Case Summary (G.R. No. 163101)
Procedural history leading to the Supreme Court petition
After Benguet’s March 8, 1999 reply asserting compliance and citing MGB delay and force majeure, J.G. Realty filed a Petition for Declaration of Nullity/Cancellation of the RAWOP with the Legazpi City Panel of Arbitrators (POA) on June 7, 2000 (DENR Case No. 2000‑01). The POA issued a decision on March 19, 2001 canceling the RAWOP and excluding Benguet from the joint MPSA application. Benguet appealed to the MAB (docketed R‑M‑2000‑01); the MAB affirmed the POA decision on December 2, 2002 and denied reconsideration on March 17, 2004. Benguet then filed a Rule 65 petition with the Supreme Court seeking annulment of the MAB decisions.
Preliminary procedural ruling on proper forum and appeal route
The Court first held that Benguet resorted to an improper remedy by filing directly with the Supreme Court. Citing Article VI, Section 30 of the 1987 Constitution and Carpio v. Sulu Resources Development Corp., the Court reiterated that MAB decisions must ordinarily be appealed to the Court of Appeals under Rule 43 of the Rules of Court; therefore Benguet should have filed a petition for review with the Court of Appeals. Because Benguet filed the petition with the Supreme Court after Carpio was already applicable, the MAB decision had become final and executory for failure to follow the prescribed appeal route. The petition was dismissed on this ground alone.
First substantive issue — arbitration clause and jurisdiction of POA/MAB
The Court addressed whether the dispute should have been submitted to voluntary arbitration under the RAWOP. The RAWOP contains an arbitration clause (Secs. 11.01–11.02) requiring submission of disputes to a three‑member Board of Arbitrators and prohibiting court or administrative actions except to enforce an arbitration award. The Court applied RA 876 (and RA 9285’s continuation of RA 876 for domestic arbitration) and held that a contractual stipulation requiring prior resort to voluntary arbitration is valid and enforceable. It distinguished voluntary contractual arbitration from the POA’s compulsory arbitration function: the POA’s mandate is a form of compulsory, administrative arbitration and is not the voluntary contractual forum agreed upon by the parties. Consequently, POA lacked jurisdiction over disputes that were properly the subject of voluntary arbitration under the RAWOP.
Estoppel and waiver of jurisdictional objection by Benguet
Notwithstanding the foregoing, the Court found that Benguet was estopped from contesting the jurisdiction of the POA and MAB. Benguet actively participated in the POA proceedings (filed an answer and counterclaim), appealed the POA decision to the MAB, participated in MAB proceedings, filed a motion for reconsideration, and ultimately petitioned the Supreme Court under Section 79 of RA 7942—conduct which implicitly recognized the jurisdictional posture of the POA/MAB. Because Benguet failed to timely challenge POA’s jurisdiction via a special civil action for certiorari when jurisdiction was first asserted, and having fully participated for several years, the Court held Benguet could no longer raise that objection.
Second substantive issue — whether cancellation of the RAWOP was supported by evidence
The Court examined the grounds for cancellation: (1) Benguet’s alleged nonpayment of royalties and (2) failure to diligently pursue the MPSA application (APSA‑V‑0009). The RAWOP expressly prescribed the method of royalty payment (Sec. 14.05), requiring deposits to a bank account maintained by the owner; prior informal practice of J.G. Realty collecting checks from Benguet did not supplant the contractually mandated mode of payment. The Court held Benguet bore the burden to prove payment; it did not do so and its contention that the checks were available for pickup was insufficient. On the MPSA application, Benguet produced no evidence of sustained efforts to expedite approval by the Mines
...continue readingCase Syllabus (G.R. No. 163101)
Case Caption, Court and Decision
- Decision rendered by the Supreme Court, Second Division; authored by Justice Velasco, Jr.
- G.R. No. 163101; decision promulgated February 13, 2008; reported at 568 Phil. 756.
- Petition under Rule 65 of the Rules of Court seeking annulment of:
- December 2, 2002 Decision of the DENR-Mines Adjudication Board (MAB) in MAB Case No. 0124-01 (Mines Administrative Case No. R‑M‑2000‑01), which affirmed the March 19, 2001 Decision of the Panel of Arbitrators (POA) canceling the June 1, 1987 Royalty Agreement with Option to Purchase (RAWOP) and excluding Benguet Corporation from the joint MPSA application; and
- March 17, 2004 Resolution denying Benguet’s Motion for Reconsideration.
Factual Background
- Parties and agreements:
- On June 1, 1987, Benguet Corporation (“Benguet”) and J.G. Realty and Mining Corporation (“J.G. Realty”) executed a Royalty Agreement with Option to Purchase (RAWOP) and a Supplemental Agreement (both dated June 1, 1987).
- J.G. Realty was acknowledged as owner of four mining claims: Bonito‑I, Bonito‑II, Bonito‑III, Bonito‑IV; total area 288.8656 hectares; location: Barangay Luklukam, Sitio Bagong Bayan, Municipality of Jose Panganiban, Camarines Norte.
- The mining claims were the subject of joint MPSA Application No. APSA‑V‑0009: J.G. Realty as claimowner and Benguet as operator.
- Key contractual obligations under the RAWOP:
- Benguet undertook to perfect or otherwise acquire the mining rights and to cause examination of the claims within 24 months to determine worthiness for development; to furnish J.G. Realty a report within a reasonable time after examination; and to conduct exploration in accordance with an exploration program during the examination period.
- Benguet could, before expiration of the examination period, give written notice to undertake development and thereafter place the claims into commercial productive stage within 24 months from such notice.
- If placed into commercial production, J.G. Realty was to receive a 5% royalty of net realizable value, and royalties for any production during examination or development periods.
- RAWOP contained an arbitration clause (Secs. 11.01 and 11.02) providing for voluntary arbitration and stipulating that no court or administrative action shall be instituted except to enforce an arbitral decision.
- RAWOP provided for a specific mode of royalty payment (Sec. 14.05): OWNER to maintain a bank account where BENGUET shall deposit advances and payments; such deposits constitute complete acquittance and release.
- Correspondence and events:
- August 9, 1989: Benguet’s Executive Vice‑President Antonio N. Tachuling notified J.G. Realty of Benguet’s intention to develop the claims.
- February 9, 1999: J.G. Realty’s President Johnny L. Tan sent a letter terminating the RAWOP for alleged grounds: (a) Benguet’s failure to undertake development within 2 years; (b) alleged allowance of high graders on the claim; (c) absence of a stipulated term limit; (d) non‑payment of royalties.
- March 8, 1999: Benguet’s Manager for Legal Services Reynaldo P. Mendoza replied, asserting (inter alia) that Benguet invested PhP 42.4 million to rehabilitate the mines; commercial operations were hampered by non‑issuance of a Mines Temporary Permit by the Mines and Geosciences Bureau (MGB), a force majeure; high graders predated Benguet’s takeover and J.G. Realty had obligation to eject them; royalties were available in Benguet’s office but J.G. Realty refused to collect checks since August 1994; and that disputes should be submitted to arbitration rather than unilateral termination.
- Administrative and arbitral actions:
- June 7, 2000: J.G. Realty filed a Petition for Declaration of Nullity/Cancellation of the RAWOP with the Legaspi City POA, Region V (DENR Case No. 2000‑01; styled J.G. Realty v. Benguet).
- March 19, 2001: POA issued a Decision declaring the June 1, 1987 RAWOP and its Supplemental Agreement cancelled and excluding Benguet from the joint MPSA Application over the Bonito claims.
- April 23, 2001: Benguet filed a Notice of Appeal with the MAB, docketed Mines Administrative Case No. R‑M‑2000‑01.
- December 2, 2002: MAB issued a Decision upholding the POA’s March 19, 2001 Decision.
- Benguet filed Motion for Reconsideration, denied by MAB’s March 17, 2004 Resolution.
- Benguet filed the instant petition with the Supreme Court (petition filed April 28, 2004 as observed by the Court).
Issues Presented to the Court
- Whether the controversy should first have been submitted to voluntary arbitration as required by the RAWOP before the POA took cognizance of the case.
- Whether the cancellation of the RAWOP was supported by evidence.
- Whether cancellation of the RAWOP resulted in unjust enrichment of J.G. Realty to the prejudice of Benguet.
Threshold Procedural Ruling (Improper Remedy / Jurisdictional Route)
- Statutory and procedural context:
- Section 79 of Republic Act No. 7942 (Philippine Mining Act of 1995) states that a petition for review by certiorari and question of law may be filed with the Supreme Court within 30 days from receipt of the MAB’s order/decision.
- The Court recognized its prior holding in Carpio v. Sulu Resources Development Corp. (G.R. No. 148267, Aug. 8, 2002) invalidating the direct‑to‑Supreme‑Court review provision of Section 79 of RA 7942 and holding that MAB decisions must first be appealed to the Court of Appeals (CA) under Rule 43 (verified petition for review).
- Carpio’s reasoning summarized by the Court:
- The Constitution restricts legislative expansion of the Supreme Court’s appellate jurisdiction without its consent; Section 79 of RA 7942 improperly expands that jurisdiction.
- The Supreme Court’s rule‑making power set forth Rule 43 as the uniform route for appeals from quasi‑judicial agencies to the CA; MAB is a quasi‑judicial body and thus Rule 43 applies.
- The CA is competent to resolve factual and mixed questions arising from quasi‑judicial agency decisions.
- The judicial policy of observing the court hierarchy disfavours direct resort to the Supreme Court when adequate remedies exist in lower tribunals.
- Application to the present case:
- The petition to the Supreme Court was filed on April 28, 2004, after Carpio (2002) and thus Benguet should have appealed to the Court of Appeals under Rule 43 instead of invoking certiorari under Rule 65.
- Petitioner’s failure to properly appeal to the CA rendered the MAB decision final and executory; this procedural ground alone warranted dismissal of the Supreme Court petition.
- The Court nevertheless proceeded to address the substantive issues and affirmed the MAB decision on the merits.
First Issue — Arbitration Clause and Jurisdiction of POA
- Contractual arbitration provisions:
- RAWOP Secs. 11.01 and 11.02 provide for voluntary arbitration: disputes between Benguet and J.G. Realty not amenable to amicable settlement “shall not be cause of any action of any kind whatsoever in any court or administrative agency but shall, upon notice … be referred to a Board of Arbitrators” of three members; no court action may be instituted except to enforce the arbitrators’ decision.
- Statutory law on a