G.R. No. 200474 - Awayan vs. Sulu Resources Development Corp.

Case Summary (G.R. No. 200474)

Background of Agreement and Compliance Issues

The Philippine government entered into a 25-year Mineral Production Sharing Agreement (MPSA) with Sulu Resources for mining operations over approximately 775 hectares. Sulu Resources submitted required quarterly and annual reports initially, but by 2002 claimed inability to comply further due to force majeure caused by a blockade imposed by a security force affiliated with Armando Carpio, thus barring access to the mining site. A government field investigation found that the blockade and ownership disputes justified non-submission of reports due to force majeure under Section 3(s) of RA 7942. The Mines and Geosciences Bureau recommended arbitration for compensation and resolution of land disputes, and early Environment Secretaries Gozun and Defensor affirmed Sulu Resources’ compliance based on these findings.

Petitioner’s Challenge and Secretary Atienza’s Cancellation Order

Maximo Awayan, a surface owner whose property was included in the MPSA area, filed a petition to cancel the agreement in 2009, alleging non-operation since 1998, unauthorized use of his land, failure of Sulu Resources to fulfill contractual and legal obligations including report submissions and declaration of project feasibility, overextension of the exploration period, and lack of qualification due to insufficient paid-up capital. Environment Secretary Atienza granted this petition, citing violations of the MPSA’s terms and provisions under the Philippine Mining Act and cancelled the Agreement. Sulu Resources moved for reconsideration, which was denied; the area was declared open for new mining applications.

Administrative and Judicial Proceedings Post-Cancellation

Sulu Resources appealed to the Office of the President, which affirmed DENR’s cancellation order in 2010, emphasizing that violations dated back to 2000 and that administrative agency findings are generally accorded respect. The Court of Appeals reversed this cancellation in 2011, ruling that Secretary Atienza’s order was tainted with grave abuse of discretion as Sulu Resources’ noncompliance was justified by force majeure, a position supported by several DENR officers and the Mines and Geosciences Bureau. The Court of Appeals also declared the cancellation void for lack of a recommendation from the MGB Director, as required under Section 7(e) of Administrative Order No. 96-40. Petitioner’s motion for reconsideration in the appellate court was denied, leading to the filing of the present Petition for Review on Certiorari with the Supreme Court.

Issues for Supreme Court Review

Whether questions of fact may be resolved in the Petition for Review under Rule 45.
Whether petitioner Maximo Awayan has legal standing.
Whether the Environment Secretary can cancel a mineral agreement without a prior recommendation from the MGB Director.
Whether Secretary Atienza gravely abused his discretion in cancelling the Agreement.
Whether prior findings of former DENR Secretaries bind Secretary Atienza.

Resolution on Review of Facts and Exceptions

The Supreme Court restated the general rule that Rule 45 petitions involve questions of law and that findings of fact by appellate courts are binding if supported by substantial evidence. Exceptions permitting review of facts include grave abuse of discretion and conflicting findings among others. Petitioner successfully established conflict between the Department of Environment and Natural Resources’ findings and the Court of Appeals, as well as grave abuse of discretion, thus justifying substantive judicial review of questions of fact presented.

Legal Standing of Petitioner

Maximo Awayan was recognized as a real party in interest because, as a surface owner, he has a direct, substantial, and material interest in whether the mining Agreement complies with applicable requirements and safeguards. His enjoyment of property rights is potentially affected by the Agreement’s implementation, granting him standing to challenge the validity of the MPSA.

Authority of the Environment Secretary to Cancel Mineral Agreements

The Supreme Court referenced the historical and legal basis for the Environment Secretary’s power, tracing the authority from early mining laws (Commonwealth Act No. 137), presidential decrees (PD Nos. 461 and 463), and the continued effect of the Administrative Code of 1987. In Celestial Nickel Mining Exploration Corporation v. Macroasia Corporation, the Court confirmed that the Environment Secretary exercises supervision and control over mineral resources, which includes the power to cancel mineral agreements for noncompliance. The Philippine Mining Act and its implementing rules do not explicitly repeal this authority.

The Mines and Geosciences Bureau has the authority under Administrative Order No. 96-40 to recommend or effect cancellation after due process; however, this authority does not limit or deprive the Secretary of the Department of Environment and Natural Resources of independent power to cancel mineral agreements without waiting for such recommendation. The Secretary's cancellation is an act of executive and administrative discretion, which courts respect unless there is grave abuse of discretion.

Review of Secretary Atienza’s Cancellation Order and Force Majeure Claim

Secretary Atienza's cancellation was based on verified violations, specifically: failure to apply for renewal of the exploration period, failure to submit the Declaration of Mining Project Feasibility, and failure to file required quarterly and annual reports, all constituting breach of the MPSA. The respondent’s claim of force majeure due to impediments by surface owner disputes was rejected, because:

The definition of force majeure requires extraordinary, unforeseeable, and inevitable events beyond the party’s control.
Respondent failed to invoke available remedies provided by RA 7942 Sections 75 and 76 and the MPSA itself, such as posting bonds and submission to Panel of Arbitrators.
The persistence of the dispute was partly attributable to respondent's inaction and neglect.
Force majeure should not be invoked to shield from obligations when human participation contributes to the problem.

Thus, the automatic extension of the exploration peri

Case Syllabus (G.R. No. 200474)

Background and Case Context

The Republic of the Philippines entered into a Mineral Production Sharing Agreement (MPSA) on April 7, 1998 with Sulu Resources Development Corporation for the development and utilization of minerals within a 775.1659-hectare area in Barangay Cupang, Antipolo, Rizal, for 25 years, renewable for another 25 years.
Sulu Resources was required under the agreement to submit quarterly and annual reports of mining operations. Initial reports were submitted between 1998 and 2000, but Sulu Resources later asserted it could no longer comply due to force majeure conditions.
The Mines and Geosciences Bureau (MGB) conducted a field investigation in 2002 after Sulu Resources claimed inability to access the contract area due to a roadblock and demands by a security force under Armando Carpio, amidst ownership disputes over the surface area.
The MGB concluded this constituted force majeure under Section 3(s) of Republic Act No. 7942 (Philippine Mining Act of 1995) and recommended arbitration for resolving compensation and right-of-way charges.
Prior Environment Secretaries Elisea Gozun and Michael T. Defensor issued orders affirming Sulu Resources’ compliance and continuity of the agreement.
In 2009, petitioner Maximo Awayan, a surface owner of part of the contract area, filed a petition for cancellation of the agreement, alleging non-operation, unauthorized inclusion of his property, non-compliance by Sulu Resources with contractual obligations, failure to file a Declaration of Mining Project Feasibility, over-extension of exploration period, and failing to meet minimum paid-up capital requirements for a qualified contractor.

Actions and Orders Leading to Dispute

Environment Secretary Jose L. Atienza, Jr., upon review, granted Awayan’s petition and canceled the MPSA on grounds of Sulu Resources’:
- Failure to file for renewal of the Exploration Period.
- Failure to submit the Declaration of Mining Project Feasibility.
- Failure to submit required reports.
The cancellation was made pursuant to Section 96 of the Mining Act and Section 15.2 of the MPSA, and in line with the Department’s policy to remove non-performing mining tenements.
Sulu Resources’ motion for reconsideration was denied, and the contract area was declared open to new mining applications.
The Office of the President affirmed the cancellation in 2010, emphasizing that the deficiencies were due since 2000 and that administrative findings are accorded great respect.
Sulu Resources filed a petition before the Court of Appeals (CA), which reversed the cancellation on the ground of grave abuse of discretion, citing the repeated recognition of force majeure by DENR officers and finding that the cancellation lacked due process.
The CA ruled that the Mines and Geosciences Bureau Director's recommendation is mandatory prior to cancellation, pursuant to Section 7(e) of Administrative Order No. 96-42.
Maximo Awayan’s motion for reconsideration of the CA ruling was denied.

Issues Presented to the Supreme Court

Whether questions of fact may be resolved in a Rule 45 Petition for Review.
Whether Maximo Awayan is the real party in interest and has the legal standing to file the petition.
Whether the Court of Appeals erred in its decision reversing the cancellation order, including sub-issues on:
- The necessity of the Mines and Geosciences Bureau’s recommendation for cancellation.
- Whether Secretary Atienza gravely abused his discretion.
- Whether prior findings of former DENR Secretaries bind the current Secretary.

Rule on Review of Questions of Fact

Rule 45 petitions generally raise questions of law, not fact.
The Supreme Court is bound by factual findings of lower courts or administrative bodies when supported by substantial evidence.
Exceptions permitting review of factual matters include scenarios of grave abuse of discretion, conflicting findings, or contradictions with established evidence.
Petitioner successfully invoked exceptions, particularly that the CA’s findings conflicted with those of DENR, thus requiring Court review.

Legal Standing of Petitioner Maximo Awayan

Under Rule 3, Section 2 of the Rules of Court, actions must be prosecuted by the real party in interest with direct, substantial, and material interest.
As a surface owner directly affected by the MPSA, Awayan demonstrate