Republic of the PhilippinesSUPREME COURT

Manila

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.

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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.

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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; and

e) 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 hectares

c) 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

Republic of the PhilippinesSUPREME COURT

Manila

FIRST DIVISION

G.R. No. 157882 March 30, 2006

DIDIPIO EARTH-SAVERS’ MULTI-PURPOSE ASSOCIATION, INCORPORATED (DESAMA), MANUEL BUTIC, CESAR MARIANO, LAURO ABANCE, BEN TAYABAN, ANTONIO DINGCOG, TEDDY B. KIMAYONG, ALONZO ANANAYO, ANTONIO MALAN-UYA, JOSE BAHAG, ANDRES INLAB, RUFINO LICYAYO, ALFREDO CULHI, CATALILNA INABYUHAN, GUAY DUMMANG, GINA PULIDO, EDWIN ANSIBEY, CORAZON SICUAN, LOPEZ DUMULAG, FREDDIE AYDINON, VILMA JOSE, FLORENTINA MADDAWAT, LINDA DINGCOG, ELMER SICUAN, GARY ANSIBEY, JIMMY MADDAWAT, JIMMY GUAY, ALFREDO CUT-ING, ANGELINA UDAN, OSCAR INLAB, JUANITA CUT-ING, ALBERT PINKIHAN, CECILIA TAYABAN, CRISTA BINWAK,

PEDRO DUGAY, SR., EDUARDO ANANAYO, ROBIN INLAB, JR., LORENZO PULIDO, TOMAS BINWAG, EVELYN BUYA, JAIME DINGCOG, DINAOAN CUT-ING, PEDRO DONATO, MYRNA GUAY, FLORA ANSIBEY, GRACE DINAMLING, EDUARDO MENCIAS, ROSENDA JACOB, SIONITA DINGCOG, GLORIA JACOB, MAXIMA GUAY, RODRIGO PAGGADUT, MARINA ANSIBEY, TOLENTINO INLAB, RUBEN DULNUAN, GERONIMO LICYAYO, LEONCIO CUMTI, MARY DULNUAN, FELISA BALANBAN, MYRNA DUYAN, MARY MALAN-UYA, PRUDENCIO ANSIBEY, GUILLERMO GUAY, MARGARITA CULHI, ALADIN ANSIBEY, PABLO DUYAN, PEDRO PUGUON, JULIAN INLAB, JOSEPH NACULON, ROGER BAJITA, DINAON GUAY, JAIME ANANAYO, MARY ANSIBEY, LINA ANANAYO, MAURA DUYAPAT, ARTEMEO ANANAYO, MARY BABLING, NORA ANSIBEY, DAVID DULNUAN, AVELINO PUGUON, LUCAS GUMAWI, LUISA ABBAC, CATHRIN GUWAY, CLARITA TAYABAN, FLORA JAVERA, RANDY SICOAN, FELIZA PUTAKI, CORAZON P. DULNUAN, NENA D. BULLONG, ERMELYN GUWAY, GILBERT BUTALE, JOSEPH B. BULLONG, FRANCISCO PATNAAN, JR., SHERWIN DUGAY, TIRSO GULLINGAY, BENEDICT T. NABALLIN, RAMON PUN-ADWAN, ALFONSO DULNUAN, CARMEN D. BUTALE, LOLITA ANSIBEY, ABRAHAM DULNUAN, ARLYNDA BUTALE, MODESTO A. ANSIBEY, EDUARDO LUGAY, ANTONIO HUMIWAT, ALFREDO PUMIHIC, MIKE TINO, TONY CABARROGUIS, BASILIO TAMLIWOK, JR., NESTOR TANGID, ALEJO TUGUINAY, BENITO LORENZO, RUDY BAHIWAG, ANALIZA BUTALE, NALLEM LUBYOC, JOSEPH DUHAYON, RAFAEL CAMPOL, MANUEL PUMALO, DELFIN AGALOOS, PABLO CAYANGA, PERFECTO SISON, ELIAS NATAMA, LITO PUMALO, SEVERINA DUGAY, GABRIEL PAKAYAO, JEOFFREY SINDAP, FELIX TICUAN, MARIANO S. MADDELA, MENZI TICAWA, DOMINGA DUGAY, JOE BOLINEY, JASON ASANG, TOMMY ATENYAYO, ALEJO AGMALIW, DIZON AGMALIW, EDDIE ATOS, FELIMON BLANCO, DARRIL DIGOY, LUCAS BUAY, ARTEMIO BRAZIL, NICANOR MODI, LUIS REDULFIN, NESTOR JUSTINO, JAIME CUMILA, BENEDICT GUINID, EDITHA ANIN, INOH-YABAN BANDAO, LUIS BAYWONG, FELIPE DUHALNGON, PETER

BENNEL, JOSEPH T. BUNGGALAN, JIMMY B. KIMAYONG, HENRY PUGUON, PEDRO BUHONG, BUGAN NADIAHAN, SR., MARIA EDEN ORLINO, SPC, PERLA VISSORO, and BISHOP RAMON VILLENA, Petitioners, vs.ELISEA GOZUN, in her capacity as SECRETARY of the DEPARTMENT OF ENVIRONMENT and NATURAL RESOURCES (DENR), HORACIO RAMOS, in his capacity as Director of the Mines and Geosciences Bureau (MGB-DENR), ALBERTO ROMULO, in his capacity as the Executive Secretary of the Office of the President, RICHARD N. FERRER, in his capacity as Acting Undersecretary of the Office of the President, IAN HEATH SANDERCOCK, in his capacity as President of CLIMAX-ARIMCO Mining Corporation.Respondents.

D E C I S I O N

CHICO-NAZARIO, J.:

This petition for prohibition and mandamus under Rule 65 of the Rules of Court assails the constitutionality of Republic Act No. 7942 otherwise known as the Philippine Mining Act of 1995, together with the Implementing Rules and Regulations issued pursuant thereto, Department of Environment and Natural Resources (DENR) Administrative Order No. 96-40, s. 1996 (DAO 96-40) and of the Financial and Technical Assistance Agreement (FTAA) entered into on 20 June 1994 by the Republic of the Philippines and Arimco Mining Corporation (AMC), a corporation established under the laws of Australia and owned by its nationals.

On 25 July 1987, then President Corazon C. Aquino promulgated

Executive Order No. 279 which authorized the DENR Secretary to accept, consider and evaluate proposals from foreign-owned corporations or foreign investors for contracts of 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.

On 3 March 1995, then President Fidel V. Ramos signed into law Rep. Act No. 7942 entitled, "An Act Instituting A New System of Mineral Resources Exploration, Development, Utilization and Conservation," otherwise known as the Philippine Mining Act of 1995.

On 15 August 1995, then DENR Secretary Victor O. Ramos issued DENR Administrative Order (DAO) No. 23, Series of 1995, containing the implementing guidelines of Rep. Act No. 7942. This was soon superseded by DAO No. 96-40, s. 1996, which took effect on 23 January 1997 after due publication.

Previously, however, or specifically on 20 June 1994, President Ramos executed an FTAA with AMC over a total land area of 37,000 hectares covering the provinces of Nueva Vizcaya and Quirino. Included in this area is Barangay Dipidio, Kasibu, Nueva Vizcaya.

Subsequently, AMC consolidated with Climax Mining Limited to form a single company that now goes under the new name of Climax-Arimco Mining Corporation (CAMC), the controlling 99% of stockholders of which are Australian nationals.

On 7 September 2001, counsels for petitioners filed a demand letter addressed to then DENR Secretary Heherson Alvarez, for the cancellation of the CAMC FTAA for the primary reason that Rep. Act No. 7942 and its Implementing Rules and Regulations DAO 96-40 are unconstitutional. The Office of the Executive Secretary was also furnished a copy of the said letter. There being no response to

both letters, another letter of the same content dated 17 June 2002 was sent to President Gloria Macapagal Arroyo. This letter was indorsed to the DENR Secretary and eventually referred to the Panel of Arbitrators of the Mines and Geosciences Bureau (MGB), Regional Office No. 02, Tuguegarao, Cagayan, for further action.

On 12 November 2002, counsels for petitioners received a letter from the Panel of Arbitrators of the MGB requiring the petitioners to comply with the Rules of the Panel of Arbitrators before the letter may be acted upon.

Yet again, counsels for petitioners sent President Arroyo another demand letter dated 8 November 2002. Said letter was again forwarded to the DENR Secretary who referred the same to the MGB, Quezon City.

In a letter dated 19 February 2003, the MGB rejected the demand of counsels for petitioners for the cancellation of the CAMC FTAA.1avvphil.net

Petitioners thus filed the present petition for prohibition and mandamus, with a prayer for a temporary restraining order. They pray that the Court issue an order:

1. enjoining public respondents from acting on any application for FTAA;

2. declaring unconstitutional the Philippine Mining Act of 1995 and its Implementing Rules and Regulations;

3. canceling the FTAA issued to CAMC.

In their memorandum petitioners pose the following issues:

I

Whether or not Republic Act No. 7942 and the CAMC FTAA are void because they allow the unjust and unlawful taking of property without payment of just compensation , in violation of Section 9, Article III of the Constitution.

II

Whether or not the Mining Act and its Implementing Rules and Regulations are void and unconstitutional for sanctioning an unconstitutional administrative process of determining just compensation.

III

Whether or not the State, through Republic Act No. 7942 and the CAMC FTAA, abdicated its primary responsibility to the full control and supervision over natural resources.

IV

Whether or not the respondents’ interpretation of the role of wholly foreign and foreign-owned corporations in their involvement in mining enterprises, violates paragraph 4, section 2, Article XII of the Constitution.

V

WHETHER OR NOT THE 1987 CONSTITUTION PROHIBITS SERVICE CONTRACTS.1

Before going to the substantive issues, the procedural question raised by public respondents shall first be dealt with. Public respondents are of the view that petitioners’ eminent domain claim is not ripe for adjudication as they fail to allege that CAMC has actually taken their properties nor do they allege that their property rights have been endangered or are in danger on account of

CAMC’s FTAA. In effect, public respondents insist that the issue of eminent domain is not a justiciable controversy which this Court can take cognizance of.

A justiciable controversy is defined as a definite and concrete dispute touching on the legal relations of parties having adverse legal interests which may be resolved by a court of law through the application of a law.2 Thus, courts have no judicial power to review cases involving political questions and as a rule, will desist from taking cognizance of speculative or hypothetical cases, advisory opinions and cases that have become moot.3 The Constitution is quite explicit on this matter.4 It provides that judicial power includes the duty of the courts of justice to settle actual controversies involving rights which are legally demandable and enforceable. Pursuant to this constitutional mandate, courts, through the power of judicial review, are to entertain only real disputes between conflicting parties through the application of law. For the courts to exercise the power of judicial review, the following must be extant (1) there must be an actual case calling for the exercise of judicial power; (2) the question must be ripe for adjudication; and (3) the person challenging must have the "standing."5

An actual case or controversy involves a conflict of legal rights, an assertion of opposite legal claims, susceptible of judicial resolution as distinguished from a hypothetical or abstract difference or dispute.6 There must be a contrariety of legal rights that can be interpreted and enforced on the basis of existing law and jurisprudence.

Closely related to the second requisite is that the question must be ripe for adjudication. A question is considered ripe for adjudication when the act being challenged has had a direct adverse effect on the individual challenging it.7

The third requisite is legal standing or locus standi. It is defined as a personal or 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, alleging more than a generalized grievance.8 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."9 Unless a person is injuriously affected in any of his constitutional rights by the operation of statute or ordinance, he has no standing.10

In the instant case, there exists a live controversy involving a clash of legal rights as Rep. Act No. 7942 has been enacted, DAO 96-40 has been approved and an FTAAs have been entered into. The FTAA holders have already been operating in various provinces of the country. Among them is CAMC which operates in the provinces of Nueva Vizcaya and Quirino where numerous individuals including the petitioners are imperiled of being ousted from their landholdings in view of the CAMC FTAA. In light of this, the court cannot await the adverse consequences of the law in order to consider the controversy actual and ripe for judicial intervention.11

Actual eviction of the land owners and occupants need not happen for this Court to intervene. As held in Pimentel, Jr. v. Hon. Aguirre12:

By the mere enactment of the questioned law or the approval of the challenged act, the dispute is said to have ripened into a judicial controversy even without any other overt act. Indeed, even a singular violation of the Constitution and/or the law is enough to awaken judicial duty.13

Petitioners embrace various segments of the society. These include Didipio Earth-Savers’ Multi-Purpose Association, Inc., an organization of farmers and indigenous peoples organized under Philippine laws, representing a community actually affected by the mining activities of CAMC, as well as other residents of areas affected by the mining activities of CAMC. These petitioners have the standing to raise the constitutionality of the questioned FTAA as they allege a personal and substantial injury.14 They assert that they are affected by the mining activities of CAMC. Likewise, they

are under imminent threat of being displaced from their landholdings as a result of the implementation of the questioned FTAA. They thus meet the appropriate case requirement as they assert an interest adverse to that of respondents who, on the other hand, claim the validity of the assailed statute and the FTAA of CAMC.

Besides, the transcendental importance of the issues raised and the magnitude of the public interest involved will have a bearing on the country’s economy which is to a greater extent dependent upon the mining industry. Also affected by the resolution of this case are the proprietary rights of numerous residents in the mining contract areas as well as the social existence of indigenous peoples which are threatened. Based on these considerations, this Court deems it proper to take cognizance of the instant petition.

Having resolved the procedural question, the constitutionality of the law under attack must be addressed squarely.

First Substantive Issue: Validity of Section 76 of Rep. Act No. 7942 and DAO 96-40

In seeking to nullify Rep. Act No. 7942 and its implementing rules DAO 96-40 as unconstitutional, petitioners set their sight on Section 76 of Rep. Act No. 7942 and Section 107 of DAO 96-40 which they claim allow the unlawful and unjust "taking" of private property for private purpose in contradiction with Section 9, Article III of the 1987 Constitution mandating that private property shall not be taken except for public use and the corresponding payment of just compensation. They assert that public respondent DENR, through the Mining Act and its Implementing Rules and Regulations, cannot, on its own, permit entry into a private property and allow taking of land without payment of just compensation.

Interpreting Section 76 of Rep. Act No. 7942 and Section 107 of DAO 96-40, juxtaposed with the concept of taking of property for purposes of eminent domain in the case of Republic v. Vda. de

Castellvi,15 petitioners assert that there is indeed a "taking" upon entry into private lands and concession areas.

Republic v. Vda. de Castellvi defines "taking" under the concept of eminent domain as entering upon private property for more than a momentary period, and, under the warrant or color of legal authority, devoting it to a public use, or otherwise informally appropriating or injuriously affecting it in such a way as to substantially oust the owner and deprive him of all beneficial enjoyment thereof.

From the criteria set forth in the cited case, petitioners claim that the entry into a private property by CAMC, pursuant to its FTAA, is for more than a momentary period, i.e., for 25 years, and renewable for another 25 years; that the entry into the property is under the warrant or color of legal authority pursuant to the FTAA executed between the government and CAMC; and that the entry substantially ousts the owner or possessor and deprives him of all beneficial enjoyment of the property. These facts, according to the petitioners, amount to taking. As such, petitioners question the exercise of the power of eminent domain as unwarranted because respondents failed to prove that the entry into private property is devoted for public use.

Petitioners also stress that even without the doctrine in the Castellvi case, the nature of the mining activity, the extent of the land area covered by the CAMC FTAA and the various rights granted to the proponent or the FTAA holder, such as (a) the right of possession of the Exploration Contract Area, with full right of ingress and egress and the right to occupy the same; (b) the right not to be prevented from entry into private lands by surface owners and/or occupants thereof when prospecting, exploring and exploiting for minerals therein; (c) the right to enjoy easement rights, the use of timber, water and other natural resources in the Exploration Contract Area; (d) the right of possession of the Mining Area, with full right of ingress and egress and the right to occupy the same; and (e) the right to enjoy easement rights, water and

other natural resources in the Mining Area, result in a taking of private property.

Petitioners quickly add that even assuming arguendo that there is no absolute, physical taking, at the very least, Section 76 establishes a legal easement upon the surface owners, occupants and concessionaires of a mining contract area sufficient to deprive them of enjoyment and use of the property and that such burden imposed by the legal easement falls within the purview of eminent domain.

To further bolster their claim that the legal easement established is equivalent to taking, petitioners cite the case of National Power Corporation v. Gutierrez16 holding that the easement of right-of-way imposed against the use of the land for an indefinite period is a taking under the power of eminent domain.

Traversing petitioners’ assertion, public respondents argue that Section 76 is not a taking provision but a valid exercise of the police power and by virtue of which, the state may prescribe regulations to promote the health, morals, peace, education, good order, safety and general welfare of the people. This government regulation involves the adjustment of rights for the public good and that this adjustment curtails some potential for the use or economic exploitation of private property. Public respondents concluded that "to require compensation in all such circumstances would compel the government to regulate by purchase."

Public respondents are inclined to believe that by entering private lands and concession areas, FTAA holders do not oust the owners thereof nor deprive them of all beneficial enjoyment of their properties as the said entry merely establishes a legal easement upon surface owners, occupants and concessionaires of a mining contract area.

Taking in Eminent Domain Distinguished from Regulation in Police Power

The power of eminent domain is the inherent right of the state (and of those entities to which the power has been lawfully delegated) to condemn private property to public use upon payment of just compensation.17 On the other hand, police power is the power of the state to promote public welfare by restraining and regulating the use of liberty and property.18 Although both police power and the power of eminent domain have the general welfare for their object, and recent trends show a mingling19 of the two with the latter being used as an implement of the former, there are still traditional distinctions between the two.

Property condemned under police power is usually noxious or intended for a noxious purpose; hence, no compensation shall be paid.20 Likewise, in the exercise of police power, property rights of private individuals are subjected to restraints and burdens in order to secure the general comfort, health, and prosperity of the state. Thus, an ordinance prohibiting theaters from selling tickets in excess of their seating capacity (which would result in the diminution of profits of the theater-owners) was upheld valid as this would promote the comfort, convenience and safety of the customers.21 In U.S. v. Toribio,22 the court upheld the provisions of Act No. 1147, a statute regulating the slaughter of carabao for the purpose of conserving an adequate supply of draft animals, as a valid exercise of police power, notwithstanding the property rights impairment that the ordinance imposed on cattle owners. A zoning ordinance prohibiting the operation of a lumber yard within certain areas was assailed as unconstitutional in that it was an invasion of the property rights of the lumber yard owners in People v. de Guzman.23 The Court nonetheless ruled that the regulation was a valid exercise of police power. A similar ruling was arrived at in Seng Kee S Co. v. Earnshaw and Piatt24 where an ordinance divided the City of Manila into industrial and residential areas.

A thorough scrutiny of the extant jurisprudence leads to a cogent deduction that where a property interest is merely restricted because the continued use thereof would be injurious to public welfare, or where property is destroyed because its continued existence would be injurious to public interest, there is no

compensable taking.25However, when a property interest is appropriated and applied to some public purpose, there is compensable taking.26

According to noted constitutionalist, Fr. Joaquin Bernas, SJ, in the exercise of its police power regulation, the state restricts the use of private property, but none of the property interests in the bundle of rights which constitute ownership is appropriated for use by or for the benefit of the public.27 Use of the property by the owner was limited, but no aspect of the property is used by or for the public.28

The deprivation of use can in fact be total and it will not constitute compensable taking if nobody else acquires use of the property or any interest therein.29

If, however, in the regulation of the use of the property, somebody else acquires the use or interest thereof, such restriction constitutes compensable taking. Thus, in City Government of Quezon City v. Ericta,30 it was argued by the local government that an ordinance requiring private cemeteries to reserve 6% of their total areas for the burial of paupers was a valid exercise of the police power under the general welfare clause. This court did not agree in the contention, ruling that property taken under the police power is sought to be destroyed and not, as in this case, to be devoted to a public use. It further declared that the ordinance in question was actually a taking of private property without just compensation of a certain area from a private cemetery to benefit paupers who are charges of the local government. Being an exercise of eminent domain without provision for the payment of just compensation, the same was rendered invalid as it violated the principles governing eminent domain.

In People v. Fajardo,31 the municipal mayor refused Fajardo permission to build a house on his own land on the ground that the proposed structure would destroy the view or beauty of the public plaza. The ordinance relied upon by the mayor prohibited the construction of any building that would destroy the view of the plaza from the highway. The court ruled that the municipal

ordinance under the guise of police power permanently divest owners of the beneficial use of their property for the benefit of the public; hence, considered as a taking under the power of eminent domain that could not be countenanced without payment of just compensation to the affected owners. In this case, what the municipality wanted was to impose an easement on the property in order to preserve the view or beauty of the public plaza, which was a form of utilization of Fajardo’s property for public benefit.32

While the power of eminent domain often results in the appropriation of title to or possession of property, it need not always be the case. Taking may include trespass without actual eviction of the owner, material impairment of the value of the property or prevention of the ordinary uses for which the property was intended such as the establishment of an easement.33 In Ayala de Roxas v. City of Manila,34 it was held that the imposition of burden over a private property through easement was considered taking; hence, payment of just compensation is required. The Court declared:

And, considering that the easement intended to be established, whatever may be the object thereof, is not merely a real right that will encumber the property, but is one tending to prevent the exclusive use of one portion of the same, by expropriating it for public use which, be it what it may, can not be accomplished unless the owner of the property condemned or seized be previously and duly indemnified, it is proper to protect the appellant by means of the remedy employed in such cases, as it is only adequate remedy when no other legal action can be resorted to, against an intent which is nothing short of an arbitrary restriction imposed by the city by virtue of the coercive power with which the same is invested.

And in the case of National Power Corporation v. Gutierrez,35

despite the NPC’s protestation that the owners were not totally deprived of the use of the land and could still plant the same crops as long as they did not come into contact with the wires, the Court nevertheless held that the easement of right-of-way was a taking

under the power of eminent domain. The Court said:

In the case at bar, the easement of right-of-way is definitely a taking under the power of eminent domain. Considering the nature and effect of the installation of 230 KV Mexico-Limay transmission lines, the limitation imposed by NPC against the use of the land for an indefinite period deprives private respondents of its ordinary use.

A case exemplifying an instance of compensable taking which does not entail transfer of title is Republic v. Philippine Long Distance Telephone Co.36 Here, the Bureau of Telecommunications, a government instrumentality, had contracted with the PLDT for the interconnection between the Government Telephone System and that of the PLDT, so that the former could make use of the lines and facilities of the PLDT. In its desire to expand services to government offices, the Bureau of Telecommunications demanded to expand its use of the PLDT lines. Disagreement ensued on the terms of the contract for the use of the PLDT facilities. The Court ruminated:

Normally, of course, the power of eminent domain results in the taking or appropriation of title to, and possession of, the expropriated property; but no cogent reason appears why said power may not be availed of to impose only a burden upon the owner of the condemned property, without loss of title and possession. It is unquestionable that real property may, through expropriation, be subjected to an easement right of way.37

In Republic v. Castellvi,38 this Court had the occasion to spell out the requisites of taking in eminent domain, to wit:

(1) the expropriator must enter a private property;

(2) the entry must be for more than a momentary period.

(3) the entry must be under warrant or color of legal authority;

(4) the property must be devoted to public use or otherwise informally appropriated or injuriously affected;

(5) the utilization of the property for public use must be in such a way as to oust the owner and deprive him of beneficial enjoyment of the property.

As shown by the foregoing jurisprudence, a regulation which substantially deprives the owner of his proprietary rights and restricts the beneficial use and enjoyment for public use amounts to compensable taking. In the case under consideration, the entry referred to in Section 76 and the easement rights under Section 75 of Rep. Act No. 7942 as well as the various rights to CAMC under its FTAA are no different from the deprivation of proprietary rights in the cases discussed which this Court considered as taking. Section 75 of the law in question reads:

Easement Rights. - When mining areas are so situated that for purposes of more convenient mining operations it is necessary to build, construct or install on the mining areas or lands owned, occupied or leased by other persons, such infrastructure as roads, railroads, mills, waste dump sites, tailing ponds, warehouses, staging or storage areas and port facilities, tramways, runways, airports, electric transmission, telephone or telegraph lines, dams and their normal flood and catchment areas, sites for water wells, ditches, canals, new river beds, pipelines, flumes, cuts, shafts, tunnels, or mills, the contractor, upon payment of just compensation, shall be entitled to enter and occupy said mining areas or lands.

Section 76 provides:

Entry into private lands and concession areas – Subject to prior notification, holders of mining rights shall not be prevented from

entry into private lands and concession areas by surface owners, occupants, or concessionaires when conducting mining operations therein.

The CAMC FTAA grants in favor of CAMC the right of possession of the Exploration Contract Area, the full right of ingress and egress and the right to occupy the same. It also bestows CAMC the right not to be prevented from entry into private lands by surface owners or occupants thereof when prospecting, exploring and exploiting minerals therein.

The entry referred to in Section 76 is not just a simple right-of-way which is ordinarily allowed under the provisions of the Civil Code. Here, the holders of mining rights enter private lands for purposes of conducting mining activities such as exploration, extraction and processing of minerals. Mining right holders build mine infrastructure, dig mine shafts and connecting tunnels, prepare tailing ponds, storage areas and vehicle depots, install their machinery, equipment and sewer systems. On top of this, under Section 75, easement rights are accorded to them where they may build warehouses, port facilities, electric transmission, railroads and other infrastructures necessary for mining operations. All these will definitely oust the owners or occupants of the affected areas the beneficial ownership of their lands. Without a doubt, taking occurs once mining operations commence.

Section 76 of Rep. Act No. 7942 is a Taking Provision

Moreover, it would not be amiss to revisit the history of mining laws of this country which would help us understand Section 76 of Rep. Act No. 7942.

This provision is first found in Section 27 of Commonwealth Act No. 137 which took effect on 7 November 1936, viz:

Before entering private lands the prospector shall first apply in

writing for written permission of the private owner, claimant, or holder thereof, and in case of refusal by such private owner, claimant, or holder to grant such permission, or in case of disagreement as to the amount of compensation to be paid for such privilege of prospecting therein, the amount of such compensation shall be fixed by agreement among the prospector, the Director of the Bureau of Mines and the surface owner, and in case of their failure to unanimously agree as to the amount of compensation, all questions at issue shall be determined by the Court of First Instance.

Similarly, the pertinent provision of Presidential Decree No. 463, otherwise known as "The Mineral Resources Development Decree of 1974," provides:

SECTION 12. Entry to Public and Private Lands. — A person who desires to conduct prospecting or other mining operations within public lands covered by concessions or rights other than mining shall first obtain the written permission of the government official concerned before entering such lands. In the case of private lands, the written permission of the owner or possessor of the land must be obtained before entering such lands. In either case, if said permission is denied, the Director, at the request of the interested person may intercede with the owner or possessor of the land. If the intercession fails, the interested person may bring suit in the Court of First Instance of the province where the land is situated. If the court finds the request justified, it shall issue an order granting the permission after fixing the amount of compensation and/or rental due the owner or possessor: Provided, That pending final adjudication of such amount, the court shall upon recommendation of the Director permit the interested person to enter, prospect and/or undertake other mining operations on the disputed land upon posting by such interested person of a bond with the court which the latter shall consider adequate to answer for any damage to the owner or possessor of the land resulting from such entry, prospecting or any other mining operations.

Hampered by the difficulties and delays in securing surface rights for the entry into private lands for purposes of mining operations, Presidential Decree No. 512 dated 19 July 1974 was passed into law in order to achieve full and accelerated mineral resources development. Thus, Presidential Decree No. 512 provides for a new system of surface rights acquisition by mining prospectors and claimants. Whereas in Commonwealth Act No. 137 and Presidential Decree No. 463 eminent domain may only be exercised in order that the mining claimants can build, construct or install roads, railroads, mills, warehouses and other facilities, this time, the power of eminent domain may now be invoked by mining operators for the entry, acquisition and use of private lands, viz:

SECTION 1. Mineral prospecting, location, exploration, development and exploitation is hereby declared of public use and benefit, and for which the power of eminent domain may be invoked and exercised for the entry, acquisition and use of private lands. x x x.

The evolution of mining laws gives positive indication that mining operators who are qualified to own lands were granted the authority to exercise eminent domain for the entry, acquisition, and use of private lands in areas open for mining operations. This grant of authority extant in Section 1 of Presidential Decree No. 512 is not expressly repealed by Section 76 of Rep. Act No. 7942; and neither are the former statutes impliedly repealed by the former. These two provisions can stand together even if Section 76 of Rep. Act No. 7942 does not spell out the grant of the privilege to exercise eminent domain which was present in the old law.

It is an established rule in statutory construction that in order that one law may operate to repeal another law, the two laws must be inconsistent.39 The former must be so repugnant as to be irreconciliable with the latter act. Simply because a latter enactment may relate to the same subject matter as that of an earlier statute is not of itself sufficient to cause an implied repeal of the latter, since the new law may be cumulative or a continuation of

the old one. As has been the ruled, repeals by implication are not favored, and will not be decreed unless it is manifest that the legislature so intended.40 As laws are presumed to be passed with deliberation and with full knowledge of all existing ones on the subject, it is but reasonable to conclude that in passing a statute it was not intended to interfere with or abrogate any former law relating to the same matter, unless the repugnancy between the two is not only irreconcilable, but also clear and convincing, and flowing necessarily from the language used, unless the later act fully embraces the subject matter of the earlier, or unless the reason for the earlier act is beyond peradventure removed.41

Hence, every effort must be used to make all acts stand and if, by any reasonable construction, they can be reconciled, the latter act will not operate as a repeal of the earlier.

Considering that Section 1 of Presidential Decree No. 512 granted the qualified mining operators the authority to exercise eminent domain and since this grant of authority is deemed incorporated in Section 76 of Rep. Act No. 7942, the inescapable conclusion is that the latter provision is a taking provision.

While this Court declares that the assailed provision is a taking provision, this does not mean that it is unconstitutional on the ground that it allows taking of private property without the determination of public use and the payment of just compensation.

The taking to be valid must be for public use.42 Public use as a requirement for the valid exercise of the power of eminent domain is now synonymous with public interest, public benefit, public welfare and public convenience.43It includes the broader notion of indirect public benefit or advantage. Public use as traditionally understood as "actual use by the public" has already been abandoned.44

Mining industry plays a pivotal role in the economic development of the country and is a vital tool in the government’s thrust of accelerated recovery.45 The importance of the mining industry for

national development is expressed in Presidential Decree No. 463:

WHEREAS, mineral production is a major support of the national economy, and therefore the intensified discovery, exploration, development and wise utilization of the country’s mineral resources are urgently needed for national development.

Irrefragably, mining is an industry which is of public benefit.

That public use is negated by the fact that the state would be taking private properties for the benefit of private mining firms or mining contractors is not at all true. In Heirs of Juancho Ardona v. Reyes,46 petitioners therein contended that the promotion of tourism is not for public use because private concessionaires would be allowed to maintain various facilities such as restaurants, hotels, stores, etc., inside the tourist area. The Court thus contemplated:

The rule in Berman v. Parker [348 U.S. 25; 99 L. ed. 27] of deference to legislative policy even if such policy might mean taking from one private person and conferring on another private person applies as well in the Philippines.

". . . Once the object is within the authority of Congress, the means by which it will be attained is also for Congress to determine. Here one of the means chosen is the use of private enterprise for redevelopment of the area. Appellants argue that this makes the project a taking from one businessman for the benefit of another businessman. But the means of executing the project are for Congress and Congress alone to determine, once the public purpose has been established. x x x"47

Petitioners further maintain that the state’s discretion to decide when to take private property is reduced contractually by Section 13.5 of the CAMC FTAA, which reads:

If the CONTRACTOR so requests at its option, the GOVERNMENT shall use its offices and legal powers to assist in the acquisition at reasonable cost of any surface areas or rights required by the CONTRACTOR at the CONTRACTOR’s cost to carry out the Mineral Exploration and the Mining Operations herein.

All obligations, payments and expenses arising from, or incident to, such agreements or acquisition of right shall be for the account of the CONTRACTOR and shall be recoverable as Operating Expense.

According to petitioners, the government is reduced to a sub-contractor upon the request of the private respondent, and on account of the foregoing provision, the contractor can compel the government to exercise its power of eminent domain thereby derogating the latter’s power to expropriate property.

The provision of the FTAA in question lays down the ways and means by which the foreign-owned contractor, disqualified to own land, identifies to the government the specific surface areas within the FTAA contract area to be acquired for the mine infrastructure.48

The government then acquires ownership of the surface land areas on behalf of the contractor, through a voluntary transaction in order to enable the latter to proceed to fully implement the FTAA. Eminent domain is not yet called for at this stage since there are still various avenues by which surface rights can be acquired other than expropriation. The FTAA provision under attack merely facilitates the implementation of the FTAA given to CAMC and shields it from violating the Anti-Dummy Law. Hence, when confronted with the same question in La Bugal-B’Laan Tribal Association, Inc. v. Ramos,49 the Court answered:

Clearly, petitioners have needlessly jumped to unwarranted conclusions, without being aware of the rationale for the said provision. That provision does not call for the exercise of the power of eminent domain -- and determination of just compensation is not an issue -- as much as it calls for a qualified party to acquire the

surface rights on behalf of a foreign-owned contractor.

Rather than having the foreign contractor act through a dummy corporation, having the State do the purchasing is a better alternative. This will at least cause the government to be aware of such transaction/s and foster transparency in the contractor’s dealings with the local property owners. The government, then, will not act as a subcontractor of the contractor; rather, it will facilitate the transaction and enable the parties to avoid a technical violation of the Anti-Dummy Law.

There is also no basis for the claim that the Mining Law and its implementing rules and regulations do not provide for just compensation in expropriating private properties. Section 76 of Rep. Act No. 7942 and Section 107 of DAO 96-40 provide for the payment of just compensation:

Section 76. xxx Provided, that any damage to the property of the surface owner, occupant, or concessionaire as a consequence of such operations shall be properly compensated as may be provided for in the implementing rules and regulations.

Section 107. Compensation of the Surface Owner and Occupant- Any damage done to the property of the surface owners, occupant, or concessionaire thereof as a consequence of the mining operations or as a result of the construction or installation of the infrastructure mentioned in 104 above shall be properly and justly compensated.

Such compensation shall be based on the agreement entered into between the holder of mining rights and the surface owner, occupant or concessionaire thereof, where appropriate, in accordance with P.D. No. 512. (Emphasis supplied.)

Second Substantive Issue: Power of Courts to Determine Just Compensation

Closely-knit to the issue of taking is the determination of just compensation. It is contended that Rep. Act No. 7942 and Section 107 of DAO 96-40 encroach on the power of the trial courts to determine just compensation in eminent domain cases inasmuch as the same determination of proper compensation are cognizable only by the Panel of Arbitrators.

The question on the judicial determination of just compensation has been settled in the case of Export Processing Zone Authority v. Dulay50 wherein the court declared that the determination of just compensation in eminent domain cases is a judicial function. Even as the executive department or the legislature may make the initial determinations, the same cannot prevail over the court’s findings.

Implementing Section 76 of Rep. Act No. 7942, Section 105 of DAO 96-40 states that holder(s) of mining right(s) shall not be prevented from entry into its/their contract/mining areas for the purpose of exploration, development, and/or utilization. That in cases where surface owners of the lands, occupants or concessionaires refuse to allow the permit holder or contractor entry, the latter shall bring the matter before the Panel of Arbitrators for proper disposition. Section 106 states that voluntary agreements between the two parties permitting the mining right holders to enter and use the surface owners’ lands shall be registered with the Regional Office of the MGB. In connection with Section 106, Section 107 provides that the compensation for the damage done to the surface owner, occupant or concessionaire as a consequence of mining operations or as a result of the construction or installation of the infrastructure shall be properly and justly compensated and that such compensation shall be based on the agreement between the holder of mining rights and surface owner, occupant or concessionaire, or where appropriate, in accordance with Presidential Decree No. 512. In cases where there is disagreement to the compensation or where there is no agreement, the matter shall be brought before the Panel of Arbitrators. Section 206 of the implementing rules and regulations provides an aggrieved party the remedy to appeal the decision of the Panel of Arbitrators to the Mines Adjudication Board, and the

latter’s decision may be reviewed by the Supreme Court by filing a petition for review on certiorari.51

An examination of the foregoing provisions gives no indication that the courts are excluded from taking cognizance of expropriation cases under the mining law. The disagreement referred to in Section 107 does not involve the exercise of eminent domain, rather it contemplates of a situation wherein the permit holders are allowed by the surface owners entry into the latters’ lands and disagreement ensues as regarding the proper compensation for the allowed entry and use of the private lands. Noticeably, the provision points to a voluntary sale or transaction, but not to an involuntary sale.

The legislature, in enacting the mining act, is presumed to have deliberated with full knowledge of all existing laws and jurisprudence on the subject. Thus, it is but reasonable to conclude that in passing such statute it was in accord with the existing laws and jurisprudence on the jurisdiction of courts in the determination of just compensation and that it was not intended to interfere with or abrogate any former law relating to the same matter. Indeed, there is nothing in the provisions of the assailed law and its implementing rules and regulations that exclude the courts from their jurisdiction to determine just compensation in expropriation proceedings involving mining operations. Although Section 105 confers upon the Panel of Arbitrators the authority to decide cases where surface owners, occupants, concessionaires refuse permit holders entry, thus, necessitating involuntary taking, this does not mean that the determination of the just compensation by the Panel of Arbitrators or the Mines Adjudication Board is final and conclusive. The determination is only preliminary unless accepted by all parties concerned. There is nothing wrong with the grant of primary jurisdiction by the Panel of Arbitrators or the Mines Adjudication Board to determine in a preliminary matter the reasonable compensation due the affected landowners or occupants.52 The original and exclusive jurisdiction of the courts to decide determination of just compensation remains intact despite the preliminary determination made by the administrative agency.

As held in Philippine Veterans Bank v. Court of Appeals53:

The jurisdiction of the Regional Trial Courts is not any less "original and exclusive" because the question is first passed upon by the DAR, as the judicial proceedings are not a continuation of the administrative determination.

Third Substantive Issue: Sufficient Control by the State Over Mining Operations

Anent the third issue, petitioners charge that Rep. Act No. 7942, as well as its Implementing Rules and Regulations, makes it possible for FTAA contracts to cede over to a fully foreign-owned corporation full control and management of mining enterprises, with the result that the State is allegedly reduced to a passive regulator dependent on submitted plans and reports, with weak review and audit powers. The State is not acting as the supposed owner of the natural resources for and on behalf of the Filipino people; it practically has little effective say in the decisions made by the enterprise. In effect, petitioners asserted that the law, the implementing regulations, and the CAMC FTAA cede beneficial ownership of the mineral resources to the foreign contractor.

It must be noted that this argument was already raised in La Bugal-B’Laan Tribal Association, Inc. v. Ramos,54where the Court answered in the following manner:

RA 7942 provides for the state’s control and supervision over mining operations. The following provisions thereof establish the mechanism of inspection and visitorial rights over mining operations and institute reportorial requirements in this manner:

1. Sec. 8 which provides for the DENR’s power of over-all supervision and periodic review for "the conservation, management, development and proper use of the State’s mineral resources";

2. Sec. 9 which authorizes the Mines and Geosciences Bureau (MGB) under the DENR to exercise "direct charge in the administration and disposition of mineral resources", and empowers the MGB to "monitor the compliance by the contractor of the terms and conditions of the mineral agreements", "confiscate surety and performance bonds", and deputize whenever necessary any member or unit of the Phil. National Police, barangay, duly registered non-governmental organization (NGO) or any qualified person to police mining activities;

3. Sec. 66 which vests in the Regional Director "exclusive jurisdiction over safety inspections of all installations, whether surface or underground", utilized in mining operations.

4. Sec. 35, which incorporates into all FTAAs the following terms, conditions and warranties:

"(g) Mining operations shall be conducted in accordance with the provisions of the Act and its IRR.

"(h) Work programs and minimum expenditures commitments.

x x x x

"(k) Requiring proponent to effectively use appropriate anti-pollution technology and facilities to protect the environment and restore or rehabilitate mined-out areas.

"(l) The contractors shall furnish the Government records of geologic, accounting and other relevant data for its mining operation, and that books of accounts and records shall be open for inspection by the government. x x x.

"(m) Requiring the proponent to dispose of the minerals at the highest price and more advantageous terms and conditions.

x x x x

"(o) Such other terms and conditions consistent with the Constitution and with this Act as the Secretary may deem to be for the best interest of the State and the welfare of the Filipino people."

The foregoing provisions of Section 35 of RA 7942 are also reflected and implemented in Section 56 (g), (h), (l), (m) and (n) of the Implementing Rules, DAO 96-40.

Moreover, RA 7942 and DAO 96-40 also provide various stipulations confirming the government’s control over mining enterprises:

The contractor is to relinquish to the government those portions of the contract area not needed for mining operations and not covered by any declaration of mining feasibility (Section 35-e, RA 7942; Section 60, DAO 96-40).

The contractor must comply with the provisions pertaining to mine safety, health and environmental protection (Chapter XI, RA 7942; Chapters XV and XVI, DAO 96-40).

For violation of any of its terms and conditions, government may cancel an FTAA. (Chapter XVII, RA 7942; Chapter XXIV, DAO 96-40).

An FTAA contractor is obliged to open its books of accounts and records for 0inspection by the government (Section 56-m, DAO 96-40).

An FTAA contractor has to dispose of the minerals and by-products at the highest market price and register with the MGB a copy of the sales agreement (Section 56-n, DAO 96-40).

MGB is mandated to monitor the contractor’s compliance with the

terms and conditions of the FTAA; and to deputize, when necessary, any member or unit of the Philippine National Police, the barangay or a DENR-accredited nongovernmental organization to police mining activities (Section 7-d and -f, DAO 96-40).

An FTAA cannot be transferred or assigned without prior approval by the President (Section 40, RA 7942; Section 66, DAO 96-40).

A mining project under an FTAA cannot proceed to the construction/development/utilization stage, unless its Declaration of Mining Project Feasibility has been approved by government (Section 24, RA 7942).

The Declaration of Mining Project Feasibility filed by the contractor cannot be approved without submission of the following documents:

1. Approved mining project feasibility study (Section 53-d, DAO 96-40)

2. Approved three-year work program (Section 53-a-4, DAO 96-40)

3. Environmental compliance certificate (Section 70, RA 7942)

4. Approved environmental protection and enhancement program (Section 69, RA 7942)

5. Approval by the Sangguniang Panlalawigan/Bayan/Barangay (Section 70, RA 7942; Section 27, RA 7160)

6. Free and prior informed consent by the indigenous peoples concerned, including payment of royalties through a Memorandum of Agreement (Section 16, RA 7942; Section 59, RA 8371)

The FTAA contractor is obliged to assist in the development of its

mining community, promotion of the general welfare of its inhabitants, and development of science and mining technology (Section 57, RA 7942).

The FTAA contractor is obliged to submit reports (on quarterly, semi-annual or annual basis as the case may be; per Section 270, DAO 96-40), pertaining to the following:

1. Exploration

2. Drilling

3. Mineral resources and reserves

4. Energy consumption

5. Production

6. Sales and marketing

7. Employment

8. Payment of taxes, royalties, fees and other Government Shares

9. Mine safety, health and environment

10. Land use

11. Social development

12. Explosives consumption

An FTAA pertaining to areas within government reservations cannot be granted without a written clearance from the government

agencies concerned (Section 19, RA 7942; Section 54, DAO 96-40).

An FTAA contractor is required to post a financial guarantee bond in favor of the government in an amount equivalent to its expenditures obligations for any particular year. This requirement is apart from the representations and warranties of the contractor that it has access to all the financing, managerial and technical expertise and technology necessary to carry out the objectives of the FTAA (Section 35-b, -e, and -f, RA 7942).

Other reports to be submitted by the contractor, as required under DAO 96-40, are as follows: an environmental report on the rehabilitation of the mined-out area and/or mine waste/tailing covered area, and anti-pollution measures undertaken (Section 35-a-2); annual reports of the mining operations and records of geologic accounting (Section 56-m); annual progress reports and final report of exploration activities (Section 56-2).

Other programs required to be submitted by the contractor, pursuant to DAO 96-40, are the following: a safety and health program (Section 144); an environmental work program (Section 168); an annual environmental protection and enhancement program (Section 171).

The foregoing gamut of requirements, regulations, restrictions and limitations imposed upon the FTAA contractor by the statute and regulations easily overturns petitioners’ contention. The setup under RA 7942 and DAO 96-40 hardly relegates the State to the role of a "passive regulator" dependent on submitted plans and reports. On the contrary, the government agencies concerned are empowered to approve or disapprove -- hence, to influence, direct and change -- the various work programs and the corresponding minimum expenditure commitments for each of the exploration, development and utilization phases of the mining enterprise.

Once these plans and reports are approved, the contractor is

bound to comply with its commitments therein. Figures for mineral production and sales are regularly monitored and subjected to government review, in order to ensure that the products and by-products are disposed of at the best prices possible; even copies of sales agreements have to be submitted to and registered with MGB. And the contractor is mandated to open its books of accounts and records for scrutiny, so as to enable the State to determine if the government share has been fully paid.

The State may likewise compel the contractor’s compliance with mandatory requirements on mine safety, health and environmental protection, and the use of anti-pollution technology and facilities. Moreover, the contractor is also obligated to assist in the development of the mining community and to pay royalties to the indigenous peoples concerned.

Cancellation of the FTAA may be the penalty for violation of any of its terms and conditions and/or noncompliance with statutes or regulations. This general, all-around, multipurpose sanction is no trifling matter, especially to a contractor who may have yet to recover the tens or hundreds of millions of dollars sunk into a mining project.

Overall, considering the provisions of the statute and the regulations just discussed, we believe that the State definitely possesses the means by which it can have the ultimate word in the operation of the enterprise, set directions and objectives, and detect deviations and noncompliance by the contractor; likewise, it has the capability to enforce compliance and to impose sanctions, should the occasion therefor arise.

In other words, the FTAA contractor is not free to do whatever it pleases and get away with it; on the contrary, it will have to follow the government line if it wants to stay in the enterprise. Ineluctably then, RA 7942 and DAO 96-40 vest in the government more than a sufficient degree of control and supervision over the conduct of mining operations.

Fourth Substantive Issue: The Proper Interpretation of the Constitutional Phrase "Agreements Involving Either Technical or Financial Assistance

In interpreting the first and fourth paragraphs of Section 2, Article XII of the Constitution, petitioners set forth the argument that foreign corporations are barred from making decisions on the conduct of operations and the management of the mining project. The first paragraph of Section 2, Article XII reads:

x x x 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 percentum 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.

The fourth paragraph of Section 2, Article XII provides:

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.

Petitioners maintain that the first paragraph bars aliens and foreign-owned corporations from entering into any direct arrangement with the government including those which involve co-production, joint venture or production sharing agreements. They likewise insist that the fourth paragraph allows foreign-owned corporations to participate in the large-scale exploration, development and utilization of natural resources, but such participation, however, is merely limited to an agreement for either

financial or technical assistance only.

Again, this issue has already been succinctly passed upon by this Court in La Bugal-B’Laan Tribal Association, Inc. v. Ramos.55 In discrediting such argument, the Court ratiocinated:

Petitioners claim that the phrase "agreements x x x involving either technical or financial assistance" simply means technical assistance or financial assistance agreements, nothing more and nothing else. They insist that there is no ambiguity in the phrase, and that a plain reading of paragraph 4 quoted above leads to the inescapable conclusion that what a foreign-owned corporation may enter into with the government is merely an agreement for either financial or technical assistance only, for the large-scale exploration, development and utilization of minerals, petroleum and other mineral oils; such a limitation, they argue, excludes foreign management and operation of a mining enterprise.

This restrictive interpretation, petitioners believe, is in line with the general policy enunciated by the Constitution reserving to Filipino citizens and corporations the use and enjoyment of the country’s natural resources. They maintain that this Court’s Decision of January 27, 2004 correctly declared the WMCP FTAA, along with pertinent provisions of RA 7942, void for allowing a foreign contractor to have direct and exclusive management of a mining enterprise. Allowing such a privilege not only runs counter to the "full control and supervision" that the State is constitutionally mandated to exercise over the exploration, development and utilization of the country’s natural resources; doing so also vests in the foreign company "beneficial ownership" of our mineral resources. It will be recalled that the Decision of January 27, 2004 zeroed in on "management or other forms of assistance" or other activities associated with the "service contracts" of the martial law regime, since "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."

x x x x

We do not see how applying a strictly literal or verba legis interpretation of paragraph 4 could inexorably lead to the conclusions arrived at in the ponencia. First, the drafters’ choice of words -- their use of the phraseagreements x x x involving either technical or financial assistance -- does not indicate the intent to exclude other modes of assistance. The drafters opted to use involving when they could have simply said agreements forfinancial or technical assistance, if that was their intention to begin with. In this case, the limitation would be very clear and no further debate would ensue.

In contrast, the use of the word "involving" signifies the possibility of the inclusion of other forms of assistance or activities having to do with, otherwise related to or compatible with financial or technical assistance. The word "involving" as used in this context has three connotations that can be differentiated thus:one, the sense of "concerning," "having to do with," or "affecting"; two, "entailing," "requiring," "implying" or "necessitating"; and three, "including," "containing" or "comprising."

Plainly, none of the three connotations convey a sense of exclusivity. Moreover, the word "involving," when understood in the sense of "including," as in including technical or financial assistance, necessarily implies that there are activities other than those that are being included. In other words, if an agreement includes technical or financial assistance, there is apart from such assistance -- something else already in, and covered or may be covered by, the said agreement.

In short, it allows for the possibility that matters, other than those explicitly mentioned, could be made part of the agreement. Thus, we are now led to the conclusion that the use of the word "involving" implies that these agreements with foreign corporations are not limited to mere financial or technical assistance. The difference in sense becomes very apparent when we juxtapose

"agreements for technical or financial assistance" against "agreements including technical or financial assistance." This much is unalterably clear in a verba legisapproach.

Second, if the real intention of the drafters was to confine foreign corporations to financial or technical assistance and nothing more, their language would have certainly been so unmistakably restrictive and stringent as to leave no doubt in anyone’s mind about their true intent. For example, they would have used the sentence foreign corporations are absolutely prohibited from involvement in the management or operation of mining or similar ventures or words of similar import. A search for such stringent wording yields negative results. Thus, we come to the inevitable conclusion that there was a conscious and deliberate decision to avoid the use of restrictive wording that bespeaks an intent not to use the expression "agreements x x x involving either technical or financial assistance" in an exclusionary and limiting manner.

Fifth Substantive Issue: Service Contracts Not Deconstitutionalized

Lastly, petitioners stress that the service contract regime under the 1973 Constitution is expressly prohibited under the 1987 Constitution as the term service contracts found in the former was deleted in the latter to avoid the circumvention of constitutional prohibitions that were prevalent in the 1987 Constitution. According to them, the framers of the 1987 Constitution only intended for foreign-owned corporations to provide either technical assistance or financial assistance. Upon perusal of the CAMC FTAA, petitioners are of the opinion that the same is a replica of the service contract agreements that the present constitution allegedly prohibit.

Again, this contention is not well-taken. The mere fact that the term service contracts found in the 1973 Constitution was not carried over to the present constitution, sans any categorical statement

banning service contracts in mining activities, does not mean that service contracts as understood in the 1973 Constitution was eradicated in the 1987 Constitution.56 The 1987 Constitution allows the continued use of service contracts with foreign corporations as contractors who would invest in and operate and manage extractive enterprises, subject to the full control and supervision of the State; this time, however, safety measures were put in place to prevent abuses of the past regime.57 We ruled, thus:

To our mind, however, such intent cannot be definitively and conclusively established from the mere failure to carry the same expression or term over to the new Constitution, absent a more specific, explicit and unequivocal statement to that effect. What petitioners seek (a complete ban on foreign participation in the management of mining operations, as previously allowed by the earlier Constitutions) is nothing short of bringing about a momentous sea change in the economic and developmental policies; and the fundamentally capitalist, free-enterprise philosophy of our government. We cannot imagine such a radical shift being undertaken by our government, to the great prejudice of the mining sector in particular and our economy in general, merely on the basis of the omission of the terms service contract from or the failure to carry them over to the new Constitution. There has to be a much more definite and even unarguable basis for such a drastic reversal of policies.

x x x x

The foregoing are mere fragments of the framers’ lengthy discussions of the provision dealing with agreements x x x involving either technical or financial assistance, which ultimately became paragraph 4 of Section 2 of Article XII of the Constitution. Beyond any doubt, the members of the ConCom were actually debating about the martial-law-era service contracts for which they were crafting appropriate safeguards.

In the voting that led to the approval of Article XII by the ConCom,

the explanations given by Commissioners Gascon, Garcia and Tadeo indicated that they had voted to reject this provision on account of their objections to the "constitutionalization" of the "service contract" concept.

Mr. Gascon said, "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." Mr. Garcia explained, "Service contracts are given constitutional legitimization in Sec. 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." Likewise, Mr. Tadeo cited inter alia the fact that service contracts continued to subsist, enabling foreign interests to benefit from our natural resources. It was hardly likely that these gentlemen would have objected so strenuously, had the provision called for mere technical or financial assistance and nothing more.

The deliberations of the ConCom and some commissioners’ explanation of their votes leave no room for doubt that the service contract concept precisely underpinned the commissioners’ understanding of the "agreements involving either technical or financial assistance."

x x x x

From the foregoing, we are impelled to conclude that the phrase agreements involving either technical or financial assistance, referred to in paragraph 4, are in fact service contracts. But unlike those of the 1973 variety, the new ones are between foreign corporations acting as contractors on the one hand; and on the other, the government as principal or "owner" of the works. In the new service contracts, the foreign contractors provide capital, technology and technical know-how, and managerial expertise in the creation and operation of large-scale mining/extractive enterprises; and the government, through its agencies (DENR,

MGB), actively exercises control and supervision over the entire operation.

x x x x

It is therefore reasonable and unavoidable to make the following conclusion, based on the above arguments. As written by the framers and ratified and adopted by the people, the Constitution allows the continued use of service contracts with foreign corporations -- as contractors who would invest in and operate and manage extractive enterprises, subject to the full control and supervision of the State -- sans the abuses of the past regime. The purpose is clear: to develop and utilize our mineral, petroleum and other resources on a large scale for the immediate and tangible benefit of the Filipino people.58

WHEREFORE, the instant petition for prohibition and mandamus is hereby DISMISSED. Section 76 of Republic Act No. 7942 and Section 107 of DAO 96-40; Republic Act No. 7942 and its Implementing Rules and Regulations contained in DAO 96-40 – insofar as they relate to financial and technical assistance agreements referred to in paragraph 4 of Section 2 of Article XII of the Constitution are NOT UNCONSTITUTIONAL.

SO ORDERED.

Republic of the PhilippinesSUPREME COURT

Manila

FIRST DIVISION

G.R. No. 149927 March 30, 2004

REPUBLIC OF THE PHILIPPINES, Represented by the Department of Environment and Natural Resources (DENR) Under then Minister ERNESTO R. MACEDA; and Former Government Officials CATALINO MACARAIG, FULGENCIO S. FACTORAN, ANGEL C. ALCALA, BEN MALAYANG, ROBERTO PAGDANGANAN, MARIANO Z. VALERA and ROMULO SAN JUAN, petitioners, vs.ROSEMOOR MINING AND DEVELOPMENT CORPORATION, PEDRO DEL CONCHA, and ALEJANDRO and RUFO DE GUZMAN, respondents.

D E C I S I O N

PANGANIBAN, J.:

A mining license that contravenes a mandatory provision of the law under which it is granted is void. Being a mere privilege, a license does not vest absolute rights in the holder. Thus, without offending the due process and the non-impairment clauses of the Constitution, it can be revoked by the State in the public interest.

The Case

Before us is a Petition for Review1 under Rule 45 of the Rules of Court, seeking to nullify the May 29, 2001 Decision2 and the September 6, 2001 Resolution3 of the Court of Appeals (CA) in CA-GR SP No. 46878. The CA disposed as follows:

"WHEREFORE, premises considered, the appealed Decision is hereby AFFIRMED in toto."4

The questioned Resolution denied petitioners’ Motion for Reconsideration.

On the other hand, trial court’s Decision, which was affirmed by the CA, had disposed as follows:

"WHEREFORE, judgment is hereby rendered as follows:

‘1. Declaring that the cancellation of License No. 33 was done without jurisdiction and in gross violation of the Constitutional right of the petitioners against deprivation of their property rights without due process of law and is hereby set aside.

‘2. Declaring that the petitioners’ right to continue the exploitation of the marble deposits in the area covered by License No. 33 is maintained for the duration of the period of its life of twenty-five (25) years, less three (3) years of continuous operation before License No. 33 was cancelled, unless sooner terminated for

violation of any of the conditions specified therein, with due process.

‘3. Making the Writ of preliminary injunction and the Writ of Preliminary Mandatory Injunction issued as permanent.

‘4. Ordering the cancellation of the bond filed by the Petitioners in the sum of 1 Million.

‘5. Allowing the petitioners to present evidence in support of the damages they claim to have suffered from, as a consequence of the summary cancellation of License No. 33 pursuant to the agreement of the parties on such dates as maybe set by the Court; and

‘6. Denying for lack of merit the motions for contempt, it appearing that actuations of the respondents were not contumacious and intended to delay the proceedings or undermine the integrity of the Court.

‘No pronouncement yet as to costs.’"5

The Facts

The CA narrated the facts as follows:

"The four (4) petitioners, namely, Dr. Lourdes S. Pascual, Dr. Pedro De la Concha, Alejandro De La Concha, and Rufo De Guzman, after having been granted permission to prospect for marble deposits in the mountains of Biak-na-Bato, San Miguel, Bulacan, succeeded in discovering marble deposits of high quality and in commercial quantities in Mount Mabio which forms part of the Biak-na-Bato mountain range.

"Having succeeded in discovering said marble deposits, and as a result of their tedious efforts and substantial expenses, the

petitioners applied with the Bureau of Mines, now Mines and Geosciences Bureau, for the issuance of the corresponding license to exploit said marble deposits.

x x x x x x x x x

"After compliance with numerous required conditions, License No. 33 was issued by the Bureau of Mines in favor of the herein petitioners.

x x x x x x x x x

"Shortly after Respondent Ernesto R. Maceda was appointed Minister of the Department of Energy and Natural Resources (DENR), petitioners’ License No. 33 was cancelled by him through his letter to ROSEMOOR MINING AND DEVELOPMENT CORPORATION dated September 6, 1986 for the reasons stated therein. Because of the aforesaid cancellation, the original petition was filed and later substituted by the petitioners’ AMENDED PETITION dated August 21, 1991 to assail the same.

"Also after due hearing, the prayer for injunctive relief was granted in the Order of this Court dated February 28, 1992. Accordingly, the corresponding preliminary writs were issued after the petitioners filed their injunction bond in the amount of ONE MILLION PESOS (P1,000,000.00).

x x x x x x x x x

"On September 27, 1996, the trial court rendered the herein questioned decision."6

The trial court ruled that the privilege granted under respondents’ license had already ripened into a property right, which was protected under the due process clause of the Constitution. Such right was supposedly violated when the license was cancelled

without notice and hearing. The cancellation was said to be unjustified, because the area that could be covered by the four separate applications of respondents was 400 hectares. Finally, according to the RTC, Proclamation No. 84, which confirmed the cancellation of the license, was an ex post facto law; as such, it violated Section 3 of Article XVIII of the 1987 Constitution.

On appeal to the Court of Appeals, herein petitioners asked whether PD 463 or the Mineral Resources Development Decree of 1974 had been violated by the award of the 330.3062 hectares to respondents in accordance with Proclamation No. 2204. They also questioned the validity of the cancellation of respondents’ Quarry License/Permit (QLP) No. 33.

Ruling of the Court of Appeals

Sustaining the trial court in toto, the CA held that the grant of the quarry license covering 330.3062 hectares to respondents was authorized by law, because the license was embraced by four (4) separate applications -- each for an area of 81 hectares. Moreover, it held that the limitation under Presidential Decree No. 463 -- that a quarry license should cover not more than 100 hectares in any given province -- was supplanted by Republic Act No. 7942,7 which increased the mining areas allowed under PD 463.

It also ruled that the cancellation of respondents’ license without notice and hearing was tantamount to a deprivation of property without due process of law. It added that under the clause in the Constitution dealing with the non-impairment of obligations and contracts, respondents’ license must be respected by the State.

Hence, this Petition.8

Issues

Petitioners submit the following issues for the Court’s

consideration:

"(1) [W]hether or not QLP No. 33 was issued in blatant contravention of Section 69, P.D. No. 463; and (2) whether or not Proclamation No. 84 issued by then President Corazon Aquino is valid. The corollary issue is whether or not the Constitutional prohibition against ex post facto law applies to Proclamation No. 84"9

The Court’s Ruling

The Petition has merit.

First Issue:Validity of License

Respondents contend that the Petition has no legal basis, because PD 463 has already been repealed.10 In effect, they ask for the dismissal of the Petition on the ground of mootness.

PD 463, as amended, pertained to the old system of exploration, development and utilization of natural resources through licenses, concessions or leases.11 While these arrangements were provided under the 193512 and the 197313 Constitutions, they have been omitted by Section 2 of Article XII of the 1987 Constitution.14

With the shift of constitutional policy toward "full control and supervision of the State" over natural resources, the Court in Miners Association of the Philippines v. Factoran Jr. 15 declared the provisions of PD 463 as contrary to or violative of the express mandate of the 1987 Constitution. The said provisions dealt with the lease of mining claims; quarry permits or licenses covering privately owned or public lands; and other related provisions on lease, licenses and permits.

RA 7942 or the Philippine Mining Act of 1995 embodies the new

constitutional mandate. It has repealed or amended all laws, executive orders, presidential decrees, rules and regulations -- or parts thereof -- that are inconsistent with any of its provisions.16

It is relevant to state, however, that Section 2 of Article XII of the 1987 Constitution does not apply retroactively to a "license, concession or lease" granted by the government under the 1973 Constitution or before the effectivity of the 1987 Constitution on February 2, 1987.17 As noted in Miners Association of the Philippines v. Factoran Jr., the deliberations of the Constitutional Commission18 emphasized the intent to apply the said constitutional provision prospectively.

While RA 7942 has expressly repealed provisions of mining laws that are inconsistent with its own, it nonetheless respects previously issued valid and existing licenses, as follows:

"SECTION 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: Provided, That a small scale-mining cooperative covered by Republic Act No. 7076 shall be given preferential right to apply for a small-scale mining agreement for a maximum aggregate area of twenty-five percent (25%) of such mineral reservation, subject to valid existing mining/quarrying rights as provided under Section 112 Chapter XX hereof. All submerged lands within the contiguous zone and in the exclusive economic zone of the Philippines are hereby declared to be mineral reservations.

"x x x x x x x x x

"SECTION 7. Periodic Review of Existing Mineral Reservations. — The Secretary shall periodically review existing mineral reservations for the purpose of determining whether their continued existence is consistent with the national interest, and upon his recommendation, the President may, by proclamation, alter or modify the boundaries thereof or revert the same to the public domain without prejudice to prior existing rights."

"SECTION 18. Areas Open to Mining Operations. — Subject to any existing rights or reservations and prior agreements of all parties, all mineral resources in public or private lands, including timber or forestlands as defined in existing laws, shall be open to mineral agreements or financial or technical assistance agreement applications. Any conflict that may arise under this provision shall be heard and resolved by the panel of arbitrators."

"SECTION 19. Areas Closed to Mining Applications. -- Mineral agreement or financial or technical assistance agreement applications shall not be allowed:

(a) In military and other government reservations, except upon prior written clearance by the government agency concerned;

(b) Near or under public or private buildings, cemeteries, archeological and historic sites, bridges, highways, waterways, railroads, reservoirs, dams or other infrastructure projects, public or private works including plantations or valuable crops, except upon written consent of the government agency or private entity concerned;

(c) In areas covered by valid and existing mining rights;

(d) In areas expressly prohibited by law;

(e) In areas covered by small-scale miners as defined by law unless with prior consent of the small-scale miners, in which case a

royalty payment upon the utilization of minerals shall be agreed upon by the parties, said royalty forming a trust fund for the socioeconomic development of the community concerned; and

(f) Old growth or virgin forests, proclaimed watershed forest reserves, wilderness areas, mangrove forests, mossy forests, national parks, provincial/municipal forests, parks, greenbelts, game refuge and bird sanctuaries as defined by law and in areas expressly prohibited under the National Integrated Protected Areas System (NIPAS) under Republic Act No. 7586, Department Administrative Order No. 25, series of 1992 and other laws."

"SECTION 112. Non-impairment of Existing Mining/ Quarrying Rights. — All valid and existing mining lease contracts, permits/licenses, leases pending renewal, mineral production-sharing agreements granted under Executive Order No. 279, at the date of effectivity of this Act, shall remain valid, shall not be impaired, and shall be recognized by the Government: Provided, That 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: Provided, further, That no renewal of mining lease contracts shall be made after the expiration of its term: Provided, finally, That such leases, production-sharing agreements, financial or technical assistance agreements shall comply with the applicable provisions of this Act and its implementing rules and regulations.

"SECTION 113. Recognition of Valid and Existing Mining Claims and Lease/Quarry Application. — Holders of valid and existing mining claims, lease/quarry applications shall be given preferential rights to enter into any mode of mineral agreement with the government within two (2) years from the promulgation of the rules and regulations implementing this Act." (Underscoring supplied)

Section 3(p) of RA 7942 defines an existing mining/quarrying right

as "a valid and subsisting mining claim or permit or quarry permit or any mining lease contract or agreement covering a mineralized area granted/issued under pertinent mining laws." Consequently, determining whether the license of respondents falls under this definition would be relevant to fixing their entitlement to the rights and/or preferences under RA 7942. Hence, the present Petition has not been mooted.

Petitioners submit that the license clearly contravenes Section 69 of PD 463, because it exceeds the maximum area that may be granted. This incipient violation, according to them, renders the license void ab initio.

Respondents, on the other hand, argue that the license was validly granted, because it was covered by four separate applications for areas of 81 hectares each.

The license in question, QLP No. 33,19 is dated August 3, 1982, and it was issued in the name of Rosemoor Mining Development Corporation. The terms of the license allowed the corporation to extract and dispose of marbleized limestone from a 330.3062-hectare land in San Miguel, Bulacan. The license is, however, subject to the terms and conditions of PD 463, the governing law at the time it was granted; as well as to the rules and regulations promulgated thereunder.20 By the same token, Proclamation No. 2204 -- which awarded to Rosemoor the right of development, exploitation, and utilization of the mineral site -- expressly cautioned that the grant was subject to "existing policies, laws, rules and regulations."21

The license was thus subject to Section 69 of PD 463, which reads:

"Section 69. Maximum Area of Quarry License – Notwithstanding the provisions of Section 14 hereof, a quarry license shall cover an area of not more than one hundred (100) hectares in any one province and not more than one thousand (1,000) hectares in the entire Philippines." (Italics supplied)

The language of PD 463 is clear. It states in categorical and mandatory terms that a quarry license, like that of respondents, should cover a maximum of 100 hectares in any given province. This law neither provides any exception nor makes any reference to the number of applications for a license. Section 69 of PD 463 must be taken to mean exactly what it says. Where the law is clear, plain, and free from ambiguity, it must be given its literal meaning and applied without attempted interpretation.22

Moreover, the lower courts’ ruling is evidently inconsistent with the fact that QLP No. 33 was issued solely in the name of Rosemoor Mining and Development Corporation, rather than in the names of the four individual stockholders who are respondents herein. It likewise brushes aside a basic postulate that a corporation has a separate personality from that of its stockholders.23

The interpretation adopted by the lower courts is contrary to the purpose of Section 69 of PD 463. Such intent to limit, without qualification, the area of a quarry license strictly to 100 hectares in any one province is shown by the opening proviso that reads: "Notwithstanding the provisions of Section 14 hereof x x x." The mandatory nature of the provision is also underscored by the use of the word shall. Hence, in the application of the 100-hectare-per-province limit, no regard is given to the size or the number of mining claims under Section 14, which we quote:

"SECTION 14. Size of Mining Claim. -- For purposes of registration of a mining claim under this Decree, the Philippine territory and its shelf are hereby divided into meridional blocks or quadrangles of one-half minute (1/2) of latitude and longitude, each block or quadrangle containing area of eighty-one (81) hectares, more or less.

"A mining claim shall cover one such block although a lesser area may be allowed if warranted by attendant circumstances, such as geographical and other justifiable considerations as may be determined by the Director: Provided, That in no case shall the

locator be allowed to register twice the area allowed for lease under Section 43 hereof." (Italics supplied)

Clearly, the intent of the law would be brazenly circumvented by ruling that a license may cover an area exceeding the maximum by the mere expediency of filing several applications. Such ruling would indirectly permit an act that is directly prohibited by the law.

Second Issue:Validity of Proclamation No. 84

Petitioners also argue that the license was validly declared a nullity and consequently withdrawn or terminated. In a letter dated September 15, 1986, respondents were informed by then Minister Ernesto M. Maceda that their license had illegally been issued, because it violated Section 69 of PD 463; and that there was no more public interest served by the continued existence or renewal of the license. The latter reason, they added, was confirmed by the language of Proclamation No. 84. According to this law, public interest would be served by reverting the parcel of land that was excluded by Proclamation No. 2204 to the former status of that land as part of the Biak-na-Bato national park.

They also contend that Section 74 of PD 463 would not apply, because Minister Maceda’s letter did not cancel or revoke QLP No. 33, but merely declared the latter’s nullity. They further argue that respondents waived notice and hearing in their application for the license.

On the other hand, respondents submit that, as provided for in Section 74 of PD 463, their right to due process was violated when their license was cancelled without notice and hearing. They likewise contend that Proclamation No. 84 is not valid for the following reasons: 1) it violates the clause on the non-impairment of contracts; 2) it is an ex post facto law and/or a bill of attainder; and 3) it was issued by the President after the effectivity of the 1987 Constitution.

This Court ruled on the nature of a natural resource exploration permit, which was akin to the present respondents’ license, in Southeast Mindanao Gold Mining Corporation v. Balite Portal Mining Cooperative,24which held:

"x x x. As correctly held by the Court of Appeals in its challenged decision, EP No. 133 merely evidences a privilege granted by the State, which may be amended, modified or rescinded when the national interest so requires. This is necessarily so since the exploration, development and utilization of the country’s natural mineral resources are matters impressed with great public interest. Like timber permits, mining exploration permits do not vest in the grantee any permanent or irrevocable right within the purview of the non-impairment of contract and due process clauses of the Constitution, since the State, under its all-encompassing police power, may alter, modify or amend the same, in accordance with the demands of the general welfare."25

This same ruling had been made earlier in Tan v. Director of Forestry26 with regard to a timber license, a pronouncement that was reiterated in Ysmael v. Deputy Executive Secretary,27 the pertinent portion of which reads:

"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]."28 (Italics supplied)

In line with the foregoing jurisprudence, respondents’ license may be revoked or rescinded by executive action when the national interest so requires, because it is not a contract, property or a property right protected by the due process clause of the Constitution.29 Respondents themselves acknowledge this condition of the grant under paragraph 7 of QLP No. 33, which we quote:

"7. This permit/license may be revoked or cancelled at any time by the Director of Mines and Geo-Sciences when, in his opinion public interests so require or, upon failure of the permittee/licensee to comply with the provisions of Presidential Decree No. 463, as amended, and the rules and regulations promulgated thereunder, as well as with the terms and conditions specified herein; Provided, That if a permit/license is cancelled, or otherwise terminated, the permittee/licensee shall be liable for all unpaid rentals and royalties due up to the time of the termination or cancellation of the permit/license[.]"30 (Italics supplied)

The determination of what is in the public interest is necessarily vested in the State as owner of all mineral resources. That determination was based on policy considerations formally enunciated in the letter dated September 15, 1986, issued by then Minister Maceda and, subsequently, by the President through Proclamation No. 84. As to the exercise of prerogative by Maceda, suffice it to say that while the cancellation or revocation of the license is vested in the director of mines and geo-sciences, the latter is subject to the former’s control as the department head. We also stress the clear prerogative of the Executive Department in the evaluation and the consequent cancellation of licenses in the process of its formulation of policies with regard to their utilization. Courts will not interfere with the exercise of that discretion without any clear showing of grave abuse of discretion.31

Moreover, granting that respondents’ license is valid, it can still be validly revoked by the State in the exercise of police power.32 The exercise of such power through Proclamation No. 84 is clearly in

accord with jura regalia, which reserves to the State ownership of all natural resources.33 This Regalian doctrine is an exercise of its sovereign power as owner of lands of the public domain and of the patrimony of the nation, the mineral deposits of which are a valuable asset.34

Proclamation No. 84 cannot be stigmatized as a violation of the non-impairment clause. As pointed out earlier, respondents’ license is not a contract to which the protection accorded by the non-impairment clause may extend.35 Even if the license were, it is settled that provisions of existing laws and a reservation of police power are deemed read into it, because it concerns a subject impressed with public welfare.36 As it is, the non-impairment clause must yield to the police power of the state.37

We cannot sustain the argument that Proclamation No. 84 is a bill of attainder; that is, a "legislative act which inflicts punishment without judicial trial."38 Its declaration that QLP No. 33 is a patent nullity39 is certainly not a declaration of guilt. Neither is the cancellation of the license a punishment within the purview of the constitutional proscription against bills of attainder.

Too, there is no merit in the argument that the proclamation is an ex post facto law. There are six recognized instances when a law is considered as such: 1) it criminalizes and punishes an action that was done before the passing of the law and that was innocent when it was done; 2) it aggravates a crime or makes it greater than it was when it was committed; 3) it changes the punishment and inflicts one that is greater than that imposed by the law annexed to the crime when it was committed; 4) it alters the legal rules of evidence and authorizes conviction upon a less or different testimony than that required by the law at the time of the commission of the offense; 5) it assumes the regulation of civil rights and remedies only, but in effect imposes a penalty or a deprivation of a right as a consequence of something that was considered lawful when it was done; and 6) it deprives a person accused of a crime of some lawful protection to which he or she

become entitled, such as the protection of a former conviction or an acquittal or the proclamation of an amnesty.40 Proclamation No. 84 does not fall under any of the enumerated categories; hence, it is not an ex post facto law.

It is settled that an ex post facto law is limited in its scope only to matters criminal in nature.41 Proclamation 84, which merely restored the area excluded from the Biak-na-Bato national park by canceling respondents’ license, is clearly not penal in character.

Finally, it is stressed that at the time President Aquino issued Proclamation No. 84 on March 9, 1987, she was still validly exercising legislative powers under the Provisional Constitution of 1986.42 Section 1 of Article II of Proclamation No. 3, which promulgated the Provisional Constitution, granted her legislative power "until a legislature is elected and convened under a new Constitution." The grant of such power is also explicitly recognized and provided for in Section 6 of Article XVII of the 1987 Constitution.43

WHEREFORE, this Petition is hereby GRANTED and the appealed Decision of the Court of Appeals SET ASIDE. No costs.

SO ORDERED.

Davide, Jr., C.J., (Chairman), Ynares-Santiago, Carpio, and Azcuna, JJ., concur.

FOOTNOTES:

Section 1, Article XIII of the 1935 Constitution, reads:

"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 limit of the grant." (Italics supplied)

13 Section 8, Article XIV of the 1973 Constitution, is quoted thus:

"SEC. 8. All lands of the public domain, waters, minerals, coal, petroleum and other mineral oils, all forces of potential energy, fisheries, wildlife, and other natural resources of the 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 limit of the grant." (Italics supplied)

14 The pertinent provision of Section 2 of Article XII 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 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 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.

Republic of the PhilippinesSUPREME COURT

Manila

FIRST DIVISION

G.R. No. 162331 November 20, 2006

LEPANTO CONSOLIDATED MINING CO., Petitioner, vs.WMC RESOURCES INT’L. PTY. LTD., WMC PHILIPPINES, INC. and SAGITTARIUS MINES, INC., Respondents.

D E C I S I O N

CHICO-NAZARIO, J.:

Before Us is a Petition for Review on Certiorari under Rule 45 of the Rules of Civil Procedure, assailing the Decision1 of the Court of Appeals in CA-G.R. SP No. 74161, dated 21 November 2003, which dismissed herein petitioner’s Petition for Review of the Decision2 of the Office of the President dated 23 July 2002 affirming in totothe Order3 of the Secretary of the Department of Environment and Natural Resources (DENR) dated 18 December 2001 approving the application for and the consequent registration of FTAA No. 02-95-XI from WMC Philippines to Sagittarius Mines,

Inc.

On 22 March 1995, the Philippine Government and WMC Philippines, the local wholly-owned subsidiary of WMC Resources International Pty. Ltd. (WMC Resources) executed a Financial and Technical Assistance Agreement, denominated as the Columbio FTAA No. 02-95-XI (Columbio FTAA) for the purpose of large scale exploration, development, and commercial exploration of possible mineral resources in an initial contract area of 99,387 hectares located in the provinces of South Cotabato, Sultan Kudarat, Davao del Sur, and North Cotabato in accordance with Executive Order No. 279 and Department Administrative Order No. 63, Series of 1991.

The Columbio FTAA is covered in part by 156 mining claims held under various Mineral Production Sharing Agreements (MPSA) by Southcot Mining Corporation, Tampakan Mining Corporation, and Sagittarius Mines, Inc. (collectively called the Tampakan Companies), in accordance with the Tampakan Option Agreement entered into by WMC Philippines and the Tampakan Companies on 25 April 1991, as amended by Amendatory Agreement dated 15 July 1994, for purposes of exploration of the mining claims in Tampakan, South Cotabato. The Option Agreement, among other things, provides for the grant of the right of first refusal to the Tampakan Companies in case WMC Philippines desires to dispose of its rights and interests in the mining claims covering the area subject of the agreement.

WMC Resources subsequently divested itself of its rights and interests in the Columbio FTAA, and on 12 July 2000 executed a Sale and Purchase Agreement with petitioner Lepanto over its entire shareholdings in WMC Philippines, subject to the exercise of the Tampakan Companies’ exercise of their right of first refusal to purchase the subject shares. On 28 August 2000, petitioner sought the approval of the 12 July 2000 Agreement from the DENR Secretary.

In an Agreement dated 6 October 2000, however, the Tampakan Companies sought to exercise its right of first refusal. Thus, in a letter dated 13 October 2000, petitioner assailed the Tampakan Companies’ exercise of its right of first refusal, alleging that the Tampakan Companies failed to match the terms and conditions set forth in the 12 July 2000 Agreement.

Thereafter, petitioner filed a case4 for Injunction, Specific Performance, Annulment of Contracts and Contractual Interference with the Regional Trial Court of Makati, Branch 135, against WMC Resources, WMC Philippines, and the Tampakan Companies. WMC Philippines and the Tampakan Companies moved for the dismissal of said case. Said Motion to Dismiss having been denied, WMC Philippines challenged the order dismissing the Motion on appeal5 before the Court of Appeals which subsequently ordered the dismissal of the case on the ground of forum shopping in this wise:

Nevertheless, the Court finds that private respondent is guilty of forum-shopping. There is forum-shopping whenever, as a result of an adverse opinion in one forum, a party seeks a favorable opinion (other than by appeal or certiorari) in another. The principle applies not only with respect to suits filed in courts but also in connection with litigation commenced in the courts while an administrative processes and in anticipation of an unfavorable administrative ruling and a favorable court ruling.

In this case, petitioners argue that private respondent is guilty of forum shopping for having lodged the complain before respondent Court pending action by the Secretary of the DENR through the Mines and Geo-Sciences Bureau (MGB) on its approval of the Sale and Purchase Agreement dated July 12, 2000. Private respondent on the other hand, opposes the foregoing contention arguing that the MGB will be merely exercising its administrative not quasi-judicial power.

The action before respondent court was filed by private respondent

to compel petitioner WMC Resources to convey its equity in WMC Phils. and Hillcrest to the former. Meanwhile, in the case before the MGB, private respondent sought the approval of Sale and that the MGB’s authority over the case is purely administrative, but further review shows that private respondent raised contentious issues which need resolution by the MGB before it can recommend any approval to the Secretary of the DENR. Particularly, in its letter dated October 13, 2000 to the Secretary of the DENR, private respondent posed its objection to the approval of the Sales and Purchase agreements between WMC Resources and the Tampakan Companies, asserting that the latter failed to validly exercise its right of first refusal. Also, in its letter to the Director of the MGB dated December 8, 2000, private respondent spelled out in detail its reasons for objecting to the agreement between WMC Resources and the Tampakan Companies, and in the same breath, argued for the approval of its own contract. And because of the opposing claims posited by private respondent and petitioners, the MGB was constrained to require the parties to submit their respective comments. At the juncture, the MGB’s authority ceased to be administrative. Evidently, the MGB has to review all these opposing contentions and resolve the same. A resolution of the MGB on which contract to recommend or endorse to the Secretary of the DENR for approval will necessarily include a declaration on the validity of the different Sale and Purchase Agreements executed between the disagreeing parties, as well as on the exercise of the Tampakan Companies exercise of its right of first refusal and its qualification as a contractor under the FTAA. Even the MGB is aware that the dispute revolves around these sales and purchase agreements. Hence, it cannot be gainsaid that the MGB will be exercising its quasi-judicial powers in resolving the conflict before it. Whether the MGB can validly exercise such jurisdiction over the controversy is another issue but nonetheless immaterial in determining whether private respondent is guilty of forum-shopping. What is determinative is the filing of two (2) separate actions in different for a based principally on the same cause on the supposition that one or the other court would make a favorable disposition. Thus, it is not highly unlikely that respondent Court and MGB will come up with conflicting pronouncements on the dispute,

thereby creating a quandary as to which one will prevail. Private respondent’s act undisputably constitutes a clear case of forum-shopping, a ground for summary dismissal with prejudice of the action. The respondent court committed grave abuse of discretion in refusing to dismiss Civil Case No. 01-087 on ground of forum-shopping.6

With the denial of petitioner’s Motion for Reconsideration, the case7

was elevated to this Court. In a Decision dated 24 September 2003, the Court affirmed the Decision of the appellate court and dismissed the petition. In said Decision, the Court elucidated that:

True, the questioned agreements of sale between petitioner and WMC on one hand and between WMC and the Tampakan Companies on the other pertain to transfer of shares of stock from one entity to another. But said shares of stock represent ownership of mining rights or interest in mining agreements. Hence, the power of the MGB to rule on the validity of the questioned agreements of sale, which was raised by petitioner before the DENR, is inextricably linked to the very nature of such agreements over which the MGB has jurisdiction under the law. Unavoidably, there is identity of reliefs that petitioner seeks from both the MGB and the RTC.

Forum shopping exists when both actions involve the same transactions, same essential facts and circumstances and raise identical causes of actions, subject matter, and issues. Such elements are evidently present in both the proceedings before the MGB and before the trial court. The case instituted with the RTC was thus correctly ordered dismissed by the appellate court on the ground of forum shopping. Besides, not only did petitioner commit forum shopping but it also failed to exhaust administrative remedies by opting to go ahead in seeking reliefs from the court even while those same reliefs were appropriately awaiting resolution by the MGB.8

In the interim, on 10 January 2001, contending that the 12 July

Agreement between petitioner and WMC Philippines had expired due to failure to meet the necessary preconditions for its validity, WMC Resources and the Tampakan Companies executed another Sale and Purchase Agreement, where Sagittarius Mines, Inc. was designated assignee and corporate vehicle which would acquire the shareholdings and undertake the Columbio FTAA activities. On 15 January 2001, Sagittarius Mines, Inc. increased its authorized capitalization to P250 million. Subsequently, WMC Resources and Sagittarius Mines, Inc. executed a Deed of Absolute Sale of Shares of Stocks on 23 January 2001.

After due consideration and evaluation of the financial and technical qualifications of Sagittarius Mines, Inc., the DENR Secretary approved the transfer of the Columbio FTAA from WMC Philippines to Sagittarius Mines, Inc. in the assailed Order. According to said Order, pursuant to Section 66 of Department Administrative Order No. 96-40, as amended, Sagittarius Mines, Inc. meets the qualification requirements as Contractor-Transferee of FTAA No. 02-95-XI, and that the application for transfer of said FTAA went thru the procedure and other requirements set forth under the law.

Aggrieved by the transfer of the Columbio FTAA in favor of Sagittarius Mines, Inc., petitioner filed a Petition for Review of the Order of the DENR Secretary with the Office of the President. Petitioner assails the validity of the 18 December 2001 Order on the ground that: 1) it violates the constitutional right of Lepanto to due process; 2) it preempts the resolution of very crucial legal issues pending with the regular courts; and 3) it blatantly violates Section 40 of the Mining Act.

In a Decision dated 23 July 2002, the Office of the President dismissed the petition in this wise:

At the outset, it bears emphasis that quite contrary to the argument of petitioner Lepanto, the above Order of the DENR Secretary is not violative of the Mining Law. Since the subject Columbio FTAA

was granted in accordance with the pertinent provisions of Executive Order No. 279 and Department Administrative Order No. 63 on 22 March 1995, or prior to the effectivity of the Philippine Mining Act of 1995, especially as it highlights the non-impairment of existing mining and/or quarrying rights, under Section 14.1 (b) thereof, only the consent of DENR Secretary is required. To hold otherwise would be to unduly impose a burden on transferor WMC and thereby restrict its freedom to dispose of or alienate this property right without due process. Thus, under the Revised Implementing Rules and Regulations of the Philippine Mining Act of 1995, Chapter XXX thereof expressly echoes the guaranty:

"Section 272. Non-Impairment of Existing Mining/Quarrying Rights.- All valid and existing mining lease contracts, permits/licenses, leases pending renewal, Mineral Production Sharing Agreements, FTAA granted under Executive Order No. 279, at the date of the Act shall remain valid, shall not be impaired and shall be recognized by the Government x x x.

x x x Provided, finally, That this provision is applicable only to all FTAA/MPSA applications filed under Department Administrative Order No. 63 prior to the effectivity of the act and these implementing rules and regulations."

As correctly stated by the MGB Director and affirmed by the DENR Secretary, Section 14.1 of the Columbio FTAA provides that the FTAA may be transferred provided that the Secretary consents to the same. Pursuant to Section 112 of the Mining Act and Section 272 of DAO No. 96-40, as amended, on non-impairment of existing mining rights, the subject application for transfer of the Columbio FTAA to Sagittarius requires only the approval of the DENR Secretary.

Moreover, there is no merit in petitioner Lepanto’s argument that the DENR Secretary and consequently, this Office, has no jurisdiction over the subject matter in issue. The assailed Order of the DENR Secretary was pursuant to the latter’s exercise of the

well-entrenched doctrine of primary jurisdiction of administrative agencies.

By virtue of the operation of the doctrine of primary jurisdiction, "courts cannot and will not determine a controversy involving a question which is within the jurisdiction of an administrative tribunal, especially where the question demands the exercise of sound administrative discretion requiring the special knowledge, experience and services of the tribunal to determine technical and intricate matters of fact and where a uniformity of ruling is essential to comply with the purposes regulatory statute administered." (Province of Zamboanga del Norte v. Court of Appeals, 342 SCRA 549 [2000]; Factoran v. Court of Appeals, 320 SCRA 530 [1999]; Brett v. Intermediate Appellate Court, 191 SCRA 687 [1990]; Qualitrans Limousine Service, Inc. v. Royal Class Limousine Service, 179 SCRA 569 [1989]). Thus, even though an action may be lodged in court that is ostensibly for annulment or "rescission of what appears to be an ordinary civil contract cognizable by a civil court," the doctrine of primary jurisdiction still applies. (Industrial Enterprises, Inc. v. Court of Appeals, 184 SCRA 426 [1990]).

Section 4, Chapter 1, Title XIV, Book IV of the Administrative Code of 1987 specifies the powers and functions of the DENR. Also, the Philippine Mining Act of 1995 provides that the DENR "shall be the primary government agency responsible for the conservation, management, development, and proper use of the State’s mineral resources including those in reservations, watershed areas, and lands of the public domain. The Secretary shall have the authority to enter into mineral agreements on behalf of the Government upon the recommendation of the Director, promulgate such rules and regulations as may be necessary to implement the intent and provisions of this Act." (Chapter II, Section 8). Since an FTAA is "a contract involving financial or technical assistance for large-scale exploration, development and utilization of mineral resources" (Ibid., Chapter 1, Section 3 [r]), any issue affecting the same is indubitably within the primary jurisdiction of the DENR, as in fact, the government enters into FTAA’s through the DENR (Ibid., Chapter VI, Section 33).

There is no dispute that the instant case involves and requires the special technical knowledge and expertise of the DENR. In the determination by the DENR of a "qualified person" pursuant to the Philippine Mining Act of 1995, such person must possess the technical and financial capability to undertake mineral resources development". (Chapter I, Section 3 [aq]) Obviously, this determination peculiarly lies within the expertise of the DENR.

The validity of the successive transfers is not a civil issue, contrary to the allegation of petitioner Lepanto, because validity of transfer depends on technical qualifications of the transferee and compliance with the DENR requirements on qualifications, all of which require administrative expertise. Notably, petitioner Lepanto is estopped from assailing the primary jurisdiction of the DENR since petitioner Lepanto itself anchored its Petition (cf. pp. 4-5) on the contention that, allegedly, "the Tampakan Companies failed to match the terms and conditions of the July 12 Agreement with petitioner Lepanto in that they did not possess the financial and technical qualifications under the Mining Act and its Implementing Rules". Petitioner Lepanto’s objections therefore go into the very qualifications of a transferee which is a technical issue.

This contention is a recognition by petitioner Lepanto itself of the fact that the crucial and determinative issue in the instant case is grounded on the financial and technical qualifications of a transferee, which issue, indisputably, is within the exclusive domain and expertise of the DENR and not of the courts.

x x x x

Moreover, petitioner Lepanto, by its conduct, is again estopped from assailing the DENR’s jurisdiction after actively participating in the proceedings therein and seeking affirmative relief. A party who invoked the jurisdiction [of] a tribunal and actively participated in the proceedings therein cannot impugn such jurisdiction when faced with an adverse decision. (cf.

Briad Agro Development Corporation v. dela Serna, 174 SCRA 524 [1989]).9 [Emphasis ours]

With the denial of its Motion for Reconsideration, petitioner lodged an appeal before the Court of Appeals which was consequently dismissed by the appellate court in the herein assailed Decision. According to the Court of Appeals:

Petitioner forcefully argues that the DENR Secretary had usurped the power of the President of the Philippines to approve the transfer of FTAA, as under the provision of Section 40 of the Philippine Mining Act of 1995, any transfer or assignment of an FTAA has to be approved not by the DENR Secretary but by the President.

The argument does not wash.

The issue hinges on the applicability of Section 40 of RA 7942 or the Philippine Mining Act of 1995, which took force on 14 April 1995, on the transfer of FTAA from WMC to the Tampakan Companies, particularly the Sagittarius Mines, Inc.

The said law provides:

"Sec. 40. Assignment/Transfer – A financial or technical assistance agreement may be assigned or transferred, in whole or in part, to a qualified person subject to the prior approval of the President: Provided, that the President shall notify Congress of every financial or technical assistance agreement assigned or converted in accordance with this provision within thirty (30) days from the date of approval."

However, the above provision does not apply to the Columbio FTAA which was entered into by and between the Philippine Government and WMCP on 22 March 1995, or prior to the effectivity of RA No. 7942. Section 14.1 of the Columbio FTAA,

under which the Tampakan Companies claim their rights to first refusal, reads:

"14.1 Assignment

"The Contractor may assign, transfer, convey or otherwise dispose of all or any part of its interest in the Agreement provided that such assignment, transfer, conveyance or disposition does not infringe any Philippine law applicable to foreign ownership:

(a) to an Affiliate provided that it gives notice of such assignment to the Secretary within 30 days after such assignment; or

(b) to any third party provided that the Secretary consents to the same, which consent shall not be unreasonably withheld."

Section 10, Article III of the Philippine Constitution enjoins Congress from passing a law impairing the obligation of contracts. It is axiomatic that a law that impairs an obligation of contract also violates the due process clause. The obligation of an existing contract is impaired when its terms and conditions are changed by law, ordinance, or any issuance having the force of law, thereby weakening the position or diminishing the rights of a party to the contract. The extent of the change is not material. It is not a question of degree or manner or cause, but of encroaching in any respect on its obligations or dispensing with any part of its force. Impairment has also been predicated on laws which, without destroying contracts, derogate from substantial contractual rights.

The condition of RA No. 7942 requiring the further approval of the President, if made to apply retroactively to the Columbio FTAA, would impair the obligation of contracts simply because it constitutes a restriction on the right of the contractor to assign or transfer its interest in an FTAA. In other words, it diminished the vested rights of the contractor to assign or transfer its interests on mere approval of the DENR Secretary. The restriction is therefore

substantive, and not merely procedural, contrary to the contention of petitioner.

x x x x

Likewise militating against the petitioner’s side is the doctrine that statutes are to be construed as having only a prospective operation unless the purpose and intention of the Legislature to give them a retrospective effect is expressly declared or is necessarily implied from the language used. In case of doubt, the doubt must be resolved against the retrospective effect. At any rate, even if RA No. 7942 be accorded a retroactive effect, this does notipso facto permit the application of the requirement of securing a prior presidential consent to the transfer of FTAA, for, to iterate, this would impair the obligation of contract. In such a case, the correct application of RA No. 7942 is for the provisions to [be] made to apply on existing FTAAs only if the same would not result in impairment of obligation of contracts.

This is as it should be. To hold otherwise would be to unduly impose a burden on transferor WMC and thereby restrict its freedom to dispose of or alienate its property right without due process. It constitutes impairment of obligation of contracts, which the Fundamental Law enjoins, and contravenes the doctrine of prospective application of laws.10

Hence, the instant Petition.

The pivotal issue to be resolved herein involves the propriety of the application to the Columbio FTAA of Republic Act No. 7942 or the Philippine Mining Act of 1995, particularly Section 40 thereof requiring the approval of the President of the assignment or transfer of financial or technical assistance agreements. Petitioner maintains that respondents failed to comprehend the express language of Section 40 of the Philippine Mining Act of 1995 requiring the approval of the President on the transfer or assignment of a financial or technical assistance agreement.

To resolve this matter, it is imperative at this point to stress the fact that the Columbio FTAA was entered into by the Philippine Government and WMC Philippines on 22 March 1995, undoubtedly before the Philippine Mining Act of 1995 took effect on 14 April 1995. Furthermore, it is undisputed that said FTAA was granted in accordance with Executive Order No. 279 and Department Administrative Order No. 63, Series of 1991, which does not contain any similar condition on the transfer or assignment of financial or technical assistance agreements. Thus, it would seem that what petitioner would want this Court to espouse is the retroactive application of the Philippine Mining Act of 1995 to the Columbio FTAA, a valid agreement concluded prior to the naissance of said piece of legislation.

This posture of petitioner would clearly contradict the established legal doctrine that statutes are to be construed as having only a prospective operation unless the contrary is expressly stated or necessarily implied from the language used in the law. As reiterated in the case of Segovia v. Noel,11 a sound cannon of statutory construction is that a statute operates prospectively only and never retroactively, unless the legislative intent to the contrary is made manifest either by the express terms of the statute or by necessary implication.

Article 4 of the Civil Code provides that: "Laws shall not have a retroactive effect unless therein otherwise provided." According to this provision of law, in order that a law may have retroactive effect it is necessary that an express provision to this effect be made in the law, otherwise nothing should be understood which is not embodied in the law.12 Furthermore, it must be borne in mind that a law is a rule established to guide our actions without no binding effect until it is enacted, wherefore, it has no application to past times but only to future time, and that is why it is said that the law looks to the future only and has no retroactive effect unless the legislator may have formally given that effect to some legal provisions.13

In the case at bar, there is an absence of either an express declaration or an implication in the Philippine Mining Act of 1995 that the provisions of said law shall be made to apply retroactively, therefore, any section of said law must be made to apply only prospectively, in view of the rule that a statute ought not to receive a construction making it act retroactively, unless the words used are so clear, strong, and imperative that no other meaning can be annexed to them, or unless the intention of the legislature cannot be otherwise satisfied.14

Be that as it may, assuming for the sake of argument that We are to apply the Philippine Mining Act of 1995 retrospectively to the Columbio FTAA, the lack of presidential approval will not be fatal as to render the transfer illegal, especially since, as in the instant case, the alleged lack of presidential approval has been remedied when petitioner appealed the matter to the Office of the President which approved the Order of the DENR Secretary granting the application for transfer of the Columbio FTAA to Sagittarius Mines, Inc. As expounded by the Court in the Resolution of the Motion for Reconsideration in the La Bugal-B’Laan Tribal Association, Inc. v. Ramos[15]case, involving the same FTAA subject of the instant case:

x x x Moreover, when the transferee of an FTAA is another foreign corporation, there is a logical application of the requirement of prior approval by the President of the Republic and notification to Congress in the event of assignment or transfer of an FTAA. In this situation, such approval and notification are appropriate safeguards, considering that the new contractor is the subject of a foreign government.1âwphi1

On the other hand, when the transferee of the FTAA happens to be a Filipino corporation, the need for such safeguard is not critical; hence, the lack of prior approval and notification may not be deemed fatal as to render the transfer invalid. Besides, it is not as if approval by the President is entirely absent in this instance. x x x That case involved the review of the Decision

of the Court of Appeals dated November 21, 2003 in CA G.R. SP No. 74161, which affirmed the DENR Order dated December 31, 2001 and the Decision of the Office of the President dated July 23, 2002, both approving the assignment of the WMCP FTAA to Sagittarius.16 (Emphasis ours.)

Furthermore, if petitioner was indeed of the mind that Section 40 of the Philippine Mining Act of 1995 is applicable to the Columbio FTAA, thus necessitating the approval of the President for the validity of its transfer or assignment, it would seem contradictory that petitioner sought the approval of the DENR Secretary, and not that of the President, of its 12 July 2000 Sale and Purchase Agreement with WMC Resources. Hence, it may be glimpsed from the very act of petitioner that it recognized that the provision of the Columbio FTAA regarding the consent of the DENR Secretary with respect to the transfer of said FTAA must be upheld.

It is engrained in jurisprudence that the constitutional prohibition on the impairment of the obligation of contract does not prohibit every change in existing laws,17 and to fall within the prohibition, the change must not only impair the obligation of the existing contract, but the impairment must be substantial.18 Substantial impairment as conceived in relation to impairment of contracts has been explained in the case of Clemons v. Nolting,19 which stated that: a law which changes the terms of a legal contract between parties, either in the time or mode of performance, or imposes new conditions, or dispenses with those expressed, or authorizes for its satisfaction something different from that provided in its terms, is law which impairs the obligation of a contract and is therefore null and void. Section 40 of the Philippine Mining Act of 1995 requiring the approval of the President with respect to assignment or transfer of FTAAs, if made applicable retroactively to the Columbio FTAA, would be tantamount to an impairment of the obligations under said contract as it would effectively restrict the right of the parties thereto to assign or transfer their interests in the said FTAA.

By imposing a new condition apart from those already contained in

the agreement, before the parties to the Columbio FTAA may assign or transfer its rights and interest in the said agreement, Section 40 of the Philippine Mining Act of 1995, if made to apply to the Columbio FTAA,

will effectively modify the terms of the original contract and thus impair the obligations of the parties thereto and restrict the exercise of their vested rights under the original agreement. Such modification to the Columbio FTAA, particularly in the conditions imposed for its valid transfer is equivalent to an impairment of said contract violative of the Constitution.

WHEREFORE, premises considered, the instant petition is hereby DENIED. The Decision of the Court of Appeals in CA G.R. SP No. 74161 dated 21 November 2003 is hereby AFFIRMED. Costs against petitioner.

SO ORDERED.

MINITA V. CHICO-NAZARIOAssociate Justice

FIRST DIVISION

[G.R. No. 148622. September 12, 2002]

REPUBLIC OF THE PHILIPPINES, represented by HON.HEHERSON T. ALVAREZ, in his capacity as Secretary of theDEPARTMENT OF ENVIRONMENT AND NATURALRESOURCES (DENR), CLARENCE L. BAGUILAT, in his capacity as the Regional Executive Director of DENR-Region XI and ENGR. BIENVENIDO L. LIPAYON, in his capacity as the Regional Director of the DENR-ENVIRONMENTAL MANAGEMENT BUREAU (DENR-EMB), Region XI, petitioners, vs. THE CITY OF DAVAO, represented by BENJAMIN C. DE GUZMAN, City Mayor, respondent.

D E C I S I O N

YNARES-SANTIAGO, J.:

Before us is a petition for review[1] on certiorari assailing the decision[2] dated May 28, 2001 of the Regional Trial Court of Davao City, Branch 33, which granted the writ of mandamus and injunction in favor of respondent, the City of Davao, and against petitioner, the Republic, represented by the Department of Environment and Natural Resources (DENR). The trial court also directed petitioner to issue a Certificate of Non-Coverage in favor of respondent.

The antecedent facts of the case are as follows:

On August 11, 2000, respondent filed an application for a Certificate of Non-Coverage (CNC) for its proposed project, the Davao City Artica Sports Dome, with the Environmental Management Bureau (EMB), Region XI. Attached to the application were the required documents for its issuance, namely, a) detailed

location map of the project site; b) brief project description; and c) a certification from the City Planning and Development Office that the project is not located in an environmentally critical area (ECA). The EMB Region XI denied the application after finding that the proposed project was within an environmentally critical area and ruled that, pursuant to Section 2, Presidential Decree No. 1586, otherwise known as the Environmental Impact Statement System, in relation to Section 4 of Presidential Decree No, 1151, also known as the Philippine Environment Policy, the City of Davao must undergo the environmental impact assessment (EIA) process to secure an Environmental Compliance Certificate (ECC), before it can proceed with the construction of its project.

Believing that it was entitled to a Certificate of Non-Coverage, respondent filed a petition for mandamus and injunction with the Regional Trial Court of Davao, docketed as Civil Case No. 28,133-2000. It alleged that its proposed project was neither an environmentally critical project nor within an environmentally critical area; thus it was outside the scope of the EIS system. Hence, it was the ministerial duty of the DENR, through the EMB-Region XI, to issue a CNC in favor of respondent upon submission of the required documents.

The Regional Trial Court rendered judgment in favor of respondent, the dispositive portion of which reads as follows:

WHEREFORE, finding the petition to be meritorious, judgment granting the writ of mandamus and injunction is hereby rendered in favor of the petitioner City of Davao and against respondents Department of Environment and Natural Resources and the other respondents by:

1) directing the respondents to issue in favor of the petitioner City of Davao a Certificate of Non-Coverage, pursuant to Presidential Decree No. 1586 and related laws, in connection with the construction by the City of Davao of the Artica Sports Dome;

2) making the preliminary injunction issued on December 12, 2000 permanent.

Costs de oficio.

SO ORDERED.[3]

The trial court ratiocinated that there is nothing in PD 1586, in relation to PD 1151 and Letter of Instruction No. 1179 (prescribing guidelines for compliance with the EIA system), which requires local government units (LGUs) to comply with the EIS law. Only agencies and instrumentalities of the national government, including government owned or controlled corporations, as well as private corporations, firms and entities are mandated to go through the EIA process for their proposed projects which have significant effect on the quality of the environment. A local government unit, not being an agency or instrumentality of the National Government, is deemed excluded under the principle of expressio unius est exclusio alterius.

The trial court also declared, based on the certifications of the DENR-Community Environment and Natural Resources Office (CENRO)-West, and the data gathered from the Philippine Institute of Volcanology and Seismology (PHIVOLCS), that the site for the Artica Sports Dome was not within an environmentally critical area. Neither was the project an environmentally critical one. It therefore becomes mandatory for the DENR, through the EMB Region XI, to approve respondents application for CNC after it has satisfied all the requirements for its issuance. Accordingly, petitioner can be compelled by a writ of mandamus to issue the CNC, if it refuses to do so.

Petitioner filed a motion for reconsideration, however, the same was denied. Hence, the instant petition for review.

With the supervening change of administration, respondent, in

lieu of a comment, filed a manifestation expressing its agreement with petitioner that, indeed, it needs to secure an ECC for its proposed project. It thus rendered the instant petition moot and academic. However, for the guidance of the implementors of the EIS law and pursuant to our symbolic function to educate the bench and bar,[4] we are inclined to address the issue raised in this petition.

Section 15 of Republic Act 7160,[5] otherwise known as the Local Government Code, defines a local government unit as a body politic and corporate endowed with powers to be exercised by it in conformity with law. As such, it performs dual functions, governmental and proprietary. Governmental functions are those that concern the health, safety and the advancement of the public good or welfare as affecting the public generally. [6] Proprietary functions are those that seek to obtain special corporate benefits or earn pecuniary profit and intended for private advantage and benefit.[7] When exercising governmental powers and performing governmental duties, an LGU is an agency of the national government.[8] When engaged in corporate activities, it acts as an agent of the community in the administration of local affairs.[9]

Found in Section 16 of the Local Government Code is the duty of the LGUs to promote the peoples right to a balanced ecology. [10]

Pursuant to this, an LGU, like the City of Davao, can not claim exemption from the coverage of PD 1586. As a body politic endowed with governmental functions, an LGU has the duty to ensure the quality of the environment, which is the very same objective of PD 1586.

Further, it is a rule of statutory construction that every part of a statute must be interpreted with reference to the context, i.e., that every part must be considered with other parts, and kept subservient to the general intent of the enactment.[11] The trial court, in declaring local government units as exempt from the coverage of the EIS law, failed to relate Section 2 of PD 1586 [12] to the following provisions of the same law:

WHEREAS, the pursuit of a comprehensive and integrated environmental protection program necessitates the establishment and institutionalization of a system whereby the exigencies of socio-economic undertakings can be reconciled with the requirements of environmental quality; x x x.

Section 1. Policy. It is hereby declared the policy of the State to attain and maintain a rational and orderly balance between socio-economic growth and environmental protection.

x x x x x x x x x

Section 4. Presidential Proclamation of Environmentally Critical Areas and Projects. The President of the Philippines may, on his own initiative or upon recommendation of the National Environmental Protection Council, by proclamation declare certain projects, undertakings or areas in the country as environmentally critical. No person, partnership or corporation shall undertake or operate any such declared environmentally critical project or area without first securing an Environmental Compliance Certificate issued by the President or his duly authorized representative. For the proper management of said critical project or area, the President may by his proclamation reorganize such government offices, agencies, institutions, corporations or instrumentalities including the realignment of government personnel, and their specific functions and responsibilities.

Section 4 of PD 1586 clearly states that no person, partnership or corporation shall undertake or operate any such declared environmentally critical project or area without first securing an Environmental Compliance Certificate issued by the President or his duly authorized representative.[13] The Civil Code defines a person as either natural or juridical. The state and its political subdivisions, i.e., the local government units[14] are juridical persons.[15] Undoubtedly therefore, local government units are not excluded from the coverage of PD 1586.

Lastly, very clear in Section 1 of PD 1586 that said law intends to implement the policy of the state to achieve a balance between socio-economic development and environmental protection, which are the twin goals of sustainable development. The above-quoted first paragraph of the Whereas clause stresses that this can only be possible if we adopt a comprehensive and integrated environmental protection program where all the sectors of the community are involved, i.e., the government and the private sectors. The local government units, as part of the machinery of the government, cannot therefore be deemed as outside the scope of the EIS system.[16]

The foregoing arguments, however, presuppose that a project, for which an Environmental Compliance Certificate is necessary, is environmentally critical or within an environmentally critical area. In the case at bar, respondent has sufficiently shown that the Artica Sports Dome will not have a significant negative environmental impact because it is not an environmentally critical project and it is not located in an environmentally critical area. In support of this contention, respondent submitted the following:

1. Certification from the City Planning and Development Office that the project is not located in an environmentally critical area;

2. Certification from the Community Environment and Natural Resources Office (CENRO-West) that the project area is within the 18-30% slope, is outside the scope of the NIPAS (R.A. 7586), and not within a declared watershed area; and

3. Certification from PHILVOCS that the project site is thirty-seven (37) kilometers southeast of the southernmost extension of the Davao River Fault and forty-five (45) kilometers west of the Eastern Mindanao Fault; and is outside the required minimum buffer zone of five (5) meters from a fault zone.

The trial court, after a consideration of the evidence, found that the Artica Sports Dome is not within an environmentally critical

area. Neither is it an environmentally critical project. It is axiomatic that factual findings of the trial court, when fully supported by the evidence on record, are binding upon this Court and will not be disturbed on appeal.[17] This Court is not a trier of facts.[18]

There are exceptional instances when this Court may disregard factual findings of the trial court, namely: a) when the conclusion is a finding grounded entirely on speculations, surmises, or conjectures; b) when the inference made is manifestly mistaken, absurd, or impossible; c) where there is a grave abuse of discretion; d) when the judgment is based on a misapprehension of facts; e) when the findings of fact are conflicting; f) when the Court of Appeals, in making its findings, went beyond the issues of the case and the same are contrary to the admissions of both appellant and appellee; g) when the findings of the Court of Appeals are contrary to those of the trial court; h) when the findings of fact are conclusions without citation of specific evidence on which they are based; i) when the finding of fact of the Court of Appeals is premised on the supposed absence of evidence but is contradicted by the evidence on record; and j) when the Court of Appeals manifestly overlooked certain relevant facts not disputed by the parties and which, if properly considered, would justify a different conclusion.[19] None of these exceptions, however, obtain in this case.

The Environmental Impact Statement System, which ensures environmental protection and regulates certain government activities affecting the environment, was established by Presidential Decree No. 1586. Section 2 thereof states:

There is hereby established an Environmental Impact Statement System founded and based on the environmental impact statement required under Section 4 of Presidential Decree No. 1151, of all agencies and instrumentalities of the national government, including government-owned or controlled corporations, as well as private corporations, firms and entities, for every proposed project and undertaking which significantly affect the quality of the

environment.

Section 4 of PD 1151, on the other hand, provides:

Environmental Impact Statements. Pursuant to the above enunciated policies and goals, all agencies and instrumentalities of the national government, including government-owned or controlled corporations, as well as private corporations, firms and entities shall prepare, file and include in every action, project or undertaking which significantly affects the quality of the environment a detailed statement on

(a) the environmental impact of the proposed action, project or undertaking

(b) any adverse environmental effect which cannot be avoided should the proposal be implemented

(c) alternative to the proposed action

(d) a determination that the short-term uses of the resources of the environment are consistent with the maintenance and enhancement of the long-term productivity of the same; and

(e) whenever a proposal involves the use of depletable or nonrenewable resources, a finding must be made that such use and commitment are warranted.

Before an environmental impact statement is issued by a lead agency, all agencies having jurisdiction over, or special expertise on, the subject matter involved shall comment on the draft environmental impact statement made by the lead agency within thirty (30) days from receipt of the same.

Under Article II, Section 1, of the Rules and Regulations Implementing PD 1586, the declaration of certain projects or areas

as environmentally critical, and which shall fall within the scope of the Environmental Impact Statement System, shall be by Presidential Proclamation, in accordance with Section 4 of PD 1586 quoted above.

Pursuant thereto, Proclamation No. 2146 was issued on December 14, 1981, proclaiming the following areas and types of projects as environmentally critical and within the scope of the Environmental Impact Statement System established under PD 1586:

A. Environmentally Critical Projects

I. Heavy Industries

a. Non-ferrous metal industries

b. Iron and steel mills

c. Petroleum and petro-chemical industries including oil and gas

d. Smelting plants

II. Resource Extractive Industries

a. Major mining and quarrying projects

b. Forestry projects

1.Logging

2.Major wood processing projects

3.Introduction of fauna (exotic-animals) in public/private forests

4. Forest occupancy

5. Extraction of mangrove products

6. Grazing

c. Fishery Projects

1. Dikes for/and fishpond development projects

III. Infrastructure Projects

a. Major dams

b. Major power plants (fossil-fueled, nuclear fueled, hydroelectric or geothermal)

c. Major reclamation projects

d. Major roads and bridges

B. Environmentally Critical Areas

1. All areas declared by law as national parks, watershed reserves, wildlife preserves and sanctuaries;

2. Areas set aside as aesthetic potential tourist spots;

3. Areas which constitute the habitat for any endangered or threatened species of indigenous Philippine Wildlife (flora and fauna);

4. Areas of unique historic, archaeological, or scientific interests;

5. Areas which are traditionally occupied by cultural communities or tribes;

6. Areas frequently visited and/or hard-hit by natural calamities (geologic hazards, floods, typhoons, volcanic activity, etc.);

7. Areas with critical slopes;

8. Areas classified as prime agricultural lands;

9. Recharged areas of aquifers;

10. Water bodies characterized by one or any combination of the following conditions;

a. tapped for domestic purposes

b. within the controlled and/or protected areas declared by appropriate authorities

c. which support wildlife and fishery activities

11. Mangrove areas characterized by one or any combination of the following conditions:

a. with primary pristine and dense young growth;

b. adjoining mouth of major river systems;

c. near or adjacent to traditional productive fry or fishing grounds;

d. which act as natural buffers against shore erosion, strong winds and storm floods;

e. on which people are dependent for their livelihood.

12. Coral reefs, characterized by one or any combinations of the following conditions:

a. with 50% and above live coralline cover;

b. spawning and nursery grounds for fish;

c. which act as natural breakwater of coastlines.

In this connection, Section 5 of PD 1586 expressly states:

Environmentally Non-Critical Projects. All other projects, undertakings and areas not declared by the President as environmentally critical shall be considered as non-critical and shall not be required to submit an environmental impact statement. The National Environmental Protection Council, thru the Ministry of Human Settlements may however require non-critical projects and undertakings to provide additional environmental safeguards as it may deem necessary.

The Artica Sports Dome in Langub does not come close to any of the projects or areas enumerated above. Neither is it analogous to any of them. It is clear, therefore, that the said project is not classified as environmentally critical, or within an environmentally critical area. Consequently, the DENR has no choice but to issue the Certificate of Non-Coverage. It becomes its ministerial duty, the performance of which can be compelled by writ of mandamus, such as that issued by the trial court in the case at bar.

WHEREFORE, in view of the foregoing, the instant petition is DENIED. The decision of the Regional Trial Court of Davao City,

Branch 33, in Civil Case No. 28,133-2000, granting the writ of mandamus and directing the Department of Environment and Natural Resources to issue in favor of the City of Davao a Certificate of Non-Coverage, pursuant to Presidential Decree No. 1586 and related laws, in connection with the construction of the Artica Sports Dome, is AFFIRMED.

SO ORDERED.

Davide, Jr., C.J., (Chairman), Vitug, and Carpio, JJ., concur.

Republic of the PhilippinesSUPREME COURT

EN BANC

G.R. No. 129546 December 13, 2005

PROVINCE OF RIZAL, MUNICIPALITY OF SAN MATEO, PINTONG BOCAUE MULTIPURPOSE COOPERATIVE, CONCERNED CITIZENS OF RIZAL, INC., ROLANDO E. VILLACORTE, BERNARDO HIDALGO, ANANIAS EBUENGA, VILMA T. MONTAJES, FEDERICO MUNAR, JR., ROLANDO BEÑAS, SR., ET AL., and KILOSBAYAN, INC., Petitioners, vs.EXECUTIVE SECRETARY, SECRETARY OF ENVIRONMENT & NATURAL RESOURCES, LAGUNA LAKE DEVELOPMENT AUTHORITY, SECRETARY OF PUBLIC WORKS & HIGHWAYS, SECRETARY OF BUDGET & MANAGEMENT, METRO MANILA DEVELOPMENT AUTHORITY and THE HONORABLE COURT OF APPEALS, Respondents.

D E C I S I O N

CHICO-NAZARIO, J.:

The earth belongs in usufruct to the living.1

At the height of the garbage crisis plaguing Metro Manila and its environs, parts of the Marikina Watershed Reservation were set aside by the Office of the President, through Proclamation No. 635 dated 28 August 1995, for use as a sanitary landfill and similar waste disposal applications. In fact, this site, extending to more or less 18 hectares, had already been in operation since 19 February 19902 for the solid wastes of Quezon City, Marikina, San Juan, Mandaluyong, Pateros, Pasig, and Taguig.3

This is a petition filed by the Province of Rizal, the municipality of San Mateo, and various concerned citizens for review on certiorari of the Decision of the Court of Appeals in CA-G.R. SP No. 41330, denying, for lack of cause of action, the petition for certiorari, prohibition and mandamus with application for a temporary

restraining order/writ of preliminary injunction assailing the legality and constitutionality of Proclamation No. 635.

The facts are documented in painstaking detail.

On 17 November 1988, the respondent Secretaries of the Department of Public Works and Highways (DPWH) and the Department of Environment and Natural Resources (DENR) and the Governor of the Metropolitan Manila Commission (MMC) entered into a Memorandum of Agreement (MOA),4 which provides in part:

1. The DENR agrees to immediately allow the utilization by the Metropolitan Manila Commission of its land property located at Pintong Bocaue in San Mateo, Rizal as a sanitary landfill site, subject to whatever restrictions that the government impact assessment might require.

2. Upon signing of this Agreement, the DPWH shall commence the construction/development of said dumpsite.

3. The MMC shall: a) take charge of the relocation of the families within and around the site; b) oversee the development of the areas as a sanitary landfill; c) coordinate/monitor the construction of infrastructure facilities by the DPWH in the said site; and d) ensure that the necessary civil works are properly undertaken to safeguard against any negative environmental impact in the area.

On 7, 8 and 10 February 1989, the Sangguniang Bayan of San Mateo wrote Gov. Elfren Cruz of the MMC, Sec. Fiorello Estuar of the DPWH, the Presidential Task Force on Solid Waste Management, Executive Secretary Catalino Macaraig, and Sec. Fulgencio Factoran, Jr., pointing out that it had recently passed a Resolution banning the creation of dumpsites for Metro Manila garbage within its jurisdiction, asking that their side be heard, and that the addressees "suspend and temporarily hold in abeyance all

and any part of your operations with respect to the San Mateo Landfill Dumpsite." No action was taken on these letters.

It turns out that the land subject of the MOA of 17 November 1988 and owned by the DENR was part of the Marikina Watershed Reservation Area. Thus, on 31 May 1989, forest officers of the Forest Engineering and Infrastructure Unit of the Community Environment and Natural Resource Office, (CENRO) DENR-IV, Rizal Province, submitted a Memorandum5 on the "On-going Dumping Site Operation of the MMC inside (the) Upper Portion of Marikina Watershed Reservation, located at Barangay Pintong Bocaue, San Mateo, Rizal, and nearby localities." Said Memorandum reads in part:

Observations:

3.1 The subject area is arable and agricultural in nature;

3.2 Soil type and its topography are favorable for agricultural and forestry productions;

. . .

3.5 Said Dumping Site is observed to be confined within the said Watershed Reservation, bearing in the northeastern part of Lungsod Silangan Townsite Reservation. Such illegal Dumping Site operation inside (the) Watershed Reservation is in violation of P.D. 705, otherwise known as the Revised Forestry Code,as amended. . .

Recommendations:

5.1 The MMC Dumping Site Inside Marikina Watershed Reservation, particularly at Brgy. Pintong Bocaue, San Mateo, Rizal and at Bo. Pinugay, Baras/Antipolo, Rizal which are the present garbage zones must totally be stopped and

discouraged without any political intervention and delay in order to save our healthy ecosystems found therein, to avoid much destruction, useless efforts and lost (sic) of millions of public funds over the land in question; (Emphasis ours)

On 19 June 1989, the CENRO submitted another Investigation Report6 to the Regional Executive Director which states in part that:

1. About two (2) hectares had been excavated by bulldozers and garbage dumping operations are going on.

2. The dumping site is without the concurrence of the Provincial Governor, Rizal Province and without any permit from DENR who has functional jurisdiction over the Watershed Reservation; and

3. About 1,192 families residing and cultivating areas covered by four (4) Barangays surrounding the dumping site will adversely be affected by the dumping operations of MMC including their sources of domestic water supply. x x x x

On 22 January 1990, the CENRO submitted still another Investigation Report7 to the Regional Executive Director which states that:

Findings show that the areas used as Dumping Site of the MMC are found to be within the Marikina Watershed which are part of the Integrated Social Forestry Project (ISF) as per recorded inventory of Forest Occupancy of this office.

It also appears that as per record, there was no permit issued to the MMC to utilize these portions of land for dumping purposes.

It is further observed that the use of the areas as dumping site greatly affects the ecological balance and environmental factors in this community.

On 19 February 1990, the DENR Environmental Management Bureau, through Undersecretary for Environment and Research Celso R. Roque, granted the Metro Manila Authority (MMA [formerly MMC]) an Environmental Compliance Certificate (ECC) for the operation of a two-and-a-half-hectare garbage dumpsite.

The ECC was sought and granted to comply with the requirement of Presidential Decree No. 1586 "Establishing an Environmental Impact Statement System," Section 4 of which states in part that, "No persons, partnership or corporation shall undertake or operate any such declared environmentally critical project or area without first securing an Environmental Compliance Certificate." Proclamation No. 2146, passed on 14 December 1981, designates "all areas declared by law as national parks, watershed reserves, wildlife preserves, and sanctuaries" as "Environmentally Critical Areas."

On 09 March 1990, respondent Laguna Lake Development Authority (LLDA), through its Acting General Manager, sent a letter8

to the MMA, which reads in part:

Through this letter we would like to convey our reservation on the choice of the sites for solid waste disposal inside the watershed of Laguna Lake. As you may already know, the Metropolitan Waterworks and Sewerage System (MWSS) has scheduled the abstraction of water from the lake to serve the needs of about 1.2 million residents of Muntinlupa, Paranaque, Las Pinas and Bacoor, Cavite by 1992. Accordingly, the Laguna Lake Development Authority (LLDA) is accelerating its environmental management program to upgrade the water quality of the lake in order to make it suitable as a source of domestic water supplythe whole year round. The said program regards dumpsites as incompatible within the watershed because of the heavy pollution, including the risk of diseases, generated by such activities which would negate the government’s efforts to upgrade the water quality of the lake. Consequently, please consider our objection to the proposed location of the

dumpsites within the watershed. (Emphasis supplied by petitioners)

On 31 July 1990, less than six months after the issuance of the ECC, Undersecretary Roque suspended the ECC in a letter9

addressed to the respondent Secretary of DPWH, stating in part that:

Upon site investigation conducted by Environmental Management Bureau staff on development activities at the San Mateo Landfill Site, it was ascertained that ground slumping and erosion have resulted from improper development of the site. We believe that this will adversely affect the environmental quality in the area if the proper remedial measures are not instituted in the design of the landfill site. This is therefore contradictory to statements made in the Environmental Impact Statement (EIS) submitted that above occurrences will be properly mitigated.

In view of this, we are forced to suspend the Environmental Compliance Certificate (ECC) issued until appropriate modified plans are submitted and approved by this Office for implementation. (Emphasis ours)

On 21 June 1993, the Acting Mayor of San Mateo, Enrique Rodriguez, Jr., Barangay Captain Dominador Vergara, and petitioner Rolando E. Villacorte, Chairman of the Pintong Bocaue Multipurpose Cooperative (PBMC) wrote10then President Fidel V. Ramos expressing their objections to the continued operation of the MMA dumpsite for causing "unabated pollution and degradation of the Marikina Watershed Reservation."

On 14 July 1993, another Investigation Report11 submitted by the Regional Technical Director to the DENR Undersecretary for Environment and Research contained the following findings and recommendations:

Remarks and Findings:

. . . .

5. Interview with Mr. Dayrit, whose lot is now being endangered because soil erosion have (sic) caused severe siltation and sedimentation of the Dayrit Creek which water is greatly polluted by the dumping of soil bulldozed to the creek;

6. Also interview with Mrs. Vilma Montajes, the multi-grade teacher of Pintong Bocaue Primary School which is located only about 100 meters from the landfill site. She disclosed that bad odor have (sic) greatly affected the pupils who are sometimes sick with respiratory illnesses. These odors show that MMA have (sic) not instituted/sprayed any disinfectant chemicals to prevent air pollution in the area. Besides large flies (Bangaw) are swarming all over the playground of the school. The teacher also informed the undersigned that plastic debris are being blown whenever the wind blows in their direction.

7. As per investigation report … there are now 15 hectares being used as landfill disposal sites by the MMA. The MMA is intending to expand its operation within the 50 hectares.

8. Lots occupied within 50 hectares are fully planted with fruit bearing trees like Mangoes, Santol, Jackfruit, Kasoy, Guyabano, Kalamansi and Citrus which are now bearing fruits and being harvested and marketed to nearby San Mateo Market and Masinag Market in Antipolo.

. . . .

Recommendations:

1. As previously recommended, the undersigned also strongly recommend(s) that the MMA be made to relocate the landfill site because the area is within the Marikina Watershed Reservation and Lungsod Silangan. The leachate treatment plant ha(s) been

eroded twice already and contaminated the nearby creeks which is the source of potable water of the residents. The contaminated water also flows to Wawa Dam and Boso-boso River which also flows to Laguna de Bay.

2. The proposed Integrated Social Forestry Project be pushed through or be approved. ISF project will not only uplift the socio-economic conditions of the participants but will enhance the rehabilitation of the Watershed considering that fruit bearing trees are vigorously growing in the area. Some timber producing species are also planted like Mahogany and Gmelina Arboiea. There are also portions where dipterocarp residuals abound in the area.

3. The sanitary landfill should be relocated to some other area, in order to avoid any conflict with the local government of San Mateo and the nearby affected residents who have been in the area for almost 10-20 years.

On 16 November 1993, DENR Secretary Angel C. Alcala sent MMA Chairman Ismael A. Mathay, Jr. a letter12stating that "after a series of investigations by field officials" of the DENR, the agency realized that the MOA entered into on 17 November 1988 "is a very costly error because the area agreed to be a garbage dumpsite is inside the Marikina Watershed Reservation." He then strongly recommended that all facilities and infrastructure in the garbage dumpsite in Pintong Bocaue be dismantled, and the garbage disposal operations be transferred to another area outside the Marikina Watershed Reservation to protect "the health and general welfare of the residents of San Mateo in particular and the residents of Metro Manila in general."

On 06 June 1995, petitioner Villacorte, Chairman of the PBMC, wrote13 President Ramos, through the Executive Secretary, informing the President of the issues involved, that the dumpsite is located near three public elementary schools, the closest of which is only fifty meters away, and that its location "violates the municipal zoning ordinance of San Mateo and, in truth, the Housing

and Land Use Regulatory Board had denied the then MMA chairman’s application for a locational clearance on this ground."

On 21 August 1995, the Sangguniang Bayan of San Mateo issued a Resolution14 "expressing a strong objection to the planned expansion of the landfill operation in Pintong Bocaue and requesting President Ramos to disapprove the draft Presidential Proclamation segregating 71.6 Hectares from Marikina Watershed Reservation for the landfill site in Pintong Bocaue, San Mateo, Rizal."

Despite the various objections and recommendations raised by the government agencies aforementioned, the Office of the President, through Executive Secretary Ruben Torres, signed and issued Proclamation No. 635 on 28 August 1995, "Excluding from the Marikina Watershed Reservation Certain Parcels of Land Embraced Therein for Use as Sanitary Landfill Sites and Similar Waste Disposal Under the Administration of the Metropolitan Manila Development Authority." The pertinent portions thereof state:

WHEREAS, to cope with the requirements of the growing population in Metro Manila and the adjoining provinces and municipalities, certain developed and open portions of the Marikina Watershed Reservation, upon the recommendation of the Secretary of the Department of Environment and Natural Resources should now be excluded form the scope of the reservation;

WHEREAS, while the areas delineated as part of the Watershed Reservations are intended primarily for use in projects and/or activities designed to contain and preserve the underground water supply, other peripheral areas had been included within the scope of the reservation to provide for such space as may be needed for the construction of the necessary structures, other related facilities, as well as other priority projects of government as may be eventually determined;

WHEREAS, there is now an urgent need to provide for, and develop, the necessary facilities for the disposal of the waste generated by the population of Metro Manila and the adjoining provinces and municipalities, to ensure their sanitary and /or hygienic disposal;

WHEREAS, to cope with the requirements for the development of the waste disposal facilities that may be used, portions of the peripheral areas of the Marikina Watershed Reservation, after due consideration and study, have now been identified as suitable sites that may be used for the purpose;

WHEREAS, the Secretary of the Department of Environment and Natural Resources has recommended the exclusion of these areas that have been so identified from the Marikina Watershed Reservation so that they may then be developed for the purpose;

NOW, THEREFORE, for and in consideration of the aforecited premises, I, Fidel V. Ramos, President of the Philippines, by virtue of the powers vested in me by law, do hereby ordain:

Section 1. General – That certain parcels of land, embraced by the Marikina Watershed Reservation, were found needed for use in the solid waste disposal program of the government in Metropolitan Manila, are hereby excluded from that which is held in reserve and are now made available for use as sanitary landfill and such other related waste disposal applications.

Section 2. Purpose – The areas being excluded from the Marikina Watershed Reservation are hereby placed under the administration of the Metropolitan Manila Development Authority, for development as Sanitary Landfill, and/or for use in the development of such other related waste disposal facilities that may be used by the cities and municipalities of Metro Manila and the adjoining province of Rizal and its municipalities.

Section 3. Technical Description – Specifically, the areas being hereby excluded from the Marikina Watershed Reservation consist of two (2) parcels, with an aggregate area of approximately ONE MILLION SIXTY THOUSAND FIVE HUNDRED TWENTY NINE (1,060,529) square meters more or less, as follows: x x x x

Section 4. Reservations – The development, construction, use and/or operation of any facility that may be established within the parcel of land herein excluded from the Marikina Watershed Reservation shall be governed by existing laws, rules and regulations pertaining to environmental control and management. When no longer needed for sanitary landfill purposes or the related waste disposal activities, the parcels of land subject of this proclamation shall revert back as part of the Marikina Watershed Reservation, unless otherwise authorized.

On 06 September 1995, Director Wilfrido S. Pollisco of the Protected Areas and Wildlife Bureau wrote the DENR Secretary to express the bureau’s stand against the dumpsite at Pintong Bocaue, and that "it is our view . . . that the mere presence of a garbage dumpsite inside a watershed reservation is definitely not compatible with the very purpose and objectives for which the reservation was established."

On 24 November 1995, the petitioners Municipality of San Mateo and the residents of Pintong Bocaue, represented by former Senator Jovito Salonga, sent a letter to President Ramos requesting him to reconsider Proclamation No. 635. Receiving no reply, they sent another letter on 02 January 1996 reiterating their previous request.

On 04 March 1996, then chairman of the Metro Manila Development Authority (MMDA [formerly MMA]) Prospero I. Oreta addressed a letter to Senator Salonga, stating in part that:

….

2. Considering the circumstances under which we are pursuing the project, we are certain you will agree that, unless we are prepared with a better alternative, the project simply has to be pursued in the best interest of the greater majority of the population, particularly their health and welfare."

2.1 The San Mateo Sanitary Landfill services, at least, 38% of the waste disposal site requirements of Metro Manila where an estimated 9 million population reside.

2.2 Metro Manila is presently estimated to be generating, at least, 15,700 cubic meters of household or municipal waste, a 1.57 hectare of land area will be filled in a month’s time with a pile 31 meters high of garbage, or in a year, the accumulated volume will require 18.2 hectares.

. . . .

4. The sanitary landfill projects are now on their fifth year of implementation. The amount of effort and money already invested in the project by the government cannot easily be disregarded, much more set aside in favor of the few settlers/squatters who chose to ignore the earlier notice given to them that the area would be used precisely for the development of waste disposal sites, and are now attempting to arouse opposition to the project.

4.2 There is no place within the jurisdiction of Metro Manila, with an area big enough to accommodate at least 3 to 5 years of waste disposal requirements. x x x x

4.21 The present site at San Mateo was selected because, at the time consideration was being made, and up to the present, it is found to have the attributes that positively respond to the criteria established:

4.21.1 The site was a government property and would not require

any outlay for it to be acquired.

4.21.2 It is far from any sizeable community/settlements that could be affected by the development that would be introduced and yet, was within economic hauling distance from the areas they are designed to serve.

4.21.21 At the time it was originally decided to locate the landfills at the present site, there were not more that fifteen (15) settlers in the area and they had hardly established themselves. The community settlements were located far from the site.

4.21.22 The area was hardly accessible, especially to any public transport. The area was being served by a public utility jeep that usually made only two (2) trips daily. During the rainy season, it could only be reached by equipping the vehicle with tire chains to traverse the slippery muddy trail roads.

4.21.3 There was, at least, seventy-three (73) hectares available at the site.

4.3 While the site was within the Marikina Watershed Reservation under the administration of the DENR, the site was located at the lower periphery of the buffer zone; was evaluated to be least likely to affect the underground water supply; and could, in fact, be excluded from the reservation.

4.31 It was determined to be far from the main water containment area for it to pose any immediate danger of contaminating the underground water, in case of a failure in any of the mitigating measures that would be installed.

4.32 It was likewise too far from the nearest body of water, the Laguna Lake, and the distance, plus the increasing accumulation of water from other tributaries toward the lake, would serve to dilute and mitigate any contamination it may emit, in case one happened.

4.33 To resolve the recurring issue regarding its being located within the Marikina Watershed Reservation, the site had been recommended by the DENR, and approved by the President, to already be excluded from the Marikina Watershed reservation and placed under the administration of MMDA, since the site was deemed to form part of the land resource reserve then commonly referred to as buffer zone.

5. Contrary to the impression that you had been given, relocating the site at this point and time would not be easy, if not impracticable, because aside from the investments that had been made in locating the present site, further investments have been incurred in:

5.1 The conduct of the technical studies for the development being implemented. Through a grant-in-aid from the World Bank, US$600,000 was initially spent for the conduct of the necessary studies on the area and the design of the landfill. This was augmented by, at least, another P1.5 million from the government for the studies to be completed, or a total cost at the time (1990) of approximately P20 million.

5.2. Additionally, the government has spent approximately P33 million in improving on the roadway to make the site accessible from the main road/highway.

5.3 To achieve the necessary economies in the development of the site, the utilities had been planned so that their use could be maximized. These include the access roads, the drainage system, the leacheate collection system, the gas collection system, and the waste water treatment system. Their construction are designed so that instead of having to construct independent units for each area, the use of existing facilities can be maximized through a system of interconnection. On the average, the government is spending P14.8 million to develop a hectare of sanitary landfill area.

6. Despite the preparations and the investments that are now being

made on the project, it is estimated that the total available area, at an accelerated rate of disposal, assuming that all open dump sites were to be closed, will only last for 39 months.

6.1 We are still hard pressed to achieve advanced development on the sites to assure against any possible crisis in garbage from again being experienced in Metro Manila, aside from having to look for the additional sites that may be used after the capacities shall have been exhausted.

6.2 Faced with the prospects of having the 15,700 cubic meters of garbage generated daily strewn all over Metro Manila, we are certain you will agree that it would be futile to even as much as consider a suspension of the waste disposal operations at the sanitary landfills.

On 22 July 1996, the petitioners filed before the Court of Appeals a civil action for certiorari, prohibition andmandamus with application for a temporary restraining order/writ of preliminary injunction. The hearing on the prayer for preliminary injunction was held on 14 August 1996.

On 13 June 1997, the court a quo rendered a Decision,15 the dispositive part of which reads:

WHEREFORE, the petition for certiorari, prohibition and mandamus with application for a temporary restraining order/writ of preliminary injunction for lack of cause of action, is hereby DENIED.16

Hence, this petition for review on certiorari of the above decision on the following grounds:

I

The Court of Appeals erred and abused its discretion in deliberately

ignoring the significant fact that Presidential Proclamation No. 635 was based on a brazen forgery – it was supposedly issued, as stated in the proclamation itself and repeatedly asserted by respondents in their comment, on the basis of the alleged recommendation of the DENR Secretary dated June 26, 1995 but which assertion was denounced by the then Secretary Angel C. Alcala himself – in a sworn statement dated September 18, 1996 and again during the special hearing of the case in the Court of Appeals on November 13, 1996 – as a forgery since his signature on the alleged recommendation had been falsified, as now admitted by respondents themselves in their comment filed with the Court of Appeals, through the Office of the Solicitor General.

II

The Court of Appeals erred and abused its discretion in completely ignoring the significant fact that the respondents are operating the landfill based on a spurious Environmental Compliance Certificate.

III

The Court of Appeals erred in ruling that the respondents did not violate R.A. 7586 when they issued and implemented Proclamation No. 635 considering that the withdrawal or disestablishment of a protected area or the modification of the Marikina Watershed can only be done by an act of Congress.

IV

The Court of Appeals erred and abused its discretion when it deliberately and willfully brushed aside the unanimous findings and adverse recommendations of responsible government agencies and non-partisan officials concerned with environmental protection in favor of the self-serving, gratuitous assertions found in the unsolicited, partisan letter of former Malabon Mayor, now Chairman Prospero Oreta of the MMDA who is an interested party in this

case.

V

The Court of Appeals erred when it readily swallowed respondents’ assertion that the San Mateo Dumpsite "is located in the ‘Buffer Zone’ of the reservation" and is therefore outside of its boundaries, and even declared in its decision that it took "serious note" of this particular argument.

VI

The Court of Appeals erred and abused its discretion when it encroached on the function of Congress by expressing its unjustified fear of mini-smokey mountains proliferating in Metro Manila and justifying its decision in favor of "an integrated system of solid waste management like the San Mateo Landfill.

On 05 January 1998, while the appeal was pending, the petitioners filed a Motion for Temporary Restraining Order,17 pointing out that the effects of the El Niño phenomenon would be aggravated by the relentless destruction of the Marikina Watershed Reservation. They noted that respondent MMDA had, in the meantime, continued to expand the area of the dumpsite inside the Marikina Watershed Reservation, cutting down thousands of mature fruit trees and forest trees, and leveling hills and mountains to clear the dumping area. Garbage disposal operations were also being conducted on a 24-hour basis, with hundreds of metric tons of wastes being dumped daily, including toxic and infectious hospital wastes, intensifying the air, ground and water pollution.18

The petitioners reiterated their prayer that respondent MMDA be temporarily enjoined from further dumping waste into the site and from encroaching into the area beyond its existing perimeter fence so as not to render the case moot and academic.

On 28 January 1999, the petitioners filed a Motion for Early Resolution,19 calling attention to the continued expansion of the dumpsite by the MMDA that caused the people of Antipolo to stage a rally and barricade the Marcos Highway to stop the dump trucks from reaching the site for five successive days from 16 January 1999. On the second day of the barricade, all the municipal mayors of the province of Rizal openly declared their full support for the rally, and notified the MMDA that they would oppose any further attempt to dump garbage in their province.20

As a result, MMDA officials, headed by then Chairman Jejomar Binay, agreed to abandon the dumpsite after six months. Thus, the municipal mayors of Rizal, particularly the mayors of Antipolo and San Mateo, agreed to the use of the dumpsite until that period, which would end on 20 July 1999.21

On 13 July 1999, the petitioners filed an Urgent Second Motion for Early Resolution22 in anticipation of violence between the conflicting parties as the date of the scheduled closure of the dumpsite neared.

On 19 July 1999, then President Joseph E. Estrada, taking cognizance of the gravity of the problems in the affected areas and the likelihood that violence would erupt among the parties involved, issued a Memorandum ordering the closure of the dumpsite on 31 December 2000.23 Accordingly, on 20 July 1999, the Presidential Committee on Flagship Programs and Projects and the MMDA entered into a MOA with the Provincial Government of Rizal, the Municipality of San Mateo, and the City of Antipolo, wherein the latter agreed to further extend the use of the dumpsite until its permanent closure on 31 December 2000.24

On 11 January 2001, President Estrada directed Department of Interior and Local Government Secretary Alfredo Lim and MMDA Chairman Binay to reopen the San Mateo dumpsite "in view of the emergency situation of uncollected garbage in Metro Manila, resulting in a critical and imminent health and sanitation

epidemic."25

Claiming the above events constituted a "clear and present danger of violence erupting in the affected areas," the petitioners filed an Urgent Petition for Restraining Order26 on 19 January 2001.

On 24 January 2001, this Court issued the Temporary Restraining Order prayed for, "effective immediately and until further orders."27

Meanwhile, on 26 January 2001, Republic Act No. 9003, otherwise known as "The Ecological Solid Waste Management Act of 2000," was signed into law by President Estrada.

Thus, the petitioners raised only two issues in their Memorandum28

of 08 February 2005: 1) whether or not respondent MMDA agreed to the permanent closure of the San Mateo Landfill as of December 2000, and 2) whether or not the permanent closure of the San Mateo landfill is mandated by Rep. Act No. 9003.

We hold that the San Mateo Landfill will remain permanently closed.

Although the petitioners may be deemed to have waived or abandoned the issues raised in their previous pleadings but not included in the memorandum,29 certain events we shall relate below have inclined us to address some of the more pertinent issues raised in the petition for the guidance of the herein respondents, and pursuant to our symbolic function to educate the bench and bar.30

The law and the facts indicate that a mere MOA does not guarantee the dumpsite’s permanent closure.

The rally and barricade staged by the people of Antipolo on 28 January 1999, with the full support of all the mayors of Rizal Province caused the MMDA to agree that it would abandon the

dumpsite after six months. In return, the municipal mayors allowed the use of the dumpsite until 20 July 1999.

On 20 July 1999, with much fanfare and rhetoric, the Presidential Committee on Flagship Programs and Projects and the MMDA entered into a MOA with the Provincial Government of Rizal, the Municipality of San Mateo, and the City of Antipolo, whereby the latter agreed to an extension for the use of the dumpsite until 31 December 2000, at which time it would be permanently closed.

Despite this agreement, President Estrada directed Department of Interior and Local Government Secretary Alfredo Lim and MMDA Chairman Binay to reopen the San Mateo dumpsite on 11 January 2001, "in view of the emergency situation of uncollected garbage in Metro Manila, resulting in a critical and imminent health and sanitation epidemic;" our issuance of a TRO on 24 January 2001 prevented the dumpsite’s reopening.

Were it not for the TRO, then President Estrada’s instructions would have been lawfully carried out, for as we observed in Oposa v. Factoran, the freedom of contract is not absolute. Thus:

….. In Abe vs. Foster Wheeler Corp., 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 inNebia vs. New York, quoted in Philippine American Life Insurance Co. vs. Auditor General, 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. (Citations omitted, emphasis supplied)

We thus feel there is also the added need to reassure the residents of the Province of Rizal that this is indeed a final resolution of this controversy, for a brief review of the records of this case indicates two self-evident facts.First, the San Mateo site has adversely affected its environs, and second, sources of water should always be protected.

As to the first point, the adverse effects of the site were reported as early as 19 June 1989, when the Investigation Report of the Community Environment and Natural Resources Officer of DENR-IV-1 stated that the sources of domestic water supply of over one thousand families would be adversely affected by the dumping operations.31The succeeding report included the observation that the use of the areas as dumping site greatly affected the ecological balance and environmental factors of the community.32 Respondent LLDA in fact informed the MMA that the heavy pollution and risk of disease generated by dumpsites rendered the location of a dumpsite within the Marikina Watershed Reservation incompatible with its program of upgrading the water quality of the Laguna Lake.33

The DENR suspended the site’s ECC after investigations revealed ground slumping and erosion had resulted from improper development of the site.34 Another Investigation Report35 submitted by the Regional Technical Director to the DENR reported respiratory illnesses among pupils of a primary school located approximately 100 meters from the site, as well as the constant presence of large flies and windblown debris all over the school’s playground. It further reiterated reports that the leachate treatment plant had been eroded twice already, contaminating the nearby creeks that were sources of potable water for the residents. The

contaminated water was also found to flow to the Wawa Dam and Boso-boso River, which in turn empties into Laguna de Bay.

This brings us to the second self-evident point. Water is life, and must be saved at all costs. In Collado v. Court of Appeals,36 we had occasion to reaffirm our previous discussion in Sta. Rosa Realty Development Corporation v. Court of Appeals,37 on the primordial importance of watershed areas, thus: "The most important product of a watershed is water, which is one of the most important human necessities. The protection of watersheds ensures an adequate supply of water for future generations and the control of flashfloods that not only damage property but also cause loss of lives. Protection of watersheds is an "intergenerational" responsibility that needs to be answered now.38

Three short months before Proclamation No. 635 was passed to avert the garbage crisis, Congress had enacted the National Water Crisis Act39 to "adopt urgent and effective measures to address the nationwide water crisis which adversely affects the health and well-being of the population, food production, and industrialization process. One of the issues the law sought to address was the "protection and conservation of watersheds."40

In other words, while respondents were blandly declaring that "the reason for the creation of the Marikina Watershed Reservation, i.e., to protect Marikina River as the source of water supply of the City of Manila, no longer exists," the rest of the country was gripped by a shortage of potable water so serious, it necessitated its own legislation.

Respondents’ actions in the face of such grave environmental consequences defy all logic. The petitioners rightly noted that instead of providing solutions, they have, with unmitigated callousness, worsened the problem. It is this readiness to wreak irrevocable damage on our natural heritage in pursuit of what is expedient that has compelled us to rule at length on this issue. We

ignore the unrelenting depletion of our natural heritage at our peril.

I.

The Reorganization Act of the DENR Defines and

Limits Its Powers over the Country’s Natural Resources

The respondents next point out that the Marikina Watershed Reservation, and thus the San Mateo Site, is located in the public domain. They allege that as such, neither the Province of Rizal nor the municipality of San Mateo has the power to control or regulate its use since properties of this nature belong to the national, and not to the local governments.

It is ironic that the respondents should pursue this line of reasoning.

In Cruz v. Secretary of Environment and Natural Resources,41 we had occasion to observe that "(o)ne of the fixed and dominating objectives of the 1935 Constitutional Convention was the nationalization and conservation of the natural resources of the country. 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."42

The Regalian doctrine was embodied in the 1935 Constitution, in Section 1 of Article XIII on "Conservation and Utilization of Natural Resources." This was reiterated in the 1973 Constitution under Article XIV on the "National Economy and the Patrimony of the Nation," and reaffirmed in the 1987 Constitution in Section 2 of Article XII on "National Economy and Patrimony," to wit:

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.43

Clearly, the state is, and always has been, zealous in preserving as much of our natural and national heritage as it can, enshrining as it did the obligation to preserve and protect the same within the text of our fundamental law.

It was with this objective in mind that the respondent DENR was mandated by then President Corazon C. Aquino, under Section 4 of Executive Order No. 192, 44 otherwise known as "The Reorganization Act of the Department of Environment and Natural Resources," to 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. It is also responsible for 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."

We expounded on this matter in the landmark case of Oposa v. Factoran,45 where we held that the right to a balanced and healthful ecology is a fundamental legal right that carries with it the correlative duty to refrain from impairing the environment. This right implies, among other things, the judicious management and conservation of the country’s resources, which duty is reposed in the DENR under the aforequoted Section 4 of Executive Order No. 192. Moreover:

Section 3 (of E. O. No. 192) 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 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. (Emphasis ours)

This policy declaration is substantially re-stated in Title XIV, Book IV of the Administrative Code of 1987, specifically 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 conservationof 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."46 (Emphasis ours.)

In sum, the Administrative Code of 1987 and Executive Order No. 192 entrust the DENR with the guardianshipand safekeeping of the Marikina Watershed Reservation and our other natural treasures. However, although the DENR, an agency of the government, owns the Marikina Reserve and has jurisdiction over the same, this power is not absolute, but is defined by the declared policies of the state, and is subject to the law and higher authority.Section 2, Title XIV, Book IV of the Administrative Code of 1987, while specifically referring to the mandate of the DENR, makes particular reference to the agency’s being subject to law and higher authority, thus:

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.

With great power comes great responsibility. It is the height of irony that the public respondents have vigorously arrogated to themselves the power to control the San Mateo site, but have deftly

ignored their corresponding responsibility as guardians and protectors of this tormented piece of land.

II.

The Local Government Code Gives to Local Government Units All the Necessary Powers to Promote the General Welfare of Their Inhabitants

The circumstances under which Proclamation No. 635 was passed also violates Rep. Act No. 7160, or the Local Government Code.

Contrary to the averment of the respondents, Proclamation No. 635, which was passed on 28 August 1995, is subject to the provisions of the Local Government Code, which was approved four years earlier, on 10 October 1991.

Section 2(c) of the said law declares that it is the policy of the state " to require all national agencies and offices to conduct periodic consultations with appropriate local government units, non-governmental and people's organizations, and other concerned sectors of the community before any project or program is implemented in their respective jurisdictions." Likewise, Section 27 requires prior consultations before a program shall be implemented by government authorities and the prior approval of the sanggunian is obtained.

During the oral arguments at the hearing for the temporary restraining order, Director Uranza of the MMDA Solid Waste Management Task Force declared before the Court of Appeals that they had conducted the required consultations. However, he added that "(t)his is the problem, sir, the officials we may have been talking with at the time this was established may no longer be incumbent and this is our difficulty now. That is what we are trying to do now, a continuing dialogue." 47

The ambivalent reply of Director Uranza was brought to the fore when, at the height of the protest rally and barricade along Marcos Highway to stop dump trucks from reaching the site, all the municipal mayors of the province of Rizal openly declared their full support for the rally and notified the MMDA that they would oppose any further attempt to dump garbage in their province. 48

The municipal mayors acted within the scope of their powers, and were in fact fulfilling their mandate, when they did this. Section 16 allows every local government unit to "exercise the powers expressly granted, those necessarily implied therefrom, as well as powers necessary, appropriate, or incidental for its efficient and effective governance, and those which are essential to the promotion of the general welfare," which involve, among other things, "promot(ing) health and safety, enhance(ing) the right of the people to a balanced ecology, and preserv(ing) the comfort and convenience of their inhabitants. "

In Lina , Jr. v. Paño,49 we held that Section 2 (c), requiring consultations with the appropriate local government units, should apply to national government projects affecting the environmental or ecological balance of the particular community implementing the project. Rejecting the petitioners’ contention that Sections 2(c) and 27 of the Local Government Code applied mandatorily in the setting up of lotto outlets around the country, we held that:

From a careful reading of said provisions, we find that these apply only to national programs and/or projects which are to be implemented in a particular local community. Lotto is neither a program nor a project of the national government, but of a charitable institution, the PCSO. Though sanctioned by the national government, it is far fetched to say that lotto falls within the contemplation of Sections 2 (c) and 27 of the Local Government Code.

Section 27 of the Code should be read in conjunction with Section 26 thereof. Section 26 reads:

SECTION 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, range-land, 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.

Thus, the projects and programs mentioned in Section 27 should be interpreted to mean projects and programs whose effects are among those enumerated in Section 26 and 27, to wit, those that: (1) may cause pollution; (2) may bring about climatic change; (3) may cause the depletion of non-renewable resources; (4) may result in loss of crop land, range-land, or forest cover; (5) may eradicate certain animal or plant species from the face of the planet; and (6) other projects or programs that may call for the eviction of a particular group of people residing in the locality where these will be implemented. Obviously, none of these effects will be produced by the introduction of lotto in the province of Laguna. (emphasis supplied)

We reiterated this doctrine in the recent case of Bangus Fry Fisherfolk v. Lanzanas,50 where we held that there was no statutory requirement for the sangguniang bayan of Puerto Galera to approve the construction of a mooring facility, as Sections 26 and 27 are inapplicable to projects which are not environmentally critical.

Moreover, Section 447, which enumerates the powers, duties and functions of the municipality, grants thesangguniang bayan the power to, among other things, "enact ordinances, approve

resolutions and appropriate funds for the general welfare of the municipality and its inhabitants pursuant to Section 16 of th(e) Code." These include:

(1) Approving ordinances and passing resolutions to protect the environment and impose appropriate penalties for acts which endanger the environment, such as dynamite fishing and other forms of destructive fishing, illegal logging and smuggling of logs, smuggling of natural resources products and of endangered species of flora and fauna, slash and burn farming, and such other activities which result in pollution, acceleration of eutrophication of rivers and lakes, or of ecological imbalance; [Section 447 (1)(vi)]

(2) Prescribing reasonable limits and restraints on the use of property within the jurisdiction of the municipality, adopting a comprehensive land use plan for the municipality, reclassifying land within the jurisdiction of the city, subject to the pertinent provisions of this Code, enacting integrated zoning ordinancesin consonance with the approved comprehensive land use plan, subject to existing laws, rules and regulations; establishing fire limits or zones, particularly in populous centers; and regulating the construction, repair or modification of buildings within said fire limits or zones in accordance with the provisions of this Code; [Section 447 (2)(vi-ix)]

(3) Approving ordinances which shall ensure the efficient and effective delivery of the basic services and facilities as provided for under Section 17 of this Code, and in addition to said services and facilities, …providing for the establishment, maintenance, protection, and conservation of communal forests and watersheds, tree parks, greenbelts, mangroves, and other similar forest development projects ….and, subject to existing laws, establishing and providing for the maintenance, repair and operation of an efficient waterworks system to supply water for the inhabitants and purifying the source of the water supply; regulating the construction, maintenance, repair and use of

hydrants, pumps, cisterns and reservoirs; protecting the purity and quantity of the water supply of the municipality and, for this purpose, extending the coverage of appropriate ordinances over all territory within the drainage area of said water supply and within one hundred (100) meters of the reservoir, conduit, canal, aqueduct, pumping station, or watershed used in connection with the water service; and regulating the consumption, use or wastage of water." [Section 447 (5)(i) & (vii)]

Under the Local Government Code, therefore, two requisites must be met before a national project that affects the environmental and ecological balance of local communities can be implemented: prior consultation with the affected local communities, and prior approval of the project by the appropriate sanggunian. Absent either of these mandatory requirements, the project’s implementation is illegal.

III.

Waste Disposal Is Regulated by the Ecological

Solid Waste Management Act of 2000

The respondents would have us overlook all the abovecited laws because the San Mateo site is a very expensive - and necessary - fait accompli. The respondents cite the millions of pesos and hundreds of thousands of dollars the government has already expended in its development and construction, and the lack of any viable alternative sites.

The Court of Appeals agreed, thus:

During the hearing on the injunction, questions were also asked. "What will happen if the San Mateo Sanitary Landfill is closed? Where will the daily collections of garbage be disposed of and dumped?" Atty. Mendoza, one of the lawyers of the petitioners, answered that each city/municipality ‘must take care of its own.’

Reflecting on that answer, we are troubled: will not the proliferation of separate open dumpsites be a more serious health hazard (which ha(s) to be addressed) to the residents of the community? What with the galloping population growth and the constricting available land area in Metro Manila? There could be a ‘mini-Smokey Mountain’ in each of the ten cities…comprising Metro Manila, placing in danger the health and safety of more people. Damage to the environment could be aggravated by the increase in number of open dumpsites. An integrated system of solid waste management, like the San Mateo Sanitary Landfill, appears advisable to a populous metropolis like the Greater Metro Manila Area absent access to better technology.51

We acknowledge that these are valid concerns. Nevertheless, the lower court should have been mindful of the legal truism that it is the legislature, by its very nature, which is the primary judge of the necessity, adequacy, wisdom, reasonableness and expediency of any law.52

Moreover, these concerns are addressed by Rep. Act No. 9003. Approved on 26 January 2001, "The Ecological Solid Waste Management Act of 2000" was enacted pursuant to the declared policy of the state "to adopt a systematic, comprehensive and ecological solid waste management system which shall ensure the protection of public health and environment, and utilize environmentally sound methods that maximize the utilization of valuable resources and encourage resource conservation and recovery."53 It requires the adherence to a Local Government Solid Waste Management Plan with regard to the collection and transfer, processing, source reduction, recycling, composting and final disposal of solid wastes, the handling and disposal of special wastes, education and public information, and the funding of solid waste management projects.

The said law mandates the formulation of a National Solid Waste Management Framework, which should include, among other things, the method and procedure for the phaseout and the

eventual closure within eighteen months from effectivity of the Act in case of existing open dumps and/or sanitary landfills located within an aquifer, groundwater reservoir or watershed area.54

Any landfills subsequently developed must comply with the minimum requirements laid down in Section 40, specifically that the site selected must be consistent with the overall land use plan of the local government unit, and that the site must be located in an area where the landfill’s operation will not detrimentally affect environmentally sensitive resources such as aquifers, groundwater reservoirs or watershed areas.55

This writes finis to any remaining aspirations respondents may have of reopening the San Mateo Site. Having declared Proclamation No. 635 illegal, we see no compelling need to tackle the remaining issues raised in the petition and the parties’ respective memoranda.

A final word. Laws pertaining to the protection of the environment were not drafted in a vacuum. Congress passed these laws fully aware of the perilous state of both our economic and natural wealth. It was precisely to minimize the adverse impact humanity’s actions on all aspects of the natural world, at the same time maintaining and ensuring an environment under which man and nature can thrive in productive and enjoyable harmony with each other, that these legal safeguards were put in place. They should thus not be so lightly cast aside in the face of what is easy and expedient.

WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals in CA-G.R. SP No. 41330, dated 13 June 1997, is REVERSED and SET ASIDE. The temporary restraining order issued by the Court on 24 January 2001 is hereby made permanent.

SO ORDERED.

Republic of the PhilippinesSUPREME COURT

Manila

FIRST DIVISION

G.R. No. 131442 July 10, 2003

BANGUS FRY FISHERFOLK, DIWATA MAGBUHOS, ANGELITA BINAY, ELMA GARCIA, VIRGILIO PANGUIO, ARSENIO CASTILLO, ARIEL PANGUIO, ANTONIO PANGUIO, ANTONIO BUNQUIN, GENEROSO BUNQUIN, CHARLIE DIMAYACYAC, RENATO PANGUIO, ATILANO BUNQUIN, CARLOS CHAVEZ, JUAN DIMAYACYAC, FILEMON BUNQUIN, MARIO MAGBUHOS, MAURO MAGBUHOS, NORA MAGBUHOS, JEOVILYN, GENALYN and JORVAN QUIMUEL, minors, represented by their parents FELICIANA and SABINO QUIMUEL, MARICAR MAGBUHOS, minor, represented by her parents CARMELITA and ANTONIO MAGBUHOS, MARLO BINAY, minor, represented by his parents

EFRENITA and CHARLITO BINAY, and the BANGUS, BANGUS FRY and other MARINE LIFE OF MINOLO COVE, petitioners, vs.THE HONORABLE ENRICO LANZANAS as Judge of the Regional Trial Court of Manila, Branch VII, THE DEPARTMENT OF ENVIRONMENT AND NATURAL RESOURCES — Region IV, represented by its Regional Executive Director and its Regional Director for Environment, THE NATIONAL POWER CORPORATION, ORIENTAL MINDORO ELECTRIC COOPERATIVE, PROVINCIAL GOVERNMENT OF ORIENTAL MINDORO, herein represented by GOVERNOR RODOLFO VALENCIA, PUERTO GALERA MAYOR GREGORIO DELGADO, VICE MAYOR ARISTEO ATIENZA, and MEMBERS OF THE SANGGUNIANG BAYAN OF PUERTO GALERA, JUAN ASCAN, JR., RAFAEL ROMEY, CENON SALCEDO, JERRY DALISAY, SIMON BALITAAN, RENATO CATAQUIS, MARCELINO BANAAG, DANIEL ENRIQUEZ, AMELYN MARCO, GABRIEL ILAGAN, MUNICIPAL ENGINEER RODEL RUBIO, and MUNICIPAL PLANNING and DEVELOPMENT COORDINATOR WILHELMINA LINESES, respondents.

CARPIO, J.:

The Case

This is a petition for review1 of the Order2 dated 7 November 1997 of the Regional Trial Court of Manila, Branch 7 ("Manila RTC"), dismissing petitioners' complaint for lack of cause of action and lack of jurisdiction.

The Facts

On 30 June 1997, Regional Executive Director Antonio G. Principe ("RED Principe") of Region IV, Department of Environment and Natural Resources ("DENR"), issued an Environmental Clearance Certificate ("ECC") in favor of respondent National Power Corporation ("NAPOCOR"). The ECC authorized NAPOCOR to construct a temporary mooring facility in Minolo Cove, Sitio Minolo, Barangay San Isidro, Puerto Galera, Oriental Mindoro. The

Sangguniang Bayan of Puerto Galera has declared Minolo Cove, a mangrove area and breeding ground for bangus fry, an eco-tourist zone.3

The mooring facility would serve as the temporary docking site of NAPOCOR's power barge, which, due to turbulent waters at its former mooring site in Calapan, Oriental Mindoro, required relocation to a safer site like Minolo Cove. The 14.4 megawatts power barge would provide the main source of power for the entire province of Oriental Mindoro pending the construction of a land-based power plant in Calapan, Oriental Mindoro. The ECC for the mooring facility was valid for two years counted from its date of issuance or until 30 June 1999.4

Petitioners, claiming to be fisherfolks from Minolo, San Isidro, Puerto Galera,5 sought reconsideration of the ECC issuance. RED Principe, however, denied petitioners' plea on 15 July 1997. On 21 July 1997, petitioners filed a complaint with the Regional Trial Court of Manila, Branch 7, for the cancellation of the ECC and for the issuance of a writ of injunction to stop the construction of the mooring facility. Impleaded as defendants were the following: (1) NAPOCOR, (2) RED Principe, (3) DENR Region IV Technical Director for Environment Oscar Dominguez, (4) Oriental Mindoro Electric Cooperative ("ORMECO"), which is engaged in the distribution of electricity in Oriental Mindoro, and (5) certain officials of Puerto Galera.6 Petitioners subsequently amended their complaint to include as additional defendants the elective officials of Oriental Mindoro represented by then Governor Rodolfo G. Valencia. Petitioners further prayed for the demolition of mooring structures that respondents had already built.

On 28 July 1997, prior to the filing of the amended complaint, the trial court issued a 20-day temporary restraining order enjoining the construction of the mooring facility. However, the trial court lifted the same on 6 August 1997 on NAPOCOR's manifestation that the provincial government of Oriental Mindoro was the one undertaking the construction of the mooring facility.7

On 28 August 1997, before filing their answers, respondents ORMECO and the provincial officials of Oriental Mindoro moved to dismiss the complaint. These respondents claimed that petitioners failed to exhaust administrative remedies, rendering the complaint without cause of action. They also asserted that the Manila RTC has no jurisdiction to enjoin the construction of the mooring facility in Oriental Mindoro, which lies outside the Manila RTC's territorial jurisdiction.

Petitioners opposed the motion on the ground that there was no need to exhaust administrative remedies. They argued that the issuance of the ECC was in patent violation of Presidential Decree No. 1605, 8 Sections 26 and 27 of Republic Act No. 7160,9 and the provisions of DENR Department Administrative Order No. 96-37 ("DAO 96-37") on the documentation of ECC applications. Petitioners also claimed that the implementation of the ECC was in patent violation of its terms.

In its order of 7 November 1997, the trial court granted the motion and dismissed petitioners' complaint.

Hence, this petition.

The Ruling of the Trial Court

The trial court's order dismissing the complaint reads in part:

After careful evaluation and analysis, this Court finds the Motion to Dismiss tenable and meritorious.

Petitioners have clearly failed to exhaust all administrative remedies before taking this legal action in Court x x x.

It is x x x worth mentioning that the decision of the Regional Director may still be x x x elevated to the Office of the Secretary of the DENR to fully comply with the process of exhaustion of

administrative remedies. And well settled is the rule in our jurisdiction that before bringing an action in or resorting to the Courts of Justice, all remedies of administrative character affecting or determinative of the controversy at that level should first be exhausted by the aggrieved party (Pestanas vs. Dyogi, L-25786, February 27, 1978). And petitioners' failure to exhaust administrative remedies renders his [sic] petition dismissible (Chia vs. Acting Collector of Customs, 177 SCRA 755). And a dismissal on the ground of failure to exhaust administrative remedies is tantamount to a dismissal based on lack of cause of action (Baguiro vs. Basa, Jr., 214 SCRA 437; Pineda vs. CFI of Davao, 111 Phil. 643; Sarabia vs. Secretary of Agriculture & Natural Resources, L-16002, May 23, 1961; Gone, et al. vs. District Engineer, et. al., L-22782, August 29, 1975; Abe-Abe, et al. vs. Manta, et. al., L-4827, May 31, 1979) although it does not affect the jurisdiction of the court over the subject matter (Mun. of La Trinidad, et al. vs. CFI of Baguio-Benguet, et al., L-33889, June 28, 1983).

Moreover, this Court finds the Opposition of the Petitioners highly untenable and bereft of merits that the controverted act in question is patently illegal and there was an immediate need for judicial intervention.

The ECC in question was issued by the Regional Office of the DENR which has jurisdiction and authority over the same . . .. And corollary to this, the issue as to whether or not the Minolo Cove is within the enclosed coves and waters embraced by Puerto Galera bay and protected by Medio island is a clear question of fact which the DENR may appropriately resolve before resorting to [the] Court[s].

This Court is likewise aware and cognizant of its territorial jurisdiction in the enforcement of Writ of Injunction. That truly, [a] writ of injunction can only be enforced within [the] territorial jurisdiction of this Court but not for acts which are being or about to be committed outside its territorial jurisdiction. Thus, inPhilippine

National Bank vs. Pineda, 197 SCRA 1, the Honorable Supreme Court ruled: "Regional Trial Courts can only enforce their writs of injunction within their respective designated territories. Furthermore, we find the issuance of the preliminary injunction directed against the Provincial Sheriff of Negros Occidental a jurisdictional paux [sic] pas (from Black Dictionary means jurisdictional falsity) as the Courts of First Instance now Regional Trial Court[s], can only enforce their writs of injunction within their respective designated territories.

And finally, this Court is not unmindful of the relevant and square application in the case at bar of Presidential Decree No. 1818, Executive Order No. 380 dated November 27, 1989, and Circular No. 2-91 of the Supreme Court that the National Power Corporation (NPC) is a public utility, created under special legislation, engaged in the generation and distribution of electric power and energy. The mooring site of NPC in Puerto Galera, Oriental Mindoro is one of its infrastructure projects falling within the mantle of Executive Order No. 380, November 27, 1989 x x x.

And as held by the Supreme Court in the case of National Power Corporation vs. Honorable Abraham P. Vera, et al., 170 SCRA 721, courts are without jurisdiction to issue injunctive writs against [the] National Power Corporation. The latter enjoys the protective mantle of P.D. 1818, (Circular No. 2-91).

xxx xxx xxx

Injunction in this case is not a mere ancillary [sic] writ but the main action itself together with the Annulment of the Environmental Clearance Certificate (ECC). Even assuming arguendo that the court [can] annul the ECC how can the latter enforce the same against the Provincial Government of Oriental Mindoro which was impleaded by the petitioners as a necessary party together with the Oriental Mindoro Electric Cooperative and the government officials of Puerto Galera, Oriental Mindoro, whose acts and functions are being performed outside the territorial jurisdiction of this court? x x

x Indisputably, the injunction and annulment of ECC as prayed for in the petition are inseparable x x x.

The conclusion, therefore, is inescapable that petitioners have failed to exhaust all the available administrative remedies and this Court has no jurisdiction to issue the injunctive writ prayed for in the Amended [Complaint].10

The Issue

The issue is whether the trial court erred in dismissing petitioners' complaint for lack of cause action and lack of jurisdiction.

The Ruling of the Court

The petition has no merit.

Jurisdiction of the Manila RTC over the Case

Jurisdiction over the subject matter of a case is conferred by law. Such jurisdiction is determined by the allegations in the complaint, irrespective of whether the plaintiff is entitled to all or some of the reliefs sought.11

A perusal of the allegations in the complaint shows that petitioners' principal cause of action is the alleged illegality of the issuance of the ECC. The violation of laws on environmental protection and on local government participation in the implementation of environmentally critical projects is an issue that involves the validity of NAPOCOR's ECC. If the ECC is void, then as a necessary consequence, NAPOCOR or the provincial government of Oriental Mindoro could not construct the mooring facility. The subsidiary issue of non-compliance with pertinent local ordinances in the construction of the mooring facility becomes immaterial for purposes of granting petitioners' main prayer, which is the annulment of the ECC. Thus, if the court has jurisdiction to

determine the validity of the issuance of the ECC, then it has jurisdiction to hear and decide petitioners' complaint.

Petitioners' complaint is one that is not capable of pecuniary estimation. It falls within the exclusive and original jurisdiction of the Regional Trial Courts under Section 19(1) of Batas Pambansa Blg. 129, as amended by Republic Act No. 7691. The question of whether petitioners should file their complaint in the Regional Trial Court of Manila or Oriental Mindoro then becomes a matter of venue, to be determined by the residence of the parties.12

Petitioners' main prayer is the annulment of the ECC. The principal respondent, DENR Region IV, has its main office at the L & S Building, Roxas Boulevard, Manila. Regional Executive Director Principe of the DENR Region IV, who issued the ECC, holds office there. Plainly, the principal respondent resides in Manila, which is within the territorial jurisdiction of the Manila RTC. Thus, petitioners filed their complaint in the proper venue.

On the other hand, the jurisdiction of Regional Trial Courts to issue injunctive writs is limited to acts committed or about to be committed within their judicial region.13 Moreover, Presidential Decree No. 1818 ("PD No. 1818") prohibited14 courts from issuing injunctive writs against government infrastructure projects like the mooring facility in the present case. Republic Act No. 8975 ("RA No. 8975"), which took effect on 26 November 2000, superseded PD No. 1818 and delineates more clearly the coverage of the prohibition, reserves the power to issue such writs exclusively with this Court, and provides penalties for its violation.15 Obviously, neither the Manila RTC nor the Oriental Mindoro RTC can issue an injunctive writ to stop the construction of the mooring facility. Only this Court can do so under PD No. 1818 and later under RA No. 8975. Thus, the question of whether the Manila RTC has jurisdiction over the complaint considering that its injunctive writ is not enforceable in Oriental Mindoro is academic.

Clearly, the Manila RTC has jurisdiction to determine the validity of

the issuance of the ECC, although it could not issue an injunctive writ against the DENR or NAPOCOR. However, since the construction of the mooring facility could not proceed without a valid ECC, the validity of the ECC remains the determinative issue in resolving petitioners' complaint.

Exhaustion of Administrative Remedies

The settled rule is before a party may seek the intervention of the courts, he should first avail of all the means afforded by administrative processes. Hence, if a remedy within the administrative machinery is still available, with a procedure prescribed pursuant to law for an administrative officer to decide the controversy, a party should first exhaust such remedy before resorting to the courts. The premature invocation of a court's intervention renders the complaint without cause of action and dismissible on such ground.16

RED Principe of the DENR Region IV Office issued the ECC based on (1) Presidential Decree No. 1586 ("PD No. 1586") and its implementing rules establishing the Environmental Impact Statement System, (2) DAO 96-3717 and (3) the Procedural Manual of DAO 96-37. Section 418 of PD No. 1586 requires a proponent of an environmentally critical project, or a project located within an environmentally critical area as declared by the President, to secure an ECC prior to the project's operation.19 NAPOCOR thus secured the ECC because the mooring facility in Minolo Cove, while not an environmentally critical project, is located within an environmentally critical area under Presidential Proclamation No. 2146, issued on 14 December 1981.20

The rules on administrative appeals from rulings of the DENR Regional Directors on the implementation of PD No. 1586 are found in Article VI of DAO 96-37, which provides:

SECTION 1.0. Appeal to the Office of the Secretary. — Any party aggrieved by the final decision of the RED may, within 15 days

from receipt of such decision, file an appeal with the Office of the Secretary. The decision of the Secretary shall be immediately executory.

SECTION 2.0. Grounds for Appeal. — The grounds for appeal shall be limited to grave abuse of discretion and serious errors in the findings of fact which would cause grave or irreparable injury to the aggrieved party. Frivolous appeals shall not be countenanced.

SECTION 3.0. Who May Appeal. — The proponent or any stakeholder, including but not limited to, the LGUs concerned and affected communities, may file an appeal.

The DENR Procedural Manual for DAO 96-37 explains these provisions thus:

Final decisions of the RED may be appealed. These decisions include those relating to the issuance or non-issuance of an ECC, and the imposition of fines and penalties. By inference, the decision of the Secretary on the issuance or non-issuance of the ECC may also be appealed based on this provision.Resort to courts prior to availing of this remedy would make the appellant's action dismissible on the ground of non-exhaustion of administrative remedies.

The right to appeal must be exercised within 15 days from receipt by the aggrieved party of such decision. Failure to file such appeal within the requisite period will result in the finality of the RED's or Secretary's decision(s), which can no longer be disturbed.

An appeal shall not stay the effectivity of the RED's decision, unless the Secretary directs otherwise.

The right to appeal does not prevent the aggrieved party from first resorting to the filing of a motion for reconsideration with the RED, to give the RED an opportunity to re-evaluate his decision.

(Emphasis added)

Instead of following the foregoing procedure, petitioners bypassed the DENR Secretary and immediately filed their complaint with the Manila RTC, depriving the DENR Secretary the opportunity to review the decision of his subordinate, RED Principe. Under the Procedural Manual for DAO 96-37 and applicable jurisprudence, petitioners' omission renders their complaint dismissible for lack of cause of action.21 Consequently, the Manila RTC did not err in dismissing petitioners' complaint for lack of cause of action.

On the Alleged Patent Illegality of the ECC

Petitioners nevertheless contend that they are exempt from filing an appeal with the DENR Secretary because the issuance of the ECC was in patent violation of existing laws and regulations. These are (1) Section 1 of Presidential Decree No. 1605, as amended, (2) Sections 26 and 27 of Republic Act No. 7160 (Local Government Code of 1991), and (3) the provisions of DAO 96-37 on the documentary requirements for the zoning permit and social acceptability of the mooring facility.

Petitioners' contention is without merit. While the patent illegality of an act exempts a party from complying with the rule on exhaustion Of administrative remedies,22 this does not apply in the present case.

Presidential Decree No. 1605

Presidential Decree No. 1605 ("PD No. 1605"),23 as amended by Presidential Decrees Nos. 1605-A and 1805, declares as ecologically threatened zone "the coves and waters embraced by Puerto Galera Bay as protected by Medio Island." This decree provides in part:

Section 1. Any provision of law to the contrary notwithstanding, the

construction of marinas, hotels, restaurants, other commercial structures; commercial or semi-commercial wharfs [sic]; commercial docking within the enclosed coves of Puerto Galera; the destruction of its mangrove stands; the devastation of its corals and coastline by large barges, motorboats, tugboat propellers, and any form of destruction by other human activities are hereby prohibited.

Section 2. x x x

No permit for the construction of any wharf, marina, hotel, restaurants and other commercial structures in Puerto Galera shall be issued without prior approval of the Office of the President upon the recommendation of the Philippine Tourism Authority. (Emphasis supplied)

NAPOCOR claims that since Minolo Cove lies outside of "Puerto Galera Bay as protected by Medio Island",24 PD No. 1605 does not apply to this case. However, petitioners assert that Minolo Cove is one of the "enclosed coves of Puerto Galera"25 and thus protected under PD No. 1605. This is a question of fact that the DENR Secretary should have first resolved. In any event, there is no dispute that NAPOCOR will use the mooring facility for its power barge that will supply 14.4 megawatts of electricity to the entire province of Oriental Mindoro, including Puerto Galera. The mooring facility is obviously a government-owned public infrastructure intended to serve a basic need of the people of Oriental Mindoro. The mooring facility is not a "commercial structure; commercial or semi-commercial wharf or commercial docking" as contemplated in Section 1 of PD No. 1605. Therefore, the issuance of the ECC does not violate PD No. 1605 which applies only to commercial structures like wharves, marinas, hotels and restaurants.

Sections 26 and 27 of RA No. 7160

Congress introduced Sections 26 and 27 in the Local Government Code to emphasize the legislative concern "for the maintenance of

a sound ecology and clean environment."26 These provisions require every national government agency or government-owned and controlled corporation to hold prior consultations with the local government unit concerned and to secure the prior approval of its sanggunian before implementing "any project or program that may cause pollution, climatic change, depletion of non-renewable resources, loss of cropland, rangeland, or forest cover and extinction of animal or plant species." Sections 26 and 27 respectively provide:

Section 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 authorized 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, non-governmental 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.

Section 27. Prior Consultations Required. — No project or program shall be implemented by government authorities unless the consultations mentioned in Section . . . 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.

In Lina, Jr. v. Paño,27 the Court interpreted these provisions in this manner:

Section 27 of the Code should be read in conjunction with Section

26 thereof x x x.

Thus, the projects and programs mentioned in Section 27 should be interpreted to mean projects and programs whose effects are among those enumerated in Sections 26 and 27, to wit, those that: (1) may cause pollution; (2) may bring about climatic change; (3) may cause the depletion of non-renewable resources; (4) may result in loss of crop land, rangeland, or forest cover; (5) may eradicate certain animal or plant species; and (6) other projects or programs that may call for the eviction of a particular group of people residing in the locality where these will be implemented.

Again, Sections 26 and 27 do not apply to this case because as petitioners admit,28 the mooring facility itself is not environmentally critical and hence does not belong to any of the six types of projects mentioned in the law. There is no statutory requirement for the concerned sanggunian to approve the construction of the mooring facility. It is another matter if the operation of the power barge is at issue. As an environmentally critical project that causes pollution, the operation of the power barge needs the prior approval of the concerned sanggunian. However, what is before this Court is only the construction of the mooring facility, not the operation of the power barge. Thus, the issuance of the ECC does not violate Sections 26 and 27 of RA No. 7160.

Documentary Requirements for ECC Applications

Under DAO 96-37, an ECC applicant for a project located within an environmentally critical area is required to submit an Initial Environment Examination, which must contain a brief description of the environmental setting and a documentation of the consultative process undertaken, when appropriate.29 As part of the description of the environmental setting, the ECC applicant must submit a certificate of locational clearance or zoning certificate.

Petitioners further contend that NAPOCOR, in applying for the ECC, did not submit to the DENR Region IV Office the documents

proving the holding of consultations and the issuance of a locational clearance or zoning certificate. Petitioners assert that this omission renders the issuance of the ECC patently illegal.

The contention is also without merit. While such documents are part of the submissions required from a project proponent, their mere absence does not render the issuance of the ECC patently illegal. To justify non-exhaustion of administrative remedies due to the patent illegality of the ECC, the public officer must have issued the ECC "[without any] semblance of compliance, or even an attempt to comply, with the pertinent laws; when manifestly, the officer has acted without jurisdiction or has exceeded his jurisdiction, or has committed a grave abuse of discretion; or when his act is clearly and obviously devoid of any color of authority."30

RED Principe, as chief of DENR Region IV, is the officer duly authorized under DAO 96-3731 to issue ECCs for projects located within environmentally critical areas. RED Principe issued the ECC on the recommendation of Amelia Supetran, the Director of the Environmental Management Bureau. Thus, RED Principe acted with full authority pursuant to DENR regulations. Moreover, the legal presumption is that he acted with the requisite authority.32

This clothes RED Principe's acts with presumptive validity and negates any claim that his actions are patently illegal or that he gravely abused his discretion. While petitioners may present proof to the contrary, they must do so before the proper administrative forum before resorting to judicial remedies.

On the Alleged Non-Compliance with the Terms of the ECC

Lastly, petitioners claim that they are justified in immediately seeking judicial recourse because NAPOCOR is guilty of violating the conditions of the ECC, which requires it to secure a separate ECC for the operation of the power barge. The ECC also mandates NAPOCOR to secure the usual local government permits, like zoning and building permits, from the municipal government of Puerto Galera.

The contention is similarly without merit. The fact that NAPOCOR's ECC is subject to cancellation for non-compliance with its conditions does not justify petitioners' conduct in ignoring the procedure prescribed in DAO 96-37 on appeals from the decision of the DENR Executive Director. Petitioners vigorously insist that NAPOCOR should comply with the requirements of consultation and locational clearance prescribed in DAO 96-37. Ironically, petitioners themselves refuse to abide with the procedure for filing complaints and appealing decisions laid down in DAO 96-37.

DAO 96-37 provides for a separate administrative proceeding to address complaints for the cancellation of an ECC. Under Article IX of DAO 96-37, complaints to nullify an ECC must undergo an administrative investigation, after which the hearing officer will submit his report to the EMB Director or the Regional Executive Director, who will then render his decision. The aggrieved party may file an appeal to the DENR Secretary, who has authority to issue cease and desist orders. Article IX also classifies the types of violations covered under DAO 96-37, including projects operating without an ECC or violating the conditions of the ECC. This is the applicable procedure to address petitioners' complaint on NAPOCOR's alleged violations and not the filing of the instant case in court.

A Final Word

The Court commends petitioners for their courageous efforts to safeguard and maintain the ecological balance of Minolo Cove. This Court recognizes the utmost importance of protecting the environment.33 Indeed, we have called for the vigorous prosecution of violators of environmental laws.34 Legal actions to achieve this end, however, must be done in accordance with established rules of procedure that were intended, in the first place, to achieve orderly and efficient administration of justice.

WHEREFORE, we DENY the petition for lack of merit.

SO ORDERED.

Davide, Jr., C .J ., Vitug, Ynares-Santiago and Azcuna, JJ ., concur.