Cases On Environmental Law Part 2

CASES ON ENVIRONMENTAL LAW PART 2
1

CASE NUMBER 6
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 163663 June 30, 2006
GREATER METROPOLITAN MANILA SOLID WASTE MANAGEMENT COMMITTEE
and the METROPOLITAN MANILA DEVELOPMENT AUTHORITY, Petitioners,
vs.
JANCOM ENVIRONMENTAL CORPORATION and JANCOM INTERNATIONAL
DEVELOPMENT PROJECTS PTY. LIMITED OF AUSTRALIA, Respondents.

D E C I S I O N
CARPIO MORALES, J .:
The present petition for review on certiorari challenges the Decision
1
dated December
19, 2003 and Resolution
2
dated May 11, 2004 of the Court of Appeals (CA)
3
in CA-G.R.
SP No. 78752 which denied the petition for certiorari filed by herein petitioners Greater
Metropolitan Manila Solid Waste Management Committee (GMMSWMC) and the
Metropolitan Manila Development Authority (MMDA) and their Motion for
Reconsideration, respectively.
In 1994, Presidential Memorandum Order No. 202 was issued by then President Fidel
V. Ramos creating an Executive Committee to oversee and develop waste-to-energy
projects for the waste disposal sites in San Mateo, Rizal and Carmona, Cavite under the
Build-Operate-Transfer (BOT) scheme.
Respondent Jancom International Development Projects Pty. Limited of Australia
(Jancom International) was one of the bidders for the San Mateo Waste Disposal Site. It
subsequently entered into a partnership with Asea Brown Boveri under the firm name
JANCOM Environmental Corporation (JANCOM), its co-respondent.
On February 12, 1997, the above-said Executive Committee approved the
recommendation of the Pre-qualification, Bids and Awards Committee to declare
JANCOM as the sole complying bidder for the San Mateo Waste Disposal Site.

2

On December 19, 1997, a Contract for the BOT Implementation of the Solid Waste
Management Project for the San Mateo, Rizal Waste Disposal Site
4
(the contract) was
entered into by the Republic of the Philippines, represented by the Presidential Task
Force on Solid Waste Management through then Department of Environment and
Natural Resources Secretary Victor Ramos, then Cabinet Office for Regional
Development-National Capital Region Chairman Dionisio dela Serna, and then MMDA
Chairman Prospero Oreta on one hand, and JANCOM represented by its Chief
Executive Officer Jorge Mora Aisa and its Chairman Jay Alparslan, on the other.
On March 5, 1998, the contract was submitted for approval to President Ramos who
subsequently endorsed it to then incoming President Joseph E. Estrada.
Owing to the clamor of the residents of Rizal, the Estrada administration ordered the
closure of the San Mateo landfill. Petitioner GMMSWMC thereupon adopted a
Resolution not to pursue the contract with JANCOM, citing as reasons therefor the
passage of Republic Act 8749, otherwise known as the Clean Air Act of 1999, the non-
availability of the San Mateo site, and costly tipping fees.
5

The Board of Directors of Jancom International thereafter adopted on January 4, 2000 a
Resolution
6
authorizing Atty. Manuel Molina to act as legal counsel for respondents and
"determine and file such legal action as deemed necessary before the Philippine courts
in any manner he may deem appropriate" against petitioners.
The Board of Directors of JANCOM also adopted a Resolution
7
on February 7, 2000
granting Atty. Molina similar authorization to file legal action as may be necessary to
protect its interest with respect to the contract.
On March 14, 2000, respondents filed a petition for certiorari
8
with the Regional Trial
Court (RTC) of Pasig City where it was docketed as Special Civil Action No. 1955, to
declare the GMMSWMC Resolution and the acts of the MMDA calling for bids for and
authorizing the forging of a new contract for the Metro Manila waste management as
illegal, unconstitutional and void and to enjoin petitioners from implementing the
Resolution and making another award in lieu thereof.
By Decision
9
of May 29, 2000, Branch 68 of the Pasig City RTC found in favor of
respondents.
10

Petitioners thereupon assailed the RTC Decision via petition for certiorari
11
with prayer
for a temporary restraining order with the CA, docketed as CA-G.R. SP No. 59021.

3

By Decision
12
of November 13, 2000, the CA denied the petition for lack of merit and
affirmed in toto the May 29, 2000 RTC Decision. Petitioners Motion for Reconsideration
was denied, prompting them to file a petition for review before this Court, docketed as
G.R. No. 147465.
By Decision
13
of January 30, 2002 and Resolution
14
of April 10, 2002, this Court
affirmed the November 13, 2001 CA Decision and declared the contract valid and
perfected, albeit ineffective and unimplementable pending approval by the President.
JANCOM and the MMDA later purportedly entered into negotiations to modify certain
provisions of the contract which were embodied in a draft Amended Agreement
15
dated
June 2002. The draft Amended Agreement bore no signature of the parties.
Respondents, through Atty. Molina, subsequently filed before Branch 68 of the Pasig
City RTC an Omnibus Motion
16
dated July 29, 2002 praying that: (1) an alias writ of
execution be issued prohibiting and enjoining petitioners and their representatives from
calling for, accepting, evaluating, approving, awarding, negotiating or implementing all
bids, awards and contracts involving other Metro Manila waste management projects
intended to be pursued or which are already being pursued; (2) the MMDA, through its
Chairman Bayani F. Fernando, be directed to immediately forward and recommend the
approval of the Amended Agreement to President Gloria Macapagal Arroyo; (3)
Chairman Fernando be ordered to personally appear before the court and explain his
acts and public pronouncements which are in direct violation and gross defiance of the
final and executory May 29, 2000 RTC Decision; (4) the Executive Secretary and the
Cabinet Secretaries of the departments-members of the National Solid Waste
Management Commission be directed "to submit the contract within 30 days from notice
to the President for signature and approval and if the latter chooses not to sign or
approve the contract, the Executive Secretary be made to show cause therefor;" and (5)
petitioners be directed to comply with and submit their written compliance with their
obligations specifically directed under the provisions of Article 18, paragraphs 18.1,
18.1.1 (a), (b), (c) and (d) of the contract within 30 days from notice.
17

To the Omnibus Motion petitioners filed their Opposition
18
which merited JANCOMs
Reply
19
filed on August 19, 2002.
On August 21, 2002, Atty. Simeon M. Magdamit, on behalf of Jancom International, filed
before the RTC an Entry of Special Appearance and Manifestation with Motion to Reject
the Pending Omnibus Motion
20
alleging that: (1) the Omnibus Motion was never
approved by Jancom International; (2) the Omnibus Motion was initiated by lawyers
whose services had already been terminated, hence, were unauthorized to represent it;
and (3) the agreed judicial venue for dispute resolution relative to the implementation of

4

the contract is the International Court of Arbitration in the United Kingdom pursuant to
Article 16.1
21
of said contract.
In the meantime, on November 3, 2002, the MMDA forwarded the contract to the Office
of the President for appropriate action,
22
together with MMDA Resolution No. 02-
18
23
dated June 26, 2002, "Recommending to her Excellency the President of the
Republic of the Philippines to Disapprove the Contract Entered Into by the Executive
Committee of the Presidential Task Force on Waste Management with Jancom
Environmental Corporation and for Other Purposes."
By Order
24
of November 18, 2002, the RTC noted the above-stated Entry of Special
Appearance of Atty. Magdamit for Jancom International and denied the Motion to Reject
Pending Omnibus Motion for lack of merit. Jancom International filed on December 9,
2002 a Motion for Reconsideration
25
which was denied for lack of merit by Order
26
of
January 8, 2003.
Petitioners and respondents then filed their Memoranda
27
on May 23, 2003 and May 26,
2003, respectively.
By Order
28
of June 11, 2003, the RTC granted respondents Omnibus Motion in part.
The dispositive portion of the Order reads, quoted verbatim:
WHEREFORE, in view of the foregoing, let an Alias Writ of Execution immediately issue
and the Clerk of Court and Ex-Oficio Sheriff or any o[f] her Deputies is directed to
implement the same within sixty (60) days from receipt thereof.
Thus, any and all such bids or contracts entered into by respondent MMDA with third
parties covering the waste disposal and management within the Metro Manila after
August 14, 2000 are hereby declared NULL and VOID. Respondents are henceforth
enjoined and prohibited, with a stern warning, from entering into any such contract with
any third party whether directly or indirectly, in violation of the contractual rights of
petitioner JANCOM under the BOT Contract Award, consistent with the Supreme
Courts Decision of January 30, 2002.
Respondent MMDA is hereby directed to SUBMIT the Amended Agreement concluded
by petitioners with the previous MMDA officials, or in its discretion if it finds [it] more
advantageous to the government, to require petitioners to make adjustments in the
Contract in accordance with existing environmental laws and other relevant concerns,
and thereafter forward the Amended Agreement for signature and approval by the
President of the Philippines. The concerned respondents are hereby further directed to

5

comply fully and in good faith with its institutional obligations or undertakings as
provided in Article 18 of the BOT Contract.
Let a copy of this Order be furnished the Office of the Clerk of Court and the
Commission on Audit for its information and guidance.
SO ORDERED.
29
(Emphasis in the original)
On June 23, 2003 the RTC issued an Alias Writ of Execution
30
reading:
WHEREAS, on May 29, 2000, a Decision was rendered by this Court in the above-
entitled case, the pertinent portions of which is [sic] hereunder quoted as follows:
WHEREFORE, in view of the foregoing, the Court hereby renders judgment in favor of
petitioners JANCOM ENVIRONMENTAL CORP and JANCOM INTERNATIONAL
DEVELOPMENT PROJECTS PTY., LIMITED OF AUSTRALIAS [sic], and against
respondents GREATER METROPOLITAN MANILA SOLID WASTE MANAGEMENT
COMM., and HON. ROBERTO N. AVENTAJADO, in his capacity as Chairman of the
said Committee, METRO MANILA DEVELOPMENT AUTHORITY and HON. JEJOMAR
C. BINAY, in his capacity as Chairman of said Authority, declaring the Resolution of
respondent Greater Metropolitan Manila Solid Waste Management Committee
disregarding petitioners BOT Award Contract and calling for bids for and authorizing a
new contract for the Metro Manila waste management ILLEGAL an[d] VOID.
Moreover, respondents and their agents are hereby PROHIBITED and ENJOINED from
implementing the aforesaid Resolution and disregarding petitioners BOT Award
Contract and from making another award in its place.
Let it be emphasized that this Court is not preventing or stopping the government from
implementing infrastructure projects as it is aware of the proscription under PD 1818.
On the contrary, the Court is paving the way for the necessary and modern solution to
the perennial garbage problem that has been the major headache of the government
and in the process would serve to attract more investors in the country.
SO ORDERED.
WHEREAS, on August 7, 2000, petitioners through counsel filed a "Motion for
Execution" which the Court GRANTED in its Order dated August 14, 2000;
WHEREAS, as a consequence thereof, a Writ of Execution was issued on August 14,
2000 and was duly served upon respondents as per Sheriffs Return dated August 27,
2000;

6

WHEREAS, ON July 29, 2002, petitioners through counsel filed an "Omnibus Motion,"
praying, among others, for the issuance of an Alias Writ of Execution which the Court
GRANTED in its Order dated June 11, 2003, the dispositive portion of which reads as
follows:
WHEREFORE, in view of the foregoing, let an Alias Writ of Execution immediately issue
and the Clerk of Court and Ex-Oficio Sheriff or any of her Deputies is directed to
implement the same within sixty (60) days from receipt thereof.
Thus, any and all such bids or contracts entered into by respondent MMDA [with] third
parties covering the waste disposal and management within the Metro Manila after
August 14, 2000 are hereby declared NULL and VOID. Respondents are henceforth
enjoined and prohibited, with a stern warning, from entering into any such contract with
any third party whether directly or indirectly, in violation of the contractual rights of
petitioner Jancom under the BOT Contract Award, consistent with the Supreme Courts
Decision of January 30, 2002.
Respondent MMDA is hereby directed to SUBMIT the Amended Agreement concluded
by petitioners with the previous MMDA officials, or in its discretion if it finds [it] more
advantageous to the government, to require petitioners to make adjustments in the
Contract in accordance with existing environmental laws and other relevant concerns,
and thereafter forward the Amended Agreement for signature and approval by the
President of the Philippines. The concerned respondents are hereby further directed to
comply fully and in good faith with its institutional obligations or undertakings as
provided in Article 18 of the BOT Contract.
Let a copy of this Order be furnished the Office of the Clerk of Court and the
Commission on Audit for its information and guidance.
SO ORDERED.
x x x x (Emphasis in the original)
By letter
31
of August 15, 2003, Chairman Fernando advised Sheriff Alejandro Q.
Loquinario of the Office of the Clerk of Court and Ex-Oficio Sheriff, Pasig City RTC that:
1. MMDA has not entered into a new contract for solid waste management in lieu
of JANCOMs Contract.
2. JANCOMs Contract has been referred to the Office of the President for
appropriate action.

7

3. Without the Presidents approval, JANCOMs Contract cannot be
implemented.
32

Petitioners later challenged the RTC June 11, 2003 Order via petition for certiorari
33
with
prayer for the issuance of a temporary restraining order and/or writ of preliminary
injunction before the CA. They subsequently filed an Amended Petition
34
on September
26, 2003.
To the Amended Petition JANCOM filed on October 8, 2003 its Comment
35
after which
petitioners filed their Reply
36
on November 24, 2003.
By the challenged Decision of December 19, 2003, the CA denied the petition and
affirmed the June 11, 2003 RTC Order in this wise:
The Supreme Court ruled that the Jancom contract has the force of law and the parties
must abide in good faith by their respective contractual commitments. It is precisely this
pronouncement that the alias writ of execution issued by respondent judge seeks to
enforce. x x x
x x x x
The fact that the Jancom contract has been declared unimplementable without the
Presidents signature, would not excuse petitioners failure to comply with their
undertakings under Article 18 of the contract. x x x
x x x x
Petitioners complain that respondent judge focused only on requiring them to perform
their supposed obligations under Article 18 of the contract when private respondents are
also required thereunder to post a Performance Security acceptable to the Republic in
the amount allowed in the BOT Law. Petitioners complaint is not justified. x x x
x x x x
It cannot x x x be said that respondent judge had been unfair or one-sided in directing
only petitioners to fulfill their own obligations under Article 18 of the Jancom contract.
Compliance with private respondents obligations under the contract had not yet
become due.
x x x x

8

There is no debate that the trial courts Decision has attained finality. Once a judgment
becomes final and executory, the prevailing party can have it executed as a matter of
right and the granting of execution becomes a mandatory or ministerial duty of the court.
After a judgment has become final and executory, vested rights are acquired by the
winning party. Just as the losing party has the right to file an appeal within the
prescribed period, so also the winning party has the correlative right to enjoy the finality
of the resolution of the case.
It is true that the ministerial duty of the court to order the execution of a final and
executory judgment admits of exceptions as (a) where it becomes imperative in the
higher interest of justice to direct the suspension of its execution; or (b) whenever it is
necessary to accomplish the aims of justice; or (c) when certain facts and
circumstances transpired after the judgment became final which could render the
execution of the judgment unjust. Petitioners have not shown that any of these
exceptions exists to prevent the mandatory execution of the trial
courts Decision.
37
(Italics in the original)
Petitioners Motion for Reconsideration
38
having been denied by the CA by Resolution
of May 11, 2004, the present petition for review
39
was filed on July 12, 2004 positing
that:
THE COURT OF APPEALS GRAVELY ERRED IN UPHOLDING THE LOWER COURT
AND IN DISREGARDING THE FOLLOWING PROPOSITIONS:
I
THE SUBJECT CONTRACT IS INEFFECTIVE AND UNIMPLEMENTABLE UNTIL AND
UNLESS IT IS APPROVED BY THE PRESIDENT.
II
THE SUBJECT CONTRACT ONLY COVERS THE DISPOSITION OF 3,000 TONS OF
SOLID WASTE A DAY.
III
THE ALLEGED AMENDED AGREEMENT IS ONLY A DRAFT OR PROPOSAL
SUBMITTED BY RESPONDENTS.
IV

9

RESPONDENTS MUST ALSO BE MADE TO COMPLY WITH THEIR CONTRACTUAL
COMMITMENTS.
40
(Underscoring supplied)
JANCOM filed on September 20, 2004 its Comment
41
on the petition to which
petitioners filed their Reply
42
on January 28, 2005.
On May 4, 2005, Jancom International filed its Comment,
43
reiterating its position that it
did not authorize the filing before the RTC by Atty. Molina of the July 29, 2002 Omnibus
Motion that impleaded it as party-movant.
On July 7, 2005, petitioners filed their Reply
44
to Jancom Internationals Comment.
Petitioners argue that since the contract remains unsigned by the President, it cannot
yet be executed. Ergo, they conclude, the proceedings which resulted in the issuance of
an alias writ of execution "ran afoul of the [January 30, 2002] decision of [the Supreme]
Court in G.R. No. 147465."
45

Petitioners go on to argue that since the contract covers only 3,000 tons of garbage per
day while Metro Manila generates at least 6,000 tons of solid waste a day, MMDA may
properly bid out the other 3,000 tons of solid waste to other interested groups or entities.
Petitioners moreover argue that the alleged Amended Agreement concluded
supposedly between JANCOM and former MMDA Chairman Benjamin Abalos is a mere
scrap of paper, a mere draft or proposal submitted by JANCOM to the MMDA, no
agreement on which was reached by the parties; and at all events, express authority
ought to have first been accorded the MMDA to conclude such an amended agreement
with JANCOM, the original contract having been concluded between the Republic of the
Philippines and JANCOM.
Finally, petitioners argue that respondents should also be required to perform their
commitments pursuant to Article 18
46
of the contract.
The petition is impressed with merit in light of the following considerations.
Section 1, Rule 39 of the Rules of Court provides:
SECTION 1. Execution upon judgments or final orders. Execution shall issue as a
matter of right, on motion, upon a judgment or order that disposes of the action or
proceeding upon the expiration of the period to appeal therefrom if no appeal has been
duly perfected.

10

If the appeal has been duly perfected and finally resolved, the execution may forthwith
be applied for in the court of origin, on motion of the judgment obligee, submitting
therewith certified true copies of the judgment or judgments or final order or orders
sought to be enforced and of the entry thereof, with notice to the adverse party.
The appellate court may, on motion in the same case, when the interest of justice so
requires, direct the court of origin to issue the writ of execution.
Once a judgment becomes final, it is basic that the prevailing party is entitled as a
matter of right to a writ of execution the issuance of which is the trial courts ministerial
duty, compellable by mandamus.
47

There are instances, however, when an error may be committed in the course of
execution proceedings prejudicial to the rights of a party. These instances call for
correction by a superior court, as where:
1) the writ of execution varies the judgment;
2) there has been a change in the situation of the parties making execution
inequitable or unjust;
3) execution is sought to be enforced against property exempt from execution;
4) it appears that the controversy has never been submitted to the judgment of
the court;
5) the terms of the judgment are not clear enough and there remains room for
interpretation thereof; or
6) it appears that the writ of execution has been improvidently issued, or that it is
defective in substance, or is issued against the wrong party, or that the
judgment debt has been paid or otherwise satisfied, or the writ was issued
without authority.
48
(Emphasis and Underscoring supplied)
That a writ of execution must conform to the judgment which is to be executed,
substantially to every essential particular thereof,
49
it is settled. It may not thus vary the
terms of the judgment it seeks to enforce,
50
nor go beyond its terms. Where the
execution is not in harmony with the judgment which gives it life and exceeds it, it has
no validity.
51

This Courts January 30, 2002 Decision in G.R. No. 147465 held:

11

We, therefore, hold that the Court of Appeals did not err when it declared the existence
of a valid and perfected contract between the Republic of the Philippines and JANCOM.
There being a perfected contract, MMDA cannot revoke or renounce the same without
the consent of the other. From the moment of perfection, the parties are bound not only
to the fulfillment of what has been expressly stipulated but also to all the consequences
which, according to their nature, may be in keeping with good faith, usage, and law
(Article 1315, Civil Code). The contract has the force of law between the parties and
they are expected to abide in good faith by their respective contractual commitments,
not weasel out of them. Just as nobody can be forced to enter into a contract, in the
same manner, once a contract is entered into, no party can renounce it unilaterally or
without the consent of the other. It is a general principle of law that no one may be
permitted to change his mind or disavow and go back upon his own acts, or to proceed
contrary thereto, to the prejudice of the other party. Nonetheless, it has to be repeated
that although the contract is a perfected one, it is still ineffective or
unimplementable until and unless it is approved by the President.
52
(Emphasis and
Underscoring supplied)
This Courts April 10, 2002 Resolution also in G.R. No. 147465 moreover held:
x x x The only question before the Court is whether or not there is a valid and perfected
contract between the parties. As to the necessity, expediency, and wisdom of the
contract, these are outside the realm of judicial adjudication. These considerations are
primarily and exclusively a matter for the President to decide. While the Court
recognizes that the garbage problem is a matter of grave public concern, it can only
declare that the contract in question is a valid and perfected one between the parties,
but the same is still ineffective or unimplementable until and unless it is approved
by the President, the contract itself providing that such approval by the President
is necessary for its effectivity.
53
(Emphasis and Underscoring supplied)
Article 19 of the contract provides:
Article 19. Effectivity. This Contract shall become effective upon approval by the
President of the Republic of [the] Philippines pursuant to existing Laws subject to
condition precedent in Article 18. This Contract shall remain in full force and effect for
twenty five (25) years subject to renewal for another twenty five (25) years from the date
of Effectivity. Such renewal will be subject to mutual agreement of the parties and
approval by the [P]resident of the Republic of [the] Philippines. (Emphasis and
underscoring supplied)

12

In issuing the alias writ of execution, the trial court in effect ordered the enforcement of
the contract despite this Courts unequivocal pronouncement that albeit valid and
perfected, the contract shall become effective only upon approval by the President.
Indubitably, the alias writ of execution varied the tenor of this Courts judgment, went
against essential portions and exceeded the terms thereof.
x x x a lower court is without supervisory jurisdiction to interpret or to reverse the
judgment of the higher court x x x. A judge of a lower court cannot enforce different
decrees than those rendered by the superior court. x x x
The inferior court is bound by the decree as the law of the case, and must carry it into
execution according to the mandate. They cannot vary it, or examine it for any other
purpose than execution, or give any other or further relief, or review it upon any matter
decided on appeal for error apparent, or intermeddle with it, further than to settle so
much as has been remanded. x x x
54

The execution directed by the trial court being out of harmony with the judgment, legal
implications cannot save it from being found to be fatally defective.
55

Notably, while the trial court ratiocinated that it issued on June 23, 2003 the alias writ "to
set into motion the legal mechanism for Presidential approval and signature,"
56
it failed
to take due consideration of the fact that during the pendency of the Omnibus Motion,
the contract had earlier been forwarded for appropriate action on November 3, 2002 by
Chairman Fernando to the Office of the President, with recommendation for its
disapproval, which fact the trial court had been duly informed of through pleadings and
open court manifestations.
57

Additionally, it bears noting that the June 11, 2003 Order of the trial court is likewise
indisputably defective in substance for having directed the submission of the draft
Amended Agreement to the President.
The appellate court, in affirming the June 11, 2003 Order of the trial court, overlooked
the fact that the Amended Agreement was unsigned by the parties and it instead
speculated and rationalized that the submission thereof to the President would at all
events solve the mounting garbage problem in Metro Manila:
We find that the submission of the Amended Agreement to the President will break the
impasse now existing between the parties which has effectively halted the governments
efforts to address Metro Manilas mounting garbage problem. x x x

13

As long as petitioners refuse to deal with private respondents, the Metro Manila garbage
problem will only continue to worsen. x x x
That the Amended Agreement could have well been negotiated, if not concluded
between private respondents and the former MMDA administration, is not far-fetched.
Petitioners do not dispute that the President had referred the Jancom contract to then
MMDA Chairman Benjamin Abalos for recommendation. Petitioners also do not dispute
that private respondents negotiated with the MMDA for the amendment of the contract.
Besides, the Amended Agreement does not veer away from the original Jancom
contract. x x x
58
lawphil.net
The Amended Agreement was, as petitioners correctly allege, merely a draft document
containing the proposals of JANCOM, subject to the approval of the MMDA. As earlier
stated, it was not signed by the parties.
59

The original contract itself provides in Article 17.6 that it "may not be amended except
by a written [c]ontractsigned by the parties."
60

It is elementary that, being consensual, a contract is perfected by mere consent.
61
The
essence of consent is the conformity of the parties to the terms of the contract, the
acceptance by one of the offer made by the other;
62
it is the concurrence of the minds of
the parties on the object and the cause which shall constitute the contract.
63
Where there
is merely an offer by one party without acceptance by the other, there is no consent and
the contract does not come into existence.
64

As distinguished from the original contract in which this Court held in G.R. No. 147465:
x x x the signing and execution of the contract by the parties clearly show that, as
between the parties, there was concurrence of offer and acceptance with respect to the
material details of the contract, thereby giving rise to the perfection of the contract. The
execution and signing of the contract is not disputed by the parties x x x,
65

the parties did not, with respect to the Amended Agreement, get past the negotiation
stage. No meeting of minds was established. While there was an initial offer made,
there was no acceptance.
Even JANCOM President Alfonso G. Tuzon conceded, by letter
66
of June 17, 2002 to
Chairman Fernando, that the Amended Agreement was a mere proposal:

14

Apropos to all these, we are seeking an urgent EXECUTIVE SESSION on your best
time and venue. We can thresh up major points to establish a common perspective
based on data and merit.
We are optimistic you shall then consider with confidence the proposed Amended
Contract which incorporates the adjustments we committed to as stated and earlier
submitted to your Office during the incumbency of your predecessor, for evaluation and
appropriate action by NEDA in compliance with the BOT Law and Article 18.1.1 of our
contract.
67

While respondents aver that an acceptance was made, they have not proffered any
proof. While indeed the MMDA, by a letter
68
issued by then MMDA General Manager
Jaime Paz, requested then Secretary of Justice Hernando B. Perez for his legal opinion
on the draft Amended Agreement, nowhere in the letter is there any statement
indicating that the MMDA, or the Republic of the Philippines for that matter, had
approved respondents proposals embodied in the said draft agreement.
The pertinent portions of the letter read:
Attention: HON. HERNANDO B. PEREZ
Secretary
Subject: Request for Opinion Regarding the Compromise Offer of Jancom
Environmental Corporation for the Municipal Solid Waste Management of Metro Manila
Dear Secretary Perez:
This is to respectfully request for an opinion from your Honorable Office regarding the
Compromise Proposal offered by JANCOM Environmental Corporation ("JANCOM") in
relation to its Contract for the BOT Implementation of the Waste Management Project
for the San Mateo, Rizal Waste Disposal Site dated 19 December 1997 (hereinafter
referred to as the BOT Contract for brevity) with the Republic of the Philippines.
x x x x
x x x this representation is requesting your Honorable Office to render a legal opinion on
the following:
Does the offer of JANCOM to temporarily set aside the waste-to-energy plant and
implement only the other two major components of the BOT Contract amount to a
novation of the BOT Contract, and therefore necessitating a re-bidding? If the same

15

does not amount to a novation, by what authority may Jancom set aside temporarily a
major component of the BOT Contract?
x x x x
69

Only an absolute or unqualified acceptance of a definite offer manifests the consent
necessary to perfect a contract.
70
If at all, the MMDA letter only shows that the parties
had not gone beyond the preparation stage, which is the period from the start of the
negotiations until the moment just before the agreement of the parties.
71
Obviously,
other material considerations still remained before the Amended Agreement could be
perfected. At any time prior to the perfection of a contract, unaccepted offers and
proposals remain as such and cannot be considered as binding commitments.
72

Respecting petitioners argument that respondents should be directed to comply with
their commitments under Article 18 of the contract, this Court is not convinced.
Article 18.2.1 of the contract provides:
18.2.1 The BOT COMPANY hereby undertakes to provide the following within 2 months
from execution of this Contract as an effective document:
a) sufficient proof of the actual equity contributions from the proposed
shareholders of the BOT COMPANY in a total amount not less than PHP
500,000,000 in accordance with the BOT Law and the implementing rules and
regulations;1avvphil.net
b) sufficient proof of financial commitment from a lending institution sufficient to
cover total project cost in accordance with the BOT Law and the implementing
rules and regulations;
c) to support its obligation under this Contract, the BOT COMPANY shall submit
a security bond to the CLIENT in accordance with the form and amount required
under the BOT Law. (Underscoring supplied)
As this Court held in G.R. No. 147465:
As clearly stated in Article 18, JANCOM undertook to comply with the stated conditions
within 2 months from execution of the Contract as an effective document. Since the
President of the Philippines has not yet affixed his signature on the contract, the same
has not yet become an effective document. Thus, the two-month period within which
JANCOM should comply with the conditions has not yet started to run. x x
x
73
(Underscoring supplied)

16

A final point. The argument raised against the authority of Atty. Molina to file
respondents Omnibus Motion before the RTC does not lie.
Representation continues until the court dispenses with the services of counsel in
accordance with Section 26, Rule 138 of the Rules of Court.
74
No substitution of counsel
of record is allowed unless the following essential requisites concur: (1) there must be a
written request for substitution; (2) it must be filed with the written consent of the client;
(3) it must be with the written consent of the attorney to be substituted; and (4) in case
the consent of the attorney to be substituted cannot be obtained, there must be at least
a proof of notice that the motion for substitution was served on him in the manner
prescribed by the Rules of Court.
75

In the case at bar, there is no showing that there was a valid substitution of counsel at
the time Atty. Molina filed the Omnibus Motion on July 29, 2002 before the RTC, nor
that he had priorly filed a Withdrawal of Appearance. He thus continued to enjoy the
presumption of authority granted to him by respondents.
While clients undoubtedly have the right to terminate their relations with their counsel
and effect a substitution or change at any stage of the proceedings, the exercise of such
right is subject to compliance with the prescribed requirements. Otherwise, no
substitution can be effective and the counsel who last appeared in the case before the
substitution became effective shall still be responsible for the conduct of the case.
76
The
rule is intended to ensure the orderly disposition of cases.
77

In the absence then of compliance with the essential requirements for valid substitution
of the counsel of record, Atty. Molina enjoys the presumption of authority granted to him
by respondents.
In light of the foregoing disquisition, a discussion of the other matters raised by
petitioners has been rendered unnecessary.
WHEREFORE, the petition is GRANTED. The Decision dated December 19, 2003 and
Resolution dated May 11, 2004 of the Court of Appeals in CA-G.R. SP No. 78752
are REVERSED and SET ASIDE. The June 11, 2003 Order of the Regional Trial Court
of Pasig, Branch 68 in SCA No. 1955 is declared NULL and VOID.
SO ORDERED.
CONCHITA CARPIO MORALES
Associate Justice

17

CASE NUMBER 7
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 158290 October 23, 2006
HILARION M. HENARES, JR., VICTOR C. AGUSTIN, ALFREDO L. HENARES,
DANIEL L. HENARES, ENRIQUE BELO HENARES, and CRISTINA BELO
HENARES, petitioners,
vs.
LAND TRANSPORTATION FRANCHISING AND REGULATORY BOARD and
DEPARTMENT OF TRANSPORTATION AND COMMUNICATIONS, respondents.

R E S O L U T I O N

QUISUMBING, J .:
Petitioners challenge this Court to issue a writ of mandamus commanding respondents
Land Transportation Franchising and Regulatory Board (LTFRB) and the Department of
Transportation and Communications (DOTC) to require public utility vehicles (PUVs) to
use compressed natural gas (CNG) as alternative fuel.
Citing statistics from the Metro Manila Transportation and Traffic Situation Study of
1996,
1
the Environmental Management Bureau (EMB) of the National Capital Region,
2
a
study of the Asian Development Bank,
3
the Manila Observatory
4
and the Department of
Environment and Natural Resources
5
(DENR) on the high growth and low turnover in
vehicle ownership in the Philippines, including diesel-powered vehicles, two-stroke
engine powered motorcycles and their concomitant emission of air pollutants,

18

petitioners attempt to present a compelling case for judicial action against the bane of
air pollution and related environmental hazards.
Petitioners allege that the particulate matters (PM) complex mixtures of dust, dirt,
smoke, and liquid droplets, varying in sizes and compositions emitted into the air from
various engine combustions have caused detrimental effects on health, productivity,
infrastructure and the overall quality of life. Petitioners particularly cite the effects of
certain fuel emissions from engine combustion when these react to other pollutants. For
instance, petitioners aver, with hydrocarbons, oxide of nitrogen (NO
x
) creates smog;
with sulfur dioxide, it creates acid rain; and with ammonia, moisture and other
compounds, it reacts to form nitric acid and harmful nitrates. Fuel emissions also cause
retardation and leaf bleaching in plants. According to petitioner, another emission,
carbon monoxide (CO), when not completely burned but emitted into the atmosphere
and then inhaled can disrupt the necessary oxygen in blood. With prolonged exposure,
CO affects the nervous system and can be lethal to people with weak hearts.
6

Petitioners add that although much of the new power generated in the country will use
natural gas while a number of oil and coal-fired fuel stations are being phased-out, still
with the projected doubling of power generation over the next 10 years, and with the
continuing high demand for motor vehicles, the energy and transport sectors are likely
to remain the major sources of harmful emissions. Petitioners refer us to the study of
the Philippine Environment Monitor 2002
7
, stating that in four of the country's major
cities, Metro Manila, Davao, Cebu and Baguio, the exposure to PM
10
,

a finer PM which
can penetrate deep into the lungs causing serious health problems, is estimated at over
US$430 million.
8
The study also reports that the emissions of PMs have caused the
following:
Over 2,000 people die prematurely. This loss is valued at about US$140 million.
Over 9,000 people suffer from chronic bronchitis, which is valued at about
US$120 million.
Nearly 51 million cases of respiratory symptom days in Metro Manila (averaging
twice a year in Davao and Cebu, and five to six times in Metro Manila and
Baguio), costs about US$170 million. This is a 70 percent increase, over a
decade, when compared with the findings of a similar study done in 1992 for
Metro Manila, which reported 33 million cases.
9

Petitioners likewise cite the University of the Philippines' studies in 1990-91 and 1994
showing that vehicular emissions in Metro Manila have resulted to the prevalence of
chronic obstructive pulmonary diseases (COPD); that pulmonary tuberculosis is highest

19

among jeepney drivers; and there is a 4.8 to 27.5 percent prevalence of respiratory
symptoms among school children and 15.8 to 40.6 percent among child vendors. The
studies also revealed that the children in Metro Manila showed more compromised
pulmonary function than their rural counterparts. Petitioners infer that these are mostly
due to the emissions of PUVs.
To counter the aforementioned detrimental effects of emissions from PUVs, petitioners
propose the use of CNG. According to petitioners, CNG is a natural gas comprised
mostly of methane which although containing small amounts of propane and
butane,
10
is colorless and odorless and considered the cleanest fossil fuel because it
produces much less pollutants than coal and petroleum; produces up to 90 percent less
CO compared to gasoline and diesel fuel; reduces NO
x
emissions by 50 percent and
cuts hydrocarbon emissions by half; emits 60 percent less PMs; and releases virtually
no sulfur dioxide. Although, according to petitioners, the only drawback of CNG is that it
produces more methane, one of the gases blamed for global warming.
11

Asserting their right to clean air, petitioners contend that the bases for their petition for a
writ of mandamus to order the LTFRB to require PUVs to use CNG as an alternative
fuel, lie in Section 16,
12
Article II of the 1987 Constitution, our ruling in Oposa v.
Factoran, Jr.,
13
and Section 4
14
of Republic Act No. 8749 otherwise known as the
"Philippine Clean Air Act of 1999."
Meantime, following a subsequent motion, the Court granted petitioners' motion to
implead the Department of Transportation and Communications (DOTC) as additional
respondent.
In his Comment for respondents LTFRB and DOTC, the Solicitor General, cites Section
3, Rule 65 of the Revised Rules of Court and explains that the writ of mandamus is not
the correct remedy since the writ may be issued only to command a tribunal,
corporation, board or person to do an act that is required to be done, when he or it
unlawfully neglects the performance of an act which the law specifically enjoins as a
duty resulting from an office, trust or station, or unlawfully excludes another from the
use and enjoyment of a right or office to which such other is entitled, there being no
other plain, speedy and adequate remedy in the ordinary course of law.
15
Further citing
existing jurisprudence, the Solicitor General explains that in contrast to a discretionary
act, a ministerial act, which a mandamus is, is one in which an officer or tribunal
performs in a given state of facts, in a prescribed manner, in obedience to a mandate of
legal authority, without regard to or the exercise of his own judgment upon the propriety
or impropriety of an act done.

20

The Solicitor General also notes that nothing in Rep. Act No. 8749 that petitioners
invoke, prohibits the use of gasoline and diesel by owners of motor vehicles. Sadly too,
according to the Solicitor General, Rep. Act No. 8749 does not even mention the
existence of CNG as alternative fuel and avers that unless this law is amended to
provide CNG as alternative fuel for PUVs, the respondents cannot propose that PUVs
use CNG as alternative fuel.
The Solicitor General also adds that it is the DENR that is tasked to implement Rep. Act
No. 8749 and not the LTFRB nor the DOTC. Moreover, he says, it is the Department of
Energy (DOE), under Section 26
16
of Rep. Act No. 8749, that is required to set the
specifications for all types of fuel and fuel-related products to improve fuel compositions
for improved efficiency and reduced emissions. He adds that under Section 21
17
of the
cited Republic Act, the DOTC is limited to implementing the emission standards for
motor vehicles, and the herein respondents cannot alter, change or modify the emission
standards. The Solicitor General opines that the Court should declare the instant
petition for mandamus without merit.
Petitioners, in their Reply, insist that the respondents possess the administrative and
regulatory powers to implement measures in accordance with the policies and principles
mandated by Rep. Act No. 8749, specifically Section 2
18
and Section 21.
19
Petitioners
state that under these laws and with all the available information provided by the DOE
on the benefits of CNG, respondents cannot ignore the existence of CNG, and their
failure to recognize CNG and compel its use by PUVs as alternative fuel while air
pollution brought about by the emissions of gasoline and diesel endanger the
environment and the people, is tantamount to neglect in the performance of a duty
which the law enjoins.
Lastly, petitioners aver that other than the writ applied for, they have no other plain,
speedy and adequate remedy in the ordinary course of law. Petitioners insist that the
writ in fact should be issued pursuant to the very same Section 3, Rule 65 of the
Revised Rules of Court that the Solicitor General invokes.
In their Memorandum, petitioners phrase the issues before us as follows:
I. WHETHER OR NOT THE PETITIONERS HAVE THE PERSONALITY TO
BRING THE PRESENT ACTION
II. WHETHER OR NOT THE PRESENT ACTION IS SUPPORTED BY LAW

21

III. WHETHER OR NOT THE RESPONDENT IS THE AGENCY RESPONSIBLE
TO IMPLEMENT THE SUGGESTED ALTERNATIVE OF REQUIRING PUBLIC
UTILITY VEHICLES TO USE COMPRESSED NATURAL GAS (CNG)
IV. WHETHER OR NOT THE RESPONDENT CAN BE COMPELLED TO
REQUIRE PUBLIC UTILITY VEHICLES TO USE COMPRESSED NATURAL
GAS THROUGH A WRIT OF MANDAMUS
20

Briefly put, the issues are two-fold. First, Do petitioners have legal personality to bring
this petition before us? Second, Should mandamus issue against respondents to
compel PUVs to use CNG as alternative fuel?
According to petitioners, Section 16,
21
Article II of the 1987 Constitution is the policy
statement that bestows on the people the right to breathe clean air in a healthy
environment. This policy is enunciated in Oposa.
22
The implementation of this policy is
articulated in Rep. Act No. 8749. These, according to petitioners, are the bases for their
standing to file the instant petition. They aver that when there is an omission by the
government to safeguard a right, in this case their right to clean air, then, the citizens
can resort to and exhaust all remedies to challenge this omission by the government.
This, they say, is embodied in Section 4
23
of Rep. Act No. 8749.
Petitioners insist that since it is the LTFRB and the DOTC that are the government
agencies clothed with power to regulate and control motor vehicles, particularly PUVs,
and with the same agencies' awareness and knowledge that the PUVs emit dangerous
levels of air pollutants, then, the responsibility to see that these are curbed falls under
respondents' functions and a writ of mandamus should issue against them.
The Solicitor General, for his part, reiterates his position that the respondent
government agencies, the DOTC and the LTFRB, are not in a position to compel the
PUVs to use CNG as alternative fuel. The Solicitor General explains that the function of
the DOTC is limited to implementing the emission standards set forth in Rep. Act No.
8749 and the said law only goes as far as setting the maximum limit for the emission of
vehicles, but it does not recognize CNG as alternative engine fuel. The Solicitor General
avers that the petition should be addressed to Congress for it to come up with a policy
that would compel the use of CNG as alternative fuel.
Patently, this Court is being asked to resolve issues that are not only procedural.
Petitioners challenge this Court to decide if what petitioners propose could be done
through a less circuitous, speedy and unchartered course in an issue that Chief Justice
Hilario G. Davide, Jr. in his ponencia in the Oposa case,
24
describes as "inter-
generational responsibility" and "inter-generational justice."

22

Now, as to petitioners' standing. There is no dispute that petitioners have standing to
bring their case before this Court. Even respondents do not question their standing. This
petition focuses on one fundamental legal right of petitioners, their right to clean air.
Moreover, as held previously, a party's standing before this Court is a procedural
technicality which may, in the exercise of the Court's discretion, be set aside in view of
the importance of the issue raised. We brush aside this issue of technicality under the
principle of the transcendental importance to the public, especially so if these cases
demand that they be settled promptly.
Undeniably, the right to clean air not only is an issue of paramount importance to
petitioners for it concerns the air they breathe, but it is also impressed with public
interest. The consequences of the counter-productive and retrogressive effects of a
neglected environment due to emissions of motor vehicles immeasurably affect the well-
being of petitioners. On these considerations, the legal standing of the petitioners
deserves recognition.
Our next concern is whether the writ of mandamus is the proper remedy, and if the writ
could issue against respondents.
Under Section 3, Rule 65 of the Rules of Court, mandamus lies under any of the
following cases: (1) against any tribunal which unlawfully neglects the performance of
an act which the law specifically enjoins as a duty; (2) in case any corporation, board or
person unlawfully neglects the performance of an act which the law enjoins as a duty
resulting from an office, trust, or station; and (3) in case any tribunal, corporation, board
or person unlawfully excludes another from the use and enjoyment of a right or office to
which such other is legally entitled; and there is no other plain, speedy, and adequate
remedy in the ordinary course of law.
In University of San Agustin, Inc. v. Court of Appeals,
25
we said,
It is settled that mandamus is employed to compel the performance,
when refused, of a ministerial duty, this being its main objective. It does
not lie to require anyone to fulfill contractual obligations or to compel a
course of conduct, nor to control or review the exercise of discretion. On
the part of the petitioner, it is essential to the issuance of a writ of
mandamus that he should have a clear legal rightto the thing demanded
and it must be the imperative duty of the respondent to perform the act
required. It never issues in doubtful cases. While it may not be necessary
that the duty be absolutely expressed, it must however, be clear. The writ
will not issue to compel an official to do anything which is not his duty to
do or which is his duty not to do, or give to the applicant anything to which

23

he is not entitled by law. The writ neither confers powers nor imposes
duties. It is simply a command to exercise a power already possessed and
to perform a duty already imposed. (Emphasis supplied.)
In this petition the legal right which is sought to be recognized and enforced hinges on a
constitutional and a statutory policy already articulated in operational terms, e.g. in Rep.
Act No. 8749, the Philippine Clean Air Act of 1999. Paragraph (a), Section 21 of the Act
specifically provides that when PUVs are concerned, the responsibility of implementing
the policy falls on respondent DOTC. It provides as follows:
SEC 21. Pollution from Motor Vehicles. - a) The DOTC shall implement the
emission standards for motor vehicles set pursuant to and as provided in this Act.
To further improve the emission standards, the Department [DENR] shall review,
revise and publish the standards every two (2) years, or as the need arises. It
shall consider the maximum limits for all major pollutants to ensure substantial
improvement in air quality for the health, safety and welfare of the general public.
Paragraph (b) states:
b) The Department [DENR] in collaboration with the DOTC, DTI and LGUs,
shall develop an action plan for the control and management of air pollution
from motor vehicles consistent with the Integrated Air Quality Framework . . . .
(Emphasis supplied.)
There is no dispute that under the Clean Air Act it is the DENR that is tasked to set the
emission standards for fuel use and the task of developing an action plan. As far as
motor vehicles are concerned, it devolves upon the DOTC and the line agency whose
mandate is to oversee that motor vehicles prepare an action plan and implement the
emission standards for motor vehicles, namely the LTFRB.
In Oposa
26
we said, the right to a balanced and healthful ecology carries with it the
correlative duty to refrain from impairing the environment. We also said, it is clearly the
duty of the responsible government agencies to advance the said right.
Petitioners invoke the provisions of the Constitution and the Clean Air Act in their prayer
for issuance of a writ of mandamus commanding the respondents to require PUVs to
use CNG as an alternative fuel. Although both are general mandates that do not
specifically enjoin the use of any kind of fuel, particularly the use of CNG, there is an
executive order implementing a program on the use of CNG by public vehicles.
Executive Order No. 290, entitledImplementing the Natural Gas Vehicle Program for
Public Transport (NGVPPT), took effect on February 24, 2004. The program

24

recognized, among others, natural gas as a clean burning alternative fuel for vehicle
which has the potential to produce substantially lower pollutants; and the Malampaya
Gas-to-Power Project as representing the beginning of the natural gas industry of the
Philippines. Paragraph 1.2, Section 1 of E.O. No. 290 cites as one of its objectives, the
use of CNG as a clean alternative fuel for transport. Furthermore, one of the
components of the program is the development of CNG refueling stations and all related
facilities in strategic locations in the country to serve the needs of CNG-powered PUVs.
Section 3 of E.O. No. 290, consistent with E.O. No. 66, series of 2002, designated the
DOE as the lead agency (a) in developing the natural gas industry of the country with
the DENR, through the EMB and (b) in formulating emission standards for CNG. Most
significantly, par. 4.5, Section 4 tasks the DOTC, working with the DOE, to develop an
implementation plan for "a gradual shift to CNG fuel utilization in PUVs and promote
NGVs [natural gas vehicles] in Metro Manila and Luzon through the issuance of
directives/orders providing preferential franchises in present day major routes and
exclusive franchises to NGVs in newly opened routes" A thorough reading of the
executive order assures us that implementation for a cleaner environment is being
addressed. To a certain extent, the instant petition had been mooted by the issuance of
E.O. No. 290.
Regrettably, however, the plain, speedy and adequate remedy herein sought by
petitioners, i.e., a writ of mandamus commanding the respondents to require PUVs to
use CNG, is unavailing. Mandamus is available only to compel the doing of an act
specifically enjoined by law as a duty. Here, there is no law that mandates the
respondents LTFRB and the DOTC to order owners of motor vehicles to use CNG. At
most the LTFRB has been tasked by E.O. No. 290 in par. 4.5 (ii), Section 4 "to grant
preferential and exclusive Certificates of Public Convenience (CPC) or franchises to
operators of NGVs based on the results of the DOTC surveys."
Further, mandamus will not generally lie from one branch of government to a coordinate
branch, for the obvious reason that neither is inferior to the other.
27
The need for future
changes in both legislation and its implementation cannot be preempted by orders from
this Court, especially when what is prayed for is procedurally infirm. Besides, comity
with and courtesy to a coequal branch dictate that we give sufficient time and leeway for
the coequal branches to address by themselves the environmental problems raised in
this petition.
In the same manner that we have associated the fundamental right to a balanced and
healthful ecology with the twin concepts of "inter-generational responsibility" and "inter-
generational justice" in Oposa,
28
where we upheld the right of future Filipinos to prevent
the destruction of the rainforests, so do we recognize, in this petition, the right of
petitioners and the future generation to clean air. In Oposa we said that if the right to a

25

balanced and healthful ecology is now explicitly found in the Constitution even if the
right is "assumed to exist from the inception of humankind, it is because of the well-
founded fear of its framers [of the Constitution] that unless the rights to a balanced and
healthful ecology and to health are mandated as state policies by the Constitution itself,
thereby highlighting their continuing importance and imposing upon the state a solemn
obligation to preserve the first and protect and advance the second, the day would not
be too far when all else would be lost not only for the present generation, but also for
those to come. . ."
29

It is the firm belief of this Court that in this case, it is timely to reaffirm the premium we
have placed on the protection of the environment in the landmark case of Oposa. Yet,
as serious as the statistics are on air pollution, with the present fuels deemed toxic as
they are to the environment, as fatal as these pollutants are to the health of the citizens,
and urgently requiring resort to drastic measures to reduce air pollutants emitted by
motor vehicles, we must admit in particular that petitioners are unable to pinpoint the
law that imposes an indubitable legal duty on respondents that will justify a grant of the
writ of mandamus compelling the use of CNG for public utility vehicles. It appears to us
that more properly, the legislature should provide first the specific statutory remedy to
the complex environmental problems bared by herein petitioners before any judicial
recourse by mandamus is taken.
WHEREFORE, the petition for the issuance of a writ of mandamus is DISMISSED for
lack of merit.
SO ORDERED.
Carpio, Morales, Tinga, and Velasco, Jr., JJ., concur.


26

CASE NUMBER 8
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 175289 August 31, 2011
CRISOSTOMO VILLARIN and ANIANO LATAYADA, Petitioners,
vs.
PEOPLE OF THE PHILIPPINES, Respondent.

D E C I S I O N
DEL CASTILLO, J .:
Mere possession of timber without the legal documents required under forest laws and
regulations makes one automatically liable of violation of Section 68, Presidential
Decree (P.D.) No. 705,
1
as amended. Lack of criminal intent is not a valid defense.
This petition for review on certiorari seeks to reverse the June 28, 2005 Decision
2
of the
Court of Appeals (CA) in CA-G.R. CR No. 26720 which affirmed in all respects the
Judgment
3
of the Regional Trial Court (RTC), Branch 38, Cagayan De Oro City, finding
petitioners guilty beyond reasonable doubt of violation of Section 68, P.D. No. 705, as
amended. Likewise assailed in this petition is the September 22, 2006
Resolution
4
denying petitioners Motion for
Reconsideration.
5

Factual Antecedents

27

In a Criminal Complaint
6
filed before the Municipal Trial Court in Cities, Branch 4,
Cagayan de Oro City by Marcelino B. Pioquinto (Pioquinto), Chief of the Forest
Protection and Law Enforcement Unit under the TL Strike Force Team of Department of
Environment and Natural Resources (DENR), petitioner Aniano Latayada (Latayada)
and three others namely, Barangay Captain Camilo Sudaria (Sudaria) of Tagpangi,
Cagayan de Oro City, Marlon Baillo (Baillo) and Cipriano Boyatac (Boyatac), were
charged with violation of Section 68, P.D. No. 705 as amended by Executive Order No.
277.
7

Subsequently, however, the Office of the City Prosecutor of Cagayan de Oro City
issued a Resolution
8
dated March 13, 1996 recommending the filing of an Information
for the aforesaid charge not only against Latayada, Baillo and Boyatac but also against
petitioner Crisostomo Villarin (Villarin), then Barangay Captain of Pagalungan, Cagayan
de Oro City. The dismissal of the complaint against Sudaria was likewise
recommended. Said Resolution was then approved by the Office of the Ombudsman-
Mindanao through a Resolution
9
dated May 9, 1996 ordering the filing of the Information
in the RTC of Cagayan de Oro City.
Thus, on October 29, 1996, an Information
10
was filed against petitioners Villarin and
Latayada and their co-accused Baillo and Boyatac, for violation of Section 68, P.D. No.
705 as follows:
That on or about January 13, 1996, in Pagalungan, Cagayan de Oro City, Philippines,
and within the jurisdiction of this Honorable Court, pursuant to RA 7975, the accused,
Crisostomo Villarin, a public officer being the Barangay Captain of Pagalungan, this
City, with salary grade below 27, taking advantage of his official position and committing
the offense in relation to his office, and the other above-named accused, all private
individuals, namely: Marlon Baillo, Cipriano Boyatac, and Aniano Latayada,
confederating and mutually helping one another did then and there, willfully, unlawfully
and feloniously gather and possess sixty-three (63) pieces flitches of varying sizes
belonging to the Apitong specie with a total volume of Four Thousand Three Hundred
Twenty Six (4,326) board feet valued at P108,150.00, without any authority and
supporting documents as required under existing forest laws and regulation to the
damage and prejudice of the government.
CONTRARY TO LAW.
11

On January 14, 1997, Villarin, Boyatac and Baillo, filed a Motion for
Reinvestigation.
12
They alleged that the Joint Affidavit
13
of the personnel of the DENR
which became one of the bases in filing the Information never mentioned Villarin as one
of the perpetrators of the crime while the accusations against Baillo and Boyatac were

28

not based on the personal knowledge of the affiants. They also asserted that their
indictment was based on polluted sources, consisting of the sworn statements of
witnesses like Latayada and Sudaria, who both appeared to have participated in the
commission of the crime charged.
Instead of resolving the Motion for Reinvestigation, the RTC, in its Order
14
dated
January 27, 1997, directed Villarin, Boyatac, and Baillo to file their Motion for
Reinvestigation with the Office of the Ombudsman-Mindanao, it being the entity which
filed the Information in Court. On March 31, 1997, only Villarin filed a Petition for
Reinvestigation
15
but same was, however, denied by the Office of the Ombudsman-
Mindanao in an Order
16
dated May 15, 1997 because the grounds relied upon were not
based on newly discovered evidence or errors of fact, law or irregularities that are
prejudicial to the interest of the movants, pursuant to Administrative Order No. 07 or the
Rules of Procedure of the Office of the Ombudsman in Criminal Cases. The Office of
the Ombudsman-Mindanao likewise opined that Villarin was directly implicated by
Latayada, his co-accused.
The RTC thus proceeded with the arraignment of the accused who entered separate
pleas of not guilty.
17
Thereafter, trial ensued.
The Version of the Prosecution
On December 31, 1995, at around five oclock in the afternoon, prosecution witness
Roland Granada (Granada) noticed that a public utility jeep loaded with timber stopped
near his house. The driver, petitioner Latayada, was accompanied by four to five other
persons, one of whom was Boyatac while the rest could not be identified by
Granada.
18
They alighted from the jeep and unloaded the timber 10 to 15 meters away
from the Batinay bridge at Barangay Pagalungan, Cagayan De Oro City. Another
prosecution witness, Pastor Pansacala (Pansacala), also noticed the jeep with plate
number MBB 226 and owned by Sudaria, loaded with timber.
19
Being then the president
of a community-based organization which serves as a watchdog of illegal cutting of
trees,
20
Pansacala even ordered a certain Mario Bael to count the timber.
21

At six oclock in the evening of the same day, Barangay Captain Angeles Alarcon
(Alarcon)
22
noticed that the pile of timber was already placed near the bridge. Since she
had no knowledge of any scheduled repair of the Batinay bridge she was surprised to
discover that the timber would be used for the repair. After inquiring from the people
living near the bridge, she learned that Latayada and Boyatac delivered the timber.
23

Another prosecution witness, Ariel Palanga (Palanga), testified that at seven oclock in
the morning of January 1, 1996, Boyatac bought a stick of cigarette from his store and

29

requested him to cover the pile of timber near the bridge for a fee. Palanga acceded
and covered the pile with coconut leaves.
24

On January 13, 1996, at around ten oclock in the morning, prosecution witness Juan
Casenas (Casenas), a radio and TV personality of RMN-TV8, took footages of the
timber
25
hidden and covered by coconut leaves. Casenas also took footages of more
logs inside a bodega at the other side of the bridge. In the following evening, the
footages were shown in a news program on television.
On the same day, members of the DENR Region 10 Strike Force Team measured the
timber which consisted of 63 pieces of Apitong flitches and determined that it totaled
4,326 board feet
26
and subsequently entrusted the same to Alarcon for safekeeping.
Upon further investigation, it was learned that the timber was requisitioned by Villarin,
who was then Barangay Captain of Pagulangan, Cagayan de Oro City. Villarin gave
Sudaria the specifications for the requisitioned timber. Thereafter, Boyatac informed
Villarin that the timber was already delivered on December 31, 1995.
27

On January 18, 1996, Felix Vera Cruz (Vera Cruz), a security guard at the DENR
Region 10 Office, received and signed for the confiscated timber since the property
custodian at that time was not around.
The filing of the aforestated Information followed.
The Version of the Defense
In response to the clamor of the residents of Barangays Tampangan, Pigsag-an,
Tuburan and Taglinao, all in Cagayan De Oro City, Villarin, decided to repair the
impassable Batinay bridge. The project was allegedly with the concurrence of the
Barangay Council.
Pressured to immediately commence the needed repairs, Villarin commissioned
Boyatac to inquire from Sudaria about the availability of timber without first informing the
City Engineer. Sudaria asked for the specifications which Villarin gave. Villarin then
asked Baillo and Boyatac to attend to the same. When the timber was already available,
it was transported from Tagpangi to Batinay. However, the timber flitches were seized
by the DENR Strike Force Team and taken to its office where they were received by
Vera Cruz, the security guard on duty.
Ruling of the Regional Trial Court

30

In its Memorandum filed before the trial court, the defense notified the court of
Boyatacs demise.
28
However, the trial court did not act on such notice. Instead, it
proceeded to rule on the culpability of Boyatac. Thus, in its Judgment, the trial court
found herein petitioners and the deceased Boyatac guilty as charged. On the other
hand, it found the evidence against Baillo insufficient. The dispositive portion of the
Judgment reads:
WHEREFORE, in view of the foregoing findings, judgment is hereby rendered finding
the accused Crisostomo Villarin, Cipriano Boyatac and Aniano Latayada guilty beyond
reasonable doubt of violating Section 68 of Presidential Decree No. 705 as amended,
and hereby sentences each of them to suffer an indeterminate sentence of twelve (12)
years of prision mayor as minimum to seventeen (17) years of reclusion temporal as
maximum.
Accused Marlon Baillo is hereby acquitted for lack of evidence.
SO ORDERED.
29

In reaching said conclusions, the RTC noted that:
Without an iota of doubt, accused Crisostomo Villarin, being then a Barangay Captain of
Pagalungan, Cagayan de Oro City, was the one who procured the subject flitches, while
accused Aniano Latayada and Cipriano Boyatac mutually helped him and each other by
transporting the flitches from Sitio Batinay to the Pagalungan Bridge. The accused
would like to impress upon the Court that the subject fltiches were intended for the
repair of the Pagalungan Bridge and were acquired by virtue of Barangay Resolution
No. 110 of Barangay Pagalungan. The Court is not impressed by this lame excuse.
There is no dispute that the flitches were intended for the repair of the bridge. The Court
finds it a laudable motive. The fact remains though that the said forest products were
obtained without the necessary authority and legal documents required under existing
forest laws and regulations.
30

Petitioners filed a Motion for Reconsideration
31
which was denied by the
RTC in its Order
32
dated August 20, 2002.
Ruling of the Court of Appeals
Petitioners filed an appeal which was denied by the CA in its Decision dated June 28,
2005. The dispositive portion of which reads:

31

WHEREFORE, in view of all the foregoing, the judgment of the court a quo finding
[d]efendant-[a]ppellants Crisostomo Villarin, Cipriano Boyatac and Aniano Latayada
GUILTY beyond reasonable doubt for violating Sec. 68 of Presidential Decree 705 is
hereby AFFIRMED in toto. No pronouncement as to cost.1avvphi1
SO ORDERED.
33

Petitioners filed a Motion for Reconsideration
34
which the appellate court denied for lack
of merit in its Resolution
35
promulgated on September 22, 2006.
Issues
Undeterred, petitioners filed the instant petition raising the following issues:
1. WHETHER X X X THE COURT OF APPEALS[,] ON [THE] MATTER OF
PRELIMINARY INVESTIGATION[,] DECIDED NOT IN ACCORD WITH
JURISPRUDENCE OF THE SUPREME COURT;
2. WHETHER X X X THE COURT OF APPEALS DEPARTED FROM WHAT
THE SUPREME COURT HAS ALWAYS BEEN SAYING, THAT, TO CONVICT
AN ACCUSED ALL ELEMENTS OF THE CRIME MUST BE PROVEN BEYOND
REASONABLE DOUBT and;
3. WHETHER X X X THE COURT OF APPEALS[,] IN AFFIRMING THE
PENALTY IMPOSED BY THE COURT A QUO[,] DEPARTED FROM
JURISPRUDENCE THAT EVEN IN CRIMES [INVOLVING] VIOLATION OF
SPECIAL LAWS[,] SPECIAL CONSIDERATION SHOULD BE GIVEN TO
CIRCUMSTANCES THAT [CAN BE CONSIDERED AS MITIGATING HAD THE
VIOLATION BEEN PENALIZED UNDER THE REVISED PENAL CODE, IN
ORDER TO REDUCE PENALTY].
36

Petitioners argue that the refusal of the Ombudsman to conduct a reinvestigation is
tantamount to a denial of the right to due process. As Villarin was indicted in the
Information despite his not being included in the criminal complaint filed by Pioquinto of
the TL Strike Force Team of the DENR, they claim that he was not afforded a
preliminary investigation. They also bewail the fact that persons who appear to be
equally guilty, such as Sudaria, have not been included in the Information. Hence, they
argue that the Ombudsman acted with grave abuse of discretion in denying their petition
for reinvestigation because it deprived Villarin of his right to preliminary investigation
and in refusing and to equally prosecute the guilty. They contend that the Ombudsman

32

should not have relied on the prosecutors Certification
37
contained in the Information to
the effect that a preliminary investigation was conducted in the case.
Moreover, petitioners contend that the evidence was insufficient to prove their guilt
beyond reasonable doubt since they had no intention to possess the timber and dispose
of it for personal gain. They likewise claim that there was failure on the part of the
prosecution to present the timber, which were the object of the offense.
Our Ruling
The petition is unmeritorious.
Villarin was properly afforded his right to due process.
Records show that the investigating prosecutor received a criminal complaint charging
Sudaria, Latayada, Baillo and Boyatac with violation of Section 68 of P.D. No. 705, as
amended.
38
The said complaint did not state the known addresses of the accused.
Neither was the notarized joint-affidavit of the complainants attached thereto. The
subpoena issued to the accused and the copy of their counter-affidavits were also not
part of the record. Moreover, the complaint did not include Villarin as a respondent.
However, said infirmities do not constitute denial of due process particularly on the part
of Villarin.
It is evidently clear from the Resolution dated March 13, 1996 of the Office of the City
Prosecutor that Villarin and all the accused participated in the scheduled preliminary
investigation that was conducted prior to the filing of the criminal case.
39
They knew
about the filing of the complaint and even denied any involvement in the illegal cutting of
timber. They were also given the opportunity to submit countervailing evidence to
convince the investigating prosecutor of their innocence.
Foregoing findings considered, there is no factual basis to the assertion that Villarin was
not afforded a preliminary investigation. Accordingly, we find no grave abuse of
discretion on the part of the Office of the Ombudsman-Mindanao in denying Villarins
motion for reconsideration. It validly relied on the certification contained in the
Information that a preliminary investigation was properly conducted in this case. The
certification was made under oath by no less than the public prosecutor, a public officer
who is presumed to have regularly performed his official duty.
40
Besides, it aptly noted
that "Villarin was implicated by x x x Latayada in his affidavit dated January 22, 1996
before Marcelino B. Pioquinto, Chief, Forest Protection and Law Enforcement Unit. The
denial of Villarin cannot prevail over the declaration of witnesses."
41


33

Moreover, the absence of a proper preliminary investigation must be timely raised and
must not have been waived. This is to allow the trial court to hold the case in abeyance
and conduct its own investigation or require the prosecutor to hold a reinvestigation,
which, necessarily "involves a re-examination and re-evaluation of the evidence already
submitted by the complainant and the accused, as well as the initial finding of probable
cause which led to the filing of the Informations after the requisite preliminary
investigation."
42

Here, it is conceded that Villarin raised the issue of lack of a preliminary investigation in
his Motion for Reinvestigation. However, when the Ombudsman denied the motion, he
never raised this issue again. He accepted the Ombudsman's verdict, entered a plea of
not guilty during his arraignment and actively participated in the trial on the merits by
attending the scheduled hearings, conducting cross-examinations and testifying on his
own behalf. It was only after the trial court rendered judgment against him that he once
again assailed the conduct of the preliminary investigation in the Motion for
Reconsideration.
43
Whatever argument Villarin may have regarding the alleged absence
of a preliminary investigation has therefore been mooted. By entering his plea, and
actively participating in the trial, he is deemed to have waived his right to preliminary
investigation.
Petitioners also contend that Sudaria should also have been included as a principal in
the commission of the offense. However, whether Sudaria should or should not be
included as co-accused can no longer be raised on appeal. Any right that the petitioners
may have in questioning the non-inclusion of Sudaria in the Information should have
been raised in a motion for reconsideration of the March 13, 1996 Resolution of the
Office of the City Prosecutor which recommended the dismissal of the complaint against
Sudaria.
44
Having failed to avail of the proper
procedural remedy, they are now estopped from assailing his non-inclusion.
Two Offenses Penalized Under Sec. 68 of Presidential Decree No. 705.
Section 68 of P.D. No. 705, as amended, provides:
Section 68. Cutting, Gathering and/or Collecting Timber or Other Forest Products
Without License. Any person who shall cut, gather, collect, remove timber or other
forest products from any forest land, or timber from alienable or disposable public land,
or from private land, without any authority, or possess timber or other forest products
without legal documents as required under existing forest laws and regulations, shall be
punished with the penalties imposed under Articles 309 and 310 of the Revised Penal
Code: Provided, that in the case of partnerships, associations, or corporations, the

34

officers who ordered the cutting, gathering, collection or possession shall be liable, and
if such officers are aliens, they shall, in addition to the penalty, be deported without
further proceedings on the part of the Commission on Immigration and Deportation.
"There are two distinct and separate offenses punished under Section 68 of P.D. No.
705, to wit:
(1) Cutting, gathering, collecting and removing timber or other forest products from any
forest land, or timber from alienable or disposable public land, or from private land
without any authorization; and
(2) Possession of timber or other forest products without the legal documents required
under existing forest laws and regulations."
45

The Information charged petitioners with the second offense which is consummated by
the mere possession of forest products without the proper documents.
We reviewed the records and hold that the prosecution had discharged the
burden of proving all the elements of the offense charged. The evidence of the
prosecution proved beyond reasonable doubt that petitioners were in custody of timber
without the necessary legal documents. Incidentally, we note that several transcripts of
stenographic notes (TSNs) were not submitted by the trial court. No explanation was
provided for these missing TSNs. Notwithstanding the incomplete TSNs, we still find
that the prosecution was able to prove beyond reasonable doubt petitioners culpability.
The prosecution adduced several documents to prove that timber was confiscated from
petitioners. It presented a Tally Sheet
46
to prove that the DENR Strike Force Team
examined the seized timber on January 13, 1996. The number, volume and appraised
value of said timber were also noted in the Tally Sheet. Seizure receipts were also
presented to prove that the confiscated timber were placed in the custody of
Alarcon
47
and eventually taken to the DENR Office.
48
There was a photograph of the
timber taken by the television crew led by Casenas.
49

The prosecution likewise presented in evidence the testimonies of eyewitnesses
Granada and Pansacala who testified that Latayada and Boyatac were the ones who
delivered the timber.
50

More significantly, Villarin admitted that he was the one who commissioned the
procurement of the timber
51
for the repair of the Batinay bridge. He even deputized
Boyatac to negotiate with Sudaria and gave Latayada P2,000.00 to transport the logs.

35

Boyatac later informed him of the delivery of timber. However, he could not present any
document to show that his possession thereof was legal and pursuant to existing forest
laws and regulations.
Relevant portions of the testimony of Villarin are as follows:
Q As Barangay Captain of Pagalungan, of course, you heard reports prior to the
incident on December 31, 1995 that Barangay Captain Camilo Sudaria was also
engaged in supplying forest products like forest lumber?
A Yes, because I always go to Cagayan de Oro and I can always ride on his jeepney.
Q And you were sure that information of yours was received by you and not only by one
but several persons from Barangay Tagpangi even up to Barangay Pagalungan?
A Thats true because he even has a record with the police.
Q And you learned [this] prior to January 1995?
A Yes, Sir.
Q And your information was even to the effect that Sudaria was supplying illegally cut
lumber regularly?
A What I have noticed because I always ride on his jeep wherein lumber was being
loaded, the lumber will be taken when it arrived in Lumbia, kilometer 5.
Q Even if there were already raids being conducted to the person of Camilo
Sudaria, still he continued to load illegally cut lumber?
A He slowed down after several arrest because maybe he was ashamed because he
was the Barangay Captain of Tagpangi.
Q And his arrest and the slackening of his activities of illegally cut lumber occurred prior
to June 1995?
A Yes, sir.
Q [In spite] of your knowledge that he is engaged [in] illegally cut[ting] forest products,
you as Barangay Captain of Pagalungan transacted with him for the purpose of
acquiring lumber [for] the bridge at Pagalungan?

36

A As we rode together in his jeep, he informed me that he has some lumber to be used
to build his house and he told me he will sell it for the repair of the bridge in
Pagalungan.
Q And because of that, in addition, you sent him the specifications of materials for the
repair of the bridge in Pagalungan?
A I let Boyatac go to him and [inquire] from him if he has those specifications.
Q And he communicated to you that he has available lumber of those specification?
A Yes, because he sent to Boyatac some requirements of the specifications and he let
me sign it.
Q And after that, you closed the [deal] with Sudaria?
A Yes, because I sent somebody to him and we did not talk anymore.
Q And thereafter on December 31, 1995, according to your testimony before, Aniano
Latayada delivered the lumber flitches you ordered on board the passenger jeep of
Camilo Sudaria?
A When the specifications were given, we were informed that the lumber were already
there. So, it was delivered.
Q Who informed you that the lumber were already delivered?
A Boyatac.
Q And he is referring to those lumber placed alongside the Batinay Bridge.
A Yes, Sir.
Q And even without personally inspecting it, you immediately paid Latayada the
compensation for the delivery of those lumber?
A There was already an advance payment for his delivery.
Q To whom did you give the advance?
A To Latayada.

37

Q You have not given the amount to Camilo Sudaria?
A No, Sir.
Q In fact, the money that you paid to Latayada was specifically for the transportation of
the lumber from Tagpangi to Batinay bridge?
A Yes, Sir.
PROS. GALARRITA:
Q And at that time, you paid Latayada P2,000 as payment of the lumber?
A Yes, Sir.
COURT:
Q Did you pay Latayada?
A Yes, Sir.
Q How much?
A P2,000.
Q And you gave this to the conductor?
A Yes, Sir.
Q You told the conductor to pay the money to Latayada?
A Yes, sir.
Q What did the conductor say?
A The conductor said that the money was for the payment for the transporting of lumber
from Tagpangi.
52
(Underscoring ours.)
Violation of Sec. 68 of Presidential Decree No. 705, as amended, is
malum prohibitum.

38

As a special law, the nature of the offense is malum prohibitum and as such, criminal
intent is not an essential element. "However, the prosecution must prove that petitioners
had the intent to possess (animus possidendi)" the timber.
53
"Possession, under the
law, includes not only actual possession, but also constructive possession. Actual
possession exists when the [object of the crime] is in the immediate physical control of
the accused. On the other hand, constructive possession exists when the [object of the
crime] is under the dominion and control of the accused or when he has the right to
exercise dominion and control over the place where it is found."
54

There is no dispute that petitioners were in constructive possession of the timber
without the requisite legal documents. Villarin and Latayada were personally involved in
its procurement, delivery and storage without any license or permit issued by any
competent authority. Given these and considering that the offense is malum prohibitum,
petitioners contention that the possession of the illegally cut timber was not for personal
gain but for the repair of said bridge is, therefore, inconsequential.
Corpus Delicti is the Fact of the Commission of the Crime
Petitioners argue that their convictions were improper because the corpus delicti had
not been established. They assert that the failure to present the confiscated timber in
court was fatal to the cause of the prosecution.
We disagree. "[C]orpus delicti refers to the fact of the commission of the crime charged
or to the body or substance of the crime. In its legal sense, it does not refer to the
ransom money in the crime of kidnapping for ransom or to the body of the person
murdered"
55
or, in this case, to the seized timber. "Since the corpus delicti is the fact of
the commission of the crime, this Court has ruled that even a single witness
uncorroborated testimony, if credible, may suffice to prove it and warrant a conviction
therefor. Corpus delicti may even be established by circumstantial evidence."
56

Here, the trial court and the CA held that the corpus delicti was established by the
documentary and testimonial evidence on record. The Tally Sheet, Seizure Receipts
issued by the DENR and photograph proved the existence of the timber and its
confiscation. The testimonies of the petitioners themselves stating in no uncertain terms
the manner in which they consummated the offense they were charged with were
likewise crucial to their conviction.
We find no reason to deviate from these findings since it has been established that
factual findings of a trial court are binding on us, absent any showing that it overlooked
or misinterpreted facts or circumstances of weight and substance.
57
The legal precept

39

applies to this case in which the trial courts findings were affirmed by the appellate
court.
58

The Proper Penalty
Violation of Section 68 of P.D. No. 705, as amended, is penalized as qualified theft
under Article 310 in relation to Article 309 of the Revised Penal Code (RPC). The
pertinent portions of these provisions read:
Art. 310. Qualified Theft The crime of theft shall be punished by the penalties next
higher by two degrees than those respectively specified in the next preceding articles, if
committed by a domestic servant, or with grave abuse of confidence, or if the property
stolen is motor vehicle, mail matter or large cattle or consists of coconuts taken from the
premises of the plantation or fish taken from a fishpond or fishery, or if property is taken
on the occasion of fire, earthquake, typhoon, volcanic eruption, or any calamity,
vehicular accident or civil disturbance.
Art. 309. Penalties. Any person guilty of theft shall be punished by:
1. The penalty of prision mayor in its minimum and medium periods, if the value of the
thing stolen is more than 12,000 pesos but does not exceed 22,000 pesos; but if the
value of the thing stolen exceeds the latter amount, the penalty shall be the maximum
period of the one prescribed in this paragraph, and one year for each additional ten
thousand pesos, but the total of the penalty which may be imposed shall not exceed
twenty years. In such cases, and in connection with the accessory penalties which may
be imposed and for the purpose of the other provisions of this Code, the penalty shall
be termed prision mayor or reclusion temporal, as the case may be. x x x
The Information filed against the petitioners alleged that the 63 pieces of timber without
the requisite legal documents measuring 4,326 board feet were valued at P108,150.00.
To prove this allegation, the prosecution presented Pioquinto to testify, among others,
on this amount. Tally Sheets and Seizure Receipts were also presented to corroborate
said amount. With the value of the timber exceeding P22,000.00, the basic penalty is
prision mayor in its minimum and medium periods to be imposed in its maximum, the
range of which is eight (8) years, eight (8) months and one (1) day to ten (10) years.
Since none of the qualifying circumstances in Article 310 of the RPC was alleged in the
Information, the penalty cannot be increased two degrees higher.
In determining the additional years of imprisonment, P22,000.00 is to be deducted
from P108,150.00, which results to P86,150.00. This remainder must be divided
by P10,000.00, disregarding any amount less thanP10,000.00. Consequently, eight (8)

40

years must be added to the basic penalty. Thus the maximum imposable penalty ranges
from sixteen (16) years, eight (8) months and one (1) day to eighteen (18) years of
reclusion temporal.
Applying the Indeterminate Sentence Law, the minimum imposable penalty should be
taken anywhere within the range of the penalty next lower in degree, without
considering the modifying circumstances. The penalty one degree lower from prision
mayor in its minimum and medium periods is prision correccional in its medium and
maximum periods, the range of which is from two (2) years, four (4) months and one (1)
day to six (6) years. Thus, the RTC, as affirmed by the CA, erroneously fixed the
minimum period of the penalty at twelve (12) years of prision mayor.
Finally, the case against Boyatac must be dismissed considering his demise even
before the RTC rendered its Judgment.
WHEREFORE, the petition is DENIED. The assailed Decision dated June 28, 2005 and
the Resolution dated September 22, 2006 in CA-G.R. CR No. 26720 are AFFIRMED
with the modificationS that petitioners Crisostomo Villarin and Aniano Latayada are
each sentenced to suffer imprisonment of two (2) years, four (4) months, and one (1)
day of prision correccional, as minimum, to sixteen (16) years, eight (8) months, and
one (1) day of reclusion temporal, as maximum. The complaint against Cipriano
Boyatac is hereby DISMISSED.
SO ORDERED.
MARIANO C. DEL CASTILLO
Associate Justice

CASE NUMBER 9


41

CASE NUMBER 10

SUPREME COURT
Manila
THIRD DIVISION

G.R. No. 120391 September 24, 1997
SIMPLICIO AMPER, petitioner,
vs.
SANDIGANBAYAN and PEOPLE OF THE PHILIPPINES, respondents.

FRANCISCO, J .:

42

The petitioner, SIMPLICIO AMPER, was charged with the violation of Section 3(e)
of Republic Act No. 3019 otherwise known as the Anti-Graft and Corrupt Practices
Act which provides as follows:
Sec. 3. Corrupt practices of public officers. In addition to acts or
omissions of public officers already penalized by existing law, the
following shall constitute corrupt practices of any public officer and are
hereby declared to be unlawful:
xxx xxx xxx
(e) Causing any undue injury to any party, including the Government, or
giving advantage or preference in the discharge of his official
administrative or judicial functions through manifest partiality, evident bad
faith, or gross inexcusable negligence. This provision shall apply to
officers and employees of offices or government corporations charged with
the grant of licenses or permits or other concessions.
The Information against him reads:
That on or about August 7, 1988, in the City of Davao, Philippines, and
within the jurisdiction of this Honorable Court, the above-mentioned
accused, a public officer, being then the Assistant City Engineer of Davao
City, taking advantage of his official position, with manifest partiality and
bad faith in the discharge of his official duties, did then and there wilfully-
(sic) unlawfully, and criminally, cause undue injury to the Republic of the
Philippines by using for his personal benefit and advantage, to treasure
hunt, one (1) unit Allis Backhoe, belonging to the City Government of
Davao, without the knowledge, consent and authority from the latter, to the
damage and prejudice of the City Government of Davao.
CONTRARY TO LAW.
1

Upon arraignment the petitioner pleaded not guilty and trial ensued. The
prosecution presented its witnesses whose testimonies are succinctly
summarized in the Comment filed by the Office of the Solicitor General (OSG), the
pertinent portions of which we quote hereunder with approval.
On August 1, 1988, Filemon Cantela was visiting his two "sisters-in-Christ"
near the vicinity of the Guzman Estate at Matina District, Davao City when
he chanced upon petitioner Simplicio Amper, Assistant City Engineer,

43

Davao City, together with two others, scanning the area with the use of
detector. After petitioner had left, he inquired and gathered from the
landowner, Emilio Alvarez-Guiman, that petitioner and his companions
were looking for hidden treasure and that they were planning to operate in
the area with the use of a backhoe which is a heavy equipment used for
excavating. Apprehensive that appellant, being the Assistant City Engineer,
and as such had at his disposal the use of the city government-owned
backhoe, might actually make use of the said equipment, he advised his
"sister-in-Christ" to inform him if and when petitioner would actually
resume his treasure hunting operation in the area. (TSN, April 11, 1991, pp.
14-19).
On August 6, 1988, around 6:00 o'clock in the afternoon (sic), Cantela was
informed by his "sister-in-Christ" that petitioner and five others were earlier
in the area clearing the premises and preparing to resume their treasure
hunting operation that night. Together with Mike Lusenara and Marcelo
Gervacio, Jr. of the Civil Security Unit, he prepared to conduct a
surveillance on petitioner and his companions that evening (Ibid., pp. 19-
20).
They went to the area at about 8:30 in the evening and discreetly waited for
the arrival of petitioner and his companions. Around 11:30 in (sic) the same
evening petitioner arrived on board a Toyota Land Cruiser, together with
two others who were on board another vehicle. Shortly, after the arrival of
petitioner and his companions, a backhoe, bearing inscription on its sides
that it is owned by the city government of Davao City, arrived (Ibid., pp. 22-
26). The backhoe was being operated by Tobias Porta, a heavy equipment
operator assigned at the City Engineer's Office, who was with his assistant,
Timoteo Borongan. Thereafter, Porta, upon the instruction of petitioner,
began to excavate the area with the use of the backhoe. Cantela requested
Henry Adriano to go to the house of Davao City Mayor Rodrigo Duterte and
inform him of petitioner's illegal activity (Ibid., pp. 27-30).
Around 2:15 in the morning of August 7, 1988, Mayor Duterte arrived,
together with several policemen, and surprised petitioner and his
companions who were still in the act of excavating the area. However,
before the Mayor could actually order their arrest, some of petitioner's
companions scampered, leaving only petitioner, Porta and Borongan (Ibid.,
p. 31).

44

Thereupon, Mayor Duterte ordered Porta to stop the engine of the backhoe
and confronted him as to what he was digging in the area. Porta replied
that he was ordered by appellant to dig for gold. Mayor Duterte likewise
confronted Borongan, who upon being asked the same question, gave the
same reply (Ibid.).
Duterte ordered one of the members of the Civil Security Unit to pick up
petitioner, who was then sitting in his vehicle parked nearby. Mayor Duterte
confronted petitioner and shortly thereafter, ordered petitioner, Porta and
Borongan to follow him to the Tolomo Police Station (Ibid., p. 32).
Mayor Duterte declared that there are four (4) backhoes owned by the city
government of Davao City including the subject backhoe; that he checked
it out with the Office of the City Engineer and he found out that no
permission was granted to petitioner to use the subject backhoe for private
purposes (TSN, April 29, 1993, p. 12).
While in the past, the use of the city government-owned backhoe for
private purposes was allowed upon payment of the corresponding rental,
Mayor Duterte disallowed the same during his administration because the
city government which had so many projects to undertake needed those
equipment for the aforesaid projects. He allowed the lease of the city-
government-owned backhoes to private individuals but not as matter of
policy and only in extreme cases upon payment of rental (Ibid.).
2

The petitioner denied the allegations against him and asserted that contrary to
Mayor Duterte's claim that the use of the subject backhoe was unauthorized, the
same was in fact officially leased by the Davao City government to Francisco
Chavez of F.T. Chavez Construction, thus, its use on the private property of
Segundo Tan was proper.
3
Public respondent Sandiganbayan found the
foregoing asseveration to be without merit considering that petitioner was
caught en flagrante delicto directing the use and operation of the said backhoe
for his own treasure hunting operations. Furthermore, the petitioner failed to
present either Francisco Chavez or Segundo Tan to corroborate his testimony
that the backhoe subject of the instant case was the same backhoe which
Francisco Chavez rented from the city government.
4

In a decision promulgated on March 6, 1995, the Sandiganbayan convicted the
petitioner of violating Section 3(e) of R.A. No. 3019 and sentenced him "to suffer
the penalty of imprisonment of SIX (6) YEARS, ONE (1) MONTH and ONE (1) day,

45

to further suffer perpetual special disqualification from public office, and to pay
the costs."
5

We have carefully reviewed the records of this case and find nothing therein to
warrant a reversal of the assailed decision of the Sandiganbayan.
The petitioner's conviction was anchored mainly on the prosecution witnesses'
uniform testimonies that they saw him in the actual perpetration of the crime
charged. Filomeno Cantela attested to the petitioner's presence at the scene of
the crime from the inception of the treasure hunting operation at around 11:30 in
the evening of August 6, 1988 until his subsequent apprehension by the group of
Mayor Duterte at around 2:00 o'clock in the morning of the next day. Petitioner's
participation in the commission of the said crime was categorically established
also by Filomeno Cantela who further testified that the backhoe began to operate
upon the instructions of the petitioner.
6
And no less than the Mayor of Davao City
whose group effected the petitioner's arrest corroborated this eyewitness
account.
7
Furthermore, even the backhoe operator, Tobias Porta, belied the
petitioner's futile denials when he testified that on the night of August 6, 1988, the
petitioner asked him to proceed to the vacant lot in front of the A-Mart in Matina
District, Davao City on the pretext that they were going to install concrete
culverts but upon reaching the said lot, petitioner ordered him to excavate the
area for gold.
8

No ill-motives have been shown to induce the abovementioned witnesses to
falsely testify against the petitioner and maliciously implicate him in the said
crime. The petitioner's representation that Mayor Duterte had an axe to grind
against him because he did not support the latter in the past elections is
unsupported by evidence and cannot, thus, be accorded any iota of
consideration. At the risk of being repetitious, we state here the well established
rule that absent a showing that the prosecution witnesses were actuated by any
improper motive, their testimony is entitled to full faith and credit.
9
This being so,
the petitioner's claim of non-involvement must necessarily fail, for denial, to
reiterate, cannot prevail over positive identification.
10

Moreover, what the petitioner ultimately assails are the factual findings and
evaluation of witnesses' credibility by the trial court. It is a settled tenet, however,
that the findings of fact of the trial court is accorded not only with great weight
and respect on appeal but at times finality, provided that it is supported by
substantial evidence on record, as in this case. With respect to who as between
the prosecution and the defense witnesses are to be believed, the trial court's

46

assessment thereof enjoys a badge of respect for the reason that the trial court
has the advantage of observing the demeanor of the witnesses as they testify.
11

Anent the petitioner's attempt to obtain a new trial of his case on the ground of
newly discovered evidence, suffice it to state that it simply cannot be allowed as
correctly ruled by the Sandiganbayan for the undeniable reason that the
testimonies of Francisco Chavez and Segundo Tan which the petitioner seeks to
belatedly present do not constitute newly discovered evidence. Under the Rules
of Court,
12
the requisites for newly discovered evidence as a ground for new trial
are: (a) the evidence was discovered after the trial; (b) such evidence could not
have been discovered and produced at the trial with reasonable diligence; and (c)
that it is material, not merely cumulative, corroborative or impeaching, and is of
such weight that, if admitted, will probably change the judgment. All three
requisites must characterize the evidence sought to be introduced at the new
trial.
13
Unfortunately, by petitioner's own admission, "it is not clear on the record
why were (sic) they (testimonies of Francisco Chavez and Segundo Tan) not
presented (but) the accused (herein petitioner) had manifested that they should
have been presented . . . ."
14
Aside from the petitioner's bare assertion that the
non-presentation of these testimonies was not due to his fault or negligence, he
miserably failed to offer any evidence that the same could not have been
discovered and produced at the trial despite reasonable diligence.
15
We also
agree with the Office of the Solicitor General (OSG) which accurately observed
that the testimonies sought to be introduced as newly discovered evidence would
not alter the judgment even if admitted, thus:
Petitioner himself testified that he asked Tobias Porta to operate the
backhoe at the behest of Segundo Tan, who about one or two days before
August 7, 1988, requested him to look for a backhoe operator, because he
would be installing reinforced concrete culverts along his property at the
J.P. Laurel, McArthur Highway, Davao City. However, Mayor Rodrigo
Duterte, City Mayor of Davao City caught petitioner en flagrante
delicto directing the use and operation of the backhoe, not for the purpose
of installing reinforced concrete culverts but for his own personal gold
treasure hunting operation (TSN, April 29, 1993, p.9). Assuming, therefore,
that the testimonies of Francisco Chavez and Segundo Tan may be
admitted as newly discovered evidence, petitioner can still be held liable
for unauthorized use of the backhoe, because he was not himself
authorized to use the backhoe for treasure hunting operation; thus,
causing the government of Davao City undue injury because of the undue
wear and tear caused to the said equipment.
16


47

As a last recourse, the petitioner insists that the testimonies of Francisco Chavez
and Segundo Tan should be admitted as newly discovered evidence since the
Sandiganbayan relied on the adverse presumption arising from their non-
presentation in convicting him. This contention is unfounded and misleading. It is
true that according to the Sandiganbayan, the failure on the part of the defense to
present these vital witnesses without offering any valid reason therefor, raised
the presumption that the testimonies of Francisco Chavez and Segundo Tan
would be adverse to petitioner's interest if they were actually presented. However,
as discussed earlier, the petitioner's conviction was based on the overwhelming
and unrebutted evidence of his positive identification by the prosecution
witnesses, and not, as petitioner would have us believe, on the presumption that
the testimonies of Francisco Chavez and Segundo Tan if presented would be
adverse to the defense's case. There is, in fact, only one short paragraph in the
entire nineteen (19) page decision of the Sandiganbayan which adverts to the
non-presentation of Francisco Chavez and Segundo Tan as witnesses for the
defense.
17
A close scrutiny of the assailed decision reveals that the antecedent
facts of this case as culled from the testimonies of the witnesses were
painstakingly established by the ponente
18
in order to arrive at the correct
conclusions both of fact and of law. We cannot, thus, subscribe to the petitioner's
view and reduce the said decision into a conviction premised on an erroneous
presumption.
By taking advantage of his official position as Assistant City Engineer of Davao
City, the petitioner was able to use for his personal gain, a city government
owned Allis Backhoe without any consideration and without any authority from
the city government, thereby causing undue injury to the Davao City government
consisting in the undue wear and tear caused to the said equipment and its use
without consideration.
19

WHEREFORE, the assailed decision of the Sandiganbayan is hereby
AFFIRMED in toto.
SO ORDERED.
Narvasa, C.J ., Romero, Melo and Panganiban, J J ., concur.


48

CASE NUMBER 11
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 186487 August 15, 2011
ROSITO BAGUNU, Petitioner,
vs.
SPOUSES FRANCISCO AGGABAO & ROSENDA ACERIT, Respondents.
R E S O L U T I O N
BRION, J .:
We resolve the motion for reconsideration
1
filed by Rosito Bagunu (petitioner) to reverse
our April 13, 2009 Resolution
2
which denied his petition for review on certiorari for lack
of merit.
FACTUAL ANTECEDENTS
R.L.O. Claim No. 937/DENR Case No. 5177
The present controversy stemmed from a protest filed by the spouses Francisco
Aggabao and Rosenda Acerit (respondents) against the petitioners free patent

49

application over a parcel of unregistered land located in Caniogan, Sto. Tomas, Isabela
(subject land), pending before the Department of Environment and Natural Resources,
Region II, Tuguegarao City, Cagayan (DENR Regional Office).
The subject land was previously owned by Marcos Binag, who later sold it (first sale) to
Felicisimo Bautista (Bautista). In 1959, Bautista, in turn, sold the subject land (second
sale) to Atty. Samson Binag.
On December 12, 1961, Atty. Binag applied for a free patent
3
over the subject land with
the Bureau of Lands (now Lands Management Bureau).
4
On November 24, 1987, Atty.
Binag sold the subject land (third sale) to the petitioner,
5
who substituted for Atty. Binag
as the free patent applicant. The parties deed of sale states that the land sold to the
petitioner is the same lot subject of Atty. Binags pending free patent application.
6

The deeds evidencing the successive sale of the subject land, the Bureau of Lands
survey,
7
and the free patent applications uniformly identified the subject land as Lot
322. The deeds covering the second and third sale also uniformly identified the
boundaries of the subject land.
8

On December 28, 1992, the respondents filed a protest against the petitioners free
patent application. The respondents asserted ownership over Lot 322 based on the
Deeds of Extrajudicial Settlement with Sale, dated June 23, 1971 and April 15, 1979,
executed in their favor by the heirs of one Rafael Bautista.
9

The Office of the Regional Executive Director of the DENR conducted an ocular
inspection and formal investigation. The DENR Regional Office found out that the
petitioner actually occupies and cultivates "the area in dispute including the area
purchased by [the respondents]."
10

On July 10, 1998, the DENR Regional Office ruled that the petitioner wrongfully
included Lot 322 in his free patent application since this lot belongs to the respondents.
The DENR Regional Office ordered:
1. [The respondents to] file their appropriate public land application covering Lot
No. 322, Pls-541-D xxx;
2. [The petitioners free patent application] be amended by excluding Lot No.
322, Pls-541-D, as included in Lot No. 258;

50

3. [A] relocation survey xxx to determine the exact area as indicated in [the
parties] respective technical description of x x x Lot Nos. 258 and 322, Pls-541-
D.
11

The petitioner moved for reconsideration. The DENR Regional Office denied the motion
ruling that in determining the identity of a lot, the boundaries and not the lot number
assigned to it - are controlling. Since the boundaries indicated in the deed of sale in the
petitioners favor correspond to the boundaries of Lot 258, what the petitioner acquired
was Lot 258, notwithstanding the erroneous description of the lot sold as Lot 322.
12

On appeal, the DENR Secretary affirmed
13
the ruling of the DENR Regional Office. After
noting the differences in the boundaries stated in the parties respective Deeds of Sale,
the DENR Secretary concluded that the land claimed by the petitioner is, in fact, distinct
from that claimed by the respondents. The DENR Secretary ruled that based on the
parties respective deeds of sale, the Subdivision Plan of the lot sold to the petitioner
and Atty. Binags affidavit - claiming that the designation of Lot 322 in the Deed of Sale
in the petitioners favor is erroneous - what the petitioner really acquired was Lot 258
and not Lot 322.
14
The petitioner appealed to the Court of Appeals (CA).
COURT OF APPEALS RULING
The CA affirmed the ruling of the DENR Secretary. Applying the doctrine of primary
jurisdiction, the CA ruled that since questions on the identity of a land require a
technical determination by the appropriate administrative body, the findings of fact of the
DENR Regional Office, as affirmed by the DENR Secretary, are entitled to great
respect, if not finality.
15
The petitioner assails this ruling before the Court.
Civil Case No. 751
In the meantime, on November 22, 1994 (or during the pendency of the respondents
protest), Atty. Binag filed a complaint for reformation of instruments, covering the
second and third sale, against Bautista and the petitioner (the civil case) with the
Cabagan, Isabela Regional Trial Court (RTC). Atty. Binag alleged that while the deeds
evidencing the successive sale of the subject land correctly identified the boundaries of
the land sold, the deeds, nevertheless, erroneously identified the subject land as Lot
322, instead of Lot 258.
16

On December 9, 1994, the petitioner and Bautista filed a motion to dismiss with the
RTC, citing the pendency of the land protest before the Bureau of Lands. The RTC held
in abeyance its resolution on the motion to dismiss.
17


51

After obtaining a favorable ruling from the DENR Regional Office, the respondents
joined Atty. Binag in the civil case by filing a complaint-in-intervention against the
petitioner. The complaint-in-intervention captioned the respondents causes of action as
one for Quieting of Title, Reivindicacion and Damages.
18
The respondents alleged that
the petitioners claim over Lot 322 is a cloud on their title and ownership of Lot 322. The
respondents also alleged that they were in peaceful, continuous, public and adverse
possession of Lot 322 from the time they fully acquired it in 1979 until sometime in
August of 1992, when the petitioner, through stealth and strategy, ejected them from Lot
322 after transferring his possession from Lot 258.
19
The respondents asked the RTC to
declare them as owners of Lot 322.
After the CA affirmed the DENR Secretarys favorable resolution on the respondents
protest, the respondents asked the RTC to suspend the civil case or, alternatively, to
adopt the DENR Secretarys ruling.
20
In their prayer, the respondents asked the RTC to:
1. [Adopt] the findings of the DENR as affirmed by the Court of Appeals xxx thus,
the cause of action xxx for reformation of contracts be granted;
2. [Order the petitioner] to vacate Lot 322 xxx and his [Free Patent Application]
be amended to exclude Lot 322 xxx.
3. [Set the case] for hearing to receive evidence on the claim of the [respondents]
for damages[.]
THE PETITION
The petitioner argues that the CA erred in affirming the DENR
Secretarys jurisdiction to resolve the parties conflicting claims of ownership over Lot
322, notwithstanding that the same issue is pending with the RTC. By ruling that the
petitioner bought Lot 258 (and not Lot 322) from Atty. Binag and for adjudicating Lot 322
to the respondents, the DENR effectively reformed contracts and determined claims of
ownership over a real property matters beyond the DENRs competence to determine.
The petitioner faults the CA for applying the doctrine of primary jurisdiction since the
issue of who has a better right over Lot 322 does not involve the "specialized technical
expertise" of the DENR. On the contrary, the issue involves interpretation of contracts,
appreciation of evidence and the application of the pertinent Civil Code provisions,
which are matters within the competence of the courts.
The petitioner claims that the DENR Secretarys factual finding, as affirmed by the
CA, is contrary to the evidence. The petitioner asserts that the Deed of Sale in his favor

52

clearly identified the property sold as Lot 322, which was the same land Atty. Binag
identified in his free patent application; that the area of Lot 322, as previously
determined in a survey caused by the vendor himself (Atty. Binag), tallies with the area
stated in the deed in his favor; that he has been in possession of Lot 322 since 1987,
when it was sold to him; and that his present possession and cultivation of Lot 322 were
confirmed by the DENR Regional Office during its ocular investigation.
The petitioner also invites our attention to the incredulity of the respondents claim of
ownership over Lot 322, based on Atty. Binags testimony during the hearing on the
respondents protest. According to the petitioner, the respondents could not have
expressed interest in buying Lot 322 from Atty. Binag had they already acquired Lot 322
from the heirs of one Rafael Bautista. The petitioner adds that as early as 1979, the
respondents were already aware of Atty. Binags free patent application over Lot 322.
Yet, they filed their protest to the free patent application only in 1992 when the
petitioner had already substituted Atty. Binag. The petitioner claims that the
respondents inaction is inconsistent with their claim of ownership.
Lastly, the petitioner contests the adjudication of Lot 322 in the respondents favor by
claiming that the respondents presented no sufficient evidence to prove their (or their
predecessor-in-interests) title.
In our April 13, 2009 Resolution, we denied the petition for failure to sufficiently show
any reversible error in the assailed CA Decision and for raising substantially factual
issues. The petitioner moved for reconsideration, confining his arguments to the issue of
jurisdiction and the consequent applicability of the primary jurisdiction doctrine.
THE RULING
We deny the motion for reconsideration.
Questions of fact generally barred under Rule 45
The main thrust of the petitioners arguments refers to the alleged error of the DENR
and the CA in identifying the parcel of land that the petitioner bought an error that
adversely affected his right to apply for a free patent over the subject land. In his motion
for reconsideration, the petitioner apparently took a cue from our April 13, 2009
Resolution, denying his petition, since his present motion limitedly argues against the
DENRs jurisdiction and the CAs application of the doctrine of primary jurisdiction.
The petitioner correctly recognized the settled rule that questions of fact are generally
barred under a Rule 45 petition. In the present case, the identity of Lots 258 and 322 is

53

a central factual issue. The determination of the identity of these lots involves the task of
delineating their actual boundaries in accordance with the parties respective deeds of
sale and survey plan, among others. While there are instances where the Court departs
from the general rule on the reviewable issues under Rule 45, the petitioner did not
even attempt to show that his case falls within the recognized exceptions.
21
On top of
this legal reality, the findings and decision of the Director of Lands
22
on questions of
fact, when approved by the DENR Secretary, are generally conclusive on the
courts,
23
and even on this Court, when these factual findings are affirmed by the
appellate court. We shall consequently confine our discussions to the petitioners twin
legal issues.
The determination of the identity of a public land is within the DENRs exclusive
jurisdiction to manage and dispose of lands of the public domain
The petitioner insists that under the law
24
actions incapable of pecuniary estimation, to
which a suit for reformation of contracts belong, and those involving ownership of real
property fall within the exclusive jurisdiction of the Regional Trial Court. Since these
actions are already pending before the RTC, the DENR Secretary overstepped his
authority in excluding Lot 322 from the petitioners free patent application and ordering
the respondents to apply for a free patent over the same lot.
In an action for reformation of contract, the court determines whether the parties written
agreement reflects their true intention.
25
In the present case, this intention refers to
the identity of the land covered by the second and third sale. On the other hand, in
a reivindicatory action, the court resolves the issue of ownership of real property and the
plaintiffs entitlement to recover its full possession. In this action, the plaintiff is required
to prove not only his ownership, but also the identity of the real property he seeks to
recover.
26

While these actions ordinarily fall within the exclusive jurisdiction of the RTC, the courts
jurisdiction to resolve controversies involving ownership of real property extends only to
private lands. In the present case, neither party has asserted private ownership over Lot
322. The respondents acknowledged the public character of Lot 322 by mainly relying
on the administrative findings of the DENR in their complaint-in-intervention, instead of
asserting their own private ownership of the property. For his part, the petitioners act of
applying for a free patent with the Bureau of Lands is an acknowledgment that the land
covered by his application is a public land
27
whose management and disposition belong
to the DENR Secretary, with the assistance of the Bureau of Lands. Section 4, Chapter
1, Title XIV of Executive Order No. 292
28
reads:

54

Section 4. Powers and Functions. - The Department [of Environment and Natural
Resources] shall:
x x x
(4) Exercise supervision and control over forest lands, alienable and disposable public
lands, mineral resources and, in the process of exercising such control, impose
appropriate taxes, fees, charges, rentals and any such form of levy and collect such
revenues for the exploration, development, utilization or gathering of such resources;
x x x
(15) Exercise exclusive jurisdiction on the management and disposition of all lands of
the public domain and serve as the sole agency responsible for classification, sub-
classification, surveying and titling of lands in consultation with appropriate agencies[.]
(Underscoring supplied.)
Under Section 14(f) of Executive Order No. 192,
29
the Director of the Lands
Management Bureau has the duty, among others, to assist the DENR Secretary in
carrying out the provisions of Commonwealth Act No. 141 (C.A. No. 141)
30
by having
direct executive control of the survey, classification, lease, sale or any other forms of
concession or disposition and management of the lands of the public domain.
As the CA correctly pointed out, the present case stemmed from the protest filed by the
respondents against the petitioners free patent application. In resolving this protest, the
DENR, through the Bureau of Lands, had to resolve the issue of identity of the lot
claimed by both parties. This issue of identity of the land requires a technical
determination by the Bureau of Lands, as the administrative agency with direct control
over the disposition and management of lands of the public domain. The DENR, on the
other hand, in the exercise of its jurisdiction to manage and dispose of public lands,
must likewise determine the applicants entitlement (or lack of it) to a free patent.
(Incidentally, the DENR Regional Office still has to determine the respondents
entitlement to the issuance of a free patent
31
in their favor since it merely ordered the
exclusion of Lot 322 from the petitioners own application.) Thus, it is the DENR which
determines the respective rights of rival claimants to alienable and disposable public
lands; courts have no jurisdiction to intrude on matters properly falling within the powers
of the DENR Secretary and the Director of Lands,
32
unless grave abuse of discretion
exists.
After the DENR assumed jurisdiction over Lot 322, pursuant to its mandate, the RTC
must defer the exercise of its jurisdiction on related issues on the same matter properly

55

within its jurisdiction,
33
such as the distinct cause of action for reformation of contracts
involving the same property. Note that the contracts refer to the same property,
identified as "Lot 322," - which the DENR Regional Office, DENR Secretary and the CA
found to actually pertain to Lot 258. When an administrative agency or body is conferred
quasi-judicial functions, all controversies relating to the subject matter pertaining to its
specialization are deemed to be included within its jurisdiction since the law does not
sanction a split of jurisdiction
34

The argument that only courts of justice can adjudicate claims resoluble under the
provisions of the Civil Code is out of step with the fast-changing times. There are
hundreds of administrative bodies now performing this function by virtue of a valid
authorization from the legislature. This quasi-judicial function, as it is called, is exercised
by them as an incident of the principal power entrusted to them of regulating certain
activities falling under their particular expertise.
35

The DENR has primary jurisdiction to resolve conflicting claims of title over
public lands
The petitioner argues that the CA erred in applying the doctrine of primary jurisdiction,
claiming that the issue (of who has a better right over Lot 322) does not require the
"specialized technical expertise" of the DENR. He posits that the issue, in fact, involves
interpretation of contracts, appreciation of evidence and application of the pertinent Civil
Code provisions, which are all within the competence of regular courts.
We disagree.
Under the doctrine of primary jurisdiction, courts must refrain from determining a
controversy involving a question which is within the jurisdiction of the administrative
tribunal prior to its resolution by the latter, where the question demands the exercise of
sound administrative discretion requiring the special knowledge, experience and
services of the administrative tribunal to determine technical and intricate matters of
fact
36

In recent years, it has been the jurisprudential trend to apply [the doctrine of primary
jurisdiction] to cases involving matters that demand the special competence of
administrative agencies[. It may occur that the Court has jurisdiction to take cognizance
of a particular case, which means that the matter involved is also judicial in character.
However, if the case is such that its determination requires the expertise, specialized
skills and knowledge of the proper administrative bodies because technical matters or
intricate questions of facts are involved, then relief must first be obtained in an
administrative proceeding before a remedy will be supplied by the courts even though

56

the matter is within the proper jurisdiction of a court. This is the doctrine of primary
jurisdiction.] It applies "where a claim is originally cognizable in the courts, and comes
into play whenever enforcement of the claim requires the resolution of issues which,
under a regulatory scheme, have been placed within the special competence of an
administrative body, in such case the judicial process is suspended pending referral of
such issues to the administrative body for its view."
37

The application of the doctrine of primary jurisdiction, however, does not call for the
dismissal of the case below. It need only be suspended until after the matters within the
competence of [the Lands Management Bureau] are threshed out and determined.
Thereby, the principal purpose behind the doctrine of primary jurisdiction is salutarily
served.
38
(Emphases added.)
The resolution of conflicting claims of ownership over real property is within the regular
courts area of competence and, concededly, this issue is judicial in character. However,
regular courts would have no power to conclusively resolve this issue of ownership
given the public character of the land, since under C.A. No. 141, in relation to Executive
Order No. 192,
39
the disposition and management of public lands fall within the
exclusive jurisdiction of the Director of Lands, subject to review by the DENR
Secretary.
40

While the powers given to the DENR, through the Bureau of Lands, to alienate and
dispose of public land do not divest regular courts of jurisdiction
over possessory actions instituted by occupants or applicants (to protect their respective
possessions and occupations),
41
the respondents complaint-in-intervention does not
simply raise the issue of possession whether de jure or de facto but likewise raised
the issue of ownership as basis to recover possession. Particularly, the respondents
prayed for declaration of ownership of Lot 322.1avvphi1 Ineluctably, the RTC would
have to defer its ruling on the respondents reivindicatory action pending final
determination by the DENR, through the Lands Management Bureau, of the
respondents entitlement to a free patent, following the doctrine of primary jurisdiction.
Undoubtedly, the DENR Secretarys exclusion of Lot 322 from the petitioners free
patent application and his consequent directive for the respondents to apply for the
same lot are within the DENR Secretarys exercise of sound administrative discretion. In
the oft-cited case of Vicente Villaflor, etc. v. CA, et al,
42
which involves the decisions of
the Director of Lands and the then Minister of Natural Resources, we stressed that the
rationale underlying the doctrine of primary jurisdiction applies to questions on the
identity of the disputed public land since this matter requires a technical determination
by the Bureau of Lands. Since this issue precludes prior judicial determination, the

57

courts must stand aside even when they apparently have statutory power to proceed, in
recognition of the primary jurisdiction of the administrative agency.
WHEREFORE, we hereby DENY the motion for reconsideration. No costs.
SO ORDERED.
ARTURO D. BRION
Associate Justice

CASE NUMBER 12
SUPREME COURT
Manila
FIRST DIVISION

G.R. No. 88384 July 14, 1994
FEDERATION OF LAND REFORM FARMERS OF THE PHILIPPINES and VIC
TAGLE, petitioners,
vs.
THE COURT OF APPEALS (FIFTEENTH DIVISION), HON. PATRICIO M. PATAJO, in
his capacity as Presiding Judge, Regional Trial Court of Rizal, Branch 71, and
JAIME T. TORRES, respondents.

QUIASON, J .:
This is a petition for review on certiorari of the Decision dated May 16, 1989 of the Court
of Appeals in CA-G.R. SP No. 17243. The Decision dismissed for lack of merit the
petition for certiorari questioning the orders of the trial court, which allegedly violated the

58

rule that a temporary restraining order issued by a court shall have a lifespan of only 20
days.
I
On May 10, 1988, respondent Jaime T. Torres was ordered by then Secretary
Fulgencio S. Factoran of the Department of Environment and Natural Resources
(DENR) to vacate a parcel of land located in Boso-Boso, Antipolo, Rizal. He refused to
leave the premises, claiming that he had been in actual possession thereof for more
than 30 years. Thus, his case was referred to the Secretary of Justice, who rendered
Opinion No. 137, Series of 1988, holding that since private respondent had not shown
any proof that the land had been validly transferred to him or that his predecessor-in-
interest, Carmen Garcia, had a title to it, he could be ejected therefrom as a squatter
and be prosecuted for unlawful occupation of forest lands under Section 69 of P.D. No.
705, Revised Forestry Code of the Philippines.
On the strength of said opinion, the DENR formally demanded that private respondent
vacate the land. Again, he refused to heed the demand. Instead, he filed a complaint for
injunction before the Regional Trial Court, Antipolo, Rizal to enjoin the DENR from
ejecting him, wherein he alleged that he had a pending application for registration of title
of the property (Civil Case No. 1223-A).
In its answer, DENR alleged that private respondent was squatting on a watershed and
forest reservation. It further alleged that Proclamation No. 1283, which was issued on
June 21, 1974 and which excluded a portion of the watershed and forest reservation in
Antipolo, Rizal for townsite purposes, inadvertently included in the intended townsite the
area being claimed by private respondent. It added, however, that the error had been
rectified by Proclamation No. 1637 dated April 18, 1977, which designated certain
portions of the municipalities of San Mateo, Antipolo and Montalban in Rizal as reserved
for the Lungsod Silangan Townsite Reservation. The said area was increased to
180,000 hectares by presidential Decree No. 1396 dated June 2, 1978, thereby
embracing the areas both claimed by private respondent and petitioner Federation of
Land Reform Farmers of the Philippines (FLRFP). Since the said areas had not been
included in PFD LC Map No. 639 as alienable and disposable, they should be protected
from all kinds of entry, occupation and destruction
The DENR also alleged that private respondent had not exhausted all administrative
remedies and that the trial court had no jurisdiction to issue a writ of preliminary
injunction as such issuance was proscribed by Section 1 of P.D. No. 605. This decree
banned the issuance by courts of preliminary injunctions in cases involving

59

concessions, licenses and other permits issued by administrative officials or agencies
for the exploitation of natural resources.
On August 8, 1988, the trial court issued an order setting the hearing of the application
for a writ of preliminary injunction for August 19, 1988. On August 10, 1988, the trial
court, taking into account the length of time to resolve the application for a writ of
preliminary injunction and to prevent the same from becoming moot and academic,
issued an order for the maintenance of the status quo and restrained the defendants
from ejecting private respondent.
On August 23, 1988, upon the agreement of the parties, the trial court ordered that
the status quo be maintained and created a committee, composed of representatives of
the court, the DENR and private respondent, to conduct a survey and ocular inspection
for the purpose of pinpointing the areas allegedly titled in private respondent's name,
the Marikina Watershed Reservation, the untitled disposable and alienable lands and
the areas for townsite reservation under Proclamation No. 1283.
Before the issuance of said order, petitioner FLRFP, through its president, petitioner Vic
Tagle, had filed a motion for intervention on the ground that it had entered into a
Memorandum of Agreement with DENR for the lease of 500 hectares of the Marikina
Watershed Reservation. The motion also averred that the land being claimed by private
respondent was inalienable.
After private respondent failed to comment on the motion for intervention, the trial court
allowed petitioner FLRFP's intervention and admitted the answer-in-intervention.
However, on November 10, 1988, the trial court, noting that petitioner FLRFP's interest
as a lessee was not direct but merely collateral and that such interest may be protected
in a separate proceeding, denied the motion to intervene.
On November 12, 1988, petitioner FLRFP filed a motion to declare without force and
effect the restraining order earlier issued by the trial court arguing that said order had
long become functus officio because under Section 5, Rule 58 of the Revised Rules of
Court a temporary restraining order has a lifespan of only 20 days and that by its failure
to decide whether to grant the writ of preliminary injunction within said period, the trial
court could no longer grant the said writ.
On November 28, 1988, the trial court set aside its November 10, 1988 Order on the
ground that it had been issued "thru inadvertence." The Court, however, denied
petitioner FLRFP's motion to declare the restraining order without force and effect,
stating thus:

60

. . . While it is true that a restraining order is good for twenty days,
however, since the parties agreed to maintain the status quo before the
incident on preliminary injunction could be resolved by the Court, the
maintenance of status quo is likewise necessary since the Court has still
to wait for the result of the relocation survey and ocular inspection which
was directed by the Court in its order dated August 23, 1988 (Rollo, p. 26).
Hence, petitioners filed a petition for certiorari before this Court seeking to annul the
Orders of August 23, 1988 and November 28, 1988 (G.R. No. 86259). The petition was
referred by this Court to the Court of Appeals as there was no "special and important
reason" to justify the Court's taking cognizance thereof in the first instance.
On May 16, 1989, the Court of Appeals dismissed the petition for lack of merit. The
appellate court underscored the fact that it was upon the agreement of the parties that
the status quo was maintained.
II
Aggrieved by said decision, petitioners filed the instant petition raising as the main issue
the question whether the trial court could extend the temporary restraining order beyond
the 20-day period.
III
The "20-day Rule" is found in Section 5, Rule 58 of the Revised Rules of Court, which
provides:
Preliminary injunction not granted without notice; issuance of restraining
order. No preliminary injunction shall be granted without notice to the
defendant. If it shall appear from the facts shown by affidavits or by the
verified complaint that great or irreparable injury would result to the
applicant before the matter can be heard on notice, the judge to whom the
application for preliminary injunction was made, may issue a restraining
order to be effective only for a period of twenty days from date of its
issuance. Within the said twenty-day period, the judge must cause an
order to be served on the defendant, requiring him to show cause, at a
specified time and place, why the injunction should not be granted, and
determine within the same period whether or not the preliminary injunction
shall be granted, and shall accordingly issue the corresponding order. In
the event that the application for preliminary injunction is denied, the
restraining order is deemed automatically vacated.

61

Nothing herein contained shall be construed to impair, affect or modify in
any way any rights granted by, or rules pertaining to injunctions contained
in, existing agrarian, labor or social legislation.
The August 8, 1988 Order explained:
In the instant case, plaintiff seeks for the issuance of Preliminary
Injunction with prayer for a restraining order to restrain defendants, their
agents, representatives, employees or any person or persons acting in
their behalf to eject the plaintiff; to demolish the several houses
constructed thereon and the removal of the fences which kept the cattle
and carabaos in the area.
It appearing from the facts shown by the verified complaint that great
irreparable injury would resort (sic) to the plaintiff before the matter can be
heard on notice, let the said application for preliminary injunction be set for
hearing on August 19, 1988 at 8:30 o'clock (sic) in the morning, at which
time and date, defendants are directed to appear in Court to show cause if
any why the injunction should not be granted.
To ensure receipt of a copy of this Order, the Process Server, Isaias
Leyva, is directed to serve the same personally to the defendants.
Meanwhile, let summons and copy of the complaint be likewise served to
the defendants (Rollo, p. 21, Emphasis supplied).
Apparently, because this Order does not clearly show what acts were being restrained,
the trial court issued the August 10, 1988 Order as a supplement. Thus, the said Order
states in pertinent part:
. . . . Considering that it will take time before the incident on the prayer for
injunction could be resolved by the Court and in order not to make the
incident moot and academic, let a status quo be ordered, and to restrain
the defendants, their agents, representatives, employees or any person or
persons acting in their behalf to eject the plaintiff, to demolish the several
houses constructed thereon and the removal of the fences which kept the
cattle and the carabaos (Rollo, p. 22).
Counted from August 8, 1988, the temporary restraining order automatically expired on
August 28, 1988, the end of the twentieth day from its issuance (Johannesburg
Packaging Corporation v. Court of Appeals, 216 SCRA 439 [1992]). Thus, when the trial
court issued the Order of August 23, 1988 directing the maintenance of the status

62

quo upon agreement of the parties, the temporary restraining order was still in full force
and effect.
Before the intervention of petitioner FLRFP was allowed, the original parties were
private respondent and DENR. Be it noted that the intervention was first disallowed on
the ground that the interest of petitioner FLRFP as a lessee from DENR of a portion of
the land in dispute was merely collateral. That the intervention was eventually allowed
on reconsideration did not alter the fact that the interest of petitioner FLRFP is collateral.
The Memorandum of Agreement between petitioner FLRFP and DENR, as well as
FLRFP's tree-planting activity, may only be implemented in the event that private
respondent should fail to obtain the writ of preliminary injunction for only then may
DENR eject private respondent. Under the circumstances, therefore, petitioner FLRFP's
interest in Civil Case No. 1223-A is not merely contingent and expectant but also
inchoate and subordinate to that of DENR's. It is not actual, direct and immediate.
In Pardo v. Veridiano II, 204 SCRA 654 (1991), we held that sublessees cannot invoke
any right superior to that of their sublessor, as they do not have a clear and positive
right to the protection of the ancillary relief of preliminary injunction against a third party
(See also Sipin v. CFI of Manila, 74 Phil. 649 [1944]). By the same token, a lessee
cannot have a right superior to that of his lessor over the premises in a dispute between
the lessor and a third party regarding the ownership or possession of the said premises.
Ordinarily, the efficacy of a temporary restraining order is non-extendible and the courts
have no discretion to extend the same considering the mandatory tenor of the Rule.
However, there is no reason to prevent a court from extending the 20-day period when
the parties themselves ask for such extension or for the maintenance of the status quo.
The questioned Order of August 23, 1988 was necessary for an orderly resolution of the
application for a writ of preliminary injunction. It states:
Upon agreement of parties, the status quo is hereby maintained. As
further agreed by the parties in connection with the verification, relocation
or ocular inspection the Court hereby appoints a Committee which is
composed of the Court Interpreter and Legal Researcher representing the
Court, Geodetic Engineer Romulo Unciano representing the defendants
and Junco Surveying Office representing the plaintiffs and the parties are
directed to be present in the premises starting August 29, 1988 at 1:00
o'clock (sic) in the afternoon and every afternoon until it is finished.

63

Said Survey and ocular inspection is for the purpose of pinpointing the
area allegedly titled in the name of Plaintiff Jaime Torres, the area of
Marikina Watershed Reservation, the disposable and alienable area not
yet titled in favor of any other person and the area for the townsite
reservation pursuant to Proclamation No. 1283 now being claimed by the
Federation of Land Reform Farmers and earmarked by the government for
them (Rollo, p. 23, Emphasis supplied).
Clearly then, this Order was issued to maintain the status quo while the committee
ascertained facts necessary in resolving whether or not the writ of preliminary injunction
should be issued. By issuing said Order, the trial court should be deemed as merely
exercising its inherent power under Section 5 (b), Rule 135 of the Revised Rules of
Court "to enforce order in proceedings before it" in the absence of any showing that it
has gravely abused its discretion in so doing (Johannesburg Packaging Corporation v.
Court of Appeals, supra).

The resolution of the application for writ of preliminary injunction in Civil Case No. 1223-
A has not been rendered moot and academic by the issuance of a preliminary injunction
by the same court in Civil Case No. 1300-A. Civil Case No. 1300-A was filed by Jaime
Torres and Myrna M. Torres for the cancellation of the Memorandum of Agreement
between the Bureau of Forest Development (BFD), now the Forest Management
Bureau (FMB) and petitioner FLRFP, and for quieting of title with restraining order and
preliminary injunction. The causes of action in the two cases being distinct from each
other, the issuance of the preliminary injunction in Civil Case No. 1300-A did not
necessarily mean that the enforcement of the ejectment order sought to be enjoined in
Civil Case No. 1223-A had also been halted. The court has still to determine the
propriety of issuing a writ of preliminary injunction in the latter case, the proceedings of
which had been suspended by the institution of the instant petition. The trial court shall
determine in Civil Case No. 1223-A: (1) the existence of private respondent's alleged
right to the property which needed protection by an injunction; and (2) the particular acts
against which the injunction is to be directed as violative of said right (Director of Forest
Administration v. Fernandez, 192 SCRA 121, 139 [1990]). However, for an orderly
administration of justice, the two cases should be consolidated.
WHEREFORE, the instant petition for review on certiorari is DENIED and the trial court
is DIRECTED to consolidate Civil Case Nos. 1223-A and 1300-A and to proceed with
dispatch in resolving them.
SO ORDERED.

64

Padilla, Davide, Jr. and Kapunan, JJ., concur.


65

CASE NUMBER 13
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 199501 March 6, 2013
REPUBLIC OF THE PHILIPPINES, represented by the REGIONAL EXECUTIVE
DIRECTOR, DEPARTMENT OF ENVIRONMENT AND NATURAL RESOURCES,
REGION III, Petitioner,
vs.
HEIRS OF ENRIQUE ORIBELLO, JR. and THE REGISTER OF DEEDS OF
OLONGAPO CITY, Respondents.
D E C I S I O N
CARPIO, J .:
The Case
This petition for review
1
assails the 29 April 2011 Decision
2
and 16 November 2011
Resolution
3
of the Court of Appeals in CA-G.R. CV No. 90559. The Court of Appeals
denied petitioner Republic of the Philippines' (peitioner) appeal of the Order of the
Regional Trial Court, Olongapo City, Branch 72,
4
which dismissed petitioner's action for
reversion and cancellation of Original Certificate of Title (OCT) No. P-5004 in the name
of Enrique Oribello, Jr. (Oribello ).
The Facts
The present controversy involves a parcel of land situated in Nagbaculao, Kalaklan,
Olongapo City, which was once classified as forest land by the Bureau of Forest
Development. The property was originally occupied by a certain Valentin Fernandez
(Valentin) in 1968 by virtue of a Residential Permit issued by the same government
office.

66

Upon Valentins death, his son, Odillon Fernandez (Odillon), continued to occupy the
property, together with spouses Ruperto and Matilde Apog. Sometime in 1969, Odillon
sold the property to a certain Mrs. Florentina Balcita who, later on, sold the same
property to Oribello. Oribello filed a Miscellaneous Sales Application with the
Department of Environment and Natural Resources (DENR), which denied the
application since the land remained forest land.
On 20 February 1987, the subject property was declared open to disposition under the
Public Land Act. Thus, Oribello filed another Miscellaneous Sales Application on 6 April
1987.
On 27 March 1990, the Director of Lands issued an Order for the issuance of a patent in
favor of Oribello. On even date, Miscellaneous Sales Patent No. 12756 and OCT No. P-
5004 were issued to Oribello.
Matilde Apog (Apog) and Aliseo San Juan (San Juan),
5
claiming to be actual occupants
of the property, protested with the DENR the issuance of the sales patent and OCT in
favor of Oribello. They sought the annulment of the sales patent, arguing that Oribello
and Land Inspector Dominador Laxa (Laxa) committed fraud and misrepresentation in
the approval of the Miscellaneous Sales Application of Oribello. They alleged that Laxa
submitted a false report to the Director of Lands, by stating that there were no other
claimants to the property and that Oribello was the actual occupant thereof, when the
contrary was true.
After investigation, the Regional Executive Director of the DENR found substantial
evidence that fraud and misrepresentation were committed in the issuance of the sales
patent in favor of Oribello, warranting a reversion suit.
On 25 March 1992, the Office of the Solicitor General, representing petitioner, instituted
a complaint for reversion and cancellation of title before the Regional Trial Court of
Olongapo City, docketed as Civil Case No. 225-0-92. The case was thereafter
consolidated with Civil Case No. 233-0-91, a complaint for recovery of possession filed
by Oribello against Apog and San Juan.
During the trial, petitioner marked numerous documentary evidence and presented
several witnesses on various hearing dates.
6

In an Order dated 20 December 1996, the trial court warned petitioner on the possible
effect of its non-appearance on the next scheduled hearing, thus:

67

WHEREFORE, let the continuation of the reception of evidence for the Republic of the
Philippines be reset to February 14, 21 and 28, 1997, all at 10:00 oclock in the morning,
as previously scheduled.
The Solicitor General is warned that should his designated lawyer or any of his
assistants fail to appear on the dates above-stated, the Court will be constrained to
consider the presentation of evidence for the Republic of the Philippines as terminated.
Atty. Dumpit, therefore, is advised that he bring his witnesses on said dates to testify for
the defendants Matilde Apog and Eliseo San Juan should the Solicitor General fail to
appear and present evidence.
x x x x
SO ORDERED.
7
(Emphasis supplied)
On the hearing of 4 April 1997, Atty. Oscar Pascua, representing petitioner, presented a
witness on the stand.For petitioners failure to appear on the hearing of 12 September
1997, the trial court issued an Order
8
on even date holding as follows:
On July 25, 1997, this Court issued an Order, quoted as follows:
x x x x
On several occasions when these cases were set for trial, neither Atty. Barcelo nor Atty.
Pascua appeared, constraining the Court to postpone the hearing. The actuations of
both lawyers result to delay in the early termination of these cases which have been
pending since 1992.
x x x x
WHEREFORE, the Republic of the Philippines is hereby deemed to have abandoned
the case for the government.
Attorney Dumpit for the defendant Matilde Apog, et al., is hereby required to manifest in
writing on whether or not he is adopting the evidence already presented by the Republic
of the Philippines, and if so, to make his offer of evidence within 30 days from today.
Atty. Leyco is given 10 days from receipt of a copy of his offer to file his comment or
opposition. Let the reception of evidence, if there be any on any part of Enrique Oribello,
be set on October 24, 1997 at 10:00 a.m. as previously scheduled. And in addition
thereto on November 21, and December 5, 1997 also both at 10:00 a.m. To give way to
the filing of these pleadings, cancel the hearing scheduled for October 3, 1997.

68

Upon receipt of proof from the Post Office by this Court which will show that Atty.
Pascua has received a copy of the Order dated July 25, 1997, the Motion to hold him in
contempt will be deemed submitted for resolution. Furnish Atty. Barcelo, the Solicitor
General, the Executive Regional Director, DENR, R-III, Angeles City, and Atty. Oscar
Pascua, a copy of this Order. Attys. Dumpit and Leyco are both notified in open court of
this Order.
SO ORDERED.
9

The trial of the consolidated cases continued and the reception of evidence of the
private parties proceeded.
However, in its Order of 21 February 2005, the trial court dismissed the consolidated
cases without prejudice for non-substitution of the deceased plaintiff (Oribello) and his
counsel, to wit:
Considering that the plaintiffs counsel is already dead, and the plaintiff is likewise dead
already, there being no substitution of party-plaintiffs or any record showing the heirs or
party in interest, these cases are dismissed without prejudice.
10

Petitioner moved for reconsideration, contending that the Order applied exclusively to
Civil Case No. 233-0-91 (for recovery of possession) and did not affect Civil Case No.
225-0-92 (for reversion of property). Petitioner prayed that it be allowed to present its
evidence.
Acting favorably on the motion, the trial court allowed the continuation of the
presentation of petitioners evidence in its Order dated 29 June 2005.
11

Aggrieved, Oribellos heirs filed a Manifestation and Motion, bringing to the attention of
the trial court the previous 12 September 1997 Order declaring petitioner to have
abandoned the reversion case. Oribellos heirs pointed out that from the time petitioner
received the Order in 1997, it did nothing to question the same, making the Order final.
In its Resolution of 12 July 2006, the trial court recalled its 29 June 2005 Order, and
declared instead:
Finding merit in defendants Motion and Manifestation, the Order dated 29 June 2005
granting the Motion for Reconsideration filed by the Solicitor General is recalled and the
above-entitled case is DISMISSED.
SO RESOLVED.
12


69

Petitioner appealed to the Court of Appeals.
The Ruling of the Court of Appeals
The Court of Appeals denied petitioners appeal. The Court of Appeals held "that the
remedy of appeal is no longer available" to petitioner. The appellate court agreed with
respondents that petitioner has lost its right to participate in the proceedings of Civil
Case No. 225-0-92 when it failed to question the trial courts 12 September 1997 Order,
declaring it to have abandoned the case. As a consequence of petitioners inaction,
such order inevitably became final.
Moreover, the Court of Appeals ruled that petitioner is barred by laches and estoppel for
failing to challenge the 12 September 1997 Order after almost a decade from receipt
thereof. The appellate court stated that "while the general rule is that an action to
recover lands of public domain is imprescriptible, said right can be barred by laches or
estoppel."
The Court of Appeals disposed of the case as follows:
WHEREFORE, the foregoing premises considered, the instant appeal is hereby
DENIED for lack of merit.
SO ORDERED.
13
(Emphasis in the original)
The Court of Appeals denied the motion for reconsideration.
The Issues
Petitioner anchors the present petition on the following grounds:
1. Interlocutory orders are not subject of appeal.
2. The consolidated cases, without any order of severance, cannot be subject of
multiple appeals.
3. There can be no private ownership over an unclassified public forest.
The Ruling of the Court
Is the 12 September 1997 Order interlocutory?

70

Petitioner contends that the 12 September 1997 Order of the trial court, deeming it to
have abandoned the case, is interlocutory in nature; thus, is not
appealable.
14
Respondents argue otherwise, maintaining that such Order is a dismissal
of the complaint on the ground of failure to prosecute which is, under the
Rules,
15
considered an adjudication on the merits, and hence appealable.
We agree with petitioner.
A final order is defined as "one which disposes of the subject matter in its entirety or
terminates a particular proceeding or action, leaving nothing else to be done but to
enforce by execution what has been determined by the court."
16

Conversely, an interlocutory order "does not dispose of the case completely but leaves
something to be decided upon"
17
by the court. Its effects are merely provisional in
character and substantial proceedings have to be further conducted by the court in
order to finally resolve the issue or controversy.
18

Based on the records, petitioner has presented testimonial evidence on various hearing
dates and marked numerous documents during the trial of Civil Case No. 225-0-92.
Such acts do not manifest lack of interest to prosecute. Admittedly there was delay in
this case. However, such delay is not the delay warranting dismissal of the complaint.
To be a sufficient ground for dismissal, delay must not only be lengthy but also
unnecessary resulting in the trifling of court processes.
19
There is no proof that
petitioner intended to delay the proceedings in this case, much less abuse judicial
processes.
While petitioner failed to appear on the hearing of 12 September 1997, such failure
does not constitute a ground for the dismissal of the reversion complaint for failure to
prosecute. Petitioners non-appearance on that date should simply be construed as a
waiver of the right to present additional evidence.
20

We note that prior to the issuance of the 12 September 1997 Order, the trial court
already warned petitioner on the likely adverse effect of its non-appearance on the next
hearing date. If petitioner fails to attend the next scheduled hearing, the trial court would
consider petitioners presentation of evidence as terminated. Termination of
presentation of a partys evidence does not equate to dismissal of the complaint for
failure to prosecute. In fact, the trial court merely "deemed" petitioner to have
abandoned the case without stating expressly and unequivocally that the complaint for
reversion was dismissed. Had the trial court declared, in no uncertain terms, that the
reversion suit was dismissed for failure to prosecute, there is no doubt that petitioner

71

would have questioned such ruling, as it now did with respect to the trial courts 29 June
2005 Order.
While it is within the trial courts discretion to dismiss motu proprio the complaint on the
ground of plaintiffs failure to prosecute, it must be exercised with caution. Resort to
such action must be determined according to the procedural history of each case, the
situation at the time of the dismissal, and the diligence (or the lack thereof) of the
plaintiff to proceed therein.
21
As the Court held in Gomez v. Alcantara,
22
if a lesser
sanction would achieve the same result, then dismissal should not be resorted to.
Unless a partys conduct is so indifferent, irresponsible, contumacious or slothful as to
provide substantial grounds for dismissal, i.e., equivalent to default or non-appearance
in the case, the courts should consider lesser sanctions which would still amount to
achieving the desired end. In the absence of a pattern or scheme to delay the
disposition of the case or of a wanton failure to observe the mandatory requirement of
the rules on the part of the plaintiff, as in the case at bar, courts should decide to
dispense with rather than wield their authority to dismiss.
23
(Emphasis supplied)
Notably, the trial court, even after its supposed "dismissal" of the case for petitioners
abandonment, continued to recognize petitioners personality in its proceedings. In fact,
in its Order of 16 January 1998, well beyond the "dismissal" on 12 September 1997, the
trial court directed the service of such order to the Solicitor General, to wit:
x x x x
Should Atty. Dumpit fail to submit the said offer of evidence, it will be deemed a waiver
on his part to do so. Atty. Leyco announced that he is presenting evidence for and in
behalf of the defendants Oribello in Civil Case No. 225-0-92 and as plaintiff in Civil Case
No. 233-0-91.
To give way to the filing of said pleadings, cancel the hearing on February 20, 1998. Let
the reception of evidence for the plaintiff Oribellos be set on March 20, 1998 at 9:00
a.m.. Attys. Leyco and Dumpit are notified in open court. Furnish a copy of this order the
Solicitor General, DENR Office in Angeles City, as well as Atty. Pascua.
24
(Emphasis
supplied)
In addition, the above Order states that Oribellos counsel was presenting evidence on
the two consolidated cases. This means that Oribello himself continued to recognize the
pendency of the reversion suit (Civil Case No. 225-0-92), contrary to his subsequent
allegation that such case has already been dismissed.

72

Are the consolidated cases subject to multiple appeals?
Section 1, Rule 31 of the Rules of Court provides:
SECTION 1. Consolidation. When actions involving a common question of law or fact
are pending before the court, it may order a joint hearing or trial of any or all the matters
in issue in the actions; it may order all the actions consolidated, and it may make such
orders concerning proceedings therein as may tend to avoid unnecessary costs or
delay.
Consolidation is a procedural device to aid the court in deciding how cases in its docket
are to be tried so that the business of the court may be dispatched expeditiously and
with economy while providing justice to the parties.
25
To promote this end, the rule
allows the consolidation and a single trial of several cases in the courts docket, or the
consolidation of issues within those cases.
26
The Court explained, thus:
In the context of legal procedure, the term "consolidation" is used in three different
senses:
(1) Where all except one of several actions are stayed until one is tried, in which
case the judgment in the one trial is conclusive as to the others. This is not
actually consolidation but is referred to as such. (quasi-consolidation)
(2) Where several actions are combined into one, lose their separate identity,
and become a single action in which a single judgment is rendered. This is
illustrated by a situation where several actions are pending between the same
parties stating claims which might have been set out originally in one complaint.
(actual consolidation)1wphi1
(3) Where several actions are ordered to be tried together but each retains its
separate character and requires the entry of a separate judgment. This type of
consolidation does not merge the suits into a single action, or cause the parties
to one action to be parties to the other. (consolidation for trial)
27

In the present case, the complaint for reversion filed by petitioner (Civil Case No. 225-0-
92) was consolidated with the complaint for recovery of possession filed by Oribello
(Civil Case No. 223-0-91). While these two cases involve common questions of law and
fact,
28
each action retains its separate and distinct character. The reversion suit settles
whether the subject land will be reverted to the State, while the recovery of possession
case determines which private party has the better right of possession over the subject
property. These cases, involving different issues and seeking different remedies, require

73

the rendition and entry of separate judgments. The consolidation is merely for joint trial
of the cases. Notably, the complaint for recovery of possession proceeded
independently of the reversion case, and was disposed of accordingly by the trial court.
Since each action does not lose its distinct character, severance of one action from the
other is not necessary to appeal a judgment already rendered in one action. There is no
rule or law prohibiting the appeal of a judgment or part of a judgment in one case which
is consolidated with other cases. Further, severance is within the sound discretion of the
court for convenience or to avoid prejudice. It is not mandatory under the Rules of Court
that the court sever one case from the other cases before a party can appeal an
adverse ruling on such case.
Is the property unclassified public forest?
In its petition, petitioner contended that the subject property remains unclassified public
forest, incapable of private appropriation. In its complaint, petitioner alleged that Oribello
committed fraud and misrepresentation in acquiring the subject property.
This Court is not a trier of facts. Fraud is a question offact.
29
Whether there was fraud
and misrepresentation in the issuance of the sales patent in favor of Oribello calls for a
thorough evaluation of the parties' evidence. Thus, this Court will have to remand the
reversion case to the trial court for further proceedings in order to resolve this issue and
accordingly dispose of the case based on the parties' evidence on record.
WHEREFORE, the Court GRANTS the petition IN PART and SETS ASIDE the assailed
Decision and Resolution of the Court of Appeals. The reversion case is remanded to the
trial court for further proceedings. The trial court is ordered to resolve the reversion case
with utmost dispatch.
SO ORDERED.
ANTONIO T. CARPIO
Associate Justice

CASE NUMBER 14

74

SUPREME COURT
Manila
EN BANC
G.R. No. 127882 January 27, 2004
LA BUGAL-B'LAAN TRIBAL ASSOCIATION, INC., represented by its Chairman
F'LONG MIGUEL M. LUMAYONG, WIGBERTO E. TAADA, PONCIANO
BENNAGEN, JAIME TADEO, RENATO R. CONSTANTINO, JR., F'LONG AGUSTIN
M. DABIE, ROBERTO P. AMLOY, RAQIM L. DABIE, SIMEON H. DOLOJO, IMELDA
M. GANDON, LENY B. GUSANAN, MARCELO L. GUSANAN, QUINTOL A.
LABUAYAN, LOMINGGES D. LAWAY, BENITA P. TACUAYAN, minors JOLY L.
BUGOY, represented by his father UNDERO D. BUGOY, ROGER M. DADING,
represented by his father ANTONIO L. DADING, ROMY M. LAGARO, represented
by his father TOTING A. LAGARO, MIKENY JONG B. LUMAYONG, represented by
his father MIGUEL M. LUMAYONG, RENE T. MIGUEL, represented by his mother
EDITHA T. MIGUEL, ALDEMAR L. SAL, represented by his father DANNY M. SAL,
DAISY RECARSE, represented by her mother LYDIA S. SANTOS, EDWARD M.
EMUY, ALAN P. MAMPARAIR, MARIO L. MANGCAL, ALDEN S. TUSAN, AMPARO
S. YAP, VIRGILIO CULAR, MARVIC M.V.F. LEONEN, JULIA REGINA CULAR, GIAN
CARLO CULAR, VIRGILIO CULAR, JR., represented by their father VIRGILIO
CULAR, PAUL ANTONIO P. VILLAMOR, represented by his parents JOSE
VILLAMOR and ELIZABETH PUA-VILLAMOR, ANA GININA R. TALJA, represented
by her father MARIO JOSE B. TALJA, SHARMAINE R. CUNANAN, represented by
her father ALFREDO M. CUNANAN, ANTONIO JOSE A. VITUG III, represented by
his mother ANNALIZA A. VITUG, LEAN D. NARVADEZ, represented by his father
MANUEL E. NARVADEZ, JR., ROSERIO MARALAG LINGATING, represented by
her father RIO OLIMPIO A. LINGATING, MARIO JOSE B. TALJA, DAVID E. DE
VERA, MARIA MILAGROS L. SAN JOSE, SR., SUSAN O. BOLANIO, OND, LOLITA
G. DEMONTEVERDE, BENJIE L. NEQUINTO,
1
ROSE LILIA S. ROMANO, ROBERTO
S. VERZOLA, EDUARDO AURELIO C. REYES, LEAN LOUEL A. PERIA,
represented by his father ELPIDIO V. PERIA,
2
GREEN FORUM PHILIPPINES,
GREEN FORUM WESTERN VISAYAS, (GF-WV), ENVIRONMETAL LEGAL
ASSISTANCE CENTER (ELAC), PHILIPPINE KAISAHAN TUNGO SA KAUNLARAN
NG KANAYUNAN AT REPORMANG PANSAKAHAN (KAISAHAN),
3
KAISAHAN
TUNGO SA KAUNLARAN NG KANAYUNAN AT REPORMANG PANSAKAHAN
(KAISAHAN), PARTNERSHIP FOR AGRARIAN REFORM and RURAL
DEVELOPMENT SERVICES, INC. (PARRDS), PHILIPPINE PART`NERSHIP FOR
THE DEVELOPMENT OF HUMAN RESOURCES IN THE RURAL AREAS, INC.

75

(PHILDHRRA), WOMEN'S LEGAL BUREAU (WLB), CENTER FOR ALTERNATIVE
DEVELOPMENT INITIATIVES, INC. (CADI), UPLAND DEVELOPMENT INSTITUTE
(UDI), KINAIYAHAN FOUNDATION, INC., SENTRO NG ALTERNATIBONG LINGAP
PANLIGAL (SALIGAN), LEGAL RIGHTS AND NATURAL RESOURCES CENTER,
INC. (LRC), petitioners,
vs.
VICTOR O. RAMOS, SECRETARY, DEPARTMENT OF ENVIRONMENT AND
NATURAL RESOURCES (DENR), HORACIO RAMOS, DIRECTOR, MINES AND
GEOSCIENCES BUREAU (MGB-DENR), RUBEN TORRES, EXECUTIVE
SECRETARY, and WMC (PHILIPPINES), INC.
4
respondents.

D E C I S I O N
CARPIO-MORALES, J .:
The present petition for mandamus and prohibition assails the constitutionality of
Republic Act No. 7942,
5
otherwise known as the PHILIPPINE MINING ACT OF 1995,
along with the Implementing Rules and Regulations issued pursuant thereto,
Department of Environment and Natural Resources (DENR) Administrative Order 96-
40, and of the Financial and Technical Assistance Agreement (FTAA) entered into on
March 30, 1995 by the Republic of the Philippines and WMC (Philippines), Inc.
(WMCP), a corporation organized under Philippine laws.
On July 25, 1987, then President Corazon C. Aquino issued Executive Order (E.O.) No.
279
6
authorizing the DENR Secretary to accept, consider and evaluate proposals from
foreign-owned corporations or foreign investors for contracts or agreements involving
either technical or financial assistance for large-scale exploration, development, and
utilization of minerals, which, upon appropriate recommendation of the Secretary, the
President may execute with the foreign proponent. In entering into such proposals, the
President shall consider the real contributions to the economic growth and general
welfare of the country that will be realized, as well as the development and use of local
scientific and technical resources that will be promoted by the proposed contract or
agreement. Until Congress shall determine otherwise, large-scale mining, for purpose of
this Section, shall mean those proposals for contracts or agreements for mineral
resources exploration, development, and utilization involving a committed capital
investment in a single mining unit project of at least Fifty Million Dollars in United States
Currency (US $50,000,000.00).
7


76

On March 3, 1995, then President Fidel V. Ramos approved R.A. No. 7942 to "govern
the exploration, development, utilization and processing of all mineral resources."
8
R.A.
No. 7942 defines the modes of mineral agreements for mining operations,
9
outlines the
procedure for their filing and approval,
10
assignment/transfer
11
and withdrawal,
12
and
fixes their terms.
13
Similar provisions govern financial or technical assistance
agreements.
14

The law prescribes the qualifications of contractors
15
and grants them certain rights,
including timber,
16
water
17
and easement
18
rights, and the right to possess
explosives.
19
Surface owners, occupants, or concessionaires are forbidden from
preventing holders of mining rights from entering private lands and concession
areas.
20
A procedure for the settlement of conflicts is likewise provided for.
21

The Act restricts the conditions for exploration,
22
quarry
23
and other
24
permits. It
regulates the transport, sale and processing of minerals,
25
and promotes the
development of mining communities, science and mining technology,
26
and safety and
environmental protection.
27

The government's share in the agreements is spelled out and allocated,
28
taxes and
fees are imposed,
29
incentives granted.
30
Aside from penalizing certain acts,
31
the law
likewise specifies grounds for the cancellation, revocation and termination of
agreements and permits.
32

On April 9, 1995, 30 days following its publication on March 10, 1995 in Malaya and
Manila Times, two newspapers of general circulation, R.A. No. 7942 took
effect.
33
Shortly before the effectivity of R.A. No. 7942, however, or on March 30, 1995,
the President entered into an FTAA with WMCP covering 99,387 hectares of land in
South Cotabato, Sultan Kudarat, Davao del Sur and North Cotabato.
34

On August 15, 1995, then DENR Secretary Victor O. Ramos issued DENR
Administrative Order (DAO) No. 95-23, s. 1995, otherwise known as the Implementing
Rules and Regulations of R.A. No. 7942. This was later repealed by DAO No. 96-40, s.
1996 which was adopted on December 20, 1996.
On January 10, 1997, counsels for petitioners sent a letter to the DENR Secretary
demanding that the DENR stop the implementation of R.A. No. 7942 and DAO No. 96-
40,
35
giving the DENR fifteen days from receipt
36
to act thereon. The DENR, however,
has yet to respond or act on petitioners' letter.
37

Petitioners thus filed the present petition for prohibition and mandamus, with a prayer
for a temporary restraining order. They allege that at the time of the filing of the petition,

77

100 FTAA applications had already been filed, covering an area of 8.4 million
hectares,
38
64 of which applications are by fully foreign-owned corporations covering a
total of 5.8 million hectares, and at least one by a fully foreign-owned mining company
over offshore areas.
39

Petitioners claim that the DENR Secretary acted without or in excess of jurisdiction:
I
x x x in signing and promulgating DENR Administrative Order No. 96-40 implementing
Republic Act No. 7942, the latter being unconstitutional in that it allows fully foreign
owned corporations to explore, develop, utilize and exploit mineral resources in a
manner contrary to Section 2, paragraph 4, Article XII of the Constitution;
II
Republic Act No. 7942, the latter being unconstitutional in that it allows the taking of
private property without the determination of public use and for just compensation;
III
Republic Act No. 7942, the latter being unconstitutional in that it violates Sec. 1, Art. III
of the Constitution;
IV
Republic Act No. 7942, the latter being unconstitutional in that it allows enjoyment by
foreign citizens as well as fully foreign owned corporations of the nation's marine wealth
contrary to Section 2, paragraph 2 of Article XII of the Constitution;
V
Republic Act No. 7942, the latter being unconstitutional in that it allows priority to foreign
and fully foreign owned corporations in the exploration, development and utilization of
mineral resources contrary to Article XII of the Constitution;
VI

78

Republic Act No. 7942, the latter being unconstitutional in that it allows the inequitable
sharing of wealth contrary to Sections [sic] 1, paragraph 1, and Section 2, paragraph 4[,]
[Article XII] of the Constitution;
VII
x x x in recommending approval of and implementing the Financial and Technical
Assistance Agreement between the President of the Republic of the Philippines and
Western Mining Corporation Philippines Inc. because the same is illegal and
unconstitutional.
40

They pray that the Court issue an order:
(a) Permanently enjoining respondents from acting on any application for
Financial or Technical Assistance Agreements;
(b) Declaring the Philippine Mining Act of 1995 or Republic Act No. 7942 as
unconstitutional and null and void;
(c) Declaring the Implementing Rules and Regulations of the Philippine Mining
Act contained in DENR Administrative Order No. 96-40 and all other similar
administrative issuances as unconstitutional and null and void; and
(d) Cancelling the Financial and Technical Assistance Agreement issued to
Western Mining Philippines, Inc. as unconstitutional, illegal and null and void.
41

Impleaded as public respondents are Ruben Torres, the then Executive Secretary,
Victor O. Ramos, the then DENR Secretary, and Horacio Ramos, Director of the Mines
and Geosciences Bureau of the DENR. Also impleaded is private respondent WMCP,
which entered into the assailed FTAA with the Philippine Government. WMCP is owned
by WMC Resources International Pty., Ltd. (WMC), "a wholly owned subsidiary of
Western Mining Corporation Holdings Limited, a publicly listed major Australian mining
and exploration company."
42
By WMCP's information, "it is a 100% owned subsidiary of
WMC LIMITED."
43

Respondents, aside from meeting petitioners' contentions, argue that the requisites for
judicial inquiry have not been met and that the petition does not comply with the criteria
for prohibition and mandamus. Additionally, respondent WMCP argues that there has
been a violation of the rule on hierarchy of courts.

79

After petitioners filed their reply, this Court granted due course to the petition. The
parties have since filed their respective memoranda.
WMCP subsequently filed a Manifestation dated September 25, 2002 alleging that on
January 23, 2001, WMC sold all its shares in WMCP to Sagittarius Mines, Inc.
(Sagittarius), a corporation organized under Philippine laws.
44
WMCP was subsequently
renamed "Tampakan Mineral Resources Corporation."
45
WMCP claims that at least
60% of the equity of Sagittarius is owned by Filipinos and/or Filipino-owned corporations
while about 40% is owned by Indophil Resources NL, an Australian company.
46
It
further claims that by such sale and transfer of shares, "WMCP has ceased to be
connected in any way with WMC."
47

By virtue of such sale and transfer, the DENR Secretary, by Order of December 18,
2001,
48
approved the transfer and registration of the subject FTAA from WMCP to
Sagittarius. Said Order, however, was appealed by Lepanto Consolidated Mining Co.
(Lepanto) to the Office of the President which upheld it by Decision of July 23,
2002.
49
Its motion for reconsideration having been denied by the Office of the President
by Resolution of November 12, 2002,
50
Lepanto filed a petition for review
51
before the
Court of Appeals. Incidentally, two other petitions for review related to the approval of
the transfer and registration of the FTAA to Sagittarius were recently resolved by this
Court.
52

It bears stressing that this case has not been rendered moot either by the transfer and
registration of the FTAA to a Filipino-owned corporation or by the non-issuance of a
temporary restraining order or a preliminary injunction to stay the above-said July 23,
2002 decision of the Office of the President.
53
The validity of the transfer remains in
dispute and awaits final judicial determination. This assumes, of course, that such
transfer cures the FTAA's alleged unconstitutionality, on which question judgment is
reserved.
WMCP also points out that the original claimowners of the major mineralized areas
included in the WMCP FTAA, namely, Sagittarius, Tampakan Mining Corporation, and
Southcot Mining Corporation, are all Filipino-owned corporations,
54
each of which was a
holder of an approved Mineral Production Sharing Agreement awarded in 1994, albeit
their respective mineral claims were subsumed in the WMCP FTAA;
55
and that these
three companies are the same companies that consolidated their interests in Sagittarius
to whom WMC sold its 100% equity in WMCP.
56
WMCP concludes that in the event that
the FTAA is invalidated, the MPSAs of the three corporations would be revived and the
mineral claims would revert to their original claimants.
57


80

These circumstances, while informative, are hardly significant in the resolution of this
case, it involving the validity of the FTAA, not the possible consequences of its
invalidation.
Of the above-enumerated seven grounds cited by petitioners, as will be shown later,
only the first and the last need be delved into; in the latter, the discussion shall dwell
only insofar as it questions the effectivity of E. O. No. 279 by virtue of which order the
questioned FTAA was forged.
I
Before going into the substantive issues, the procedural questions posed by
respondents shall first be tackled.
REQUISITES FOR JUDICIAL REVIEW
When an issue of constitutionality is raised, this Court can exercise its power of judicial
review only if the following requisites are present:
(1) The existence of an actual and appropriate case;
(2) A personal and substantial interest of the party raising the constitutional
question;
(3) The exercise of judicial review is pleaded at the earliest opportunity; and
(4) The constitutional question is the lis mota of the case.
58

Respondents claim that the first three requisites are not present.
Section 1, Article VIII of the Constitution states that "(j)udicial power includes the duty of
the courts of justice to settle actual controversies involving rights which are legally
demandable and enforceable." The power of judicial review, therefore, is limited to the
determination of actual cases and controversies.
59

An actual case or controversy means an existing case or controversy that is appropriate
or ripe for determination, not conjectural or anticipatory,
60
lest the decision of the court
would amount to an advisory opinion.
61
The power does not extend to hypothetical
questions
62
since any attempt at abstraction could only lead to dialectics and barren
legal questions and to sterile conclusions unrelated to actualities.
63


81

"Legal standing" or locus standi has been defined as a personal and substantial interest
in the case such that the party has sustained or will sustain direct injury as a result of
the governmental act that is being challenged,
64
alleging more than a generalized
grievance.
65
The gist of the question of standing is whether a party alleges "such
personal stake in the outcome of the controversy as to assure that concrete
adverseness which sharpens the presentation of issues upon which the court depends
for illumination of difficult constitutional questions."
66
Unless a person is injuriously
affected in any of his constitutional rights by the operation of statute or ordinance, he
has no standing.
67

Petitioners traverse a wide range of sectors. Among them are La Bugal B'laan Tribal
Association, Inc., a farmers and indigenous people's cooperative organized under
Philippine laws representing a community actually affected by the mining activities of
WMCP, members of said cooperative,
68
as well as other residents of areas also affected
by the mining activities of WMCP.
69
These petitioners have standing to raise the
constitutionality of the questioned FTAA as they allege a personal and substantial injury.
They claim that they would suffer "irremediable displacement"
70
as a result of the
implementation of the FTAA allowing WMCP to conduct mining activities in their area of
residence. They thus meet the appropriate case requirement as they assert an interest
adverse to that of respondents who, on the other hand, insist on the FTAA's validity.
In view of the alleged impending injury, petitioners also have standing to assail the
validity of E.O. No. 279, by authority of which the FTAA was executed.
Public respondents maintain that petitioners, being strangers to the FTAA, cannot sue
either or both contracting parties to annul it.
71
In other words, they contend that
petitioners are not real parties in interest in an action for the annulment of contract.
Public respondents' contention fails. The present action is not merely one for annulment
of contract but for prohibition and mandamus. Petitioners allege that public respondents
acted without or in excess of jurisdiction in implementing the FTAA, which they submit is
unconstitutional. As the case involves constitutional questions, this Court is not
concerned with whether petitioners are real parties in interest, but with whether they
have legal standing. As held in Kilosbayan v. Morato:
72

x x x. "It is important to note . . . that standing because of its constitutional and public
policy underpinnings, is very different from questions relating to whether a particular
plaintiff is the real party in interest or has capacity to sue. Although all three
requirements are directed towards ensuring that only certain parties can maintain an
action, standing restrictions require a partial consideration of the merits, as well as

82

broader policy concerns relating to the proper role of the judiciary in certain areas.["]
(FRIEDENTHAL, KANE AND MILLER, CIVIL PROCEDURE 328 [1985])
Standing is a special concern in constitutional law because in some cases suits are
brought not by parties who have been personally injured by the operation of a law or by
official action taken, but by concerned citizens, taxpayers or voters who actually sue in
the public interest. Hence, the question in standing is whether such parties have
"alleged such a personal stake in the outcome of the controversy as to assure that
concrete adverseness which sharpens the presentation of issues upon which the court
so largely depends for illumination of difficult constitutional questions." (Baker v. Carr,
369 U.S. 186, 7 L.Ed.2d 633 [1962].)
As earlier stated, petitioners meet this requirement.
The challenge against the constitutionality of R.A. No. 7942 and DAO No. 96-40
likewise fulfills the requisites of justiciability. Although these laws were not in force when
the subject FTAA was entered into, the question as to their validity is ripe for
adjudication.
The WMCP FTAA provides:
14.3 Future Legislation
Any term and condition more favourable to Financial &Technical Assistance Agreement
contractors resulting from repeal or amendment of any existing law or regulation or from
the enactment of a law, regulation or administrative order shall be considered a part of
this Agreement.
It is undisputed that R.A. No. 7942 and DAO No. 96-40 contain provisions that are more
favorable to WMCP, hence, these laws, to the extent that they are favorable to WMCP,
govern the FTAA.
In addition, R.A. No. 7942 explicitly makes certain provisions apply to pre-existing
agreements.
SEC. 112. Non-impairment of Existing Mining/Quarrying Rights. x x x That the
provisions of Chapter XIV on government share in mineral production-sharing
agreement and of Chapter XVI on incentives of this Act shall immediately govern and
apply to a mining lessee or contractor unless the mining lessee or contractor indicates
his intention to the secretary, in writing, not to avail of said provisions x x x Provided,
finally, That such leases, production-sharing agreements, financial or technical

83

assistance agreements shall comply with the applicable provisions of this Act and its
implementing rules and regulations.
As there is no suggestion that WMCP has indicated its intention not to avail of the
provisions of Chapter XVI of R.A. No. 7942, it can safely be presumed that they apply to
the WMCP FTAA.
Misconstruing the application of the third requisite for judicial review that the exercise
of the review is pleaded at the earliest opportunity WMCP points out that the petition
was filed only almost two years after the execution of the FTAA, hence, not raised at the
earliest opportunity.
The third requisite should not be taken to mean that the question of constitutionality
must be raised immediately after the execution of the state action complained of. That
the question of constitutionality has not been raised before is not a valid reason for
refusing to allow it to be raised later.
73
A contrary rule would mean that a law, otherwise
unconstitutional, would lapse into constitutionality by the mere failure of the proper party
to promptly file a case to challenge the same.
PROPRIETY OF PROHIBITION AND MANDAMUS
Before the effectivity in July 1997 of the Revised Rules of Civil Procedure, Section 2 of
Rule 65 read:
SEC. 2. Petition for prohibition. When the proceedings of any tribunal, corporation,
board, or person, whether exercising functions judicial or ministerial, are without or in
excess of its or his jurisdiction, or with grave abuse of discretion, and there is no appeal
or any other plain, speedy, and adequate remedy in the ordinary course of law, a
person aggrieved thereby may file a verified petition in the proper court alleging the
facts with certainty and praying that judgment be rendered commanding the defendant
to desist from further proceeding in the action or matter specified therein.
Prohibition is a preventive remedy.
74
It seeks a judgment ordering the defendant to
desist from continuing with the commission of an act perceived to be illegal.
75

The petition for prohibition at bar is thus an appropriate remedy. While the execution of
the contract itself may be fait accompli, its implementation is not. Public respondents, in
behalf of the Government, have obligations to fulfill under said contract. Petitioners seek
to prevent them from fulfilling such obligations on the theory that the contract is
unconstitutional and, therefore, void.

84

The propriety of a petition for prohibition being upheld, discussion of the propriety of the
mandamus aspect of the petition is rendered unnecessary.
HIERARCHY OF COURTS
The contention that the filing of this petition violated the rule on hierarchy of courts does
not likewise lie. The rule has been explained thus:
Between two courts of concurrent original jurisdiction, it is the lower court that should
initially pass upon the issues of a case. That way, as a particular case goes through the
hierarchy of courts, it is shorn of all but the important legal issues or those of first
impression, which are the proper subject of attention of the appellate court. This is a
procedural rule borne of experience and adopted to improve the administration of
justice.
This Court has consistently enjoined litigants to respect the hierarchy of courts.
Although this Court has concurrent jurisdiction with the Regional Trial Courts and the
Court of Appeals to issue writs of certiorari, prohibition, mandamus, quo warranto,
habeas corpus and injunction, such concurrence does not give a party unrestricted
freedom of choice of court forum. The resort to this Court's primary jurisdiction to issue
said writs shall be allowed only where the redress desired cannot be obtained in the
appropriate courts or where exceptional and compelling circumstances justify such
invocation. We held in People v. Cuaresma that:
A becoming regard for judicial hierarchy most certainly indicates that petitions for the
issuance of extraordinary writs against first level ("inferior") courts should be filed with
the Regional Trial Court, and those against the latter, with the Court of Appeals. A direct
invocation of the Supreme Court's original jurisdiction to issue these writs should be
allowed only where there are special and important reasons therefor, clearly and
specifically set out in the petition. This is established policy. It is a policy necessary to
prevent inordinate demands upon the Court's time and attention which are better
devoted to those matters within its exclusive jurisdiction, and to prevent further over-
crowding of the Court's docket x x x.
76
[Emphasis supplied.]
The repercussions of the issues in this case on the Philippine mining industry, if not the
national economy, as well as the novelty thereof, constitute exceptional and compelling
circumstances to justify resort to this Court in the first instance.
In all events, this Court has the discretion to take cognizance of a suit which does not
satisfy the requirements of an actual case or legal standing when paramount public

85

interest is involved.
77
When the issues raised are of paramount importance to the public,
this Court may brush aside technicalities of procedure.
78

II
Petitioners contend that E.O. No. 279 did not take effect because its supposed date of
effectivity came after President Aquino had already lost her legislative powers under the
Provisional Constitution.
And they likewise claim that the WMC FTAA, which was entered into pursuant to E.O.
No. 279, violates Section 2, Article XII of the Constitution because, among other
reasons:
(1) It allows foreign-owned companies to extend more than mere financial or
technical assistance to the State in the exploitation, development, and utilization
of minerals, petroleum, and other mineral oils, and even permits foreign owned
companies to "operate and manage mining activities."
(2) It allows foreign-owned companies to extend both technical and financial
assistance, instead of "either technical or financial assistance."
To appreciate the import of these issues, a visit to the history of the pertinent
constitutional provision, the concepts contained therein, and the laws enacted pursuant
thereto, is in order.
Section 2, Article XII reads in full:
Sec. 2. All lands of the public domain, waters, 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 production-sharing agreements with Filipino citizens,
or corporations or associations at least sixty per centum of whose capital is owned by
such citizens. Such agreements may be for a period not exceeding twenty-five years,
renewable for not more than twenty-five years, and under such terms and conditions as
may be provided by law. In cases of water rights for irrigation, water supply, fisheries, or
industrial uses other than the development of water power, beneficial use may be the
measure and limit of the grant.

86

The State shall protect the nation's marine wealth in its archipelagic waters, territorial
sea, and exclusive economic zone, and reserve its use and enjoyment exclusively to
Filipino citizens.
The Congress may, by law, allow small-scale utilization of natural resources by Filipino
citizens, as well as cooperative fish farming, with priority to subsistence fishermen and
fish-workers in rivers, lakes, bays, and lagoons.
The President may enter into agreements with foreign-owned corporations involving
utilization of minerals, petroleum, and other mineral oils according to the general terms
and conditions provided by law, based on real contributions to the economic growth and
general welfare of the country. In such agreements, the State shall promote the
development and use of local scientific and technical resources.
The President shall notify the Congress of every contract entered into in accordance
with this provision, within thirty days from its execution.
THE SPANISH REGIME AND THE REGALIAN DOCTRINE
The first sentence of Section 2 embodies the Regalian doctrine or jura regalia.
Introduced by Spain into these Islands, this feudal concept is based on the State's
power of dominium, which is the capacity of the State to own or acquire property.
79

In its broad sense, the term "jura regalia" refers to royal rights, or those rights which the
King has by virtue of his prerogatives. In Spanish law, it refers to a right which the
sovereign has over anything in which a subject has a right of property or propriedad.
These were rights enjoyed during feudal times by the king as the sovereign.
The theory of the feudal system was that title to all lands was originally held by the King,
and while the use of lands was granted out to others who were permitted to hold them
under certain conditions, the King theoretically retained the title. By fiction of law, the
King was regarded as the original proprietor of all lands, and the true and only source of
title, and from him all lands were held. The theory of jura regalia was therefore nothing
more than a natural fruit of conquest.
80

The Philippines having passed to Spain by virtue of discovery and conquest,
81
earlier
Spanish decrees declared that "all lands were held from the Crown."
82

The Regalian doctrine extends not only to land but also to "all natural wealth that may
be found in the bowels of the earth."
83
Spain, in particular, recognized the unique value

87

of natural resources, viewing them, especially minerals, as an abundant source of
revenue to finance its wars against other nations.
84
Mining laws during the Spanish
regime reflected this perspective.
85

THE AMERICAN OCCUPATION AND THE CONCESSION REGIME
By the Treaty of Paris of December 10, 1898, Spain ceded "the archipelago known as
the Philippine Islands" to the United States. The Philippines was hence governed by
means of organic acts that were in the nature of charters serving as a Constitution of
the occupied territory from 1900 to 1935.
86
Among the principal organic acts of the
Philippines was the Act of Congress of July 1, 1902, more commonly known as the
Philippine Bill of 1902, through which the United States Congress assumed the
administration of the Philippine Islands.
87
Section 20 of said Bill reserved the disposition
of mineral lands of the public domain from sale. Section 21 thereof allowed the free and
open exploration, occupation and purchase of mineral deposits not only to citizens of
the Philippine Islands but to those of the United States as well:
Sec. 21. That all valuable mineral deposits in public lands in the Philippine Islands, both
surveyed and unsurveyed, are hereby declared to be free and open to exploration,
occupation and purchase, and the land in which they are found, to occupation and
purchase, by citizens of the United States or of said Islands: Provided, That when on
any lands in said Islands entered and occupied as agricultural lands under the
provisions of this Act, but not patented, mineral deposits have been found, the working
of such mineral deposits is forbidden until the person, association, or corporation who or
which has entered and is occupying such lands shall have paid to the Government of
said Islands such additional sum or sums as will make the total amount paid for the
mineral claim or claims in which said deposits are located equal to the amount charged
by the Government for the same as mineral claims.
Unlike Spain, the United States considered natural resources as a source of wealth for
its nationals and saw fit to allow both Filipino and American citizens to explore and
exploit minerals in public lands, and to grant patents to private mineral lands.
88
A person
who acquired ownership over a parcel of private mineral land pursuant to the laws then
prevailing could exclude other persons, even the State, from exploiting minerals within
his property.
89
Thus, earlier jurisprudence
90
held that:
A valid and subsisting location of mineral land, made and kept up in accordance with
the provisions of the statutes of the United States, has the effect of a grant by the
United States of the present and exclusive possession of the lands located, and this
exclusive right of possession and enjoyment continues during the entire life of the
location. x x x.

88

x x x.
The discovery of minerals in the ground by one who has a valid mineral location
perfects his claim and his location not only against third persons, but also against the
Government. x x x. [Italics in the original.]
The Regalian doctrine and the American system, therefore, differ in one essential
respect. Under the Regalian theory, mineral rights are not included in a grant of land by
the state; under the American doctrine, mineral rights are included in a grant of land by
the government.
91

Section 21 also made possible the concession (frequently styled "permit", license" or
"lease")
92
system.
93
This was the traditional regime imposed by the colonial
administrators for the exploitation of natural resources in the extractive sector
(petroleum, hard minerals, timber, etc.).
94

Under the concession system, the concessionaire makes a direct equity investment for
the purpose of exploiting a particular natural resource within a given area.
95
Thus, the
concession amounts to complete control by the concessionaire over the country's
natural resource, for it is given exclusive and plenary rights to exploit a particular
resource at the point of extraction.
96
In consideration for the right to exploit a natural
resource, the concessionaire either pays rent or royalty, which is a fixed percentage of
the gross proceeds.
97

Later statutory enactments by the legislative bodies set up in the Philippines adopted
the contractual framework of the concession.
98
For instance, Act No. 2932,
99
approved
on August 31, 1920, which provided for the exploration, location, and lease of lands
containing petroleum and other mineral oils and gas in the Philippines, and Act No.
2719,
100
approved on May 14, 1917, which provided for the leasing and development of
coal lands in the Philippines, both utilized the concession system.
101

THE 1935 CONSTITUTION AND THE NATIONALIZATION OF NATURAL
RESOURCES
By the Act of United States Congress of March 24, 1934, popularly known as the
Tydings-McDuffie Law, the People of the Philippine Islands were authorized to adopt a
constitution.
102
On July 30, 1934, the Constitutional Convention met for the purpose of
drafting a constitution, and the Constitution subsequently drafted was approved by the
Convention on February 8, 1935.
103
The Constitution was submitted to the President of
the United States on March 18, 1935.
104
On March 23, 1935, the President of the United
States certified that the Constitution conformed substantially with the provisions of the

89

Act of Congress approved on March 24, 1934.
105
On May 14, 1935, the Constitution
was ratified by the Filipino people.
106

The 1935 Constitution adopted the Regalian doctrine, declaring all natural resources of
the Philippines, including mineral lands and minerals, to be property belonging to the
State.
107
As adopted in a republican system, the medieval concept of jura regalia is
stripped of royal overtones and ownership of the land is vested in the State.
108

Section 1, Article XIII, on Conservation and Utilization of Natural Resources, of the 1935
Constitution provided:
SECTION 1. All agricultural, timber, and mineral lands of the public domain,
waters, minerals, coal, petroleum, and other mineral oils, all forces of potential
energy, and other natural resources of the Philippines belong to the State, and
their disposition, exploitation, development, or utilization shall be limited to
citizens of the Philippines, or to corporations or associations at least sixty per
centum of the capital of which is owned by such citizens, subject to any existing
right, grant, lease, or concession at the time of the inauguration of the
Government established under this Constitution. Natural resources, with the
exception of public agricultural land, shall not be alienated, and no license,
concession, or lease for the exploitation, development, or utilization of any of the
natural resources shall be granted for a period exceeding twenty-five years,
except as to water rights for irrigation, water supply, fisheries, or industrial uses
other than the development of water power, in which cases beneficial use may
be the measure and the limit of the grant.
The nationalization and conservation of the natural resources of the country was one of
the fixed and dominating objectives of the 1935 Constitutional Convention.
109
One
delegate relates:
There was an overwhelming sentiment in the Convention in favor of the principle of
state ownership of natural resources and the adoption of the Regalian doctrine. State
ownership of natural resources was seen as a necessary starting point to secure
recognition of the state's power to control their disposition, exploitation, development, or
utilization. The delegates of the Constitutional Convention very well knew that the
concept of State ownership of land and natural resources was introduced by the
Spaniards, however, they were not certain whether it was continued and applied by the
Americans. To remove all doubts, the Convention approved the provision in the
Constitution affirming the Regalian doctrine.

90

The adoption of the principle of state ownership of the natural resources and of the
Regalian doctrine was considered to be a necessary starting point for the plan of
nationalizing and conserving the natural resources of the country. For with the
establishment of the principle of state ownership of the natural resources, it would not
be hard to secure the recognition of the power of the State to control their disposition,
exploitation, development or utilization.
110

The nationalization of the natural resources was intended (1) to insure their
conservation for Filipino posterity; (2) to serve as an instrument of national defense,
helping prevent the extension to the country of foreign control through peaceful
economic penetration; and (3) to avoid making the Philippines a source of international
conflicts with the consequent danger to its internal security and independence.
111

The same Section 1, Article XIII also adopted the concession system, expressly
permitting the State to grant licenses, concessions, or leases for the exploitation,
development, or utilization of any of the natural resources. Grants, however, were
limited to Filipinos or entities at least 60% of the capital of which is owned by
Filipinos.lawph!l.ne+
The swell of nationalism that suffused the 1935 Constitution was radically diluted when
on November 1946, the Parity Amendment, which came in the form of an "Ordinance
Appended to the Constitution," was ratified in a plebiscite.
112
The Amendment extended,
from July 4, 1946 to July 3, 1974, the right to utilize and exploit our natural resources to
citizens of the United States and business enterprises owned or controlled, directly or
indirectly, by citizens of the United States:
113

Notwithstanding the provision of section one, Article Thirteen, and section eight, Article
Fourteen, of the foregoing Constitution, during the effectivity of the Executive
Agreement entered into by the President of the Philippines with the President of the
United States on the fourth of July, nineteen hundred and forty-six, pursuant to the
provisions of Commonwealth Act Numbered Seven hundred and thirty-three, but in no
case to extend beyond the third of July, nineteen hundred and seventy-four, the
disposition, exploitation, development, and utilization of all agricultural, timber, and
mineral lands of the public domain, waters, minerals, coals, petroleum, and other
mineral oils, all forces and sources of potential energy, and other natural resources of
the Philippines, and the operation of public utilities, shall, if open to any person, be open
to citizens of the United States and to all forms of business enterprise owned or
controlled, directly or indirectly, by citizens of the United States in the same manner as
to, and under the same conditions imposed upon, citizens of the Philippines or
corporations or associations owned or controlled by citizens of the Philippines.

91

The Parity Amendment was subsequently modified by the 1954 Revised Trade
Agreement, also known as the Laurel-Langley Agreement, embodied in Republic Act
No. 1355.
114

THE PETROLEUM ACT OF 1949 AND THE CONCESSION SYSTEM
In the meantime, Republic Act No. 387,
115
also known as the Petroleum Act of 1949,
was approved on June 18, 1949.
The Petroleum Act of 1949 employed the concession system for the exploitation of the
nation's petroleum resources. Among the kinds of concessions it sanctioned were
exploration and exploitation concessions, which respectively granted to the
concessionaire the exclusive right to explore for
116
or develop
117
petroleum within
specified areas.
Concessions may be granted only to duly qualified persons
118
who have sufficient
finances, organization, resources, technical competence, and skills necessary to
conduct the operations to be undertaken.
119

Nevertheless, the Government reserved the right to undertake such work itself.
120
This
proceeded from the theory that all natural deposits or occurrences of petroleum or
natural gas in public and/or private lands in the Philippines belong to the
State.
121
Exploration and exploitation concessions did not confer upon the
concessionaire ownership over the petroleum lands and petroleum
deposits.
122
However, they did grant concessionaires the right to explore, develop,
exploit, and utilize them for the period and under the conditions determined by the
law.
123

Concessions were granted at the complete risk of the concessionaire; the Government
did not guarantee the existence of petroleum or undertake, in any case, title warranty.
124

Concessionaires were required to submit information as maybe required by the
Secretary of Agriculture and Natural Resources, including reports of geological and
geophysical examinations, as well as production reports.
125
Exploration
126
and
exploitation
127
concessionaires were also required to submit work programs.lavvphi1.net
Exploitation concessionaires, in particular, were obliged to pay an annual exploitation
tax,
128
the object of which is to induce the concessionaire to actually produce petroleum,
and not simply to sit on the concession without developing or exploiting it.
129
These
concessionaires were also bound to pay the Government royalty, which was not less
than 12% of the petroleum produced and saved, less that consumed in the operations

92

of the concessionaire.
130
Under Article 66, R.A. No. 387, the exploitation tax may be
credited against the royalties so that if the concessionaire shall be actually producing
enough oil, it would not actually be paying the exploitation tax.
131

Failure to pay the annual exploitation tax for two consecutive years,
132
or the royalty due
to the Government within one year from the date it becomes due,
133
constituted grounds
for the cancellation of the concession. In case of delay in the payment of the taxes or
royalty imposed by the law or by the concession, a surcharge of 1% per month is
exacted until the same are paid.
134

As a rule, title rights to all equipment and structures that the concessionaire placed on
the land belong to the exploration or exploitation concessionaire.
135
Upon termination of
such concession, the concessionaire had a right to remove the same.
136

The Secretary of Agriculture and Natural Resources was tasked with carrying out the
provisions of the law, through the Director of Mines, who acted under the Secretary's
immediate supervision and control.
137
The Act granted the Secretary the authority to
inspect any operation of the concessionaire and to examine all the books and accounts
pertaining to operations or conditions related to payment of taxes and royalties.
138

The same law authorized the Secretary to create an Administration Unit and a Technical
Board.
139
The Administration Unit was charged, inter alia, with the enforcement of the
provisions of the law.
140
The Technical Board had, among other functions, the duty to
check on the performance of concessionaires and to determine whether the obligations
imposed by the Act and its implementing regulations were being complied with.
141

Victorio Mario A. Dimagiba, Chief Legal Officer of the Bureau of Energy Development,
analyzed the benefits and drawbacks of the concession system insofar as it applied to
the petroleum industry:
Advantages of Concession. Whether it emphasizes income tax or royalty, the most
positive aspect of the concession system is that the State's financial involvement is
virtually risk free and administration is simple and comparatively low in cost.
Furthermore, if there is a competitive allocation of the resource leading to substantial
bonuses and/or greater royalty coupled with a relatively high level of taxation, revenue
accruing to the State under the concession system may compare favorably with other
financial arrangements.
Disadvantages of Concession. There are, however, major negative aspects to this
system. Because the Government's role in the traditional concession is passive, it is at a
distinct disadvantage in managing and developing policy for the nation's petroleum

93

resource. This is true for several reasons. First, even though most concession
agreements contain covenants requiring diligence in operations and production, this
establishes only an indirect and passive control of the host country in resource
development. Second, and more importantly, the fact that the host country does not
directly participate in resource management decisions inhibits its ability to train and
employ its nationals in petroleum development. This factor could delay or prevent the
country from effectively engaging in the development of its resources. Lastly, a direct
role in management is usually necessary in order to obtain a knowledge of the
international petroleum industry which is important to an appreciation of the host
country's resources in relation to those of other countries.
142

Other liabilities of the system have also been noted:
x x x there are functional implications which give the concessionaire great economic
power arising from its exclusive equity holding. This includes, first, appropriation of the
returns of the undertaking, subject to a modest royalty; second, exclusive management
of the project; third, control of production of the natural resource, such as volume of
production, expansion, research and development; and fourth, exclusive responsibility
for downstream operations, like processing, marketing, and distribution. In short, even if
nominally, the state is the sovereign and owner of the natural resource being exploited,
it has been shorn of all elements of control over such natural resource because of the
exclusive nature of the contractual regime of the concession. The concession system,
investing as it does ownership of natural resources, constitutes a consistent
inconsistency with the principle embodied in our Constitution that natural resources
belong to the state and shall not be alienated, not to mention the fact that the
concession was the bedrock of the colonial system in the exploitation of natural
resources.
143

Eventually, the concession system failed for reasons explained by Dimagiba:
Notwithstanding the good intentions of the Petroleum Act of 1949, the concession
system could not have properly spurred sustained oil exploration activities in the
country, since it assumed that such a capital-intensive, high risk venture could be
successfully undertaken by a single individual or a small company. In effect,
concessionaires' funds were easily exhausted. Moreover, since the concession system
practically closed its doors to interested foreign investors, local capital was stretched to
the limits. The old system also failed to consider the highly sophisticated technology and
expertise required, which would be available only to multinational companies.
144

A shift to a new regime for the development of natural resources thus seemed
imminent.

94

PRESIDENTIAL DECREE NO. 87, THE 1973 CONSTITUTION AND THE SERVICE
CONTRACT SYSTEM
The promulgation on December 31, 1972 of Presidential Decree No. 87,
145
otherwise
known as The Oil Exploration and Development Act of 1972 signaled such a
transformation. P.D. No. 87 permitted the government to explore for and produce
indigenous petroleum through "service contracts."
146

"Service contracts" is a term that assumes varying meanings to different people, and it
has carried many names in different countries, like "work contracts" in Indonesia,
"concession agreements" in Africa, "production-sharing agreements" in the Middle East,
and "participation agreements" in Latin America.
147
A functional definition of "service
contracts" in the Philippines is provided as follows:
A service contract is a contractual arrangement for engaging in the exploitation and
development of petroleum, mineral, energy, land and other natural resources by which a
government or its agency, or a private person granted a right or privilege by the
government authorizes the other party (service contractor) to engage or participate in
the exercise of such right or the enjoyment of the privilege, in that the latter provides
financial or technical resources, undertakes the exploitation or production of a given
resource, or directly manages the productive enterprise, operations of the exploration
and exploitation of the resources or the disposition of marketing or resources.
148

In a service contract under P.D. No. 87, service and technology are furnished by the
service contractor for which it shall be entitled to the stipulated service fee.
149
The
contractor must be technically competent and financially capable to undertake the
operations required in the contract.
150

Financing is supposed to be provided by the Government to which all petroleum
produced belongs.
151
In case the Government is unable to finance petroleum
exploration operations, the contractor may furnish services, technology and financing,
and the proceeds of sale of the petroleum produced under the contract shall be the
source of funds for payment of the service fee and the operating expenses due the
contractor.
152
The contractor shall undertake, manage and execute petroleum
operations, subject to the government overseeing the management of the
operations.
153
The contractor provides all necessary services and technology and the
requisite financing, performs the exploration work obligations, and assumes all
exploration risks such that if no petroleum is produced, it will not be entitled to
reimbursement.
154
Once petroleum in commercial quantity is discovered, the contractor
shall operate the field on behalf of the government.
155


95

P.D. No. 87 prescribed minimum terms and conditions for every service contract.
156
It
also granted the contractor certain privileges, including exemption from taxes and
payment of tariff duties,
157
and permitted the repatriation of capital and retention of
profits abroad.
158

Ostensibly, the service contract system had certain advantages over the concession
regime.
159
It has been opined, though, that, in the Philippines, our concept of a service
contract, at least in the petroleum industry, was basically a concession regime with a
production-sharing element.
160

On January 17, 1973, then President Ferdinand E. Marcos proclaimed the ratification of
a new Constitution.
161
Article XIV on the National Economy and Patrimony contained
provisions similar to the 1935 Constitution with regard to Filipino participation in the
nation's natural resources. Section 8, Article XIV thereof provides:
Sec. 8. All lands of the public domain, waters, minerals, coal, petroleum and other
mineral oils, all forces of potential energy, fisheries, wildlife, and other natural resources
of the Philippines belong to the State. With the exception of agricultural, industrial or
commercial, residential and resettlement lands of the public domain, natural resources
shall not be alienated, and no license, concession, or lease for the exploration,
development, exploitation, or utilization of any of the natural resources shall be granted
for a period exceeding twenty-five years, renewable for not more than twenty-five years,
except as to water rights for irrigation, water supply, fisheries, or industrial uses other
than the development of water power, in which cases beneficial use may be the
measure and the limit of the grant.
While Section 9 of the same Article maintained the Filipino-only policy in the enjoyment
of natural resources, it also allowed Filipinos, upon authority of the Batasang
Pambansa, to enter into service contracts with any person or entity for the exploration or
utilization of natural resources.
Sec. 9. The disposition, exploration, development, exploitation, or utilization of any of
the natural resources of the Philippines shall be limited to citizens, or to corporations or
associations at least sixty per centum of which is owned by such citizens. The Batasang
Pambansa, in the national interest, may allow such citizens, corporations or
associations to enter into service contracts for financial, technical, management, or
other forms of assistance with any person or entity for the exploration, or utilization of
any of the natural resources. Existing valid and binding service contracts for financial,
technical, management, or other forms of assistance are hereby recognized as such.

96

The concept of service contracts, according to one delegate, was borrowed from the
methods followed by India, Pakistan and especially Indonesia in the exploration of
petroleum and mineral oils.
162
The provision allowing such contracts, according to
another, was intended to "enhance the proper development of our natural resources
since Filipino citizens lack the needed capital and technical know-how which are
essential in the proper exploration, development and exploitation of the natural
resources of the country."
163

The original idea was to authorize the government, not private entities, to enter into
service contracts with foreign entities.
164
As finally approved, however, a citizen or
private entity could be allowed by the National Assembly to enter into such service
contract.
165
The prior approval of the National Assembly was deemed sufficient to
protect the national interest.
166
Notably, none of the laws allowing service contracts
were passed by the Batasang Pambansa. Indeed, all of them were enacted by
presidential decree.
On March 13, 1973, shortly after the ratification of the new Constitution, the President
promulgated Presidential Decree No. 151.
167
The law allowed Filipino citizens or entities
which have acquired lands of the public domain or which own, hold or control such
lands to enter into service contracts for financial, technical, management or other forms
of assistance with any foreign persons or entity for the exploration, development,
exploitation or utilization of said lands.
168

Presidential Decree No. 463,
169
also known as The Mineral Resources Development
Decree of 1974, was enacted on May 17, 1974. Section 44 of the decree, as amended,
provided that a lessee of a mining claim may enter into a service contract with a
qualified domestic or foreign contractor for the exploration, development and
exploitation of his claims and the processing and marketing of the product thereof.
Presidential Decree No. 704
170
(The Fisheries Decree of 1975), approved on May 16,
1975, allowed Filipinos engaged in commercial fishing to enter into contracts for
financial, technical or other forms of assistance with any foreign person, corporation or
entity for the production, storage, marketing and processing of fish and fishery/aquatic
products.
171

Presidential Decree No. 705
172
(The Revised Forestry Code of the Philippines),
approved on May 19, 1975, allowed "forest products licensees, lessees, or permitees to
enter into service contracts for financial, technical, management, or other forms of
assistance . . . with any foreign person or entity for the exploration, development,
exploitation or utilization of the forest resources."
173


97

Yet another law allowing service contracts, this time for geothermal resources, was
Presidential Decree No. 1442,
174
which was signed into law on June 11, 1978. Section 1
thereof authorized the Government to enter into service contracts for the exploration,
exploitation and development of geothermal resources with a foreign contractor who
must be technically and financially capable of undertaking the operations required in the
service contract.
Thus, virtually the entire range of the country's natural resources from petroleum and
minerals to geothermal energy, from public lands and forest resources to fishery
products was well covered by apparent legal authority to engage in the direct
participation or involvement of foreign persons or corporations (otherwise disqualified) in
the exploration and utilization of natural resources through service contracts.
175

THE 1987 CONSTITUTION AND TECHNICAL OR FINANCIAL ASSISTANCE
AGREEMENTS
After the February 1986 Edsa Revolution, Corazon C. Aquino took the reins of power
under a revolutionary government. On March 25, 1986, President Aquino issued
Proclamation No. 3,
176
promulgating the Provisional Constitution, more popularly
referred to as the Freedom Constitution. By authority of the same Proclamation, the
President created a Constitutional Commission (CONCOM) to draft a new constitution,
which took effect on the date of its ratification on February 2, 1987.
177

The 1987 Constitution retained the Regalian doctrine. The first sentence of Section 2,
Article XII states: "All lands of the public domain, waters, 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."
Like the 1935 and 1973 Constitutions before it, the 1987 Constitution, in the second
sentence of the same provision, prohibits the alienation of natural resources, except
agricultural lands.
The third sentence of the same paragraph is new: "The exploration, development and
utilization of natural resources shall be under the full control and supervision of the
State." The constitutional policy of the State's "full control and supervision" over natural
resources proceeds from the concept of jura regalia, as well as the recognition of the
importance of the country's natural resources, not only for national economic
development, but also for its security and national defense.
178
Under this provision, the
State assumes "a more dynamic role" in the exploration, development and utilization of
natural resources.
179


98

Conspicuously absent in Section 2 is the provision in the 1935 and 1973 Constitutions
authorizing the State to grant licenses, concessions, or leases for the exploration,
exploitation, development, or utilization of natural resources. By such omission, the
utilization of inalienable lands of public domain through "license, concession or lease" is
no longer allowed under the 1987 Constitution.
180

Having omitted the provision on the concession system, Section 2 proceeded to
introduce "unfamiliar language":
181

The State may directly undertake such activities or it may enter into co-production, joint
venture, or production-sharing agreements with Filipino citizens, or corporations or
associations at least sixty per centum of whose capital is owned by such citizens.
Consonant with the State's "full supervision and control" over natural resources, Section
2 offers the State two "options."
182
One, the State may directly undertake these activities
itself; or two, it may enter into co-production, joint venture, or production-sharing
agreements with Filipino citizens, or entities at least 60% of whose capital is owned by
such citizens.
A third option is found in the third paragraph of the same section:
The Congress may, by law, allow small-scale utilization of natural resources by Filipino
citizens, as well as cooperative fish farming, with priority to subsistence fishermen and
fish-workers in rivers, lakes, bays, and lagoons.
While the second and third options are limited only to Filipino citizens or, in the case of
the former, to corporations or associations at least 60% of the capital of which is owned
by Filipinos, a fourth allows the participation of foreign-owned corporations. The fourth
and fifth paragraphs of Section 2 provide:
The President may enter into agreements with foreign-owned corporations involving
utilization of minerals, petroleum, and other mineral oils according to the general terms
and conditions provided by law, based on real contributions to the economic growth and
general welfare of the country. In such agreements, the State shall promote the
development and use of local scientific and technical resources.
The President shall notify the Congress of every contract entered into in accordance
with this provision, within thirty days from its execution.

99

Although Section 2 sanctions the participation of foreign-owned corporations in the
exploration, development, and utilization of natural resources, it imposes certain
limitations or conditions to agreements with such corporations.
First, the parties to FTAAs. Only the President, in behalf of the State, may enter
into these agreements, and only with corporations. By contrast, under the 1973
Constitution, a Filipino citizen, corporation or association may enter into a service
contract with a "foreign person or entity."
Second, the size of the activities: only large-scale exploration, development, and
utilization is allowed. The term "large-scale usually refers to very capital-intensive
activities."
183

Third, the natural resources subject of the activities is restricted to minerals,
petroleum and other mineral oils, the intent being to limit service contracts to
those areas where Filipino capital may not be sufficient.
184

Fourth, consistency with the provisions of statute. The agreements must be in
accordance with the terms and conditions provided by law.
Fifth, Section 2 prescribes certain standards for entering into such agreements.
The agreements must be based on real contributions to economic growth and
general welfare of the country.
Sixth, the agreements must contain rudimentary stipulations for the promotion of
the development and use of local scientific and technical resources.
Seventh, the notification requirement. The President shall notify Congress of
every financial or technical assistance agreement entered into within thirty days
from its execution.
Finally, the scope of the agreements. While the 1973 Constitution referred to
"service contracts for financial, technical, management, or other forms of
assistance" the 1987 Constitution provides for "agreements. . . involving either
financial or technical assistance." It bears noting that the phrases "service
contracts" and "management or other forms of assistance" in the earlier
constitution have been omitted.
By virtue of her legislative powers under the Provisional Constitution,
185
President
Aquino, on July 10, 1987, signed into law E.O. No. 211 prescribing the interim
procedures in the processing and approval of applications for the exploration,

100

development and utilization of minerals. The omission in the 1987 Constitution of the
term "service contracts" notwithstanding, the said E.O. still referred to them in Section 2
thereof:
Sec. 2. Applications for the exploration, development and utilization of mineral
resources, including renewal applications and applications for approval of operating
agreements and mining service contracts, shall be accepted and processed and may be
approved x x x. [Emphasis supplied.]
The same law provided in its Section 3 that the "processing, evaluation and approval of
all mining applications . . . operating agreements and service contracts . . . shall be
governed by Presidential Decree No. 463, as amended, other existing mining laws, and
their implementing rules and regulations. . . ."
As earlier stated, on the 25th also of July 1987, the President issued E.O. No. 279 by
authority of which the subject WMCP FTAA was executed on March 30, 1995.
On March 3, 1995, President Ramos signed into law R.A. No. 7942. Section 15 thereof
declares that the Act "shall govern the exploration, development, utilization, and
processing of all mineral resources." Such declaration notwithstanding, R.A. No. 7942
does not actually cover all the modes through which the State may undertake the
exploration, development, and utilization of natural resources.
The State, being the owner of the natural resources, is accorded the primary power and
responsibility in the exploration, development and utilization thereof. As such, it may
undertake these activities through four modes:
The State may directly undertake such activities.
(2) The State may enter into co-production, joint venture or production-sharing
agreements with Filipino citizens or qualified corporations.
(3) Congress may, by law, allow small-scale utilization of natural resources by
Filipino citizens.
(4) For the large-scale exploration, development and utilization of minerals,
petroleum and other mineral oils, the President may enter into agreements with
foreign-owned corporations involving technical or financial assistance.
186

Except to charge the Mines and Geosciences Bureau of the DENR with performing
researches and surveys,
187
and a passing mention of government-owned or controlled
corporations,
188
R.A. No. 7942 does not specify how the State should go about the first

101

mode. The third mode, on the other hand, is governed by Republic Act No. 7076
189
(the
People's Small-Scale Mining Act of 1991) and other pertinent laws.
190
R.A. No. 7942
primarily concerns itself with the second and fourth modes.
Mineral production sharing, co-production and joint venture agreements are collectively
classified by R.A. No. 7942 as "mineral agreements."
191
The Government participates
the least in a mineral production sharing agreement (MPSA). In an MPSA, the
Government grants the contractor
192
the exclusive right to conduct mining operations
within a contract area
193
and shares in the gross output.
194
The MPSA contractor
provides the financing, technology, management and personnel necessary for the
agreement's implementation.
195
The total government share in an MPSA is the excise
tax on mineral products under Republic Act No. 7729,
196
amending Section 151(a) of
the National Internal Revenue Code, as amended.
197

In a co-production agreement (CA),
198
the Government provides inputs to the mining
operations other than the mineral resource,
199
while in a joint venture agreement (JVA),
where the Government enjoys the greatest participation, the Government and the JVA
contractor organize a company with both parties having equity shares.
200
Aside from
earnings in equity, the Government in a JVA is also entitled to a share in the gross
output.
201
The Government may enter into a CA
202
or JVA
203
with one or more
contractors. The Government's share in a CA or JVA is set out in Section 81 of the law:
The share of the Government in co-production and joint venture agreements shall be
negotiated by the Government and the contractor taking into consideration the: (a)
capital investment of the project, (b) the risks involved, (c) contribution of the project to
the economy, and (d) other factors that will provide for a fair and equitable sharing
between the Government and the contractor. The Government shall also be entitled to
compensations for its other contributions which shall be agreed upon by the parties, and
shall consist, among other things, the contractor's income tax, excise tax, special
allowance, withholding tax due from the contractor's foreign stockholders arising from
dividend or interest payments to the said foreign stockholders, in case of a foreign
national and all such other taxes, duties and fees as provided for under existing laws.
All mineral agreements grant the respective contractors the exclusive right to conduct
mining operations and to extract all mineral resources found in the contract area.
204
A
"qualified person" may enter into any of the mineral agreements with the
Government.
205
A "qualified person" is
any citizen of the Philippines with capacity to contract, or a corporation, partnership,
association, or cooperative organized or authorized for the purpose of engaging in
mining, with technical and financial capability to undertake mineral resources

102

development and duly registered in accordance with law at least sixty per centum (60%)
of the capital of which is owned by citizens of the Philippines x x x.
206

The fourth mode involves "financial or technical assistance agreements." An FTAA is
defined as "a contract involving financial or technical assistance for large-scale
exploration, development, and utilization of natural resources."
207
Any qualified person
with technical and financial capability to undertake large-scale exploration,
development, and utilization of natural resources in the Philippines may enter into such
agreement directly with the Government through the DENR.
208
For the purpose of
granting an FTAA, a legally organized foreign-owned corporation (any corporation,
partnership, association, or cooperative duly registered in accordance with law in which
less than 50% of the capital is owned by Filipino citizens)
209
is deemed a "qualified
person."
210

Other than the difference in contractors' qualifications, the principal distinction between
mineral agreements and FTAAs is the maximum contract area to which a qualified
person may hold or be granted.
211
"Large-scale" under R.A. No. 7942 is determined by
the size of the contract area, as opposed to the amount invested (US $50,000,000.00),
which was the standard under E.O. 279.
Like a CA or a JVA, an FTAA is subject to negotiation.
212
The Government's
contributions, in the form of taxes, in an FTAA is identical to its contributions in the two
mineral agreements, save that in an FTAA:
The collection of Government share in financial or technical assistance agreement shall
commence after the financial or technical assistance agreement contractor has fully
recovered its pre-operating expenses, exploration, and development expenditures,
inclusive.
213

III
Having examined the history of the constitutional provision and statutes enacted
pursuant thereto, a consideration of the substantive issues presented by the petition is
now in order.
THE EFFECTIVITY OF EXECUTIVE ORDER NO. 279
Petitioners argue that E.O. No. 279, the law in force when the WMC FTAA was
executed, did not come into effect.

103

E.O. No. 279 was signed into law by then President Aquino on July 25, 1987, two days
before the opening of Congress on July 27, 1987.
214
Section 8 of the E.O. states that
the same "shall take effect immediately." This provision, according to petitioners, runs
counter to Section 1 of E.O. No. 200,
215
which provides:
SECTION 1. Laws shall take effect after fifteen days following the completion of their
publication either in the Official Gazette or in a newspaper of general circulation in the
Philippines, unless it is otherwise provided.
216
On that premise, petitioners contend that E.O. No. 279 could have only taken effect
fifteen days after its publication at which time Congress had already convened and the
President's power to legislate had ceased.
Respondents, on the other hand, counter that the validity of E.O. No. 279 was settled in
Miners Association of the Philippines v. Factoran, supra. This is of course incorrect for
the issue in Miners Association was not the validity of E.O. No. 279 but that of DAO
Nos. 57 and 82 which were issued pursuant thereto.
Nevertheless, petitioners' contentions have no merit.
It bears noting that there is nothing in E.O. No. 200 that prevents a law from taking
effect on a date other than even before the 15-day period after its publication.
Where a law provides for its own date of effectivity, such date prevails over that
prescribed by E.O. No. 200. Indeed, this is the very essence of the phrase "unless it is
otherwise provided" in Section 1 thereof. Section 1, E.O. No. 200, therefore, applies
only when a statute does not provide for its own date of effectivity.
What is mandatory under E.O. No. 200, and what due process requires, as this Court
held in Taada v. Tuvera,
217
is the publication of the law for without such notice and
publication, there would be no basis for the application of the maxim "ignorantia legis
n[eminem] excusat." It would be the height of injustice to punish or otherwise burden a
citizen for the transgression of a law of which he had no notice whatsoever, not even a
constructive one.
While the effectivity clause of E.O. No. 279 does not require its publication, it is not a
ground for its invalidation since the Constitution, being "the fundamental, paramount
and supreme law of the nation," is deemed written in the law.
218
Hence, the due process
clause,
219
which, so Taada held, mandates the publication of statutes, is read into
Section 8 of E.O. No. 279. Additionally, Section 1 of E.O. No. 200 which provides for
publication "either in the Official Gazette or in a newspaper of general circulation in the

104

Philippines," finds suppletory application. It is significant to note that E.O. No. 279 was
actually published in the Official Gazette
220
on August 3, 1987.
From a reading then of Section 8 of E.O. No. 279, Section 1 of E.O. No. 200, and
Taada v. Tuvera, this Court holds that E.O. No. 279 became effective immediately
upon its publication in the Official Gazette on August 3, 1987.
That such effectivity took place after the convening of the first Congress is irrelevant. At
the time President Aquino issued E.O. No. 279 on July 25, 1987, she was still validly
exercising legislative powers under the Provisional Constitution.
221
Article XVIII
(Transitory Provisions) of the 1987 Constitution explicitly states:
Sec. 6. The incumbent President shall continue to exercise legislative powers until the
first Congress is convened.
The convening of the first Congress merely precluded the exercise of legislative powers
by President Aquino; it did not prevent the effectivity of laws she had previously
enacted.
There can be no question, therefore, that E.O. No. 279 is an effective, and a validly
enacted, statute.
THE CONSTITUTIONALITY OF THE WMCP FTAA
Petitioners submit that, in accordance with the text of Section 2, Article XII of the
Constitution, FTAAs should be limited to "technical or financial assistance" only. They
observe, however, that, contrary to the language of the Constitution, the WMCP FTAA
allows WMCP, a fully foreign-owned mining corporation, to extend more than mere
financial or technical assistance to the State, for it permits WMCP to manage and
operate every aspect of the mining activity.
222

Petitioners' submission is well-taken. It is a cardinal rule in the interpretation of
constitutions that the instrument must be so construed as to give effect to the intention
of the people who adopted it.
223
This intention is to be sought in the constitution itself,
and the apparent meaning of the words is to be taken as expressing it, except in cases
where that assumption would lead to absurdity, ambiguity, or contradiction.
224
What the
Constitution says according to the text of the provision, therefore, compels acceptance
and negates the power of the courts to alter it, based on the postulate that the framers
and the people mean what they say.
225
Accordingly, following the literal text of the
Constitution, assistance accorded by foreign-owned corporations in the large-scale

105

exploration, development, and utilization of petroleum, minerals and mineral oils should
be limited to "technical" or "financial" assistance only.
WMCP nevertheless submits that the word "technical" in the fourth paragraph of Section
2 of E.O. No. 279 encompasses a "broad number of possible services," perhaps,
"scientific and/or technological in basis."
226
It thus posits that it may also well include
"the area of management or operations . . . so long as such assistance requires
specialized knowledge or skills, and are related to the exploration, development and
utilization of mineral resources."
227

This Court is not persuaded. As priorly pointed out, the phrase "management or other
forms of assistance" in the 1973 Constitution was deleted in the 1987 Constitution,
which allows only "technical or financial assistance." Casus omisus pro omisso
habendus est. A person, object or thing omitted from an enumeration must be held to
have been omitted intentionally.
228
As will be shown later, the management or operation
of mining activities by foreign contractors, which is the primary feature of service
contracts, was precisely the evil that the drafters of the 1987 Constitution sought to
eradicate.
Respondents insist that "agreements involving technical or financial assistance" is just
another term for service contracts. They contend that the proceedings of the CONCOM
indicate "that although the terminology 'service contract' was avoided [by the
Constitution], the concept it represented was not." They add that "[t]he concept is
embodied in the phrase 'agreements involving financial or technical assistance.'"
229
And
point out how members of the CONCOM referred to these agreements as "service
contracts." For instance:
SR. TAN. Am I correct in thinking that the only difference between these future
service contracts and the past service contracts under Mr. Marcos is the general
law to be enacted by the legislature and the notification of Congress by the
President? That is the only difference, is it not?
MR. VILLEGAS. That is right.
SR. TAN. So those are the safeguards[?]
MR. VILLEGAS. Yes. There was no law at all governing service contracts before.
SR. TAN. Thank you, Madam President.
230

106

WMCP also cites the following statements of Commissioners Gascon, Garcia,
Nolledo and Tadeo who alluded to service contracts as they explained their
respective votes in the approval of the draft Article:
MR. GASCON. Mr. Presiding Officer, I vote no primarily because of two reasons:
One, the provision on service contracts. I felt that if we would constitutionalize
any provision on service contracts, this should always be with the concurrence of
Congress and not guided only by a general law to be promulgated by Congress.
x x x.
231
x x x.
MR. GARCIA. Thank you.
I vote no. x x x.
Service contracts are given constitutional legitimization in Section 3, even when
they have been proven to be inimical to the interests of the nation, providing as
they do the legal loophole for the exploitation of our natural resources for the
benefit of foreign interests. They constitute a serious negation of Filipino control
on the use and disposition of the nation's natural resources, especially with
regard to those which are nonrenewable.
232
x x x
MR. NOLLEDO. While there are objectionable provisions in the Article on
National Economy and Patrimony, going over said provisions meticulously,
setting aside prejudice and personalities will reveal that the article contains a
balanced set of provisions. I hope the forthcoming Congress will implement such
provisions taking into account that Filipinos should have real control over our
economy and patrimony, and if foreign equity is permitted, the same must be
subordinated to the imperative demands of the national interest.
x x x.
It is also my understanding that service contracts involving foreign corporations
or entities are resorted to only when no Filipino enterprise or Filipino-controlled
enterprise could possibly undertake the exploration or exploitation of our natural
resources and that compensation under such contracts cannot and should not
equal what should pertain to ownership of capital. In other words, the service
contract should not be an instrument to circumvent the basic provision, that the

107

exploration and exploitation of natural resources should be truly for the benefit of
Filipinos.
Thank you, and I vote yes.
233
x x x.
MR. TADEO. Nais ko lamang ipaliwanag ang aking boto.
Matapos suriin ang kalagayan ng Pilipinas, ang saligang suliranin, pangunahin
ang salitang "imperyalismo." Ang ibig sabihin nito ay ang sistema ng lipunang
pinaghaharian ng iilang monopolyong kapitalista at ang salitang "imperyalismo"
ay buhay na buhay sa National Economy and Patrimony na nating ginawa. Sa
pamamagitan ng salitang "based on," naroroon na ang free trade sapagkat tayo
ay mananatiling tagapagluwas ng hilaw na sangkap at tagaangkat ng yaring
produkto. Pangalawa, naroroon pa rin ang parity rights, ang service contract, ang
60-40 equity sa natural resources. Habang naghihirap ang sambayanang
Pilipino, ginagalugad naman ng mga dayuhan ang ating likas na yaman. Kailan
man ang Article on National Economy and Patrimony ay hindi nagpaalis sa
pagkaalipin ng ating ekonomiya sa kamay ng mga dayuhan. Ang solusyon sa
suliranin ng bansa ay dalawa lamang: ang pagpapatupad ng tunay na reporma
sa lupa at ang national industrialization. Ito ang tinatawag naming pagsikat ng
araw sa Silangan. Ngunit ang mga landlords and big businessmen at ang mga
komprador ay nagsasabi na ang free trade na ito, ang kahulugan para sa amin,
ay ipinipilit sa ating sambayanan na ang araw ay sisikat sa Kanluran. Kailan man
hindi puwedeng sumikat ang araw sa Kanluran. I vote no.
234
[Emphasis
supplied.]
This Court is likewise not persuaded.
As earlier noted, the phrase "service contracts" has been deleted in the 1987
Constitution's Article on National Economy and Patrimony. If the CONCOM intended to
retain the concept of service contracts under the 1973 Constitution, it could have simply
adopted the old terminology ("service contracts") instead of employing new and
unfamiliar terms ("agreements . . . involving either technical or financial assistance").
Such a difference between the language of a provision in a revised constitution and that
of a similar provision in the preceding constitution is viewed as indicative of a difference
in purpose.
235
If, as respondents suggest, the concept of "technical or financial
assistance" agreements is identical to that of "service contracts," the CONCOM would
not have bothered to fit the same dog with a new collar. To uphold respondents' theory

108

would reduce the first to a mere euphemism for the second and render the change in
phraseology meaningless.
An examination of the reason behind the change confirms that technical or financial
assistance agreements are not synonymous to service contracts.
[T]he Court in construing a Constitution should bear in mind the object sought to be
accomplished by its adoption, and the evils, if any, sought to be prevented or remedied.
A doubtful provision will be examined in light of the history of the times, and the
condition and circumstances under which the Constitution was framed. The object is to
ascertain the reason which induced the framers of the Constitution to enact the
particular provision and the purpose sought to be accomplished thereby, in order to
construe the whole as to make the words consonant to that reason and calculated to
effect that purpose.
236

As the following question of Commissioner Quesada and Commissioner Villegas'
answer shows the drafters intended to do away with service contracts which were used
to circumvent the capitalization (60%-40%) requirement:
MS. QUESADA. The 1973 Constitution used the words "service contracts." In
this particular Section 3, is there a safeguard against the possible control of
foreign interests if the Filipinos go into coproduction with them?
MR. VILLEGAS. Yes. In fact, the deletion of the phrase "service contracts" was
our first attempt to avoid some of the abuses in the past regime in the use of
service contracts to go around the 60-40 arrangement. The safeguard that has
been introduced and this, of course can be refined is found in Section 3, lines
25 to 30, where Congress will have to concur with the President on any
agreement entered into between a foreign-owned corporation and the
government involving technical or financial assistance for large-scale exploration,
development and utilization of natural resources.
237
In a subsequent discussion, Commissioner Villegas allayed the fears of
Commissioner Quesada regarding the participation of foreign interests in
Philippine natural resources, which was supposed to be restricted to Filipinos.
MS. QUESADA. Another point of clarification is the phrase "and utilization of
natural resources shall be under the full control and supervision of the State." In
the 1973 Constitution, this was limited to citizens of the Philippines; but it was
removed and substituted by "shall be under the full control and supervision of the
State." Was the concept changed so that these particular resources would be

109

limited to citizens of the Philippines? Or would these resources only be under the
full control and supervision of the State; meaning, noncitizens would have access
to these natural resources? Is that the understanding?
MR. VILLEGAS. No, Mr. Vice-President, if the Commissioner reads the next
sentence, it states:
Such activities may be directly undertaken by the State, or it may enter into co-
production, joint venture, production-sharing agreements with Filipino citizens.
So we are still limiting it only to Filipino citizens.
x x x.
MS. QUESADA. Going back to Section 3, the section suggests that:
The exploration, development, and utilization of natural resources may be directly
undertaken by the State, or it may enter into co-production, joint venture or production-
sharing agreement with . . . corporations or associations at least sixty per cent of whose
voting stock or controlling interest is owned by such citizens.
Lines 25 to 30, on the other hand, suggest that in the large-scale exploration,
development and utilization of natural resources, the President with the concurrence of
Congress may enter into agreements with foreign-owned corporations even for
technical or financial assistance.
I wonder if this part of Section 3 contradicts the second part. I am raising this point for
fear that foreign investors will use their enormous capital resources to facilitate the
actual exploitation or exploration, development and effective disposition of our natural
resources to the detriment of Filipino investors. I am not saying that we should not
consider borrowing money from foreign sources. What I refer to is that foreign interest
should be allowed to participate only to the extent that they lend us money and give us
technical assistance with the appropriate government permit. In this way, we can insure
the enjoyment of our natural resources by our own people.
MR. VILLEGAS. Actually, the second provision about the President does not permit
foreign investors to participate. It is only technical or financial assistance they do not
own anything but on conditions that have to be determined by law with the
concurrence of Congress. So, it is very restrictive.

110

If the Commissioner will remember, this removes the possibility for service contracts
which we said yesterday were avenues used in the previous regime to go around the
60-40 requirement.
238
The present Chief Justice, then a member of the CONCOM, also referred to this
limitation in scope in proposing an amendment to the 60-40 requirement:
MR. DAVIDE. May I be allowed to explain the proposal?
MR. MAAMBONG. Subject to the three-minute rule, Madam President.
MR. DAVIDE. It will not take three minutes.
The Commission had just approved the Preamble. In the Preamble we clearly stated
that the Filipino people are sovereign and that one of the objectives for the creation or
establishment of a government is to conserve and develop the national patrimony. The
implication is that the national patrimony or our natural resources are exclusively
reserved for the Filipino people. No alien must be allowed to enjoy, exploit and develop
our natural resources. As a matter of fact, that principle proceeds from the fact that our
natural resources are gifts from God to the Filipino people and it would be a breach of
that special blessing from God if we will allow aliens to exploit our natural resources.
I voted in favor of the Jamir proposal because it is not really exploitation that we granted
to the alien corporations but only for them to render financial or technical assistance. It
is not for them to enjoy our natural resources. Madam President, our natural resources
are depleting; our population is increasing by leaps and bounds. Fifty years from now, if
we will allow these aliens to exploit our natural resources, there will be no more natural
resources for the next generations of Filipinos. It may last long if we will begin now.
Since 1935 the aliens have been allowed to enjoy to a certain extent the exploitation of
our natural resources, and we became victims of foreign dominance and control. The
aliens are interested in coming to the Philippines because they would like to enjoy the
bounty of nature exclusively intended for Filipinos by God.
And so I appeal to all, for the sake of the future generations, that if we have to pray in
the Preamble "to preserve and develop the national patrimony for the sovereign Filipino
people and for the generations to come," we must at this time decide once and for all
that our natural resources must be reserved only to Filipino citizens.
Thank you.
239

111

The opinion of another member of the CONCOM is persuasive
240
and leaves no doubt
as to the intention of the framers to eliminate service contracts altogether. He writes:
Paragraph 4 of Section 2 specifies large-scale, capital-intensive, highly technological
undertakings for which the President may enter into contracts with foreign-owned
corporations, and enunciates strict conditions that should govern such contracts. x x x.
This provision balances the need for foreign capital and technology with the need to
maintain the national sovereignty. It recognizes the fact that as long as Filipinos can
formulate their own terms in their own territory, there is no danger of relinquishing
sovereignty to foreign interests.
Are service contracts allowed under the new Constitution? No. Under the new
Constitution, foreign investors (fully alien-owned) can NOT participate in Filipino
enterprises except to provide: (1) Technical Assistance for highly technical enterprises;
and (2) Financial Assistance for large-scale enterprises.
The intent of this provision, as well as other provisions on foreign investments, is to
prevent the practice (prevalent in the Marcos government) of skirting the 60/40 equation
using the cover of service contracts.
241
Furthermore, it appears that Proposed Resolution No. 496,
242
which was the draft
Article on National Economy and Patrimony, adopted the concept of "agreements . . .
involving either technical or financial assistance" contained in the "Draft of the 1986
U.P. Law Constitution Project" (U.P. Law draft) which was taken into consideration
during the deliberation of the CONCOM.
243
The former, as well as Article XII, as
adopted, employed the same terminology, as the comparative table below shows:
DRAFT OF THE UP
LAW CONSTITUTION
PROJECT
PROPOSED
RESOLUTION NO. 496
OF THE
CONSTITUTIONAL
COMMISSION
ARTICLE XII OF THE
1987 CONSTITUTION
Sec. 1. All lands of the
public domain, waters,
minerals, coal, petroleum
and other mineral oils, all
minerals, coal, petroleum
and other mineral oils, all
minerals, coal,
petroleum, and other

112

forces of potential
energy, fisheries, flora
and fauna and other
natural resources of the
Philippines 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.
Such activities may be
directly undertaken by
the state, or it may enter
into co-production, joint
venture, production
sharing agreements with
Filipino citizens or
corporations or
associations sixty per
cent of whose voting
stock or controlling
interest is owned by such
citizens for a period of
not more than twenty-five
years, renewable for not
more than twenty-five
years and under such
terms and conditions as
may be provided by law.
In case as to water rights
for irrigation, water
supply, fisheries, or
industrial uses other than
forces of potential
energy, fisheries, forests,
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
Such activities may be
directly undertaken by
the State, or it may enter
into co-production, joint
venture, production-
sharing agreements with
Filipino citizens or
corporations or
associations at least sixty
per cent of whose voting
stock or controlling
interest is owned by such
citizens. Such
agreements shall be for a
period of twenty-five
years, renewable for not
more than twenty-five
years, and under such
term and conditions as
may be provided by law.
In cases of water rights
for irrigation, water
supply, fisheries or
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
The State may directly
undertake such activities
or it may enter into co-
production, joint venture,
or production-sharing
agreements with Filipino
citizens, or corporations
or associations at least
sixty per centum of
whose capital is owned
by such citizens. Such
agreements may be for a
period not exceeding
twenty-five years,
renewable for not more
than twenty-five years,
and under such terms
and conditions as may
be provided by law. In
case of water rights for
irrigation, water supply,

113

the development of water
power, beneficial use
may be the measure and
limit of the grant.
The National Assembly
may by law allow small
scale utilization of natural
resources by Filipino
citizens.
The National Assembly,
may, by two-thirds vote
of all its members by
special law provide the
terms and conditions
under which a foreign-
owned corporation may
enter into agreements
with the government
involving either
technical or financial
assistance for large-
scale exploration,
development, or
resources. [Emphasis
supplied.]
industrial uses other than
the development for
water power, beneficial
use may be the measure
and limit of the grant.
The Congress may by
law allow small-scale
citizens, as well as
cooperative fish farming
in rivers, lakes, bays, and
lagoons.
The President with the
concurrence of
Congress, by special
law, shall provide the
terms and conditions
under which a foreign-
owned corporation may
enter into agreements
with the government
involving either
scale exploration,
development, and
resources. [Emphasis
supplied.]
fisheries, or industrial
uses other than the
development of water
power, beneficial use
may be the measure and
limit of the grant.
The State shall protect
the nation's marine
wealth in its archipelagic
waters, territorial sea,
and exclusive economic
zone, and reserve its use
and enjoyment
exclusively to Filipino
citizens.
The Congress may, by
law, allow small-scale
citizens, as well as
cooperative fish farming,
with priority to
subsistence fishermen
and fish-workers in
rivers, lakes, bays, and
lagoons.
The President may enter
into agreements with
foreign-owned
corporations
involving either
scale exploration,
development, and
utilization of minerals,

114

petroleum, and other
mineral oils according to
the general terms and
conditions provided by
law, based on real
contributions to the
economic growth and
general welfare of the
country. In such
agreements, the State
shall promote the
development and use of
local scientific and
technical resources.
The President shall notify
the Congress of every
contract entered into in
accordance with this
provision, within thirty
days from its execution.
The insights of the proponents of the U.P. Law draft are, therefore, instructive in
interpreting the phrase "technical or financial assistance."
In his position paper entitled Service Contracts: Old Wine in New Bottles?, Professor
Pacifico A. Agabin, who was a member of the working group that prepared the U.P. Law
draft, criticized service contracts for they "lodge exclusive management and control of
the enterprise to the service contractor, which is reminiscent of the old concession
regime. Thus, notwithstanding the provision of the Constitution that natural resources
belong to the State, and that these shall not be alienated, the service contract system
renders nugatory the constitutional provisions cited."
244
He elaborates:
Looking at the Philippine model, we can discern the following vestiges of the concession
regime, thus:

115

1. Bidding of a selected area, or leasing the choice of the area to the interested
party and then negotiating the terms and conditions of the contract; (Sec. 5, P.D.
87)
2. Management of the enterprise vested on the contractor, including operation of
the field if petroleum is discovered; (Sec. 8, P.D. 87)
3. Control of production and other matters such as expansion and development;
(Sec. 8)
4. Responsibility for downstream operations marketing, distribution, and
processing may be with the contractor (Sec. 8);
5. Ownership of equipment, machinery, fixed assets, and other properties remain
with contractor (Sec. 12, P.D. 87);
6. Repatriation of capital and retention of profits abroad guaranteed to the
contractor (Sec. 13, P.D. 87); and
7. While title to the petroleum discovered may nominally be in the name of the
government, the contractor has almost unfettered control over its disposition and
sale, and even the domestic requirements of the country is relegated to
a pro rata basis (Sec. 8).
In short, our version of the service contract is just a rehash of the old concession regime
x x x. Some people have pulled an old rabbit out of a magician's hat, and foisted it upon
us as a new and different animal.
The service contract as we know it here is antithetical to the principle of sovereignty
over our natural resources restated in the same article of the [1973] Constitution
containing the provision for service contracts. If the service contractor happens to be a
foreign corporation, the contract would also run counter to the constitutional provision
on nationalization or Filipinization, of the exploitation of our natural
resources.
245
[Emphasis supplied. Underscoring in the original.]
Professor Merlin M. Magallona, also a member of the working group, was harsher in his
reproach of the system:
x x x the nationalistic phraseology of the 1935 [Constitution] was retained by the [1973]
Charter, but the essence of nationalism was reduced to hollow rhetoric. The 1973
Charter still provided that the exploitation or development of the country's natural
resources be limited to Filipino citizens or corporations owned or controlled by them.

116

However, the martial-law Constitution allowed them, once these resources are in their
name, to enter into service contracts with foreign investors for financial, technical,
management, or other forms of assistance. Since foreign investors have the capital
resources, the actual exploitation and development, as well as the effective disposition,
of the country's natural resources, would be under their direction, and control, relegating
the Filipino investors to the role of second-rate partners in joint ventures.
Through the instrumentality of the service contract, the 1973 Constitution had
legitimized at the highest level of state policy that which was prohibited under the 1973
Constitution, namely: the exploitation of the country's natural resources by foreign
nationals. The drastic impact of [this] constitutional change becomes more pronounced
when it is considered that the active party to any service contract may be a corporation
wholly owned by foreign interests. In such a case, the citizenship requirement is
completely set aside, permitting foreign corporations to obtain actual possession,
control, and [enjoyment] of the country's natural resources.
246
Accordingly, Professor Agabin recommends that:
Recognizing the service contract for what it is, we have to expunge it from the
Constitution and reaffirm ownership over our natural resources. That is the only way we
can exercise effective control over our natural resources.
This should not mean complete isolation of the country's natural resources from foreign
investment. Other contract forms which are less derogatory to our sovereignty and
control over natural resources like technical assistance agreements, financial
assistance [agreements], co-production agreements, joint ventures, production-sharing
could still be utilized and adopted without violating constitutional provisions. In other
words, we can adopt contract forms which recognize and assert our sovereignty and
ownership over natural resources, and where the foreign entity is just a pure contractor
instead of the beneficial owner of our economic resources.
247
Still another member of the working group, Professor Eduardo Labitag, proposed that:
2. Service contracts as practiced under the 1973 Constitution should be discouraged,
instead the government may be allowed, subject to authorization by special law passed
by an extraordinary majority to enter into either technical or financial assistance. This is
justified by the fact that as presently worded in the 1973 Constitution, a service contract
gives full control over the contract area to the service contractor, for him to work,
manage and dispose of the proceeds or production. It was a subterfuge to get around
the nationality requirement of the constitution.
248

117

In the annotations on the proposed Article on National Economy and Patrimony, the
U.P. Law draft summarized the rationale therefor, thus:
5. The last paragraph is a modification of the service contract provision found in Section
9, Article XIV of the 1973 Constitution as amended. This 1973 provision shattered the
framework of nationalism in our fundamental law (see Magallona, "Nationalism and its
Subversion in the Constitution"). Through the service contract, the 1973 Constitution
had legitimized that which was prohibited under the 1935 constitutionthe exploitation
of the country's natural resources by foreign nationals. Through the service contract,
acts prohibited by the Anti-Dummy Law were recognized as legitimate arrangements.
Service contracts lodge exclusive management and control of the enterprise to the
service contractor, not unlike the old concession regime where the concessionaire had
complete control over the country's natural resources, having been given exclusive and
plenary rights to exploit a particular resource and, in effect, having been assured of
ownership of that resource at the point of extraction (see Agabin, "Service Contracts:
Old Wine in New Bottles"). Service contracts, hence, are antithetical to the principle of
sovereignty over our natural resources, as well as the constitutional provision on
nationalization or Filipinization of the exploitation of our natural resources.
Under the proposed provision, only technical assistance or financial assistance
agreements may be entered into, and only for large-scale activities. These are contract
forms which recognize and assert our sovereignty and ownership over natural
resources since the foreign entity is just a pure contractor and not a beneficial owner of
our economic resources. The proposal recognizes the need for capital and technology
to develop our natural resources without sacrificing our sovereignty and control over
such resources by the safeguard of a special law which requires two-thirds vote of all
the members of the Legislature. This will ensure that such agreements will be debated
upon exhaustively and thoroughly in the National Assembly to avert prejudice to the
nation.
249
The U.P. Law draft proponents viewed service contracts under the 1973 Constitution as
grants of beneficial ownership of the country's natural resources to foreign owned
corporations. While, in theory, the State owns these natural resources and Filipino
citizens, their beneficiaries service contracts actually vested foreigners with the right
to dispose, explore for, develop, exploit, and utilize the same. Foreigners, not Filipinos,
became the beneficiaries of Philippine natural resources. This arrangement is clearly
incompatible with the constitutional ideal of nationalization of natural resources, with the
Regalian doctrine, and on a broader perspective, with Philippine sovereignty.
The proponents nevertheless acknowledged the need for capital and technical know-
how in the large-scale exploitation, development and utilization of natural resources

118

the second paragraph of the proposed draft itself being an admission of such scarcity.
Hence, they recommended a compromise to reconcile the nationalistic provisions dating
back to the 1935 Constitution, which reserved all natural resources exclusively to
Filipinos, and the more liberal 1973 Constitution, which allowed foreigners to participate
in these resources through service contracts. Such a compromise called for the
adoption of a new system in the exploration, development, and utilization of natural
resources in the form of technical agreements or financial agreements which,
necessarily, are distinct concepts from service contracts.
The replacement of "service contracts" with "agreements involving either technical or
financial assistance," as well as the deletion of the phrase "management or other forms
of assistance," assumes greater significance when note is taken that the U.P. Law draft
proposed other equally crucial changes that were obviously heeded by the CONCOM.
These include the abrogation of the concession system and the adoption of new
"options" for the State in the exploration, development, and utilization of natural
resources. The proponents deemed these changes to be more consistent with the
State's ownership of, and its "full control and supervision" (a phrase also employed by
the framers) over, such resources. The Project explained:
3. In line with the State ownership of natural resources, the State should take a more
active role in the exploration, development, and utilization of natural resources, than the
present practice of granting licenses, concessions, or leases hence the provision that
said activities shall be under the full control and supervision of the State. There are
three major schemes by which the State could undertake these activities: first, directly
by itself; second, by virtue of co-production, joint venture, production sharing
agreements with Filipino citizens or corporations or associations sixty per cent (60%) of
the voting stock or controlling interests of which are owned by such citizens; or third,
with a foreign-owned corporation, in cases of large-scale exploration, development, or
utilization of natural resources through agreements involving either technical or financial
assistance only. x x x.
At present, under the licensing concession or lease schemes, the government benefits
from such benefits only through fees, charges, ad valorem taxes and income taxes of
the exploiters of our natural resources. Such benefits are very minimal compared with
the enormous profits reaped by theses licensees, grantees, concessionaires. Moreover,
some of them disregard the conservation of natural resources and do not protect the
environment from degradation. The proposed role of the State will enable it to a greater
share in the profits it can also actively husband its natural resources and engage in
developmental programs that will be beneficial to them.

119

4. Aside from the three major schemes for the exploration, development, and utilization
of our natural resources, the State may, by law, allow Filipino citizens to explore,
develop, utilize natural resources in small-scale. This is in recognition of the plight of
marginal fishermen, forest dwellers, gold panners, and others similarly situated who
exploit our natural resources for their daily sustenance and survival.
250

Professor Agabin, in particular, after taking pains to illustrate the similarities between
the two systems, concluded that the service contract regime was but a "rehash" of the
concession system. "Old wine in new bottles," as he put it. The rejection of the service
contract regime, therefore, is in consonance with the abolition of the concession system.
In light of the deliberations of the CONCOM, the text of the Constitution, and the
adoption of other proposed changes, there is no doubt that the framers considered and
shared the intent of the U.P. Law proponents in employing the phrase "agreements . . .
involving either technical or financial assistance."
While certain commissioners may have mentioned the term "service contracts" during
the CONCOM deliberations, they may not have been necessarily referring to the
concept of service contracts under the 1973 Constitution. As noted earlier, "service
contracts" is a term that assumes different meanings to different people.
251
The
commissioners may have been using the term loosely, and not in its technical and legal
sense, to refer, in general, to agreements concerning natural resources entered into by
the Government with foreign corporations. These loose statements do not necessarily
translate to the adoption of the 1973 Constitution provision allowing service contracts.
It is true that, as shown in the earlier quoted portions of the proceedings in CONCOM, in
response to Sr. Tan's question, Commissioner Villegas commented that, other than
congressional notification, the only difference between "future" and "past" "service
contracts" is the requirement of a general law as there were no laws previously
authorizing the same.
252
However, such remark is far outweighed by his more
categorical statement in his exchange with Commissioner Quesada that the draft article
"does not permit foreign investors to participate" in the nation's natural resources
which was exactly what service contracts did except to provide "technical or financial
assistance."
253

In the case of the other commissioners, Commissioner Nolledo himself clarified in his
work that the present charter prohibits service contracts.
254
Commissioner Gascon was
not totally averse to foreign participation, but favored stricter restrictions in the form of
majority congressional concurrence.
255
On the other hand, Commissioners Garcia and
Tadeo may have veered to the extreme side of the spectrum and their objections may

120

be interpreted as votes against any foreign participation in our natural resources
whatsoever.
WMCP cites Opinion No. 75, s. 1987,
256
and Opinion No. 175, s. 1990
257
of the
Secretary of Justice, expressing the view that a financial or technical assistance
agreement "is no different in concept" from the service contract allowed under the 1973
Constitution. This Court is not, however, bound by this interpretation. When an
administrative or executive agency renders an opinion or issues a statement of policy, it
merely interprets a pre-existing law; and the administrative interpretation of the law is at
best advisory, for it is the courts that finally determine what the law means.
258

In any case, the constitutional provision allowing the President to enter into FTAAs with
foreign-owned corporations is an exception to the rule that participation in the nation's
natural resources is reserved exclusively to Filipinos. Accordingly, such provision must
be construed strictly against their enjoyment by non-Filipinos. As Commissioner Villegas
emphasized, the provision is "very restrictive."
259
Commissioner Nolledo also remarked
that "entering into service contracts is an exception to the rule on protection of natural
resources for the interest of the nation and, therefore, being an exception, it should be
subject, whenever possible, to stringent rules."
260
Indeed, exceptions should be strictly
but reasonably construed; they extend only so far as their language fairly warrants and
all doubts should be resolved in favor of the general provision rather than the
exception.
261

With the foregoing discussion in mind, this Court finds that R.A. No. 7942 is invalid
insofar as said Act authorizes service contracts. Although the statute employs the
phrase "financial and technical agreements" in accordance with the 1987 Constitution, it
actually treats these agreements as service contracts that grant beneficial ownership to
foreign contractors contrary to the fundamental law.
Section 33, which is found under Chapter VI (Financial or Technical Assistance
Agreement) of R.A. No. 7942 states:
SEC. 33. Eligibility.Any qualified person with technical and financial capability to
undertake large-scale exploration, development, and utilization of mineral resources in
the Philippines may enter into a financial or technical assistance agreement directly with
the Government through the Department. [Emphasis supplied.]
"Exploration," as defined by R.A. No. 7942,
means the searching or prospecting for mineral resources by geological, geochemical
or geophysical surveys, remote sensing, test pitting, trending, drilling, shaft sinking,

121

tunneling or any other means for the purpose of determining the existence, extent,
quantity and quality thereof and the feasibility of mining them for profit.
262

A legally organized foreign-owned corporation may be granted an exploration
permit,
263
which vests it with the right to conduct exploration for all minerals in specified
areas,
264
i.e., to enter, occupy and explore the same.
265
Eventually, the foreign-owned
corporation, as such permittee, may apply for a financial and technical assistance
agreement.
266

"Development" is the work undertaken to explore and prepare an ore body or a mineral
deposit for mining, including the construction of necessary infrastructure and related
facilities.
267

"Utilization" "means the extraction or disposition of minerals."
268
A stipulation that the
proponent shall dispose of the minerals and byproducts produced at the highest price
and more advantageous terms and conditions as provided for under the implementing
rules and regulations is required to be incorporated in every FTAA.
269

A foreign-owned/-controlled corporation may likewise be granted a mineral processing
permit.
270
"Mineral processing" is the milling, beneficiation or upgrading of ores or
minerals and rocks or by similar means to convert the same into marketable
products.
271

An FTAA contractor makes a warranty that the mining operations shall be conducted in
accordance with the provisions of R.A. No. 7942 and its implementing rules
272
and for
work programs and minimum expenditures and commitments.
273
And it obliges itself to
furnish the Government records of geologic, accounting, and other relevant data for its
mining operation.
274

"Mining operation," as the law defines it, means mining activities involving exploration,
feasibility, development, utilization, and processing.
275

The underlying assumption in all these provisions is that the foreign contractor manages
the mineral resources, just like the foreign contractor in a service contract.
Furthermore, Chapter XII of the Act grants foreign contractors in FTAAs the same
auxiliary mining rights that it grants contractors in mineral agreements (MPSA, CA and
JV).
276
Parenthetically, Sections 72 to 75 use the term "contractor," without
distinguishing between FTAA and mineral agreement contractors. And so does "holders
of mining rights" in Section 76. A foreign contractor may even convert its FTAA into a
mineral agreement if the economic viability of the contract area is found to be

122

inadequate to justify large-scale mining operations,
277
provided that it reduces its equity
in the corporation, partnership, association or cooperative to forty percent (40%).
278

Finally, under the Act, an FTAA contractor warrants that it "has or has access to all the
financing, managerial, and technical expertise. . . ."
279
This suggests that an FTAA
contractor is bound to provide some management assistance a form of assistance
that has been eliminated and, therefore, proscribed by the present Charter.
By allowing foreign contractors to manage or operate all the aspects of the mining
operation, the above-cited provisions of R.A. No. 7942 have in effect conveyed
beneficial ownership over the nation's mineral resources to these contractors, leaving
the State with nothing but bare title thereto.
Moreover, the same provisions, whether by design or inadvertence, permit a
circumvention of the constitutionally ordained 60%-40% capitalization requirement for
corporations or associations engaged in the exploitation, development and utilization of
Philippine natural resources.
In sum, the Court finds the following provisions of R.A. No. 7942 to be violative of
Section 2, Article XII of the Constitution:
(1) The proviso in Section 3 (aq), which defines "qualified person," to wit:
Provided, That a legally organized foreign-owned corporation shall be deemed a
qualified person for purposes of granting an exploration permit, financial or
technical assistance agreement or mineral processing permit.
(2) Section 23,
280
which specifies the rights and obligations of an exploration
permittee, insofar as said section applies to a financial or technical assistance
agreement,
(3) Section 33, which prescribes the eligibility of a contractor in a financial or
technical assistance agreement;
(4) Section 35,
281
which enumerates the terms and conditions for every financial
or technical assistance agreement;
(5) Section 39,
282
which allows the contractor in a financial and technical
assistance agreement to convert the same into a mineral production-sharing
agreement;

123

(6) Section 56,
283
which authorizes the issuance of a mineral processing permit
to a contractor in a financial and technical assistance agreement;
The following provisions of the same Act are likewise void as they are dependent on the
foregoing provisions and cannot stand on their own:
(1) Section 3 (g),
284
which defines the term "contractor," insofar as it applies to a
financial or technical assistance agreement.
Section 34,
285
which prescribes the maximum contract area in a financial or
technical assistance agreements;
Section 36,
286
which allows negotiations for financial or technical assistance
agreements;
Section 37,
287
which prescribes the procedure for filing and evaluation of financial
or technical assistance agreement proposals;
Section 38,
288
which limits the term of financial or technical assistance
agreements;
Section 40,
289
which allows the assignment or transfer of financial or technical
assistance agreements;
Section 41,
290
which allows the withdrawal of the contractor in an FTAA;
The second and third paragraphs of Section 81,
291
which provide for the
Government's share in a financial and technical assistance agreement; and
Section 90,
292
which provides for incentives to contractors in FTAAs insofar as it
applies to said contractors;
When the parts of the statute are so mutually dependent and connected as conditions,
considerations, inducements, or compensations for each other, as to warrant a belief
that the legislature intended them as a whole, and that if all could not be carried into
effect, the legislature would not pass the residue independently, then, if some parts are
unconstitutional, all the provisions which are thus dependent, conditional, or connected,
must fall with them.
293

There can be little doubt that the WMCP FTAA itself is a service contract.

124

Section 1.3 of the WMCP FTAA grants WMCP "the exclusive right to explore, exploit,
utilise[,] process and dispose of all Minerals products and by-products thereof that may
be produced from the Contract Area."
294
The FTAA also imbues WMCP with the
following rights:
(b) to extract and carry away any Mineral samples from the Contract area for the
purpose of conducting tests and studies in respect thereof;
(c) to determine the mining and treatment processes to be utilised during the
Development/Operating Period and the project facilities to be constructed during
the Development and Construction Period;
(d) have the right of possession of the Contract Area, with full right of ingress and
egress and the right to occupy the same, subject to the provisions of Presidential
Decree No. 512 (if applicable) and not be prevented from entry into private ands
by surface owners and/or occupants thereof when prospecting, exploring and
exploiting for minerals therein;
x x x
(f) to construct roadways, mining, drainage, power generation and transmission
facilities and all other types of works on the Contract Area;
(g) to erect, install or place any type of improvements, supplies, machinery and
other equipment relating to the Mining Operations and to use, sell or otherwise
dispose of, modify, remove or diminish any and all parts thereof;
(h) enjoy, subject to pertinent laws, rules and regulations and the rights of third
Parties, easement rights and the use of timber, sand, clay, stone, water and
other natural resources in the Contract Area without cost for the purposes of the
Mining Operations;
x x x
(i) have the right to mortgage, charge or encumber all or part of its interest and
obligations under this Agreement, the plant, equipment and infrastructure and the
Minerals produced from the Mining Operations;
x x x.
295


125

All materials, equipment, plant and other installations erected or placed on the Contract
Area remain the property of WMCP, which has the right to deal with and remove such
items within twelve months from the termination of the FTAA.
296

Pursuant to Section 1.2 of the FTAA, WMCP shall provide "[all] financing, technology,
management and personnel necessary for the Mining Operations." The mining company
binds itself to "perform all Mining Operations . . . providing all necessary services,
technology and financing in connection therewith,"
297
and to "furnish all materials,
labour, equipment and other installations that may be required for carrying on all Mining
Operations."
298
> WMCP may make expansions, improvements and replacements of the
mining facilities and may add such new facilities as it considers necessary for the
mining operations.
299

These contractual stipulations, taken together, grant WMCP beneficial ownership over
natural resources that properly belong to the State and are intended for the benefit of its
citizens. These stipulations are abhorrent to the 1987 Constitution. They are precisely
the vices that the fundamental law seeks to avoid, the evils that it aims to suppress.
Consequently, the contract from which they spring must be struck down.
In arguing against the annulment of the FTAA, WMCP invokes the Agreement on the
Promotion and Protection of Investments between the Philippine and Australian
Governments, which was signed in Manila on January 25, 1995 and which entered into
force on December 8, 1995.
x x x. Article 2 (1) of said treaty states that it applies to investments whenever made and
thus the fact that [WMCP's] FTAA was entered into prior to the entry into force of the
treaty does not preclude the Philippine Government from protecting [WMCP's]
investment in [that] FTAA. Likewise, Article 3 (1) of the treaty provides that "Each Party
shall encourage and promote investments in its area by investors of the other Party and
shall [admit] such investments in accordance with its Constitution, Laws, regulations
and investment policies" and in Article 3 (2), it states that "Each Party shall ensure that
investments are accorded fair and equitable treatment." The latter stipulation indicates
that it was intended to impose an obligation upon a Party to afford fair and equitable
treatment to the investments of the other Party and that a failure to provide such
treatment by or under the laws of the Party may constitute a breach of the treaty. Simply
stated, the Philippines could not, under said treaty, rely upon the inadequacies of its
own laws to deprive an Australian investor (like [WMCP]) of fair and equitable treatment
by invalidating [WMCP's] FTAA without likewise nullifying the service contracts entered
into before the enactment of RA 7942 such as those mentioned in PD 87 or EO 279.

126

This becomes more significant in the light of the fact that [WMCP's] FTAA was executed
not by a mere Filipino citizen, but by the Philippine Government itself, through its
President no less, which, in entering into said treaty is assumed to be aware of the
existing Philippine laws on service contracts over the exploration, development and
utilization of natural resources. The execution of the FTAA by the Philippine
Government assures the Australian Government that the FTAA is in accordance with
existing Philippine laws.
300
[Emphasis and italics by private respondents.]
The invalidation of the subject FTAA, it is argued, would constitute a breach of said
treaty which, in turn, would amount to a violation of Section 3, Article II of the
Constitution adopting the generally accepted principles of international law as part of the
law of the land. One of these generally accepted principles is pacta sunt servanda,
which requires the performance in good faith of treaty obligations.
Even assuming arguendo that WMCP is correct in its interpretation of the treaty and its
assertion that "the Philippines could not . . . deprive an Australian investor (like
[WMCP]) of fair and equitable treatment by invalidating [WMCP's] FTAA without likewise
nullifying the service contracts entered into before the enactment of RA 7942 . . .," the
annulment of the FTAA would not constitute a breach of the treaty invoked. For this
decision herein invalidating the subject FTAA forms part of the legal system of the
Philippines.
301
The equal protection clause
302
guarantees that such decision shall apply
to all contracts belonging to the same class, hence, upholding rather than violating, the
"fair and equitable treatment" stipulation in said treaty.
One other matter requires clarification. Petitioners contend that, consistent with the
provisions of Section 2, Article XII of the Constitution, the President may enter into
agreements involving "either technical or financial assistance" only. The agreement in
question, however, is a technical and financial assistance agreement.
Petitioners' contention does not lie. To adhere to the literal language of the Constitution
would lead to absurd consequences.
303
As WMCP correctly put it:
x x x such a theory of petitioners would compel the government (through the President)
to enter into contract with two (2) foreign-owned corporations, one for financial
assistance agreement and with the other, for technical assistance over one and the
same mining area or land; or to execute two (2) contracts with only one foreign-owned
corporation which has the capability to provide both financial and technical assistance,
one for financial assistance and another for technical assistance, over the same mining
area. Such an absurd result is definitely not sanctioned under the canons of
constitutional construction.
304
[Underscoring in the original.]

127

Surely, the framers of the 1987 Charter did not contemplate such an absurd result from
their use of "either/or." A constitution is not to be interpreted as demanding the
impossible or the impracticable; and unreasonable or absurd consequences, if possible,
should be avoided.
305
Courts are not to give words a meaning that would lead to absurd
or unreasonable consequences and a literal interpretation is to be rejected if it would be
unjust or lead to absurd results.
306
That is a strong argument against its
adoption.
307
Accordingly, petitioners' interpretation must be rejected.
The foregoing discussion has rendered unnecessary the resolution of the other issues
raised by the petition.
WHEREFORE, the petition is GRANTED. The Court hereby declares unconstitutional
and void:
(1) The following provisions of Republic Act No. 7942:
(a) The proviso in Section 3 (aq),
(b) Section 23,
(c) Section 33 to 41,
(d) Section 56,
(e) The second and third paragraphs of Section 81, and
(f) Section 90.
(2) All provisions of Department of Environment and Natural Resources
Administrative Order 96-40, s. 1996 which are not in conformity with this
Decision, and
(3) The Financial and Technical Assistance Agreement between the Government
of the Republic of the Philippines and WMC Philippines, Inc.
SO ORDERED.
Davide, Jr., C.J., Puno, Quisumbing, Carpio, Corona, Callejo, Sr., and Tinga. JJ.,
concur.
Vitug, J., see Separate Opinion.
Panganiban, J., see Separate Opinion.

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