G.R. No. 168332 - Koruga vs. Arcenas, Jr.

Naredico, Inc. (petitioner) and Krominco, Inc. (respondent) are engaged in a dispute over overlapping mining contract areas in the Surigao Mineral Reservation.
The controversy arises from various mining contracts and agreements with the Government, with both companies having entered into different agreements at different periods, leading to conflicting boundary determinations.

In 1977, Krominco (then Malayan Wood Products, Inc.) entered into an Operating Contract with the Government covering a 50,600.38-hectare area in Parcel III of the Surigao Mineral Reservation.
A second Operating Contract was secured in 1978 for a portion of Parcel II within the same reservation.
In 1986, both contracts were canceled by the Minister of Natural Resources due to violations of their terms and conditions, prompting Krominco to move for reconsideration while negotiating a new agreement.
In December 1988, Romarico G. Vitug, president of Naredico, applied for an Exploration Contract covering approximately 500 hectares in Dinagat Island, Surigao del Norte.

On February 21, 1989, Krominco and the Government signed a new Operating Contract covering approximately 729 hectares within Parcel III, with the final boundaries to be determined by actual survey and verification.
In August 1990, Vitug requested a revision of Naredico’s application—converting it into a mineral production sharing agreement and increasing the proposed area.
The Mines and Geosciences Bureau, under Director Joel D. Muyco, approved certain conditions and later granted Krominco’s Amended Survey Plan (1991) for its final operating area.
On January 28, 1992, a colatilla was proposed and agreed upon by the parties, excluding areas covered by valid and subsisting mining rights, which was later incorporated in Section IV of the Mineral Production Sharing Agreement executed on February 21, 1992 by the Government and Naredico.

In March–April 1993, Naredico applied for an Order of Survey, and Engineer Felix M. Illana’s technical report in January 1994 revealed that although there was no overlap in contract areas per se, Krominco’s Amended Survey Plan extended beyond its Operating Contract, encroaching into Naredico’s contracted area by approximately 445.50 hectares.
Naredico filed a petition with the Department of Environment and Natural Resources to annul Krominco’s Amended Survey Plan.
In the January 31, 1995 Decision, Environment Secretary Angel C. Alcala declared the Amended Survey Plan null and void, and directed a field verification of the disputed area to determine control and appropriation of resources based on actual structures and mining activities.

In 1996, following motions for execution, Environment Secretary Victor O. Ramos directed an ocular inspection of the disputed area.
In April 1999, both parties filed respective petitions before the Mines and Geosciences Bureau Panel of Arbitrators.

On October 4, 2001, the Panel ruled that Krominco had exclusive rights over the overlap area, given that Naredico had knowingly excluded such area in its Agreement.

Naredico appealed this decision to the Mines Adjudication Board, which in its May 25, 2007 Decision modified the arbitrators’ ruling by awarding the built-up areas (occupied by Krominco’s structures) to Krominco and the remaining “free area” to Naredico.
On November 26, 2010, the Court of Appeals reversed the Mines Adjudication Board Decision, reinstating the Panel of Arbitrators’ October 4, 2001 Decision and upholding the first-in-time, first-in-right principle, noting that Krominco’s final operating area was based on actual survey and approved boundaries.
Naredico’s subsequent motion for reconsideration was denied in the Court of Appeals’ May 10, 2011 Resolution.
The dispute also involved issues regarding the status of Krominco’s Operating Contract—its alleged expiration in 2005 versus subsequent extensions and the issuance of a Mineral Production Sharing Agreement covering the area, which further complicated the boundary and contractual claims.

Krominco’s failure to renew its Operating Contract rendered the dispute moot and that its Agreement granted Naredico superior mining rights over the overlap area.
The Court of Appeals erred in not taking judicial notice of factual findings made in Secretary Alcala’s Decision and in misapplying the first-in-time, first-in-right principle because the controversy was essentially a boundary dispute.

Its mining rights were continuously valid and substantiated by the various contracts, including extensions and special permits granted even before the alleged expiration of the Operating Contract.
The factual and technical findings by the Mines Adjudication Board, which were supported by the Joint Relocation Survey, were binding on the Court of Appeals and the Supreme Court.
The first-in-time, first-in-right principle properly applies to mining claims where the claimant’s operations and actual occupation predate the petitioner’s application.

Whether respondent Krominco’s alleged failure to renew its Operating Contract (expired February 27, 2005) rendered the proceeding moot despite subsequent extensions, special permits, and a Mineral Production Sharing Agreement indicating continued operation.

Whether the Court of Appeals erred in reversing the Mines Adjudication Board’s factual findings (supported by substantial evidence and technical surveys) and thereby misapplying the first-in-time, first-in-right principle in resolving the dispute over the overlapping mining areas.