APEX MINING CO., INC., v. Southeast Mindanao Gold Mining Corp. et al.

G.R. Nos. 152613 & 152628,                            November 20, 2009

FACTS
In its June 2006 decision, the Supreme Court held that
the assignment of Exploration Permit (EP) 133 in favor of SEM violated one of the
conditions stipulated in the permit, that the same shall be for the exclusive use and
benefit of Marcopper Mining Corporation (MMC) or its duly authorized agents.
Because SEM did not claim or submit evidence that it was a designated agent of
MMC, the latter cannot be considered as an agent of the former that can use EP
133 and benefit from it.
the transfer of EP 133 violated Presidential Decree No. 463, which requires that the
assignment of a mining right be made with the prior approval of the Secretary of
the Department of Environment and Natural Resources (DENR).
the EP 133 expired by non-renewal since it was not renewed before or after its
expiration.
Proclamation No. 297 is valid absent any question against its validity. IN relation,
under Section 5 of Republic Act No. 7942, mining operations in mineral
reservations may be undertaken directly by the State or through a contractor, the
Court deemed the issue of ownership of priority right as having been overtaken by
the said proclamation.
It is now within the prerogative of the Executive Department to undertake directly
the mining operations of the disputed area or to award the operations to private
entities such as Apex, subject to applicable laws, rules and regulations, and
provided that these private entities are qualified.
Southeast Mindanao Gold Mining Corporation (SEM) filed a motion for
reconsideration of the Supreme Court’s assailed decision. Apex filed a Motion for
Clarification asking that the Court elucidate on the Decision’s pronouncement that
“mining operations, are now, therefore within the full control of the State through
the executive branch.”  Moreover it asked the  Court to order the Mines and
Geosciences Board (MGB) to accept its application for an exploration permit.
Balite echoes the same concern as that of Apex on the actual takeover by the State
of the mining industry in the disputed area to the exclusion of the private sector.  In
addition, Balite prayed that the Court will direct MGB to accept its application for
an exploration permit.
ISSUES
Whether the transfer or assignment of Exploration Permit (EP) 133 by MMC to
SEM was validly made without violating any of the terms and conditions set forth
in Presidential Decree No. 463 and EP 133 itself.
Whether Southeast Mindanao Mining Corp. acquired a vested right over the
disputed area, which constitutes a property right protected by the Constitution.
Assuming that the legality/constitutionality of Proclamation No. 297 was timely
raised, whether said proclamation violates Article XII, Section 4 of the
Constitution.
Whether RA 7942 is the applicable law.
 
RULING                                                                                                                       
                     
No, the assignment of EP 133 violated its terms and conditions and Sec. 97, PD
463. Section 97 is entitled, “Assignment of Mining Rights.”  This hints that before
mining rights — namely, the rights to explore, develop and utilize — are
transferred or assigned, prior approval must be obtained from the DENR Secretary.
An exploration permit, thus, cannot be assigned without the imprimatur of the
Secretary of the DENR.
While Presidential Decree No. 463 has already been repealed by Executive Order
No. 279, the administrative aspect of the former law nonetheless remains
applicable.  Hence, the transfer or assignment of exploration permits still needs the
prior approval of the Secretary of the DENR.
In addition, the terms of the permit was violated. 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.
No, SEM does not acquire aver or prove that its mining rights had been perfected
and completed when the Philippine Bill of 1902 was still the operative law.
It is impossible for SEM to successfully assert that it acquired mining rights over
the disputed area in accordance with the same bill, since it was only in 1984 that
MMC, SEM’s predecessor-in-interest, filed its declaration of locations and its
prospecting permit application in compliance with Presidential Decree No. 463.  It
was on 1 July 1985 and 10 March 1986 that a Prospecting Permit and EP 133,
respectively, were issued to MMC.  Considering these facts, there is no possibility
that MMC or SEM could have acquired a perfected mining claim under the
auspices of the Philippine Bill of 1902.
SEM likens EP 133 with a building permit. SEM likewise equates its supposed
rights attached to the exploration permit with the rights that a private property land
owner has to said landholding.  This analogy has no basis in law.
In addition, national wealth, such as mineral resources, are owned by the State and
not by their discoverer.  The discoverer or locator can only develop and utilize said
minerals for his own benefit if he has complied with all the requirements set forth
by applicable laws and if the State has conferred on him such right through
permits, concessions or agreements.  Without the imprimatur of the State, any
mining aspirant does not have any definitive right over the mineral land because,
unlike a private landholding, mineral land is owned by the State, and the same
cannot be alienated to any private person as explicitly stated in Section 2, Article
XIV of the 1987 Constitution.
The right that SEM acquired was limited to exploration, only because MMC was a
mere holder of an exploration permit.  As previously explained, SEM did not
acquire the rights inherent in the permit, as the assignment by MMC to SEM was
done in violation of the condition stipulated in the permit, and the assignment was
effected without the approval of the proper authority in contravention of the
provision of the mining law governing at that time.  In addition, the permit expired
on 6 July 1994.  It is, therefore, quite clear that SEM has no right over the area.
An exploration permit does not automatically ripen into a right to extract and
utilize the minerals; much less does it develop into a vested right.  The holder of an
exploration permit only has the right to conduct exploration works on the area
awarded.  Presidential Decree No. 463 defined exploration as “the examination and
investigation of lands supposed to contain valuable minerals, by drilling, trenching,
shaft sinking, tunneling, test pitting and other means, for the purpose of probing
the presence of mineral deposits and the extent thereof.”  Exploration does not
include development and exploitation of the minerals found.  Development is
defined by the same statute as the steps necessarily taken to reach an ore body or
mineral deposit so that it can be mined, whereas exploitation is defined as “the
extraction and utilization of mineral deposits.”  An exploration permit is nothing
more than a mere right accorded to its holder to be given priority in the
government’s consideration in the granting of the right to develop and utilize the
minerals over the area.  An exploration permit is merely inchoate, in that the holder
still has to comply with the terms and conditions embodied in the permit
SEM did not acquire the rights attached to EP 133, since their transfer was without
legal effect.  Granting for the sake of argument that SEM was a valid transferee of
the permit, its right is not that of a mining contractor.  An exploration permit
grantee is vested with the right to conduct exploration only, while an FTAA or
MPSA contractor is authorized to extract and carry off the mineral resources that
may be discovered in the area. An exploration permit holder still has to comply
with the mining project feasibility and other requirements under the mining law.  It
has to obtain approval of such accomplished requirements from the appropriate
government agencies.  Upon obtaining this approval, the exploration permit holder
has to file an application for an FTAA or an MPSA and have it approved also. 
Until the MPSA application of SEM is approved, it cannot lawfully claim that it
possesses the rights of an MPSA or FTAA holder. But again, SEM is not qualified
to apply for an FTAA or any mineral agreement, considering that it is not a holder
of a valid exploration permit, since EP 133 expired by non-renewal and the transfer
to it of the same permit has no legal value.
No, Proclamation No. 297 does not violate the following:
Article XII, Sec. 4: It is only after the specific limits of the forest lands shall have
been determined by the legislature will this constitutional restriction apply. SEM
does not allege nor present any evidence that Congress had already enacted a
statute determining with specific limits forest lands and national parks. In addition,
there is nothing in the constitutional provision that prohibits the President from
declaring a forest land as an environmentally critical area and from regulating the
mining operations therein by declaring it as a mineral reservation in order to
prevent the further degradation of the forest environment and to resolve the health
and peace and order problems that beset the area.
There is nothing contradictory between the two.  Proclamation No. 297, a measure
to attain and maintain a rational and orderly balance between socio-economic
growth and environmental protection, jibes with the constitutional policy of
preserving and protecting the forest lands from being further devastated by
denudation. In other words, the proclamation in question is in line with Section 4,
Article XII of the Constitution, as the former fosters the preservation of the forest
environment of the Diwalwal area and is aimed at preventing the further
degradation of the same.
Yes, RA 7942 is the applicable law. Proclamation No. 297, declaring a certain
portion of land located in Monkayo, Compostela Valley, with an area of 8,100
hectares, more or less, as a mineral reservation, was issued by the President
pursuant to Section 5 of Republic Act No. 7942, also known as the “Philippine
Mining Act of 1995.” Section 5 of Republic Act No. 7942 authorizes the President
to establish mineral reservations

GR NO. 163101

Benguet Corporation vs. DENR

FACTS
Benguet Corporation (“Benguet”) and J.G. Realty and Mining (“J.G. Realty”)
entered into a Royalty Agreement with Option to Purchase (“RAWOP”), wherein
J.G. Realty was acknowledged as the owner of four mining claims covered by
Mineral Production Sharing Agreement (“MPSA”) Application No. APSA-V-0009
jointly filed by J.G. Realty as claimowner and Benguet as operator.  The RAWOP,
among others, provide that “any disputes x x x between Benguet and [J.G. Realty]
with reference to anything whatsoever pertaining to [the RAWOP]  x x x shall not
be cause of any action x x x in any court or administrative agency but shall x x x be
referred to a Board of Arbitrators consisting of three (3) members, one to be
selected by Benguet, another to be selected by [J.G. Realty] and the third to be
selected by the aforementioned two arbitrators so appointed.”

J.G. Realty subsequently informed Benguet that it was terminating the RAWOP by
reason of Benguet’s failure to comply with its obligations thereunder.  J.G. Realty
sought the cancellation of the RAWOP, filing a petition for this purpose with the
Panel of Arbitrators (“POA”)  having territorial jurisdiction over the mining area
involved.  In its Decision, the POA declared the RAWOP cancelled. Benguet then
filed a notice of appeal with the MAB. The decision was affirmed on appeal to the
Mines Adjudication Board (“MAB”).

Benguet contended that the issue raised by the J.G. Realty should have been raised
first with the arbitration before POA took cognizance of the case.

ISSUE

WON the controversy should have first been submitted to arbitration before the
POA

HELD

YES. Sec. 2 of RA 876 elucidates the scope of arbitration:

 
Section 2. Persons and matters subject to arbitration.Two or more persons or
parties may submit to the arbitration of one or more arbitrators any controversy
existing between them at the time of the submission and which may be the subject
of an action, or the parties to any contract may in such contract agree to settle by
arbitration a controversy thereafter arising between them. Such submission or
contract shall be valid, enforceable and irrevocable, save upon such grounds as
exist at law for the revocation of any contract.

In RA 9285 or the Alternative Dispute Resolution Act of 2004, the Congress

reiterated the efficacy of arbitration as an alternative mode of dispute resolution by
stating in Sec. 32 thereof that domestic arbitration shall still be governed by RA
876. Clearly, a contractual stipulation that requires prior resort to voluntary
arbitration before the parties can go directly to court is not illegal and is in fact
promoted by the State.