim of ownership for the required period to constitute to tack his possession to what he theorized upon as
a grant from the State.[13] possession of the same land by his parents. However,
other than his unilateral assertion, private respondent
Notwithstanding absence of opposition from the has not introduced sufficient evidence to substantiate
government, the petitioner in land registration cases is his allegation that his late mother possessed the land
not relieved of the burden of proving the imperfect right in question even prior to 1911.
or title sought to be confirmed. In Director of Lands vs.
Agustin,[14] this Court stressed that: Basic is the rule that the petitioner in a land registration
" x x x The petitioner is not necessarily entiled to have case must prove the facts and circumstances
the land registered under the Torrens system simply evidencing his alleged ownership of the land applied
because no one appears to oppose his title and to for. General statements, which are mere conclusions
oppose the registration of his land. He must show, of law and not factual proof of possession are
even though there is no opposition, to the satisfaction unavailing and cannot suffice.[20]
of the court, that he is the absolute owner, in fee
simple. Courts are not justified in registering property From the relevant documentary evidence, it can be
under the Torrens system, simply because there is no gleaned that the earliest tax declaration covering Lot
opposition offered. Courts may, even in the absence of No. 6 was Tax Declaration No. 3214 issued in 1949
any opposition, deny the registration of the land under under the names of the private respondent and his
the Torrens system, upon the ground that the facts brother, Severino Carino. The same was followed by
presented did not show that petitioner is the owner, in Tax Declaration No. 1921 issued in 1969 declaring an
fee simple, of the land which he is attempting to have assessed value of Five Thousand Two Hundred Thirty-
registered."[15] three (P5,233.00) Pesos and Tax Declaration No.
There is thus an imperative necessity of the most 6359 issued in 1974 in the name of private
rigorous scrutiny before imperfect titles over public respondent, declaring an assessment of Twenty-One
agricultural lands may be granted judicial Thousand Seven Hundred Seventy (P21,770.00)
recognition.[16] Pesos.[21]

The underlying principle is that all lands that were not It bears stressing that the Exhibit "E" referred to in the
acquired from the government, either by purchase or decision below as the tax declaration for subject land
by grant, belong to the state as part of the public under the names of the parents of herein private
domain. As enunciated in Republic vs. Lee:"[17] respondent does not appear to have any sustainable
"x x x Both under the 1935 and the present basis. Said Exhibit "E" shows that it is Tax Declaration
Constitutions, the conservation no less than the 1921 for Lot No. 6 in the name of private respondent
utilization of the natural resources is ordained. There and not in the name of his parents.[22]
would be a failure to abide by its command if the
judiciary does not scrutinize with care applications to The rule that findings of fact by the trial court and the
private ownership of real estate. To be granted, they Court of Appeals are binding upon this Court is not
must be grounded in well-nigh incontrovertible without exceptions. Where, as in this case, pertinent
evidence. Where, as in this case, no such proof would records belie the findings by the lower courts that
be forthcoming, there is no justification for viewing subject land was declared for taxation purposes in the
19
name of private respondent's predecessor-in-interest, pursuant to Section 48 (b) of the Public Land Law;
such findings have to be disregarded by this Court. holding as follows:
In Republic vs. Court of Appeals,[23] the Court "Based on the foregoing, it is incumbent upon private
ratiocinated thus: respondent to prove that the alleged twenty year or
"‘This case represents an instance where the findings more possession of the spouses Urbano Diaz and
of the lower court overlooked certain facts of Bernarda Vinluan which supposedly formed part of the
substance and value that if considered would affect the thirty (30) year period prior to the filing of the
result of the case (People v. Royeras, 130 SCRA 259) application, was open, continuous, exclusive, notorious
and when it appears that the appellate court based its and in concept of owners. This burden, private
judgment on a misapprehension of facts (Carolina respondent failed to discharge to the satisfaction of the
Industries, Inc. v. CMS Stock Brokerage, Inc., et al., 97 Court. The bare assertion that the spouses Urbano
SCRA 734; Moran, Jr. v. Court of Appeals, 133 SCRA Diaz and Bernarda Vinluan had been in possession of
88; Director of Lands v. Funtillar, et al., G.R. No. the property for more than twenty (20) years found in
68533, May 3, 1986). This case therefore is an private respondent's declaration is hardly the 'well-nigh
exception to the general rule that the findings of facts incontrovertible' evidence required in cases of this
of the Court of Appeals are final and conclusive and nature. Private respondent should have presented
cannot be reviewed on appeal to this Court.’ specific facts that would have shown the nature of
such possession. x x x"[30]
and- In Director of Lands vs. Datu,[31] the application for
confirmation of imperfect title was likewise denied on
‘x x x in the interest of substantial justice this Court is the basis of the following disquisition, to wit:
not prevented from considering such a pivotal factual "We hold that applicants' nebulous evidence does not
matter that had been overlooked by the Courts below. support their claim of open, continuous, exclusive and
The Supreme Court is clothed with ample authority to notorious occupation of Lot No. 2027-B en concepto
review palpable errors not assigned as such if it finds de dueno. Although they claimed that they have
that their consideration is necessary in arriving at a just possessed the land since 1950, they declared it for tax
decision."’[24] purposes only in 1972. It is not clear whether at the
Verily, the Court of Appeals just adopted entirely the time they filed their application in 1973, the lot was still
findings of the trial court. Had it examined the original cogon land or already cultivated land.
records of the case, the said court could have verified
that the land involved was never declared for taxation They did not present as witness their predecessor,
purposes by the parents of the private respondent. Tax Peñaflor, to testify on his alleged possession of the
receipts and tax declarations are not incontrovertible land. They alleged in their application that they had
evidence of ownership. They are mere indicia of claim tenants on the land. Not a single tenant was presented
of ownership.[25] In Director of Lands vs. Santiago:[26] as witness to prove that the applicants had possessed
"x x x if it is true that the original owner and possessor, the land as owners.
Generosa Santiago, had been in possession since
1925, why were the subject lands declared for taxation x x x
purposes for the first time only in 1968, and in the
names of Garcia and Obdin? For although tax receipts On the basis of applicants' insubstantial evidence, it
and declarations, of ownership for taxation purposes cannot justifiably be concluded that they have an
are not incontrovertible evidence of ownership, they imperfect title that should be confirmed or that they
constitute at least proof that the holder had a claim of had performed all the conditions essential to a
title over the property."[27] Government grant of a portion of the public domain."[32]
As stressed by the Solicitor General, the contention of Neither can private respondent seek refuge under P.D.
private respondent that his mother had been in No. 1073,[33] amending Section 48(b) of
possession of subject land even prior to 1911 is self- Commonwealth Act No. 141, under which law a
serving, hearsay, and inadmissible in evidence. The certificate of title may issue to any occupant of a public
phrase "adverse, continuous, open, public, peaceful land, who is a Filipino citizen, upon proof of open,
and in concept of owner", by which characteristics continuous, exclusive, and notorious possession and
private respondent describes his possession and that occupation since June 12, 1945, or earlier. Failing to
of his parents, are mere conclusions of law requiring prove that his predecessors-in-interest occupied
evidentiary support and substantiation. The burden of subject land under the conditions laid down by law, the
proof is on the private respondent, as applicant, to private respondent could only establish his possession
prove by clear, positive and convincing evidence that since 1949, four years later than June 12, 1945, as set
the alleged possession of his parents was of the by law.
nature and duration required by law. His bare
allegations without more, do not amount to The Court cannot apply here the juris et de jure
preponderant evidence that would shift the burden of presumption that the lot being claimed by the private
proof to the oppositor.[28] respondent ceased to be a public land and has
become private property.[34] To reiterate, under the
In a case,[29] this Court set aside the decisions of the Regalian doctrine all lands belong to the
trial court and the Court of Appeals for the registration State.[35] Unless alienated in accordance with law, it
of a parcel of land in the name of the applicant, retains its basic rights over the same as dominus.[36]
20
submitted the following documents: (1) Special power
Private respondent having failed to come forward with of attorney showing that the respondents authorized
muniments of title to reinforce his petition for Jose dela Paz to file the application; (2) Conversion
registration under the Land Registration Act (Act 496), Consolidated plan of Lot Nos. 3212 and 3234,
and to present convincing and positive proof of his MCADM 590-D, Taguig Cadastral Mapping (Ccn-00-
open, continuous, exclusive and notorious occupation 000084) with the annotation that the survey is inside
of Lot No. 6 en concepto de dueño for at least 30 L.C. Map No. 2623 Proj. No. 27-B classified as
years immediately preceding the filing of his alienable/disposable by the Bureau of Forest
petition,[37] the Court is of the opinion, and so finds, Development, Quezon City on January 03, 1968; (3)
that subject Lot No. 6 surveyed under Psu-108952, Technical Descriptions of Ccn-00-000084; (4)
forms part of the pubic domain not registrable in the Geodetic Engineer's Certificate; (5) Tax Declaration
name of private respondent. No. FL-018-01466; (6) Salaysay ng
Pagkakaloob dated June 18, 1987; (7) Sinumpaang
WHEREFORE, the Petition is GRANTED; the Decision Pahayag sa Paglilipat sa Sarili ng mga Pagaari ng
of the Court of Appeals, dated November 11, 1993, in Namatay dated March 10, 1979; (8) Certification that
CA-G.R. No. 29218 affirming the Decision, dated the subject lots are not covered by any land patent or
February 5, 1990, of Branch XXIV, Regional Trial any public land appilcation; and (9) Certification by the
Court of Laguna in LRC No. B-467, is SET ASIDE; and Office of the Treasurer, Municipality of Taguig, Metro
Lot No. 6, covered by and more particularly described Manila, that the tax on the real property for the year
in Psu-108952, is hereby declared a public land, under 2003 has been paid.
the administrative supervision and power of disposition
of the Bureau of Lands Management. No Respondents alleged that they acquired the subject
pronouncement as to costs. SO ORDERED. property, which is an agricultural land, by virtue
of Salaysay ng Pagkakaloob dated June 18, 1987,
executed by their parents Zosimo dela Paz and Ester
G.R. No. 171631, November 15, 2010
dela Paz (Zosimo and Ester), who earlier acquired the
said property from their deceased parent Alejandro
REPUBLIC OF THE PHILIPPINES, PETITIONER, VS. dela Paz (Alejandro) by virtue of a "Sinumpaang
AVELINO R. DELA PAZ, ARSENIO R. DELA PAZ, Pahayag sa Paglilipat sa Sarili ng mga Pag-aari ng
JOSE R. DELA PAZ, AND GLICERIO R. DELA PAZ, Namatay dated March 10, 1979. In their application,
REPRESENTED BY JOSE R. DELA PAZ, respondents claimed that they are co-owners of the
RESPONDENTS. subject parcel of land and they have been in
continuous, uninterrupted, open, public, adverse
DECISION possession of the same, in the concept of owner since
they acquired it in 1987. Respondents further averred
PERALTA, J.: that by way of tacking of possession, they, through
their predecessors-in-interest have been in open,
Before this Court is a petition for review public, adverse, continuous, and uninterrupted
on certiorari under Rule 45 of the Rules of Court possession of the same, in the concept of an owner
seeking to set aside the Decision of the Court of even before June 12, 1945, or for a period of more
Appeals (CA), dated February 15, 2006, in CA-G.R. than fifty (50) years since the filing of the application of
CV No. 84206, which affirmed the Decision of the registration with the trial court. They maintained that
Regional Trial Court (RTC) of Pasig City, Branch 167, the subject property is classified as alienable and
in LRC Case No. N-11514, granting respondents' disposable land of the public domain.
application for registration and confirmation of title over
a parcel of land located in Barangay Ibayo, Napindan, The case was set for initial hearing on April 30, 2004.
Taguig, Metro Manila. On said date, respondents presented documentary
evidence to prove compliance with the jurisdictional
requirements of the law.
The factual milieu of this case is as follows:

Petitioner Republic of the Philippines (Republic),


On November 13, 2003, respondents Avelino R. dela
through the Office of the Solicitor General (OSG),
Paz, Arsenio R. dela Paz, Jose R. dela Paz, and
opposed the application for registration on the
Glicerio R. dela Paz, represented by Jose R. dela Paz
following grounds, among others: (1) that neither the
(Jose), filed with the RTC of Pasig City an application
applicants nor their predecessors-in-interest have
for registration of land under Presidential Decree No.
been in open, continuous, exclusive and notorious
1529 (PD 1529) otherwise known as the Property
possession and occupation of the land in question for
Registration Decree. The application covered a parcel
a period of not less than thirty (30) years; (2) that the
of land with an area of 25,825 square meters, situated
muniments of title, and/or the tax declarations and tax
at Ibayo, Napindan, Taguig, Metro Manila, described
payments receipts of applicants, if any, attached to or
under survey Plan Ccn-00-000084, (Conversion
alleged in the application, do not constitute competent
Consolidated plan of Lot Nos. 3212 and 3234,
and sufficient evidence of bona fide acquisition of the
MCADM 590-D, Taguig Cadastral Mapping). Together
land applied for; and (3) that the parcel of land applied
with their application for registration, respondents
for is a portion of public domain belonging to the
21
Republic not subject to private appropriation. Except AND NOTORIOUS POSSESSION OF THE SUBJECT
for the Republic, there was no other oppositor to the LOT IN THE CONCEPT OF AN OWNER.
application.
II
On May 5, 2004, the trial court issued an Order of
General Default against the whole world except as THE COURT OF APPEALS ERRED IN ORDERING
against the Republic. Thereafter, respondents THE REGISTRATION OF THE SUBJECT LOT IN
presented their evidence in support of their application. RESPONDENTS' NAME CONSIDERING THAT NO
EVIDENCE WAS FORMALLY OFFERED TO PROVE
In its Decision dated November 17, 2004, the RTC THAT THE SAME IS WITHIN THE ALIENABLE AND
granted respondents' application for registration of the DISPOSABLE AREA OF THE PUBLIC DOMAIN.[9]
subject property. The dispositive portion of the
decision states: In its Memorandum, petitioner claims that the CA's
findings that respondents and their predecessors-in-
WHEREFORE, affirming the order of general default interest have been in open, uninterrupted, public, and
hereto entered, judgment is hereby rendered adverse possession in the concept of owners, for more
AFFIRMING and CONFIRMING the title of AVELINO than fifty years or even before June 12, 1945, was
R. DELA PAZ, Arsenio R. dela Paz, Jose R. dela Paz unsubstantiated. Respondents failed to show actual or
and Glicerio R. dela Paz, all married and residents of constructive possession and occupation over the
and with postal address at No. 65 Ibayo, Napindan, subject land in the concept of an owner. Respondents
Taguig, Metro Manila, over a parcel of land described also failed to establish that the subject property is
and bounded under Plan Ccn-00-000084 within the alienable and disposable portion of the
(consolidation of Lots No. 3212 and 3234, Mcadm- public domain. The subject property remained to be
590-D, Taguig, Cadastral Mapping, containing Twenty- owned by the State under the Regalian Doctrine.
Five Thousand Eight Hundred Twenty-Five (25,825)
Square Meters, more or less, situated at Barangay In their Memorandum, respondents alleged that they
Ibayo, Napindan, Taguig, Metro Manila, under the were able to present evidence of specific acts of
operation of P.D. 1529, otherwise known as the ownership showing open, notorious, continuous and
Property Registration Decree. adverse possession and occupation in the concept of
an owner of the subject land. To prove their continuous
After the decision shall have been become final and and uninterrupted possession of the subject land, they
executory and, upon payment of all taxes and other presented several tax declarations, dated 1949, 1966,
charges due on the land, the order for the issuance of 1974, 1979, 1980, 1985, 1991, 1994 and 2000, issued
a decree of registration shall be accordingly in the name of their predecessors-in-interest. In
undertaken. SO ORDERED. addition, respondents presented a tax clearance
issued by the Treasurer's Office of the City of Taguig
Aggrieved by the Decision, petitioner filed a Notice of to show that they are up to date in their payment of
Appeal. The CA, in its Decision dated February 15, real property taxes. Respondents maintain that the
2006, dismissed the appeal and affirmed the decision annotations appearing on the survey plan of the
of the RTC. The CA ruled that respondents were able subject land serves as sufficient proof that the land is
to show that they have been in continuous, open, within the alienable and disposable portion of the
exclusive and notorious possession of the subject public domain. Finally, respondents assert that the
property through themselves and their predecessors- issues raised by the petitioner are questions of fact
in-interest. The CA found that respondents acquired which the Court should not consider in a petition for
the subject land from their predecessors-in-interest, review under Rule 45.
who have been in actual, continuous, uninterrupted,
public and adverse possession in the concept of an The petition is meritorious.
owner since time immemorial. The CA, likewise, held
that respondents were able to present sufficient
evidence to establish that the subject property is part In petitions for review on certiorari under Rule 45 of the
of the alienable and disposable lands of the public Revised Rules of Court, this Court is limited to
domain. Hence, the instant petition raising the reviewing only errors of law, not of fact, unless the
following grounds: factual findings complained of are devoid of support by
the evidence on record, or the assailed judgment is
I based on a misapprehension of facts. It is not the
function of this Court to analyze or weigh evidence all
THE COURT OF APPEALS ERRED IN AFFIRMING over again, unless there is a showing that the findings
THE TRIAL COURT'S ORDER GRANTING of the lower court are totally devoid of support or are
RESPONDENTS' APPLICATION FOR glaringly erroneous as to constitute palpable error or
REGISTRATION OF THE SUBJECT LOT grave abuse of discretion.
CONSIDERING THAT THE EVIDENCE ON RECORD
FAILED TO ESTABLISH THAT RESPONDENTS In the present case, the records do not support the
HAVE BEEN IN OPEN, CONTINUOUS, EXCLUSIVE findings made by the CA that the subject land is part of
22
the alienable and disposable portion of the public In Republic v. Sarmiento, the Court ruled that the
domain. notation of the surveyor-geodetic engineer on the blue
print copy of the conversion and subdivision plan
Section 14 (1) of PD 1529, otherwise known as approved by the Department of Environment and
the Property Registration Decree provides: Natural Resources (DENR) Center, that "this survey is
inside the alienable and disposable area, Project No.
SEC. 14. Who may apply. - The following persons may 27-B. L.C. Map No. 2623, certified on January 3, 1968
file in the proper Court of First Instance an application by the Bureau of Forestry," is insufficient and does not
for registration of title to land, whether personally or constitute incontrovertible evidence to overcome the
through their duly authorized representatives: presumption that the land remains part of the
inalienable public domain.
(1) Those who by themselves or through their
predecessors-in-interest have been in open, Further, in Republic v. Tri-plus Corporation, the Court
continuous, exclusive and notorious possession and held that:
occupation of alienable and disposable lands of the
public domain under a bona fide claim of ownership In the present case, the only evidence to prove the
since June 12, 1945, or earlier. character of the subject lands as required by law is the
notation appearing in the Advance Plan stating in
From the foregoing, respondents need to prove that (1) effect that the said properties are alienable and
the land forms part of the alienable and disposable disposable. However, this is hardly the kind of proof
land of the public domain; and (2) they, by themselves required by law. To prove that the land subject of an
or through their predecessors-in-interest, have been in application for registration is alienable, an applicant
open, continuous, exclusive, and notorious possession must establish the existence of a positive act of the
and occupation of the subject land under a bona government, such as a presidential proclamation or an
fide claim of ownership from June 12, 1945 or executive order, an administrative action, investigation
earlier.These the respondents must prove by no less reports of Bureau of Lands investigators, and a
than clear, positive and convincing evidence. legislative act or statute. The applicant may also
secure a certification from the Government that the
Under the Regalian doctrine, which is embodied in our lands applied for are alienable and disposable. In the
Constitution, all lands of the public domain belong to case at bar, while the Advance Plan bearing the
the State, which is the source of any asserted right to notation was certified by the Lands Management
any ownership of land. All lands not appearing to be Services of the DENR, the certification refers only to
clearly within private ownership are presumed to the technical correctness of the survey plotted in the
belong to the State. Accordingly, public lands not said plan and has nothing to do whatsoever with the
shown to have been reclassified or released as nature and character of the property surveyed.
alienable agricultural land, or alienated to a private Respondents failed to submit a certification from the
person by the State, remain part of the inalienable proper government agency to prove that the lands
public domain. The burden of proof in overcoming the subject for registration are indeed alienable and
presumption of State ownership of the lands of the disposable.
public domain is on the person applying for registration
(or claiming ownership), who must prove that the land Furthermore, in Republic of the Philippines v. Rosila
subject of the application is alienable or disposable. To Roche, the Court held that the applicant bears the
overcome this presumption, incontrovertible evidence burden of proving the status of the land. In this
must be established that the land subject of the connection, the Court has held that he must present a
application (or claim) is alienable or disposable. certificate of land classification status issued by the
Community Environment and Natural Resources Office
To support its contention that the land subject of the (CENRO), or the Provincial Environment and Natural
application for registration is alienable, respondents Resources Office (PENRO) of the DENR. He must
presented survey Plan Ccn-00-000084 (Conversion also prove that the DENR Secretary had approved the
Consolidated plan of Lot Nos. 3212 & 3234, MCADM land classification and released the land as alienable
590-D, Taguig Cadastral Mapping) prepared by and disposable, and that it is within the approved area
Geodetic Engineer Arnaldo C. Torres with the following per verification through survey by the CENRO or
annotation: PENRO. Further, the applicant must present a copy of
the original classification approved by the DENR
This survey is inside L.C. Map No. 2623 Proj. Secretary and certified as true copy by the legal
No. 27-B clasified as alienable/disposable by custodian of the official records. These facts must be
the Bureau of Forest Development, Quezon established by the applicant to prove that the land is
City on Jan. 03, 1968. alienable and disposable.

Respondents' reliance on the afore-mentioned Clearly, the surveyor's annotation presented by


annotation is misplaced. respondents is not the kind of proof required by law to
prove that the subject land falls within the alienable
and disposable zone. Respondents failed to submit a
23
certification from the proper government agency to possess land when not supported by any other
establish that the subject land are part of the alienable evidence. The fact that the disputed property may have
and disposable portion of the public domain. In the been declared for taxation purposes in the names of
absence of incontrovertible evidence to prove that the the applicants for registration or of their predecessors-
subject property is already classified as alienable and in-interest does not necessarily prove ownership. They
disposable, we must consider the same as still are merely indicia of a claim of ownership.[28]
inalienable public domain.
The foregoing pieces of evidence, taken together,
Anent respondents' possession and occupation of the failed to paint a clear picture that respondents by
subject property, a reading of the records failed to themselves or through their predecessors-in-interest
show that the respondents by themselves or through have been in open, exclusive, continuous and
their predecessors-in-interest possessed and occupied notorious possession and occupation of the subject
the subject land since June 12, 1945 or earlier. land, under a bona fide claim of ownership since June
12, 1945 or earlier.
The evidence submitted by respondents to prove their
possession and occupation over the subject property Evidently, since respondents failed to prove that (1)
consists of the testimonies of Jose and Amado the subject property was classified as part of the
Geronimo (Amado), the tenant of the adjacent lot. disposable and alienable land of the public domain;
However, their testimonies failed to establish and (2) they and their predecessors-in-interest have
respondents' predecessors-in-interest' possession and been in open, continuous, exclusive, and notorious
occupation of subject property since June 12, 1945 or possession and occupation thereof under a bonafide
earlier. Jose, who was born on March 19, claim of ownership since June 12, 1945 or earlier, their
1939, testified that since he attained the age of reason application for confirmation and registration of the
he already knew that the land subject of this case subject property under PD 1529 should be denied.
belonged to them. Amado testified that he was a
tenant of the land adjacent to the subject property WHEREFORE, the petition is GRANTED. The
since 1950, and on about the same year, he knew that Decision of the Court of Appeals dated February 15,
the respondents were occupying the subject land. 2006, in CA-G.R. CV No. 84206, affirming the Decision
of the Regional Trial Court of Pasig City, Branch 167,
Jose and Amado's testimonies consist merely of in LRC Case No. N-11514, is REVERSED and SET
general statements with no specific details as to when ASIDE. The application for registration and
respondents' predecessors-in-interest began actual confirmation of title filed by respondents Avelino R.
occupancy of the land subject of this case. While Jose dela Paz, Arsenio R. dela Paz, Jose R. dela Paz, and
testified that the subject land was previously owned by Glicerio R. dela Paz, as represented by Jose R. dela
their parents Zosimo and Ester, who earlier inherited Paz, over a parcel of land, with a total area of twenty-
the property from their parent Alejandro, no clear five thousand eight hundred twenty-five (25,825)
evidence was presented to show Alejandro's mode of square meters situated at Barangay Ibayo, Napindan,
acquisition of ownership and that he had been in Taguig, Metro Manila, is DENIED. SO ORDERED.
possession of the same on or before June 12, 1945,
the period of possession required by law. It is a rule
G.R. No. 104988, June 18, 1996
that general statements that are mere conclusions of
law and not factual proof of possession are unavailing
and cannot suffice. An applicant in a land registration MUSTANG LUMBER, INC., PETITIONER, VS. HON.
case cannot just harp on mere conclusions of law to COURT OF APPEALS, HON. FULGENCIO S.
embellish the application but must impress thereto the FACTORAN, JR., SECRETARY, DEPARTMENT OF
facts and circumstances evidencing the alleged ENVIRONMENT AND NATURAL RESOURCES
ownership and possession of the land. (DENR), AND ATTY. VINCENT A. ROBLES, CHIEF,
SPECIAL ACTIONS AND INVESTIGATION
Respondents' earliest evidence can be traced back to DIVISION, DENR, RESPONDENTS.
a tax declaration issued in the name of their
predecessors-in-interest only in the year 1949. At best, [G.R. NO. 106424. JUNE 18, 1996]
respondents can only prove possession since said
date. What is required is open, exclusive, continuous PEOPLE OF THE PHILIPPINES, PETITIONER, VS.
and notorious possession by respondents and their HON. TERESITA DIZON-CAPULONG, IN HER
predecessors-in-interest, under a bona fide claim of CAPACITY AS THE PRESIDING JUDGE, REGIONAL
ownership, since June 12, 1945 or TRIAL COURT NATIONAL CAPITAL JUDICIAL
earlier.[27] Respondents failed to explain why, despite REGION, BRANCH 172, VALENZUELA, METRO
their claim that their predecessors-in interest have MANILA, AND RI CHUY PO, RESPONDENTS.
possessed the subject properties in the concept of an
owner even before June 12, 1945, it was only in 1949 [G.R. NO. 123784. JUNE 18, 1996]
that their predecessors-in-interest started to declare
the same for purposes of taxation. Well settled is the MUSTANG LUMBER, INC., PETITIONER, VS. HON.
rule that tax declarations and receipts are not COURT OF APPEALS, ATTY. VINCENT A. ROBLES,
conclusive evidence of ownership or of the right to CHIEF, SPECIAL ACTIONS AND INVESTIGATION
24
DIVISION, DEPARTMENT OF ENVIRONMENT AND under administrative seizure the remaining stockpile of
NATURAL RESOURCES (DENR), ATTY. NESTOR V. almaciga, supa, and lauan lumber with a total volume
GAPUSAN, TIRSO P. PARIAN, JR., AND FELIPE H. of 311,000 board feet because the petitioner failed to
CALLORINA, JR., RESPONDENTS. produce upon demand the corresponding certificate of
lumber origin, auxiliary invoices, tally sheets, and
DECISION delivery receipts from the source of the invoices
covering the lumber to prove the legitimacy of their
DAVIDE, JR., J.: source and origin.[4]

Parenthetically, it may be stated that under an


The first and third cases, G.R. No. 104988 and G.R.
administrative seizure the owner retains the physical
No. 123784, were originally assigned to the Second
and Third Divisions of the Court, respectively. They possession of the seized articles. Only an inventory of
the articles is taken and signed by the owner or his
were subsequently consolidated with the second, a
case of the Court en banc. representative. The owner is prohibited from disposing
them until further orders.[5]
Petitioner, a domestic corporation with principal office
at Nos. 1350-1352 Juan Luna Street, Tondo, Manila, On 10 April 1990, counsel for the petitioner sent a
and with a lumberyard at Fortune Street, Fortune letter to Robles requesting an extension of fifteen days
from 14 April 1990 to produce the required documents
Village, Paseo de Blas, Valenzuela, Metro Manila, was
covering the seized articles because some of them,
duly registered as a lumber dealer with the Bureau of
particularly the certificate of lumber origin, were
Forest Development (BFD) under Certificate of
allegedly in the Province of Quirino. Robles denied the
Registration No. NRD-4-092590-0469. Its permit as
such was to expire on 25 September 1990. motion on the ground that the documents being
required from the petitioner must accompany the
lumber or forest products placed under seizure.[6]
Respondent Secretary Fulgencio S. Factoran, Jr., and
respondent Atty. Vincent A. Robles were, during all the
On 11 April 1990, Robles submitted his memorandum-
time material to these cases, the Secretary of the
report recommending to Secretary Factoran the
Department of Environment and Natural Resources
(DENR) and the Chief of the Special Actions and following:
Investigation Division (SAID) of the DENR,
respectively. 1. Suspension and subsequent cancellation of the
lumber Dealer's Permit of Mustang Lumber, Inc. for
The material operative facts are as follows: operating an unregistered lumberyard and resaw mill
and possession of Almaciga Lumber (a banned
On 1 April 1990, acting on an information that a huge specie) without the required documents;
stockpile of narra flitches, shorts, and slabs were seen
inside the lumberyard of the petitioner in Valenzuela, 2. Confiscation of the lumber seized at the Mustang
Metro Manila, the SAID organized a team of foresters Lumberyard including the truck with Plate No. CCK-
and policemen and sent it to conduct surveillance at 322 and the lumber loaded herein [sic] now at the
the said lumberyard. In the course thereof, the team DENR compound in the event its owner fails to submit
members saw coming out from the lumberyard the documents showing legitimacy of the source of said
petitioner's truck, with Plate No. CCK-322, loaded with lumber within ten days from date of seizure;
lauan and almaciga lumber of assorted sizes and
dimensions. Since the driver could not produce the 3. Filing of criminal charges against Mr. Ri Chuy Po,
required invoices and transport documents, the team owner of Mustang Lumber Inc. and Mr. Ruiz, or if the
seized the truck together with its cargo and impounded circumstances warrant for illegal possession of narra
them at the DENR compound at Visayas Avenue, and almaciga lumber and shorts if and when
Quezon City.[1] The team was not able to gain entry recommendation no. 2 pushes through;
into the premises because of the refusal of the
owner.[2] 4. Confiscation of Trucks with Plate No. CCS-639 and
CDV-458 as well as the lumber loaded therein for
On 3 April 1990, the team was able to secure a search transport lumber using "recycled" documents.[7]
warrant from Executive Judge Adriano R. Osorio of the
Regional Trial Court (RTC) of Valenzuela, Metro
Manila. By virtue thereof, the team seized on that date On 23 April 1990, Secretary Factoran issued an order
from the petitioners lumberyard four truckloads of suspending immediately the petitioner's lumber-
narra shorts, trimmings, and slabs; a negligible number dealer's permit No. NRD-4-092590-0469 and directing
of narra lumber; and approximately 200,000 board feet the petitioner to explain in writing within fifteen days
of lumber and shorts of various species including why its lumber-dealer's permit should not be cancelled.
almaciga and supa.[3]
On the same date, counsel for the petitioner sent
On 4 April 1990, the team returned to the premises of another letter to Robles informing the latter that the
the petitioner 's lumberyard in Valenzuela and placed petitioner had already secured the required documents
and was ready to submit them. None, however, was
25
submitted.[8] In the meantime, Robles filed with the Department of
Justice (DOJ) a complaint against the petitioner's
On 3 May 1990, Secretary Factoran issued another president and general manager, Ri Chuy Po, for
order wherein, after reciting the events which took violation of Section 68 of P.D. No. 705, as amended by
place on 1 April and 3 April 1990, he ordered E.O. No. 277. After appropriate preliminary
"CONFISCATED in favor of the government to be investigation, the investigating prosecutor, Claro
disposed of in accordance with law" the approximately Arellano, handed down a resolution[11] whose
311,000 board feet of lauan, supa, and almaciga dispositive portion reads:
lumber, shorts, and sticks found inside the petitioner's
lumberyard.[9] WHEREFORE, premises considered, it is hereby
recommended that an information be filed against
On 11 July 1990, the petitioner filed with the RTC of respondent Ri Chuy Po for illegal possession of
Manila a petition for certiorari and prohibition with a approximately 200,000 bd. ft. of lumber consisting of
prayer for a restraining order or preliminary injunction almaciga and supa and for illegal shipment of almaciga
against Secretary Fulgencio S. Factoran, Jr., and Atty. and lauan in violation of Sec. 68 of PD 705 as
Vincent A. Robles. The case (hereinafter, the FIRST amended by E.O. 277, series of 1987.
CIVIL CASE) was docketed as Civil Case No. 90-
53648 and assigned to Branch 35 o the said court. The It is further recommended that the 30,000 bd. ft. of
petitioner questioned therein (a) the seizure on 1 April narra shorts, trimmings and slabs covered by legal
1990, without any search and seizure order issued by documents be released to the rightful owner,
a judge, of its truck with Plate No. CCK-322 and its Malupa.[12]
cargo of assorted lumber consisting of apitong,
tanguile, and lauan of different sizes and dimensions
with a total value of P38,000.00; and (b) the orders of This resolution was approved by Undersecretary of
Secretary Factoran of 23 April 1990 for lack of prior Justice Silvestre H. Bello, III, who served as Chairman
notice and hearing and of 3 May 1990 for violation of of the Task Force on Illegal Logging.[13]
Section 2, Article III of the Constitution.
On the basis of that resolution, an information was filed
On 17 September 1990, in response to reports that on 5 June 1991 by the DOJ with Branch 172 of the
violations of P.D. No. 705 (The Revised Forestry Code RTC of Valenzuela, charging Ri Chuy Po with the
of the Philippines), as amended, were committed and violation of Section 68 of P.D. No. 705, as amended,
acting upon instruction of Robles and under Special which was docketed as Criminal Case No. 324-V-91
Order No. 897, series of 1990, a team of DENR agents (hereinafter, the CRIMINAL CASE). The accusatory
went to the business premises of the petitioner located portion of the information reads as follows:
at No. 1352 Juan Luna Street, Tondo, Manila. The
team caught the petitioner operating as a lumber
dealer although its lumber-dealer's permit had already That on or about the 3rd day of April 1990, or prior to
been suspended on 23 April 1990. Since the gate of or subsequent thereto, within the premises and vicinity
the petitioner's lumberyard was open, the team went of Mustang Lumber, Inc. in Fortune Village,
inside and saw an owner-type jeep with a trailer loaded Valenzuela, Metro Manila, and within the jurisdiction of
with lumber. Upon investigation, the team was this Honorable Court, the above-named accused, did
informed that the lumber loaded on the trailer was to then and there wilfully, feloniously and unlawfully, have
be delivered to the petitioner's customer. It also came in his possession truckloads of almaciga and lauan
upon the sales invoice covering the transaction. The and approximately 200,000 bd. ft. of lumber and shorts
members of the team then introduced themselves to of various species including almaciga and supa,
the caretaker, one Ms. Chua, who turned out to be the without the legal documents as required under existing
wife of the petitioner's president and general manager, forest laws and regulations.[14]
Mr. Ri Chuy Po, who was then out of town. The team's
photographer was able to take photographs of the
stockpiles of lumber including newly cut ones, fresh On 7 June 1991, Branch 35 of the RTC of Manila
dust around sawing or cutting machineries and rendered its decision[15] in the FIRST CIVIL CASE, the
equipment, and the transport vehicles loaded with dispositive portion of which reads:
lumber. The team thereupon effected a constructive
seizure of approximately 20,000 board feet of lauan WHEREFORE, judgment in this case is rendered as
lumber in assorted sizes stockpiled in the premises by follows:
issuing a receipt therefor.[10]
1. The Order of Respondent Secretary of the DENR,
As a consequence of this 17 September 1990 incident, the Honorable Fulgencio S. Factoran, Jr., dated 3 May
the petitioner filed with the RTC of Manila a petition for 1990 ordering the confiscation in favor of the
certiorari and prohibition. The case (hereinafter, Government the approximately 311,000 board feet of
the SECOND CIVIL CASE) was docketed as Civil lauan, supa, and almaciga lumber, shorts and sticks,
Case No. 90-54610 and assigned to Branch 24 of the found inside and seized from the lumberyard of the
said court. petitioner at Fortune Drive, Fortune Village, Paseo de
Blas, Valenzuela, Metro Manila, on April 4, 1990
26
(Exhibit 10), is hereby set aside and vacated, and warrant.
instead the respondents are required to report and
bring to the Hon. Adriano Osorio, Executive Judge, As to the propriety of the 23 April 1990 order of
Regional Trial Court, NCJR, Valenzuela, Metro Manila, Secretary Factoran, the trial court ruled that the same
the said 311,000 board feet of Lauan, supa and had been rendered moot and academic by the
almaciga Lumber, shorts and sticks, to be dealt with as expiration of the petitioner's lumber-dealer's permit on
directed by law; 25 September 1990, a fact the petitioner admitted in its
memorandum.
2. The respondents are required to initiate and
prosecute the appropriate action before the proper The petitioner forthwith appealed from the decision in
court regarding the lauan and almaciga lumber of the FIRST CIVIL CASE to the Court of Appeals, which
assorted sizes and dimensions loaded in petitioner's docketed the appeal as CA-G.R. SP No. 25510.
truck bearing Plate No. CCK-322 which were seized
on April 1, 1990; On 7 July 1991, accused Ri Chuy Po filed in the
CRIMINAL CASE a Motion to Quash and/or to
3. The Writ of Preliminary Injunction issued by the Suspend Proceedings based on the following grounds:
Court on August 2, 1990 shall be rendered functus (a) the information does not charge an offense, for
oficio upon compliance by the respondents with possession of lumber, as opposed to timber, is not
paragraphs 1 and 2 of this judgment; penalized in Section 68 of P.D. No. 705, as amended,
and even granting arguendo that lumber falls within the
4. Action on the prayer of the petitioner that the lauan, purview of the said section, the same may not be used
supa and almaciga lumber, shorts and sticks in evidence against him for they were taken by virtue
mentioned above in paragraphs 1 and 2 of this of an illegal seizure; and (b) Civil Case No. 90-53648
judgment be returned to said petitioner, is withheld in of Branch 35 of the RTC of Manila, the FIRST CIVIL
this case until after the proper court has taken CASE, then pending before the Court of Appeals,
cognizance and determined how those lumber, shorts which involves the legality of the seizure, raises a
and sticks should be disposed of; and prejudicial question.[19]

5. The petitioner is ordered to pay the costs. The prosecution opposed the motion alleging
that lumber is included in Section 68 of P.D. No. 705,
SO ORDERED. as amended, and possession thereof without the
required legal documents is penalized therein. It
referred to Section 3.2 of DENR Administrative Order
In resolving the said case, the trial court held that the No. 19, series of 1989, for the definitions
warrantless search and seizure on 1 April 1990 of the of timber and lumber, and then argued that exclusion
petitioner's truck, which was moving out from the of lumber from Section 68 would defeat the very
petitioner's lumberyard in Valenzuela, Metro Manila, purpose of the law, i.e., to minimize, if not halt, illegal
loaded with large volumes of lumber without covering logging that has resulted in the rapid denudation of our
document showing the legitimacy of its source or origin forest resources.[20]
did not offend the constitutional mandate that search
and seizure must be supported by a valid warrant. The In her order of 16 August 1991 in the CRIMINAL
situation fell under one of the settled and accepted CASE,[21] respondent Judge Teresita Dizon-Capulong
exceptions where warrantless search and seizure is granted the motion to quash and dismissed the case
justified, viz., a search of a moving vehicle.[16] As to the on the ground that "possession of lumber without the
seizure of a large volume of almaciga, supa, and lauan legal documents required by forest laws and
lumber and shorts effected on 4 April 1990, the trial regulations is not a crime."[22]
court ruled that the said seizure was a continuation of
that made the previous day and was still pursuant to or Its motion for reconsideration having been denied in
by virtue of the search warrant issued by Executive the order of 18 October 1991,[23] the People filed a
Judge Osorio whose validity the petitioner did not even petition for certiorari with this Court
question.[17] And, although the search warrant did not in G.R. No. 106424,wherein it contends that the
specifically mention almaciga, supa, and lauan lumber respondent Judge acted with grave abuse of discretion
and shorts, their seizure was valid because it is settled in granting the motion to quash and in dismissing the
that the executing officer is not required to ignore case.
contrabands observed during the conduct of the
search.[18] On 29 November 1991, the Court of Appeals rendered
a decision[24] in CA-G.R. SP No. 25510 dismissing for
The trial court, however, set aside Secretary lack of merit the petitioner's appeal from the decision in
Factoran's order of 3 May 1990 ordering the the FIRST CIVIL CASE and affirming the trial court's
confiscation of the seized articles in favor of the rulings on the issues raised. As to the claim that the
Government for the reason that since the articles were truck was not carrying contraband articles since there
seized pursuant to the search warrant issued by is no law punishing the possession of lumber, and
Executive Judge Osorio they should have been that lumber is not timber whose possession without the
returned to him in compliance with the directive in the
27
required legal documents is unlawful under P.D. No. presence any of the offenses defined in this chapter.
705, as amended, the Court of Appeals held: He shall also seize and confiscate, in favor of the
Government, the tools and equipment used in
This undue emphasis on lumber or the commercial committing the offense, or the forest products cut,
nature of the forest product involved has always been gathered or taken by the offender in the process of
foisted by those who claim to be engaged in the committing the offense.
legitimate business of lumber dealership. But what is
important to consider is that when appellant was
required to present the valid documents showing its Among the offenses punished in the chapter referred
acquisition and lawful possession of the lumber in to in said Section 80 are the cutting, gathering,
question, it failed to present any despite the period of collection, or removal of timber or other forest products
extension granted to it.[25] or possession of timber or other forest products
without the required legal documents.

The petitioner's motion to reconsider the said decision Its motion to reconsider the decision having been
was denied by the Court of Appeals in its resolution of denied by the Court of Appeals in the resolution of 6
3 March 1992.[26] Hence, the petitioner came to this February 1996, the petitioner filed with this Court on 27
Court by way of a petition for review February 1996 a petition for review
on certiorari in G.R. No. 104988, which was filed on 2 on certiorari in G.R. No. 123784.
May 1992.[27]
We shall now resolve these three cases starting with
On 24 September 1992, Branch 24 of the RTC of G.R. 106424 with which the other two were
Manila handed down a decision in the SECOND CIVIL consolidated.
CASE dismissing the petition for certiorari and
prohibition because (a) the petitioner did not exhaust G.R. No. 106424
administrative remedies; (b) when the seizure was
made on 17 September 1990 the petitioner could not
lawfully sell lumber, as its license was still under The petitioner had moved to quash the information in
suspension; (c) the seizure was valid under Section Criminal Case No. 324-V-91 on the ground that it does
68-A of P.D. No. 705, as amended; and (d) the seizure not charge an offense. Respondent Judge Dizon-
was justified as a warrantless search and seizure Capulong granted the motion reasoning that the
under Section 80 of P.D. No. 705, as amended. subject matter of the information in the CRIMINAL
CASE is LUMBER, which is neither "timber" nor "other
The petitioner appealed from the decision to the Court forest product" under Section 68 of P.D. No. 705, as
of Appeals, which docketed the appeal as CA- amended, and hence, possession thereof without the
G.R. SP No. 33778. required legal documents is not prohibited and
penalized under the said section.
In its decision[28] of 31 July 1995, the Court of Appeals
dismissed the petitioner's appeal in CA-G.R. SP No. Under paragraph (a), Section 3, Rule 117 of the Rules
33778 for lack of merit and sustained the grounds of Court, an information may be quashed on the
relied upon by the trial court in dismissing the ground that the facts alleged therein do not constitute
SECOND CIVIL CASE. Relying on the definition of an offense. It has been said that "the test for the
"lumber" by Webster, viz., "timber or logs, especially correctness of this ground is the sufficiency of the
after being prepared for the market," and by the averments in the information, that is, whether the facts
Random House Dictionary of the English alleged, if hypothetically admitted, constitute the
Language, viz., "wood, esp. when suitable or adapted elements of the offense,[29] and matters aliunde will not
for various building purposes," the respondent Court be considered." Anent the sufficiency of the
held that since wood is included in the definition information, Section 6, Rule 110 of the Rules of Court
of forest product in Section 3(q) of P.D. No. 705, as requires, inter alia, that the information state the acts
amended, lumber is necessarily included in Section 68 or omissions complained of as constituting the offense.
under the term forest product.
Respondent Ri Chuy Po is charged with the violation
The Court of Appeals further emphasized that a forest of Section 68 of P.D. No. 705, as amended by E.O.
officer or employee can seize the forest product No. 277, which provides:
involved in a violation of Section 68 of P.D. No. 705
pursuant to Section 80 thereof, as amended by P.D. SEC. 68. Cutting, Gathering and/or collecting Timber,
No. 1775, which provides in part as follows: or Other Forest Products Without License.-- Any
person who shall cut, gather, collect, remove timber or
SEC. 80. Arrest, Institution of Criminal Actions.--A other forest products from any forest land, or timber
forest officer or employee of the Bureau or any from alienable or disposable public land, or from
personnel of the Philippine Constabulary/Integrated private land, without any authority, or possess timber
National Police shall arrest even without warrant any or other forest products without the legal documents as
person who has committed or is committing in his required under existing forest laws and regulations,
28
shall be punished with the penalties imposed under
Articles 309 and 310 of the Revised Penal Code:
Provided, That in the case of partnerships, It follows then that lumber is only one of the items
associations, or corporations, the officers who ordered covered by the information. The public and the private
the cutting, gathering, collection or possession shall be respondents obviously miscomprehended the
liable, and if such officers are aliens, they shall, in averments in the information. Accordingly, even
addition to the penalty, be deported without further if lumber is not included in Section 68, the other items
proceedings on the part of the Commission on therein as noted above fall within the ambit of the said
Immigration and Deportation. section, and as to them, the information validly
charges an offense.
The Court shall further order the confiscation in favor
of the government of the timber or any forest products Our respected brother, Mr. Justice Jose C. Vitug,
cut, gathered, collected, removed, or possessed, as suggests in his dissenting opinion that this Court go
well as the machinery, equipment, implements and beyond the four corners of the information for
tools illegally used in the area where the timber or enlightenment as to whether the information
forest products are found. exclusively refers to lumber. With the aid of the
pleadings and the annexes thereto, he arrives at the
Punished then in this section are (1) conclusion that "only lumber has been envisioned in
the cutting, gathering, collection, or removal of timber o the indictment."
r other forest products from the places therein
mentioned without any authority; and (b) possession of The majority is unable to subscribe to his view. First,
timber or other forest products without the legal his proposition violates the rule that only the facts
documents as required under existing forest laws and alleged in the information vis-a-vis the law violated
regulations. must be considered in determining whether an
information charges an offense.
Indeed, the word lumber does not appear in Section
68. But conceding ex gratia that this omission amounts Second, the pleadings and annexes he resorted to are
to an exclusion of lumber from the section's coverage, insufficient to justify his conclusion. On the contrary,
do the facts averred in the information in the the Joint Affidavit of Melencio Jalova, Jr., and Araman
CRIMINAL CASE validly charge a violation of the said Belleng, which is one of the annexes he referred
section? to,[30] cannot lead one to infer that what the team
seized was all lumber. Paragraph 8 thereof expressly
A cursory reading of the information readily leads us to states:
an infallible conclusion
that lumber is not solely its subject matter. It is evident 8. That when inside the compound, the team found
therefrom that what are alleged to be in the possession approximately four (4) truckloads of narra
of the private respondent, without the required legal shorts, trimmings and slabs and a negligible amount of
documents, are truckloads of narra lumber, and approximately 200,000 bd. ft. of
lumber and shorts of various species including
(1) almaciga and lauan; and almaciga and supa which are classified as prohibited
(2) approximately 200,000 bd. ft. of lumber and shorts wood species. (Italics supplied)
of various species including almaciga and supa.

In the same vein, the dispositive portion of the


The "almaciga and lauan" specifically mentioned in no. resolution[31] of the investigating prosecutor, which
(1) are not described as lumber." They cannot refer to served as the basis for the filing of the information,
the "lumber" in no. (2) because they are separated by does not limit itself to lumber; thus:
the words "approximately 200,000 bd. ft." with the
conjunction "and," and not with the preposition "of." WHEREFORE, premises considered, it is hereby
They must then be raw forest products or, more recommended that an information be filed against
specifically, timbers under Section 3(q) of P.D. No. respondent Ri Chuy Po for illegal possession of
705, as amended, which reads: 200,000 bd. ft. of lumber consisting of almaciga and
supa and for illegal shipment of almaciga and lauan in
SEC. 3. Definitions.-- violation of Sec. 63 of PD 705 as amended by E.O.
277, series of 1987. (Italics supplied)
xxx xxx xxx

(q) Forest product means timber, pulpwood, firewood, The foregoing disquisitions should not, in any manner,
bark, tree top, resin, gum, wood, oil, honey, beeswax, be construed as an affirmance of the respondent
nipa, rattan, or other forest growth such as grass, Judge's conclusion that lumber is excluded from the
shrub, and flowering plant, the associated water, fish, coverage of Section 68 of P.D. No. 705, as amended,
game, scenic, historical, recreational and geological and thus possession thereof without the required legal
resources in forest lands. documents is not a crime. On the contrary, this Court
29
rules that such possession is penalized in the said be lawfully conducted without a search warrant.
section because lumber is included in the term timber.
Search of a moving vehicle is one of the five doctrinally
The Revised Forestry Code contains no definition of accepted exceptions to the constitutional
either timber or lumber. While the former is included in mandate[34] that no search or seizure shall be made
forest products as defined in paragraph (q) of Section except by virtue of a warrant issued by a judge after
3, the latter is found in paragraph (aa) of the same personally determining the existence of probable
section in the definition of "Processing plant;" which cause. The other exceptions are (1) search as an
reads: incident to a lawful arrest, (2) seizure of evidence in
plain view, (3) customs searches, and (4) consented
(aa) Processing plant is any mechanical set-up, warrantless search.[35]
machine or combination of machine used for the
processing of logs and other forest raw materials We also affirm the rulings of both the trial court and the
into lumber, veneer, plywood, wallboard, block-board, Court of Appeals that the search on 4 April 1990 was a
paper board, pulp, paper or other finished wood continuation of the search on 3 April 1990 done under
products. and by virtue of the search warrant issued on 3 April
1990 by Executive Judge Osorio. Under Section 9,
Rule 126 of the Rules of Court, a search warrant has a
This simply means that lumber is a processed log or lifetime of ten days. Hence, it could be served at any
processed forest raw material. Clearly, the Code uses time within the said period, and if its object or purpose
the term lumber in its ordinary or common usage. In cannot be accomplished in one day, the same may be
the 1993 copyright edition of Webster's Third New continued the following day or days until completed.
International Dictionary, lumber is defined, inter alia, as Thus, when the search under a warrant on one day
"timber or logs after being prepared for the was interrupted, it may be continued under the same
market."[32]Simply put, lumber is a processed log warrant the following day, provided it is still within the
or timber. ten-day period.[36]

It is settled that in the absence of legislative intent to As to the final plea of the petitioner that the search was
the contrary, words and phrases used in a statute illegal because possession of lumber without the
should be given their plain, ordinary, and common required legal documents is not illegal under Section
usage meaning.[33] And insofar as possession 68 of P.D. No. 705, as amended, since lumber is
of timber without the required legal documents is neither specified therein nor included in the
concerned, Section 68 of P.D. No. 705, as amended, term forest product, the same hardly merits further
makes no distinction between raw or processed discussion in view of our ruling in G.R. No. 106424.
timber. Neither should we. Ubi lex non distanguit nec
nos distinguere debemus. G.R. No. 123784

Indisputably, respondent Judge Teresita Dizon-


Capulong of Branch 172 of the RTC of Valenzuela, The allegations and arguments set forth in the petition
Metro Manila, committed grave abuse of discretion in in this case palpably fail to show prima facie that a
granting the motion to quash the information in the reversible error has been committed by the Court of
CRIMINAL CASE and in dismissing the said case. Appeals in its challenged decision of 31 July 1995 and
resolution of 6 February 1996 in CA-G.R. SP No.
G.R. No. 104988 33778. We must, forthwith, deny it for utter want of
merit. There is no need to require the respondents to
comment on the petition.
We find this petition to be without merit. The petitioner
has miserably failed to show that the Court of Appeals The Court of Appeals correctly dismissed the
committed any reversible error in its assailed decision petitioner's appeal from the judgment of the trial court
of 29 November 1991. in the SECOND CIVIL CASE. The petitioner never
disputed the fact that its lumber-dealer's license or
It was duly established that on 1 April 1990, the permit had been suspended by Secretary Factoran on
petitioner's truck with Plate No. CCK-322 was coming 23 April 1990. The suspension was never lifted, and
out from the petitioner's lumberyard loaded with lauan since the license had only a lifetime of up to 25
and almaciga lumber of different sizes and dimensions September 1990, the petitioner has absolutely no right
which were not accompanied with the required to possess, sell, or otherwise dispose of lumber.
invoices and transport documents. The seizure of such Accordingly, Secretary Factoran or his authorized
truck and its cargo was a valid exercise of the power representative had the authority to seize the lumber
vested upon a forest officer or employee by Section 80 pursuant to Section 68-A of P.D. No. 705, as
of P.D. No. 705, as amended by P.D. No. 1775. Then, amended, which provides as follows:
too, as correctly held by the trial court and the Court of
Appeals in the FIRST CIVIL CASE, the search was Section 68-A. Administrative Authority of the
conducted on a moving vehicle. Such a search could Department Head or his Duly Authorized
30
Representative to Order Confiscation.--In all cases of SESINANDO MERIDA, PETITIONER, VS. PEOPLE
violations of this Code or other forest laws, rules and OF THE PHILIPPINES, RESPONDENT.
regulations, the Department Head or his duly
authorized representative may order the confiscation DECISION
of any forest products illegally cut, gathered, removed,
or possessed or abandoned. . . . CARPIO, J.:

The Case
The petitioner's insistence that possession or sale of
lumber is not penalized must also fail in view of our
This is a petition for review[1] of the Decision[2] dated 28
disquisition and ruling on the same issue in G.R. No.
June 2002 and the Resolution dated 14 May 2003 of
106424. Besides, the issue is totally irrelevant in the the Court of Appeals. The 28 June 2002 Decision
SECOND CIVIL CASE which involves administrative
affirmed the conviction of petitioner Sesinando Merida
seizure as a consequence of the violation of the
(petitioner) for violation of Section 68,[3] Presidential
suspension of the petitioner's license as lumber dealer.
Decree No. 705 (PD 705),[4] as amended by Executive
Order No. 277. The Resolution dated 14 May 2003
All told then, G.R. No. 104988 and G.R. No. 123784 denied admission of petitioner's motion for
are nothing more than rituals to cover up blatant reconsideration.[5]
violations of the Revised Forestry Code of the
Philippines (P.D. No. 705), as amended. They are The Facts
presumably trifling attempts to block the serious efforts
of the DENR to enforce the decree, efforts which
Petitioner was charged in the Regional Trial Court of
deserve the commendation of the public in light of the Romblon, Romblon, Branch 81 (trial court) with
urgent need to take firm and decisive action against violation of Section 68 of PD 705, as amended, for
despoilers of our forests whose continuous destruction
"cut[ting], gather[ing], collect[ing] and remov[ing]" a
only ensures to the generations to come, if not the
lone narra tree inside a private land in Mayod, Ipil,
present, an inheritance of parched earth incapable of
Magdiwang, Romblon (Mayod Property) over which
sustaining life. The Government must not tire in its
private complainant Oscar M. Tansiongco
vigilance to protect the environment by prosecuting (Tansiongco) claims ownership.[6]
without fear or favor any person who dares to violate
our laws for the utilization and protection of our forests.
The prosecution evidence showed that on 23
December 1998, Tansiongco learned that petitioner
WHEREFORE, judgment is hereby rendered
cut a narra tree in the Mayod Property. Tansiongco
reported the matter to Florencio Royo (Royo),
1. (a) GRANTING the petition in G.R. No. the punong barangay of Ipil. On 24 December
106424; (b) SETTING ASIDE and ANNULLING, for
1998,[7] Royo summoned petitioner to a meeting with
having been rendered with grave abuse of
Tansiongco. When confronted during the meeting
discretion,the challenged orders of 16 August
about the felled narra tree, petitioner admitted cutting
1991 and 18 October 1991 of respondent Judge
the tree but claimed that he did so with the permission
Teresita Dizon-Capulong, Branch 172, Regional Trial
of one Vicar Calix (Calix) who, according to petitioner,
Court of Valenzuela, Metro Manila, in Criminal Case
bought the Mayod Property from Tansiongco in
No. 324-V-91, entitled "People of the Philippines vs. Ri
October 1987 under a pacto de retro sale. Petitioner
Chuy Po"; (c) REINSTATING the information in the
showed to Royo Calix's written authorization signed by
said criminal case; and
Calix's wife.[8]
(d) DIRECTING the respondent Judge on her
successor to hear and decide the case with
On 11 January 1999, Tansiongco reported the tree-
purposeful dispatch; and cutting to the Department of Environment and Natural
Resources (DENR) forester Thelmo S. Hernandez
2. DENYING the petitions in G.R. No. 104988 and
(Hernandez) in Sibuyan, Romblon. When Hernandez
in G. R. No. 123784 for utter failure of the petitioner
confronted petitioner about the felled tree, petitioner
to show that the respondent Court of Appeals
reiterated his earlier claim to Royo that he cut the tree
committed any reversible error in the challenged
with Calix's permission. Hernandez ordered petitioner
decisions of 29 November 1991 in CA-G.R. SP No.
not to convert the felled tree trunk into lumber.
25510 in the FIRST CIVIL CASE and of 31 July
1995in CA-G.R. SP No. 33778 in the SECOND CIVIL
On 26 January 1999, Tansiongco informed Hernandez
CASE.
that petitioner had converted the narra trunk into
lumber. Hernandez, with other DENR employees and
Costs against the petitioner in each of these three
enforcement officers, went to the Mayod Property and
cases.
saw that the narra tree had been cut into six smaller
pieces of lumber. Hernandez took custody of the
SO ORDERED.
lumber,[9] deposited them for safekeeping with Royo,
and issued an apprehension receipt to petitioner. A
larger portion of the felled tree remained at the Mayod
G.R. No. 158182, June 12, 2008
31
Property. The DENR subsequently conducted an [petitioner] should be (14) years, eight (8) months and
investigation on the matter.[10] one (1) day to twenty (20) years of reclusion
temporal,"[14] the same penalty the trial court imposed.
Tansiongco filed a complaint with the Office of the
Provincial Prosecutor of Romblon (Provincial Petitioner sought reconsideration but the Court of
Prosecutor) charging petitioner with violation of Appeals, in its Resolution dated 14 May 2003, did not
Section 68 of PD 705, as amended. During the admit his motion for having been filed late.[15]
preliminary investigation, petitioner submitted a
counter-affidavit reiterating his claim that he cut the Hence, this petition. Petitioner raises the following
narra tree with Calix's permission. The Provincial issues:
Prosecutor[11] found probable cause to indict petitioner
and filed the Information with the trial court (docketed I. WHETHER x x x SECTION 68 OF P.D. 705
as Criminal Case No. 2207). AS AMENDED PROHIBITING THE CUTTING,
GATHERING, COLLECTING AND
During the trial, the prosecution presented six REMOVING TIMBER OR OTHER FOREST
witnesses including Tansiongco, Royo, and Hernandez PRODUCTS FROM ANY FOREST LAND
who testified on the events leading to the discovery of APPLIES TO PETITIONER.
and investigation on the tree-cutting. Petitioner testified
as the lone defense witness and claimed, for the first
II. WHETHER x x x POSSESSION OF THE
time, that he had no part in the tree-cutting.
NARRA TREE CUT IN PRIVATE LAND
CONTESTED BY VICAR CALIX AND
The Ruling of the Trial Court
PRIVATE-COMPLAINANT OSCAR
TANSIONGCO IS COVERED BY SECTION
In its Decision dated 24 November 2000, the trial court
80 OF P.D. 705 AS AMENDED.
found petitioner guilty as charged, sentenced him to
fourteen (14) years, eight (8) months and one (1) day
to twenty (20) years of reclusion temporal and ordered III. WHETHER PRIVATE-COMPLAINANT CAN
the seized lumber forfeited in Tansiongco's INITIATE THE CHARGE EVEN WITHOUT
favor.[12] The trial court dismissed petitioner's defense THE STANDING AUTHORITY COMING
of denial in view of his repeated extrajudicial FROM THE INVESTIGATING FOREST
admissions that he cut the narra tree in the Mayod OFFICER OF THE DEPARTMENT OF
Property with Calix's permission. With this finding and ENVIRONMENT AND NATURAL
petitioner's lack of DENR permit to cut the tree, the trial RESOURCES AS MANDATED BY SECTION
court held petitioner liable for violation of Section 68 of 80 OF P.D. 705 AS AMENDED.
PD 705, as amended.
[IV.] WHETHER x x x THE TRIAL COURT
Petitioner appealed to the Court of Appeals reiterating ERRED IN TAKING COGNIZANCE OF THE
his defense of denial. Petitioner also contended that CASE FILED BY PRIVATE-COMPLAINANT
(1) the trial court did not acquire jurisdiction over the BECAUSE IT WAS NOT THE
case because it was based on a complaint filed by INVESTIGATING OFFICER AS REQUIRED
Tansiongco and not by a forest officer as provided BY SECTION 80 OF P.D. 705 AS AMENDED
under Section 80 of PD 705 and (2) the penalty WHO MUST BE THE ONE TO INSTITUTE
imposed by the trial court is excessive. THE FILING OF THE SAME.[16]

The Ruling of the Court of Appeals In its Comment to the petition, the Office of the
Solicitor General (OSG) countered that (1) the trial
In its Decision dated 28 June 2002, the Court of court acquired jurisdiction over the case even though
Appeals affirmed the trial court's ruling but ordered the Tansiongco, and not a DENR forest officer, filed the
seized lumber confiscated in the government's complaint against petitioner and (2) petitioner is liable
favor.[13]The Court of Appeals sustained the trial court's for violation of Section 68 of PD 705, as amended.
finding that petitioner is bound by his extrajudicial The Issues
admissions of cutting the narra tree in the Mayod
Property without any DENR permit. The Court of The petition raises the following issues:[17]
Appeals also found nothing irregular in the filing of the
complaint by Tansiongco instead of a DENR forest 1) Whether the trial court acquired jurisdiction over
officer considering that the case underwent preliminary Criminal Case No. 2207 even though it was based on
investigation by the proper officer who filed the a complaint filed by Tansiongco and not by a DENR
Information with the trial court. forest officer; and

On the imposable penalty, the Court of Appeals, in the 2) Whether petitioner is liable for violation of Section
dispositive portion of its ruling, sentenced petitioner to 68 of PD 705, as amended.
14 years, 8 months and 1 day to 17 years of reclusion
temporal. However, in the body of its ruling, the Court The Ruling of the Court
of Appeals held that "the penalty to be imposed on
32
Petitioner is Liable for Cutting Timber in Private
The petition has no merit. Property Without Permit

The Trial Court Acquired Jurisdiction Over Section 68, as amended, one of the 12
Criminal Case No. 2207 acts[25] penalized under PD 705, provides:
SECTION 68. Cutting, Gathering and/or Collecting
We sustain the OSG's claim that the trial court Timber, or Other Forest Products Without License. —
acquired jurisdiction over Criminal Case No. 2207. The Any person who shall cut, gather, collect, remove
Revised Rules of Criminal Procedure (Revised Rules) timber or other forest products from any forest land,
list the cases which must be initiated by a complaint or timber from alienable or disposable public land,
filed by specified individuals,[18] non-compliance of or from private land, without any authority, or
which ousts the trial court of jurisdiction from trying possess timber or other forest products without the
such cases.[19] However, these cases concern only legal documents as required under existing forest laws
defamation and other crimes against chastity[20] and and regulations, shall be punished with the penalties
not to cases concerning Section 68 of PD 705, as imposed under Articles 309 and 310 of the Revised
amended. Further, Section 80 of PD 705 does not Penal Code: Provided, That in the case of
prohibit an interested person from filing a complaint partnerships, associations, or corporations, the officers
before any qualified officer for violation of Section 68 of who ordered the cutting, gathering, collection or
PD 705, as amended. Section 80 of PD 705 provides possession shall be liable, and if such officers are
in relevant parts: aliens, they shall, in addition to the penalty, be
SECTION 80. Arrest; Institution of criminal actions. — deported without further proceedings on the part of the
x x x x Commission on Immigration and Deportation.

Reports and complaints regarding the commission The court shall further order the confiscation in favor of
of any of the offenses defined in this Chapter, not the government of the timber or any forest products
committed in the presence of any forest officer or cut, gathered, collected, removed, or possessed as
employee, or any of the deputized officers or well as the machinery, equipment, implements and
officials, shall immediately be investigated by the tools illegally used in the area where the timber or
forest officer assigned in the area where the offense forest products are found. (Emphasis supplied)
was allegedly committed, who shall thereupon receive Section 68 penalizes three categories of acts: (1) the
the evidence supporting the report or complaint. cutting, gathering, collecting, or removing of timber or
other forest products from any forest land without any
If there is prima facie evidence to support the authority; (2) the cutting, gathering, collecting, or
complaint or report, the investigating forest officer removing of timber from alienable or disposable public
shall file the necessary complaint with the land, or from private land without any
appropriate official authorized by law to conduct a authority;[26]and (3) the possession of timber or other
preliminary investigation of criminal cases and file forest products without the legal documents as
an information in Court. (Emphasis supplied) required under existing forest laws and
We held in People v. CFI of Quezon[21] that the phrase regulations.[27] Petitioner stands charged of having
"reports and complaints" in Section 80 refers to "cut, gathered, collected and removed timber or other
"reports and complaints as might be brought to the forest products from a private land[28] without x x x the
forest officer assigned to the area by other forest necessary permit x x x " thus his liablity, if ever, should
officers or employees of the Bureau of Forest be limited only for "cut[ting], gather[ing], collect[ing]
Development or any of the deputized officers or and remov[ing] timber," under the second category.
officials, for violations of forest laws not committed in Further, the prosecution evidence showed that
their presence."[22] petitioner did not perform any acts of "gathering,
collecting, or removing" but only the act of "cutting" a
Here, it was not "forest officers or employees of the lone narra tree. Hence, this case hinges on the
Bureau of Forest Development or any of the deputized question of whether petitioner "cut x x x timber" in
officers or officials" who reported to Hernandez the the Mayod Property without a DENR permit.[29]
tree-cutting in the Mayod Property but Tansiongco, a
private citizen who claims ownership over the Mayod We answer in the affirmative and thus affirm the lower
Property. Thus, Hernandez cannot be faulted for not courts' rulings.
conducting an investigation to determine "if there is
prima facie evidence to support the complaint or On the question of whether petitioner cut a narra tree
report."[23] At any rate, Tansiongco was not precluded, in the Mayod Property without a DENR permit,
either under Section 80 of PD 705 or the Revised petitioner adopted conflicting positions. Before his trial,
Rules, from filing a complaint before the Provincial petitioner consistently represented to the authorities
Prosecutor for petitioner's alleged violation of Section that he cut a narra tree in the Mayod Property and that
68 of PD 705, as amended. For its part, the trial court he did so only with Calix's permission. However, when
correctly took cognizance of Criminal Case No. 2207 he testified, petitioner denied cutting the tree in
as the case falls within its exclusive original question. We sustain the lower courts' rulings that
jurisdiction.[24] petitioner's extrajudicial admissions bind
him.[30] Petitioner does not explain why Royo and
33
Hernandez, public officials who testified under oath in are too small for use as posts, panelling, beams,
their official capacities, would lie on the stand to tables, or chairs cannot be considered timber.[38]
implicate petitioner in a serious criminal offense, not to
mention that the acts of these public officers enjoy the Here, petitioner was charged with having felled a narra
presumption of regularity. Further, petitioner does not tree and converted the same into "several pieces of
deny presenting Calix's authorization to Royo and sawn lumber, about three (3) pcs. 2x16x6 and three
Hernandez as his basis for cutting the narra tree in the (3) pcs. 2x18x7 x x x consisting of 111 board feet x x
Mayod Property. Petitioner has no use of Calix's x." These measurements were indicated in the
authorization if, as he claimed during the trial, he did apprehension receipt Hernandez issued to petitioner
not cut any tree in the Mayod Property. on 26 January 1999 which the prosecution introduced
in evidence.[39] Further, Hernandez testified that the
We further hold that the lone narre tree petitioner cut larger portion of the felled log left in the Mayod
from the Mayod Property constitutes "timber" under Property "measured 76 something centimeters [at the
Section 68 of PD 705, as amended. PD 705 does not big end] while the smaller end measured 65
define "timber," only "forest product" (which circuitously centimeters and the length was 2.8
includes "timber.")[31] Does the narra tree in question meters."[40] Undoubtedly, the narra tree petitioner felled
constitute "timber" under Section 68? The closest this and converted to lumber was "timber" fit "for building or
Court came to defining the term "timber" in Section 68 for carpentry or joinery" and thus falls under the ambit
was to provide that "timber," includes "lumber" or of Section 68 of PD 705, as amended.
"processed log."[32] In other jurisdictions, timber is
determined by compliance with specified
dimensions[33] or certain "stand age" or "rotation The Penalty Imposable on Petitioner
age."[34] In Mustang Lumber, Inc. v. Court
of Appeals,[35] this Court was faced with a similar task Violation of Section 68 of PD 705, as amended, is
of having to define a term in Section 68 of PD 705 - punishable as Qualified Theft under Article 310 in
"lumber" - to determine whether possession of lumber relation to Article 309 of the Revised Penal Code
is punishable under that provision. In ruling in the (RPC), thus:
affirmative, we held that "lumber" should be taken in its
ordinary or common usage meaning to refer to
"processed log or timber," thus: Art. 310. Qualified theft. - The crime of qualified theft
The Revised Forestry Code contains no definition of shall be punished by the penalties next higher by two
either timber or lumber. While the former is included in degrees than those respectively specified in the next
forest products as defined in paragraph (q) of Section preceding article x x x.
3, the latter is found in paragraph (aa) of the same
section in the definition of "Processing plant," which Art. 309. Penalties. - Any person guilty of theft shall be
reads: punished by:
(aa) Processing plant is any mechanical set-up,
machine or combination of machine used for the 1. The penalty of prisión mayor in its minimum
processing of logs and other forest raw materials and medium periods, if the value of the thing
into lumber, veneer, plywood, wallboard, blackboard, stolen is more than 12,000 pesos but does not
paper board, pulp, paper or other finished wood exceed 22,000 pesos; but if the value of the
products. thing stolen exceeds the latter amount, the
This simply means that lumber is a processed log or penalty shall be the maximum period of the
processed forest raw material. Clearly, the Code uses one prescribed in this paragraph, and one year
the term lumber in its ordinary or common usage. In for each additional ten thousand pesos, but the
the 1993 copyright edition of Webster's Third New total of the penalty which may be imposed
International Dictionary, lumber is defined, inter alia, as shall not exceed twenty years. In such cases,
"timber or logs after being prepared for the market." and in connection with the accessory penalties
Simply put, lumber is a processed log or timber. which may be imposed and for the purpose of
the other provisions of this Code, the penalty
It is settled that in the absence of legislative intent shall be termed prisión mayor or reclusión
to the contrary, words and phrases used in a temporal, as the case may be.
statute should be given their plain, ordinary, and
common usage meaning. And in so far as 2. The penalty of prisión correccional in its
possession of timber without the required legal medium and maximum periods, if the value of
documents is concerned, Section 68 of PD No. 705, as the thing stolen is more than 6,000 pesos but
amended, makes no distinction between raw and does not exceed 12,000 pesos.
procesed timber. Neither should we.[36] x x x x
(Italicization in the original; boldfacing supplied)
3. The penalty of prisión correccional in its
We see no reason why, as in Mustang, the term
minimum and medium periods, if the value of
"timber" under Section 68 cannot be taken in its
the property stolen is more than 200 pesos but
common acceptation as referring to "wood used for or
does not exceed 6,000 pesos.
suitable for building or for carpentry or
joinery."[37] Indeed, tree saplings or tiny tree stems that
34
4. Arresto mayor in its medium period to prisión the circumstances obtaining here, the penalty of four
correccional in its minimum period, if the value (4) months and one (1) day of arresto mayor, as
of the property stolen is over 50 pesos but minimum, to three (3) years, four (4) months and
does not exceed 200 pesos. twenty-one (21) days of prision correcional, as
maximum.
5. Arresto mayor to its full extent, if such value is
over 5 pesos but does not exceed 50 pesos. WHEREFORE, we AFFIRM the Decision dated 28
June 2002 and the Resolution dated 14 May 2003 of
the Court of Appeals with the modification that
6. Arresto mayor in its minimum and medium petitioner Sesinando Merida is sentenced to four (4)
periods, if such value does not exceed 5 months and one (1) day of arresto mayor, as minimum,
pesos. to three (3) years, four (4) months and twenty-one (21)
days of prision correcional, as maximum.
7. Arresto menor or a fine not exceeding 200
pesos, if the theft is committed under the SO ORDERED.
circumstances enumerated in paragraph 3 of
the next preceding article and the value of the
thing stolen does not exceed 5 pesos. If such G.R. No. 111107, January 10, 1997
value exceeds said amount, the provisions of
any of the five preceding subdivisions shall be
LEONARDO A. PAAT, IN HIS CAPACITY AS
made applicable.
OFFICER-IN-CHARGE (OIC), REGIONAL
EXECUTIVE DIRECTOR (RED), REGION 2 AND
8. Arresto menor in its minimum period or a fine JOVITO LAYUGAN, JR., IN HIS CAPACITY AS
not exceeding 50 pesos, when the value of the COMMUNITY ENVIRONMENT AND NATURAL
thing stolen is not over 5 pesos, and the RESOURCES OFFICER (CENRO), BOTH OF THE
offender shall have acted under the impulse of DEPARTMENT OF ENVIRONMENT AND NATURAL
hunger, poverty, or the difficulty of earning a RESOURCES (DENR), PETITIONERS, VS. COURT
livelihood for the support of himself or his OF APPEALS, HON. RICARDO A. BACULI IN HIS
family. CAPACITY AS PRESIDING JUDGE OF BRANCH 2,
REGIONAL TRIAL COURT AT TUGUEGARAO,
The Information filed against petitioner alleged that the CAGAYAN, AND SPOUSES BIENVENIDO AND
six pieces of lumber measuring 111 board feet were VICTORIA DE GUZMAN, RESPONDENTS.
valued at P3,330. However, if the value of the log left DECISION
at the Mayod Property is included, the amount
increases to P20,930.40. To prove this allegation, the TORRES, JR., J.:
prosecution relied on Hernandez's testimony that these
amounts, as stated in the apprehension receipt he
Without violating the principle of exhaustion of
issued, are his "estimates" based on "prevailing local administrative remedies, may an action for replevin
price."[41] prosper to recover a movable property which is the
subject matter of an administrative forfeiture
This evidence does not suffice. To prove the amount of
proceeding in the Department of Environment and
the property taken for fixing the penalty imposable
Natural Resources pursuant to Section 68-A of P. D.
against the accused under Article 309 of the RPC, the
705, as amended, entitled The Revised Forestry Code
prosecution must present more than a mere of the Philippines?
uncorroborated "estimate" of such fact.[42] In the
absence of independent and reliable corroboration of
Are the Secretary of DENR and his representatives
such estimate, courts may either apply the minimum
empowered to confiscate and forfeit conveyances
penalty under Article 309 or fix the value of the
used in transporting illegal forest products in favor of
property taken based on the attendant circumstances
the government?
of the case.[43] In People v. Dator[44] where, as here,
the accused was charged with violation of Section 68 These are two fundamental questions presented
of PD 705, as amended, for possession of lumber
before us for our resolution.
without permit, the prosecution's evidence for the
lumber's value consisted of an estimate made by the
The controversy on hand had its incipiency on May 19,
apprehending authorities whose apparent lack of
1989 when the truck of private respondent Victoria de
corroboration was compounded by the fact that the Guzman while on its way to Bulacan from San Jose,
transmittal letter for the estimate was not presented in Baggao, Cagayan, was seized by the Department of
evidence. Accordingly, we imposed on the accused the
Environment and Natural Resources (DENR, for
minimum penalty under Article 309(6)[45] of the RPC.[46]
brevity) personnel in Aritao, Nueva Vizcaya because
the driver could not produce the required documents
Applying Dator in relation to Article 310 of the RPC
for the forest products found concealed in the truck.
and taking into account the Indeterminate Sentence Petitioner Jovito Layugan, the Community
Law, we find it proper to impose on petitioner, under
Environment and Natural Resources Officer (CENRO)
35
in Aritao, Cagayan, issued on May 23, 1989 an order Upon a thorough and delicate scrutiny of the records
of confiscation of the truck and gave the owner thereof and relevant jurisprudence on the matter, we are of the
fifteen (15) days within which to submit an explanation opinion that the plea of petitioners for reversal is in
why the truck should not be forfeited. Private order.
respondents, however, failed to submit the required
explanation. On June 22, 1989,[1] Regional Executive This Court in a long line of cases has consistently held
Director Rogelio Baggayan of DENR sustained that before a party is allowed to seek the intervention
petitioner Layugan’s action of confiscation and ordered of the court, it is a pre-condition that he should have
the forfeiture of the truck invoking Section 68-A of availed of all the means of administrative processes
Presidential Decree No. 705 as amended by Executive afforded him. Hence, if a remedy within the
Order No. 277. Private respondents filed a letter of administrative machinery can still be resorted to by
reconsideration dated June 28, 1989 of the June 22, giving the administrative officer concerned every
1989 order of Executive Director Baggayan, which opportunity to decide on a matter that comes within his
was, however, denied in a subsequent order of July jurisdiction then such remedy should be exhausted first
12, 1989.[2] Subsequently, the case was brought by before court’s judicial power can be sought. The
thea petitioners to the Secretary of DENR pursuant to premature invocation of court’s intervention is fatal to
private respondents’ statement in their letter dated one’s cause of action.[11] Accordingly, absent any
June 28, 1989 that in case their letter for finding of waiver or estoppel the case is susceptible of
reconsideration would be denied then “this letter dismissal for lack of cause of action.[12] This doctrine of
should be considered as an appeal to the exhaustion of administrative remedies was not without
Secretary.”[3] Pending resolution however of the its practical and legal reasons, for one thing, availment
appeal, a suit for replevin, docketed as Civil Case of administrative remedy entails lesser expenses and
4031, was filed by the private respondents against provides for a speedier disposition of controversies. It
petitioner Layugan and Executive Director is no less true to state that the courts of justice for
Baggayan[4] with the Regional Trial Court, Branch 2 of reasons of comity and convenience will shy away from
Cagayan,[5] which issued a writ ordering the return of a dispute until the system of administrative redress has
the truck to private respondents.[6] Petitioner Layugan been completed and complied with so as to give the
and Executive Director Baggayan filed a motion to administrative agency concerned every opportunity to
dismiss with the trial court contending, inter alia, that correct its error and to dispose of the case. However,
private respondents had no cause of action for their we are not amiss to reiterate that the principle of
failure to exhaust administrative remedies. The trial exhaustion of administrative remedies as tested by a
court denied the motion to dismiss in an order dated battery of cases is not an ironclad rule. This doctrine is
December 28, 1989.[7] Their motion for reconsideration a relative one and its flexibility is called upon by the
having been likewise denied, a petition for certiorari peculiarity and uniqueness of the factual and
was filed by the petitioners with the respondent Court circumstantial settings of a case. Hence, it is
of Appeals which sustained the trial court’s order ruling disregarded (1) when there is a violation of due
that the question involved is purely a legal process,[13] (2) when the issue involved is purely a
question.[8] Hence, this present petition,[9] with prayer legal question,[14] (3) when the administrative action is
for temporary restraining order and/or preliminary patently illegal amounting to lack or excess of
injunction, seeking to reverse the decision of the jurisdiction,[15] (4) when there is estoppel on the part of
respondent Court of Appeals was filed by the the administrative agency concerned,[16] (5) when there
petitioners on September 9, 1993. By virtue of the is irreparable injury,[17] (6) when the respondent is a
Resolution dated September 27, 1993,[10] the prayer department secretary whose acts as an alter ego of
for the issuance of temporary restraining order of the President bears the implied and assumed approval
petitioners was granted by this Court. of the latter,[18] (7) when to require exhaustion of
administrative remedies would be unreasonable,[19] (8)
Invoking the doctrine of exhaustion of administrative when it would amount to a nullification of a claim, [20] (9)
remedies, petitioners aver that the trial court could not when the subject matter is a private land in land case
legally entertain the suit for replevin because the truck proceedings,[21] (10) when the rule does not provide a
was under administrative seizure proceedings plain, speedy and adequate remedy, and (11) when
pursuant to Section 68-A of P.D. 705, as amended by there are circumstances indicating the urgency of
E.O. 277. Private respondents, on the other hand, judicial intervention.[22]
would seek to avoid the operation of this principle
asserting that the instant case falls within the In the case at bar, there is no question that the
exception of the doctrine upon the justification that (1) controversy was pending before the Secretary of
due process was violated because they were not given DENR when it was forwarded to him following the
the chance to be heard, and (2) the seizure and denial by the petitioners of the motion for
forfeiture was unlawful on the grounds: (a) that the reconsideration of private respondents through the
Secretary of DENR and his representatives have no order of July 12, 1989. In their letter of reconsideration
authority to confiscate and forfeit conveyances utilized dated June 28, 1989,[23]private respondents clearly
in transporting illegal forest products, and (b) that the recognize the presence of an administrative forum to
truck as admitted by petitioners was not used in the which they seek to avail, as they did avail, in the
commission of the crime. resolution of their case. The letter, reads, thus:

36
“xxx than oral argument, through pleadings.[29] In
administrative proceedings moreover, technical rules
If this motion for reconsideration does not merit your of procedure and evidence are not strictly applied;
favorable action, then this letter should be considered administrative process cannot be fully equated with
as an appeal to the Secretary.”[24] due process in its strict judicial sense.[30] Indeed,
deprivation of due process cannot be successfully
It was easy to perceive then that the private invoked where a party was given the chance to be
respondents looked up to the Secretary for the review heard on his motion for reconsideration,[31] as in the
and disposition of their case. By appealing to him, they instant case, when private respondents were
acknowledged the existence of an adequate and plain undisputedly given the opportunity to present their side
remedy still available and open to them in the ordinary when they filed a letter of reconsideration dated June
course of the law. Thus, they cannot now, without 28, 1989 which was, however, denied in an order of
violating the principle of exhaustion of administrative July 12, 1989 of Executive Director Baggayan. In
remedies, seek court’s intervention by filing an action Navarro III vs. Damasco,[32] we ruled that :
for replevin for the grant of their relief during the “The essence of due process is simply an opportunity
pendency of an administrative proceedings. to be heard, or as applied to administrative
proceedings, an opportunity to explain one’s side or an
Moreover, it is important to point out that the opportunity to seek a reconsideration of the action or
enforcement of forestry laws, rules and regulations and ruling complained of. A formal or trial type hearing is
the protection, development and management of forest not at all times and in all instances essential. The
lands fall within the primary and special responsibilities requirements are satisfied when the parties are
of the Department of Environment and Natural afforded fair and reasonable opportunity to explain
Resources. By the very nature of its function, the their side of the controversy at hand. What is frowned
DENR should be given a free hand unperturbed by upon is the absolute lack of notice or hearing.”
judicial intrusion to determine a controversy which is Second, private respondents imputed the patent
well within its jurisdiction. The assumption by the trial illegality of seizure and forfeiture of the truck because
court, therefore, of the replevin suit filed by private the administrative officers of the DENR allegedly have
respondents constitutes an unjustified encroachment no power to perform these acts under the law. They
into the domain of the administrative agency’s insisted that only the court is authorized to confiscate
prerogative. The doctrine of primary jurisdiction does and forfeit conveyances used in transporting illegal
not warrant a court to arrogate unto itself the authority forest products as can be gleaned from the second
to resolve a controversy the jurisdiction over which is paragraph of Section 68 of P.D. 705, as amended by
initially lodged with an administrative body of special E.O. 277. The pertinent provision reads as follows:
competence.[25] In Felipe Ismael, Jr. and Co. vs.
Deputy Executive Secretary,[26] which was reiterated in “SECTION 68. xxx
the recent case of Concerned Officials of MWSS vs.
Vasquez,[27] this Court held: xxx

“Thus, while the administration grapples with the The court shall further order the confiscation in favor of
complex and multifarious problems caused by the government of the timber or any forest products
unbriddled exploitation of these resources, the cut, gathered, collected, removed, or possessed, as
judiciary will stand clear. A long line of cases establish well as the machinery, equipments, implements and
the basic rule that the courts will not interfere in tools illegaly [sic] used in the area where the timber or
matters which are addressed to the sound discretion of forest products are found.” (Underline ours)
government agencies entrusted with the regulation of
activities coming under the special technical A reading, however, of the law persuades us not to go
knowledge and training of such agencies.” along with private respondents’ thinking not only
because the aforequoted provision apparently does
not mention nor include “conveyances” that can be the
To sustain the claim of private respondents would in subject of confiscation by the courts, but to a large
effect bring the instant controversy beyond the pale of extent, due to the fact that private respondents’
the principle of exhaustion of administrative remedies interpretation of the subject provision unduly restricts
and fall within the ambit of excepted cases heretofore the clear intention of the law and inevitably reduces the
stated. However, considering the circumstances other provision of Section 68-A , which is quoted
prevailing in this case, we can not but rule out these herein below:
assertions of private respondents to be without merit. “SECTION 68-A. Administrative Authority of the
First, they argued that there was violation of due Department or His Duly Authorized Representative To
process because they did not receive the May 23, Order Confiscation. In all cases of violation of this
1989 order of confiscation of petitioner Layugan. This Code or other forest laws, rules and regulations, the
contention has no leg to stand on. Due process does Department Head or his duly authorized
not necessarily mean or require a hearing, but simply representative, may order the confiscation of any
an opportunity or right to be heard.[28] One may be forest products illegally cut, gathered, removed, or
heard , not solely by verbal presentation but also, and possessed or abandoned, and all conveyances used
perhaps many times more creditably and practicable either by land, water or air in the commission of the
37
offense and to dispose of the same in accordance with Private respondents, likewise, contend that the seizure
pertinent laws, regulations and policies on the matter.” was illegal because the petitioners themselves
(Underline ours) admitted in the Order dated July 12, 1989 of Executive
It is, thus, clear from the foregoing provision that the Director Baggayan that the truck of private
Secretary and his duly authorized representatives are respondents was not used in the commission of the
given the authority to confiscate and forfeit any crime. This order, a copy of which was given to and
conveyances utilized in violating the Code or other received by the counsel of private respondents, reads
forest laws, rules and regulations. The phrase “to in part , viz. :
dispose of the same” is broad enough to cover the act “xxx while it is true that the truck of your client was not
of forfeiting conveyances in favor of the government. used by her in the commission of the crime, we uphold
The only limitation is that it should be made “in your claim that the truck owner is not liable for the
accordance with pertinent laws, regulations or policies crime and in no case could a criminal case be filed
on the matter.” In the construction of statutes, it must against her as provided under Article 309 and 310 of
be read in such a way as to give effect to the purpose the Revised Penal Code. xxx”[36]
projected in the statute.[33] Statutes should be We observed that private respondents misread the
construed in the light of the object to be achieved and content of the aforestated order and obviously
the evil or mischief to be suppressed, and they should misinterpreted the intention of petitioners. What is
be given such construction as will advance the object, contemplated by the petitioners when they stated that
suppress the mischief, and secure the benefits the truck "was not used in the commission of the
intended.[34] In this wise, the observation of the Solicitor crime" is that it was not used in the commission of the
General is significant, thus: crime of theft, hence, in no case can a criminal action
“But precisely because of the need to make forestry be filed against the owner thereof for violation of Article
laws ‘more responsive to present situations and 309 and 310 of the Revised Penal Code. Petitioners
realities’ and in view of the ‘urgency to conserve the did not eliminate the possibility that the truck was
remaining resources of the country,’ that the being used in the commission of another crime, that is,
government opted to add Section 68-A. This the breach of Section 68 of P.D.705 as amended by
amendatory provision is an administrative remedy E.O. 277. In the same order of July 12, 1989,
totally separate and distinct from criminal proceedings. petitioners pointed out:
More than anything else, it is intended to supplant the “xxx However, under Section 68 of P.D.705 as
inadequacies that characterize enforcement of forestry amended and further amended by Executive Order
laws through criminal actions. The preamble of EO No.277 specifically provides for the confiscation of the
277-the law that added Section 68-A to PD 705-is conveyance used in the transport of forest products
most revealing: not covered by the required legal documents. She may
not have been involved in the cutting and gathering of
‘WHEREAS, there is an urgency to conserve the the product in question but the fact that she accepted
remaining forest resources of the country for the the goods for a fee or fare the same is therefor liable.
benefit and welfare of the present and future xxx”[37]
generations of Filipinos; Private respondents, however, contended that there is
no crime defined and punishable under Section 68
WHEREAS, our forest resources may be effectively other than qualified theft, so that, when petitioners
conserved and protected through the vigilant admitted in the July 12, 1989 order that private
enforcement and implementation of our forestry laws, respondents could not be charged for theft as provided
rules and regulations; for under Articles 309 and 310 of the Revised Penal
Code, then necessarily private respondents could not
WHEREAS, the implementation of our forestry laws have committed an act constituting a crime under
suffers from technical difficulties, due to certain Section 68. We disagree. For clarity, the provision of
inadequacies in the penal provisions of the Revised Section 68 of P.D. 705 before its amendment by E.O.
Forestry Code of the Philippines; and 277 and the provision of Section 1 of E.O. No.277
amending the aforementioned Section 68 are
WHEREAS, to overcome this difficulties, there is a reproduced herein, thus:
need to penalize certain acts more responsive to “SECTION 68. Cutting, gathering and/or collecting
present situations and realities;’ timber or other products without license. - Any person
who shall cut , gather , collect , or remove timber or
It is interesting to note that Section 68-A is a new other forest products from any forest land, or timber
provision authorizing the DENR to confiscate, not only from alienable and disposable public lands, or from
‘conveyances,’ but forest products as well. On the private lands, without any authority under a license
other hand, confiscation of forest products by the agreement, lease, license or permit, shall be guilty of
‘court’ in a criminal action has long been provided for qualified theft as defined and punished under Articles
in Section 68. If as private respondents insist, the 309 and 310 of the Revised Penal Code xxx.”
power on confiscation cannot be exercised except only (Underscoring ours; Section 68, P.D.705 before its
through the court under Section 68, then Section 68-A amendment by E.O.277 )
would have no purpose at all. Simply put, Section 68-A “SECTION 1. Section 68 of Presidential Decree
would not have provided any solution to the problem No.705, as amended, is hereby amended to read as
perceived in EO 277, supra.”[35] follows:
38
‘Section 68. Cutting, gathering and/or collecting timber execution, or attachment, or if so seized, that it is
or other forest products without license. -Any person exempt from such seizure, and the actual value of the
who shall cut, gather, collect, remove timber or other property.[42] Private respondents miserably failed to
forest products from any forest land, or timber from convince this Court that a wrongful detention of the
alienable or disposable public land, or from private subject truck obtains in the instant case. It should be
land, without any authority, or possess timber or other noted that the truck was seized by the petitioners
forest products without the legal documents as because it was transporting forest products with out
required under existing forest laws and regulations, the required permit of the DENR in manifest
shall be punished with the penalties imposed under contravention of Section 68 of P.D. 705 as amended
Articles 309 and 310 of the Revised Penal Code xxx." by E.O 277. Section 68-A of P.D. 705, as amended,
(Underscoring ours; Section 1, E.O No. 277 amending unquestionably warrants the confiscation as well as
Section 68, P.D. 705 as amended) the disposition by the Secretary of DENR or his duly
With the introduction of Executive Order No. 277 authorized representatives of the conveyances used in
amending Section 68 of P.D. 705, the act of cutting, violating the provision of forestry laws. Evidently, the
gathering, collecting, removing, or possessing forest continued possession or detention of the truck by the
products without authority constitutes a distinct offense petitioners for administrative forfeiture proceeding is
independent now from the crime of theft under Articles legally permissible, hence , no wrongful detention
309 and 310 of the Revised Penal Code, but the exists in the case at bar.
penalty to be imposed is that provided for under Article
309 and 310 of the Revised Penal Code. This is clear Moreover, the suit for replevin is never intended as a
from the language of Executive Order No. 277 when it procedural tool to question the orders of confiscation
eliminated the phrase “ shall be guilty of qualified theft and forfeiture issued by the DENR in pursuance to the
as defined and punished under Articles 309 and 310 of authority given under P.D.705, as amended. Section 8
the Revised Penal Code ” and inserted the words “ of the said law is explicit that actions taken by the
shall be punished with the penalties imposed under Director of the Bureau of Forest Development
Article 309 and 310 of the Revised Penal Code ”. concerning the enforcement of the provisions of the
When the statute is clear and explicit, there is hardly said law are subject to review by the Secretary of
room for any extended court ratiocination or DENR and that courts may not review the decisions of
rationalization of the law.[38] the Secretary except through a special civil action for
certiorari or prohibition. It reads :
From the foregoing disquisition, it is clear that a suit for SECTION 8 . REVIEW - All actions and decisions of
replevin can not be sustained against the petitioners the Director are subject to review, motu propio or upon
for the subject truck taken and retained by them for appeal of any person aggrieved thereby, by the
administrative forfeiture proceedings in pursuant to Department Head whose decision shall be final and
Section 68-A of the P. D. 705, as amended. Dismissal executory after the lapse of thirty (30) days from the
of the replevin suit for lack of cause of action in view of receipt of the aggrieved party of said decision, unless
the private respondents’ failure to exhaust appealed to the President in accordance with
administrative remedies should have been the proper Executive Order No. 19, Series of 1966. The Decision
course of action by the lower court instead of of the Department Head may not be reviewed by the
assuming jurisdiction over the case and consequently courts except through a special civil action for certiorari
issuing the writ ordering the return of the truck. or prohibition.
Exhaustion of the remedies in the administrative WHEREFORE, the Petition is GRANTED; the Decision
forum, being a condition precedent prior to one’s of the respondent Court of Appeals dated October 16,
recourse to the courts and more importantly, being an 1991 and its Resolution dated July 14, 1992 are
element of private respondents’ right of action, is too hereby SET ASIDE AND REVERSED; the Restraining
significant to be waylaid by the lower court. Order promulgated on September 27, 1993 is hereby
made permanent; and the Secretary of DENR is
It is worth stressing at this point, that a suit for replevin directed to resolve the controversy with utmost
is founded solely on the claim that the defendant dispatch.
wrongfully withholds the property sought to be SO ORDERED.
recovered. It lies to recover possession of personal
chattels that are unlawfully detained.[39] “To detain” is
defined as to mean “to hold or keep in custody,” [40] and
it has been held that there is tortuous taking whenever
there is an unlawful meddling with the property, or an G.R. No. 157882, March 30, 2006
exercise or claim of dominion over it, without any
pretense of authority or right; this, without manual
seizing of the property is sufficient.[41] Under the Rules DIDIPIO EARTH-SAVERS MULTI-PURPOSE
of Court, it is indispensable in replevin proceedings, ASSOCIATION, INCORPORATED (DESAMA),
that the plaintiff must show by his own affidavit that he MANUEL BUTIC, CESAR MARIANO, LAURO
is entitled to the possession of property, that the ABANCE, BEN TAYABAN, ANTONIO DINGCOG,
property is wrongfully detained by the defendant, TEDDY B. KIMAYONG, ALONZO ANANAYO,
alleging the cause of detention, that the same has not ANTONIO MALAN-UYA, JOSE BAHAG, ANDRES
been taken for tax assessment, or seized under INLAB, RUFINO LICYAYO, ALFREDO CULHI,
39
CATALILNA INABYUHAN, GUAY DUMMANG, GINA RAMOS, IN HIS CAPACITY AS DIRECTOR OF THE
PULIDO, EDWIN ANSIBEY, CORAZON SICUAN, MINES AND GEOSCIENCES BUREAU (MGB-
LOPEZ DUMULAG, FREDDIE AYDINON, VILMA DENR), ALBERTO ROMULO, IN HIS CAPACITY AS
JOSE, FLORENTINA MADDAWAT, LINDA THE EXECUTIVE SECRETARY OF THE OFFICE OF
DINGCOG, ELMER SICUAN, GARY ANSIBEY, THE PRESIDENT, RICHARD N. FERRER, IN HIS
JIMMY MADDAWAT, JIMMY GUAY, ALFREDO CUT- CAPACITY AS ACTING UNDERSECRETARY OF
ING, ANGELINA UDAN, OSCAR INLAB, JUANITA THE OFFICE OF THE PRESIDENT, IAN HEATH
CUT-ING, ALBERT PINKIHAN, CECILIA TAYABAN, SANDERCOCK, IN HIS CAPACITY AS PRESIDENT
CRISTA BINWAK, PEDRO DUGAY, SR., EDUARDO OF CLIMAX-ARIMCO MINING CORPORATION,
ANANAYO, ROBIN INLAB, JR., LORENZO PULIDO, RESPONDENTS.
TOMAS BINWAG, EVELYN BUYA, JAIME
DINGCOG, DINAOAN CUT-ING, PEDRO DONATO, DECISION
MYRNA GUAY, FLORA ANSIBEY, GRACE
DINAMLING, EDUARDO MENCIAS, ROSENDA CHICO-NAZARIO, J.:
JACOB, SIONITA DINGCOG, GLORIA JACOB,
MAXIMA GUAY, RODRIGO PAGGADUT, MARINA
This petition for prohibition and mandamus under Rule
ANSIBEY, TOLENTINO INLAB, RUBEN DULNUAN,
65 of the Rules of Court assails the constitutionality of
GERONIMO LICYAYO, LEONCIO CUMTI, MARY
Republic Act No. 7942 otherwise known as the
DULNUAN, FELISA BALANBAN, MYRNA DUYAN,
Philippine Mining Act of 1995, together with the
MARY MALAN-UYA, PRUDENCIO ANSIBEY,
Implementing Rules and Regulations issued pursuant
GUILLERMO GUAY, MARGARITA CULHI, ALADIN
thereto, Department of Environment and Natural
ANSIBEY, PABLO DUYAN, PEDRO PUGUON,
Resources (DENR) Administrative Order No. 96-40, s.
JULIAN INLAB, JOSEPH NACULON, ROGER
1996 (DAO 96-40) and of the Financial and Technical
BAJITA, DINAON GUAY, JAIME ANANAYO, MARY
Assistance Agreement (FTAA) entered into on 20 June
ANSIBEY, LINA ANANAYO, MAURA DUYAPAT,
1994 by the Republic of the Philippines and Arimco
ARTEMEO ANANAYO, MARY BABLING, NORA
Mining Corporation (AMC), a corporation established
ANSIBEY, DAVID DULNUAN, AVELINO PUGUON,
under the laws of Australia and owned by its nationals.
LUCAS GUMAWI, LUISA ABBAC, CATHRIN
GUWAY, CLARITA TAYABAN, FLORA JAVERA,
RANDY SICOAN, FELIZA PUTAKI, CORAZON P. On 25 July 1987, then President Corazon C. Aquino
DULNUAN, NENA D. BULLONG, ERMELYN promulgated Executive Order No. 279 which
GUWAY, GILBERT BUTALE, JOSEPH B. authorized the DENR Secretary to accept, consider
BULLONG, FRANCISCO PATNAAN, JR., SHERWIN and evaluate proposals from foreign-owned
DUGAY, TIRSO GULLINGAY, BENEDICT T. corporations or foreign investors for contracts of
NABALLIN, RAMON PUN-ADWAN, ALFONSO agreements involving either technical or financial
DULNUAN, CARMEN D. BUTALE, LOLITA assistance for large-scale exploration, development,
ANSIBEY, ABRAHAM DULNUAN, ARLYNDA and utilization of minerals, which, upon appropriate
BUTALE, MODESTO A. ANSIBEY, EDUARDO recommendation of the Secretary, the President may
LUGAY, ANTONIO HUMIWAT, ALFREDO PUMIHIC, execute with the foreign proponent.
MIKE TINO, TONY CABARROGUIS, BASILIO
TAMLIWOK, JR., NESTOR TANGID, ALEJO On 3 March 1995, then President Fidel V. Ramos
TUGUINAY, BENITO LORENZO, RUDY BAHIWAG, signed into law Rep. Act No. 7942 entitled, "An Act
ANALIZA BUTALE, NALLEM LUBYOC, JOSEPH Instituting A New System of Mineral Resources
DUHAYON, RAFAEL CAMPOL, MANUEL PUMALO, Exploration, Development, Utilization and
DELFIN AGALOOS, PABLO CAYANGA, PERFECTO Conservation," otherwise known as the Philippine
SISON, ELIAS NATAMA, LITO PUMALO, SEVERINA Mining Act of 1995.
DUGAY, GABRIEL PAKAYAO, JEOFFREY SINDAP,
FELIX TICUAN, MARIANO S. MADDELA, MENZI On 15 August 1995, then DENR Secretary Victor O.
TICAWA, DOMINGA DUGAY, JOE BOLINEY, Ramos issued DENR Administrative Order (DAO) No.
JASON ASANG, TOMMY ATENYAYO, ALEJO 23, Series of 1995, containing the implementing
AGMALIW, DIZON AGMALIW, EDDIE ATOS, guidelines of Rep. Act No. 7942. This was soon
FELIMON BLANCO, DARRIL DIGOY, LUCAS BUAY, superseded by DAO No. 96-40, s. 1996, which took
ARTEMIO BRAZIL, NICANOR MODI, LUIS effect on 23 January 1997 after due publication.
REDULFIN, NESTOR JUSTINO, JAIME CUMILA,
BENEDICT GUINID, EDITHA ANIN, INOH-YABAN Previously, however, or specifically on 20 June 1994,
BANDAO, LUIS BAYWONG, FELIPE DUHALNGON, President Ramos executed an FTAA with AMC over a
PETER BENNEL, JOSEPH T. BUNGGALAN, JIMMY total land area of 37,000 hectares covering the
B. KIMAYONG, HENRY PUGUON, PEDRO provinces of Nueva Vizcaya and Quirino. Included in
BUHONG, BUGAN NADIAHAN, SR., MARIA EDEN this area is Barangay Dipidio, Kasibu, Nueva Vizcaya.
ORLINO, SPC, PERLA VISSORO, AND BISHOP
RAMON VILLENA, PETITIONERS, VS. ELISEA
Subsequently, AMC consolidated with Climax Mining
GOZUN, IN HER CAPACITY AS SECRETARY OF
Limited to form a single company that now goes under
THE DEPARTMENT OF ENVIRONMENT AND
the new name of Climax-Arimco Mining Corporation
NATURAL RESOURCES (DENR), HORACIO
40
(CAMC), the controlling 99% of stockholders of which Whether or not the Mining Act and its Implementing
are Australian nationals. Rules and Regulations are void and unconstitutional
for sanctioning an unconstitutional administrative
On 7 September 2001, counsels for petitioners filed a process of determining just compensation.
demand letter addressed to then DENR Secretary
Heherson Alvarez, for the cancellation of the CAMC III
FTAA for the primary reason that Rep. Act No. 7942
and its Implementing Rules and Regulations DAO 96- Whether or not the State, through Republic Act No.
40 are unconstitutional. The Office of the Executive 7942 and the CAMC FTAA, abdicated its primary
Secretary was also furnished a copy of the said letter. responsibility to the full control and supervision over
There being no response to both letters, another letter natural resources.
of the same content dated 17 June 2002 was sent to
President Gloria Macapagal Arroyo. This letter was IV
indorsed to the DENR Secretary and eventually
referred to the Panel of Arbitrators of the Mines and Whether or not the respondents interpretation of the
Geosciences Bureau (MGB), Regional Office No. 02, role of wholly foreign and foreign-owned corporations
Tuguegarao, Cagayan, for further action. in their involvement in mining enterprises, violates
paragraph 4, section 2, Article XII of the Constitution.
On 12 November 2002, counsels for petitioners
received a letter from the Panel of Arbitrators of the V
MGB requiring the petitioners to comply with the Rules
of the Panel of Arbitrators before the letter may be WHETHER OR NOT THE 1987 CONSTITUTION
acted upon. PROHIBITS SERVICE CONTRACTS.[1]

Yet again, counsels for petitioners sent President Before going to the substantive issues, the procedural
Arroyo another demand letter dated 8 November 2002. question raised by public respondents shall first be
Said letter was again forwarded to the DENR dealt with. Public respondents are of the view that
Secretary who referred the same to the MGB, Quezon petitioners eminent domain claim is not ripe for
City. adjudication as they fail to allege that CAMC has
actually taken their properties nor do they allege that
In a letter dated 19 February 2003, the MGB rejected their property rights have been endangered or are in
the demand of counsels for petitioners for the danger on account of CAMCs FTAA. In effect, public
cancellation of the CAMC FTAA. respondents insist that the issue of eminent domain is
not a justiciable controversy which this Court can take
cognizance of.
Petitioners thus filed the present petition for prohibition
and mandamus, with a prayer for a temporary
restraining order. They pray that the Court issue an A justiciable controversy is defined as a definite and
order: concrete dispute touching on the legal relations of
parties having adverse legal interests which may be
resolved by a court of law through the application of a
1. enjoining public respondents from acting on any
law.[2] Thus, courts have no judicial power to review
application for FTAA;
cases involving political questions and as a rule, will
desist from taking cognizance of speculative or
2. declaring unconstitutional the Philippine Mining Act hypothetical cases, advisory opinions and cases that
of 1995 and its Implementing Rules and Regulations; have become moot.[3] The Constitution is quite explicit
on this matter.[4] It provides that judicial power includes
3. canceling the FTAA issued to CAMC. the duty of the courts of justice to settle actual
controversies involving rights which are legally
In their memorandum petitioners pose the following demandable and enforceable. Pursuant to this
issues: constitutional mandate, courts, through the power of
judicial review, are to entertain only real disputes
I between conflicting parties through the application of
law. For the courts to exercise the power of judicial
review, the following must be extant (1) there must be
Whether or not Republic Act No. 7942 and the CAMC
an actual case calling for the exercise of judicial
FTAA are void because they allow the unjust and
power; (2) the question must be ripe for adjudication;
unlawful taking of property without payment of just
and (3) the person challenging must have the
compensation , in violation of Section 9, Article III of
standing.[5]
the Constitution.
An actual case or controversy involves a conflict of
II
legal rights, an assertion of opposite legal claims,
susceptible of judicial resolution as distinguished from
a hypothetical or abstract difference or
41
dispute.[6] There must be a contrariety of legal rights an interest adverse to that of respondents who, on the
that can be interpreted and enforced on the basis of other hand, claim the validity of the assailed statute
existing law and jurisprudence. and the FTAA of CAMC.

Closely related to the second requisite is that the Besides, the transcendental importance of the issues
question must be ripe for adjudication. A question is raised and the magnitude of the public interest
considered ripe for adjudication when the act being involved will have a bearing on the countrys economy
challenged has had a direct adverse effect on the which is to a greater extent dependent upon the mining
individual challenging it.[7] industry. Also affected by the resolution of this case
are the proprietary rights of numerous residents in the
The third requisite is legal standing or locus standi. It is mining contract areas as well as the social existence of
defined as a personal or substantial interest in the indigenous peoples which are threatened. Based on
case such that the party has sustained or will sustain these considerations, this Court deems it proper to
direct injury as a result of the governmental act that is take cognizance of the instant petition.
being challenged, alleging more than a generalized
grievance.[8] The gist of the question of standing is Having resolved the procedural question, the
whether a party alleges "such personal stake in the constitutionality of the law under attack must be
outcome of the controversy as to assure that concrete addressed squarely.
adverseness which sharpens the presentation of
issues upon which the court depends for illumination of First Substantive Issue: Validity of Section 76 of Rep.
difficult constitutional questions."[9] Unless a person is Act No. 7942 and DAO 96-40
injuriously affected in any of his constitutional rights by
the operation of statute or ordinance, he has no
In seeking to nullify Rep. Act No. 7942 and its
standing.[10]
implementing rules DAO 96-40 as unconstitutional,
petitioners set their sight on Section 76 of Rep. Act No.
In the instant case, there exists a live controversy 7942 and Section 107 of DAO 96-40 which they claim
involving a clash of legal rights as Rep. Act No. 7942 allow the unlawful and unjust taking of private property
has been enacted, DAO 96-40 has been approved and for private purpose in contradiction with Section 9,
an FTAAs have been entered into. The FTAA holders Article III of the 1987 Constitution mandating that
have already been operating in various provinces of private property shall not be taken except for public
the country. Among them is CAMC which operates in use and the corresponding payment of just
the provinces of Nueva Vizcaya and Quirino where compensation. They assert that public respondent
numerous individuals including the petitioners are DENR, through the Mining Act and its Implementing
imperiled of being ousted from their landholdings in Rules and Regulations, cannot, on its own, permit
view of the CAMC FTAA. In light of this, the court entry into a private property and allow taking of land
cannot await the adverse consequences of the law in without payment of just compensation.
order to consider the controversy actual and ripe for
judicial intervention.[11] Actual eviction of the land Interpreting Section 76 of Rep. Act No. 7942 and
owners and occupants need not happen for this Court
Section 107 of DAO 96-40, juxtaposed with the
to intervene. As held in Pimentel, Jr. v. Hon. Aguirre[12]:
concept of taking of property for purposes of eminent
domain in the case of Republic v. Vda. de
By the mere enactment of the questioned law or the Castellvi,[15] petitioners assert that there is indeed a
approval of the challenged act, the dispute is said to taking upon entry into private lands and concession
have ripened into a judicial controversy even without areas.
any other overt act. Indeed, even a singular violation of
the Constitution and/or the law is enough to awaken Republic v. Vda. de Castellvi defines taking under the
judicial duty.[13]
concept of eminent domain as entering upon private
property for more than a momentary period, and,
Petitioners embrace various segments of the society. under the warrant or color of legal authority, devoting it
These include Didipio Earth-Savers Multi-Purpose to a public use, or otherwise informally appropriating or
Association, Inc., an organization of farmers and injuriously affecting it in such a way as to substantially
indigenous peoples organized under Philippine laws, oust the owner and deprive him of all beneficial
representing a community actually affected by the enjoyment thereof.
mining activities of CAMC, as well as other residents of
areas affected by the mining activities of CAMC. These
From the criteria set forth in the cited case, petitioners
petitioners have the standing to raise the
claim that the entry into a private property by CAMC,
constitutionality of the questioned FTAA as they allege
pursuant to its FTAA, is for more than a momentary
a personal and substantial injury.[14] They assert that period, i.e., for 25 years, and renewable for another 25
they are affected by the mining activities of CAMC. years; that the entry into the property is under the
Likewise, they are under imminent threat of being
warrant or color of legal authority pursuant to the FTAA
displaced from their landholdings as a result of the
executed between the government and CAMC; and
implementation of the questioned FTAA. They thus
that the entry substantially ousts the owner or
meet the appropriate case requirement as they assert
42
possessor and deprives him of all beneficial enjoyment upon surface owners, occupants and concessionaires
of the property. These facts, according to the of a mining contract area.
petitioners, amount to taking. As such, petitioners
question the exercise of the power of eminent domain Taking in Eminent Domain Distinguished from
as unwarranted because respondents failed to prove Regulation in Police Power
that the entry into private property is devoted for public
use. The power of eminent domain is the inherent right of
the state (and of those entities to which the power has
Petitioners also stress that even without the doctrine in been lawfully delegated) to condemn private property
the Castellvi case, the nature of the mining activity, the to public use upon payment of just
extent of the land area covered by the CAMC FTAA compensation.[17] On the other hand, police power is
and the various rights granted to the proponent or the the power of the state to promote public welfare by
FTAA holder, such as (a) the right of possession of the restraining and regulating the use of liberty and
Exploration Contract Area, with full right of ingress and property.[18] Although both police power and the power
egress and the right to occupy the same; (b) the right of eminent domain have the general welfare for their
not to be prevented from entry into private lands by object, and recent trends show a mingling[19] of the two
surface owners and/or occupants thereof when with the latter being used as an implement of the
prospecting, exploring and exploiting for minerals former, there are still traditional distinctions between
therein; (c) the right to enjoy easement rights, the use the two.
of timber, water and other natural resources in the
Exploration Contract Area; (d) the right of possession
Property condemned under police power is usually
of the Mining Area, with full right of ingress and egress noxious or intended for a noxious purpose; hence, no
and the right to occupy the same; and (e) the right to compensation shall be paid.[20] Likewise, in the
enjoy easement rights, water and other natural
exercise of police power, property rights of private
resources in the Mining Area, result in a taking of
individuals are subjected to restraints and burdens in
private property.
order to secure the general comfort, health, and
prosperity of the state. Thus, an ordinance prohibiting
Petitioners quickly add that even theaters from selling tickets in excess of their seating
assuming arguendo that there is no absolute, physical capacity (which would result in the diminution of profits
taking, at the very least, Section 76 establishes a legal of the theater-owners) was upheld valid as this would
easement upon the surface owners, occupants and promote the comfort, convenience and safety of the
concessionaires of a mining contract area sufficient to customers.[21] In U.S. v. Toribio,[22] the court upheld the
deprive them of enjoyment and use of the property and provisions of Act No. 1147, a statute regulating the
that such burden imposed by the legal easement falls slaughter of carabao for the purpose of conserving an
within the purview of eminent domain. adequate supply of draft animals, as a valid exercise of
police power, notwithstanding the property rights
To further bolster their claim that the legal easement impairment that the ordinance imposed on cattle
established is equivalent to taking, petitioners cite the owners. A zoning ordinance prohibiting the operation
case of National Power Corporation v. of a lumber yard within certain areas was assailed as
Gutierrez[16] holding that the easement of right-of-way unconstitutional in that it was an invasion of the
imposed against the use of the land for an indefinite property rights of the lumber yard owners in People v.
period is a taking under the power of eminent domain. de Guzman.[23] The Court nonetheless ruled that the
regulation was a valid exercise of police power. A
Traversing petitioners assertion, public respondents similar ruling was arrived at in Seng Kee S Co. v.
argue that Section 76 is not a taking provision but a Earnshaw and Piatt[24] where an ordinance divided the
valid exercise of the police power and by virtue of City of Manila into industrial and residential areas.
which, the state may prescribe regulations to promote
the health, morals, peace, education, good order, A thorough scrutiny of the extant jurisprudence leads
safety and general welfare of the people. This to a cogent deduction that where a property interest is
government regulation involves the adjustment of merely restricted because the continued use thereof
rights for the public good and that this adjustment would be injurious to public welfare, or where property
curtails some potential for the use or economic is destroyed because its continued existence would be
exploitation of private property. Public respondents injurious to public interest, there is no compensable
concluded that to require compensation in all such taking.[25] However, when a property interest is
circumstances would compel the government to appropriated and applied to some public purpose,
regulate by purchase. there is compensable taking.[26]

Public respondents are inclined to believe that by According to noted constitutionalist, Fr. Joaquin
entering private lands and concession areas, FTAA Bernas, SJ, in the exercise of its police power
holders do not oust the owners thereof nor deprive regulation, the state restricts the use of private
them of all beneficial enjoyment of their properties as property, but none of the property interests in the
the said entry merely establishes a legal easement bundle of rights which constitute ownership is
appropriated for use by or for the benefit of the
43
public.[27] Use of the property by the owner was limited, which, be it what it may, can not be accomplished
but no aspect of the property is used by or for the unless the owner of the property condemned or seized
public.[28] The deprivation of use can in fact be total be previously and duly indemnified, it is proper to
and it will not constitute compensable taking if nobody protect the appellant by means of the remedy
else acquires use of the property or any interest employed in such cases, as it is only adequate remedy
therein.[29] when no other legal action can be resorted to, against
an intent which is nothing short of an arbitrary
If, however, in the regulation of the use of the property, restriction imposed by the city by virtue of the coercive
somebody else acquires the use or interest thereof, power with which the same is invested.
such restriction constitutes compensable taking. Thus,
in City Government of Quezon City v. Ericta,[30] it was And in the case of National Power Corporation v.
argued by the local government that an ordinance Gutierrez,[35] despite the NPCs protestation that the
requiring private cemeteries to reserve 6% of their total owners were not totally deprived of the use of the land
areas for the burial of paupers was a valid exercise of and could still plant the same crops as long as they did
the police power under the general welfare clause. not come into contact with the wires, the Court
This court did not agree in the contention, ruling that nevertheless held that the easement of right-of-way
property taken under the police power is sought to be was a taking under the power of eminent domain. The
destroyed and not, as in this case, to be devoted to a Court said:
public use. It further declared that the ordinance in
question was actually a taking of private property In the case at bar, the easement of right-of-way is
without just compensation of a certain area from a definitely a taking under the power of eminent domain.
private cemetery to benefit paupers who are charges Considering the nature and effect of the installation of
of the local government. Being an exercise of eminent 230 KV Mexico-Limay transmission lines, the limitation
domain without provision for the payment of just imposed by NPC against the use of the land for an
compensation, the same was rendered invalid as it indefinite period deprives private respondents of its
violated the principles governing eminent domain. ordinary use.

In People v. Fajardo,[31] the municipal mayor refused A case exemplifying an instance of compensable
Fajardo permission to build a house on his own land taking which does not entail transfer of title is Republic
on the ground that the proposed structure would v. Philippine Long Distance Telephone Co.[36] Here, the
destroy the view or beauty of the public plaza. The Bureau of Telecommunications, a government
ordinance relied upon by the mayor prohibited the instrumentality, had contracted with the PLDT for the
construction of any building that would destroy the interconnection between the Government Telephone
view of the plaza from the highway. The court ruled System and that of the PLDT, so that the former could
that the municipal ordinance under the guise of police make use of the lines and facilities of the PLDT. In its
power permanently divest owners of the beneficial use desire to expand services to government offices, the
of their property for the benefit of the public; hence, Bureau of Telecommunications demanded to expand
considered as a taking under the power of eminent its use of the PLDT lines. Disagreement ensued on the
domain that could not be countenanced without terms of the contract for the use of the PLDT facilities.
payment of just compensation to the affected owners. The Court ruminated:
In this case, what the municipality wanted was to
impose an easement on the property in order to
Normally, of course, the power of eminent domain
preserve the view or beauty of the public plaza, which
results in the taking or appropriation of title to, and
was a form of utilization of Fajardos property for public possession of, the expropriated property; but no
benefit.[32] cogent reason appears why said power may not be
availed of to impose only a burden upon the owner of
While the power of eminent domain often results in the the condemned property, without loss of title and
appropriation of title to or possession of property, it possession. It is unquestionable that real property
need not always be the case. Taking may include may, through expropriation, be subjected to an
trespass without actual eviction of the owner, material easement right of way.[37]
impairment of the value of the property or prevention of
the ordinary uses for which the property was intended In Republic v. Castellvi,[38] this Court had the occasion
such as the establishment of an easement.[33] In Ayala
to spell out the requisites of taking in eminent domain,
de Roxas v. City of Manila,[34] it was held that the
to wit:
imposition of burden over a private property through
easement was considered taking; hence, payment of
just compensation is required. The Court declared: (1) the expropriator must enter a private property;

And, considering that the easement intended to be (2) the entry must be for more than a momentary
established, whatever may be the object thereof, is not period.
merely a real right that will encumber the property, but
is one tending to prevent the exclusive use of one (3) the entry must be under warrant or color of legal
portion of the same, by expropriating it for public use authority;
44
(4) the property must be devoted to public use or areas and vehicle depots, install their machinery,
otherwise informally appropriated or injuriously equipment and sewer systems. On top of this, under
affected; Section 75, easement rights are accorded to them
where they may build warehouses, port facilities,
(5) the utilization of the property for public use must electric transmission, railroads and other
be in such a way as to oust the owner and deprive him infrastructures necessary for mining operations. All
of beneficial enjoyment of the property. these will definitely oust the owners or occupants of
the affected areas the beneficial ownership of their
lands. Without a doubt, taking occurs once mining
As shown by the foregoing jurisprudence, a regulation
operations commence.
which substantially deprives the owner of his
proprietary rights and restricts the beneficial use and
enjoyment for public use amounts to compensable Section 76 of Rep. Act No. 7942 is a Taking Provision
taking. In the case under consideration, the entry
referred to in Section 76 and the easement rights Moreover, it would not be amiss to revisit the history of
under Section 75 of Rep. Act No. 7942 as well as the mining laws of this country which would help us
various rights to CAMC under its FTAA are no different understand Section 76 of Rep. Act No. 7942.
from the deprivation of proprietary rights in the cases
discussed which this Court considered as taking. This provision is first found in Section 27 of
Section 75 of the law in question reads: Commonwealth Act No. 137 which took effect on 7
November 1936, viz:
Easement Rights. - When mining areas are so situated
that for purposes of more convenient mining Bfore entering private lands the prospector shall first
operations it is necessary to build, construct or install apply in writing for written permission of the private
on the mining areas or lands owned, occupied or owner, claimant, or holder thereof, and in case of
leased by other persons, such infrastructure as roads, refusal by such private owner, claimant, or holder to
railroads, mills, waste dump sites, tailing ponds, grant such permission, or in case of disagreement as
warehouses, staging or storage areas and port to the amount of compensation to be paid for such
facilities, tramways, runways, airports, electric privilege of prospecting therein, the amount of such
transmission, telephone or telegraph lines, dams and compensation shall be fixed by agreement among the
their normal flood and catchment areas, sites for water prospector, the Director of the Bureau of Mines and
wells, ditches, canals, new river beds, pipelines, the surface owner, and in case of their failure to
flumes, cuts, shafts, tunnels, or mills, the contractor, unanimously agree as to the amount of compensation,
upon payment of just compensation, shall be entitled all questions at issue shall be determined by the Court
to enter and occupy said mining areas or lands. of First Instance.

Similarly, the pertinent provision of Presidential Decree


No. 463, otherwise known as The Mineral Resources
Section 76 provides: Development Decree of 1974, provides:

Entry into private lands and concession areas Subject SECTION 12. Entry to Public and Private Lands. A
to prior notification, holders of mining rights shall not person who desires to conduct prospecting or other
be prevented from entry into private lands and mining operations within public lands covered by
concession areas by surface owners, occupants, or concessions or rights other than mining shall first
concessionaires when conducting mining operations obtain the written permission of the government official
therein. concerned before entering such lands. In the case of
private lands, the written permission of the owner or
The CAMC FTAA grants in favor of CAMC the right of possessor of the land must be obtained before
possession of the Exploration Contract Area, the full entering such lands. In either case, if said permission
right of ingress and egress and the right to occupy the is denied, the Director, at the request of the interested
same. It also bestows CAMC the right not to be person may intercede with the owner or possessor of
prevented from entry into private lands by surface the land. If the intercession fails, the interested person
owners or occupants thereof when prospecting, may bring suit in the Court of First Instance of the
exploring and exploiting minerals therein. province where the land is situated. If the court finds
the request justified, it shall issue an order granting the
permission after fixing the amount of compensation
The entry referred to in Section 76 is not just a simple
and/or rental due the owner or possessor: Provided,
right-of-way which is ordinarily allowed under the
That pending final adjudication of such amount, the
provisions of the Civil Code. Here, the holders of
mining rights enter private lands for purposes of court shall upon recommendation of the Director
permit the interested person to enter, prospect and/or
conducting mining activities such as exploration,
undertake other mining operations on the disputed
extraction and processing of minerals. Mining right
land upon posting by such interested person of a bond
holders build mine infrastructure, dig mine shafts and
with the court which the latter shall consider adequate
connecting tunnels, prepare tailing ponds, storage
to answer for any damage to the owner or possessor
45
of the land resulting from such entry, prospecting or reasonable construction, they can be reconciled, the
any other mining operations. latter act will not operate as a repeal of the earlier.

Hampered by the difficulties and delays in securing Considering that Section 1 of Presidential Decree No.
surface rights for the entry into private lands for 512 granted the qualified mining operators the
purposes of mining operations, Presidential Decree authority to exercise eminent domain and since this
No. 512 dated 19 July 1974 was passed into law in grant of authority is deemed incorporated in Section 76
order to achieve full and accelerated mineral resources of Rep. Act No. 7942, the inescapable conclusion is
development. Thus, Presidential Decree No. 512 that the latter provision is a taking provision.
provides for a new system of surface rights acquisition
by mining prospectors and claimants. Whereas in While this Court declares that the assailed provision is
Commonwealth Act No. 137 and Presidential Decree a taking provision, this does not mean that it is
No. 463 eminent domain may only be exercised in unconstitutional on the ground that it allows taking of
order that the mining claimants can build, construct or private property without the determination of public use
install roads, railroads, mills, warehouses and other and the payment of just compensation.
facilities, this time, the power of eminent domain may
now be invoked by mining operators for the entry,
The taking to be valid must be for public use.[42] Public
acquisition and use of private lands, viz:
use as a requirement for the valid exercise of the
power of eminent domain is now synonymous with
SECTION 1. Mineral prospecting, location, exploration, public interest, public benefit, public welfare and public
development and exploitation is hereby declared of convenience.[43] It includes the broader notion of
public use and benefit, and for which the power of indirect public benefit or advantage. Public use as
eminent domain may be invoked and exercised for the traditionally understood as actual use by the public has
entry, acquisition and use of private lands. x x x. already been abandoned.[44]

The evolution of mining laws gives positive indication Mining industry plays a pivotal role in the economic
that mining operators who are qualified to own lands development of the country and is a vital tool in the
were granted the authority to exercise eminent domain governments thrust of accelerated recovery.[45] The
for the entry, acquisition, and use of private lands in importance of the mining industry for national
areas open for mining operations. This grant of development is expressed in Presidential Decree No.
authority extant in Section 1 of Presidential Decree No. 463:
512 is not expressly repealed by Section 76 of Rep.
Act No. 7942; and neither are the former statutes WHEREAS, mineral production is a major support of
impliedly repealed by the former. These two provisions
the national economy, and therefore the intensified
can stand together even if Section 76 of Rep. Act No.
discovery, exploration, development and wise
7942 does not spell out the grant of the privilege to
utilization of the countrys mineral resources are
exercise eminent domain which was present in the old urgently needed for national development.
law.
Irrefragably, mining is an industry which is of public
It is an established rule in statutory construction that in
benefit.
order that one law may operate to repeal another law,
the two laws must be inconsistent.[39] The former must
be so repugnant as to be irreconciliable with the latter That public use is negated by the fact that the state
act. Simply because a latter enactment may relate to would be taking private properties for the benefit of
the same subject matter as that of an earlier statute is private mining firms or mining contractors is not at all
not of itself sufficient to cause an implied repeal of the true. In Heirs of Juancho Ardona v.
latter, since the new law may be cumulative or a Reyes,[46] petitioners therein contended that the
continuation of the old one. As has been the ruled, promotion of tourism is not for public use because
repeals by implication are not favored, and will not be private concessionaires would be allowed to maintain
decreed unless it is manifest that the legislature so various facilities such as restaurants, hotels, stores,
intended.[40] As laws are presumed to be passed with etc., inside the tourist area. The Court thus
deliberation and with full knowledge of all existing ones contemplated:
on the subject, it is but reasonable to conclude that in
passing a statute it was not intended to interfere with The rule in Berman v. Parker [348 U.S. 25; 99 L. ed.
or abrogate any former law relating to the same 27] of deference to legislative policy even if such policy
matter, unless the repugnancy between the two is not might mean taking from one private person and
only irreconcilable, but also clear and convincing, and conferring on another private person applies as well in
flowing necessarily from the language used, unless the the Philippines.
later act fully embraces the subject matter of the
earlier, or unless the reason for the earlier act is . . . Once the object is within the authority of
beyond peradventure removed.[41] Hence, every effort Congress, the means by which it will be attained is
must be used to make all acts stand and if, by any also for Congress to determine. Here one of the
means chosen is the use of private enterprise for
46
redevelopment of the area. Appellants argue that this contractors dealings with the local property
makes the project a taking from one businessman for owners. The government, then, will not act as a
the benefit of another businessman. But the means of subcontractor of the contractor; rather, it will facilitate
executing the project are for Congress and Congress the transaction and enable the parties to avoid a
alone to determine, once the public purpose has been technical violation of the Anti-Dummy Law.
established. x x x[47]
There is also no basis for the claim that the Mining
Petitioners further maintain that the states discretion to Law and its implementing rules and regulations do not
decide when to take private property is reduced provide for just compensation in expropriating private
contractually by Section 13.5 of the CAMC FTAA, properties. Section 76 of Rep. Act No. 7942 and
which reads: Section 107 of DAO 96-40 provide for the payment of
just compensation:
If the CONTRACTOR so requests at its option, the
GOVERNMENT shall use its offices and legal powers Section 76. xxx Provided, that any damage to the
to assist in the acquisition at reasonable cost of any property of the surface owner, occupant, or
surface areas or rights required by the CONTRACTOR concessionaire as a consequence of such operations
at the CONTRACTORs cost to carry out the Mineral shall be properly compensated as may be provided for
Exploration and the Mining Operations herein. in the implementing rules and regulations.
Section 107. Compensation of the Surface Owner and
All obligations, payments and expenses arising from, Occupant- Any damage done to the property of the
or incident to, such agreements or acquisition of right surface owners, occupant, or concessionaire thereof
shall be for the account of the CONTRACTOR and as a consequence of the mining operations or as a
shall be recoverable as Operating Expense. result of the construction or installation of the
infrastructure mentioned in 104 above shall be
properly and justly compensated.
According to petitioners, the government is reduced to
a sub-contractor upon the request of the private
respondent, and on account of the foregoing provision, Such compensation shall be based on the agreement
the contractor can compel the government to exercise entered into between the holder of mining rights and
the surface owner, occupant or concessionaire thereof,
its power of eminent domain thereby derogating the
where appropriate, in accordance with P.D. No. 512.
latters power to expropriate property.
(Emphasis supplied.)
The provision of the FTAA in question lays down the
Second Substantive Issue: Power of Courts to
ways and means by which the foreign-owned
Determine Just Compensation
contractor, disqualified to own land, identifies to the
government the specific surface areas within the FTAA
contract area to be acquired for the mine Closely-knit to the issue of taking is the determination
infrastructure.[48] The government then acquires of just compensation. It is contended that Rep. Act No.
ownership of the surface land areas on behalf of the 7942 and Section 107 of DAO 96-40 encroach on the
contractor, through a voluntary transaction in order to power of the trial courts to determine just
enable the latter to proceed to fully implement the compensation in eminent domain cases inasmuch as
FTAA. Eminent domain is not yet called for at this the same determination of proper compensation are
stage since there are still various avenues by which cognizable only by the Panel of Arbitrators.
surface rights can be acquired other than
expropriation. The FTAA provision under attack merely The question on the judicial determination of just
facilitates the implementation of the FTAA given to compensation has been settled in the case of Export
CAMC and shields it from violating the Anti-Dummy Processing Zone Authority v. Dulay[50] wherein the
Law. Hence, when confronted with the same question court declared that the determination of just
in La Bugal-B'Laan Tribal Association, Inc. v. compensation in eminent domain cases is a judicial
Ramos,[49] the Court answered: function. Even as the executive department or the
legislature may make the initial determinations, the
Clearly, petitioners have needlessly jumped to same cannot prevail over the courts findings.
unwarranted conclusions, without being aware of the
rationale for the said provision. That provision does Implementing Section 76 of Rep. Act No. 7942,
not call for the exercise of the power of eminent Section 105 of DAO 96-40 states that holder(s) of
domain -- and determination of just compensation is mining right(s) shall not be prevented from entry into
not an issue -- as much as it calls for a qualified party its/their contract/mining areas for the purpose of
to acquire the surface rights on behalf of a foreign- exploration, development, and/or utilization. That in
owned contractor. cases where surface owners of the lands, occupants
Rather than having the foreign contractor act through or concessionaires refuse to allow the permit holder or
a dummy corporation, having the State do the contractor entry, the latter shall bring the matter before
purchasing is a better alternative. This will at least the Panel of Arbitrators for proper disposition. Section
cause the government to be aware of such 106 states that voluntary agreements between the two
transaction/s and foster transparency in the parties permitting the mining right holders to enter and
47
use the surface owners lands shall be registered with despite the preliminary determination made by the
the Regional Office of the MGB. In connection with administrative agency. As held in Philippine Veterans
Section 106, Section 107 provides that the Bank v. Court of Appeals[53]:
compensation for the damage done to the surface
owner, occupant or concessionaire as a consequence The jurisdiction of the Regional Trial Courts is not any
of mining operations or as a result of the construction less original and exclusive because the question is first
or installation of the infrastructure shall be properly and passed upon by the DAR, as the judicial proceedings
justly compensated and that such compensation shall are not a continuation of the administrative
be based on the agreement between the holder of determination.
mining rights and surface owner, occupant or
concessionaire, or where appropriate, in accordance Third Substantive Issue: Sufficient Control by the State
with Presidential Decree No. 512. In cases where Over Mining Operations
there is disagreement to the compensation or where
there is no agreement, the matter shall be brought
before the Panel of Arbitrators. Section 206 of the Anent the third issue, petitioners charge that Rep. Act
implementing rules and regulations provides an No. 7942, as well as its Implementing Rules and
aggrieved party the remedy to appeal the decision of Regulations, makes it possible for FTAA contracts to
the Panel of Arbitrators to the Mines Adjudication cede over to a fully foreign-owned corporation full
Board, and the latters decision may be reviewed by the control and management of mining enterprises, with
Supreme Court by filing a petition for review the result that the State is allegedly reduced to a
on certiorari.[51] passive regulator dependent on submitted plans and
reports, with weak review and audit powers. The State
is not acting as the supposed owner of the natural
An examination of the foregoing provisions gives no resources for and on behalf of the Filipino people; it
indication that the courts are excluded from taking
practically has little effective say in the decisions made
cognizance of expropriation cases under the mining
by the enterprise. In effect, petitioners asserted that
law. The disagreement referred to in Section 107 does
the law, the implementing regulations, and the CAMC
not involve the exercise of eminent domain, rather it
FTAA cede beneficial ownership of the mineral
contemplates of a situation wherein the permit holders resources to the foreign contractor.
are allowed by the surface owners entry into the latters
lands and disagreement ensues as regarding the
proper compensation for the allowed entry and use of It must be noted that this argument was already raised
the private lands. Noticeably, the provision points to a in La Bugal-B'Laan Tribal Association, Inc. v.
voluntary sale or transaction, but not to an involuntary Ramos,[54] where the Court answered in the following
sale. manner:

The legislature, in enacting the mining act, is RA 7942 provides for the states control and
presumed to have deliberated with full knowledge of all supervision over mining operations. The following
existing laws and jurisprudence on the subject. Thus, it provisions thereof establish the mechanism of
is but reasonable to conclude that in passing such inspection and visitorial rights over mining operations
statute it was in accord with the existing laws and and institute reportorial requirements in this manner:
jurisprudence on the jurisdiction of courts in the
determination of just compensation and that it was not
intended to interfere with or abrogate any former law 1. Sec. 8 which provides for the DENRs power of
relating to the same matter. Indeed, there is nothing in over-all supervision and periodic review for the
the provisions of the assailed law and its implementing conservation, management, development and proper
rules and regulations that exclude the courts from their use of the States mineral resources;
jurisdiction to determine just compensation in
expropriation proceedings involving mining operations. 2. Sec. 9 which authorizes the Mines and
Although Section 105 confers upon the Panel of Geosciences Bureau (MGB) under the DENR to
Arbitrators the authority to decide cases where surface exercise direct charge in the administration and
owners, occupants, concessionaires refuse permit disposition of mineral resources, and empowers the
holders entry, thus, necessitating involuntary taking, MGB to monitor the compliance by the contractor of
this does not mean that the determination of the just the terms and conditions of the mineral agreements,
compensation by the Panel of Arbitrators or the Mines confiscate surety and performance bonds, and
Adjudication Board is final and conclusive. The deputize whenever necessary any member or unit of
determination is only preliminary unless accepted by the Phil. National Police, barangay, duly registered
all parties concerned. There is nothing wrong with the non-governmental organization (NGO) or any qualified
grant of primary jurisdiction by the Panel of Arbitrators person to police mining activities;
or the Mines Adjudication Board to determine in a
preliminary matter the reasonable compensation due 3. Sec. 66 which vests in the Regional Director
the affected landowners or occupants.[52] The original exclusive jurisdiction over safety inspections of all
and exclusive jurisdiction of the courts to decide installations, whether surface or underground, utilized
determination of just compensation remains intact in mining operations.
48
4. Sec. 35, which incorporates into all FTAAs the An FTAA contractor has to dispose of the minerals
following terms, conditions and warranties: and by-products at the highest market price and
register with the MGB a copy of the sales agreement
"(g) Mining operations shall be conducted in (Section 56-n, DAO 96-40).
accordance with the provisions of the Act and its
IRR. MGB is mandated to monitor the contractors
compliance with the terms and conditions of the FTAA;
"(h) Work programs and minimum expenditures and to deputize, when necessary, any member or unit
commitments. of the Philippine National Police, the barangay or a
DENR-accredited nongovernmental organization to
police mining activities (Section 7-d and -f, DAO 96-
xxx xxx xxx 40).

An FTAA cannot be transferred or assigned without


"(k) Requiring proponent to effectively use
prior approval by the President (Section 40, RA 7942;
appropriate anti-pollution technology and facilities to
protect the environment and restore or rehabilitate Section 66, DAO 96-40).
mined-out areas.
A mining project under an FTAA cannot proceed to the
"(l) The contractors shall furnish the Government construction/development/utilization stage, unless its
records of geologic, accounting and other relevant Declaration of Mining Project Feasibility has been
data for its mining operation, and that books of approved by government (Section 24, RA 7942).
accounts and records shall be open for inspection by
the government. x x x. The Declaration of Mining Project Feasibility filed by
the contractor cannot be approved without submission
"(m) Requiring the proponent to dispose of the of the following documents:
minerals at the highest price and more advantageous
terms and conditions.
1. Approved mining project feasibility study
(Section 53-d, DAO 96-40)
xxx xxx xxx 2. Approved three-year work program (Section 53-
a-4, DAO 96-40)
"(o) Such other terms and conditions consistent 3. Environmental compliance certificate (Section
with the Constitution and with this Act as the Secretary 70, RA 7942)
may deem to be for the best interest of the State and 4. Approved environmental protection and
the welfare of the Filipino people. enhancement program (Section 69, RA 7942)
5. Approval by the Sangguniang
The foregoing provisions of Section 35 of RA 7942 are Panlalawigan/Bayan/Barangay (Section 70, RA 7942;
also reflected and implemented in Section 56 (g), (h), Section 27, RA 7160)
(l), (m) and (n) of the Implementing Rules, DAO 96- 6. Free and prior informed consent by the
40. indigenous peoples concerned, including payment of
royalties through a Memorandum of Agreement
Moreover, RA 7942 and DAO 96-40 also provide (Section 16, RA 7942; Section 59, RA 8371)
various stipulations confirming the governments
control over mining enterprises:
The FTAA contractor is obliged to assist in the
The contractor is to relinquish to the government development of its mining community, promotion of the
those portions of the contract area not needed for general welfare of its inhabitants, and development of
mining operations and not covered by any declaration science and mining technology (Section 57, RA
of mining feasibility (Section 35-e, RA 7942; Section 7942).
60, DAO 96-40).
The contractor must comply with the provisions The FTAA contractor is obliged to submit reports (on
pertaining to mine safety, health and environmental quarterly, semi-annual or annual basis as the case
protection (Chapter XI, RA 7942; Chapters XV and may be; per Section 270, DAO 96-40), pertaining to
XVI, DAO 96-40). the following:

For violation of any of its terms and conditions, 1. Exploration


government may cancel an FTAA. (Chapter XVII, RA 2. Drilling
7942; Chapter XXIV, DAO 96-40). 3. Mineral resources and reserves
4. Energy consumption
An FTAA contractor is obliged to open its books of 5. Production
accounts and records for 0inspection by the 6. Sales and marketing
government (Section 56-m, DAO 96-40). 7. Employment
49
8. Payment of taxes, royalties, fees and other for scrutiny, so as to enable the State to determine if
Government Shares the government share has been fully paid.
9. Mine safety, health and environment
10. Land use The State may likewise compel the contractors
11. Social development compliance with mandatory requirements on mine
12. Explosives consumption safety, health and environmental protection, and the
use of anti-pollution technology and
An FTAA pertaining to areas within government facilities. Moreover, the contractor is also obligated to
reservations cannot be granted without a written assist in the development of the mining community and
clearance from the government agencies concerned to pay royalties to the indigenous peoples
(Section 19, RA 7942; Section 54, DAO 96-40). concerned.

An FTAA contractor is required to post a financial Cancellation of the FTAA may be the penalty for
guarantee bond in favor of the government in an violation of any of its terms and conditions and/or
amount equivalent to its expenditures obligations for noncompliance with statutes or regulations. This
any particular year. This requirement is apart from the general, all-around, multipurpose sanction is no trifling
representations and warranties of the contractor that it matter, especially to a contractor who may have yet to
has access to all the financing, managerial and recover the tens or hundreds of millions of dollars sunk
technical expertise and technology necessary to carry into a mining project.
out the objectives of the FTAA (Section 35-b, -e, and -
f, RA 7942).
Overall, considering the provisions of the statute and
the regulations just discussed, we believe that the
Other reports to be submitted by the contractor, as State definitely possesses the means by which it can
required under DAO 96-40, are as follows: an have the ultimate word in the operation of the
environmental report on the rehabilitation of the mined- enterprise, set directions and objectives, and detect
out area and/or mine waste/tailing covered area, and deviations and noncompliance by the contractor;
anti-pollution measures undertaken (Section 35-a-2); likewise, it has the capability to enforce compliance
annual reports of the mining operations and records of and to impose sanctions, should the occasion therefor
geologic accounting (Section 56-m); annual progress arise.
reports and final report of exploration activities
(Section 56-2).
In other words, the FTAA contractor is not free to do
whatever it pleases and get away with it; on the
Other programs required to be submitted by the contrary, it will have to follow the government line if it
contractor, pursuant to DAO 96-40, are the following: a wants to stay in the enterprise. Ineluctably then, RA
safety and health program (Section 144); an 7942 and DAO 96-40 vest in the government more
environmental work program (Section 168); an annual than a sufficient degree of control and supervision over
environmental protection and enhancement program the conduct of mining operations.
(Section 171).
Fourth Substantive Issue: The Proper Interpretation of
The foregoing gamut of requirements, regulations, the Constitutional Phrase "Agreements Involving Either
restrictions and limitations imposed upon the FTAA Technical or Financial Assistance
contractor by the statute and regulations easily
overturns petitioners contention. The setup under RA In interpreting the first and fourth paragraphs of
7942 and DAO 96-40 hardly relegates the State to the
Section 2, Article XII of the Constitution, petitioners set
role of a passive regulator dependent on submitted
forth the argument that foreign corporations are barred
plans and reports. On the contrary, the government
from making decisions on the conduct of operations
agencies concerned are empowered to approve or
and the management of the mining project. The first
disapprove -- hence, to influence, direct and change -- paragraph of Section 2, Article XII reads:
the various work programs and the corresponding
minimum expenditure commitments for each of the
exploration, development and utilization phases of the x x x The exploration, development, and utilization of
mining enterprise. 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-
Once these plans and reports are approved, the production, joint venture, or production sharing
contractor is bound to comply with its commitments
agreements with Filipino citizens, or corporations or
therein. Figures for mineral production and sales are
associations at least sixty percentum of whose capital
regularly monitored and subjected to government
is owned by such citizens. Such agreements may be
review, in order to ensure that the products and by-
for a period not exceeding twenty five years,
products are disposed of at the best prices possible; renewable for not more than twenty five years, and
even copies of sales agreements have to be submitted
under such terms and conditions as may be provided
to and registered with MGB. And the contractor is
by law x x x.
mandated to open its books of accounts and records

50
The fourth paragraph of Section 2, Article XII since "the management or operation of mining
provides: activities by foreign contractors, which is the primary
feature of service contracts, was precisely the evil that
The President may enter into agreements with foreign- the drafters of the 1987 Constitution sought to
owned corporations involving either technical or eradicate."
financial assistance for large scale exploration,
development, and utilization of minerals, petroleum, xxx xxx xxx
and other mineral oils according to the general terms
and conditions provided by law, based on real We do not see how applying a strictly literal or verba
contributions to the economic growth and general legis interpretation of paragraph 4 could inexorably
welfare of the country x x x. lead to the conclusions arrived at in
the ponencia. First, the drafters choice of words --
Petitioners maintain that the first paragraph bars aliens their use of the phrase agreements x x
and foreign-owned corporations from entering into any x involving either technical or financial assistance --
direct arrangement with the government including does not indicate the intent to exclude other modes of
those which involve co-production, joint venture or assistance. The drafters opted to use involving when
production sharing agreements. They likewise insist they could have simply said agreements for financial
that the fourth paragraph allows foreign-owned or technical assistance, if that was their intention to
corporations to participate in the large-scale begin with. In this case, the limitation would be very
exploration, development and utilization of natural clear and no further debate would ensue.
resources, but such participation, however, is merely
limited to an agreement for either financial or technical In contrast, the use of the word "involving" signifies
assistance only. the possibility of the inclusion of other forms of
assistance or activities having to do with, otherwise
Again, this issue has already been succinctly passed related to or compatible with financial or technical
upon by this Court in La Bugal-B'Laan Tribal assistance. The word "involving" as used in this
Association, Inc. v. Ramos.[55] In discrediting such context has three connotations that can be
argument, the Court ratiocinated: differentiated thus: one, the sense of "concerning,"
"having to do with," or "affecting"; two, "entailing,"
Petitioners claim that the phrase "agreements x x x "requiring," "implying" or "necessitating"; and three,
involving either technical or financial "including," "containing" or "comprising."
assistance" simply means technical assistance or
financial assistance agreements, nothing more and Plainly, none of the three connotations convey a sense
nothing else. They insist that there is no ambiguity in of exclusivity. Moreover, the word "involving," when
the phrase, and that a plain reading of paragraph 4 understood in the sense of "including," as in including
quoted above leads to the inescapable conclusion that technical or financial assistance, necessarily implies
what a foreign-owned corporation may enter into with that there are activities other than those that are being
the government is merely an agreement included. In other words, if an agreement includes
for either financial or technical assistance only, for the technical or financial assistance, there is apart from
large-scale exploration, development and utilization of such assistance -- something else already in, and
minerals, petroleum and other mineral oils; such a covered or may be covered by, the said agreement.
limitation, they argue, excludes foreign management
and operation of a mining enterprise. In short, it allows for the possibility that matters, other
than those explicitly mentioned, could be made part of
This restrictive interpretation, petitioners believe, is in the agreement. Thus, we are now led to the
line with the general policy enunciated by the conclusion that the use of the word involving implies
Constitution reserving to Filipino citizens and that these agreements with foreign corporations are
corporations the use and enjoyment of the countrys not limited to mere financial or technical assistance.
natural resources. They maintain that this Courts The difference in sense becomes very apparent when
Decision of January 27, 2004 correctly declared the we juxtapose "agreements for technical or financial
WMCP FTAA, along with pertinent provisions of RA assistance against agreements includingtechnical or
7942, void for allowing a foreign contractor to have financial assistance. This much is unalterably clear in
direct and exclusive management of a mining a verba legis approach.
enterprise. Allowing such a privilege not only runs
counter to the full control and supervision that the Second, if the real intention of the drafters was to
State is constitutionally mandated to exercise over the confine foreign corporations to financial or technical
exploration, development and utilization of the assistance and nothing more, their language would
countrys natural resources; doing so also vests in the have certainly been so unmistakably restrictive and
foreign company beneficial ownership of our mineral stringent as to leave no doubt in anyones mind about
resources. It will be recalled that the Decision of their true intent. For example, they would have used
January 27, 2004 zeroed in on management or other the sentence foreign corporations are absolutely
forms of assistance or other activities associated with prohibited from involvement in the management or
the service contracts of the martial law regime, operation of mining or similar ventures or words of
51
similar import. A search for such stringent wording The foregoing are mere fragments of the framers
yields negative results. Thus, we come to the lengthy discussions of the provision dealing
inevitable conclusion that there was a conscious with agreements x x x involving either technical or
and deliberate decision to avoid the use of financial assistance, which ultimately became
restrictive wording that bespeaks an intent not to paragraph 4 of Section 2 of Article XII of the
use the expression agreements x x x involving Constitution. Beyond any doubt, the members of the
either technical or financial assistance in an ConCom were actually debating about the martial-law-
exclusionary and limiting manner. era service contracts for which they were crafting
appropriate safeguards.
Fifth Substantive Issue: Service Contracts Not
Deconstitutionalized In the voting that led to the approval of Article XII by
the ConCom, the explanations given by
Lastly, petitioners stress that the service contract Commissioners Gascon, Garcia and Tadeo indicated
regime under the 1973 Constitution is expressly that they had voted to reject this provision on account
prohibited under the 1987 Constitution as the term of their objections to the constitutionalization of the
service contracts found in the former was deleted in service contract concept.
the latter to avoid the circumvention of constitutional
prohibitions that were prevalent in the 1987 Mr. Gascon said, "I felt that if we would
Constitution. According to them, the framers of the constitutionalize any provision on service contracts,
1987 Constitution only intended for foreign-owned this should always be with the concurrence of
corporations to provide either technical assistance or Congress and not guided only by a general law to be
financial assistance. Upon perusal of the CAMC FTAA, promulgated by Congress." Mr. Garcia explained,
petitioners are of the opinion that the same is a replica "Service contracts are given constitutional
of the service contract agreements that the present legitimization in Sec. 3, even when they have been
constitution allegedly prohibit. proven to be inimical to the interests of the nation,
providing, as they do, the legal loophole for the
Again, this contention is not well-taken. The mere fact exploitation of our natural resources for the benefit of
that the term service contracts found in the 1973 foreign interests." Likewise, Mr. Tadeo cited inter alia
Constitution was not carried over to the present the fact that service contracts continued to subsist,
constitution, sans any categorical statement banning enabling foreign interests to benefit from our natural
service contracts in mining activities, does not mean resources. It was hardly likely that these gentlemen
that service contracts as understood in the 1973 would have objected so strenuously, had the provision
Constitution was eradicated in the 1987 called for mere technical or financial assistance and
Constitution.[56] The 1987 Constitution allows the nothing more.
continued use of service contracts with foreign
corporations as contractors who would invest in and The deliberations of the ConCom and some
operate and manage extractive enterprises, subject to commissioners explanation of their votes leave no
the full control and supervision of the State; this time, room for doubt that the service contract concept
however, safety measures were put in place to prevent precisely underpinned the commissioners
abuses of the past regime.[57] We ruled, thus: understanding of the agreements involving either
technical or financial assistance.
To our mind, however, such intent cannot be
definitively and conclusively established from the mere xxx xxx xxx
failure to carry the same expression or term over to the
new Constitution, absent a more specific, explicit and From the foregoing, we are impelled to conclude that
unequivocal statement to that effect. What petitioners the phrase agreements involving either technical or
seek (a complete ban on foreign participation in the financial assistance, referred to in paragraph 4, are in
management of mining operations, as previously fact service contracts. But unlike those of the 1973
allowed by the earlier Constitutions) is nothing short of variety, the new ones are between foreign corporations
bringing about a momentous sea change in the acting as contractors on the one hand; and on the
economic and developmental policies; and the other, the government as principal or owner of the
fundamentally capitalist, free-enterprise philosophy of works. In the new service contracts, the foreign
our government. We cannot imagine such a radical contractors provide capital, technology and technical
shift being undertaken by our government, to the great know-how, and managerial expertise in the creation
prejudice of the mining sector in particular and our and operation of large-scale mining/extractive
economy in general, merely on the basis of enterprises; and the government, through its agencies
the omission of the terms service contract from or the (DENR, MGB), actively exercises control and
failure to carry them over to the new supervision over the entire operation.
Constitution. There has to be a much more definite
and even unarguable basis for such a drastic reversal xxx xxx xxx
of policies.
It is therefore reasonable and unavoidable to make
xxx xxx xxx the following conclusion, based on the above
52
arguments. As written by the framers and ratified and MARIO JOSE B. TALJA; DAVID E. DE VERA;
adopted by the people, the Constitution allows the MARIA MILAGROS L. SAN JOSE; SR. SUSAN O.
continued use of service contracts with foreign BOLANIO, OND; LOLITA G. DEMONTEVERDE;
corporations -- as contractors who would invest in and BENJIE L. NEQUINTO;[1] ROSE LILIA S. ROMANO;
operate and manage extractive enterprises, subject to ROBERTO S. VERZOLA; EDUARDO AURELIO C.
the full control and supervision of the State -- sans the REYES; LEAN LOUEL A. PERIA, REPRESENTED
abuses of the past regime. The purpose is clear: to BY HIS FATHER ELPIDIO V. PERIA;[2] GREEN
develop and utilize our mineral, petroleum and other FORUM PHILIPPINES; GREEN FORUM WESTERN
resources on a large scale for the immediate and VISAYAS (GF-WV); ENVIRONMENTAL LEGAL
tangible benefit of the Filipino people.[58] ASSISTANCE CENTER (ELAC); KAISAHAN TUNGO
SA KAUNLARAN NG KANAYUNAN AT
WHEREFORE, the instant petition for prohibition and REPORMANG PANSAKAHAN
mandamus is hereby DISMISSED. Section 76 of (KAISAHAN);[3] PARTNERSHIP FOR AGRARIAN
Republic Act No. 7942 and Section 107 of DAO 96-40; REFORM AND RURAL DEVELOPMENT SERVICES,
Republic Act No. 7942 and its Implementing Rules and INC. (PARRDS); PHILIPPINE PARTNERSHIP FOR
Regulations contained in DAO 96-40 insofar as they THE DEVELOPMENT OF HUMAN RESOURCES IN
relate to financial and technical assistance agreements THE RURAL AREAS, INC. (PHILDHRRA);
referred to in paragraph 4 of Section 2 of Article XII of WOMEN’S LEGAL BUREAU (WLB); CENTER FOR
the Constitution are NOT UNCONSTITUTIONAL. SO ALTERNATIVE DEVELOPMENT INITIATIVES, INC.
ORDERED. (CADI); UPLAND DEVELOPMENT INSTITUTE (UDI);
KINAIYAHAN FOUNDATION, INC.; SENTRO NG
ALTERNATIBONG LINGAP PANLIGAL (SALIGAN);
AND LEGAL RIGHTS AND NATURAL RESOURCES
CENTER, INC. (LRC), PETITIONERS, VS. VICTOR
G.R. No. 127882, December 01, 2004 O. RAMOS, SECRETARY, DEPARTMENT OF
ENVIRONMENT AND NATURAL RESOURCES
LA BUGAL-B’LAAN TRIBAL ASSOCIATION, INC., (DENR); HORACIO RAMOS, DIRECTOR, MINES
REPRESENTED BY ITS CHAIRMAN F’LONG AND GEOSCIENCES BUREAU (MGB-DENR);
MIGUEL M. LUMAYONG; WIGBERTO E. TAÑADA; RUBEN TORRES, EXECUTIVE SECRETARY; AND
PONCIANO BENNAGEN; JAIME TADEO; RENATO WMC (PHILIPPINES), INC.,[4] RESPONDENTS.
R. CONSTANTINO JR.; F’LONG AGUSTIN M.
DABIE; ROBERTO P. AMLOY; RAQIM L. DABIE; RESOLUTION
SIMEON H. DOLOJO; IMELDA M. GANDON; LENY
B. GUSANAN; MARCELO L. GUSANAN; QUINTOL PANGANIBAN, J.:
A. LABUAYAN; LOMINGGES D. LAWAY; BENITA P.
TACUAYAN; MINORS JOLY L. BUGOY,
REPRESENTED BY HIS FATHER UNDERO D. All mineral resources are owned by the State. Their
BUGOY AND ROGER M. DADING; REPRESENTED exploration, development and utilization (EDU) must
BY HIS FATHER ANTONIO L. DADING; ROMY M. always be subject to the full control and supervision of
LAGARO, REPRESENTED BY HIS FATHER TOTING the State. More specifically, given the inadequacy of
Filipino capital and technology in large-scale EDU
A. LAGARO; MIKENY JONG B. LUMAYONG,
REPRESENTED BY HIS FATHER MIGUEL M. activities, the State may secure the help of foreign
LUMAYONG; RENE T. MIGUEL, REPRESENTED BY companies in all relevant matters -- especially financial
HIS MOTHER EDITHA T. MIGUEL; ALDEMAR L. and technical assistance -- provided that, at all times,
SAL, REPRESENTED BY HIS FATHER DANNY M. the State maintains its right of full control. The foreign
SAL; DAISY RECARSE, REPRESENTED BY HER assistor or contractor assumes all financial, technical
MOTHER LYDIA S. SANTOS; EDWARD M. EMUY; and entrepreneurial risks in the EDU activities; hence,
ALAN P. MAMPARAIR; MARIO L. MANGCAL; it may be given reasonable management, operational,
ALDEN S. TUSAN; AMPARO S. YAP; VIRGILIO marketing, audit and other prerogatives to protect its
CULAR; MARVIC M.V.F. LEONEN; JULIA REGINA investments and to enable the business to succeed.
CULAR, GIAN CARLO CULAR, VIRGILIO CULAR
JR., REPRESENTED BY THEIR FATHER VIRGILIO Full control is not anathematic to day-to-day
CULAR; PAUL ANTONIO P. VILLAMOR, management by the contractor, provided that the State
REPRESENTED BY HIS PARENTS JOSE retains the power to direct overall strategy; and to set
VILLAMOR AND ELIZABETH PUA-VILLAMOR; ANA aside, reverse or modify plans and actions of the
GININA R. TALJA, REPRESENTED BY HER contractor. The idea of full control is similar to that
FATHER MARIO JOSE B. TALJA; SHARMAINE R. which is exercised by the board of directors of a
CUNANAN, REPRESENTED BY HER FATHER private corporation: the performance of managerial,
ALFREDO M. CUNANAN; ANTONIO JOSE A. VITUG operational, financial, marketing and other functions
III, REPRESENTED BY HIS MOTHER ANNALIZA A. may be delegated to subordinate officers or given to
VITUG, LEAN D. NARVADEZ, REPRESENTED BY contractual entities, but the board retains full residual
HIS FATHER MANUEL E. NARVADEZ JR.; control of the business.
ROSERIO MARALAG LINGATING, REPRESENTED
BY HER FATHER RIO OLIMPIO A. LINGATING; Who or what organ of government actually exercises

53
this power of control on behalf of the State? The authors who had criticized service contracts for, inter
Constitution is crystal clear: the President. Indeed, the alia, vesting in the foreign
Chief Executive is the official constitutionally mandated contractor exclusive management and control of the
to “enter into agreements with foreign owned enterprise, including operation of the field in the event
corporations.” On the other hand, Congress may petroleum was discovered; control of production,
review the action of the President once it is notified of expansion and development; nearly unfettered control
“every contract entered into in accordance with this over the disposition and sale of the products
[constitutional] provision within thirty days from its discovered/extracted; effective ownership of the
execution.” In contrast to this express mandate of the natural resource at the point of extraction; and
President and Congress in the EDU of natural beneficial ownership of our economic resources.
resources, Article XII of the Constitution is silent on the According to the Decision, the 1987 Constitution
role of the judiciary. However, should the President (Section 2 of Article XII) effectively banned such
and/or Congress gravely abuse their discretion in this service contracts.
regard, the courts may -- in a proper case -- exercise
their residual duty under Article VIII. Clearly then, the Subsequently, respondents filed separate Motions for
judiciary should not inordinately interfere in the Reconsideration. In a Resolution dated March 9, 2004,
exercise of this presidential power of control over the the Court required petitioners to comment thereon. In
EDU of our natural resources. the Resolution of June 8, 2004, it set the case for Oral
Argument on June 29, 2004.
The Constitution should be read in broad, life-giving
strokes. It should not be used to strangulate economic After hearing the opposing sides, the Court required
growth or to serve narrow, parochial interests. Rather, the parties to submit their respective Memoranda in
it should be construed to grant the President and amplification of their arguments. In a Resolution issued
Congress sufficient discretion and reasonable leeway later the same day, June 29, 2004, the Court
to enable them to attract foreign investments and noted, inter alia, the Manifestation and Motion (in lieu
expertise, as well as to secure for our people and our of comment) filed by the Office of the Solicitor General
posterity the blessings of prosperity and peace. (OSG) on behalf of public respondents. The OSG said
that it was not interposing any objection to the Motion
On the basis of this control standard, this Court for Intervention filed by the Chamber of Mines of the
upholds the constitutionality of the Philippine Mining Philippines, Inc. (CMP) and was in fact joining and
Law, its Implementing Rules and Regulations -- insofar adopting the latter’s Motion for Reconsideration.
as they relate to financial and technical agreements --
as well as the subject Financial and Technical Memoranda were accordingly filed by the intervenor as
Assistance Agreement (FTAA).[5] well as by petitioners, public respondents, and private
respondent, dwelling at length on the three issues
Background discussed below. Later, WMCP submitted its Reply
Memorandum, while the OSG -- in obedience to an
The Petition for Prohibition and Mandamus before the Order of this Court -- filed a Compliance submitting
Court challenges the constitutionality of (1) Republic copies of more FTAAs entered into by the government.
Act No. [RA] 7942 (The Philippine Mining Act of 1995);
(2) its Implementing Rules and Regulations (DENR Three Issues Identified by the Court
Administrative Order No. [DAO] 96-40); and (3) the
FTAA dated March 30, 1995,[6] executed by the During the Oral Argument, the Court identified the
government with Western Mining Corporation three issues to be resolved in the present controversy,
(Philippines), Inc. (WMCP).[7] as follows:

On January 27, 2004, the Court en banc promulgated 1. Has the case been rendered moot by the sale of
its Decision[8] granting the Petition and declaring the WMC shares in WMCP to Sagittarius (60 percent of
unconstitutionality of certain provisions of RA 7942, Sagittarius’ equity is owned by Filipinos and/or Filipino-
DAO 96-40, as well as of the entire FTAA executed owned corporations while 40 percent is owned by
between the government and WMCP, mainly on the Indophil Resources NL, an Australian company) and
finding that FTAAs are service contracts prohibited by by the subsequent transfer and registration of the
the 1987 Constitution. FTAA from WMCP to Sagittarius?

The Decision struck down the subject FTAA for being 2. Assuming that the case has been rendered moot,
similar to service contracts,[9] which, though permitted would it still be proper to resolve the constitutionality of
under the 1973 Constitution,[10] were subsequently the assailed provisions of the Mining Law, DAO 96-40
denounced for being antithetical to the principle of and the WMCP FTAA?
sovereignty over our natural resources, because they
allowed foreign control over the exploitation of our 3. What is the proper interpretation of the
natural resources, to the prejudice of the Filipino phrase Agreements Involving Either Technical or
nation. Financial Assistance contained in paragraph 4 of
Section 2 of Article XII of the Constitution?
The Decision quoted several legal scholars and
54
Should the Motion for Reconsideration Be by a Filipino corporation, it is no longer possible for the
Granted? Court to declare it unconstitutional. The case pending
in the Court of Appeals is a dispute between two
Respondents’ and intervenor’s Motions for Filipino companies (Sagittarius and Lepanto), both
Reconsideration should be granted, for the reasons claiming the right to purchase the foreign shares in
discussed below. The foregoing three issues identified WMCP. So, regardless of which side eventually wins,
by the Court shall now be taken up seriatim. the FTAA would still be in the hands of a qualified
Filipino company. Considering that there is no longer
First Issue: any justiciable controversy, the plea to nullify the
Mootness Mining Law has become a virtual petition for
declaratory relief, over which this Court has no original
In declaring unconstitutional certain provisions of RA jurisdiction.
7942, DAO 96-40, and the WMCP FTAA, the majority
Decision agreed with petitioners’ contention that the In their Final Memorandum, however, petitioners argue
subject FTAA had been executed in violation of that the case has not become moot, considering the
Section 2 of Article XII of the 1987 Constitution. invalidity of the alleged sale of the shares in WMCP
According to petitioners, the FTAAs entered into by the from WMC to Sagittarius, and of the transfer of the
government with foreign-owned corporations are FTAA from WMCP to Sagittarius, resulting in the
limited by the fourth paragraph of the said provision to change of contractor in the FTAA in question. And
agreements involving only technical or financial even assuming that the said transfers were valid, there
assistance for large-scale exploration, development still exists an actual case predicated on the invalidity of
and utilization of minerals, petroleum and other mineral RA 7942 and its Implementing Rules and Regulations
oils. Furthermore, the foreign contractor is allegedly (DAO 96-40). Presently, we shall discuss petitioners’
permitted by the FTAA in question to fully manage and objections to the transfer of both the shares and the
control the mining operations and, therefore, to acquire FTAA. We shall take up the alleged invalidity of RA
“beneficial ownership” of our mineral resources. 7942 and DAO 96-40 later on in the discussion of the
third issue.
The Decision merely shrugged off the Manifestation by
WMPC informing the Court (1) that on January 23, No Transgression of the Constitution
2001, WMC had sold all its shares in WMCP to by the Transfer of the WMCP Shares
Sagittarius Mines, Inc., 60 percent of whose equity
was held by Filipinos; and (2) that the assailed FTAA Petitioners claim, first, that the alleged invalidity of
had likewise been transferred from WMCP to the transfer of the WMCP shares to Sagittarius violates
Sagittarius.[11] The ponencia declared that the instant the fourth paragraph of Section 2 of Article XII of the
case had not been rendered moot by the transfer and Constitution; second, that it is contrary to the
registration of the FTAA to a Filipino-owned provisions of the WMCP FTAA itself; and third, that the
corporation, and that the validity of the said transfer sale of the shares is suspect and should therefore be
remained in dispute and awaited final judicial the subject of a case in which its validity may properly
determination.[12] Patently therefore, the Decision is be litigated.
anchored on the assumption that WMCP had
remained a foreign corporation. On the first ground, petitioners assert that paragraph 4
of Section 2 of Article XII permits the government to
The crux of this issue of mootness is the fact that enter into FTAAs only with foreign-owned corporations.
WMCP, at the time it entered into the FTAA, happened Petitioners insist that the first paragraph of this
to be wholly owned by WMC Resources International constitutional provision limits the participation of
Pty., Ltd. (WMC), which in turn was a wholly owned Filipino corporations in the exploration, development
subsidiary of Western Mining Corporation Holdings and utilization of natural resources to only three
Ltd., a publicly listed major Australian mining and species of contracts -- production sharing, co-
exploration company. production and joint venture -- to the exclusion of all
other arrangements or variations thereof, and the
The nullity of the FTAA was obviously premised upon WMCP FTAA may therefore not be validly assumed
the contractor being a foreign corporation. Had the and implemented by Sagittarius. In short, petitioners
FTAA been originally issued to a Filipino-owned claim that a Filipino corporation is not allowed by the
corporation, there would have been no constitutionality Constitution to enter into an FTAA with the
issue to speak of. Upon the other hand, the government.
conveyance of the WMCP FTAA to a Filipino
corporation can be likened to the sale of land to a However, a textual analysis of the first paragraph of
foreigner who subsequently acquires Filipino Section 2 of Article XII does not support petitioners’
citizenship, or who later resells the same land to a argument. The pertinent part of the said provision
Filipino citizen. The conveyance would be validated, as states: “Sec. 2. x x x The exploration, development
the property in question would no longer be owned by and utilization of natural resources shall be under the
a disqualified vendee. full control and supervision of the State. The State may
directly undertake such activities, or it may enter into
And, inasmuch as the FTAA is to be implemented now co-production, joint venture, or production-sharing
55
agreements with Filipino citizens, or corporations or Congress of every financial or technical assistance
associations at least sixty per centum of whose capital agreement assigned or converted in accordance with
is owned by such citizens. x x x.” Nowhere in the this provision within thirty (30) days from the date of
provision is there any express limitation or restriction the approval thereof.”
insofar as arrangements other than the three
aforementioned contractual schemes are concerned. Section 40 expressly applies to the assignment or
transfer of the FTAA, not to the sale and transfer of
Neither can one reasonably discern any implied shares of stock in WMCP. Moreover, when the
stricture to that effect. Besides, there is no basis to transferee of an FTAA is another foreign corporation,
believe that the framers of the Constitution, a majority there is a logical application of the requirement of prior
of whom were obviously concerned with furthering the approval by the President of the Republic and
development and utilization of the country’s natural notification to Congress in the event of assignment or
resources, could have wanted to restrict Filipino transfer of an FTAA. In this situation, such approval
participation in that area. This point is clear, especially and notification are appropriate safeguards,
in the light of the overarching constitutional principle of considering that the new contractor is the subject of a
giving preference and priority to Filipinos and Filipino foreign government.
corporations in the development of our natural
resources. On the other hand, when the transferee of the FTAA
happens to be a Filipino corporation, the need for such
Besides, even assuming (purely for argument’s sake) safeguard is not critical; hence, the lack of prior
that a constitutional limitation barring Filipino approval and notification may not be deemed fatal as
corporations from holding and implementing an FTAA to render the transfer invalid. Besides, it is not as if
actually exists, nevertheless, such provision would approval by the President is entirely absent in this
apply only to the transfer of the FTAA to Sagittarius, instance. As pointed out by private respondent in its
but definitely not to the sale of WMC’s equity stake in Memorandum,[13] the issue of approval is the subject of
WMCP to Sagittarius. Otherwise, an unreasonable one of the cases brought by Lepanto against
curtailment of property rights without due process of Sagittarius in GR No. 162331. That case involved the
law would ensue. Petitioners’ argument must therefore review of the Decision of the Court of Appeals dated
fail. November 21, 2003 in CA-GR SP No. 74161, which
affirmed the DENR Order dated December 31, 2001
FTAA Not Intended and the Decision of the Office of the President dated
Solely for Foreign Corporation July 23, 2002, both approving the assignment of the
WMCP FTAA to Sagittarius.
Equally barren of merit is the second ground cited by
petitioners -- that the FTAA was intended to apply Petitioners also question the sale price and the
solely to a foreign corporation, as can allegedly be financial capacity of the transferee. According to the
seen from the provisions therein. They manage to cite Deed of Absolute Sale dated January 23, 2001,
only one WMCP FTAA provision that can be regarded executed between WMC and Sagittarius, the price of
as clearly intended to apply only to a foreign the WMCP shares was fixed at US$9,875,000,
contractor: Section 12, which provides for international equivalent to P553 million at an exchange rate of 56:1.
commercial arbitration under the auspices of the Sagittarius had an authorized capital stock of P250
International Chamber of Commerce, after local million and a paid up capital of P60 million. Therefore,
remedies are exhausted. This provision, however, at the time of approval of the sale by the DENR, the
does not necessarily imply that the WMCP FTAA debt-to-equity ratio of the transferee was over 9:1 --
cannot be transferred to and assumed by a Filipino hardly ideal for an FTAA contractor, according to
corporation like Sagittarius, in which event the said petitioners.
provision should simply be disregarded as a
superfluity. However, private respondents counter that the Deed of
Sale specifically provides that the payment of the
No Need for a Separate purchase price would take place only after Sagittarius’
Litigation of the Sale of Shares commencement of commercial production from mining
operations, if at all. Consequently, under the
Petitioners claim as third ground the “suspicious” sale circumstances, we believe it would not be reasonable
of shares from WMC to Sagittarius; hence, the need to to conclude, as petitioners did, that the transferee’s
litigate it in a separate case. Section 40 of RA 7942 high debt-to-equity ratio per se necessarily carried
(the Mining Law) allegedly requires the President’s negative implications for the enterprise; and it would
prior approval of a transfer. certainly be improper to invalidate the sale on that
basis, as petitioners propose.
A re-reading of the said provision, however, leads to a
different conclusion. “Sec. 40. Assignment/Transfer -- FTAA Not Void,
A financial or technical assistance agreement may be Thus Transferrable
assigned or transferred, in whole or in part, to a
qualified person subject to the prior approval of the To bolster further their claim that the case is not moot,
President: Provided, That the President shall notify petitioners insist that the FTAA is void and, hence
56
cannot be transferred; and that its transfer does not
operate to cure the constitutional infirmity that is In their Comment, petitioners contend that
inherent in it; neither will a change in the in Chavez and Halili, the object of the transfer (the
circumstances of one of the parties serve to ratify the land) was not what was assailed for alleged
void contract. unconstitutionality. Rather, it was the transaction that
was assailed; hence subsequent compliance with
While the discussion in their Final Memorandum was constitutional provisions would cure its infirmity. In
skimpy, petitioners in their Comment (on the MR) did contrast, in the instant case it is the FTAA itself, the
ratiocinate that this Court had declared the FTAA to be object of the transfer, that is being assailed as invalid
void because, at the time it was executed with WMCP, and unconstitutional. So, petitioners claim that the
the latter was a fully foreign-owned corporation, in subsequent transfer of a void FTAA to a Filipino
which the former vested full control and management corporation would not cure the defect.
with respect to the exploration, development and
utilization of mineral resources, contrary to the Petitioners are confusing themselves. The present
provisions of paragraph 4 of Section 2 of Article XII of Petition has been filed, precisely because the grantee
the Constitution. And since the FTAA was per se void, of the FTAA was a wholly owned subsidiary of a
no valid right could be transferred; neither could it be foreign corporation. It cannot be gainsaid that anyone
ratified, so petitioners conclude. would have asserted that the same FTAA was void if it
had at the outset been issued to a Filipino corporation.
Petitioners have assumed as fact that which has yet to The FTAA, therefore, is not per se defective or
be established. First and foremost, the Decision of this unconstitutional. It was questioned only because it had
Court declaring the FTAA void has not yet become been issued to an allegedly non-qualified, foreign-
final. That was precisely the reason the Court still owned corporation.
heard Oral Argument in this case. Second, the FTAA
does not vest in the foreign corporation full control and We believe that this case is clearly analogous to Halili,
supervision over the exploration, development and in which the land acquired by a non-Filipino was re-
utilization of mineral resources, to the exclusion of the conveyed to a qualified vendee and the original
government. This point will be dealt with in greater transaction was thereby cured. Paraphrasing Halili, the
detail below; but for now, suffice it to say that a perusal same rationale applies to the instant case:
of the FTAA provisions will prove that the government assuming arguendo the invalidity of its prior grant to a
has effective overall direction and control of the mining foreign corporation, the disputed FTAA -- being now
operations, including marketing and product pricing, held by a Filipino corporation -- can no longer be
and that the contractor’s work programs and budgets assailed; the objective of the constitutional provision --
are subject to its review and approval or disapproval. to keep the exploration, development and utilization of
our natural resources in Filipino hands -- has been
As will be detailed later on, the government does not served.
have to micro-manage the mining operations and dip
its hands into the day-to-day management of the More accurately speaking, the present situation is one
enterprise in order to be considered as having overall degree better than that obtaining in Halili, in which the
control and direction. Besides, for practical and original sale to a non-Filipino was clearly and
pragmatic reasons, there is a need for government indisputably violative of the constitutional prohibition
agencies to delegate certain aspects of the and thus void ab initio. In the present case, the
management work to the contractor. Thus the basis for issuance/grant of the subject FTAA to the then foreign-
declaring the FTAA void still has to be revisited, owned WMCP was not illegal, void or unconstitutional
reexamined and reconsidered. at the time. The matter had to be brought to court,
precisely for adjudication as to whether the FTAA and
Petitioners sniff at the citation of Chavez v. Public the Mining Law had indeed violated the Constitution.
Estates Authority,[14] and Halili v. CA,[15] claiming that Since, up to this point, the decision of this Court
the doctrines in these cases are wholly inapplicable to declaring the FTAA void has yet to become final, to all
the instant case. intents and purposes, the FTAA must be deemed valid
and constitutional.[17]
Chavez clearly teaches: “Thus, the Court has ruled
consistently that where a Filipino citizen sells land to At bottom, we find completely outlandish petitioners’
an alien who later sells the land to a Filipino, the contention that an FTAA could be entered into by the
invalidity of the first transfer is corrected by the government only with a foreign corporation, never with
subsequent sale to a citizen. Similarly, where the alien a Filipino enterprise. Indeed, the nationalistic
who buys the land subsequently acquires Philippine provisions of the Constitution are all anchored on the
citizenship, the sale is validated since the purpose of protection of Filipino interests. How petitioners can
the constitutional ban to limit land ownership to now argue that foreigners have the exclusive right to
Filipinos has been achieved. In short, the law FTAAs totally overturns the entire basis of the Petition
disregards the constitutional disqualification of the -- preference for the Filipino in the exploration,
buyer to hold land if the land is subsequently development and utilization of our natural resources. It
transferred to a qualified party, or the buyer himself does not take deep knowledge of law and logic to
becomes a qualified party.”[16]
57
understand that what the Constitution grants to uncertainties plaguing the mining industry and the
foreigners should be equally available to Filipinos. affected communities as a result of doubts cast upon
the constitutionality and validity of the Mining Act, the
Second Issue: subject FTAA and future FTAAs, and the need to avert
Whether the Court Can Still Decide the Case, a multiplicity of suits. Paraphrasing Gonzales v.
Even Assuming It Is Moot Commission on Elections,[21] it is evident that strong
reasons of public policy demand that the
All the protagonists are in agreement that the Court constitutionality issue be resolved now.[22]
has jurisdiction to decide this controversy, even
assuming it to be moot. In further support of the immediate resolution of the
constitutionality issue, public respondents cite Acop v.
Petitioners stress the following points. First, while a Guingona,[23] to the effect that the courts will decide a
case becomes moot and academic when “there is no question -- otherwise moot and academic -- if it is
more actual controversy between the parties or no “capable of repetition, yet evading review.”[24] Public
useful purpose can be served in passing upon the respondents ask the Court to avoid a situation in which
merits,”[18] what is at issue in the instant case is not the constitutionality issue may again arise with respect
only the validity of the WMCP FTAA, but also the to another FTAA, the resolution of which may not be
constitutionality of RA 7942 and its Implementing achieved until after it has become too late for our
Rules and Regulations. Second, the acts of private mining industry to grow out of its infancy. They also
respondent cannot operate to cure the law of its recall Salonga v. Cruz Paño,[25] in which this Court
alleged unconstitutionality or to divest this Court of its declared that “(t)he Court also has the duty to
jurisdiction to decide. Third, the Constitution imposes formulate guiding and controlling constitutional
upon the Supreme Court the duty to declare invalid principles, precepts, doctrines or rules. It has the
any law that offends the Constitution. symbolic function of educating the bench and bar on
the extent of protection given by constitutional
Petitioners also argue that no amendatory laws have guarantees. x x x.”
been passed to make the Mining Act of 1995 conform
to constitutional strictures (assuming that, at present, it The mootness of the case in relation to the WMCP
does not); that public respondents will continue to FTAA led the undersigned ponente to state in his
implement and enforce the statute until this Court rules dissent to the Decision that there was no more
otherwise; and that the said law continues to be the justiciable controversy and the plea to nullify the
source of legal authority in accepting, processing and Mining Law has become a virtual petition for
approving numerous applications for mining rights. declaratory relief.[26] The entry of the Chamber of
Mines of the Philippines, Inc., however, has put into
Indeed, it appears that as of June 30, 2002, some 43 focus the seriousness of the allegations of
FTAA applications had been filed with the Mines and unconstitutionality of RA 7942 and DAO 96-40 which
Geosciences Bureau (MGB), with an aggregate area converts the case to one for prohibition[27] in the
of 2,064,908.65 hectares -- spread over Luzon, the enforcement of the said law and regulations.
Visayas and Mindanao[19] -- applied for. It may be a bit
far-fetched to assert, as petitioners do, that each and Indeed, this CMP entry brings to fore that the real
every FTAA that was entered into under the provisions issue in this case is whether paragraph 4 of Section 2
of the Mining Act “invites potential litigation” for as long of Article XII of the Constitution is contravened by RA
as the constitutional issues are not resolved with 7942 and DAO 96-40, not whether it was violated by
finality. Nevertheless, we must concede that there specific acts implementing RA 7942 and DAO 96-40.
exists the distinct possibility that one or more of the “[W]hen an act of the legislative department is
future FTAAs will be the subject of yet another suit seriously alleged to have infringed the Constitution,
grounded on constitutional issues. settling the controversy becomes the duty of this
Court. By the mere enactment of the questioned law or
But of equal if not greater significance is the cloud of the approval of the challenged action, the dispute is
uncertainty hanging over the mining industry, which is said to have ripened into a judicial controversy even
even now scaring away foreign investments. Attesting without any other overt act.”[28] This ruling can be
to this climate of anxiety is the fact that the Chamber of traced from Tañada v. Angara,[29] in which the Court
Mines of the Philippines saw the urgent need to said:
intervene in the case and to present its position during “In seeking to nullify an act of the Philippine Senate on
the Oral Argument; and that Secretary General the ground that it contravenes the Constitution, the
Romulo Neri of the National Economic Development petition no doubt raises a justiciable
Authority (NEDA) requested this Court to allow him to controversy. Where an action of the legislative branch
speak, during that Oral Argument, on the economic is seriously alleged to have infringed the Constitution,
consequences of the Decision of January 27, 2004. [20] it becomes not only the right but in fact the duty of the
judiciary to settle the dispute.
We are convinced. We now agree that the Court must
recognize the exceptional character of the situation xxx xxx xxx
and the paramount public interest involved, as well as
the necessity for a ruling to put an end to the “As this Court has repeatedly and firmly emphasized in
58
many cases, it will not shirk, digress from or abandon provided by law, based on real contributions to the
its sacred duty and authority to uphold the Constitution economic growth and general welfare of the country. In
in matters that involve grave abuse of discretion such agreements, the State shall promote the
brought before it in appropriate cases, committed by development and use of local scientific and technical
any officer, agency, instrumentality or department of resources.
the government.”[30]
Additionally, the entry of CMP into this case has also “The President shall notify the Congress of every
effectively forestalled any possible objections arising contract entered into in accordance with this provision,
from the standing or legal interest of the original within thirty days from its execution.”[31]
parties. No Restriction of Meaning by
a Verba Legis Interpretation
For all the foregoing reasons, we believe that the Court
should proceed to a resolution of the constitutional To interpret the foregoing provision, petitioners
issues in this case. adamantly assert that the language of the Constitution
should prevail; that the primary method of interpreting
Third Issue: it is to seek the ordinary meaning of the words used in
The Proper Interpretation of the Constitutional its provisions. They rely on rulings of this Court, such
Phrase as the following:
“Agreements Involving Either Technical or “The fundamental principle in constitutional
Financial Assistance” construction however is that the primary source from
which to ascertain constitutional intent or purpose is
The constitutional provision at the nucleus of the the language of the provision itself. The presumption is
controversy is paragraph 4 of Section 2 of Article XII of that the words in which the constitutional provisions
the 1987 Constitution. In order to appreciate its are couched express the objective sought to be
context, Section 2 is reproduced in full: attained. In other words, verba legis prevails. Only
“Sec. 2. All lands of the public domain, waters, when the meaning of the words used is unclear and
minerals, coal, petroleum, and other mineral oils, all equivocal should resort be made to extraneous aids of
forces of potential energy, fisheries, forests or timber, construction and interpretation, such as the
wildlife, flora and fauna, and other natural resources proceedings of the Constitutional Commission or
are owned by the State. With the exception of Convention to shed light on and ascertain the true
agricultural lands, all other natural resources shall not intent or purpose of the provision being construed.”[32]
be alienated. The exploration, development and Very recently, in Francisco v. The House of
utilization of natural resources shall be under the full Representatives,[33] this Court indeed had the occasion
control and supervision of the State. The State may to reiterate the well-settled principles of constitutional
directly undertake such activities, or it may enter into construction:
co-production, joint venture or production-sharing “First, verba legis, that is, wherever possible, the
agreements with Filipino citizens or corporations or words used in the Constitution must be given
associations at least sixty per centum of whose capital their ordinary meaning except where technical terms
is owned by such citizens. Such agreements may be are employed. x x x.
for a period not exceeding twenty-five years,
renewable for not more than twenty-five years, and xxx xxx xxx
under such terms and conditions as may be provided
by law. In cases of water rights for irrigation, water “Second, where there is ambiguity, ratio legis est
supply, fisheries, or industrial uses other than the anima. The words of the Constitution should be
development of water power, beneficial use may be interpreted in accordance with the intent of its framers.
the measure and limit of the grant. x x x.

“The State shall protect the nation’s marine wealth in xxx xxx xxx
its archipelagic waters, territorial sea, and exclusive
economic zone, and reserve its use and enjoyment “Finally, ut magis valeat quam pereat. The Constitution
exclusively to Filipino citizens. is to be interpreted as a whole.”[34]
For ease of reference and in consonance with verba
“The Congress may, by law, allow small-scale legis, we reconstruct and stratify the aforequoted
utilization of natural resources by Filipino citizens, as Section 2 as follows:
well as cooperative fish farming, with priority to
subsistence fishermen and fish-workers in rivers,
1. All natural resources are owned by the State.
lakes, bays and lagoons.
Except for agricultural lands, natural resources
cannot be alienated by the State.
“The President may enter into agreements with
foreign-owned corporations involving either
technical or financial assistance for large-scale 2. The exploration, development and utilization
exploration, development, and utilization of (EDU) of natural resources shall be under the
minerals, petroleum, and other mineral full control and supervision of the State.
oils according to the general terms and conditions
59
3. The State may undertake these EDU activities resources. It will be recalled that the Decision of
through either of the following: January 27, 2004 zeroed in on “management or other
forms of assistance” or other activities associated with
(a)By itself directly and solely the “service contracts” of the martial law regime, since
(b)By (i) co-production; (ii) joint venture; or (iii)“the management or operation of mining activities by
production sharing agreements with Filipino citizensforeign contractors, which is the primary feature of
or corporations, at least 60 percent of the capital ofservice contracts, was precisely the evil that the
which is owned by such citizens drafters of the 1987 Constitution sought to eradicate.”

On the other hand, the intervenor[37] and public


4.
respondents argue that the FTAA allowed by
5. Small-scale utilization of natural resources
paragraph 4 is not merely an agreement for supplying
may be allowed by law in favor of Filipino
limited and specific financial or technical services to
citizens.
the State. Rather, such FTAA is a comprehensive
agreement for the foreign-owned
6. For large-scale EDU of minerals, petroleum corporation’s integrated exploration, development and
and other mineral oils, the President may enter utilization of mineral, petroleum or other mineral oils on
into “agreements with foreign-owned a large-scale basis. The agreement, therefore,
corporations involving either technical or authorizes the foreign contractor’s rendition of a whole
financial assistance according to the general range of integrated and comprehensive services,
terms and conditions provided by law x x x.” ranging from the discovery to the development,
utilization and production of minerals or petroleum
Note that in all the three foregoing mining activities -- products.
exploration, development and utilization -- the State
may undertake such EDU activities by itself or in We do not see how applying a strictly literal or verba
tandem with Filipinos or Filipino corporations, except in legis interpretation of paragraph 4 could inexorably
two instances: first, in small-scale utilization of natural lead to the conclusions arrived at in the ponencia.
resources, which Filipinos may be allowed by law to First, the drafters’ choice of words -- their use of the
undertake; and second, in large-scale EDU of phrase agreements x x x involving either technical or
minerals, petroleum and mineral oils, which may be financial assistance -- does not indicate the intent to
undertaken by the State via “agreements with foreign- exclude other modes of assistance. The drafters opted
owned corporations involving either technical or to use involving when they could have simply
financial assistance” as provided by law. said agreements for financial or technical assistance,
if that was their intention to begin with. In this case, the
Petitioners claim that the phrase “agreements x x x limitation would be very clear and no further debate
involving either technical or financial assistance” would ensue.
simply means technical assistance or financial
assistance agreements, nothing more and nothing In contrast, the use of the word “involving” signifies
else. They insist that there is no ambiguity in the the possibility of the inclusion of other forms of
phrase, and that a plain reading of paragraph 4 quoted assistance or activities having to do with, otherwise
above leads to the inescapable conclusion that what a related to or compatible with financial or technical
foreign-owned corporation may enter into with the assistance. The word “involving” as used in this
government is merely an agreement context has three connotations that can be
for either financial or technical assistance only, for the differentiated thus: one, the sense of “concerning,”
large-scale exploration, development and utilization of “having to do with,” or “affecting”; two, “entailing,”
minerals, petroleum and other mineral oils; such a “requiring,” “implying” or “necessitating”; and three,
limitation, they argue, excludes foreign management “including,” “containing” or “comprising.”[38]
and operation of a mining enterprise.[35]
Plainly, none of the three connotations convey a sense
This restrictive interpretation, petitioners believe, is in of exclusivity. Moreover, the word “involving,” when
line with the general policy enunciated by the understood in the sense of “including,” as in including
Constitution reserving to Filipino citizens and technical or financial assistance, necessarily implies
corporations the use and enjoyment of the country’s that there are activities other than those that are being
natural resources. They maintain that this Court’s included. In other words, if an
Decision[36] of January 27, 2004 correctly declared the agreement includes technical or financial assistance,
WMCP FTAA, along with pertinent provisions of RA there is apart from such assistance -- something else
7942, void for allowing a foreign contractor to have already in, and covered or may be covered by, the said
direct and exclusive management of a mining agreement.
enterprise. Allowing such a privilege not only runs
counter to the “full control and supervision” that the In short, it allows for the possibility that matters, other
State is constitutionally mandated to exercise over the than those explicitly mentioned, could be made part of
exploration, development and utilization of the the agreement. Thus, we are now led to the conclusion
country’s natural resources; doing so also vests in the that the use of the word “involving” implies that these
foreign company “beneficial ownership” of our mineral agreements with foreign corporations are not limited to
60
mere financial or technical assistance. The difference
in sense becomes very apparent when we juxtapose Fourth, a literal and restrictive interpretation of
“agreements for technical or financial assistance” paragraph 4, such as that proposed by petitioners,
against “agreements including technical or financial suffers from certain internal logical inconsistencies that
assistance.” This much is unalterably clear in a verba generate ambiguities in the understanding of the
legis approach. provision. As the intervenor pointed out, there has
never been any constitutional or statutory provision
Second, if the real intention of the drafters was to that reserved to Filipino citizens or corporations, at
confine foreign corporations to financial or technical least 60 percent of which is Filipino-owned, the
assistance and nothing more, their language would rendition of financial or technical assistance to
have certainly been so unmistakably restrictive and companies engaged in mining or the development of
stringent as to leave no doubt in anyone’s mind about any other natural resource. The taking out of foreign-
their true intent. For example, they would have used currency or peso-denominated loans or any other kind
the sentence foreign corporations are absolutely of financial assistance, as well as the rendition of
prohibited from involvement in the management or technical assistance -- whether to the State or to any
operation of mining or similar ventures or words of other entity in the Philippines -- has never been
similar import. A search for such stringent wording restricted in favor of Filipino citizens or corporations
yields negative results. Thus, we come to the having a certain minimum percentage of Filipino
inevitable conclusion that there was a conscious equity. Such a restriction would certainly be
and deliberate decision to avoid the use of preposterous and unnecessary. As a matter of fact,
restrictive wording that bespeaks an intent not to financial, and even technical assistance, regardless of
use the expression “agreements x x x involving the nationality of its source, would be welcomed in the
either technical or financial assistance” in an mining industry anytime with open arms, on account of
exclusionary and limiting manner. the dearth of local capital and the need to continually
update technological know-how and improve technical
Deletion of “Service Contracts” to skills.
Avoid Pitfalls of Previous Constitutions,
Not to Ban Service Contracts Per Se There was therefore no need for a constitutional
provision specifically allowing foreign-owned
Third, we do not see how a verba legis approach leads corporations to render financial or technical
to the conclusion that “the management or operation of assistance, whether in respect of mining or some other
mining activities by foreign contractors, which is the resource development or commercial activity in the
primary feature of service contracts, was precisely the Philippines. The last point needs to be emphasized: if
evil that the drafters of the 1987 Constitution sought to merely financial or technical assistance agreements
eradicate.” Nowhere in the above-quoted Section can are allowed, there would be no need to limit them to
be discerned the objective to keep out of foreign hands large-scale mining operations, as there would be far
the management or operation of mining activities or greater need for them in the smaller-scale mining
the plan to eradicate service contracts as these were activities (and even in non-mining areas). Obviously,
understood in the 1973 Constitution. Still, petitioners the provision in question was intended to refer to
maintain that the deletion or omission from the 1987 agreements other than those for mere financial or
Constitution of the term “service contracts” found in the technical assistance.
1973 Constitution sufficiently proves the drafters’ intent
to exclude foreigners from the management of the In like manner, there would be no need to require the
affected enterprises. President of the Republic to report to Congress, if only
financial or technical assistance agreements are
To our mind, however, such intent cannot be involved. Such agreements are in the nature of foreign
definitively and conclusively established from the mere loans that -- pursuant to Section 20 of Article VII[39] of
failure to carry the same expression or term over to the the 1987 Constitution -- the President may contract or
new Constitution, absent a more specific, explicit and guarantee, merely with the prior concurrence of the
unequivocal statement to that effect. What petitioners Monetary Board. In turn, the Board is required to report
seek (a complete ban on foreign participation in the to Congress within thirty days from the end of every
management of mining operations, as previously quarter of the calendar year, not thirty days after the
allowed by the earlier Constitutions) is nothing short of agreement is entered into.
bringing about a momentous sea change in the
economic and developmental policies; and the And if paragraph 4 permits only agreements for loans
fundamentally capitalist, free-enterprise philosophy of and other forms of financial, or technical assistance,
our government. We cannot imagine such a radical what is the point of requiring that they be based on real
shift being undertaken by our government, to the great contributions to the economic growth and general
prejudice of the mining sector in particular and our welfare of the country? For instance, how is one to
economy in general, merely on the basis of measure and assess the “real contributions” to the
the omission of the terms service contract from or the “economic growth” and “general welfare” of the country
failure to carry them over to the new Constitution. that may ensue from a foreign-currency loan
There has to be a much more definite and even agreement or a technical-assistance agreement for,
unarguable basis for such a drastic reversal of policies. say, the refurbishing of an existing power generating
61
plant for a mining operation somewhere in Mindanao? intensive and technology-oriented nature of large-scale
Such a criterion would make more sense when applied mineral or petroleum extraction and the country’s
to a major business investment in a principal sector of deficiency in precisely those areas.[41] To say so would
the industry. be tantamount to asserting that the provision was
purposely designed to ladle the large-scale
The conclusion is clear and inescapable -- a verba development and utilization of mineral, petroleum and
legis construction shows that paragraph 4 is not to be related resources with impossible conditions; and to
understood as one limited only to foreign loans (or remain forever and permanently “reserved” for future
other forms of financial support) and to technical generations of Filipinos.
assistance. There is definitely more to it than
that. These are provisions permitting participation by A More Reasonable Look
foreign companies; requiring the President’s report to at the Charter’s Plain Language
Congress; and using, as yardstick, contributions based
on economic growth and general welfare. These were Sixth, we shall now look closer at the plain language of
neither accidentally inserted into the Constitution nor the Charter and examining the logical inferences. The
carelessly cobbled together by the drafters in lip drafters chose to emphasize and highlight agreements
service to shallow nationalism. The provisions patently x x x involving either technical or financial
have significance and usefulness in a context that assistance in relation to foreign corporations’
allows agreements with foreign companies to include participation in large-scale EDU. The inclusion of this
more than mere financial or technical assistance. clause on “technical or financial assistance”
recognizes the fact that foreign business entities and
Fifth, it is argued that Section 2 of Article XII authorizes multinational corporations are the ones with the
nothing more than a rendition of specific and limited resources and know-how to provide technical and/or
financial service or technical assistance by a foreign financial assistance of the magnitude and type
company. This argument begs the question “To whom required for large-scale exploration, development and
or for whom would it be rendered”? or Who is being utilization of these resources.
assisted? If the answer is “The State,” then it
necessarily implies that the State itself is the The drafters -- whose ranks included many
one directly and solely undertaking the large-scale academicians, economists, businessmen, lawyers,
exploration, development and utilization of a mineral politicians and government officials -- were not
resource, so it follows that the State must itself bear unfamiliar with the practices of foreign corporations
the liability and cost of repaying the financing sourced and multinationals.
from the foreign lender and/or of paying compensation
to the foreign entity rendering technical assistance. Neither were they so naïve as to believe that these
entities would provide “assistance” without
However, it is of common knowledge, and of judicial conditionalities or some quid pro quo. Definitely, as
notice as well, that the government is and has for business persons well know and as a matter of judicial
many many years been financially strapped, to the notice, this matter is not just a question of signing a
point that even the most essential services have promissory note or executing a technology transfer
suffered serious curtailments -- education and health agreement. Foreign corporations usually require that
care, for instance, not to mention judicial services -- they be given a say in the management, for instance,
have had to make do with inadequate budgetary of day-to-day operations of the joint venture. They
allocations. Thus, government has had to resort to would demand the appointment of their own men as,
build-operate-transfer and similar arrangements with for example, operations managers, technical experts,
the private sector, in order to get vital infrastructure quality control heads, internal auditors or comptrollers.
projects built without any governmental outlay. Furthermore, they would probably require seats on the
Board of Directors -- all these to ensure the success of
The very recent brouhaha over the gargantuan “fiscal the enterprise and the repayment of the loans and
crisis” or “budget deficit” merely confirms what the other financial assistance and to make certain that the
ordinary citizen has suspected all along. After the funding and the technology they supply would not go
reality check, one will have to admit the implausibility to waste. Ultimately, they would also want to protect
of a direct undertaking -- by the State itself -- of large- their business reputation and bottom lines.[42]
scale exploration, development and utilization of
minerals, petroleum and other mineral oils. Such an In short, the drafters will have to be credited with
undertaking entails not only humongous capital enough pragmatism and savvy to know that these
requirements, but also the attendant risk of never foreign entities will not enter into such “agreements
finding and developing economically viable quantities involving assistance” without requiring arrangements
of minerals, petroleum and other mineral oils.[40] for the protection of their investments, gains and
benefits.
It is equally difficult to imagine that such a provision
restricting foreign companies to the rendition of only Thus, by specifying such “agreements involving
financial or technical assistance to the government assistance,” the drafters necessarily gave implied
was deliberately crafted by the drafters of the assent to everything that these agreements
Constitution, who were all well aware of the capital- necessarily entailed; or that could reasonably be
62
deemed necessary to make them tenable and shall remain operative for not more than eighteen
effective, including management authority with respect months after the ratification of this Constitution.
to the day-to-day operations of the enterprise and However, in the national interest, as certified by the
measures for the protection of the interests of the President, the Congress may extend such period.
foreign corporation, PROVIDED THAT Philippine
sovereignty over natural resources and full control over A sequestration or freeze order shall be issued only
the enterprise undertaking the EDU activities remain upon showing of a prima facie case. The order and the
firmly in the State. list of the sequestered or frozen properties shall
forthwith be registered with the proper court. For
Petitioners’ Theory Deflated by the orders issued before the ratification of this
Absence of Closing-Out Rules or Guidelines Constitution, the corresponding judicial action or
proceeding shall be filed within six months from its
Seventh and final point regarding the plain-language ratification. For those issued after such ratification, the
approach, one of the practical difficulties that results judicial action or proceeding shall be commenced
from it is the fact that there is nothing by way of within six months from the issuance thereof.
transitory provisions that would serve to confirm the
theory that the omission of the term “service contract” The sequestration or freeze order is deemed
from the 1987 Constitution signaled the demise of automatically lifted if no judicial action or proceeding is
service contracts. commenced as herein provided.”[43]
It is inconceivable that the drafters of the Constitution
The framers knew at the time they were deliberating would leave such an important matter -- an expression
that there were various service contracts extant and in of sovereignty as it were -- indefinitely hanging in the
force and effect, including those in the petroleum air in a formless and ineffective state. Indeed, the
industry. Many of these service contracts were long- complete absence of even a general framework only
term (25 years) and had several more years to run. If serves to further deflate petitioners’ theory, like a
they had meant to ban service contracts altogether, child’s balloon losing its air.
they would have had to provide for the termination or
pretermination of the existing contracts. Accordingly, Under the circumstances, the logical inconsistencies
they would have supplied the specifics and the when resulting from petitioners’ literal and purely verba
and how of effecting the extinguishment of these legis approach to paragraph 4 of Section 2 of Article
existing contracts (or at least the mechanics for XII compel a resort to other aids to interpretation.
determining them); and of putting in place the means
to address the just claims of the contractors for Petitioners’ Posture Also Negated
compensation for their investments, lost opportunities, by Ratio Legis Et Anima
and so on, if not for the recovery thereof.
Thus, in order to resolve the inconsistencies,
If the framers had intended to put an end to service incongruities and ambiguities encountered and to
contracts, they would have at least left specific supply the deficiencies of the plain-language
instructions to Congress to deal with these closing-out approach, there is a need for recourse to the
issues, perhaps by way of general guidelines and a proceedings of the 1986 Constitutional Commission.
timeline within which to carry them out. The following There is a need for ratio legis et anima.
are some extant examples of such transitory
guidelines set forth in Article XVIII of our Constitution: Service Contracts Not
“Section 23. Advertising entities affected by paragraph “Deconstitutionalized”
(2), Section 11 of Article XVI of this Constitution shall
have five years from its ratification to comply on a Pertinent portions of the deliberations of the members
graduated and proportionate basis with the minimum of the Constitutional Commission (ConCom)
Filipino ownership requirement therein. x x x x x x x conclusively show that they discussed agreements
x x involving either technical or financial assistance in the
same breadth as service contracts and used the terms
“Section 25. After the expiration in 1991 of the interchangeably. The following exchange between
Agreement between the Republic of the Philippines Commissioner Jamir (sponsor of the provision) and
and the United States of America concerning military Commissioner Suarez irrefutably proves that the
bases, foreign military bases, troops, or facilities shall “agreements involving technical or financial
not be allowed in the Philippines except under a treaty assistance” were none other than service contracts.
duly concurred in by the Senate and, when the THE PRESIDENT. Commissioner Jamir is recognized.
Congress so requires, ratified by a majority of the We are still on Section 3.
votes cast by the people in a national referendum held
for that purpose, and recognized as a treaty by the MR. JAMIR. Yes, Madam President. With respect to
other contracting State. the second paragraph of Section 3, my amendment by
substitution reads: THE PRESIDENT MAY ENTER
“Section 26. The authority to issue sequestration or INTO AGREEMENTS WITH FOREIGN-OWNED
freeze orders under Proclamation No. 3 dated March CORPORATIONS INVOLVING EITHER TECHNICAL
25, 1986 in relation to the recovery of ill-gotten wealth OR FINANCIAL ASSISTANCE FOR LARGE-SCALE
63
EXPLORATION, DEVELOPMENT AND UTILIZATION
OF NATURAL RESOURCES ACCORDING TO THE THE PRESIDENT. Commissioner Gascon may
TERMS AND CONDITIONS PROVIDED BY LAW. proceed.

MR. VILLEGAS. The Committee accepts the MR. GASCON. As it is proposed now, such service
amendment. Commissioner Suarez will give the contracts will be entered into by the President with the
background. guidelines of a general law on service contract to be
enacted by Congress. Is that correct?
MR. JAMIR. Thank you.
MR. VILLEGAS. The Commissioner is right, Madam
THE PRESIDENT. Commissioner Suarez is President.
recognized.
MR. GASCON. According to the original proposal, if
MR. SUAREZ. Thank you, Madam President. the President were to enter into a particular
agreement, he would need the concurrence of
Will Commissioner Jamir answer a few clarificatory Congress. Now that it has been changed by the
questions? proposal of Commissioner Jamir in that Congress will
set the general law to which the President shall
MR. JAMIR. Yes, Madam President. comply, the President will, therefore, not need the
concurrence of Congress every time he enters
MR. SUAREZ. This particular portion of the section into service contracts. Is that correct?
has reference to what was popularly known before as
service contracts, among other things, is that correct? MR. VILLEGAS. That is right.

MR. JAMIR. Yes, Madam President. MR. GASCON. The proposed amendment of
Commissioner Jamir is in indirect contrast to my
MR. SUAREZ. As it is formulated, the President may proposed amendment, so I would like to object and
enter into service contracts but subject to the present my proposed amendment to the body.
guidelines that may be promulgated by Congress?
xxx xxx xxx
MR. JAMIR. That is correct.
MR. GASCON. Yes, it will be up to the body.
MR. SUAREZ. Therefore, that aspect of negotiation
and consummation will fall on the President, not upon I feel that the general law to be set by Congress as
Congress? regard service contract agreements which the
President will enter into might be too general or since
MR. JAMIR. That is also correct, Madam President. we do not know the content yet of such a law, it might
be that certain agreements will be detrimental to the
MR. SUAREZ. Except that all of these contracts, interest of the Filipinos. This is in direct contrast to my
service or otherwise, must be made strictly in proposal which provides that there be effective
accordance with guidelines prescribed by Congress? constraints in the implementation of service contracts.
MR. JAMIR. That is also correct. So instead of a general law to be passed by Congress
to serve as a guideline to the President when entering
MR. SUAREZ. And the Gentleman is thinking in terms into service contract agreements, I propose that
of a law that uniformly covers situations of the same every service contract entered into by the President
nature? would need the concurrence of Congress, so as to
assure the Filipinos of their interests with regard to the
MR. JAMIR. That is 100 percent correct. issue in Section 3 on all lands of the public domain. My
alternative amendment, which we will discuss later,
MR. SUAREZ. I thank the Commissioner. reads: THAT THE PRESIDENT SHALL ENTER INTO
SUCH AGREEMENTS ONLY WITH THE
MR. JAMIR. Thank you very much.[44] CONCURRENCE OF TWO-THIRDS VOTE OF ALL
The following exchange leaves no doubt that the THE MEMBERS OF CONGRESS SITTING
commissioners knew exactly what they were dealing SEPARATELY.
with: service contracts.
THE PRESIDENT. Commissioner Gascon is
recognized. xxx xxx xxx

MR. GASCON. Commissioner Jamir had proposed an MR. BENGZON. The reason we made that shift is that
amendment with regard to special service contracts we realized the original proposal could breed
which was accepted by the Committee. Since the corruption. By the way, this is not just confined to
Committee has accepted it, I would like to ask some service contracts but also to financial assistance. If we
questions. are going to make every single contract subject to the
64
concurrence of Congress – which, according to the
Commissioner’s amendment is the concurrence of MR. VILLEGAS. Yes, the Committee accepts the
two-thirds of Congress voting separately – then (1) amendment.
there is a very great chance that each contract will be
different from another; and (2) there is a great xxx xxx xxx
temptation that it would breed corruption because of
the great lobbying that is going to happen. And we do SR. TAN. Madam President, may I ask a question?
not want to subject our legislature to that.
THE PRESIDENT. Commissioner Tan is recognized.
Now, to answer the Commissioner’s apprehension, by
“general law,” we do not mean statements of SR. TAN. Am I correct in thinking that the only
motherhood. Congress can build all the restrictions difference between these future service contracts and
that it wishes into that general law so that every the past service contracts under Mr. Marcos is the
contract entered into by the President under that general law to be enacted by the legislature and the
specific area will have to be uniform. The President notification of Congress by the President? That is the
has no choice but to follow all the guidelines that will only difference, is it not?
be provided by law.
MR. VILLEGAS. That is right.
MR. GASCON. But my basic problem is that we do not
know as of yet the contents of such a general law as to SR. TAN. So those are the safeguards.
how much constraints there will be in it. And to my
mind, although the Committee’s contention that the MR. VILLEGAS. Yes. There was no law at all
regular concurrence from Congress would subject governing service contracts before.
Congress to extensive lobbying, I think that is a risk we
will have to take since Congress is a body of SR. TAN. Thank you, Madam President.[45]
representatives of the people whose membership will More Than Mere Financial
be changing regularly as there will be changing and Technical Assistance
circumstances every time certain agreements are Entailed by the Agreements
made. It would be best then to keep in tab and attuned
to the interest of the Filipino people, whenever the The clear words of Commissioner Jose N. Nolledo
President enters into any agreement with regard to quoted below explicitly and eloquently demonstrate
such an important matter as technical or financial that the drafters knew that the agreements with foreign
assistance for large-scale exploration, development corporations were going to entail not mere technical or
and utilization of natural resources or service financial assistance but, rather, foreign investment in
contracts, the people’s elected representatives should and management of an enterprise involved in large-
be on top of it. scale exploration, development and utilization of
minerals, petroleum, and other mineral oils.
xxx xxx xxx THE PRESIDENT. Commissioner Nolledo is
recognized.
MR. OPLE. Madam President, we do not need to
suspend the session. If Commissioner Gascon needs MR. NOLLEDO. Madam President, I have the
a few minutes, I can fill up the remaining time while he permission of the Acting Floor Leader to speak for only
completes his proposed amendment. I just wanted to two minutes in favor of the amendment of
ask Commissioner Jamir whether he would entertain a Commissioner Gascon.
minor amendment to his amendment, and it reads as
follows: THE PRESIDENT SHALL SUBSEQUENTLY THE PRESIDENT. Commissioner Nolledo may
NOTIFY CONGRESS OF EVERY SERVICE proceed.
CONTRACTENTERED INTO IN ACCORDANCE
WITH THE GENERAL LAW. I think the reason is, if I MR. NOLLEDO. With due respect to the members of
may state it briefly, as Commissioner Bengzon said, the Committee and Commissioner Jamir, I am in favor
Congress can always change the general law later on of the objection of Commissioner Gascon.
to conform to new perceptions of standards that should
be built into service contracts. But the only way Madam President, I was one of those who refused to
Congress can do this is if there were a notification sign the 1973 Constitution, and one of the reasons is
requirement from the Office of the President that that there were many provisions in the Transitory
such service contracts had been entered into, subject Provisions therein that favored aliens. I was shocked
then to the scrutiny of the Members of Congress. This when I read a provision authorizing service
pertains to a situation where the service contracts are contracts while we, in this Constitutional Commission,
already entered into, and all that this amendment provided for Filipino control of the economy. We are,
seeks is the reporting requirement from the Office of therefore, providing for exceptional instances where
the President. Will Commissioner Jamir entertain that? aliens may circumvent Filipino control of our economy.
And one way of circumventing the rule in favor of
MR. JAMIR. I will gladly do so, if it is still within my Filipino control of the economy is to recognize service
power. contracts.
65
As far as I am concerned, if I should have my own MR. SUAREZ. Just a point of clarification again,
way, I am for the complete deletion of this Madam President. When the Commissioner made
provision. However, we are presenting a those enumerations and specifications, I suppose he
compromise in the sense that we are requiring a two- deliberately did not include “agricultural land”?
thirds vote of all the Members of Congress as a
safeguard. I think we should not mistrust the future MR. DAVIDE. That is precisely the reason we have to
Members of Congress by saying that the purpose of enumerate what these resources are into
this provision is to avoid corruption. We cannot claim which service contracts may enter. So, beyond the
that they are less patriotic than we are. I think the reach of any service contract will be lands of the public
Members of this Commission should know that domain, timberlands, forests, marine resources, fauna
entering into service contracts is an exception to the and flora, wildlife and national parks.[47]
rule on protection of natural resources for the interest After the Jamir amendment was voted upon and
of the nation, and therefore, being an exception it approved by a vote of 21 to 10 with 2 abstentions,
should be subject, whenever possible, to stringent Commissioner Davide made the following statement,
rules. It seems to me that we are liberalizing the rules which is very relevant to our quest:
in favor of aliens. THE PRESIDENT. Commissioner Davide is
recognized.
I say these things with a heavy heart, Madam
President. I do not claim to be a nationalist, but I love MR. DAVIDE. I am very glad that Commissioner
my country. Although we need investments, we must Padilla emphasized minerals, petroleum and mineral
adopt safeguards that are truly reflective of the oils. The Commission has just approved the possible
sentiments of the people and not mere cosmetic foreign entry into the development, exploration and
safeguards as they now appear in the Jamir utilization of these minerals, petroleum and other
amendment. (Applause) mineral oils by virtue of the Jamir amendment. I voted
in favor of the Jamir amendment because it will
Thank you, Madam President.[46] eventually give way to vesting in exclusively Filipino
Another excerpt, featuring then Commissioner (now citizens and corporations wholly owned by Filipino
Chief Justice) Hilario G. Davide Jr., indicates the citizens the right to utilize the other natural resources.
limitations of the scope of such service contracts -- This means that as a matter of policy, natural
they are valid only in regard to minerals, petroleum resources should be utilized and exploited only by
and other mineral oils, not to all natural resources. Filipino citizens or corporations wholly owned by such
THE PRESIDENT. Commissioner Davide is citizens. But by virtue of the Jamir amendment, since
recognized. we feel that Filipino capital may not be enough for the
development and utilization of minerals, petroleum and
MR. DAVIDE. Thank you, Madam President. This is an other mineral oils, the President can enter into service
amendment to the Jamir amendment and also to the contracts with foreign corporations precisely for the
Ople amendment. I propose to delete “NATURAL development and utilization of such resources. And so,
RESOURCES” and substitute it with the following: there is nothing to fear that we will stagnate in the
MINERALS, PETROLEUM AND OTHER MINERAL development of minerals, petroleum and mineral
OILS. On the Ople amendment, I propose to add: THE oils because we now allow service contracts. x x x.”[48]
NOTIFICATION TO CONGRESS SHALL BE WITHIN The foregoing are mere fragments of the framers’
THIRTY DAYS FROM THE EXECUTION OF THE lengthy discussions of the provision dealing
SERVICE CONTRACT. with agreements x x x involving either technical or
financial assistance, which ultimately became
THE PRESIDENT. What does the Committee say with paragraph 4 of Section 2 of Article XII of the
respect to the first amendment in lieu of “NATURAL Constitution. Beyond any doubt, the members of the
RESOURCES”? ConCom were actually debating about the martial-law-
era service contracts for which they were crafting
MR. VILLEGAS. Could Commissioner Davide explain appropriate safeguards.
that?
In the voting that led to the approval of Article XII by
MR. DAVIDE. Madam President, with the use of the ConCom, the explanations given by
“NATURAL RESOURCES” here, it would necessarily Commissioners Gascon, Garcia and Tadeo indicated
include all lands of the public domain, our marine that they had voted to reject this provision on account
resources, forests, parks and so on. So we would like of their objections to the “constitutionalization” of the
to limit the scope of these service contracts to those “service contract” concept.
areas really where these may be needed, the
exploitation, development and exploration of minerals, Mr. Gascon said, “I felt that if we would
petroleum and other mineral oils. And so, we believe constitutionalize any provision on service contracts,
that we should really, if we want to grant service this should always be with the concurrence of
contracts at all, limit the same to only those particular Congress and not guided only by a general law to be
areas where Filipino capital may not be sufficient, and promulgated by Congress.”[49] Mr. Garcia explained,
not to all natural resources. “Service contracts are given constitutional
66
legitimization in Sec. 3, even when they have been considered adequate and reasonable. But
proven to be inimical to the interests of the nation, some of them, having more “radical” leanings,
providing, as they do, the legal loophole for the wanted to ban service contracts altogether; for
exploitation of our natural resources for the benefit of them, the provision would permit aliens to
foreign interests.”[50] Likewise, Mr. Tadeo cited inter exploit and benefit from the nation’s natural
alia the fact that service contracts continued to subsist, resources, which they felt should be reserved
enabling foreign interests to benefit from our natural only for Filipinos.
resources.[51] It was hardly likely that these gentlemen
would have objected so strenuously, had the provision  In the explanation of their votes, the individual
called for mere technical or financial assistance and commissioners were heard by the entire body.
nothing more. They sounded off their individual opinions,
openly enunciated their philosophies, and
The deliberations of the ConCom and some supported or attacked the provisions with
commissioners’ explanation of their votes leave no fervor. Everyone’s viewpoint was heard.
room for doubt that the service contract concept
precisely underpinned the commissioners’
understanding of the “agreements involving either  In the final voting, the Article on the National
technical or financial assistance.” Economy and Patrimony -- including
paragraph 4 allowing service contracts with
Summation of the foreign corporations as an exception to the
Concom Deliberations general norm in paragraph 1 of Section 2 of
the same article -- was resoundingly approved
At this point, we sum up the matters established, by a vote of 32 to 7, with 2 abstentions.
based on a careful reading of the ConCom
deliberations, as follows: Agreements Involving Technical
or Financial Assistance Are
 In their deliberations on what was to become Service Contracts With Safeguards
paragraph 4, the framers used the
term service contracts in referring From the foregoing, we are impelled to conclude that
to agreements x x x involving either technical the phrase agreements involving either technical or
or financial assistance. financial assistance, referred to in paragraph 4, are in
fact service contracts. But unlike those of the 1973
variety, the new ones are between foreign corporations
 They spoke of service contracts as the acting as contractors on the one hand; and on the
concept was understood in the 1973 other, the government as principal or “owner” of the
Constitution. works. In the new service contracts, the foreign
contractors provide capital, technology and technical
 It was obvious from their discussions that they know-how, and managerial expertise in the creation
were not about to ban or eradicate service and operation of large-scale mining/extractive
contracts. enterprises; and the government, through its agencies
(DENR, MGB), actively exercises control and
 Instead, they were plainly crafting provisions to supervision over the entire operation.
put in place safeguards that would eliminate or
minimize the abuses prevalent during the Such service contracts may be entered into only with
marital law regime. In brief, they were going to respect to minerals, petroleum and other mineral oils.
permit service contracts with foreign The grant thereof is subject to several safeguards,
corporations as contractors, but with safety among which are these requirements:
measures to prevent abuses, as an exception (1)The service contract shall be crafted in accordance
to the general norm established in the first with a general law that will set standard or uniform
paragraph of Section 2 of Article XII. This terms, conditions and requirements, presumably to
provision reserves or limits to Filipino citizens - attain a certain uniformity in provisions and avoid
- and corporations at least 60 percent of which the possible insertion of terms disadvantageous to
is owned by such citizens -- the exploration, the country.
development and utilization of natural (2)The President shall be the signatory for the
resources. government because, supposedly before an
agreement is presented to the President for
signature, it will have been vetted several times
 This provision was prompted by the perceived over at different levels to ensure that it conforms to
insufficiency of Filipino capital and the felt law and can withstand public scrutiny.
need for foreign investments in the EDU of (3)Within thirty days of the executed agreement, the
minerals and petroleum resources. President shall report it to Congress to give that
branch of government an opportunity to look over
 The framers for the most part debated about the agreement and interpose timely objections, if
the sort of safeguards that would be any.
67
Use of the Record of the percentage of those who voted in favor of it did so
ConCom to Ascertain Intent more out of faith and trust. For them, it was the product
of the hard work and careful deliberation of a group of
At this juncture, we shall address, rather than gloss intelligent, dedicated and trustworthy men and women
over, the use of the “framers’ intent” approach, and the of integrity and conviction, whose love of country and
criticism hurled by petitioners who quote a ruling of this fidelity to duty could not be questioned.
Court:
“While it is permissible in this jurisdiction to consult the In short, a large proportion of the voters voted “yes”
debates and proceedings of the constitutional because the drafters, or a majority of them, endorsed
convention in order to arrive at the reason and purpose the proposed Constitution. What this fact translates to
of the resulting Constitution, resort thereto may be had is the inescapable conclusion that many of the voters
only when other guides fail as said proceedings are in the referendum did not form their own isolated
powerless to vary the terms of the Constitution when judgment about the draft Charter, much less about
the meaning is clear. Debates in the constitutional particular provisions therein. They only relied or fell
convention ‘are of value as showing the views of the back and acted upon the favorable endorsement or
individual members, and as indicating the reason for recommendation of the framers as a group. In other
their votes, but they give us no light as to the views of words, by voting yes, they may be deemed to have
the large majority who did not talk, much less the mass signified their voluntary adoption of the understanding
of our fellow citizens whose votes at the polls gave that and interpretation of the delegates with respect to the
instrument the force of fundamental law. We think it proposed Charter and its particular provisions. “If it’s
safer to construe the constitution from what appears good enough for them, it’s good enough for me;” or, in
upon its face.’ The proper interpretation therefore many instances, “If it’s good enough for President Cory
depends more on how it was understood by the people Aquino, it’s good enough for me.”
adopting it than in the framers’ understanding
thereof.”[52] And even for those who voted based on their own
The notion that the deliberations reflect only the views individual assessment of the proposed Charter, there
of those members who spoke out and not the views of is no evidence available to indicate that their
the majority who remained silent should be clarified. assessment or understanding of its provisions was in
We must never forget that those who spoke out were fact different from that of the drafters. This unwritten
heard by those who remained silent and did not react. assumption seems to be petitioners’ as well. For all we
If the latter were silent because they happened not to know, this segment of voters must have read and
be present at the time, they are presumed to have understood the provisions of the Constitution in the
read the minutes and kept abreast of the deliberations. same way the framers had, an assumption that would
By remaining silent, they are deemed to have signified account for the favorable votes.
their assent to and/or conformity with at least some of
the views propounded or their lack of objections Fundamentally speaking, in the process of rewriting
thereto. It was incumbent upon them, as the Charter, the members of the ConCom as a group
representatives of the entire Filipino people, to follow were supposed to represent the entire Filipino people.
the deliberations closely and to speak their minds on Thus, we cannot but regard their views as being very
the matter if they did not see eye to eye with the much indicative of the thinking of the people with
proponents of the draft provisions. respect to the matters deliberated upon and to the
Charter as a whole.
In any event, each and every one of the
commissioners had the opportunity to speak out and to It is therefore reasonable and unavoidable to make the
vote on the matter. Moreover, the individual following conclusion, based on the above arguments.
explanations of votes are on record, and they show As written by the framers and ratified and adopted by
where each delegate stood on the issues. In sum, we the people, the Constitution allows the continued use
cannot completely denigrate the value or usefulness of of service contracts with foreign corporations -- as
the record of the ConCom, simply because certain contractors who would invest in and operate and
members chose not to speak out. manage extractive enterprises, subject to the full
control and supervision of the State -- sans the abuses
It is contended that the deliberations therein did not of the past regime. The purpose is clear: to develop
necessarily reflect the thinking of the voting population and utilize our mineral, petroleum and other resources
that participated in the referendum and ratified the on a large scale for the immediate and tangible benefit
Constitution. Verily, whether we like it or not, it is a bit of the Filipino people.
too much to assume that every one of those who voted
to ratify the proposed Charter did so only after carefully In view of the foregoing discussion, we should reverse
reading and mulling over it, provision by provision. the Decision of January 27, 2004, and in fact now hold
a view different from that of the Decision, which had
Likewise, it appears rather extravagant to assume that these findings: (a) paragraph 4 of Section 2 of Article
every one of those who did in fact bother to read the XII limits foreign involvement in the local mining
draft Charter actually understood the import of its industry to agreements strictly for either financial or
provisions, much less analyzed it vis-à-vis the previous technical assistance only; (b) the same paragraph
Constitutions. We believe that in reality, a good precludes agreements that grant to foreign
68
corporations the management of local mining authority necessary and indispensable to their proper
operations, as such agreements are purportedly in the functioning.
nature of service contracts as these were understood
under the 1973 Constitution; (c) these service For one thing, such an interpretation would discourage
contracts were supposedly “de-constitutionalized” and foreign entry into large-scale exploration, development
proscribed by the omission of the term service and utilization activities; and result in the unmitigated
contracts from the 1987 Constitution; (d) since the stagnation of this sector, to the detriment of our
WMCP FTAA contains provisions permitting the nation’s development. This scenario renders
foreign contractor to manage the concern, the said paragraph 4 inoperative and useless. And as
FTAA is invalid for being a prohibited service contract; respondents have correctly pointed out, the
and (e) provisions of RA 7942 and DAO 96-40, which government does not have to micro-manage the
likewise grant managerial authority to the foreign mining operations and dip its hands into the day-to-day
contractor, are also invalid and unconstitutional. affairs of the enterprise in order for it to be considered
as having full control and supervision.
Ultimate Test: State’s “Control”
Determinative of Constitutionality The concept of control[53] adopted in Section 2 of
Article XII must be taken to mean less than dictatorial,
But we are not yet at the end of our quest. Far from it. all-encompassing control; but nevertheless sufficient to
It seems that we are confronted with a possible give the State the power to direct, restrain, regulate
collision of constitutional provisions. On the one hand, and govern the affairs of the extractive enterprises.
paragraph 1 of Section 2 of Article XII explicitly Control by the State may be on a macro level, through
mandates the State to exercise “full control and the establishment of policies, guidelines, regulations,
supervision” over the exploration, development and industry standards and similar measures that would
utilization of natural resources. On the other hand, enable the government to control the conduct of affairs
paragraph 4 permits safeguarded service contracts in various enterprises and restrain activities deemed
with foreign contractors. Normally, pursuant thereto, not desirable or beneficial.
the contractors exercise management prerogatives
over the mining operations and the enterprise as a The end in view is ensuring that these enterprises
whole. There is thus a legitimate ground to be contribute to the economic development and general
concerned that either the State’s full control and welfare of the country, conserve the environment, and
supervision may rule out any exercise of management uplift the well-being of the affected local communities.
authority by the foreign contractor; or, the other way Such a concept of control would be compatible with
around, allowing the foreign contractor full permitting the foreign contractor sufficient and
management prerogatives may ultimately negate the reasonable management authority over the enterprise
State’s full control and supervision. it invested in, in order to ensure that it is operating
efficiently and profitably, to protect its investments and
to enable it to succeed.
Ut Magis Valeat
Quam Pereat The question to be answered, then, is whether RA
7942 and its Implementing Rules enable the
Under the third principle of constitutional construction government to exercise that degree of control sufficient
laid down in Francisco -- ut magis valeat quam pereat - to direct and regulate the conduct of affairs of
- every part of the Constitution is to be given effect, individual enterprises and restrain undesirable
and the Constitution is to be read and understood as a activities.
harmonious whole. Thus, “full control and supervision”
by the State must be understood as one that does not On the resolution of these questions will depend the
preclude the legitimate exercise of management validity and constitutionality of certain provisions of the
prerogatives by the foreign contractor. Before any Philippine Mining Act of 1995 (RA 7942) and its
further discussion, we must stress the primacy and Implementing Rules and Regulations (DAO 96-40), as
supremacy of the principle of sovereignty and State well as the WMCP FTAA.
control and supervision over all aspects of exploration,
development and utilization of the country’s natural Indeed, petitioners charge[54] that RA 7942, as well as
resources, as mandated in the first paragraph of its Implementing Rules and Regulations, makes it
Section 2 of Article XII. possible for FTAA contracts to cede full control and
management of mining enterprises over to fully
But in the next breadth we have to point out that “full foreign-owned corporations, with the result that the
control and supervision” cannot be taken literally to State is allegedly reduced to a passive regulator
mean that the State controls and dependent on submitted plans and reports, with weak
supervises everything involved, down to the minutest review and audit powers. The State does not
details, and makes all decisions required in the mining supposedly act as the owner of the natural resources
operations. This strained concept of control and for and on behalf of the Filipino people; it practically
supervision over the mining enterprise would render has little effective say in the decisions made by the
impossible the legitimate exercise by the contractors of enterprise. Petitioners then conclude that the law, the
a reasonable degree of management prerogative and implementing regulations, and the WMCP FTAA cede
69
“beneficial ownership” of the mineral resources to the 4. Sec. 35, which incorporates into all FTAAs the
foreign contractor. following terms, conditions and warranties:

A careful scrutiny of the provisions of RA 7942 and its “(g) Mining operations shall be conducted in
Implementing Rules belies petitioners’ claims. accordance with the provisions of the Act
Paraphrasing the Constitution, Section 4 of the statute and its IRR.
clearly affirms the State’s control thus:
“(h) Work programs and minimum
“Sec. 4. Ownership of Mineral Resources. – Mineral
expenditures commitments.
resources are owned by the State and the exploration,
development, utilization and processing thereof shall xxx xxx xxx
be under its full control and supervision. The State “(k) Requiring proponent to effectively use
may directly undertake such activities or it may enter appropriate anti-pollution technology and
into mineral agreements with contractors. facilities to protect the environment and
restore or rehabilitate mined-out areas.
“The State shall recognize and protect the rights of the “(l) The contractors shall furnish the
indigenous cultural communities to their ancestral Government records of geologic,
lands as provided for by the Constitution.” accounting and other relevant data for its
The aforequoted provision is substantively reiterated in mining operation, and that books of
Section 2 of DAO 96-40 as follows: accounts and records shall be open for
“Sec. 2. Declaration of Policy. All mineral resources in inspection by the government. x x x.
public and private lands within the territory and “(m)Requiring the proponent to dispose of the
exclusive economic zone of the Republic of the minerals at the highest price and more
Philippines are owned by the State. It shall be the advantageous terms and conditions.
responsibility of the State to promote their rational “(n) x x x x x x x x x
exploration, development, utilization and conservation
“(o) Such other terms and conditions
through the combined efforts of the Government and
consistent with the Constitution and with
private sector in order to enhance national growth in a
this Act as the Secretary may deem to be
way that effectively safeguards the environment and
for the best interest of the State and the
protects the rights of affected communities.”
welfare of the Filipino people.”
Sufficient Control Over Mining
Operations Vested in the State
The foregoing provisions of Section 35 of RA 7942 are
by RA 7942 and DAO 96-40
also reflected and implemented in Section 56 (g), (h),
(l), (m) and (n) of the Implementing Rules, DAO 96-40.
RA 7942 provides for the State’s control and
supervision over mining operations. The following
Moreover, RA 7942 and DAO 96-40 also provide
provisions thereof establish the mechanism of
various stipulations confirming the government’s
inspection and visitorial rights over mining operations
control over mining enterprises:
and institute reportorial requirements in this manner:

1. Sec. 8 which provides for the DENR’s power of  The contractor is to relinquish to the
over-all supervision and periodic review for government those portions of the contract area
“the conservation, management, development not needed for mining operations and not
and proper use of the State’s mineral covered by any declaration of mining feasibility
resources”; (Section 35-e, RA 7942; Section 60, DAO 96-
40).
2. Sec. 9 which authorizes the Mines and
Geosciences Bureau (MGB) under the DENR  The contractor must comply with the
to exercise “direct charge in the administration provisions pertaining to mine safety, health
and disposition of mineral resources”, and and environmental protection (Chapter XI, RA
empowers the MGB to “monitor the 7942; Chapters XV and XVI, DAO 96-40).
compliance by the contractor of the terms and
conditions of the mineral agreements”,  For violation of any of its terms and conditions,
“confiscate surety and performance bonds”, government may cancel an FTAA. (Chapter
and deputize whenever necessary any XVII, RA 7942; Chapter XXIV, DAO 96-40).
member or unit of the Phil. National
Police, barangay, duly registered non-  An FTAA contractor is obliged to open its
governmental organization (NGO) or any books of accounts and records for inspection
qualified person to police mining activities; by the government (Section 56-m, DAO 96-
40).
3. Sec. 66 which vests in the Regional Director
”exclusive jurisdiction over safety inspections  An FTAA contractor has to dispose of the
of all installations, whether surface or minerals and by-products at the highest
underground”, utilized in mining operations. market price and register with the MGB a copy
70
of the sales agreement (Section 56-n, DAO  The FTAA contractor is obliged to submit
96-40). reports (on quarterly, semi-annual or annual
basis as the case may be; per Section 270,
 MGB is mandated to monitor the contractor’s DAO 96-40), pertaining to the following:
compliance with the terms and conditions of
the FTAA; and to deputize, when necessary, 1. Exploration
any member or unit of the Philippine National
Police, the barangay or a DENR-accredited 2. Drilling
nongovernmental organization to police mining
activities (Section 7-d and -f, DAO 96-40). 3. Mineral resources and reserves

 An FTAA cannot be transferred or assigned 4. Energy consumption


without prior approval by the President
(Section 40, RA 7942; Section 66, DAO 96- 5. Production
40).
6. Sales and marketing
 A mining project under an FTAA cannot 7. Employment
proceed to the
construction/development/utilization stage, 8. Payment of taxes, royalties, fees and
unless its Declaration of Mining Project other Government Shares
Feasibility has been approved by government
(Section 24, RA 7942). 9. Mine safety, health and environment

 The Declaration of Mining Project Feasibility 10. Land use


filed by the contractor cannot be approved
without submission of the following 11. Social development
documents:
12. Explosives consumption
1. Approved mining project feasibility
study (Section 53-d, DAO 96-40)

2. Approved three-year work program  An FTAA pertaining to areas within


(Section 53-a-4, DAO 96-40) government reservations cannot be granted
without a written clearance from the
government agencies concerned (Section 19,
3. Environmental compliance certificate
RA 7942; Section 54, DAO 96-40).
(Section 70, RA 7942)

 An FTAA contractor is required to post a


4. Approved environmental protection
financial guarantee bond in favor of the
and enhancement program (Section
government in an amount equivalent to its
69, RA 7942)
expenditures obligations for any particular
year. This requirement is apart from the
5. Approval by the Sangguniang representations and warranties of the
Panlalawigan/Bayan/Barangay (Sectio contractor that it has access to all the
n 70, RA 7942; Section 27, RA 7160) financing, managerial and technical expertise
and technology necessary to carry out the
6. Free and prior informed consent by objectives of the FTAA (Section 35-b, -e, and -
the indigenous peoples concerned, f, RA 7942).
including payment of royalties through
a Memorandum of Agreement  Other reports to be submitted by the
(Section 16, RA 7942; Section 59, RA contractor, as required under DAO 96-40, are
8371) as follows: an environmental report on the
rehabilitation of the mined-out area and/or
mine waste/tailing covered area, and anti-
pollution measures undertaken (Section 35-a-
2); annual reports of the mining operations and
 The FTAA contractor is obliged to assist in the
records of geologic accounting (Section 56-m);
development of its mining community,
annual progress reports and final report of
promotion of the general welfare of its
exploration activities (Section 56-2).
inhabitants, and development of science and
mining technology (Section 57, RA 7942).
 Other programs required to be submitted by
the contractor, pursuant to DAO 96-40, are the
71
following: a safety and health program than a sufficient degree of control and supervision over
(Section 144); an environmental work program the conduct of mining operations.
(Section 168); an annual environmental
protection and enhancement program (Section Section 3(aq) of RA 7942
171). Not Unconstitutional

The foregoing gamut of requirements, regulations, An objection has been expressed that Section
restrictions and limitations imposed upon the FTAA 3(aq)[55] of RA 7942 -- which allows a foreign
contractor by the statute and regulations easily contractor to apply for and hold an exploration permit --
overturns petitioners’ contention. The setup under RA is unconstitutional. The reasoning is that Section 2 of
7942 and DAO 96-40 hardly relegates the State to the Article XII of the Constitution does not allow foreign-
role of a “passive regulator” dependent on submitted owned corporations to undertake mining operations
plans and reports. On the contrary, the government directly. They may act only as contractors of the State
agencies concerned are empowered to approve or under an FTAA; and the State, as the party directly
disapprove -- hence, to influence, direct and change -- undertaking exploitation of its natural resources, must
the various work programs and the corresponding hold through the government all exploration permits
minimum expenditure commitments for each of the and similar authorizations. Hence, Section 3(aq), in
exploration, development and utilization phases of the permitting foreign-owned corporations to hold
mining enterprise. exploration permits, is unconstitutional.

Once these plans and reports are approved, the The objection, however, is not well-founded. While the
contractor is bound to comply with its commitments Constitution mandates the State to exercise full control
therein. Figures for mineral production and sales are and supervision over the exploitation of mineral
regularly monitored and subjected to government resources, nowhere does it require the government to
review, in order to ensure that the products and by- hold all exploration permits and similar authorizations.
products are disposed of at the best prices possible; In fact, there is no prohibition at all against foreign or
even copies of sales agreements have to be submitted local corporations or contractors holding exploration
to and registered with MGB. And the contractor is permits. The reason is not hard to see.
mandated to open its books of accounts and records
for scrutiny, so as to enable the State to determine if Pursuant to Section 20 of RA 7942, an exploration
the government share has been fully paid. permit merely grants to a qualified person the right
to conduct exploration for all minerals in specified
The State may likewise compel the contractor’s areas. Such a permit does not amount to an
compliance with mandatory requirements on mine authorization to extract and carry off the mineral
safety, health and environmental protection, and the resources that may be discovered. This phase involves
use of anti-pollution technology and facilities. nothing but expenditures for exploring the contract
Moreover, the contractor is also obligated to assist in area and locating the mineral bodies. As no extraction
the development of the mining community and to pay is involved, there are no revenues or incomes to speak
royalties to the indigenous peoples concerned. of. In short, the exploration permit is an authorization
for the grantee to spend its own funds on exploration
Cancellation of the FTAA may be the penalty for programs that are pre-approved by the government,
violation of any of its terms and conditions and/or without any right to recover anything should no
noncompliance with statutes or regulations. This minerals in commercial quantities be discovered. The
general, all-around, multipurpose sanction is no trifling State risks nothing and loses nothing by granting these
matter, especially to a contractor who may have yet to permits to local or foreign firms; in fact, it stands to
recover the tens or hundreds of millions of dollars sunk gain in the form of data generated by the exploration
into a mining project. activities.

Overall, considering the provisions of the statute and Pursuant to Section 24 of RA 7942, an exploration
the regulations just discussed, we believe that the permit grantee who determines the commercial
State definitely possesses the means by which it can viability of a mining area may, within the term of the
have the ultimate word in the operation of the permit, file with the MGB a declaration of mining
enterprise, set directions and objectives, and detect project feasibility accompanied by a work program for
deviations and noncompliance by the contractor; development. The approval of the mining project
likewise, it has the capability to enforce compliance feasibility and compliance with other requirements of
and to impose sanctions, should the occasion therefor RA 7942 vests in the grantee the exclusive right to an
arise. MPSA or any other mineral agreement, or to an FTAA.

In other words, the FTAA contractor is not free to do Thus, the permit grantee may apply for an MPSA, a
whatever it pleases and get away with it; on the joint venture agreement, a co-production agreement,
contrary, it will have to follow the government line if it or an FTAA over the permit area, and the application
wants to stay in the enterprise. Ineluctably then, RA shall be approved if the permit grantee meets the
7942 and DAO 96-40 vest in the government more necessary qualifications and the terms and conditions
of any such agreement. Therefore, the contractor will
72
be in a position to extract minerals and earn revenues 7. A Declaration of Mining Feasibility must be
only when the MPSA or another mineral agreement, or submitted for approval by the State (Clause
an FTAA, is granted. At that point, the contractor’s 4.6-b).
rights and obligations will be covered by an FTAA or a
mineral agreement. 8. The contractor is obligated to report to the
State its exploration activities (Clause 4.9).
But prior to the issuance of such FTAA or mineral
agreement, the exploration permit grantee (or
prospective contractor) cannot yet be deemed to have 9. The contractor is required to obtain State
entered into any contract or agreement with the State, approval of its work programs for the
and the grantee would definitely need to have some succeeding two-year periods, containing the
document or instrument as evidence of its right to proposed work activities and expenditures
conduct exploration works within the specified area. budget related to exploration (Clause 5.1).
This need is met by the exploration permit issued
pursuant to Sections 3(aq), 20 and 23 of RA 7942. 10. The contractor is required to obtain State
approval for its proposed expenditures for
In brief, the exploration permit serves a practical and exploration activities (Clause 5.2).
legitimate purpose in that it protects the interests and
preserves the rights of the exploration permit grantee 11. The contractor is required to submit an annual
(the would-be contractor) -- foreign or local -- during report on geological, geophysical, geochemical
the period of time that it is spending heavily on and other information relating to its
exploration works, without yet being able to earn explorations within the FTAA area (Clause 5.3-
revenues to recoup any of its investments and a).
expenditures. Minus this permit and the protection it
affords, the exploration works and expenditures may
12. The contractor is to submit within six months
end up benefiting only claim-jumpers. Such a
after expiration of exploration period a final
possibility tends to discourage investors and
report on all its findings in the contract area
contractors. Thus, Section 3(aq) of RA 7942 may not
(Clause 5.3-b).
be deemed unconstitutional.

13. The contractor, after conducting feasibility


The Terms of the WMCP FTAA
studies, shall submit a declaration of mining
A Deference to State Control
feasibility, along with a description of the area
to be developed and mined, a description of
A perusal of the WMCP FTAA also reveals a slew of
the proposed mining operations and the
stipulations providing for State control and supervision:
technology to be employed, and a proposed
work program for the development phase, for
1. The contractor is obligated to account for the approval by the DENR secretary (Clause 5.4).
value of production and sale of minerals
(Clause 1.4).
14. The contractor is obliged to complete the
development of the mine, including
2. The contractor’s work program, activities and construction of the production facilities, within
budgets must be approved by/on behalf of the the period stated in the approved work
State (Clause 2.1). program (Clause 6.1).

3. The DENR secretary has the power to extend 15. The contractor is obligated to submit for
the exploration period (Clause 3.2-a). approval of the DENR secretary a work
program covering each period of three fiscal
4. Approval by the State is necessary for years (Clause 6.2).
incorporating lands into the FTAA contract
area (Clause 4.3-c). 16. The contractor is to submit reports to the
DENR secretary on the production, ore
5. The Bureau of Forest Development is vested reserves, work accomplished and work in
with discretion in regard to approving the progress, profile of its work force and
inclusion of forest reserves as part of the management staff, and other technical
FTAA contract area (Clause 4.5). information (Clause 6.3).

6. The contractor is obliged to relinquish 17. Any expansions, modifications, improvements


periodically parts of the contract area not and replacements of mining facilities shall be
needed for exploration and development subject to the approval of the secretary
(Clause 4.6). (Clause 6.4).

73
18. The State has control with respect to the mining enterprise itself.
amount of funds that the contractor may
borrow within the Philippines (Clause 7.2). Following its exploration activities or feasibility studies,
if the contractor believes that any part of the contract
19. The State has supervisory power with respect area is likely to contain an economic mineral resource,
to technical, financial and marketing issues it shall submit to the DENR secretary a declaration of
(Clause 10.1-a). mining feasibility (per Clause 5.4 of the FTAA),
together with a technical description of the area
delineated for development and production,
20. The contractor is required to ensure 60 a description of the proposed mining operations
percent Filipino equity in the contractor, within including the technology to be used, a work program
ten years of recovering specified expenditures, for development, an environmental impact statement,
unless not so required by subsequent and a description of the contributions to the economic
legislation (Clause 10.1). and general welfare of the country to be generated by
the mining operations (pursuant to Clause 5.5).
21. The State has the right to terminate the FTAA
for the contractor’s unremedied substantial The work program for development is subject to
breach thereof (Clause 13.2); the approval of the DENR secretary. Upon its
approval, the contractor must comply with it and
22. The State’s approval is needed for any complete the development of the mine, including the
assignment of the FTAA by the contractor to construction of production facilities and installation of
an entity other than an affiliate (Clause 14.1). machinery and equipment, within the period provided
in the approved work program for development (per
We should elaborate a little on the work programs and Clause 6.1).
budgets, and what they mean with respect to the
Thus, notably, the development phase of the project is
State’s ability to exercise full control and effective
likewise subject to the control and supervision of the
supervision over the enterprise. For instance,
throughout the initial five-year exploration and government. It cannot be emphasized enough that the
feasibility phase of the project, the contractor is proper and timely construction and deployment of the
mandated by Clause 5.1 of the WMCP FTAA to submit production facilities and the development of the mine
are of pivotal significance to the success of the mining
a series of work programs (copy furnished the director
of MGB) to the DENR secretary for approval. The venture. Any missteps here will potentially be very
costly to remedy. Hence, the submission of the work
programs will detail the contractor’s
proposed exploration activities and budget covering program for development to the DENR secretary for
each subsequent period of two fiscal years. approval is particularly noteworthy, considering that so
many millions of dollars worth of investments --
courtesy of the contractor -- are made to depend on
In other words, the concerned government officials will
the State’s consideration and action.
be informed beforehand of the proposed exploration
activities and expenditures of the contractor for each
succeeding two-year period, with the right to Throughout the operating period, the contractor is
approve/disapprove them or require changes or required to submit to the DENR secretary for approval,
copy furnished the director of MGB, work programs
adjustments therein if deemed necessary.
covering each period of three fiscal years (per Clause
6.2). During the same period (per Clause 6.3), the
Likewise, under Clause 5.2(a), the amount that the
contractor is mandated to submit various quarterly and
contractor was supposed to spend for exploration
activities during the first contract year of the annual reports to the DENR secretary, copy furnished
exploration period was fixed at not less than P24 the director of MGB, on the tonnages of production in
terms of ores and concentrates, with corresponding
million; and then for the succeeding years, the amount
grades, values and destinations; reports of sales; total
shall be as agreed between the DENR secretary and
ore reserves, total tonnage of ores, work accomplished
the contractor prior to the commencement of each
and work in progress (installations and facilities related
subsequent fiscal year. If no such agreement is arrived
upon, the previous year’s expenditure commitment to mining operations), investments made or committed,
and so on and so forth.
shall apply.
Under Section VIII, during the period of mining
This provision alone grants the government through
operations, the contractor is also required to submit to
the DENR secretary a very big say in the exploration
the DENR secretary (copy furnished the director of
phase of the project. This fact is not something to be
taken lightly, considering that the government has MGB) the work program and corresponding budget for
absolutely no contribution to the exploration the contract area, describing the mining operations
expenditures or work activities and yet is given veto that are proposed to be carried out during the period
power over such a critical aspect of the project. We covered. The secretary is, of course, entitled to grant
or deny approval of any work program or budget
cannot but construe as very significant such a degree
of control over the project and, resultantly, over the and/or propose revisions thereto. Once the
program/budget has been approved, the contractor
74
shall comply therewith.
We hold, however, that the foregoing provisions do not
In sum, the above provisions of the WMCP FTAA manifest a relinquishment of control. For instance,
taken together, far from constituting a surrender of Clause 8.2 merely provides a mechanism for
control and a grant of beneficial ownership of mineral preventing the business or mining operations from
resources to the contractor in question, bestow upon grinding to a complete halt as a result of possibly over-
the State more than adequate control and long and unjustified delays in the government’s
supervision over the activities of the contractor handling, processing and approval of submitted work
and the enterprise. programs and budgets. Anyway, the provision does
give the DENR secretary more than sufficient time (60
No Surrender of Control days) to react to submitted work programs and
Under the WMCP FTAA budgets. It cannot be supposed that proper grounds
for objecting thereto, if any exist, cannot be discovered
Petitioners, however, take aim at Clause 8.2, 8.3, and within a period of two months.
8.5 of the WMCP FTAA which, they say, amount to a
relinquishment of control by the State, since it “cannot On the other hand, Clause 8.3 seeks to provide a
truly impose its own discretion” in respect of the temporary, stop-gap solution in the event a
submitted work programs. disagreement over the submitted work program or
budget arises between the State and the contractor
“8.2.The Secretary shall be deemed to have approved and results in a stalemate or impasse, in order that
any Work Programme or Budget or variation there will be no unreasonably long delays in the
thereof submitted by the Contractor unless within performance of the works.
sixty (60) days after submission by the Contractor
the Secretary gives notice declining such approval These temporary or stop-gap solutions are not
or proposing a revision of certain features and necessarily evil or wrong. Neither does it follow that
specifying its reasons therefor (‘the Rejection the government will inexorably be aggrieved if and
Notice’). when these temporary remedies come into play. First,
8.3. If the Secretary gives a Rejection Notice, the avoidance of long delays in these situations will
Parties shall promptly meet and endeavor to undoubtedly redound to the benefit of the State as well
agree on amendments to the Work Programme or as the contractor. Second, who is to say that the work
Budget. If the Secretary and the Contractor fail to program or budget proposed by the contractor and
agree on the proposed revision within 30 days deemed approved under Clause 8.3 would not be the
from delivery of the Rejection Notice then better or more reasonable or more effective
the Work Programme or Budget or variation alternative? The contractor, being the “insider,” as it
thereof proposed by the Contractor shall be were, may be said to be in a better position than the
deemed approved, so as not to unnecessarily State -- an outsider looking in -- to determine what
delay the performance of the Agreement. work program or budget would be appropriate, more
8.4. x x x x x x x x x effective, or more suitable under the circumstances.
8.5. So far as is practicable, the Contractor shall
comply with any approved Work Programme and All things considered, we take exception to the
Budget. It is recognized by the Secretary and the characterization of the DENR secretary as a
Contractor that the details of any Work subservient nonentity whom the contractor can
Programmes or Budgets may require changes in overrule at will, on account of Clause 8.3. And neither
the light of changing circumstances. The is it true that under the same clause, the DENR
Contractor may make such changes without secretary has no authority whatsoever to disapprove
approval of the Secretary provided they do not the work program. As Respondent WMCP reasoned in
change the general objective of any Work its Reply-Memorandum, the State -- despite Clause
Programme, nor entail a downward variance of 8.3 -- still has control over the contract area and it
more than twenty per centum (20percent) of the may, as sovereign authority, prohibit work thereon until
relevant Budget. All other variations to an the dispute is resolved. And ultimately, the State may
approved Work Programme or Budget shall be terminate the agreement, pursuant to Clause 13.2 of
submitted for approval of the Secretary.” the same FTAA, citing substantial breach thereof.
Hence, it clearly retains full and effective control of the
exploitation of the mineral resources.
From the provisions quoted above, petitioners On the other hand, Clause 8.5 is merely an
generalize by asserting that the government does not acknowledgment of the parties’ need for flexibility,
participate in making critical decisions regarding the given that no one can accurately forecast under all
operations of the mining firm. Furthermore, while the circumstances, or predict how situations may change.
State can require the submission of work programs Hence, while approved work programs and budgets
and budgets, the decision of the contractor will still are to be followed and complied with as far as
prevail, if the parties have a difference of opinion with practicable, there may be instances in which changes
regard to matters affecting operations and will have to be effected, and effected rapidly, since
management. events may take shape and unfold with suddenness
75
and urgency. Thus, Clause 8.5 allows the contractor to to purchase or acquire surface areas for and on behalf
move ahead and make changes without the express or of the Contractor at such price and terms as may be
implicit approval of the DENR secretary. Such changes acceptable to the contractor. At the termination of this
are, however, subject to certain conditions that will Agreement such areas shall be sold by public auction
serve to limit or restrict the variance and prevent the or tender and the Contractor shall be entitled to
contractor from straying very far from what has been reimbursement of the costs of acquisition and
approved. maintenance, adjusted for inflation, from the proceeds
of sale.”
Clause 8.5 provides the contractor a certain amount of
flexibility to meet unexpected situations, while still According to petitioners, “government becomes a
guaranteeing that the approved work programs and subcontractor to the contractor” and may, on account
budgets are not abandoned altogether. Clause 8.5 of this provision, be compelled “to make use of its
does not constitute proof that the State has power of eminent domain, not for public purposes but
relinquished control. And ultimately, should there be on behalf of a private party, i.e., the contractor.”
disagreement with the actions taken by the contractor Moreover, the power of the courts to determine the
in this instance as well as under Clause 8.3 discussed amount corresponding to the constitutional
above, the DENR secretary may resort to requirement of just compensation has allegedly also
cancellation/termination of the FTAA as the ultimate been contracted away by the government, on account
sanction. of the latter’s commitment that the acquisition shall be
at such terms as may be acceptable to the contractor.
Discretion to Select Contract
Area Not an Abdication of Control However, private respondent has proffered a logical
explanation for the provision.[58] Section 10.2(e)
Next, petitioners complain that the contractor has full contemplates a situation applicable to foreign-owned
discretion to select -- and the government has no say corporations. WMCP, at the time of the execution of
whatsoever as to -- the parts of the contract area to be the FTAA, was a foreign-owned corporation and
relinquished pursuant to Clause 4.6 of the WMCP therefore not qualified to own land. As contractor, it
FTAA.[56] This clause, however, does not constitute has at some future date to construct the infrastructure -
abdication of control. Rather, it is a mere - the mine processing plant, the camp site, the tailings
acknowledgment of the fact that the contractor will dam, and other infrastructure -- needed for the large-
have determined, after appropriate exploration works, scale mining operations. It will then have to identify
which portions of the contract area do not contain and pinpoint, within the FTAA contract area, the
minerals in commercial quantities sufficient to justify particular surface areas with favorable topography
developing the same and ought therefore to be deemed ideal for such infrastructure and will need to
relinquished. The State cannot just substitute its acquire the surface rights. The State owns the mineral
judgment for that of the contractor and dictate upon the deposits in the earth, and is also qualified to own land.
latter which areas to give up.
Section 10.2(e) sets forth the mechanism whereby the
Moreover, we can be certain that the contractor’s self- foreign-owned contractor, disqualified to own land,
interest will propel proper and efficient relinquishment. identifies to the government the specific surface areas
According to private respondent,[57] a mining company within the FTAA contract area to be acquired for the
tries to relinquish as much non-mineral areas as soon mine infrastructure. The government then acquires
as possible, because the annual occupation fees paid ownership of the surface land areas on behalf of the
to the government are based on the total hectarage of contractor, in order to enable the latter to proceed to
the contract area, net of the areas relinquished. Thus, fully implement the FTAA.
the larger the remaining area, the heftier the amount of
occupation fees to be paid by the contractor. The contractor, of course, shoulders the purchase
Accordingly, relinquishment is not an issue, given that price of the land. Hence, the provision allows it, after
the contractor will not want to pay the annual termination of the FTAA, to be reimbursed from
occupation fees on the non-mineral parts of its contract proceeds of the sale of the surface areas, which the
area. Neither will it want to relinquish promising sites, government will dispose of through public bidding. It
which other contractors may subsequently pick up. should be noted that this provision will not be
applicable to Sagittarius as the present FTAA
contractor, since it is a Filipino corporation qualified to
Government Not own and hold land. As such, it may therefore freely
a Subcontractor negotiate with the surface rights owners and acquire
the surface property in its own right.
Petitioners further maintain that the contractor can
compel the government to exercise its power of Clearly, petitioners have needlessly jumped to
eminent domain to acquire surface areas within the unwarranted conclusions, without being aware of the
contract area for the contractor’s use. Clause 10.2 (e) rationale for the said provision. That provision does not
of the WMCP FTAA provides that the government call for the exercise of the power of eminent domain --
agrees that the contractor shall “(e) have the right to and determination of just compensation is not an issue
require the Government at the Contractor’s own cost, -- as much as it calls for a qualified party to acquire the
76
surface rights on behalf of a foreign-owned contractor. It is not uncommon to find that a debtor corporation
has executed deeds of assignment “by way of security”
Rather than having the foreign contractor act through a over the production for the next twelve months and/or
dummy corporation, having the State do the the proceeds of the sale thereof -- or the
purchasing is a better alternative. This will at least corresponding accounts receivable, if sold on terms --
cause the government to be aware of such in favor of its creditor-banks. Such deeds may include
transaction/s and foster transparency in the authorizing the creditors to sell the products
contractor’s dealings with the local property owners. themselves and to collect the sales proceeds and/or
The government, then, will not act as a subcontractor the accounts receivable.
of the contractor; rather, it will facilitate the transaction
and enable the parties to avoid a technical violation of Seen in this context, Clause 10.2(l) is not something
the Anti-Dummy Law. out of the ordinary or objectionable. In any case, as will
be explained below, even if it is allowed to mortgage or
Absence of Provision encumber the mineral end-products themselves, the
Requiring Sale at Posted contractor is not freed of its obligation to pay the
Prices Not Problematic government its basic and additional shares in the net
mining revenue, which is the essential thing to
The supposed absence of any provision in the WMCP consider.
FTAA directly and explicitly requiring the contractor
to sell the mineral products at posted or market In brief, the alarum raised over the contractor’s right to
prices is not a problem. Apart from Clause 1.4 of the mortgage the minerals is simply unwarranted. Just the
FTAA obligating the contractor to account for the total same, the contractor must account for the value of
value of mineral production and the sale of minerals, mineral production and the sales proceeds therefrom.
we can also look to Section 35 of RA 7942, which Likewise, under the WMCP FTAA, the government
incorporates into all FTAAs certain terms, conditions remains entitled to its sixty percent share in the net
and warranties, including the following: mining revenues of the contractor. The latter’s right to
“(l) The contractors shall furnish the Government mortgage the minerals does not negate the State’s
records of geologic, accounting and other relevant right to receive its share of net mining revenues.
data for its mining operation, and that books of
accounts and records shall be open for inspection by Shareholders Free
the government. x x x to Sell Their Stocks

(m) Requiring the proponent to dispose of the minerals Petitioners likewise criticize Clause 10.2(k), which
at the highest price and more advantageous terms and gives the contractor authority “to change its equity
conditions.” structure at any time.” This provision may seem
For that matter, Section 56(n) of DAO 99-56 somewhat unusual, but considering that WMCP then
specifically obligates an FTAA contractor to dispose of was 100 percent foreign-owned, any change would
the minerals and by-products at the highest market mean that such percentage would either stay unaltered
price and to register with the MGB a copy of the sales or be decreased in favor of Filipino ownership.
agreement. After all, the provisions of prevailing Moreover, the foreign-held shares may change hands
statutes as well as rules and regulations are deemed freely. Such eventuality is as it should be.
written into contracts.
We believe it is not necessary for government to
Contractor’s Right to Mortgage attempt to limit or restrict the freedom of the
Not Objectionable Per Se shareholders in the contractor to freely transfer,
dispose of or encumber their shareholdings, consonant
Petitioners also question the absolute right of the with the unfettered exercise of their business judgment
contractor under Clause 10.2 (l) to mortgage and and discretion. Rather, what is critical is that,
encumber not only its rights and interests in the FTAA regardless of the identity, nationality and percentage
and the infrastructure and improvements introduced, ownership of the various shareholders of the
but also the mineral products extracted. Private contractor -- and regardless of whether these
respondents do not touch on this matter, but we shareholders decide to take the company public, float
believe that this provision may have to do with the bonds and other fixed-income instruments, or allow the
conditions imposed by the creditor-banks of the then creditor-banks to take an equity position in the
foreign contractor WMCP to secure the lendings made company -- the foreign-owned contractor is always in a
or to be made to the latter. Ordinarily, banks lend not position to render the services required under the
only on the security of mortgages on fixed assets, but FTAA, under the direction and control of the
also on encumbrances of goods produced that can government.
easily be sold and converted into cash that can be
applied to the repayment of loans. Banks even lend on Contractor’s Right to Ask
the security of accounts receivable that are collectible For Amendment Not Absolute
within 90 days.[59]
With respect to Clauses 10.4(e) and (i), petitioners
77
complain that these provisions bind government to finding was based on the underlying assumption,
allow amendments to the FTAA if required by banks common to the said provisions, that the foreign
and other financial institutions as part of the conditions contractor manages the mineral resources in the same
for new lendings. However, we do not find anything way that foreign contractors in service contracts used
wrong with Clause 10.4(e), which only states that “if to. “By allowing foreign contractors to manage or
the Contractor seeks to obtain financing contemplated operate all the aspects of the mining operation, the
herein from banks or other financial institutions, (the above-cited provisions of R.A. No. 7942 have in
Government shall) cooperate with the Contractor in effect conveyed beneficial ownership over the
such efforts provided that such financing arrangements nation’s mineral resources to these contractors,
will in no event reduce the Contractor’s obligations or leaving the State with nothing but bare title
the Government’s rights hereunder.” The colatilla thereto.”[60] As the WMCP FTAA contained similar
obviously safeguards the State’s interests; if breached, provisions deemed by the ponente to be abhorrent to
it will give the government cause to object to the the Constitution, the Decision struck down the Contract
proposed amendments. as well.

On the other hand, Clause 10.4(i) provides that “the Beneficial ownership has been defined as ownership
Government shall favourably consider any request recognized by law and capable of being enforced in
from [the] Contractor for amendments of this the courts at the suit of the beneficial
Agreement which are necessary in order for the owner.[61] Black’s Law Dictionary indicates that the
Contractor to successfully obtain the financing.” term is used in two senses: first, to indicate the interest
Petitioners see in this provision a complete of a beneficiary in trust property (also called “equitable
renunciation of control. We disagree. ownership”); and second, to refer to the power of a
corporate shareholder to buy or sell the shares, though
The proviso does not say that the government shall the shareholder is not registered in the corporation’s
grant any request for amendment. Clause 10.4(i) only books as the owner.[62] Usually, beneficial ownership is
obliges the State to favorably consider any such distinguished from naked ownership, which is the
request, which is not at all unreasonable, as it is not enjoyment of all the benefits and privileges of
equivalent to saying that the government must ownership, as against possession of the bare title to
automatically consent to it. This provision should be property.
read together with the rest of the FTAA provisions
instituting government control and supervision over the An assiduous examination of the WMCP FTAA
mining enterprise. The clause should not be given an uncovers no indication that it confers upon WMCP
interpretation that enables the contractor to wiggle out ownership, beneficial or otherwise, of the mining
of the restrictions imposed upon it by merely property it is to develop, the minerals to be produced,
suggesting that certain amendments are requested by or the proceeds of their sale, which can be legally
the lenders. asserted and enforced as against the State.

Rather, it is up to the contractor to prove to the As public respondents correctly point out, any interest
government that the requested changes to the FTAA the contractor may have in the proceeds of the mining
are indispensable, as they enable the contractor to operation is merely the equivalent of the consideration
obtain the needed financing; that without such contract the government has undertaken to pay for its services.
changes, the funders would absolutely refuse to All lawful contracts require such mutual prestations,
extend the loan; that there are no other sources of and the WMCP FTAA is no different. The contractor
financing available to the contractor (a very unlikely commits to perform certain services for the
scenario); and that without the needed financing, the government in respect of the mining operation, and in
execution of the work programs will not proceed. But turn it is to be compensated out of the net mining
the bottom line is, in the exercise of its power of revenues generated from the sale of mineral products.
control, the government has the final say on whether to What would be objectionable is a contractual provision
approve or disapprove such requested amendments to that unduly benefits the contractor far in excess of the
the FTAA. In short, approval thereof is not mandatory service rendered or value delivered, if any, in
on the part of the government. exchange therefor.

In fine, the foregoing evaluation and analysis of the A careful perusal of the statute itself and its
aforementioned FTAA provisions sufficiently overturns implementing rules reveals that neither RA 7942 nor
petitioners’ litany of objections to and criticisms of the DAO 99-56 can be said to convey beneficial ownership
State’s alleged lack of control. of any mineral resource or product to any foreign
FTAA contractor.
Financial Benefits Not
Surrendered to the Contractor Equitable Sharing
of Financial Benefits
One of the main reasons certain provisions of RA 7942
were struck down was the finding mentioned in the On the contrary, DAO 99-56, entitled “Guidelines
Decision that beneficial ownership of the mineral Establishing the Fiscal Regime of Financial or
resources had been conveyed to the contractor. This Technical Assistance Agreements” aims to ensure an
78
equitable sharing of the benefits derived from mineral  VAT on imported equipment, goods and
resources. These benefits are to be equitably shared services – 10 percent of value
among the government (national and local), the FTAA
contractor, and the affected communities. The purpose  Royalties due the government on minerals
is to ensure sustainable mineral resources extracted from mineral reservations, if
development; and a fair, equitable, competitive and applicable – 5 percent of the actual market
stable investment regime for the large-scale value of the minerals produced
exploration, development and commercial utilization of
minerals. The general framework or concept followed
 Documentary stamp tax - the rate depends on
in crafting the fiscal regime of the FTAA is based on
the type of transaction
the principle that the government expects real
contributions to the economic growth and general
welfare of the country, while the contractor expects a  Capital gains tax on traded stocks - 5 to 10
reasonable return on its investments in the project.[63] percent of the value of the shares

Specifically, under the fiscal regime, the government’s  Withholding tax on interest payments on
expectation is, inter alia, the receipt of its share from foreign loans -15 percent of the amount of
the taxes and fees normally paid by a mining interest
enterprise. On the other hand, the FTAA contractor is
granted by the government certain fiscal and non-fiscal
incentives[64] to help support the former’s cash flow  Withholding tax on dividend payments to
during the most critical phase (cost recovery) and to foreign stockholders – 15 percent of the
dividend
make the Philippines competitive with other mineral-
producing countries. After the contractor has
recovered its initial investment, it will pay all the normal  Wharfage and port fees
taxes and fees comprising the basic share of the
government, plus an additional share for the  Licensing fees (for example, radio permit,
government based on the options and formulae set firearms permit, professional fees)
forth in DAO 99-56.

The said DAO spells out the financial benefits the  Other national taxes and fees.
government will receive from an FTAA, referred to as
“the Government Share,” composed of a basic Payments to Local Governments:
government share and an additional government
share.  Local business tax - a maximum of 2 percent
of gross sales or receipts (the rate varies
The basic government share is comprised of all direct among local government units)
taxes, fees and royalties, as well as other payments
made by the contractor during the term of the FTAA.
 Real property tax - 2 percent of the fair market
These are amounts paid directly to (i) the national
value of the property, based on an assessment
government (through the Bureau of Internal Revenue,
level set by the local government
Bureau of Customs, Mines & Geosciences Bureau and
other national government agencies imposing taxes or
fees), (ii) the local government units where the mining  Special education levy - 1 percent of the basis
activity is conducted, and (iii) persons and used for the real property tax
communities directly affected by the mining project.
The major taxes and other payments constituting the  Occupation fees - PhP50 per hectare per year;
basic government share are enumerated below:[65] PhP100 per hectare per year if located in a
mineral reservation
Payments to the National Government:
 Community tax - maximum of PhP10,500 per
 Excise tax on minerals - 2 percent of the gross year
output of mining operations
 All other local government taxes, fees and
 Contractor’ income tax - maximum of 32 imposts as of the effective date of the FTAA -
percent of taxable income for corporations the rate and the type depend on the local
government
 Customs duties and fees on imported capital
equipment -the rate is set by the Tariff and Other Payments:
Customs Code (3-7 percent for chemicals; 3-
10 percent for explosives; 3-15 percent for
mechanical and electrical equipment; and 3-10
percent for vehicles, aircraft and vessels
79
 Royalty to indigenous cultural communities, if Government’s Share in an
any – 1 percent of gross output from mining FTAA Not Consisting Solely
operations of Taxes, Duties and Fees

 Special allowance - payment to claim owners In connection with the foregoing discussion on
and surface rights holders the basic and additional government shares, it is
pertinent at this juncture to mention the criticism
leveled at the second paragraph of Section 81 of RA
Apart from the basic share, an additional government 7942, quoted earlier. The said proviso has been
share is also collected from the FTAA contractor in denounced, because, allegedly, the State’s share in
accordance with the second paragraph of Section 81 FTAAs with foreign contractors has been limited to
of RA 7942, which provides that the government share taxes, fees and duties only; in effect, the State has
shall be comprised of, among other things, certain been deprived of a share in the after-tax income of the
taxes, duties and fees. The subject proviso reads: enterprise. In the face of this allegation, one has to
“The Government share in a financial or technical consider that the law does not define the term among
assistance agreement shall consist of, among other other things; and the Office of the Solicitor General, in
things, the contractor’s corporate income tax, excise its Motion for Reconsideration, appears to have
tax, special allowance, withholding tax due from the erroneously claimed that the phrase refers to indirect
contractor’s foreign stockholders arising from dividend taxes.
or interest payments to the said foreign stockholder in
case of a foreign national, and all such other taxes, The law provides no definition of the term among other
duties and fees as provided for under existing laws.” things, for the reason that Congress deliberately
(Italics types supplied.) avoided setting unnecessary limitations as to what
The government, through the DENR and the MGB, has may constitute compensation to the State for the
interpreted the insertion of the phrase among other exploitation and use of mineral resources. But the
things as signifying that the government is entitled to inclusion of that phrase clearly and unmistakably
an “additional government share” to be paid by the reveals the legislative intent to have the State collect
contractor apart from the “basic share,” in order to more than just the usual taxes, duties and fees.
attain a fifty-fifty sharing of net benefits from mining. Certainly, there is nothing in that phrase -- or in the
second paragraph of Section 81 -- that would suggest
The additional government share is computed by using that such phrase should be interpreted as referring
one of three options or schemes presented in DAO 99- only to taxes, duties, fees and the like.
56: (1) a fifty-fifty sharing in the cumulative present
value of cash flows; (2) the share based on excess Precisely for that reason, to fulfill the legislative intent
profits; and (3) the sharing based on the cumulative behind the inclusion of the phrase among other
net mining revenue. The particular formula to be things in the second paragraph of Section 81,[67] the
applied will be selected by the contractor, with a DENR structured and formulated in DAO 99-56 the
written notice to the government prior to the said additional government share. Such a share was to
commencement of the development and construction consist not of taxes, but of a share in the earnings or
phase of the mining project.[66] cash flows of the mining enterprise. The additional
government share was to be paid by the contractor on
Proceeds from the government shares arising from an top of the basic share, so as to achieve a fifty-fifty
FTAA contract are distributed to and received by the sharing -- between the government and the contractor
different levels of government in the following -- of net benefits from mining. In the Ramos-DeVera
proportions: paper, the explanation of the three options or
National 50 formulas[68] -- presented in DAO 99-56 for the
Governmentpercent computation of the additional government share --
serves to debunk the claim that the government’s take
Provincial 10 from an FTAA consists solely of taxes, fees and duties.
Governmentpercent
Unfortunately, the Office of the Solicitor General --
Municipal 20 although in possession of the relevant data -- failed to
Governmentpercent fully replicate or echo the pertinent elucidation in the
Ramos-DeVera paper regarding the three schemes or
Affected 20 options for computing the additional government share
Barangays percent presented in DAO 99-56. Had due care been taken by
the OSG, the Court would have been duly apprised of
the real nature and particulars of the additional share.
The portion of revenues remaining after the deduction
of the basic and additional government shares is what But, perhaps, on account of the esoteric discussion in
goes to the contractor. the Ramos-DeVera paper, and the even more
abstruse mathematical jargon employed in DAO 99-56,
the OSG omitted any mention of the three options.
Instead, the OSG skipped to a side discussion of the
80
effect of indirect taxes, which had nothing at all to do DeVera paper, these results are not at all shabby,
with the additional government share, to begin with. considering that the contractor puts in all the capital
Unfortunately, this move created the wrong requirements and assumes all the risks, without the
impression, pointed out in Justice Antonio T. Carpio’s government having to contribute or risk anything.
Opinion, that the OSG had taken the position that the
additional government share consisted of indirect Despite the foregoing explanation, Justice Carpio still
taxes. insisted during the Court’s deliberations that the
phrase among other things refers only to taxes, duties
In any event, what is quite evident is the fact that and fees. We are bewildered by his position. On the
the additional government share, as formulated, has one hand, he condemns the Mining Law for allegedly
nothing to do with taxes -- direct or indirect -- or with limiting the government’s benefits only to taxes, duties
duties, fees or charges. To repeat, it is over and above and fees; and on the other, he refuses to allow the
the basic government share composed of taxes and State to benefit from the correct and proper
duties. Simply put, the additional share may be (a) an interpretation of the DENR/MGB. To remove all doubts
amount that will result in a 50-50 sharing of the then, we hold that the State’s share is not limited to
cumulative present value of the cash flows[69] of the taxes, duties and fees only and that the DENR/MGB
enterprise; (b) an amount equivalent to 25 percent of interpretation of the phrase among other things is
the additional or excess profits of the enterprise, correct. Definitely, this DENR/MGB interpretation is not
reckoned against a benchmark return on investments; only legally sound, but also greatly advantageous to
or (c) an amount that will result in a fifty-fifty sharing of the government.
the cumulative net mining revenue from the end of the
recovery period up to the taxable year in question. The One last point on the subject. The legislature acted
contractor is required to select one of the three options judiciously in not defining the terms among other
or formulae for computing the additional share, an things and, instead, leaving it to the agencies
option it will apply to all of its mining operations. concerned to devise and develop the various modes of
arriving at a reasonable and fair amount for
As used above, “net mining revenue” is defined as the the additional government share. As can be seen from
gross output from mining operations for a calendar DAO 99-56, the agencies concerned did an admirable
year, less deductible expenses (inclusive of taxes, job of conceiving and developing not just one formula,
duties and fees). Such revenue would roughly be but three different formulae for arriving at the additional
equivalent to “taxable income” or income before government share. Each of these options is quite fair
income tax. Definitely, as compared with, say, and reasonable; and, as Messrs. Ramos and De Vera
calculating the additional government share on the stated, other alternatives or schemes for a possible
basis of net income (after income tax), the net mining improvement of the fiscal regime for FTAAs are also
revenue is a better and much more reasonable basis being studied by the government.
for such computation, as it gives a truer picture of the
profitability of the company. Besides, not locking into a fixed definition of the
term among other things will ultimately be more
To demonstrate that the three options or formulations beneficial to the government, as it will have that innate
will operate as intended, Messrs. Ramos and de Vera flexibility to adjust to and cope with rapidly changing
also performed some quantifications of the circumstances, particularly those in the international
government share via a financial modeling of each of markets. Such flexibility is especially significant for the
the three options discussed above. They found that the government in terms of helping our mining enterprises
government would get the highest share from the remain competitive in world markets despite
option that is based on the net mining revenue, as challenging and shifting economic scenarios.
compared with the other two options, considering only
the basic and the additional shares; and that, even In conclusion, we stress that we do not share the view
though production rate decreases, the government that in FTAAs with foreign contractors under RA 7942,
share will actually increase when the net mining the government’s share is limited to taxes, fees and
revenue and the additional profit-based options are duties. Consequently, we find the attacks on the
used. second paragraph of Section 81 of RA 7942 totally
unwarranted.
Furthermore, it should be noted that the three options
or formulae do not yet take into account the indirect Collections Not Made Uncertain
taxes[70] and other financial contributions[71] of mining by the Third Paragraph of Section 81
projects. These indirect taxes and other contributions
are real and actual benefits enjoyed by the Filipino The third or last paragraph of Section 81[72] provides
people and/or government. Now, if some of the that the government share in FTAAs shall be collected
quantifiable items are taken into account in the when the contractor shall have recovered its pre-
computations, the financial modeling would show that operating expenses and exploration and development
the total government share increases to 60 percent or expenditures. The objection has been advanced that,
higher -- in one instance, as much as 77 percent and on account of the proviso, the collection of the State’s
even 89 percent -- of the net present value of total share is not even certain, as there is no time limit in
benefits from the project. As noted in the Ramos- RA 7942 for this grace period or recovery period.
81
declaration of mining project feasibility. This
We believe that Congress did not set any time limit for declaration is to be accompanied by a work program
the grace period, preferring to leave it to the concerned for development for the Bureau’s approval, the
agencies, which are, on account of their technical necessary prelude for entering into an FTAA, a mineral
expertise and training, in a better position to determine production sharing agreement (MPSA), or some other
the appropriate durations for such recovery periods. mineral agreement. At this stage, too, the government
After all, these recovery periods are determined, to a obviously has the opportunity to approve or reject the
great extent, by technical and technological factors proposed work program and budgeted expenditures
peculiar to the mining industry. Besides, with for development works on the project. Such
developments and advances in technology and in the expenditures will ultimately become the pre-operating
geosciences, we cannot discount the possibility of and development costs that will have to be recovered
shorter recovery periods. At any rate, the concerned by the contractor.
agencies have not been remiss in this area. The 1995
and 1996 Implementing Rules and Regulations of RA Naturally, with the submission of approved work
7942 specify that the period of recovery, reckoned programs and budgets for the exploration and the
from the date of commercial operation, shall be for a development/construction phases, the government will
period not exceeding five years, or until the date be able to scrutinize and approve or reject such
of actual recovery, whichever comes earlier. expenditures. It will be well-informed as to the amounts
of pre-operating and other expenses that the
Approval of Pre-Operating contractor may legitimately recover and the
Expenses Required by RA 7942 approximate period of time needed to effect such a
recovery. There is therefore no way the contractor can
Still, RA 7942 is criticized for allegedly not requiring just randomly post any amount of pre-operating
government approval of pre-operating, exploration and expenses and expect to recover the same.
development expenses of the foreign contractors, who
are in effect given unfettered discretion to determine The aforecited provisions on approved work programs
the amounts of such expenses. Supposedly, nothing and budgets have counterparts in Section 35, which
prevents the contractors from recording such deals with the terms and conditions exclusively
expenses in amounts equal to the mining revenues applicable to FTAAs. The said provision requires
anticipated for the first 10 or 15 years of commercial certain terms and conditions to be incorporated into
production, with the result that the share of the State FTAAs; among them, “a firm commitment x x x of an
will be zero for the first 10 or 15 years. Moreover, amount corresponding to the expenditure obligation
under the circumstances, the government would be that will be invested in the contract area” and
unable to say when it would start to receive its share “representations and warranties x x x to timely deploy
under the FTAA. these [financing, managerial and technical expertise
and technological] resources under its supervision
We believe that the argument is based on incorrect pursuant to the periodic work programs and related
information as well as speculation. Obviously, certain budgets x x x,” as well as “work
crucial provisions in the Mining Law were overlooked. programs and minimum expenditures
Section 23, dealing with the rights and obligations of commitments.” (Italics supplied)
the exploration permit grantee, states: “The permittee
shall undertake exploration work on the area as Unarguably, given the provisions of Section 35, the
specified by its permit based on an approved work State has every opportunity to pass upon the proposed
program.” The next proviso reads: “Any expenditure in expenditures under an FTAA and approve or reject
excess of the yearly budget of the approved work them. It has access to all the information it may need
program may be carried forward and credited to the in order to determine in advance the amounts of pre-
succeeding years covering the duration of the permit. x operating and developmental expenses that will have
x x.” (Italics supplied) to be recovered by the contractor and the amount of
time needed for such recovery.
Clearly, even at the stage of application for an
exploration permit, the applicant is required to submit - In summary, we cannot agree that the third or last
- for approval by the government -- a proposed work paragraph of Section 81 of RA 7942 is in any manner
program for exploration, containing a yearly budget of unconstitutional.
proposed expenditures. The State has the opportunity
to pass upon (and approve or reject) such proposed No Deprivation of
expenditures, with the foreknowledge that -- if Beneficial Rights
approved -- these will subsequently be recorded as
pre-operating expenses that the contractor will have to It is also claimed that aside from the second and the
recoup over the grace period. That is not all. third paragraphs of Section 81 (discussed above),
Sections 80, 84 and 112 of RA 7942 also operate to
Under Section 24, an exploration permit holder who deprive the State of beneficial rights of ownership over
determines the commercial viability of a project mineral resources; and give them away for free to
covering a mining area may, within the term of the private business enterprises (including foreign owned
permit, file with the Mines and Geosciences Bureau a corporations). Likewise, the said provisions have been
82
construed as constituting, together with Section 81, an FTAAs are covered by and in fact are the subject of
ingenious attempt to resurrect the old and discredited Chapter VI, an entirely different chapter altogether.
system of “license, concession or lease.” The law obviously intends to treat them as a breed
apart from mineral agreements, since Section 35
Specifically, Section 80 is condemned for limiting the (found in Chapter VI) creates a long list of specific
State’s share in a mineral production-sharing terms, conditions, commitments, representations and
agreement (MPSA) to just the excise tax on the warranties -- which have not been made applicable to
mineral product. Under Section 151(A) of the Tax mineral agreements -- to be incorporated into FTAAs.
Code, such tax is only 2 percent of the market value of
the gross output of the minerals. The colatilla in Third, under Section 39, the FTAA contractor is given
Section 84, the portion considered offensive to the the option to “downgrade” -- to convert the FTAA into a
Constitution, reiterates the same limitation made in mineral agreement at any time during the term if the
Section 80.[73] economic viability of the contract area is inadequate to
sustain large-scale mining operations. Thus, there is
It should be pointed out that Section 80 and the no reason to think that the law through Section 112
colatilla in Section 84 pertain only to MPSAs and have intends to exact from FTAA contractors merely the
no application to FTAAs. These particular statutory same government share (a 2 percent excise tax) that it
provisions do not come within the issues that were apparently demands from contractors under the three
defined and delineated by this Court during the Oral forms of mineral agreements. In brief, Section 112
Argument -- particularly the third issue, which does not apply to FTAAs.
pertained exclusively to FTAAs. Neither did the parties
argue upon them in their pleadings. Hence, this Court Notwithstanding the foregoing explanation, Justices
cannot make any pronouncement in this Carpio and Morales maintain that the Court must
case regarding the constitutionality of Sections 80 and rule now on the constitutionality of Sections 80, 84 and
84 without violating the fundamental rules of due 112, allegedly because the WMCP FTAA contains a
process. Indeed, the two provisos will have to await provision which grants the contractor unbridled and
another case specifically placing them in issue. “automatic” authority to convert the FTAA into an
MPSA; and should such conversion happen, the State
On the other hand, Section 112[74] is disparaged for would be prejudiced since its share would be limited to
allegedly reverting FTAAs and all mineral agreements the 2 percent excise tax. Justice Carpio adds that
to the old and discredited “license, concession or there are five MPSAs already signed just awaiting the
lease” system. This Section states in relevant part that judgment of this Court on respondents’ and
“the provisions of Chapter XIV [which includes intervenor’s Motions for Reconsideration. We hold
Sections 80 to 82] on government share in mineral however that, at this point, this argument is based on
production-sharing agreement x x x shall immediately pure speculation. The Court cannot rule on mere
govern and apply to a mining lessee or contractor.” surmises and hypothetical assumptions, without firm
(Italics supplied) This provision is construed as factual anchor. We repeat: basic due process requires
signifying that the 2 percent excise tax which, pursuant that we hear the parties who have a real legal interest
to Section 80, comprises the government share in in the MPSAs (i.e. the parties who executed them)
MPSAs shall now also constitute the government before these MPSAs can be reviewed, or worse, struck
share in FTAAs -- as well as in co-production down by the Court. Anything less than that
agreements and joint venture agreements -- to the requirement would be arbitrary and capricious.
exclusion of revenues of any other nature or from any
other source. In any event, the conversion of the present FTAA into
an MPSA is problematic. First, the contractor must
Apart from the fact that Section 112 likewise does not comply with the law, particularly Section 39 of RA
come within the issues delineated by this Court during 7942; inter alia, it must convincingly show that the
the Oral Argument, and was never touched upon by “economic viability of the contract is found to be
the parties in their pleadings, it must also be noted that inadequate to justify large-scale mining
the criticism hurled against this Section is rooted in operations;” second, it must contend with the
unwarranted conclusions made without considering President’s exercise of the power of State control over
other relevant provisions in the statute. Whether the EDU of natural resources; and third, it will have to
Section 112 may properly apply to co-production or risk a possible declaration of the unconstitutionality (in
joint venture agreements, the fact of the matter is a proper case) of Sections 80, 84 and 112.
that it cannot be made to apply to FTAAs.
The first requirement is not as simple as it looks.
First, Section 112 does not specifically mention or refer Section 39 contemplates a situation in which an FTAA
to FTAAs; the only reason it is being applied to them at has already been executed and entered into, and is
all is the fact that it happens to use the word presumably being implemented, when the contractor
“contractor.” Hence, it is a bit of a stretch to insist that “discovers” that the mineral ore reserves in the
it covers FTAAs as well. Second, mineral agreements, contract area are not sufficient to justify large-scale
of which there are three types -- MPSAs, co-production mining, and thus the contractor requests the
agreements, and joint venture agreements -- are conversion of the FTAA into an MPSA. The contractor
covered by Chapter V of RA 7942. On the other hand, in effect needs to explain why, despite its exploration
83
activities, including the conduct of various geologic and shell out funds for the duration of over a decade,
other scientific tests and procedures in the contract before they can commence commercial production
area, it was unable to determine correctly the mineral from which they would eventually derive revenues. All
ore reserves and the economic viability of the area. that money translates into a lot of “pump-priming” for
The contractor must explain why, after conducting the local economy.
such exploration activities, it decided to file a
declaration of mining feasibility, and to apply for an Granted that the contractors are allowed subsequently
FTAA, thereby leading the State to believe that the to recover their pre-operating expenses, still, that
area could sustain large-scale mining. The contractor eventuality will happen only after they shall have first
must justify fully why its earlier findings, based on put out the cash and fueled the economy. Moreover, in
scientific procedures, tests and data, turned out to be the process of recouping their investments and costs,
wrong, or were way off. It must likewise prove that the foreign contractors do not actually pull out the
its new findings, also based on scientific tests and money from the economy. Rather, they recover or
procedures, are correct. Right away, this puts the recoup their investments out of actual commercial
contractor’s technical capabilities and expertise into production by not paying a portion of the basic
serious doubt. We wonder if anyone would relish being government share corresponding to national taxes,
in this situation. The State could even question and along with the additional government share, for a
challenge the contractor’s qualification and period of not more than five years[77] counted from the
competence to continue the activity under an MPSA. commencement of commercial production.

All in all, while there may be cogent grounds to assail It must be noted that there can be no recovery without
the aforecited Sections, this Court -- on considerations commencing actual commercial production. In the
of due process -- cannot rule upon them here. Anyway, meantime that the contractors are recouping costs,
if later on these Sections are declared unconstitutional, they need to continue operating; in order to do so, they
such declaration will not affect the other portions since have to disburse money to meet their various needs. In
they are clearly separable from the rest. short, money is continually infused into the economy.

Our Mineral Resources Not The foregoing discussion should serve to rid us of the
Given Away for Free by RA 7942 mistaken belief that, since the foreign contractors are
allowed to recover their investments and costs, the
Nevertheless, if only to disabuse our minds, we should end result is that they practically get the minerals for
address the contention that our mineral resources are free, which leaves the Filipino people none the better
effectively given away for free by the law (RA 7942) in for it.
general and by Sections 80, 81, 84 and 112 in
particular. All Businesses Entitled
to Cost Recovery
Foreign contractors do not just waltz into town one day
and leave the next, taking away mineral Let it be put on record that not only foreign contractors,
resources without paying anything. In order to get at but all businessmen and all business entities in
the minerals, they have to invest huge sums of money general, have to recoup their investments and costs.
(tens or hundreds of millions of dollars) in exploration That is one of the first things a student learns in
works first. If the exploration proves unsuccessful, all business school. Regardless of its nationality, and
the cash spent thereon will not be returned to the whether or not a business entity has a five-year cost
foreign investors; rather, those funds will have been recovery period, it will -- must -- have to recoup its
infused into the local economy, to remain there investments, one way or another. This is just common
permanently. The benefits therefrom cannot be simply business sense. Recovery of investments is absolutely
ignored. And assuming that the foreign contractors are indispensable for business survival; and business
successful in finding ore bodies that are viable for survival ensures soundness of the economy, which is
commercial exploitation, they do not just pluck out the critical and contributory to the general welfare of the
minerals and cart them off. They have first to build people. Even government corporations must recoup
camp sites and roadways; dig mine shafts and their investments in order to survive and continue in
connecting tunnels; prepare tailing ponds, storage operation. And, as the preceding discussion has
areas and vehicle depots; install their machinery and shown, there is no business that gets ahead or earns
equipment, generator sets, pumps, water tanks and profits without any cost to it.
sewer systems, and so on.
It must also be stressed that, though the State owns
In short, they need to expend a great deal more of vast mineral wealth, such wealth is not readily
their funds for facilities, equipment and supplies, fuel, accessible or transformable into usable and negotiable
salaries of local labor and technical staff, and other currency without the intervention of the credible mining
operating expenses. In the meantime, they also have companies. Those untapped mineral resources,
to pay taxes,[75] duties, fees, and royalties. All told, the hidden beneath tons of earth and rock, may as well not
exploration, pre-feasibility, feasibility, development and be there for all the good they do us right now. They
construction phases together add up to as many as have first to be extracted and converted into
eleven years.[76] The contractors have to continually marketable form, and the country needs the foreign
84
contractor’s funds, technology and know-how for that. “going concern” if the entire “net profit” earned in any
particular year will be taken out and repatriated. The
After about eleven years of pre-operation and another “net income” figure reflected in the bottom line is a
five years for cost recovery, the foreign contractors will mere accounting figure not necessarily corresponding
have just broken even. Is it likely that they would at to cash in the bank, or other quick assets. In order to
that point stop their operations and leave? Certainly produce and set aside cash in an amount equivalent to
not. They have yet to make profits. Thus, for the the bottom line figure, one may need to sell off assets
remainder of the contract term, they must strive to or immediately collect receivables or liquidate short-
maintain profitability. During this period, they pay the term investments; but doing so may very likely disrupt
whole of the basic government share and the normal business operations.
additional government share which, taken together
with indirect taxes and other contributions, amount to In terms of cash flows, the funds corresponding to the
approximately 60 percent or more of the entire net income as of a particular point in time are actually
financial benefits generated by the mining venture. in use in the normal course of business operations.
Pulling out such net income disrupts the cash flows
In sum, we can hardly talk about foreign contractors and cash position of the enterprise and, depending on
taking our mineral resources for free. It takes a lot of the amount being taken out, could seriously cripple or
hard cash to even begin to do what they do. And what endanger the normal operations and financial health of
they do in this country ultimately benefits the local the business enterprise. In short, no sane business
economy, grows businesses, generates employment, person, concerned with maintaining the mining
and creates infrastructure, as discussed above. enterprise as a going concern and keeping a foothold
Hence, we definitely disagree with the sweeping claim in its market, can afford to repatriate the entire after-
that no FTAA under Section 81 will ever make any real tax income to the home country.
contribution to the growth of the economy or to the
general welfare of the country. This is not a plea for The State’s Receipt of Sixty
foreign contractors. Rather, this is a question of Percent of an FTAA Contractor’s
focusing the judicial spotlight squarely on all the After-Tax Income Not Mandatory
pertinent facts as they bear upon the issue at hand, in
order to avoid leaping precipitately to ill-conceived We now come to the next objection which runs this
conclusions not solidly grounded upon fact. way: In FTAAs with a foreign contractor, the State
must receive at least 60 percent of the after-tax
Repatriation of income from the exploitation of its mineral resources.
After-Tax Income This share is the equivalent of the constitutional
requirement that at least 60 percent of the capital, and
Another objection points to the alleged failure of the hence 60 percent of the income, of mining companies
Mining Law to ensure real contributions to the should remain in Filipino hands.
economic growth and general welfare of the country,
as mandated by Section 2 of Article XII of the First, we fail to see how we can properly conclude that
Constitution. Pursuant to Section 81 of the law, the the Constitution mandates the State to extract at least
entire after-tax income arising from the exploitation of 60 percent of the after-tax income from a mining
mineral resources owned by the State supposedly company run by a foreign contractor. The argument is
belongs to the foreign contractors, which will naturally that the Charter requires the State’s partner in a co-
repatriate the said after-tax income to their home production agreement, joint venture agreement or
countries, thereby resulting in no real contribution to MPSA to be a Filipino corporation (at least 60 percent
the economic growth of this country. Clearly, this owned by Filipino citizens).
contention is premised on erroneous assumptions.
We question the logic of this reasoning, premised on a
First, as already discussed in detail hereinabove, the supposedly parallel or analogous situation. We are,
concerned agencies have correctly interpreted the after all, dealing with an essentially different equation,
second paragraph of Section 81 of RA 7942 to mean one that involves different elements. The Charter did
that the government is entitled to an additional share, not intend to fix an iron-clad rule on the 60 percent
to be computed based on any one of the following share, applicable to all situations at all times and in all
factors: net mining revenues, the present value of the circumstances. If ever such was the intention of the
cash flows, or excess profits reckoned against a framers, they would have spelt it out in black and
benchmark rate of return on investments. So it is not white. Verba legis will serve to dispel unwarranted and
correct to say that all of the after-tax income will untenable conclusions.
accrue to the foreign FTAA contractor, as the
government effectively receives a significant portion Second, if we would bother to do the math, we might
thereof. better appreciate the impact (and reasonableness) of
what we are demanding of the foreign contractor. Let
Second, the foreign contractors can hardly “repatriate us use a simplified illustration. Let us base it on gross
the entire after-tax income to their home countries.” revenues of, say, P500. After deducting operating
Even a bit of knowledge of corporate finance will show expenses, but prior to income tax, suppose a mining
that it will be impossible to maintain a business as a firm makes a taxable income of P100. A corporate
85
income tax of 32 percent results in P32 of taxable contractor is fair and reasonable under most if not all
income going to the government, leaving the mining circumstances. The fact that some petroleum
firm with P68. Government then takes 60 percent companies like Shell acceded to such percentage of
thereof, equivalent to P40.80, leaving only P27.20 for sharing does not ipso facto mean that it is per se
the mining firm. reasonable and applicable to non-petroleum situations
(that is, mining companies) as well. We can take
At this point the government has pocketed P32.00 plus judicial notice of the fact that there are, after
P40.80, or a total of P72.80 for every P100 of taxable all, numerous intrinsic differences involved in their
income, leaving the mining firm with only P27.20. But respective operations and equipment or technological
that is not all. The government has also taken 2 requirements, costs structures and capital investment
percent excise tax “off the top,” equivalent to another needs, and product pricing and markets.
P10. Under the minimum 60 percent proposal, the
government nets around P82.80 (not counting other There is no showing, for instance, that mining
taxes, duties, fees and charges) from a taxable income companies can readily cope with a 60 percent
of P100 (assuming gross revenues of P500, for government share in the same way petroleum
purposes of illustration). On the other hand, the foreign companies apparently can. What we have is a
contractor, which provided all the capital, equipment suggestion to enforce the 60 percent quota on the
and labor, and took all the entrepreneurial risks -- basis of a disjointed analogy. The only factor common
receives P27.20. One cannot but wonder whether such to the two disparate situations is the extraction of
a distribution is even remotely equitable and natural resources.
reasonable, considering the nature of the mining
business. The amount of P82.80 out of P100.00 is Indeed, we should take note of the fact that Congress
really a lot – it does not matter that we call part of made a distinction between mining firms and
it excise tax or income tax, and another portion petroleum companies. In Republic Act No. 7729 -- “An
thereof income from exploitation of mineral resources. Act Reducing the Excise Tax Rates on Metallic and
Some might think it wonderful to be able to take the Non-Metallic Minerals and Quarry Resources,
lion’s share of the benefits. But we have to ask Amending for the Purpose Section 151(a) of the
ourselves if we are really serious in attracting the National Internal Revenue Code, as amended” -- the
investments that are the indispensable and key lawmakers fixed the excise tax rate on metallic and
element in generating the monetary benefits of which non-metallic minerals at two percent of the actual
we wish to take the lion’s share. Fairness is a credo market value of the annual gross output at the time of
not only in law, but also in business. removal. However, in the case of petroleum, the
lawmakers set the excise tax rate for the first taxable
Third, the 60 percent rule in the petroleum industry sale at fifteen percent of the fair international market
cannot be insisted upon at all times in the mining price thereof.
business. The reason happens to be the fact that in
petroleum operations, the bulk of expenditures is in There must have been a very sound reason that
exploration, but once the contractor has found and impelled Congress to impose two very dissimilar
tapped into the deposit, subsequent investments and excise tax rate. We cannot assume, without proof, that
expenditures are relatively minimal. The crude (or gas) our honorable legislators acted arbitrarily, capriciously
keeps gushing out, and the work entailed is just a and whimsically in this instance. We cannot just ignore
matter of piping, transporting and storing. Not so in the reality of two distinctly different situations and
mineral mining. The ore body does not pop out on its stubbornly insist on going “minimum 60 percent.”
own. Even after it has been located, the contractor
must continually invest in machineries and expend To repeat, the mere fact that gas and oil exploration
funds to dig and build tunnels in order to access and contracts grant the State 60 percent of the net
extract the minerals from underneath hundreds of tons revenues does not necessarily imply that mining
of earth and rock. contracts should likewise yield a minimum of 60
percent for the State. Jumping to that erroneous
As already stated, the numerous intrinsic differences conclusion is like comparing apples with oranges. The
involved in their respective operations and exploration, development and utilization of gas and oil
requirements, cost structures and investment needs are simply different from those of mineral resources.
render it highly inappropriate to use petroleum
operations FTAAs as benchmarks for mining FTAAs. To stress again, the main risk in gas and oil is in the
Verily, we cannot just ignore the realities of the exploration. But once oil in commercial quantities is
distinctly different situations and stubbornly insist on struck and the wells are put in place, the risk is
the “minimum 60 percent.” relatively over and black gold simply flows out
continuously with comparatively less need for fresh
The Mining and the Oil Industries investments and technology.
Different From Each Other
On the other hand, even if minerals are found in viable
To stress, there is no independent showing that the quantities, there is still need for continuous
taking of at least a 60 percent share in the after-tax fresh capital and expertise to dig the mineral ores from
income of a mining company operated by a foreign the mines. Just because deposits of mineral ores are
86
found in one area is no guarantee that an equal to be most favorable or most acceptable under the
amount can be found in the adjacent areas. There are circumstances, even if it means agreeing to less than
simply continuing risks and need for more capital, 60 percent. Nothing must prevent the State from
expertise and industry all the time. agreeing to a share less than that, should it be
deemed fit; otherwise the State will be deprived of full
Note, however, that the indirect benefits -- apart from control over mineral exploitation that the Charter has
the cash revenues -- are much more in the mineral vested in it.
industry. As mines are explored and extracted, vast
employment is created, roads and other infrastructure To stress again, there is simply no constitutional or
are built, and other multiplier effects arise. On the legal provision fixing the minimum share of the
other hand, once oil wells start producing, there is less government in an FTAA at 60 percent of the net profit.
need for employment. Roads and other public works For this Court to decree such minimum is to wade into
need not be constructed continuously. In fine, there is judicial legislation, and thereby inordinately impinge on
no basis for saying that government revenues from the the control power of the State. Let it be clear: the Court
oil industry and from the mineral industries are to be is not against the grant of more benefits to the State; in
identical all the time. fact, the more the better. If during the FTAA
negotiations, the President can secure 60
Fourth, to our mind, the proffered “minimum 60 percent,[78] or even 90 percent, then all the better for
percent” suggestion tends to limit the flexibility and tie our people. But, if under the peculiar circumstances of
the hands of government, ultimately hampering the a specific contract, the President could secure only 50
country’s competitiveness in the international market, percent or 55 percent, so be it. Needless to say, the
to the detriment of the Filipino people. This “you-have- President will have to report (and be responsible for)
to-give-us-60-percent-of-after-tax-income-or-we-don’t- the specific FTAA to Congress, and eventually to the
do- business-with-you” approach is quite perilous. people.
True, this situation may not seem too unpalatable to
the foreign contractor during good years, when Finally, if it should later be found that the share agreed
international market prices are up and the mining firm to is grossly disadvantageous to the government, the
manages to keep its costs in check. However, under officials responsible for entering into such a contract
unfavorable economic and business conditions, with on its behalf will have to answer to the courts for their
costs spiraling skywards and minerals prices malfeasance. And the contract provision voided. But
plummeting, a mining firm may consider itself lucky to this Court would abuse its own authority should it force
make just minimal profits. the government’s hand to adopt the 60 percent
demand of some of our esteemed colleagues.
The inflexible, carved-in-granite demand for a 60
percent government share may spell the end of the Capital and Expertise Provided,
mining venture, scare away potential investors, and Yet All Risks Assumed by Contractor
thereby further worsen the already dismal economic
scenario. Moreover, such an unbending or unyielding Here, we will repeat what has not been emphasized
policy prevents the government from responding and appreciated enough: the fact that the contractor in
appropriately to changing economic conditions and an FTAA provides all the needed capital, technical and
shifting market forces. This inflexibility further renders managerial expertise, and technology required to
our country less attractive as an investment option undertake the project.
compared with other countries.
In regard to the WMCP FTAA, the then foreign-owned
And fifth, for this Court to decree imperiously that the WMCP as contractor committed, at the very outset, to
government’s share should be not less than 60 percent make capital investments of up to US$50 million in that
of the after-tax income of FTAA contractors at all times single mining project. WMCP claims to have already
is nothing short of dictating upon the government. The poured in well over P800 million into the country as of
result, ironically, is that the State ends up losing February 1998, with more in the pipeline. These
control. To avoid compromising the State’s full control resources, valued in the tens or hundreds of millions of
and supervision over the exploitation of mineral dollars, are invested in a mining project that provides
resources, this Court must back off from insisting upon no assurance whatsoever that any part of the
a “minimum 60 percent” rule. It is sufficient that the investment will be ultimately recouped.
State has the power and means, should it so decide, to
get a 60 percent share (or more) in the contractor’s net At the same time, the contractor must comply with
mining revenues or after-tax income, or whatever other legally imposed environmental standards and the
basis the government may decide to use in reckoning social obligations, for which it also commits to make
its share. It is not necessary for it to do so in every significant expenditures of funds. Throughout, the
case, regardless of circumstances. contractor assumes all the risks[79] of the business, as
mentioned earlier. These risks are indeed very high,
In fact, the government must be trusted, must be considering that the rate of success in exploration is
accorded the liberty and the utmost flexibility to deal, extremely low. The probability of finding any mineral or
negotiate and transact with contractors and third petroleum in commercially viable quantities is
parties as it sees fit; and upon terms that it ascertains estimated to be about 1:1,000 only. On that slim
87
chance rides the contractor’s hope of recouping Section 7.9 of the WMCP FTAA
investments and generating profits. And when the Invalid and Disadvantageous
contractor has recouped its initial investments in the
project, the government share increases to sixty Having defended the WMCP FTAA, we shall now turn
percent of net benefits -- without the State ever being to two defective provisos. Let us start with Section 7.9
in peril of incurring costs, expenses and losses. of the WMCP FTAA. While Section 7.7 gives the
government a 60 percent share in the net mining
And even in the worst possible scenario -- an absence revenues of WMCP from the commencement of
of commercial quantities of minerals to justify commercial production, Section 7.9 deprives the
development -- the contractor would already have government of part or all of the said 60 percent. Under
spent several million pesos for exploration works, the latter provision, should WMCP’s foreign
before arriving at the point in which it can make that shareholders -- who originally owned 100 percent of
determination and decide to cut its losses. In fact, the equity -- sell 60 percent or more of its outstanding
during the firstyear alone of the exploration period, the capital stock to a Filipino citizen or corporation, the
contractor was already committed to spend not less State loses its right to receive its 60 percent share in
than P24 million. The FTAA therefore clearly ensures net mining revenues under Section 7.7.
benefits for the local economy, courtesy of the
contractor. Section 7.9 provides:
The percentage of Net Mining Revenues payable to
All in all, this setup cannot be regarded as the Government pursuant to Clause 7.7 shall be
disadvantageous to the State or the Filipino people; it reduced by 1percent of Net Mining Revenues for every
certainly cannot be said to convey beneficial 1percent ownership interest in the Contractor (i.e.,
ownership of our mineral resources to foreign WMCP) held by a Qualified Entity.[83]
contractors. Evidently, what Section 7.7 grants to the State is taken
away in the next breath by Section 7.9 without any
offsetting compensation to the State. Thus, in reality,
the State has no vested right to receive any income
Deductions Allowed by the from the FTAA for the exploitation of its mineral
WMCP FTAA Reasonable resources. Worse, it would seem that what is given to
the State in Section 7.7 is by mere tolerance of
Petitioners question whether the State’s weak control WMCP’s foreign stockholders, who can at any time cut
might render the sharing arrangements ineffective. off the government’s entire 60 percent share. They can
They cite the so-called do so by simply selling 60 percent of WMCP’s
“suspicious” deductions allowed by the WMCP FTAA outstanding capital stock to a Philippine citizen or
in arriving at the net mining revenue, which is the basis corporation. Moreover, the proceeds of such sale will
for computing the government share. The WMCP of course accrue to the foreign stockholders of WMCP,
FTAA, for instance, allows expenditures for not to the State.
“development within and outside the Contract
Area relating to the Mining Operations,”[80] “consulting The sale of 60 percent of WMCP’s outstanding equity
fees incurred both inside and outside the to a corporation that is 60 percent Filipino-owned and
Philippines for work related directly to the Mining 40 percent foreign-owned will still trigger the operation
Operations,”[81] and “the establishment and of Section 7.9. Effectively, the State will lose its right to
administration of field offices including administrative receive all 60 percent of the net mining revenues of
overheads incurred within and outside the WMCP; and foreign stockholders will own beneficially
Philippines which are properly allocatable to the Mining up to 64 percent of WMCP, consisting of the remaining
Operations and reasonably related to the performance 40 percent foreign equity therein, plus the 24 percent
of the Contractor’s obligations and exercise of its rights pro-rata share in the buyer-corporation.[84]
under this Agreement.”[82]
In fact, the January 23, 2001 sale by WMCP’s foreign
It is quite well known, however, that mining companies stockholder of the entire outstanding equity in WMCP
do perform some marketing activities abroad in respect to Sagittarius Mines, Inc. -- a domestic corporation at
of selling their mineral products and by-products. least 60 percent Filipino owned -- may be deemed to
Hence, it would not be improper to allow the deduction have automatically triggered the operation of Section
of reasonable consulting fees incurred abroad, as well 7.9, without need of further action by any party, and
as administrative expenses and overheads related to removed the State’s right to receive the 60 percent
marketing offices also located abroad -- provided that share in net mining revenues.
these deductions are directly related or properly
allocatable to the mining operations and reasonably At bottom, Section 7.9 has the effect of depriving the
related to the performance of the contractor’s State of its 60 percent share in the net mining
obligations and exercise of its rights. In any event, revenues of WMCP without any offset or
more facts are needed. Until we see how these compensation whatsoever. It is possible that the
provisions actually operate, mere “suspicions” will not inclusion of the offending provision was initially
suffice to propel this Court into taking action. prompted by the desire to provide some form of
incentive for the principal foreign stockholder in WMCP
88
to eventually reduce its equity position and ultimately convenient; but these should not be contrary to law,
divest in favor of Filipino citizens and corporations. morals, good customs, public order or public
However, as finally structured, Section 7.9 has the policy.[87] Being precisely violative of anti-graft
deleterious effect of depriving government of the entire provisions and contrary to public policy, Section 7.9
60 percent share in WMCP’s net mining revenues, must therefore be stricken off as invalid.
without any form of compensation whatsoever. Such
an outcome is completely unacceptable. Whether the government officials concerned acceded
to that provision by sheer mistake or with full
The whole point of developing the nation’s natural awareness of the ill consequences, is of no moment. It
resources is to benefit the Filipino people, future is hornbook doctrine that the principle of estoppel does
generations included. And the State as sovereign and not operate against the government for the act of its
custodian of the nation’s natural wealth is mandated to agents,[88] and that it is never estopped by any mistake
protect, conserve, preserve and develop that part of or error on their part.[89] It is therefore possible and
the national patrimony for their benefit. Hence, the proper to rectify the situation at this time. Moreover, we
Charter lays great emphasis on “real contributions to may also say that the FTAA in question does not
the economic growth and general welfare of the involve mere contractual rights; being impressed as it
country”[85] as essential guiding principles to be kept in is with public interest, the contractual provisions and
mind when negotiating the terms and conditions of stipulations must yield to the common good and the
FTAAs. national interest.

Earlier, we held (1) that the State must be accorded Since the offending provision is very much
the liberty and the utmost flexibility to deal, negotiate separable[90] from Section 7.7 and the rest of the
and transact with contractors and third parties as it FTAA, the deletion of Section 7.9 can be done without
sees fit, and upon terms that it ascertains to be most affecting or requiring the invalidation of the WMCP
favorable or most acceptable under the circumstances, FTAA itself. Such a deletion will preserve for the
even if that should mean agreeing to less than 60 government its due share of the benefits. This way, the
percent; (2) that it is not necessary for the State to mandates of the Constitution are complied with and
extract a 60 percent share in every case and the interests of the government fully protected, while
regardless of circumstances; and (3) that should the the business operations of the contractor are not
State be prevented from agreeing to a share less than needlessly disrupted.
60 percent as it deems fit, it will be deprived of the full
control over mineral exploitation that the Charter has Section 7.8(e) of the WMCP FTAA
vested in it. Also Invalid and Disadvantageous
That full control is obviously not an end in itself; it Section 7.8(e) of the WMCP FTAA is likewise invalid. It
exists and subsists precisely because of the need to provides thus:
serve and protect the national interest. In this instance,
national interest finds particular application in the “7.8The Government Share shall be deemed to include
protection of the national patrimony and the all of the following sums:
development and exploitation of the country’s mineral “(a)all Government taxes, fees, levies, costs,
resources for the benefit of the Filipino people and the imposts, duties and royalties including excise
enhancement of economic growth and the general tax, corporate income tax, customs duty,
welfare of the country. Undoubtedly, such full control sales tax, value added tax, occupation and
can be misused and abused, as we now witness. regulatory fees, Government controlled price
stabilization schemes, any other form of
Section 7.9 of the WMCP FTAA effectively gives away Government backed schemes, any tax on
the State’s share of net mining revenues (provided for dividend payments by the Contractor or its
in Section 7.7) without anything in exchange. Affiliates in respect of revenues from the
Moreover, this outcome constitutes unjust Mining Operations and any tax on interest on
enrichment on the part of the local and foreign domestic and foreign loans or other financial
stockholders of WMCP. By their mere divestment of up arrangements or accommodations, including
to 60 percent equity in WMCP in favor of Filipino loans extended to the Contractor by its
citizens and/or corporations, the local and foreign stockholders;
stockholders get a windfall. Their share in the net “(b)any payments to local and regional
mining revenues of WMCP is automatically increased, government, including taxes, fees, levies,
without their having to pay the government anything for costs, imposts, duties, royalties, occupation
it. In short, the provision in question is without a and regulatory fees and infrastructure
doubt grossly disadvantageous to the government, contributions;
detrimental to the interests of the Filipino people, and “(c) any payments to landowners, surface rights
violative of public policy. holders, occupiers, indigenous people or
Claimowners;
Moreover, it has been reiterated in numerous “(d)costs and expenses of fulfilling the
decisions[86] that the parties to a contract may establish Contractor’s obligations to contribute to
any agreements, terms and conditions that they deem national development in accordance with
89
Clause 10.1(i) (1) and 10.1(i) (2); balance of Gov’t share, payable 4 months from the end
“(e)an amount equivalent to whatever benefits of the fiscal year
that may be extended in the future by the It should become apparent that the fiscal arrangement
Government to the Contractor or to financial under the WMCP FTAA is very similar to that under
or technical assistance agreement contractors DAO 99-56, with the “balance of government share
in general; payable 4 months from end of fiscal year” being the
“(f) all of the foregoing items which have not equivalent of the additional government
previously been offset against the share computed in accordance with the “net-mining-
Government Share in an earlier Fiscal Year, revenue-based option” under DAO 99-56, as
adjusted for inflation.” (Italics supplied) discussed above. As we have emphasized earlier, we
find each of the three options for computing
the additional government share -- as presented in
Section 7.8(e) is out of place in the FTAA. It makes no DAO 99-56 -- to be sound and reasonable.
sense why, for instance, money spent by the
government for the benefit of the contractor in building We therefore conclude that there is nothing inherently
roads leading to the mine site should still be deductible wrong in the fiscal regime of the WMCP FTAA, and
from the State’s share in net mining revenues. certainly nothing to warrant the invalidation of the
Allowing this deduction results in benefiting the FTAA in its entirety.
contractor twice over. It constitutes unjust
enrichment on the part of the contractor at the expense Section 3.3 of the WMCP
of the government, since the latter is effectively being FTAA Constitutional
made to pay twice for the same item.[91] For being
grossly disadvantageous and prejudicial to the Section 3.3 of the WMCP FTAA is assailed for
government and contrary to public policy, Section violating supposed constitutional restrictions on the
7.8(e) is undoubtedly invalid and must be declared to term of FTAAs. The provision in question reads:
be without effect. Fortunately, this provision can also
easily be stricken off without affecting the rest of the “3.3This Agreement shall be renewed by the
FTAA. Government for a further period of twenty-five (25)
years under the same terms and conditions
Nothing Left Over provided that the Contractor lodges a request for
After Deductions? renewal with the Government not less than sixty
(60) days prior to the expiry of the initial term of
In connection with Section 7.8, an objection has been this Agreement and provided that the Contractor is
raised: Specified in Section 7.8 are numerous items of not in breach of any of the requirements of this
deduction from the State’s 60 percent share. After Agreement.”
taking these into account, will the State ever receive
anything for its ownership of the mineral resources? Allegedly, the above provision runs afoul of Section 2
of Article XII of the 1987 Constitution, which states:
We are confident that under normal circumstances, the “Sec. 2. All lands of the public domain, waters,
answer will be yes. If we examine the various items of minerals, coal, petroleum, and other mineral oils, all
“deduction” listed in Section 7.8 of the WMCP FTAA, forces of potential energy, fisheries, forests or timber,
we will find that they correspond closely to the wildlife, flora and fauna, and other natural resources
components or elements of the basic government are owned by the State. With the exception of
share established in DAO 99-56, as discussed in the agricultural lands, all other natural resources shall not
earlier part of this Opinion. be alienated. The exploration, development and
utilization of natural resources shall be under the full
Likewise, the balance of the government’s 60 percent control and supervision of the State. The State may
share -- after netting out the items of deduction listed directly undertake such activities, or it may enter into
in Section 7.8 --corresponds closely to the additional co-production, joint venture or production-sharing
government share provided for in DAO 99-56 which, agreements with Filipino citizens or corporations or
we once again stress, has nothing at all to do with associations at least sixty per centum of whose capital
indirect taxes. The Ramos-DeVera paper[92] concisely is owned by such citizens. Such agreements may be
presents the fiscal contribution of an FTAA under DAO for a period not exceeding twenty-five years,
99-56 in this equation: renewable for not more than twenty-five years, and
Receipts from an FTAA = basic gov’t share + add’l under such terms and conditions as may be
gov’t share provided by law. In cases of water rights for irrigation,
water supply, fisheries, or industrial uses other than
Transposed into a similar equation, the fiscal the development of water power, beneficial use may
payments system from the WMCP FTAA assumes the be the measure and limit of the grant. “The State shall
following formulation: protect the nation’s marine wealth in its archipelagic
waters, territorial sea, and exclusive economic zone,
Government’s 60 percent share in net mining revenues and reserve its use and enjoyment exclusively to
of WMCP = items listed in Sec. 7.8 of the FTAA + Filipino citizens.

90
“The Congress may, by law, allow small-scale government to renew the WMCP FTAA for another 25
utilization of natural resources by Filipino citizens, as years and deprives the State of any say on whether to
well as cooperative fish farming, with priority to renew the contract.
subsistence fishermen and fish-workers in rivers,
lakes, bays and lagoons. While we agree that Section 3.3 could have been
worded so as to prevent it from favoring the contractor,
“The President may enter into agreements with this provision does not violate any constitutional limits,
foreign-owned corporations involving either technical since the said term limitation does not apply at all to
or financial assistance for large-scale exploration, FTAAs. Neither can the provision be deemed in any
development, and utilization of minerals, petroleum, manner to be illegal, as no law is being violated
and other mineral oils according to the general terms thereby. It is certainly not illegal for the government to
and conditions provided by law, based on real waive its option to refuse the renewal of a commercial
contributions to the economic growth and general contract.
welfare of the country. In such agreements, the State
shall promote the development and use of local Verily, the government did not have to agree to
scientific and technical resources. Section 3.3. It could have said “No” to the stipulation,
but it did not. It appears that, in the process of
“The President shall notify the Congress of every negotiations, the other contracting party was able to
contract entered into in accordance with this provision, convince the government to agree to the renewal
within thirty days from its execution.”[93] terms. Under the circumstances, it does not seem
We hold that the term limitation of twenty-five years proper for this Court to intervene and step in to undo
does not apply to FTAAs. The reason is that the above what might have perhaps been
provision is found within paragraph 1 of Section 2 of a possible miscalculation on the part of the State. If
Article XII, which refers to mineral agreements -- co- government believes that it is or will be aggrieved by
production agreements, joint venture agreements and the effects of Section 3.3, the remedy is the
mineral production-sharing agreements -- which the renegotiation of the provision in order to provide the
government may enter into with Filipino citizens and State the option to not renew the FTAA.
corporations, at least 60 percent owned by Filipino
citizens. The word “such” clearly refers to these three Financial Benefits for Foreigners
mineral agreements -- CPAs, JVAs and MPSAs -- not Not Forbidden by the Constitution
to FTAAs.
Before leaving this subject matter, we find it necessary
Specifically, FTAAs are covered by paragraphs 4 and for us to rid ourselves of the false belief that the
5 of Section 2 of Article XII of the Constitution. It will be Constitution somehow forbids foreign-owned
noted that there are no term limitations provided for in corporations from deriving financial benefits from the
the said paragraphs dealing with FTAAs. This shows development of our natural or mineral resources.
that FTAAs are sui generis, in a class of their own.
This omission was obviously a deliberate move on the The Constitution has never prohibited foreign
part of the framers. They probably realized that FTAAs corporations from acquiring and enjoying “beneficial
would be different in many ways from MPSAs, JVAs interest” in the development of Philippine natural
and CPAs. The reason the framers did not fix term resources. The State itself need not directly undertake
limitations applicable to FTAAs is that they preferred to exploration, development, and utilization activities.
leave the matter to the discretion of the legislature Alternatively, the Constitution authorizes the
and/or the agencies involved in implementing the laws government to enter into joint venture agreements
pertaining to FTAAs, in order to give the latter enough (JVAs), co-production agreements (CPAs) and mineral
flexibility and elbow room to meet changing production sharing agreements (MPSAs) with
circumstances. contractors who are Filipino citizens or corporations
that are at least 60 percent Filipino-owned. They may
Note also that, as previously stated, the exploratory do the actual “dirty work” -- the mining operations.
phrases of an FTAA lasts up to eleven years.
Thereafter, a few more years would be gobbled up in In the case of a 60 percent Filipino-owned corporation,
start-up operations. It may take fifteen years before an the 40 percent individual and/or corporate non-Filipino
FTAA contractor can start earning profits. And thus, stakeholders obviously participate in the beneficial
the period of 25 years may really be short for an FTAA. interest derived from the development and utilization of
Consider too that in this kind of agreement, the our natural resources. They may receive by way of
contractor assumes all entrepreneurial risks. If no dividends, up to 40 percent of the contractor’s earnings
commercial quantities of minerals are found, the from the mining project. Likewise, they may have a say
contractor bears all financial losses. To compensate in the decisions of the board of directors, since they
for this long gestation period and extra business risks, are entitled to representation therein to the extent of
it would not be totally unreasonable to allow it to their equity participation, which the Constitution
continue EDU activities for another twenty five years. permits to be up to 40 percent of the contractor’s
equity. Hence, the non-Filipino stakeholders may in
In any event, the complaint is that, in essence, Section that manner also participate in the management of the
3.3 gives the contractor the power to compel the contractor’s natural resource development work. All of
91
this is permitted by our Constitution, for any natural Correlatively, the foreign stakeholder bears up to 100
resource, and without limitation even in regard to the percent of the risk of loss if the project fails. In respect
magnitude of the mining project or operations (see of the particular FTAA granted to it, WMCP (then 100
paragraph 1 of Section 2 of Article XII). percent foreign owned) was responsible, as contractor,
for providing the entire equity, including all the inputs
It is clear, then, that there is nothing inherently wrong for the project. It was to bear 100 percent of the risk of
with or constitutionally objectionable about the idea of loss if the project failed, but its maximum potential
foreign individuals and entities having or enjoying “beneficial interest” consisted only of 40 percent of the
“beneficial interest” in -- and participating in the net beneficial interest, because the other 60 percent is
management of operations relative to -- the the share of the government, which will never be
exploration, development and utilization of our natural exposed to any risk of loss whatsoever.
resources.
In consonance with the degree of risk assumed, the
FTAA More Advantageous FTAA vested in WMCP the day-to-day management of
Than Other Schemes the mining operations. Still such management is
Like CPA, JVA and MPSA subject to the overall control and supervision of the
State in terms of regular reporting, approvals of work
A final point on the subject of beneficial interest. We programs and budgets, and so on.
believe the FTAA is a more advantageous proposition
for the government as compared with other So, one needs to consider in relative terms, the costs
agreements permitted by the Constitution. In a CPA of inputs for, degree of risk attendant to, and benefits
that the government enters into with one or more derived or to be derived from a CPA, a JVA or an
contractors, the government shall provide inputs to the MPSA vis-à-vis those pertaining to an FTAA. It may
mining operations other than the mineral resource not be realistically asserted that the foreign grantee of
itself.[94] an FTAA is being unduly favored or benefited as
compared with a foreign stakeholder in a corporation
In a JVA, a JV company is organized by the holding a CPA, a JVA or an MPSA. Seen the other
government and the contractor, with both parties way around, the government is definitely better off with
having equity shares (investments); and the contractor an FTAA than a CPA, a JVA or an MPSA.
is granted the exclusive right to conduct mining
operations and to extract minerals found in the Developmental Policy
area.[95] On the other hand, in an MPSA, the on the Mining Industry
government grants the contractor the exclusive right to
conduct mining operations within the contract area During the Oral Argument and in their Final
and shares in the gross output; and the contractor Memorandum, petitioners repeatedly urged the Court
provides the necessary financing, technology, to consider whether mining as an industry and
management and manpower. economic activity deserved to be accorded priority,
preference and government support as against, say,
The point being made here is that, in two of the three agriculture and other activities in which Filipinos and
types of agreements under consideration, the Philippines may have an “economic advantage.”
the government has to ante up some risk capital for For instance, a recent US study[96] reportedly
the enterprise. In other words, government funds examined the economic performance of all local US
(public moneys) are withdrawn from other possible counties that were dependent on mining and 20
uses, put to work in the venture and placed at risk in percent of whose labor earnings between 1970 and
case the venture fails. This notwithstanding, 2000 came from mining enterprises.
management and control of the operations of the
enterprise are -- in all three arrangements -- in the The study -- covering 100 US counties in 25 states
hands of the contractor, with the government being dependent on mining -- showed that per capita income
mainly a silent partner. The three types of agreement grew about 30 percent less in mining-dependent
mentioned above apply to any natural resource, communities in the 1980s and 25 percent less for the
without limitation and regardless of the size or entire period 1980 to 2000; the level of per capita
magnitude of the project or operations. income was also lower. Therefore, given the slower
rate of growth, the gap between these and other local
In contrast to the foregoing arrangements, and counties increased.
pursuant to paragraph 4 of Section 2 of Article XII, the
FTAA is limited to large-scale projects and only for Petitioners invite attention to the OXFAM America
minerals, petroleum and other mineral oils. Here, the Report’s warning to developing nations that mining
Constitution removes the 40 percent cap on foreign brings with it serious economic problems, including
ownership and allows the foreign corporation to own increased regional inequality, unemployment and
up to 100 percent of the equity. Filipino capital may not poverty. They also cite the final report[97] of the
be sufficient on account of the size of the project, so Extractive Industries Review project commissioned by
the foreign entity may have to ante up all the risk the World Bank (the WB-EIR Report), which warns of
capital. environmental degradation, social disruption, conflict,
and uneven sharing of benefits with local communities
92
that bear the negative social and environmental REFUTATION OF DISSENTS
impact. The Report suggests that countries need to
decide on the best way to exploit their natural The Court will now take up a number of other specific
resources, in order to maximize the value added from points raised in the dissents of Justices Carpio and
the development of their resources and ensure that Morales.
they are on the path to sustainable development once
the resources run out. 1. Justice Morales introduced us to Hugh Morgan,
former president and chief executive officer of Western
Whatever priority or preference may be given to mining Mining Corporation (WMC) and former president of the
vis-à-vis other economic or non-economic activities is Australian Mining Industry Council, who spearheaded
a question of policy that the President and Congress the vociferous opposition to the filing by aboriginal
will have to address; it is not for this Court to peoples of native title claims against mining companies
decide. This Court declares what the Constitution and in Australia in the aftermath of the
the laws say, interprets only when necessary, and landmark Mabo decision by the Australian High Court.
refrains from delving into matters of policy. According to sources quoted by our esteemed
colleague, Morgan was also a racist and a bigot. In the
Suffice it to say that the State control accorded by the course of protesting Mabo, Morgan allegedly uttered
Constitution over mining activities assures a proper derogatory remarks belittling the aboriginal culture and
balancing of interests. More pointedly, such control will race.
enable the President to demand the best mining
practices and the use of the best available An unwritten caveat of this introduction is that this
technologies to protect the environment and to Court should be careful not to permit the entry of the
rehabilitate mined-out areas. Indeed, under the Mining likes of Hugh Morgan and his hordes of alleged racist-
Law, the government can ensure the protection of the bigots at WMC. With all due respect, such scare
environment during and after mining. It can likewise tactics should have no place in the discussion of this
provide for the mechanisms to protect the rights of case. We are deliberating on the constitutionality of RA
indigenous communities, and thereby mold a more 7942, DAO 96-40 and the FTAA originally granted to
socially-responsive, culturally-sensitive and WMCP, which had been transferred to Sagittarius
sustainable mining industry. Mining, a Filipino corporation. We are not discussing
the apparition of white Anglo-Saxon racists/bigots
Early on during the launching of the Presidential massing at our gates.
Mineral Industry Environmental Awards on February 6,
1997, then President Fidel V. Ramos captured the 2. On the proper interpretation of the
essence of balanced and sustainable mining in these phrase agreements involving either technical or
words: financial assistance, Justice Morales points out that at
“Long term, high profit mining translates into higher times we “conveniently omitted” the use of the
revenues for government, more decent jobs for the disjunctive either . . . or, which according to her
population, more raw materials to feed the engines of denotes restriction; hence the phrase must be deemed
downstream and allied industries, and improved to connote restriction and limitation.
chances of human resource and countryside
development by creating self-reliant communities away But, as Justice Carpio himself pointed out during the
from urban centers. Oral Argument, the disjunctive phrase either technical
or financial assistance would, strictly speaking, literally
xxx xxx xxx mean that a foreign contractor may provide only one or
the other, but not both. And if both technical and
“Against a fragile and finite environment, it is financial assistance were required for a project, the
sustainability that holds the key. In sustainable mining, State would have to deal with at least two different
we take a middle ground where both production and foreign contractors -- one for financial and the other for
protection goals are balanced, and where parties-in- technical assistance. And following on that, a foreign
interest come to terms.” contractor, though very much qualified to
Neither has the present leadership been remiss in provide both kinds of assistance, would nevertheless
addressing the concerns of sustainable mining be prohibited from providing one kind as soon as it
operations. Recently, on January 16, 2004 and April shall have agreed to provide the other.
20, 2004, President Gloria Macapagal Arroyo issued
Executive Orders Nos. 270 and 270-A, respectively, But if the Court should follow this restrictive and literal
“to promote responsible mineral resources exploration, construction, can we really find two (or more)
development and utilization, in order to enhance contractors who are willing to participate in one single
economic growth, in a manner that adheres to the project -- one to provide the “financial assistance” only
principles of sustainable development and with due and the other the “technical assistance” exclusively; it
regard for justice and equity, sensitivity to the culture would be excellent if these two or more contractors
of the Filipino people and respect for Philippine happen to be willing and are able to cooperate and
sovereignty.”[98] work closely together on the same project (even if they
are otherwise competitors). And it would be superb if
no conflicts would arise between or among them in the
93
entire course of the contract. But what are the chances the people, the coffers of government, and the strength
things will turn out this way in the real world? To think of the economy. Such a pronouncement will surely
that the framers deliberately imposed this kind of discourage investments (local and foreign) which are
restriction is to say that they were either exceedingly critically needed to fuel the engine of economic growth
optimistic, or incredibly naïve. This begs the question - and move this country out of the rut of poverty. In
- What laudable objective or purpose could possibly be sum, Oposa is not applicable.
served by such strict and restrictive literal
interpretation? 4. Justice Morales adverts to the supposedly “clear
intention” of the framers of the Constitution to reserve
3. Citing Oposa v. Factoran Jr., Justice Morales claims our natural resources exclusively for the Filipino
that a service contract is not a contract or property people. She then quoted from the records of the
right which merits protection by the due process clause ConCom deliberations a passage in which then
of the Constitution, but merely a license or privilege Commissioner Davide explained his vote, arguing in
which may be validly revoked, rescinded or withdrawn the process that aliens ought not be allowed to
by executive action whenever dictated by public participate in the enjoyment of our natural resources.
interest or public welfare. One passage does not suffice to capture the tenor or
substance of the entire extensive deliberations of the
Oposa cites Tan v. Director of Forestry and Ysmael v. commissioners, or to reveal the clear intention of the
Deputy Executive Secretary as authority. The latter framers as a group. A re-reading of the entire
cases dealt specifically with timber licenses deliberations (quoted here earlier) is necessary if we
only. Oposa allegedly reiterated that a license is are to understand the true intent of the framers.
merely a permit or privilege to do what otherwise
would be unlawful, and is not a contract between the 5. Since 1935, the Filipino people, through their
authority, federal, state or municipal, granting it and Constitution, have decided that the retardation or delay
the person to whom it is granted; neither is it property in the exploration, development or utilization of the
or a property right, nor does it create a vested right; nation’s natural resources is merely secondary to the
nor is it taxation. Thus this Court held that the granting protection and preservation of their ownership of the
of license does not create irrevocable rights, neither is natural resources, so says Justice Morales, citing
it property or property rights. Aruego. If it is true that the framers of the 1987
Constitution did not care much about alleviating the
Should Oposa be deemed applicable to the case at retardation or delay in the development and
bar, on the argument that natural resources are also utilization of our natural resources, why did they bother
involved in this situation? We do not think so. A to write paragraph 4 at all? Were they merely paying
grantee of a timber license, permit or license lip service to large-scale exploration, development and
agreement gets to cut the timber already growing on utilization? They could have just completely ignored
the surface; it need not dig up tons of earth to get at the subject matter and left it to be dealt with through a
the logs. In a logging concession, the investment of the future constitutional amendment. But we have to
licensee is not as substantial as the investment of a harmonize every part of the Constitution and to
large-scale mining contractor. If a timber license were interpret each provision in a manner that would give
revoked, the licensee packs up its gear and moves to life and meaning to it and to the rest of the provisions.
a new area applied for, and starts over; what it leaves It is obvious that a literal interpretation of paragraph 4
behind are mainly the trails leading to the logging site. will render it utterly inutile and inoperative.

In contrast, the mining contractor will have sunk a 6. According to Justice Morales, the deliberations of
great deal of money (tens of millions of dollars) into the the Constitutional Commission do not support our
ground, so to speak, for exploration activities, for contention that the framers, by specifying such
development of the mine site and infrastructure, and agreements involving financial or technical assistance,
for the actual excavation and extraction of minerals, necessarily gave implied assent to everything that
including the extensive tunneling work to reach the ore these agreements implicitly entailed, or that could
body. The cancellation of the mining contract will reasonably be deemed necessary to make them
utterly deprive the contractor of its investments (i.e., tenable and effective, including management authority
prevent recovery of investments), most of which in the day-to-day operations. As proof thereof, she
cannot be pulled out. quotes one single passage from the ConCom
deliberations, consisting of an exchange among
To say that an FTAA is just like a mere timber license Commissioners Tingson, Garcia and Monsod.
or permit and does not involve contract or property
rights which merit protection by the due process clause However, the quoted exchange does not serve to
of the Constitution, and may therefore be revoked or contradict our argument; it even bolsters it. Comm.
cancelled in the blink of an eye, is to adopt a well-nigh Christian Monsod was quoted as saying: “xxx I think
confiscatory stance; at the very least, it is downright we have to make a distinction that it is not really
dismissive of the property rights of businesspersons realistic to say that we will borrow on our own terms.
and corporate entities that have investments in the Maybe we can say that we inherited unjust loans, and
mining industry, whose investments, operations and we would like to repay these on terms that are not
expenditures do contribute to the general welfare of prejudicial to our own growth. But the general
94
statement that we should only borrow on our own of the contract, when the surface rights will no longer
terms is a bit unrealistic.” Comm. Monsod is one who be needed, and the land previously acquired will have
knew whereof he spoke. to be disposed of, in which case the contractor gets
reimbursement from the sales proceeds. The
7. Justice Morales also declares that the optimal time contractor has to pay out the acquisition price for the
for the conversion of an FTAA into an MPSA is after land. That money will belong to the seller of the land.
completion of the exploration phase and just before Only if and when the land is finally sold off will the
undertaking the development and construction phase, contractor get any reimbursement. In other words, the
on account of the fact that the requirement for a contractor will have been cash-out for the entire
minimum investment of $50 million is applicable only duration of the term of the contract -- 25 or 50 years,
during the development, construction and utilization depending. If we calculate the cost of money at say 12
phase, but not during the exploration phase, when the percent per annum, that is the cost or opportunity loss
foreign contractor need merely comply with minimum to the contractor, in addition to the amount of the
ground expenditures. Thus by converting, the foreign acquisition price. 12 percent per annum for 50 years is
contractor maximizes its profits by avoiding its 600 percent; this, without any compounding yet. The
obligation to make the minimum investment of $50 cost of money is therefore at least 600 percent of the
million. original acquisition cost; it is in addition to the
acquisition cost. “For free”? Not by a long shot.
This argument forgets that the foreign contractor is in
the game precisely to make money. In order to come 10. The contractor will acquire and hold up to 5,000
anywhere near profitability, the contractor must first hectares? We doubt it. The acquisition by the State of
extract and sell the mineral ore. In order to do that, it land for the contractor is just to enable the contractor
must also develop and construct the mining facilities, to establish its mine site, build its facilities, establish a
set up its machineries and equipment and dig the tailings pond, set up its machinery and equipment, and
tunnels to get to the deposit. The contractor is thus dig mine shafts and tunnels, etc. It is impossible that
compelled to expend funds in order to make profits. If it the surface requirement will aggregate 5,000 hectares.
decides to cut back on investments and expenditures, Much of the operations will consist of the tunneling and
it will necessarily sacrifice the pace of development digging underground, which will not require possessing
and utilization; it will necessarily sacrifice the amount or using any land surface. 5,000 hectares is way too
of profits it can make from the mining operations. In much for the needs of a mining operator. It simply will
fact, at certain less-than-optimal levels of operation, not spend its cash to acquire property that it will not
the stream of revenues generated may not even be need; the cash may be better employed for the actual
enough to cover variable expenses, let alone overhead mining operations, to yield a profit.
expenses; this is a dismal situation anyone would want
to avoid. In order to make money, one has to spend 11. Justice Carpio claims that the phrase among other
money. This truism applies to the mining industry as things (found in the second paragraph of Section 81 of
well. the Mining Act) is being incorrectly treated as a
delegation of legislative power to the DENR secretary
8. Mortgaging the minerals to secure a foreign FTAA to issue DAO 99-56 and prescribe the formulae therein
contractor’s obligations is anomalous, according to on the State’s share from mining operations. He adds
Justice Morales since the contractor was from the that the phrase among other things was not intended
beginning obliged to provide all financing needed for as a delegation of legislative power to the DENR
the mining operations. However, the mortgaging of secretary, much less could it be deemed a valid
minerals by the contractor does not necessarily signify delegation of legislative power, since there is nothing
that the contractor is unable to provide all financing in the second paragraph of Section 81 which can be
required for the project, or that it does not have the said to grant any delegated legislative power to the
financial capability to undertake large-scale operations. DENR secretary. And even if there were, such
Mortgaging of mineral products, just like the delegation would be void, for lack of any standards by
assignment (by way of security) of manufactured which the delegated power shall be exercised.
goods and goods in inventory, and the assignment of
receivables, is an ordinary requirement of banks, even While there is nothing in the second paragraph of
in the case of clients with more than sufficient financial Section 81 which can directly be construed as a
resources. And nowadays, even the richest and best delegation of legislative power to the DENR secretary,
managed corporations make use of bank credit it does not mean that DAO 99-56 is invalid per se, or
facilities -- it does not necessarily signify that they do that the secretary acted without any authority or
not have the financial resources or are unable to jurisdiction in issuing DAO 99-56. As we stated earlier
provide the financing on their own; it is just a manner in our Prologue, “Who or what organ of
of maximizing the use of their funds. government actually exercises this power of control on
behalf of the State? The Constitution is crystal clear:
9. Does the contractor in reality acquire the surface the President. Indeed, the Chief Executive is the
rights “for free,” by virtue of the fact that it is entitled to official constitutionally mandated to ‘enter into
reimbursement for the costs of acquisition and agreements with foreign owned corporations.’ On the
maintenance, adjusted for inflation? We think not. The other hand, Congress may review the action of the
“reimbursement” is possible only at the end of the term President once it is notified of ‘every contract entered
95
into in accordance with this [constitutional] provision 12. Justice Carpio’s insistence on applying
within thirty days from its execution.’” It is the President the ejusdem generis rule of statutory construction to
who is constitutionally mandated to enter into the phrase among other things is therefore useless,
FTAAswith foreign corporations, and in doing so, it is and must fall by the wayside. There is no point trying
within the President’s prerogative to specify certain to construe that phrase in relation to the enumeration
terms and conditions of the FTAAs, for example, the of taxes, duties and fees found in paragraph 2 of
fiscal regime of FTAAs -- i.e., the sharing of the net Section 81, precisely because “the constitutional
mining revenues between the contractor and the State. power to prescribe the sharing of mining income
between the State and mining companies,” to quote
Being the President’s alter ego with respect to the Justice Carpio pursuant to an FTAA is constitutionally
control and supervision of the mining industry, the lodged with the President, not with Congress. It thus
DENR secretary, acting for the President, is makes no sense to persist in giving the phrase among
necessarily clothed with the requisite authority and other things a restricted meaning referring only to
power to draw up guidelines delineating certain terms taxes, duties and fees.
and conditions, and specifying therein the terms of
sharing of benefits from mining, to be applicable to 13. Strangely, Justice Carpio claims that the DENR
FTAAs in general. It is important to remember that secretary can change the formulae in DAO 99-56 any
DAO 99-56 has been in existence for almost six years, time even without the approval of the President, and
and has not been amended or revoked by the the secretary is the sole authority to determine the
President. amount of consideration that the State shall receive in
an FTAA, because Section 5 of the DAO states that
The issuance of DAO 99-56 did not involve the “xxx any amendment of an FTAA other than the
exercise of delegated legislative power. The legislature provision on fiscal regime shall require the negotiation
did not delegate the power to determine the nature, with the Negotiation Panel and the recommendation of
extent and composition of the items that would come the Secretary for approval of the Presidentxxx”.
under the phrase among other things. The legislature’s Allegedly, because of that provision, if an amendment
power pertains to the imposition of taxes, duties and in the FTAA involves non-fiscal matters, the
fees. This power was not delegated to the DENR amendment requires approval of the President, but if
secretary. But the power to negotiate and enter into the amendment involves a change in the fiscal regime,
FTAAs was withheld from Congress, and reserved for the DENR secretary has the final authority, and
the President. In determining the sharing of mining approval of the President may be dispensed with;
benefits, i.e., in specifying what the phrase among hence the secretary is more powerful than the
other things include, the President (through the President.
secretary acting in his/her behalf) was not determining
the amount or rate of taxes, duties and fees, but rather We believe there is some distortion resulting from the
the amount of INCOME to be derived from minerals to quoted provision being taken out of context. Section 5
be extracted and sold, income which belongs to the of DAO 99-56 reads as follows:
State as owner of the mineral resources. We may say “Section 5. Status of Existing FTAAs. All FTAAs
that, in the second paragraph of Section 81, the approved prior to the effectivity of this Administrative
legislature in a sense intruded partially into the Order shall remain valid and be recognized by the
President’s sphere of authority when the former Government: Provided, That should a Contractor
provided that desire to amend its FTAA, it shall do so by filing a
“The Government share in financial or technical Letter of Intent (LOI) to the Secretary thru the Director.
assistance agreement shall consist of, among other Provided, further, That if the Contractor desires to
things, the contractor’s corporate income tax, excise amend the fiscal regime of its FTAA, it may do so by
tax, special allowance, withholding tax due from the seeking for the amendment of its FTAA’s whole fiscal
contractor’s foreign stockholders arising from dividend regime by adopting the fiscal regime provided hereof:
or interest payments to the said foreign stockholder in Provided, finally, That any amendment of an FTAA
case of a foreign national and all such other taxes, other than the provision on fiscal regime shall require
duties and fees as provided for under existing laws.” the negotiation with the Negotiating Panel and the
(Italics supplied) recommendation of the Secretary for approval of the
But it did not usurp the President’s authority since the President of the Republic of the Philippines.” (Italics
provision merely included the enumerated items as supplied)
part of the government share, without foreclosing or in It looks like another case of misapprehension. The
any way preventing (as in fact Congress could not proviso being objected to by Justice Carpio is actually
validly prevent) the President from determining what preceded by a phrase that requires a contractor
constitutes the State’s compensation derived from desiring to amend the fiscal regime of its FTAA, to
FTAAs. In this case, the President in effect directed amend the same by adopting the fiscal regime
the inclusion or addition of “other things,” viz., prescribed in DAO 99-56 -- i.e., solely in that
INCOME for the owner of the resources, in the manner, and in no other. Obviously, since DAO 99-56
government’s share, while adopting the items was issued by the secretary under the authority and
enumerated by Congress as part of the government with the presumed approval of the President, the
share also. amendment of an FTAA by merely adopting the fiscal
regime prescribed in said DAO 99-56 (and nothing
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more) need not have the express clearance of the WMCP FTAA are provisions grossly disadvantageous
President anymore. It is as if the same had been pre- to government and detrimental to the interests of the
approved. We cannot fathom the complaint that that Filipino people, as well as violative of public policy, and
makes the secretary more powerful than the President, must therefore be stricken off as invalid. Since the
or that the former is trying to hide things from the offending provisions are very much separable from
President or Congress. Section 7.7 and the rest of the FTAA, the deletion of
Sections 7.9 and 7.8(e) can be done without affecting
14. Based on the first sentence of Section 5 of DAO or requiring the invalidation of the WMCP FTAA itself,
99-56, which states “[A]ll FTAAs approved prior to the and such deletion will preserve for government its due
effectivity of this Administrative Order shall remain share of the 60 percent benefits. Therefore, the WMCP
valid and be recognized by the Government”, Justice FTAA is NOT bereft of a valid consideration (assuming
Carpio concludes that said Administrative Order for the nonce that indeed this is the “consideration” of
allegedly exempts FTAAs approved prior to its the FTAA).
effectivity -- like the WMCP FTAA -- from having to pay
the State any share from their mining income, apart SUMMATION
from taxes, duties and fees.
To conclude, a summary of the key points discussed
We disagree. What we see in black and white is the above is now in order.
statement that the FTAAs approved before the DAO
came into effect are to continue to be valid and will be The Meaning of “Agreements Involving
recognized by the State. Nothing is said about their Either Technical or Financial Assistance”
fiscal regimes. Certainly, there is no basis to claim that
the contractors under said FTAAs were being Applying familiar principles of constitutional
exempted from paying the government a share in their construction to the phrase agreements involving either
mining incomes. technical or financial assistance, the framers’ choice of
words does not indicate the intent to exclude other
For the record, the WMCP FTAA is NOT and has modes of assistance, but rather implies that there
never been exempt from paying the government share. are other things being included or possibly being made
The WMCP FTAA has its own fiscal regime -- Section part of the agreement, apart from financial or technical
7.7 -- which gives the government a 60 percent share assistance. The drafters avoided the use of restrictive
in the net mining revenues of WMCP from the and stringent phraseology; a verba legis scrutiny of
commencement of commercial production. Section 2 of Article XII of the Constitution discloses not
even a hint of a desire to prohibit foreign involvement
For that very reason, we have never said that DAO 99- in the management or operation of mining activities, or
56 is the basis for claiming that the WMCP FTAA has to eradicate service contracts. Such moves would
a consideration. Hence, we find quite out of place necessarily imply an underlying drastic shift in
Justice Carpio’s statement that ironically, DAO 99-56, fundamental economic and developmental policies of
the very authority cited to support the claim that the the State. That change requires a much more definite
WMCP FTAA has a consideration, does not apply to and irrefutable basis than mere omission of the words
the WMCP FTAA. By its own express terms, DAO 99- “service contract” from the new Constitution.
56 does not apply to FTAAs executed before the
issuance of DAO 99-56, like the WMCP FTAA. The Furthermore, a literal and restrictive interpretation of
majority’s position has allegedly no leg to stand on this paragraph leads to logical inconsistencies. A
since even DAO 99-56, assuming it is valid, cannot constitutional provision specifically allowing foreign-
save the WMCP FTAA from want of consideration. owned corporations to render financial or technical
Even assuming arguendo that DAO 99-56 does not assistance in respect of mining or any other
apply to the WMCP FTAA, nevertheless, the WMCP commercial activity was clearly unnecessary; the
FTAA has its own fiscal regime, found in Section 7.7 provision was meant to refer to more than mere
thereof. Hence, there is no such thing as “want of financial or technical assistance.
consideration” here.
Also, if paragraph 4 permits only agreements for
Still more startling is this claim: The majority financial or technical assistance, there would be no
supposedly agrees that the provisions of the WMCP point in requiring that they be “based on real
FTAA, which grant a sham consideration to the State, contributions to the economic growth and general
are void. Since the majority agrees that the WMCP welfare of the country.” And considering that there
FTAA has a sham consideration, the WMCP FTAA were various long-term service contracts still in force
thus lacks the third element of a valid contract. The and effect at the time the new Charter was being
Decision should declare the WMCP FTAA void for drafted, the absence of any transitory provisions to
want of consideration unless it treats the contract as govern the termination and closing-out of the then
an MPSA under Section 80. Indeed the only recourse existing service contracts strongly militates against the
of WMCP to save the validity of its contract is to theory that the mere omission of “service contracts”
convert it into an MPSA. signaled their prohibition by the new Constitution.
To clarify, we said that Sections 7.9 and 7.8(e) of the Resort to the deliberations of the Constitutional
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Commission is therefore unavoidable, and a careful are between foreign corporations acting as contractors
scrutiny thereof conclusively shows that the ConCom on the one hand, and on the other hand government
members discussed agreements involving either as principal or “owner” (of the works), whereby the
technical or financial assistance in the same sense foreign contractor provides the capital, technology and
as service contracts and used the terms technical know-how, and managerial expertise in the
interchangeably. The drafters in fact knew that the creation and operation of the large-scale
agreements with foreign corporations were going to mining/extractive enterprise, and government through
entail not mere technical or financial assistance but, its agencies (DENR, MGB) actively exercises full
rather, foreign investment in and management of an control and supervision over the entire enterprise.
enterprise for large-scale exploration, development
and utilization of minerals. Such service contracts may be entered into only with
respect to minerals, petroleum and other mineral oils.
The framers spoke about service contracts as the The grant of such service contracts is subject to
concept was understood in the 1973 Constitution. It is several safeguards, among them: (1) that the service
obvious from their discussions that they did not intend contract be crafted in accordance with a general law
to ban or eradicate service contracts. Instead, they setting standard or uniform terms, conditions and
were intent on crafting provisions to put in place requirements; (2) the President be the signatory for the
safeguards that would eliminate or minimize the government; and (3) the President report the executed
abuses prevalent during the martial law regime. In agreement to Congress within thirty days.
brief, they were going to permit service contracts with
foreign corporations as contractors, but with safety Ultimate Test:
measures to prevent abuses, as an exception to the Full State Control
general norm established in the first paragraph of
Section 2 of Article XII, which reserves or limits to To repeat, the primacy of the principle of the State’s
Filipino citizens and corporations at least 60 percent sovereign ownership of all mineral resources, and its
owned by such citizens the exploration, development full control and supervision over all aspects of
and utilization of mineral or petroleum resources. This exploration, development and utilization of natural
was prompted by the perceived insufficiency of Filipino resources must be upheld. But “full control and
capital and the felt need for foreign expertise in the supervision” cannot be taken literally to mean that the
EDU of mineral resources. State controls and supervises everything down to the
minutest details and makes all required actions, as this
Despite strong opposition from some ConCom would render impossible the legitimate exercise by the
members during the final voting, the Article on the contractor of a reasonable degree of management
National Economy and Patrimony -- including prerogative and authority, indispensable to the proper
paragraph 4 allowing service contracts with foreign functioning of the mining enterprise. Also, government
corporations as an exception to the general norm in need not micro-manage mining operations and day-to-
paragraph 1 of Section 2 of the same Article -- was day affairs of the enterprise in order to be considered
resoundingly and overwhelmingly approved. as exercising full control and supervision.

The drafters, many of whom were economists, Control, as utilized in Section 2 of Article XII, must be
academicians, lawyers, businesspersons and taken to mean a degree of control sufficient to enable
politicians knew that foreign entities will not enter into the State to direct, restrain, regulate and govern the
agreements involving assistance without requiring affairs of the extractive enterprises. Control by the
measures of protection to ensure the success of the State may be on a macro level, through the
venture and repayment of their investments, loans and establishment of policies, guidelines, regulations,
other financial assistance, and ultimately to protect the industry standards and similar measures that would
business reputation of the foreign corporations. The enable government to regulate the conduct of affairs in
drafters, by specifying such agreements involving various enterprises, and restrain activities deemed not
assistance, necessarily gave implied assent to desirable or beneficial, with the end in view of ensuring
everything that these agreements entailed or that that these enterprises contribute to the economic
could reasonably be deemed necessary to make them development and general welfare of the country,
tenable and effective -- including management conserve the environment, and uplift the well-being of
authority with respect to the day-to-day operations of the local affected communities. Such a degree of
the enterprise, and measures for the protection of the control would be compatible with permitting the foreign
interests of the foreign corporation, at least to the contractor sufficient and reasonable management
extent that they are consistent with Philippine authority over the enterprise it has invested in, to
sovereignty over natural resources, the constitutional ensure efficient and profitable operation.
requirement of State control, and beneficial ownership
of natural resources remaining vested in the State. Government Granted Full Control
by RA 7942 and DAO 96-40
From the foregoing, it is clear that agreements
involving either technical or financial Baseless are petitioners’ sweeping claims that RA
assistance referred to in paragraph 4 are in 7942 and its Implementing Rules and Regulations
fact service contracts, but such new service contracts make it possible for FTAA contracts to cede full control
98
and management of mining enterprises over to fully contractor) is spending and investing heavily in
foreign owned corporations. Equally wobbly is the exploration activities without yet being able to extract
assertion that the State is reduced to a passive minerals and generate revenues. The exploration
regulator dependent on submitted plans and reports, permit issued under Sections 3(aq), 20 and 23 of RA
with weak review and audit powers and little say in the 7942, which allows exploration but not extraction,
decision-making of the enterprise, for which reasons serves to protect the interests and rights of the
“beneficial ownership” of the mineral resources is exploration permit grantee (and would-be contractor),
allegedly ceded to the foreign contractor. foreign or local. Otherwise, the exploration works
already conducted, and expenditures already made,
As discussed hereinabove, the State’s full control and may end up only benefiting claim-jumpers. Thus,
supervision over mining operations are ensured Section 3(aq) of RA 7942 is not unconstitutional.
through the following provisions in RA 7942: Sections
8, 9, 16, 19, 24, 35[(b), (e), (f), (g), (h), (k), (l), (m) and
(o)], 40, 57, 66, 69, 70, and Chapters XI and XVII; as
well as the following provisions of DAO 96-40: WMCP FTAA Likewise Gives the
Sections7[(d) and (f)], 35(a-2), 53[(a-4) and (d)], 54, State Full Control and Supervision
56[(g), (h), (l), (m) and (n)], 56(2), 60, 66, 144, 168,
171 and 270, and also Chapters XV, XVI and XXIV. The WMCP FTAA obligates the contractor to account
for the value of production and sale of minerals
Through the foregoing provisions, the government (Clause 1.4); requires that the contractor’s work
agencies concerned are empowered to approve or program, activities and budgets be approved by the
disapprove -- hence, in a position to influence, direct, State (Clause 2.1); gives the DENR secretary power to
and change -- the various work programs and the extend the exploration period (Clause 3.2-a); requires
corresponding minimum expenditure commitments for approval by the State for incorporation of lands into the
each of the exploration, development and utilization contract area (Clause 4.3-c); requires Bureau of Forest
phases of the enterprise. Once they have been Development approval for inclusion of forest reserves
approved, the contractor’s compliance with its as part of the FTAA contract area (Clause 4.5);
commitments therein will be monitored. Figures for obligates the contractor to periodically relinquish parts
mineral production and sales are regularly monitored of the contract area not needed for exploration and
and subjected to government review, to ensure that development (Clause 4.6); requires submission of a
the products and by-products are disposed of at the declaration of mining feasibility for approval by the
best prices; copies of sales agreements have to be State (Clause 4.6-b); obligates the contractor to report
submitted to and registered with MGB. to the State the results of its exploration activities
(Clause 4.9); requires the contractor to obtain State
The contractor is mandated to open its books of approval for its work programs for the succeeding two
accounts and records for scrutiny, to enable the State year periods, containing the proposed work activities
to determine that the government share has been fully and expenditures budget related to exploration (Clause
paid. The State may likewise compel compliance by 5.1); requires the contractor to obtain State approval
the contractor with mandatory requirements on mine for its proposed expenditures for exploration activities
safety, health and environmental protection, and the (Clause 5.2); requires the contractor to submit an
use of anti-pollution technology and facilities. The annual report on geological, geophysical, geochemical
contractor is also obligated to assist the development and other information relating to its explorations within
of the mining community, and pay royalties to the the FTAA area (Clause 5.3-a); requires the contractor
indigenous peoples concerned. And violation of any of to submit within six months after expiration of
the FTAA’s terms and conditions, and/or non- exploration period a final report on all its findings in the
compliance with statutes or regulations, may be contract area (Clause 5.3-b); requires the contractor
penalized by cancellation of the FTAA. Such sanction after conducting feasibility studies to submit a
is significant to a contractor who may have yet to declaration of mining feasibility, along with a
recover the tens or hundreds of millions of dollars sunk description of the area to be developed and mined, a
into a mining project. description of the proposed mining operations and the
technology to be employed, and the proposed work
Overall, the State definitely has a pivotal say in the program for the development phase, for approval by
operation of the individual enterprises, and can set the DENR secretary (Clause 5.4); obligates the
directions and objectives, detect deviations and non- contractor to complete the development of the mine,
compliances by the contractor, and enforce including construction of the production facilities, within
compliance and impose sanctions should the occasion the period stated in the approved work program
arise. Hence, RA 7942 and DAO 96-40 vest in (Clause 6.1); requires the contractor to submit for
government more than a sufficient degree of control approval a work program covering each period of three
and supervision over the conduct of mining operations. fiscal years (Clause 6.2); requires the contractor to
submit reports to the secretary on the production, ore
Section 3(aq) of RA 7942 was objected to as being reserves, work accomplished and work in progress,
unconstitutional for allowing a foreign contractor to profile of its work force and management staff, and
apply for and hold an exploration permit. During the other technical information (Clause 6.3); subjects any
exploration phase, the permit grantee (and prospective expansions, modifications, improvements and
99
replacements of mining facilities to the approval of the contain minerals in commercial quantities and should
secretary (Clause 6.4); subjects to State control the be relinquished. Also, since the annual occupation
amount of funds that the contractor may borrow within fees paid to government are based on the total
the Philippines (Clause 7.2); subjects to State hectarage of the contract area, net of the areas
supervisory power any technical, financial and relinquished, the contractor’s self-interest will assure
marketing issues (Clause 10.1-a); obligates the proper and efficient relinquishment.
contractor to ensure 60 percent Filipino equity in the
contractor within ten years of recovering specified Clause 10.2(e) of the WMCP FTAA does not mean
expenditures unless not so required by subsequent that the contractor can compel government to use its
legislation (Clause 10.1); gives the State the right to power of eminent domain. It contemplates a situation
terminate the FTAA for unremedied substantial breach in which the contractor is a foreign-owned corporation,
thereof by the contractor (Clause 13.2); requires State hence, not qualified to own land. The contractor
approval for any assignment of the FTAA by the identifies the surface areas needed for it to construct
contractor to an entity other than an affiliate (Clause the infrastructure for mining operations, and the State
14.1). then acquires the surface rights on behalf of the
former. The provision does not call for the exercise of
In short, the aforementioned provisions of the WMCP the power of eminent domain (or determination of just
FTAA, far from constituting a surrender of control and compensation); it seeks to avoid a violation of the anti-
a grant of beneficial ownership of mineral resources to dummy law.
the contractor in question, vest the State with control
and supervision over practically all aspects of the Clause 10.2(l) of the WMCP FTAA giving the
operations of the FTAA contractor, including the contractor the right to mortgage and encumber the
charging of pre-operating and operating expenses, and mineral products extracted may have been a result of
the disposition of mineral products. conditions imposed by creditor-banks to secure the
loan obligations of WMCP. Banks lend also upon the
There is likewise no relinquishment of control on security of encumbrances on goods produced, which
account of specific provisions of the WMCP FTAA. can be easily sold and converted into cash and applied
Clause 8.2 provides a mechanism to prevent the to the repayment of loans. Thus, Clause 10.2(l) is not
mining operations from grinding to a complete halt as a something out of the ordinary. Neither is it
result of possible delays of more than 60 days in the objectionable, because even though the contractor is
government’s processing and approval of submitted allowed to mortgage or encumber the mineral end-
work programs and budgets. Clause 8.3 seeks to products themselves, the contractor is not thereby
provide a temporary, stop-gap solution in case a relieved of its obligation to pay the government its
disagreement between the State and the contractor basic and additional shares in the net mining revenue.
(over the proposed work program or budget submitted The contractor’s ability to mortgage the minerals does
by the contractor) should result in a deadlock or not negate the State’s right to receive its share of net
impasse, to avoid unreasonably long delays in the mining revenues.
performance of the works.
Clause 10.2(k) which gives the contractor authority “to
The State, despite Clause 8.3, still has control over the change its equity structure at any time,” means that
contract area, and it may, as sovereign authority, WMCP, which was then 100 percent foreign owned,
prohibit work thereon until the dispute is resolved, or it could permit Filipino equity ownership. Moreover, what
may terminate the FTAA, citing substantial breach is important is that the contractor, regardless of its
thereof. Hence, the State clearly retains full and ownership, is always in a position to render the
effective control. services required under the FTAA, under the direction
and control of the government.
Clause 8.5, which allows the contractor to make
changes to approved work programs and budgets Clauses 10.4(e) and (i) bind government to allow
without the prior approval of the DENR secretary, amendments to the FTAA if required by banks and
subject to certain limitations with respect to the other financial institutions as part of the conditions of
variance/s, merely provides the contractor a certain new lendings. There is nothing objectionable here,
amount of flexibility to meet unexpected situations, since Clause 10.4(e) also provides that such financing
while still guaranteeing that the approved work arrangements should in no event reduce the
programs and budgets are not abandoned altogether. contractor’s obligations or the government’s rights
And if the secretary disagrees with the actions taken under the FTAA. Clause 10.4(i) provides that
by the contractor in this instance, he may also resort to government shall “favourably consider” any request for
cancellation/termination of the FTAA as the ultimate amendments of this agreement necessary for the
sanction. contractor to successfully obtain financing. There is no
renunciation of control, as the proviso does not say
Clause 4.6 of the WMCP FTAA gives the contractor that government shall automatically grant any such
discretion to select parts of the contract area to be request. Also, it is up to the contractor to prove the
relinquished. The State is not in a position to substitute need for the requested changes. The government
its judgment for that of the contractor, who knows always has the final say on whether to approve or
exactly which portions of the contract area do not disapprove such requests.
100
and Regulations provided that the period of recovery,
In fine, the FTAA provisions do not reduce or abdicate reckoned from the date of commercial operation, shall
State control. be for a period not exceeding five years, or until the
date of actual recovery, whichever comes earlier.
No Surrender of
Financial Benefits And since RA 7942 allegedly does not require
government approval for the pre-operating, exploration
The second paragraph of Section 81 of RA 7942 has and development expenses of the foreign contractors,
been denounced for allegedly limiting the State’s share it is feared that such expenses could be bloated to
in FTAAs with foreign contractors to just taxes, fees wipe out mining revenues anticipated for 10 years, with
and duties, and depriving the State of a share in the the result that the State’s share is zero for the first 10
after-tax income of the enterprise. However, the years. However, the argument is based on incorrect
inclusion of the phrase “among other things” in the information.
second paragraph of Section 81 clearly and
unmistakably reveals the legislative intent to have the Under Section 23 of RA 7942, the applicant for
State collect more than just the usual taxes, duties and exploration permit is required to submit a proposed
fees. work program for exploration, containing a yearly
budget of proposed expenditures, which the State
Thus, DAO 99-56, the “Guidelines Establishing the passes upon and either approves or rejects; if
Fiscal Regime of Financial or Technical Assistance approved, the same will subsequently be recorded as
Agreements,” spells out the financial benefits pre-operating expenses that the contractor will have to
government will receive from an FTAA, as consisting recoup over the grace period.
of not only a basic government share, comprised of all
direct taxes, fees and royalties, as well as other Under Section 24, when an exploration permittee files
payments made by the contractor during the term of with the MGB a declaration of mining project feasibility,
the FTAA, but also an additional government share, it must submit a work program for development, with
being a share in the earnings or cash flows of the corresponding budget, for approval by the Bureau,
mining enterprise, so as to achieve a fifty-fifty sharing before government may grant an FTAA or MPSA or
of net benefits from mining between the government other mineral agreements; again, government has the
and the contractor. opportunity to approve or reject the proposed work
program and budgeted expenditures for development
The additional government share is computed using works, which will become the pre-operating and
one of three (3) options or schemes detailed in DAO development costs that will have to be recovered.
99-56, viz., (1) the fifty-fifty sharing of cumulative Government is able to know ahead of time the
present value of cash flows; (2) the excess profit- amounts of pre-operating and other expenses to be
related additional government share; and (3) the recovered, and the approximate period of time needed
additional sharing based on the cumulative net mining therefor. The aforecited provisions have counterparts
revenue. Whichever option or computation is used, in Section 35, which deals with the terms and
the additional government share has nothing to do with conditions exclusively applicable to FTAAs. In sum, the
taxes, duties, fees or charges. The portion of revenues third or last paragraph of Section 81 of RA 7942
remaining after the deduction of the basic and cannot be deemed defective.
additional government shares is what goes to the
contractor. Section 80 of RA 7942 allegedly limits the State’s
share in a mineral production-sharing agreement
The basic government share and the additional (MPSA) to just the excise tax on the mineral
government share do not yet take into account the product, i.e., only 2 percent of market value of the
indirect taxes and other financial contributions of minerals. The colatilla in Section 84 reiterates the
mining projects, which are real and actual benefits same limitation in Section 80. However, these two
enjoyed by the Filipino people; if these are taken into provisions pertain only to MPSAs, and have no
account, total government share increases to 60 application to FTAAs. These particular provisions do
percent or higher (as much as 77 percent, and 89 not come within the issues defined by this Court.
percent in one instance) of the net present value of Hence, on due process grounds, no pronouncement
total benefits from the project. can be made in this case in respect of the
constitutionality of Sections 80 and 84.
The third or last paragraph of Section 81 of RA 7942 is
slammed for deferring the payment of the government Section 112 is disparaged for reverting FTAAs and all
share in FTAAs until after the contractor shall have mineral agreements to the old “license, concession or
recovered its pre-operating expenses, exploration and lease” system, because it allegedly effectively reduces
development expenditures. Allegedly, the collection of the government share in FTAAs to just the 2 percent
the State’s share is rendered uncertain, as there is no excise tax which pursuant to Section 80 comprises the
time limit in RA 7942 for this grace period or recovery government share in MPSAs. However, Section 112
period. But although RA 7942 did not limit the grace likewise does not come within the issues delineated by
period, the concerned agencies (DENR and MGB) in this Court, and was never touched upon by the parties
formulating the 1995 and 1996 Implementing Rules in their pleadings. Moreover, Section 112 may not
101
properly apply to FTAAs. The mining law obviously their equity to a Filipino citizen or corporation, the
meant to treat FTAAs as a breed apart from mineral State loses its right to receive its share in net mining
agreements. There is absolutely no basis to believe revenues under Section 7.7, without any offsetting
that the law intends to exact from FTAA contractors compensation to the State. And what is given to the
merely the same government share (i.e., the 2 percent State in Section 7.7 is by mere tolerance of WMCP’s
excise tax) that it apparently demands from contractors foreign stockholders, who can at any time cut off the
under the three forms of mineral agreements. government’s entire share by simply selling 60 percent
of WMCP’s equity to a Philippine citizen or corporation.
While there is ground to believe that Sections 80, 84
and 112 are indeed unconstitutional, they cannot be In fact, the sale by WMCP’s foreign stockholder on
ruled upon here. In any event, they are separable; January 23, 2001 of the entire outstanding equity in
thus, a later finding of nullity will not affect the rest of WMCP to Sagittarius Mines, Inc., a domestic
RA 7942. corporation at least 60 percent Filipino owned, can be
deemed to have automatically triggered the operation
In fine, the challenged provisions of RA 7942 cannot of Section 7.9 and removed the State’s right to receive
be said to surrender financial benefits from an FTAA to its 60 percent share. Section 7.9 of the WMCP FTAA
the foreign contractors. has effectively given away the State’s share without
anything in exchange.
Moreover, there is no concrete basis for the view that,
in FTAAs with a foreign contractor, the State must Moreover, it constitutes unjust enrichment on the part
receive at least 60 percent of the after-tax income from of the local and foreign stockholders in WMCP,
the exploitation of its mineral resources, and that such because by the mere act of divestment, the local and
share is the equivalent of the constitutional foreign stockholders get a windfall, as their share in
requirement that at least 60 percent of the capital, and the net mining revenues of WMCP is automatically
hence 60 percent of the income, of mining companies increased, without having to pay anything for it.
should remain in Filipino hands. Even if the State is
entitled to a 60 percent share from other mineral Being grossly disadvantageous to government and
agreements (CPA, JVA and MPSA), that would not detrimental to the Filipino people, as well as violative
create a parallel or analogous situation for FTAAs. We of public policy, Section 7.9 must therefore be stricken
are dealing with an essentially different equation. Here off as invalid. The FTAA in question does not involve
we have the old apples and oranges syndrome. mere contractual rights but, being impressed as it is
with public interest, the contractual provisions and
The Charter did not intend to fix an iron-clad rule of 60 stipulations must yield to the common good and the
percent share, applicable to all situations, regardless national interest. Since the offending provision is very
of circumstances. There is no indication of such an much separable from the rest of the FTAA, the deletion
intention on the part of the framers. Moreover, the of Section 7.9 can be done without affecting or
terms and conditions of petroleum FTAAs cannot requiring the invalidation of the entire WMCP FTAA
serve as standards for mineral mining FTAAs, itself.
because the technical and operational requirements,
cost structures and investment needs of off-shore Section 7.8(e) of the WMCP FTAA likewise is invalid,
petroleum exploration and drilling companies do not since by allowing the sums spent by government for
have the remotest resemblance to those of on-shore the benefit of the contractor to be deductible from the
mining companies. State’s share in net mining revenues, it results in
benefiting the contractor twice over. This
To take the position that government’s share must be constitutes unjust enrichment on the part of the
not less than 60 percent of after-tax income of FTAA contractor, at the expense of government. For being
contractors is nothing short of this Court dictating upon grossly disadvantageous and prejudicial to
the government. The State resultantly ends up losing government and contrary to public policy, Section
control. To avoid compromising the State’s full control 7.8(e) must also be declared without effect. It may
and supervision over the exploitation of mineral likewise be stricken off without affecting the rest of the
resources, there must be no attempt to impose a FTAA.
“minimum 60 percent” rule. It is sufficient that the State
has the power and means, should it so decide, to get a EPILOGUE
60 percent share (or greater); and it is not necessary
that the State does so in every case. AFTER ALL IS SAID AND DONE, it is clear that there
is unanimous agreement in the Court upon the key
Invalid Provisions of principle that the State must exercise full control and
the WMCP FTAA supervision over the exploration, development and
utilization of mineral resources.
Section 7.9 of the WMCP FTAA clearly
renders illusory the State’s 60 percent share of The crux of the controversy is the amount of discretion
WMCP’s revenues. Under Section 7.9, should to be accorded the Executive Department, particularly
WMCP’s foreign stockholders (who originally owned the President of the Republic, in respect of
100 percent of the equity) sell 60 percent or more of negotiations over the terms of FTAAs, particularly
102
when it comes to the government share of financial privileged brethren in tribal and cultural communities
benefits from FTAAs. The Court believes that it is not who deserve the attention of this Court; rather, all
unconstitutional to allow a wide degree of discretion to parties concerned -- including the State itself, the
the Chief Executive, given the nature and complexity contractor (whether Filipino or foreign), and the vast
of such agreements, the humongous amounts of majority of our citizens -- equally deserve the
capital and financing required for large-scale mining protection of the law and of this Court. To stress, the
operations, the complicated technology needed, and benefits to be derived by the State from mining
the intricacies of international trade, coupled with the activities must ultimately serve the great majority of our
State’s need to maintain flexibility in its dealings, in fellow citizens. They have as much right and interest in
order to preserve and enhance our country’s the proper and well-ordered development and
competitiveness in world markets. utilization of the country’s mineral resources as the
petitioners.
We are all, in one way or another, sorely affected by
the recently reported scandals involving corruption in Whether we consider the near term or take the longer
high places, duplicity in the negotiation of multi-billion view, we cannot overemphasize the need for
peso government contracts, huge payoffs to an appropriate balancing of interests and needs -- the
government officials, and other malfeasances; and need to develop our stagnating mining industry and
perhaps, there is the desire to see some measures put extract what NEDA Secretary Romulo Neri estimates
in place to prevent further abuse. However, dictating is some US$840 billion (approx. PhP47.04 trillion)
upon the President what minimum share to get from an worth of mineral wealth lying hidden in the ground, in
FTAA is not the solution. It sets a bad precedent since order to jumpstart our floundering economy on the one
such a move institutionalizes the very reduction if not hand, and on the other, the need to enhance our
deprivation of the State’s control. The remedy may be nationalistic aspirations, protect our indigenous
worse than the problem it was meant to address. In communities, and prevent irreversible ecological
any event, provisions in such future agreements which damage.
may be suspected to be grossly disadvantageous or
detrimental to government may be challenged in court, This Court cannot but be mindful that any decision
and the culprits haled before the bar of justice. rendered in this case will ultimately impact not only the
cultural communities which lodged the instant Petition,
Verily, under the doctrine of separation of powers and and not only the larger community of the Filipino
due respect for co-equal and coordinate branches of people now struggling to survive amidst a
government, this Court must restrain itself from fiscal/budgetary deficit, ever increasing prices of fuel,
intruding into policy matters and must allow the food, and essential commodities and services, the
President and Congress maximum discretion in using shrinking value of the local currency, and a
the resources of our country and in securing the government hamstrung in its delivery of basic services
assistance of foreign groups to eradicate the grinding by a severe lack of resources, but also countless
poverty of our people and answer their cry for viable future generations of Filipinos.
employment opportunities in the country.
For this latter group of Filipinos yet to be born, their
“The judiciary is loath to interfere with the due exercise eventual access to education, health care and basic
by coequal branches of government of their official services, their overall level of well-being, the very
functions.”[99] As aptly spelled out seven decades ago shape of their lives are even now being determined
by Justice George Malcolm, “Just as the Supreme and affected partly by the policies and directions being
Court, as the guardian of constitutional rights, should adopted and implemented by government today. And
not sanction usurpations by any other department of in part by the this Resolution rendered by this Court
government, so should it as strictly confine its own today.
sphere of influence to the powers expressly or by
implication conferred on it by the Organic Act.”[100] Let Verily, the mineral wealth and natural resources of this
the development of the mining industry be the country are meant to benefit not merely a select group
responsibility of the political branches of government. of people living in the areas locally affected by mining
And let not this Court interfere inordinately and activities, but the entire Filipino nation, present and
unnecessarily. future, to whom the mineral wealth really belong. This
Court has therefore weighed carefully the rights and
The Constitution of the Philippines is the supreme law interests of all concerned, and decided for the greater
of the land. It is the repository of all the aspirations and good of the greatest number. JUSTICE FOR ALL, not
hopes of all the people. We fully sympathize with the just for some; JUSTICE FOR THE PRESENT AND
plight of Petitioner La Bugal B’laan and other tribal THE FUTURE, not just for the here and now.
groups, and commend their efforts to uplift their
communities. However, we cannot justify the WHEREFORE, the Court RESOLVES to GRANT the
invalidation of an otherwise constitutional statute along respondents’ and the intervenors’ Motions for
with its implementing rules, or the nullification of an Reconsideration; to REVERSE and SET ASIDE this
otherwise legal and binding FTAA contract. Court’s January 27, 2004 Decision; to DISMISS the
Petition; and to issue this new judgment
We must never forget that it is not only our less declaring CONSTITUTIONAL (1) Republic Act No.
103
7942 (the Philippine Mining Law), (2) its Implementing as G.R. No. 169080, wherein petitioner Celestial
Rules and Regulations contained in DENR Nickel Mining Exploration Corporation (Celestial)
Administrative Order (DAO) No. 9640 -- insofar as they seeks to set aside the April 15, 2005 Decision[2] of the
relate to financial and technical assistance agreements Court of Appeals (CA) in CA-G.R. SP No. 87931. The
referred to in paragraph 4 of Section 2 of Article XII of CA affirmed the November 26, 2004 Resolution of the
the Constitution; and (3) the Financial and Technical Mines Adjudication Board (MAB) in MAB Case Nos.
Assistance Agreement (FTAA) dated March 30, 1995 056-97 and 057-97 (DENR Case Nos. 97-01 and 97-
executed by the government and Western Mining 02), upholding the authority of the Department of
Corporation Philippines Inc. (WMCP), except Sections Environment and Natural Resources (DENR)
7.8 and 7.9 of the subject FTAA which are hereby Secretary to grant and cancel mineral agreements.
INVALIDATED for being contrary to public policy and Also assailed is the August 3, 2005 Resolution[3] of the
for being grossly disadvantageous to the government. CA denying the Motion for Reconsideration of the
SO ORDERED. assailed Decision.

G.R. No. 169080, December 19, 2007 The second is a Petition for Certiorari[4] under Rule 65
docketed as G.R. No. 172936, wherein petitioner Blue
CELESTIAL NICKEL MINING EXPLORATION Ridge Mineral Corporation (Blue Ridge) seeks to annul
CORPORATION, PETITIONER, VS. MACROASIA and set aside the action of then Secretary Michael T.
CORPORATION (FORMERLY INFANTA MINERAL Defensor, in his capacity as DENR Secretary,
AND INDUSTRIAL CORPORATION), approving and signing two Mineral Production Sharing
CORPORATION, AND LEBACH MINING Agreements (MPSAs) in favor of Macroasia
CORPORATION, RESPONDENTS. Corporation (Macroasia) denominated as MPSA Nos.
220-2005-IVB and 221-2005-IVB.
[G.R. No. 172936]
And the third and fourth are petitions for review on
certiorari[5] under Rule 45 docketed as G.R. No.
BLUE RIDGE MINERAL CORPORATION,
176226 and G.R. No. 176319, wherein petitioners
PETITIONER, VS. HON. ANGELO REYES IN HIS
CAPACITY AS SECRETARY OF THE DEPARTMENT Celestial and Macroasia, respectively, seek to set
OF ENVIRONMENT AND NATURAL RESOURCES, aside the May 18, 2006 Decision[6] of the CA in CA-
HON. GUILLERMO ESTABILLO IN HIS CAPACITY G.R. SP No. 90828. The CA reversed and set aside
AS REGIONAL DIRECTOR OF THE MINES AND the November 26, 2004 and July 12, 2005 Resolutions
GEOSCIENCES BUREAU, REGION IV-B OF THE of the MAB, and reinstated the October 24, 2000
DEPARTMENT OF ENVIRONMENT AND NATURAL Decision in MAB Case Nos. 056-97 and 057-97,
RESOURCES, AND MACROASIA CORPORATION granting Blue Ridge the prior and preferential right to
(FORMERLY INFANTA MINERAL AND INDUSTRIAL file its application over the mining claims of Macroasia.
CORPORATION), RESPONDENTS. These petitions likewise seek to set aside the January
19, 2007 Resolution[7]of the CA denying petitioners'
[G.R. No. 176226] motions for reconsideration of the assailed Decision.

CELESTIAL NICKEL MINING EXPLORATION Through our July 5, 2006 Resolution,[8] we


CORPORATION, PETITIONER, VS. BLUE RIDGE consolidated the first two cases. While in our
MINERAL CORPORATION AND MACROASIA subsequent April 23, 2007[9] and July 11,
CORPORATION (FORMERLY INFANTA MINERAL 2007[10] Resolutions, we consolidated the four cases
AND INDUSTRIAL as they arose from the same facts.
CORPORATION),RESPONDENTS.
The undisputed facts as found by the CA in CA-G.R.
[G.R. No. 176319] SP No. 87931 are as follows:

MACROASIA CORPORATION (FORMERLY On September 24, 1973, the then Secretary of


INFANTA MINERAL AND INDUSTRIAL Agriculture and Natural Resources and Infanta Mineral
CORPORATION), PETITIONER, VS. BLUE RIDGE and Industrial Corporation (Infanta) entered into a
MINERAL CORPORATION AND CELESTIAL Mining Lease Contract (V-1050) for a term of 25 years
NICKEL MINING EXPLORATION CORPORATION, up to September 23, 1998 for mining lode claims
RESPONDENTS. covering an area of 216 hectares at Sitio Linao, Ipilan,
Brooke's Point, Palawan. The mining claims of Infanta
DECISION covered by lode/lease contracts were as follows:

VELASCO JR., J.: Contract No. Area Date of Issuance

The Case LLC-V-941 18 hectares January 17, 1972


LC-V-1050 216 hectares September 24,
Before us are four (4) petitions. The first is a Petition 1973
for Review on Certiorari[1] under Rule 45 docketed LLC-V-1060 16 hectares October 30, 1973
104
LLC-V-1061 144 hectares October 30, 1973 lost all their rights to the mining claims. The POA
LLC-V-1073 144 hectares April 18, 1973 granted the petition of Celestial to cancel the following
MLC-MRD-52 306 hectares April 26, 1978 Mining Lease Contracts of Macroasia: LLC-V-941,
MLC-MRC-53 72 hectares April 26, 1978 LLC-V-1050, LLC-V-1060, LLC-V-1061, LLC-V-1073,
MLC-MRD-52, and MLC-MRC-53; and found the
claims of the others indubitably meritorious. It gave
Infanta's corporate name was changed to Cobertson Celestial the preferential right to Macroasia's mining
Holdings Corporation on January 26, 1994 and areas.[12] It upheld Blue Ridge's petition regarding
subsequently to its present name, Macroasia DENR Case No. 97-02, but only as against the Mining
Corporation, on November 6, 1995. Lease Contract areas of Lebach (LLC-V-1153, LLC-V-
1154, and LLC-V-1155), and the said leased areas
Sometime in 1997, Celestial filed a Petition to Cancel were declared automatically abandoned. It gave Blue
the subject mining lease contracts and other mining Ridge priority right to the aforesaid Lebach's
claims of Macroasia including those covered by Mining areas/mining claims.[13]
Lease Contract No. V-1050, before the Panel of
Arbitrators (POA) of the Mines and Geo-Sciences Blue Ridge and Macroasia appealed before the MAB,
Bureau (MGB) of the DENR. The petition was and the cases were docketed as MAB Case Nos. 056-
docketed as DENR Case No. 97-01. 97 and 057-97, respectively.

Blue Ridge, in an earlier letter-petition, also wrote the Lebach did not file any notice of appeal with the
Director of Mines to seek cancellation of mining lease required memorandum of appeal; thus, with respect to
contracts and other mining rights of Macroasia and Lebach, the above resolution became final and
another entity, Lebach Mining Corporation (Lebach), in executory.
mining areas in Brooke's Point. The petition was
eventually docketed as DENR Case No. 97-02. The Rulings of the Mines Adjudication Board in
MAB Case Nos. 056-97 and 057-97 (DENR Case
Celestial is the assignee of 144 mining claims covering Nos. 97-01 and 97-02)
such areas contiguous to Infanta's (now Macroasia)
mining lode claims. Said area was involved in The MAB resolved the issues of timeliness and
protracted administrative disputes with Infanta (now perfection of Macroasia's appeal; Macroasia's
Macroasia), Lecar & Sons, Inc., and Palawan Nickel abandonment of its mining claims; and the preferential
Mining Corporation. Celestial also holds an MPSA right over the abandoned mining claims of Macroasia.
with the government which covers 2,835 hectares
located at Ipilan/Maasin, Brooke's Point, Palawan and Conformably with Section 51 of Consolidated Mines
two pending applications covering another 4,040 Administrative Order (CMAO)[14] implementing
hectares in Barangay Mainit also in Brooke's Point. Presidential Decree No. (PD) 463[15] and our ruling
in Medrana v. Office of the President (OP),[16] the MAB
Celestial sought the cancellation of Macroasia's lease affirmed the POA findings that Macroasia abandoned
contracts on the following grounds: (1) the its mining claims. The MAB found that Macroasia did
nonpayment of Macroasia of required occupational not comply with its work obligations from 1986 to 1991.
fees and municipal taxes; (2) the non-filing of It based its conclusion on the field verifications
Macroasia of Affidavits of Annual Work Obligations; (3) conducted by the MGB, Region IV and validated by the
the failure of Macroasia to provide improvements on Special Team tasked by the MAB.[17] However,
subject mining claims; (4) the concentration of contrary to the findings of the POA, the MAB found
Macroasia on logging; (5) the encroachment, mining, that it was Blue Ridge that had prior and preferential
and extraction by Macroasia of nickel ore from rights over the mining claims of Macroasia, and not
Celestial's property; (6) the ability of Celestial to Celestial.
subject the mining areas to commercial production;
and (7) the willingness of Celestial to pay fees and Thus, on October 24, 2000, the MAB promulgated its
back taxes of Macroasia. Decision upholding the Decision of the POA to cancel
the Mining Lode/Lease Contracts of Macroasia;
In the later part of the proceedings, Macroasia declaring abandoned the subject mining claims; and
intervened in the case and submitted its position paper opening the mining area with prior and preferential
refuting the grounds for cancellation invoked by rights to Blue Ridge for mining applications, subject to
Celestial.[11] strict compliance with the procedure and requirements
provided by law. In case Blue Ridge defaults, Celestial
The Ruling of the Panel of Arbitrators in could exercise the secondary priority and preferential
DENR Case Nos. 97-01 and 97-02 rights, and subsequently, in case Celestial also
defaults, other qualified applicants could file.[18]
Based on the records of the Bureau of Mines and
findings of the field investigations, the POA found that Both Celestial and Macroasia moved for
Macroasia and Lebach not only automatically reconsideration.[19] Celestial asserted that it had better
abandoned their areas/mining claims but likewise had rights than Blue Ridge over the mining claims of
Macroasia as it had correctly filed its petition, and filed
105
its MPSA application after Macroasia's lease contract Corporation (formerly Infanta Mineral & Industrial
expired on January 17, 1997 and after the POA's Corporation) are DECLARED SUBSISTING prior to
resolution was issued on September 1, their expirations without prejudice to any Decision or
1997. Moreover, it argued that priority was not an Order that the Secretary may render on the same. NO
issue when the contested area had not yet been PREFERENTIAL RIGHT over the same mining claims
declared abandoned. Thus, Blue Ridge's MPSA is accorded to Blue Ridge Mineral Corporation or
application filed on June 17, 1996 had no effect and Celestial Nickel Mining Exploration Corporation also
should not be considered superior since Macroasia's without prejudice to the determination by the Secretary
lease contracts were still valid and subsisting and over the matter at the proper time.[23]
could not have been canceled by Macroasia's mere After the issuance of the MAB Resolution, Celestial
failure to perform annual work obligations and pay and Blue Ridge went through divergent paths in their
corresponding royalties/taxes to the government. quest to protect their individual interests.

Macroasia, in its Motion for Reconsideration, reiterated On January 10, 2005, Celestial assailed the November
that it did not abandon its mining claims, and even if 26, 2004 MAB Resolution before the CA in a petition
mining was not listed among its purposes in its for review[24] under Rule 43 of the Rules of Court. The
amended Articles of Incorporation, its mining activities petition entitled Celestial Nickel Mining Exploration
were acts that were only ultra vires but were ratified as Corporation v. Macroasia Corporation, et al. was
a secondary purpose by its stockholders in subsequent docketed as CA-G.R. SP No. 87931.
amendments of its Articles of Incorporation.
On the other hand, Blue Ridge first filed a Motion for
Before the MAB could resolve the motions for Reconsideration[25] which was denied.[26] On August
reconsideration, on March 16, 2001, Macroasia filed its 26, 2005, Blue Ridge questioned the MAB's November
Supplemental Motion for 26, 2004 and July 12, 2005 Resolutions before the CA
Reconsideration[20] questioning the jurisdiction of the in a petition for review[27] entitled Blue Ridge Mineral
POA in canceling mining lease contracts and mining Corporation v. Mines Adjudication Board, et
claims. Macroasia averred that the power and al. docketed as CA-G.R. SP No. 90828.
authority to grant, cancel, and revoke mineral
agreements is exclusively lodged with the DENR CA-G.R. SP No. 87931 filed by Celestial was heard by
Secretary. Macroasia further pointed out that in the 12th Division of the CA; while Blue Ridge's CA-
arrogating upon itself such power, the POA G.R. SP No. 90828 was heard by the Special 10th
whimsically and capriciously discarded the procedure Division. Ironically, the two divisions rendered two (2)
on conferment of mining rights laid down in Republic diametrically opposing decisions.
Act No. (RA) 7942, The Philippine Mining Act of 1995,
and DENR Administrative Order No. (AO) 96- The Ruling of the Court of Appeals Twelfth
40,[21] and perfunctorily and improperly awarded its Division
mining rights to Blue Ridge and Celestial.
On April 15, 2005, in CA-G.R. SP No. 87931, the CA
Subsequently, on November 26, 2004, the MAB issued 12th Division affirmed the November 26, 2004 MAB
a Resolution[22] vacating its October 24, 2000 Decision, Resolution which declared Macroasia's seven mining
holding that neither the POA nor the MAB had the lease contracts as subsisting; rejected Blue Ridge's
power to revoke a mineral agreement duly entered into claim for preferential right over said mining claims; and
by the DENR Secretary, ratiocinating that there was no upheld the exclusive authority of the DENR Secretary
provision giving the POA and MAB the concurrent to approve, cancel, and revoke mineral agreements.
power to manage or develop mineral resources. The The CA also denied Celestial's Motion for
MAB further held that the power to cancel or revoke a Reconsideration[28] of the assailed August 3, 2005
mineral agreement was exclusively lodged with the Resolution.[29]
DENR Secretary; that a petition for cancellation is not
a mining dispute under the exclusive jurisdiction of the Hence, Celestial filed its Petition for Review on
POA pursuant to Sec. 77 of RA 7942; and that the Certiorari[30] docketed as G.R. No. 169080,before this
POA could only adjudicate claims or contests during Court.
the MPSA application and not when the claims and
leases were already granted and subsisting.
The Ruling of the Court of Appeals Special Tenth
Moreover, the MAB held that there was no Division
abandonment by Macroasia because the DENR
Secretary had not decided to release Macroasia from On May 18, 2006, the CA Special 10th Division in CA-
its obligations. The Secretary may choose not to G.R. SP No. 90828 granted Blue Ridge's petition;
release a contractor from its obligations on grounds of reversed and set aside the November 26, 2004 and
public interest. Thus, through its said resolution, the July 12, 2005 Resolutions of the MAB; and reinstated
MAB rendered its disposition, as follows: the October 24, 2000 Decision in MAB Case Nos. 056-
WHEREFORE, premises considered, the assailed 97 and 057-97. The Special Tenth Division canceled
Decision of October 24, 2000 is hereby VACATED. Macroasia's lease contracts; granted Blue Ridge prior
The seven (7) mining lease contracts of Macroasia and preferential rights; and treated the cancellation of
106
a mining lease agreement as a mining dispute within
the exclusive jurisdiction of the POA under Sec. 77 of (5) Whether or not Macroasia/Infanta had lost its right
RA 7942, explaining that the power to resolve mining to participate in this case after it failed to
disputes, which is the greater power, necessarily seasonably file its appeal and after its lease
includes the lesser power to cancel mining contracts had been declared abandoned and
agreements. expired without having been renewed by the
government? [sic]
On February 20, 2006, Celestial filed a Most Urgent
Motion for Issuance of a Temporary Restraining (6) Whether or not Celestial has the preferential right to
Order/Preliminary Prohibitory Injunction/Mandatory apply for the 23 DE LARA claims which were
Injunction[31] to defer and preclude the issuance of included in Infanta's (Macroasia) expired lease
MPSA to Macroasia by the MGB and the DENR contract (LLC-V-941) and the other areas
Secretary. We denied this motion in our February 22, declared as lapsed or abandoned by MGB-Region
2006 Resolution.[32] 4 and the Panel of Arbitrators?[37] [sic]

Upon inquiry with the DENR, Blue Ridge discovered In G.R. No. 172936, petitioner Blue Ridge raises the
that sometime in December 2005 two MPSAs, duly following grounds for the allowance of the petition:
approved and signed by the DENR Secretary, had I
been issued in favor of Macroasia. Thus, we have the
instant Petition for Certiorari[33] filed by Blue Ridge At the outset, the instant petition must be given due
docketed as G.R. No. 172936 under Rule 65, seeking course and taken cognizance of by the Honorable
to invalidate the two MPSAs issued to Macroasia. Court considering that exceptional and compelling
circumstances justify the availment of the instant
In the meantime, on June 7, 2006, Celestial filed its petition and the call for the exercise of the Honorable
Motion for Partial Reconsideration[34] of the May 18, Court's primary jurisdiction.
2006 CA Decision in CA-G.R. SP No. 90828, while
Macroasia filed its motion for reconsideration of the A. The exploration, development and utilization of
same CA decision on July 7, 2006. The motions were minerals, petroleum and other mineral oils
denied in the assailed January 19, 2007 CA are imbued with public interest. The action of
Resolution. Hence, on March 8, 2007, Celestial filed then Secretary Defensor, maintained
the third petition[35] docketed as G.R. No. 176226, and continued by public respondent
assailing the CA's May 18, 2006 Decision and January Secretary Reyes, was tainted with grave
19, 2007 Resolution, insofar as these granted Blue abuse of discretion, has far-reaching
Ridge's prior and preferential rights. While on March consequences because of the magnitude of
9, 2007, Macroasia filed the fourth petition[36] docketed the effect created thereby.
as G.R. No. 176319, also assailing the CA's May 18,
2006 Decision and January 19, 2007 Resolution.
B. The issues in the instant petition have already
been put to fore by Celestial with the First
Division of the Honorable Court, and hence,
this circumstance justifies the cognizance by
The Issues the Honorable Court of the instant petition.

In G.R. No. 169080, petitioner Celestial raises the


II
following issues for our consideration:
It was grave abuse of discretion amounting to lack
(1) Whether or not Macroasia, for reasons of public
and/or excess of jurisdiction for then Secretary
policy is estopped from assailing the alleged lack of Defensor to have issued the subject MPSAs in favor of
jurisdiction of the Panel of Arbitrators and the Mines private respondent Macroasia, considering that:
Adjudication Board only after receiving an adverse
judgment therefrom? [sic]
A. Non-compliance of the mandatory
(2) Whether or not it is only the Secretary of the DENR requirements by private respondent Macroasia
who has the jurisdiction to cancel mining contracts prior to approval of the subject
and privileges? [sic] MPSAs should have precluded then
Secretary Defensor from approving subject
(3) Whether or not a petition for the cancellation of a MPSAs.
mining lease contract or privilege is a mining
dispute within the meaning of the law? [sic] B. Petitioner Blue Ridge has the prior and
preferential right to file its mining application
(4) Whether or not Infanta's (Macroasia) mining lease over the mining claims covered by the subject
contract areas were deemed abandoned warranting MPSAs, pursuant to the Decision dated 24
the cancellation of the lease contracts and the October 2000 of the Board and as affirmed by
opening of the areas to other qualified applicants? the Decision dated 18 May 2006 of the Court
[sic] of Appeals in CA-G.R. SP No. 90828.[38]
107
In G.R. No. 176226, petitioner Celestial ascribes the II.
following errors to the CA for our consideration:
(1) That in reinstating and adopting as its own the The Court of Appeals (Special Tenth Division) gravely
Decision of the Mine Adjudication Board affirming the erred in denying Macroasia's Motion to Inhibit
abandonment and cancellation of the mining Associate Justice Rosmari Carandang from hearing
areas/claims of Macroasia (Infanta) but awarding the and deciding the Petition
prior or preferential rights to Blue Ridge, the Hon.
Court of Appeals had decided a question of substance III.
in a way not in accord with the Law (RA 7942) or with
the applicable decisions of the Supreme Court; in other There were no factual nor legal bases for the Court of
words, errors of law had been committed by the Hon. Appeals to rule that Macroasia had waived its right to
Court of Appeals in granting preferential rights to Blue question the jurisdiction of the Mines Adjudication
Ridge; Board
(2) That the Hon. Court of Appeals has so far departed
from the accepted and usual course of judicial IV.
proceedings or so far sanctioned such departure by
the Mines Adjudication Board in its Decision of May Republic Act No. 7942 contains provisions which
18, 2006 and Resolution of January 19, 2007 because: unequivocally indicate that only the Secretary of the
Department of Environment and Natural Resources
has the power and authority to cancel mining lease
(A) The findings of fact of the Hon. Court of Appeals agreements
are contradictory or inconsistent with the findings of
the Panel of Arbitrators;
V.
(B) There is grave abuse of discretion on the part of
the Hon. Court of Appeals in its appreciation of the The Court of Appeals (Special Tenth Division) gravely
facts, the evidence and the law thereby leading it to erred in perfunctorily transferring Macroasia's mining
make the erroneous conclusion that Blue Ridge, not lease agreements to Blue Ridge without observing the
Celestial, is entitled to the Award of prior/preferential required procedure nor providing any basis therefor [40]
rights over the mining areas declared as abandoned The Court's Ruling
by Macroasia;
The petitions under G.R. Nos. 169080, 172936, and
(C) There is likewise, a grave abuse of discretion on 176226 are bereft of merit, while the petition under
the part of the Hon. Court of Appeals in that the said G.R. No. 176319 is meritorious.
Court did not even consider some of the issues raised
by Celestial; The pith of the controversy, upon which the other
issues are hinged is, who has authority and jurisdiction
(D) That the findings of the Hon. Court of Appeals are to cancel existing mineral agreements under RA 7942
mere conclusions not supported by substantial in relation to PD 463 and pertinent rules and
evidence and without citation of the specific evidence regulations.
upon which they are based; they were arrived at
arbitrarily or in disregard of contradiction of the G.R. Nos. 169080, 176226 and 176319
evidence on record and findings of the Panel of
Arbitrators in the Resolution of September 1, 1997; We will jointly tackle G.R. Nos. 169080, 176266, and
176319 as the issues and arguments of these three
(E) That the findings of the Hon. Court of Appeals are are inextricably intertwined.
premised on the absence of evidence but such
findings are contradicted by the evidence on record Core Issue: Jurisdiction over Cancellation of
and are violative of the provisions of RA 7942 and its Mineral Agreements
Implementing Rules and Regulations.[39]
In G.R. No. 176319, petitioner Macroasia raises the Petitioner Celestial maintains that while the jurisdiction
following grounds for the allowance of the petition: to approve mining lease contracts or mineral
agreements is conferred on the DENR Secretary, Sec.
I. 77(a) of RA 7942 by implication granted to the POA
and MAB the authority to cancel existing mining lease
The Court of Appeals (Special Tenth Division) should contracts or mineral agreements.
have dismissed the Petition of Blue Ridge outright
since the issues, facts and matters involved in the said On the other hand, respondent Macroasia strongly
Petition are identical to those which had already been asserts that it is the DENR Secretary who has the
painstakingly passed upon, reviewed and resolved by exclusive and primary jurisdiction to grant and cancel
the Court of Appeal's Twelfth Division in CA-G.R. SP existing mining lease contracts; thus, the POA and
No. 87931 MAB have no jurisdiction to cancel much less to grant
any preferential rights to other mining firms.

108
Before we resolve this core issue of jurisdiction over the applications for mineral agreements are now
cancellation of mining lease contracts, we first need to required to be filed with the Regional Director as
look back at previous mining laws pertinent to this provided by Sec. 29 of RA 7942. The proper filing gave
issue. the proponent the prior right to be approved by the
Secretary and thereafter to be submitted to the
Under PD 463, The Mineral Resources Development President. The President shall provide a list to
Decree of 1974, which took effect on May 17, 1974, Congress of every approved mineral agreement within
applications for lease of mining claims were required to 30 days from its approval by the Secretary. Again, RA
be filed with the Director of the Bureau of Mines, within 7942 is silent on who has authority to cancel the
two (2) days from the date of their recording.[41] Sec. agreement.
40 of PD 463 provided that if no adverse claim was
filed within (15) days after the first date of publication, Compared to PD 463 where disputes were decided by
it was conclusively presumed that no adverse claim the Bureau of Mines Director whose decisions were
existed and thereafter no objection from third parties to appealable to the DENR Secretary and then to the
the grant of the lease could be heard, except protests President, RA 7942 now provides for the creation of
pending at the time of publication. The Secretary quasi-judicial bodies (POA and MAB) that would have
would then approve and issue the corresponding jurisdiction over conflicts arising from the applications
mining lease contract. In case of any protest or and mineral agreements. Secs. 77, 78, and 79 lay
adverse claim relating to any mining claim and lease down the procedure, thus:
application, Secs. 48 and 50 of PD 463 prescribed the SEC. 77. Panel of Arbitrators.—There shall be a panel
procedure. Under Sec. 48, the protest should be filed of arbitrators in the regional office of the Department
with the Bureau of Mines. Under Sec. 50, any party composed of three (3) members, two (2) of whom must
not satisfied with the decision or order of the Director be members of the Philippine Bar in good standing and
could, within five (5) days from receipt of the decision one [1] licensed mining engineer or a professional in a
or order, appeal to the Secretary. The decisions of the related field, and duly designated by the Secretary as
Secretary were likewise appealable within five (5) days recommended by the Mines and Geosciences Bureau
from receipts by the affected party to the President of Director. Those designated as members of the panel
the Philippines whose decision shall be final and shall serve as such in addition to their work in the
executory. PD 463 was, however, silent as to who was Department without receiving any additional
authorized to cancel the mineral agreements. compensation. As much as practicable, said members
shall come from the different bureaus of the
On July 10, 1987, President Corazon C. Aquino issued Department in the region. The presiding officer thereof
Executive Order No. (EO) 211. Under Sec. 2 of EO shall be selected by the drawing of lots. His tenure as
211, the processing, evaluation, and approval of all presiding officer shall be on a yearly basis. The
mining applications, declarations of locations, members of the panel shall perform their duties and
operating agreements, and service contracts were obligations in hearing and deciding cases until their
governed by PD 463, as amended. EO 211 likewise designation is withdrawn or revoked by the
did not contain any provision on the authority to cancel Secretary. Within thirty (30) working days, after the
operating agreements and service contracts. submission of the case by the parties for decision, the
panel shall have exclusive and original jurisdiction to
On July 25, 1987, EO 279 was issued by President hear and decide on the following:
Aquino. It authorized the DENR Secretary to negotiate
and enter into, for and in behalf of the Government, (a) Disputes involving rights to mining areas;
joint venture, co-production, or production-sharing
agreements for the exploration, development, and (b) Disputes involving mineral agreements or
utilization of mineral resources with any Filipino citizen, permits;
corporation, or association, at least 60% of whose
capital was owned by Filipino citizens.[42] The contract (c) Disputes involving surface owners, occupants and
or agreement was subject to the approval of the claimholders/concessionaires; and
President.[43] With respect to contracts of foreign-
owned corporations or foreign investors involving (d) Disputes pending before the Bureau and the
either technical or financial assistance for large-scale Department at the date of the effectivity of this Act.
exploration, development, and utilization of minerals,
the DENR Secretary could recommend approval of SEC. 78. Appellate Jurisdiction.—The decision or
said contracts to the President.[44] EO 279 provided order of the panel of arbitrators may be appealed by
that PD 463 and its implementing rules and the party not satisfied thereto to the Mines Adjudication
regulations, which were not inconsistent with EO 279, Board within fifteen (15) days from receipt thereof
continued in force and effect.[45] Again, EO 279 was which must decide the case within thirty (30) days from
silent on the authority to cancel mineral agreements. submission thereof for decision.

RA 7942, The Philippine Mining Act of 1995 enacted SEC. 79. Mines Adjudication Board.—The Mines
on March 3, 1995, repealed the provisions of PD 463 Adjudication Board shall be composed of three (3)
inconsistent with RA 7942. Unlike PD 463, where the members. The Secretary shall be the chairman with
application was filed with the Bureau of Mines Director, the Director of the Mines and Geosciences Bureau and
109
the Undersecretary for Operations of the Department
as members thereof. (4) Exercise supervision and control over forest
lands, alienable and disposable public lands, mineral
x x x x resources x x x

A petition for review by certiorari and question of law x x x x


may be filed by the aggrieved party with the Supreme
Court within thirty (30) days from receipt of the order or (12) Regulate the development, disposition,
decision of the Board. extraction, exploration and use of the country's
RA 7942 is also silent as to who is empowered to forest, land, water and mineral resources;
cancel existing lease contracts and mineral
agreements. (13) Assume responsibility for the assessment,
development, protection, licensing and regulation as
Meanwhile, in Southeast Mindanao Gold Mining Corp. provided for by law, where applicable, of all energy
v. MAB, we explained that the decision of the MAB can and natural resources; the regulation and
first be appealed, via a petition for review, to the CA monitoring of service contractors, licensees,
before elevating the case to this Court.[46] lessees, and permit for the extraction, exploration,
development and use of natural resources
After a scrutiny of the provisions of PD 463, EO 211, products; x x x
EO 279, RA 7942 and its implementing rules and
regulations, executive issuances, and case law, we x x x x
rule that the DENR Secretary, not the POA, has the
jurisdiction to cancel existing mineral lease contracts (15) Exercise exclusive jurisdiction on the
or mineral agreements based on the following reasons: management and disposition of all lands of the
public domain x x x
1. The power of the DENR Secretary to cancel mineral
agreements emanates from his administrative Chapter 2—The Department Proper
authority, supervision, management, and control over
mineral resources under Chapter I, Title XIV of Book x x x x
IV of the Revised Administrative Code of 1987, viz:
Chapter 1—General Provisions Sec. 8. The Secretary.—The Secretary shall:
Section 1. Declaration of Policy.—(1) The State shall x x x x
ensure, for the benefit of the Filipino people, the full
exploration and development as well as the judicious (3) Promulgate rules, regulations and other
disposition, utilization, management, renewal and issuances necessary in carrying out the
conservation of the country's forest, mineral, land, Department's mandate, objectives, policies, plans,
waters, fisheries, wildlife, off-shore areas and other programs and projects.
natural resources x x x
(4) Exercise supervision and control over all
Sec. 2. Mandate.—(1) The Department of functions and activities of the Department;
Environment and Natural Resources shall be
primarily responsible for the implementation of the (5) Delegate authority for the performance of any
foregoing policy. (2) It shall, subject to law and administrative or substantive function to subordinate
higher authority, be in charge of carrying out the officials of the Department x x x (Emphasis supplied.)
State's constitutional mandate to control and It is the DENR, through the Secretary, that manages,
supervise the exploration, development, utilization, supervises, and regulates the use and development of
and conservation of the country's natural all mineral resources of the country. It has exclusive
resources. jurisdiction over the management of all lands of public
domain, which covers mineral resources and deposits
x x x x from said lands. It has the power to oversee,
supervise, and police our natural resources which
Sec. 4. Powers and Functions.—The Department include mineral resources. Derived from the broad
shall: and explicit powers of the DENR and its Secretary
under the Administrative Code of 1987 is the power to
x x x x approve mineral agreements and necessarily to cancel
or cause to cancel said agreements.
(2) Formulate, implement and supervise the
implementation of the government's policies, 2. RA 7942 confers to the DENR Secretary specific
plans, and programs pertaining to the authority over mineral resources.
management, conservation, development, use and
replenishment of the country's natural resources; Secs. 8 and 29 of RA 7942 pertinently provide:
SEC. 8. Authority of the Department.—The
x x x x Department shall be the primary government agency
110
responsible for the conservation, management, and cancel mineral agreements under PD 463, and the
development, and proper use of the States mineral power to cancel them under the CMAO implementing
resources including those in reservations, watershed PD 463, EO 211, and EO 279, then there was no recall
areas, and lands of the public domain. The Secretary of the power of the DENR Secretary under RA
shall have the authority to enter into mineral 7942. Historically, the DENR Secretary has the
agreements on behalf of the Government upon the express power to approve mineral agreements or
recommendation of the Director, promulgate such contracts and the implied power to cancel said
rules and regulations as may be necessary to agreements.
implement the intent and provisions of this Act.
It is a well-established principle that in the
SEC. 29. Filing and approval of Mineral Agreements.— interpretation of an ambiguous provision of law, the
x x x. history of the enactment of the law may be used as an
extrinsic aid to determine the import of the legal
The filing of a proposal for a mineral agreement shall provision or the law.[47] History of the enactment of the
give the proponent the prior right to areas covered by statute constitutes prior laws on the same subject
the same. The proposed mineral agreement will be matter. Legislative history necessitates review of "the
approved by the Secretary and copies thereof shall origin, antecedents and derivation" of the law in
be submitted to the President. Thereafter, the question to discover the legislative purpose or
President shall provide a list to Congress of every intent.[48] It can be assumed "that the new legislation
approved mineral agreement within thirty (30) days has been enacted as continuation of the existing
from its approval by the Secretary. (Emphasis legislative policy or as a new effort to perpetuate it or
supplied.) further advance it."[49]
Sec. 29 is a carry over of Sec. 40 of PD 463 which
granted jurisdiction to the DENR Secretary to approve We rule, therefore, that based on the grant of implied
mining lease contracts on behalf of the government, power to terminate mining or mineral contracts under
thus: previous laws or executive issuances like PD 463, EO
SEC. 40. Issuance of Mining Lease Contract.—If no 211, and EO 279, RA 7942 should be construed as a
adverse claim is filed within fifteen (15) days after the continuation of the legislative intent to authorize the
first date of publication, it shall be conclusively DENR Secretary to cancel mineral agreements on
presumed that no such adverse claim exists and account of violations of the terms and conditions
thereafter no objection from third parties to the grant of thereof.
the lease shall be heard, except protest pending at the
time of publication, and the Secretary shall approve 3. Under RA 7942, the power of control and
and issue the corresponding mining lease x x x. supervision of the DENR Secretary over the MGB to
To enforce PD 463, the CMAO containing the rules cancel or recommend cancellation of mineral rights
and regulations implementing PD 463 was issued. clearly demonstrates the authority of the DENR
Sec. 44 of the CMAO provides: Secretary to cancel or approve the cancellation of
SEC. 44. Procedure for Cancellation.—Before any mineral agreements.
mining lease contract is cancelled for any cause
enumerated in Section 43 above, the mining lessee Under Sec. 9 of RA 7942, the MGB was given the
shall first be notified in writing of such cause or power of direct supervision of mineral lands and
causes, and shall be given an opportunity to be heard, resources, thus:
and to show cause why the lease shall not be Sec. 9. Authority of the Bureau.—The Bureau shall
cancelled. have direct charge in the administration and
disposition of mineral lands and mineral resources
If, upon investigation, the Secretary shall find the and shall undertake geological, mining,
lessee to be in default, the former may warn the metallurgical, chemical, and other researches as
lessee, suspend his operations or cancel the lease well as geological and mineral exploration
contract (emphasis supplied). surveys. The Director shall recommend to the
Sec. 4 of EO 279 provided that the provisions of PD Secretary the granting of mineral agreements to
463 and its implementing rules and regulations, not duly qualified persons and shall monitor the
inconsistent with the executive order, continue in force compliance by the contractor of the terms and
and effect. conditions of the mineral agreements. The Bureau
may confiscate surety, performance and guaranty
When RA 7942 took effect on March 3, 1995, there bonds posted through an order to be promulgated by
was no provision on who could cancel mineral the Director. The Director may deputize, when
agreements. However, since the aforequoted Sec. 44 necessary, any member or unit of the Philippine
of the CMAO implementing PD 463 was not repealed National Police, barangay, duly registered
by RA 7942 and DENR AO 96-40, not being contrary nongovernmental organization (NGO) or any qualified
to any of the provisions in them, then it follows that person to police all mining activities. (Emphasis
Sec. 44 serves as basis for the DENR Secretary's supplied.)
authority to cancel mineral agreements. Corollary to the power of the MGB Director to
recommend approval of mineral agreements is his
Since the DENR Secretary had the power to approve power to cancel or recommend cancellation of mining
111
rights covered by said agreements under Sec. 7 of which may later, change or affect substantially
DENR AO 96-40, containing the revised Implementing the facts set forth in said statements.
Rules and Regulations of RA 7942. Sec. 7 reads:
Sec. 7. Organization and Authority of the Bureau. Though Sec. 230 is silent as to who can order the
cancellation, revocation, and termination of a
x x x x permit/mineral agreement/FTAA, it has to be
correlated with the power of the MGB under Sec. 7 of
The Bureau shall have the following authority, among AO 96-40 "to cancel or to recommend cancellation,
others: after due process, mining rights, mining applications
and mining claims for noncompliance with pertinent
a. To have direct charge in the administration laws, rules and regulations." As the MGB is under the
and disposition of mineral land and mineral supervision of the DENR Secretary, then the logical
resources; conclusion is that it is the DENR Secretary who can
cancel the mineral agreements and not the POA nor
xxxx the MAB.

5. Celestial and Blue Ridge are not unaware of the


d. To recommend to the Secretary the granting of
stipulations in the Mining Lease Contract Nos. V-1050
mineral agreements or to endorse to the
and MRD-52,[50] the cancellation of which they sought
Secretary for action by the President the grant
from the POA. It is clear from said lease contracts that
of FTAAs [Financial and Technical Assistance
the parties are the Republic of the Philippines
Agreements], in favor of qualified persons and
to monitor compliance by the Contractor with represented by the Secretary of Agriculture and
the terms and conditions of the mineral Natural Resources (now DENR Secretary) as lessor,
and Infanta (Macroasia) as lessee. Paragraph 18 of
agreements and FTAAs.
said lease contracts provides:
Whenever the LESSEE fails to comply with any
e. To cancel or to recommend cancellation provision of [PD 463, and] Commonwealth Acts Nos.
after due process, mining rights, mining 137, 466 and 470, [both as amended,] and/or the rules
applications and mining claims for non- and regulations promulgated thereunder, or any of the
compliance with pertinent laws, rules and covenants therein, the LESSOR may declare this
regulations. lease cancelled and, after having given thirty (30)
days' notice in writing to the LESSEE, may enter and
It is explicit from the foregoing provision that the DENR take possession of the said premises, and said lessee
Secretary has the authority to cancel mineral shall be liable for all unpaid rentals, royalties and taxes
agreements based on the recommendation of the due the Government on the lease up to the time of the
MGB Director. As a matter of fact, the power to cancel forfeiture or cancellation, in which event, the LESSEE
mining rights can even be delegated by the DENR hereby covenants and agrees to give up the
Secretary to the MGB Director. Clearly, it is the possession of the property leased. (Emphasis
Secretary, not the POA, that has authority and supplied.)
jurisdiction over cancellation of existing mining Thus, the government represented by the then
contracts or mineral agreements. Secretary of Agriculture and Natural Resources (now
the DENR Secretary) has the power to cancel the
4. The DENR Secretary's power to cancel mining lease contracts for violations of existing laws, rules and
rights or agreements through the MGB can be inferred regulations and the terms and conditions of the
from Sec. 230, Chapter XXIV of DENR AO 96-40 on contracts. Celestial and Blue Ridge are now estopped
cancellation, revocation, and termination of a from challenging the power and authority of the DENR
permit/mineral agreement/FTAA. Sec. 230 provides: Secretary to cancel mineral agreements.
Section 230. Grounds
However, Celestial and Blue Ridge insist that the
The following grounds for cancellation revocation and power to cancel mineral agreements is also lodged
termination of a Mining Permit Mineral with the POA under the explicit provisions of Sec. 77 of
Agreement/FTAA. RA 7942.

a. Violation of any of the terms and conditions of This postulation is incorrect.


the Permits or Agreements;
Sec. 77 of RA 7942 lays down the jurisdiction of POA,
to wit:
b. Nonpayment of taxes and fees due the
Within thirty (30) days, after the submission of the case
government for two (2) consecutive years; and
by the parties for the decision, the panel shall have
exclusive and original jurisdiction to hear and decide
c. Falsehood or omission of facts in the the following:
application for exploration [or Mining] Permit
Mineral Agreement/FTAA or other permits (a) Disputes involving rights to mining areas

112
with Mineral Reservations, within fifteen (15) working
(b) Disputes involving mineral agreements or permits days from receipt of the Certification issued by the
The phrase "disputes involving rights to mining areas" Panel of Arbitrators as provided for in Section 38
refers to any adverse claim, protest, or opposition to hereof, the same shall be evaluated and endorsed
an application for mineral agreement. The POA by the Director to the Secretary for
therefore has the jurisdiction to resolve any adverse consideration/approval within fifteen days from
claim, protest, or opposition to a pending application receipt of such endorsement. (Emphasis supplied.)
for a mineral agreement filed with the concerned It has been made clear from the aforecited provisions
Regional Office of the MGB. This is clear from Secs. that the "disputes involving rights to mining areas"
38 and 41 of DENR AO 96-40, which provide: under Sec. 77(a) specifically refer only to those
Sec. 38. disputes relative to the applications for a mineral
agreement or conferment of mining rights.
x x x x
The jurisdiction of the POA over adverse claims,
Within thirty (30) calendar days from the last date of protest, or oppositions to a mining right application is
publication/posting/radio announcements, the further elucidated by Secs. 219 and 43 of DENR AO
authorized officer(s) of the concerned office(s) shall 95-936, which read:
issue a certification(s) that the publication/posting/radio Sec. 219. Filing of Adverse
announcement have been complied with. Any Claims/Conflicts/Oppositions.—Notwithstanding the
adverse claim, protest or opposition shall be filed provisions of Sections 28, 43 and 57 above, any
directly, within thirty (30) calendar days from the adverse claim, protest or opposition specified in
last date of publication/posting/radio said sections may also be filed directly with the
announcement, with the concerned Regional Office Panel of Arbitrators within the concerned periods for
or through any concerned PENRO or CENRO for filing such claim, protest or opposition as specified in
filing in the concerned Regional Office for said Sections.
purposes of its resolution by the Panel of
Arbitrators pursuant to the provisions of this Act Sec. 43. Publication/Posting of Mineral Agreement
and these implementing rules and regulations. Application.—
Upon final resolution of any adverse claim, protest
or opposition, the Panel of Arbitrators shall x x x x
likewise issue a certification to that effect within
five (5) working days from the date of finality of The Regional Director or concerned Regional Director
resolution thereof. Where there is no adverse shall also cause the posting of the application on the
claim, protest or opposition, the Panel of bulletin boards of the Bureau, concerned Regional
Arbitrators shall likewise issue a Certification to office(s) and in the concerned province(s) and
that effect within five working days therefrom. municipality(ies), copy furnished the barangays where
the proposed contract area is located once a week for
x x x x two (2) consecutive weeks in a language generally
understood in the locality. After forty-five (45) days
No Mineral Agreement shall be approved unless from the last date of publication/posting has been
the requirements under this Section are fully made and no adverse claim, protest or opposition was
complied with and any adverse filed within the said forty-five (45) days, the concerned
claim/protest/opposition is finally resolved by the offices shall issue a certification that
Panel of Arbitrators. publication/posting has been made and that no
adverse claim, protest or opposition of whatever nature
Sec. 41. has been filed. On the other hand, if there be any
adverse claim, protest or opposition, the same
x x x x shall be filed within forty-five (45) days from the
last date of publication/posting, with the Regional
Within fifteen (15) working days from the receipt of Offices concerned, or through the Department's
the Certification issued by the Panel of Arbitrators Community Environment and Natural Resources
as provided in Section 38 hereof, the concerned Officers (CENRO) or Provincial Environment and
Regional Director shall initially evaluate the Natural Resources Officers (PENRO), to be filed at
Mineral Agreement applications in areas outside the Regional Office for resolution of the Panel of
Mineral reservations. He/She shall thereafter Arbitrators. However previously published valid and
endorse his/her findings to the Bureau for further subsisting mining claims are exempted from
evaluation by the Director within fifteen (15) posted/posting required under this Section.
working days from receipt of forwarded
documents. Thereafter, the Director shall endorse No mineral agreement shall be approved unless
the same to the secretary for the requirements under this section are fully
consideration/approval within fifteen working days complied with and any opposition/adverse claim is
from receipt of such endorsement. dealt with in writing by the Director and resolved
by the Panel of Arbitrators. (Emphasis supplied.)
In case of Mineral Agreement applications in areas
113
These provisions lead us to conclude that the power of involved, or a mere incidental interest." It is settled in
the POA to resolve any adverse claim, opposition, or this jurisdiction that "one having no right or interest to
protest relative to mining rights under Sec. 77(a) of RA protect cannot invoke the jurisdiction of the court as a
7942 is confined only to adverse claims, conflicts and party-plaintiff in an action."[56] Real interest is defined
oppositions relating to applications for the grant of as "a present substantial interest, as distinguished
mineral rights. POA's jurisdiction is confined only to from a mere expectancy, or a future, contingent,
resolutions of such adverse claims, conflicts and subordinate or consequential interest."[57]
oppositions and it has no authority to approve or reject
said applications. Such power is vested in the DENR From the foregoing, a petition for the cancellation of an
Secretary upon recommendation of the MGB Director. existing mineral agreement covering an area applied
Clearly, POA's jurisdiction over "disputes involving for by an applicant based on the alleged violation of
rights to mining areas" has nothing to do with the any of the terms thereof, is not a "dispute" involving a
cancellation of existing mineral agreements. mineral agreement under Sec. 77 (b) of RA 7942. It
does not pertain to a violation by a party of the right of
On the other hand, Celestial and Blue Ridge contend another. The applicant is not a real party-in-interest as
that POA has jurisdiction over their petitions for the he does not have a material or substantial interest in
cancellation of Macroasia's lease agreements banking the mineral agreement but only a prospective or
on POA's jurisdiction over "disputes involving mineral expectant right or interest in the mining area. He has
agreements or permits" under Sec. 77 (b) of RA 7942. no legal right to such mining claim and hence no
dispute can arise between the applicant and the
Such position is bereft of merit. parties to the mineral agreement. The court rules
therefore that a petition for cancellation of a mineral
As earlier discussed, the DENR Secretary, by virtue of agreement anchored on the breach thereof even if filed
his powers as administrative head of his department in by an applicant to a mining claim, like Celestial and
charge of the management and supervision of the Blue Ridge, falls within the jurisdiction of the DENR
natural resources of the country under the 1987 Secretary and not POA. Such petition is excluded
Administrative Code, RA 7942, and other laws, rules, from the coverage of the POA's jurisdiction over
and regulations, can cancel a mineral agreement for disputes involving mineral agreements under Sec. 77
violation of its terms, even without a petition or request (b) of RA 7942.
filed for its cancellation, provided there is compliance
with due process. Since the cancellation of the mineral Macroasia not estopped from raising the issue of
agreement is approved by the DENR Secretary, then jurisdiction on appeal
the recourse of the contractor is to elevate the matter
to the OP pursuant to AO 18, Series of 1987 but not On the related issue of estoppel, petitioner Celestial
with the POA. argues that Macroasia is estopped from raising and
questioning the issue of the jurisdiction of the POA and
Matched with the legal provisions empowering the MAB over the petition for cancellation of its mining
DENR Secretary to cancel a mineral agreement is lease contracts, when Macroasia raised it only in its
Sec. 77 (b) of RA 7942 which grants POA jurisdiction Supplemental Motion for Reconsideration.
over disputes involving mineral agreements.
We rule that the principle of estoppel does not apply.
A dispute is defined as "a conflict or controversy; a
conflict of claims or rights; an assertion of a right, claim Indeed, Macroasia was not the one that initiated the
or demand on one side; met by contrary claims or instant case before the POA, and thus was not the one
allegations on the other."[51] It is synonymous to a that invoked the jurisdiction of the POA. Hence, on
cause of action which is "an act or omission by which a appeal, Macroasia is not precluded from raising the
party violates a right of another."[52] issue of jurisdiction as it may be invoked even on
appeal.[58] As a matter of fact, a party can raise the
A petition or complaint originating from a dispute can issue of jurisdiction at any stage of the proceedings.
be filed or initiated only by a real party-in-interest. The
rules of court define a real party-in-interest as "the Petitioner Celestial's reliance on Villela v. Gozun[59] to
party who stands to be benefited or injured by the support the contention that the POA has jurisdiction to
judgment in the suit or the party entitled to the avails of hear and decide a petition to cancel existing mining
the suit."[53] Every action, therefore, can only be lease contracts, is misplaced. In said case, we
prosecuted in the name of the real party-in- dismissed the petition on the ground of non-exhaustion
interest.[54] It has been explained that "a real party-in- of administrative remedies and disregarded judicial
interest plaintiff is one who has a legal right, while a hierarchy as no compelling reason was shown to
real party-in-interest-defendant is one who has a warrant otherwise. While we pointed out the authority
correlative legal obligation whose act or omission of the POA, there was no categorical pronouncement
violates the legal right of the former."[55] on the jurisdictional issue.

On the other hand, interest "means material interest, No valid pronouncement of abandonment due to
an interest in issue and to be affected by the decree, lack of jurisdiction over petition to cancel
as distinguished from mere interest in the question
114
As we are not a trier of facts, we need not make any From these facts, the CA Special Tenth Division
finding on the various investigations done by the MGB should have ordered the consolidation of the petition in
and MAB on the issue of Macroasia's non-compliance CA-G.R. SP No. 90828 by CA-G.R. SP No. 87931
with its work obligations and nonpayment of taxes and pursuant to the Internal Rules of the CA, the latter
fees. Verily, the law does not impose automatic having the earlier docket number. Had it done so, then
cancellation of an existing mining lease contract, as it the occurrence of the conflicting decisions could have
is a question of fact which must be determined by the been prevented. The CA Special Tenth Division
MGB which can recommend the cancellation of the should have abided by our ruling in Nacuray v. NLRC,
mineral or lease agreements to the DENR where we held, "Consequently, a division cannot and
Secretary. Be that as it may, since the POA and MAB should not review a case already passed upon by
have no jurisdiction over the petition for cancellation of another Division of this Court. It is only proper, to
existing mining lease contracts of Macroasia, they allow the case to take its rest after having attained
could not have made any binding pronouncement that finality."[60]
Macroasia had indeed abandoned the subject mining
claims. Besides, it is the DENR Secretary who has the The CA should take the appropriate steps, including
authority to cancel Macroasia's existing mining lease the adoption or amendment of the rules, to see to it
contracts whether on grounds of abandonment or any that cases or petitions arising from the same
valid grounds for cancellation. questioned decision, order, or resolution are
consolidated to steer clear of contrary or opposing
Decision in CA-G.R. SP No. 90828 not in accord decisions of the different CA Divisions and ensure that
with the law incidents of similar nature will not be replicated.

With our resolution of the issue on the lack of G.R. No. 172936
jurisdiction of the POA and the MAB over petitions to
cancel existing mining lease contracts or mineral No showing that the DENR Secretary gravely
agreements, it is thus clear that the May 18, 2006 abused his discretion
Decision in CA-G.R. SP No. 90828 must be nullified
for being not in accord with the law and the April 15, Now, going to the substance of the petition in G.R. No.
2005 Decision in CA-G.R. SP No. 87931 must be 172936. A scrutiny of the records shows that the
upheld. DENR Secretary did not gravely abuse his discretion in
approving and signing MPSA Nos. 220-2005-IVB and
Notwithstanding the nullification of the May 18, 2006 221-2005-IVB in favor of Macroasia.
Decision of the Special Tenth Division in CA-G.R. SP
No. 90828, the rendition of two conflicting decisions of Petitioner Blue Ridge anchors its rights on the May 18,
the two CA Divisions over the same challenged 2006 Decision in CA-G.R. SP No. 90828, which we
resolutions of the MAB should be avoided in the future have unfortunately struck down. Blue Ridge's
as this is anathema to stability of judicial decisions and argument in assailing the approval and issuance of the
orderly administration of justice. subject MPSAs that it has been accorded preferential
right by the CA has no leg to stand on.
The chronology of events reveals the following:
The October 24, 2000 MAB Decision, nullified by the
1. January 10, 2005 – petitioner Celestial filed its subsequent November 26, 2004 Resolution, is
petition docketed as CA-G.R. SP No. 87931 unequivocal that Blue Ridge was granted only "prior
with the CA. and preferential rights to FILE its mining application
over the same mining claims."[61] What was accorded
Blue Ridge was only the right to file the mining
2. April 15, 2005 – the CA through its
application but with no assurance that the application
Twelfth Division rendered its Decision in CA-
will be recommended for approval by the MGB and
G.R. SP No. 87931 affirming the November
finally approved by the DENR Secretary.
26, 2004 MAB Resolution.
Moreover, a preferential right wo