G.R. No. 54305 - Atlas Consolidated Mining and Development Corp. vs. Court of Appeals

Case Summary (G.R. No. 54305)

Facts and Origin of the Mining Controversy

The nine (9) overlapping mining claims became the subject of Mines Administrative Cases Nos. V-727 and V-750, resolved by the Director of Mines in favor of CUENCO-VELEZ on February 12, 1974. BIGA COPPER appealed to the Secretary of Agriculture and Natural Resources, which affirmed the Director of Mines in DANR Cases Nos. 3936 and 3936-A dated April 14, 1974. BIGA COPPER then appealed to the Office of the President under O.P. Case No. 0435.

During the pendency of that appeal, CUENCO-VELEZ and BIGA COPPER entered into a compromise agreement, enabling BIGA COPPER to eventually lay claim to the nine (9) overlapping mining claims. Against this administrative backdrop, ATLAS alleged that when it began operations for its “Carmen Project,” it received numerous letters from third parties claiming to be assignees of BIGA COPPER and BIGA PARTNERS and thus allegedly entitled to royalties. ATLAS said it verified these demands and confirmed that before the registration of the Articles of Partnership of BIGA COPPER, the BIGA PARTNERS had sold and/or assigned some of their shares, rights, interests, and participations in the mining claims to third parties, and that BIGA COPPER had likewise sold and/or assigned its undivided shares, interests, and participations to third parties.

A further complication arose when Alejandro T. Escano wrote ATLAS claiming to be an assignee of CUENCO-VELEZ regarding three (3) mining claims retained under the compromise agreement, and asserting an alleged assignment of fifty percent (50%) of CUENCO-VELEZ’s rights. CUENCO-VELEZ then advised ATLAS that the assignment to Escano was revoked or rescinded for failure of the assignee to fulfill conditions in the deed of assignment.

ATLAS’s Petition for Declaratory Relief and the Trial Court’s Initial Handling

Faced with royalty claims by competing purported assignees, ATLAS instituted a petition for declaratory relief with the then Court of First Instance of Cebu, Branch 8, docketed as Civil Case No. 16669-R, with BIGA COPPER, BIGA PARTNERS, CUENCO-VELEZ, and some thirty-one (31) assignees named as respondents. In its amended petition, ATLAS framed multiple questions for resolution. In substance, it sought judicial guidance as to whom it should pay royalties extracted from the mining claims, considering (a) the existence of the compromise agreement between BIGA COPPER and CUENCO-VELEZ pending presidential approval; (b) the effect of assignments made by BIGA COPPER and its partners to third parties prior to the registration of the partnership; (c) whether the compromise binds assignees; and (d) whether ATLAS is bound by assignments made before and after partnership registration.

Respondents moved to dismiss on jurisdictional and failure-to-state-a-cause-of-action grounds. With the promulgation of Presidential Decree No. 1281, several defendants filed a supplemental motion to dismiss, asserting that the trial court was divested of jurisdiction under Sections 7 and 12 of the Decree. ATLAS opposed the supplemental motion, insisting that BIGA COPPER could not unilaterally cancel its operating agreement.

On May 29, 1978, the trial court (then presided over by Judge Regino Hermosisima, Jr.) required the defendants to answer, concluding that the asserted ground for dismissal was not indubitable. The defendants answered by reiterating the motion-to-dismiss allegations. Later, on December 29, 1978, some defendants again moved to dismiss, this time arguing that the trial court had lost jurisdiction because an action for annulment of the operating agreement between BIGA COPPER and ATLAS had been filed with the Bureau of Mines (Special Case No. V-95) set for hearing on January 22, 1979.

In an order dated January 17, 1979, the trial court denied the motion, holding that there was no mining controversy in the declaratory action before it. The court clarified that the declaratory action was intended only for a judicial pronouncement on ATLAS’s rights and obligations under the operating agreements, while the Bureau of Mines annulment action was not identical in nature; thus, it did not oust the trial court’s jurisdiction.

Proceedings on Certiorari and the Court of Appeals Ruling

Respondents sought reconsideration without success and then filed a petition for certiorari in the Court of Appeals, docketed CA-G.R. No. SP-09773, alleging grave abuse of discretion amounting to lack or excess of jurisdiction. The Court of Appeals was asked to resolve, among others, whether the trial court had jurisdiction over the declaratory action and, if it did, whether it was divested by the enactment of PD 1281.

The Court of Appeals ruled for respondents. Although it stated that the trial judge had jurisdiction over the declaratory action and was not divested by PD 1281, it held that the trial judge committed grave abuse of discretion by proceeding because the petition lacked justiciability and cause of action. It found that the declaratory suit called for resolution of issues on validity and enforcement of operating agreements and deeds of assignment that were already the subject of pending administrative cases before the Bureau of Mines, where adequate and exclusive relief could be obtained. It also observed that ATLAS’s right to sue was questionable, and concluded that the action should not have been allowed because the allegations suggested an advisory-opinion type request and a more proper remedy would have been interpleader.

Supreme Court Proceedings Including Motions for Intervention

ATLAS then brought the matter to the Supreme Court by petition for review on certiorari. During the proceedings, Efifanio A. Anoos moved to intervene, claiming a legal interest because he was among the defendants in the declaratory-relief proceedings and because the trial court purportedly rendered a summary judgment in his favor on February 21, 1979, which he claimed had become final and executory due to failure of private respondents to appeal. Anoos asserted, additionally, that the Court of Appeals violated due process when it rendered the questioned decision without notice to the other parties in the proceedings below.

Milagros Cuenco and other CUENCO-VELEZ heirs filed a similar petition for intervention, claiming that their due process rights were violated because they were not impleaded before the Court of Appeals and asserting that the appellate decision did not accord with law. The Supreme Court ultimately gave due course to ATLAS’s petition and granted both intervention motions in a resolution dated July 1, 1981.

The Parties’ Contentions and the Threshold Issues

The Supreme Court addressed two threshold issues. First, it asked whether a person who was not a party to certain contracts—specifically, the deeds of assignment—could file a petition for declaratory relief to obtain a judicial interpretation of those instruments. Second, it asked whether the trial court—which had already taken cognizance of an action that, by its nature, involved a mining controversy—was divested of jurisdiction upon the effectivity of Presidential Decree No. 1281.

Legal Basis and Reasoning on Standing for Declaratory Relief

On the first issue, the Supreme Court ruled in the negative. It restated that declaratory relief is an action by any person interested under a deed, will, contract, or other written instrument, or whose rights are affected by a statute, ordinance, executive order, or regulation, to determine questions of construction or validity arising under the instrument or statute and to obtain a declaration of rights and duties thereunder. It emphasized that the only questions properly raised in such a petition involve the construction or validity arising under the instrument or statute. It further explained the general rule that declaratory actions must be justified because no other adequate remedy is available, since their object is merely to terminate uncertainty.

Applying these principles, the Court found no legal basis to sustain ATLAS’s standing. While ATLAS was indeed a party to the operating agreements, the ambiguity ATLAS sought to resolve was not in the operating agreements themselves. The ambiguity and uncertainty concerned the validity of assignments of mining rights allegedly made by BIGA COPPER and CUENCO-VELEZ to third parties. The third parties whose assignment rights were in dispute were not parties to ATLAS’s operating agreements with BIGA COPPER or CUENCO-VELEZ, and ATLAS was likewise not a party to the deeds of assignment executed by BIGA COPPER or CUENCO-VELEZ.

Although ATLAS claimed that, due to numerous assignments, it was left uncertain as to whom to pay royalties, the Court held that such uncertainty did not justify declaratory relief because ATLAS was not a party to the deeds of assignment that were the real source of the controversy. The Court relied on guidance from earlier pronouncements in Tadeo vs. Provincial Fiscal of Pangasinan and United Central & Cellulose Labor Association (PLUM) vs. Santos, where the Court had rejected declaratory-judgment actions brought by persons lacking the legally requisite interest in the relevant instrument. It also aligned its analysis with the Court of Appeals’ view that other effective remedies were available, notably interpleader, which could determine with finality who among the contracting parties and their respective assignees was entitled to the royalties ATLAS would later pay under the operating agreements. The Supreme Court added that courts should refuse to construe instruments or declare rights where it would not terminate the uncertainty or controversy or where it was unnecessary and improper at the time, reinforcing the conclusion that declaratory relief was not an appropriate vehicle on ATLAS’s allegations.

Legal Basis and Reasoning on Jurisdiction Under Presidential Decree No. 1281

On the second issue, the Supreme Court answered affirmatively. It traced the legislative

Case Syllabus (G.R. No. 54305)

Atlas Consolidated Mining & Development Corporation (ATLAS) entered two operating agreements to explore and operate mining claims in Toledo City, Cebu, in exchange for royalties.
ATLAS entered a June 5, 1973 operating agreement with the heirs of Manuel Cuenco and Jose P. Velez (CUENCO-VELEZ) for twelve mining claims.
ATLAS entered a June 17, 1973 operating agreement with Biga Copper Mines Exploration Company (BIGA COPPER), a partnership composed of Pablo B. Gorosin, Francisco B. Gorosin, Pedro B. Gorosin, and Vicente T. Garaygay (BIGA PARTNERS), for thirty-one mining claims.
Some mining claims overlapped between the CUENCO-VELEZ and BIGA COPPER claims, and the overlap generated administrative mining cases.
The overlapping nine mining claims were resolved by the Director of Mines in favor of CUENCO-VELEZ, and the decision was affirmed on appeal to the Secretary of Agriculture and Natural Resources.
The administrative decisions were further appealed to the Office of the President, and during the pendency of that appeal, CUENCO-VELEZ and BIGA COPPER executed a compromise agreement enabling BIGA COPPER to lay claim to the overlapping claims.
ATLAS later received letters from third parties asserting that they were assignees of BIGA COPPER and BIGA PARTNERS and seeking substitution as royalty recipients under the operating agreements.
ATLAS verified the demands and allegedly confirmed that BIGA PARTNERS, before the registration of their partnership articles, had sold or assigned portions of their interests in the mining claims to third parties.
ATLAS likewise allegedly confirmed that BIGA COPPER sold or assigned its undivided shares, interests, and participations in the mining claims to third parties.
Alejandro T. Escano informed ATLAS that he claimed to be an assignee of CUENCO-VELEZ over three mining claims retained under the compromise agreement, asserting a fifty percent assignment of rights and participations.
CUENCO-VELEZ later advised ATLAS that the assignment to Escano was revoked or rescinded for failure to fulfill conditions in the deed of assignment.
In light of competing claims, ATLAS filed a petition for declaratory relief in the Court of First Instance of Cebu, Branch 8, docketed as Civil Case No. 16669-R.
The petition impleaded BIGA COPPER, BIGA PARTNERS, CUENCO-VELEZ, and numerous assignees.
Respondents moved to dismiss for lack of jurisdiction, lack of cause of action, and improper jurisdiction over the nature of the suit.
After Presidential Decree No. 1281 took effect on January 16, 1978, some defendants filed a supplemental motion to dismiss, invoking the decree to argue that the trial court had lost jurisdiction.
The trial court denied dismissal, finding the asserted ground not indubitable, and required defendants to answer.
Respondents later renewed motions to dismiss, again asserting the loss of jurisdiction and alleging that an administrative action for annulment of the operating agreement was filed with the Bureau of Mines as Special Case No. V-95.
In an order dated January 17, 1979, the trial court denied the renewed motion, holding that no mining controversy was involved and that declaratory relief sought only a judicial pronouncement on rights and obligations under operating agreements.
Respondents sought certiorari before the Court of Appeals (CA-G.R. No. SP-09773), alleging grave abuse of discretion amounting to lack or excess of jurisdiction.
The Court of Appeals ruled that the trial court had jurisdiction over the declaratory action initially but held that it should have dismissed for lack of justiciable controversy, noting issues involving validity and enforcement of the operating agreements and deeds of assignment pending as mining matters before the Bureau of Mines.
The Court of Appeals further characterized the declaratory action as improperly seeking an advisory opinion and suggested interpleader as the more appropriate remedy.
ATLAS filed a petition for review on certiorari before the Supreme Court, assailing the Court of Appeals decision.
Efifanio A. Anoos moved to intervene, claiming legal interest and alleging a summary judgment in his favor in the trial court had become final and executory.
CUENCO-VELEZ also filed a petition for intervention, alleging due process violations in that they were not impleaded before the Court of Appeals and challenging conformity with law.
The Supreme Court granted due course to ATLAS’s petition and granted both motions for intervention.
The Supreme Court ultimately dismissed the intervention of CUENCO-VELEZ, declared the intervenor Anoos-favoring summary judgment null and void, and affirmed the Court of Appeals disposition.

Key Contracting Parties and Agreements

ATLAS contracted first with CUENCO-VELEZ through a June 5, 1973 Operating Agreement granting ATLAS the right to explore, develop, and operate twelve (12) mining claims in Toledo City, Cebu, subject to royalty payments.
ATLAS contracted next with BIGA COPPER through a June 17, 1973 Operating Agreement granting exploration, development, and operation rights over thirty-one (31) mining claims.
The parties’ operating agreements were linked to an overlap of nine mining claims, which became subject of administrative litigation before the Director of Mines and subsequent appeals.
The parties CUENCO-VELEZ and BIGA COPPER entered into a compromise agreement during the pendency of administrative appeal, resolving the overlapping claims in a way that allowed BIGA COPPER to eventually claim them.
The factual controversy involved competing third-party claims to royalties based on asserted assignments of shares, rights, interests, and participations in the mining claims.

Administrative Mining History

The overlapping nine mining claims were resolved by the Director of Mines in favor of CUENCO-VELEZ in Mines Administrative Cases Nos. V-727 and V-750.
The Secretary of Agriculture and Natural Resources affirmed the Director of Mines decision in DANR Cases Nos. 3936 and 3936-A.
The matter proceeded on appeal to the Office of the President as 0.P. Case No. 0435.
During that administrative appeal, CUENCO-VELEZ and BIGA COPPER executed a compromise agreement that later supported BIGA COPPER’s claim over the overlapping claims.

ATLAS’s Declaratory Relief Petition

ATLAS alleged uncertainty as to whom it should pay royalties for ores extracted from mining claims covered by its operating agreements.
ATLAS asserted that third parties demanded payment of royalties as assignees of BIGA COPPER and BIGA PARTNERS and asked for substitution under the operating agreement.
ATLAS claimed it verified competing assignment histories involving both BIGA PARTNERS and BIGA COPPER, including asserted assignments before partnership registration.
ATLAS also confronted an assignment dispute involving Alejandro T. Escano, whom ATLAS was notified to recognize, subject to CUENCO-VELEZ’s later revocation or rescission.
ATLAS sought judicial resolution through questions including whether it should respect the compromise agreement pending presidential approval, whether the compromise binds assignees, and whether assignments after partnership registration were valid and binding upon ATLAS.
ATLAS further sought determination of which assignees were entitled to royalties where assignments allegedly exceeded partnership participation and w