Fourteenth CongressSecond Regular Session

Begun and held in Metro Manila, on Monday, the twenty-eight day of July, two thousand eight.

Republic Act No. 9522             March 10, 2009

AN ACT TO AMEND CERTAIN PROVISIONS OF REPUBLIC ACT NO. 3046, AS AMENDED BY REPUBLIC ACT NO. 5446, TO DEFINE THE ARCHIPELAGIC BASELINE OF THE PHILIPPINES AND FOR OTHER PURPOSES

Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled::

Section 1. Section 1 of Republic Act No. 3046, entitled "An Act to Define the Baselines of the Territorial Sea of the Philippines", as amended by Section 1 of Republic Act No. 5446, is hereby amended to read as follows:

Section 1. The baselines of the Philippines archipelago are hereby defined and described specifically as follows:

Section 2. The baseline in the following areas over which the Philippines likewise exercises sovereignty and jurisdiction shall be determined as "Regime of Islands" under the Republic of the Philippines consistent with Article 121 of the United Nations Convention on the Law of the Sea (UNCLOS):

a) The Kalayaan Island Group as constituted under Presidential Decree No. 1596; andb) Bajo de Masinloc, also known as Scarborough Shoal.

Section 3. This Act affirms that the Republic of the Philippines has dominion, sovereignty and jurisdiction over all portions of the national territory as defined in the Constitution and by provisions of applicable laws including, without limitation, Republic Act No. 7160, otherwise known as the Local Government Code of 1991, as amended.

Section 4. This Act, together with the geographic coordinates and the chart and maps indicating the aforesaid baselines, shall be deposited and registered with the Secretary General of the United Nations.

Section 5. The National Mapping and Resource Information Authority (NAMRIA) shall forthwith produce and publish charts and maps of the appropriate scale clearly representing the delineation of basepoints and baselines as set forth in this Act.

Section 6. The amount necessary to carry out the provisions of this Act shall be provided in a supplemental budyet or included in the General Appropriations Act of the year of its enactment into law.

Section 7. If any portion or provision of this Act is declared unconstitutional or invalid the other portions or provisions hereof which are not affected thereby shall continue to be in full force and effect.

Section 8. The provisions of Republic Act No. 3046, as amended by Republic Act No. 5446, and all other laws, decrees, executive orders, rules and issuances inconsistent with this Act are hereby amended or modified accordingly.

Section 9. This Act shall take effect fifteen (15) days following its publication in the Official Gazette or in any two (2) newspaper of general circulation.

Approved

(Sgd.) PROSPERO C. NOGRALESSpeaker of the House of Representatives

(Sgd.) JUAN PONCE ENRILEPresident of the Senate

This Act which is a consolidation of Senate Bill No. 2699 and House Bill No. 3216 was finally passed by the Senate and the House of Representative on February 17, 2009.

(Sgd.) MARILYN B. BARUA-YAPSecretary General

House of Represenatives

(Sgd.) EMMA LIRIO-REYESSecretary of Senate

Approved: MAR 10, 2009

(Sgd.) GLORIA MACAPAGAL-ARROYOPresident of the Philippines

Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R No. 187167               August 16, 2011

PROF. MERLIN M. MAGALLONA, AKBAYAN PARTY-LIST REP. RISA HONTIVEROS, PROF. HARRY C. ROQUE, JR., AND UNIVERSITY OF THE PHILIPPINES COLLEGE OF LAW STUDENTS, ALITHEA BARBARA ACAS, VOLTAIRE ALFERES, CZARINA MAY ALTEZ, FRANCIS ALVIN ASILO, SHERYL BALOT, RUBY AMOR BARRACA, JOSE JAVIER BAUTISTA, ROMINA BERNARDO, VALERIE PAGASA BUENAVENTURA, EDAN MARRI CAÑETE, VANN ALLEN DELA CRUZ, RENE DELORINO, PAULYN MAY DUMAN, SHARON ESCOTO, RODRIGO FAJARDO III, GIRLIE FERRER, RAOULLE OSEN FERRER, CARLA REGINA GREPO, ANNA MARIE CECILIA GO, IRISH KAY KALAW, MARY ANN JOY LEE, MARIA LUISA MANALAYSAY, MIGUEL RAFAEL MUSNGI, MICHAEL OCAMPO, JAKLYN HANNA PINEDA, WILLIAM RAGAMAT, MARICAR RAMOS, ENRIK FORT REVILLAS, JAMES MARK TERRY RIDON, JOHANN FRANTZ RIVERA IV, CHRISTIAN RIVERO, DIANNE MARIE ROA, NICHOLAS SANTIZO, MELISSA CHRISTINA SANTOS, CRISTINE MAE TABING, VANESSA ANNE TORNO, MARIA ESTER VANGUARDIA, and MARCELINO VELOSO III, Petitioners, vs.HON. EDUARDO ERMITA, IN HIS CAPACITY AS EXECUTIVE SECRETARY, HON. ALBERTO ROMULO, IN HIS CAPACITY AS SECRETARY OF THE DEPARTMENT OF FOREIGN AFFAIRS, HON. ROLANDO ANDAYA, IN HIS CAPACITY AS SECRETARY OF THE DEPARTMENT OF BUDGET AND MANAGEMENT, HON. DIONY VENTURA, IN HIS CAPACITY AS ADMINISTRATOR OF THE NATIONAL MAPPING & RESOURCE INFORMATION AUTHORITY, and HON. HILARIO DAVIDE, JR., IN HIS CAPACITY AS REPRESENTATIVE OF THE PERMANENT MISSION OF THE REPUBLIC OF THE PHILIPPINES TO THE UNITED NATIONS, Respondents.

D E C I S I O N

CARPIO, J.:

The Case

This original action for the writs of certiorari and prohibition assails the constitutionality of Republic Act No. 95221(RA 9522) adjusting the country’s archipelagic baselines and classifying the baseline regime of nearby territories.

The Antecedents

In 1961, Congress passed Republic Act No. 3046 (RA 3046)2 demarcating the maritime baselines of the Philippines as an archipelagic State.3 This law followed the framing of the Convention on the Territorial Sea and the Contiguous Zone in 1958 (UNCLOS I),4 codifying, among others, the sovereign right of States parties over their "territorial sea," the breadth of which, however, was left undetermined. Attempts to fill this void during the second round of negotiations in Geneva in 1960 (UNCLOS II) proved futile. Thus, domestically, RA 3046 remained unchanged for nearly five decades, save for legislation passed in 1968 (Republic Act No. 5446 [RA 5446]) correcting typographical errors and reserving the drawing of baselines around Sabah in North Borneo.

In March 2009, Congress amended RA 3046 by enacting RA 9522, the statute now under scrutiny. The change was prompted by the need to make RA 3046 compliant with the terms of the United Nations Convention on the Law of the Sea (UNCLOS III),5 which the Philippines ratified on 27 February 1984.6 Among others, UNCLOS III prescribes the water-land ratio, length, and contour of baselines of archipelagic States like the Philippines7 and sets the deadline for the filing of application for the extended continental shelf.8 Complying with these requirements, RA 9522 shortened one baseline, optimized the location of some basepoints around the Philippine archipelago and classified adjacent territories, namely, the Kalayaan Island Group (KIG) and the Scarborough Shoal, as "regimes of islands" whose islands generate their own applicable maritime zones.

Petitioners, professors of law, law students and a legislator, in their respective capacities as "citizens, taxpayers or x x x legislators,"9 as the case may be, assail the constitutionality of RA 9522 on two principal grounds, namely: (1) RA 9522 reduces Philippine maritime territory, and logically, the reach of the Philippine state’s sovereign power, in violation of Article 1 of the 1987 Constitution,10 embodying the terms of the Treaty of Paris11 and ancillary treaties,12 and (2) RA 9522 opens the country’s waters landward of the baselines to maritime passage by all vessels and aircrafts, undermining Philippine sovereignty and national security, contravening the country’s nuclear-free policy, and damaging marine resources, in violation of relevant constitutional provisions.13

In addition, petitioners contend that RA 9522’s treatment of the KIG as "regime of islands" not only results in the loss of a large maritime area but also prejudices the livelihood of subsistence fishermen.14 To buttress their argument of territorial diminution, petitioners facially attack RA 9522 for what it excluded and included – its failure to reference either the Treaty of Paris or Sabah and its use of UNCLOS III’s framework of regime of islands to determine the maritime zones of the KIG and the Scarborough Shoal.

Commenting on the petition, respondent officials raised threshold issues questioning (1) the petition’s compliance with the case or controversy requirement for judicial review grounded on petitioners’ alleged lack of locus standiand (2) the propriety of the writs of certiorari and prohibition to assail the constitutionality of RA 9522. On the merits, respondents defended RA 9522 as the country’s compliance with the terms of UNCLOS III, preserving Philippine territory over the KIG or Scarborough Shoal. Respondents add that RA 9522 does not undermine the country’s security, environment and economic interests or relinquish the Philippines’ claim over Sabah.

Respondents also question the normative force, under international law, of petitioners’ assertion that what Spain ceded to the United States under the Treaty of Paris were the islands and all the waters found within the boundaries of the rectangular area drawn under the Treaty of Paris.

We left unacted petitioners’ prayer for an injunctive writ.

The Issues

The petition raises the following issues:

1. Preliminarily –

1. Whether petitioners possess locus standi to bring this suit; and

2. Whether the writs of certiorari and prohibition are the proper remedies to assail the constitutionality of RA 9522.

2. On the merits, whether RA 9522 is unconstitutional.

The Ruling of the Court

On the threshold issues, we hold that (1) petitioners possess locus standi to bring this suit as citizens and (2) the writs of certiorari and prohibition are proper remedies to test the constitutionality of RA 9522. On the merits, we find no basis to declare RA 9522 unconstitutional.

On the Threshold IssuesPetitioners Possess LocusStandi as Citizens

Petitioners themselves undermine their assertion of locus standi as legislators and taxpayers because the petition alleges neither infringement of legislative prerogative15 nor misuse of public funds,16 occasioned by the passage and implementation of RA 9522. Nonetheless, we recognize petitioners’ locus standi as citizens with constitutionally sufficient interest in the resolution of the merits of the case which undoubtedly raises issues of national significance necessitating urgent resolution. Indeed, owing to the peculiar nature of RA 9522, it is understandably difficult to find other litigants possessing "a more direct and specific interest" to bring the suit, thus satisfying one of the requirements for granting citizenship standing.17

The Writs of Certiorari and ProhibitionAre Proper Remedies to Testthe Constitutionality of Statutes

In praying for the dismissal of the petition on preliminary grounds, respondents seek a strict observance of the offices of the writs of certiorari and prohibition, noting that the writs cannot issue absent any showing of grave abuse of discretion in the exercise of judicial, quasi-judicial or ministerial powers on the part of respondents and resulting prejudice on the part of petitioners.18

Respondents’ submission holds true in ordinary civil proceedings. When this Court exercises its constitutional power of judicial review, however, we have, by tradition, viewed the writs of certiorari and prohibition as proper remedial vehicles to test the constitutionality of statutes,19 and indeed, of acts of other branches of government.20 Issues of constitutional import are sometimes crafted out of statutes which, while having no bearing on the personal interests of the petitioners, carry such relevance in the life of this nation that the Court inevitably finds itself constrained to take cognizance of the case and pass upon the issues raised, non-compliance with the letter of procedural rules notwithstanding. The statute sought to be reviewed here is one such law.

RA 9522 is Not UnconstitutionalRA 9522 is a Statutory Tool to Demarcate the Country’sMaritime Zones and Continental Shelf Under UNCLOS III, not to Delineate Philippine Territory

Petitioners submit that RA 9522 "dismembers a large portion of the national territory"21 because it discards the pre-UNCLOS III demarcation of Philippine territory under the Treaty of Paris and related treaties, successively encoded in the definition of national territory under the 1935, 1973 and 1987 Constitutions. Petitioners theorize that this constitutional definition trumps any treaty or statutory provision denying the Philippines sovereign control over waters, beyond the territorial sea recognized at the time of the Treaty of Paris, that Spain supposedly ceded to the United States. Petitioners argue that from the Treaty of Paris’ technical description, Philippine sovereignty over territorial waters extends hundreds of nautical miles around the Philippine archipelago, embracing the rectangular area delineated in the Treaty of Paris.22

Petitioners’ theory fails to persuade us.

UNCLOS III has nothing to do with the acquisition (or loss) of territory. It is a multilateral treaty regulating, among others, sea-use rights over maritime zones (i.e., the territorial waters [12 nautical miles from the baselines], contiguous zone [24 nautical miles from the baselines], exclusive economic zone [200 nautical miles from the baselines]), and continental shelves that UNCLOS III delimits.23 UNCLOS III was the culmination of decades-long negotiations among United Nations members to codify norms regulating the conduct of States in the world’s oceans and submarine areas, recognizing coastal and archipelagic States’ graduated authority over a limited span of waters and submarine lands along their coasts.

On the other hand, baselines laws such as RA 9522 are enacted by UNCLOS III States parties to mark-out specific basepoints along their coasts from which baselines are drawn, either straight or contoured, to serve as geographic starting points to measure the breadth of the maritime zones and continental shelf. Article 48 of UNCLOS III on archipelagic States like ours could not be any clearer:

Article 48. Measurement of the breadth of the territorial sea, the contiguous zone, the exclusive economic zone and the continental shelf. – The breadth of the territorial sea, the contiguous zone, the exclusive economic zone and the continental shelf shall be measured from archipelagic baselines drawn in accordance with article 47. (Emphasis supplied)

Thus, baselines laws are nothing but statutory mechanisms for UNCLOS III States parties to delimit with precision the extent of their maritime zones and continental shelves. In turn, this gives notice to the rest of the international community of the scope of the maritime space and submarine areas within which States parties exercise treaty-based rights, namely, the exercise of sovereignty over territorial waters (Article 2), the jurisdiction to enforce customs, fiscal, immigration, and sanitation laws in the contiguous zone (Article 33), and the right to exploit the living and non-living resources in the exclusive economic zone (Article 56) and continental shelf (Article 77).

Even under petitioners’ theory that the Philippine territory embraces the islands and all the waters within the rectangular area delimited in the Treaty of Paris, the baselines of the Philippines would still have to be drawn in accordance with RA 9522 because this is the only way to draw the baselines in conformity with UNCLOS III. The baselines cannot be drawn from the boundaries or other portions of the rectangular area delineated in the Treaty of Paris, but from the "outermost islands and drying reefs of the archipelago."24

UNCLOS III and its ancillary baselines laws play no role in the acquisition, enlargement or, as petitioners claim, diminution of territory. Under traditional international law typology, States acquire (or conversely, lose) territory through occupation, accretion, cession and prescription,25 not by executing multilateral treaties on the regulations of sea-use rights or enacting statutes to comply with the treaty’s terms to delimit maritime zones and continental shelves. Territorial claims to land features are outside UNCLOS III, and are instead governed by the rules on general international law.26

RA 9522’s Use of the Framework of Regime of Islands to Determine theMaritime Zones of the KIG and the Scarborough Shoal, not Inconsistentwith the Philippines’ Claim of Sovereignty Over these Areas

Petitioners next submit that RA 9522’s use of UNCLOS III’s regime of islands framework to draw the baselines, and to measure the breadth of the applicable maritime zones of the KIG, "weakens our territorial claim" over that area.27 Petitioners add that the KIG’s (and Scarborough Shoal’s) exclusion from the Philippine archipelagic baselines results in the loss of "about 15,000 square nautical miles of territorial waters," prejudicing the livelihood of subsistence fishermen.28 A comparison of the configuration of the baselines drawn under RA 3046 and RA 9522 and the extent of maritime space encompassed by each law, coupled with a reading of the text of RA 9522 and its congressional deliberations, vis-à-vis the Philippines’ obligations under UNCLOS III, belie this view. 1avvphi1

The configuration of the baselines drawn under RA 3046 and RA 9522 shows that RA 9522 merely followed the basepoints mapped by RA 3046, save for at least nine basepoints that RA 9522 skipped to optimize the location of basepoints and adjust the length of one baseline (and thus comply with UNCLOS III’s limitation on the maximum length of baselines). Under RA 3046, as under RA 9522, the KIG and the Scarborough Shoal lie outside of the baselines drawn around the Philippine archipelago. This undeniable cartographic fact takes the wind out of petitioners’ argument branding RA 9522 as a statutory renunciation of the Philippines’ claim over the KIG, assuming that baselines are relevant for this purpose.

Petitioners’ assertion of loss of "about 15,000 square nautical miles of territorial waters" under RA 9522 is similarly unfounded both in fact and law. On the contrary, RA 9522, by optimizing the location of basepoints, increasedthe Philippines’ total maritime space (covering its internal waters, territorial sea and exclusive economic zone) by 145,216 square nautical miles, as shown in the table below:29

Extent of maritime area using RA 3046, as amended, taking into account the Treaty of Paris’ delimitation (in square nautical miles)

Extent of maritime area using RA 9522, taking into account UNCLOS III (in square nautical miles)

Internal or archipelagic waters 166,858 171,435

Territorial Sea 274,136 32,106

Exclusive Economic Zone 382,669

TOTAL 440,994 586,210

Thus, as the map below shows, the reach of the exclusive economic zone drawn under RA 9522 even extends way beyond the waters covered by the rectangular demarcation under the Treaty of Paris. Of course, where there are overlapping exclusive economic zones of opposite or adjacent States, there will have to be a delineation of maritime boundaries in accordance with UNCLOS III.30

Further, petitioners’ argument that the KIG now lies outside Philippine territory because the baselines that RA 9522 draws do not enclose the KIG is negated by RA 9522 itself. Section 2 of the law commits to text the Philippines’ continued claim of sovereignty and jurisdiction over the KIG and the Scarborough Shoal:

SEC. 2. The baselines in the following areas over which the Philippines likewise exercises sovereignty and jurisdiction shall be determined as "Regime of Islands" under the Republic of the Philippines consistent with Article 121 of the United Nations Convention on the Law of the Sea (UNCLOS):

a) The Kalayaan Island Group as constituted under Presidential Decree No. 1596 and

b) Bajo de Masinloc, also known as Scarborough Shoal. (Emphasis supplied)

Had Congress in RA 9522 enclosed the KIG and the Scarborough Shoal as part of the Philippine archipelago, adverse legal effects would have ensued. The Philippines would have committed a breach of two provisions of UNCLOS III. First, Article 47 (3) of UNCLOS III requires that "[t]he drawing of such baselines shall not depart to any

appreciable extent from the general configuration of the archipelago." Second, Article 47 (2) of UNCLOS III requires that "the length of the baselines shall not exceed 100 nautical miles," save for three per cent (3%) of the total number of baselines which can reach up to 125 nautical miles.31

Although the Philippines has consistently claimed sovereignty over the KIG32 and the Scarborough Shoal for several decades, these outlying areas are located at an appreciable distance from the nearest shoreline of the Philippine archipelago,33 such that any straight baseline loped around them from the nearest basepoint will inevitably "depart to an appreciable extent from the general configuration of the archipelago."

The principal sponsor of RA 9522 in the Senate, Senator Miriam Defensor-Santiago, took pains to emphasize the foregoing during the Senate deliberations:

What we call the Kalayaan Island Group or what the rest of the world call[] the Spratlys and the Scarborough Shoal are outside our archipelagic baseline because if we put them inside our baselines we might be accused of violating the provision of international law which states: "The drawing of such baseline shall not depart to any appreciable extent from the general configuration of the archipelago." So sa loob ng ating baseline, dapat magkalapit ang mga islands. Dahil malayo ang Scarborough Shoal, hindi natin masasabing malapit sila sa atin although we are still allowed by international law to claim them as our own.

This is called contested islands outside our configuration. We see that our archipelago is defined by the orange line which [we] call[] archipelagic baseline. Ngayon, tingnan ninyo ang maliit na circle doon sa itaas, that is Scarborough Shoal, itong malaking circle sa ibaba, that is Kalayaan Group or the Spratlys. Malayo na sila sa ating archipelago kaya kung ilihis pa natin ang dating archipelagic baselines para lamang masama itong dalawang circles, hindi na sila magkalapit at baka hindi na tatanggapin ng United Nations because of the rule that it should follow the natural configuration of the archipelago.34 (Emphasis supplied)

Similarly, the length of one baseline that RA 3046 drew exceeded UNCLOS III’s limits. 1avvphi1 The need to shorten this baseline, and in addition, to optimize the location of basepoints using current maps, became imperative as discussed by respondents:

[T]he amendment of the baselines law was necessary to enable the Philippines to draw the outer limits of its maritime zones including the extended continental shelf in the manner provided by Article 47 of [UNCLOS III]. As defined by R.A. 3046, as amended by R.A. 5446, the baselines suffer from some technical deficiencies, to wit:

1. The length of the baseline across Moro Gulf (from Middle of 3 Rock Awash to Tongquil Point) is 140.06 nautical miles x x x. This exceeds the maximum length allowed under Article 47(2) of the [UNCLOS III], which states that "The length of such baselines shall not exceed 100 nautical miles, except that up to 3 per cent of the total number of baselines enclosing any archipelago may exceed that length, up to a maximum length of 125 nautical miles."

2. The selection of basepoints is not optimal. At least 9 basepoints can be skipped or deleted from the baselines system. This will enclose an additional 2,195 nautical miles of water.

3. Finally, the basepoints were drawn from maps existing in 1968, and not established by geodetic survey methods. Accordingly, some of the points, particularly along the west coasts of Luzon down to Palawan were later found to be located either inland or on water, not on low-water line and drying reefs as prescribed by Article 47.35

Hence, far from surrendering the Philippines’ claim over the KIG and the Scarborough Shoal, Congress’ decision to classify the KIG and the Scarborough Shoal as "‘Regime[s] of Islands’ under the Republic of the Philippines consistent with Article 121"36 of UNCLOS III manifests the Philippine State’s responsible observance of its pacta sunt servanda obligation under UNCLOS III. Under Article 121 of UNCLOS III, any "naturally formed area of land, surrounded by water, which is above water at high tide," such as portions of the KIG, qualifies under the category of "regime of islands," whose islands generate their own applicable maritime zones.37

Statutory Claim Over Sabah underRA 5446 Retained

Petitioners’ argument for the invalidity of RA 9522 for its failure to textualize the Philippines’ claim over Sabah in North Borneo is also untenable. Section 2 of RA 5446, which RA 9522 did not repeal, keeps open the door for drawing the baselines of Sabah:

Section 2. The definition of the baselines of the territorial sea of the Philippine Archipelago as provided in this Actis without prejudice to the delineation of the baselines of the territorial sea around the territory of Sabah, situated in North Borneo, over which the Republic of the Philippines has acquired dominion and sovereignty. (Emphasis supplied)

UNCLOS III and RA 9522 notIncompatible with the Constitution’sDelineation of Internal Waters

As their final argument against the validity of RA 9522, petitioners contend that the law unconstitutionally "converts" internal waters into archipelagic waters, hence subjecting these waters to the right of innocent and sea lanes passage under UNCLOS III, including overflight. Petitioners extrapolate that these passage rights indubitably expose Philippine internal waters to nuclear and maritime pollution hazards, in violation of the Constitution.38

Whether referred to as Philippine "internal waters" under Article I of the Constitution39 or as "archipelagic waters" under UNCLOS III (Article 49 [1]), the Philippines exercises sovereignty over the body of water lying landward of the baselines, including the air space over it and the submarine areas underneath. UNCLOS III affirms this:

Article 49. Legal status of archipelagic waters, of the air space over archipelagic waters and of their bed and subsoil.

1. The sovereignty of an archipelagic State extends to the waters enclosed by the archipelagic baselines drawn in accordance with article 47, described as archipelagic waters, regardless of their depth or distance from the coast.

2. This sovereignty extends to the air space over the archipelagic waters, as well as to their bed and subsoil, and the resources contained therein.

x x x x

4. The regime of archipelagic sea lanes passage established in this Part shall not in other respects affect the status of the archipelagic waters, including the sea lanes, or the exercise by the archipelagic State of its sovereignty over such waters and their air space, bed and subsoil, and the resources contained therein. (Emphasis supplied)

The fact of sovereignty, however, does not preclude the operation of municipal and international law norms subjecting the territorial sea or archipelagic waters to necessary, if not marginal, burdens in the interest of maintaining unimpeded, expeditious international navigation, consistent with the international law principle of freedom of navigation. Thus, domestically, the political branches of the Philippine government, in the competent discharge of their constitutional powers, may pass legislation designating routes within the archipelagic waters to regulate innocent and sea lanes passage.40 Indeed, bills drawing nautical highways for sea lanes passage are now pending in Congress.41

In the absence of municipal legislation, international law norms, now codified in UNCLOS III, operate to grant innocent passage rights over the territorial sea or archipelagic waters, subject to the treaty’s limitations and conditions for their exercise.42 Significantly, the right of innocent passage is a customary international law,43 thus automatically incorporated in the corpus of Philippine law.44 No modern State can validly invoke its sovereignty to absolutely forbid innocent passage that is exercised in accordance with customary international law without risking retaliatory measures from the international community.

The fact that for archipelagic States, their archipelagic waters are subject to both the right of innocent passage and sea lanes passage45 does not place them in lesser footing vis-à-vis continental coastal States which are subject, in their territorial sea, to the right of innocent passage and the right of transit passage through international straits. The imposition of these passage rights through archipelagic waters under UNCLOS III was a concession by archipelagic

States, in exchange for their right to claim all the waters landward of their baselines,regardless of their depth or distance from the coast, as archipelagic waters subject to their territorial sovereignty. More importantly, the recognition of archipelagic States’ archipelago and the waters enclosed by their baselines as one cohesive entity prevents the treatment of their islands as separate islands under UNCLOS III.46 Separate islands generate their own maritime zones, placing the waters between islands separated by more than 24 nautical miles beyond the States’ territorial sovereignty, subjecting these waters to the rights of other States under UNCLOS III.47

Petitioners’ invocation of non-executory constitutional provisions in Article II (Declaration of Principles and State Policies)48 must also fail. Our present state of jurisprudence considers the provisions in Article II as mere legislative guides, which, absent enabling legislation, "do not embody judicially enforceable constitutional rights x x x."49 Article II provisions serve as guides in formulating and interpreting implementing legislation, as well as in interpreting executory provisions of the Constitution. Although Oposa v. Factoran50 treated the right to a healthful and balanced ecology under Section 16 of Article II as an exception, the present petition lacks factual basis to substantiate the claimed constitutional violation. The other provisions petitioners cite, relating to the protection of marine wealth (Article XII, Section 2, paragraph 251 ) and subsistence fishermen (Article XIII, Section 752 ), are not violated by RA 9522.

In fact, the demarcation of the baselines enables the Philippines to delimit its exclusive economic zone, reserving solely to the Philippines the exploitation of all living and non-living resources within such zone. Such a maritime delineation binds the international community since the delineation is in strict observance of UNCLOS III. If the maritime delineation is contrary to UNCLOS III, the international community will of course reject it and will refuse to be bound by it.

UNCLOS III favors States with a long coastline like the Philippines. UNCLOS III creates a sui generis maritime space – the exclusive economic zone – in waters previously part of the high seas. UNCLOS III grants new rights to coastal States to exclusively exploit the resources found within this zone up to 200 nautical miles.53 UNCLOS III, however, preserves the traditional freedom of navigation of other States that attached to this zone beyond the territorial sea before UNCLOS III.

RA 9522 and the Philippines’ Maritime Zones

Petitioners hold the view that, based on the permissive text of UNCLOS III, Congress was not bound to pass RA 9522.54 We have looked at the relevant provision of UNCLOS III55 and we find petitioners’ reading plausible. Nevertheless, the prerogative of choosing this option belongs to Congress, not to this Court. Moreover, the luxury of choosing this option comes at a very steep price. Absent an UNCLOS III compliant baselines law, an archipelagic State like the Philippines will find itself devoid of internationally acceptable baselines from where the breadth of its maritime zones and continental shelf is measured. This is recipe for a two-fronted disaster: first, it sends an open invitation to the seafaring powers to freely enter and exploit the resources in the waters and submarine areas around our archipelago; and second, it weakens the country’s case in any international dispute over Philippine maritime space. These are consequences Congress wisely avoided.

The enactment of UNCLOS III compliant baselines law for the Philippine archipelago and adjacent areas, as embodied in RA 9522, allows an internationally-recognized delimitation of the breadth of the Philippines’ maritime zones and continental shelf. RA 9522 is therefore a most vital step on the part of the Philippines in safeguarding its maritime zones, consistent with the Constitution and our national interest.

WHEREFORE, we DISMISS the petition.

SO ORDERED.

ANTONIO T. CARPIOAssociate Justice

Republic of the PhilippinesSUPREME COURT

Manila

THIRD DIVISION

G.R. No. 158290             October 23, 2006

HILARION M. HENARES, JR., VICTOR C. AGUSTIN, ALFREDO L. HENARES, DANIEL L. HENARES, ENRIQUE BELO HENARES, and CRISTINA BELO HENARES, petitioners, vs.LAND TRANSPORTATION FRANCHISING AND REGULATORY BOARD and DEPARTMENT OF TRANSPORTATION AND COMMUNICATIONS, respondents.

R E S O L U T I O N

QUISUMBING, J.:

Petitioners challenge this Court to issue a writ of mandamus commanding respondents Land Transportation Franchising and Regulatory Board (LTFRB) and the Department of Transportation and Communications (DOTC) to require public utility vehicles (PUVs) to use compressed natural gas (CNG) as alternative fuel.

Citing statistics from the Metro Manila Transportation and Traffic Situation Study of 1996,1 the Environmental Management Bureau (EMB) of the National Capital Region,2 a study of the Asian Development Bank,3 the Manila Observatory4 and the Department of Environment and Natural Resources5 (DENR) on the high growth and low turnover in vehicle ownership in the Philippines, including diesel-powered vehicles, two-stroke engine powered motorcycles and their concomitant emission of air pollutants, petitioners attempt to present a compelling case for judicial action against the bane of air pollution and related environmental hazards.

Petitioners allege that the particulate matters (PM) – complex mixtures of dust, dirt, smoke, and liquid droplets, varying in sizes and compositions emitted into the air from various engine combustions – have caused detrimental effects on health, productivity, infrastructure and the overall quality of life. Petitioners particularly cite the effects of certain fuel emissions from engine combustion when these react to other pollutants. For instance, petitioners aver, with hydrocarbons, oxide of nitrogen (NOx) creates smog; with sulfur dioxide, it creates acid rain; and with ammonia, moisture and other compounds, it reacts to form nitric acid and harmful nitrates. Fuel emissions also cause retardation and leaf bleaching in plants. According to petitioner, another emission, carbon monoxide (CO), when not completely burned but emitted into the atmosphere and then inhaled can disrupt the necessary oxygen in blood. With prolonged exposure, CO affects the nervous system and can be lethal to people with weak hearts.6

Petitioners add that although much of the new power generated in the country will use natural gas while a number of oil and coal-fired fuel stations are being phased-out, still with the projected doubling of power generation over the next 10 years, and with the continuing high demand for motor vehicles, the energy and transport sectors are likely to remain the major sources of harmful emissions. Petitioners refer us to the study of the Philippine Environment Monitor 20027, stating that in four of the country's major cities, Metro Manila, Davao, Cebu and Baguio, the exposure to PM10, a finer PM which can penetrate deep into the lungs causing serious health problems, is estimated at over US$430 million.8 The study also reports that the emissions of PMs have caused the following:

· Over 2,000 people die prematurely. This loss is valued at about US$140 million.

· Over 9,000 people suffer from chronic bronchitis, which is valued at about US$120 million.

· Nearly 51 million cases of respiratory symptom days in Metro Manila (averaging twice a year in Davao and Cebu, and five to six times in Metro Manila and Baguio), costs about US$170 million. This is a 70 percent increase, over a decade, when compared with the findings of a similar study done in 1992 for Metro Manila, which reported 33 million cases.9

Petitioners likewise cite the University of the Philippines' studies in 1990-91 and 1994 showing that vehicular emissions in Metro Manila have resulted to the prevalence of chronic obstructive pulmonary diseases (COPD); that pulmonary tuberculosis is highest among jeepney drivers; and there is a 4.8 to 27.5 percent prevalence of respiratory symptoms among school children and 15.8 to 40.6 percent among child vendors. The studies also revealed that the children in Metro Manila showed more compromised pulmonary function than their rural counterparts. Petitioners infer that these are mostly due to the emissions of PUVs.

To counter the aforementioned detrimental effects of emissions from PUVs, petitioners propose the use of CNG. According to petitioners, CNG is a natural gas comprised mostly of methane which although containing small amounts of propane and butane,10 is colorless and odorless and considered the cleanest fossil fuel because it produces much less pollutants than coal and petroleum; produces up to 90 percent less CO compared to gasoline and diesel fuel; reduces NOx emissions by 50 percent and cuts hydrocarbon emissions by half; emits 60 percent less PMs; and releases virtually no sulfur dioxide. Although, according to petitioners, the only drawback of CNG is that it produces more methane, one of the gases blamed for global warming.11

Asserting their right to clean air, petitioners contend that the bases for their petition for a writ of mandamus to order the LTFRB to require PUVs to use CNG as an alternative fuel, lie in Section 16,12 Article II of the 1987 Constitution, our ruling in Oposa v. Factoran, Jr.,13 and Section 414 of Republic Act No. 8749 otherwise known as the "Philippine Clean Air Act of 1999."

Meantime, following a subsequent motion, the Court granted petitioners' motion to implead the Department of Transportation and Communications (DOTC) as additional respondent.

In his Comment for respondents LTFRB and DOTC, the Solicitor General, cites Section 3, Rule 65 of the Revised Rules of Court and explains that the writ of mandamus is not the correct remedy since the writ may be issued only to command a tribunal, corporation, board or person to do an act that is required to be done, when he or it unlawfully neglects the performance of an act which the law specifically enjoins as a duty resulting from an office, trust or station, or unlawfully excludes another from the use and enjoyment of a right or office to which such other is entitled, there being no other plain, speedy and adequate remedy in the ordinary course of law.15 Further citing existing jurisprudence, the Solicitor General explains that in contrast to a discretionary act, a ministerial act, which a mandamus is, is one in which an officer or tribunal performs in a given state of facts, in a prescribed manner, in obedience to a mandate of legal authority, without regard to or the exercise of his own judgment upon the propriety or impropriety of an act done.

The Solicitor General also notes that nothing in Rep. Act No. 8749 that petitioners invoke, prohibits the use of gasoline and diesel by owners of motor vehicles. Sadly too, according to the Solicitor General, Rep. Act No. 8749 does not even mention the existence of CNG as alternative fuel and avers that unless this law is amended to provide CNG as alternative fuel for PUVs, the respondents cannot propose that PUVs use CNG as alternative fuel.

The Solicitor General also adds that it is the DENR that is tasked to implement Rep. Act No. 8749 and not the LTFRB nor the DOTC. Moreover, he says, it is the Department of Energy (DOE), under Section 2616 of Rep. Act No. 8749, that is required to set the specifications for all types of fuel and fuel-related products to improve fuel compositions for improved efficiency and reduced emissions. He adds that under Section 2117 of the cited Republic Act, the DOTC is limited to implementing the emission standards for motor vehicles, and the herein respondents cannot alter, change or modify the emission standards. The Solicitor General opines that the Court should declare the instant petition for mandamus without merit.

Petitioners, in their Reply, insist that the respondents possess the administrative and regulatory powers to implement measures in accordance with the policies and principles mandated by Rep. Act No. 8749, specifically Section 218 and Section 21.19 Petitioners state that under these laws and with all the available information provided by the DOE on the benefits of CNG, respondents cannot ignore the existence of CNG, and their failure to recognize CNG and compel its use by PUVs as alternative fuel while air pollution brought about by the emissions of gasoline

and diesel endanger the environment and the people, is tantamount to neglect in the performance of a duty which the law enjoins.

Lastly, petitioners aver that other than the writ applied for, they have no other plain, speedy and adequate remedy in the ordinary course of law. Petitioners insist that the writ in fact should be issued pursuant to the very same Section 3, Rule 65 of the Revised Rules of Court that the Solicitor General invokes.

In their Memorandum, petitioners phrase the issues before us as follows:

I. WHETHER OR NOT THE PETITIONERS HAVE THE PERSONALITY TO BRING THE PRESENT ACTION

II. WHETHER OR NOT THE PRESENT ACTION IS SUPPORTED BY LAW

III. WHETHER OR NOT THE RESPONDENT IS THE AGENCY RESPONSIBLE TO IMPLEMENT THE SUGGESTED ALTERNATIVE OF REQUIRING PUBLIC UTILITY VEHICLES TO USE COMPRESSED NATURAL GAS (CNG)

IV. WHETHER OR NOT THE RESPONDENT CAN BE COMPELLED TO REQUIRE PUBLIC UTILITY VEHICLES TO USE COMPRESSED NATURAL GAS THROUGH A WRIT OF MANDAMUS20

Briefly put, the issues are two-fold. First, Do petitioners have legal personality to bring this petition before us? Second, Should mandamus issue against respondents to compel PUVs to use CNG as alternative fuel?

According to petitioners, Section 16,21 Article II of the 1987 Constitution is the policy statement that bestows on the people the right to breathe clean air in a healthy environment. This policy is enunciated in Oposa.22 The implementation of this policy is articulated in Rep. Act No. 8749. These, according to petitioners, are the bases for their standing to file the instant petition. They aver that when there is an omission by the government to safeguard a right, in this case their right to clean air, then, the citizens can resort to and exhaust all remedies to challenge this omission by the government. This, they say, is embodied in Section 423 of Rep. Act No. 8749.

Petitioners insist that since it is the LTFRB and the DOTC that are the government agencies clothed with power to regulate and control motor vehicles, particularly PUVs, and with the same agencies' awareness and knowledge that the PUVs emit dangerous levels of air pollutants, then, the responsibility to see that these are curbed falls under respondents' functions and a writ of mandamus should issue against them.

The Solicitor General, for his part, reiterates his position that the respondent government agencies, the DOTC and the LTFRB, are not in a position to compel the PUVs to use CNG as alternative fuel. The Solicitor General explains that the function of the DOTC is limited to implementing the emission standards set forth in Rep. Act No. 8749 and the said law only goes as far as setting the maximum limit for the emission of vehicles, but it does not recognize CNG as alternative engine fuel. The Solicitor General avers that the petition should be addressed to Congress for it to come up with a policy that would compel the use of CNG as alternative fuel.

Patently, this Court is being asked to resolve issues that are not only procedural. Petitioners challenge this Court to decide if what petitioners propose could be done through a less circuitous, speedy and unchartered course in an issue that Chief Justice Hilario G. Davide, Jr. in his ponencia in the Oposa case,24 describes as "inter-generational responsibility" and "inter-generational justice."

Now, as to petitioners' standing. There is no dispute that petitioners have standing to bring their case before this Court. Even respondents do not question their standing. This petition focuses on one fundamental legal right of petitioners, their right to clean air. Moreover, as held previously, a party's standing before this Court is a procedural technicality which may, in the exercise of the Court's discretion, be set aside in view of the importance of the issue raised. We brush aside this issue of technicality under the principle of the transcendental importance to the public, especially so if these cases demand that they be settled promptly.

Undeniably, the right to clean air not only is an issue of paramount importance to petitioners for it concerns the air they breathe, but it is also impressed with public interest. The consequences of the counter-productive and

retrogressive effects of a neglected environment due to emissions of motor vehicles immeasurably affect the well-being of petitioners. On these considerations, the legal standing of the petitioners deserves recognition.

Our next concern is whether the writ of mandamus is the proper remedy, and if the writ could issue against respondents.

Under Section 3, Rule 65 of the Rules of Court, mandamus lies under any of the following cases: (1) against any tribunal which unlawfully neglects the performance of an act which the law specifically enjoins as a duty; (2) in case any corporation, board or person unlawfully neglects the performance of an act which the law enjoins as a duty resulting from an office, trust, or station; and (3) in case any tribunal, corporation, board or person unlawfully excludes another from the use and enjoyment of a right or office to which such other is legally entitled; and there is no other plain, speedy, and adequate remedy in the ordinary course of law.

In University of San Agustin, Inc. v. Court of Appeals,25 we said,

…It is settled that mandamus is employed to compel the performance, when refused, of a ministerial duty, this being its main objective. It does not lie to require anyone to fulfill contractual obligations or to compel a course of conduct, nor to control or review the exercise of discretion. On the part of the petitioner, it is essential to the issuance of a writ of mandamus that he should have a clear legal rightto the thing demanded and it must be the imperative duty of the respondent to perform the act required. It never issues in doubtful cases. While it may not be necessary that the duty be absolutely expressed, it must however, be clear. The writ will not issue to compel an official to do anything which is not his duty to do or which is his duty not to do, or give to the applicant anything to which he is not entitled by law. The writ neither confers powers nor imposes duties. It is simply a command to exercise a power already possessed and to perform a duty already imposed. (Emphasis supplied.)

In this petition the legal right which is sought to be recognized and enforced hinges on a constitutional and a statutory policy already articulated in operational terms, e.g. in Rep. Act No. 8749, the Philippine Clean Air Act of 1999. Paragraph (a), Section 21 of the Act specifically provides that when PUVs are concerned, the responsibility of implementing the policy falls on respondent DOTC. It provides as follows:

SEC 21. Pollution from Motor Vehicles. - a) The DOTC shall implement the emission standards for motor vehicles set pursuant to and as provided in this Act. To further improve the emission standards, the Department [DENR] shall review, revise and publish the standards every two (2) years, or as the need arises. It shall consider the maximum limits for all major pollutants to ensure substantial improvement in air quality for the health, safety and welfare of the general public.

Paragraph (b) states:

b) The Department [DENR] in collaboration with the DOTC, DTI and LGUs, shall develop an action plan for the control and management of air pollution from motor vehicles consistent with the Integrated Air Quality Framework . . . . (Emphasis supplied.)

There is no dispute that under the Clean Air Act it is the DENR that is tasked to set the emission standards for fuel use and the task of developing an action plan. As far as motor vehicles are concerned, it devolves upon the DOTC and the line agency whose mandate is to oversee that motor vehicles prepare an action plan and implement the emission standards for motor vehicles, namely the LTFRB.

In Oposa26 we said, the right to a balanced and healthful ecology carries with it the correlative duty to refrain from impairing the environment. We also said, it is clearly the duty of the responsible government agencies to advance the said right.

Petitioners invoke the provisions of the Constitution and the Clean Air Act in their prayer for issuance of a writ of mandamus commanding the respondents to require PUVs to use CNG as an alternative fuel. Although both are general mandates that do not specifically enjoin the use of any kind of fuel, particularly the use of CNG, there is an executive order implementing a program on the use of CNG by public vehicles. Executive Order No. 290, entitled Implementing the Natural Gas Vehicle Program for Public Transport (NGVPPT), took effect on February 24,

2004. The program recognized, among others, natural gas as a clean burning alternative fuel for vehicle which has the potential to produce substantially lower pollutants; and the Malampaya Gas-to-Power Project as representing the beginning of the natural gas industry of the Philippines. Paragraph 1.2, Section 1 of E.O. No. 290 cites as one of its objectives, the use of CNG as a clean alternative fuel for transport. Furthermore, one of the components of the program is the development of CNG refueling stations and all related facilities in strategic locations in the country to serve the needs of CNG-powered PUVs. Section 3 of E.O. No. 290, consistent with E.O. No. 66, series of 2002, designated the DOE as the lead agency (a) in developing the natural gas industry of the country with the DENR, through the EMB and (b) in formulating emission standards for CNG. Most significantly, par. 4.5, Section 4 tasks the DOTC, working with the DOE, to develop an implementation plan for "a gradual shift to CNG fuel utilization in PUVs and promote NGVs [natural gas vehicles] in Metro Manila and Luzon through the issuance of directives/orders providing preferential franchises in present day major routes and exclusive franchises to NGVs in newly opened routes…" A thorough reading of the executive order assures us that implementation for a cleaner environment is being addressed. To a certain extent, the instant petition had been mooted by the issuance of E.O. No. 290.

Regrettably, however, the plain, speedy and adequate remedy herein sought by petitioners, i.e., a writ of mandamus commanding the respondents to require PUVs to use CNG, is unavailing. Mandamus is available only to compel the doing of an act specifically enjoined by law as a duty. Here, there is no law that mandates the respondents LTFRB and the DOTC to order owners of motor vehicles to use CNG. At most the LTFRB has been tasked by E.O. No. 290 in par. 4.5 (ii), Section 4 "to grant preferential and exclusive Certificates of Public Convenience (CPC) or franchises to operators of NGVs based on the results of the DOTC surveys."

Further, mandamus will not generally lie from one branch of government to a coordinate branch, for the obvious reason that neither is inferior to the other.27 The need for future changes in both legislation and its implementation cannot be preempted by orders from this Court, especially when what is prayed for is procedurally infirm. Besides, comity with and courtesy to a coequal branch dictate that we give sufficient time and leeway for the coequal branches to address by themselves the environmental problems raised in this petition.

In the same manner that we have associated the fundamental right to a balanced and healthful ecology with the twin concepts of "inter-generational responsibility" and "inter-generational justice" in Oposa,28 where we upheld the right of future Filipinos to prevent the destruction of the rainforests, so do we recognize, in this petition, the right of petitioners and the future generation to clean air. In Oposa we said that if the right to a balanced and healthful ecology is now explicitly found in the Constitution even if the right is "assumed to exist from the inception of humankind,… it is because of the well-founded fear of its framers [of the Constitution] that unless the rights to a balanced and healthful ecology and to health are mandated as state policies by the Constitution itself, thereby highlighting their continuing importance and imposing upon the state a solemn obligation to preserve the first and protect and advance the second, the day would not be too far when all else would be lost not only for the present generation, but also for those to come. . ."29

It is the firm belief of this Court that in this case, it is timely to reaffirm the premium we have placed on the protection of the environment in the landmark case of Oposa. Yet, as serious as the statistics are on air pollution, with the present fuels deemed toxic as they are to the environment, as fatal as these pollutants are to the health of the citizens, and urgently requiring resort to drastic measures to reduce air pollutants emitted by motor vehicles, we must admit in particular that petitioners are unable to pinpoint the law that imposes an indubitable legal duty on respondents that will justify a grant of the writ of mandamus compelling the use of CNG for public utility vehicles. It appears to us that more properly, the legislature should provide first the specific statutory remedy to the complex environmental problems bared by herein petitioners before any judicial recourse by mandamus is taken.

WHEREFORE, the petition for the issuance of a writ of mandamus is DISMISSED for lack of merit.

SO ORDERED.

Carpio, Morales, Tinga, and Velasco, Jr., JJ., concur.

EN BANC 

G.R. No. 101083 July 30, 1993

JUAN ANTONIO, ANNA ROSARIO and JOSE ALFONSO, all surnamed OPOSA, minors, and represented by their parents ANTONIO and RIZALINA OPOSA, ROBERTA NICOLE SADIUA, minor, represented by her parents CALVIN and ROBERTA SADIUA, CARLO, AMANDA SALUD and PATRISHA, all surnamed FLORES, minors and represented by their parents ENRICO and NIDA FLORES, GIANINA DITA R. FORTUN, minor, represented by her parents SIGRID and DOLORES FORTUN, GEORGE II and MA. CONCEPCION, all surnamed MISA, minors and represented by their parents GEORGE and MYRA MISA, BENJAMIN ALAN V. PESIGAN, minor, represented by his parents ANTONIO and ALICE PESIGAN, JOVIE MARIE ALFARO, minor, represented by her parents JOSE and MARIA VIOLETA ALFARO, MARIA CONCEPCION T. CASTRO, minor, represented by her parents FREDENIL and JANE CASTRO, JOHANNA DESAMPARADO, minor, represented by her parents JOSE and ANGELA DESAMPRADO, CARLO JOAQUIN T. NARVASA, minor, represented by his parents GREGORIO II and CRISTINE CHARITY NARVASA, MA. MARGARITA, JESUS IGNACIO, MA. ANGELA and MARIE GABRIELLE, all surnamed SAENZ, minors, represented by their parents ROBERTO and AURORA SAENZ, KRISTINE, MARY ELLEN, MAY, GOLDA MARTHE and DAVID IAN, all surnamed KING, minors, represented by their parents MARIO and HAYDEE KING, DAVID, FRANCISCO and THERESE VICTORIA, all surnamed ENDRIGA, minors, represented by their parents BALTAZAR and TERESITA ENDRIGA, JOSE MA. and REGINA MA., all surnamed ABAYA, minors, represented by their parents ANTONIO and MARICA ABAYA, MARILIN, MARIO, JR. and MARIETTE, all surnamed CARDAMA, minors, represented by their parents MARIO and LINA CARDAMA, CLARISSA, ANN MARIE, NAGEL, and IMEE LYN, all surnamed OPOSA, minors and represented by their parents RICARDO and MARISSA OPOSA, PHILIP JOSEPH, STEPHEN JOHN and ISAIAH JAMES, all surnamed QUIPIT, minors, represented by their parents JOSE MAX and VILMI QUIPIT, BUGHAW CIELO, CRISANTO, ANNA, DANIEL and FRANCISCO, all surnamed BIBAL, minors, represented by their parents FRANCISCO, JR. and MILAGROS BIBAL, and THE PHILIPPINE ECOLOGICAL NETWORK, INC., petitioners, vs.THE HONORABLE FULGENCIO S. FACTORAN, JR., in his capacity as the Secretary of the Department of Environment and Natural Resources, and THE HONORABLE ERIBERTO U. ROSARIO, Presiding Judge of the RTC, Makati, Branch 66, respondents.

Oposa Law Office for petitioners.

The Solicitor General for respondents.

 

DAVIDE, JR., J.:

In a broader sense, this petition bears upon the right of Filipinos to a balanced and healthful ecology which the petitioners dramatically associate with the twin concepts of "inter-generational responsibility" and "inter-generational justice." Specifically, it touches on the issue of whether the said petitioners have a cause of action to "prevent the misappropriation or impairment" of Philippine rainforests and "arrest the unabated hemorrhage of the country's vital life support systems and continued rape of Mother Earth."

The controversy has its genesis in Civil Case No. 90-77 which was filed before Branch 66 (Makati, Metro Manila) of the Regional Trial Court (RTC), National Capital Judicial Region. The principal plaintiffs therein, now the principal petitioners, are all minors duly represented and joined by their respective parents. Impleaded as an additional plaintiff is the Philippine Ecological Network, Inc. (PENI), a domestic, non-stock and non-profit corporation organized for the purpose of, inter alia, engaging in concerted action geared for the protection of our environment and natural resources. The original defendant was the Honorable Fulgencio S. Factoran, Jr., then Secretary of the Department of Environment and Natural Resources (DENR). His substitution in this petition by the new Secretary, the Honorable Angel C. Alcala, was subsequently ordered upon proper motion by the petitioners. 1 The complaint 2 was instituted as a taxpayers' class suit 3 and alleges that the plaintiffs "are all citizens of the Republic of the Philippines, taxpayers, and entitled to the full benefit, use and enjoyment of the natural resource treasure that is the country's virgin tropical forests." The same was filed for themselves and others who are equally concerned about the preservation of said resource but are

"so numerous that it is impracticable to bring them all before the Court." The minors further asseverate that they "represent their generation as well as generations yet unborn." 4 Consequently, it is prayed for that judgment be rendered:

. . . ordering defendant, his agents, representatives and other persons acting in his behalf to —

(1) Cancel all existing timber license agreements in the country;

(2) Cease and desist from receiving, accepting, processing, renewing or approving new timber license agreements.

and granting the plaintiffs ". . . such other reliefs just and equitable under the premises."  5

The complaint starts off with the general averments that the Philippine archipelago of 7,100 islands has a land area of thirty million (30,000,000) hectares and is endowed with rich, lush and verdant rainforests in which varied, rare and unique species of flora and fauna may be found; these rainforests contain a genetic, biological and chemical pool which is irreplaceable; they are also the habitat of indigenous Philippine cultures which have existed, endured and flourished since time immemorial; scientific evidence reveals that in order to maintain a balanced and healthful ecology, the country's land area should be utilized on the basis of a ratio of fifty-four per cent (54%) for forest cover and forty-six per cent (46%) for agricultural, residential, industrial, commercial and other uses; the distortion and disturbance of this balance as a consequence of deforestation have resulted in a host of environmental tragedies, such as (a) water shortages resulting from drying up of the water table, otherwise known as the "aquifer," as well as of rivers, brooks and streams, (b) salinization of the water table as a result of the intrusion therein of salt water, incontrovertible examples of which may be found in the island of Cebu and the Municipality of Bacoor, Cavite, (c) massive erosion and the consequential loss of soil fertility and agricultural productivity, with the volume of soil eroded estimated at one billion (1,000,000,000) cubic meters per annum — approximately the size of the entire island of Catanduanes, (d) the endangering and extinction of the country's unique, rare and varied flora and fauna, (e) the disturbance and dislocation of cultural communities, including the disappearance of the Filipino's indigenous cultures, (f) the siltation of rivers and seabeds and consequential destruction of corals and other aquatic life leading to a critical reduction in marine resource productivity, (g) recurrent spells of drought as is presently experienced by the entire country, (h) increasing velocity of typhoon winds which result from the absence of windbreakers, (i) the floodings of lowlands and agricultural plains arising from the absence of the absorbent mechanism of forests, (j) the siltation and shortening of the lifespan of multi-billion peso dams constructed and operated for the purpose of supplying water for domestic uses, irrigation and the generation of electric power, and (k) the reduction of the earth's capacity to process carbon dioxide gases which has led to perplexing and catastrophic climatic changes such as the phenomenon of global warming, otherwise known as the "greenhouse effect."

Plaintiffs further assert that the adverse and detrimental consequences of continued and deforestation are so capable of unquestionable demonstration that the same may be submitted as a matter of judicial notice. This notwithstanding, they expressed their intention to present expert witnesses as well as documentary, photographic and film evidence in the course of the trial.

As their cause of action, they specifically allege that:

CAUSE OF ACTION

7. Plaintiffs replead by reference the foregoing allegations.

8. Twenty-five (25) years ago, the Philippines had some sixteen (16) million hectares of rainforests constituting roughly 53% of the country's land mass.

9. Satellite images taken in 1987 reveal that there remained no more than 1.2 million hectares of said rainforests or four per cent (4.0%) of the country's land area.

10. More recent surveys reveal that a mere 850,000 hectares of virgin old-growth rainforests are left, barely 2.8% of the entire land mass of the Philippine archipelago and about 3.0 million hectares of immature and uneconomical secondary growth forests.

11. Public records reveal that the defendant's, predecessors have granted timber license agreements ('TLA's') to various corporations to cut the aggregate area of 3.89 million hectares for commercial logging purposes.

A copy of the TLA holders and the corresponding areas covered is hereto attached as Annex "A".

12. At the present rate of deforestation, i.e. about 200,000 hectares per annum or 25 hectares per hour — nighttime, Saturdays, Sundays and holidays included — the Philippines will be bereft of forest resources after the end of this ensuing decade, if not earlier.

13. The adverse effects, disastrous consequences, serious injury and irreparable damage of this continued trend of deforestation to the plaintiff minor's generation and to generations yet unborn are evident and incontrovertible. As a matter of fact, the environmental damages enumerated in paragraph 6 hereof are already being felt, experienced and suffered by the generation of plaintiff adults.

14. The continued allowance by defendant of TLA holders to cut and deforest the remaining forest stands will work great damage and irreparable injury to plaintiffs — especially plaintiff minors and their successors — who may never see, use, benefit from and enjoy this rare and unique natural resource treasure.

This act of defendant constitutes a misappropriation and/or impairment of the natural resource property he holds in trust for the benefit of plaintiff minors and succeeding generations.

15. Plaintiffs have a clear and constitutional right to a balanced and healthful ecology and are entitled to protection by the State in its capacity as the parens patriae.

16. Plaintiff have exhausted all administrative remedies with the defendant's office. On March 2, 1990, plaintiffs served upon defendant a final demand to cancel all logging permits in the country.

A copy of the plaintiffs' letter dated March 1, 1990 is hereto attached as Annex "B".

17. Defendant, however, fails and refuses to cancel the existing TLA's to the continuing serious damage and extreme prejudice of plaintiffs.

18. The continued failure and refusal by defendant to cancel the TLA's is an act violative of the rights of plaintiffs, especially plaintiff minors who may be left with a country that is desertified (sic), bare, barren and devoid of the wonderful flora, fauna and indigenous cultures which the Philippines had been abundantly blessed with.

19. Defendant's refusal to cancel the aforementioned TLA's is manifestly contrary to the public policy enunciated in the Philippine Environmental Policy which, in pertinent part, states that it is the policy of the State —

(a) to create, develop, maintain and improve conditions under which man and nature can thrive in productive and enjoyable harmony with each other;

(b) to fulfill the social, economic and other requirements of present and future generations of Filipinos and;

(c) to ensure the attainment of an environmental quality that is conductive to a life of dignity and well-being. (P.D. 1151, 6 June 1977)

20. Furthermore, defendant's continued refusal to cancel the aforementioned TLA's is contradictory to the Constitutional policy of the State to —

a. effect "a more equitable distribution of opportunities, income and wealth" and "make full and efficient use of natural resources (sic)." (Section 1, Article XII of the Constitution);

b. "protect the nation's marine wealth." (Section 2, ibid);

c. "conserve and promote the nation's cultural heritage and resources (sic)" (Section 14, Article XIV,id.);

d. "protect and advance the right of the people to a balanced and healthful ecology in accord with the rhythm and harmony of nature." (Section 16, Article II, id.)

21. Finally, defendant's act is contrary to the highest law of humankind — the natural law — and violative of plaintiffs' right to self-preservation and perpetuation.

22. There is no other plain, speedy and adequate remedy in law other than the instant action to arrest the unabated hemorrhage of the country's vital life support systems and continued rape of Mother Earth. 6

On 22 June 1990, the original defendant, Secretary Factoran, Jr., filed a Motion to Dismiss the complaint based on two (2) grounds, namely: (1) the plaintiffs have no cause of action against him and (2) the issue raised by the plaintiffs is a political question which properly pertains to the legislative or executive branches of Government. In their 12 July 1990 Opposition to the Motion, the petitioners maintain that (1) the complaint shows a clear and unmistakable cause of action, (2) the motion is dilatory and (3) the action presents a justiciable question as it involves the defendant's abuse of discretion.

On 18 July 1991, respondent Judge issued an order granting the aforementioned motion to dismiss.  7 In the said order, not only was the defendant's claim — that the complaint states no cause of action against him and that it raises a political question — sustained, the respondent Judge further ruled that the granting of the relief prayed for would result in the impairment of contracts which is prohibited by the fundamental law of the land.

Plaintiffs thus filed the instant special civil action for certiorari under Rule 65 of the Revised Rules of Court and ask this Court to rescind and set aside the dismissal order on the ground that the respondent Judge gravely abused his discretion in dismissing the action. Again, the parents of the plaintiffs-minors not only represent their children, but have also joined the latter in this case. 8

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 General (OSG) filed a Comment in behalf of the respondents and the petitioners filed a reply thereto.

Petitioners contend that the complaint clearly and unmistakably states a cause of action as it contains sufficient allegations concerning their right to a sound environment based on Articles 19, 20 and 21 of the Civil Code (Human Relations), Section 4 of Executive Order (E.O.) No. 192 creating the DENR, Section 3 of Presidential Decree (P.D.) No. 1151 (Philippine Environmental Policy), Section 16, Article II of the 1987 Constitution recognizing the right of the people to a balanced and healthful ecology, the concept of generational genocide in Criminal Law and the concept of man's inalienable right to self-preservation and self-perpetuation embodied in natural law. Petitioners likewise rely on the respondent's correlative obligation per Section 4 of E.O. No. 192, to safeguard the people's right to a healthful environment.

It is further claimed that the issue of the respondent Secretary's alleged grave abuse of discretion in granting Timber License Agreements (TLAs) to cover more areas for logging than what is available involves a judicial question.

Anent the invocation by the respondent Judge of the Constitution's non-impairment clause, petitioners maintain that the same does not apply in this case because TLAs are not contracts. They likewise submit that even if TLAs may be considered protected by the said clause, it is well settled that they may still be revoked by the State when the public interest so requires.

On the other hand, the respondents aver that the petitioners failed to allege in their complaint a specific legal right violated by the respondent Secretary for which any relief is provided by law. They see nothing in the complaint but vague and nebulous allegations concerning an "environmental right" which supposedly entitles the petitioners to the "protection by the state in its capacity as parens patriae." Such allegations, according to them, do not reveal a valid cause of action. They then reiterate the theory that the question of whether logging should be permitted in the country is a political question which should be properly addressed to the executive or legislative branches of Government. They therefore assert that the petitioners' resources is not to file an action to court, but to lobby before Congress for the passage of a bill that would ban logging totally.

As to the matter of the cancellation of the TLAs, respondents submit that the same cannot be done by the State without due process of law. Once issued, a TLA remains effective for a certain period of time — usually for twenty-five (25) years. During its effectivity, the same can neither be revised nor cancelled unless the holder has been found, after due notice and hearing, to have violated the terms of the agreement or other forestry laws and regulations. Petitioners' proposition to have all the TLAs indiscriminately cancelled without the requisite hearing would be violative of the requirements of due process.

Before going any further, We must first focus on some procedural matters. Petitioners instituted Civil Case No. 90-777 as a class suit. The original defendant and the present respondents did not take issue with this matter. Nevertheless, We hereby rule that the said civil case is indeed a class suit. The subject matter of the complaint is of common and general interest not just to several, but to all citizens of the Philippines. Consequently, since the parties are so numerous, it, becomes impracticable, if not totally impossible, to bring all of them before the court. We likewise declare that the plaintiffs therein are numerous and representative enough to ensure the full protection of all concerned interests. Hence, all the requisites for the filing of a valid class suit under Section 12, Rule 3 of the Revised Rules of Court are present both in the said civil case and in the instant petition, the latter being but an incident to the former.

This case, however, has a special and novel element. Petitioners minors assert that they represent their generation as well as generations yet unborn. We find no difficulty in ruling that they can, for themselves, for others of their generation and for the succeeding generations, file a class suit. Their personality to sue in behalf of the succeeding generations can only be based on the concept of intergenerational responsibility insofar as the right to a balanced and healthful ecology is concerned. Such a right, as hereinafter expounded, considers the "rhythm and harmony of nature." Nature means the created world in its entirety. 9 Such rhythm and harmony indispensably include, inter alia, the judicious disposition, utilization, management, renewal and conservation of the country's forest, mineral, land, waters, fisheries, wildlife, off-shore areas and other natural resources to the end that their exploration, development and utilization be equitably accessible to the present as well as future generations. 10 Needless to say, every generation has a responsibility to the next to preserve that rhythm and harmony for the full enjoyment of a balanced and healthful ecology. Put a little differently, the minors' assertion of their right to a sound environment constitutes, at the same time, the performance of their obligation to ensure the protection of that right for the generations to come.

The locus standi of the petitioners having thus been addressed, We shall now proceed to the merits of the petition.

After a careful perusal of the complaint in question and a meticulous consideration and evaluation of the issues raised and arguments adduced by the parties, We do not hesitate to find for the petitioners and rule against the respondent Judge's challenged order for having been issued with grave abuse of discretion amounting to lack of jurisdiction. The pertinent portions of the said order reads as follows:

xxx xxx xxx

After a careful and circumspect evaluation of the Complaint, the Court cannot help but agree with the defendant. For although we believe that plaintiffs have but the noblest of all intentions, it (sic) fell short of alleging, with sufficient definiteness, a specific legal right they are seeking to enforce and protect, or a specific legal wrong they are seeking to prevent and redress (Sec. 1, Rule 2, RRC). Furthermore, the Court notes that the Complaint is replete with vague assumptions and vague conclusions based on unverified data. In fine, plaintiffs fail to state a cause of action in its Complaint against the herein defendant.

Furthermore, the Court firmly believes that the matter before it, being impressed with political color and involving a matter of public policy, may not be taken cognizance of by this Court without doing violence to the sacred principle of "Separation of Powers" of the three (3) co-equal branches of the Government.

The Court is likewise of the impression that it cannot, no matter how we stretch our jurisdiction, grant the reliefs prayed for by the plaintiffs, i.e., to cancel all existing timber license agreements in the country and to cease and desist from receiving, accepting, processing, renewing or approving new timber license agreements. For to do otherwise would amount to "impairment of contracts" abhored (sic) by the fundamental law. 11

We do not agree with the trial court's conclusions that the plaintiffs failed to allege with sufficient definiteness a specific legal right involved or a specific legal wrong committed, and that the complaint is replete with vague assumptions and conclusions based on unverified data. A reading of the complaint itself belies these conclusions.

The complaint focuses on one specific fundamental legal right — the right to a balanced and healthful ecology which, for the first time in our nation's constitutional history, is solemnly incorporated in the fundamental law. Section 16, Article II of the 1987 Constitution explicitly provides:

Sec. 16. The State shall protect and advance the right of the people to a balanced and healthful ecology in accord with the rhythm and harmony of nature.

This right unites with the right to health which is provided for in the preceding section of the same article:

Sec. 15. The State shall protect and promote the right to health of the people and instill health consciousness among them.

While the right to a balanced and healthful ecology is to be found under the Declaration of Principles and State Policies and not under the Bill of Rights, it does not follow that it is less important than any of the civil and political rights enumerated in the latter. Such a right belongs to a different category of rights altogether for it concerns nothing less than self-preservation and self-perpetuation — aptly and fittingly stressed by the petitioners — the advancement of which may even be said to predate all governments and constitutions. As a matter of fact, these basic rights need not even be written in the Constitution for they are assumed to exist from the inception of humankind. If they are now explicitly mentioned in the fundamental charter, it is because of the well-founded fear of its framers that unless the rights to a balanced and healthful ecology and to health are mandated as state policies by the Constitution itself, thereby highlighting their continuing importance and imposing upon the state a solemn obligation to preserve the first and protect and advance the second, the day would not be too far when all else would be lost not only for the present generation, but also for those to come — generations which stand to inherit nothing but parched earth incapable of sustaining life.

The right to a balanced and healthful ecology carries with it the correlative duty to refrain from impairing the environment. During the debates on this right in one of the plenary sessions of the 1986 Constitutional Commission, the following exchange transpired between Commissioner Wilfrido Villacorta and Commissioner Adolfo Azcuna who sponsored the section in question:

MR. VILLACORTA:

Does this section mandate the State to provide sanctions against all forms of pollution — air, water and noise pollution?

MR. AZCUNA:

Yes, Madam President. The right to healthful (sic) environment necessarily carries with it the correlative duty of not impairing the same and, therefore, sanctions may be provided for impairment of environmental balance. 12

The said right implies, among many other things, the judicious management and conservation of the country's forests.

Without such forests, the ecological or environmental balance would be irreversiby disrupted.

Conformably with the enunciated right to a balanced and healthful ecology and the right to health, as well as the other related provisions of the Constitution concerning the conservation, development and utilization of the country's natural resources, 13 then President Corazon C. Aquino promulgated on 10 June 1987 E.O. No. 192, 14 Section 4 of which expressly mandates that the Department of Environment and Natural Resources "shall be the primary government agency responsible for the conservation, management, development and proper use of the country's environment and natural resources, specifically forest and grazing lands, mineral, resources, including those in reservation and watershed areas, and lands of the public domain, as well as the licensing and regulation of all natural resources as may be provided for by law in order to ensure equitable sharing of the benefits derived therefrom for the welfare of the present and future generations of Filipinos." Section 3 thereof makes the following statement of policy:

Sec. 3. Declaration of Policy. — It is hereby declared the policy of the State to ensure the sustainable use, development, management, renewal, and conservation of the country's forest, mineral, land, off-shore areas and other natural resources, including the protection and enhancement of the quality of the environment, and equitable access of the different segments of the population to the development and the use of the country's natural resources, not only for the present generation but for future generations as well. It is also the policy of the state to recognize and apply a true value system including social and environmental cost implications relative to their utilization, development and conservation of our natural resources.

This policy declaration is substantially re-stated it Title XIV, Book IV of the Administrative Code of 1987,  15specifically in Section 1 thereof which reads:

Sec. 1. Declaration of Policy. — (1) The State shall ensure, for the benefit of the Filipino people, the full exploration and development as well as the judicious disposition, utilization, management, renewal and conservation of the country's forest, mineral, land, waters, fisheries, wildlife, off-shore areas and other natural resources, consistent with the necessity of maintaining a sound ecological balance and protecting and enhancing the quality of the environment and the objective of making the exploration, development and utilization of such natural resources equitably accessible to the different segments of the present as well as future generations.

(2) The State shall likewise recognize and apply a true value system that takes into account social and environmental cost implications relative to the utilization, development and conservation of our natural resources.

The above provision stresses "the necessity of maintaining a sound ecological balance and protecting and enhancing the quality of the environment." Section 2 of the same Title, on the other hand, specifically speaks of the mandate of the DENR; however, it makes particular reference to the fact of the agency's being subject to law and higher authority. Said section provides:

Sec. 2. Mandate. — (1) The Department of Environment and Natural Resources shall be primarily responsible for the implementation of the foregoing policy.

(2) It shall, subject to law and higher authority, be in charge of carrying out the State's constitutional mandate to control and supervise the exploration, development, utilization, and conservation of the country's natural resources.

Both E.O. NO. 192 and the Administrative Code of 1987 have set the objectives which will serve as the bases for policy formulation, and have defined the powers and functions of the DENR.

It may, however, be recalled that even before the ratification of the 1987 Constitution, specific statutes already paid special attention to the "environmental right" of the present and future generations. On 6 June 1977, P.D. No. 1151 (Philippine Environmental Policy) and P.D. No. 1152 (Philippine Environment Code) were issued. The former "declared a continuing policy of the State (a) to create, develop, maintain and improve conditions under which man

and nature can thrive in productive and enjoyable harmony with each other, (b) to fulfill the social, economic and other requirements of present and future generations of Filipinos, and (c) to insure the attainment of an environmental quality that is conducive to a life of dignity and well-being." 16 As its goal, it speaks of the "responsibilities of each generation as trustee and guardian of the environment for succeeding generations." 17 The latter statute, on the other hand, gave flesh to the said policy.

Thus, the right of the petitioners (and all those they represent) to a balanced and healthful ecology is as clear as the DENR's duty — under its mandate and by virtue of its powers and functions under E.O. No. 192 and the Administrative Code of 1987 — to protect and advance the said right.

A denial or violation of that right by the other who has the corelative duty or obligation to respect or protect the same gives rise to a cause of action. 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 healthful ecology; hence, the full protection thereof requires that no further TLAs should be renewed or granted.

A cause of action is defined as:

. . . an act or omission of one party in violation of the legal right or rights of the other; and its essential elements are legal right of the plaintiff, correlative obligation of the defendant, and act or omission of the defendant in violation of said legal right. 18

It is settled in this jurisdiction that in a motion to dismiss based on the ground that the complaint fails to state a cause of action, 19 the question submitted to the court for resolution involves the sufficiency of the facts alleged in the complaint itself. No other matter should be considered; furthermore, the truth of falsity of the said allegations is beside the point for the truth thereof is deemed hypothetically admitted. The only issue to be resolved in such a case is: admitting such alleged facts to be true, may the court render a valid judgment in accordance with the prayer in the complaint? 20 InMilitante vs. Edrosolano, 21 this Court laid down the rule that the judiciary should "exercise the utmost care and circumspection in passing upon a motion to dismiss on the ground of the absence thereof [cause of action] lest, by its failure to manifest a correct appreciation of the facts alleged and deemed hypothetically admitted, what the law grants or recognizes is effectively nullified. If that happens, there is a blot on the legal order. The law itself stands in disrepute."

After careful examination of the petitioners' complaint, We find the statements under the introductory affirmative allegations, as well as the specific averments under the sub-heading CAUSE OF ACTION, to be adequate enough to show, prima facie, the claimed violation of their rights. On the basis thereof, they may thus be granted, wholly or partly, the reliefs prayed for. It bears stressing, however, that insofar as the cancellation of the TLAs is concerned, there is the need to implead, as party defendants, the grantees thereof for they are indispensable parties.

The foregoing considered, Civil Case No. 90-777 be said to raise a political question. Policy formulation or determination by the executive or legislative branches of Government is not squarely put in issue. What is principally involved is the enforcement of a right vis-a-vis policies already formulated and expressed in legislation. It must, nonetheless, be emphasized that the political question doctrine is no longer, the insurmountable obstacle to the exercise of judicial power or the impenetrable shield that protects executive and legislative actions from judicial inquiry or review. The second paragraph of section 1, Article VIII of the Constitution states that:

Judicial power includes the duty of the courts of justice to settle actual controversies involving rights which are legally demandable and enforceable, and to determine whether or not there has been a grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or instrumentality of the Government.

Commenting on this provision in his book, Philippine Political Law, 22 Mr. Justice Isagani A. Cruz, a distinguished member of this Court, says:

The first part of the authority represents the traditional concept of judicial power, involving the settlement of conflicting rights as conferred as law. The second part of the authority represents a broadening of judicial 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.

As worded, the new provision vests in the judiciary, and particularly the Supreme Court, the power to rule 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 with grave abuse of discretion. The catch, of course, is the meaning of "grave abuse of discretion," which is a very elastic phrase that can expand or contract according to the disposition of the judiciary.

In Daza vs. Singson, 23 Mr. Justice Cruz, now speaking for this Court, noted:

In the case now before us, the jurisdictional objection becomes even less tenable and decisive. The reason is that, even if we were to assume that the issue presented before us was political in nature, we would still not be precluded from revolving it under the expanded jurisdiction conferred upon us that now covers, in proper cases, even the political question. Article VII, Section 1, of the Constitution clearly provides: . . .

The last ground invoked by the trial court in dismissing the complaint is the non-impairment of contracts clause found in the Constitution. The court a quo declared that:

The Court is likewise of the impression that it cannot, no matter how we stretch our jurisdiction, grant the reliefs prayed for by the plaintiffs, i.e., to cancel all existing timber license agreements in the country and to cease and desist from receiving, accepting, processing, renewing or approving new timber license agreements. For to do otherwise would amount to "impairment of contracts" abhored (sic) by the fundamental law. 24

We are not persuaded at all; on the contrary, We are amazed, if not shocked, by such a sweeping pronouncement. In the first place, the respondent Secretary did not, for obvious reasons, even invoke in his motion to dismiss the non-impairment clause. If he had done so, he would have acted with utmost infidelity to the Government by providing undue and unwarranted benefits and advantages to the timber license holders because he would have forever bound the Government to strictly respect the said licenses 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 out by the petitioners, into every timber license must be read Section 20 of the Forestry Reform Code (P.D. No. 705) which provides:

. . . Provided, That when the national interest so requires, the President may amend, modify, replace or rescind any contract, concession, permit, licenses or any other form of privilege granted herein . . .

Needless to say, all licenses may thus be revoked or rescinded by executive action. It is not a contract, property or a property right protested by the due process clause of the Constitution. In Tan vs. Director of Forestry, 25 this Court held:

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

A license is merely a permit or privilege to do what otherwise would be unlawful, and is not a contract between the authority, federal, state, or municipal, granting it and the person to whom it is granted; neither is it property or a property right, nor does it create a vested right; nor is it taxation (37 C.J. 168). Thus, this Court held that the granting of license does not create irrevocable rights, neither is it property or property rights (People vs. Ong Tin, 54 O.G. 7576).

We reiterated this pronouncement in Felipe Ysmael, Jr. & Co., Inc. vs. Deputy Executive Secretary: 26

. . . Timber licenses, permits and license agreements are the principal instruments by which the State regulates the utilization and disposition of forest resources to the end that public welfare is promoted. And it can hardly be gainsaid that they merely evidence a privilege granted by the State to qualified entities, and do not vest in the latter a permanent or irrevocable right to the particular

concession area and the forest products therein. They may be validly amended, modified, replaced or rescinded by the Chief Executive when national interests so require. Thus, they are not deemed contracts within the purview of the due process of law clause [See Sections 3(ee) and 20 of Pres. Decree No. 705, as amended. Also, Tan v. Director of Forestry, G.R. No. L-24548, October 27, 1983, 125 SCRA 302].

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

Sec. 10. No law impairing, the obligation of contracts shall be passed. 27

cannot be invoked.

In the second place, even if it is to be assumed 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 law has actually been passed mandating cancellations or modifications, the same cannot still be stigmatized as a violation of the non-impairment clause. This is because by its very nature and purpose, such as law could have only been passed in the exercise of the police power of the state for the purpose of advancing the right of the people to a balanced and healthful ecology, promoting their health and enhancing the general welfare. In Abe vs. Foster Wheeler Corp. 28 this Court stated:

The freedom of contract, under our system of government, is not meant to be absolute. The same is understood to be subject to reasonable legislative regulation aimed at the promotion of public health, moral, safety and welfare. In other words, the constitutional guaranty of non-impairment of obligations of contract is limited by the exercise of the police power of the State, in the interest of public health, safety, moral and general welfare.

The reason for this is emphatically set forth in Nebia vs. New York, 29 quoted in Philippine American Life Insurance Co. vs. Auditor General, 30 to wit:

Under our form of government the use of property and the making of contracts are normally matters of private and not of public concern. The general rule is that both shall be free of governmental interference. But neither property rights nor contract rights are absolute; for government cannot exist if the citizen may at will use his property to the detriment of his fellows, or exercise his freedom of contract to work them harm. Equally fundamental with the private right is that of the public to regulate it in the common interest.

In short, the non-impairment clause must yield to the police power of the state. 31

Finally, it is difficult to imagine, as the trial court did, how the non-impairment clause could apply with respect to the prayer to enjoin the respondent Secretary from receiving, accepting, processing, renewing or approving new timber licenses for, save in cases of renewal, no contract would have as of yet existed in the other instances. Moreover, with respect to renewal, the holder is not entitled to it as a matter of right.

WHEREFORE, being impressed with merit, the instant Petition is hereby GRANTED, and the challenged Order of respondent Judge of 18 July 1991 dismissing Civil Case No. 90-777 is hereby set aside. The petitioners may therefore amend their complaint to implead as defendants the holders or grantees of the questioned timber license agreements.

No pronouncement as to costs.

SO ORDERED.

Cruz, Padilla, Bidin, Griño-Aquino, Regalado, Romero, Nocon, Bellosillo, Melo and Quiason, JJ., concur.

Narvasa, C.J., Puno and Vitug, JJ., took no part.

THIRD DIVISION

G.R. No. 79538 October 18, 1990

FELIPE YSMAEL, JR. & CO., INC., petitioner, vs.THE DEPUTY EXECUTIVE SECRETARY, THE SECRETARY OF ENVIRONMENT AND NATURAL RESOURCES, THE DIRECTOR OF THE BUREAU OF FOREST DEVELOPMENT and TWIN PEAKS DEVELOPMENT AND REALTY CORPORATION, respondents.

Tañada, Vivo & Tan for petitioner.

Antonio E. Escober and Jurado Law Office for respondent Twin Peaks Development Corporation.

 

COURTS, J.:

Soon after the change of government in February 1986, petitioner sent a letter dated March 17, 1986 to the Office of the President, and another letter dated April 2, 1986 to Minister Ernesto Maceda of the Ministry of Natural Resources [MNR], seeking: (1) the reinstatement of its timber license agreement which was cancelled in August 1983 during the Marcos administration; (2) the revocation of TLA No. 356 which was issued to Twin Peaks Development and Realty Corporation without public bidding and in violation of forestry laws, rules and regulations; and, (3) the issuance of an order allowing petitioner to take possession of all logs found in the concession area [Annexes "6" and "7" of the Petition; Rollo, pp. 54-63].

Petitioner made the following allegations:

(a) That on October 12, 1965, it entered into a timber license agreement designated as TLA No. 87 with the Department of Agriculture and Natural Resources, represented by then Secretary Jose Feliciano, wherein it was issued an exclusive license to cut, collect and remove timber except prohibited species within a specified portion of public forest land with an area of 54,920 hectares located in the municipality of Maddela, province of Nueva Vizcaya * from October 12, 1965 until June 30, 1990;

(b) That on August 18, 1983, the Director of the Bureau of Forest Development [hereinafter referred to as "Bureau"], Director Edmundo Cortes, issued a memorandum order stopping all logging operations in Nueva Vizcaya and Quirino provinces, and cancelling the logging concession of petitioner and nine other forest concessionaires, pursuant to presidential instructions and a memorandum order of the Minister of Natural Resources Teodoro Pena [Annex "5" of the Petition; Rollo, p. 49];

(c) that on August 25, 1983, petitioner received a telegram from the Bureau, the contents of which were as follows:

PURSUANT TO THE INSTRUCTIONS OF THE PRESIDENT YOU ARE REQUESTED TO STOP ALL LOGGING OPERATIONS TO CONSERVE REMAINING FORESTS PLEASE CONDUCT THE ORDERLY PULL-OUT OF LOGGING MACHINERIES AND EQUIPMENT AND COORDINATE WITH THE RESPECTIVE DISTRICT FORESTERS FOR THE INVENTORY OF LOGS CUT PRIOR TO THIS ORDER THE SUBMISSION OF A COMPLIANCE REPORT WITHIN THIRTY DAYS SHALL BE APPRECIATED — [Annex "4" of the Petition; Rollo, p. 48];

(d) That after the cancellation of its timber license agreement, it immediately sent a letter addressed to then President Ferdinand Marcos which sought reconsideration of the Bureau's directive, citing in support thereof its contributions to alleging that it was not given the forest conservation and opportunity to be heard prior to the cancellation of its logging 531, but no operations (Annex "6" of the Petition; Rollo, pp. 50 favorable action was taken on this letter;

(e) That barely one year thereafter, approximately one-half or 26,000 hectares of the area formerly covered by TLA No. 87 was re-awarded to Twin Peaks Development and Reality Corporation under TLA No. 356 which was set to

expire on July 31, 2009, while the other half was allowed to be logged by Filipinas Loggers, Inc. without the benefit of a formal award or license; and,

(f) That the latter entities were controlled or owned by relatives or cronies of deposed President Ferdinand Marcos. Acting on petitioner's letter, the MNR through then Minister Ernesto Maceda issued an order dated July 22, 1986 denying petitioner's request. The Ministry ruled that a timber license was not a contract within the due process clause of the Constitution, but only a privilege which could be withdrawn whenever public interest or welfare so demands, and that petitioner was not discriminated against in view of the fact that it was among ten concessionaires whose licenses were revoked in 1983. Moreover, emphasis was made of the total ban of logging operations in the provinces of Nueva Ecija, Nueva Vizcaya, Quirino and Ifugao imposed on April 2, 1986, thus:

xxx xxx xxx

It should be recalled that [petitioner's] earlier request for reinstatement has been denied in view of the total ban of all logging operations in the provinces of Nueva Ecija, Nueva Vizcaya, Quirino and Ifugao which was imposed for reasons of conservation and national security.

The Ministry imposed the ban because it realizes the great responsibility it bear [sic] in respect to forest t considers itself the trustee thereof. This being the case, it has to ensure the availability of forest resources not only for the present, but also for the future generations of Filipinos.

On the other hand, the activities of the insurgents in these parts of the country are well documented. Their financial demands on logging concessionaires are well known. The government, therefore, is well within its right to deprive its enemy of sources of funds in order to preserve itself, its established institutions and the liberty and democratic way of life of its people.

xxx xxx xxx

[Annex "9" of the Petition, pp. 2-4; Rollo, pp. 65-67.]

Petitioner moved for reconsideration of the aforestated order reiterating, among others. its request that TLA No. 356 issued to private respondent be declared null and void. The MNR however denied this motion in an order dated September 15, 1986. stating in part:

xxx xxx xxx

Regarding [petitioner's] request that the award of a 26,000 hectare portion of TLA No. 87 to Twin Peaks Realty Development Corporation under TLA No. 356 be declared null and void, suffice it to say that the Ministry is now in the process of reviewing all contracts, permits or other form of privileges for the exploration, development, exploitation, or utilization of natural resources entered into, granted, issued or acquired before the issuance of Proclamation No. 3, otherwise known as the Freedom Constitution for the purpose of amending, modifying or revoking them when the national interest so requires.

xxx xxx xxx

The Ministry, through the Bureau of Forest Development, has jurisdiction and authority over all forest lands. On the basis of this authority, the Ministry issued the order banning all logging operations/activities in Quirino province, among others, where movant's former concession area is located. Therefore, the issuance of an order disallowing any person or entity from removing cut or uncut logs from the portion of TLA No. 87, now under TLA No. 356, would constitute an unnecessary or superfluous act on the part of the Ministry.

xxx xxx xxx

[Annex "11" of the Petition, pp. 3-4; Rollo, pp. 77-78.]

On November 26, 1986, petitioner's supplemental motion for reconsideration was likewise denied. Meanwhile, per MNR Administrative Order No. 54, series of 1986, issued on November 26, 1986, the logging ban in the province of Quirino was lifted.

Petitioner subsequently appealed from the orders of the MNR to the Office of the President. In a resolution dated July 6, 1987, the Office of the President, acting through then Deputy Executive Secretary Catalino Macaraig, denied petitioner's appeal for lack of merit. The Office of the President ruled that the appeal of petitioner was prematurely filed, the matter not having been terminated in the MNR. Petitioner's motion for reconsideration was denied on August 14, 1987.

Hence, petitioner filed directly with this Court a petition for certiorari, with prayer for the issuance of a restraining order or writ of preliminary injunction, on August 27, 1987. On October 13, 1987, it filed a supplement to its petition for certiorari. Thereafter, public and private respondents submitted their respective comments, and petitioner filed its consolidated reply thereto. In a resolution dated May 22, 1989, the Court resolved to give due course to the petition.

After a careful study of the circumstances in the case at bar, the Court finds several factors which militate against the issuance of a writ of certiorari in favor of petitioner.

1. Firstly, the refusal of public respondents herein to reverse final and executory administrative orders does not constitute grave abuse of discretion amounting to lack or excess of jurisdiction.

It is an established doctrine in this jurisdiction that the decisions and orders of administrative agencies have upon their finality, the force and binding effect of a final judgment within the purview of the doctrine of res judicata. These decisions and orders are as conclusive upon the rights of the affected parties as though the same had been rendered by a court of general jurisdiction. The rule of res judicata thus forbids the reopening of a matter once determined by competent authority acting within their exclusive jurisdiction [See Brillantes v. Castro, 99 Phil. 497 (1956); Ipekdjian Merchandising Co., Inc. v. Court of Tax Appeals, G.R. No. L-15430, September 30, 1963, 9 SCRA 72; San Luis v. Court of Appeals, G.R. No. 80160, June 26, 1989].

In the case at bar, petitioner's letters to the Office of the President and the MNR [now the Department of Environment and Natural Resources (DENR) dated March 17, 1986 and April 2, 1986, respectively, sought the reconsideration of a memorandum order issued by the Bureau of Forest Development which cancelled its timber license agreement in 1983, as well as the revocation of TLA No. 356 subsequently issued by the Bureau to private respondents in 1984.

But as gleaned from the record, petitioner did not avail of its remedies under the law, i.e. Section 8 of Pres. Dec. No. 705 as amended, for attacking the validity of these administrative actions until after 1986. By the time petitioner sent its letter dated April 2, 1986 to the newly appointed Minister of the MNR requesting reconsideration of the above Bureau actions, these were already settled matters as far as petitioner was concerned [See Rueda v. Court of Agrarian Relations, 106 Phil. 300 (1959); Danan v. Aspillera G.R. No. L-17305, November 28, 1962, 6 SCRA 609; Ocampo v. Arboleda G.R. No. L-48190, August 31, 1987, 153 SCRA 374].

No particular significance can be attached to petitioner's letter dated September 19, 1983 which petitioner claimed to have sent to then President Marcos [Annex "6" of Petition, Rollo, pp. 50-53], seeking the reconsideration of the 1983 order issued by Director Cortes of the Bureau. It must be pointed out that the averments in this letter are entirely different from the charges of fraud against officials under the previous regime made by petitioner in its letters to public respondents herein. In the letter to then President Marcos, petitioner simply contested its inclusion in the list of concessionaires, whose licenses were cancelled, by defending its record of selective logging and reforestation practices in the subject concession area. Yet, no other administrative steps appear to have been taken by petitioner until 1986, despite the fact that the alleged fraudulent scheme became apparent in 1984 as evidenced by the awarding of the subject timber concession area to other entities in that year.

2. Moreover, petitioner is precluded from availing of the benefits of a writ of certiorari in the present case because he failed to file his petition within a reasonable period.

The principal issue ostensibly presented for resolution in the instant petition is whether or not public respondents herein acted with grave abuse of discretion amounting to lack or excess of jurisdiction in refusing to overturn

administrative orders issued by their predecessors in the past regime. Yet, what the petition ultimately seeks is the nullification of the Bureau orders cancelling TLA No. 87 and granting TLA No. 356 to private respondent, which were issued way back in 1983 and 1984, respectively.

Once again, the fact that petitioner failed to seasonably take judicial recourse to have the earlier administrative actions reviewed by the courts through a petition for certiorari is prejudicial to its cause. For although no specific time frame is fixed for the institution of a special civil action for certiorari under Rule 65 of the Revised Rules of Court, the same must nevertheless be done within a "reasonable time". The yardstick to measure the timeliness of a petition for certiorari is the "reasonableness of the length of time that had expired from the commission of the acts complained of up to the institution of the proceeding to annul the same" [Toledo v. Pardo, G.R. No. 56761, November 19, 1982, 118 SCRA 566, 571]. And failure to file the petition for certiorari within a reasonable period of time renders the petitioner susceptible to the adverse legal consequences of laches [Municipality of Carcar v. Court of First Instance of Cebu, G.R. No. L-31628, December 27, 1982, 119 SCRA 392).

Laches is defined as the failure or neglect for an unreasonable and unexplained length of time to do that which by exercising due diligence, could or should have been done earlier, or to assert a right within a reasonable time, warranting a presumption that the party entitled thereto has either abandoned it or declined to assert it [Tijam v. Sibonghanoy, G.R. No. L-21450, April 15, 1968, 23 SCRA 29; Seno v. Mangubat, G.R. No. L-44339, December 2, 1987, 156 SCRA 113]. The rule is that unreasonable delay on the part of a plaintiff in seeking to enforce an alleged right may, depending upon the circumstances, be destructive of the right itself. Verily, the laws aid those who are vigilant, not those who sleep upon their rights (Vigilantibus et non dormientibus jura subveniunt) [See Buenaventura v. David, 37 Phil. 435 (1918)].

In the case at bar, petitioner waited for at least three years before it finally filed a petition for certiorari with the Court attacking the validity of the assailed Bureau actions in 1983 and 1984. Considering that petitioner, throughout the period of its inaction, was not deprived of the opportunity to seek relief from the courts which were normally operating at the time, its delay constitutes unreasonable and inexcusable neglect, tantamount to laches. Accordingly, the writ of certiorari requiring the reversal of these orders will not lie.

3. Finally, there is a more significant factor which bars the issuance of a writ of certiorari in favor of petitioner and against public respondents herein. It is precisely this for which prevents the Court from departing from the general application of the rules enunciated above.

A cursory reading of the assailed orders issued by public respondent Minister Maceda of the MNR which were ed by the Office of the President, will disclose public policy consideration which effectively forestall judicial interference in the case at bar,

Public respondents herein, upon whose shoulders rests the task of implementing the policy to develop and conserve the country's natural resources, have indicated an ongoing department evaluation of all timber license agreements entered into, and permits or licenses issued, under the previous dispensation. In fact, both the executive and legislative departments of the incumbent administration are presently taking stock of its environmental policies with regard to the utilization of timber lands and developing an agenda for future programs for their conservation and rehabilitation.

The ongoing administrative reassessment is apparently in response to the renewed and growing global concern over the despoliation of forest lands and the utter disregard of their crucial role in sustaining a balanced ecological system. The legitimacy of such concern can hardly be disputed, most especially in this country. The Court takes judicial notice of the profligate waste of the country's forest resources which has not only resulted in the irreversible loss of flora and fauna peculiar to the region, but has produced even more disastrous and lasting economic and social effects. The delicate balance of nature having been upset, a vicious cycle of floods and droughts has been triggered and the supply of food and energy resources required by the people seriously depleted.

While there is a desire to harness natural resources to amass profit and to meet the country's immediate financial requirements, the more essential need to ensure future generations of Filipinos of their survival in a viable environment demands effective and circumspect action from the government to check further denudation of whatever remains of the forest lands. Nothing less is expected of the government, in view of the clear constitutional command to maintain a balanced and healthful ecology. Section 16 of Article II of the 1987 Constitution provides:

SEC. 16. The State shall protect and promote the right of the people to a balanced and healthful ecology in accord with the rhythm and harmony of nature.

Thus, while the administration grapples with the complex and multifarious problems caused by unbridled exploitation of these resources, the judiciary will stand clear. A long line of cases establish the basic rule that the courts will not interfere in matters which are addressed to the sound discretion of government agencies entrusted with the regulation of activities coming under the special technical knowledge and training of such agencies [See Espinosa v. Makalintal, 79 Phil. 134 (1947); Coloso v. Board of Accountancy, 92 Phil. 938 (1953); Pajo v. Ago, 108 Phil. 905 (1960); Suarez v. Reyes, G.R. No. L-19828, February 28, 1963, 7 SCRA 461; Ganitano v. Secretary of Agriculture and Natural Resources, G. R. No. L-21167, March 31, 1966, 16 SCRA 543; Villegas v. Auditor General, G.R. No. L-21352, November 29, 1966, 18 SCRA 877; Manuel v. Villena, G.R. No. L-28218, February 27, 1971, 37 SCRA 745; Lacuesta v. Herrera, G.R. No. L-33646, January 28, 1975, 62 SCRA 115; Lianga Bay Logging Co., Inc. v. Enage, G.R. No. L-30637, July 16, 1987, 152 SCRA 80]. More so where, as in the present case, the interests of a private logging company are pitted against that of the public at large on the pressing public policy issue of forest conservation. For this Court recognizes the wide latitude of discretion possessed by the government in determining the appropriate actions to be taken to preserve and manage natural resources, and the proper parties who should enjoy the privilege of utilizing these resources [Director of Forestry v. Munoz, G.R. No. L-24796, June 28, 1968, 23 SCRA 1183; Lim, Sr. v. The Secretary of Agriculture and Natural Resources, G.R. No. L-26990, August 31, 1970, 34 SCRA 751]. Timber licenses, permits and license agreements are the principal instruments by which the State regulates the utilization and disposition of forest resources to the end that public welfare is promoted. And it can hardly be gainsaid that they merely evidence a privilege granted by the State to qualified entities, and do not vest in the latter a permanent or irrevocable right to the particular concession area and the forest products therein. They may be validly amended, modified, replaced or rescinded by the Chief Executive when national interests so require. Thus, they are not deemed contracts within the purview of the due process of law clause [See Sections 3 (ee) and 20 of Pres. Decree No. 705, as amended. Also, Tan v. Director of Forestry, G.R. No. L-24548, October 27, 1983, 125 SCRA 302].

In fine, the legal precepts highlighted in the foregoing discussion more than suffice to justify the Court's refusal to interfere in the DENR evaluation of timber licenses and permits issued under the previous regime, or to pre-empt the adoption of appropriate corrective measures by the department.

Nevertheless, the Court cannot help but express its concern regarding alleged irregularities in the issuance of timber license agreements to a number of logging concessionaires.

The grant of licenses or permits to exploit the country's timber resources, if done in contravention of the procedure outlined in the law, or as a result of fraud and undue influence exerted on department officials, is indicative of an arbitrary and whimsical exercise of the State's power to regulate the use and exploitation of forest resources. The alleged practice of bestowing "special favors" to preferred individuals, regardless of merit, would be an abuse of this power. And this Court will not be a party to a flagrant mockery of the avowed public policy of conservation enshrined in the 1987 Constitution. Therefore, should the appropriate case be brought showing a clear grave abuse of discretion on the part of officials in the DENR and related bureaus with respect to the implementation of this public policy, the Court win not hesitate to step in and wield its authority, when invoked, in the exercise of judicial powers under the Constitution [Section 1, Article VIII].

However, petitioner having failed to make out a case showing grave abuse of discretion on the part of public respondents herein, the Court finds no basis to issue a writ of certiorari and to grant any of the affirmative reliefs sought.

WHEREFORE, the present petition is DISMISSED.

SO ORDERED. Fernan, C.J., Gutierrez Jr. and Bidin, JJ., concur. Feliciano, J., is on leave.

Footnotes * As a result of the creation of the province of Quirino the municipality of Maddela is now deemed part of the Quirino province.

EN BANC

G.R. No. 135385               December 6, 2000

ISAGANI CRUZ and CESAR EUROPA, petitioners, vs.SECRETARY OF ENVIRONMENT AND NATURAL RESOURCES, SECRETARY OF BUDGET AND MANAGEMENT and CHAIRMAN and COMMISSIONERS OF THE NATIONAL COMMISSION ON INDIGENOUS PEOPLES, respondents.HON. JUAN M .FLAVIER, HON. PONCIANO BENNAGEN, BAYANI ASCARRAGA, EDTAMI MANSAYANGAN, BASILIO WANDAG, EVELYN DUNUAN, YAOM TUGAS, ALFREMO CARPIANO, LIBERATO A. GABIN, MATERNIDAD M. COLAS, NARCISA M. DALUPINES, BAI KIRAM-CONNIE SATURNO, BAE MLOMO-BEATRIZ T. ABASALA, DATU BALITUNGTUNG-ANTONIO D. LUMANDONG, DATU MANTUMUKAW TEOFISTO SABASALES, DATU EDUAARDO BANDA, DATU JOEL UNAD, DATU RAMON BAYAAN, TIMUAY JOSE ANOY, TIMUAY MACARIO D. SALACAO, TIMUAY EDWIN B. ENDING, DATU SAHAMPONG MALANAW VI, DATU BEN PENDAO CABIGON, BAI NANAPNAY-LIZA SAWAY, BAY INAY DAYA-MELINDA S. REYMUNDO, BAI TINANGHAGA HELINITA T. PANGAN, DATU MAKAPUKAW ADOLINO L. SAWAY, DATU MAUDAYAW-CRISPEN SAWAY, VICKY MAKAY, LOURDES D. AMOS, GILBERT P. HOGGANG, TERESA GASPAR, MANUEL S. ONALAN, MIA GRACE L. GIRON, ROSEMARIE G. PE, BENITO CARINO, JOSEPH JUDE CARANTES, LYNETTE CARANTES-VIVAL, LANGLEY SEGUNDO, SATUR S. BUGNAY, CARLING DOMULOT, ANDRES MENDIOGRIN, LEOPOLDO ABUGAN, VIRGILIO CAYETANO, CONCHITA G. DESCAGA, LEVY ESTEVES, ODETTE G. ESTEVEZ, RODOLFO C. AGUILAR, MAURO VALONES, PEPE H. ATONG, OFELIA T. DAVI, PERFECTO B. GUINOSAO, WALTER N. TIMOL, MANUEL T. SELEN, OSCAR DALUNHAY, RICO O. SULATAN, RAFFY MALINDA, ALFREDO ABILLANOS, JESSIE ANDILAB, MIRLANDO H. MANGKULINTAS, SAMIE SATURNO, ROMEO A. LINDAHAY, ROEL S. MANSANG-CAGAN, PAQUITO S. LIESES, FILIPE G. SAWAY, HERMINIA S. SAWAY, JULIUS S. SAWAY, LEONARDA SAWAY, JIMMY UGYUB, SALVADOR TIONGSON, VENANCIO APANG, MADION MALID, SUKIM MALID, NENENG MALID, MANGKATADONG AUGUSTO DIANO, JOSEPHINE M. ALBESO, MORENO MALID, MARIO MANGCAL, FELAY DIAMILING, SALOME P. SARZA, FELIPE P. BAGON, SAMMY SALNUNGAN, ANTONIO D. EMBA, NORMA MAPANSAGONOS, ROMEO SALIGA, SR., JERSON P. GERADA, RENATO T. BAGON, JR., SARING MASALONG, SOLEDAD M. GERARDA, ELIZABETH L. MENDI, MORANTE S. TIWAN, DANILO M. MALUDAO, MINORS MARICEL MALID, represented by her father CORNELIO MALID, MARCELINO M. LADRA, represented by her father MONICO D. LADRA, JENNYLYN MALID, represented by her father TONY MALID, ARIEL M. EVANGELISTA, represented by her mother LINAY BALBUENA, EDWARD M. EMUY, SR., SUSAN BOLANIO, OND, PULA BATO B'LAAN TRIBAL FARMER'S ASSOCIATION, INTER-PEOPLE'S EXCHANGE, INC. and GREEN FORUM-WESTERN VISAYAS, intervenors.COMMISSION ON HUMAN RIGHTS, intervenor.IKALAHAN INDIGENOUS PEOPLE and HARIBON FOUNDATION FOR THE CONSERVATION OF NATURAL RESOURCES, INC., intervenor.

R E S O L U T I O N

PER CURIAM:

Petitioners Isagani Cruz and Cesar Europa brought this suit for prohibition and mandamus as citizens and taxpayers, assailing the constitutionality of certain provisions of Republic Act No. 8371 (R.A. 8371), otherwise known as the Indigenous Peoples Rights Act of 1997 (IPRA), and its Implementing Rules and Regulations (Implementing Rules).

In its resolution of September 29, 1998, the Court required respondents to comment.1 In compliance, respondents Chairperson and Commissioners of the National Commission on Indigenous Peoples (NCIP), the government agency created under the IPRA to implement its provisions, filed on October 13, 1998 their Comment to the Petition, in which they defend the constitutionality of the IPRA and pray that the petition be dismissed for lack of merit.

On October 19, 1998, respondents Secretary of the Department of Environment and Natural Resources (DENR) and Secretary of the Department of Budget and Management (DBM) filed through the Solicitor General a

consolidated Comment. The Solicitor General is of the view that the IPRA is partly unconstitutional on the ground that it grants ownership over natural resources to indigenous peoples and prays that the petition be granted in part.

On November 10, 1998, a group of intervenors, composed of Sen. Juan Flavier, one of the authors of the IPRA, Mr. Ponciano Bennagen, a member of the 1986 Constitutional Commission, and the leaders and members of 112 groups of indigenous peoples (Flavier, et. al), filed their Motion for Leave to Intervene. They join the NCIP in defending the constitutionality of IPRA and praying for the dismissal of the petition.

On March 22, 1999, the Commission on Human Rights (CHR) likewise filed a Motion to Intervene and/or to Appear as Amicus Curiae. The CHR asserts that IPRA is an expression of the principle of parens patriae and that the State has the responsibility to protect and guarantee the rights of those who are at a serious disadvantage like indigenous peoples. For this reason it prays that the petition be dismissed.

On March 23, 1999, another group, composed of the Ikalahan Indigenous People and the Haribon Foundation for the Conservation of Natural Resources, Inc. (Haribon, et al.), filed a motion to Intervene with attached Comment-in-Intervention. They agree with the NCIP and Flavier, et al. that IPRA is consistent with the Constitution and pray that the petition for prohibition and mandamus be dismissed.

The motions for intervention of the aforesaid groups and organizations were granted.

Oral arguments were heard on April 13, 1999. Thereafter, the parties and intervenors filed their respective memoranda in which they reiterate the arguments adduced in their earlier pleadings and during the hearing.

Petitioners assail the constitutionality of the following provisions of the IPRA and its Implementing Rules on the ground that they amount to an unlawful deprivation of the State’s ownership over lands of the public domain as well as minerals and other natural resources therein, in violation of the regalian doctrine embodied in Section 2, Article XII of the Constitution:

"(1) Section 3(a) which defines the extent and coverage of ancestral domains, and Section 3(b) which, in turn, defines ancestral lands;

"(2) Section 5, in relation to section 3(a), which provides that ancestral domains including inalienable public lands, bodies of water, mineral and other resources found within ancestral domains are private but community property of the indigenous peoples;

"(3) Section 6 in relation to section 3(a) and 3(b) which defines the composition of ancestral domains and ancestral lands;

"(4) Section 7 which recognizes and enumerates the rights of the indigenous peoples over the ancestral domains;

(5) Section 8 which recognizes and enumerates the rights of the indigenous peoples over the ancestral lands;

"(6) Section 57 which provides for priority rights of the indigenous peoples in the harvesting, extraction, development or exploration of minerals and other natural resources within the areas claimed to be their ancestral domains, and the right to enter into agreements with nonindigenous peoples for the development and utilization of natural resources therein for a period not exceeding 25 years, renewable for not more than 25 years; and

"(7) Section 58 which gives the indigenous peoples the responsibility to maintain, develop, protect and conserve the ancestral domains and portions thereof which are found to be necessary for critical watersheds, mangroves, wildlife sanctuaries, wilderness, protected areas, forest cover or reforestation."2

Petitioners also content that, by providing for an all-encompassing definition of "ancestral domains" and "ancestral lands" which might even include private lands found within said areas, Sections 3(a) and 3(b) violate the rights of private landowners.3

In addition, petitioners question the provisions of the IPRA defining the powers and jurisdiction of the NCIP and making customary law applicable to the settlement of disputes involving ancestral domains and ancestral lands on the ground that these provisions violate the due process clause of the Constitution.4

These provisions are:

"(1) sections 51 to 53 and 59 which detail the process of delineation and recognition of ancestral domains and which vest on the NCIP the sole authority to delineate ancestral domains and ancestral lands;

"(2) Section 52[i] which provides that upon certification by the NCIP that a particular area is an ancestral domain and upon notification to the following officials, namely, the Secretary of Environment and Natural Resources, Secretary of Interior and Local Governments, Secretary of Justice and Commissioner of the National Development Corporation, the jurisdiction of said officials over said area terminates;

"(3) Section 63 which provides the customary law, traditions and practices of indigenous peoples shall be applied first with respect to property rights, claims of ownership, hereditary succession and settlement of land disputes, and that any doubt or ambiguity in the interpretation thereof shall be resolved in favor of the indigenous peoples;

"(4) Section 65 which states that customary laws and practices shall be used to resolve disputes involving indigenous peoples; and

"(5) Section 66 which vests on the NCIP the jurisdiction over all claims and disputes involving rights of the indigenous peoples."5

Finally, petitioners assail the validity of Rule VII, Part II, Section 1 of the NCIP Administrative Order No. 1, series of 1998, which provides that "the administrative relationship of the NCIP to the Office of the President is characterized as a lateral but autonomous relationship for purposes of policy and program coordination." They contend that said Rule infringes upon the President’s power of control over executive departments under Section 17, Article VII of the Constitution.6

Petitioners pray for the following:

"(1) A declaration that Sections 3, 5, 6, 7, 8, 52[I], 57, 58, 59, 63, 65 and 66 and other related provisions of R.A. 8371 are unconstitutional and invalid;

"(2) The issuance of a writ of prohibition directing the Chairperson and Commissioners of the NCIP to cease and desist from implementing the assailed provisions of R.A. 8371 and its Implementing Rules;

"(3) The issuance of a writ of prohibition directing the Secretary of the Department of Environment and Natural Resources to cease and desist from implementing Department of Environment and Natural Resources Circular No. 2, series of 1998;

"(4) The issuance of a writ of prohibition directing the Secretary of Budget and Management to cease and desist from disbursing public funds for the implementation of the assailed provisions of R.A. 8371; and

"(5) The issuance of a writ of mandamus commanding the Secretary of Environment and Natural Resources to comply with his duty of carrying out the State’s constitutional mandate to control and supervise the exploration, development, utilization and conservation of Philippine natural resources."7

After due deliberation on the petition, the members of the Court voted as follows:

Seven (7) voted to dismiss the petition. Justice Kapunan filed an opinion, which the Chief Justice and Justices Bellosillo, Quisumbing, and Santiago join, sustaining the validity of the challenged provisions of R.A. 8371. Justice Puno also filed a separate opinion sustaining all challenged provisions of the law with the exception of Section 1, Part II, Rule III of NCIP Administrative Order No. 1, series of 1998, the Rules and Regulations Implementing the IPRA, and Section 57 of the IPRA which he contends should be interpreted as dealing with the large-scale

exploitation of natural resources and should be read in conjunction with Section 2, Article XII of the 1987 Constitution. On the other hand, Justice Mendoza voted to dismiss the petition solely on the ground that it does not raise a justiciable controversy and petitioners do not have standing to question the constitutionality of R.A. 8371.

Seven (7) other members of the Court voted to grant the petition. Justice Panganiban filed a separate opinion expressing the view that Sections 3 (a)(b), 5, 6, 7 (a)(b), 8, and related provisions of R.A. 8371 are unconstitutional. He reserves judgment on the constitutionality of Sections 58, 59, 65, and 66 of the law, which he believes must await the filing of specific cases by those whose rights may have been violated by the IPRA. Justice Vitug also filed a separate opinion expressing the view that Sections 3(a), 7, and 57 of R.A. 8371 are unconstitutional. Justices Melo, Pardo, Buena, Gonzaga-Reyes, and De Leon join in the separate opinions of Justices Panganiban and Vitug.

As the votes were equally divided (7 to 7) and the necessary majority was not obtained, the case was redeliberated upon. However, after redeliberation, the voting remained the same. Accordingly, pursuant to Rule 56, Section 7 of the Rules of Civil Procedure, the petition is DISMISSED.

Attached hereto and made integral parts thereof are the separate opinions of Justices Puno, Vitug, Kapunan, Mendoza, and Panganiban.

SO ORDERED.

Davide, Jr., C.J., Bellosillo, Melo, Quisumbing, Pardo, Buena, Gonzaga-Reyes, Ynares-Santiago, and De Leon, Jr., JJ., concur.Puno, Vitug, Kapunan, Mendoza and Panganiban JJ., see separate opinion

Footnotes

1 Rollo, p. 114.

2 Petition, Rollo, pp. 16-23.

3 Id. at 23-25.

4 Section 1, Article III of the Constitution states: "No person shall be deprived of life, liberty or property without due process of law, nor shall any person be denied the equal protection of the laws."

5 Rollo, pp. 25-27.

6 Id. at 27-28.

7 Transcript of Stenographic Notes of the hearing held on April 13, 1999, pp. 5-6.

EN BANC

G.R. No. 127882           January 27, 2004

LA BUGAL-B'LAAN TRIBAL ASSOCIATION, INC., represented by its Chairman F'LONG MIGUEL M. LUMAYONG, WIGBERTO E. TAÑADA, PONCIANO BENNAGEN, JAIME TADEO, RENATO R. CONSTANTINO, JR., F'LONG AGUSTIN M. DABIE, ROBERTO P. AMLOY, RAQIM L. DABIE, SIMEON H. DOLOJO, IMELDA M. GANDON, LENY B. GUSANAN, MARCELO L. GUSANAN, QUINTOL A. LABUAYAN, LOMINGGES D. LAWAY, BENITA P. TACUAYAN, minors JOLY L. BUGOY, represented by his father UNDERO D. BUGOY, ROGER M. DADING, represented by his father ANTONIO L. DADING, ROMY M. LAGARO, represented by his father TOTING A. LAGARO, MIKENY JONG B. LUMAYONG, represented by his father MIGUEL M. LUMAYONG, RENE T. MIGUEL, represented by his mother EDITHA T. MIGUEL, ALDEMAR L. SAL, represented by his father DANNY M. SAL, DAISY RECARSE, represented by her mother LYDIA S. SANTOS, EDWARD M. EMUY, ALAN P. MAMPARAIR, MARIO L. MANGCAL, ALDEN S. TUSAN, AMPARO S. YAP, VIRGILIO CULAR, MARVIC M.V.F. LEONEN, JULIA REGINA CULAR, GIAN CARLO CULAR, VIRGILIO CULAR, JR., represented by their father VIRGILIO CULAR, PAUL ANTONIO P. VILLAMOR, represented by his parents JOSE VILLAMOR and ELIZABETH PUA-VILLAMOR, ANA GININA R. TALJA, represented by her father MARIO JOSE B. TALJA, SHARMAINE R. CUNANAN, represented by her father ALFREDO M. CUNANAN, ANTONIO JOSE A. VITUG III, represented by his mother ANNALIZA A. VITUG, LEAN D. NARVADEZ, represented by his father MANUEL E. NARVADEZ, JR., ROSERIO MARALAG LINGATING, represented by her father RIO OLIMPIO A. LINGATING, MARIO JOSE B. TALJA, DAVID E. DE VERA, MARIA MILAGROS L. SAN JOSE, SR., SUSAN O. BOLANIO, OND, LOLITA G. DEMONTEVERDE, BENJIE L. NEQUINTO,1 ROSE LILIA S. ROMANO, ROBERTO S. VERZOLA, EDUARDO AURELIO C. REYES, LEAN LOUEL A. PERIA, represented by his father ELPIDIO V. PERIA,2 GREEN FORUM PHILIPPINES, GREEN FORUM WESTERN VISAYAS, (GF-WV), ENVIRONMETAL LEGAL ASSISTANCE CENTER (ELAC), PHILIPPINE KAISAHAN TUNGO SA KAUNLARAN NG KANAYUNAN AT REPORMANG PANSAKAHAN (KAISAHAN),3 KAISAHAN TUNGO SA KAUNLARAN NG KANAYUNAN AT REPORMANG PANSAKAHAN (KAISAHAN), PARTNERSHIP FOR AGRARIAN REFORM and RURAL DEVELOPMENT SERVICES, INC. (PARRDS), PHILIPPINE PART`NERSHIP FOR THE DEVELOPMENT OF HUMAN RESOURCES IN THE RURAL AREAS, INC. (PHILDHRRA), WOMEN'S LEGAL BUREAU (WLB), CENTER FOR ALTERNATIVE DEVELOPMENT INITIATIVES, INC. (CADI), UPLAND DEVELOPMENT INSTITUTE (UDI), KINAIYAHAN FOUNDATION, INC., SENTRO NG ALTERNATIBONG LINGAP PANLIGAL (SALIGAN), LEGAL RIGHTS AND NATURAL RESOURCES CENTER, INC. (LRC), petitioners, vs.VICTOR O. RAMOS, SECRETARY, DEPARTMENT OF ENVIRONMENT AND NATURAL RESOURCES (DENR), HORACIO RAMOS, DIRECTOR, MINES AND GEOSCIENCES BUREAU (MGB-DENR), RUBEN TORRES, EXECUTIVE SECRETARY, and WMC (PHILIPPINES), INC.4 respondents.

D E C I S I O N

CARPIO-MORALES, J.:

The present petition for mandamus and prohibition assails the constitutionality of Republic Act No. 7942,5otherwise known as the PHILIPPINE MINING ACT OF 1995, along with the Implementing Rules and Regulations issued pursuant thereto, Department of Environment and Natural Resources (DENR) Administrative Order 96-40, and of the Financial and Technical Assistance Agreement (FTAA) entered into on March 30, 1995 by the Republic of the Philippines and WMC (Philippines), Inc. (WMCP), a corporation organized under Philippine laws.

On July 25, 1987, then President Corazon C. Aquino issued Executive Order (E.O.) No. 2796 authorizing the DENR Secretary to accept, consider and evaluate proposals from foreign-owned corporations or foreign investors for contracts or agreements involving either technical or financial assistance for large-scale exploration, development, and utilization of minerals, which, upon appropriate recommendation of the Secretary, the President may execute with the foreign proponent. In entering into such proposals, the President shall consider the real contributions to the economic growth and general welfare of the country that will be realized, as well as the development and use of local scientific and technical resources that will be promoted by the proposed contract or agreement. Until Congress shall determine otherwise, large-scale mining, for purpose of this Section, shall mean those proposals for contracts or agreements for mineral resources exploration, development, and utilization involving a committed capital

investment in a single mining unit project of at least Fifty Million Dollars in United States Currency (US $50,000,000.00).7

On March 3, 1995, then President Fidel V. Ramos approved R.A. No. 7942 to "govern the exploration, development, utilization and processing of all mineral resources."8 R.A. No. 7942 defines the modes of mineral agreements for mining operations,9 outlines the procedure for their filing and approval,10 assignment/transfer11and withdrawal,12 and fixes their terms.13 Similar provisions govern financial or technical assistance agreements.14

The law prescribes the qualifications of contractors15 and grants them certain rights, including timber,16 water17and easement18 rights, and the right to possess explosives.19 Surface owners, occupants, or concessionaires are forbidden from preventing holders of mining rights from entering private lands and concession areas.20 A procedure for the settlement of conflicts is likewise provided for.21

The Act restricts the conditions for exploration,22 quarry23 and other24 permits. It regulates the transport, sale and processing of minerals,25 and promotes the development of mining communities, science and mining technology,26 and safety and environmental protection.27

The government's share in the agreements is spelled out and allocated,28 taxes and fees are imposed,29incentives granted.30 Aside from penalizing certain acts,31 the law likewise specifies grounds for the cancellation, revocation and termination of agreements and permits.32

On April 9, 1995, 30 days following its publication on March 10, 1995 in Malaya and Manila Times, two newspapers of general circulation, R.A. No. 7942 took effect.33 Shortly before the effectivity of R.A. No. 7942, however, or on March 30, 1995, the President entered into an FTAA with WMCP covering 99,387 hectares of land in South Cotabato, Sultan Kudarat, Davao del Sur and North Cotabato.34

On August 15, 1995, then DENR Secretary Victor O. Ramos issued DENR Administrative Order (DAO) No. 95-23, s. 1995, otherwise known as the Implementing Rules and Regulations of R.A. No. 7942. This was later repealed by DAO No. 96-40, s. 1996 which was adopted on December 20, 1996.

On January 10, 1997, counsels for petitioners sent a letter to the DENR Secretary demanding that the DENR stop the implementation of R.A. No. 7942 and DAO No. 96-40,35 giving the DENR fifteen days from receipt36 to act thereon. The DENR, however, has yet to respond or act on petitioners' letter.37

Petitioners thus filed the present petition for prohibition and mandamus, with a prayer for a temporary restraining order. They allege that at the time of the filing of the petition, 100 FTAA applications had already been filed, covering an area of 8.4 million hectares,38 64 of which applications are by fully foreign-owned corporations covering a total of 5.8 million hectares, and at least one by a fully foreign-owned mining company over offshore areas.39

Petitioners claim that the DENR Secretary acted without or in excess of jurisdiction:

I. x x x in signing and promulgating DENR Administrative Order No. 96-40 implementing Republic Act No. 7942, the latter being unconstitutional in that it allows fully foreign owned corporations to explore,

develop, utilize and exploit mineral resources in a manner contrary to Section 2, paragraph 4, Article XII of the Constitution;

II. x x x in signing and promulgating DENR Administrative Order No. 96-40 implementing Republic Act No. 7942, the latter being unconstitutional in that it allows the taking of private property without the

determination of public use and for just compensation;III. x x x in signing and promulgating DENR Administrative Order No. 96-40 implementing Republic Act No.

7942, the latter being unconstitutional in that it violates Sec. 1, Art. III of the Constitution;IV. x x x in signing and promulgating DENR Administrative Order No. 96-40 implementing Republic Act No.

7942, the latter being unconstitutional in that it allows enjoyment by foreign citizens as well as fully foreign owned corporations of the nation's marine wealth contrary to Section 2, paragraph 2 of Article XII

of the Constitution;V. x x x in signing and promulgating DENR Administrative Order No. 96-40 implementing Republic Act No.

7942, the latter being unconstitutional in that it allows priority to foreign and fully foreign owned

corporations in the exploration, development and utilization of mineral resources contrary to Article XII of the Constitution;

VI. x x x in signing and promulgating DENR Administrative Order No. 96-40 implementing Republic Act No. 7942, the latter being unconstitutional in that it allows the inequitable sharing of wealth contrary to

Sections [sic] 1, paragraph 1, and Section 2, paragraph 4[,] [Article XII] of the Constitution;VII. x x x in recommending approval of and implementing the Financial and Technical Assistance Agreement

between the President of the Republic of the Philippines and Western Mining Corporation Philippines Inc. because the same is illegal and unconstitutional.40

They pray that the Court issue an order:

(a) Permanently enjoining respondents from acting on any application for Financial or Technical Assistance Agreements;(b) Declaring the Philippine Mining Act of 1995 or Republic Act No. 7942 as unconstitutional and null and void;(c) Declaring the Implementing Rules and Regulations of the Philippine Mining Act contained in DENR Administrative Order No. 96-40 and all other similar administrative issuances as unconstitutional and null and void; and(d) Cancelling the Financial and Technical Assistance Agreement issued to Western Mining Philippines, Inc. as unconstitutional, illegal and null and void.41

Impleaded as public respondents are Ruben Torres, the then Executive Secretary, Victor O. Ramos, the then DENR Secretary, and Horacio Ramos, Director of the Mines and Geosciences Bureau of the DENR. Also impleaded is private respondent WMCP, which entered into the assailed FTAA with the Philippine Government. WMCP is owned by WMC Resources International Pty., Ltd. (WMC), "a wholly owned subsidiary of Western Mining Corporation Holdings Limited, a publicly listed major Australian mining and exploration company."42 By WMCP's information, "it is a 100% owned subsidiary of WMC LIMITED."43

Respondents, aside from meeting petitioners' contentions, argue that the requisites for judicial inquiry have not been met and that the petition does not comply with the criteria for prohibition and mandamus. Additionally, respondent WMCP argues that there has been a violation of the rule on hierarchy of courts.

After petitioners filed their reply, this Court granted due course to the petition. The parties have since filed their respective memoranda.

WMCP subsequently filed a Manifestation dated September 25, 2002 alleging that on January 23, 2001, WMC sold all its shares in WMCP to Sagittarius Mines, Inc. (Sagittarius), a corporation organized under Philippine laws.44 WMCP was subsequently renamed "Tampakan Mineral Resources Corporation."45 WMCP claims that at least 60% of the equity of Sagittarius is owned by Filipinos and/or Filipino-owned corporations while about 40% is owned by Indophil Resources NL, an Australian company.46 It further claims that by such sale and transfer of shares, "WMCP has ceased to be connected in any way with WMC."47

By virtue of such sale and transfer, the DENR Secretary, by Order of December 18, 2001,48 approved the transfer and registration of the subject FTAA from WMCP to Sagittarius. Said Order, however, was appealed by Lepanto Consolidated Mining Co. (Lepanto) to the Office of the President which upheld it by Decision of July 23, 2002.49 Its motion for reconsideration having been denied by the Office of the President by Resolution of November 12, 2002,50 Lepanto filed a petition for review51 before the Court of Appeals. Incidentally, two other petitions for review related to the approval of the transfer and registration of the FTAA to Sagittarius were recently resolved by this Court.52

It bears stressing that this case has not been rendered moot either by the transfer and registration of the FTAA to a Filipino-owned corporation or by the non-issuance of a temporary restraining order or a preliminary injunction to stay the above-said July 23, 2002 decision of the Office of the President.53 The validity of the transfer remains in dispute and awaits final judicial determination. This assumes, of course, that such transfer cures the FTAA's alleged unconstitutionality, on which question judgment is reserved.

WMCP also points out that the original claimowners of the major mineralized areas included in the WMCP FTAA, namely, Sagittarius, Tampakan Mining Corporation, and Southcot Mining Corporation, are all Filipino-owned

corporations,54 each of which was a holder of an approved Mineral Production Sharing Agreement awarded in 1994, albeit their respective mineral claims were subsumed in the WMCP FTAA;55 and that these three companies are the same companies that consolidated their interests in Sagittarius to whom WMC sold its 100% equity in WMCP.56 WMCP concludes that in the event that the FTAA is invalidated, the MPSAs of the three corporations would be revived and the mineral claims would revert to their original claimants.57

These circumstances, while informative, are hardly significant in the resolution of this case, it involving the validity of the FTAA, not the possible consequences of its invalidation.

Of the above-enumerated seven grounds cited by petitioners, as will be shown later, only the first and the last need be delved into; in the latter, the discussion shall dwell only insofar as it questions the effectivity of E. O. No. 279 by virtue of which order the questioned FTAA was forged.

I

Before going into the substantive issues, the procedural questions posed by respondents shall first be tackled.

REQUISITES FOR JUDICIAL REVIEW

When an issue of constitutionality is raised, this Court can exercise its power of judicial review only if the following requisites are present:

(1) The existence of an actual and appropriate case;(2) A personal and substantial interest of the party raising the constitutional question;(3) The exercise of judicial review is pleaded at the earliest opportunity; and(4) The constitutional question is the lis mota of the case. 58

Respondents claim that the first three requisites are not present.

Section 1, Article VIII of the Constitution states that "(j)udicial power includes the duty of the courts of justice to settle actual controversies involving rights which are legally demandable and enforceable." The power of judicial review, therefore, is limited to the determination of actual cases and controversies.59

An actual case or controversy means an existing case or controversy that is appropriate or ripe for determination, not conjectural or anticipatory,60 lest the decision of the court would amount to an advisory opinion.61 The power does not extend to hypothetical questions62 since any attempt at abstraction could only lead to dialectics and barren legal questions and to sterile conclusions unrelated to actualities.63

"Legal standing" or locus standi has been defined as a personal and substantial interest in the case such that the party has sustained or will sustain direct injury as a result of the governmental act that is being challenged,64alleging more than a generalized grievance.65 The gist of the question of standing is whether a party alleges "such personal stake in the outcome of the controversy as to assure that concrete adverseness which sharpens the presentation of issues upon which the court depends for illumination of difficult constitutional questions."66Unless a person is injuriously affected in any of his constitutional rights by the operation of statute or ordinance, he has no standing.67

Petitioners traverse a wide range of sectors. Among them are La Bugal B'laan Tribal Association, Inc., a farmers and indigenous people's cooperative organized under Philippine laws representing a community actually affected by the mining activities of WMCP, members of said cooperative,68 as well as other residents of areas also affected by the mining activities of WMCP.69 These petitioners have standing to raise the constitutionality of the questioned FTAA as they allege a personal and substantial injury. They claim that they would suffer "irremediable displacement"70 as a result of the implementation of the FTAA allowing WMCP to conduct mining activities in their area of residence. They thus meet the appropriate case requirement as they assert an interest adverse to that of respondents who, on the other hand, insist on the FTAA's validity.

In view of the alleged impending injury, petitioners also have standing to assail the validity of E.O. No. 279, by authority of which the FTAA was executed.

Public respondents maintain that petitioners, being strangers to the FTAA, cannot sue either or both contracting parties to annul it.71 In other words, they contend that petitioners are not real parties in interest in an action for the annulment of contract.

Public respondents' contention fails. The present action is not merely one for annulment of contract but for prohibition and mandamus. Petitioners allege that public respondents acted without or in excess of jurisdiction in implementing the FTAA, which they submit is unconstitutional. As the case involves constitutional questions, this Court is not concerned with whether petitioners are real parties in interest, but with whether they have legal standing. As held in Kilosbayan v. Morato:72

x x x. "It is important to note . . . that standing because of its constitutional and public policy underpinnings, is very different from questions relating to whether a particular plaintiff is the real party in interest or has capacity to sue. Although all three requirements are directed towards ensuring that only certain parties can maintain an action, standing restrictions require a partial consideration of the merits, as well as broader policy concerns relating to the proper role of the judiciary in certain areas.["] (FRIEDENTHAL, KANE AND MILLER, CIVIL PROCEDURE 328 [1985])

Standing is a special concern in constitutional law because in some cases suits are brought not by parties who have been personally injured by the operation of a law or by official action taken, but by concerned citizens, taxpayers or voters who actually sue in the public interest. Hence, the question in standing is whether such parties have "alleged such a personal stake in the outcome of the controversy as to assure that concrete adverseness which sharpens the presentation of issues upon which the court so largely depends for illumination of difficult constitutional questions." (Baker v. Carr, 369 U.S. 186, 7 L.Ed.2d 633 [1962].)

As earlier stated, petitioners meet this requirement.

The challenge against the constitutionality of R.A. No. 7942 and DAO No. 96-40 likewise fulfills the requisites of justiciability. Although these laws were not in force when the subject FTAA was entered into, the question as to their validity is ripe for adjudication.

The WMCP FTAA provides:

14.3 Future Legislation

Any term and condition more favourable to Financial &Technical Assistance Agreement contractors resulting from repeal or amendment of any existing law or regulation or from the enactment of a law, regulation or administrative order shall be considered a part of this Agreement.

It is undisputed that R.A. No. 7942 and DAO No. 96-40 contain provisions that are more favorable to WMCP, hence, these laws, to the extent that they are favorable to WMCP, govern the FTAA.

In addition, R.A. No. 7942 explicitly makes certain provisions apply to pre-existing agreements.

SEC. 112. Non-impairment of Existing Mining/Quarrying Rights. – x x x That the provisions of Chapter XIV on government share in mineral production-sharing agreement and of Chapter XVI on incentives of this Act shall immediately govern and apply to a mining lessee or contractor unless the mining lessee or contractor indicates his intention to the secretary, in writing, not to avail of said provisions x x x Provided, finally, That such leases, production-sharing agreements, financial or technical assistance agreements shall comply with the applicable provisions of this Act and its implementing rules and regulations.

As there is no suggestion that WMCP has indicated its intention not to avail of the provisions of Chapter XVI of R.A. No. 7942, it can safely be presumed that they apply to the WMCP FTAA.

Misconstruing the application of the third requisite for judicial review – that the exercise of the review is pleaded at the earliest opportunity – WMCP points out that the petition was filed only almost two years after the execution of the FTAA, hence, not raised at the earliest opportunity.

The third requisite should not be taken to mean that the question of constitutionality must be raised immediately after the execution of the state action complained of. That the question of constitutionality has not been raised before is not a valid reason for refusing to allow it to be raised later.73 A contrary rule would mean that a law, otherwise unconstitutional, would lapse into constitutionality by the mere failure of the proper party to promptly file a case to challenge the same.

PROPRIETY OF PROHIBITION AND MANDAMUS

Before the effectivity in July 1997 of the Revised Rules of Civil Procedure, Section 2 of Rule 65 read:

SEC. 2. Petition for prohibition. – When the proceedings of any tribunal, corporation, board, or person, whether exercising functions judicial or ministerial, are without or in excess of its or his jurisdiction, or with grave abuse of discretion, and there is no appeal or any other plain, speedy, and adequate remedy in the ordinary course of law, a person aggrieved thereby may file a verified petition in the proper court alleging the facts with certainty and praying that judgment be rendered commanding the defendant to desist from further proceeding in the action or matter specified therein.

Prohibition is a preventive remedy.74 It seeks a judgment ordering the defendant to desist from continuing with the commission of an act perceived to be illegal.75

The petition for prohibition at bar is thus an appropriate remedy. While the execution of the contract itself may be fait accompli, its implementation is not. Public respondents, in behalf of the Government, have obligations to fulfill under said contract. Petitioners seek to prevent them from fulfilling such obligations on the theory that the contract is unconstitutional and, therefore, void.

The propriety of a petition for prohibition being upheld, discussion of the propriety of the mandamus aspect of the petition is rendered unnecessary.

HIERARCHY OF COURTS

The contention that the filing of this petition violated the rule on hierarchy of courts does not likewise lie. The rule has been explained thus:

Between two courts of concurrent original jurisdiction, it is the lower court that should initially pass upon the issues of a case. That way, as a particular case goes through the hierarchy of courts, it is shorn of all but the important legal issues or those of first impression, which are the proper subject of attention of the appellate court. This is a procedural rule borne of experience and adopted to improve the administration of justice.

This Court has consistently enjoined litigants to respect the hierarchy of courts. Although this Court has concurrent jurisdiction with the Regional Trial Courts and the Court of Appeals to issue writs of certiorari, prohibition, mandamus, quo warranto, habeas corpus and injunction, such concurrence does not give a party unrestricted freedom of choice of court forum. The resort to this Court's primary jurisdiction to issue said writs shall be allowed only where the redress desired cannot be obtained in the appropriate courts or where exceptional and compelling circumstances justify such invocation. We held in People v. Cuaresma that:

A becoming regard for judicial hierarchy most certainly indicates that petitions for the issuance of extraordinary writs against first level ("inferior") courts should be filed with the Regional Trial Court, and those against the latter, with the Court of Appeals. A direct invocation of the Supreme Court's original jurisdiction to issue these writs should be allowed only where there are special and important reasons therefor, clearly and specifically set out in the petition. This is established policy. It is a policy necessary to prevent inordinate demands upon the Court's time and attention which are better devoted to those matters within its exclusive jurisdiction, and to prevent further over-crowding of the Court's docket x x x.76 [Emphasis supplied.]

The repercussions of the issues in this case on the Philippine mining industry, if not the national economy, as well as the novelty thereof, constitute exceptional and compelling circumstances to justify resort to this Court in the first instance.

In all events, this Court has the discretion to take cognizance of a suit which does not satisfy the requirements of an actual case or legal standing when paramount public interest is involved.77 When the issues raised are of paramount importance to the public, this Court may brush aside technicalities of procedure.78

II

Petitioners contend that E.O. No. 279 did not take effect because its supposed date of effectivity came after President Aquino had already lost her legislative powers under the Provisional Constitution.

And they likewise claim that the WMC FTAA, which was entered into pursuant to E.O. No. 279, violates Section 2, Article XII of the Constitution because, among other reasons:

(1) It allows foreign-owned companies to extend more than mere financial or technical assistance to the State in the exploitation, development, and utilization of minerals, petroleum, and other mineral oils, and even permits foreign owned companies to "operate and manage mining activities."

(2) It allows foreign-owned companies to extend both technical and financial assistance, instead of "either technical or financial assistance."

To appreciate the import of these issues, a visit to the history of the pertinent constitutional provision, the concepts contained therein, and the laws enacted pursuant thereto, is in order.

Section 2, Article XII reads in full:

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

The State shall protect the nation's marine wealth in its archipelagic waters, territorial sea, and exclusive economic zone, and reserve its use and enjoyment exclusively to Filipino citizens.

The Congress may, by law, allow small-scale utilization of natural resources by Filipino citizens, as well as cooperative fish farming, with priority to subsistence fishermen and fish-workers in rivers, lakes, bays, and lagoons.

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

The President shall notify the Congress of every contract entered into in accordance with this provision, within thirty days from its execution.

THE SPANISH REGIME AND THE REGALIAN DOCTRINE

The first sentence of Section 2 embodies the Regalian doctrine or jura regalia. Introduced by Spain into these Islands, this feudal concept is based on the State's power of dominium, which is the capacity of the State to own or acquire property.79

In its broad sense, the term "jura regalia" refers to royal rights, or those rights which the King has by virtue of his prerogatives. In Spanish law, it refers to a right which the sovereign has over anything in which a subject has a right of property or propriedad. These were rights enjoyed during feudal times by the king as the sovereign.

The theory of the feudal system was that title to all lands was originally held by the King, and while the use of lands was granted out to others who were permitted to hold them under certain conditions, the King theoretically retained the title. By fiction of law, the King was regarded as the original proprietor of all lands, and the true and only source of title, and from him all lands were held. The theory of jura regalia was therefore nothing more than a natural fruit of conquest.80

The Philippines having passed to Spain by virtue of discovery and conquest,81 earlier Spanish decrees declared that "all lands were held from the Crown."82

The Regalian doctrine extends not only to land but also to "all natural wealth that may be found in the bowels of the earth."83 Spain, in particular, recognized the unique value of natural resources, viewing them, especially minerals, as an abundant source of revenue to finance its wars against other nations.84 Mining laws during the Spanish regime reflected this perspective.85

THE AMERICAN OCCUPATION AND THE CONCESSION REGIME

By the Treaty of Paris of December 10, 1898, Spain ceded "the archipelago known as the Philippine Islands" to the United States. The Philippines was hence governed by means of organic acts that were in the nature of charters serving as a Constitution of the occupied territory from 1900 to 1935.86 Among the principal organic acts of the Philippines was the Act of Congress of July 1, 1902, more commonly known as the Philippine Bill of 1902, through which the United States Congress assumed the administration of the Philippine Islands.87 Section 20 of said Bill reserved the disposition of mineral lands of the public domain from sale. Section 21 thereof allowed the free and open exploration, occupation and purchase of mineral deposits not only to citizens of the Philippine Islands but to those of the United States as well:

Sec. 21. That all valuable mineral deposits in public lands in the Philippine Islands, both surveyed and unsurveyed, are hereby declared to be free and open to exploration, occupation and purchase, and the land in which they are found, to occupation and purchase, by citizens of the United States or of said Islands: Provided, That when on any lands in said Islands entered and occupied as agricultural lands under the provisions of this Act, but not patented, mineral deposits have been found, the working of such mineral deposits is forbidden until the person, association, or corporation who or which has entered and is occupying such lands shall have paid to the Government of said Islands such additional sum or sums as will make the total amount paid for the mineral claim or claims in which said deposits are located equal to the amount charged by the Government for the same as mineral claims.

Unlike Spain, the United States considered natural resources as a source of wealth for its nationals and saw fit to allow both Filipino and American citizens to explore and exploit minerals in public lands, and to grant patents to private mineral lands.88 A person who acquired ownership over a parcel of private mineral land pursuant to the laws then prevailing could exclude other persons, even the State, from exploiting minerals within his property.89Thus, earlier jurisprudence90 held that:

A valid and subsisting location of mineral land, made and kept up in accordance with the provisions of the statutes of the United States, has the effect of a grant by the United States of the present and exclusive possession of the lands located, and this exclusive right of possession and enjoyment continues during the entire life of the location. x x x.

x x x.

The discovery of minerals in the ground by one who has a valid mineral location perfects his claim and his location not only against third persons, but also against the Government. x x x. [Italics in the original.]

The Regalian doctrine and the American system, therefore, differ in one essential respect. Under the Regalian theory, mineral rights are not included in a grant of land by the state; under the American doctrine, mineral rights are included in a grant of land by the government.91

Section 21 also made possible the concession (frequently styled "permit", license" or "lease")92 system.93 This was the traditional regime imposed by the colonial administrators for the exploitation of natural resources in the extractive sector (petroleum, hard minerals, timber, etc.).94

Under the concession system, the concessionaire makes a direct equity investment for the purpose of exploiting a particular natural resource within a given area.95 Thus, the concession amounts to complete control by the concessionaire over the country's natural resource, for it is given exclusive and plenary rights to exploit a particular resource at the point of extraction.96 In consideration for the right to exploit a natural resource, the concessionaire either pays rent or royalty, which is a fixed percentage of the gross proceeds.97

Later statutory enactments by the legislative bodies set up in the Philippines adopted the contractual framework of the concession.98 For instance, Act No. 2932,99 approved on August 31, 1920, which provided for the exploration, location, and lease of lands containing petroleum and other mineral oils and gas in the Philippines, and Act No. 2719,100 approved on May 14, 1917, which provided for the leasing and development of coal lands in the Philippines, both utilized the concession system.101

THE 1935 CONSTITUTION AND THE NATIONALIZATION OF NATURAL RESOURCES

By the Act of United States Congress of March 24, 1934, popularly known as the Tydings-McDuffie Law, the People of the Philippine Islands were authorized to adopt a constitution.102 On July 30, 1934, the Constitutional Convention met for the purpose of drafting a constitution, and the Constitution subsequently drafted was approved by the Convention on February 8, 1935.103 The Constitution was submitted to the President of the United States on March 18, 1935.104 On March 23, 1935, the President of the United States certified that the Constitution conformed substantially with the provisions of the Act of Congress approved on March 24, 1934.105On May 14, 1935, the Constitution was ratified by the Filipino people.106

The 1935 Constitution adopted the Regalian doctrine, declaring all natural resources of the Philippines, including mineral lands and minerals, to be property belonging to the State.107 As adopted in a republican system, the medieval concept of jura regalia is stripped of royal overtones and ownership of the land is vested in the State.108

Section 1, Article XIII, on Conservation and Utilization of Natural Resources, of the 1935 Constitution provided:

SECTION 1. All agricultural, timber, and mineral lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all forces of potential energy, and other natural resources of the Philippines belong to the State, and their disposition, exploitation, development, or utilization shall be limited to citizens of the Philippines, or to corporations or associations at least sixty per centum of the capital of which is owned by such citizens, subject to any existing right, grant, lease, or concession at the time of the inauguration of the Government established under this Constitution. Natural resources, with the exception of public agricultural land, shall not be alienated, and no license, concession, or lease for the exploitation, development, or utilization of any of the natural resources shall be granted for a period exceeding twenty-five years, except as to water rights for irrigation, water supply, fisheries, or industrial uses other than the development of water power, in which cases beneficial use may be the measure and the limit of the grant.

The nationalization and conservation of the natural resources of the country was one of the fixed and dominating objectives of the 1935 Constitutional Convention.109 One delegate relates:

There was an overwhelming sentiment in the Convention in favor of the principle of state ownership of natural resources and the adoption of the Regalian doctrine. State ownership of natural resources was seen as a necessary starting point to secure recognition of the state's power to control their disposition, exploitation, development, or utilization. The delegates of the Constitutional Convention very well knew that the concept of State ownership of land and natural resources was introduced by the Spaniards, however, they were not certain whether it was continued and applied by the Americans. To remove all doubts, the Convention approved the provision in the Constitution affirming the Regalian doctrine.

The adoption of the principle of state ownership of the natural resources and of the Regalian doctrine was considered to be a necessary starting point for the plan of nationalizing and conserving the natural resources of the country. For with the establishment of the principle of state ownership of the natural resources, it would not be hard

to secure the recognition of the power of the State to control their disposition, exploitation, development or utilization.110

The nationalization of the natural resources was intended (1) to insure their conservation for Filipino posterity; (2) to serve as an instrument of national defense, helping prevent the extension to the country of foreign control through peaceful economic penetration; and (3) to avoid making the Philippines a source of international conflicts with the consequent danger to its internal security and independence.111

The same Section 1, Article XIII also adopted the concession system, expressly permitting the State to grant licenses, concessions, or leases for the exploitation, development, or utilization of any of the natural resources. Grants, however, were limited to Filipinos or entities at least 60% of the capital of which is owned by Filipinos. lawph!l.ne+

The swell of nationalism that suffused the 1935 Constitution was radically diluted when on November 1946, the Parity Amendment, which came in the form of an "Ordinance Appended to the Constitution," was ratified in a plebiscite.112 The Amendment extended, from July 4, 1946 to July 3, 1974, the right to utilize and exploit our natural resources to citizens of the United States and business enterprises owned or controlled, directly or indirectly, by citizens of the United States:113

Notwithstanding the provision of section one, Article Thirteen, and section eight, Article Fourteen, of the foregoing Constitution, during the effectivity of the Executive Agreement entered into by the President of the Philippines with the President of the United States on the fourth of July, nineteen hundred and forty-six, pursuant to the provisions of Commonwealth Act Numbered Seven hundred and thirty-three, but in no case to extend beyond the third of July, nineteen hundred and seventy-four, the disposition, exploitation, development, and utilization of all agricultural, timber, and mineral lands of the public domain, waters, minerals, coals, petroleum, and other mineral oils, all forces and sources of potential energy, and other natural resources of the Philippines, and the operation of public utilities, shall, if open to any person, be open to citizens of the United States and to all forms of business enterprise owned or controlled, directly or indirectly, by citizens of the United States in the same manner as to, and under the same conditions imposed upon, citizens of the Philippines or corporations or associations owned or controlled by citizens of the Philippines.

The Parity Amendment was subsequently modified by the 1954 Revised Trade Agreement, also known as the Laurel-Langley Agreement, embodied in Republic Act No. 1355.114

THE PETROLEUM ACT OF 1949 AND THE CONCESSION SYSTEM

In the meantime, Republic Act No. 387,115 also known as the Petroleum Act of 1949, was approved on June 18, 1949.

The Petroleum Act of 1949 employed the concession system for the exploitation of the nation's petroleum resources. Among the kinds of concessions it sanctioned were exploration and exploitation concessions, which respectively granted to the concessionaire the exclusive right to explore for116 or develop117 petroleum within specified areas.

Concessions may be granted only to duly qualified persons118 who have sufficient finances, organization, resources, technical competence, and skills necessary to conduct the operations to be undertaken.119

Nevertheless, the Government reserved the right to undertake such work itself.120 This proceeded from the theory that all natural deposits or occurrences of petroleum or natural gas in public and/or private lands in the Philippines belong to the State.121 Exploration and exploitation concessions did not confer upon the concessionaire ownership over the petroleum lands and petroleum deposits.122 However, they did grant concessionaires the right to explore, develop, exploit, and utilize them for the period and under the conditions determined by the law.123

Concessions were granted at the complete risk of the concessionaire; the Government did not guarantee the existence of petroleum or undertake, in any case, title warranty.124

Concessionaires were required to submit information as maybe required by the Secretary of Agriculture and Natural Resources, including reports of geological and geophysical examinations, as well as production reports.125 Exploration126 and exploitation127 concessionaires were also required to submit work programs. lavvphi1.net

Exploitation concessionaires, in particular, were obliged to pay an annual exploitation tax,128 the object of which is to induce the concessionaire to actually produce petroleum, and not simply to sit on the concession without developing or exploiting it.129 These concessionaires were also bound to pay the Government royalty, which was not less than 12½% of the petroleum produced and saved, less that consumed in the operations of the concessionaire.130 Under Article 66, R.A. No. 387, the exploitation tax may be credited against the royalties so that if the concessionaire shall be actually producing enough oil, it would not actually be paying the exploitation tax.131

Failure to pay the annual exploitation tax for two consecutive years,132 or the royalty due to the Government within one year from the date it becomes due,133 constituted grounds for the cancellation of the concession. In case of delay in the payment of the taxes or royalty imposed by the law or by the concession, a surcharge of 1% per month is exacted until the same are paid.134

As a rule, title rights to all equipment and structures that the concessionaire placed on the land belong to the exploration or exploitation concessionaire.135 Upon termination of such concession, the concessionaire had a right to remove the same.136

The Secretary of Agriculture and Natural Resources was tasked with carrying out the provisions of the law, through the Director of Mines, who acted under the Secretary's immediate supervision and control.137 The Act granted the Secretary the authority to inspect any operation of the concessionaire and to examine all the books and accounts pertaining to operations or conditions related to payment of taxes and royalties.138

The same law authorized the Secretary to create an Administration Unit and a Technical Board.139 The Administration Unit was charged, inter alia, with the enforcement of the provisions of the law.140 The Technical Board had, among other functions, the duty to check on the performance of concessionaires and to determine whether the obligations imposed by the Act and its implementing regulations were being complied with.141

Victorio Mario A. Dimagiba, Chief Legal Officer of the Bureau of Energy Development, analyzed the benefits and drawbacks of the concession system insofar as it applied to the petroleum industry:

Advantages of Concession. Whether it emphasizes income tax or royalty, the most positive aspect of the concession system is that the State's financial involvement is virtually risk free and administration is simple and comparatively low in cost. Furthermore, if there is a competitive allocation of the resource leading to substantial bonuses and/or greater royalty coupled with a relatively high level of taxation, revenue accruing to the State under the concession system may compare favorably with other financial arrangements.

Disadvantages of Concession. There are, however, major negative aspects to this system. Because the Government's role in the traditional concession is passive, it is at a distinct disadvantage in managing and developing policy for the nation's petroleum resource. This is true for several reasons. First, even though most concession agreements contain covenants requiring diligence in operations and production, this establishes only an indirect and passive control of the host country in resource development. Second, and more importantly, the fact that the host country does not directly participate in resource management decisions inhibits its ability to train and employ its nationals in petroleum development. This factor could delay or prevent the country from effectively engaging in the development of its resources. Lastly, a direct role in management is usually necessary in order to obtain a knowledge of the international petroleum industry which is important to an appreciation of the host country's resources in relation to those of other countries.142

Other liabilities of the system have also been noted:

x x x there are functional implications which give the concessionaire great economic power arising from its exclusive equity holding. This includes, first, appropriation of the returns of the undertaking, subject to a modest royalty; second, exclusive management of the project; third, control of production of the natural resource, such as volume of production, expansion, research and development; and fourth, exclusive responsibility for downstream operations, like processing, marketing, and distribution. In short, even if nominally, the state is the sovereign and owner of the

natural resource being exploited, it has been shorn of all elements of control over such natural resource because of the exclusive nature of the contractual regime of the concession. The concession system, investing as it does ownership of natural resources, constitutes a consistent inconsistency with the principle embodied in our Constitution that natural resources belong to the state and shall not be alienated, not to mention the fact that the concession was the bedrock of the colonial system in the exploitation of natural resources.143

Eventually, the concession system failed for reasons explained by Dimagiba:

Notwithstanding the good intentions of the Petroleum Act of 1949, the concession system could not have properly spurred sustained oil exploration activities in the country, since it assumed that such a capital-intensive, high risk venture could be successfully undertaken by a single individual or a small company. In effect, concessionaires' funds were easily exhausted. Moreover, since the concession system practically closed its doors to interested foreign investors, local capital was stretched to the limits. The old system also failed to consider the highly sophisticated technology and expertise required, which would be available only to multinational companies.144

A shift to a new regime for the development of natural resources thus seemed imminent.

PRESIDENTIAL DECREE NO. 87, THE 1973 CONSTITUTION AND THE SERVICE CONTRACT SYSTEM

The promulgation on December 31, 1972 of Presidential Decree No. 87,145 otherwise known as The Oil Exploration and Development Act of 1972 signaled such a transformation. P.D. No. 87 permitted the government to explore for and produce indigenous petroleum through "service contracts."146

"Service contracts" is a term that assumes varying meanings to different people, and it has carried many names in different countries, like "work contracts" in Indonesia, "concession agreements" in Africa, "production-sharing agreements" in the Middle East, and "participation agreements" in Latin America.147 A functional definition of "service contracts" in the Philippines is provided as follows:

A service contract is a contractual arrangement for engaging in the exploitation and development of petroleum, mineral, energy, land and other natural resources by which a government or its agency, or a private person granted a right or privilege by the government authorizes the other party (service contractor) to engage or participate in the exercise of such right or the enjoyment of the privilege, in that the latter provides financial or technical resources, undertakes the exploitation or production of a given resource, or directly manages the productive enterprise, operations of the exploration and exploitation of the resources or the disposition of marketing or resources.148

In a service contract under P.D. No. 87, service and technology are furnished by the service contractor for which it shall be entitled to the stipulated service fee.149 The contractor must be technically competent and financially capable to undertake the operations required in the contract.150

Financing is supposed to be provided by the Government to which all petroleum produced belongs.151 In case the Government is unable to finance petroleum exploration operations, the contractor may furnish services, technology and financing, and the proceeds of sale of the petroleum produced under the contract shall be the source of funds for payment of the service fee and the operating expenses due the contractor.152 The contractor shall undertake, manage and execute petroleum operations, subject to the government overseeing the management of the operations.153 The contractor provides all necessary services and technology and the requisite financing, performs the exploration work obligations, and assumes all exploration risks such that if no petroleum is produced, it will not be entitled to reimbursement.154 Once petroleum in commercial quantity is discovered, the contractor shall operate the field on behalf of the government.155

P.D. No. 87 prescribed minimum terms and conditions for every service contract.156 It also granted the contractor certain privileges, including exemption from taxes and payment of tariff duties,157 and permitted the repatriation of capital and retention of profits abroad.158

Ostensibly, the service contract system had certain advantages over the concession regime.159 It has been opined, though, that, in the Philippines, our concept of a service contract, at least in the petroleum industry, was basically a concession regime with a production-sharing element.160

On January 17, 1973, then President Ferdinand E. Marcos proclaimed the ratification of a new Constitution.161Article XIV on the National Economy and Patrimony contained provisions similar to the 1935 Constitution with regard to Filipino participation in the nation's natural resources. Section 8, Article XIV thereof provides:

Sec. 8. All lands of the public domain, waters, minerals, coal, petroleum and other mineral oils, all forces of potential energy, fisheries, wildlife, and other natural resources of the Philippines belong to the State. With the exception of agricultural, industrial or commercial, residential and resettlement lands of the public domain, natural resources shall not be alienated, and no license, concession, or lease for the exploration, development, exploitation, or utilization of any of the natural resources shall be granted for a period exceeding twenty-five years, renewable for not more than twenty-five years, except as to water rights for irrigation, water supply, fisheries, or industrial uses other than the development of water power, in which cases beneficial use may be the measure and the limit of the grant.

While Section 9 of the same Article maintained the Filipino-only policy in the enjoyment of natural resources, it also allowed Filipinos, upon authority of the Batasang Pambansa, to enter into service contracts with any person or entity for the exploration or utilization of natural resources.

Sec. 9. The disposition, exploration, development, exploitation, or utilization of any of the natural resources of the Philippines shall be limited to citizens, or to corporations or associations at least sixty per centum of which is owned by such citizens. The Batasang Pambansa, in the national interest, may allow such citizens, corporations or associations to enter into service contracts for financial, technical, management, or other forms of assistance with any person or entity for the exploration, or utilization of any of the natural resources. Existing valid and binding service contracts for financial, technical, management, or other forms of assistance are hereby recognized as such. [Emphasis supplied.]

The concept of service contracts, according to one delegate, was borrowed from the methods followed by India, Pakistan and especially Indonesia in the exploration of petroleum and mineral oils.162 The provision allowing such contracts, according to another, was intended to "enhance the proper development of our natural resources since Filipino citizens lack the needed capital and technical know-how which are essential in the proper exploration, development and exploitation of the natural resources of the country."163

The original idea was to authorize the government, not private entities, to enter into service contracts with foreign entities.164 As finally approved, however, a citizen or private entity could be allowed by the National Assembly to enter into such service contract.165 The prior approval of the National Assembly was deemed sufficient to protect the national interest.166 Notably, none of the laws allowing service contracts were passed by the Batasang Pambansa. Indeed, all of them were enacted by presidential decree.

On March 13, 1973, shortly after the ratification of the new Constitution, the President promulgated Presidential Decree No. 151.167 The law allowed Filipino citizens or entities which have acquired lands of the public domain or which own, hold or control such lands to enter into service contracts for financial, technical, management or other forms of assistance with any foreign persons or entity for the exploration, development, exploitation or utilization of said lands.168

Presidential Decree No. 463,169 also known as The Mineral Resources Development Decree of 1974, was enacted on May 17, 1974. Section 44 of the decree, as amended, provided that a lessee of a mining claim may enter into a service contract with a qualified domestic or foreign contractor for the exploration, development and exploitation of his claims and the processing and marketing of the product thereof.

Presidential Decree No. 704170 (The Fisheries Decree of 1975), approved on May 16, 1975, allowed Filipinos engaged in commercial fishing to enter into contracts for financial, technical or other forms of assistance with any foreign person, corporation or entity for the production, storage, marketing and processing of fish and fishery/aquatic products.171

Presidential Decree No. 705172 (The Revised Forestry Code of the Philippines), approved on May 19, 1975, allowed "forest products licensees, lessees, or permitees to enter into service contracts for financial, technical, management, or other forms of assistance . . . with any foreign person or entity for the exploration, development, exploitation or utilization of the forest resources."173

Yet another law allowing service contracts, this time for geothermal resources, was Presidential Decree No. 1442,174 which was signed into law on June 11, 1978. Section 1 thereof authorized the Government to enter into service contracts for the exploration, exploitation and development of geothermal resources with a foreign contractor who must be technically and financially capable of undertaking the operations required in the service contract.

Thus, virtually the entire range of the country's natural resources –from petroleum and minerals to geothermal energy, from public lands and forest resources to fishery products – was well covered by apparent legal authority to engage in the direct participation or involvement of foreign persons or corporations (otherwise disqualified) in the exploration and utilization of natural resources through service contracts.175

THE 1987 CONSTITUTION AND TECHNICAL OR FINANCIAL ASSISTANCE AGREEMENTS

After the February 1986 Edsa Revolution, Corazon C. Aquino took the reins of power under a revolutionary government. On March 25, 1986, President Aquino issued Proclamation No. 3,176 promulgating the Provisional Constitution, more popularly referred to as the Freedom Constitution. By authority of the same Proclamation, the President created a Constitutional Commission (CONCOM) to draft a new constitution, which took effect on the date of its ratification on February 2, 1987.177

The 1987 Constitution retained the Regalian doctrine. The first sentence of Section 2, Article XII states: "All lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural resources are owned by the State."

Like the 1935 and 1973 Constitutions before it, the 1987 Constitution, in the second sentence of the same provision, prohibits the alienation of natural resources, except agricultural lands.

The third sentence of the same paragraph is new: "The exploration, development and utilization of natural resources shall be under the full control and supervision of the State." The constitutional policy of the State's "full control and supervision" over natural resources proceeds from the concept of jura regalia, as well as the recognition of the importance of the country's natural resources, not only for national economic development, but also for its security and national defense.178 Under this provision, the State assumes "a more dynamic role" in the exploration, development and utilization of natural resources.179

Conspicuously absent in Section 2 is the provision in the 1935 and 1973 Constitutions authorizing the State to grant licenses, concessions, or leases for the exploration, exploitation, development, or utilization of natural resources. By such omission, the utilization of inalienable lands of public domain through "license, concession or lease" is no longer allowed under the 1987 Constitution.180

Having omitted the provision on the concession system, Section 2 proceeded to introduce "unfamiliar language":181

The State may directly undertake such activities or it may enter into co-production, joint venture, or production-sharing agreements with Filipino citizens, or corporations or associations at least sixty per centum of whose capital is owned by such citizens.

Consonant with the State's "full supervision and control" over natural resources, Section 2 offers the State two "options."182 One, the State may directly undertake these activities itself; or two, it may enter into co-production, joint venture, or production-sharing agreements with Filipino citizens, or entities at least 60% of whose capital is owned by such citizens.

A third option is found in the third paragraph of the same section:

The Congress may, by law, allow small-scale utilization of natural resources by Filipino citizens, as well as cooperative fish farming, with priority to subsistence fishermen and fish-workers in rivers, lakes, bays, and lagoons.

While the second and third options are limited only to Filipino citizens or, in the case of the former, to corporations or associations at least 60% of the capital of which is owned by Filipinos, a fourth allows the participation of foreign-owned corporations. The fourth and fifth paragraphs of Section 2 provide:

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

The President shall notify the Congress of every contract entered into in accordance with this provision, within thirty days from its execution.

Although Section 2 sanctions the participation of foreign-owned corporations in the exploration, development, and utilization of natural resources, it imposes certain limitations or conditions to agreements with such corporations.

First, the parties to FTAAs. Only the President, in behalf of the State, may enter into these agreements, and only with corporations. By contrast, under the 1973 Constitution, a Filipino citizen, corporation or association may enter into a service contract with a "foreign person or entity."Second, the size of the activities: only large-scale exploration, development, and utilization is allowed. The term "large-scale usually refers to very capital-intensive activities."183

Third, the natural resources subject of the activities is restricted to minerals, petroleum and other mineral oils, the intent being to limit service contracts to those areas where Filipino capital may not be sufficient.184

Fourth, consistency with the provisions of statute. The agreements must be in accordance with the terms and conditions provided by law.Fifth, Section 2 prescribes certain standards for entering into such agreements. The agreements must be based on real contributions to economic growth and general welfare of the country.Sixth, the agreements must contain rudimentary stipulations for the promotion of the development and use of local scientific and technical resources.Seventh, the notification requirement. The President shall notify Congress of every financial or technical assistance agreement entered into within thirty days from its execution.Finally, the scope of the agreements. While the 1973 Constitution referred to "service contracts for financial, technical, management, or other forms of assistance" the 1987 Constitution provides for "agreements. . . involving either financial or technical assistance." It bears noting that the phrases "service contracts" and "management or other forms of assistance" in the earlier constitution have been omitted.

By virtue of her legislative powers under the Provisional Constitution,185 President Aquino, on July 10, 1987, signed into law E.O. No. 211 prescribing the interim procedures in the processing and approval of applications for the exploration, development and utilization of minerals. The omission in the 1987 Constitution of the term "service contracts" notwithstanding, the said E.O. still referred to them in Section 2 thereof:

Sec. 2. Applications for the exploration, development and utilization of mineral resources, including renewal applications and applications for approval of operating agreements and mining service contracts, shall be accepted and processed and may be approved x x x. [Emphasis supplied.]

The same law provided in its Section 3 that the "processing, evaluation and approval of all mining applications . . . operating agreements and service contracts . . . shall be governed by Presidential Decree No. 463, as amended, other existing mining laws, and their implementing rules and regulations. . . ."

As earlier stated, on the 25th also of July 1987, the President issued E.O. No. 279 by authority of which the subject WMCP FTAA was executed on March 30, 1995.

On March 3, 1995, President Ramos signed into law R.A. No. 7942. Section 15 thereof declares that the Act "shall govern the exploration, development, utilization, and processing of all mineral resources." Such declaration notwithstanding, R.A. No. 7942 does not actually cover all the modes through which the State may undertake the exploration, development, and utilization of natural resources.

The State, being the owner of the natural resources, is accorded the primary power and responsibility in the exploration, development and utilization thereof. As such, it may undertake these activities through four modes:

The State may directly undertake such activities.

(2) The State may enter into co-production, joint venture or production-sharing agreements with Filipino citizens or qualified corporations.(3) Congress may, by law, allow small-scale utilization of natural resources by Filipino citizens.(4) For the large-scale exploration, development and utilization of minerals, petroleum and other mineral oils, the President may enter into agreements with foreign-owned corporations involving technical or financial assistance.186

Except to charge the Mines and Geosciences Bureau of the DENR with performing researches and surveys,187and a passing mention of government-owned or controlled corporations,188 R.A. No. 7942 does not specify how the State should go about the first mode. The third mode, on the other hand, is governed by Republic Act No. 7076189 (the People's Small-Scale Mining Act of 1991) and other pertinent laws.190 R.A. No. 7942 primarily concerns itself with the second and fourth modes.

Mineral production sharing, co-production and joint venture agreements are collectively classified by R.A. No. 7942 as "mineral agreements."191 The Government participates the least in a mineral production sharing agreement (MPSA). In an MPSA, the Government grants the contractor192 the exclusive right to conduct mining operations within a contract area193 and shares in the gross output.194 The MPSA contractor provides the financing, technology, management and personnel necessary for the agreement's implementation.195 The total government share in an MPSA is the excise tax on mineral products under Republic Act No. 7729,196 amending Section 151(a) of the National Internal Revenue Code, as amended.197

In a co-production agreement (CA),198 the Government provides inputs to the mining operations other than the mineral resource,199 while in a joint venture agreement (JVA), where the Government enjoys the greatest participation, the Government and the JVA contractor organize a company with both parties having equity shares.200 Aside from earnings in equity, the Government in a JVA is also entitled to a share in the gross output.201 The Government may enter into a CA202 or JVA203 with one or more contractors. The Government's share in a CA or JVA is set out in Section 81 of the law:

The share of the Government in co-production and joint venture agreements shall be negotiated by the Government and the contractor taking into consideration the: (a) capital investment of the project, (b) the risks involved, (c) contribution of the project to the economy, and (d) other factors that will provide for a fair and equitable sharing between the Government and the contractor. The Government shall also be entitled to compensations for its other contributions which shall be agreed upon by the parties, and shall consist, among other things, the contractor's income tax, excise tax, special allowance, withholding tax due from the contractor's foreign stockholders arising from dividend or interest payments to the said foreign stockholders, in case of a foreign national and all such other taxes, duties and fees as provided for under existing laws.

All mineral agreements grant the respective contractors the exclusive right to conduct mining operations and to extract all mineral resources found in the contract area.204 A "qualified person" may enter into any of the mineral agreements with the Government.205 A "qualified person" is

any citizen of the Philippines with capacity to contract, or a corporation, partnership, association, or cooperative organized or authorized for the purpose of engaging in mining, with technical and financial capability to undertake mineral resources development and duly registered in accordance with law at least sixty per centum (60%) of the capital of which is owned by citizens of the Philippines x x x.206

The fourth mode involves "financial or technical assistance agreements." An FTAA is defined as "a contract involving financial or technical assistance for large-scale exploration, development, and utilization of natural resources."207 Any qualified person with technical and financial capability to undertake large-scale exploration, development, and utilization of natural resources in the Philippines may enter into such agreement directly with the Government through the DENR.208 For the purpose of granting an FTAA, a legally organized foreign-owned corporation (any corporation, partnership, association, or cooperative duly registered in accordance with law in which less than 50% of the capital is owned by Filipino citizens)209 is deemed a "qualified person."210

Other than the difference in contractors' qualifications, the principal distinction between mineral agreements and FTAAs is the maximum contract area to which a qualified person may hold or be granted.211 "Large-scale" under R.A. No. 7942 is determined by the size of the contract area, as opposed to the amount invested (US $50,000,000.00), which was the standard under E.O. 279.

Like a CA or a JVA, an FTAA is subject to negotiation.212 The Government's contributions, in the form of taxes, in an FTAA is identical to its contributions in the two mineral agreements, save that in an FTAA:

The collection of Government share in financial or technical assistance agreement shall commence after the financial or technical assistance agreement contractor has fully recovered its pre-operating expenses, exploration, and development expenditures, inclusive.213

III

Having examined the history of the constitutional provision and statutes enacted pursuant thereto, a consideration of the substantive issues presented by the petition is now in order.

THE EFFECTIVITY OF EXECUTIVE ORDER NO. 279

Petitioners argue that E.O. No. 279, the law in force when the WMC FTAA was executed, did not come into effect.

E.O. No. 279 was signed into law by then President Aquino on July 25, 1987, two days before the opening of Congress on July 27, 1987.214 Section 8 of the E.O. states that the same "shall take effect immediately." This provision, according to petitioners, runs counter to Section 1 of E.O. No. 200,215 which provides:

SECTION 1. Laws shall take effect after fifteen days following the completion of their publication either in the Official Gazette or in a newspaper of general circulation in the Philippines, unless it is otherwise provided.216[Emphasis supplied.]

On that premise, petitioners contend that E.O. No. 279 could have only taken effect fifteen days after its publication at which time Congress had already convened and the President's power to legislate had ceased.

Respondents, on the other hand, counter that the validity of E.O. No. 279 was settled in Miners Association of the Philippines v. Factoran, supra. This is of course incorrect for the issue in Miners Association was not the validity of E.O. No. 279 but that of DAO Nos. 57 and 82 which were issued pursuant thereto.

Nevertheless, petitioners' contentions have no merit.

It bears noting that there is nothing in E.O. No. 200 that prevents a law from taking effect on a date other than – even before – the 15-day period after its publication. Where a law provides for its own date of effectivity, such date prevails over that prescribed by E.O. No. 200. Indeed, this is the very essence of the phrase "unless it is otherwise provided" in Section 1 thereof. Section 1, E.O. No. 200, therefore, applies only when a statute does not provide for its own date of effectivity.

What is mandatory under E.O. No. 200, and what due process requires, as this Court held in Tañada v. Tuvera,217 is the publication of the law for without such notice and publication, there would be no basis for the application of the maxim "ignorantia legis n[eminem] excusat." It would be the height of injustice to punish or otherwise burden a citizen for the transgression of a law of which he had no notice whatsoever, not even a constructive one.

While the effectivity clause of E.O. No. 279 does not require its publication, it is not a ground for its invalidation since the Constitution, being "the fundamental, paramount and supreme law of the nation," is deemed written in the law.218 Hence, the due process clause,219 which, so Tañada held, mandates the publication of statutes, is read into Section 8 of E.O. No. 279. Additionally, Section 1 of E.O. No. 200 which provides for publication "either in the Official Gazette or in a newspaper of general circulation in the Philippines," finds suppletory application. It is significant to note that E.O. No. 279 was actually published in the Official Gazette220 on August 3, 1987.

From a reading then of Section 8 of E.O. No. 279, Section 1 of E.O. No. 200, and Tañada v. Tuvera, this Court holds that E.O. No. 279 became effective immediately upon its publication in the Official Gazette on August 3, 1987.

That such effectivity took place after the convening of the first Congress is irrelevant. At the time President Aquino issued E.O. No. 279 on July 25, 1987, she was still validly exercising legislative powers under the Provisional Constitution.221 Article XVIII (Transitory Provisions) of the 1987 Constitution explicitly states:

Sec. 6. The incumbent President shall continue to exercise legislative powers until the first Congress is convened.

The convening of the first Congress merely precluded the exercise of legislative powers by President Aquino; it did not prevent the effectivity of laws she had previously enacted.

There can be no question, therefore, that E.O. No. 279 is an effective, and a validly enacted, statute.

THE CONSTITUTIONALITY OF THE WMCP FTAA

Petitioners submit that, in accordance with the text of Section 2, Article XII of the Constitution, FTAAs should be limited to "technical or financial assistance" only. They observe, however, that, contrary to the language of the Constitution, the WMCP FTAA allows WMCP, a fully foreign-owned mining corporation, to extend more than mere financial or technical assistance to the State, for it permits WMCP to manage and operate every aspect of the mining activity. 222

Petitioners' submission is well-taken. It is a cardinal rule in the interpretation of constitutions that the instrument must be so construed as to give effect to the intention of the people who adopted it.223 This intention is to be sought in the constitution itself, and the apparent meaning of the words is to be taken as expressing it, except in cases where that assumption would lead to absurdity, ambiguity, or contradiction.224 What the Constitution says according to the text of the provision, therefore, compels acceptance and negates the power of the courts to alter it, based on the postulate that the framers and the people mean what they say.225 Accordingly, following the literal text of the Constitution, assistance accorded by foreign-owned corporations in the large-scale exploration, development, and utilization of petroleum, minerals and mineral oils should be limited to "technical" or "financial" assistance only.

WMCP nevertheless submits that the word "technical" in the fourth paragraph of Section 2 of E.O. No. 279 encompasses a "broad number of possible services," perhaps, "scientific and/or technological in basis."226 It thus posits that it may also well include "the area of management or operations . . . so long as such assistance requires specialized knowledge or skills, and are related to the exploration, development and utilization of mineral resources."227

This Court is not persuaded. As priorly pointed out, the phrase "management or other forms of assistance" in the 1973 Constitution was deleted in the 1987 Constitution, which allows only "technical or financial assistance." Casus omisus pro omisso habendus est. A person, object or thing omitted from an enumeration must be held to have been omitted intentionally.228 As will be shown later, the management or operation of mining activities by foreign contractors, which is the primary feature of service contracts, was precisely the evil that the drafters of the 1987 Constitution sought to eradicate.

Respondents insist that "agreements involving technical or financial assistance" is just another term for service contracts. They contend that the proceedings of the CONCOM indicate "that although the terminology 'service contract' was avoided [by the Constitution], the concept it represented was not." They add that "[t]he concept is embodied in the phrase 'agreements involving financial or technical assistance.'"229 And point out how members of the CONCOM referred to these agreements as "service contracts." For instance:

SR. TAN. Am I correct in thinking that the only difference between these future service contracts and the past service contracts under Mr. Marcos is the general law to be enacted by the legislature and the notification of Congress by the President? That is the only difference, is it not?

MR. VILLEGAS. That is right.

SR. TAN. So those are the safeguards[?]

MR. VILLEGAS. Yes. There was no law at all governing service contracts before.

SR. TAN. Thank you, Madam President.230 [Emphasis supplied.]

WMCP also cites the following statements of Commissioners Gascon, Garcia, Nolledo and Tadeo who alluded to service contracts as they explained their respective votes in the approval of the draft Article:

MR. GASCON. Mr. Presiding Officer, I vote no primarily because of two reasons: One, the provision on service contracts. I felt that if we would constitutionalize any provision on service contracts, this should always be with the concurrence of Congress and not guided only by a general law to be promulgated by Congress. x x x.231 [Emphasis supplied.]

x x x.

MR. GARCIA. Thank you.

I vote no. x x x.

Service contracts are given constitutional legitimization in Section 3, even when they have been proven to be inimical to the interests of the nation, providing as they do the legal loophole for the exploitation of our natural resources for the benefit of foreign interests. They constitute a serious negation of Filipino control on the use and disposition of the nation's natural resources, especially with regard to those which are nonrenewable.232 [Emphasis supplied.]

x x x

MR. NOLLEDO. While there are objectionable provisions in the Article on National Economy and Patrimony, going over said provisions meticulously, setting aside prejudice and personalities will reveal that the article contains a balanced set of provisions. I hope the forthcoming Congress will implement such provisions taking into account that Filipinos should have real control over our economy and patrimony, and if foreign equity is permitted, the same must be subordinated to the imperative demands of the national interest.

x x x.

It is also my understanding that service contracts involving foreign corporations or entities are resorted to only when no Filipino enterprise or Filipino-controlled enterprise could possibly undertake the exploration or exploitation of our natural resources and that compensation under such contracts cannot and should not equal what should pertain to ownership of capital. In other words, the service contract should not be an instrument to circumvent the basic provision, that the exploration and exploitation of natural resources should be truly for the benefit of Filipinos.

Thank you, and I vote yes.233 [Emphasis supplied.]

x x x.

MR. TADEO. Nais ko lamang ipaliwanag ang aking boto.

Matapos suriin ang kalagayan ng Pilipinas, ang saligang suliranin, pangunahin ang salitang "imperyalismo." Ang ibig sabihin nito ay ang sistema ng lipunang pinaghaharian ng iilang monopolyong kapitalista at ang salitang "imperyalismo" ay buhay na buhay sa National Economy and Patrimony na nating ginawa. Sa pamamagitan ng salitang "based on," naroroon na ang free trade sapagkat tayo ay mananatiling tagapagluwas ng hilaw na sangkap at tagaangkat ng yaring produkto. Pangalawa, naroroon pa rin ang parity rights, ang service contract, ang 60-40 equity sa natural resources. Habang naghihirap ang sambayanang Pilipino, ginagalugad naman ng mga dayuhan ang ating likas na yaman. Kailan man ang Article on National Economy and Patrimony ay hindi nagpaalis sa pagkaalipin ng ating ekonomiya sa kamay ng mga dayuhan. Ang solusyon sa suliranin ng bansa ay dalawa lamang: ang pagpapatupad ng tunay na reporma sa lupa at ang national industrialization. Ito ang tinatawag naming pagsikat ng araw sa Silangan. Ngunit ang mga landlords and big businessmen at ang mga komprador ay nagsasabi na ang free trade na ito, ang kahulugan para sa amin, ay ipinipilit sa ating sambayanan na ang araw ay sisikat sa Kanluran. Kailan man hindi puwedeng sumikat ang araw sa Kanluran. I vote no.234 [Emphasis supplied.]

This Court is likewise not persuaded.

As earlier noted, the phrase "service contracts" has been deleted in the 1987 Constitution's Article on National Economy and Patrimony. If the CONCOM intended to retain the concept of service contracts under the 1973 Constitution, it could have simply adopted the old terminology ("service contracts") instead of employing new and unfamiliar terms ("agreements . . . involving either technical or financial assistance"). Such a difference between the language of a provision in a revised constitution and that of a similar provision in the preceding constitution is viewed as indicative of a difference in purpose.235 If, as respondents suggest, the concept of "technical or financial assistance" agreements is identical to that of "service contracts," the CONCOM would not have bothered to fit the same dog with a new collar. To uphold respondents' theory would reduce the first to a mere euphemism for the second and render the change in phraseology meaningless.

An examination of the reason behind the change confirms that technical or financial assistance agreements are not synonymous to service contracts.

[T]he Court in construing a Constitution should bear in mind the object sought to be accomplished by its adoption, and the evils, if any, sought to be prevented or remedied. A doubtful provision will be examined in light of the history of the times, and the condition and circumstances under which the Constitution was framed. The object is to ascertain the reason which induced the framers of the Constitution to enact the particular provision and the purpose sought to be accomplished thereby, in order to construe the whole as to make the words consonant to that reason and calculated to effect that purpose.236

As the following question of Commissioner Quesada and Commissioner Villegas' answer shows the drafters intended to do away with service contracts which were used to circumvent the capitalization (60%-40%) requirement:

MS. QUESADA. The 1973 Constitution used the words "service contracts." In this particular Section 3, is there a safeguard against the possible control of foreign interests if the Filipinos go into coproduction with them?

MR. VILLEGAS. Yes. In fact, the deletion of the phrase "service contracts" was our first attempt to avoid some of the abuses in the past regime in the use of service contracts to go around the 60-40 arrangement. The safeguard that has been introduced – and this, of course can be refined – is found in Section 3, lines 25 to 30, where Congress will have to concur with the President on any agreement entered into between a foreign-owned corporation and the government involving technical or financial assistance for large-scale exploration, development and utilization of natural resources.237 [Emphasis supplied.]

In a subsequent discussion, Commissioner Villegas allayed the fears of Commissioner Quesada regarding the participation of foreign interests in Philippine natural resources, which was supposed to be restricted to Filipinos.

MS. QUESADA. Another point of clarification is the phrase "and utilization of natural resources shall be under the full control and supervision of the State." In the 1973 Constitution, this was limited to citizens of the Philippines; but it was removed and substituted by "shall be under the full control and supervision of the State." Was the concept changed so that these particular resources would be limited to citizens of the Philippines? Or would these resources only be under the full control and supervision of the State; meaning, noncitizens would have access to these natural resources? Is that the understanding?

MR. VILLEGAS. No, Mr. Vice-President, if the Commissioner reads the next sentence, it states:

Such activities may be directly undertaken by the State, or it may enter into co-production, joint venture, production-sharing agreements with Filipino citizens.

So we are still limiting it only to Filipino citizens.

x x x.

MS. QUESADA. Going back to Section 3, the section suggests that:

The exploration, development, and utilization of natural resources… may be directly undertaken by the State, or it may enter into co-production, joint venture or production-sharing agreement with . . . corporations or associations at least sixty per cent of whose voting stock or controlling interest is owned by such citizens.

Lines 25 to 30, on the other hand, suggest that in the large-scale exploration, development and utilization of natural resources, the President with the concurrence of Congress may enter into agreements with foreign-owned corporations even for technical or financial assistance.

I wonder if this part of Section 3 contradicts the second part. I am raising this point for fear that foreign investors will use their enormous capital resources to facilitate the actual exploitation or exploration, development and effective disposition of our natural resources to the detriment of Filipino investors. I am not saying that we should not consider borrowing money from foreign sources. What I refer to is that foreign interest should be allowed to participate only to the extent that they lend us money and give us technical assistance with the appropriate government permit. In this way, we can insure the enjoyment of our natural resources by our own people.

MR. VILLEGAS. Actually, the second provision about the President does not permit foreign investors to participate. It is only technical or financial assistance – they do not own anything – but on conditions that have to be determined by law with the concurrence of Congress. So, it is very restrictive.

If the Commissioner will remember, this removes the possibility for service contracts which we said yesterday were avenues used in the previous regime to go around the 60-40 requirement.238 [Emphasis supplied.]

The present Chief Justice, then a member of the CONCOM, also referred to this limitation in scope in proposing an amendment to the 60-40 requirement:

MR. DAVIDE. May I be allowed to explain the proposal?MR. MAAMBONG. Subject to the three-minute rule, Madam President.MR. DAVIDE. It will not take three minutes.

The Commission had just approved the Preamble. In the Preamble we clearly stated that the Filipino people are sovereign and that one of the objectives for the creation or establishment of a government is to conserve and develop the national patrimony. The implication is that the national patrimony or our natural resources are exclusively reserved for the Filipino people. No alien must be allowed to enjoy, exploit and develop our natural resources. As a matter of fact, that principle proceeds from the fact that our natural resources are gifts from God to the Filipino people and it would be a breach of that special blessing from God if we will allow aliens to exploit our natural resources.

I voted in favor of the Jamir proposal because it is not really exploitation that we granted to the alien corporations but only for them to render financial or technical assistance. It is not for them to enjoy our natural resources. Madam President, our natural resources are depleting; our population is increasing by leaps and bounds. Fifty years from now, if we will allow these aliens to exploit our natural resources, there will be no more natural resources for the next generations of Filipinos. It may last long if we will begin now. Since 1935 the aliens have been allowed to enjoy to a certain extent the exploitation of our natural resources, and we became victims of foreign dominance and control. The aliens are interested in coming to the Philippines because they would like to enjoy the bounty of nature exclusively intended for Filipinos by God.

And so I appeal to all, for the sake of the future generations, that if we have to pray in the Preamble "to preserve and develop the national patrimony for the sovereign Filipino people and for the generations to come," we must at this time decide once and for all that our natural resources must be reserved only to Filipino citizens.

Thank you.239 [Emphasis supplied.]

The opinion of another member of the CONCOM is persuasive240 and leaves no doubt as to the intention of the framers to eliminate service contracts altogether. He writes:

Paragraph 4 of Section 2 specifies large-scale, capital-intensive, highly technological undertakings for which the President may enter into contracts with foreign-owned corporations, and enunciates strict conditions that should govern such contracts. x x x.

This provision balances the need for foreign capital and technology with the need to maintain the national sovereignty. It recognizes the fact that as long as Filipinos can formulate their own terms in their own territory, there is no danger of relinquishing sovereignty to foreign interests.

Are service contracts allowed under the new Constitution? No. Under the new Constitution, foreign investors (fully alien-owned) can NOT participate in Filipino enterprises except to provide: (1) Technical Assistance for highly technical enterprises; and (2) Financial Assistance for large-scale enterprises.

The intent of this provision, as well as other provisions on foreign investments, is to prevent the practice (prevalent in the Marcos government) of skirting the 60/40 equation using the cover of service contracts.241[Emphasis supplied.]

Furthermore, it appears that Proposed Resolution No. 496,242 which was the draft Article on National Economy and Patrimony, adopted the concept of "agreements . . . involving either technical or financial assistance" contained in the "Draft of the 1986 U.P. Law Constitution Project" (U.P. Law draft) which was taken into consideration during the deliberation of the CONCOM.243 The former, as well as Article XII, as adopted, employed the same terminology, as the comparative table below shows:

DRAFT OF THE UP LAW CONSTITUTION PROJECT

PROPOSED RESOLUTION NO. 496 OF THE

CONSTITUTIONAL COMMISSION

ARTICLE XII OF THE 1987 CONSTITUTION

Sec. 1. All lands of the public domain, waters, minerals, coal, petroleum and other mineral oils, all forces of potential energy, fisheries, flora and fauna and other natural resources of the Philippines are owned by the State. With the exception of agricultural lands, all other natural resources shall not be alienated. The exploration, development and utilization of natural resources shall be under the full control and supervision of the State. Such activities may be directly undertaken by the state, or it may enter into co-production, joint venture, production sharing agreements with Filipino citizens or corporations or associations sixty per cent of whose voting stock or controlling interest is owned by such citizens for a period of not more than twenty-five years, renewable for not more than twenty-five years and under

Sec. 3. All lands of the public domain, waters, minerals, coal, petroleum and other mineral oils, all forces of potential energy, fisheries, forests, flora and fauna, and other natural resources are owned by the State. With the exception of agricultural lands, all other natural resources shall not be alienated. The exploration, development, and utilization of natural resources shall be under the full control and supervision of the State. Such activities may be directly undertaken by the State, or it may enter into co-production, joint venture, production-sharing agreements with Filipino citizens or corporations or associations at least sixty per cent of whose voting stock or controlling interest is owned by such citizens. Such agreements shall be for a period of twenty-five years, renewable for not more than twenty-five years,

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

such terms and conditions as may be provided by law. In case as to water rights for irrigation, water supply, fisheries, or industrial uses other than the development of water power, beneficial use may be the measure and limit of the grant.

The National Assembly may by law allow small scale utilization of natural resources by Filipino citizens.

The National Assembly, may, by two-thirds vote of all its members by special law provide the terms and conditions under which a foreign-owned corporation may enter into agreements with the government involving either technical or financial assistance for large-scale exploration, development, or utilization of natural resources. [Emphasis supplied.]

and under such term and conditions as may be provided by law. In cases of water rights for irrigation, water supply, fisheries or industrial uses other than the development for water power, beneficial use may be the measure and limit of the grant.

The Congress may by law allow small-scale utilization of natural resources by Filipino citizens, as well as cooperative fish farming in rivers, lakes, bays, and lagoons.

The President with the concurrence of Congress, by special law, shall provide the terms and conditions under which a foreign-owned corporation may enter into agreements with the government involving either technical or financial assistance for large-scale exploration, development, and utilization of natural resources. [Emphasis supplied.]

under such terms and conditions as may be provided by law. In case of water rights for irrigation, water supply, fisheries, or industrial uses other than the development of water power, beneficial use may be the measure and limit of the grant.

The State shall protect the nation's marine wealth in its archipelagic waters, territorial sea, and exclusive economic zone, and reserve its use and enjoyment exclusively to Filipino citizens.

The Congress may, by law, allow small-scale utilization of natural resources by Filipino citizens, as well as cooperative fish farming, with priority to subsistence fishermen and fish-workers in rivers, lakes, bays, and lagoons.

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

The President shall notify the Congress of every contract entered into in accordance with this provision, within thirty days from its execution.

The insights of the proponents of the U.P. Law draft are, therefore, instructive in interpreting the phrase "technical or financial assistance."

In his position paper entitled Service Contracts: Old Wine in New Bottles?, Professor Pacifico A. Agabin, who was a member of the working group that prepared the U.P. Law draft, criticized service contracts for they "lodge exclusive management and control of the enterprise to the service contractor, which is reminiscent of the old concession regime. Thus, notwithstanding the provision of the Constitution that natural resources belong to the State, and that these shall not be alienated, the service contract system renders nugatory the constitutional provisions cited."244 He elaborates:

Looking at the Philippine model, we can discern the following vestiges of the concession regime, thus:

1. Bidding of a selected area, or leasing the choice of the area to the interested party and then negotiating the terms and conditions of the contract; (Sec. 5, P.D. 87)2. Management of the enterprise vested on the contractor, including operation of the field if petroleum is discovered; (Sec. 8, P.D. 87)3. Control of production and other matters such as expansion and development; (Sec. 8)4. Responsibility for downstream operations – marketing, distribution, and processing may be with the contractor (Sec. 8);5. Ownership of equipment, machinery, fixed assets, and other properties remain with contractor (Sec. 12, P.D. 87);6. Repatriation of capital and retention of profits abroad guaranteed to the contractor (Sec. 13, P.D. 87); and7. While title to the petroleum discovered may nominally be in the name of the government, the contractor has almost unfettered control over its disposition and sale, and even the domestic requirements of the country is relegated to a pro rata basis (Sec. 8).

In short, our version of the service contract is just a rehash of the old concession regime x x x. Some people have pulled an old rabbit out of a magician's hat, and foisted it upon us as a new and different animal.

The service contract as we know it here is antithetical to the principle of sovereignty over our natural resources restated in the same article of the [1973] Constitution containing the provision for service contracts. If the service contractor happens to be a foreign corporation, the contract would also run counter to the constitutional provision on nationalization or Filipinization, of the exploitation of our natural resources.245 [Emphasis supplied. Underscoring in the original.]

Professor Merlin M. Magallona, also a member of the working group, was harsher in his reproach of the system:

x x x the nationalistic phraseology of the 1935 [Constitution] was retained by the [1973] Charter, but the essence of nationalism was reduced to hollow rhetoric. The 1973 Charter still provided that the exploitation or development of the country's natural resources be limited to Filipino citizens or corporations owned or controlled by them. However, the martial-law Constitution allowed them, once these resources are in their name, to enter into service contracts with foreign investors for financial, technical, management, or other forms of assistance. Since foreign investors have the capital resources, the actual exploitation and development, as well as the effective disposition, of the country's natural resources, would be under their direction, and control, relegating the Filipino investors to the role of second-rate partners in joint ventures.

Through the instrumentality of the service contract, the 1973 Constitution had legitimized at the highest level of state policy that which was prohibited under the 1973 Constitution, namely: the exploitation of the country's natural resources by foreign nationals. The drastic impact of [this] constitutional change becomes more pronounced when it is considered that the active party to any service contract may be a corporation wholly owned by foreign interests. In such a case, the citizenship requirement is completely set aside, permitting foreign corporations to obtain actual possession, control, and [enjoyment] of the country's natural resources.246[Emphasis supplied.]

Accordingly, Professor Agabin recommends that:

Recognizing the service contract for what it is, we have to expunge it from the Constitution and reaffirm ownership over our natural resources. That is the only way we can exercise effective control over our natural resources.

This should not mean complete isolation of the country's natural resources from foreign investment. Other contract forms which are less derogatory to our sovereignty and control over natural resources – like technical assistance

agreements, financial assistance [agreements], co-production agreements, joint ventures, production-sharing – could still be utilized and adopted without violating constitutional provisions. In other words, we can adopt contract forms which recognize and assert our sovereignty and ownership over natural resources, and where the foreign entity is just a pure contractor instead of the beneficial owner of our economic resources.247[Emphasis supplied.]

Still another member of the working group, Professor Eduardo Labitag, proposed that:

2. Service contracts as practiced under the 1973 Constitution should be discouraged, instead the government may be allowed, subject to authorization by special law passed by an extraordinary majority to enter into either technical or financial assistance. This is justified by the fact that as presently worded in the 1973 Constitution, a service contract gives full control over the contract area to the service contractor, for him to work, manage and dispose of the proceeds or production. It was a subterfuge to get around the nationality requirement of the constitution.248 [Emphasis supplied.]

In the annotations on the proposed Article on National Economy and Patrimony, the U.P. Law draft summarized the rationale therefor, thus:

5. The last paragraph is a modification of the service contract provision found in Section 9, Article XIV of the 1973 Constitution as amended. This 1973 provision shattered the framework of nationalism in our fundamental law (see Magallona, "Nationalism and its Subversion in the Constitution"). Through the service contract, the 1973 Constitution had legitimized that which was prohibited under the 1935 constitution—the exploitation of the country's natural resources by foreign nationals. Through the service contract, acts prohibited by the Anti-Dummy Law were recognized as legitimate arrangements. Service contracts lodge exclusive management and control of the enterprise to the service contractor, not unlike the old concession regime where the concessionaire had complete control over the country's natural resources, having been given exclusive and plenary rights to exploit a particular resource and, in effect, having been assured of ownership of that resource at the point of extraction (see Agabin, "Service Contracts: Old Wine in New Bottles"). Service contracts, hence, are antithetical to the principle of sovereignty over our natural resources, as well as the constitutional provision on nationalization or Filipinization of the exploitation of our natural resources.

Under the proposed provision, only technical assistance or financial assistance agreements may be entered into, and only for large-scale activities. These are contract forms which recognize and assert our sovereignty and ownership over natural resources since the foreign entity is just a pure contractor and not a beneficial owner of our economic resources. The proposal recognizes the need for capital and technology to develop our natural resources without sacrificing our sovereignty and control over such resources by the safeguard of a special law which requires two-thirds vote of all the members of the Legislature. This will ensure that such agreements will be debated upon exhaustively and thoroughly in the National Assembly to avert prejudice to the nation.249[Emphasis supplied.]

The U.P. Law draft proponents viewed service contracts under the 1973 Constitution as grants of beneficial ownership of the country's natural resources to foreign owned corporations. While, in theory, the State owns these natural resources – and Filipino citizens, their beneficiaries – service contracts actually vested foreigners with the right to dispose, explore for, develop, exploit, and utilize the same. Foreigners, not Filipinos, became the beneficiaries of Philippine natural resources. This arrangement is clearly incompatible with the constitutional ideal of nationalization of natural resources, with the Regalian doctrine, and on a broader perspective, with Philippine sovereignty.

The proponents nevertheless acknowledged the need for capital and technical know-how in the large-scale exploitation, development and utilization of natural resources – the second paragraph of the proposed draft itself being an admission of such scarcity. Hence, they recommended a compromise to reconcile the nationalistic provisions dating back to the 1935 Constitution, which reserved all natural resources exclusively to Filipinos, and the more liberal 1973 Constitution, which allowed foreigners to participate in these resources through service contracts. Such a compromise called for the adoption of a new system in the exploration, development, and utilization of natural resources in the form of technical agreements or financial agreements which, necessarily, are distinct concepts from service contracts.

The replacement of "service contracts" with "agreements… involving either technical or financial assistance," as well as the deletion of the phrase "management or other forms of assistance," assumes greater significance when note is taken that the U.P. Law draft proposed other equally crucial changes that were obviously heeded by the

CONCOM. These include the abrogation of the concession system and the adoption of new "options" for the State in the exploration, development, and utilization of natural resources. The proponents deemed these changes to be more consistent with the State's ownership of, and its "full control and supervision" (a phrase also employed by the framers) over, such resources. The Project explained:

3. In line with the State ownership of natural resources, the State should take a more active role in the exploration, development, and utilization of natural resources, than the present practice of granting licenses, concessions, or leases – hence the provision that said activities shall be under the full control and supervision of the State. There are three major schemes by which the State could undertake these activities: first, directly by itself; second, by virtue of co-production, joint venture, production sharing agreements with Filipino citizens or corporations or associations sixty per cent (60%) of the voting stock or controlling interests of which are owned by such citizens; or third, with a foreign-owned corporation, in cases of large-scale exploration, development, or utilization of natural resources through agreements involving either technical or financial assistance only. x x x.

At present, under the licensing concession or lease schemes, the government benefits from such benefits only through fees, charges, ad valorem taxes and income taxes of the exploiters of our natural resources. Such benefits are very minimal compared with the enormous profits reaped by theses licensees, grantees, concessionaires. Moreover, some of them disregard the conservation of natural resources and do not protect the environment from degradation. The proposed role of the State will enable it to a greater share in the profits – it can also actively husband its natural resources and engage in developmental programs that will be beneficial to them.

4. Aside from the three major schemes for the exploration, development, and utilization of our natural resources, the State may, by law, allow Filipino citizens to explore, develop, utilize natural resources in small-scale. This is in recognition of the plight of marginal fishermen, forest dwellers, gold panners, and others similarly situated who exploit our natural resources for their daily sustenance and survival.250

Professor Agabin, in particular, after taking pains to illustrate the similarities between the two systems, concluded that the service contract regime was but a "rehash" of the concession system. "Old wine in new bottles," as he put it. The rejection of the service contract regime, therefore, is in consonance with the abolition of the concession system.

In light of the deliberations of the CONCOM, the text of the Constitution, and the adoption of other proposed changes, there is no doubt that the framers considered and shared the intent of the U.P. Law proponents in employing the phrase "agreements . . . involving either technical or financial assistance."

While certain commissioners may have mentioned the term "service contracts" during the CONCOM deliberations, they may not have been necessarily referring to the concept of service contracts under the 1973 Constitution. As noted earlier, "service contracts" is a term that assumes different meanings to different people.251 The commissioners may have been using the term loosely, and not in its technical and legal sense, to refer, in general, to agreements concerning natural resources entered into by the Government with foreign corporations. These loose statements do not necessarily translate to the adoption of the 1973 Constitution provision allowing service contracts.

It is true that, as shown in the earlier quoted portions of the proceedings in CONCOM, in response to Sr. Tan's question, Commissioner Villegas commented that, other than congressional notification, the only difference between "future" and "past" "service contracts" is the requirement of a general law as there were no laws previously authorizing the same.252 However, such remark is far outweighed by his more categorical statement in his exchange with Commissioner Quesada that the draft article "does not permit foreign investors to participate" in the nation's natural resources – which was exactly what service contracts did – except to provide "technical or financial assistance."253

In the case of the other commissioners, Commissioner Nolledo himself clarified in his work that the present charter prohibits service contracts.254 Commissioner Gascon was not totally averse to foreign participation, but favored stricter restrictions in the form of majority congressional concurrence.255 On the other hand, Commissioners Garcia and Tadeo may have veered to the extreme side of the spectrum and their objections may be interpreted as votes against any foreign participation in our natural resources whatsoever.

WMCP cites Opinion No. 75, s. 1987,256 and Opinion No. 175, s. 1990257 of the Secretary of Justice, expressing the view that a financial or technical assistance agreement "is no different in concept" from the service contract allowed under the 1973 Constitution. This Court is not, however, bound by this interpretation. When an administrative or

executive agency renders an opinion or issues a statement of policy, it merely interprets a pre-existing law; and the administrative interpretation of the law is at best advisory, for it is the courts that finally determine what the law means.258

In any case, the constitutional provision allowing the President to enter into FTAAs with foreign-owned corporations is an exception to the rule that participation in the nation's natural resources is reserved exclusively to Filipinos. Accordingly, such provision must be construed strictly against their enjoyment by non-Filipinos. As Commissioner Villegas emphasized, the provision is "very restrictive."259 Commissioner Nolledo also remarked that "entering into service contracts is an exception to the rule on protection of natural resources for the interest of the nation and, therefore, being an exception, it should be subject, whenever possible, to stringent rules."260Indeed, exceptions should be strictly but reasonably construed; they extend only so far as their language fairly warrants and all doubts should be resolved in favor of the general provision rather than the exception.261

With the foregoing discussion in mind, this Court finds that R.A. No. 7942 is invalid insofar as said Act authorizes service contracts. Although the statute employs the phrase "financial and technical agreements" in accordance with the 1987 Constitution, it actually treats these agreements as service contracts that grant beneficial ownership to foreign contractors contrary to the fundamental law.

Section 33, which is found under Chapter VI (Financial or Technical Assistance Agreement) of R.A. No. 7942 states:

SEC. 33. Eligibility.—Any qualified person with technical and financial capability to undertake large-scale exploration, development, and utilization of mineral resources in the Philippines may enter into a financial or technical assistance agreement directly with the Government through the Department. [Emphasis supplied.]

"Exploration," as defined by R.A. No. 7942,

means the searching or prospecting for mineral resources by geological, geochemical or geophysical surveys, remote sensing, test pitting, trending, drilling, shaft sinking, tunneling or any other means for the purpose of determining the existence, extent, quantity and quality thereof and the feasibility of mining them for profit.262

A legally organized foreign-owned corporation may be granted an exploration permit,263 which vests it with the right to conduct exploration for all minerals in specified areas,264 i.e., to enter, occupy and explore the same.265Eventually, the foreign-owned corporation, as such permittee, may apply for a financial and technical assistance agreement.266

"Development" is the work undertaken to explore and prepare an ore body or a mineral deposit for mining, including the construction of necessary infrastructure and related facilities.267

"Utilization" "means the extraction or disposition of minerals."268 A stipulation that the proponent shall dispose of the minerals and byproducts produced at the highest price and more advantageous terms and conditions as provided for under the implementing rules and regulations is required to be incorporated in every FTAA.269

A foreign-owned/-controlled corporation may likewise be granted a mineral processing permit.270 "Mineral processing" is the milling, beneficiation or upgrading of ores or minerals and rocks or by similar means to convert the same into marketable products.271

An FTAA contractor makes a warranty that the mining operations shall be conducted in accordance with the provisions of R.A. No. 7942 and its implementing rules272 and for work programs and minimum expenditures and commitments.273 And it obliges itself to furnish the Government records of geologic, accounting, and other relevant data for its mining operation.274

"Mining operation," as the law defines it, means mining activities involving exploration, feasibility, development, utilization, and processing.275

The underlying assumption in all these provisions is that the foreign contractor manages the mineral resources, just like the foreign contractor in a service contract.

Furthermore, Chapter XII of the Act grants foreign contractors in FTAAs the same auxiliary mining rights that it grants contractors in mineral agreements (MPSA, CA and JV).276 Parenthetically, Sections 72 to 75 use the term "contractor," without distinguishing between FTAA and mineral agreement contractors. And so does "holders of mining rights" in Section 76. A foreign contractor may even convert its FTAA into a mineral agreement if the economic viability of the contract area is found to be inadequate to justify large-scale mining operations,277provided that it reduces its equity in the corporation, partnership, association or cooperative to forty percent (40%).278

Finally, under the Act, an FTAA contractor warrants that it "has or has access to all the financing, managerial, and technical expertise. . . ."279 This suggests that an FTAA contractor is bound to provide some management assistance – a form of assistance that has been eliminated and, therefore, proscribed by the present Charter.

By allowing foreign contractors to manage or operate all the aspects of the mining operation, the above-cited provisions of R.A. No. 7942 have in effect conveyed beneficial ownership over the nation's mineral resources to these contractors, leaving the State with nothing but bare title thereto.

Moreover, the same provisions, whether by design or inadvertence, permit a circumvention of the constitutionally ordained 60%-40% capitalization requirement for corporations or associations engaged in the exploitation, development and utilization of Philippine natural resources.

In sum, the Court finds the following provisions of R.A. No. 7942 to be violative of Section 2, Article XII of the Constitution:

(1) The proviso in Section 3 (aq), which defines "qualified person," to wit:Provided, That a legally organized foreign-owned corporation shall be deemed a qualified person for purposes of granting an exploration permit, financial or technical assistance agreement or mineral processing permit.(2) Section 23,280 which specifies the rights and obligations of an exploration permittee, insofar as said section applies to a financial or technical assistance agreement,(3) Section 33, which prescribes the eligibility of a contractor in a financial or technical assistance agreement;(4) Section 35,281 which enumerates the terms and conditions for every financial or technical assistance agreement;(5) Section 39,282 which allows the contractor in a financial and technical assistance agreement to convert the same into a mineral production-sharing agreement;(6) Section 56,283 which authorizes the issuance of a mineral processing permit to a contractor in a financial and technical assistance agreement;

The following provisions of the same Act are likewise void as they are dependent on the foregoing provisions and cannot stand on their own:

(1) Section 3 (g),284 which defines the term "contractor," insofar as it applies to a financial or technical assistance agreement.Section 34,285 which prescribes the maximum contract area in a financial or technical assistance agreements;Section 36,286 which allows negotiations for financial or technical assistance agreements;Section 37,287 which prescribes the procedure for filing and evaluation of financial or technical assistance agreement proposals;Section 38,288 which limits the term of financial or technical assistance agreements;Section 40,289 which allows the assignment or transfer of financial or technical assistance agreements;Section 41,290 which allows the withdrawal of the contractor in an FTAA;The second and third paragraphs of Section 81,291 which provide for the Government's share in a financial and technical assistance agreement; andSection 90,292 which provides for incentives to contractors in FTAAs insofar as it applies to said contractors;

When the parts of the statute are so mutually dependent and connected as conditions, considerations, inducements, or compensations for each other, as to warrant a belief that the legislature intended them as a whole, and that if all could not be carried into effect, the legislature would not pass the residue independently, then, if some parts are unconstitutional, all the provisions which are thus dependent, conditional, or connected, must fall with them.293

There can be little doubt that the WMCP FTAA itself is a service contract.

Section 1.3 of the WMCP FTAA grants WMCP "the exclusive right to explore, exploit, utilise[,] process and dispose of all Minerals products and by-products thereof that may be produced from the Contract Area."294 The FTAA also imbues WMCP with the following rights:

(b) to extract and carry away any Mineral samples from the Contract area for the purpose of conducting tests and studies in respect thereof;(c) to determine the mining and treatment processes to be utilised during the Development/Operating Period and the project facilities to be constructed during the Development and Construction Period;(d) have the right of possession of the Contract Area, with full right of ingress and egress and the right to occupy the same, subject to the provisions of Presidential Decree No. 512 (if applicable) and not be prevented from entry into private ands by surface owners and/or occupants thereof when prospecting, exploring and exploiting for minerals therein;x x x(f) to construct roadways, mining, drainage, power generation and transmission facilities and all other types of works on the Contract Area;(g) to erect, install or place any type of improvements, supplies, machinery and other equipment relating to the Mining Operations and to use, sell or otherwise dispose of, modify, remove or diminish any and all parts thereof;(h) enjoy, subject to pertinent laws, rules and regulations and the rights of third Parties, easement rights and the use of timber, sand, clay, stone, water and other natural resources in the Contract Area without cost for the purposes of the Mining Operations;x x x(i) have the right to mortgage, charge or encumber all or part of its interest and obligations under this Agreement, the plant, equipment and infrastructure and the Minerals produced from the Mining Operations;x x x. 295

All materials, equipment, plant and other installations erected or placed on the Contract Area remain the property of WMCP, which has the right to deal with and remove such items within twelve months from the termination of the FTAA.296

Pursuant to Section 1.2 of the FTAA, WMCP shall provide "[all] financing, technology, management and personnel necessary for the Mining Operations." The mining company binds itself to "perform all Mining Operations . . . providing all necessary services, technology and financing in connection therewith,"297 and to "furnish all materials, labour, equipment and other installations that may be required for carrying on all Mining Operations."298> WMCP may make expansions, improvements and replacements of the mining facilities and may add such new facilities as it considers necessary for the mining operations.299

These contractual stipulations, taken together, grant WMCP beneficial ownership over natural resources that properly belong to the State and are intended for the benefit of its citizens. These stipulations are abhorrent to the 1987 Constitution. They are precisely the vices that the fundamental law seeks to avoid, the evils that it aims to suppress. Consequently, the contract from which they spring must be struck down.

In arguing against the annulment of the FTAA, WMCP invokes the Agreement on the Promotion and Protection of Investments between the Philippine and Australian Governments, which was signed in Manila on January 25, 1995 and which entered into force on December 8, 1995.

x x x. Article 2 (1) of said treaty states that it applies to investments whenever made and thus the fact that [WMCP's] FTAA was entered into prior to the entry into force of the treaty does not preclude the Philippine Government from protecting [WMCP's] investment in [that] FTAA. Likewise, Article 3 (1) of the treaty provides that "Each Party shall encourage and promote investments in its area by investors of the other Party and shall [admit] such investments in accordance with its Constitution, Laws, regulations and investment policies" and in Article 3 (2), it states that "Each Party shall ensure that investments are accorded fair and equitable treatment." The latter stipulation indicates that it was intended to impose an obligation upon a Party to afford fair and equitable treatment to the investments of the other Party and that a failure to provide such treatment by or under the laws of the Party may constitute a breach of the treaty. Simply stated, the Philippines could not, under said treaty, rely upon the inadequacies of its own laws to deprive an Australian investor (like [WMCP]) of fair and equitable treatment by invalidating [WMCP's] FTAA without

likewise nullifying the service contracts entered into before the enactment of RA 7942 such as those mentioned in PD 87 or EO 279.

This becomes more significant in the light of the fact that [WMCP's] FTAA was executed not by a mere Filipino citizen, but by the Philippine Government itself, through its President no less, which, in entering into said treaty is assumed to be aware of the existing Philippine laws on service contracts over the exploration, development and utilization of natural resources. The execution of the FTAA by the Philippine Government assures the Australian Government that the FTAA is in accordance with existing Philippine laws.300 [Emphasis and italics by private respondents.]

The invalidation of the subject FTAA, it is argued, would constitute a breach of said treaty which, in turn, would amount to a violation of Section 3, Article II of the Constitution adopting the generally accepted principles of international law as part of the law of the land. One of these generally accepted principles is pacta sunt servanda, which requires the performance in good faith of treaty obligations.

Even assuming arguendo that WMCP is correct in its interpretation of the treaty and its assertion that "the Philippines could not . . . deprive an Australian investor (like [WMCP]) of fair and equitable treatment by invalidating [WMCP's] FTAA without likewise nullifying the service contracts entered into before the enactment of RA 7942 . . .," the annulment of the FTAA would not constitute a breach of the treaty invoked. For this decision herein invalidating the subject FTAA forms part of the legal system of the Philippines.301 The equal protection clause302 guarantees that such decision shall apply to all contracts belonging to the same class, hence, upholding rather than violating, the "fair and equitable treatment" stipulation in said treaty.

One other matter requires clarification. Petitioners contend that, consistent with the provisions of Section 2, Article XII of the Constitution, the President may enter into agreements involving "either technical or financial assistance" only. The agreement in question, however, is a technical and financial assistance agreement.

Petitioners' contention does not lie. To adhere to the literal language of the Constitution would lead to absurd consequences.303 As WMCP correctly put it:

x x x such a theory of petitioners would compel the government (through the President) to enter into contract with two (2) foreign-owned corporations, one for financial assistance agreement and with the other, for technical assistance over one and the same mining area or land; or to execute two (2) contracts with only one foreign-owned corporation which has the capability to provide both financial and technical assistance, one for financial assistance and another for technical assistance, over the same mining area. Such an absurd result is definitely not sanctioned under the canons of constitutional construction.304 [Underscoring in the original.]

Surely, the framers of the 1987 Charter did not contemplate such an absurd result from their use of "either/or." A constitution is not to be interpreted as demanding the impossible or the impracticable; and unreasonable or absurd consequences, if possible, should be avoided.305 Courts are not to give words a meaning that would lead to absurd or unreasonable consequences and a literal interpretation is to be rejected if it would be unjust or lead to absurd results.306 That is a strong argument against its adoption.307 Accordingly, petitioners' interpretation must be rejected.

The foregoing discussion has rendered unnecessary the resolution of the other issues raised by the petition.

WHEREFORE, the petition is GRANTED. The Court hereby declares unconstitutional and void:

(1) The following provisions of Republic Act No. 7942:

(a) The proviso in Section 3 (aq),(b) Section 23,(c) Section 33 to 41,(d) Section 56,(e) The second and third paragraphs of Section 81, and(f) Section 90.

(2) All provisions of Department of Environment and Natural Resources Administrative Order 96-40, s. 1996 which are not in conformity with this Decision, and

(3) The Financial and Technical Assistance Agreement between the Government of the Republic of the Philippines and WMC Philippines, Inc.

SO ORDERED.

Davide, Jr., C.J., Puno, Quisumbing, Carpio, Corona, Callejo, Sr., and Tinga. JJ., concur.Vitug, J., see Separate Opinion.Panganiban, J., see Separate Opinion.Ynares-Santiago, Sandoval-Gutierrez and Austria-Martinez, JJ., joins J., Panganiban's separate opinion.Azcuna, no part, one of the parties was a client.

FIRST DIVISION

G.R. No. 172331               August 24, 2011

RAMON ARANDA, Petitioner, vs.REPUBLIC OF THE PHILIPPINES, Respondent.

D E C I S I O N

VILLARAMA, JR., J.:

On appeal is the Decision1 dated July 26, 2005 and Resolution2 dated April 11, 2006 of the Court of Appeals (CA) in CA-G.R. CV No. 73067 which reversed and set aside the Decision3 dated January 31, 2001 of the Regional Trial Court (RTC) of Tanauan, Batangas, Branch 6 in Land Reg. Case No. T-335 (LRA Record No. N-69447).

Subject of a petition for original registration before the RTC is a parcel of land situated in San Andres, Malvar, Batangas with an area of 9,103 square meters and designated as Lot 3730, Psc 47, Malvar Cadastre. The petition4 was originally filed by ICTSI Warehousing, Inc. (ICTSI-WI) represented by its Chairman, Enrique K. Razon, Jr. The Republic through the Office of the Solicitor General (OSG) filed its opposition5 on grounds that the land applied for is part of the public domain and the applicant has not acquired a registrable title thereto under the provisions of Commonwealth Act No. 141 as amended by Republic Act No. 6940.

ICTSI-WI sought leave of court to amend the application citing the following reasons: (1) the petition was not accompanied by a certification of non-forum shopping; (2) the statement of technical description was based merely on the boundaries set forth in the tax declaration; and (3) due to a technicality, the sale between the vendor and applicant corporation cannot push through and consequently the tax declaration is still in the name of vendor Ramon Aranda and the land cannot be transferred and declared in the name of ICTSI-WI.6

The trial court admitted the Amended Application for Registration of Title,7 this time filed in the name of Ramon Aranda, herein petitioner. Petitioner prayed that should the Land Registration Act be not applicable to this case, he invokes the liberal provisions of Section 48 of Commonwealth Act No. 141, as amended, having been in continuous possession of the subject land in the concept of owner, publicly, openly and adversely for more than thirty (30) years prior to the filing of the application.8

In support of the application, petitioner’s sister Merlita A. Enriquez testified that in 1965 her father Anatalio Aranda donated the subject land to his brother (petitioner), as evidenced by documents "Pagpapatunay ng Pagkakaloob ng Lupa" which she and her siblings executed on June 7, 2000.9 She came to know the land for the first time in 1965 when she was eight years old and his brother Ramon has been tilling the land since then, planting it with rice and corn. His brother did not introduce any permanent improvement and also did not hire a tenant to work on the land. As to the donation made by his father to his brother Ramon, she recalled there was such a document but it was eaten by rats.10

Another witness, Luis Olan, testified that his father Lucio Olan originally owned the land and that he had known about this property since he was six (6) years old as he used to accompany his father in going to the land. His father farmed the land and planted it first, with rice, and later corn. They had open, peaceful, continuous and adverse possession of the land in the concept of owner until his father sold the land in 1946 to Anatalio Aranda. The children of Anatalio then took over in tilling the land, planting it with rice and corn and adding a few coconut trees. He does not have any copy of the document of sale because his mother gave it to Anatalio.11

On January 31, 2001, the trial court rendered its Decision12 granting the application and ordering the issuance of a decree of registration in favor of petitioner.

The Republic appealed to the CA which reversed the trial court. The CA held that petitioner’s evidence does not satisfactorily establish the character and duration of possession required by law, as petitioner failed to prove specific acts showing the nature of the possession by his predecessors-in-interest. The CA also did not give evidentiary

weight to the documents "Pagpapatunay ng Pagkakaloob ng Lupa" and "Pagpapatunay ng Bilihang Lampasan ng Lupa",13 both prepared only in the year 2000 when the application for registration was filed, as factual proof of ownership by the parties to the compromise agreement.

Petitioner’s motion for reconsideration was likewise denied by the CA.

Hence, this appeal by way of a petition for review on certiorari under Rule 45 alleging that the decision of the CA is based on a misapprehension of facts with regard to compliance with the required 30 years of open, exclusive, public and adverse possession in the concept of owner. Petitioner argues that the deeds of confirmation of the 1946 sale in favor of Anatalio Aranda and the 1965 donation to petitioner are competent proof of transfer of ownership notwithstanding that these were executed only in the year 2000. He asserts that the testimonies of witnesses Merlita Aranda-Enriquez and Luis Olan on the fact of loss and destruction of copies of the aforesaid deeds constitute secondary evidence of the contents thereof based on recollection of persons who are adversely affected. Such testimonial evidence coupled with the deeds of confirmation warrants the application of the exception from the best evidence rule. Petitioner thus contends that the CA had no legal basis to doubt the veracity of the donation and sale of the subject property, and to conclude that the confirmation deeds can be treated as compromise agreement considering that the transactions had been previously completed and perfected by the parties.

We deny the petition.

The Property Registration Decree (P.D. No. 1529) provides for original registration of land in an ordinary registration proceeding. Under Section 14(1)14 thereof, a petition may be granted upon compliance with the following requisites: (a) that the property in question is alienable and disposable land of the public domain; (b) that the applicants by themselves or through their predecessors-in-interest have been in open, continuous, exclusive and notorious possession and occupation; and (c) that such possession is under a bona fide claim of ownership since June 12, 1945 or earlier.

Under the Regalian doctrine which is embodied in Section 2, Article XII of the 1987 Constitution, all lands of the public domain belong to the State, which is the source of any asserted right to ownership of land. All lands not appearing to be clearly within private ownership are presumed to belong to the State. Unless public land is shown to have been reclassified or alienated to a private person by the State, it remains part of the inalienable public domain. To overcome this presumption, incontrovertible evidence must be established that the land subject of the application is alienable or disposable.15

To prove that the land subject of an application for registration is alienable, an applicant must establish the existence of a positive act of the government such as a presidential proclamation or an executive order; an administrative action; investigation reports of Bureau of Lands investigators; and a legislative act or a statute.16The applicant may also secure a certification from the Government that the lands applied for are alienable and disposable.17

In this case, the Assistant Regional Executive Director For Operations-Mainland Provinces of the Department of Environment and Natural Resources (DENR), in compliance with the directive of the trial court, issued a certification stating that the subject property "falls within the Alienable and Disposable Land, Project No. 22-A of Lipa, Batangas per LC Map 718 certified on March 26, 1928."18 However, in the Certification19 dated January 14, 2000 issued by the DENR CENR Officer of Batangas City, Pancrasio M. Alcantara, which was submitted in evidence by the petitioner, it states that:

This is to certify that based on projection from the technical reference map of this Office, Lot No. 3730, Ap-04-009883, situated at Barangay San Andres, Malvar, Batangas containing an area of NINE THOUSAND ONE HUNDRED THREE AND FORTY SEVEN (9,103.47) SQUARE METERS and shown at the reverse side hereof has been verified to be within the ALIENABLE AND DISPOSABLE ZONE under Project No. 39, Land Classification Map No. 3601 certified on 22 December 1997 except for twenty meters strip of land along the creek bounding on the northeastern portion which is to be maintained as streambank protection.

x x x x (Emphasis supplied.)

Petitioner has not explained the discrepancies in the dates of classification20 mentioned in the foregoing government certifications. Consequently, the status of the land applied for as alienable and disposable was not clearly established.

We also agree with the CA that petitioner’s evidence failed to show that he possessed the property in the manner and for the duration required by law.

Petitioner presented tax declarations and the deeds of confirmation of the 1946 sale from the original owner (Lucio Olan) to Anatalio Aranda and the 1965 donation made by the latter in favor of petitioner. But as found by the CA, the history of the land shows that it was declared for taxation purposes for the first time only in 1981. On the other hand, the Certification issued by the Municipal Treasurer of Malvar stated that petitioner, who supposedly received the property from his father in 1965, had been paying the corresponding taxes for said land "for more than five consecutive years including the current year [1999]," or beginning 1994 only or just three years before the filing of the application for original registration. While, as a rule, tax declarations or realty tax payments of property are not conclusive evidence of ownership, nevertheless they are good indicia of possession in the concept of owner, for no one in his right mind would be paying taxes for a property that is not in his actual or constructive possession – they constitute at least proof that the holder has a claim of title over the property.21

Petitioner likewise failed to prove the alleged possession of his predecessors-in-interest. His witness Luis Olan testified that he had been visiting the land along with his father Lucio since he was 6 years old (he was 70 years old at the time he testified), or as early as 1936. Yet, there was no evidence that Lucio Olan declared the property for tax purposes at anytime before he sold it to Anatalio Aranda. There is also no showing that Anatalio Aranda declared the property in his name from the time he bought it from Lucio Olan. And even assuming that Lucio actually planted rice and corn on the land, such statement is not sufficient to establish possession in the concept of owner as contemplated by law. Mere casual cultivation of the land does not amount to exclusive and notorious possession that would give rise to ownership.22 Specific acts of dominion must be clearly shown by the applicant.

We have held that a person who seeks the registration of title to a piece of land on the basis of possession by himself and his predecessors-in-interest must prove his claim by clear and convincing evidence, i.e., he must prove his title and should not rely on the absence or weakness of the evidence of the oppositors.23 Furthermore, the court has the bounden duty, even in the absence of any opposition, to require the petitioner to show, by a preponderance of evidence and by positive and absolute proof, so far as possible, that he is the owner in fee simple of the lands which he is attempting to register.24 Since petitioner failed to meet the quantum of proof required by law, the CA was correct in reversing the trial court and dismissing his application for judicial confirmation of title.

WHEREFORE, the present petition for review on certiorari is DENIED. The Decision dated July 26, 2005 and Resolution dated April 11, 2006 of the Court of Appeals in CA-G.R. CV No. 73067 are AFFIRMED and UPHELD.

With costs against the petitioner.

SO ORDERED.

MARTIN S. VILLARAMA, JR.Associate Justice

WE CONCUR:

RENATO C. CORONAChief JusticeChairperson

TERESITA J. LEONARDO-DE CASTROAssociate Justice

LUCAS P. BERSAMINAssociate Justice

JOSE PORTUGAL PEREZ*

Associate Justice

EN BANC 

G.R. No. 98332 January 16, 1995

MINERS ASSOCIATION OF THE PHILIPPINES, INC., petitioner, vs.HON. FULGENCIO S. FACTORAN, JR., Secretary of Environment and Natural Resources, and JOEL D. MUYCO, Director of Mines and Geosciences Bureau, respondents.

 

ROMERO, J.:

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

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

The adoption of the concept of jura regalia 2 that all natural resources are owned by the State embodied in the 1935, 1973 and 1987 Constitutions, as well as the recognition of the importance of the country's natural resources, not only for national economic development, but also for its security and national defense, 3 ushered in the adoption of the constitutional policy of "full control and supervision by the State" in the exploration, development and utilization of the country's natural resources. The options open to the State are through direct undertaking or by entering into co-production, joint venture; or production-sharing agreements, or by entering into agreement with foreign-owned corporations for large-scale exploration, development and utilization.

Article XII, Section 2 of the 1987 Constitution provides:

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

xxx xxx xxx

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

The President shall notify the Congress of every contract entered into in accordance with this provision, within thirty days from its execution. (Emphasis supplied)

Pursuant to the mandate of the above-quoted provision, legislative acts 4 were successively issued by the President in the exercise of her legislative power. 5

To implement said legislative acts, the Secretary of the Department of Environment and Natural Resources (DENR) in turn promulgated Administrative Order Nos. 57 and 82, the validity and constitutionality of which are being challenged in this petition.

On July 10, 1987, President Corazon C. Aquino, in the exercise of her then legislative powers under Article II, Section 1 of the Provisional Constitution and Article XIII, Section 6 of the 1987 Constitution, promulgated Executive Order No. 211 prescribing the interim procedures in the processing and approval of applications for the exploration, development and utilization of minerals pursuant to the 1987 Constitution in order to ensure the continuity of mining operations and activities and to hasten the development of mineral resources. The pertinent provisions read as follows:

Sec. 1. Existing mining permits, licenses, leases and other mining grants issued by the Department of Environment and Natural Resources and Bureau of Mines and Geo-Sciences, including existing operating agreements and mining service contracts, shall continue and remain in full force and effect, subject to the same terms and conditions as originally granted and/or approved.

Sec. 2. Applications for the exploration, development and utilization of mineral resources, including renewal applications for approval of operating agreements and mining service contracts, shall be accepted and processed and may be approved; concomitantly thereto, declarations of locations and all other kinds of mining applications shall be accepted and registered by the Bureau of Mines and Geo-Sciences.

Sec. 3. The processing, evaluation and approval of all mining applications, declarations of locations, operating agreements and service contracts as provided for in Section 2 above, shall be governed by Presidential Decree No. 463, as amended, other existing mining laws and their implementing rules and regulations: Provided, however, that the privileges granted, as well as the terms and conditions thereof shall be subject to any and all modifications or alterations which Congress may adopt pursuant to Section 2, Article XII of the 1987 Constitution.

On July 25, 1987, President Aquino likewise promulgated Executive Order No. 279 authorizing the DENR Secretary to negotiate and conclude joint venture, co-production, or production-sharing agreements for the exploration, development and utilization of mineral resources, and prescribing the guidelines for such agreements and those agreements involving technical or financial assistance by foreign-owned corporations for large-scale exploration, development, and utilization of minerals. The pertinent provisions relevant to this petition are as follows:

Sec. 1. The Secretary of the Department of Environment and Natural Resources (hereinafter referred to as "the Secretary") is hereby authorized to negotiate and enter into, for and in behalf of the Government, joint venture, co-production, or production-sharing agreements for the exploration, development, and utilization of mineral resources with any Filipino citizens, or corporation or association at least sixty percent (60%) of whose capital is owned by Filipino citizens. Such joint venture, co-production, or production-sharing agreements may be for a period not exceeding twenty-five years, renewable for not more than twenty-five years, and shall include the minimum terms and conditions prescribed in Section 2 hereof. In the execution of a joint venture, co-production or production agreements, the contracting parties, including the Government, may consolidate two or more contiguous or geologically — related mining claims or leases and consider them as one contract area for purposes of determining the subject of the joint venture, co-production, or production-sharing agreement.

xxx xxx xxx

Sec. 6. The Secretary shall promulgate such supplementary rules and regulations as may be necessary to effectively implement the provisions of this Executive Order.

Sec. 7. All provisions of Presidential Decree No. 463, as amended, other existing mining laws, and their implementing rules and regulations, or parts thereof, which are not inconsistent with the provisions of this Executive Order, shall continue in force and effect.

Pursuant to Section 6 of Executive Order No. 279, the DENR Secretary issued on June 23, 1989 DENR Administrative Order No. 57, series of 1989, captioned "Guidelines of Mineral Production Sharing Agreement under Executive Order No. 279." 6 Under the transitory provision of said DENR Administrative Order No. 57, embodied in its Article 9, all existing mining leases or agreements which were granted after the effectivity of the 1987 Constitution pursuant to Executive Order No. 211, except small scale mining leases and those pertaining to sand and gravel and quarry resources covering an area of twenty (20) hectares or less, shall be converted into production-sharing agreements within one (1) year from the effectivity of these guidelines.

On November 20, 1980, the Secretary of the DENR Administrative Order No. 82, series of 1990, laying down the "Procedural Guidelines on the Award of Mineral Production Sharing Agreement (MPSA) through Negotiation."  7

Section 3 of the aforementioned DENR Administrative Order No. 82 enumerates the persons or entities required to submit Letter of Intent (LOIs) and Mineral Production Sharing Agreement (MPSAs) within two (2) years from the effectivity of DENR Administrative Order No. 57 or until July 17, 1991. Failure to do so within the prescribed period shall cause the abandonment of mining, quarry and sand and gravel claims. Section 3 of DENR Administrative Order No. 82 provides:

Sec. 3. Submission of Letter of Intent (LOIs) and MPSAs). The following shall submit their LOIs and MPSAs within two (2) years from the effectivity of DENR A.O. 57 or until July 17, 1991.

i. Declaration of Location (DOL) holders, mining lease applicants, exploration permitees, quarry applicants and other mining applicants whose mining/quarry applications have not been perfected prior to the effectivity of DENR Administrative Order No. 57.

ii. All holders of DOL acquired after the effectivity of DENR A.O. No. 57.

iii. Holders of mining leases or similar agreements which were granted after (the) effectivity of 1987 Constitution.

Failure to submit letters of intent and MPSA applications/proposals within the prescribed period shall cause the abandonment of mining, quarry and sand and gravel claims.

The issuance and the impeding implementation by the DENR of Administrative Order Nos. 57 and 82 after their respective effectivity dates compelled the Miners Association of the Philippines, Inc. 8 to file the instant petition assailing their validity and constitutionality before this Court.

In this petition for certiorari, petitioner Miners Association of the Philippines, Inc. mainly contends that respondent Secretary of DENR issued both Administrative Order Nos. 57 and 82 in excess of his rule-making power under Section 6 of Executive Order No. 279. On the assumption that the questioned administrative orders do not conform with Executive Order Nos. 211 and 279, petitioner contends that both orders violate the non-impairment of contract provision under Article III, Section 10 of the 1987 Constitution on the ground that Administrative Order No. 57 unduly pre-terminates existing mining agreements and automatically converts them into production-sharing agreements within one (1) year from its effectivity date. On the other hand, Administrative Order No. 82 declares that failure to submit Letters of Intent and Mineral Production-Sharing Agreements within two (2) years from the date of effectivity of said guideline or on July 17, 1991 shall cause the abandonment of their mining, quarry and sand gravel permits.

On July 2, 1991, the Court, acting on petitioner's urgent ex-parte petition for issuance of a restraining order/preliminary injunction, issued a Temporary Restraining Order, upon posting of a P500,000.00 bond, enjoining the enforcement and implementation of DENR Administrative Order Nos. 57 and 82, as amended, Series of 1989 and 1990, respectively. 9

On November 13, 1991, Continental Marble Corporation, 10 thru its President, Felipe A. David, sought to intervene 11in this case alleging that because of the temporary order issued by the Court , the DENR, Regional Office No. 3 in San Fernando, Pampanga refused to renew its Mines Temporary Permit after it expired on July 31, 1991. Claiming that its rights and interests are prejudicially affected by the implementation of DENR Administrative Order Nos. 57 and 82, it joined petitioner herein in seeking to annul Administrative Order Nos. 57 and 82 and prayed that the DENR, Regional Office No. 3 be ordered to issue a Mines Temporary Permit in its favor to enable it to operate during the pendency of the suit.

Public respondents were acquired to comment on the Continental Marble Corporation's petition for intervention in the resolution of November 28, 1991. 12

Now to the main petition. If its argued that Administrative Order Nos. 57 and 82 have the effect of repealing or abrogating existing mining laws 13 which are not inconsistent with the provisions of Executive Order No. 279. Invoking Section 7 of said Executive Order No. 279, 14 petitioner maintains that respondent DENR Secretary cannot provide guidelines such as Administrative Order Nos. 57 and 82 which are inconsistent with the provisions of Executive Order No. 279 because both Executive Order Nos. 211 and 279 merely reiterated the acceptance and registration of declarations of location and all other kinds of mining applications by the Bureau of Mines and Geo-Sciences under the provisions of Presidential Decree No. 463, as amended, until Congress opts to modify or alter the same.

In other words, petitioner would have us rule that DENR Administrative Order Nos. 57 and 82 issued by the DENR Secretary in the exercise of his rule-making power are tainted with invalidity inasmuch as both contravene or subvert the provisions of Executive Order Nos. 211 and 279 or embrace matters not covered, nor intended to be covered, by the aforesaid laws.

We disagree.

We reiterate the principle that the power of administrative officials to promulgate rules and regulations in the implementation of a statute is necessarily limited only to carrying into effect what is provided in the legislative enactment. The principle was enunciated as early as 1908 in the case of United States v. Barrias. 15 The scope of the exercise of such rule-making power was clearly expressed in the case of United States v. Tupasi Molina, 16 decided in 1914, thus: "Of course, the regulations adopted under legislative authority by a particular department must be in harmony with the provisions of the law, and for the sole purpose of carrying into effect its general provisions. By such regulations, of course, the law itself can not be extended. So long, however, as the regulations relate solely to carrying into effect its general provisions. By such regulations, of course, the law itself can not be extended. So long, however, as the regulations relate solely to carrying into effect the provision of the law, they are valid."

Recently, the case of People v. Maceren 17 gave a brief delienation of the scope of said power of administrative officials:

Administrative regulations adopted under legislative authority by a particular department must be in harmony with the provisions of the law, and should be for the sole purpose of carrying into effect its general provision. By such regulations, of course, the law itself cannot be extended (U.S. v. Tupasi Molina, supra). An administrative agency cannot amend an act of Congress (Santos vs. Estenzo, 109 Phil. 419, 422; Teoxon vs. Members of the Board of Administrators, L-25619, June 30, 1970, 33 SCRA 585; Manuel vs. General Auditing Office, L-28952, December 29, 1971, 42 SCRA 660; Deluao v. Casteel, L-21906, August 29, 1969, 29 SCRA 350).

The rule-making power must be confined to details for regulating the mode or proceeding to carry into effect the law as it has been enacted. The power cannot be extended to amending or expanding the statutory requirements or to embrace matters not covered by the statute. Rules that subvert the statute cannot be sanctioned (University of Santo Tomas v. Board of Tax Appeals, 93 Phil. 376, 382, citing 12 C.J. 845-46. As to invalid regulations, see Collector of Internal Revenue v. Villaflor, 69 Phil. 319; Wise & Co. v. Meer, 78 Phil. 655, 676; Del Mar v. Phil. Veterans Administration, L-27299, June 27, 1973, 51 SCRA 340, 349).

xxx xxx xxx

. . . The rule or regulation should be within the scope of the statutory authority granted by the legislature to the administrative agency (Davis, Administrative Law, p. 194, 197, cited in Victorias Milling Co., Inc. v. Social Security Commission, 114 Phil. 555, 558).

In case of discrepancy between the basic law and a rule or regulation issued to implement said law, the basic prevails because said rule or regulations cannot go beyond the terms and provisions of the basic law (People v. Lim, 108 Phil. 1091).

Considering that administrative rules draw life from the statute which they seek to implement, it is obvious that the spring cannot rise higher than its source. We now examine petitioner's argument that DENR Administrative Order Nos. 57 and 82 contravene Executive Order Nos. 211 and 279 as both operate to repeal or abrogate Presidential Decree No. 463, as amended, and other mining laws allegedly acknowledged as the principal law under Executive Order Nos. 211 and 279.

Petitioner's insistence on the application of Presidential Decree No. 463, as amended, as the governing law on the acceptance and approval of declarations of location and all other kinds of applications for the exploration, development, and utilization of mineral resources pursuant to Executive Order No. 211, is erroneous. Presidential Decree No. 463, as amended, pertains to the old system of exploration, development and utilization of natural resources through "license, concession or lease" which, however, has been disallowed by Article XII, Section 2 of the 1987 Constitution. By virtue of the said constitutional mandate and its implementing law, Executive Order No. 279 which superseded Executive Order No. 211, the provisions dealing on "license, concession or lease" of mineral resources under Presidential Decree No. 463, as amended, and other existing mining laws are deemed repealed and, therefore, ceased to operate as the governing law. In other words, in all other areas of administration and management of mineral lands, the provisions of Presidential Decree No. 463, as amended, and other existing mining laws, still govern. Section 7 of Executive Order No. 279 provides, thus:

Sec. 7. All provisions of Presidential Decree No. 463, as amended, other existing mining laws, and their implementing rules and regulations, or parts thereof, which are not inconsistent with the provisions of this Executive Order, shall continue in force and effect.

Specifically, the provisions of Presidential Decree No. 463, as amended, on lease of mining claims under Chapter VIII, quarry permits on privately-owned lands of quarry license on public lands under Chapter XIII and other related provisions on lease, license and permits are not only inconsistent with the raison d'etre for which Executive Order No. 279 was passed, but contravene the express mandate of Article XII, Section 2 of the 1987 Constitution. It force and effectivity is thus foreclosed.

Upon the effectivity of the 1987 Constitution on February 2, 1987, 18 the State assumed a more dynamic role in the exploration, development and utilization of the natural resources of the country. Article XII, Section 2 of the said Charter explicitly ordains that the exploration, development and utilization of natural resources shall be under the full control and supervision of the State. Consonant therewith, the exploration, development and utilization of natural resources may be undertaken by means of direct act of the State, or it may opt to enter into co-production, joint venture, or production-sharing agreements, or it may enter into agreements with foreign-owned corporations involving either technical or financial assistance for large-scale exploration, development, and utilization of minerals, petroleum, and other mineral oils according to the general terms and conditions provided by law, based on real contributions to the economic growth and general welfare of the country.

Given these considerations, there is no clear showing that respondent DENR Secretary has transcended the bounds demarcated by Executive Order No. 279 for the exercise of his rule-making power tantamount to a grave abuse of discretion. Section 6 of Executive Order No. 279 specifically authorizes said official to promulgate such supplementary rules and regulations as may be necessary to effectively implement the provisions thereof. Moreover, the subject sought to be governed and regulated by the questioned orders is germane to the objects and purposes of Executive Order No. 279 specifically issued to carry out the mandate of Article XII, Section 2 of the 1987 Constitution.

Petitioner likewise maintains that Administrative Order No. 57, in relation to Administrative Order No. 82, impairs vested rights as to violate the non-impairment of contract doctrine guaranteed under Article III, Section 10 of the 1987 Constitution because Article 9 of Administrative Order No. 57 unduly pre-terminates and automatically converts mining leases and other mining agreements into production-sharing agreements within one (1) year from

effectivity of said guideline, while Section 3 of Administrative Order No. 82, declares that failure to submit Letters of Intent (LOIs) and MPSAs within two (2) years from the effectivity of Administrative Order No. 57 or until July 17, 1991 shall cause the abandonment of mining, quarry, and sand gravel permits.

In Support of the above contention, it is argued by petitioner that Executive Order No. 279 does not contemplate automatic conversion of mining lease agreements into mining production-sharing agreement as provided under Article 9, Administrative Order No. 57 and/or the consequent abandonment of mining claims for failure to submit LOIs and MPSAs under Section 3, Administrative Order No. 82 because Section 1 of said Executive Order No. 279 empowers the DENR Secretary to negotiate and enter into voluntary agreements which must set forth the minimum terms and conditions provided under Section 2 thereof. Moreover, petitioner contends that the power to regulate and enter into mining agreements does not include the power to preterminate existing mining lease agreements.

To begin with, we dispel the impression created by petitioner's argument that the questioned administrative orders unduly preterminate existing mining leases in general. A distinction which spells a real difference must be drawn. Article XII, Section 2 of the 1987 Constitution does not apply retroactively to "license, concession or lease" granted by the government under the 1973 Constitution or before the effectivity of the 1987 Constitution on February 2, 1987. The intent to apply prospectively said constitutional provision was stressed during the deliberations in the Constitutional Commission, 19 thus:

MR. DAVIDE: Under the proposal, I notice that except for the [inalienable] lands of the public domain, all other natural resources cannot be alienated and in respect to [alienable] lands of the public domain, private corporations with the required ownership by Filipino citizens can only lease the same. Necessarily, insofar as other natural resources are concerned, it would only be the State which can exploit, develop, explore and utilize the same. However, the State may enter into a joint venture, co-production or production-sharing. Is that not correct?

MR. VILLEGAS: Yes.

MR. DAVIDE: Consequently, henceforth upon, the approval of this Constitution, no timber or forest concession, permits or authorization can be exclusively granted to any citizen of the Philippines nor to any corporation qualified to acquire lands of the public domain?

MR. VILLEGAS: Would Commissioner Monsod like to comment on that? I think his answer is "yes."

MR. DAVIDE: So, what will happen now license or concessions earlier granted by the Philippine government to private corporations or to Filipino citizens? Would they be deemed repealed?

MR. VILLEGAS: This is not applied retroactively. They will be respected.

MR. DAVIDE: In effect, they will be deemed repealed?

MR. VILLEGAS: No. (Emphasis supplied)

During the transition period or after the effectivity of the 1987 Constitution on February 2, 1987 until the first Congress under said Constitution was convened on July 27, 1987, two (2) successive laws, Executive Order Nos. 211 and 279, were promulgated to govern the processing and approval of applications for the exploration, development and utilization of minerals. To carry out the purposes of said laws, the questioned Administrative Order Nos. 57 and 82, now being assailed, were issued by the DENR Secretary.

Article 9 of Administrative Order No. 57 provides:

ARTICLE 9

TRANSITORY PROVISION

9.1. All existing mining leases or agreements which were granted after the effectivity of the 1987 Constitution pursuant to Executive Order No. 211, except small scale mining leases and those pertaining to sand and gravel and quarry resources covering an area of twenty (20) hectares or less shall be subject to these guidelines. All such leases or agreements shall be converted into production sharing agreement within one (1) year from the effectivity of these guidelines. However, any minimum firm which has established mining rights under Presidential Decree 463 or other laws may avail of the provisions of EO 279 by following the procedures set down in this document.

It is clear from the aforestated provision that Administrative Order No. 57 applies only to all existing mining leases or agreements which were granted after the effectivity of the 1987 Constitution pursuant to Executive Order No. 211. It bears mention that under the text of Executive Order No. 211, there is a reservation clause which provides that the privileges as well as the terms and conditions of all existing mining leases or agreements granted after the effectivity of the 1987 Constitution pursuant to Executive Order No. 211, shall be subject to any and all modifications or alterations which Congress may adopt pursuant to Article XII, Section 2 of the 1987 Constitution. Hence, the strictures of the non-impairment of contract clause under Article III, Section 10 of the 1987 Constitution 20 do not apply to the aforesaid leases or agreements granted after the effectivity of the 1987 Constitution, pursuant to Executive Order No. 211. They can be amended, modified or altered by a statute passed by Congress to achieve the purposes of Article XII, Section 2 of the 1987 Constitution.

Clearly, Executive Order No. 279 issued on July 25, 1987 by President Corazon C. Aquino in the exercise of her legislative power has the force and effect of a statute or law passed by Congress. As such, it validly modified or altered the privileges granted, as well as the terms and conditions of mining leases and agreements under Executive Order No. 211 after the effectivity of the 1987 Constitution by authorizing the DENR Secretary to negotiate and conclude joint venture, co-production, or production-sharing agreements for the exploration, development and utilization of mineral resources and prescribing the guidelines for such agreements and those agreements involving technical or financial assistance by foreign-owned corporations for large-scale exploration, development, and utilization of minerals.

Well -settled is the rule, however, that regardless of the reservation clause, mining leases or agreements granted by the State, such as those granted pursuant to Executive Order No. 211 referred to this petition, are subject to alterations through a reasonable exercise of the police power of the State. In the 1950 case of Ongsiako v. Gamboa, 21 where the constitutionality of Republic Act No. 34 changing the 50-50 sharecropping system in existing agricultural tenancy contracts to 55-45 in favor of tenants was challenged, the Court, upholding the constitutionality of the law, emphasized the superiority of the police power of the State over the sanctity of this contract:

The prohibition contained in constitutional provisions against: impairing the obligation of contracts is not an absolute one and it is not to be read with literal exactness like a mathematical formula. Such provisions are restricted to contracts which respect property, or some object or value, and confer rights which may be asserted in a court of justice, and have no application to statute relating to public subjects within the domain of the general legislative powers of the State, and involving the public rights and public welfare of the entire community affected by it. They do not prevent a proper exercise by the State of its police powers. By enacting regulations reasonably necessary to secure the health, safety, morals, comfort, or general welfare of the community, even the contracts may thereby be affected; for such matter can not be placed by contract beyond the power of the State shall regulates and control them. 22

In Ramas v. CAR and Ramos 23 where the constitutionality of Section 14 of Republic Act No. 1199 authorizing the tenants to charge from share to leasehold tenancy was challenged on the ground that it impairs the obligation of contracts, the Court ruled that obligations of contracts must yield to a proper exercise of the police power when such power is exercised to preserve the security of the State and the means adopted are reasonably adapted to the accomplishment of that end and are, therefore, not arbitrary or oppressive.

The economic policy on the exploration, development and utilization of the country's natural resources under Article XII, Section 2 of the 1987 Constitution could not be any clearer. As enunciated in Article XII, Section 1 of the 1987 Constitution, the exploration, development and utilization of natural resources under the new system mandated in Section 2, is geared towards a more equitable distribution of opportunities, income, and wealth; a sustained

increase in the amount of goods and services produced by the nation for the benefit of the people; and an expanding productivity as the key to raising the quality of life for all, especially the underprivileged.

The exploration, development and utilization of the country's natural resources are matters vital to the public interest and the general welfare of the people. The recognition of the importance of the country's natural resources was expressed as early as the 1984 Constitutional Convention. In connection therewith, the 1986 U.P. Constitution Project observed: "The 1984 Constitutional Convention recognized the importance of our natural resources not only for its security and national defense. Our natural resources which constitute the exclusive heritage of the Filipino nation, should be preserved for those under the sovereign authority of that nation and for their prosperity. This will ensure the country's survival as a viable and sovereign republic."

Accordingly, the State, in the exercise of its police power in this regard, may not be precluded by the constitutional restriction on non-impairment of contract from altering, modifying and amending the mining leases or agreements granted under Presidential Decree No. 463, as amended, pursuant to Executive Order No. 211. Police Power, being co-extensive with the necessities of the case and the demands of public interest; extends to all the vital public needs. The passage of Executive Order No. 279 which superseded Executive Order No. 211 provided legal basis for the DENR Secretary to carry into effect the mandate of Article XII, Section 2 of the 1987 Constitution.

Nowhere in Administrative Order No. 57 is there any provision which would lead us to conclude that the questioned order authorizes the automatic conversion of mining leases and agreements granted after the effectivity of the 1987 Constitution, pursuant to Executive Order No. 211, to production-sharing agreements. The provision in Article 9 of Administrative Order No. 57 that "all such leases or agreements shall be converted into production sharing agreements within one (1) year from the effectivity of these guidelines" could not possibility contemplate a unilateral declaration on the part of the Government that all existing mining leases and agreements are automatically converted into production-sharing agreements. On the contrary, the use of the term "production-sharing agreement" if they are so minded. Negotiation negates compulsion or automatic conversion as suggested by petitioner in the instant petition. A mineral production-sharing agreement (MPSA) requires a meeting of the minds of the parties after negotiations arrived at in good faith and in accordance with the procedure laid down in the subsequent Administrative Order No. 82.

We, therefore, rule that the questioned administrative orders are reasonably directed to the accomplishment of the purposes of the law under which they were issued and were intended to secure the paramount interest of the public, their economic growth and welfare. The validity and constitutionality of Administrative Order Nos. 57 and 82 must be sustained, and their force and effect upheld.

We now, proceed to the petition-in-intervention. Under Section 2, Rule 12 of the Revised Rules of Court, an intervention in a case is proper when the intervenor has a "legal interest in the matter in litigation, or in the success of either of the parties, or an interest against both, or when he is so situated as to be adversely affected by a distribution or other disposition of property in the custody of the court or of an officer thereof. "Continental Marble Corporation has not sufficiently shown that it falls under any of the categories mentioned above. The refusal of the DENR, Regional Office No. 3, San Fernando, Pampanga to renew its Mines Temporary Permit does not justify such an intervention by Continental Marble Corporation for the purpose of obtaining a directive from this Court for the issuance of said permit. Whether or not Continental Marble matter best addressed to the appropriate government body but certainly, not through this Court. Intervention is hereby DENIED.

WHEREFORE, the petition is DISMISSED for lack of merit. The Temporary Restraining Order issued on July 2, 1991 is hereby LIFTED.

SO ORDERED.

Narvasa, C.J., Feliciano, Padilla, Bidin, Regalado, Davide, Jr., Bellosillo, Melo, Quiason, Puno, Vitug, Kapunan and Mendoza, JJ., concur.

EN BANC

G.R. No. 162243               December 3, 2009

HON. HEHERSON ALVAREZ substituted by HON. ELISEA G. GOZUN, in her capacity as Secretary of the Department of Environment and Natural Resources, Petitioner, vs.PICOP RESOURCES, INC., Respondent.

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

G.R. No. 164516

PICOP RESOURCES, INC., Petitioner, vs.HON. HEHERSON ALVAREZ substituted by HON. ELISEA G. GOZUN, in her capacity as Secretary of the Department of Environment and Natural Resources Respondent.

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

G.R. No. 171875              

THE HON. ANGELO T. REYES (formerly Hon. Elisea G. Gozun), in his capacity as Secretary of the Department of Environment and Natural Resources (DENR), Petitioner, vs.PAPER INDUSTRIES CORP. OF THE PHILIPPINES (PICOP), Respondent.

R E S O L U T I O N

CHICO-NAZARIO, J.:

The cause of action of PICOP Resources, Inc. (PICOP) in its Petition for Mandamus with the trial court is clear: the government is bound by contract, a 1969 Document signed by then President Ferdinand Marcos, to enter into an Integrated Forest Management Agreement (IFMA) with PICOP. Since the remedy of mandamus lies only to compel an officer to perform a ministerial duty, and since the 1969 Document itself has a proviso requiring compliance with the laws and the Constitution, the issues in this Motion for Reconsideration are the following: (1) firstly, is the 1969 Document a contract enforceable under the Non-Impairment Clause of the Constitution, so as to make the signing of the IFMA a ministerial duty? (2) secondly, did PICOP comply with all the legal and constitutional requirements for the issuance of an IFMA?

To recall, PICOP filed with the Department of Environment and Natural Resources (DENR) an application to have its Timber License Agreement (TLA) No. 43 converted into an IFMA. In the middle of the processing of PICOP’s application, however, PICOP refused to attend further meetings with the DENR. Instead, on 2 September 2002, PICOP filed before the Regional Trial Court (RTC) of Quezon City a Petition for Mandamus1 against then DENR Secretary Heherson T. Alvarez. PICOP seeks the issuance of a privileged writ of mandamus to compel the DENR Secretary to sign, execute and deliver an IFMA to PICOP, as well as to –

[I]ssue the corresponding IFMA assignment number on the area covered by the IFMA, formerly TLA No. 43, as amended; b) to issue the necessary permit allowing petitioner to act and harvest timber from the said area of TLA No. 43, sufficient to meet the raw material requirements of petitioner’s pulp and paper mills in accordance with the warranty and agreement of July 29, 1969 between the government and PICOP’s predecessor-in-interest; and c) to honor and respect the Government Warranties and contractual obligations to PICOP strictly in accordance with the warranty and agreement dated July 29, [1969] between the government and PICOP’s predecessor-in-interest. x x x.2

On 11 October 2002, the RTC rendered a Decision granting PICOP’s Petition for Mandamus, thus:

WHEREFORE, premises considered, the Petition for Mandamus is hereby GRANTED.

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

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

2. to issue the necessary permit allowing petitioner to act and harvest timber from the said area of TLA No. 43, sufficient to meet the raw material requirements of petitioner’s pulp and paper mills in accordance with the warranty and agreement of July 29, 1969 between the government and PICOP’s predecessor-in-interest; and

3. to honor and respect the Government Warranties and contractual obligations to PICOP strictly in accordance with the warranty and agreement dated July 29, 1999 (sic) between the government and PICOP’s predecessor-in-interest (Exhibits "H", "H-1" to "H-5", particularly the following:

a) the area coverage of TLA No. 43, which forms part and parcel of the government warranties;

b) PICOP tenure over the said area of TLA No. 43 and exclusive right to cut, collect and remove sawtimber and pulpwood for the period ending on April 26, 1977; and said period to be renewable for [an]other 25 years subject to compliance with constitutional and statutory requirements as well as with existing policy on timber concessions; and

c) The peaceful and adequate enjoyment by PICOP of the area as described and specified in the aforesaid amended Timber License Agreement No. 43.

The Respondent Secretary Alvarez is likewise ordered to pay petitioner the sum of P10 million a month beginning May 2002 until the conversion of TLA No. 43, as amended, to IFMA is formally effected and the harvesting from the said area is granted.3

On 25 October 2002, the DENR Secretary filed a Motion for Reconsideration.4 In a 10 February 2003 Order, the RTC denied the DENR Secretary’s Motion for Reconsideration and granted PICOP’s Motion for the Issuance of Writ of Mandamus and/or Writ of Mandatory Injunction.5 The fallo of the 11 October 2002 Decision was practically copied in the 10 February 2003 Order, although there was no mention of the damages imposed against then DENR Secretary Alvarez.6 The DENR Secretary filed a Notice of Appeal7 from the 11 October 2002 Decision and the 10 February 2003 Order.

On 19 February 2004, the Seventh Division of the Court of Appeals affirmed8 the Decision of the RTC, to wit:

WHEREFORE, the appealed Decision is hereby AFFIRMED with modification that the order directing then DENR Secretary Alvarez "to pay petitioner-appellee the sum of P10 million a month beginning May, 2002 until the conversion to IFMA of TLA No. 43, as amended, is formally effected and the harvesting from the said area is granted" is hereby deleted. 9

Challenging the deletion of the damages awarded to it, PICOP filed a Motion for Partial Reconsideration10 of this Decision, which was denied by the Court of Appeals in a 20 July 2004 Resolution.11

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

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

WHEREFORE, the Petition in G.R. No. 162243 is GRANTED. The Decision of the Court of Appeals insofar as it affirmed the RTC Decision granting the Petition for Mandamus filed by Paper Industries Corp. of the Philippines (PICOP) is hereby REVERSED and SET ASIDE. The Petition in G.R. No. 164516 seeking the reversal of the same

Decision insofar as it nullified the award of damages in favor of PICOP is DENIED for lack of merit. The Petition in G.R. No. 171875, assailing the lifting of the Preliminary Mandatory Injunction in favor of the Secretary of Environment and Natural Resources is DISMISSED on the ground of mootness.12

On 18 January 2006, PICOP filed the instant Motion for Reconsideration, based on the following grounds:

I.

THE HONORABLE COURT ERRED IN HOLDING THAT THE CONTRACT WITH PRESIDENTIAL WARRANTY SIGNED BY THE PRESIDENT OF THE REPUBLIC ON 29 JUNE 1969 ISSUED TO PICOP IS A MERE PERMIT OR LICENSE AND IS NOT A CONTRACT, PROPERTY OR PROPERTY RIGHT PROTECTED BY THE DUE PROCESS CLAUSE OF THE CONSTITUTION

II.

THE EVALUATION OF PICOP’S MANAGEMENT OF THE TLA 43 NATURAL FOREST CLEARLY SHOWED SATISFACTORY PERFORMANCE FOR KEEPING THE NATURAL FOREST GENERALLY INTACT AFTER 50 YEARS OF FOREST OPERATIONS. THIS COMPLETES THE REQUIREMENT FOR AUTOMATIC CONVERSION UNDER SECTION 9 OF DAO 99-53.

III.

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

i.

PICOP FAILED TO SUBMIT A FIVE-YEAR FOREST PROTECTION PLAN AND A SEVEN-YEAR REFORESTATION PLAN FOR THE YEARS UNDER REVIEW.

ii.

PICOP FAILED TO COMPLY WITH THE PAYMENT OF FOREST CHARGES.

iii.

PICOP DID NOT COMPLY WITH THE REQUIREMENT FOR A CERTIFICATION FROM THE NCIP THAT THE AREA OF TLA 43 DOES NOT OVERLAP WITH ANY ANCESTRAL DOMAIN.

iv.

PICOP FAILED TO HAVE PRIOR CONSULTATION WITH AND APPROVAL FROM THE SANGUNIAN CONCERNED, AS REQUIRED BY SECTION 27 OF THE REPUBLIC ACT NO. 7160, OTHERWISE KNOWN AS THE LOCAL GOVERNMENT CODE OF 1991.

v.

PCIOP FAILED TO SECURE SOCIAL ACCEPTABILITY UNDER PRESIDENTIAL DECREE NO. 1586.

IV

THE MOTIVATION OF ALVAREZ IN RECALLING THE CLEARANCE FOR AUTOMATIC CONVERSION HE ISSUED ON 25 OCTOBER 2001 WAS NOT DUE TO ANY SHORTCOMING FROM PICOP BUT DUE TO HIS DETERMINATION TO EXCLUDE 28,125 HECTARES FROM THE CONVERSION AND OTHER THINGS.

On 15 December 2008, on Motion by PICOP, the Third Division of this Court resolved to refer the consolidated cases at bar to the Court en banc. On 16 December 2008, this Court sitting en banc resolved to accept the said cases and set them for oral arguments. Oral arguments were conducted on 10 February 2009.

PICOP’s Cause of Action: Matters PICOP Should Have Proven to Be Entitled to a Writ of Mandamus

In seeking a writ of mandamus to compel the issuance of an IFMA in its favor, PICOP relied on a 29 July 1969 Document, the so-called Presidential Warranty approved by then President Ferdinand E. Marcos in favor of PICOP’s predecessor-in-interest, Bislig Bay Lumber Company, Inc. (BBLCI). PICOP’s cause of action is summarized in paragraphs 1.6 and 4.19 of its Petition for Mandamus:

1.6 Respondent Secretary impaired the obligation of contract under the said Warranty and Agreement of 29 July 1969 by refusing to respect the tenure; and its renewal for another twenty five (25) years, of PICOP over the area covered by the said Agreement which consists of permanent forest lands with an aggregate area of 121,587 hectares and alienable and disposable lands with an aggregate area of approximately 21,580 hectares, and petitioner’s exclusive right to cut, collect and remove sawtimber and pulpwood therein and the peaceful and adequate enjoyment of the said area as described and specified in petitioner’s Timber License Agreement (TLA) No. 43 guaranteed by the Government, under the Warranty and Agreement of 29 July 1969.13

4.19 Respondent is in violation of the Constitution and has impaired the obligation of contract by his refusal to respect: a) the tenurial rights of PICOP over the forest area covered by TLA No. 43, as amended and its renewal for another twenty five (25) years; b) the exclusive right of PICOP to cut, collect and remove sawtimber and pulpwood therein; and c) PICOP’s peaceful and adequate enjoyment of the said area which the government guaranteed under the Warranty and Agreement of 29 July 1969.14

The grounds submitted by PICOP in its Petition for Mandamus are as follows:

I

Respondent secretary has unlawfully refused and/or neglected to sign and execute the IFMA contract of PICOP even as the latter has complied with all the legal requirements for the automatic conversion of TLA No. 43, as amended, into an IFMA.

II

Respondent Secretary acted with grave abuse of discretion and/or in excess of jurisdiction in refusing to sign and execute PICOP’s IFMA contract, notwithstanding that PICOP had complied with all the requirements for Automatic Conversion under DAO 99-53, as in fact Automatic Conversion was already cleared in October, 2001, and was a completed process.

III

Respondent Secretary has impaired the obligation of contract under a valid and binding warranty and agreement of 29 July 1969 between the government and PICOP’s predecessor-in-interest, by refusing to respect: a) the tenure of PICOP, and its renewal for another twenty five (25) years, over the TLA No.43 area covered by said agreement; b) the exclusive right to cut, collect and remove sawtimber and pulpwood timber; and c) the peaceful and adequate enjoyment of the said area.

IV

As a result of respondent Secretary’s unlawful refusal and/or neglect to sign and deliver the IFMA contract, and violation of the constitutional rights of PICOP against non-impairment of the obligation of contract (Sec. 10, Art. III, 1997 [sic] Constitution), PICOP suffered grave and irreparable damages.15

Petitions for Mandamus are governed by Rule 65 of the Rules of Court, Section 3 of which provides:

SEC. 3. Petition for mandamus.—When any tribunal, corporation, board, officer or person unlawfully neglects the performance of an act which the law specifically enjoins as a duty resulting from an office, trust, or station, or unlawfully excludes another from the use and enjoyment of a right or office to which such other is entitled, and there is no other plain, speedy and adequate remedy in the ordinary course of law, the person aggrieved thereby may file a verified petition in the proper court, alleging the facts with certainty and praying that judgment be rendered commanding the respondent, immediately or at some other time to be specified by the court, to do the act required to be done to protect the rights of the petitioner, and to pay the damages sustained by the petitioner by reason of the wrongful acts of the respondent. (Emphasis supplied.)

PICOP is thus asking this Court to conclude that the DENR Secretary is specifically enjoined by law to issue an IFMA in its favor. An IFMA, as defined by DENR Administrative Order (DAO) No. 99-53,16 is -

[A] production-sharing contract entered into by and between the DENR and a qualified applicant wherein the DENR grants to the latter the exclusive right to develop, manage, protect and utilize a specified area of forestland and forest resource therein for a period of 25 years and may be renewed for another 25-year period, consistent with the principle of sustainable development and in accordance with an approved CDMP, and under which both parties share in its produce.17

PICOP stresses the word "automatic" in Section 9 of this DAO No. 99-53:

Sec. 9. Qualifications of Applicants. – The applicants for IFMA shall be:

(a) A Filipino citizen of legal age; or,

(b) Partnership, cooperative or corporation whether public or private, duly registered under Philippine laws.

However, in the case of application for conversion of TLA into IFMA, an automatic conversion after proper evaluation shall be allowed, provided the TLA holder shall have signified such intention prior to the expiry of the TLA, PROVIDED further, that the TLA holder has showed satisfactory performance and have complied in the terms of condition of the TLA and pertinent rules and regulations. (Emphasis supplied.)18

This administrative regulation provision allowing automatic conversion after proper evaluation can hardly qualify as a law, much less a law specifically enjoining the execution of a contract. To enjoin is "to order or direct with urgency; to instruct with authority; to command."19 "‘Enjoin’ is a mandatory word, in legal parlance, always; in common parlance, usually."20 The word "allow," on the other hand, is not equivalent to the word "must," and is in no sense a command.21

As an extraordinary writ, the remedy of mandamus lies only to compel an officer to perform a ministerial duty, not a discretionary one; mandamus will not issue to control the exercise of discretion of a public officer where the law imposes upon him the duty to exercise his judgment in reference to any manner in which he is required to act, because it is his judgment that is to be exercised and not that of the court.22

The execution of agreements, in itself, involves the exercise of discretion. Agreements are products of negotiations and mutual concessions, necessitating evaluation of their provisions on the part of both parties. In the case of the IFMA, the evaluation on the part of the government is specifically mandated in the afore-quoted Section 3 of DAO No. 99-53. This evaluation necessarily involves the exercise of discretion and judgment on the part of the DENR Secretary, who is tasked not only to negotiate the sharing of the profit arising from the IFMA, but also to evaluate the compliance with the requirements on the part of the applicant.

Furthermore, as shall be discussed later, the period of an IFMA that was merely automatically converted from a TLA in accordance with Section 9, paragraph 2 of DAO No. 99-53 would only be for the remaining period of the TLA. Since the TLA of PICOP expired on 26 April 2002, the IFMA that could have been granted to PICOP via the automatic conversion provision in DAO No. 99-53 would have expired on the same date, 26 April 2002, and the PICOP’s Petition for Mandamus would have become moot.

This is where the 1969 Document, the purported Presidential Warranty, comes into play. When PICOP’s application was brought to a standstill upon the evaluation that PICOP had yet to comply with the requirements for such

conversion, PICOP refused to attend further meetings with the DENR and instead filed a Petition for Mandamus, insisting that the DENR Secretary had impaired the obligation of contract by his refusal to respect: a) the tenurial rights of PICOP over the forest area covered by TLA No. 43, as amended, and its renewal for another twenty-five (25) years; b) the exclusive right of PICOP to cut, collect and remove sawtimber and pulpwood therein; and c) PICOP’s peaceful and adequate enjoyment of the said area which the government guaranteed under the Warranty and Agreement of 29 July 1969. 23

PICOP is, thus, insisting that the government is obligated by contract to issue an IFMA in its favor because of the 1969 Document.

A contract, being the law between the parties, can indeed, with respect to the State when it is a party to such contract, qualify as a law specifically enjoining the performance of an act. Hence, it is possible that a writ of mandamus may be issued to PICOP, but only if it proves both of the following:

1) That the 1969 Document is a contract recognized under the non-impairment clause; and

2) That the 1969 Document specifically enjoins the government to issue the IFMA.

If PICOP fails to prove any of these two matters, the grant of a privileged writ of mandamus is not warranted. This was why we pronounced in the assailed Decision that the overriding controversy involved in the Petition was one of law.24 If PICOP fails to prove any of these two matters, more significantly its assertion that the 1969 Document is a contract, PICOP fails to prove its cause of action.25 Not even the satisfactory compliance with all legal and administrative requirements for an IFMA would save PICOP’s Petition for Mandamus.

The reverse, however, is not true. The 1969 Document expressly states that the warranty as to the tenure of PICOP is "subject to compliance with constitutional and statutory requirements as well as with existing policy on timber concessions." Thus, if PICOP proves the two above-mentioned matters, it still has to prove compliance with statutory and administrative requirements for the conversion of its TLA into an IFMA.

Exhaustion of Administrative Remedies

PICOP uses the same argument –– that the government is bound by contract to issue the IFMA –– in its refusal to exhaust all administrative remedies by not appealing the alleged illegal non-issuance of the IFMA to the Office of the President. PICOP claimed in its Petition for Mandamus with the trial court that:

1.10 This petition falls as an exception to the exhaustion of administrative remedies. The acts of respondent DENR Secretary complained of in this petition are patently illegal; in derogation of the constitutional rights of petitioner against non-impairment of the obligation of contracts; without jurisdiction, or in excess of jurisdiction or so capriciously as to constitute an abuse of discretion amounting to excess or lack of jurisdiction; and moreover, the failure or refusal of a high government official such as a Department head from whom relief is brought to act on the matter was considered equivalent to exhaustion of administrative remedies (Sanoy v. Tantuico, 50 SCRA 455 [1973]), and there are compelling and urgent reasons for judicial intervention (Bagatsing v. Ramirez, 74 SCRA 306 [1976]).

Thus, if there has been no impairment of the obligation of contracts in the DENR Secretary’s non-issuance of the IFMA, the proper remedy of PICOP in claiming that it has complied with all statutory and administrative requirements for the issuance of the IFMA should have been with the Office of the President. This makes the issue of the enforceability of the 1969 Document as a contract even more significant.

The Nature and Effects of the Purported 29 July 1969 Presidential Warranty

Base Metals Case

PICOP challenges our ruling that the 1969 Document is not a contract. Before we review this finding, however, it must be pointed out that one week after the assailed Decision, another division of this Court promulgated a Decision concerning the very same 1969 Document. Thus, in PICOP Resources, Inc. v. Base Metals Mineral Resources

Corporation,26 five other Justices who were still unaware of this Division’s Decision,27 came up with the same conclusion as regards the same issue of whether former President Marcos’s Presidential Warranty is a contract:

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

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

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

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

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

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

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

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

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

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

cannot be invoked.

The Presidential Warranty cannot, in any manner, be construed as a contractual undertaking assuring PICOP of exclusive possession and enjoyment of its concession areas. Such an interpretation would result in the complete abdication by the State in favor of PICOP of the sovereign power to control and supervise the exploration, development and utilization of the natural resources in the area.28

The Motion for Reconsideration was denied with finality on 14 February 2007. A Second Motion for Reconsideration filed by PICOP was denied on 23 May 2007.

PICOP insists that the pronouncement in Base Metals is a mere obiter dictum, which would not bind this Court in resolving this Motion for Reconsideration. In the oral arguments, however, upon questioning from the ponente himself of Base Metals, it was agreed that the issue of whether the 1969 Document is a contract was necessary in the resolution of Base Metals:

JUSTICE TINGA:

And do you confirm that one of the very issues raised by PICOP in that case [PICOP Resources Inc. v. Base Metal Mineral Resources Corporation] revolves around its claim that a Presidential Warranty is protected by the non-impairment c[l]ause of the Constitution.

ATTY. AGABIN:

Yes, I believe that statement was made by the Court, your Honor.

JUSTICE TINGA:

Yes. And that claim on the part of PICOP necessarily implies that the Presidential Warranty according to PICOP is a contract protected by the non-impairment clause.

ATTY. AGABIN:

Yes, Your Honor.

JUSTICE TINGA:

Essentially, the PICOP raised the issue of whether the Presidential Warranty is a contract or not.

ATTY. AGABIN:

Yes, Your Honor.

JUSTICE TINGA:

And therefore any ruling on the part of the Court on that issue could not be an obiter dictum.

ATTY. AGABIN:

Your Honor, actually we believe that the basic issue in that case was whether or not Base Metals could conduct mining activities underneath the forest reserve allotted to PICOP and the Honorable Court ruled that the Mining Act of 1995 as well as the Department Order of DENR does not disallow mining activity under a forest reserve.

JUSTICE TINGA:

But it was PICOP itself which raised the claim that a Presidential Warranty is a contract. And therefore be, should be protected on the under the non-impairment clause of the Constitution.

ATTY. AGABIN:

Yes, Your Honor. Except that…

JUSTICE TINGA:

So, how can you say now that the Court merely uttered, declared, laid down an obiter dictum in saying that the Presidential Warranty is not a contract, and it is not being a contract, it is not prohibited by the non-impairment clause.

ATTY. AGABIN:

This Honorable Court could have just ruled, held that the mining law allows mining activities under a forest reserve without deciding on that issue that was raised by PICOP, your Honor, and therefore we believe….

JUSTICE TINGA:

It could have been better if PICOP has not raised that issue and had not claimed that the Presidential Warranty is not a contract.

ATTY. AGABIN:

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

JUSTICE TINGA:

Why[?]

ATTY. AGABIN:

It already settled the issue, the basic issue.

JUSTICE TINGA:

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

ATTY. AGABIN:

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

JUSTICE TINGA:

It was not necessary[?]

ATTY. AGABIN:

To the decision of the Court.

JUSTICE TINGA:

It was.

ATTY. AGABIN:

It was not necessary.

JUSTICE TINGA:

It was.

ATTY. AGABIN:

Yes.

JUSTICE TINGA:

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

ATTY. AGABIN:

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

Interpretation of the 1969 Document That Would Be in Harmony with the Constitution

To remove any doubts as to the contents of the 1969 Document, the purported Presidential Warranty, below is a complete text thereof:

Republic of the PhilippinesDepartment of Agriculture and Natural Resources

OFFICE OF THE SECRETARYDiliman, Quezon City

D-53, Licenses (T.L.A. No. 43)Bislig Bay Lumber Co., Inc.(Bislig, Surigao)

July 29, 1969

Bislig Bay Lumber Co., Inc. [unreadable word] Bldg.Makati, Rizal

S i r s:

This has reference to the request of the Board of Investments through its Chairman in a letter dated July 16, 1969 for a warranty on the boundaries of your concession area under Timber License Agreement No. 43, as amended.

We are made to understand that your company is committed to support the first large scale integrated wood processing complex hereinafter called: "The Project") and that such support will be provided not only in the form of the supply of pulpwood and other wood materials from your concession but also by making available funds generated out of your own operations, to supplement PICOP’s operational sources of funds and other financial arrangements made by him. In order that your company may provide such support effectively, it is understood that you will call upon your stockholders to take such steps as may be necessary to effect a unification of managerial, technical, economic and manpower resources between your company and PICOP.

It is in the public interest to promote industries that will enhance the proper conservation of our forest resources as well as insure the maximum utilization thereof to the benefit of the national economy. The administration feels that the PICOP project is one such industry which should enjoy priority over the usual logging operations hitherto practiced by ordinary timber licensees: For this reason, we are pleased to consider favorably the request.

We confirm that your Timber License Agreement No. 43, as amended (copy of which is attached as Annex "A" hereof which shall form part and parcel of this warranty) definitely establishes the boundary lines of your concession area which consists of permanent forest lands with an aggregate area of 121,587 hectares and alienable or disposable lands with an aggregate area of approximately 21,580 hectares.

We further confirm that your tenure over the area and exclusive right to cut, collect and remove sawtimber and pulpwood shall be for the period ending on April 26, 1977; said period to be renewable for other 25 years subject to compliance with constitutional and statutory requirements as well as with existing policy on timber concessions.

The peaceful and adequate enjoyment by you of your area as described and specified in your aforesaid amended Timber License Agreement No. 43 is hereby warranted provided that pertinent laws, regulations and the terms and conditions of your license agreement are observed.

Very truly yours,

(Sgd.) FERNANDO LOPEZSecretary of Agricultureand Natural Resources

Encl.:

RECOMMENDED BY:

(Sgd.) JOSE VIADOActing Director of Forestry

APPROVED:

(Sgd.) FERDINAND E. MARCOSPresident of the Philippines

ACCEPTED:

BISLIG BAY LBR. CO., INC.

By:

(Sgd.) JOSE E. SORIANOPresident

PICOP interprets this document in the following manner:

6.1 It is clear that the thrust of the government warranty is to establish a particular area defined by boundary lines of TLA No. 43 for the PICOP Project. In consideration for PICOP’s commitment to pursue and establish the project requiring huge investment/funding from stockholders and lending institutions, the government provided a warranty that ensures the continued and exclusive right of PICOP to source its raw materials needs from the forest and renewable trees within the areas established.

6.2 As a long-term support, the warranty covers the initial twenty five (25) year period and is renewable for periods of twenty five (25) years provided the project continues to exist and operate. Very notably, the wording of the Presidential Warranty connotes that for as long as the holder complies with all the legal requirements, the term of the warranty is not limited to fifty (50) years but other twenty five (25) years.

6.3 Note must be made that the government warranted that PICOP’s tenure over the area and exclusive right to cut, collect and remove saw timber and pulpwood shall be for the period ending on 26 April 1977 and said period to be renewable for other 25 years subject to "compliance with constitutional and statutory requirements as well as existing policy on timber requirements". It is clear that the renewal for other 25 years, not necessarily for another 25 years is guaranteed. This explains why on 07 October 1977, TLA No. 43, as amended, was automatically renewed for another period of twenty five (25) years to expire on 26 April 2002.30

PICOP’s interpretation of the 1969 Document cannot be sustained. PICOP’s claim that the term of the warranty is not limited to fifty years, but that it extends to other fifty years, perpetually, violates Section 2, Article XII of the Constitution which provides:

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

Mr. Justice Dante O. Tinga’s interpretation of the 1969 Document is much more in accord with the laws and the Constitution. What one cannot do directly, he cannot do indirectly. Forest lands cannot be alienated in favor of private entities. Granting to private entities, via a contract, a permanent, irrevocable, and exclusive possession of and right over forest lands is tantamount to granting ownership thereof. PICOP, it should be noted, claims nothing less than having exclusive, continuous and uninterrupted possession of its concession areas,31 where all other entrants are illegal,32 and where so-called "illegal settlers and squatters" are apprehended.33

IFMAs are production-sharing agreements concerning the development and utilization of natural resources. As such, these agreements "may be for a period not exceeding twenty-five years, renewable for not more than twenty-five years, and under such terms and conditions as may be provided by law." Any superior "contract" requiring the State to issue TLAs and IFMAs whenever they expire clearly circumvents Section 2, Article XII of the Constitution, which provides for the only permissible schemes wherein the full control and supervision of the State are not derogated: co-production, joint venture, or production-sharing agreements within the time limit of twenty-five years, renewable for another twenty-five years.

On its face, the 1969 Document was meant to expire on 26 April 2002, upon the expiration of the expected extension of the original TLA period ending on 26 April 1977:

We further confirm that your tenure over the area and exclusive right to cut, collect and remove sawtimber and pulpwood shall be for the period ending on April 26, 1977; said period to be renewable for other 25 years subject to compliance with constitutional and statutory requirements as well as with existing policy on timber concessions. 1avvphi1

Any interpretation extending the application of the 1969 Document beyond 26 April 2002 and any concession that may be granted to PICOP beyond the said date would violate the Constitution, and no amount of legal hermeneutics can change that. Attempts of PICOP to explain its way out of this Constitutional provision only led to absurdities, as exemplified in the following excerpt from the oral arguments:

JUSTICE CARPIO: The maximum trend of agreement to develop and utilize natural resources like forest products is 25 years plus another 25 years or a total of 50 years correct?

ATTY. AGABIN: Yes, Your Honor.

JUSTICE CARPIO: That is true for the 1987, 1973, 1935 Constitution, correct?

ATTY. AGABIN: Yes, Your Honor.

JUSTICE CARPIO: The TLA here, TLA 43, expired, the first 25 years expired in 1977, correct?

ATTY. AGABIN: Yes, Your Honor.

JUSTICE CARPIO: And it was renewed for another 25 years until 2002, the 50th year?

ATTY. AGABIN: Yes, Your Honor.

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

ATTY. AGABIN: I believe so, Your Honor.

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

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

JUSTICE CARPIO: The Constitution is very clear, you have only a maximum of 50 years, 25 plus another 25. PICOP could never have applied for an extension, for a third 25-year term whether under the 1935 Constitution, the 1973 Constitution and the 1987 Constitution, correct?

ATTY. AGABIN: Your Honor, except that we are invoking the warranty, the terms of the warranty….

JUSTICE CARPIO: Can the warranty prevail over the Constitution?

ATTY. AGABIN: Well, it is a vested right, your Honor.

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

ATTY. AGABIN: The Constitution itself provides that vested rights should be ….

JUSTICE CARPIO: If it is not in violation of specific provision of the Constitution. The Constitution says, 25 years plus another 25 years, that’s the end of it. You mean to say that a President of the Philippines can give somebody 1,000 years license?

ATTY. AGABIN: Well, that is not our position, Your Honor. Because our position is that ….

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

ATTY. AGABIN: Yes, based on the contract of warranty, Your Honor, because the contract of warranty….

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

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

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

ATTY. AGABIN: Yes, Your Honor.

JUSTICE CARPIO: But IFMA is the same, it is based on Section 2, Article 12 of the Constitution, develop and utilize natural resources because as you said when the new constitution took effect we did away with the old licensing regime, we have now co-production, a production sharing, joint venture, direct undertaking but still the same developing and utilizing the natural resources, still comes from section 2, Art. 12 of the Constitution. It is still a license but different format now.

ATTY. AGABIN: It is correct, Your Honor, except that the regimes of joint venture, co-production and production sharing are what is referred to in the constitution, Your Honor, and still covered…

JUSTICE CARPIO: Yes, but it is covered by same 25 year[s], you mean to say people now can circumvent the 50 year maximum term by calling their TLA as IFMA and after fifty years calling it ISMA, after another 50 years call it MAMA.

ATTY. AGABIN: Yes, Your Honor. Because…

JUSTICE CARPIO: It can be done.

ATTY. AGABIN: That is provided for by the department itself.34

PICOP is, in effect, arguing that the DENR issued DAO No. 99-53 in order to provide a way to circumvent the provisions of the Constitution limiting agreements for the utilization of natural resources to a maximum period of fifty years. Official duties are, however, disputably considered to be regularly performed,35 and good faith is always presumed.

DAO No. 99-53 was issued to change the means by which the government enters into an agreement with private entities for the utilization of forest products. DAO No. 99-53 is a late response to the change in the constitutional provisions on natural resources from the 1973 Constitution, which allowed the granting of licenses to private entities,36 to the present Constitution, which provides for co-production, joint venture, or production-sharing agreements as the permissible schemes wherein private entities may participate in the utilization of forest products. Since the granting of timber licenses ceased to be a permissible scheme for the participation of private entities under the present Constitution, their operations should have ceased upon the issuance of DAO No. 99-53, the rule regulating the schemes under the present Constitution. This would be iniquitous to those with existing TLAs that would not have expired yet as of the issuance of DAO No. 99-53, especially those with new TLAs that were originally set to expire after 10 or even 20 or more years. The DENR thus inserted a provision in DAO No. 99-53 allowing these TLA holders to finish the period of their TLAs, but this time as IFMAs, without the rigors of going through a new application, which they have probably just gone through a few years ago.

Such an interpretation would not only make DAO No. 99-53 consistent with the provisions of the Constitution, but would also prevent possible discrimination against new IFMA applicants:

ASSOCIATE JUSTICE DE CASTRO: I ask this question because of your interpretation that the period of the IFMA, if your TLA is converted into IFMA, would cover a new a fresh period of twenty-five years renewable by another period of twenty-five years.

DEAN AGABIN: Yes, Your Honor.

ASSOCIATE JUSTICE DE CASTRO: Don’t you think that will, in effect, be invidious discrimination with respect to other applicants if you are granted a fresh period of twenty-five years extendible to another twenty-five years?

DEAN AGABIN: I don’t think it would be, Your Honor, considering that the IFMA is different regime from the TLA. And not only that, there are considerations of public health and ecology which should come into play in this case, and which we had explained in our opening statement and, therefore the provision of the Constitution on the twenty-five limits for renewal of co-production, joint venture and production sharing agreements, should be balanced with other values stated in the Constitution, like the value of balanced ecology, which should be in harmony with the rhythm of nature, or the policy of forest preservation in Article XII, Section 14 of the Constitution. These are all important policy considerations which should be balanced against the term limits in Article II of the Constitution.

ASSOCIATE JUSTICE DE CASTRO: The provision of this Administrative Order regarding automatic conversion may be reasonable, if, I want to know if you agree with me, if we limit this automatic conversion to the remaining period of the TLA, because in that case there will be a valid ground to make a distinction between those with existing TLA and those who are applying for the first time for IFMA?

DEAN AGABIN: Well, Your Honor, we beg to disagree, because as I said TLA’s are completely different from IFMA. The TLA has no production sharing or co-production agreement or condition. All that the licensee has to do is, to pay forest charges, taxes and other impositions from the local and national government. On the other hand, the IFMAs contained terms and conditions which are completely different, and that they either impose co-production, production sharing or joint venture terms. So it’s a completely different regime, Your Honor.

ASSOCIATE JUSTICE DE CASTRO: Precisely, that is the reason why there should be an evaluation of what you mentioned earlier of the development plan.

DEAN AGABIN: Yes, Your Honor.

ASSOCIATE JUSTICE DE CASTRO: So it will be reasonable to convert a TLA into an IFMA without considering the development plan submitted by other applicants or the development plan itself of one seeking conversion into IFMA if it will only be limited to the period, the original period of the TLA. But once you go beyond the period of the TLA, then you will be, the DENR is I think should evaluate the different proposals of the applicants if we are thinking of a fresh period of twenty-five years, and which is renewable under the Constitution by another twenty-five years. So the development plan will be important in this case, the submission of the development plan of the different applicants must be considered. So I don’t understand why you mentioned earlier that the development plan will later on be a subject matter of negotiation between the IFMA grantee and the government. So it seems that it will be too late in the day to discuss that if you have already converted the TLA into IFMA or if the government has already granted the IFMA, and then it will later on study the development plan, whether it is viable or not, or it is sustainable or not, and whether the development plan of the different applicants are, are, which of the development plan of the different applicants is better or more advantageous to the government.37

PICOP insists that the alleged Presidential Warranty, having been signed on 29 July 1969, could not have possibly considered the limitations yet to be imposed by future issuances, such as the 1987 Constitution. However, Section 3, Article XVIII of said Constitution, provides:

Section 3. All existing laws, decrees, executive orders, proclamations, letters of instructions, and other executive issuances not inconsistent with this Constitution shall remain operative until amended, repealed, or revoked.

In the recent case Sabio v. Gordon,38 we ruled that "(t)he clear import of this provision is that all existing laws, executive orders, proclamations, letters of instructions and other executive issuances inconsistent or repugnant to the Constitution are repealed."

When a provision is susceptible of two interpretations, "the one that will render them operative and effective and harmonious with other provisions of law"39 should be adopted. As the interpretations in the assailed Decision and in Mr. Justice Tinga’s ponencia are the ones that would not make the subject Presidential Warranty unconstitutional, these are what we shall adopt.

Purpose of the 1969 Document: Assurance That the Boundaries of Its Concession Area Would Not Be Altered Despite the Provision in the TLA that the DENR Secretary Can Amend Said Boundaries

In the assailed Decision, we ruled that the 1969 Document cannot be considered a contract that would bind the government regardless of changes in policy and the demands of public interest and social welfare. PICOP claims this conclusion "did not take into consideration that PICOP already had a valid and current TLA before the contract with warranty was signed in 1969."40 PICOP goes on: "The TLA is a license that equips any TLA holder in the country for harvesting of timber. A TLA is signed by the Secretary of the DANR now DENR. The Court ignored the significance of the need for another contract with the Secretary of the DANR but this time with the approval of the President of the Republic."41 PICOP then asks us: "If PICOP/BBLCI was only an ordinary TLA holder, why will it go through the extra step of securing another contract just to harvest timber when the same can be served by the TLA signed only by the Secretary and not requiring the approval of the President of the Republic(?)"42

The answer to this query is found in TLA No. 43 itself wherein, immediately after the boundary lines of TLA No. 43 were established, the following conditions were given:

This license is granted to the said party of the second part upon the following express conditions:

I. That authority is granted hereunder to the party of the second part43 to cut, collect or remove firewood or other minor forest products from the area embraced in this license agreement except as hereinafter provided.II. That the party of the first part44 may amend or alter the description of the boundaries of the area covered by this license agreement to conform with official surveys and that the decision of the party of the first part as to the exact location of the said boundaries shall be final.III. That if the party of the first part deems it necessary to establish on the ground the boundary lines of the area granted under this license agreement, the party of the second part shall furnish to the party of the first part or its representatives as many laborers as it needs and all the expenses to be incurred on the work including the wages of such laborers shall be paid by the party of the second part.45

Thus, BBLCI needed an assurance that the boundaries of its concession area, as established in TLA No. 43, as amended, would not be altered despite this provision. Hence, BBLCI endeavored to obtain the 1969 Document, which provides:

We confirm that your Timber License Agreement No. 43, as amended (copy of which is attached as Annex "A" hereof which shall form part and parcel of this warranty) definitely establishes the boundary lines of your concession area which consists of permanent forest lands with an aggregate area of 121,587 hectares and alienable or disposable lands with an aggregate area of approximately 21,580 hectares.

We further confirm that your tenure over the area and exclusive right to cut, collect and remove sawtimber and pulpwood shall be for the period ending on April 26, 1977; said period to be renewable for other 25 years subject to compliance with constitutional and statutory requirements as well as with existing policy on timber concessions.

The peaceful and adequate enjoyment by you of your area as described and specified in your aforesaid amended Timber License Agreement No. 43 is hereby warranted provided that pertinent laws, regulations and the terms and conditions of your license agreement are observed.46

In Koa v. Court of Appeals,47 we ruled that a warranty is a collateral undertaking and is merely part of a contract. As a collateral undertaking, it follows the principal wherever it goes. When this was pointed out by the Solicitor General, PICOP changed its designation of the 1969 Document from "Presidential Warranty" or "government warranty" in all its pleadings prior to our Decision, to "contract with warranty" in its Motion for Reconsideration. This, however, is belied by the statements in the 29 July 1969 Document, which refers to itself as "this warranty."

Re: Allegation That There Were Mutual Contract Considerations

Had the 29 July 1969 Document been intended as a contract, it could have easily said so. More importantly, it could have clearly defined the mutual considerations of the parties thereto. It could have also easily provided for the sanctions for the breach of the mutual considerations specified therein. PICOP had vigorously argued that the 1969 Document was a contract because of these mutual considerations, apparently referring to the following paragraph of the 1969 Document:

We are made to understand that your company is committed to support the first large scale integrated wood processing complex hereinafter called: "The Project") and that such support will be provided not only in the form of the supply of pulpwood and other wood materials from your concession but also by making available funds generated out of your own operations, to supplement PICOP’s operational surces (sic) of funds and other financial arrangements made by him. In order that your company may provide such support effectively, it is understood that you will call upon your stockholders to take such steps as may be necessary to effect a unification of managerial, technical, economic and manpower resources between your company and PICOP. 1avvphi1

This provision hardly evinces a contract consideration (which, in PICOP’s interpretation, is in exchange for the exclusive and perpetual tenure over 121,587 hectares of forest land and 21,580 hectares of alienable and disposable lands). As elucidated by PICOP itself in bringing up the Investment Incentives Act which we shall discuss later, and as shown by the tenor of the 1969 Document, the latter document was more of a conferment of an incentive for BBLCI’s investment rather than a contract creating mutual obligations on the part of the government, on one hand, and BBLCI, on the other. There was no stipulation providing for sanctions for breach if BBLCI’s being "committed to support the first large scale integrated wood processing complex" remains a commitment. Neither did the 1969 Document give BBLCI a period within which to pursue this commitment.

According to Article 1350 of the Civil Code, "(i)n onerous contracts the cause is understood to be, for each contracting party, the prestation or promise of a thing or service by the other."48 Private investments for one’s businesses, while indeed eventually beneficial to the country and deserving to be given incentives, are still principally and predominantly for the benefit of the investors. Thus, the "mutual" contract considerations by both parties to this alleged contract would be both for the benefit of one of the parties thereto, BBLCI, which is not obligated by the 1969 Document to surrender a share in its proceeds any more than it is already required by its TLA and by the tax laws.

PICOP’s argument that its investments can be considered as contract consideration derogates the rule that "a license or a permit is not a contract between the sovereignty and the licensee or permittee, and is not a property in the constitutional sense, as to which the constitutional proscription against the impairment of contracts may extend." All licensees obviously put up investments, whether they are as small as a tricycle unit or as big as those put up by multi-billion-peso corporations. To construe these investments as contract considerations would be to abandon the foregoing rule, which would mean that the State would be bound to all licensees, and lose its power to revoke or amend these licenses when public interest so dictates.

The power to issue licenses springs from the State’s police power, known as "the most essential, insistent and least limitable of powers, extending as it does to all the great public needs."49 Businesses affecting the public interest, such as the operation of public utilities and those involving the exploitation of natural resources, are mandated by law to acquire licenses. This is so in order that the State can regulate their operations and thereby protect the public interest. Thus, while these licenses come in the form of "agreements," e.g., "Timber License Agreements," they cannot be considered contracts under the non-impairment clause.50

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

43. It is respectfully submitted that the aforesaid pronouncement in the Decision is an egregious and monumental error.

44. The Decision could not dismiss as "preposterous" the mutual covenants in the Presidential Warranty which calls for a huge investment of Php500 million at that time in 1969 out of which Php268,440,000 raised from domestic foreign lending institution to establish the first large scale integrated wood processing complex in the Philippines.

45. The Decision puts up a lame explanation that "all licensees put up investments in pursuing their business"

46. Now there are about a hundred timber licenses issued by the Government thru the DENR, but these are ordinary timber licenses which involve the mere cutting of timber in the concession area, and nothing else. Records in the DENR shows that no timber licensee has put up an integrated large wood processing complex in the Philippines except PICOP.51

PICOP thus argues on the basis of quantity, and wants us to distinguish between the investment of the tricycle driver and that of the multi-billion corporation. However, not even billions of pesos in investment can change the fact that natural resources and, therefore, public interest are involved in PICOP’s venture, consequently necessitating the full control and supervision by the State as mandated by the Constitution. Not even billions of pesos in investment can buy forest lands, which is practically what PICOP is asking for by interpreting the 1969 Document as a contract giving it perpetual and exclusive possession over such lands. Among all TLA holders in the Philippines, PICOP has, by far, the largest concession area at 143,167 hectares, a land area more than the size of two Metro Manilas.52 How can it not expect to also have the largest investment?

Investment Incentives Act

PICOP then claims that the contractual nature of the 1969 Document was brought about by its issuance in accordance with and pursuant to the Investment Incentives Act. According to PICOP:

The conclusion in the Decision that to construe PICOP’s investments as a consideration in a contract would be to stealthily render ineffective the principle that a license is not a contract between the sovereignty and the licensee is so flawed since the contract with the warranty dated 29 July 1969 was issued by the Government in accordance with and pursuant to Republic Act No. 5186, otherwise known as "The Investment Incentives Act."53

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

Section 2. Declaration of Policy – To accelerate the sound development of the national economy in consonance with the principles and objectives of economic nationalism, and in pursuance of a planned, economically feasible and practicable dispersal of industries, under conditions which will encourage competition and discharge monopolies, it is hereby declared to be the policy of the state to encourage Filipino and foreign investments, as hereinafter set out, in projects to develop agricultural, mining and manufacturing industries which increase national income most at the least cost, increase exports, bring about greater economic stability, provide more opportunities for employment, raise the standards of living of the people, and provide for an equitable distribution of wealth. It is further declared to be the policy of the state to welcome and encourage foreign capital to establish pioneer enterprises that are capital intensive and would utilize a substantial amount of domestic raw materials, in joint venture with substantial Filipino capital, whenever available.

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

x x x x

d) Freedom from Expropriation. – There shall be no expropriation by the government of the property represented by investments or of the property of enterprises except for public use or in the interest of national welfare and defense and upon payment of just compensation. x x x.

e) Requisition of Investment. – There shall be no requisition of the property represented by the investment or of the property of enterprises, except in the event of war or national emergency and only for the duration thereof. Just compensation shall be determined and paid either at the time of requisition or immediately after cessation of the state of war or national emergency. Payments received as compensation for the requisitioned property may be remitted in the currency in which the investment was originally made and at the exchange rate prevailing at the time of remittance, subject to the provisions of Section seventy-four of republic Act Numbered Two hundred sixty-five.

Section 2 speaks of the policy of the State to encourage Filipino and foreign investments. It does not speak of how this policy can be implemented. Implementation of this policy is tackled in Sections 5 to 12 of the same law,54which PICOP failed to mention, and for a good reason. None of the 24 incentives enumerated therein relates to, or even remotely suggests that, PICOP’s proposition that the 1969 Document is a contract.

PICOP could indeed argue that the enumeration is not exclusive. Certainly, granting incentives to investors, whether included in the enumeration or not, would be an implementation of this policy. However, it is presumed that whatever incentives may be given to investors should be within the bounds of the laws and the Constitution. The declaration of policy in Section 2 cannot, by any stretch of the imagination, be read to provide an exception to either the laws or, heaven forbid, the Constitution. Exceptions are never presumed and should be convincingly proven. Section 2 of the Investment Incentives Act cannot be read as exempting investors from the Constitutional provisions (1) prohibiting private ownership of forest lands; (2) providing for the complete control and supervision by the State of exploitation activities; or (3) limiting exploitation agreements to twenty-five years, renewable for another twenty-five years.

Section 4(d) and (e), on the other hand, is a recognition of rights already guaranteed under the Constitution. Freedom from expropriation is granted under Section 9 of Article III55 of the Constitution, while the provision on requisition is a negative restatement of Section 6, Article XII.56

Refusal to grant perpetual and exclusive possession to PICOP of its concession area would not result in the expropriation or requisition of PICOP’s property, as these forest lands belong to the State, and not to PICOP. This is not changed by PICOP’s allegation that:

Since it takes 35 years before the company can go back and harvest their residuals in a logged-over area, it must be assured of tenure in order to provide an inducement for the company to manage and preserve the residuals during their growth period. This is a commitment of resources over a span of 35 years for each plot for each cycle.

No company will undertake the responsibility and cost involved in policing, preserving and managing residual forest areas until it were sure that it had firm title to the timber.57

The requirement for logging companies to preserve and maintain forest areas, including the reforestation thereof, is one of the prices a logging company must pay for the exploitation thereof. Forest lands are meant to be enjoyed by countless future generations of Filipinos, and not just by one logging company. The requirements of reforestation and preservation of the concession areas are meant to protect them, the future generations, and not PICOP. Reforestation and preservation of the concession areas are not required of logging companies so that they would have something to cut again, but so that the forest would remain intact after their operations. That PICOP would not accept the responsibility to preserve its concession area if it is not assured of tenure thereto does not speak well of its corporate policies.

Conclusion

In sum, PICOP was not able to prove either of the two things it needed to prove to be entitled to a Writ of Mandamus against the DENR Secretary. The 1969 Document is not a contract recognized under the non-impairment clause and, even if we assume for the sake of argument that it is, it did not enjoin the government to issue an IFMA in 2002 either. These are the essential elements in PICOP’s cause of action, and the failure to prove the same warrants a dismissal of PICOP’s Petition for Mandamus, as not even PICOP’s compliance with all the administrative and statutory requirements can save its Petition now.

Whether PICOP Has Complied with the Statutory and Administrative Requirements for the Conversion of the TLA to an IFMA

In the assailed Decision, our ruling was based on two distinct grounds, each one being sufficient in itself for us to rule that PICOP was not entitled to a Writ of Mandamus: (1) the 1969 Document, on which PICOP hinges its right to compel the issuance of an IFMA, is not a contract; and (2) PICOP has not complied with all administrative and statutory requirements for the issuance of an IFMA.

When a court bases its decision on two or more grounds, each is as authoritative as the other and neither is obiter dictum.58 Thus, both grounds on which we based our ruling in the assailed Decision would become judicial dictum, and would affect the rights and interests of the parties to this case unless corrected in this Resolution on PICOP’s Motion for Reconsideration. Therefore, although PICOP would not be entitled to a Writ of Mandamus even if the second issue is resolved in its favor, we should nonetheless resolve the same and determine whether PICOP has indeed complied with all administrative and statutory requirements for the issuance of an IFMA.

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

For the factual sub-issues, PICOP invokes the doctrine that factual findings of the trial court, especially when upheld by the Court of Appeals, deserve great weight. However, deserving of even greater weight are the factual findings of administrative agencies that have the expertise in the area of concern. The contentious facts in this case relate to the licensing, regulation and management of forest resources, the determination of which belongs exclusively to the DENR:

SECTION 4. Mandate. – The Department shall be the primary government agency responsible for the conservation, management, development and proper use of the country’s environment and natural resources, specifically forest and grazing lands, mineral resources, including those in reservation and watershed areas, and lands of the public domain, as well as the licensing and regulation of all natural resources as may be provided for by law in order to ensure equitable sharing of the benefits derived therefrom for the welfare of the present and future generations of Filipinos.59

When parties file a Petition for Certiorari against judgments of administrative agencies tasked with overseeing the implementation of laws, the findings of such administrative agencies are entitled to great weight. In the case at bar, PICOP could not have filed a Petition for Certiorari, as the DENR Secretary had not yet even determined whether PICOP should be issued an IFMA. As previously mentioned, when PICOP’s application was brought to a standstill upon the evaluation that PICOP had yet to comply with the requirements for the issuance of an IFMA, PICOP refused to attend further meetings with the DENR and instead filed a Petition for Mandamus against the latter. By jumping the gun, PICOP did not diminish the weight of the DENR Secretary’s initial determination.

Forest Protection and Reforestation Plans

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

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

Upon examination of the portions of the SFMP submitted to us, we cannot help but notice that PICOP’s concept of forest protection is the security of the area against "illegal" entrants and settlers. There is no mention of the protection of the wildlife therein, as the focus of the discussion of the silvicultural treatments and the SFMP itself is on the protection and generation of future timber harvests. We are particularly disturbed by the portions stating that trees of undesirable quality shall be removed.

However, when we required the DENR Secretary to comment on PICOP’s Motion for Reconsideration, the DENR Secretary did not dispute the existence of this SFMP, or question PICOP’s assertion that a Ten-Year Forest Protection Plan and a Ten-Year Reforestation Plan are already incorporated therein. Hence, since the agency tasked to determine compliance with IFMA administrative requirements chose to remain silent in the face of allegations of compliance, we are constrained to withdraw our pronouncement in the assailed Decision that PICOP had not submitted a Five-Year Forest Protection Plan and a Seven-Year Reforestation Plan for its TLA No. 43. As previously mentioned, the licensing, regulation and management of forest resources are the primary responsibilities of the DENR.62

The compliance discussed above is, of course, only for the purpose of determining PICOP’s satisfactory performance as a TLA holder, and covers a period within the subsistence of PICOP’s TLA No. 43. This determination, therefore, cannot prohibit the DENR from requiring PICOP, in the future, to submit proper forest protection and reforestation plans covering the period of the proposed IFMA.

Forest Charges

In determining that PICOP did not have unpaid forest charges, the Court of Appeals relied on the assumption that if it were true that PICOP had unpaid forest charges, it should not have been issued an approved Integrated Annual Operation Plan (IAOP) for the year 2001-2002 by Secretary Alvarez himself.63

In the assailed Decision, we held that the Court of Appeals had been selective in its evaluation of the IAOP, as it disregarded the part thereof that shows that the IAOP was approved subject to several conditions, not the least of which was the submission of proof of the updated payment of forest charges from April 2001 to June 2001.64 We also held that even if we considered for the sake of argument that the IAOP should not have been issued if PICOP had existing forestry accounts, the issuance of the IAOP could not be considered proof that PICOP had paid the same. Firstly, the best evidence of payment is the receipt thereof. PICOP has not presented any evidence that such receipts were lost or destroyed or could not be produced in court.65 Secondly, the government cannot be estopped by the acts of its officers. If PICOP has been issued an IAOP in violation of the law, allegedly because it may not be issued if PICOP had existing forestry accounts, the government cannot be estopped from collecting such amounts and providing the necessary sanctions therefor, including the withholding of the IFMA until such amounts are paid.

We therefore found that, as opposed to the Court of Appeals’ findings, which were based merely on estoppel of government officers, the positive and categorical evidence presented by the DENR Secretary was more convincing with respect to the issue of payment of forestry charges:

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

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

We also considered these pieces of evidence more convincing than the other ones presented by PICOP:

1. PICOP presented the certification of Community Environment and Natural Resources Office (CENRO) Officer Philip A. Calunsag, which refers only to PICOP’s alleged payment of regular forest charges covering the period from 14 September 2001 to 15 May 2002.71 We noted that it does not mention similar payment of the penalties, surcharges and interests that PICOP incurred in paying late several forest charges, which fact was not rebutted by PICOP.

2. The 27 May 2002 Certification by CENRO Calunsag specified only the period covering 14 September 2001 to 15 May 2002 and the amount of P53,603,719.85 paid by PICOP without indicating the corresponding volume and date of production of the logs. This is in contrast to the findings of SFMS Evangelista, which cover the period from CY 1996 to 30 August 2002 and includes penalties, interests, and surcharges for late payment pursuant to DAO 80, series of 1987.

3. The 21 August 2002 PICOP-requested certification issued by Bill Collector Amelia D. Arayan, and attested to by CENRO Calunsag himself, shows that PICOP paid only regular forest charges for its log production covering 1 July 2001 to 21 September 2001. However, there were log productions after 21 September 2001, the regular forest charges for which have not been paid, amounting to P15,056,054.05.72The same certification shows delayed payment of forest charges, thereby corroborating the testimony of SFMS Evangelista and substantiating the imposition of penalties and surcharges.

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

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

An evaluation of the DENR Secretary’s position on this matter shows a heavy reliance on the testimony of SFMS Evangelista, making it imperative for us to strictly scrutinize the same with respect to its contents and admissibility.

PICOP claims that SFMS Evangelista’s office has nothing to do with the collection of forest charges. According to PICOP, the entity having administrative jurisdiction over it is CENRO, Bislig City by virtue of DENR Administrative Order No. 96-36, dated 20 November 1996, which states:

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

We disagree. Evangelista is an SFMS assigned at the Natural Forest Management Division of the FMB, DENR. In Evangelista’s aforementioned affidavit submitted as part of his direct examination, Evangelista enumerated his duties and functions as SFMS:

1. As SFMS, I have the following duties and functions:

a) To evaluate and act on cases pertaining to forest management referred to in the Natural forest Management Division;b) To monitor, verify and validate forest management and related activities by timber licences as to their compliance to approved plans and programs;c) To conduct investigation and verification of compliance by timber licenses/permittees to existing DENR rules and regulations;d) To gather field data and information to be used in the formulation of forest policies and regulations; ande) To perform other duties and responsibilities as may be directed by superiors.73

PICOP also alleges that the testimony of SFMS Evangelista was based on the aforementioned Memoranda of Orlanes and Arayan and that, since neither Orlanes nor Arayan was presented as a witness, SFMS Evangelista’s testimony should be deemed hearsay. SFMS Evangelista’s 1 October 2002 Affidavit,74 which was offered as part of his testimony, provides:

2. Sometime in September, 2001 the DENR Secretary was furnished a copy of forest Management Specialist II (FMS II) Teofila L. Orlanes’ Memorandum dated September 24, 2001 concerning unopaid forest charges of PICOP. Attached to the said Memorandum was a Memorandum dated September 19, 2001 of Amelia D. Arayan, Bill collector of the DENR R13-14, Bislig City. Copies of the said Memoranda are attached as Annexes 1 and 2, respectively.

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

4. Thus, on August 5, 2002, I was directed by the FMB Director to proceed to Region 13 to gather forestry-related data and validate the report contained in the Memoranda of Ms. Orlanes and Arayan.

5. On August 6, 2002, I proceeded to DENR Region 13 in Bislig City. A copy of my Travel Order is attached as Annex 3.

6. Upon my arrival at CENRO, Bislig, surigao del Sur, I coordinated with CENRO Officer Philip A. Calunsag and requested him to make available to me the records regarding the forest products assessments of PICOP.

7. After I was provided with the requested records, I evaluated and collected the data.

8. After the evaluation, I found that the unpaid forest charges adverted to in the Memoranda of Mr. Orlanes and Arayan covering the period from May 8, 2001 to July 7, 2001 had already been paid but late. I further found out that PICOP had not paid its forest charges covering the period from September 22, 2001 to April 26, 2002 in the total amount of P15,056,054.05.

9. I also discovered that from 1996 up to august 30, 2002, PICOP paid late some of its forest charges in 1996 and consistently failed to pay late its forest charges from 1997 up to the present time.

10. Under Section 7.4 of DAO No. 80 Series of 197\87 and Paragraph (4a), Section 10 of BIR revenue Regulations No. 2-81 dated November 18, 1980, PICOP is mandated to pay a surcharge of 25% per annum of the tax due and interest of 20% per annum for late payment of forest charges.

11. The overdue unpaid forest charges of PICOP as shown in the attached tabulation marked as Annex 4 hereof is P150,169,485.02. Likewise, PICOP has overdue and unpaid silvicultural fees in the amount ofP2,366,901.00 from 1996 to the present.

12. In all, PICOP has an outstanding and overdue total obligation of P167,592,440.90 as of August 30, 2002 based on the attached tabulation which is marked as Annex 5 hereof.75

Clearly, SFMS Evangelista had not relied on the Memoranda of Orlanes and Arayan. On the contrary, he traveled to Surigao del Sur in order to verify the contents of these Memoranda. SFMS Evangelista, in fact, revised the findings therein, as he discovered that certain forest charges adverted to as unpaid had already been paid.

This does not mean, however, that SFMS Evangelista’s testimony was not hearsay. A witness may testify only on facts of which he has personal knowledge; that is, those derived from his perception, except in certain circumstances allowed by the Rules.76 Otherwise, such testimony is considered hearsay and, hence, inadmissible in evidence.77

SFMS Evangelista, while not relying on the Memoranda of Orlanes and Arayan, nevertheless relied on records, the preparation of which he did not participate in.78 These records and the persons who prepared them were not presented in court, either. As such, SFMS Evangelista’s testimony, insofar as he relied on these records, was on matters not derived from his own perception, and was, therefore, hearsay.

Section 44, Rule 130 of the Rules of Court, which speaks of entries in official records as an exception to the hearsay rule, cannot excuse the testimony of SFMS Evangelista. Section 44 provides:

SEC. 44. Entries in official records. – Entries in official records made in the performance of his duty by a public officer of the Philippines, or by a person in the performance of a duty specially enjoined by law, are prima facie evidence of the facts therein stated.

In Africa v. Caltex,79 we enumerated the following requisites for the admission of entries in official records as an exception to the hearsay rule: (1) the entries were made by a public officer or a private person in the performance of a duty; (2) the performance of the duty is especially enjoined by law; (3) the public officer or the private person had sufficient knowledge of the facts stated by him, which must have been acquired by him personally or through official information.

The presentation of the records themselves would, therefore, have been admissible as an exception to the hearsay rule even if the public officer/s who prepared them was/were not presented in court, provided the above requisites could be adequately proven. In the case at bar, however, neither the records nor the persons who prepared them were presented in court. Thus, the above requisites cannot be sufficiently proven. Also, since SFMS Evangelista merely testified based on what those records contained, his testimony was hearsay evidence twice removed, which was one step too many to be covered by the official-records exception to the hearsay rule.

SFMS Evangelista’s testimony of nonpayment of forest charges was, furthermore, based on his failure to find official receipts corresponding to billings sent to PICOP. As stated above, PICOP attached official receipts in its Addendum to Motion for Reconsideration to this Court. While this course of action is normally irregular in judicial proceedings, we merely stated in the assailed Decision that "the DENR Secretary has adequately proven that PICOP has, at this time, failed to comply with administrative and statutory requirements for the conversion of TLA No. 43 into an IFMA,"80 and that "this disposition confers another chance to comply with the foregoing requirements."81

In view of the foregoing, we withdraw our pronouncement that PICOP has unpaid forestry charges, at least for the purpose of determining compliance with the IFMA requirements.

NCIP Certification

The Court of Appeals held that PICOP need not comply with Section 59 of Republic Act No. 8371, which requires prior certification from the NCIP that the areas affected do not overlap with any ancestral domain before any IFMA can be entered into by the government. According to the Court of Appeals, Section 59 should be interpreted to refer to ancestral domains that have been duly established as such by the continuous possession and occupation of the area concerned by indigenous peoples since time immemorial up to the present. The Court of Appeals held that PICOP had acquired property rights over TLA No. 43 areas, being in exclusive, continuous and uninterrupted possession and occupation of these areas since 1952 up to the present.

In the assailed Decision, we reversed the findings of the Court of Appeals. Firstly, the Court of Appeals ruling defies the settled jurisprudence we have mentioned earlier, that a TLA is neither a property nor a property right, and that it does not create a vested right.82

Secondly, the Court of Appeals’ resort to statutory construction is misplaced, as Section 59 of Republic Act No. 8379 is clear and unambiguous:

SEC. 59. Certification Precondition. – All departments and other governmental agencies shall henceforth be strictly enjoined from issuing, renewing or granting any concession, license or lease, or entering into any production-sharing agreement, without prior certification from the NCIP that the area affected does not overlap with any ancestral domain. Such certification shall only be issued after a field-based investigation is conducted by the Ancestral Domains Office of the area concerned: Provided, That no certification shall be issued by the NCIP without the free and prior informed and written consent of the ICCs/IPs concerned: Provided, further, That no department, government agency or government-owned or controlled corporation may issue new concession, license, lease, or production sharing agreement while there is a pending application for a CADT: Provided, finally, That the ICCs/IPs shall have the right to stop or suspend, in accordance with this Act, any project that has not satisfied the requirement of this consultation process.

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

a) Ancestral domains – Subject to Section 56 hereof, refers to all areas generally belonging to ICCs/IPs comprising lands, inland waters, coastal areas, and natural resources therein, held under a claim of ownership, occupied or possessed by ICCs/IPs, by themselves or through their ancestors, communally or individually since time immemorial, continuously to the present except when interrupted by war, force majeure or displacement by force, deceit, stealth or as a consequence of government projects or any other voluntary dealings entered into by government and private individuals/corporations, and which are necessary to ensure their economic, social and cultural welfare. It shall include ancestral lands, forests, pasture, residential, agricultural, and other lands individually owned whether alienable and disposable or otherwise, hunting grounds, burial grounds, worship areas, bodies of water, mineral and other natural resources, and lands which may no longer be exclusively occupied by ICCs/IPs but from which they traditionally had access to for their subsistence and traditional activities, particularly the home ranges of ICCs/IPs who are still nomadic and/or shifting cultivators;

Ancestral domains, therefore, remain as such even when possession or occupation of these areas has been interrupted by causes provided under the law, such as voluntary dealings entered into by the government and private individuals/corporations. Consequently, the issuance of TLA No. 43 in 1952 did not cause the ICCs/IPs to lose their possession or occupation over the area covered by TLA No. 43.

Thirdly, we held that it was manifestly absurd to claim that the subject lands must first be proven to be part of ancestral domains before a certification that the lands are not part of ancestral domains can be required, and invoked the separate opinion of now Chief Justice Reynato Puno in Cruz v. Secretary of DENR83:

As its subtitle suggests, [Section 59 of R.A. No. 8371] requires as a precondition for the issuance of any concession, license or agreement over natural resources, that a certification be issued by the NCIP that the area subject of the agreement does not lie within any ancestral domain. The provision does not vest the NCIP with power over the other agencies of the State as to determine whether to grant or deny any concession or license or agreement. It merely

gives the NCIP the authority to ensure that the ICCs/IPs have been informed of the agreement and that their consent thereto has been obtained. Note that the certification applies to agreements over natural resources that do not necessarily lie within the ancestral domains. For those that are found within the said domains, Sections 7(b) and 57 of the IPRA apply.

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

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

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

PICOP’s position is anything but clear. What is clearly provided for in Section 59 is that it covers "issuing, renewing or granting (of) any concession, license or lease, or entering into any production sharing agreement." PICOP is implying that, when the government changed the tenurial system to an IFMA, PICOP’s existing TLA would just be upgraded or modified, but would be the very same agreement, hence, dodging the inclusion in the word "renewing." However, PICOP is conveniently leaving out the fact that its TLA expired in 2002. If PICOP really intends to pursue the argument that the conversion of the TLA into an IFMA would not create a new agreement, but would only be a modification of the old one, then it should be willing to concede that the IFMA expired as well in 2002. An automatic modification would not alter the terms and conditions of the TLA except when they are inconsistent with the terms and conditions of an IFMA. Consequently, PICOP’s concession period under the renewed TLA No. 43, which is from the year 1977 to 2002, would remain the same.

PICOP cannot rely on a theory of the case whenever such theory is beneficial to it, but refute the same whenever the theory is damaging to it. In the same way, PICOP cannot claim that the alleged Presidential Warranty is "renewable for other 25 years" and later on claim that what it is asking for is not a renewal. Extensions of agreements must necessarily be included in the term renewal. Otherwise, the inclusion of "renewing" in Section 59 would be rendered inoperative.

PICOP further claims:

85. Verily, in interpreting the term "held under claim of ownership," the Supreme Court could not have meant to include claims that had just been filed and not yet recognized under the provisions of DENR Administrative Order No. 2 Series of 1993, nor to any other community / ancestral domain program prior to R.A. 8371.

x x x x

87. One can not imagine the terrible damage and chaos to the country, its economy, its people and its future if a mere claim filed for the issuance of a CADC or CADT will already provide those who filed the application, the authority or right to stop the renewal or issuance of any concession, license or lease or any production-sharing agreement. The same interpretation will give such applicants through a mere application the right to stop or suspend any project that they can cite for not satisfying the requirements of the consultation process of R.A. 8371. If such interpretation gets enshrined in the statures of the land, the unscrupulous and the extortionists can put any ongoing or future project or activity to a stop in any part of the country citing their right from having filed an application for issuance of a CADC or CADT claim and the legal doctrine established by the Supreme Court in this PICOP case.85

We are not sure whether PICOP’s counsels are deliberately trying to mislead us, or are just plainly ignorant of basic precepts of law. The term "claim" in the phrase "claim of ownership" is not a document of any sort. It is an attitude towards something. The phrase "claim of ownership" means "the possession of a piece of property with the intention of claiming it in hostility to the true owner."86 It is also defined as "a party’s manifest intention to take over land, regardless of title or right."87 Other than in Republic Act No. 8371, the phrase "claim of ownership" is thoroughly discussed in issues relating to acquisitive prescription in Civil Law.

Before PICOP’s counsels could attribute to us an assertion that a mere attitude or intention would stop the renewal or issuance of any concession, license or lease or any production-sharing agreement, we should stress beforehand that this attitude or intention must be clearly shown by overt acts and, as required by Section 3(a), should have been in existence "since time immemorial, continuously to the present except when interrupted by war, force majeure or displacement by force, deceit, stealth or as a consequence of government projects or any other voluntary dealings entered into by government and private individuals/corporations."

Another argument of PICOP involves the claim itself that there was no overlapping:

Second, there could be no overlapping with any Ancestral Domain as proven by the evidence presented and testimonies rendered during the hearings in the Regional Trial Court. x x x.

x x x x.

88. The DENR issued a total of 73 CADCs as of December 11, 1996. The DENR Undersecretary for Field Operations had recommended another 11 applications for issuance of CADCs. None of the CADCs overlap the TLA 43 area.

89. However former DENR Secretary Alvarez, in a memorandum dated 13 September, 2002 addressed to PGMA, insisted that PICOP had to comply with the requirement to secure a Free and Prior Informed Concent because CADC 095 was issued covering 17,112 hectares of TLA 43.

90. This CADC 095 is a fake CADC and was not validly released by the DENR. While the Legal Department of the DENR was still in the process of receiving the filings for applicants and the oppositors to the CADC application, PICOP came across filed copies of a CADC 095 with the PENRO of Davao Oriental as part of their application for a Community Based Forest Management Agreement (CBFMA). Further research came across the same group filing copies of the alleged CADC 095 with the Mines and Geosciences Bureau in Davao City for a mining agreement application. The two applications had two different versions of the CADCs second page. One had Mr. Romeo T. Acosta signing as the Social reform Agenda Technical Action Officer, while the other had him signing as the Head, Community-Based Forest Management Office. One had the word "Eight" crossed out and "Seven" written to make it appear that the CADC was issued on September 25, 1997, the other made it appear that there were no alterations and the date was supposed to be originally 25 September 1997.

What is required in Section 59 of Republic Act No. 8379 is a Certification from the NCIP that there was no overlapping with any Ancestral Domain. PICOP cannot claim that the DENR gravely abused its discretion for requiring this Certification, on the ground that there was no overlapping. We reiterate that it is manifestly absurd to claim that the subject lands must first be proven to be part of ancestral domains before a certification that they are not can be required. As discussed in the assailed Decision, PICOP did not even seek any certification from the NCIP that the area covered by TLA No. 43, subject of its IFMA conversion, did not overlap with any ancestral domain.88

Sanggunian Consultation and Approval

While PICOP did not seek any certification from the NCIP that the former’s concession area did not overlap with any ancestral domain, PICOP initially sought to comply with the requirement under Sections 26 and 27 of the Local Government Code to procure prior approval of the Sanggunians concerned. However, only one of the many provinces affected approved the issuance of an IFMA to PICOP. Undaunted, PICOP nevertheless submitted to the DENR the purported resolution89 of the Province of Surigao del Sur indorsing the approval of PICOP’s application for IFMA conversion, apparently hoping either that the disapproval of the other provinces would go unnoticed, or that the Surigao del Sur approval would be treated as sufficient compliance.

Surprisingly, the disapproval by the other provinces did go unnoticed before the RTC and the Court of Appeals, despite the repeated assertions thereof by the Solicitor General. When we pointed out in the assailed Decision that the approval must be by all the Sanggunians concerned and not by only one of them, PICOP changed its theory of the case in its Motion for Reconsideration, this time claiming that they are not required at all to procure Sanggunian approval.

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

SEC. 2. x x x.

x x x x

(c) It is likewise the policy of the State to require all national agencies and offices to conduct periodic consultations with appropriate local government units, nongovernmental and people’s organizations, and other concerned sectors of the community before any project or program is implemented in their respective jurisdictions.

SEC. 26. Duty of National Government Agencies in the Maintenance of Ecological Balance. – It shall be the duty of every national agency or government-owned or controlled corporation authorizing or involved in the planning and implementation of any project or program that may cause pollution, climatic change, depletion of non-renewable resources, loss of crop land, rangeland, or forest cover, and extinction of animal or plant species, to consult with the local government units, nongovernmental organizations, and other sectors concerned and explain the goals and objectives of the project or program, its impact upon the people and the community in terms of environmental or ecological balance, and the measures that will be undertaken to prevent or minimize the adverse effects thereof.

SEC. 27. Prior Consultations Required. – No project or program shall be implemented by government authorities unless the consultations mentioned in Sections 2(c) and 26 hereof are complied with, and prior approval of the sanggunian concerned is obtained: Provided, That occupants in areas where such projects are to be implemented shall not be evicted unless appropriate relocation sites have been provided, in accordance with the provisions of the Constitution.

As stated in the assailed Decision, the common evidence of the DENR Secretary and PICOP, namely, the 31 July 2001 Memorandum of Regional Executive Director (RED) Elias D. Seraspi, Jr., enumerated the local government units and other groups which had expressed their opposition to PICOP’s application for IFMA conversion:

7. During the conduct of the performance evaluation of TLA No. 43 issues complaints against PRI were submitted thru Resolutions and letters. It is important that these are included in this report for assessment of what are their worth, viz:

x x x x

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

7.3 Resolution Nos. 10, s-2001 and 05, s-2001 (ANNEXES G & H) of the Bunawan Tribal Council of Elders (BBMTCE) strongly demanding none renewal of PICOP TLA. They claim to be the rightful owner of the area it being their alleged ancestral land.

7.4 Resolution No. 4, S-2001 of Sitio Linao, San Jose, Bislig City (ANNEX I) requesting not to renew TLA 43 over the 900 hectares occupied by them.

7.5 Resolution No. 22, S-2001 (ANNEX J) of the Sanguniang Bayan, Lingig, Surigao del Sur not to grant the conversion of TLA 43 citing the plight of former employees of PRI who were forced to enter and farm portion of TLA No. 43, after they were laid off.

7.6 SP Resolution No. 2001-113 and CDC Resolution Nos. 09-2001 of the Sanguniang Panglungsod of Bislig City (ANNEXES K & L) requesting to exclude the area of TLA No. 43 for watershed purposes.

7.7 Resolution No. 2001-164, dated June 01, 2001 (ANNEX M) Sanguniang Panglungsod of Bislig City opposing the conversion of TLA 43 to IFMA for the reason that IFMA do not give revenue benefits to the City.90

PICOP had claimed that it complied with the Local Government Code requirement of obtaining prior approval of the Sanggunian concerned by submitting a purported resolution91 of the Province of Surigao del Sur indorsing the

approval of PICOP’s application for IFMA conversion. We ruled that this cannot be deemed sufficient compliance with the foregoing provision. Surigao del Sur is not the only province affected by the area covered by the proposed IFMA. As even the Court of Appeals found, PICOP’s TLA No. 43 traverses the length and breadth not only of Surigao del Sur but also of Agusan del Sur, Compostela Valley and Davao Oriental.92

On Motion for Reconsideration, PICOP now argues that the requirement under Sections 26 and 27 does not apply to it:

97. PICOP is not a national agency. Neither is PICOP government owned or controlled. Thus Section 26 does not apply to PICOP.

98. It is very clear that Section 27 refers to projects or programs to be implemented by government authorities or government-owned and controlled corporations. PICOP’s project or the automatic conversion is a purely private endevour. First the PICOP project has been implemented since 1969. Second, the project was being implemented by private investors and financial institutions.

99. The primary government participation is to warrant and ensure that the PICOP project shall have peaceful tenure in the permanent forest allocated to provide raw materials for the project. To rule now that a project whose foundations were commenced as early as 1969 shall now be subjected to a 1991 law is to apply the law retrospectively in violation of Article 4 of the Civil Code that laws shall not be applied retroactively.

100. In addition, under DAO 30, Series of 1992, TLA and IFMA operations were not among those devolved function from the National Government / DENR to the local government unit. Under its Section 03, the devolved function cover only:

a) Community Based forestry projects.b) Communal forests of less than 5000 hectaresc) Small watershed areas which are sources of local water supply.93

We have to remind PICOP again of the contents of Section 2, Article XII of the Constitution:

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

All projects relating to the exploration, development and utilization of natural resources are projects of the State. While the State may enter into co-production, joint venture, or production-sharing agreements with Filipino citizens, or corporations or associations at least sixty per centum of whose capital is owned by these citizens, such as PICOP, the projects nevertheless remain as State projects and can never be purely private endeavors.

Also, despite entering into co-production, joint venture, or production-sharing agreements, the State remains in full control and supervision over such projects. PICOP, thus, cannot limit government participation in the project to being merely its bouncer, whose primary participation is only to "warrant and ensure that the PICOP project shall have peaceful tenure in the permanent forest allocated to provide raw materials for the project."

PICOP is indeed neither a national agency nor a government-owned or controlled corporation. The DENR, however, is a national agency and is the national agency prohibited by Section 27 from issuing an IFMA without the prior approval of the Sanggunian concerned. As previously discussed, PICOP’s Petition for Mandamus can only be granted if the DENR Secretary is required by law to issue an IFMA. We, however, see here the exact opposite: the

DENR Secretary was actually prohibited by law from issuing an IFMA, as there had been no prior approval by all the other Sanggunians concerned.

As regards PICOP’s assertion that the application to them of a 1991 law is in violation of the prohibition against the non-retroactivity provision in Article 4 of the Civil Code, we have to remind PICOP that it is applying for an IFMA with a term of 2002 to 2027. Section 2, Article XII of the Constitution allows exploitation agreements to last only "for a period not exceeding twenty-five years, renewable for not more than twenty-five years." PICOP, thus, cannot legally claim that the project’s term started in 1952 and extends all the way to the present.

Finally, the devolution of the project to local government units is not required before Sections 26 and 27 would be applicable. Neither Section 26 nor 27 mentions such a requirement. Moreover, it is not only the letter, but more importantly the spirit of Sections 26 and 27, that shows that the devolution of the project is not required. The approval of the Sanggunian concerned is required by law, not because the local government has control over such project, but because the local government has the duty to protect its constituents and their stake in the implementation of the project. Again, Section 26 states that it applies to projects that "may cause pollution, climatic change, depletion of non-renewable resources, loss of crop land, rangeland, or forest cover, and extinction of animal or plant species." The local government should thus represent the communities in such area, the very people who will be affected by flooding, landslides or even climatic change if the project is not properly regulated, and who likewise have a stake in the resources in the area, and deserve to be adequately compensated when these resources are exploited.

Indeed, it would be absurd to claim that the project must first be devolved to the local government before the requirement of the national government seeking approval from the local government can be applied. If a project has been devolved to the local government, the local government itself would be implementing the project. That the local government would need its own approval before implementing its own project is patently silly.

EPILOGUE AND DISPOSITION

PICOP’c cause of action consists in the allegation that the DENR Secretary, in not issuing an IFMA, violated its constitutional right against non-impairment of contracts. We have ruled, however, that the 1969 Document is not a contract recognized under the non-impairment clause, much less a contract specifically enjoining the DENR Secretary to issue the IFMA. The conclusion that the 1969 Document is not a contract recognized under the non-impairment clause has even been disposed of in another case decided by another division of this Court, PICOP Resources, Inc. v. Base Metals Mineral Resources Corporation,94 the Decision in which case has become final and executory. PICOP’s Petition for Mandamus should, therefore, fail.

Furthermore, even if we assume for the sake of argument that the 1969 Document is a contract recognized under the non-impairment clause, and even if we assume for the sake of argument that the same is a contract specifically enjoining the DENR Secretary to issue an IFMA, PICOP’s Petition for Mandamus must still fail. The 1969 Document expressly states that the warranty as to the tenure of PICOP is "subject to compliance with constitutional and statutory requirements as well as with existing policy on timber concessions." Thus, if PICOP proves the two above-mentioned matters, it still has to prove compliance with statutory and administrative requirements for the conversion of its TLA into an IFMA.

While we have withdrawn our pronouncements in the assailed Decision that (1) PICOP had not submitted the required forest protection and reforestation plans, and that (2) PICOP had unpaid forestry charges, thus effectively ruling in favor of PICOP on all factual issues in this case, PICOP still insists that the requirements of an NCIP certification and Sanggunian consultation and approval do not apply to it. To affirm PICOP’s position on these matters would entail nothing less than rewriting the Indigenous Peoples’ Rights Act and the Local Government Code, an act simply beyond our jurisdiction.

WHEREFORE, the Motion for Reconsideration of PICOP Resources, Inc. is DENIED.

SO ORDERED.

MINITA V. CHICO-NAZARIOAssociate Justice

WE CONCUR:

REYNATO S. PUNOChief Justice

Carpio, Corona, Carpio-Morales, Velasco, Nachura,

De Castro, Brion, Peralta, Bersamin, Del Castillo, Abad, Villarama, JJ.

EN BANC

 

G.R. No. L-30299 August 17, 1972

REPUBLIC OF THE PHILIPPINES and/or THE SOLICITOR GENERAL petitioners, vs.WILLIAM H. QUASHA, respondent.

Office of the Solicitor General Estelito P. Mendoza for petitioner.

Quasha, Asperilla Blanco, Zafra & Tayag for respondent.

 

REYES J. B. L., J.:p

This case involves a judicial determination of the scope and duration of the rights acquired by American citizens and corporations controlled by them, under the Ordinance appended to the Constitution as of 18 September 1946, or the so-called Parity Amendment.

The respondent, William H. Quasha, an American citizen, had acquired by purchase on 26 November 1954 a parcel of land with the permanent improvements thereon, situated at 22 Molave Place, in Forbes Park, Municipality of Makati, Province of Rizal, with an area of 2,616 sq. m. more or less, described in and covered by T. C. T. 36862. On 19 March 1968, he filed a petition in the Court of First Instance of Rizal, docketed as its Civil Case No. 10732, wherein he (Quasha) averred the acquisition of the real estate aforesaid; that the Republic of the Philippines, through its officials, claimed that upon expiration of the Parity Amendment on 3 July 1974, rights acquired by citizens of the United States of America shall cease and be of no further force and effect; that such claims necessarily affect the rights and interest of the plaintiff, and that continued uncertainty as to the status of plaintiff's property after 3 July 1974 reduces the value thereof, and precludes further improvements being introduced thereon, for which reason plaintiff Quasha sought a declaration of his rights under the Parity Amendment, said plaintiff contending that the ownership of properties during the effectivity of the Parity Amendment continues notwithstanding the termination and effectivity of the Amendment.

The then Solicitor General Antonio P. Barredo (and later on his successors in office, Felix V. Makasiar and Felix Q. Antonio) contended that the land acquired by plaintiff constituted private agricultural land and that the acquisition violated section 5, Article XIII, of the Constitution of the Philippines, which prohibits the transfer of private agricultural land to non-Filipinos, except by hereditary succession; and assuming, without conceding, that Quasha's acquisition was valid, any and all rights by him so acquired "will expire ipso facto and ipso jure at the end of the day on 3 July 1974, if he continued to hold the property until then, and will be subject to escheat or reversion proceedings" by the Republic.

After hearing, the Court of First Instance of Rizal (Judge Pedro A. Revilla presiding) rendered a decision, dated 6 March 1969, in favor of plaintiff, with the following dispositive portion:

WHEREFORE, judgment is hereby rendered declaring that acquisition by the plaintiff on 26 November 1954 of, the private agricultural land described in and covered by Transfer Certificate of Title No. 36862 in his name was valid, and that plaintiff has a right to continue in ownership of the said property even beyond July 3, 1974.

Defendants appealed directly to this Court on questions of law, pleading that the court below erred:

(1) In ruling that under the Parity Amendment American citizens and American owned and/or controlled business enterprises "are also qualified to acquire private agricultural lands" in the Philippines; and

(2) In ruling that when the Parity Amendment ceases to be effective on 3 July 1974, "what must be considered to end should be the right to acquire land, and not the right to continue in ownership of land already acquired prior to that time."

As a historical background, requisite to a proper understanding of the issues being litigated, it should be recalled that the Constitution as originally adopted, contained the following provisions:

Article XIII — CONSERVATION AND UTILIZATION OF NATURAL RESOURCES

Section 1. All Agricultural, timber, and mineral lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all forces of potential energy, and other natural resources of the Philippines belong to the State, and their disposition, exploitation, development, or utilization shall be limited to citizens of the Philippines, or to corporations or associations at least sixty per centum of the capital of which is owned by such citizens subject to any existing right, grant, lease, or concession at the time of the inauguration of the Government established under this Constitution. Natural resources, with the exception of public agricultural land, shall not be alienated, and no license, concession, or lease for the resources shall be granted for a period exceeding twenty-five years, renewable for another twenty-five years, except as to water right for irrigation, water supply, fisheries, or industrial uses other than the development of water power, in which cases beneficial use may be the measure and the limit of the grant.

Section 2. No private corporation or association may acquire, lease, or hold public agricultural lands in excess of one thousand and twenty-four hectares, nor may any individual acquire such lands by purchase in excess of one hundred and forty-four hectares, or by lease in excess of one thousand and twenty-four hectares, or by homestead in excess of twenty-four hectares. Lands adapted to grazing not exceeding two thousand hectares, may be leased to an individual, private corporation, or association.

xxx xxx xxx

Section 5. Save in cases of hereditary succession, no private agricultural land shall be transferred or assigned except to individuals, corporations, or associations qualified to acquire or hold lands of the public domain in the Philippines.

Article XIV — GENERAL PROVISIONS

Section 8. No franchise, certificate, or any other form of authorization for the operation of a public utility shall be granted except to citizens of the Philippines or to corporations or other entities organized under the laws of the Philippines, sixty per centum of the capital of which is owned by citizens of the Philippines, nor shall such franchise, certificate, or authorization be exclusive in character or for a longer period than fifty years. No franchise or right shall be granted to any individual, firm, or corporation, except under the condition that it shall be subject to amendment, alteration, or repeal by the Congress when the public interest so requires.

The nationalistic spirit that pervaded these and other provisions of the Constitution are self-evident and require no further emphasis.

From the Japanese occupation and the reconquest of the Archipelago, the Philippine nation emerged with its industries destroyed and its economy dislocated. It was described in this Court's opinion in Commissioner of Internal Revenue vs. Guerrero, et al., L-20942, 22 September 1967, 21 SCRA 181, 187, penned by Justice Enrique M. Fernando, in the following terms:

It was fortunate that the Japanese Occupation ended when it did. Liberation was hailed by all, but the problems faced by the legitimate government were awesome in their immensity. The Philippine treasury was bankrupt and her economy prostrate. There were no dollar-earning export crops to speak of; commercial operations were paralyzed; and her industries were unable to produce with

mills, factories and plants either destroyed or their machineries obsolete or dismantled. It was a desolate and tragic sight that greeted the victorious American and Filipino troops. Manila, particularly that portion south of the Pasig, lay in ruins, its public edifices and business buildings lying in a heap of rubble and numberless houses razed to the ground. It was in fact, next to Warsaw, the most devastated city in the expert opinion of the then General Eisenhower. There was thus a clear need of help from the United States. American aid was forthcoming but on terms proposed by her government and later on accepted by the Philippines.

The foregoing description is confirmed by the 1945 Report of the Committee on Territories and Insular Affairs to the United States Congress:

When the Philippines do become independent next July, they will start on the road to independence with a country whose commerce, trade and political institutions have been very, very seriously damaged. Years of rebuilding are necessary before the former physical conditions of the islands can be restored. Factories, homes, government and commercial buildings, roads, bridges, docks, harbors and the like are in need of complete reconstruction or widespread repairs. It will be quite some while before the Philippine can produce sufficient food with which to sustain themselves.

The internal revenues of the country have been greatly diminished by war. Much of the assessable property basis has been destroyed. Foreign trade has vanished. Internal commerce is but a faction of what it used to be. Machinery, farming implements, ships, bus and truck lines, inter-island transportation and communications have been wrecked.

Shortly thereafter, in 1946, the United States 79th Congress enacted Public Law 3721, known as the Philippine Trade Act, authorizing the President of the United States to enter into an Executive Agreement with the President of the Philippines, which should contain a provision that —

The disposition, exploitation, development, and utilization of all agricultural, timber, and mineral lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils,; all forces and sources of potential energy, and other natural resources of the Philippines, and the operation of public utilities shall, if open to any person, be open to citizens of the United States and to all forms of business enterprise owned or controlled, directly or indirectly, by United States citizens.

and that:

The President of the United States is not authorized ... to enter into such executive agreement unless in the agreement the Government of the Philippines ... will promptly take such steps as are necessary to secure the amendment of the Constitution of the Philippines so as to permit the taking effect as laws of the Philippines of such part of the provisions of section 1331 ... as is in conflict with such Constitution before such amendment.

The Philippine Congress, by Commonwealth Act No. 733, authorized the President of the Philippines to enter into the Executive Agreement. Said Act provided, inter alia, the following:

ARTICLE VII

1. The disposition, exploitation, development, and utilization of all agricultural, timber, and mineral lands of the public domain, waters, mineral, coal, petroleum, and other mineral oils, all forces and sources of potential energy, and other natural resources of the Philippines, and the operation of public utilities, shall, if open to any person, be open to citizens of the United States and to all forms of business enterprise owned or controlled, directly or indirectly, by United States citizens, except that (for the period prior to the amendment of the Constitution of the Philippines referred to in Paragraph 2 of this Article) the Philippines shall not be required to comply with such part of the foregoing provisions of this sentence as are in conflict with such Constitution.

2. The Government of the Philippines will promptly take such steps as are necessary to secure the amendment of the constitution of the Philippines so as to permit the taking effect as laws of the

Philippines of such part of the provisions of Paragraph 1 of this Article as is in conflict with such Constitution before such amendment.

Thus authorized, the Executive Agreement was signed on 4 July 1946, and shortly thereafter the President of the Philippines recommended to the Philippine Congress the approval of a resolution proposing amendments to the Philippine Constitution pursuant to the Executive Agreement. Approved by the Congress in joint session, the proposed amendment was submitted to a plebiscite and was ratified in November of 1946. Generally known as the Parity Amendment, it was in the form of an Ordinance appended to the Philippine Constitution, reading as follows:

Notwithstanding the provision of section one, Article Thirteen, and section eight, Article Fourteen, of the foregoing Constitution, during the effectivity of the Executive Agreement entered into by the President of the Philippines with the President of the United States on the fourth of July, nineteen hundred and forty-six, pursuant to the provisions of Commonwealth Act Numbered Seven hundred and thirty-three, but in no case to extend beyond the third of July, nineteen hundred and seventy-four, the disposition, exploitation, development, and utilization of all agricultural, timber, and mineral lands of the public domain, waters, minerals, coals, petroleum, and other mineral oils, all forces and sources of potential energy, and other natural resources of the Philippines, and the operation of public utilities, shall, if OPEN to any person, be open to citizens of the United States and to all forms of business enterprise owned or controlled, directly or indirectly, by citizens of the United States in the same manner as to and under the same conditions imposed upon, citizens of the Philippines or corporations or associations owned or controlled by citizens of the Philippines.

A revision of the 1946 Executive Agreement was authorized by the Philippines by Republic Act 1355, enacted in July 1955. The revision was duly negotiated by representatives of the Philippines and the United States, and a new agreement was concluded on 6 September 1955 to take effect on 1 January 1956, becoming known as the Laurel-Langley Agreement.

This latter agreement, however, has no direct application to the case at bar, since the purchase by herein respondent Quasha of the property in question was made in 1954, more than one year prior to the effectivity of the Laurel-Langley Agreement..

I

Bearing in mind the legal provisions previously quoted and their background, We turn to the first main issue posed in this appeal: whether under or by virtue of the so-called Parity Amendment to the Philippine Constitution respondent Quasha could validly acquire ownership of the private residential land in Forbes Park, Makati, Rizal, which is concededly classified private agricultural land.

Examination of the "Parity Amendment", as ratified, reveals that it only establishes an express exception to two (2) provisions of our Constitution, to wit: (a) Section 1, Article XIII, re disposition, exploitation, development and utilization of agricultural, timber and mineral lands of the public domain and other natural resources of the Philippines; and (b) Section 8, Article XIV, regarding operation of public utilities. As originally drafted by the framers of the Constitution, the privilege to acquire and exploit agricultural lands of the public domain, and other natural resources of the Philippines, and to operate public utilities, were reserved to Filipinos and entities owned or controlled by them: but the "Parity Amendment" expressly extended the privilege to citizens of the United States of America and/or to business enterprises owned or controlled by them.

No other provision of our Constitution was referred to by the "Parity Amendment"; nor Section 2 of Article XIII limiting the maximum area of public agricultural lands that could be held by individuals or corporations or associations; nor Section 5 restricting the transfer or assignment of private agricultural lands to those qualified to acquire or hold lands of the public domain (which under the original Section 1 of Article XIII meant Filipinos exclusively), save in cases of hereditary succession. These sections 2 and 5 were therefore left untouched and allowed to continue in operation as originally intended by the Constitution's framers.

Respondent Quasha argues that since the amendment permitted United States citizens or entities controlled by them to acquire agricultural lands of the public domain, then such citizens or entities became entitled to acquire private agricultural land in the Philippines, even without hereditary succession, since said section 5 of Article XIII only negates the transfer or assignment of private agricultural land to individuals or entities not qualified to acquire

or hold lands of the public domain. Clearly, this argument of respondent Quasha rests not upon the text of the Constitutional Amendment but upon a mere inference therefrom. If it was ever intended to create also an exception to section 5 of Article XIII, why was mention therein made only of Section 1 of Article XIII and Section 8 of Article XIV and of no other? When the text of the Amendment was submitted for popular ratification, did the voters understand that three sections of the Constitution were to be modified, when only two sections were therein mentioned?

A reading of Sections 1 and 4 of Article XIII, as originally drafted by its farmers, leaves no doubt that the policy of the Constitution was to reserve to Filipinos the disposition, exploitation development or utilization of agricultural lands, public (section 1) or private (section 5), as well as all other natural resources of the Philippines. The "Parity Amendment" created exceptions to that Constitutional Policy and in consequence to the sovereignty of the Philippines. By all canons of construction, such exceptions must be given strict interpretation; and this Court has already so ruled in Commissioner of Internal Revenue vs. Guerrero, et al., L-20942, 22 September 1967, 21 SCRA 181, per Justice Enrique M. Fernando:

While good faith, no less than adherence to the categorical wording of the Ordinance, requires that all the rights and privileges thus granted to Americans and business enterprises owned and controlled by them be respected, anything further would not be warranted. Nothing less would suffice but anything more is not justified.

The basis for the strict interpretation was given by former President of the University of the Philippines, Hon. Vicente G. Sinco (Congressional Record, House of Representatives, Volume 1, No. 26, page 561):

It should be emphatically stated that the provisions of our Constitution which limit to Filipinos the rights to develop the natural resources and to operate the public utilities of the Philippines is one of the bulwarks of our national integrity. The Filipino people decided to include it in our Constitution in order that it may have the stability and permanency that its importance requires. It is written in our Constitution so that it may neither be the subject of barter nor be impaired in the give and take of politics. With our natural resources, our sources of power and energy, our public lands, and our public utilities, the material basis of the nation's existence, in the hands of aliens over whom the Philippine Government does not have complete control, the Filipinos may soon find themselves deprived of their patrimony and living as it were, in a house that no longer belongs to them.

The true extent of the Parity Amendment, as understood by its proponents in the Philippine Congress, was clearly expressed by one of its advocates, Senator Lorenzo Sumulong:

It is a misconception to believe that under this amendment Americans will be able to acquire all kinds of natural resources of this country, and even after the expiration of 28 years their acquired rights cannot be divested from them. If we read carefully the language of this amendment which is taken verbatim from the Provision of the Bell Act, and, which in turn, is taken also verbatim from certain sections of the Constitution, you will find out that the equality of rights granted under this amendment refers only to two subjects. Firstly, it refers to exploitation of natural resources, and secondly, it refers to the operation of public utilities. Now, when it comes to exploitation of natural resources, it must be pointed out here that, under our Constitution and under this amendment, only public agricultural land may be acquired, may be bought, so that on the supposition that we give way to this amendment and on the further supposition that it is approved by our people, let not the mistaken belief be entertained that all kinds of natural resources may be acquired by Americans because under our Constitution forest lands cannot be bought, mineral lands cannot be bought, because by explicit provision of the Constitution they belong to the State, they belong to our Government, they belong to our people. That is why we call them rightly the patrimony of our race. Even if the Americans should so desire, they can have no further privilege than to ask for a lease of concession of forest lands and mineral lands because it is so commanded in the Constitution. And under the Constitution, such a concession is given only for a limited period. It can be extended only for 25 years, renewable for another 25. So that with respect to mineral or forest lands, all they can do is to lease it for 25 years, and after the expiration of the original 25 years they will have to extend it, and I believe it can be extended provided that it does not exceed 28 years because this agreement is to be effected only as an ordinance and for the express period of 28 years. So that it is

my humble belief that there is nothing to worry about insofar as our forest and mineral lands are concerned.

Now, coming to the operation of public utilities, as every member of the Congress knows, it is also for a limited period, under our Constitution, for a period not exceeding 50 years. And since this amendment is intended to endure only for 28 years, it is my humble opinion that when Americans try to operate public utilities they cannot take advantage of the maximum provided in the Constitution but only the 28 years which is expressly provided to be the life of this amendment.

There remains for us to consider the case of our public agricultural lands. To be sure, they may be bought, and if we pass this amendment, Americans may buy our public agricultural lands, but the very same Constitution applying even to Filipinos, provides that the sale of public agricultural lands to a corporation can never exceed one thousand and twenty-four hectares. That is to say, if an American corporation, and American enterprise, should decide to invest its money in public agricultural lands, it will be limited to the amount of 1,024 hectares, no more than 1,024 hectares' (Emphasis supplied).

No views contrary to these were ever expressed in the Philippine Legislature during the discussion of the Proposed Amendment to our Constitution, nor was any reference made to acquisition of private agricultural lands by non-Filipinos except by hereditary succession. On the American side, it is significant to observe that the draft of the Philippine Trade Act submitted to the House of Representatives by Congressman Bell, provided in the first Portion of Section 19 the following:

SEC. 19. Notwithstanding any existing provision of the constitution and statutes of the Philippine Government, citizens and corporations of the United States shall enjoy in the Philippine Islands during the period of the validity of this Act, or any extension thereof by statute or treaty, the same rights as to property, residence, and occupation as citizens of the Philippine Islands ...

But as finally approved by the United States Congress, the equality as to " property residence and occupation" provided in the bill was eliminated and Section 341 of the Trade Act limited such parity to the disposition, exploitation, development, and utilization of lands of the public domain, and other natural resources of the Philippines (V. ante, page 5 of this opinion).

Thus, whether from the Philippine or the American side, the intention was to secure parity for United States citizens, only in two matters: (1) exploitation, development and utilization of public lands, and other natural resources of the Philippines; and (2) the operation of public utilities. That and nothing else.

Respondent Quasha avers that as of 1935 when the Constitution was adopted, citizens of the United States were already qualified to acquire public agricultural lands, so that the literal text of section 5 must be understood as permitting transfer or assignment of private agricultural lands to Americans even without hereditary succession. Such capacity of United States citizens could exist only during the American sovereignty over the Islands. For the Constitution of the Philippines was designed to operate even beyond the extinction of the United States sovereignty, when the Philippines would become fully independent. That is apparent from the provision of the original Ordinance appended to the Constitution as originally approved and ratified. Section 17 of said Ordinance provided that:

(17) Citizens and corporations of the United States shall enjoy in the Commonwealth of the Philippines all the civil rights of the citizens and corporations, respectively, thereof. (Emphasis supplied)

The import of paragraph (17) of the Ordinance was confirmed and reenforced by Section 127 of Commonwealth Act 141 (the Public Land Act of 1936) that prescribes:

Sec. 127. During the existence and continuance of the Commonwealth, and before the Republic of the Philippines is established, citizens and corporations of the United States shall enjoy the same rights granted to citizens and corporations of the Philippines under this Act.

thus clearly evidencing once more that equal rights of citizens and corporations of the United States to acquire agricultural lands of the Philippines vanished with the advent of the Philippine Republic. Which explains the need of introducing the "Parity Amendment" of 1946.

It is then indubitable that the right of United States citizens and corporations to acquire and exploit private or public lands and other natural resources of the Philippines was intended to expire when the Commonwealth ended on 4 July 1946. Thereafter, public and private agricultural lands and natural resources of the Philippines were or became exclusively reserved by our Constitution for Filipino citizens. This situation lasted until the "Parity Amendment", ratified in November, 1946, once more reopened to United States citizens and business enterprises owned or controlled by them the lands of the public domain, the natural resources of the Philippines, and the operation of the public utilities, exclusively, but not the acquisition or exploitation of private agricultural lands, about which not a word is found in the Parity Amendment..Respondent Quasha's pretenses can find no support in Article VI of the Trade Agreement of 1955, known popularly as the Laurel-Langley Agreement, establishing a sort of reciprocity rights between citizens of the Philippines and those of the United States, couched in the following terms:

ARTICLE VI

2. The rights provided for in Paragraph I may be exercised, in the case of citizens of the Philippines with respect to natural resources in the United States which are subject to Federal control or regulations, only through the medium of a corporation organized under the laws of the United States or one of the States hereof and likewise, in the case of citizens of the United States with respect to natural resources in the public domain in the Philippines only through the medium of a corporation organized under the laws of the Philippines and at least 60% of the capital stock of which is owned or controlled by citizens of the United States. This provision, however, does not affect the right of citizens of the United States to acquire or own private agricultural lands in the Philippines or citizens of the Philippines to acquire or own land in the United States which is subject to the jurisdiction of the United States and not within the jurisdiction of any state and which is not within the public domain. The Philippines reserves the right to dispose of the public lands in small quantities on especially favorable terms exclusively to actual settlers or other users who are its own citizens. The United States reserves the right to dispose of its public lands in small quantities on especially favorable terms exclusively to actual settlers or other users who are its own citizens or aliens who have declared their intention to become citizens. Each party reserves the right to limit the extent to which aliens may engage in fishing, or engage in enterprises which furnish communications services and air or water transport. The United States also reserves the right to limit the extent to which aliens may own land in its outlying territories and possessions, but the Philippines will extend to American nationals who are residents of any of those outlying territories and possessions only the same rights, with respect to, ownership of lands, which are granted therein to citizens of the Philippines. The rights provided for in this paragraph shall not, however, be exercised by either party so as to derogate from the rights previously acquired by citizens or corporations or associations owned or controlled by citizens of the other party.

The words used in Article VI to the effect that —

... This provision does not affect the right of citizen of the United States to acquire or own private agricultural lands in the Philippines, or citizens of the Philippines to acquire or own land in the United States which is subject to the jurisdiction of the United States ...

must be understood as referring to rights of United States citizens to acquire or own private agricultural lands before the independence of the Philippines since the obvious purpose of the article was to establish rights of United States and Filipino citizens on a basis of reciprocity. For as already shown, no such right to acquire or own private agricultural lands in the Philippines has existed since the independent Republic was established in 1946. The quoted expressions of the Laurel-Langley Agreement could not expand the rights of United States citizens as to public agricultural lands of the Philippines to private lands, when the Parity Amendment and the Constitution authorize such United States citizens and business entities only to acquire and exploit agricultural lands of the public domain. If the reopening of only public lands to Americans required a Constitutional Amendment, how could a mere Trade Agreement, like the Laurel-Langley, by itself enable United States citizens to acquire and exploit private agricultural lands, a right that ceased to exist since the independence of the Philippines by express prescription of our Constitution?

We turn to the second issue involved in this appeal: On the assumption that respondent Quasha's purchase of the private agricultural land involved is valid and constitutional, will or will not his rights expire on 3 July 1974?

For the solution of this problem, We again turn to the "Parity Amendment". Under it,

Notwithstanding the provision of section one, Article Thirteen, and section eight, Article Fourteen, of the foregoing Constitution, during the effectivity of the Executive Agreement entered into by the President of the Philippines with the President of the United States on the fourth of July, nineteen hundred and forty-six, pursuant to the provisions of Commonwealth Act Numbered Seven hundred and thirty-three, but in no case to extend beyond the third of July, nineteen hundred and seventy-four, the disposition, exploitation, development, and utilization of all agricultural, timber, and mineral lands of the public domain, waters, minerals, coals, petroleum, and other mineral oils, all forces and sources of potential energy, and other natural resources of the Philippines, and the operation of public utilities, shall, if open to any person, be open to citizens of the United states and to all forms of business enterprise owned or controlled, directly or indirectly, by citizens of the United States in the same manner as to, and under the same conditions imposed upon, citizens of the Philippines or corporations or associations owned or controlled by citizens of the Philippines. (Emphasis supplied)

It is easy to see that all exceptional rights conferred upon United States citizens and business entities owned or controlled by them, under the Amendment, are subject to one and the same resolutory term or period: they are to last "during the effectivity of the Executive Agreement entered into on 4 July 1946", "but in no case to extend beyond the, third of July, 1974". None of the privileges conferred by the "Parity Amendment" are excepted from this resolutory period.

This limitation of time is in conformity with Article X, Section 2, of the Philippine Trade Act of 1946, as embodied in Commonwealth Act No. 733. It says:

ARTICLE X

2. This Agreement shall have no effect after 3 July 1974. It may be terminated by either the United States or the Philippines at any time, upon not less than five years' written notice. It the President of the United States or the President of the Philippines determines and proclaims that the other Country has adopted or applied measures or practices which would operate to nullify or impair any right or obligation provided for in this Agreement, then the Agreement may be terminated upon not less than six months' written notice.

Respondent Quasha argues that the limitative period set in the "Parity Amendment" should be understood not to be applicable to the disposition, or correlative acquisition, of alienable agricultural lands of the public domain, since such lands can be acquired in full ownership, in which event, under Article 428 of the Civil Code of Philippines —

ART, 428. The owner has the right to enjoy and dispose of a thing, without other limitations than those established by law.

The owner has also a right of action against the holder and possessor of the thing in order to recover it.

and that since any period or condition which produces the effect of loss or deprivation of valuable rights is in derogation of due process of law, there must be "a law which expressly and indubitably limits and extinguishes the ownership of non-citizens over private agricultural lands situated in the Philippines validly acquired under the law existing at the time of acquisition."

Strangely enough, this argument ignores the provisions of the "Parity Amendment" prescribing that the disposition and exploitation, etc. of agricultural lands of the public domain are in no case to extend beyond the third of July 1974. This limitation already existed when Quasha in 1954 purchased the Forbes Park property, and the acquisition was subject to it. If the Philippine government can not dispose of its alienable public agricultural lands beyond that date under the "Parity Amendment", then, logically, the Constitution, as modified by the Amendment, only authorizes either of two things: (a) alienation or transfer of rights less than ownership or (b) a resoluble ownership that will be

extinguished not later than the specified period. For the Philippine government to dispose of the public agricultural land for an indefinite time would necessarily be in violation of the Constitution. There is nothing in the Civil Law of this country that is repugnant to the existence of ownership for a limited duration; thus the title of a "reservista" (ascendant inheriting from a descendant) in reserva troncal, under Article 891 of the Civil Code of the Philippines, is one such owner, holding title and dominion, although under condition subsequent; he can do anything that a genuine owner can do, until his death supervenes with "reservataries surviving", i.e., relatives within the third degree (Edroso vs. Sablan, 25 Phil. 295; Lunsod vs. Ortega, 46 Phil. 661, 695). In truth, respondent himself invokes Article 428 of the Civil Code to the effect that "the owner has the right to enjoy and dispose of a thing, without other limitations than those established by law". One such limitation is the period fixed on the "Parity Amendment", which forms part of the Constitution, the highest law of the land. How then can he complain of deprivation of due process?

That the legislature has not yet determined what is to be done with the property when the respondent's rights thereto terminate on 3 July 1974 is irrelevant to the issues in this case. The law, making power has until that date full power to adopt the apposite measures, and it is expected to do so.

One last point: under the "Parity Amendment" the disposition, exploitation, development and utilization of lands of the public domain, and other natural resources of the Philippines, and the operation of public utilities are open —

to citizens of the United States and to all forms of business enterprises owned or controlled, directly or indirectly, by citizens of the United States

while under the Philippine Constitution (section 1, Article XIII, and section 8, Article XIV) utilization of such lands, natural resources and public utilities are open to citizens of the Philippines or to —

corporations or associations at least sixty per centum of the capital of which is owned by such citizens ...

It is thus apparent that American business enterprises are more favored than Philippine organization during the period of parity in that, first, they need not be owned by American citizens up to 60% of their capital; all that is required is that they be controlled by United States citizens, a control that is attained by ownership of only 51% a of the capital stock; and second, that the control by United States citizens may be direct or indirect (voting trusts, pyramiding, etc.) which indirect control is not allowed in the case of Philippine nationals.

That Filipinos should be placed under the so-called Parity in a more disadvantageous position than United States citizens in the disposition, exploitation, development and utilization of the public lands, forests, mines, oils and other natural resources of their own country is certainly rank injustice and inequity that warrants a most strict interpretation of the "Parity Amendment", in order that the dishonorable inferiority in which Filipinos find themselves at present in the land of their ancestors should not be prolonged more than is absolutely necessary.

FOR THE FOREGOING REASONS, the appealed decision of the Court of First Instance of Rizal is hereby reversed and set aside; and judgment is rendered declaring that, under the "Parity Amendment" to our Constitution, citizens of the United States and corporations and business enterprises owned or controlled by them can not acquire and own, save in cases of hereditary succession, private agricultural lands in the Philippines and that all other rights acquired by them under said amendment will expire on 3 July 1974.

Concepcion, C.J., Makalintal, Zaldivar, Castro, Fernando and Esguerra, JJ., concur.

Teehankee, Barredo, Makasiar and Antonio, JJ., took no part.

THIRD DIVISION

REPUBLIC OF THE PHILIPPINES, represented by the Department of Environment and Natural Resources (DENR),

Petitioner,

- versus -

PAGADIAN CITY TIMBER CO., INC.,

Respondent.

G.R. No. 159308

Present:

YNARES-SANTIAGO, J.,

Chairperson,

AUSTRIA-MARTINEZ,

CHICO-NAZARIO,

NACHURA, and

REYES, JJ.

Promulgated:

September 16, 2008

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

DECISION

NACHURA, J.:

This is a Petition for Review on Certiorari1 under Rule 45 of the Rules of Court seeking to nullify and set aside the Decision2 dated October 18, 2001 and the Resolution3 dated July 24, 2003 of the Court of Appeals in CA-

G.R. SP No. 59194 entitled "Pagadian City Timber Co., Inc. v. Antonio Cerilles, as Secretary of the Department of Environment and Natural Resources (DENR) and Antonio Mendoza, as Regional Executive

Director, DENR, Region IX."

The antecedent facts are as follows:

On October 14, 1994, petitioner, through the DENR, and respondent Pagadian City Timber Co., Inc. executed Industrial Forest Management Agreement (IFMA) No. R-9-0404 whereby petitioner, represented by then Regional Executive Director (RED) for Region IX, Leonito C. Umali, authorized respondent, represented by its President Filomena San Juan, to develop, utilize, and manage a specified forest area covering 1,999.14 hectares located in Barangays Langapod, Cogonan, and Datagan, Municipality of Labangan, Zamboanga del Sur, for the production of timber and other forest products subject to a production-sharing scheme.

Respondent later submitted the required Comprehensive Development and Management Plan (CDMP) which the DENR approved on August 17, 1995.

On October 8, 1998, in response to the numerous complaints filed by members of the Subanen tribe regarding respondent’s alleged failure to implement the CDMP, disrespect of their rights as an indigenous people, and the constant threats and harassment by armed men employed by respondent, RED Antonio Mendoza, DENR Region IX, issued Regional Special Order No. 217 creating a regional team to evaluate and assess IFMA No. R-9-040.

Thus, the DENR sent a letter dated October 22, 1998 to respondent, giving notice of the evaluation and assessment to be conducted on the area from October 22-30, 1998 covering the years 1997 and 1998. In the

notice, the DENR requested any representative of the company to appear at the CENRO Office, Pagadian City, and bring with him documents and maps concerning its IFMA operations.

On October 23, 1998, a DENR Evaluation Team composed of Aniceto Wenceslao (Forester, DENR, Zamboanga del Sur), Isabelo Mangaya-ay (Intern Chief, RCBF/MCO), Philidor Lluisma (Forester II, Regional Office), Chanito Paul Siton (C. Forester, CENRO-Pagadian City), Adelberto Roullo (Forester, CENRO, Pagadian City), and Francisco Martin (Carto LEP, CENRO, Pagadian City) went to the IFMA site. After a briefing conference between the Evaluation Team and respondent’s Operations Manager, Inocencio Santiago, actual field evaluation and assessment followed.

On October 29, 1998, an exit conference and dialogue on post evaluation and assessment of IFMA R-9-04 was held between DENR officials, namely, CENR Officer Maximo O. Dichoso, IFMA Regional Team Leader, Forester Isabelo C. Mangaya-ay, and IFMA Regional Team Member, Forester Philidor O. Lluisma, and IFMA Representative and Operations Manager Inocencio Santiago at the CENRO, Pagadian City.5 The exit conference was called to order at 1:30 p.m. and was concluded at 3:00 p.m. Forester Mangaya-ay presented the representative results and findings of the Evaluation Team, to wit:

The presiding officer started with the mango plantation in the Noran, Langapod side. That out of the estimated number of seedlings planted of about 2,008 hills, within an equivalent area of 20 hectares, the result or finding of the inventory conducted at 100% intensity is only 98 hills of seedlings survived including the doubtful and badly deformed. The species planted along trails are Gmelina and Mahogany species. The said foot trail planted with the aforementioned species starts from the entrance of the IFMA are where the notice billboard is posted up to the only existing look-out tower. The estimated average of percent survival for Gmelina is more or less 30%. There are also portions where higher percentage of survival is recorded at 56% and lower at 14%. There are areas planted declared by Kagawad Cerning Becagas of Barangay Cogonan now covered by CSC. The areas covered by CSC, a waiver is needed to be issued by the IFMA holder.

CENR Officer Maximo O. Dichoso commented that during a meeting held before, the IFMA holder was willing to give up the said areas.

The presiding officer continued that on the courtesy call made to the Barangay Chairman of Barangay Cogonan, Mr. Roberto Palaran recounted the assistance extended by the IFMA holder to his barangay as Community Assistance/service which includes electric generator, handheld radio and laborers for the repair of Noburan – Cogonan road and the repair of the hanging bridge at Sitio Tialaic to which the said Barangay Chairman issued a duly signed certification to this effect.

With regards, the seedling stock within the nursery, there are approximately a total number of about 44,460 seedlings of Gmelina species. That the infrastructure implemented or constructed, there exist only one look-out tower of the reported 4 look-out towers constructed. Moreover, the team had also noted only 1 bunkhouse and 1 stockroom or shedhouse. There is also 1 Multi-purpose shed and 1 dilapidated or neglected notice billboard poster at the entrance trail leading to the IFMA area. That with regards the concrete monument, there are only 2 recorded. The other corners visible are those located at junctions of creeks and rivers. But the others cannot be visibly or never planted for the same cannot be pinpointed or shown to the team allegedly for lack of knowledge by the representative of the IFMA holder. Finally, the presiding officer reminded the herein IFMA representative Mr. Inocencio Santiago that per actual survey, inspection and ground verification, the team believes that the other reported areas planted are located outside the designated IFMA area particularly the Noburan and Langapod sides.6

After the presentation, Mangaya-ay asked Santiago if he had comments, suggestions, or questions regarding the matter and the manner of the conduct of the evaluation and assessment by the Evaluation Team. Santiago said he had none, but requested a copy of the report of the Evaluation Team. Mangaya-ay informed him that it was only RED Mendoza who may furnish him a copy of the report.

Later, the Evaluation Team submitted a report through a Memorandum7 dated November 6, 1998 to the DENR-RED of Region 9, Zamboanga City, on the evaluation and assessment of respondent under IFMA No. R-9-040. The said Memorandum stated –

In compliance with Regional Special Order No. 217, Series of 1998, please be informed that the herein information is the result or findings of the team for the conduct of evaluation and assessment following the guidelines setforth under Department Administrative Order (DAO) No. 11, Series of 1995 of Pagadian Timber Co., Inc. under IFMA No. R9-040 against their actual accomplishment as mandated under the terms and conditions of the IFMA including other applicable laws, rules and regulations of the department on the matter.

At the onset, the team conducted a briefing conference and dialogue with the IFMA holder, the CENR Officer of Pagadian City and personnel concerned for the proper and orderly implementation and conduct of the evaluation and assessment (please see attached).

The team was composed of the Regional Evaluating Team, the CENRO and PENRO representatives and the representatives of the IFMA holder. The team proceeded to the western portion of the area of the herein IFMA particularly Barangay Cogonan, Labangan, Zamboanga del Sur. The evaluation and assessment was then conducted on the main nursery, the established plantation, the look-out towers, the boundary of ISF and claimed or occupied areas, natural or residual forest, the IFMA boundary, monuments planted, foot trails, other improvements introduced and the billboard and signboard posted. The inspection, evaluation and assessment conducted were all undertaken in the presence of the IFMA holder, representatives, laborers and other personnel on the area. (please see attached report, tall sheets, pictorials and map).

In the conduct of the same, the IFMA representatives or laborers that assisted the team could only show the subject area under evaluation but the other areas alluded to as accomplished or undertaken by the company appeared upon actual verification and inspection to be negative and non-existent thus dispelling their allegation.

With regard the information and dissemination conducted by the IFMA holder including other services extended to the communities within the IFMA area and vicinities, it is noteworthy for recognition the donations made by the company. (Please see attached minutes of the dialogue with the barangay officials of Barangay Cogonan and pictorials).

The evaluation conducted on the nursery operations show that the facilities and other necessary implements were generally below par. An inventory of the seedlings stock of pure Gmelina species have already lapsed its plantability or have overgrown in the seedbed with an average grand total of about 44,460 within the established 2-hectare main nursery area. There was no other subsidiary nursery established in the area. Also noted is the enrichment planting conducted along both sides of the foot-trail which extends approximately 18 kms. From the entrance of the IFMA area going to the lookout tower of the four (4) lookout towers reported, only one (1) has been noted remaining in the area and the rest were destroyed or burned (pls. see attached pictorials). The signboard posted was unattended and in the state of disrepair. There were no monument planted or any marking along the IFMA boundary and in residual forest except the monuments found in the ISF boundaries within the IFMA area (please see attached pictorials). The plantation established is composed of Gmelina species with 4 x 4 spacing over a total of about 10.18 hectares. Basing on 5% estimate inventory, the result is 43% seedling survival.

Thereafter, the team also conducted evaluation and assessment at the eastern portion particularly at Langapod, Labangan, Zamboanga del Sur. The team inspected and verified on the ground the reported 20 hectares mango plantation with a spacing of 10 x 10 meters at 100% intensity inventory. The accounted number of mango seedlings planted of about 2,008 hills, only 98 seedlings survived. Wherefore, it generally represents 5% seedling survival. (Please see attached)

Finally, the team conducted an exit conference with the CENR Officer, and the IFMA holder where the tentative and general findings of the evaluation and assessment was laid-out and presented to the body. (Please see attached)8

On the basis of such findings, the Evaluation Team made the following recommendations –

1. The lessee should be required to explain why they failed to develop their IFMA area (Plantation Development) in accordance with the approved Comprehensive Development and Management Plan (CDMP);

2. The boundary and area coverage of IFMA No. R9-040 should be amended to exclude areas covered by Certificates of Stewardship Contracts (CSC) under the ISF Program with an area of 226.17 hectares, other areas previously identified as "occupied/claimed" and other conflict areas;

3. The amended boundary should be delineated/surveyed on the ground with a precise instrument and all corners appropriately marked/monumented;

4. The company should hire a full time forester.9

Acting on the Memorandum dated November 6, 1998, RED Antonio M. Mendoza, DENR-IX, Zamboanga City, submitted to the DENR Secretary a Memorandum10 dated April 7, 1999 regarding the performance evaluation of IFMA No. R-9-040. The RED Memorandum reads –

This has reference with the instruction to validate the performance/accomplishment of IFMAs of Region IX, Western Mindanao. Validation of IFMAs is in accordance with the existing policy of the DENR, to determine the capabilities of the holders to develop their Lease areas in consonance with their submitted and approved Comprehensive Development Management Plan.

x x x x

On 6 November 1998, Foresters Isabelo C. Mangaya-ay and Philidor Lluisma, pursuant to Regional Special Order No. 217, Series of 1998, conducted the evaluation of the performance of IFMA No. R9-040 of Pagadian City Timber Company, Inc. located at Langapod and Cogonan, Municipality of Labangan and Datagan, Municipality of Sominot, all of Zamboanga del Sur. Result of the evaluation reveals that the holder violated the following DENR existing Rules and Regulations particularly Section 26 of DAO 97-04 GROUNDS FOR CANCELLATION of IFMA which provides that, "any of the following violations shall be sufficient grounds for the cancellation of IFMA."

1. Paragraph 26.5, Section 26, DAO 97-04, Series of 1997, provides that failure to implement the approved Comprehensive Development and Management Plan.

As of 1998, the 4th year of existence of IFMA No. R9-040, the holder must have developed a total of 1,597.0 hectares as per approved CDMP. However, based on the report submitted by the Evaluation Team only 365.2 hectares was planted which are about 22.8%. During the evaluation, however, the IFMA representative could not even pinpoint the planted areas.

Per report of the Pagadian CENRO Composite Monitoring Team conducted on 21 August 1998 the plantation area was burned resulting to the damage of about 300 hectares leaving only about 20.0 hectares undamaged. No report had been submitted/received since then.

In infrastructure, the holder managed to put up one (1) out of four (4) programmed look-out towers; developed one (1) out of two (2) forest nurseries and constructed only 6 km. foot trail which is only about 27% accomplishment of the whole infrastructure.

2. Paragraph 26.8 of Section 26, DAO 97-04, specifically provides that failure to implement or adopt agreements made with communities and other relevant sectors.

Attached herewith, please find several petitions, sworn statements, affidavits and resolutions from various sectors particularly the Subanen Communities (IP’s) within the area. The existence and approval of IFMA No. R9-040 contract is being protested and is demanding for its cancellation.

The primary complaint was a blatant disrespect to their rights as an Indigenous People and the non-peaceful co-existence between them and the holder of the IFMA R9-040. Accordingly, they were constantly threatened/harassed by armed men employed by the holder.

In the same Memorandum, RED Mendoza recommended to the DENR Secretary the cancellation of IFMA No. R-9-040. 11

It appears that RED Mendoza issued a subsequent but similar Memorandum12 dated April 21, 1999 to the DENR Secretary relative to IFMA No. R-9-040. It stated –

This has reference with the instruction to validate the performance/accomplishment of IFMAs of Region IX, Western Mindanao. Validation of IFMAs is in accordance with the existing policy of the DENR to determine the capabilities of the holders to develop their Lease areas in consonance with their approved Comprehensive Development and Management Plan.

In furtherance thereto, Foresters Isabelo C. Mangaya-ay and Philidor Lluisma, pursuant to Regional Special Order No. 217, Series of 1998, conducted the evaluation of the performance of IFMA No. R9-040 of Pagadian City Timber Company, Inc. located at the Municipalities of Labangan, Datagan and Sominot, all of Zamboanga del Sur, on November 6, 1998. Result of the evaluation revealed that the holder violated Rules and Regulations which are sufficient ground for cancellation as stipulated under Section 26 of DAO 97-04, they are as follows

1. FAILURE TO IMPLEMENT THE APPROVED COMPREHENSIVE DEVELOPMENT AND MANAGEMENT PLAN.

Under the approved comprehensive and development plan, 1,597.0 ha of plantation should have been established from the Approval of the CDMP. However, only 365.2 ha were reportedly planted from CY 1995 to 1997. This represents only 28% of the targeted goal on plantation establishment.

Field validation of the reported established plantation revealed otherwise. The findings of the team are:

A. Portion of the area reported as established plantation by the IFMA holder is an ISF project with an area of 226.17 ha. These are covered with Certificate of Stewardship;

B. Locations and boundaries of reported plantations established from 1995 to 1997 cannot be located on the ground by the team neither by the representative of the IFMA holder who accompanied the validating team; and

C. No plantation was established during CY 1998.

On Infrastructure, the holder constructed only one (1) lookout tower as against the goal of 4 towers; established one (1) nursery as against the goal of two (2); and constructed only 6km foot trail. These represent only 27% of the total infrastructure to be undertaken by the holder over the area.

2. FAILURE TO IMPLEMENT OR ADOPT AGREEMENT WITH COMMUNITIES AND OTHER RELEVANT SECTORS.

Attached herewith are copies of petitions, sworn statements, affidavit and resolutions from Subanen Communities (IP’s) and other sectors in the area demanding the cancellation of IFMA R9-040.

The complaints and demand for cancellation by the people where the IFMA is located is a manifestation and proof of non-social acceptance of the project by the residents in the locality.

In view of the above findings, IFMA No. R9-040 is hereby recommended for cancellation.13

Acting on the latter Memorandum from RED Mendoza, then DENR Secretary Antonio H. Cerilles, on June 7, 1999, issued an Order14 canceling IFMA No. R-9-040 for failure to implement the approved CDMP and for failure of the lessee to protect the area from forest fires. The dispositive portion of the Order reads:

WHEREFORE, premises considered, IFMA No. R9-040 issued to Pagadian City Timber Co., Inc. is hereby ordered cancelled. The IFMA holder is hereby ordered to immediately vacate the area and to surrender/return copy of the Agreement to the Regional Executive Director, DENR Region 9, Zamboanga City.

The RED concerned or his duly authorized representative is hereby directed to serve this Order; determine best end use of the land; take appropriate measures to protect the same and inform this Office immediately of his compliance.

SO ORDERED.15

On July 2, 1999, respondent’s President, Filomena S. San Juan, wrote DENR Secretary Cerilles that the company was surprised to receive the Order of the cancellation of IFMA No. R-9-040 on June 22, 1999. She claimed that –

The DENR regional office is fully aware that the company is doing its best to manage and develop the area by continually planting trees and protecting the area from forest fires and illegalities. No company would ever set fire on its own plantation for obvious reasons. The company observed precautionary measures especially during the time of the El Niño phenomenon. If there have been mistakes and miscommunications in the reports of the DENR field officers, these could have been threshed out by a conference between DENR and the Pagadian Timber Company Inc.

The company was not accorded due process before the order of cancellation was issued. The company was not furnished copy of the evaluation and recommendation of the DENR Regional Executive Director of Region IX. Had the company been given the opportunity to contest the findings, evaluation and recommendation of the said office, the result would be otherwise.16

She appealed for the reconsideration of the Order asking that a re-investigation be conducted to comply with due process.

Even as the said letter for reconsideration was not yet acted upon, respondent appealed to the Office of the President (OP).

In the Resolution17 dated January 12, 2000, the OP affirmed the cancellation order based on the results of the actual evaluation and assessment of the DENR team. It ruled that the cancellation of IFMA No. R-9-040 was primarily and specifically governed by Section 26 of Department Administrative Order (DAO) 97-04. Relative to respondent’s invocation of due process, the OP held that respondent was afforded the right to be heard when it filed its motion for reconsideration and its subsequent appeal to the OP.

The motion for reconsideration filed by respondent of the January 12, 2000 Resolution was denied by the OP in the Resolution18 dated May 8, 2000.

Respondent went up to the Court of Appeals (CA) via a petition for review with a prayer for the issuance of a writ of preliminary injunction against the implementation of the assailed Order dated June 7, 1999.

In its Resolution dated January 17, 2001, the CA issued the writ of preliminary injunction prayed for, "directing and ordering respondents (petitioner) and/or any other person acting under their command, authority and/or for and in their behalf, to DESIST from implementing the assailed Order of cancellation dated June 7, 1999, and/or taking over the IFMA premises of [respondent], pending the termination of this proceeding."

In its Decision19 dated October 18, 2001, the CA ruled in favor of respondents. In striking down the rulings of the OP and the Order dated June 7, 1999, the CA declared that IFMA No. R-9-040 was a contract that could

not be unilaterally cancelled without infringing on the rights of respondent to due process and against impairment of contracts. The appellate court agreed with respondent when the latter argued that it was entitled to the benefits of Sections 3520 and 3621 of IFMA No. R-9-040 such that respondent should have been given 30 days, after due notice, to remedy any breach or default of the provisions of the IFMA and/or that the dispute regarding the bases for the cancellation of the IFMA should have first been submitted to arbitration.

Petitioner moved to reconsider the CA Decision. In the Resolution22 dated July 24, 2003, the motion was denied for lack of merit. Hence, this petition based on the following grounds:

I. The Court of Appeals gravely erred in ruling that IFMA No. R9-040 is a contract and not a mere privilege granted by the State to respondent.

II. The Court of Appeals seriously erred in ordaining that respondent can rightfully invoke prior resort to arbitration or the option to mend its violations under IFMA No. R9-040.23

In essence, petitioner argues that an IFMA is not an ordinary contract which is protected by the Constitution against impairment24 but a mere privilege granted by the State to qualified persons by means of a permit, license, franchise, agreement, or other similar concessions, which in this case is the exploration, development and utilization of the forest lands belonging to the State under its full control and supervision. Thus, the cancellation of the IFMA does not amount to a rescission of a contract but a mere withdrawal of this privilege. As such, the due process clause under the Constitution25 does not likewise apply since the IFMA area cannot be considered as property of respondent. According to petitioner, IFMA No. R-9-040, with the forest lands covered by it, is imbued with paramount considerations of public interest and public welfare such that whatever rights respondent may have under it must yield to the police power of the State. In this sense, respondent cannot take refuge in Sections 35 and 36 of IFMA No. R-9-040 to prevent the IFMA’s cancellation.

Inasmuch as the grounds cited by petitioner are interrelated, they shall be jointly discussed hereunder.

The petition is impressed with merit.

IFMA No. R-9-040 is a license agreement under Presidential Decree (P.D.) No. 705 (Revised Forestry Code), the law which is the very basis for its existence.26 Under Section 3, paragraph (dd) thereof, a license agreement is defined as "a privilege27 granted by the State to a person to utilize forest resources within any forest land with the right of possession and occupation thereof to the exclusion of others, except the government, but with the corresponding obligation to develop, protect and rehabilitate the same in accordance with the terms and conditions set forth in said agreement." This is evident in the following features, among others, of IFMA No. R-9-040, to wit:

1. The State agreed to devolve to the holder of IFMA No. R-9-040 the responsibility to manage the specified IFMA area for a period of 25 years, specifically until October 14, 2019, which period is automatically renewable for another 25 years thereafter;

2. The State imposed upon respondent, as holder of IFMA No. R-9-040, the conditions, the means, and the manner by which the IFMA area shall be managed, developed, and protected;

3. The State, through the DENR Secretary, shall not collect any rental within the first five (5) years of the IFMA, after which it shall be entitled to annual rental of fifty centavos (P0.50) per hectare from the sixth to the tenth year thereof, and one peso (P1.00) per hectare thereafter;

4. The IFMA area, except only the trees and other crops planted and the permanent improvements constructed by the IFMA holder, remains the property of the State; and

5. Upon cancellation of the IFMA through the fault of the holder, all improvements including forest plantations existing within the IFMA area shall revert to and become the property of the State.

An IFMA has for its precursor the Timber License Agreement (TLA), one of the tenurial instruments issued by the State to its grantees for the efficient management of the country’s dwindling forest resources. Jurisprudence has been consistent in holding that license agreements are not contracts within the purview of the due process and the non-impairment of contracts clauses enshrined in the Constitution. Our pronouncement in Alvarez v. PICOP Resources, Inc.28 is enlightening –

In unequivocal terms, we have consistently held that such licenses concerning the harvesting of timber in the country’s forests cannot be considered contracts that would bind the Government regardless of changes in policy and the demands of public interest and welfare. (citing Oposa v. Factoran, Jr., G.R. No. 101083, July 30, 1993, 224 SCRA 792, 811) Such unswerving verdict is synthesized in Oposa v. Factoran, Jr., (id., at pp. 811, 812) where we held:

In the first place, the respondent Secretary did not, for obvious reasons, even invoke in his motion to dismiss the non-impairment clause. If he had done so, he would have acted with utmost infidelity to the Government by providing undue and unwarranted benefits and advantages to the timber license holders because he would have forever bound the Government to strictly respect the said licenses 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 out by petitioners, into every timber license must be read Section 20 of the Forestry Reform Code (P.D. No. 705) which provides:

"x x x Provided, that when the national interest so requires, the President may amend, modify, replace or rescind any contract, concession, permit, licenses or any other form of privilege granted herein x x x."

Needless to say, all licenses may thus be revoked or rescinded by executive action. It is not a contract, property or a property right protected by the due process clause of the constitution. In Tan vs. Director of Forestry, [125 SCRA 302, 325 (1983)] this Court held:

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

"A license is merely a permit or privilege to do what otherwise would be unlawful, and is not a contract between the authority, federal, state, or municipal, granting it and the person to whom it is granted; neither is it property or a property right, nor does it create a vested right; nor is it taxation (37 C.J. 168). Thus, this Court held that the granting of license does not create irrevocable rights, neither is it property or property rights. (People vs. Ong Tin, 54 O.G. 7576). x x x"

We reiterated this pronouncement in Felipe Ysmael, Jr. & Co., Inc. vs. Deputy Executive Secretary [190 SCRA 673, 684 (1990):

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

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

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

cannot be invoked.

Even assuming arguendo that an IFMA can be considered a contract or an agreement, we agree with the Office of the Solicitor General that the alleged property rights that may have arisen from it are not absolute.

All Filipino citizens are entitled, by right, to a balanced and healthful ecology as declared under Section 16,29 Article II of the Constitution. This right carries with it the correlative duty to refrain from impairing the environment,30 particularly our diminishing forest resources. To uphold and protect this right is an express policy of the State.31 The DENR is the instrumentality of the State mandated to actualize this policy. It is "the primary government agency responsible for the conservation, management, development and proper use of the country’s environment and natural resources, including those in reservation and watershed areas, and lands of the public domain, as well as the licensing and regulation of all natural resources as may be provided for by law in order to ensure equitable sharing of the benefits derived therefrom for the welfare of the present and future generations of Filipinos."32

Thus, private rights must yield when they come in conflict with this public policy and common interest. They must give way to the police or regulatory power of the State, in this case through the DENR, to ensure that the terms and conditions of existing laws, rules and regulations, and the IFMA itself are strictly and faithfully complied with.

Respondent was not able to overturn by sufficient evidence the presumption of regularity in the performance of official functions of the Evaluation Team when the latter inspected, assessed, and reported the violations respondent committed under DAO No. 97-04 which eventually led to the cancellation of IFMA No. R-9-040.

It is worthy to note that petitioner followed regular procedure regarding the assessment of IFMA No. R-9-040. It gave notice of the evaluation on October 22, 1998 to be held within the period October 22-30, 1998. Respondent admitted through the affidavits of its President,33 Operations Manager,34 and workers35 that an Evaluation Team arrived at the IFMA area on October 23, 1998. On October 23, 1998, prior to the actual assessment, a briefing was held on the conduct thereof in the presence of the IFMA representatives. On October 29, 1998, an exit conference with IFMA Operations Manager Inocencio Santiago was held at the CENRO Office, Pagadian City, where the results of the assessment were presented. That day, the DENR officials asked Santiago if he had any questions or comments on the assessment results and on the manner the evaluation was conducted, but the latter replied that he had none.

We do not understand why Santiago did not lift a finger or raise an objection to the assessment results, and only much later in his Affidavit executed almost ten months thereafter, or on August 12, 1999, to claim so belatedly that there was no notice given on October 22, 1998, that the Evaluation Team did not actually extensively inspect the IFMA area on October 23, 1998, and that there was no proper exit conference held on October 29, 1998. The same observation applies to respondent’s President herself, who instead claimed that she vehemently opposed the appointment of then DENR Secretary Cerilles because he was bent on canceling the IFMA at all costs, prior to the cancellation of IFMA No. R-9-040.

Besides, the detailed findings on the failure of respondent to implement its CDMP under its IFMA, as shown by the November 6, 1998 Report of the Evaluation Team and the Memoranda dated April 7, 1999 and April 21, 1999, together with all its attachments, belie respondent’s claim that there was no actual evaluation and assessment that took place on October 23, 1998. That the Evaluation Report was dated November 6, 1998 does not conclusively show that the evaluation was actually held on that date. Neither was this properly proven by the Memoranda of RED Mendoza which stated that the evaluation was conducted on November 6, 1998, since RED Mendoza could have been merely misled into such an assumption because of the date of the Evaluation Report. The sweeping denials made by the IFMA representatives and their self-serving accomplishment reports cannot prevail over the actual inspection conducted, the results of which are shown by documentary proof.

Respondent, likewise, cannot insist that, pursuant to Section 35 of IFMA No. R-9-040, it should have been given notice of its breach of the IFMA and should have been given 30 days therefrom to remedy the breach. It is worthy to note that Section 35 uses the word "may" which must be interpreted as granting petitioner the discretion whether or not to give such notice and allow the option to remedy the breach. In this case, despite the lack of any specific recommendation from the Evaluation Team for the cancellation of the IFMA, DENR

Secretary Cerilles deemed it proper to cancel the IFMA due to the extent and the gravity of respondent’s violations.

It is also futile for respondent to claim that it is entitled to an arbitration under Section 36 of IFMA No. R-9-040 before the license agreement may be canceled. A reading of the said Section shows that the dispute should be based on the provisions of the IFMA to warrant a referral to arbitration of an irreconcilable conflict between the IFMA holder and the DENR Secretary. In this case, the cancellation was grounded on Section 26 of DAO No. 97-04, particularly respondent’s failure to implement the approved CDMP and its failure to implement or adopt agreements made with communities and other relevant sectors. The contrary notwithstanding, what remains is that respondent never refuted the findings of the Evaluation Team when given the opportunity to do so but waited until IFMA No. R-9-040 was already cancelled before it made its vigorous objections as to the conduct of the evaluation, harping only on its alleged right to due process.

Indeed, respondent was given the opportunity to contest the findings that caused the cancellation of its IFMA when it moved to reconsider the Order of cancellation and when it filed its appeal and motion for reconsideration before the OP.

The essence of due process is simply an opportunity to be heard, or as applied to administrative proceedings, an opportunity to explain one’s side or an opportunity to seek a reconsideration of the action or ruling complained of. What the law prohibits is the absolute absence of the opportunity to be heard; hence, a party cannot feign denial of due process where he had been afforded the opportunity to present his side.36

WHEREFORE, the Decision dated October 18, 2001 and the Resolution dated July 24, 2003 of the Court of Appeals in CA-G.R. SP No. 59194 are REVERSED and SET ASIDE, and the Order dated June 7, 1999 of then DENR Secretary Antonio Cerilles, and the Resolutions of the Office of the President dated January 12, 2000 and May 8, 2000 affirming the said Order, are REINSTATED and AFFIRMED. No pronouncement as to costs.

SO ORDERED.

ANTONIO EDUARDO B. NACHURAAssociate Justice

FIRST DIVISION

G.R. No. 152613 & No. 152628             June 23, 2006

APEX MINING CO., INC., petitioner, vs.SOUTHEAST MINDANAO GOLD MINING CORP., the mines adjudication board, provincial mining regulatory board (PMRB-DAVAO), MONKAYO INTEGRATED SMALL SCALE MINERS ASSOCIATION, INC., ROSENDO VILLAFLOR, BALITE COMMUNAL PORTAL MINING COOPERATIVE, DAVAO UNITED MINERS COOPERATIVE, ANTONIO DACUDAO, PUTING-BATO GOLD MINERS COOPERATIVE, ROMEO ALTAMERA, THELMA CATAPANG, LUIS GALANG, RENATO BASMILLO, FRANCISCO YOBIDO, EDUARDO GLORIA, EDWIN ASION, MACARIO HERNANDEZ, REYNALDO CARUBIO, ROBERTO BUNIALES, RUDY ESPORTONO, ROMEO CASTILLO, JOSE REA, GIL GANADO, PRIMITIVA LICAYAN, LETICIA ALQUEZA and joel brillantes management mining corporation, Respondents.

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G.R. No. 152619-20             June 23, 2006

BALITE COMMUNAL PORTAL MINING COOPERATIVE, petitioner, vs.SOUTHEAST MINDANAO GOLD MINING CORPORATION, APEX MINING CO., INC., the mines adjudication board, provincial mining regulatory board (PMRB-DAVAO), MONKAYO INTEGRATED SMALL SCALE MINERS ASSOCIATION, INC., ROSENDO VILLAFLOR, DAVAO UNITED MINERS COOPERATIVE, ANTONIO DACUDAO, PUTING-BATO GOLD MINERS COOPERATIVE, ROMEO ALTAMERA, THELMA CATAPANG, LUIS GALANG, RENATO BASMILLO, FRANCISCO YOBIDO, EDUARDO GLORIA, EDWIN ASION, MACARIO HERNANDEZ, REYNALDO CARUBIO, ROBERTO BUNIALES, RUDY ESPORTONO, ROMEO CASTILLO, JOSE REA, GIL GANADO, PRIMITIVA LICAYAN, LETICIA ALQUEZA and joel brillantes management mining corporation, Respondents.

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G.R. No. 152870-71             June 23, 2006

THE MINES ADJUDICATION BOARD AND ITS MEMBERS, THE HON. VICTOR O. RAMOS (Chairman), UNDERSECRETARY VIRGILIO MARCELO (Member) and DIRECTOR HORACIO RAMOS (Member),petitioners, vs.SOUTHEAST MINADANAO GOLD MINING CORPORATION, Respondent.

D E C I S I O N

CHICO-NAZARIO, J.:

On 27 February 1931, Governor General Dwight F. Davis issued Proclamation No. 369, establishing the Agusan-Davao-Surigao Forest Reserve consisting of approximately 1,927,400 hectares.1

The disputed area, a rich tract of mineral land, is inside the forest reserve located at Monkayo, Davao del Norte, and Cateel, Davao Oriental, consisting of 4,941.6759 hectares.2 This mineral land is encompassed by Mt. Diwata, which is situated in the municipalities of Monkayo and Cateel. It later became known as the "Diwalwal Gold Rush Area." It has since the early 1980’s been stormed by conflicts brought about by the numerous mining claimants scrambling for gold that lies beneath its bosom.

On 21 November 1983, Camilo Banad and his group, who claimed to have first discovered traces of gold in Mount Diwata, filed a Declaration of Location (DOL) for six mining claims in the area.

Camilo Banad and some other natives pooled their skills and resources and organized the Balite Communal Portal Mining Cooperative (Balite).3

On 12 December 1983, Apex Mining Corporation (Apex) entered into operating agreements with Banad and his group.

From November 1983 to February 1984, several individual applications for mining locations over mineral land covering certain parts of the Diwalwal gold rush area were filed with the Bureau of Mines and Geo-Sciences (BMG).

On 2 February 1984, Marcopper Mining Corporation (MMC) filed 16 DOLs or mining claims for areas adjacent to the area covered by the DOL of Banad and his group. After realizing that the area encompassed by its mining claims is a forest reserve within the coverage of Proclamation No. 369 issued by Governor General Davis, MMC abandoned the same and instead applied for a prospecting permit with the Bureau of Forest Development (BFD).

On 1 July 1985, BFD issued a Prospecting Permit to MMC covering an area of 4,941.6759 hectares traversing the municipalities of Monkayo and Cateel, an area within the forest reserve under Proclamation No. 369. The permit embraced the areas claimed by Apex and the other individual mining claimants.

On 11 November 1985, MMC filed Exploration Permit Application No. 84-40 with the BMG. On 10 March 1986, the BMG issued to MCC Exploration Permit No. 133 (EP 133).

Discovering the existence of several mining claims and the proliferation of small-scale miners in the area covered by EP 133, MMC thus filed on 11 April 1986 before the BMG a Petition for the Cancellation of the Mining Claims of Apex and Small Scale Mining Permit Nos. (x-1)-04 and (x-1)-05 which was docketed as MAC No. 1061. MMC alleged that the areas covered by its EP 133 and the mining claims of Apex were within an established and existing forest reservation (Agusan-Davao-Surigao Forest Reserve) under Proclamation No. 369 and that pursuant to Presidential Decree No. 463,4 acquisition of mining rights within a forest reserve is through the application for a permit to prospect with the BFD and not through registration of a DOL with the BMG.

On 23 September 1986, Apex filed a motion to dismiss MMC’s petition alleging that its mining claims are not within any established or proclaimed forest reserve, and as such, the acquisition of mining rights thereto must be undertaken via registration of DOL with the BMG and not through the filing of application for permit to prospect with the BFD.

On 9 December 1986, BMG dismissed MMC’s petition on the ground that the area covered by the Apex mining claims and MMC’s permit to explore was not a forest reservation. It further declared null and void MMC’s EP 133 and sustained the validity of Apex mining claims over the disputed area.

MMC appealed the adverse order of BMG to the Department of Environment and Natural Resources (DENR).

On 15 April 1987, after due hearing, the DENR reversed the 9 December 1996 order of BMG and declared MMC’s EP 133 valid and subsisting.

Apex filed a Motion for Reconsideration with the DENR which was subsequently denied. Apex then filed an appeal before the Office of the President. On 27 July 1989, the Office of the President, through Assistant Executive Secretary for Legal Affairs, Cancio C. Garcia,5 dismissed Apex’s appeal and affirmed the DENR ruling.

Apex filed a Petition for Certiorari before this Court. The Petition was docketed as G.R. No. 92605 entitled, "Apex Mining Co., Inc. v. Garcia."6 On 16 July 1991, this Court rendered a Decision against Apex holding that the disputed area is a forest reserve; hence, the proper procedure in acquiring mining rights therein is by initially applying for a permit to prospect with the BFD and not through a registration of DOL with the BMG.

On 27 December 1991, then DENR Secretary Fulgencio Factoran, Jr. issued Department Administrative Order No. 66 (DAO No. 66) declaring 729 hectares of the areas covered by the Agusan-Davao-Surigao Forest Reserve as non-forest lands and open to small-scale mining purposes.

As DAO No. 66 declared a portion of the contested area open to small scale miners, several mining entities filed applications for Mineral Production Sharing Agreement (MPSA).

On 25 August 1993, Monkayo Integrated Small Scale Miners Association (MISSMA) filed an MPSA application which was denied by the BMG on the grounds that the area applied for is within the area covered by MMC EP 133 and that the MISSMA was not qualified to apply for an MPSA under DAO No. 82,7 Series of 1990.

On 5 January 1994, Rosendo Villaflor and his group filed before the BMG a Petition for Cancellation of EP 133 and for the admission of their MPSA Application. The Petition was docketed as RED Mines Case No. 8-8-94. Davao United Miners Cooperative (DUMC) and Balite intervened and likewise sought the cancellation of EP 133.

On 16 February 1994, MMC assigned EP 133 to Southeast Mindanao Gold Mining Corporation (SEM), a domestic corporation which is alleged to be a 100% -owned subsidiary of MMC.

On 14 June 1994, Balite filed with the BMG an MPSA application within the contested area that was later on rejected.

On 23 June 1994, SEM filed an MPSA application for the entire 4,941.6759 hectares under EP 133, which was also denied by reason of the pendency of RED Mines Case No. 8-8-94. On 1 September 1995, SEM filed another MPSA application.

On 20 October 1995, BMG accepted and registered SEM’s MPSA application and the Deed of Assignment over EP 133 executed in its favor by MMC. SEM’s application was designated MPSA Application No. 128 (MPSAA 128). After publication of SEM’s application, the following filed before the BMG their adverse claims or oppositions:

a) MAC Case No. 004 (XI) – JB Management Mining Corporation;b) MAC Case No. 005(XI) – Davao United Miners Cooperative;c) MAC Case No. 006(XI) – Balite Integrated Small Scale Miner’s Cooperative;d) MAC Case No. 007(XI) – Monkayo Integrated Small Scale Miner’s Association, Inc. (MISSMA);e) MAC Case No. 008(XI) – Paper Industries Corporation of the Philippines;f) MAC Case No. 009(XI) – Rosendo Villafor, et al.;g) MAC Case No. 010(XI) – Antonio Dacudao;h) MAC Case No. 011(XI) – Atty. Jose T. Amacio;i) MAC Case No. 012(XI) – Puting-Bato Gold Miners Cooperative;j) MAC Case No. 016(XI) – Balite Communal Portal Mining Cooperative;k) MAC Case No. 97-01(XI) – Romeo Altamera, et al.8

To address the matter, the DENR constituted a Panel of Arbitrators (PA) to resolve the following:

(a) The adverse claims on MPSAA No. 128; and(b) The Petition to Cancel EP 133 filed by Rosendo Villaflor docketed as RED Case No. 8-8-94.9

On 13 June 1997, the PA rendered a resolution in RED Mines Case No. 8-8-94. As to the Petition for Cancellation of EP 133 issued to MMC, the PA relied on the ruling in Apex Mining Co., Inc. v. Garcia,10 and opined that EP 133 was valid and subsisting. It also declared that the BMG Director, under Section 99 of the Consolidated Mines Administrative Order implementing Presidential Decree No. 463, was authorized to issue exploration permits and to renew the same without limit.

With respect to the adverse claims on SEM’s MPSAA No. 128, the PA ruled that adverse claimants’ petitions were not filed in accordance with the existing rules and regulations governing adverse claims because the adverse claimants failed to submit the sketch plan containing the technical description of their respective claims, which was a mandatory requirement for an adverse claim that would allow the PA to determine if indeed there is an overlapping of the area occupied by them and the area applied for by SEM. It added that the adverse claimants were not claim owners but mere occupants conducting illegal mining activities at the contested area since only MMC or its assignee SEM had valid mining claims over the area as enunciated in Apex Mining Co., Inc. v. Garcia.11 Also, it maintained that the adverse claimants were not qualified as small-scale miners under DENR Department Administrative Order No. 34 (DAO No. 34),12 or the Implementing Rules and Regulation of Republic Act No. 7076 (otherwise known as

the "People’s Small-Scale Mining Act of 1991"), as they were not duly licensed by the DENR to engage in the extraction or removal of minerals from the ground, and that they were large-scale miners. The decretal portion of the PA resolution pronounces:

VIEWED IN THE LIGHT OF THE FOREGOING, the validity of Expoloration Permit No. 133 is hereby reiterated and all the adverse claims against MPSAA No. 128 are DISMISSED.13

Undaunted by the PA ruling, the adverse claimants appealed to the Mines Adjudication Board (MAB). In a Decision dated 6 January 1998, the MAB considered erroneous the dismissal by the PA of the adverse claims filed against MMC and SEM over a mere technicality of failure to submit a sketch plan. It argued that the rules of procedure are not meant to defeat substantial justice as the former are merely secondary in importance to the latter. Dealing with the question on EP 133’s validity, the MAB opined that said issue was not crucial and was irrelevant in adjudicating the appealed case because EP 133 has long expired due to its non-renewal and that the holder of the same, MMC, was no longer a claimant of the Agusan-Davao-Surigao Forest Reserve having relinquished its right to SEM. After it brushed aside the issue of the validity of EP 133 for being irrelevant, the MAB proceeded to treat SEM’s MPSA application over the disputed area as an entirely new and distinct application. It approved the MPSA application, excluding the area segregated by DAO No. 66, which declared 729 hectares within the Diwalwal area as non-forest lands open for small-scale mining. The MAB resolved:

WHEREFORE, PREMISES CONSIDERED, the decision of the Panel of Arbitrators dated 13 June 1997 is hereby VACATED and a new one entered in the records of the case as follows:

1. SEM’s MPSA application is hereby given due course subject to the full and strict compliance of the provisions of the Mining Act and its Implementing Rules and Regulations;

2. The area covered by DAO 66, series of 1991, actually occupied and actively mined by the small-scale miners on or before August 1, 1987 as determined by the Provincial Mining Regulatory Board (PMRB), is hereby excluded from the area applied for by SEM;

3. A moratorium on all mining and mining-related activities, is hereby imposed until such time that all necessary procedures, licenses, permits, and other requisites as provided for by RA 7076, the Mining Act and its Implementing Rules and Regulations and all other pertinent laws, rules and regulations are complied with, and the appropriate environmental protection measures and safeguards have been effectively put in place;

4. Consistent with the spirit of RA 7076, the Board encourages SEM and all small-scale miners to continue to negotiate in good faith and arrive at an agreement beneficial to all. In the event of SEM’s strict and full compliance with all the requirements of the Mining Act and its Implementing Rules and Regulations, and the concurrence of the small-scale miners actually occupying and actively mining the area, SEM may apply for the inclusion of portions of the areas segregated under paragraph 2 hereof, to its MPSA application. In this light, subject to the preceding paragraph, the contract between JB [JB Management Mining Corporation] and SEM is hereby recognized.14

Dissatisfied, the Villaflor group and Balite appealed the decision to this Court. SEM, aggrieved by the exclusion of 729 hectares from its MPSA application, likewise appealed. Apex filed a Motion for Leave to Admit Petition for Intervention predicated on its right to stake its claim over the Diwalwal gold rush which was granted by the Court. These cases, however, were remanded to the Court of Appeals for proper disposition pursuant to Rule 43 of the 1997 Rules of Civil Procedure. The Court of Appeals consolidated the remanded cases as CA-G.R. SP No. 61215 and No. 61216.

In the assailed Decision15 dated 13 March 2002, the Court of Appeals affirmed in toto the decision of the PA and declared null and void the MAB decision.

The Court of Appeals, banking on the premise that the SEM is the agent of MMC by virtue of its assignment of EP 133 in favor of SEM and the purported fact that SEM is a 100% subsidiary of MMC, ruled that the transfer of EP 133 was valid. It argued that since SEM is an agent of MMC, the assignment of EP 133 did not violate the condition therein prohibiting its transfer except to MMC’s duly designated agent. Thus, despite the non-renewal of EP 133 on

6 July 1994, the Court of Appeals deemed it relevant to declare EP 133 as valid since MMC’s mining rights were validly transferred to SEM prior to its expiration.

The Court of Appeals also ruled that MMC’s right to explore under EP 133 is a property right which the 1987 Constitution protects and which cannot be divested without the holder’s consent. It stressed that MMC’s failure to proceed with the extraction and utilization of minerals did not diminish its vested right to explore because its failure was not attributable to it.

Reading Proclamation No. 369, Section 11 of Commonwealth Act 137, and Sections 6, 7, and 8 of Presidential Decree No. 463, the Court of Appeals concluded that the issuance of DAO No. 66 was done by the DENR Secretary beyond his power for it is the President who has the sole power to withdraw from the forest reserve established under Proclamation No. 369 as non-forest land for mining purposes. Accordingly, the segregation of 729 hectares of mining areas from the coverage of EP 133 by the MAB was unfounded.

The Court of Appeals also faulted the DENR Secretary in implementing DAO No. 66 when he awarded the 729 hectares segregated from the coverage area of EP 133 to other corporations who were not qualified as small-scale miners under Republic Act No. 7076.

As to the petitions of Villaflor and company, the Court of Appeals argued that their failure to submit the sketch plan to the PA, which is a jurisdictional requirement, was fatal to their appeal. It likewise stated the Villaflor and company’s mining claims, which were based on their alleged rights under DAO No. 66, cannot stand as DAO No. 66 was null and void. The dispositive portion of the Decision decreed:

WHEREFORE, premises considered, the Petition of Southeast Mindanao Gold Mining Corporation is GRANTED while the Petition of Rosendo Villaflor, et al., is DENIED for lack of merit. The Decision of the Panel of Arbitrators dated 13 June 1997 is AFFIRMED in toto and the assailed MAB Decision is hereby SET ASIDE and declared as NULL and VOID.16

Hence, the instant Petitions for Review on Certiorari under Rule 45 of the Rules of Court filed by Apex, Balite and MAB.

During the pendency of these Petitions, President Gloria Macapagal-Arroyo issued Proclamation No. 297 dated 25 November 2002. This proclamation excluded an area of 8,100 hectares located in Monkayo, Compostela Valley, and proclaimed the same as mineral reservation and as environmentally critical area. Subsequently, DENR Administrative Order No. 2002-18 was issued declaring an emergency situation in the Diwalwal gold rush area and ordering the stoppage of all mining operations therein. Thereafter, Executive Order No. 217 dated 17 June 2003 was issued by the President creating the National Task Force Diwalwal which is tasked to address the situation in the Diwalwal Gold Rush Area.

In G.R. No. 152613 and No. 152628, Apex raises the following issues:

I. WHETHER OR NOT SOUTHEAST MINDANAO GOLD MINING’S [SEM] E.P. 133 IS NULL AND VOID DUE TO THE FAILURE OF MARCOPPER TO COMPLY WITH THE TERMS AND CONDITIONS PRESCRIBED IN EP 133.

II. WHETHER OR NOT APEX HAS A SUPERIOR AND PREFERENTIAL RIGHT TO STAKE IT’S CLAIM OVER THE ENTIRE 4,941 HECTARES AGAINST SEM AND THE OTHER CLAIMANTS PURSUANT TO THE TIME-HONORED PRINCIPLE IN MINING LAW THAT "PRIORITY IN TIME IS PRIORITY IN RIGHT."17

In G.R. No. 152619-20, Balite anchors its petition on the following grounds:

I. WHETHER OR NOT THE MPSA OF SEM WHICH WAS FILED NINE (9) DAYS LATE (JUNE 23, 1994) FROM THE FILING OF THE MPSA OF BALITE WHICH WAS FILED ON JUNE 14, 1994 HAS A PREFERENTIAL RIGHT OVER THAT OF BALITE.

II. WHETHER OR NOT THE DISMISSAL BY THE PANEL OF ARBITRATORS OF THE ADVERSE CLAIM OF BALITE ON THE GROUND THAT BALITE FAILED TO SUBMIT THE REQUIRED SKETCH PLAN DESPITE THE FACT THAT BALITE, HAD IN FACT SUBMITTED ON TIME WAS A VALID DISMISSAL OF BALITE’S ADVERSE CLAIM.

III. WHETHER OR NOT THE ACTUAL OCCUPATION AND SMALL-MINING OPERATIONS OF BALITE PURSUANT TO DAO 66 IN THE 729 HECTARES WHICH WAS PART OF THE 4,941.6759 HECTARES COVERED BY ITS MPSA WHICH WAS REJECTED BY THE BUREAU OF MINES AND GEOSCIENCES WAS ILLEGAL.18

In G.R. No. 152870-71, the MAB submits two issues, to wit:

I. WHETHER OR NOT EP NO. 133 IS STILL VALID AND SUBSISTING.

II. WHETHER OR NOT THE SUBSEQUENT ACTS OF THE GOVERNMENT SUCH AS THE ISSUANCE OF DAO NO. 66, PROCLAMATION NO. 297, AND EXECUTIVE ORDER 217 CAN OUTWEIGH EP NO. 133 AS WELL AS OTHER ADVERSE CLAIMS OVER THE DIWALWAL GOLD RUSH AREA.19

The common issues raised by petitioners may be summarized as follows:

I. Whether or not the Court of Appeals erred in upholding the validity and continuous existence of EP 133 as well as its transfer to SEM;

II. Whether or not the Court of Appeals erred in declaring that the DENR Secretary has no authority to issue DAO No. 66; and

III. Whether or not the subsequent acts of the executive department such as the issuance of Proclamation No. 297, and DAO No. 2002-18 can outweigh Apex and Balite’s claims over the Diwalwal Gold Rush Area.

On the first issue, Apex takes exception to the Court of Appeals’ ruling upholding the validity of MMC’s EP 133 and its subsequent transfer to SEM asserting that MMC failed to comply with the terms and conditions in its exploration permit, thus, MMC and its successor-in-interest SEM lost their rights in the Diwalwal Gold Rush Area. Apex pointed out that MMC violated four conditions in its permit. First, MMC failed to comply with the mandatory work program, to complete exploration work, and to declare a mining feasibility. Second, it reneged on its duty to submit an Environmental Compliance Certificate. Third, it failed to comply with the reportorial requirements. Fourth, it violated the terms of EP 133 when it assigned said permit to SEM despite the explicit proscription against its transfer.

Apex likewise emphasizes that MMC failed to file its MPSA application required under DAO No. 8220 which caused its exploration permit to lapse because DAO No. 82 mandates holders of exploration permits to file a Letter of Intent and a MPSA application not later than 17 July 1991. It said that because EP 133 expired prior to its assignment to SEM, SEM’s MPSA application should have been evaluated on its own merit.

As regards the Court of Appeals recognition of SEM’s vested right over the disputed area, Apex bewails the same to be lacking in statutory bases. According to Apex, Presidential Decree No. 463 and Republic Act No. 7942 impose upon the claimant the obligation of actually undertaking exploration work within the reserved lands in order to acquire priority right over the area. MMC, Apex claims, failed to conduct the necessary exploration work, thus, MMC and its successor-in-interest SEM lost any right over the area.

In its Memorandum, Balite maintains that EP 133 of MMC, predecessor-in-interest of SEM, is an expired and void permit which cannot be made the basis of SEM’s MPSA application.

Similarly, the MAB underscores that SEM did not acquire any right from MMC by virtue of the transfer of EP 133 because the transfer directly violates the express condition of the exploration permit stating that "it shall be for the exclusive use and benefit of the permittee or his duly authorized agents." It added that while MMC is the permittee, SEM cannot be considered as MMC’s duly designated agent as there is no proof on record authorizing SEM to represent MMC in its business dealings or undertakings, and neither did SEM pursue its interest in the permit as an agent of MMC. According to the MAB, the assignment by MMC of EP 133 in favor of SEM did not make the latter

the duly authorized agent of MMC since the concept of an agent under EP 133 is not equivalent to the concept of assignee. It finds fault in the assignment of EP 133 which lacked the approval of the DENR Secretary in contravention of Section 25 of Republic Act No. 794221 requiring his approval for a valid assignment or transfer of exploration permit to be valid.

SEM, on the other hand, counters that the errors raised by petitioners Apex, Balite and the MAB relate to factual and evidentiary matters which this Court cannot inquire into in an appeal by certiorari.

The established rule is that in the exercise of the Supreme Court’s power of review, the Court not being a trier of facts, does not normally embark on a re-examination of the evidence presented by the contending parties during the trial of the case considering that the findings of facts of the Court of Appeals are conclusive and binding on the Court.22 This rule, however, admits of exceptions as recognized by jurisprudence, to wit:

(1) [w]hen the findings are grounded entirely on speculation, surmises or conjectures; (2) when the inference made is manifestly mistaken, absurd or impossible; (3) when there is grave abuse of discretion; (4) when the judgment is based on misapprehension of facts; (5) when the findings of facts are conflicting; (6) when in making its findings the Court of Appeals went beyond the issues of the case, or its findings are contrary to the admissions of both the appellant and the appellee; (7) when the findings are contrary to the trial court; (8) when the findings are conclusions without citation of specific evidence on which they are based; (9) when the facts set forth in the petition as well as in the petitioner’s main and reply briefs are not disputed by the respondent; (10) when the findings of fact are premised on the supposed absence of evidence and contradicted by the evidence on record; and (11) when the Court of Appeals manifestly overlooked certain relevant facts not disputed by the parties, which, if properly considered, would justify a different conclusion.23

Also, in the case of Manila Electric Company v. Benamira,24 the Court in a Petition for Review on Certiorari, deemed it proper to look deeper into the factual circumstances of the case since the Court of Appeal’s findings are at odds to those of the National Labor Relations Commission (NLRC). Just like in the foregoing case, it is this Court’s considered view that a re-evaluation of the attendant facts surrounding the present case is appropriate considering that the findings of the MAB are in conflict with that of the Court of Appeals.

I

At the threshold, it is an undisputed fact that MMC assigned to SEM all its rights under EP 133 pursuant to a Deed of Assignment dated 16 February 1994.25

EP 133 is subject to the following terms and conditions26 :

1. That the permittee shall abide by the work program submitted with the application or statements made later in support thereof, and which shall be considered as conditions and essential parts of this permit;2. That permittee shall maintain a complete record of all activities and accounting of all expenditures incurred therein subject to periodic inspection and verification at reasonable intervals by the Bureau of Mines at the expense of the applicant;3. That the permittee shall submit to the Director of Mines within 15 days after the end of each calendar quarter a report under oath of a full and complete statement of the work done in the area covered by the permit;4. That the term of this permit shall be for two (2) years to be effective from this date, renewable for the same period at the discretion of the Director of Mines and upon request of the applicant;5. That the Director of Mines may at any time cancel this permit for violation of its provision or in case of trouble or breach of peace arising in the area subject hereof by reason of conflicting interests without any responsibility on the part of the government as to expenditures for exploration that might have been incurred, or as to other damages that might have been suffered by the permittee; and6. That this permit shall be for the exclusive use and benefit of the permittee or his duly authorized agents and shall be used for mineral exploration purposes only and for no other purpose.

Under Section 9027 of Presidential Decree No. 463, the applicable statute during the issuance of EP 133, the DENR Secretary, through Director of BMG, is charged with carrying out the said law. Also, under Commonwealth Act No. 136, also known as "An Act Creating The Bureau of Mines," which was approved on 7 November 1936, the Director of Mines has the direct charge of the administration of the mineral lands and minerals, and of the survey,

classification, lease or any other form of concession or disposition thereof under the Mining Act.28 This power of administration includes the power to prescribe terms and conditions in granting exploration permits to qualified entities. Thus, in the grant of EP 133 in favor of the MMC, the Director of the BMG acted within his power in laying down the terms and conditions attendant thereto.

Condition number 6 categorically states that the permit shall be for the exclusive use and benefit of MMC or its duly authorized agents. While it may be true that SEM, the assignee of EP 133, is a 100% subsidiary corporation of MMC, records are bereft of any evidence showing that the former is the duly authorized agent of the latter. For a contract of agency to exist, it is essential that the principal consents that the other party, the agent, shall act on its behalf, and the agent consents so as to act.29 In the case of Yu Eng Cho v. Pan American World Airways, Inc.,30 this Court had the occasion to set forth the elements of agency, viz:

(1) consent, express or implied, of the parties to establish the relationship;(2) the object is the execution of a juridical act in relation to a third person;(3) the agent acts as a representative and not for himself;(4) the agent acts within the scope of his authority.

The existence of the elements of agency is a factual matter that needs to be established or proven by evidence. The burden of proving that agency is extant in a certain case rests in the party who sets forth such allegation. This is based on the principle that he who alleges a fact has the burden of proving it.31 It must likewise be emphasized that the evidence to prove this fact must be clear, positive and convincing.32

In the instant Petitions, it is incumbent upon either MMC or SEM to prove that a contract of agency actually exists between them so as to allow SEM to use and benefit from EP 133 as the agent of MMC. SEM did not claim nor submit proof that it is the designated agent of MMC to represent the latter in its business dealings or undertakings. SEM cannot, therefore, be considered as an agent of MMC which can use EP 133 and benefit from it. Since SEM is not an authorized agent of MMC, it goes without saying that the assignment or transfer of the permit in favor of SEM is null and void as it directly contravenes the terms and conditions of the grant of EP 133.

Furthermore, the concept of agency is distinct from assignment. In agency, the agent acts not on his own behalf but on behalf of his principal.33 While in assignment, there is total transfer or relinquishment of right by the assignor to the assignee.34 The assignee takes the place of the assignor and is no longer bound to the latter. The deed of assignment clearly stipulates:

1. That for ONE PESO (P1.00) and other valuable consideration received by the ASSIGNOR from the ASSIGNEE, the ASSIGNOR hereby ASSIGNS, TRANSFERS and CONVEYS unto the ASSIGNEE whatever rights or interest the ASSIGNOR may have in the area situated in Monkayo, Davao del Norte and Cateel, Davao Oriental, identified as Exploration Permit No. 133 and Application for a Permit to Prospect in Bunawan, Agusan del Sur respectively.35

Bearing in mind the just articulated distinctions and the language of the Deed of Assignment, it is readily obvious that the assignment by MMC of EP 133 in favor of SEM did not make the latter the former’s agent. Such assignment involved actual transfer of all rights and obligations MMC have under the permit in favor of SEM, thus, making SEM the permittee. It is not a mere grant of authority to SEM, as an agent of MMC, to use the permit. It is a total abdication of MMC’s rights over the permit. Hence, the assignment in question did not make SEM the authorized agent of MMC to make use and benefit from EP 133.

The condition stipulating that the permit is for the exclusive use of the permittee or its duly authorized agent is not without any reason. Exploration permits are strictly granted to entities or individuals possessing the resources and capability to undertake mining operations. Without such a condition, non-qualified entities or individuals could circumvent the strict requirements under the law by the simple expediency acquiring the permit from the original permittee.

We cannot lend recognition to the Court of Appeals’ theory that SEM, being a 100% subsidiary of MMC, is automatically an agent of MMC.

A corporation is an artificial being created by operation of law, having the right of succession and the powers, attributes, and properties expressly authorized by law or incident to its existence.36 It is an artificial being invested by

law with a personality separate and distinct from those of the persons composing it as well as from that of any other legal entity to which it may be related.37 Resultantly, absent any clear proof to the contrary, SEM is a separate and distinct entity from MMC.

The Court of Appeals pathetically invokes the doctrine of piercing the corporate veil to legitimize the prohibited transfer or assignment of EP 133. It stresses that SEM is just a business conduit of MMC, hence, the distinct legal personalities of the two entities should not be recognized. True, the corporate mask may be removed when the corporation is just an alter ego or a mere conduit of a person or of another corporation.38 For reasons of public policy and in the interest of justice, the corporate veil will justifiably be impaled only when it becomes a shield for fraud, illegality or inequity committed against a third person.39 However, this Court has made a caveat in the application of the doctrine of piercing the corporate veil. Courts should be mindful of the milieu where it is to be applied. Only in cases where the corporate fiction was misused to such an extent that injustice, fraud or crime was committed against another, in disregard of its rights may the veil be pierced and removed. Thus, a subsidiary corporation may be made to answer for the liabilities and/or illegalities done by the parent corporation if the former was organized for the purpose of evading obligations that the latter may have entered into. In other words, this doctrine is in place in order to expose and hold liable a corporation which commits illegal acts and use the corporate fiction to avoid liability from the said acts. The doctrine of piercing the corporate veil cannot therefore be used as a vehicle to commit prohibited acts because these acts are the ones which the doctrine seeks to prevent.

To our mind, the application of the foregoing doctrine is unwarranted. The assignment of the permit in favor of SEM is utilized to circumvent the condition of non-transferability of the exploration permit. To allow SEM to avail itself of this doctrine and to approve the validity of the assignment is tantamount to sanctioning illegal act which is what the doctrine precisely seeks to forestall.

Quite apart from the above, a cursory consideration of the mining law pertinent to the case, will, indeed, demonstrate the infraction committed by MMC in its assignment of EP 133 to SEM.

Presidential Decree No. 463, enacted on 17 May 1974, otherwise known as the Mineral Resources Development Decree, which governed the old system of exploration, development, and utilization of mineral resources through "license, concession or lease" prescribed:

SEC. 97. Assignment of Mining Rights. – A mining lease contract or any interest therein shall not be transferred, assigned, or subleased without the prior approval of the Secretary: Provided, That such transfer, assignment or sublease may be made only to a qualified person possessing the resources and capability to continue the mining operations of the lessee and that the assignor has complied with all the obligations of the lease: Provided, further, That such transfer or assignment shall be duly registered with the office of the mining recorder concerned. (Emphasis supplied.)

The same provision is reflected in Republic Act No. 7942, otherwise known as the Philippine Mining Act of 1995, which is the new law governing the exploration, development and utilization of the natural resources, which provides:

SEC. 25. Transfer or Assignment. - An exploration permit may be transferred or assigned to a qualified person subject to the approval of the Secretary upon the recommendation of the Director.

The records are bereft of any indication that the assignment bears the imprimatur of the Secretary of the DENR. Presidential Decree No. 463, which is the governing law when the assignment was executed, explicitly requires that the transfer or assignment of mining rights, including the right to explore a mining area, must be with the prior approval of the Secretary of DENR. Quite conspicuously, SEM did not dispute the allegation that the Deed of Assignment was made without the prior approval of the Secretary of DENR. Absent the prior approval of the Secretary of DENR, the assignment of EP 133, was, therefore, without legal effect for violating the mandatory provision of Presidential Decree No. 463.

An added significant omission proved fatal to MMC/SEM’s cause. While it is true that the case of Apex Mining Co., Inc. v. Garcia40 settled the issue of which between Apex and MMC validly acquired mining rights over the disputed area, such rights, though, had been extinguished by subsequent events. Records indicate that on 6 July 1993, EP 133 was extended for 12 months or until 6 July 1994.41 MMC never renewed its permit prior and after its expiration. Thus, EP 133 expired by non-renewal.

With the expiration of EP 133 on 6 July 1994, MMC lost any right to the Diwalwal Gold Rush Area. SEM, on the other hand, has not acquired any right to the said area because the transfer of EP 133 in its favor is invalid. Hence, both MMC and SEM have not acquired any vested right over the 4,941.6759 hectares which used to be covered by EP 133.

II

The Court of Appeals theorizes that DAO No. 66 was issued beyond the power of the DENR Secretary since the power to withdraw lands from forest reserves and to declare the same as an area open for mining operation resides in the President.

Under Proclamation No. 369 dated 27 February 1931, the power to convert forest reserves as non-forest reserves is vested with the DENR Secretary. Proclamation No. 369 partly states:

From this reserve shall be considered automatically excluded all areas which had already been certified and which in the future may be proclaimed as classified and certified lands and approved by the Secretary of Agriculture and Natural Resources.42

However, a subsequent law, Commonwealth Act No. 137, otherwise known as "The Mining Act" which was approved on 7 November 1936 provides:

Sec. 14. Lands within reservations for purposes other than mining, which, after such reservation is made, are found to be more valuable for their mineral contents than for the purpose for which the reservation was made, may be withdrawn from such reservations by the President with the concurrence of the National Assembly, and thereupon such lands shall revert to the public domain and be subject to disposition under the provisions of this Act.

Unlike Proclamation No. 369, Commonwealth Act No. 137 vests solely in the President, with the concurrence of the National Assembly, the power to withdraw forest reserves found to be more valuable for their mineral contents than for the purpose for which the reservation was made and convert the same into non-forest reserves. A similar provision can also be found in Presidential Decree No. 463 dated 17 May 1974, with the modifications that (1) the declaration by the President no longer requires the concurrence of the National Assembly and (2) the DENR Secretary merely exercises the power to recommend to the President which forest reservations are to be withdrawn from the coverage thereof. Section 8 of Presidential Decree No. 463 reads:

SEC. 8. Exploration and Exploitation of Reserved Lands. – When lands within reservations, which have been established for purposes other than mining, are found to be more valuable for their mineral contents, they may, upon recommendation of the Secretary be withdrawn from such reservation by the President and established as a mineral reservation.

Against the backdrop of the applicable statutes which govern the issuance of DAO No. 66, this Court is constrained to rule that said administrative order was issued not in accordance with the laws. Inescapably, DAO No. 66, declaring 729 hectares of the areas covered by the Agusan-Davao-Surigao Forest Reserve as non-forest land open to small-scale mining operations, is null and void as, verily, the DENR Secretary has no power to convert forest reserves into non-forest reserves.

III

It is the contention of Apex that its right over the Diwalwal gold rush area is superior to that of MMC or that of SEM because it was the first one to occupy and take possession of the area and the first to record its mining claims over the area.

For its part, Balite argues that with the issuance of DAO No. 66, its occupation in the contested area, particularly in the 729 hectares small-scale mining area, has entitled it to file its MPSA. Balite claims that its MPSA application should have been given preference over that of SEM because it was filed ahead.

The MAB, on the other hand, insists that the issue on who has superior right over the disputed area has become moot and academic by the supervening events. By virtue of Proclamation No. 297 dated 25 November 2002, the disputed area was declared a mineral reservation.

Proclamation No. 297 excluded an area of 8,100 hectares located in Monkayo, Compostela Valley, and proclaimed the same as mineral reservation and as environmentally critical area, viz:

WHEREAS, by virtue of Proclamation No. 369, series of 1931, certain tracts of public land situated in the then provinces of Davao, Agusan and Surigao, with an area of approximately 1,927,400 hectares, were withdrawn from settlement and disposition, excluding, however, those portions which had been certified and/or shall be classified and certified as non-forest lands;

WHEREAS, gold deposits have been found within the area covered by Proclamation No. 369, in the Municipality of Monkayo, Compostela Valley Province, and unregulated small to medium-scale mining operations have, since 1983, been undertaken therein, causing in the process serious environmental, health, and peace and order problems in the area;

WHEREAS, it is in the national interest to prevent the further degradation of the environment and to resolve the health and peace and order problems spawned by the unregulated mining operations in the said area;

WHEREAS, these problems may be effectively addressed by rationalizing mining operations in the area through the establishment of a mineral reservation;

WHEREAS, after giving due notice, the Director of Mines and Geoxciences conducted public hearings on September 6, 9 and 11, 2002 to allow the concerned sectors and communities to air their views regarding the establishment of a mineral reservation in the place in question;

WHEREAS, pursuant to the Philippine Mining Act of 1995 (RA 7942), the President may, upon the recommendation of the Director of Mines and Geosciences, through the Secretary of Environment and Natural Resources, and when the national interest so requires, establish mineral reservations where mining operations shall be undertaken by the Department directly or thru a contractor;

WHEREAS, as a measure to attain and maintain a rational and orderly balance between socio-economic growth and environmental protection, the President may, pursuant to Presidential Decree No. 1586, as amended, proclaim and declare certain areas in the country as environmentally critical;

NOW, THEREFORE, I, GLORIA MACAPAGAL-ARROYO, President of the Philippines, upon recommendation of the Secretary of the Department of Environment and Natural Resources (DENR), and by virtue of the powers vested in me by law, do hereby exclude certain parcel of land located in Monkayo, Compostela Valley, and proclaim the same as mineral reservation and as environmentally critical area, with metes and bound as defined by the following geographical coordinates;

x x x x

with an area of Eight Thousand One Hundred (8,100) hectares, more or less. Mining operations in the area may be undertaken either by the DENR directly, subject to payment of just compensation that may be due to legitimate and existing claimants, or thru a qualified contractor, subject to existing rights, if any.

The DENR shall formulate and issue the appropriate guidelines, including the establishment of an environmental and social fund, to implement the intent and provisions of this Proclamation.

Upon the effectivity of the 1987 Constitution, the State assumed a more dynamic role in the exploration, development and utilization of the natural resources of the country.43 With this policy, the State may pursue full control and supervision of the exploration, development and utilization of the country’s natural mineral resources. The options open to the State are through direct undertaking or by entering into co-production, joint venture, or production-sharing agreements, or by entering into agreement with foreign-owned corporations for large-scale exploration, development and utilization.44 Thus, Article XII, Section 2, of the 1987 Constitution, specifically states:

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

x x x x

The President may enter into agreements with foreign-owned corporations involving either technical or financial assistance for large-scale exploration, development, and utilization of minerals, petroleum, and other mineral oils according to the general terms and conditions provided by law, based on real contributions to the economic growth and general welfare of the country. x x x (Underscoring supplied.)

Recognizing the importance of the country’s natural resources, not only for national economic development, but also for its security and national defense, Section 5 of Republic Act No. 7942 empowers the President, when the national interest so requires, to establish mineral reservations where mining operations shall be undertaken directly by the State or through a contractor.

To implement the intent and provisions of Proclamation No. 297, the DENR Secretary issued DAO No. 2002-18 dated 12 August 2002 declaring an emergency situation in the Diwalwal Gold Rush Area and ordering the stoppage of all mining operations therein.

The issue on who has priority right over the disputed area is deemed overtaken by the above subsequent developments particularly with the issuance of Proclamation 297 and DAO No. 2002-18, both being constitutionally-sanctioned acts of the Executive Branch. Mining operations in the Diwalwal Mineral Reservation are now, therefore, within the full control of the State through the executive branch. Pursuant to Section 5 of Republic Act No. 7942, the State can either directly undertake the exploration, development and utilization of the area or it can enter into agreements with qualified entities, viz:

SEC 5. Mineral Reservations. – When the national interest so requires, such as when there is a need to preserve strategic raw materials for industries critical to national development, or certain minerals for scientific, cultural or ecological value, the President may establish mineral reservations upon the recommendation of the Director through the Secretary. Mining operations in existing mineral reservations and such other reservations as may thereafter be established, shall be undertaken by the Department or through a contractor x x x .

It is now up to the Executive Department whether to take the first option, i.e., to undertake directly the mining operations of the Diwalwal Gold Rush Area. As already ruled, the State may not be precluded from considering a direct takeover of the mines, if it is the only plausible remedy in sight to the gnawing complexities generated by the gold rush. The State need be guided only by the demands of public interest in settling on this option, as well as its material and logistic feasibility.45 The State can also opt to award mining operations in the mineral reservation to private entities including petitioners Apex and Balite, if it wishes. The exercise of this prerogative lies with the Executive Department over which courts will not interfere.

WHEREFORE, premises considered, the Petitions of Apex, Balite and the MAB are PARTIALLY GRANTED, thus:

1. We hereby REVERSE and SET ASIDE the Decision of the Court of Appeals, dated 13 March 2002, and hereby declare that EP 133 of MMC has EXPIRED on 7 July 1994 and that its subsequent transfer to SEM on 16 February 1994 is VOID.

2. We AFFIRM the finding of the Court of Appeals in the same Decision declaring DAO No. 66 illegal for having been issued in excess of the DENR Secretary’s authority.

Consequently, the State, should it so desire, may now award mining operations in the disputed area to any qualified entity it may determine. No costs.

SO ORDERED.

MINITA V. CHICO-NAZARIOAssociate Justice