Title
PICOP Resources, Inc. vs. Base Metals Mineral Resources Corp.
Case
G.R. No. 163509
Decision Date
Dec 6, 2006
A mining rights dispute arose between Base Metals and PICOP over overlapping claims in Agusan del Sur. The Supreme Court ruled in favor of Base Metals, affirming mining is permissible in forest lands under the Mining Act, and PICOP’s Presidential Warranty does not grant exclusive rights or invoke constitutional non-impairment.
mining rights
mining claims
concession holder rights

Case Summary (G.R. No. L-15392)

Factual Background

In 1987, Central Mindanao Mining and Development Corporation contracted Banahaw Mining and Development Corporation as mine operator over eighteen mining claims in Agusan del Sur. Banahaw secured a Mines Temporary Permit on April 29, 1988 which was renewed until June 28, 1991. A portion of those claims lay within PICOP's logging concession; the parties executed a Memorandum of Agreement recognizing respective rights and granting Banahaw an access/right of way. Banahaw converted its claims into Mineral Production Sharing Agreement applications, and on December 18, 1996 assigned thirty-seven mining claims to Base Metals Mineral Resources Corporation. Base Metals substituted as applicant with the Bureau of Mines on March 10, 1997, secured required area clearances, and published its amended MPSA applications on October 7, 1997.

Adverse Claim and Panel Proceedings

On November 18, 1997, PICOP filed an Adverse Claim and Opposition with the MGB asserting that approval of Base Metals' MPSA would violate the constitutional proscription against impairment of contracts and would defeat PICOP's rights. Base Metals answered that the Adverse Claim was untimely and that PICOP possessed no rights over mineral resources, while representing willingness to negotiate compensation. The MGB Panel of Arbitrators held an evidentiary and pleadings sequence and, by order dated December 21, 1998, set aside Base Metals' MPSA applications. The Panel found PICOP's adverse claim timely and ruled that an MPSA could not be granted over areas covered by an IFMA or PTLA with a Presidential Warranty without the grantee's consent, and that the assignment to Base Metals lacked PICOP's consent and ratification.

Administrative Appeals and Court of Appeals Proceedings

Base Metals appealed to the Mines Adjudication Board and thereafter the MAB reinstated and gave due course to the MPSA applications subject to compliance with regulatory requirements. PICOP sought judicial review in the Court of Appeals. The appellate court affirmed the MAB, reasoning that the Presidential Warranty dated September 25, 1968 merely confirmed the timber license, guaranteed peaceful and adequate possession to PICOP in respect of timber rights, and did not convert the warranty into a government contract protected by the non-impairment clause. The Court of Appeals further held that the PTLA and IFMA did not grant PICOP exclusive rights over subsurface mineral resources, and that timber licensees are to be notified, not necessarily asked for consent, before mining operations. The Court of Appeals also noted Base Metals' area status and clearance from the DENR.

Issues Presented to the Supreme Court

PICOP presented three principal issues: whether the 2,756 hectares subject of Base Metals' MPSA are closed to mining absent PICOP's written consent by reason of their classification as permanent forest, wilderness, or protected areas; whether the Presidential Warranty is protected by the non-impairment clause of the 1987 Constitution; and whether PICOP raised new issues on appeal. Base Metals and the Office of the Solicitor General maintained that the classification issues were raised belatedly and that the Presidential Warranty is not a contract such that the non-impairment clause applies.

PICOP's Contentions

PICOP argued that the contested area lies within the Agusan-Surigao-Davao Forest Reserve established by Proclamation No. 369 and was surveyed as permanent forest under RA 3092, and that portions were set aside as wilderness forming initial components of the NIPAS under RA 7586, thereby invoking Sec. 19(f) of RA 7942 to bar MPSA applications. PICOP further maintained that the Presidential Warranty constitutes a contractual commitment protected by the non-impairment clause and that mining would impair its supply of raw materials. PICOP asserted that DENR clearances were misplaced and that DAO No. 96-40 requires an exploration permit before mining in government reservations.

Base Metals' Contentions

Base Metals contended that PICOP first raised substantive land-classification objections only in its motion for reconsideration before the Court of Appeals and that the present petition thus presents new issues. Base Metals argued that the Presidential Warranty is not a contract that can be impaired by administrative or quasi-judicial action, that the MAB and Court of Appeals did not enact legislation and therefore the non-impairment clause is inapplicable, and that the State retains the sovereign power to grant mineral agreements over public domain lands. Base Metals further asserted that PD 705 requires notice to timber licensees rather than consent, and relied on the memorandum of agreement between Banahaw and PICOP as recognition of mining access.

Office of the Solicitor General's Contentions

The OSG, representing the MAB, argued that PICOP's late invocation of permanent forest and NIPAS designations was offensive to due process and that timber licenses are not contracts within the sweep of the non-impairment or due process clauses. The OSG noted that RA 7942 allows mining in timber or forest lands subject to existing rights and reservations and that DAO No. 96-40 contemplates area status and clearance as prerequisites. The OSG also emphasized that designation as an initial component of NIPAS requires an express law, presidential decree, proclamation, or executive order, which PICOP did not prove.

Court's Consideration of Procedural Raising of Issues

The Court examined whether PICOP raised its land-classification claims anew on appeal. The Court found that PICOP had in fact pleaded, in its November 19, 1997 Adverse Claim, that the areas applied for were classified as permanent forest under PD 705 and that such areas should remain forest lands. Although PICOP more fully developed statutory arguments under RA 3092, RA 7586, and RA 7942 later, the Court concluded that those arguments fell within the scope of issues framed in the proceedings a quo and that respondents had been afforded opportunity to respond. The Court therefore exercised its discretion to address the merits.

Statutory Framework and Principle of Multiple Land Use

The Court began its statutory analysis by reaffirming the State policy of multiple land use embodied in PD 705 and RA 7942. PD 705 expressly contemplates reassessment of multiple uses and orients forest land policy to development and public welfare. RA 7942 likewise allows mineral agreements over public and private lands, including timber or forestlands, subject to existing rights, reservations, and prior agreements, and provides mechanisms for resolving conflicts through the Panel of Arbitrators. The statute grants auxiliary rights such as timber cutting under Sec. 72 and authorizes entry into private lands and concession areas subject to prior notification and compensation under Sec. 76.

Analysis of Areas Closed to Mining under RA 7942 and RA 7586

The Court parsed Sec. 19 of RA 7942 and concluded that the bar on mineral agreement applications applies to areas expressly prohibited by law and to watershed forest reserves that have been duly proclaimed. The Court found no evidence that the subject area had been proclaimed as a watershed forest reserve or otherwise set aside by law or presidential proclamation such that Sec. 20 of RA 7586 would operate to prohibit mineral locating. The Court also interpreted prior jurisprudence, notably Apex Mining Co., Inc. v. Garcia, to mean that procedures exist for acquiring mining rights within forest reserves and that mining is not categorically precluded by Proclamation No. 369. The Court further observed that PD 705, Sec. 47, regulates mining operations in forest lands and requires prior notice to licensees and prior approval of the Director rather than the licensee's consent.

Evidentiary Findings on Area Status and Clearances

The Court reviewed the DENR area status certifications attached to the file and found that portions of the MPSA applications were described as timberland, unclassified public forest, alienable and disposable land, and that certain shaded portions were identified as the wilderness area of PICOP in the DENR notes. The Court emphasized, however, that the DENR notations did not demonstrate that the area had been proclaimed, designated, or set aside pursuant to a law, presidential decree, presidential proclamation or executive order as required by RA 7586 to invoke the statutory ban on mineral agreements.

Presidential Warranty and the Non-Impairment Clause

The Court examined the Presidential Warranty dated September 25, 1968 and concluded that it simply re

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