Title
Diamond Drilling Corp. of the Philippines vs. Crescent Mining and Development Corp.
Case
G.R. No. 201785
Decision Date
Apr 10, 2019
A mining joint venture dispute over a 40% stake in the Guinaoang Project, involving execution sale, MPSA amendment, and DENR's discretionary authority, resolved by the Supreme Court upholding state control over mineral resources.
dispute
amendment
acquisition

Case Summary (G.R. No. 201785)

Mineral Agreements, Ownership Structure, and Related Instruments

Crescent, a Filipino corporation, and Pacific Falkon Resources Corporation (PFRC), a Canadian corporation, entered into a Joint Venture Agreement (JVA) on October 27, 1993 to undertake copper and gold mining within a 534-hectare area in Guinaoang and Bulalacao, Mankayan, Benguet. On November 12, 1996, the Republic of the Philippines, through then DENR Secretary Victor Ramos, awarded MPSA No. 057-96-CAR to Crescent under R.A. No. 7942 and DENR Administrative Order No. 96-40. Under that MPSA, Crescent was granted the exclusive right to conduct initial exploration and possible development and commercial utilization of minerals found within the contract area.

On August 5, 1997, Crescent and PFRC executed a Letter-Agreement amending their arrangement, whereby PFRC acquired a 40% stake in the Guinaoang Project. The Letter-Agreement was sent to and recorded with the Regional Office of the Mines and Geosciences Bureau (MGB) in Baguio City.

DDCP’s Collection Suit and the Attachment and Judicial Sale of PFRC’s Interest

On January 11, 2000, DDCP, PFRC’s drilling contractor, filed a Complaint for collection of sum of money with damages with a prayer for a writ of preliminary attachment against PFRC before the RTC of Makati City. After ex parte presentation of evidence, the trial court issued an order on January 28, 2011 granting the application for preliminary attachment. PFRC’s 40% share in the Guinaoang Project was attached through a Notice of Attachment/Levy served upon and recorded with the MGB office where the 40% share was officially recorded.

When PFRC failed to answer, the trial court declared PFRC in default on January 5, 2001 and later rendered a Decision dated April 23, 2001 holding PFRC liable to DDCP for US $307,726.00 for unpaid billings, interest, and attorney’s fees, and for P300,000.00 as exemplary damages. Entry of Judgment was issued on October 19, 2001, and DDCP caused the issuance of a writ of execution. The sheriff levied on PFRC’s 40% interest, served notice of levy on execution, and caused it to be recorded with the MGB-CAR.

On December 31, 2001, PFRC’s interest was auctioned at public sale, and DDCP emerged as the highest bidder. A Certificate of Sale was issued in favor of DDCP, and the sale was registered with the MGB-CAR. Consequently, DDCP became a 40% equitable owner.

DDCP’s Attempt to Register Its Share and the MGB’s Refusal

In 2008, DDCP requested the MGB to record its 40% interest in the Guinaoang Project. The request was denied by then DENR-MGB Director Horacio C. Ramos, who ruled that DDCP had not acquired any interest in MPSA No. 057-96-CAR because the agreement was between the government and Crescent; that PFRC had no equity in Crescent; and that the collection decision in Civil Case No. 00-055 involved PFRC only and not Crescent. The MGB further reasoned that the JVA between PFRC and Crescent was a private matter and that DDCP’s acquisition of PFRC’s interest did not fall within the DENR Secretary’s authority to approve.

The RTC Order of August 31, 2011 and the Conflicting CA Decisions

Faced with the denial, DDCP filed a motion dated June 2, 2011 in Civil Case No. 00-055, praying for an order directing the DENR Secretary, through the MGB Director, to amend MPSA No. 057-96-CAR by incorporating DDCP’s 40% ownership. The DENR Secretary and the MGB Acting Director opposed on the grounds that they were not parties and could not be bound; that amendment of an MPSA could only be made by mutual agreement between the Government and Crescent; and that DDCP failed to show compelling justification for amendment.

After the parties’ submissions, the RTC issued the assailed Order dated August 31, 2011, directing the Secretary of the DENR, through the MGB Director, to amend MPSA No. 057-96-CAR by appending DDCP as joint contractor with 40% ownership, subject to compliance with nationality and other qualification requirements under R.A. No. 7942 and its implementing rules.

The DENR then filed a petition for certiorari with the CA, docketed as CA-G.R. SP No. 124038, while Crescent filed another petition for certiorari assailing the order, docketed as CA-G.R. SP No. 121603. The CA produced conflicting outcomes. In CA-G.R. SP No. 121603, the CA 17th Division, in a decision dated January 30, 2012, annulled the RTC order. It held that the trial court had lost jurisdiction because DDCP’s motion to amend the MPSA was essentially a motion for execution of the 2001 Decision filed beyond the five-year period to execute by motion. It also ruled that the relief granted was not part of execution proceedings and therefore lay beyond the trial court’s supervisory control over execution.

In CA-G.R. SP No. 124038, the CA 2nd Division, in a decision dated December 14, 2012, denied the DENR’s petition and upheld the RTC order. The CA relied on Section 30 of R.A. No. 7942 and Section 46 of DENR Administrative Order No. 20-21, concluding that the DENR’s failure to act within the statutory period meant that the assignment of PFRC’s 40% share should be deemed automatically approved, making PFRC an absolute owner of that share. It treated PFRC’s interest as a form of property that was therefore liable to levy and execution, as the sheriff did. The CA further viewed the RTC order as within execution proceedings and thus within the trial court’s continuing supervisory control.

Both the DENR and DDCP filed motions for reconsideration, which were denied. Both sought review with the Supreme Court. DDCP’s petition for review was filed on June 25, 2012 (docketed as G.R. No. 201785), and the DENR’s petition was filed on June 24, 2013 (docketed as G.R. No. 207360). The Supreme Court consolidated the cases on August 7, 2013.

The Supreme Court’s Framing of Issues

DDCP raised issues in G.R. No. 201785, including whether the CA erred in finding that the trial court acted beyond jurisdiction or with grave abuse of discretion in granting DDCP’s motion, and whether the CA should have dismissed outright the certiorari and prohibition petitions for Crescent’s failure to avail itself of plain, speedy, and adequate remedies.

The DENR raised issues in G.R. No. 207360, including whether the DENR could be bound by a trial court decision in a case where it was not a party; whether final and executory decisions could be modified during execution; whether the RTC order contravened the Mining Act, its IRR, and the terms of MPSA No. 057-96-CAR; whether MPSA amendment was a discretionary function of the DENR Secretary that could not be compelled by judicial order; and whether DDCP’s acquisition of PFRC’s 40% interest constituted a valid assignment under R.A. No. 7942.

The Supreme Court treated the central matter as the alleged existence of grave abuse of discretion in the issuance of the RTC Order dated August 31, 2011, and addressed the procedural and substantive matters ad seriatim.

DDCP’s Challenge to Crescent’s Certiorari and the Procedural Barrier

On the propriety of Crescent’s resort to certiorari, the Supreme Court declined to address the issue because DDCP did not raise it before the CA. It invoked the settled rule that issues cannot be raised for the first time on appeal and emphasized fairness and due process considerations, applying estoppel principles.

Execution by Motion, Jurisdiction, and the Timing of the RTC Order

On the CA’s ruling that the RTC acted beyond jurisdiction because the motion was filed beyond the reglementary period to execute by motion, the Supreme Court discussed the distinction between execution proceedings and the point at which a judgment becomes beyond review. The Court reiterated that a case is considered terminated once a judgment has been fully satisfied and that when a case has an execution issued, it remains pending so that the court that rendered the judgment retains general supervisory control over execution.

Applying these principles, the Supreme Court held that the judgment in favor of DDCP should be deemed fully satisfied at the time DDCP filed its motion to amend the MPSA. It reasoned that after DDCP acquired property of its judgment debtor through the judicial sale of PFRC’s 40% interest, DDCP no longer needed trial court execution mechanisms because it had effectively obtained property as payment for the judgment debt. The Court thus held that the trial court had lost jurisdiction by the time it issued the assailed order.

The Court rejected DDCP’s framing that the order was a mere continuation of execution. It emphasized that PFRC was a foreign corporation and that its only attachable property in the Philippines was its 40% share in the Guinaoang Project. The Court further characterized that 40% share, under the JVA and related Letter-Agreement, was treated as part of the project’s “Assets” and that the execution sale subrogated DDCP to PFRC’s bundle of rights under those private instruments. Nonetheless, the Court held that DDCP’s right to demand an amendment of the MPSA to reflect its co-contractor status belonged not to the trial court but to the DENR Secretary, as approval of MPSA amendments reflecting transfers or assignments is a function of the DENR under Section 30 of the Mining Act.

State Control Over Mineral Agreements and the Contractual Nature of MPSAs

The Supreme Court turned to the substantive issues by emphasizing the principle of state control over mineral exploitation and the constitutional basis for that control. Article XII, Section 2 of the 1987 Constitution declared that natural resources are owned by the State and that the exploration, development, and utilization of natural resources shall be under the full control and supervision of the State, including through production-sharing agreements with qualified Filipino citizens or corporations.

To operationalize these constitutional mandates, R.A. No. 7942 vested primary authority in the DENR for conservation, management, development, and proper use of mineral resources.

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