APEX MINING CO., INC., PETITIONER, VS. SOUTHEAST MINDANAO GOLD MINING CORP., THE MINES ADJUDICATION BOARD, PROVINCIAL MINING REGULATORY BOARD (PMRB-DAVAO), MONKAYO INTEGRATED SM…

Apex Mining versus Southeast Mindanao Gold Mining

The Case

This is a contest over the Diwalwal Gold Rush Area, one of the richest mineral zones in the country. Apex Mining Company and Southeast Mindanao Gold Mining Corporation, together with Balite Communal Portal Mining Cooperative and the small-scale miners led by Camilo Banad, each claimed the right to explore and mine the disputed area. The case matters because the Supreme Court settles who owns mineral wealth in the Philippines, whether an exploration permit ripens into a vested property right, and whether the President may, by proclamation, take over a gold rush area as a mineral reservation. It is a first-rate review of the regalian doctrine, the principle that all natural resources belong to the State.

Procedural History

The dispute began before the Mines Adjudication Board, which ruled in favor of Southeast Mindanao Gold Mining Corporation. Apex Mining elevated the matter to the Court of Appeals, which reversed the Board and upheld Apex Mining's position. The controversy then reached the Supreme Court, where the Third Division rendered a decision on 23 June 2006 holding that the assignment of Exploration Permit 133 to Southeast Mindanao was invalid, that the permit had expired by non-renewal, and that Proclamation 297 validly placed the area under the control of the Executive Department. Southeast Mindanao moved for reconsideration and asked that the case be referred to the Court En Banc and heard in oral argument. Apex Mining and Balite filed their own motions for clarification, and Camilo Banad and others moved for reconsideration, praying that the area be awarded to them. The Court En Banc accepted the cases, set them for oral argument, and after hearing the parties required the submission of memoranda. The Court then resolved the motion for reconsideration and the related motions in this decision.

Facts

In 1984, Marcopper Mining Corporation, the predecessor-in-interest of Southeast Mindanao, filed its declaration of locations and its prospecting permit application under Presidential Decree 463. A prospecting permit was issued to Marcopper on 1 July 1985, and Exploration Permit 133 followed on 10 March 1986. The permit carried a condition that it was for the exclusive use and benefit of Marcopper or its duly authorized agents. Marcopper later assigned whatever rights and interests it had in the permit to Southeast Mindanao for one peso and other valuable consideration, but the assignment was made without the prior approval of the proper authority and without any showing that Southeast Mindanao was a designated agent of Marcopper. The permit expired by non-renewal on 6 July 1994.

Meanwhile, the Diwalwal area became the scene of unregulated small-scale and medium-scale mining, producing ecological, health, and peace and order problems. On 25 November 2002, the President issued Proclamation 297, declaring the area a mineral reservation and an environmentally critical area. Apex Mining, Southeast Mindanao, Balite, and the Banad group all pressed competing claims over the area, each asserting priority or vested rights.

Issues

• Whether or not the transfer or assignment of Exploration Permit 133 by Marcopper to Southeast Mindanao was validly made without violating the terms and conditions of Presidential Decree 463 and of the permit itself.
• Whether or not Southeast Mindanao acquired a vested right over the disputed area that constitutes a property right protected by the Constitution.
• Whether or not the decision of the Third Division is contrary to and overturns the earlier ruling in Apex Mining versus Garcia.
• Whether or not the issuance of Proclamation 297 declaring the disputed area a mineral reservation outweighs the claims of Southeast Mindanao, Apex Mining, and Balite over the Diwalwal Gold Rush Area.
• Whether or not the issue of the legality and constitutionality of Proclamation 297 was belatedly raised.
• Whether or not Proclamation 297 violates the Constitution and the several statutes invoked by the parties.

Applicable Provisions

Section 2, Article XII of the 1987 Constitution provides:

All lands of the public domain, water, minerals, coal, petroleum, and other mineral oils, all forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural resources are owned by the State. With the exception of agricultural lands, all other natural resources shall not be alienated. The exploration, development, and utilization of natural resources shall be under the full control and supervision of the State. The State may directly undertake such activities, or it may enter into co-production, joint venture, or product-sharing agreements with Filipino citizens, or corporations or associations at least sixty per centum of whose capital is owned by such citizens.

This is the constitutional anchor of the regalian doctrine, and it is why no private party may claim mineral land as though it were ordinary private property.

Section 5 of Republic Act 7942, the Mining Act of 1995, provides:

SEC 5. Mineral Reservations. - When the national interest so requires, such as when there is a need to preserve strategic raw materials for industries critical to national development, or certain minerals for scientific, cultural or ecological value, the President may establish mineral reservations upon the recommendation of the Director through the Secretary. Mining operations in existing mineral reservations and such other reservations as may thereafter be established, shall be undertaken by the Department or through a contractor.

This provision supplies the President's authority to issue Proclamation 297 and to place mining operations in the reservation under the control of the Executive Department.

Section 97 of Presidential Decree 463 provides:

SEC. 97. Assignment of Mining Rights. - A mining lease contract or any interest therein shall not be transferred, assigned, or subleased without the prior approval of the Secretary: Provided, that such transfer, assignment or sublease may be made only to a qualified person possessing the resources and capability to continue the mining operations.

This is the provision the assignment to Southeast Mindanao violated, because it was made without the prior approval of the Secretary.

Section 8 of Presidential Decree 463 provides:

Sec. 8. The right to exploit therein shall be awarded by the President under such terms and conditions as recommended by the Director and approved by the Secretary Provided, That the persons or corporations who undertook prospecting and exploration of said area shall be given priority.

This shows that an exploration permit holder is given only priority in the grant of the right to exploit, not the right itself.

Ruling

On the second issue, which the Court resolved first, it held that neither Marcopper nor Southeast Mindanao acquired vested rights over the disputed area. The rulings in McDaniel versus Apacible and Cuisia and Gold Creek Mining Corporation versus Rodriguez apply only to mining claims perfected while the Philippine Bill of 1902 was in force, because that law allowed the alienation of mineral lands to private individuals. Marcopper filed its declaration of locations and prospecting permit application only in 1984 under Presidential Decree 463, so no perfected claim under the Philippine Bill of 1902 could exist. An exploration permit, the Court stressed, is merely inchoate and does not ripen into a right to extract and utilize minerals. It is a mere license or privilege that the State may amend, modify, or rescind when national interest requires.

On the first issue, the Court held that the assignment of Exploration Permit 133 violated Section 97 of Presidential Decree 463 because it was made without the prior approval of the Secretary, and it also violated the permit's own condition that it be for the exclusive use and benefit of Marcopper or its duly authorized agents. Southeast Mindanao never showed it was a designated agent. What Marcopper assigned was only an exploration permit, so Southeast Mindanao acquired at most a right to explore, and even that was without legal effect. The permit had also expired by non-renewal on 6 July 1994.

On the third issue, the Court held that its ruling did not overturn Apex Mining versus Garcia, because that case did not invest Southeast Mindanao with any definite right to the Diwalwal mines.

On the fourth, fifth, and sixth issues, the Court upheld the validity of Proclamation 297. The proclamation was issued on 25 November 2002 to address the ecological, health, and peace and order problems caused by unregulated mining, and it is sanctioned by Section 5 of Republic Act 7942 and by the State's police power. The area being a mineral reservation, the Executive Department has full control over it and may undertake mining operations directly or through qualified entities. Southeast Mindanao's exploration permit, assuming it were still valid, was effectively withdrawn. The Court also held that the issue of the proclamation's constitutionality was not belatedly raised, and it found no violation of the Constitution or of the statutes invoked.

Doctrine

First, under the regalian doctrine, all mineral lands and minerals belong to the State and, except for agricultural lands, natural resources shall not be alienated. A private party acquires rights over minerals only through a permit, concession, or agreement granted by the State.

Second, a perfected mining claim under the Philippine Bill of 1902 is a property right that survives the regalian doctrine, but this exception applies only where the claim was perfected while that law was in force. A claim initiated in 1984 under Presidential Decree 463 does not qualify.

Third, an exploration permit is merely inchoate. It gives the holder the right to explore and a priority in the grant of the right to exploit, but it does not vest a right to extract and utilize minerals, and it may be amended, modified, or rescinded when national interest requires.

Fourth, the assignment of a mining right without the prior approval of the Secretary, as required by Section 97 of Presidential Decree 463, is without legal effect.

Fifth, when the President establishes a mineral reservation under Section 5 of Republic Act 7942, mining operations therein are undertaken by the Department or through a contractor, and the Executive Department acquires full control over the area.

Disposition

The Court denied the motions for reconsideration and the related motions, upheld the validity of Proclamation 297, and ruled that Southeast Mindanao holds no right over the disputed area, leaving the Executive Department in full control of the Diwalwal Gold Rush Area.

Remember This

Memorize this line: an exploration permit is merely inchoate and confers no vested right, and its assignment without the prior approval of the Secretary is void. Examiners use this case to test the regalian doctrine, the inchoate nature of an exploration permit, and the President's power to declare mineral reservations under Section 5 of the Mining Act of 1995.