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Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. 175368

April 11, 2013

LEAGUE OF PROVINCES OF THE PHILIPPINES, Petitioner,


vs.
DEPARTMENT OF ENVIRONMENT and NATURAL RESOURCES and HON.
ANGELO T. REYES, in his capacity as Secretary of DENR, Respondents.
DECISION
PERALTA, J.:
This is a petition for certiorari, prohibition and mandamus,1 praying that this
Court order the following: ( 1) declare as unconstitutional Section 17(b)(3)(iii) of
Republic Act (R.A.) No. 7160, otherwise known as The Local Government Code
of 1991 and Section 24 of Republic Act (R.A.) No. 7076, otherwise known as the
People's Small-Scale Mining Act of 1991; (2) prohibit and bar respondents from
exercising control over provinces; and (3) declare as illegal the respondent
Secretary of the Department of Energy and Natural Resources' (DENR)
nullification, voiding and cancellation of the Small-Scale Mining permits issued
by the Provincial Governor of Bulacan.
The Facts are as follows:
On March 28, 1996, Golden Falcon Mineral Exploration Corporation (Golden
Falcon) filed with the DENR Mines and Geosciences Bureau Regional Office No.
III (MGB R-III) an Application for Financial and Technical Assistance Agreement
(FTAA) covering an area of 61,136 hectares situated in the Municipalities of San
Miguel, San Ildefonso, Norzagaray and San Jose del Monte, Bulacan.2
On April 29, 1998, the MGB R-III issued an Order denying Golden Falcon's
Application for Financial and Technical Assistance Agreement for failure to
secure area clearances from the Forest Management Sector and Lands
Management Sector of the DENR Regional Office No. III. 3
On November 11, 1998, Golden Falcon filed an appeal with the DENR Mines and
Geosciences Bureau Central Office (MGB-Central Office), and sought
reconsideration of the Order dated April 29, 1998. 4
On February 10, 2004, while Golden Falcon's appeal was pending, Eduardo D.
Mercado, Benedicto S. Cruz, Gerardo R. Cruz and Liberato Sembrano filed with
the Provincial Environment and Natural Resources Office (PENRO) of Bulacan
their respective Applications for Quarry Permit (AQP), which covered the same

area subject of Golden Falcon's Application for Financial and Technical


Assistance Agreement.5
On July 16, 2004, the MGB-Central Office issued an Order denying Golden
Falcon's appeal and affirming the MGB R-III's Order dated April 29, 1998.
On September 13, 2004, Atlantic Mines and Trading Corporation (AMTC) filed
with the PENRO of Bulacan an Application for Exploration Permit (AEP) covering
5,281 hectares of the area covered by Golden Falcon's Application for Financial
and Technical Assistance Agreement.6
On October 19, 2004, DENR-MGB Director Horacio C. Ramos, in response to
MGB R-III Director Arnulfo V. Cabantog's memorandum query dated September
8, 2004, categorically stated that the MGB-Central Office's Order dated July 16,
2004 became final on August 11, 2004, fifteen (15) days after Golden Falcon
received the said Order, per the Certification dated October 8, 2004 issued by
the Postmaster II of the Philippine Postal Corporation of Cainta, Rizal.7
Through letters dated May 5 and May 10, 2005, AMTC notified the PENRO of
Bulacan and the MGB R-III Director, respectively, that the subject Applications
for Quarry Permit fell within its (AMTC's) existing valid and prior Application for
Exploration Permit, and the the former area of Golden Falcon was open to
mining location only on August 11, 2004 per the Memorandum dated October
19, 2004 of the MGB Director, Central Office. 8
On June 24, 2005, Ricardo Medina, Jr., PENRO of Bulacan, indorsed AMTC's
letter to the Provincial Legal Officer, Atty. Eugenio F. Resurreccion, for his legal
opinion on which date of denial of Golden Falcon's application/appeal April 29,
1998 or July 16, 2004 is to be considered in the deliberation of the Provincial
Mining Regulatory Board (PMRB) for the purpose of determining when the land
subject of the Applications for Quarry Permit could be considered open for
application.
On June 28, 2005, Provincial Legal Officer Eugenio Resurreccion issued a legal
opinion stating that the Order dated July 16, 2004 of the MGB-Central Office
was a mere reaffirmation of the Order dated April 29, 1998 of the MGB R-III;
hence, the Order dated April 29, 1998 should be the reckoning period of the
denial of the application of Golden Falcon.
On July 22, 2005, AMTC filed with the PMRB of Bulacan a formal protest against
the aforesaid Applications for Quarry Permit on the ground that the subject area
was already covered by its Application for Exploration Permit.9
On August 8, 2005, MGB R-III Director Cabantog, who was the concurrent
Chairman of the PMRB, endorsed to the Provincial Governor of Bulacan,
Governor Josefina M. dela Cruz, the aforesaid Applications for Quarry Permit
that had apparently been converted to Applications for Small-Scale Mining
Permit of Eduardo D. Mercado, Benedicto S. Cruz, Gerardo R. Cruz and Lucila S.
Valdez (formerly Liberato Sembrano).10

On August 9, 2005, the PENRO of Bulacan issued four memoranda


recommending to Governor Dela Cruz the approval of the aforesaid
Applications for Small-Scale Mining Permit.11
On August 10, 2005, Governor Dela Cruz issued the corresponding Small-Scale
Mining Permits in favor of Eduardo D. Mercado, Benedicto S. Cruz, Gerardo R.
Cruz and Lucila S. Valdez.12
Subsequently, AMTC appealed to respondent DENR Secretary the grant of the
aforesaid Small-Scale Mining Permits, arguing that: (1) The PMRB of Bulacan
erred in giving due course to the Applications for Small-Scale Mining Permit
without first resolving its formal protest; (2) The areas covered by the SmallScale Mining Permits fall within the area covered by AMTC's valid prior
Application for Exploration Permit; (3) The Applications for Quarry Permit were
illegally converted to Applications for Small-Scale Mining Permit; (4) DENR-MGB
Director Horacio C. Ramos' ruling that the subject areas became open for
mining location only on August 11, 2004 was controlling; (5) The Small-Scale
Mining Permits were null and void because they covered areas that were never
declared People's Small-Scale Mining Program sites as mandated by Section 4
of the People's Small-Scale Mining Act of 1991; and (6) Iron ore is not
considered as one of the quarry resources, as defined by Section 43 of the
Philippine Mining Act of 1995, which could be subjects of an Application for
Quarry Permit.13
On August 8, 2006, respondent DENR Secretary rendered a Decision 14 in favor
of AMTC. The DENR Secretary agreed with MGB Director Horacio C. Ramos that
the area was open to mining location only on August 11, 2004, fifteen (15) days
after the receipt by Golden Falcon on July 27, 2004 of a copy of the MGBCentral Office's Order dated July 16, 2004, which Order denied Golden Falcon's
appeal. According to the DENR Secretary, the filing by Golden Falcon of the
letter-appeal suspended the finality of the Order of denial issued on April 29,
1998 by the Regional Director until the resolution of the appeal on July 16, 2004
by the MGB-Central Office. He stated that the Applications for Quarry Permit
were filed on February 10, 2004 when the area was still closed to mining
location; hence, the Small-Scale Mining Permits granted by the PMRB and the
Governor were null and void. On the other hand, the DENR Secretary declared
that AMTC filed its Application for Exploration Permit when the area was already
open to other mining applicants; thus, AMTCs Application for Exploration
Permit was valid. Moreover, the DENR Secretary held that the questioned
Small-Scale Mining Permits were issued in violation of Section 4 of R.A. No.
7076 and beyond the authority of the Provincial Governor pursuant to Section
43 of R.A. No. 7942, because the area was never proclaimed to be under the
People's Small-Scale Mining Program. Further, the DENR Secretary stated that
iron ore mineral is not considered among the quarry resources.
The dispositive portion of the DENR Secretarys Decision reads:
WHEREFORE, the Application for Exploration Permit, AEP-III-02-04 of Atlantic
Mines and Trading Corp. is declared valid and may now be given due course.

The Small-Scale Mining Permits, SSMP-B-002-05 of Gerardo Cruz, SSMP-B-00305 of Eduardo D. Mercado, SSMP-B-004-05 of Benedicto S. Cruz and SSMP-B005-05 of Lucila S. Valdez are declared NULL AND VOID. Consequently, the said
permits are hereby CANCELLED.15
Hence, petitioner League of Provinces filed this petition.
Petitioner is a duly organized league of local governments incorporated under
R.A. No. 7160. Petitioner declares that it is composed of 81 provincial
governments, including the Province of Bulacan. It states that this is not an
action of one province alone, but the collective action of all provinces through
the League, as a favorable ruling will not only benefit one province, but all
provinces and all local governments.
Petitioner raises these issues:
I
WHETHER OR NOT SECTION 17(B)(3)(III) OF THE, 1991 LOCAL GOVERNMENT
CODE AND SECTION 24 OF THE PEOPLE'S SMALL-SCALE MINING ACT OF 1991
ARE UNCONSTITUTIONAL FOR PROVIDING FOR EXECUTIVE CONTROL AND
INFRINGING UPON THE LOCAL AUTONOMY OF PROVINCES.
II
WHETHER OR NOT THE ACT OF RESPONDENT [DENR] IN NULLIFYING, VOIDING
AND CANCELLING THE SMALL-SCALE MINING PERMITS AMOUNTS TO EXECUTIVE
CONTROL, NOT MERELY SUPERVISION AND USURPS THE DEVOLVED POWERS OF
ALL PROVINCES.16
To start, the Court finds that petitioner has legal standing to file this petition
because it is tasked under Section 504 of the Local Government Code of 1991
to promote local autonomy at the provincial level;17 adopt measures for the
promotion of the welfare of all provinces and its officials and employees;18 and
exercise such other powers and perform such other duties and functions as the
league may prescribe for the welfare of the provinces.19
Before this Court determines the validity of an act of a co-equal and coordinate
branch of the Government, it bears emphasis that ingrained in our
jurisprudence is the time-honored principle that a statute is presumed to be
valid.20This presumption is rooted in the doctrine of separation of powers which
enjoins upon the three coordinate departments of the Government a becoming
courtesy for each other's acts.21 This Court, however, may declare a law, or
portions thereof, unconstitutional where a petitioner has shown a clear and
unequivocal breach of the Constitution,22 leaving no doubt or hesitation in the
mind of the Court.23
In this case, petitioner admits that respondent DENR Secretary had the
authority to nullify the Small-Scale Mining Permits issued by the Provincial

Governor of Bulacan, as the DENR Secretary has control over the PMRB, and
the implementation of the Small-Scale Mining Program is subject to control by
respondent DENR.
Control of the DENR/DENR Secretary over small-scale mining in the provinces is
granted by three statutes: (1) R.A. No. 7061 or The Local Government Code of
1991; (2) R.A. No. 7076 or the People's Small Scale Mining Act of 1991; and (3)
R.A. No. 7942, otherwise known as the Philippine Mining Act of 1995. 24 The
pertinent provisions of law sought to be declared as unconstitutional by
petitioner are as follows:
R.A. No. 7061 (The Local Government Code of 1991)
SEC. 17. Basic Services and Facilities. - (a) Local government units shall
endeavor to be self-reliant and shall continue exercising the powers and
discharging the duties and functions currently vested upon them. They shall
also discharge the functions and responsibilities of national agencies and
offices devolved to them pursuant to this Code. Local government units shall
likewise exercise such other powers and discharge such other functions and
responsibilities as are necessary, appropriate, or incidental to efficient and
effective provision of the basic services and facilities enumerated herein.
(b) Such basic services and facilities include, but are not limited to, the
following:
xxxx
(3) For a Province:c
xxxx
(iii) Pursuant to national policies and subject to supervision, control and review
of the DENR, enforcement of forestry laws limited to community-based forestry
projects, pollution control law, small-scale mining law, and other laws on the
protection of the environment; and mini-hydro electric projects for local
purposes; x x x25
R.A. No. 7076 (People's Small-Scale Mining Act of 1991)
Sec. 24. Provincial/City Mining Regulatory Board. - There is hereby created
under the direct supervision and control of the Secretary a provincial/city
mining regulatory board, herein called the Board, which shall be the
implementing agency of the Department, and shall exercise the following
powers and functions, subject to review by the Secretary:
(a) Declare and segregate existing gold-rush areas for small-scale mining;
(b) Reserve future gold and other mining areas for small-scale mining;

(c) Award contracts to small-scale miners;


(d) Formulate and implement rules and regulations related to small-scale
mining;
(e) Settle disputes, conflicts or litigations over conflicting claims within a
peoples small-scale mining area, an area that is declared a small-mining;
and
(f) Perform such other functions as may be necessary to achieve the
goals and objectives of this Act.26
Petitioner contends that the aforecited laws and DENR Administrative Order No.
9640 (the Implementing Rules and Regulations of the Philippine Mining Act of
1995) did not explicitly confer upon respondents DENR and the DENR Secretary
the power to reverse, abrogate, nullify, void, or cancel the permits issued by
the Provincial Governor or small-scale mining contracts entered into by the
PMRB. The statutes are also silent as to the power of respondent DENR
Secretary to substitute his own judgment over that of the Provincial Governor
and the PMRB.
Moreover, petitioner contends that Section 17 (b)(3)(iii) of the Local
Government Code of 1991 and Section 24 of R.A. No. 7076, which confer upon
respondents DENR and the DENR Secretary the power of control are
unconstitutional, as the Constitution states that the President (and Executive
Departments and her alter-egos) has the power of supervision only, not control,
over acts of the local government units, and grants the local government units
autonomy, thus:
The 1987 Constitution:
Article X, Section 4. The President of the Philippines shall exercise general
supervision over local governments. Provinces with respect to component cities
and municipalities, and cities and municipalities with respect to component
barangays, shall ensure that the acts of their component units are within the
scope of their prescribed powers and functions.27
Petitioner contends that the policy in the above-cited constitutional provision is
mirrored in the Local Government Code, which states:
SEC. 25. National Supervision over Local Government Units. - (a) Consistent
with the basic policy on local autonomy, the President shall exercise general
supervision over local government units to ensure that their acts are within the
scope of their prescribed powers and functions.
The President shall exercise supervisory authority directly over provinces,
highly urbanized cities, and independent component cities; through the
province with respect to component cities and municipalities; and through the
city and municipality with respect to barangays.28

Petitioner contends that the foregoing provisions of the Constitution and the
Local Government Code of 1991 show that the relationship between the
President and the Provinces or respondent DENR, as the alter ego of the
President, and the Province of Bulacan is one of executive supervision, not one
of executive control. The term "control" has been defined as the power of an
officer to alter or modify or set aside what a subordinate officer had done in the
performance of his/her duties and to substitute the judgment of the former for
the latter, while the term "supervision" is the power of a superior officer to see
to it that lower officers perform their function in accordance with law.29
Petitioner argues that respondent DENR Secretary went beyond mere executive
supervision and exercised control when he nullified the small-scale mining
permits granted by the Provincial Governor of Bulacan, as the former
substituted the judgment of the latter.
Petitioner asserts that what is involved here is a devolved power.
Under the Local Government Code of 1991, the power to regulate small-scale
mining has been devolved to all provinces. In the exercise of devolved powers,
departmental approval is not necessary. 30
Petitioner contends that if the provisions in Section 24 of R.A. No. 7076 and
Section 17 (b)(3)(iii) of the Local Government Code of 1991 granting the power
of control to the DENR/DENR Secretary are not nullified, nothing would stop the
DENR Secretary from nullifying, voiding and canceling the small-scale mining
permits that have been issued by a Provincial Governor.
Petitioner submits that the statutory grant of power of control to respondents is
unconstitutional, as the Constitution only allows supervision over local
governments and proscribes control by the executive departments.
In its Comment, respondents, represented by the Office of the Solicitor General,
stated that contrary to the assertion of petitioner, the power to implement the
small-scale mining law is expressly limited in Section 17 (b)(3)(iii) of the Local
Government Code, which provides that it must be carried out "pursuant to
national policies and subject to supervision, control and review of the DENR."
Moreover, the fact that the power to implement the small-scale mining law has
not been fully devolved to provinces is further amplified by Section 4 of the
People's Small-Scale Mining Act of 1991, which provides, among others, that
the People's Small-Scale Mining Program shall be implemented by the DENR
Secretary.
The petition lacks merit.
Paragraph 1 of Section 2, Article XII (National Economy and Patrimony) of the
Constitution31 provides that "the exploration, development and utilization of
natural resources shall be under the full control and supervision of the State."

Moreover, paragraph 3 of Section 2, Article XII of the Constitution provides that


"the Congress may, by law, allow small-scale utilization of natural resources by
Filipino citizens x x x."
Pursuant to Section 2, Article XII of the Constitution, R.A. No. 7076 or the
People's Small-Scale Mining Act of 1991, was enacted, establishing under
Section 4 thereof a People's Small-Scale Mining Program to be implemented by
the DENR Secretary in coordination with other concerned government
agencies.
The People's Small-Scale Mining Act of 1991 defines "small-scale mining" as
"refer[ring] to mining activities, which rely heavily on manual labor using
simple implement and methods and do not use explosives or heavy mining
equipment."32
It should be pointed out that the Administrative Code of 198733 provides that
the DENR is, subject to law and higher authority, in charge of carrying out the
State's constitutional mandate, under Section 2, Article XII of the Constitution,
to control and supervise the exploration, development, utilization and
conservation of the country's natural resources. Hence, the enforcement of
small-scale mining law in the provinces is made subject to the supervision,
control and review of the DENR under the Local Government Code of 1991,
while the Peoples Small-Scale Mining Act of 1991 provides that the Peoples
Small-Scale Mining Program is to be implemented by the DENR Secretary in
coordination with other concerned local government agencies.
Indeed, Section 4, Article X (Local Government) of the Constitution states that
"[t]he President of the Philippines shall exercise general supervision over local
governments," and Section 25 of the Local Government Code reiterates the
same. General supervision by the President means no more than seeing to it
that laws are faithfully executed or that subordinate officers act within the
law.34
The Court has clarified that the constitutional guarantee of local autonomy in
the Constitution Art. X, Sec. 2 refers to the administrative autonomy of local
government units or, cast in more technical language, the decentralization of
government authority.35 It does not make local governments sovereign within
the State.36 Administrative autonomy may involve devolution of powers, but
subject to limitations like following national policies or standards,37 and those
provided by the Local Government Code, as the structuring of local
governments and the allocation of powers, responsibilities, and resources
among the different local government units and local officials have been placed
by the Constitution in the hands of Congress38 under Section 3, Article X of the
Constitution.
Section 3, Article X of the Constitution mandated Congress to "enact a local
government code which shall provide for a more responsive and accountable
local government structure instituted through a system of decentralization with
effective mechanisms of recall, initiative, and referendum, allocate among the

different local government units their powers, responsibilities, and resources,


and provide for the qualifications, election, appointment and removal, term,
salaries, powers and functions and duties of local officials, and all other matters
relating to the organization and operation of the local units."
In connection with the enforcement of the small-scale mining law in the
province, Section 17 of the Local Government Code provides:
SEC. 17. Basic Services and Facilities. - (a) Local government units shall
endeavor to be self-reliant and shall continue exercising the powers and
discharging the duties and functions currently vested upon them. They shall
also discharge the functions and responsibilities of national agencies and
offices devolved to them pursuant to this Code. Local government units shall
likewise exercise such other powers and discharge such other functions and
responsibilities as are necessary, appropriate, or incidental to efficient and
effective provision of the basic services and facilities enumerated herein.
(b) Such basic services and facilities include, but are not limited to, the
following:
xxxx
(3) For a Province:c
xxxx
(iii) Pursuant to national policies and subject to supervision, control and review
of the DENR, enforcement of forestry laws limited to community-based forestry
projects, pollution control law, small-scale mining law, and other laws on the
protection of the environment; and mini-hydro electric projects for local
purposes;39
Clearly, the Local Government Code did not fully devolve the enforcement of
the small-scale mining law to the provincial government, as its enforcement is
subject to the supervision, control and review of the DENR, which is in charge,
subject to law and higher authority, of carrying out the State's constitutional
mandate to control and supervise the exploration, development, utilization of
the country's natural resources.40
Section 17 (b)(3)(iii) of the Local Government Code of 1991 is in harmony with
R.A. No. 7076 or the People's Small-Scale Mining Act of 1991, 41 which
established a People's Small-Scale Mining Program to be implemented by the
Secretary of the DENR, thus:
Sec. 2. Declaration of Policy. It is hereby declared of the State to promote,
develop, protect and rationalize viable small-scale mining activities in order to
generate more employment opportunities and provide an equitable sharing of
the nation's wealth and natural resources, giving due regard to existing rights
as herein provided.

xxxx
Sec. 4. People's Small-Scale Mining Program. - For the purpose of carrying out
the declared policy provided in Section 2 hereof, there is hereby established a
People's Small-Scale Mining Program to be implemented by the Secretary of the
Department of Environment and Natural Resources, hereinafter called the
Department, in coordination with other concerned government agencies,
designed to achieve an orderly, systematic and rational scheme for the smallscale development and utilization of mineral resources in certain mineral areas
in order to address the social, economic, technical, and environmental
problems connected with small-scale mining activities.
xxxx
Sec. 24. Provincial/City Mining Regulatory Board. There is hereby created
under the direct supervision and control of the Secretary a provincial/city
mining regulatory board, herein called the Board, which shall be the
implementing agency of the Department, and shall exercise the following
powers and functions, subject to review by the Secretary:
(a) Declare and segregate existing gold-rush areas for small-scale mining;
(b) Reserve future gold and other mining areas for small-scale mining;
(c) Award contracts to small-scale miners;
(d) Formulate and implement rules and regulations related to small-scale
mining;
(e) Settle disputes, conflicts or litigations over conflicting claims within a
peoples small-scale mining area, an area that is declared a small-mining;
and
(f) Perform such other functions as may be necessary to achieve the
goals and objectives of this Act.42
DENR Administrative Order No. 34, series of 1992, containing the Rules and
Regulations to implement R.A. No. 7076, provides:
SEC. 21. Administrative Supervision over the People's Small-Scale Mining
Program. The following DENR officials shall exercise the following supervisory
functions in the implementation of the Program:
21.1 DENR Secretrary direct supervision and control over the program
and activities of the small-scale miners within the people's small-scale
mining area;
21.2 Director the Director shall:

a. Recommend the depth or length of the tunnel or adit taking into


account the: (1) size of membership and capitalization of the
cooperative; (2) size of mineralized areas; (3) quantity of mineral
deposits; (4) safety of miners; and (5) environmental impact and
other considerations;
b. Determine the right of small-scale miners to existing facilities in
consultation with the operator, claimowner, landowner or lessor of
an affected area upon declaration of a small-scale mining area;
c. Recommend to the Secretary the withdrawal of the status of the
people's small-scale mining area when it can no longer be feasibly
operated on a small-scale basis; and
d. See to it that the small-scale mining contractors abide by smallscale mines safety rules and regulations.
xxxx
SEC. 22. Provincial/City Mining Regulatory Board. The Provincial/City Mining
Regulatory Board created under R.A. 7076 shall exercise the following powers
and functions, subject to review by the Secretary:
22.1 Declares and segregates existing gold rush area for small-scale
mining;
22.2 Reserves for the future, mineralized areas/mineral lands for people's
small-scale mining;
22.3 Awards contracts to small-scale miners cooperative;
22.4 Formulates and implements rules and regulations related to R.A.
7076;
22.5 Settles disputes, conflicts or litigations over conflicting claims within
ninety (90) days upon filing of protests or complaints; Provided, That any
aggrieved party may appeal within five (5) days from the Board's
decision to the Secretary for final resolution otherwise the same is
considered final and executory; and
22.6 Performs such other functions as may be necessary to achieve the
goals and objectives of R.A. 7076.
SEC. 6. Declaration of People's Small-Scale Mining Areas. The Board created
under R.A. 7076 shall have the authority to declare and set aside People's
Small-Scale Mining Areas in sites onshore suitable for small-scale mining
operations subject to review by the DENR Secretary thru the Director. 43

DENR Administrative Order No. 23, otherwise known as the Implementing Rules
and Regulations of R.A. No. 7942, otherwise known as the Philippine Mining Act
of 1995, adopted on August 15, 1995, provides under Section 12344thereof that
small-scale mining applications should be filed with the PMRB45 and the
corresponding permits shall be issued by the Provincial Governor, except smallscale mining applications within the mineral reservations.
Thereafter, DENR Administrative Order No. 96-40, otherwise known as the
Revised Implementing Rules and Regulations of R.A. No. 7942, otherwise known
as the Philippine Mining Act of 1995, adopted on December 19, 1996, provides
that applications for Small-Scale Mining Permits shall be filed with the Provincial
Governor/City Mayor through the concerned Provincial/City Mining Regulatory
Board for areas outside the Mineral Reservations and with the Director though
the Bureau for areas within the Mineral Reservations.46 Moreover, it provides
that Local Government Units shall, in coordination with the Bureau/ Regional
Offices and subject to valid and existing mining rights, "approve applications
for small-scale mining, sand and gravel, quarry x x x and gravel permits not
exceeding five (5) hectares."47
Petitioner contends that the Local Government Code of 1991, R.A. No. 7076,
DENR Administrative Orders Nos. 95-23 and 96-40 granted the DENR Secretary
the broad statutory power of control, but did not confer upon the respondents
DENR and DENR Secretary the power to reverse, abrogate, nullify, void, cancel
the permits issued by the Provincial Governor or small-scale mining contracts
entered into by the Board.
The contention does not persuade.
The settlement of disputes over conflicting claims in small-scale mining is
provided for in Section 24 of R.A. No. 7076, thus:
Sec. 24. Provincial/City Mining Regulatory Board. There is hereby created
under the direct supervision and control of the Secretary a provincial/city
mining regulatory board, herein called the Board, which shall be the
implementing agency of the Department, and shall exercise the following
powers and functions, subject to review by the Secretary:
xxxx
(e) Settle disputes, conflicts or litigations over conflicting claims within a
people's small-scale mining area, an area that is declared a small mining area;
xxx
Section 24, paragraph (e) of R.A. No. 7076 cited above is reflected in Section
22, paragraph 22.5 of the Implementing Rules and Regulations of R.A. No.
7076, to wit:

SEC. 22. Provincial/City Mining Regulatory Board. The Provincial/City Mining


Regulatory Board created under R.A. No. 7076 shall exercise the following
powers and functions, subject to review by the Secretary:
xxxx
22.5 Settles disputes, conflicts or litigations over conflicting claims within
ninety (90) days upon filing of protests or complaints; Provided, That any
aggrieved party may appeal within five (5) days from the Board's decision to
the Secretary for final resolution otherwise the same is considered final and
executory; x x x
In this case, in accordance with Section 22, paragraph 22.5 of the
Implementing Rules and Regulations of R.A. No. 7076, the AMTC filed on July
22, 2005 with the PMRB of Bulacan a formal protest against the Applications for
Quarry Permits of Eduardo Mercado, Benedicto Cruz, Liberato Sembrano
(replaced by Lucila Valdez) and Gerardo Cruz on the ground that the subject
area was already covered by its Application for Exploration Permit. 48 However,
on August 8, 2005, the PMRB issued Resolution Nos. 05-8, 05-9, 05-10 and 0511, resolving to submit to the Provincial Governor of Bulacan the Applications
for Small-Scale Mining Permits of Eduardo Mercado, Benedicto Cruz, Lucila
Valdez and Gerardo Cruz for the granting/issuance of the said permits. 49 On
August 10, 2005, the Provincial Governor of Bulacan issued the Small-Scale
Mining Permits to Eduardo Mercado, Benedicto Cruz, Lucila Valdez and Gerardo
Cruz based on the legal opinion of the Provincial Legal Officer and the
Resolutions of the PMRB of Bulacan.
Hence, AMTC filed an appeal with respondent DENR Secretary, appealing from
Letter-Resolution No. 05-1317 and Resolution Nos. 05-08, 05-09, 05-10 and 0511, all dated August 8, 2005, of the PMRB of Bulacan, which resolutions gave
due course and granted, on August 10, 2005, Small-Scale Mining Permits to
Eduardo D. Mercado, Benedicto S. Cruz, Lucila Valdez and Gerardo Cruz
involving parcels of mineral land situated at Camachin, Doa Remedios
Trinidad, Bulacan.
The PMRB of Bulacan filed its Answer, stating that it is an administrative body,
created under R.A. No. 7076, which cannot be equated with the court wherein a
full-blown hearing could be conducted, but it is enough that the parties were
given the opportunity to present evidence. It asserted that the questioned
resolutions it issued were in accordance with the mining laws and that the
Small-Scale Mining Permits granted were registered ahead of AMTC's
Application for Exploration Permit. Further, the Board stated that the Governor
of Bulacan had the power to approve the Small-Scale Mining Permits under R.A.
No. 7160.
The DENR Secretary found the appeal meritorious, and resolved these pivotal
issues: (1) when is the subject mining area open for mining location by other
applicants; and (2) who among the applicants have valid

applications.1wphi1 The pertinent portion of the decision of the DENR


Secretary reads:
We agree with the ruling of the MGB Director that the area is open only to
mining location on August 11, 2004, fifteen (15) days after the receipt by
Golden Falcon on July 27, 2004 of a copy of the subject Order of July 16,
2004.1wphi1The filing by Golden Falcon of the letter-appeal suspended the
finality of the Order of Denial issued on April 29, 1998 by the Regional Director
until the Resolution thereof on July 16, 2004.
Although the subject AQPs/SSMPs were processed in accordance with the
procedures of the PMRB, however, the AQPs were filed on February 10, 2004
when the area is still closed to mining location. Consequently, the SSMPs
granted by the PMRB and the Governor are null and void making thereby AEP
No. III-02-04 of the AMTC valid, it having been filed when the area is already
open to other mining applicants.
Records also show that the AQPs were converted into SSMPs. These are two (2)
different applications. The questioned SSMPs were issued in violation of Section
4 of RA 7076 and beyond the authority of the Provincial Governor pursuant to
Section 43 of RA 7942 because the area was never proclaimed as "People's
Small-Scale Mining Program." Moreover, iron ore mineral is not considered
among the quarry resources.
xxxx
WHEREFORE, the Application for Exploration Permit, AEP-III-02-04 of Atlantic
Mines and Trading Corp. is declared valid and may now be given due course.
The Small-Scale Mining Permits, SSMP-B-002-05 of Gerardo Cruz, SSMP-B-00305 of Eduardo D. Mercado, SSMP-B-004-05 of Benedicto S. Cruz and SSMP-B005-05 of Lucila S. Valdez are declared NULL AND VOID. Consequently, the said
permits are hereby CANCELLED.50
The Court finds that the decision of the DENR Secretary was rendered in
accordance with the power of review granted to the DENR Secretary in the
resolution of disputes, which is provided for in Section 24 of R.A. No. 707651
and Section 22 of its Implementing Rules and Regulations.52 It is noted that
although AMTC filed a protest with the PMRB regarding its superior and prior
Application for Exploration Permit over the Applications for Quarry Permit,
which were converted to Small-Scale Mining Permits, the PMRB did not resolve
the same, but issued Resolution Nos. 05-08 to 05-11 on August 8, 2005,
resolving to submit to the Provincial Governor of Bulacan the Applications for
Small-Scale Mining Permits of Eduardo Mercado, Benedicto Cruz, Lucila Valdez
and Gerardo Cruz for the granting of the said permits. After the Provincial
Governor of Bulacan issued the Small-Scale Mining Permits on August 10, 2005,
AMTC appealed the Resolutions of the PMRB giving due course to the granting
of the Small-Scale Mining Permits by the Provincial Governor.

Hence, the decision of the DENR Secretary, declaring that the Application for
Exploration Permit of AMTC was valid and may be given due course, and
canceling the Small-Scale Mining Permits issued by the Provincial Governor,
emanated from the power of review granted to the DENR Secretary under R.A.
No. 7076 and its Implementing Rules and Regulations. The DENR Secretary's
power to review and, therefore, decide, in this case, the issue on the validity of
the issuance of the Small-Scale Mining Permits by the Provincial Governor as
recommended by the PMRB, is a quasi-judicial function, which involves the
determination of what the law is, and what the legal rights of the contending
parties are, with respect to the matter in controversy and, on the basis thereof
and the facts obtaining, the adjudication of their respective rights.53 The DENR
Secretary exercises quasi-judicial function under R.A. No. 7076 and its
Implementing Rules and Regulations to the extent necessary in settling
disputes, conflicts or litigations over conflicting claims. This quasi-judicial
function of the DENR Secretary can neither be equated with "substitution of
judgment" of the Provincial Governor in issuing Small-Scale Mining Permits nor
"control" over the said act of the Provincial Governor as it is a determination of
the rights of AMTC over conflicting claims based on the law.
In determining whether Section 17 (b)(3)(iii) of the Local Government Code of
1991 and Section 24 of R.A. No. 7076 are unconstitutional, the Court has been
guided by Beltran v. The Secretary of Health, 54 which held:
The fundamental criterion is that all reasonable doubts should be resolved in
favor of the constitutionality of a statute. Every law has in its favor the
presumption of constitutionality. For a law to be nullified, it must be shown that
there is a clear and unequivocal breach of the Constitution. The ground for
nullity must be clear and beyond reasonable doubt. Those who petition this
Court to declare a law, or parts thereof, unconstitutional must clearly establish
the basis therefor. Otherwise, the petition must fail. 55
In this case, the Court finds that the grounds raised by petitioner to challenge
the constitutionality of Section 17 (b )(3)(iii) of the Local Government Code of
1991 and Section 24 'of R.A. No.7076 failed to overcome the constitutionality of
the said provisions of law.
WHEREFORE, the petition is DISMISSED for lack of merit.
No costs.
SO ORDERED.

Republic of the Philippines


SUPREME COURT
Baguio City
THIRD DIVISION
G.R. No. 195580

April 21, 2014

NARRA NICKEL MINING AND DEVELOPMENT CORP., TESORO MINING


AND DEVELOPMENT, INC., and MCARTHUR MINING, INC., Petitioners,
vs.
REDMONT CONSOLIDATED MINES CORP., Respondent.
DISSENTING OPINION
LEONEN, J.:
Investments into our economy are deterred by interpretations of law that are
not based on solid ground and sound rationale. Predictability in policy is a very
strong factor in determining investor confidence.
The so-called "Grandfather Rule" has no statutory basis. It is the Control Test
that governs in determining Filipino equity in corporations. It is this test that is
provided in statute and by our most recent jurisprudence.
Furthermore, the Panel of Arbitrators created by the Philippine Mining Act is not
a court of law. It cannot decide judicial questions with finality. This includes the

determination of whether the capital of a corporation is owned or controlled by


Filipino citizens. The Panel of Arbitrators renders arbitral awards. There is no
dispute and, therefore, no competence for arbitration, if one of the parties does
not have a mining claim but simply wishes to ask for a declaration that a
corporation is not qualified to hold a mining agreement. Respondent here did
not claim a better right to a mining agreement. By forum shopping through
multiple actions, it sought to disqualify petitioners. The decision of the majority
rewards such actions.
In this case, the majority's holding glosses over statutory provisions 1 and
settled jurisprudence.2
Thus, I disagree with the ponencia in relying on the Grandfather Rule. I disagree
with the finding that petitioners Narra Nickel Mining and Development Corp.
(Narra), Tesoro Mining and Development, Inc. (Tesoro), and McArthur Mining,
Inc. (McArthur) are not Filipino corporations. Whether they should be qualified
to hold Mineral Production Sharing Agreements (MPSA) should be the subject of
proper proceedings in accordance with this opinion. I disagree that the Panel of
Arbitrators (POA) of the Department of Environment and Natural Resources
(DENR) has jurisdiction to disqualify an applicant for mining activities on the
ground that it does not have the requisite Filipino ownership.
Furthermore, respondent Redmont Consolidated Mines Corp. (Redmont) has
engaged in blatant forum shopping. The Court of Appeals3 is in error for
sustaining the POA. Thus, its findings that Narra, Tesoro, and McArthur are not
qualified corporations must be rejected.
To recapitulate, Redmont took interest in undertaking mining activities in the
Province of Palawan. Upon inquiry with the Department of Environment and
Natural Resources, it discovered that Narra, Tesoro, and McArthur had standing
MPSA applications for its interested areas.4
Narra, Tesoro, and McArthur are successors-in-interest of other corporations
that have earlier pursued MPSA applications:
1. Narra intended to succeed Alpha Resources and Development
Corporation and Patricia Louise Mining and Development Corporation
(PLMDC), which held the application MPSA-IV-1-12 covering an area of
3,277 hectares in Barangay Calategas and Barangay San Isidro, Narra,
Palawan;5
2. Tesoro intended to succeed Sara Marie Mining, Inc. (SMMI), which held
the application MPSA-AMA-IVB-154 covering an area of 3,402 hectares in
Barangay Malinao and Barangay Princess Urduja, Narra, Palawan; 6
3. McArthur intended to succeed Madridejos Mining Corporation (MMC),
which held the application MPSA-AMA-IVB-153 covering an area of more
than 1,782 hectares in Barangay Sumbiling, Bataraza, Palawan and EPA-

IVB-44 which includes a 3,720-hectare area in Barangay Malatagao,


Bataraza, Palawan from SMMI.7
Contending that Narra, Tesoro, and McArthur are corporations whose foreign
equity disqualifies them from entering into MPSAs, Redmont filed with the
DENR Panel of Arbitrators (POA) for Region IV-B three (3) separate petitions for
the denial of the MPSA applications of Narra, Tesoro, and McArthur. In these
petitions, Redmont asserted that at least sixty percent (60%) of the capital
stock of Narra, Tesoro, and McArthur are owned and controlled by MBMI
Resources, Inc. (MBMI), a corporation wholly owned by Canadians.8
Narra, Tesoro, and McArthur countered that the POA did not have jurisdiction to
rule on Redmonts petitions per Section 77 of Republic Act No. 7942, otherwise
known as the Philippine Mining Act of 1995 (Mining Act). They also argued that
Redmont did not have personality to sue as it had no pending application of its
own over the areas in which they had pending applications. They contended
that whether they were Filipino corporations has become immaterial as they
were already pursuing applications for Financial or Technical Assistance
Agreements (FTAA), which, unlike MPSAs, may be entered into by foreign
corporations. They added that, in any case, they were qualified to enter into
MPSAs as 60% of their capital is owned by Filipinos.9
In a December 14, 2007 resolution,10 the POA held that Narra, Tesoro, and
McArthur are foreign corporations disqualified from entering into MPSAs. The
dispositive portion of this resolution reads:
WHEREFORE, the Panel of Arbitrators finds the Respondents McArthur Mining
Inc., Tesoro Mining and Development, Inc., and Narra Nickel Mining and
Development Corp. as, DISQUALIFIED for being considered as Foreign
Corporations. Their Mineral Production Sharing Agreement (MPSA) are hereby
as [sic], they are DECLARED NULL AND VOID.
Accordingly, the Exploration Permit Applications of Petitioner Redmont
Consolidated Mines Corporation shall be GIVEN DUE COURSE, subject to
compliance with the provisions of the Mining Law and its implementing rules
and regulations.11
Narra, Tesoro, and McArthur then filed appeals before the Mines Adjudication
Board (MAB). In a September 10, 2008 order,12 the MAB pointed out that "no
MPSA has so far been issued in favor of any of the parties";13 thus, it faulted the
POA for still ruling that "[t]heir Mineral Production Sharing Agreement (MPSA)
are hereby as [sic], they are DECLARED NULL AND VOID."14
The MAB sustained the contention of Narra, Tesoro, and McArthur that "the
Panel does not have jurisdiction over the instant case, and that it should have
dismissed the Petition fortwith [sic]."15 It emphasized that:
[W]hether or not an applicant for an MPSA meets the qualifications imposed by
law, more particularly the nationality requirement, is a matter that is addressed

to the sound discretion of the competent body or agency, in this case the
[Securities and Exchange Commission]. In the interest of orderly procedure and
administrative efficiency, it is imperative that the DENR, including the Panel,
accord full faith and confidence to the contents of Appellants Articles of
Incorporation, which have undergone thorough evaluation and scrutiny by the
SEC. Unless the SEC or the courts promulgate a ruling to the effect that the
Appellant corporations are not Filipino corporations, the Board cannot conclude
otherwise. This proposition is borne out by the legal presumptions that official
duty has been regularly performed, and that the law has been obeyed in the
preparation and approval of said documents.16
Redmont then filed with the Court of Appeals a petition for review under Rule
43 of the 1997 Rules on Civil Procedure. This petition was docketed as CA-G.R.
SP No. 109703.
In a decision dated October 1, 2010,17 the Court of Appeals, through its Seventh
Division, reversed the MAB and sustained the findings of the POA. 18
The Court of Appeals noted that the "pivotal issue before the Court is whether
or not respondents McArthur, Tesoro and Narra are Philippine nationals under
Philippine laws, rules and regulations."19 Noting that doubt existed as to their
foreign equity ownerships, the Court of Appeals, Seventh Division, asserted
that such equity ownerships must be reckoned via the Grandfather
Rule.20 Ultimately, it ruled that Narra, Tesoro, and McArthur "are not Philippine
nationals, hence, their MPSA applications should be recommended for rejection
by the Secretary of the DENR."21
On the matter of the Panel of Arbitrators jurisdiction, the Court of Appeals,
Seventh Division, referred to this courts declarations in Celestial Nickel Mining
Exploration Corp. v. Macroasia Corp.22 and considered these pronouncements
as "clearly support[ing the conclusion] that the POA has jurisdiction to resolve
the Petitions filed by x x x Redmont."23
The motion for reconsideration of Narra, Tesoro, and McArthur was denied by
the Court of Appeals through a resolution dated February 15, 2011.24
Hence, this present petition was filed and docketed as G.R. No. 195580.
Apart from these proceedings before the POA, the MAB and the Court of
Appeals, Redmont also filed three (3) separate actions before the Securities
and Exchange Commission, the Regional Trial Court of Quezon City, and the
Office of the President:
First action: On August 14, 2008, Redmont filed a complaint for revocation of
the certificates of registration of Narra, Tesoro, and McArthur with the Securities
and Exchange Commission (SEC).25 This complaint became the subject of
another case (G.R. No. 205513), which was consolidated but later deconsolidated with the present petition, G.R. No. 195580.

In view of this complaint, Redmont filed on September 1, 2008 a manifestation


and motion to suspend proceeding[s] before the MAB.26
In a letter-resolution dated September 3, 2009, the SECs Compliance and
Enforcement Department (CED) ruled in favor of Narra, Tesoro, and McArthur. It
applied the Control Test per Section 3 of Republic Act No. 7042, as amended by
Republic Act No. 8179, the Foreign Investments Act (FIA), and held that Narra,
Tesoro, and McArthur as well as their co-respondents in that case satisfied the
requisite Filipino equity ownership.27 Redmont then filed an appeal with the SEC
En Banc.
In a decision dated March 25, 2010,28 the SEC En Banc set aside the SEC-CEDs
letter-resolution with respect to Narra, Tesoro, and McArthur as the appeal from
the MABs September 10, 2008 order was then pending with the Court of
Appeals, Seventh Division.29 The SEC En Banc considered the assertion that
Redmont has been engaging in forum shopping:
It is evident from the foregoing that aside from identity of the parties x xx, the
issue(s) raised in the CA Case and the factual foundations thereof x x x are
substantially the same as those obtaining the case at bar. Yet, Redmont did not
include this CA Case in the Certification Against Forum Shopping attached to
the instant Appeal.30
However, with respect to the other respondent-appellees in that case (Sara
Marie Mining, Inc., Patricia Louise Mining and Development Corp., Madridejos
Mining Corp., Bethlehem Nickel Corp., San Juanico Nickel Corp., and MBMI
Resources Inc.), the complaint was remanded to the SEC-CED for further
proceedings with the reminder for it to "consider every piece already on record
and, if necessary, to conduct further investigation in order to ascertain,
consistent with the Grandfather Rule, the true, actual Filipino and foreign
participation in each of these five (5) corporations."31
Asserting that the SEC En Banc had already made a definite finding that
Redmont has been engaging in forum shopping, Sara Marie Mining, Inc.,
Patricia Louise Mining and Development Corp., and Madridejos Mining Corp.
filed with the Court of Appeals a petition for review under Rule 43 of the 1997
Rules of Civil Procedure. This petition was docketed as CA-G.R. SP No. 113523.
In a decision dated May 23, 2012, the Court of Appeals, Former Tenth Division,
found that "there was a deliberate attempt not to disclose the pendency of CAGR SP No. 109703."32 It concluded that "the partial dismissal of the case before
the SEC is unwarranted. It should have been dismissed in its entirety and with
prejudice to the complainant."33 The dispositive portion of the decision reads:
WHEREFORE, the Petition is GRANTED. The Decision dated March 25, 2010 of
the Securities and Exchange Commission En Banc is REVERSED and SET ASIDE.
Accordingly, the complaint for revocation filed by Redmont Consolidated Mines
is DISMISSED with prejudice.34 (Emphasis supplied)

On January 22, 2013, the Court of Appeals, Former Tenth Division, issued a
resolution35 denying Redmonts motion for reconsideration.
Aggrieved, Redmont filed the petition for review on certiorari which became the
subject of G.R. No. 205513, initially lodged with this courts First Division.
Through a November 27, 2013 resolution, G.R. No. 205513 was consolidated
with G.R. No. 195580. Subsequently however, this courts Third Division deconsolidated the two (2) cases.
Second Action: On September 8, 2008, Redmont filed a complaint for injunction
(of the MAB proceedings pending the resolution of the complaint before the
SEC) with application for issuance of a temporary restraining order (TRO)
and/or writ of preliminary injunction with the Regional Trial Court, Branch 92,
Quezon City.36 The Regional Trial Court issued a TRO on September 16, 2008. By
then, however, the MAB had already ruled in favor of Narra, Tesoro, and
McArthur.37
Third Action: On May 7, 2010, Redmont filed with the Office of the President a
petition seeking the cancellation of the financial or technical assistance
agreement (FTAA) applications of Narra, Tesoro, and McArthur. In a decision
dated April 6, 2011,38 the Office of the President ruled in favor of Redmont. In a
resolution dated July 6, 2011,39 the Office of the President denied the motion for
reconsideration of Narra, Tesoro, and McArthur. As noted by the ponencia,
Narra, Tesoro, and McArthur then filed an appeal with the Court of Appeals. As
this appeal has been denied, they filed another appeal with this court, which
appeal is pending in another division.40
The petition for review on certiorari subject of G.R. No. 195580 is an appeal
from the Court of Appeals October 1, 2010 decision in CA-G.R. SP No. 109703
reversing the MAB and sustaining the POAs findings that Narra, Tesoro, and
McArthur are foreign corporations disqualified from entering into MPSAs. The
petition also questions the February 15, 2011 resolution of the Court of Appeals
denying the motion for reconsideration of Narra, Tesoro, and McArthur.
To reiterate, G.R. No. 195580 was consolidated with another petition G.R. No.
205513 through a resolution of this court dated November 27, 2013. G.R. No.
205513 is an appeal from the Court of Appeals, Former Tenth Divisions May 23,
2012 decision and January 22, 2013 resolution in CA-G.R. SP No. 113523.
Subsequently however, G.R. No. 195580 and G.R. No. 205513 were deconsolidated.
Apart from G.R. Nos. 195580 and 205513, a third petition has been filed with
this court. This third petition is an offshoot of the petitions filed by Redmont
with the Office of the President seeking the cancellation of the FTAA
applications of Narra, Tesoro, and McArthur.
The main issue in this case relates to the ownership of capital in Narra, Tesoro,
and McArthur, i.e., whether they have satisfied the required Filipino equity
ownership so as to be qualified to enter into MPSAs.

In addition to this, Narra, Tesoro, and McArthur raise procedural issues: (1) the
POAs jurisdiction over the subject matter of Redmonts petitions; (2) the
supposed mootness of Redmonts petitions before the POA considering that
Narra, Tesoro, and McArthur have pursued applications for FTAAs; and (3)
Redmonts supposed engagement in forum shopping.41
Governing laws
Mining is an environmentally sensitive activity that entails the exploration,
development, and utilization of inalienable natural resources. It falls within the
broad ambit of Article XII, Section 2 as well as other sections of the 1987
Constitution which refers to ancestral domains42 and the environment.43
More specifically, Republic Act No. 7942 or the Philippine Mining Act, its
implementing rules and regulations, other administrative issuances as well as
jurisprudence govern the application for mining rights among others. Smallscale mining44 is governed by Republic Act No. 7076, the Peoples Small-scale
Mining Act of 1991. Apart from these, other statutes such as Republic Act No.
8371, the Indigenous Peoples Rights Act of 1997 (IPRA), and Republic Act No.
7160, the Local Government Code (LGC) contain provisions which delimit the
conduct of mining activities.
Republic Act No. 7042, as amended by Republic Act No. 8179, the Foreign
Investments Act (FIA) is significant with respect to the participation of foreign
investors in nationalized economic activities such as mining. In the 2012
resolution ruling on the motion for reconsideration in Gamboa v. Teves,45 this
court stated that "The FIA is the basic law governing foreign investments in the
Philippines, irrespective of the nature of business and area of investment." 46
Commonwealth Act No. 108, as amended, otherwise known as the Anti-Dummy
Law, penalizes those who "allow [their] name or citizenship to be used for the
purpose of evading"47 "constitutional or legal provisions requir[ing] Philippine or
any other specific citizenship as a requisite for the exercise or enjoyment of a
right, franchise or privilege".48
Batas Pambansa Blg. 68, the Corporation Code, is the general law that
"provide[s] for the formation, organization, [and] regulation of private
corporations."49 The conduct of activities relating to securities, such as shares
of stock, is regulated by Republic Act No. 8799, the Securities Regulation Code
(SRC).
DENRs Panel of Arbitrators
has no competence over the
petitions filed by Redmont
The DENR Panel of Arbitrators does not have the competence to rule on the
issue of whether the ownership of the capital of the corporations Narra, Tesoro,
and McArthur meet the constitutional and statutory requirements. This alone is
ample basis for granting the petition.

Section 77 of the Mining Act provides for the matters falling under the exclusive
original jurisdiction of the DENR Panel of Arbitrators, as follows:
Section 77. Panel of Arbitrators x x x Within thirty (30) working days, after the
submission of the case by the parties for decision, the panel shall have
exclusive and original jurisdiction to hear and decide on the following:
(a) Disputes involving rights to mining areas;
(b) Disputes involving mineral agreements or permit;
(c) Disputes involving surface owners, occupants and claimholders /
concessionaires; and
(d) Disputes pending before the Bureau and the Department at the date
of the effectivity of this Act.
In 2007, this courts decision in Celestial Nickel Mining Exploration Corporation
v. Macroasia Corp.50 construed the phrase "disputes involving rights to mining
areas" as referring "to any adverse claim, protest, or opposition to an
application for mineral agreement."51
Proceeding from this courts statements in Celestial, the ponencia states:
Accordingly, as We enunciated in Celestial, the POA unquestionably has
jurisdiction to resolve disputes over MPSA applications subject of Redmonts
petitions. However, said jurisdiction does not include either the approval or
rejection of the MPSA applications which is vested only upon the Secretary of
the DENR. Thus, the finding of the POA, with respect to the rejection of the
petitioners MPSA applications being that they are foreign corporation [sic], is
valid.52
An earlier decision of this court, Gonzales v. Climax Mining Ltd.,53 ruled on the
jurisdiction of the Panel of Arbitrators as follows:
We now come to the meat of the case which revolves mainly around the
question of jurisdiction by the Panel of Arbitrators: Does the Panel of Arbitrators
have jurisdiction over the complaint for declaration of nullity and/or termination
of the subject contracts on the ground of fraud, oppression and violation of the
Constitution? This issue may be distilled into the more basic question of
whether the Complaint raises a mining dispute or a judicial question.
A judicial question is a question that is proper for determination by the courts,
as opposed to a moot question or one properly decided by the executive or
legislative branch. A judicial question is raised when the determination of the
question involves the exercise of a judicial function; that is, the question
involves the determination of what the law is and what the legal rights of the
parties are with respect to the matter in controversy.

On the other hand, a mining dispute is a dispute involving (a) rights to mining
areas, (b) mineral agreements, FTAAs, or permits, and (c) surface owners,
occupants and claimholders/concessionaires. Under Republic Act No. 7942
(otherwise known as the Philippine Mining Act of 1995), the Panel of Arbitrators
has exclusive and original jurisdiction to hear and decide these mining
disputes. The Court of Appeals, in its questioned decision, correctly stated that
the Panels jurisdiction is limited only to those mining disputes which raise
questions of fact or matters requiring the application of technological
knowledge and experience.54 (Emphasis supplied)
Moreover, this courts decision in Philex Mining Corp. v. Zaldivia, 55 which was
also referred to in Gonzales, explained what "questions of fact" are appropriate
for resolution in a mining dispute:
We see nothing in sections 61 and 73 of the Mining Law that indicates a
legislative intent to confer real judicial power upon the Director of Mines. The
very terms of section 73 of the Mining Law, as amended by Republic Act No.
4388, in requiring that the adverse claim must "state in full detail the nature,
boundaries and extent of the adverse claim" show that the conflicts to be
decided by reason of such adverse claim refer primarily to questions of fact.
This is made even clearer by the explanatory note to House Bill No. 2522, later
to become Republic Act 4388, that "sections 61 and 73 that refer to the
overlapping of claims are amended to expedite resolutions of mining conflicts *
* *." The controversies to be submitted and resolved by the Director of Mines
under the sections refer therfore [sic] only to the overlapping of claims and
administrative matters incidental thereto.56 (Emphasis supplied)
The pronouncements in Celestial cited by the ponencia were made to address
the assertions of Celestial Nickel and Mining Corporation (Celestial Nickel) and
Blue Ridge Mineral Corporation (Blue Ridge) that the Panel of Arbitrators had
the power to cancel existing mineral agreements pursuant to Section 77 of the
Mining Act.57 Thus:
Clearly, POAs jurisdiction over "disputes involving rights to mining areas" has
nothing to do with the cancellation of existing mineral agreements.58
These pronouncements did not undo or abandon the distinction, clarified in
Gonzales, between judicial questions and mining disputes. The former are
cognizable by regular courts of justice, while the latter are cognizable by the
DENR Panel of Arbitrators.
As has been repeatedly acknowledged by the ponencia,59 the Court of
Appeals,60 and the Mines Adjudication Board,61 the present case, and the
petitions filed by Redmont before the DENR Panel of Arbitrators boil down to
the "pivotal issue x x x [of] whether or not [Narra, Tesoro, and McArthur] are
Philippine nationals."
This is a matter that entails a consideration of the law. It is a question that
relates to the status of Narra, Tesoro, and McArthur and the legal rights (or

inhibitions) accruing to them on account of their status. This does not entail a
consideration of the specifications of mining arrangements and operations.
Thus, the petitions filed by Redmont before the DENR Panel of Arbitrators relate
to judicial questions and not to mining disputes. They relate to matters which
are beyond the jurisdiction of the Panel of Arbitrators.
Furthermore nowhere in Section 77 of the Republic Act No. 7942 is there a
grant of jurisdiction to the Panel of Arbitrators over the determination of the
qualification of applicants. The Philippine Mining Act clearly requires the
existence of a "dispute" over a mining area,62 a mining agreement,63 with a
surface owner,64 or those pending with the Bureau or the Department65 upon
the laws promulgation. The existence of a "dispute" presupposes that the party
bringing the suit has a colorable or putative claim more superior than that of
the respondent in the arbitration proceedings. After all, the Panel of Arbitrators
is supposed to provide binding arbitration which should result in a binding
award either in favor of the petitioner or the respondent. Thus, the Panel of
Arbitrators is a qualified quasi-judicial agency. It does not perform all judicial
functions in lieu of courts of law.
The petition brought by respondent before the Panel of Arbitrators a quo could
not have resulted in any kind of award in its favor. It was asking for a judicial
declaration at first instance of the qualification of the petitioners to hold mining
agreements in accordance with the law. This clearly was beyond the jurisdiction
of the Panel of Arbitrators and eventually also of the Mines Adjudication Board
(MAB).
The remedy of Redmont should have been either to cause the cancellation of
the registration of any of the petitioners with the Securities and Exchange
Commission or to request for a determination of their qualifications with the
Secretary of the Department of Environment and Natural Resources. Should
either the Securities and Exchange Commission (SEC) or the Secretary of
Environment and Natural Resources rule against its request, Redmont could
have gone by certiorari to a Regional Trial Court.
Having brought their petitions to an entity without jurisdiction, the petition in
this case should be granted.
Mining as a nationalized
economic activity
The determination of who may engage in mining activities is grounded in the
1987 Constitution and the Mining Act.
Article XII, Section 2 of the 1987 Constitution reads:
Section 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 60 per centum of whose capital is owned
by such citizens. Such agreements may be for a period not exceeding twentyfive 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 waterpower, beneficial use may be the measure and limit of the grant.
The State shall protect the nations 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 either technical or financial assistance for large-scale exploration,
development, and 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. (Emphasis
supplied)
The requirement for nationalization should always be read in relation to Article
II, Section 19 of the Constitution which reads:
Section 19. The State shall develop a self-reliant and independent national
economy effectively controlled by Filipinos. (Emphasis supplied)
Congress takes part in giving substantive meaning to the phrases "Filipino x x x
corporations or associations at least 60 per centum of whose capital is owned
by such citizens"66 as well as the phrase "effectively controlled by
Filipinos".67 Like all constitutional text, the meanings of these phrases become
more salient in context.
Thus, Section 3 (aq) of the Mining Act defines a "qualified person" as follows:
Section 3. Definition of Terms. - As used in and for purposes of this Act, the
following terms, whether in singular or plural, shall mean:
xxxx

(aq) "Qualified person" means 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 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: Provided, That a legally organized foreignowned corporation shall be deemed a qualified person for purposes of granting
an exploration permit, financial or technical assistance agreement or mineral
processing permit. (Emphasis supplied)
In addition, Section 3 (t) defines a "foreign-owned corporation" as follows:
(t) "Foreign-owned corporation" means any corporation, partnerships,
association, or cooperative duly registered in accordance with law in which less
than fifty per centum (50%) of the capital is owned by Filipino citizens.
Under the Mining Act, nationality requirements are relevant for the following
categories of mining contracts and permits: first, exploration permits (EP);
second, mineral agreements (MA); third, financial or technical assistance
agreements (FTAA); and fourth, mineral processing permits (MPP).
In Section 20 of the Mining Act, "[a]n exploration permit grants the right to
conduct exploration for all minerals in specified areas." Section 3 (q) defines
exploration as the "searching or prospecting for mineral resources by
geological, geochemical or geophysical surveys, remote sensing, test pitting,
trenching, drilling, shaft sinking, 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." DENR Administrative Order No. 2005-15
characterizes an exploration permit as the "initial mode of entry in mineral
exploration."68
In Section 26 of the Mining Act, "[a] mineral agreement shall grant to the
contractor the exclusive right to conduct mining operations and to extract all
mineral resources found in the contract area."
There are three (3) forms of mineral agreements:
1. Mineral production sharing agreement (MPSA) "where the Government
grants to the contractor the exclusive right to conduct mining operations
within a contract area and shares in the gross output [with the]
contractor x x x provid[ing] the financing, technology, management and
personnel necessary for the implementation of [the MPSA]";69
2. Co-production agreement (CA) "wherein the Government shall provide
inputs to the mining operations other than the mineral resource"; 70 and
3. Joint-venture agreement (JVA) "where a joint-venture company is
organized by the Government and the contractor with both parties having

equity shares. Aside from earnings in equity, the Government shall be


entitled to a share in the gross output".71
The second paragraph of Section 26 of the Mining Act allows a contractor "to
convert his agreement into any of the modes of mineral agreements or
financial or technical assistance agreement x x x."
Section 33 of the Mining Act allows "[a]ny qualified person with technical and
financial capability to undertake large-scale exploration, development, and
utilization of mineral resources in the Philippines" through a financial or
technical assistance agreement.
In addition to Exploration Permits, Mineral Agreements, and FTAAs, the Mining
Act allows for the grant of mineral processing permits (MPP) in order to "engage
in the processing of minerals."72 Section 3 (y) of the Mining Act defines mineral
processing as "milling, beneficiation or upgrading of ores or minerals and rocks
or by similar means to convert the same into marketable products."
Applying the definition of a "qualified person" in Section 3 (aq) of the Mining
Act, a corporation which intends to enter into a Mining Agreement must have
(1) "technical and financial capability to undertake mineral resources
development" and (2) "duly registered in accordance with law at least sixty per
centum (60%) of the capital of which is owned by citizens of the
Philippines".73 Clearly, the Department of Environment and Natural Resources,
as an administrative body, determines technical and financial capability. The
DENR, not the Panel of Arbitrators, is also mandated to determine whether the
corporation is (a) duly registered in accordance with law and (b) at least "sixty
percent of the capital" is "owned by citizens of the Philippines."
Limitations on foreign participation in certain economic activities are not new.
Similar, though not identical, limitations are contained in the 1935 and 1973
Constitutions with respect to the exploration, development, and utilization of
natural resources.
Article XII, Section 1 of the 1935 Constitution provides:
Section 1. All agricultural, timber, and mineral lands of the public domain,
waters, minerals, coal, petroleum, and other mineral oils, all forces or 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. (Emphasis supplied)
Likewise, Article XIV, Section 9 of the 1973 Constitution states:
Section 9. The disposition, exploration, development, of exploitation, or
utilization of any of the natural resources of the Philippines shall be limited to
citizens of the Philippines, or to corporations or association at least sixty per
centum of the capital 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 foreign person or entity for
the exploitation, development, exploitation, or utilization of any of the natural
resources. Existing valid and binding service contracts for financial, the
technical, management, or other forms of assistance are hereby recognized as
such. (Emphasis supplied)
The rationale for nationalizing the exploration, development, and utilization of
natural resources was explained by this court in Register of Deeds of Rizal v.
Ung Siu Si Temple74 as follows:
The purpose of the sixty per centum requirement is obviously to ensure that
corporations or associations allowed to acquire agricultural land or to exploit
natural resources shall be controlled by Filipinos; and the spirit of the
Constitution demands that in the absence of capital stock, the controlling
membership should be composed of Filipino citizens.75 (Emphasis supplied)
On point are Dean Vicente Sincos words, cited with approval by this court in
Republic v. Quasha:76
It should be emphatically stated that the provisions of our Constitution which
limit to Filipinos the rights to develop the natural resources and to operate the
public utilities of the Philippines is one of the bulwarks of our national integrity.
The Filipino people decided to include it in our Constitution in order that it may
have the stability and permanency that its importance requires. It is written in
our Constitution so that it may neither be the subject of barter nor be impaired
in the give and take of politics. With our natural resources, our sources of
power and energy, our public lands, and our public utilities, the material basis
of the nation's existence, in the hands of aliens over whom the Philippine
Government does not have complete control, the Filipinos may soon find
themselves deprived of their patrimony and living as it were, in a house that no
longer belongs to them.77 (Emphasis supplied)
Article XII, Section 2 of the 1987 Constitution ensures the effectivity of the
broad economic policy, spelled out in Article II, Section 19 of the 1987
Constitution, of "a self-reliant and independent national economy effectively
controlled by Filipinos" and the collective aspiration articulated in the 1987
Constitutions Preamble of "conserv[ing] and develop[ing] our patrimony."

In this case, Narra, Tesoro, and McArthur are corporations of which a portion of
their equity is owned by corporations and individuals acknowledged to be
foreign nationals. Moreover, they have each sought to enter into a Mineral
Production Sharing Agreement (MPSA). This arrangement requires that
foreigners own, at most, only 40% of the capital.
Notwithstanding that they have moved to obtain FTAAs which are permitted
for wholly owned foreign corporations Redmont still asserts that Narra,
Tesoro, and McArthur are in violation of the nationality requirements of the
1987 Constitution and of the Mining Act.78
Narra, Tesoro, and McArthur argue that the Grandfather Rule should not be
applied as there is no legal basis for it. They assert that Section 3 (a) of the
Foreign Investments Act (FIA) provides exclusively for the Control Test as the
means for reckoning foreign equity in a corporation and, ultimately, the
nationality of a corporation engaged in or seeking to engage in an activity with
nationality restrictions. They fault the Court of Appeals for relying on DOJ
Opinion No. 20, series of 2005, a mere administrative issuance, as opposed to
the Foreign Investments Act, a statute, for applying the Grandfather Rule. 79
Standards for reckoning
foreign equity participation in
nationalized economic
activities
The broad and long-standing nationalization of certain sectors and industries
notwithstanding, an apparent confusion has persisted as to how foreign equity
holdings in a corporation engaged in a nationalized economic activity shall be
reckoned. As have been proffered by the myriad cast of parties and
adjudicative bodies involved in this case, there have been two means: the
Control Test and the Grandfather Rule.
Paragraph 7 of the 1967 Rules of the Securities and Exchange Commission,
dated February 28, 1967, states:
Shares belonging to corporations or partnerships at least 60% of the capital of
which is owned by Filipino citizens shall be considered as of Philippine
nationality, but if the percentage of Filipino ownership in the corporation or
partnership is less than 60%, only the number of shares corresponding to such
percentage shall be counted as of Philippine nationality. Thus, if 100,000 shares
are registered in the name of a corporation or partnership at least 60% of the
capital stock or capital respectively, of which belong to a Filipino citizens, all of
the said shares shall be recorded as owned by Filipinos. But if less than 60%,
or, say, only 50% of the capital stock or capital of the corporation or
partnership, respectively belongs to Filipino citizens, only 50,000 shares shall
be counted as owned by Filipinos and the other 50,000 shares shall be recorded
as belonging to aliens.80

Department of Justice (DOJ) Opinion No. 20, series of 2005, explains that the
1967 SEC Rules provide for the Control Test and the Grandfather Rule as the
means for reckoning foreign and Filipino equity ownership in an "investee"
corporation:
The above-quoted SEC Rules provide for the manner of calculating the Filipino
interest in a corporation for purposes, among others of determining compliance
with nationality requirements (the "Investee Corporation"). Such manner of
computation is necessary since the shares of the Investee Corporation may be
owned both by individual stockholders ("Investing Individuals") and by
corporations and partnerships ("Investing Corporation"). The determination of
nationality depending on the ownership of the Investee Corporation and in
certain instances, the Investing Corporation.
Under the above-quoted SEC Rules, there are two cases in determining the
nationality of the Investee Corporation. The first case is the liberal rule, later
coined by the SEC as the Control Test in its 30 May 1990 Opinion, and pertains
to the portion in said Paragraph 7 of the 1967 SEC Rules which states, (s)hares
belonging to corporations or partnerships at least 60% of the capital of which is
owned by Filipino citizens shall be considered as of Philippine nationality. Under
the liberal Control Test, there is no need to further trace the ownership of the
60% (or more) Filipino stockholdings of the Investing Corporation since a
corporation which is at least 60% Filipino-owned is considered as Filipino.
The second case is the Strict Rule or the Grandfather Rule Proper and pertains
to the portion in said Paragraph 7 of the 1967 SEC Rules which states, but if
the percentage of Filipino ownership in the corporation or partnership is less
than 60%, only the number of shares corresponding to such percentage shall
be counted as of Philippine nationality. Under the Strict Rule or Grandfather
Rule Proper, the combined totals in the Investing Corporation and the Investee
Corporation must be traced (i.e., grandfathered) to determine the total
percentage of Filipino ownership.81
DOJ Opinion No. 20, series of 2005, then concluded as follows:
[T]he Grandfather Rule or the second part of the SEC Rule applies only when
the 60-40 Filipino-foreign equity ownership is in doubt (i.e., in cases where the
joint venture corporation with Filipino and foreign stockholders with less than
60% Filipino stockholdings [or 59%] invests in another joint venture corporation
which is either 60-40% Filipino-alien or 59% less Filipino. Stated differently,
where the 60-40 Filipino-foreign equity ownership is not in doubt, the
Grandfather Rule will not apply.82 (Emphasis supplied)
The conclusion that the Grandfather Rule "applies only when the 60-40 Filipinoforeign equity ownership is in doubt"83 is borne by that opinions consideration
of an earlier DOJ opinion (i.e., DOJ Opinion No. 18, series of 1989). DOJ Opinion
No. 20, series of 2005s quotation of DOJ Opinion No. 18, series of 1989, reads:

x x x. It is quite clear x x x that the "Grandfather Rule", which was evolved and
applied by the SEC in several cases, will not apply in cases where the 60-40
Filipino-alien equity ownership in a particular natural resource corporation is
not in doubt.84
A full quotation of the same portion of DOJ Opinion No. 18, series of 1989,
reveals that the statement quoted above was made in a very specific context
(i.e., a prior DOJ opinion) that necessitated a clarification:
Opinion No. 84, s. 1988 cited in your query is not meant to overrule the
aforesaid SEC rule.85 There is nothing in said Opinion that precludes the
application of the said SEC rule in appropriate cases. It is quite clear from said
SEC rule that the Grandfather Rule, which was evolved and applied by the SEC
in several cases, will not apply in cases where the 60-40 Filipino-alien equity
ownership in a particular natural resource corporation is not in doubt. 86
DOJ Opinion No. 18, series of 1989, addressed the query made by the Chairman
of the Securities and Exchange Commission (SEC) "on whether or not it may
give due course to the application for incorporation of Far Southeast Gold
Resources Inc., (FSEGRI) to engage in mining activities in the Philippines in the
light of [DOJ] Opinion No. 84, s. 1988 applying the so-called Grandfather Rule
x x x."87
DOJ Opinion No. 84, series of 1988, applied the Grandfather Rule. In doing so, it
noted that the DOJ has been "informed that in the registration of corporations
with the [SEC], compliance with the sixty per centum requirement is being
monitored with the Grandfather Rule"88 and added that the Grandfather Rule
is "applied specifically in cases where the corporation has corporate
stockholders with alien stockholdings."89
Prior to applying the Grandfather Rule to the specific facts subject of the inquiry
it addressed, DOJ Opinion No. 84, series of 1988, first cited the SECs
application of the Grandfather Rule in a May 30, 1987 opinion rendered by its
Chair, Julio A. Sulit, Jr.90
This SEC opinion resolved the nationality of the investee corporation, Silahis
International Hotel (Silahis). 31% of Silahis capital stock was owned by Filipino
stockholders, while 69% was owned by Hotel Properties, Inc. (HPI). HPI, in turn,
was 47% Filipino-owned and 53% alien-owned. Per the Grandfather Rule, the
47% indirect Filipino stockholding in Silahis through HPI combined with the 31%
direct Filipino stockholding in Silahis translated to an aggregate 63.43% Filipino
stockholding in Silahis, in excess of the requisite 60% Filipino stockholding
required so as to be able to engage in a partly nationalized business.91
In noting that compliance with the 60% requirement has (thus far) been
monitored by SEC through the Grandfather Rule and that the Grandfather Rule
has been applied whenever a "corporation has corporate stockholders with
alien stockholdings,"92 DOJ Opinion No. 84, series of 1988, gave the impression
that the Grandfather Rule is all-encompassing. Hence, the clarification in DOJ

Opinion No. 18, series of 1989, that the Grandfather Rule "will not apply in
cases where the 60-40 Filipino-alien equity ownership x x x is not in
doubt."93 This clarification was affirmed in DOJ Opinion No. 20, series of 2005,
albeit rephrased positively as against DOJ Opinion No. 19, series of 1989s
negative syntax (i.e., "not in doubt"). Thus, DOJ Opinion No. 20, series of 2005,
declared, that the Grandfather Rule "applies only when the 60-40 Filipinoforeign equity ownership is in doubt."94
Following DOJ Opinion No. 18, series of 1989, the SEC in its May 30, 1990
opinion addressed to Mr. Johnny M. Araneta stated:
[T]the Commission En Banc, on the basis of the Opinion of the Department of
Justice No. 18, S. 1989 dated January 19, 1989 voted and decided to do away
with the strict application/computation of the so-called "Grandfather Rule" Re:
Far Southeast Gold Resources, Inc. (FSEGRI), and instead applied the so-called
"Control Test" method of determining corporate nationality. 95 (Emphasis
supplied)
The SECs May 30, 1990 opinion related to the ownership of shares in Jericho
Mining Corporation (Jericho) which was then wholly owned by Filipinos. Two (2)
corporations wanted to purchase a total of 60% of Jerichos authorized capital
stock: 40% was to be purchased by Gold Field Asia Limited (GFAL), an
Australian corporation, while 20% was to be purchased by Gold Field Philippines
Corporation (GFPC). GFPC was itself partly foreign-owned. It was 60% Filipinoowned, while 40% of its equity was owned by Circular Quay Holdings, an
Australian corporation.96
Applying the Control Test, the SECs May 30, 1990 opinion concluded that:
GFPC, which is 60% Filipino owned, is considered a Filipino company.
Consequently, its investment in Jericho is considered that of a Filipino. The 60%
Filipino equity requirement therefore would still be met by Jericho.
Considering that under the proposed set-up Jericho's capital stock will be
owned by 60% Filipino, it is still qualified to hold mining claims or rights or
enter into mineral production sharing agreements with the Government. 97
Some two years after DOJ Opinion No. 18, series of 2009, Republic Act No.
7042, otherwise known as the Foreign Investments Act (FIA), was enacted.
Section 3 (a) of the Foreign Investments Act defines a "Philippine National" as
follows:
SEC. 3. Definitions. - As used in this Act:
a) the term "Philippine National" shall mean a citizen of the Philippines or a
domestic partnership or association wholly owned by citizens of the Philippines;
or a corporation organized under the laws of the Philippines of which at least
sixty percent (60%) of the capital stock outstanding and entitled to vote is
owned and held by citizens of the Philippines or a corporation organized abroad

and registered as doing business in the Philippine under the Corporation Code
of which one hundred percent (100%) of the capital stock outstanding and
entitled to vote is wholly owned by Filipinos or a trustee of funds for pension or
other employee retirement or separation benefits, where the trustee is a
Philippine national and at least sixty percent (60%) of the fund will accrue to
the benefit of Philippine nationals: Provided, That where a corporation and its
non-Filipino stockholders own stocks in a Securities and Exchange Commission
(SEC) registered enterprise, at least sixty percent (60%) of the capital stock
outstanding and entitled to vote of each of both corporations must be owned
and held by citizens of the Philippines and at least sixty percent (60%) of the
members of the Board of Directors of each of both corporations must be
citizens of the Philippines, in order that the corporation shall be considered a
Philippine national; (as amended by R.A. 8179). (Emphasis supplied)
Thus, under the Foreign Investments Act, a "Philippine national" is any of the
following:
1. a citizen of the Philippines;
2. a domestic partnership or association wholly owned by citizens of the
Philippines;
3. a corporation organized under the laws of the Philippines, of which at
least 60% of the capital stock outstanding and entitled to vote is owned
and held by citizens of the Philippines;
4. a corporation organized abroad and registered as doing business in the
Philippines under the Corporation Code, of which 100% of the capital
stock outstanding and entitled to vote is wholly owned by Filipinos; or
5. a trustee of funds for pension or other employee retirement or
separation benefits, where the trustee is a Philippine national and at least
60% of the fund will accrue to the benefit of Philippine nationals.
The National Economic and Development Authority (NEDA) formulated the
implementing rules and regulations (IRR) of the Foreign Investments Act. Rule I,
Section 1 (b) of these IRR reads:
RULE I
DEFINITIONS
SECTION 1. DEFINITION OF TERMS. For the purposes of these Rules and
Regulations:
xxxx
b. Philippine national shall mean a citizen of the Philippines or a domestic
partnership or association wholly owned by the citizens of the Philippines; or a
corporation organized under the laws of the Philippines of which at least sixty

percent (60%) of the capital stock outstanding and entitled to vote is owned
and held by citizens of the Philippines; or a corporation organized abroad and
registered as doing business in the Philippines under the Corporation Code of
which 100% of the capital stock outstanding and entitled to vote is wholly
owned by Filipinos; or a trustee of funds for pension or other employee
retirement or separation benefits, where the trustee is a Philippine national and
at least sixty percent (60%) of the fund will accrue to the benefits of the
Philippine nationals; Provided, that where a corporation and its non-Filipino
stockholders own stocks in Securities and Exchange Commission (SEC)
registered enterprise, at least sixty percent (60%) of the capital stock
outstanding and entitled to vote of each of both corporations must be owned
and held by citizens of the Philippines and at least sixty percent (60%) of the
members of the Board of Directors of each of both corporation must be citizens
of the Philippines, in order that the corporation shall be considered a Philippine
national. The Control Test shall be applied for this purpose.
Compliance with the required Filipino ownership of a corporation shall be
determined on the basis of outstanding capital stock whether fully paid or not,
but only such stocks which are generally entitled to vote are considered.
For stocks to be deemed owned and held by Philippine citizens or Philippine
nationals, mere legal title is not enough to meet the required Filipino equity. Full
beneficial ownership of the stocks, coupled with appropriate voting rights is
essential. Thus, stocks, the voting rights of which have been assigned or
transferred to aliens cannot be considered held by Philippine citizens or
Philippine nationals.
Individuals or juridical entities not meeting the aforementioned qualifications
are considered as non-Philippine nationals. (Emphasis supplied)
The Foreign Investments Acts implementing rules and regulations are clear
and unequivocal in declaring that the Control Test shall be applied to determine
the nationality of a corporation in which another corporation owns stocks.
From around the time of the issuance of the SECs May 30, 1990 opinion
addressed to Mr. Johnny M. Araneta where the SEC stated that it "decided to do
away with the strict application/computation of the so-called Grandfather Rule
x x x, and instead appl[y] the so-called Control Test",98 the SEC "has
consistently applied the control test".99 This is a matter expressly
acknowledged by Justice Presbitero J. Velasco in his dissent in Gamboa v.
Teves:100
It is settled that when the activity or business of a corporation falls within any
of the partly nationalized provisions of the Constitution or a special law, the
"control test" must also be applied to determine the nationality of a corporation
on the basis of the nationality of the stockholders who control its equity.
The control test was laid down by the Department of Justice (DOJ) in its Opinion
No. 18 dated January 19, 1989. It determines the nationality of a corporation

with alien equity based on the percentage of capital owned by Filipino citizens.
It reads:
Shares belonging to corporations or partnerships at least 60% of the capital of
which is owned by Filipino citizens shall be considered as Philippine nationality,
but if the percentage of Filipino ownership in the corporation or partnership is
less than 60% only the number of shares corresponding to such percentage
shall be counted as of Philippine nationality.
In a catena of opinions, the SEC, "the government agency tasked with the
statutory duty to enforce the nationality requirement prescribed in Section 11,
Article XII of the Constitution on the ownership of public utilities," has
consistently applied the control test.
The FIA likewise adheres to the control test. This intent is evident in the May
21, 1991 deliberations of the Bicameral Conference Committee (Committees on
Economic Affairs of the Senate and House of Representatives), to wit:
CHAIRMAN TEVES. x x x. On definition of terms, Ronnie, would you like anything
to say here on the definition of terms of Philippine national?
HON. RONALDO B. ZAMORA. I think weve we have already agreed that we
are adopting here the control test. Wasnt that the result of the
CHAIRMAN PATERNO. No. I thought that at the last meeting, I have made it
clear that the Senate was not able to make a decision for or against the
grandfather rule and the control test, because we had gone into caucus and we
had voted but later on the agreement was rebutted and so we had to go back
to adopting the wording in the present law which is not clearly, by its language,
a control test formulation.
HON. ANGARA. Well, I dont know. Maybe I was absent, Ting, when that
happened but my recollection is that we went into caucus, we debated [the]
pros and cons of the control versus the grandfather rule and by actual vote the
control test bloc won. I dont know when subsequent rejection took place, but
anyway even if the we are adopting the present language of the law I think by
interpretation, administrative interpretation, while there may be some
differences at the beginning, the current interpretation of this is the control
test. It amounts to the control test.
CHAIRMAN TEVES. Thats what I understood, that we could manifest our
decision on the control test formula even if we adopt the wordings here by the
Senate version.
xxxx
CHAIRMAN PATERNO. The most we can do is to say that we have explained is
to say that although the House Panel wanted to adopt language which would
make clear that the control test is the guiding philosophy in the definition of [a]

Philippine national, we explained to them the situation in the Senate and said
that we would be was asked them to adopt the present wording of the law
cognizant of the fact that the present administrative interpretation is the
control test interpretation. But, you know, we cannot go beyond that.
MR. AZCUNA. May I be clarified as to that portion that was accepted by the
Committee. [sic]
MR. VILLEGAS. The portion accepted by the Committee is the deletion of the
phrase "voting stock or controlling interest."
This intent is even more apparent in the Implementing Rules and Regulations
(IRR) of the FIA. In defining a "Philippine national," Section 1(b) of the IRR of the
FIA categorically states that for the purposes of determining the nationality of a
corporation the control test should be applied.
The cardinal rule in the interpretation of laws is to ascertain and give effect to
the intention of the legislator. Therefore, the legislative intent to apply the
control test in the determination of nationality must be given
effect.101(Emphasis supplied)
The Foreign Investments Act and its implementing rules notwithstanding, the
Department of Justice, in DOJ Opinion No. 20, series of 2005, still posited that
the Grandfather Rule is still applicable, albeit "only when the 60-40 Filipinoforeign equity ownership is in doubt."102
Anchoring itself on DOJ Opinion No. 20, series of 2005, the SEC En Banc found
the Grandfather Rule applicable in its March 25, 2010 decision in Redmont
Consolidated Mines Corp. v. McArthur Mining Corp. (subject of the petition in
G.R. No. 205513).103 It asserted that there was "doubt" in the compliance with
the requisite 60-40 Filipino-foreign equity ownership:
Such doubt, we believe, exists in the instant case because the foreign investor,
MBMI, provided practically all the funds of the remaining appelleecorporations.104
On December 9, 2010, the SEC Office of the General Counsel (OGC) rendered
an opinion (SEC-OGC Opinion No. 10-31) effectively abandoning the Control
Test in favor of the Grandfather Rule:
We are aware of the Commission's prevailing policy of applying the so-called
"Control Test" in determining the extent of foreign equity in a corporation. Since
the 1990s, the Commission En Banc, on the basis of DOJ Opinion No. 18, series
of 1989 dated January 19, 1989, voted and decided to do away with the strict
application/computation of the "Grandfather Rule," and instead applied the
"Control Test" method of determining corporate nationality. x x x105

However, we now opine that the Control Test must not be applied in
determining if a corporation satisfies the Constitution's citizenship
requirements in certain areas of activities. x x x.106
Central to the SEC-OGCs reasoning is a supposed distinction between
Philippine "citizens" and Philippine "nationals". It emphasized that Article XII,
Section 2 of the 1987 Constitution used the term "citizen" (i.e., "corporations or
associations at least 60 per centum of whose capital is owned by such
citizens") and that this terminology was reiterated in Section 3 (aq) of the
Mining Act (i.e., "at least sixty per centum (60%) of the capital of which is
owned by citizens of the Philippines").107
It added that the enumeration of who the citizens of the Philippines are in
Article III, Section 1 of the 1987 Constitution is exclusive and that "only natural
persons are susceptible of citizenship".108
Finding support in this courts ruling in the 1966 case of Palting v. San Jose
Petroleum,109 the SEC-OGC asserted that it was necessary to look into the
"citizenship of the individual stockholders, i.e., natural persons of [an] investorcorporation in order to determine if the [c]onstitutional and statutory
restrictions are complied with."110 Thus, "if there are layers of intervening
corporations x x x we must delve into the citizenship of the individual
stockholders of each corporation."111 As the SEC-OGC emphasized, "[t]his is the
strict application of the Grandfather Rule."112
Between the Grandfather Rule and the Control Test, the SEC-OGC opined that
the framers of the 1987 Constitution intended to apply the Grandfather Rule
and that the Control Test ran counter to their intentions:
Indeed, the framers of the Constitution intended for the "Grandfather Rule" to
apply in case a 60%-40% Filipino-Foreign equity corporation invests in another
corporation engaging in an activity where the Constitution restricts foreign
participation.113
xxxx
The Control Test creates a legal fiction where if 60% of the shares of an
investing corporation are owned by Philippine citizens then all of the shares or
100% of that corporation's shares are considered Filipino owned for purposes of
determining the extent of foreign equity in an investee corporation engaging in
an activity restricted to Philippine citizens.114
The SEC-OGC reasoned that the invalidity of the Control Test rested on the
matter of citizenship:
In other words, Philippine citizenship is being unduly attributed to foreign
individuals who own the rest of the shares in a 60% Filipino equity corporation
investing in another corporation. Thus, applying the Control Test effectively
circumvents the Constitutional mandate that corporations engaging in certain

activities must be 60% owned by Filipino citizens. The words of the Constitution
clearly provide that we must look at the citizenship of the individual/natural
person who ultimately owns and controls the shares of stocks of the
corporation engaging in the nationalized/partly-nationalized activity. This is
what the framers of the constitution intended. In fact, the Mining Act strictly
adheres to the text of the Constitution and does not provide for the application
of the Control Test. Indeed, the application of the Control Test has no
constitutional or statutory basis. Its application is only by mere administrative
fiat.115 (Emphasis supplied)
This court must now put to rest the seeming tension between the Control Test
and the Grandfather Rule.
This courts 1952 ruling in Davis Winship v. Philippine Trust Co.116 cited its 1951
ruling in Filipinas Compania de Seguros v. Christern, Huenefeld and Co.,
Inc.117 and stated that "the nationality of a private corporation is determined by
the character or citizenship of its controlling stockholders."118
Filipinas Compania de Seguros, for its part, specifically used the term "Control
Test" (citing a United States Supreme Court decision119) in ruling that the
respondent in that case, Christern, Huenefeld and Co., Inc. the majority of the
stockholders of which were German subjects "became an enemy corporation
upon the outbreak of the war."120
Their pronouncements and clear reference to the Control Test notwithstanding,
Davis Winship and Filipinas Compania de Seguros do not pertain to nationalized
economic activities but rather to corporations deemed to be of a belligerent
nationality during a time of war.
In and of itself, this courts 1966 decision in Palting had nothing to do with the
Control Test and the Grandfather Rule. Palting, which was relied upon by SECOGC in Opinion No. 10-31, was promulgated in 1966, months before the 1967
SEC Rules and its bifurcated paragraph 7 were adopted.
Likewise, Palting was promulgated before Republic Act No. 5186, the
Investments Incentive Act, was adopted in 1967. The Investments Incentive Act
was adopted with the declared policy of "accelerat[ing] the sound development
of the national economy in consonance with the principles and objectives of
economic nationalism,"121 thereby effecting the (1935) Constitutions
nationalization objectives.
It was through the Investments Incentive Act that a definition of a "Philippine
national" was established.122 This definition has been practically reiterated in
Presidential Decree No. 1789, the Omnibus Investments Code of
1981;123 Executive Order No. 226, the Omnibus Investments Code of
1987;124 and the present Foreign Investments Act.125

This courts 2009 decision in Unchuan v. Lozada126 referred to Section 3 (a) of


the Foreign Investments Act defining "Philippine national". In so doing, this
court may be characterized to have applied the Control Test:
In this case, we find nothing to show that the sale between the sisters Lozada
and their nephew Antonio violated the public policy prohibiting aliens from
owning lands in the Philippines. Even as Dr. Lozada advanced the money for
the payment of Antonios share, at no point were the lots registered in Dr.
Lozadas name. Nor was it contemplated that the lots be under his control for
they are actually to be included as capital of Damasa Corporation. According to
their agreement, Antonio and Dr. Lozada are to hold 60% and 40% of the
shares in said corporation, respectively. Under Republic Act No. 7042,
particularly Section 3, a corporation organized under the laws of the Philippines
of which at least 60% of the capital stock outstanding and entitled to vote is
owned and held by citizens of the Philippines, is considered a Philippine
National. As such, the corporation may acquire disposable lands in the
Philippines. Neither did petitioner present proof to belie Antonios capacity to
pay for the lots subjects of this case.127(Emphasis supplied)
This courts 2011 decision in Gamboa v. Teves128 also pertained to the
reckoning of foreign equity ownership in a nationalized economic activity (i.e.,
public utilities). However, it centered on the definition of the term
"capital"129which was deemed as referring "only to shares of stock entitled to
vote in the election of directors."130
This courts 2012 resolution ruling on the motion for reconsideration in
Gamboa131 referred to the SEC En Bancs March 25, 2010 decision in Redmont
Consolidated Mines Corp. v. McArthur Mining Corp. (subject of G.R. No.
205513), which applied the Grandfather Rule:
This SEC en banc ruling conforms to our 28 June 2011 Decision that the 60-40
ownership requirement in favor of Filipino citizens in the Constitution to engage
in certain economic activities applies not only to voting control of the
corporation, but also to the beneficial ownership of the corporation.132
However, a reading of the original 2011 decision will reveal that the matter of
beneficial ownership was considered after quoting the implementing rules and
regulations of the Foreign Investments Act. The third paragraph of Rule I,
Section 1 (b) of these rules states that "[f]ull beneficial ownership of the stocks,
coupled with appropriate voting rights is essential." It is this same provision of
the implementing rules which, in the first paragraph, declares that "the Control
Test shall be applied x x x."
In any case, the 2012 resolutions reference to the SEC En Bancs March 25,
2010 decision in Redmont can hardly be considered as authoritative. It is, at
most, obiter dictum. In the first place, Redmont was evidently not the subject of
Gamboa. It is the subject of G.R. No. 205513, which was consolidated, then deconsolidated, with the present petition. Likewise, the crux of Gamboa was the
consideration of the kind/s of shares to which the term "capital" referred, not

the applicability of the Control Test and/or the Grandfather Rule. Moreover, the
2012 resolution acknowledges that:
[T]he opinions of the SEC en banc, as well as of the DOJ, interpreting the law
are neither conclusive nor controlling and thus, do not bind the Court. It is
hornbook doctrine that any interpretation of the law that administrative or
quasi-judicial agencies make is only preliminary, never conclusive on the Court.
The power to make a final interpretation of the law, in this case the term
"capital" in Section 11, Article XII of the 1987 Constitution, lies with this Court,
not with any other government entity.133
The Grandfather Rule is not
enshrined in the Constitution
In ruling that the Grandfather Rule must apply, the ponencia relies on the
deliberations of the 1986 Constitutional Commission. The ponencia states that
these discussions "shed light on how a citizenship of a corporation will be
determined."134
The ponencia cites an exchange between Commissioners Bernardo F. Villegas
and Jose N. Nolledo:135
MR. NOLLEDO: In Sections 3, 9 and 15, the Committee stated local or Filipino
equity and foreign equity; namely, 60-40 in Section 3, 60-40 in Section 9, and
2/3-1/3 in Section 15.
MR. VILLEGAS: That is right.
MR. NOLLEDO: In teaching law, we are always faced with this question: "Where
do we base the equity requirement, is it on the authorized capital stock, on the
subscribed capital stock, or on the paid-up capital stock of a corporation"? Will
the Committee please enlighten me on this?
MR. VILLEGAS: We have just had a long discussion with the members of the
team from the UP Law Center who provided us a draft. The phrase that is
contained here which we adopted from the UP draft is "60 percent of voting
stock."
MR. NOLLEDO: That must be based on the subscribed capital stock, because
unless declared delinquent, unpaid capital stock shall be entitled to vote.
MR. VILLEGAS: That is right.
MR. NOLLEDO: Thank you.
With respect to an investment by one corporation in another corporation, say, a
corporation with 60-40 percent equity invests in another corporation which is
permitted by the Corporation Code, does the Committee adopt the Grandfather
Rule?

MR. VILLEGAS: Yes, that is the understanding of the Committee.


MR. NOLLEDO: Therefore, we need additional Filipino capital?
MR. VILLEGAS: Yes.136 (Emphasis supplied)
This court has long settled the interpretative value of the deliberations of the
Constitutional Commission. In Civil Liberties Union v. Executive
Secretary,137 this court noted:
A foolproof yardstick in constitutional construction is the intention underlying
the provision under consideration. Thus, it has been held that the 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 the 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.138
However, in the same case, this court also said:139
While it is permissible in this jurisdiction to consult the debates and
proceedings of the constitutional convention in order to arrive at the reason
and purpose of the resulting Constitution, resort thereto may be had only when
other guides fail as said proceedings are powerless to vary the terms of the
Constitution when the meaning is clear. Debates in the constitutional
convention "are of value as showing the views of the individual members, and
as indicating the reasons for their votes, but they give us no light as to the
views of the large majority who did not talk, much less of the mass of our fellow
citizens whose votes at the polls gave that instrument the force of fundamental
law. We think it safer to construe the constitution from what appears upon its
face." The proper interpretation therefore depends more on how it was
understood by the people adopting it than in the framerss understanding
thereof.140 (Emphasis supplied)
As has been stated:
The meaning of constitutional provisions should be determined from a
contemporary reading of the text in relation to the other provisions of the entire
document. We must assume that the authors intended the words to be read by
generations who will have to live with the consequences of the provisions. The
authors were not only the members of the Constitutional Commission but all
those who participated in its ratification. Definitely, the ideas and opinions
exchanged by a few of its commissioners should not be presumed to be the
opinions of all of them. The result of the deliberations of the Commission
resulted in a specific text, and it is that specific textand only that textwhich
we must read and construe.

The preamble establishes that the "sovereign Filipino people" continue to


"ordain and promulgate" the Constitution. The principle that "sovereignty
resides in the people and all government authority emanates from them" is not
hollow. Sovereign authority cannot be undermined by the ideas of a few
Constitutional Commissioners participating in a forum in 1986 as against the
realities that our people have to face in the present.
There is another, more fundamental, reason why reliance on the discussion of
the Constitutional Commissioners should not be accepted as basis for
determining the spirit behind constitutional provisions. The Constitutional
Commissioners were not infallible. Their statements of fact or status or their
inferences from such beliefs may be wrong. x x x.141
It is true that the records of the Constitutional Commission indicate an
affirmative reference to the Grandfather Rule. However, the quoted exchange
fails to indicate a consensus or the general sentiment of the forty- nine (49)
members142 of the Constitutional Commission. What it indicates is, at most, an
understanding between Commissioners Nolledo and Villegas, albeit with the
latter claiming that the same understanding is shared by the Constitutional
Commissions Committee on National Economy and Patrimony. (Though even
then, it is not established if this understanding is shared by the committee
members unanimously, or by a majority of them, or is advanced by its
leadership under the assumption that it may speak for the Committee.)
The 1987 Constitution is silent on the precise means through which foreign
equity in a corporation shall be determined for the purpose of complying with
nationalization requirements in each industry. If at all, it militates against the
supposed preference for the Grandfather Rule that, its mention in the
Constitutional Commissions deliberations notwithstanding, the 1987
Constitution was, ultimately, inarticulate on adopting a specific test or means.
The 1987 Constitution is categorical in its omission. Its meaning is clear. That is
to say, by its silence, it chose to not manifest a preference. Had there been any
such preference, the Constitution could very well have said it.
In 1986, when the Constitution was being drafted, the Grandfather Rule and the
Control Test were not novel concepts. Both tests have been articulated since as
far back as 1967. The Foreign Investments Act, while adopted in 1991, has
"predecessor statute[s]"143 dating to before 1986. As earlier mentioned, these
predecessors also define the term "Philippine national" and in substantially the
same manner that Section 3 (a) of the Foreign Investments Act does.144 It is the
same definition: This is the same basis for applying the Control Test.
It is elementary that the Constitution is not primarily a lawyers document. 145 As
the convoluted history of the Control Test and Grandfather Rule shows, even
those learned in the law have been in conflict, if not in outright confusion, as to
their application. It is not proper to insist upon the Grandfather Rule as
enshrined in the Constitution and as manifesting the sovereign peoples will
when the Constitution makes absolutely no mention of it.

In the final analysis, the records of the Constitutional Commission do not bind
this court. As Charles P. Curtis, Jr. said on the role of history in constitutional
exegesis:146
The intention of the framers of the Constitution, even assuming we could
discover what it was, when it is not adequately expressed in the Constitution,
that is to say, what they meant when they did not say it, surely that has no
binding force upon us. If we look behind or beyond what they set down in the
document, prying into what else they wrote and what they said, anything we
may find is only advisory. They may sit in at our councils. There is no reason
why we should eavesdrop on theirs.147 (Emphasis provided)
The Control Test is
established by congressional
dictum
The Foreign Investments Act addresses the gap. As this court has
acknowledged, "[t]he FIA is the basic law governing foreign investments in the
Philippines, irrespective of the nature of business and area of investment." 148
The Foreign Investments Act applies to nationalized economic activities under
the Constitution. Section 8 of the Foreign Investments Act149 provides that there
shall be two (2) component lists, A and B, with List A pertaining to "the areas of
activities reserved to Philippine nationals by mandate of the Constitution and
specific laws."
To reiterate, Section 3 (a) of the Foreign Investments Act defines a "Philippine
national" as including "a corporation organized under the laws of the
Philippines of which at least sixty per cent (60%) of the capital stock
outstanding and entitled to vote is owned and held by citizens of the
Philippines." This is a definition that is consistent with the first part of
paragraph 7 of the 1967 SEC Rules, which, as proffered by DOJ Opinion No. 20,
series of 2005, articulates the Control Test: "[s]hares belonging to corporations
or partnerships at least 60 per cent of the capital of which is owned by Filipino
citizens shall be considered as of Philippine nationality."
Moreover, the Foreign Investments Act admits of situations where a corporation
invests in another corporation by owning shares of the latter. Thus, the proviso
in Section 3 (a) of the Foreign Investments Act reads:
Provided, That where a corporation and its non-Filipino stockholders own stocks
in a Securities and Exchange Commission (SEC) registered enterprise, at least
sixty percent (60%) of the capital stock outstanding and entitled to vote of
each of both corporations must be owned and held by citizens of the
Philippines and at least sixty percent (60%) of the members of the Board of
Directors of each of both corporations must be citizens of the Philippines, in
order that the corporation shall be considered a Philippine national[.]

Supplementing this is the last sentence of the first paragraph of Rule I, Section
1 (b) of the implementing rules and regulations of the Foreign Investments Act:
"The Control Test shall be applied for this purpose."
As such, by congressional dictum, which is properly interpreted by
administrative rule making, the Control Test must govern in reckoning foreign
equity ownership in corporations engaged in nationalized economic activities. It
is through the Control Test that these corporations minimum qualification to
engage in nationalized economic activities adjudged.
DOJ Opinion No. 20, series of
2005, provides a qualifier, not
a mere example
The ponencia states that "this case calls for the application of the grandfather
rule since, x x x, doubt prevails and persists in the corporate ownership of
herein petitioners."150 This position is borne by the ponencias consideration of
DOJ Opinion No. 20, series of 2005, which states:
[T]he Grandfather Rule or the second part of the SEC Rule applies only when
the 60-40 Filipino-foreign equity ownership is in doubt (i.e., in cases where the
joint venture corporation with Filipino and foreign stockholders with less than
60% Filipino stockholdings [or 59%] invests in another joint venture corporation
which is either 60-40% Filipino-alien or 59% less Filipino. Stated differently,
where the 60-40 Filipino-foreign equity ownership is not in doubt, the
Grandfather Rule will not apply.151 (Emphasis supplied)
As is clear from the quoted portion of DOJ Opinion No. 20, series of 2005, the
phrase "in doubt" is followed by a qualifying clause: "i.e., in cases where the
joint venture corporation with Filipino and foreign stockholders with less than
60% Filipino stockholdings [or 59%] invests in another joint venture corporation
which is either 60-40% Filipino-alien or 59% less Filipino."
The ponencia states that this clause "only made an example of an instance
where doubt as to the ownership of a corporation exists"152 and is, thus, not
controlling.
This construction is erroneous. The abbreviation "i.e." is an acronym for the
Latin "id est", which translates to "that is".153 It is used not to cite an example
but "to add explanatory information or to state something in different
words."154 Whatever follows "i.e." is a paraphrasing or an alternative way of
stating the word/s that preceded it. The words succeeding "i.e.", therefore,
refer to the very conception of the words preceding "i.e.".
Had DOJ Opinion No. 20, series of 2005, intended to cite an example or to make
an illustration, it should have instead used "e.g." This stands for the Latin
"exempli gratia", which translates to "for example."155

Thus, all that DOJ Opinion No. 20, series of 2005, meant was that "doubt" as to
Filipino-foreign equity ownership exists when Filipino stockholdings is less than
sixty percent (60%). Indeed, there is no doubt where Filipino stockholdings
amount to at least sixty percent (60%).
Pursuant to Section 3 (a) of the Foreign Investments Act, a corporation is then
already deemed to be of Philippine nationality.
The Control Test serves the
rationale for nationalizing the
exploration, development,
and utilization of natural
resources
The application of the Control Test is by no means antithetical to the avowed
policy of a "national economy effectively controlled by Filipinos." 156 The Control
Test promotes this policy.
It is a matter of transitivity157 that if Filipino stockholders control a corporation
which, in turn, controls another corporation, then the Filipino stockholders
control the latter corporation, albeit indirectly or through the former
corporation.
An illustration is apt.
Suppose that a corporation, "C", is engaged in a nationalized activity requiring
that 60% of its capital be owned by Filipinos and that this 60% is owned by
another corporation, "B", while the remaining 40% is owned by stockholders,
collectively referred to as "Y". Y is composed entirely of foreign nationals. As for
B, 60% of its capital is owned by stockholders collectively referred to as "A",
while the remaining 40% is owned by stockholders collectively referred to as
"X". The collective A, is composed entirely of Philippine nationals, while the
collective X is composed entirely of foreign nationals. (N.b., in this illustration,
capital is understood to mean "shares of stock entitled to vote in the election of
directors," per the definition in Gamboa158). Thus:

By owning 60% of Bs capital, A controls B. Likewise, by owning 60% of Cs


capital, B controls C. From this, it follows, as a matter of transitivity, that A
controls C; albeit indirectly, that is, through B.
This "control" holds true regardless of the aggregate foreign capital in B and C.
As explained in Gamboa, control by stockholders is a matter resting on the
ability to vote in the election of directors:
Indisputably, one of the rights of a stockholder is the right to participate in the
control or management of the corporation. This is exercised through his vote in
the election of directors because it is the board of directors that controls or
manages the corporation.159
B will not be outvoted by Y in matters relating to C, while A will not be outvoted
by X in matters relating to B. Since all actions taken by B must necessarily be in
conformity with the will of A, anything that B does in relation to C is, in effect,
in conformity with the will of A. No amount of aggregating the foreign capital in
B and C will enable X to outvote A, nor Y to outvote B.
In effect, A controls C, through B. Stated otherwise, the collective Filipinos in A,
effectively control C, through their control of B.
To reiterate, "[t]he purpose of the sixty per centum requirement is x x x to
ensure that corporations x x x allowed to x x x exploit natural resources shall
be controlled by Filipinos."160 The decisive consideration is therefore control
rather than plain ownership of capital.
The Grandfather Rule does
not guarantee control and can
undermine the rationale for
nationalization
As against each other, it is the Control Test, rather than the Grandfather Rule,
which better serves to ensure that Philippine nationals control a corporation.
As is illustrated by the SECs September 21, 1990 opinion addressed to Carag,
Caballes, Jamora, Rodriguez and Somera Law Offices, the application of the
Grandfather Rule does not guarantee control by Filipino stockholders. In certain
instances, the application of the Grandfather Rule actually undermines the
rationale (i.e., control) for the nationalization of certain economic activities.
The SECs September 21, 1990 opinion related to the nationality of a proposed
corporation. Another corporation, Indo Phil Textile Mills, Inc. (Indo Phil),
intended to subscribe to 70% of the proposed corporations capital stock upon
incorporation. The remainder (i.e., 30%) of the proposed corporations capital
stock would have been subscribed to by Filipinos. For its part, Indo Phil was
owned by foreign stockholders to the extent of 56%. Thus, it was only 44%
Filipino-owned.

Applying the Grandfather Rule, the aggregate Filipino stockholdings in the


proposed corporation was computed to amount to 60.8%. As such, the
proposed corporation was deemed to be of Filipino nationality.
A consideration of the same case, with emphasis on the matter of "control"
(and therefore in a manner more in keeping with the rationale for
nationalization), should yield a different conclusion.
Considering that there is no indication in the SEC opinion that any of the shares
in Indo Phil do not have voting rights, it must be assumed that all such shares
have voting rights. As the foreign stockholdings in Indo Phil amount to 56%,
control of Indo Phil is held by foreign nationals; that is, this 56% can outvote
the 44% stockholding of Indo Phils Filipino stockholders. Since control of the
proposed corporation will rest on Indo Phil (which is to hold 70% of its capital),
this control would ultimately rest on those who control Indo Phil; that is, its 56%
foreign stockholding.
Had the Control Test been applied, Indo Phil would have, at the onset, been
deemed to have failed to satisfy the requisite Filipino equity ownership, and its
70% stockholding in the proposed corporation would have been deemed not
held by Philippine nationals. The Control Test would thus have averted an
aberrant result where a corporation ultimately controlled by foreign nationals
was deemed to have satisfied the requisite Filipino equity ownership.
The Control Test satisfies the
beneficial ownership
requirement
Apart from control (through voting rights), also significant is "beneficial
ownership". In the 2011 decision in Gamboa,161 this court stated:
Mere legal title is insufficient to meet the 60 percent Filipino-owned "capital"
required in the Constitution. Full beneficial ownership of 60 percent of the
outstanding capital stock, coupled with 60 percent of the voting rights, is
required. The legal and beneficial ownership of 60 percent of the outstanding
capital stock must rest in the hands of Filipino nationals in accordance with the
constitutional mandate. Otherwise, the corporation is "considered as nonPhilippine national[s]."162
The concept of "beneficial ownership" is not novel. The implementing rules and
regulations (amended 2004) of Republic Act No. 8799, the Securities Regulation
Code (SRC), defines "beneficial owner or beneficial ownership" as follows:
SRC Rule 3 Definition of Terms Used in the Rules and Regulations
1. As used in the rules and regulations adopted by the Commission under the
Code, unless the context otherwise requires:

A. Beneficial owner or beneficial ownership means any person who,


directly or indirectly, through any contract, arrangement, understanding,
relationship or otherwise, has or shares voting power, which includes the
power to vote, or to direct the voting of such security; and/or investment
returns or power, which includes the power to dispose of, or to direct the
disposition of such security; provided, however, that a person shall be
deemed to have an indirect beneficial ownership interest in any security
which is:
i. held by members of his immediate family sharing the same
household;
ii. held by a partnership in which he is a general partner;
iii. held by a corporation of which he is a controlling shareholder; or
iv. subject to any contract, arrangement or understanding which
gives him voting power or investment power with respect to such
securities; provided however, that the following persons or
institutions shall not be deemed to be beneficial owners of
securities held by them for the benefit of third parties or in
customer or fiduciary accounts in the ordinary course of business,
so long as such shares were acquired by such persons or
institutions without the purpose or effect of changing or influencing
control of the issuer:
a. a broker dealer;
b. an investment house registered under the Investment
Houses Law;
c. a bank authorized to operate as such by the Bangko
Sentral ng Pilipinas;
d. an insurance company subject to the supervision of the
Office of the Insurance Commission;
e. an investment company registered under the Investment
Company Act;
f. a pension plan subject to regulation and supervision by the
Bureau of Internal Revenue and/or the Office of the Insurance
Commission or relevant authority; and
g. a group in which all of the members are persons specified
above.

All securities of the same class beneficially owned by a person, regardless of


the form such beneficial ownership takes, shall be aggregated in calculating the
number of shares beneficially owned by such person.
A person shall be deemed to be the beneficial owner of a security if that person
has the right to acquire beneficial ownership, within thirty (30) days, including,
but not limited to, any right to acquire, through the exercise of any option,
warrant or right; through the conversion of any security; pursuant to the power
to revoke a trust, discretionary account or similar arrangement; or pursuant to
automatic termination of a trust, discretionary account or similar arrangement.
(Emphasis supplied)
Thus, there are two (2) ways through which one may be a beneficial owner of
securities, such as shares of stock: first, by having or sharing voting power; and
second, by having or sharing investment returns or power. By the implementing
rules use of "and/or", either of the two suffices. They are alternative means
which may or may not concur.
Voting power, as discussed previously, ultimately rests on the controlling
stockholders of the controlling investor corporation. To go back to the previous
illustration, voting power ultimately rests on A, it having the voting power in B
which, in turn, has the voting power in C.
As to investment returns or power, it is ultimately A which enjoys investment
power. It controls Bs investment decisions including the disposition of
securities held by B and (again, through B) controls Cs investment decisions.
Similarly, it is ultimately A which benefits from investment returns generated
through C. Any income generated by C redounds to Bs benefit, that is, through
income obtained from C, B gains funds or assets which it can use either to
finance itself in respect of capital and/or operations. This is a direct benefit to
B, itself a Philippine national. This is also an indirect benefit to A, a collectivity
of Philippine nationals, as then, its business B not only becomes more viable
as a going concern but also becomes equipped to funnel income to A.
Moreover, beneficial ownership need not be direct. A controlling shareholder is
deemed the indirect beneficial owner of securities (e.g., shares) held by a
corporation of which he or she is a controlling shareholder. Thus, in the
previous illustration, A, the controlling shareholder of B, is the indirect
beneficial owner of the shares in C to the extent that they are held by
B.
Practical difficulties with the
Grandfather Rule
Per SEC-OGC Opinion No. 10-31, the Grandfather Rule calls for the aggregation
of stockholdings on the basis of the individual stockholders (i.e., natural
persons) of every investor corporation. This construction presents practical

problems which, in many circumstances, render the reckoning of foreign equity


a futile exercise.
It is a given that a corporation may hold shares in another corporation. Having
to reckon equity to that point when natural persons hold rights to stocks makes
it conceivable that stockholdings will have to be traced ad infinitum. The
Grandfather Rule, as conceived in SEC-OGC Opinion No. 10-31, will never be
satisfied for as long as there is a corporation holding the shares of another
corporation.
This proposition is rendered even more difficult (and absurd) by how certain
corporations are listed and traded in stock exchanges. In these cases, the
ownership of stocks and the fractional composition of a corporation can change
on a daily basis.
Even Palting, which SEC-OGC Opinion No. 10-31 relied upon to justify resort to
the Grandfather Rule, acknowledged these impracticalities and absurdities:
[T]o what extent must the word "indirectly" be carried? Must we trace the
ownership or control of these various corporations ad infinitum for the purpose
of determining whether the American ownership-control-requirement is
satisfied? Add to this the admitted fact that the shares of stock of the
PANTEPEC and PANCOASTAL which are allegedly owned or controlled directly by
citizens of the United States, are traded in the stock exchange in New York, and
you have a situation where it becomes a practical impossibility to determine at
any given time, the citizenship of the controlling stock required by the law. 163
The Control Test is sustained
by the Mining Act
The Foreign Investments Acts reckoning of a Philippine national on the basis of
control and the requisite application of the Control Test are reinforced by the
Mining Act.
Section 3 (aq) of the Mining Act deems as a qualified person (for purposes of a
mineral agreement) a "corporation, x x x at least sixty per centum (60%) of the
capital of which is owned by citizens of the Philippines." Insofar as the
controlling equity requirement is concerned, this is practically a restatement of
Section 3 (a) of the Foreign Investments Act.164
Moreover, Section 3 (t), by defining a "foreign-owned corporation" as a
"corporation, x x x in which less than fifty per centum (50%) of the capital is
owned by Filipino citizens" is merely stating Section 3 (aq)s inverse. Section 3
(t) remains consistent with the Control Test, for after all, a corporation in which
less than half of the capital is owned by Filipino could not possibly be controlled
by Filipinos.

Sixty percent Filipino equity


ownership is indispensable to
be deemed a Philippine
national
But what of corporations in which Filipino equity is greater than 50% but less
than 60%?
The Foreign Investments Act is clear. The threshold to qualify as a Philippine
national, whether as a stand-alone corporation or one involving investments
from or by other corporation/s, is 60% Filipino equity ownership. Failing this, a
corporation must be deemed to be of foreign nationality.
The necessary implication of Section 3 (a) of the FIA is that anything that fails
to breach this 60% threshold is not a Philippine national. There is no "doubt", as
DOJ Opinion No. 20, series of 2005, posits. Any declaration, in the Mining Act or
elsewhere, that a corporation in which Filipino equity ownership is less than
50% is deemed foreign-owned is merely to articulate so as to eliminate
uncertainty the natural consequence of Filipinos minority shareholding in a
corporation. Ultimately, the positive determination of what makes a Philippine
national, per Section 3 (a) of the Foreign Investments Act, is that which
controls.
The Grandfather Rule may
be applied as a supplement to
the Control Test
This standard under the Foreign Investments Act is the Control Test. Its
application can be nuanced if there is a clear showing that the context of a
case requires it. The Foreign Investments Acts standard should be applied with
the end of achieving the rationale for nationalization. Thus, sixty percent equity
ownership is but a minimum.
This courts conception of what constitutes control as articulated in Gamboa
must be deemed integrated into the Foreign Investment Acts standard. Bare
ownership of 60% of a corporations shares would not suffice. What is
necessary is such ownership as will ensure control of a corporation.
In Gamboa, "[f]ull beneficial ownership of 60 percent of the outstanding capital
stock, coupled with 60 percent of the voting rights, is required." 165 With this in
mind, the Grandfather Rule may be used as a supplement to the Control Test,
that is, as a further check to ensure that control and beneficial ownership of a
corporation is in fact lodged in Filipinos.
For instance, Department of Justice Opinion No. 165, series of 1984, identified
the following "significant indicators" or badges of "dummy status":
1. That the foreign investor provides practically all the funds for the joint
investment undertaken by Filipino businessmen and their foreign partner.

2. That the foreign investors undertake to provide practically all the


technological support for the joint venture.
3. That the foreign investors, while being minority stockholders, manage
the company and prepare all economic viability studies.166
In instances where methods are employed to disable Filipinos from exercising
control and reaping the economic benefits of an enterprise, the ostensible
control vested by ownership of 60% of a corporations capital may be pierced.
Then, the Grandfather Rule allows for a further, more exacting examination of
who actually controls and benefits from holding such capital.
Narra, Tesoro, and McArthur
ostensibly satisfy the
minimum requirement of
60% Filipino equity holding
Turning now to Narra, Tesoro, and McArthur, a determination of their
qualification to enter into MPSAs requires an examination of the structures of
their respective stockholdings and controlling interests. This examination must
remain consistent with the previously discussed requirements of effective
control and beneficial ownership.
Consistent with Gamboa,167 this examination of equity structures must likewise
focus on "capital" understood as "shares of stock entitled to vote in the election
of directors."168
Proceeding from the findings of the Court of Appeals in its October 1, 2010
decision in CA-G.R. SP No. 109703,169 it appears that at least 60% of equities in
Narra, Tesoro, and McArthur is owned by Philippine nationals. Per this initial
analysis, Narra, Tesoro, and McArthur ostensibly satisfy the requirements of the
Control Test in order that they may be deemed Filipino corporations.
Attention must be drawn to how these findings fail to indicate which (fractional)
portion of these equities consist of "shares of stock entitled to vote in the
election of directors" or, if there is even any such portion of shares which are
not entitled to vote. These findings fail to indicate any distinction between
common shares and preferred shares (not entitled to vote). Absent a basis for
reckoning non-voting shares, there is, thus, no basis for diminishing the 60%
Filipino equity holding in Narra, Tesoro, and McArthur and undermining their
having ostensibly satisfied the requirements of the Control Test in order to be
deemed Filipino corporations qualified to enter into MPSAs
1. Narra Nickel Mining and Development Corporation
Petitioner Narra Nickel Mining and Development Corporation has P 10 Million in
capital stock, divided into 10,000 shares at P 1,000.00 per share, subscribed to
as follows:170

Name

Nationali Number of
ty
Shares

Amount
Subscribed

Amount
Paid

Patricia Louise Mining


Filipino
and Development Corp.

5,997

P
P
5,997,000.00 1,667,000.
00

MBMI Resources, Inc.

Canadia
n

3,996

P
P
3,996,000.00 1,116,000.
00

Higinio C. Mendoza,
Jr.

Filipino

P 1,000.00 P 1,000.00

Henry E. Fernandez

Filipino

P 1,000.00 P 1,000.00

Ma. Elena A. Bocalan

Filipino

P 1,000.00 P 1,000.00

Michael T. Mason

America
n

P 1,000.00 P 1,000.00

Robert L. McCurdy

Canadia
n

P 1,000.00 P 1,000.00

Manuel A. Agcaoili

Filipino

P 1,000.00 P 1,000.00

Bayani H. Agabin

Filipino

P 1,000.00 P 1,000.00

Total

10,000

P
P
10,000,000.0 2,800,000.
0
00

Patricia Louise Mining and Development Corporation (PLMDC) also has P 10


Million in capital stock, divided into 10,000 shares at P 1,000.00 per share,
subscribed to as follows:171
Name

Nationali
ty

Number of
Shares

Amount
Subscribed

Amount
Paid

>Palawan Alpha
South
Resource
Development Corp.

Filipino

6,596

P
6,596,000.00

P0

MBMI Resources,
Inc.

Canadia
n

3,396

P
3,396,000.00

P
2,796,000.
00

Higinio C. Mendoza, Filipino


Jr.

P 1,000.00

P 1,000.00

Fernando B.
Esguerra

Filipino

P 1,000.00

P 1,000.00

Henry E. Fernandez

Filipino

P 1,000.00

P 1,000.00

Lauro L. Salazar

Filipino

P 1,000.00

P 1,000.00

Michael T. Mason

America
n

P 1,000.00

P 1,000.00

Kenneth Cawkel

Canadia
n

P 1,000.00

P 1,000.00

Manuel A. Agcaoili

Filipino

P 1,000.00

P 1,000.00

Bayani H. Agabin

Filipino

P 1,000.00

P 1,000.00

Total

10,000

P
10,000,000.00

P
2,804,000.
00

Palawan Alpha South Resource and Development Corporation, a Filipino


corporation, along with Higinio C. Mendoza, Jr., Fernando B. Esguerra, Henry E.
Fernandez, Lauro L. Salazar, Manuel A. Agcaoili, and Bayani H. Agabin, who are
all Filipinos, collectively own 6,002 shares in or 60.02% of the capital stock of
PLMDC. PLMDC is thus ostensibly a Filipino corporation (i.e., it is controlled by
Philippine nationals who own more than 60% of its capital as required by
Section 3 (a) of the Foreign Investments Act).
PLMDC, along with Higinio C. Mendoza, Jr., Henry E. Fernandez, Ma. Elena A.
Bocalan, Manuel A. Agcaoili and Bayani H. Agabin, who are all Filipinos,
collectively own 6,002 shares in or 60.02% of the capital stock of Narra. As
Narra has satisfied the minimum Filipino equity ownership (i.e., 60%) required
by Section 3 (a) of the Foreign Investments Act, it is ostensibly a Filipino
corporation. Moreover, as it has satisfied the minimum Filipino equity
ownership (i.e., 60%) required by Section 3 (aq) of the Mining Act to be deemed
a qualified person for purposes of mineral agreements, Narra is ostensibly
qualified to enter into an MPSA.
2. Tesoro Mining and Development, Inc.
Petitioner Tesoro Mining and Development, Inc. has P 10 Million in capital stock,
divided into 10,000 shares at P 1,000.00 per share, subscribed to as follows: 172
Name

Nationali
ty

Number of
Shares

Amount
Subscribed

Amount
Paid

Sara Marie
Mining, Inc.

Filipino

5,997 P 5,997,000.00

P
825,000.00

MBMI Resources,
Inc.

Canadia
n

3,998 P 3,998,000.00

P
1,878,174.
60

Lauro L. Salazar

Filipino

P 1,000.00

P 1,000.00

Fernando B.

Filipino

P 1,000.00

P 1,000.00

Esguerra
Manuel A.
Agcaoili

Filipino

P 1,000.00

P 1,000.00

Michael T. Mason

America
n

P 1,000.00

P 1,000.00

Kenneth Cawkel

Canadia
n

P 1,000.00

P 1,000.00

10,000

P
10,000,000.00

P
2,708,174.
60

Total

Sara Marie Mining, Inc. (SMMI) also has P 10 Million in capital stock, divided into
10,000 shares at P 1,000.00 per share, subscribed to as follows: 173

Name

Nationali Number of
ty
Shares

Amount
Subscribed

Amount
Paid

Olympic Mines and


Development Corp.

Filipino

6,663

P
6,663,000.00

MBMI Resources, Inc.

Canadia
n

3,331

P
P
3,331,000.00 2,794,000.
00

Amanti Limson

Filipino

P 1,000.00 P 1,000.00

Fernando B. Esguerra

Filipino

P 1,000.00 P 1,000.00

Lauro Salazar

Filipino

P 1,000.00 P 1,000.00

Emmanuel G.
Hernando

Filipino

P 1,000.00 P 1,000.00

Michael T. Mason

America
n

P 1,000.00 P 1,000.00

Kenneth Cawkel

Canadia
n

P 1,000.00 P 1,000.00

10,000

P
P
10,000,000.0 2,809,900.
0
00

Total

P0

Olympic Mines and Development Corporation (OMDC), a Filipino corporation,


along with Amanti Limson, Fernando B. Esguerra, Lauro Salazar, and Emmanuel
G. Hernando, who are all Filipinos, collectively own 6,667 shares in or 66.67% of
the capital stock of SMMI. SMMI is thus ostensibly a Filipino corporation (i.e., it
is controlled by Philippine nationals who own more than 60% of its capital as
required by Section 3 (a) of the Foreign Investments Act).

SMMI, along with Lauro L. Salazar, Fernando B. Esguerra, and Manuel A.


Agcaoili, who are all Filipinos, collectively own 6,000 shares in or 60% of the
capital stock of Tesoro. As Tesoro has satisfied the minimum Filipino equity
ownership (i.e., 60%) required by Section 3 (a) of the
Foreign Investments Act, it is ostensibly a Filipino corporation. Moreover, as it
has satisfied the minimum Filipino equity ownership (i.e., 60%) required by
Section 3 (aq) of the Mining Act to be deemed a qualified person for purposes
of mineral agreements, Tesoro is ostensibly qualified to enter into an MPSA.
3. McArthur Mining Corporation
Petitioner McArthur Mining Corporation has P 10 Million in capital stock, divided
into 10,000 shares at P 1,000.00 per share, subscribed to as follows: 174
Name

Nationali
ty

Number of
Shares

Amount
Subscribed

Amount
Paid

Madridejos Mining
Corp.

Filipino

5,997 P 5,997,000.00

P
825,000.00

MBMI Resources,
Inc.

Canadia
n

3,998 P 3,998,000.00

P
1,878,174.
60

Lauro L. Salazar

Filipino

P 1,000.00

P 1,000.00

Fernando B.
Esguerra

Filipino

P 1,000.00

P 1,000.00

Manuel A. Agcaoili Filipino

P 1,000.00

P 1,000.00

Michael T. Mason

America
n

P 1,000.00

P 1,000.00

Kenneth Cawkel

Canadia
n

P 1,000.00

P 1,000.00

10,000

P
10,000,000.00

P
2,708,174.
60

Total

Madridejos Mining Corporation (Madridejos) also has P 10 Million in capital


stock, divided into 10,000 shares at p 1,000.00 per shares, subscribed to as
follows:175
Name
Olympic Mines and
Development Corp.

Nationali Number of
ty
Shares
Filipino

6,663

Amount
Subscribed
P
6,663,000.00

Amount
Paid
P0

MBMI Resources, Inc.

Canadia
n

3,331

P
P
3,331,000.00 2,803,900.
00

Amanti Limson

Filipino

P 1,000.00 P 1,000.00

Fernando B. Esguerra

Filipino

P 1,000.00 P 1,000.00

Lauro Salazar

Filipino

P 1,000.00 P 1,000.00

Emmanuel G.
Hernando

Filipino

P 1,000.00 P 1,000.00

Michael T. Mason

America
n

P 1,000.00 P 1,000.00

Kenneth Cawkel

Canadia
n

P 1,000.00 P 1,000.00

10,000

P
P
10,000,000.0 2,809,900.
0
00

Total

OMDC, a Filipino corporation, combined with Amanti Limson, Fernando B.


Esguerra, Lauro Salazar, and Emmanuel G. Hernando, who are all Filipino,
collectively own 6,667 shares in or 66.67% of the capital stock of Madridejos.
Madridejos is thus ostensibly a Filipino corporation (i.e., it is controlled by
Philippine nationals who own more than 60% of its capital as required by
Section 3 (a) of the Foreign Investments Act).
Madridejos combined with Lauro L. Salazar, Fernando B. Esguerra, and Manuel
A. Agcaoili, who are all Filipinos, collectively own 6,000 shares in or 60% of the
capital stock of McArthur. As McArthur has satisfied the minimum Filipino equity
ownership (i.e., 60%) required by Section 3 (a) of the Foreign Investments Act,
it is ostensibly a Filipino corporation. Moreover, as it has satisfied the minimum
Filipino equity ownership (i.e., 60%) required by Section 3 (aq) of the Mining Act
to be deemed a qualified person for purposes of mineral agreements, McArthur
is ostensibly qualified to enter into an MPSA.
In its October 1, 2010 decision, the Court of Appeals, Seventh Division, made
much of a joint venture entered into by the Canadian Corporation, MBMI
Resources Inc. with OMDC.176 This joint venture was denominated "Olympic
Properties". Per MBMIs 2006 Annual report, MBMI was noted to hold "directly
and indirectly an initial 60% interest in [Olympic Properties]."177 This joint
venture, however, does not factor into the respective stockholders genealogies
of Tesoro and McArthur. It is an independent venture entered into by OMDC with
MBMI. It is OMDC, and not Olympic Properties, which owns shares in Tesoro and
McArthur. It is, therefore, of no consequence that MBMI holds a 60% interest in
Olympic Properties.
Having made these observations, it should not be discounted that a more
thorough consideration as has been intimated in the earlier disquisition

regarding how 60% Filipino equity ownership is but a minimum and how the
Grandfather Rule may be applied to further examine actual Filipino ownership
could yield an entirely different conclusion. In fact, Redmont has asserted that
such a situation avails.
However, the contingencies of this case must restrain the courts consideration
of Redmonts claims. Redmont sought relief from a body without jurisdiction
the Panel of Arbitrators and has engaged in blatant forum shopping. It has
taken liberties with and ran amok of rules that define fair play. It is, therefore,
bound by its lapses and indiscretions and must bear the consequences of its
imprudence.
Redmont has been engaged in blatant forum shopping
The concept of and rationale against forum shopping was explained by this
court in Top Rate Construction and General Services, Inc. v. Paxton
Development Corporation:178
Forum shopping is committed by a party who institutes two or more suits in
different courts, either simultaneously or successively, in order to ask the
courts to rule on the same or related causes or to grant the same or
substantially the same reliefs, on the supposition that one or the other court
would make a favorable disposition or increase a party's chances of obtaining a
favorable decision or action. It is an act of malpractice for it trifles with the
courts, abuses their processes, degrades the administration of justice and adds
to the already congested court dockets. What is critical is the vexation brought
upon the courts and the litigants by a party who asks different courts to rule on
the same or related causes and grant the same or substantially the same
reliefs and in the process creates the possibility of conflicting decisions being
rendered by the different for a upon the same issues, regardless of whether the
court in which one of the suits was brought has no jurisdiction over the
action.179 (Emphasis supplied)
Equally settled is the test for determining forum shopping.1wphi1 As this court
explained in Yap v. Court of Appeals:180
To determine whether a party violated the rule against forum shopping, the
most important factor to ask is whether the elements of litis pendentia are
present, or whether a final judgment in one case will amount to res judicata in
another; otherwise stated, the test for determining forum shopping is whether
in the two (or more) cases pending, there is identity of parties, rights or causes
of action, and reliefs sought.181
Litis pendentia "refers to that situation wherein another action is pending
between the same parties for the same cause of action, such that the second
action becomes unnecessary and vexatious."182 It requires the concurrence of
three (3) requisites: (1) the identity of parties, or at least such as representing
the same interests in both actions; (2) the identity of rights asserted and relief
prayed for, the relief being founded on the same facts; and (3) the identity of

the two cases such that judgment in one, regardless of which party is
successful, would amount to res judicata in the other. 183
In turn, prior judgment or res judicata bars a subsequent case when the
following requisites concur: (1) the former judgment is final; (2) it is rendered
by a court having jurisdiction over the subject matter and the parties; (3) it is a
judgment or an order on the merits; (4) there is between the first and the
second actions identity of parties, of subject matter, and of causes of
action.184
Redmont has taken at least four (4) distinct routes all seeking substantially the
same remedy. Stripped of their verbosity and legalese, Redmonts petitions
before the DENR Panel of Arbitrators, complaint before the Regional Trial Court,
complaint before the Securities and Exchange Commission, and petition before
the Office of the President all seek to prevent Narra, Tesoro, and McArthur as
well as their co-respondents and/or co-defendants from engaging in mining
operations. Moreover, these are all grounded on the same cause (i.e., that they
are disqualified from doing so because they fail to satisfy the requisite Filipino
equity ownership) and premised on the same facts or circumstances.
Redmont has created a situation where multiple tribunals must rule on the
extent to which the parties adverse to Redmont have met the requisite Filipino
equity ownership. It is certainly possible that conflicting decisions will be issued
by the various tribunals over which Redmonts various applications for relief
have been lodged. It is, thus, glaring that the very evil sought to be prevented
by the rule against forum shopping is being foisted by Redmont.
The consequences of willful forum shopping are clear. Rule 7, Section 5 of the
1997 Rules of Civil Procedure provides:
Section 5. Certification against forum shopping. The plaintiff or principal
party shall certify under oath in the complaint or other initiatory pleading
asserting a claim for relief, or in a sworn certification annexed thereto and
simultaneously filed therewith: (a) that he has not theretofore commenced any
action or filed any claim involving the same issues in any court, tribunal or
quasi-judicial agency and, to the best of his knowledge, no such other action or
claim is pending therein; (b) if there is such other pending action or claim, a
complete statement of the present status thereof; and (c) if he should
thereafter learn that the same or similar action or claim has been filed or is
pending, he shall report that fact within five (5) days therefrom to the court
wherein his aforesaid complaint or initiatory pleading has been filed.
Failure to comply with the foregoing requirements shall not be curable by mere
amendment of the complaint or other initiatory pleading but shall be cause for
the dismissal of the case without prejudice, unless otherwise provided, upon
motion and after hearing. The submission of a false certification or noncompliance with any of the undertakings therein shall constitute indirect
contempt of court, without prejudice to the corresponding administrative and
criminal actions. If the acts of the party or his counsel clearly constitute willful

and deliberate forum shopping, the same shall be ground for summary
dismissal with prejudice and shall constitute direct contempt, as well as a cause
for administrative sanctions. (n)
It strains credulity to accept that Redmonts actions have not been willful. By
filing petitions with the DENR Panel of Arbitrators, Redmont started the .entire
series of events that have culminated in: first, the present petition; second, the
de-consolidated G.R. No. 205513; and third, at least one (1) more petition filed
with this court.186
Following the adverse decision of the Panel of Arbitrators, Narra, Tesoro, and
McArthur pursued appeals before the Mines Adjudication Board. This is all but
a logical consequence of the POA's adverse decision. While the appeal before
the MAB was pending, Redmont filed a complaint with the SEC and then filed a
complaint with the Regional Trial Court to enjoin the MAB from proceeding.
Redmont seems to have conveniently forgotten that it was its own actions that
gave rise to the proceedings before the MAB in the first place. Moreover, even
as all these were pending and in various stages of ap.peal and/or review,
Redmont still filed a petition before the Office of the President.
Consistent with Rule 7, Section 5 of the 1997 Rules of Civil Procedure, the
actions subject of these consolidated petitions must be dismissed with
prejudice.
It should also not escape this court's attention that the vexatious actions of
Redmont would not have been possible were it not for the permissiveness of
Redmont's counsels. To reiterate, willful forum shopping leads not only to an
action's dismissal with prejudice but "shall [also] constitute direct contempt,
[and is] a cause for administrative sanctions."187 Redmont's counsels should be
reminded that the parameters established by judicial (and even administrative)
proceedings, such as the rule against forum shopping, are not to be trifled with.
ACCORDINGLY, I vote to GRANT the petition for review on certiorari subject of
G.R. No. 195580. The assailed decision dated October 1, 2010 and the assailed
resolution dated February 15, 2011 of the Court of Appeals, Seventh Division, in
CA-G.R. SP No. 109703, which reversed and set aside the September 10, 2008
and July 1, 2009 orders of the Mines Adjudication Board (MAB) should be SET
ASIDE AND DECLARED NULL AND VOID. The September 10, 2008 order of the
Mines Adjudication Board dismissing the petitions filed by Redmont
Consolidated Mines with the DENR Panel of Arbitrators must be REINSTATED.
MARVIC MARIO VICTOR F. LEONEN
Associate Justice

FIRST DIVISION

G.R. No. 212081, February 23, 2015


DEPARTMENT OF ENVIRONMENT AND NATURAL RESOURCES
(DENR), Petitioner, v. UNITED PLANNERS CONSULTANTS, INC.
(UPCI), Respondent.
DECISION
PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari1 is the Decision2 dated March
26, 2014 of the Court of Appeals (CA) in CA-G.R. SP No. 126458 which
dismissed the petition for certiorari filed by petitioner the Department of
Environment and Natural Resources (petitioner).chanroblesvirtuallawlibrary
The Facts
On July 26, 1993, petitioner, through the Land Management Bureau (LMB),
entered into an Agreement for Consultancy Services3 (Consultancy Agreement)
with respondent United Planners Consultants, Inc. (respondent) in connection
with the LMBs Land Resource Management Master Plan Project
(LRMMP).4Under the Consultancy Agreement, petitioner committed to pay a
total contract price of P4,337,141.00, based on a predetermined percentage
corresponding to the particular stage of work accomplished.5 In December
1994, respondent completed the work required, which petitioner formally
accepted on December 27, 1994.6 However, petitioner was able to pay only
47% of the total contract price in the amount of P2,038,456.30.7cralawred
On October 25, 1994, the Commission on Audit (COA) released the Technical
Services Office Report8(TSO) finding the contract price of the Agreement to be
84.14% excessive.9 This notwithstanding, petitioner, in a letter dated December
10, 1998, acknowledged its liability to respondent in the amount of
P2,239,479.60 and assured payment at the soonest possible time.10cralawred
For failure to pay its obligation under the Consultancy Agreement despite
repeated demands, respondent instituted a Complaint11 against petitioner
before the Regional Trial Court of Quezon City, Branch 222 (RTC), docketed as
Case No. Q-07-60321.12cralawred
Upon motion of respondent, the case was subsequently referred to arbitration
pursuant to the arbitration clause of the Consultancy Agreement,13 which
petitioner did not oppose.14 As a result, Atty. Alfredo F. Tadiar, Architect
Armando N. Alli, and Construction Industry Arbitration Commission (CIAC)
Accredited Arbitrator Engr. Ricardo B. San Juan were appointed as members of
the Arbitral Tribunal. The court-referred arbitration was then docketed as
Arbitration Case No. A-001.15cralawred
During the preliminary conference, the parties agreed to adopt the CIAC
Revised Rules Governing Construction Arbitration16 (CIAC Rules) to govern the

arbitration proceedings.17 They further agreed to submit their respective draft


decisions in lieu of memoranda of arguments on or before April 21, 2010,
among others.18cralawred
On the due date for submission of the draft decisions, however, only
respondent complied with the given deadline,19 while petitioner moved for the
deferment of the deadline which it followed with another motion for extension
of time, asking that it be given until May 11, 2010 to submit its draft
decision.20cralawred
In an Order21 dated April 30, 2010, the Arbitral Tribunal denied petitioners
motions and deemed its non-submission as a waiver, but declared that it would
still consider petitioners draft decision if submitted before May 7, 2010, or the
expected date of the final awards promulgation.22 Petitioner filed its draft
decision23 only on May 7, 2010.
The Arbitral Tribunal rendered its Award24 dated May 7, 2010 (Arbitral Award) in
favor of respondent, directing petitioner to pay the latter the amount of (a)
P2,285,089.89 representing the unpaid progress billings, with interest at the
rate of 12% per annum from the date of finality of the Arbitral Award upon
confirmation by the RTC until fully paid; (b) P2,033,034.59 as accrued interest
thereon; (c) ?500,000.00 as exemplary damages; and (d) P150,000.00 as
attorneys fees.25 It also ordered petitioner to reimburse respondent its
proportionate share in the arbitration costs as agreed upon in the amount of
P182,119.44.26cralawred
Unconvinced, petitioner filed a motion for reconsideration,27 which the Arbitral
Tribunal merely noted without any action, claiming that it had already lost
jurisdiction over the case after it had submitted to the RTC its Report together
with a copy of the Arbitral Award.28cralawred
Consequently, petitioner filed before the RTC a Motion for
Reconsideration29 dated May 19, 2010 (May 19, 2010 Motion for
Reconsideration) and a Manifestation and Motion30 dated June 1, 2010 (June
1, 2010 Manifestation and Motion), asserting that it was denied the
opportunity to be heard when the Arbitral Tribunal failed to consider its draft
decision and merely noted its motion for reconsideration. 31 It also denied
receiving a copy of the Arbitral Award by either electronic or registered
mail.32 For its part, respondent filed an opposition thereto and moved for the
confirmation33 of the Arbitral Award in accordance with the Special Rules of
Court on Alternative Dispute Resolution (Special ADR Rules).34cralawred
In an Order35 dated March 30, 2011, the RTC merely noted petitioners aforesaid
motions, finding that copies of the Arbitral Award appear to have been sent to
the parties by the Arbitral Tribunal, including the OSG, contrary to petitioners
claim. On the other hand, the RTC confirmed the Arbitral Award pursuant to
Rule 11.2 (A)36 of the Special ADR Rules and ordered petitioner to pay
respondent the costs of confirming the award, as prayed for, in the total
amount of P50,000.00. From this order, petitioner did not file a motion for

reconsideration.
Thus, on June 15, 2011, respondent moved for the issuance of a writ of
execution, to which no comment/opposition was filed by petitioner despite the
RTCs directive therefor. In an Order37 dated September 12, 2011, the RTC
granted respondents motion.38cralawred
Petitioner moved to quash39 the writ of execution, positing that respondent was
not entitled to its monetary claims. It also claimed that the issuance of said writ
was premature since the RTC should have first resolved its May 19, 2010
Motion for Reconsideration and June 1, 2010 Manifestation and Motion, and not
merely noted them, thereby violating its right to due process.40cralawred
The RTC Ruling
In an Order41 dated July 9, 2012, the RTC denied petitioners motion to quash.
It found no merit in petitioners contention that it was denied due process,
ruling that its May 19, 2010 Motion for Reconsideration was a prohibited
pleading under Section 17.2,42 Rule 17 of the CIAC Rules. It explained that the
available remedy to assail an arbitral award was to file a motion for correction
of final award pursuant to Section 17.143 of the CIAC Rules, and not a motion for
reconsideration of the said award itself.44 On the other hand, the RTC found
petitioners June 1, 2010 Manifestation and Motion seeking the resolution of its
May 19, 2010 Motion for Reconsideration to be defective for petitioners failure
to observe the three-day notice rule.45 Having then failed to avail of the
remedies attendant to an order of confirmation, the Arbitral Award had become
final and executory.46cralawred
On July 12, 2012, petitioner received the RTCs Order dated July 9, 2012
denying its motion to quash.47cralawred
Dissatisfied, it filed on September 10, 2012 a petition for certiorari48 before
the CA, docketed as CA-G.R. SP No. 126458, averring in the main that the RTC
acted with grave abuse of discretion in confirming and ordering the execution
of the Arbitral Award.chanroblesvirtuallawlibrary
The CA Ruling
In a Decision49 dated March 26, 2014, the CA dismissed the certiorari petition
on two (2) grounds, namely: (a) the petition essentially assailed the merits
of the Arbitral Award which is prohibited under Rule 19.750 of the Special
ADR Rules;51 and (b) the petition was filed out of time, having been filed way
beyond 15 days from notice of the RTCs July 9, 2012 Order, in violation of Rule
19.2852 in relation to Rule 19.853 of said Rules which provide that a special civil
action for certiorari must be filed before the CA within 15 days from notice
of the judgment, order, or resolution sought to be annulled or set
aside (or until July 27, 2012).

Aggrieved, petitioner filed the instant petition.chanroblesvirtuallawlibrary


The Issue Before the Court
The core issue for the Courts resolution is whether or not the CA erred in
applying the provisions of the Special ADR Rules, resulting in the dismissal of
petitioners special civil action for certiorari.
The Courts Ruling
The petition lacks merit.chanroblesvirtuallawlibrary
I.
Republic Act No. (RA) 9285,54 otherwise known as the Alternative Dispute
Resolution Act of 2004, institutionalized the use of an Alternative Dispute
Resolution System (ADR System)55 in the Philippines. The Act, however, was
without prejudice to the adoption by the Supreme Court of any ADR system as
a means of achieving speedy and efficient means of resolving cases pending
before all courts in the Philippines.56cralawred
Accordingly, A.M. No. 07-11-08-SC was created setting forth the Special Rules
of Court on Alternative Dispute Resolution (referred herein as Special ADR
Rules) that shall govern the procedure to be followed by the courts
whenever judicial intervention is sought in ADR proceedings in the specific
cases where it is allowed.57cralawred
Rule 1.1 of the Special ADR Rules lists down the instances when the said rules
shall apply, namely: (a) Relief on the issue of Existence, Validity, or
Enforceability of the Arbitration Agreement; (b) Referral to Alternative
Dispute Resolution (ADR); (c) Interim Measures of Protection; (d)
Appointment of Arbitrator; (e) Challenge to Appointment of Arbitrator; (f)
Termination of Mandate of Arbitrator; (g) Assistance in Taking Evidence; (h)
Confirmation, Correction or Vacation of Award in Domestic Arbitration; (i)
Recognition and Enforcement or Setting Aside of an Award in International
Commercial Arbitration; (j) Recognition and Enforcement of a Foreign Arbitral
Award; (k) Confidentiality/Protective Orders; and (l) Deposit and Enforcement of
Mediated Settlement Agreements.58cralawred
Notably, the Special ADR Rules do not automatically govern the arbitration
proceedings itself. A pivotal feature of arbitration as an alternative mode of
dispute resolution is that it is a product of party autonomy or the freedom of
the parties to make their own arrangements to resolve their own
disputes.59 Thus, Rule 2.3 of the Special ADR Rules explicitly provides that
parties are free to agree on the procedure to be followed in the
conduct of arbitral proceedings. Failing such agreement, the arbitral
tribunal may conduct arbitration in the manner it considers
appropriate.60cralawred

In the case at bar, the Consultancy Agreement contained an arbitration


clause.61 Hence, respondent, after it filed its complaint, moved for its referral to
arbitration62 which was not objected to by petitioner.63 By its referral to
arbitration, the case fell within the coverage of the Special ADR Rules.
However, with respect to the arbitration proceedings itself, the parties had
agreed to adopt the CIAC Rules before the Arbitral Tribunal in accordance with
Rule 2.3 of the Special ADR Rules.
On May 7, 2010, the Arbitral Tribunal rendered the Arbitral Award in favor of
respondent. Under Section 17.2, Rule 17 of the CIAC Rules, no motion for
reconsideration or new trial may be sought, but any of the parties may file a
motion for correction64 of the final award, which shall interrupt the running of
the period for appeal,65 based on any of the following grounds, to
wit:chanRoblesvirtualLawlibrary
a. an evident miscalculation of figures, a typographical or arithmetical
error;ChanRoblesVirtualawlibrary
b. an evident mistake in the description of any party, person, date, amount,
thing or property referred to in the award;ChanRoblesVirtualawlibrary
c. where the arbitrators have awarded upon a matter not submitted to
them, not affecting the merits of the decision upon the matter
submitted;ChanRoblesVirtualawlibrary
d. where the arbitrators have failed or omitted to resolve certain issue/s
formulated by the parties in the Terms of Reference (TOR) and submitted
to them for resolution, and
e. where the award is imperfect in a matter of form not affecting the merits
of the controversy.
The motion shall be acted upon by the Arbitral Tribunal or the
surviving/remaining members.66cralawlawlibrary
Moreover, the parties may appeal the final award to the CA through a petition
for review under Rule 43 of the Rules of Court.67cralawred
Records do not show that any of the foregoing remedies were availed of by
petitioner. Instead, it filed the May 19, 2010 Motion for Reconsideration of the
Arbitral Award, which was a prohibited pleading under the Section 17.2,68 Rule
17 of the CIAC Rules, thus rendering the same final and executory.
Accordingly, the case was remanded to the RTC for confirmation proceedings
pursuant to Rule 11 of the Special ADR Rules which requires confirmation by
the court of the final arbitral award. This is consistent with Section 40, Chapter
7 (A) of RA 9285 which similarly requires a judicial confirmation of a domestic
award to make the same enforceable:chanRoblesvirtualLawlibrary

SEC. 40. Confirmation of Award. The confirmation of a domestic arbitral award


shall be governed by Section 2369 of R.A. 876.70cralawred
A domestic arbitral award when confirmed shall be enforced in the
same manner as final and executory decisions of the regional trial
court.
The confirmation of a domestic award shall be made by the regional
trial court in accordance with the Rules of Procedure to be
promulgated by the Supreme Court.
A CIAC arbitral award need not be confirmed by the regional trial court to be
executory as provided under E.O. No. 1008. (Emphases
supplied)cralawlawlibrary
During the confirmation proceedings, petitioners did not oppose the RTCs
confirmation by filing a petition to vacate the Arbitral Award under Rule 11.2
(D)71 of the Special ADR Rules. Neither did it seek reconsideration of the
confirmation order in accordance with Rule 19.1 (h) thereof. Instead, petitioner
filed only on September 10, 2012 a special civil action for certiorari before the
CA questioning the propriety of (a) the RTC Order dated September 12, 2011
granting respondents motion for issuance of a writ of execution, and (b) Order
dated July 9, 2012 denying its motion to quash. Under Rule 19.26 of the Special
ADR Rules, [w]hen the Regional Trial Court, in making a ruling under the
Special ADR Rules, has acted without or in excess of its jurisdiction, or with
grave abuse of discretion amounting to lack or excess of jurisdiction, and
there is no appeal or any plain, speedy, and adequate remedy in the
ordinary course of law, a party may file a special civil action for certiorari to
annul or set aside a ruling of the Regional Trial Court. Thus, for failing to avail
of the foregoing remedies before resorting tocertiorari, the CA correctly
dismissed its petition.chanroblesvirtuallawlibrary
II.
Note that the special civil action for certiorari described in Rule 19.26 above
may be filed to annul or set aside the following orders of the Regional Trial
Court.
a. Holding that the arbitration agreement is inexistent, invalid or
unenforceable;ChanRoblesVirtualawlibrary
b. Reversing the arbitral tribunals preliminary determination upholding its
jurisdiction;ChanRoblesVirtualawlibrary
c. Denying the request to refer the dispute to
arbitration;ChanRoblesVirtualawlibrary
d. Granting or refusing an interim relief;ChanRoblesVirtualawlibrary

e. Denying a petition for the appointment of an


arbitrator;ChanRoblesVirtualawlibrary
f. Confirming, vacating or correcting a domestic arbitral
award;ChanRoblesVirtualawlibrary
g. Suspending the proceedings to set aside an international commercial
arbitral award and referring the case back to the arbitral
tribunal;ChanRoblesVirtualawlibrary
h. Allowing a party to enforce an international commercial arbitral award
pending appeal;ChanRoblesVirtualawlibrary
i. Adjourning or deferring a ruling on whether to set aside, recognize and or
enforce an international commercial arbitral
award;ChanRoblesVirtualawlibrary
j. Allowing a party to enforce a foreign arbitral award pending appeal; and
k. Denying a petition for assistance in taking evidence. (Emphasis supplied)
cralawlawlibrary
Further, Rule 19.772 of the Special ADR Rules precludes a party to an arbitration
from filing a petition forcertiorari questioning the merits of an arbitral award.
If so falling under the above-stated enumeration, Rule 19.28 of the Special ADR
Rules provide that saidcertiorari petition should be filed with the [CA] within
fifteen (15) days from notice of the judgment, order or resolution sought to be
annulled or set aside. No extension of time to file the petition shall be allowed.
In this case, petitioner asserts that its petition is not covered by the Special
ADR Rules (particularly, Rule 19.28 on the 15-day reglementary period to file a
petition for certiorari) but by Rule 65 of the Rules of Court (particularly, Section
4 thereof on the 60-day reglementary period to file a petition forcertiorari),
which it claimed to have suppletory application in arbitration proceedings since
the Special ADR Rules do not explicitly provide for a procedure on execution.
The position is untenable.
Execution is fittingly called the fruit and end of suit and the life of the law. A
judgment, if left unexecuted, would be nothing but an empty victory for the
prevailing party.73cralawred
While it appears that the Special ADR Rules remain silent on the procedure for
the execution of a confirmed arbitral award, it is the Courts considered view
that the Rules procedural mechanisms cover not only aspects of confirmation
but necessarily extend to a confirmed awards execution in light of the doctrine
of necessary implication which states that every statutory grant of power, right
or privilege is deemed to include all incidental power, right or privilege.

In Atienza v. Villarosa,74 the doctrine was explained,


thus:chanRoblesvirtualLawlibrary
No statute can be enacted that can provide all the details involved in its
application. There is always an omission that may not meet a particular
situation. What is thought, at the time of enactment, to be an all-embracing
legislation may be inadequate to provide for the unfolding of events of the
future. So-called gaps in the law develop as the law is enforced. One of the
rules of statutory construction used to fill in the gap is the doctrine of
necessary implication. The doctrine states that what is implied in a statute is as
much a part thereof as that which is expressed. Every statute is
understood, by implication, to contain all such provisions as may be
necessary to effectuate its object and purpose, or to make effective
rights, powers, privileges or jurisdiction which it grants, including all
such collateral and subsidiary consequences as may be fairly and
logically inferred from its terms. Ex necessitate legis. And every
statutory grant of power, right or privilege is deemed to include all
incidental power, right or privilege. This is so because the greater includes
the lesser, expressed in the maxim,in eo plus sit, simper inest et
minus.75 (Emphases supplied)cralawlawlibrary
As the Court sees it, execution is but a necessary incident to the Courts
confirmation of an arbitral award. To construe it otherwise would result in an
absurd situation whereby the confirming court previously applying the Special
ADR Rules in its confirmation of the arbitral award would later shift to the
regular Rules of Procedure come execution. Irrefragably, a courts power to
confirm a judgment award under the Special ADR Rules should be deemed to
include the power to order its execution for such is but a collateral and
subsidiary consequence that may be fairly and logically inferred from the
statutory grant to regional trial courts of the power to confirm domestic arbitral
awards.
All the more is such interpretation warranted under the principle of ratio legis
est anima which provides that a statute must be read according to its spirit or
intent,76 for what is within the spirit is within the statute although it is not within
its letter, and that which is within the letter but not within the spirit is not
within the statute.77 Accordingly, since the Special ADR Rules are intended to
achieve speedy and efficient resolution of disputes and curb a litigious
culture,78 every interpretation thereof should be made consistent with these
objectives.
Thus, with these principles in mind, the Court so concludes that the Special
ADR Rules, as far as practicable, should be made to apply not only to the
proceedings on confirmation but also to the confirmed awards execution.
Further, let it be clarified that contrary to petitioners stance resort to the
Rules of Court even in a suppletory capacity is not allowed. Rule 22.1 of the
Special ADR Rules explicitly provides that [t]he provisions of the Rules of Court
that are applicable to the proceedings enumerated in Rule 1.1 of these Special

ADR Rules have either been included and incorporated in these Special ADR
Rules orspecifically referred to herein.79 Besides, Rule 1.13 thereof provides
that [i]n situations where no specific rule is provided under the Special ADR
Rules, the court shall resolve such matter summarily and be guided by the
spirit and intent of the Special ADR Rules and the ADR Laws.
As above-mentioned, the petition for certiorari permitted under the Special ADR
Rules must be filed within a period of fifteen (15) days from notice of the
judgment, order or resolution sought to be annulled or set aside.80 Hence, since
petitioners filing of its certiorari petition in CA-G.R. SP No. 126458 was made
nearly two months after its receipt of the RTCs Order dated July 9, 2012, or on
September 10, 2012,81 said petition was clearly dismissible.82cralawred
III.
Discounting the above-discussed procedural considerations, the Court still finds
that the certioraripetition had no merit.
Indeed, petitioner cannot be said to have been denied due process as the
records undeniably show that it was accorded ample opportunity to ventilate its
position. There was clearly nothing out of line when the Arbitral Tribunal denied
petitioners motions for extension to file its submissions having failed to show a
valid reason to justify the same or in rendering the Arbitral Award sans
petitioners draft decision which was filed only on the day of the scheduled
promulgation of final award on May 7, 2010. 83 The touchstone of due process is
basically the opportunity to be heard. Having been given such opportunity,
petitioner should only blame itself for its own procedural blunder.
On this score, the petition for certiorari in CA-G.R. SP No. 126458 was likewise
properly dismissed.chanroblesvirtuallawlibrary
IV.
Nevertheless, while the Court sanctions the dismissal by the CA of the petition
for certiorari due to procedural infirmities, there is a need to explicate the
matter of execution of the confirmed Arbitral Award against the petitioner, a
government agency, in the light of Presidential Decree No. (PD)
144584otherwise known as the Government Auditing Code of the Philippines.
Section 26 of PD 1445 expressly provides that execution of money judgment
against the Government or any of its subdivisions, agencies and
instrumentalities is within the primary jurisdiction of the COA, to
wit:chanRoblesvirtualLawlibrary
SEC. 26. General jurisdiction. The authority and powers of the
Commission shall extend to and comprehend all matters relating
to auditing procedures, systems and controls, the keeping of the general
accounts of the Government, the preservation of vouchers pertaining thereto
for a period of ten years, the examination and inspection of the books,

records, and papers relating to those accounts; and the audit and
settlement of the accounts of all persons respecting funds or property
received or held by them in an accountable capacity, as well as the
examination, audit, and settlement of all debts and claims of any sort
due from or owing to the Government or any of its subdivisions,
agencies and instrumentalities. The said jurisdiction extends to all
government-owned or controlled corporations, including their subsidiaries, and
other self-governing boards, commissions, or agencies of the Government, and
as herein prescribed, including non-governmental entities subsidized by the
government, those funded by donation through the government, those required
to pay levies or government share, and those for which the government has put
up a counterpart fund or those partly funded by the government. (Emphases
supplied)
cralawlawlibrary
From the foregoing, the settlement of respondents money claim is still subject
to the primary jurisdiction of the COA despite finality of the confirmed arbitral
award by the RTC pursuant to the Special ADR Rules.85 Hence, the respondent
has to first seek the approval of the COA of their monetary claim. This appears
to have been complied with by the latter when it filed a Petition for
Enforcement and Payment of Final and Executory Arbitral Award 86 before the
COA. Accordingly, it is now the COA which has the authority to rule on this
latter petition.
WHEREFORE, the petition is DENIED. The Decision dated March 26, 2014 of
the Court of Appeals in CA-G.R. SP No. 126458 which dismissed the petition
for certiorari filed by petitioner the Department of Environment and Natural
Resources is hereby AFFIRMED.
SO ORDERED.cralawlawlibrary
Sereno, C.J., (Chairperson), Leonardo-De Castro, Bersamin, and Perez,
JJ., concur.

EN BANC
G.R. No. 180771, April 21, 2015
RESIDENT MARINE MAMMALS OF THE PROTECTED SEASCAPE TANON
STRAIT, E.G., TOOTHED WHALES, DOLPHINS, PORPOISES, AND OTHER
CETACEAN SPECIES, JOINED IN AND REPRESENTED HEREIN BY HUMAN
BEINGS GLORIA ESTENZO RAMOS AND ROSE-LIZA EISMA-OSORIO, IN
THEIR CAPACITY AS LEGAL GUARDIANS OF THE LESSER LIFE-FORMS
AND AS RESPONSIBLE STEWARDS OF GOD'S
CREATIONS, Petitioners, v. SECRETARY ANGELO REYES, IN HIS CAPACITY
AS SECRETARY OF THE DEPARTMENT OF ENERGY (DOE), SECRETARY
JOSE L. ATIENZA, IN HIS CAPACITY AS SECRETARY OF THE DEPARTMENT
OF ENVIRONMENT AND NATURAL RESOURCES (DENR), LEONARDO R.
SIBBALUCA, DENR REGIONAL DIRECTOR-REGION VII AND IN HIS
CAPACITY AS CHAIRPERSON OF THE TANON STRAIT PROTECTED
SEASCAPE MANAGEMENT BOARD, BUREAU OF FISHERIES AND AQUATIC
RESOURCES (BFAR), DIRECTOR MALCOLM I. SARMIENTO, JR., BFAR
REGIONAL DIRECTOR FOR REGION VII ANDRES M. BOJOS, JAPAN
PETROLEUM EXPLORATION CO., LTD. (JAPEX), AS REPRESENTED BY ITS
PHILIPPINE AGENT, SUPPLY OILFIELD SERVICES, INC., Respondents.
G.R. No. 181527
CENTRAL VISAYAS FISHERFOLK DEVELOPMENT CENTER (FIDEC),
CERILO D. ENGARCIAL, RAMON YANONG, FRANCISCO LABID, IN THEIR
PERSONAL CAPACITY AND AS REPRESENTATIVES OF THE SUBSISTENCE
FISHERFOLKS OF THE MUNICIPALITIES OF ALOGUINSAN AND
PINAMUNGAJAN, CEBU, AND THEIR FAMILIES, AND THE PRESENT AND
FUTURE GENERATIONS OF FILIPINOS WHOSE RIGHTS ARE SIMILARLY
AFFECTED, Petitioners,v. SECRETARY ANGELO REYES, IN HIS CAPACITY
AS SECRETARY OF THE DEPARTMENT OF ENERGY (DOE), JOSE L.
ATIENZA, IN HIS CAPACITY AS SECRETARY OF THE DEPARTMENT OF
ENVIRONMENT AND NATURAL RESOURCES (DENR), LEONARDO R.
SIBBALUCA, IN HIS CAPACITY AS DENR REGIONAL DIRECTOR-REGION
VII AND AS CHAIRPERSON OF THE TAON STRAIT PROTECTED
SEASCAPE MANAGEMENT BOARD, ALAN ARRANGUEZ, IN HIS CAPACITY
AS DIRECTOR ENVIRONMENTAL MANAGEMENT BUREAU-REGION VII,
DOE REGIONAL DIRECTOR FOR REGION VIII1 ANTONIO LABIOS, JAPAN
PETROLEUM EXPLORATION CO., LTD. (JAPEX), AS REPRESENTED BY ITS
PHILIPPINE AGENT, SUPPLY OILFIELD SERVICES, INC.,Respondent.
DECISION
LEONARDO-DE CASTRO, J.:

Before Us are two consolidated Petitions filed under Rule 65 of the 1997 Rules
of Court, concerningService Contract No. 46 (SC-46), which allowed the
exploration, development, and exploitation of petroleum resources within Taon
Strait, a narrow passage of water situated between the islands of Negros and
Cebu.2
The Petition docketed as G.R. No. 180771 is an original Petition
for Certiorari, Mandamus, and Injunction, which seeks to enjoin respondents
from implementing SC-46 and to have it nullified for willful and gross violation
of the 1987 Constitution and certain international and municipal laws.3
Likewise, the Petition docketed as G.R. No. 181527 is an original Petition
for Certiorari, Prohibition, andMandamus, which seeks to nullify the
Environmental Compliance Certificate (ECC) issued by the Environmental
Management Bureau (EMB) of the Department of Environment and Natural
Resources (DENR), Region VII in connection with SC-46; to prohibit respondents
from implementing SC-46; and to compel public respondents to provide
petitioners access to the pertinent documents involving the Taon Strait Oil
Exploration Project.4
ANTECEDENT FACTS AND PROCEEDINGS
Petitioners in G.R. No. 180771, collectively referred to as the "Resident Marine
Mammals" in the petition, are the toothed whales, dolphins, porpoises, and
other cetacean species, which inhabit the waters in and around the Taon
Strait. They are joined by Gloria Estenzo Ramos (Ramos) and Rose-Liza EismaOsorio (Eisma-Osorio) as their legal guardians and as friends (to be collectively
known as "the Stewards") who allegedly empathize with, and seek the
protection of, the aforementioned marine species. Also impleaded as an
unwilling co-petitioner is former President Gloria Macapagal-Arroyo, for her
express declaration and undertaking in the ASEAN Charter to protect the Taon
Strait, among others.5
Petitioners in G.R. No. 181527 are the Central Visayas Fisherfolk Development
Center (FIDEC), a non-stock, non-profit, non-governmental organization,
established for the welfare of the marginal fisherfolk in Region VII; and Cerilo D.
Engarcial (Engarcial), Ramon Yanong (Yanong) and Francisco Labid (Labid), in
their personal capacities and as representatives of the subsistence fisherfolk of
the municipalities of Aloguinsan and Pinamungajan, Cebu.
Named as respondents in both petitions are the late Angelo T. Reyes, as then
Secretary of the Department of Energy (DOE); Jose L. Atienza, as then
Secretary of the DENR; Leonardo R. Sibbaluca, as then DENR-Regional Director
for Region VII and Chairman of the Taon Strait Protected Seascape
Management Board; Japan Petroleum Exploration Co., Ltd. (JAPEX), a company
organized and existing under the laws of Japan with a Philippine branch office;
and Supply Oilfield Services, Inc. (SOS), as the alleged Philippine agent of
JAPEX.

In G.R. No. 181527, the following were impleaded as additional public


respondents: Alan C. Arranguez (Arranguez) and Antonio Labios (Labios), in
their capacities as then Director of the EMB, Region VII and then Regional
Director of the DOE, Region VII, respectively.6
On June 13, 2002, the Government of the Philippines, acting through the DOE,
entered into a Geophysical Survey and Exploration Contract-102 (GSEC-102)
with JAPEX. This contract involved geological and geophysical studies of the
Taon Strait. The studies included surface geology, sample analysis, and
reprocessing of seismic and magnetic data. JAPEX, assisted by DOE, also
conducted geophysical and satellite surveys, as well as oil and gas sampling in
Taon Strait.7
On December 21, 2004, DOE and JAPEX formally converted GSEC-102 into SC46 for the exploration, development, and production of petroleum resources in
a block covering approximately 2,850 square kilometers offshore the Taon
Strait.8
From May 9 to 18, 2005, JAPEX conducted seismic surveys in and around the
Taon Strait. A multi-channel sub-bottom profiling covering approximately 751
kilometers was also done to determine the area's underwater composition. 9
JAPEX committed to drill one exploration well during the second sub-phase of
the project. Since the well was to be drilled in the marine waters of Aloguinsan
and Pinamungajan, where the Taon Strait was declared a protected seascape
in 1988,10 JAPEX agreed to comply with the Environmental Impact Assessment
requirements pursuant to Presidential Decree No. 1586, entitled "Establishing
An Environmental Impact Statement System, Including Other Environmental
Management Related Measures And For Other Purposes."11
On January 31, 2007, the Protected Area Management Board 12 of the Taon
Strait (PAMB-Taon Strait) issued Resolution No. 2007-001,13 wherein it adopted
the Initial Environmental Examination (IEE) commissioned by JAPEX, and
favorably recommended the approval of JAPEX's application for an ECC.
On March 6, 2007, the EMB of DENR Region VII granted an ECC to the DOE and
JAPEX for the offshore oil and gas exploration project in Taon Strait. 14 Months
later, on November 16, 2007, JAPEX began to drill an exploratory well, with a
depth of 3,150 meters, near Pinamungajan town in the western Cebu
Province.15 This drilling lasted until February 8, 2008.16
It was in view of the foregoing state of affairs that petitioners applied to this
Court for redress, via two separate original petitions both dated December 17,
2007, wherein they commonly seek that respondents be enjoined from
implementing SC-46 for, among others, violation of the 1987 Constitution.
On March 31, 2008, SOS filed a Motion to Strike17 its name as a respondent on
the ground that it is not the Philippine agent of JAPEX. In support of its motion,
it submitted the branch office application of JAPEX,18 wherein the latter's

resident agent was clearly identified. SOS claimed that it had acted as a mere
logistics contractor for JAPEX in its oil and gas exploration activities in the
Philippines.
Petitioners Resident Marine Mammals and Stewards opposed SOS's motion on
the ground that it was premature, it was pro-forma, and it was patently dilatory.
They claimed that SOS admitted that "it is in law a (sic) privy to JAPEX" since it
did the drilling and other exploration activities in Taon Strait under the
instructions of its principal, JAPEX. They argued that it would be premature to
drop SOS as a party as JAPEX had not yet been joined in the case; and that it
was "convenient" for SOS to ask the Court to simply drop its name from the
parties when what it should have done was to either notify or ask JAPEX to join
it in its motion to enable proper substitution. At this juncture, petitioners
Resident Marine Mammals and Stewards also asked the Court to implead JAPEX
Philippines as a corespondent or as a substitute for its parent company,
JAPEX.19
On April 8, 2008, the Court resolved to consolidate G.R. No. 180771 and G.R.
No. 181527.
On May 26, 2008, the FIDEC manifested20 that they were adopting in toto the
Opposition to Strike with Motion to Implead filed by petitioners Resident Marine
Mammals and Stewards in G.R. No. 180771.
On June 19, 2008, public respondents filed their Manifestation21 that they were
not objecting to SOS's Motion to Strike as it was not JAPEX's resident agent.
JAPEX during all this time, did not file any comment at all.
Thus, on February 7, 2012, this Court, in an effort to ensure that all the parties
were given ample chance and opportunity to answer the issues herein, issued a
Resolution directing the Court's process servicing unit to again serve the
parties with a copy of the September 23, 2008 Resolution of the Court, which
gave due course to the petitions in G.R. Nos. 180771 and 181527, and which
required the parties to submit their respective memoranda. The February 7,
2012 Resolution22 reads as follows:chanroblesvirtuallawlibrary
G.R. No. 180771 (Resident Marine Mammals of the Protected Seascape Taon
Strait,e.g., Toothed Whales, Dolphins, Porpoises and Other Cetacean Species, et
al. vs. Hon. Angelo Reyes, in his capacity as Secretary of the Department of
Energy, et al.) and G.R. No. 181527 (Central Visayas Fisherfolk Development
Center, et al. vs. Hon. Angelo Reyes, et al.). - The Court Resolved to direct the
Process Servicing Unit to RE-SEND the resolution dated September 23, 2008 to
the following parties and counsel, together with this
resolution:chanroblesvirtuallawlibrary
Atty. Aristeo
20th Floor Pearlbank Centre
O. Cario
Counsel for
Respondent
146 Valero Street
Supply
Oilfield
Salcedo Village, Makati City

Services, Inc.
JAPEX
Philippines
Ltd.

20th Floor Pearlbank Centre


146 Valero Street
Salcedo Village, Makati City

JAPEX
Philippines
19th Floor Pearlbank Centre
Ltd.
c/o Atty. Maria
146 Valero Street
Farah Z.G.
NicolasSalcedo Village, Makati City
Suchianco
Atty. Maria
Suite 2404 Discovery Centre
Farah Z.G.
Nicolas25 ADB Avenue
Suchianco
Resident Agent
Ortigas Center, Pasig City
of JAPEX
Philippines Ltd.
This Resolution was personally served to the above parties, at the above
addresses on February 23, 2012. On March 20, 2012, JAPEX Philippines, Ltd.
(JAPEX PH), by way of special appearance, filed a Motion to Admit 23 its Motion
for Clarification,24 wherein JAPEX PH requested to be clarified as to whether or
not it should deem the February 7, 2012 Resolution as this Court's Order of its
inclusion in the case, as it has not been impleaded. It also alleged that JAPEX
PH had already stopped exploration activities in the Taon Strait way back in
2008, rendering this case moot.
On March 22, 2012, JAPEX PH, also by special appearance, filed a Motion for
Extension of Time25 to file its Memorandum. It stated that since it received the
February 7, 2012 Resolution on February 23, 2012, it had until March 22, 2012
to file its Memorandum. JAPEX PH then asked for an additional thirty days,
supposedly to give this Court some time to consider its Motion for Clarification.
On April 24, 2012, this Court issued a Resolution26 granting JAPEX PH's Motion
to Admit its Motion for Clarification. This Court, addressing JAPEX PH's Motion
for Clarification, held:chanroblesvirtuallawlibrary
With regard to its Motion for Clarification (By Special Appearance) dated March
19, 2012, this Court considers JAPEX Philippines. Ltd. as a real party-in-interest
in these cases. Under Section 2, Rule 3 of the 1997 Rules of Court, a real partyin-interest is the party who stands to be benefited or injured by the judgment in
the suit, or the party entitled to the avails of the suit. Contrary to JAPEX
Philippines, Ltd.'s allegation that it is a completely distinct corporation, which
should not be confused with JAPEX Company, Ltd., JAPEX Philippines, Ltd. is a
mere branch office, established by JAPEX Company, Ltd. for the purpose of

carrying out the latter's business transactions here in the Philippines. Thus,
JAPEX Philippines, Ltd., has no separate personality from its mother foreign
corporation, the party impleaded in this case.
Moreover, Section 128 of the Corporation Code provides for the responsibilities
and duties of a resident agent of a foreign
corporation:chanroblesvirtuallawlibrary
SECTION 128. Resident agent; service of process. The Securities and
Exchange Commission shall require as a condition precedent to the issuance of
the license to transact business in the Philippines by any foreign corporation
that such corporation file with the Securities and Exchange Commission a
written power of attorney designating some person who must be a resident of
the Philippines, on whom any summons and other legal processes may be
served in all actions or other legal proceedings against such corporation, and
consenting that service upon such resident agent shall be admitted and held as
valid as if served upon the duly authorized officers of the foreign corporation at
its home office. Any such foreign corporation shall likewise execute and file with
the Securities and Exchange Commission an agreement or stipulation,
executed by the proper authorities of said corporation, in form and substance
as follows:
"The (name of foreign corporation) does hereby stipulate and agree, in
consideration of its being granted by the Securities and Exchange Commission
a license to transact business in the Philippines, that if at any time said
corporation shall cease to transact business in the Philippines, or shall be
without any resident agent in the Philippines on whom any summons or other
legal processes may be served, then in any action or proceeding arising out of
any business or transaction which occurred in the Philippines, service of any
summons or other legal process may be made upon the Securities and
Exchange Commission and that such service shall have the same force and
effect as if made upon the duly-authorized officers of the corporation at its
home office."
Whenever such service of summons or other process shall be made upon the
Securities and Exchange Commission, the Commission shall, within ten (10)
days thereafter, transmit by mail a copy of such summons or other legal
process to the corporation at its home or principal office. The sending of such
copy by the Commission shall be a necessary part of and shall complete such
service. All expenses incurred by the Commission for such service shall be paid
in advance by the party at whose instance the service is made.
In case of a change of address of the resident agent, it shall be his or its duty to
immediately notify in writing the Securities and Exchange Commission of the
new address.
It is clear from the foregoing provision that the function of a resident agent is to
receive summons or legal processes that may be served in all actions or other
legal proceedings against the foreign corporation. These cases have been
prosecuted in the name of JAPEX Company, Ltd., and JAPEX Philippines Ltd., as
its branch office and resident agent, had been receiving the various resolutions

from this Court, as evidenced by Registry Return Cards signed by its


representatives.
And in the interest of justice, this Court resolved to grant JAPEX PH's motion for
extension of time to file its memorandum, and was given until April 21, 2012,
as prayed for, within which to comply with the submission.27
Without filing its Memorandum, JAPEX PH, on May 14, 2012, filed a motion,
asking this Court for an additional thirty days to file its Memorandum, to be
counted from May 8, 2012. It justified its request by claiming that this Court's
April 24, 2012 Resolution was issued past its requested deadline for filing,
which was on April 21, 2012.28
On June 19, 2012, this Court denied JAPEX PH's second request for additional
time to file its Memorandum and dispensed with such filing.
Since petitioners had already filed their respective memoranda,29 and public
respondents had earlier filed a Manifestation30 that they were adopting their
Comment dated March 31, 2008 as their memorandum, this Court submitted
the case for decision.chanRoblesvirtualLawlibrary
Petitioners' Allegations
Protesting the adverse ecological impact of JAPEX's oil exploration activities in
the Taon Strait, petitioners Resident Marine Mammals and Stewards aver that
a study made after the seismic survey showed that the fish catch was reduced
drastically by 50 to 70 percent. They claim that before the seismic survey, the
average harvest per day would be from 15 to 20 kilos; but after the activity, the
fisherfolk could only catch an average of 1 to 2 kilos a day. They attribute this
"reduced fish catch" to the destruction of the "payao" also known as the "fish
aggregating device" or "artificial reef."31Petitioners Resident Marine Mammals
and Stewards also impute the incidences of "fish kill"32 observed by some of the
local fisherfolk to the seismic survey. And they further allege that the ECC
obtained by private respondent JAPEX is invalid because public consultations
and discussions with the affected stakeholders, a pre-requisite to the issuance
of the ECC, were not held prior to the ECC's issuance.
In its separate petition, petitioner FIDEC confirms petitioners Resident Marine
Mammals and Stewards' allegations of reduced fish catch and lack of public
consultations or discussions with the fisherfolk and other stakeholders prior to
the issuance of the ECC. Moreover, it alleges that during the seismic surveys
and drilling, it was barred from entering and fishing within a 7-kilometer radius
from the point where the oilrig was located, an area greater than the 1.5kilometer radius "exclusion zone" stated in the IEE.33 It also agrees in the
allegation that public respondents DENR and EMB abused their discretion when
they issued an ECC to public respondent DOE and private respondent JAPEX
without ensuring the strict compliance with the procedural and substantive
requirements under the Environmental Impact Assessment system, the
Fisheries Code, and their implementing rules and regulations.34 It further claims
that despite several requests for copies of all the documents pertaining to the

project in Taflon Strait, only copies of the PAMB-Taon Strait Resolution and the
ECC were given to the fisherfolk.35
Public Respondents' Counter-Allegations
Public respondents, through the Solicitor General, contend that petitioners
Resident Marine Mammals and Stewards have no legal standing to file the
present petition; that SC-46 does not violate the 1987 Constitution and the
various laws cited in the petitions; that the ECC was issued in accordance with
existing laws and regulations; that public respondents may not be compelled
by mandamus to furnish petitioners copies of all documents relating to SC-46;
and that all the petitioners failed to show that they are entitled to injunctive
relief. They further contend that the issues raised in these petitions have been
rendered moot and academic by the fact that SC-46 had been mutually
terminated by the parties thereto effective June 21, 2008. 36
ISSUES
The following are the issues posited by petitioners Resident Marine Mammals
and Stewards in G.R. No. 180771:chanroblesvirtuallawlibrary
I.

WHETHER OR NOT PETITIONERS HAVE LOCUS STANDI TO FILE THE


INSTANT PETITION;

II.

WHETHER OR NOT SERVICE CONTRACT NO. 46 IS VIOLAT[IVE] OF THE


1987 PHILIPPINE CONSTITUTION AND STATUTES;

III.

WHETHER OR NOT THE ON-GOING EXPLORATION AND PROPOSED


EXPLOITATION FOR OIL AND NATURAL GAS AT, AROUND, AND
UNDERNEATH THE MARINE WATERS OF THE TANON STRAIT PROTECTED
SEASCAPE IS INCONSISTENT WITH THE PHILIPPINE COMMITMENTS TO
INTERNATIONAL ENVIRONMENTAL LAWS AND INSTRUMENTS; AND

IV.

WHETHER OR NOT THE ISSUANCE OF THE ENVIRONMENTAL COMPLIANCE


CERTIFICATE (ECC) IN ENVIRONMENTALLY CRITICAL AREAS AND HABITATS
OF MARINE WILDLIFE AND ENDANGERED SPECIES IS LEGAL AND
PROPER.37

Meanwhile, in G.R. No. 181527, petitioner FIDEC presented the following issues
for our consideration:chanroblesvirtuallawlibrary
I.

WHETHER OR NOT SERVICE CONTRACT NO. 46 EXECUTED BETWEEN


RESPONDENTS DOE AND JAPEX SHOULD BE NULLIFIED AND SET ASIDE
FOR BEING IN DIRECT VIOLATION OF SPECIFIC PROVISIONS OF THE 1987
PHILIPPINE CONSTITUTION AND APPLICABLE LAWS;

II.

WHETHER OR NOT THE OFF-SHORE OIL EXPLORATION CONTEMPLATED


UNDER SERVICE CONTRACT NO. 46 IS LEGALLY PERMISSIBLE WITHOUT A
LAW BEING DULY PASSED EXPRESSLY FOR THE PURPOSE;

III.

WHETHER OR NOT THE OIL EXPLORATION BEING CONDUCTED WITHIN


THE TANON STRAIT PROTECTED SEASCAPE VIOLATES THE RIGHTS AND
LEGAL PROTECTION GRANTED TO PETITIONERS UNDER THE
CONSTITUTION AND APPLICABLE LAWS.

IV.

WHETHER OR NOT THE ISSUANCE OF THE ENVIRONMENTAL COMPLIANCE


CERTIFICATE (ECC) FOR SUCH AN ENVIRONMENTALLY CRITICAL PROJECT
INSIDE AN ENVIRONMENTALLY CRITICAL AREA SUCH AS THE TANON
STRAIT PROTECTED SEASCAPE CONFORMED TO LAW AND EXISTING
RULES AND REGULATIONS ON THE MATTER.

V.

WHETHER OR NOT THE RESPONDENTS MAY BE COMPELLED BY


MANDAMUS TO FURNISH PETITIONERS WITH COPIES OF THE DOCUMENTS
PERTAINING TO THE TANON STRAIT OIL EXPLORATION PROJECT.38

In these consolidated petitions, this Court has determined that the various
issues raised by the petitioners may be condensed into two primary issues:
I.

Procedural Issue: Locus Standi of the Resident Marine Mammals and


Stewards, petitioners in G.R. No. 180771; and

II.

Main Issue: Legality of Sendee Contract No. 46.


DISCUSSION

At the outset, this Court makes clear that the '"moot and academic principle' is
not a magical formula that can automatically dissuade the courts in resolving a
case." Courts have decided cases otherwise moot and academic under the
following exceptions:
1) There is a grave violation of the Constitution;
2) The exceptional character of the situation and the paramount public interest
is involved;
3) The constitutional issue raised requires formulation of controlling principles
to guide the bench, the bar, and the public; and
4) The case is capable of repetition yet evading review. 39
In this case, despite the termination of SC-46, this Court deems it necessary to
resolve these consolidated petitions as almost all of the foregoing exceptions
are present in this case. Both petitioners allege that SC-46 is violative of the
Constitution, the environmental and livelihood issues raised undoubtedly affect
the public's interest, and the respondents' contested actions are capable of
repetition.chanRoblesvirtualLawlibrary
Procedural Issues
Locus Standi of Petitioners Resident Marine Mammals and Stewards

The Resident Marine Mammals, through the Stewards, "claim" that they have
the legal standing to file this action since they stand to be benefited or injured
by the judgment in this suit.40 Citing Oposa v. Factoran, Jr.,41 they also assert
their right to sue for the faithful performance of international and municipal
environmental laws created in their favor and for their benefit. In this regard,
they propound that they have the right to demand that they be accorded the
benefits granted to them in multilateral international instruments that the
Philippine Government had signed, under the concept of stipulationpour
autrui.42
For their part, the Stewards contend that there should be no question of their
right to represent the Resident Marine Mammals as they have stakes in the
case as forerunners of a campaign to build awareness among the affected
residents of Taon Strait and as stewards of the environment since the primary
steward, the Government, had failed in its duty to protect the environment
pursuant to the public trust doctrine.43
Petitioners Resident Marine Mammals and Stewards also aver that this Court
may lower the benchmark in locus standi as an exercise of epistolary
jurisdiction.44
In opposition, public respondents argue that the Resident Marine Mammals
have no standing because Section 1, Rule 3 of the Rules of Court requires
parties to an action to be either natural or juridical
persons, viz.:chanroblesvirtuallawlibrary
Section 1. Who may be parties; plaintiff and defendant. - Only natural or
juridical persons, or entities authorized by law may be parties in a civil action.
The term "plaintiff may refer to the claiming party, the counter-claimant, the
cross-claimant, or the third (fourth, etc.)-party plaintiff. The term "defendant"
may refer to the original defending party, the defendant in a counterclaim, the
cross-defendant, or the third (fourth, etc.)-party defendant.
The public respondents also contest the applicability of Oposa, pointing out
that the petitioners therein were all natural persons, albeit some of them were
still unborn.45
As regards the Stewards, the public respondents likewise challenge their claim
of legal standing on the ground that they are representing animals, which
cannot be parties to an action. Moreover, the public respondents argue that the
Stewards are not the real parties-in-interest for their failure to show how they
stand to be benefited or injured by the decision in this case.46
Invoking the alter ego principle in political law, the public respondents claim
that absent any proof that former President Arroyo had disapproved of their
acts in entering into and implementing SC-46, such acts remain to be her
own.47
The public respondents contend that since petitioners Resident Marine
Mammals and Stewards' petition was not brought in the name of a real party-

in-interest, it should be dismissed for failure to state a cause of action.48


The issue of whether or not animals or even inanimate objects should be given
legal standing in actions before courts of law is not new in the field of animal
rights and environmental law. Petitioners Resident Marine Mammals and
Stewards cited the 1972 United States case Sierra Club v. Rogers C.B.
Morton,49wherein Justice William O. Douglas, dissenting to the conventional
thought on legal standing, opined:chanroblesvirtuallawlibrary
The critical question of "standing" would be simplified and also put neatly in
focus if we fashioned a federal rule that allowed environmental issues to be
litigated before federal agencies or federal courts in the name of the inanimate
object about to be despoiled, defaced, or invaded by roads and bulldozers and
where injury is the subject of public outrage, x x x.
Inanimate objects are sometimes parties in litigation. A ship has a legal
personality, a fiction found useful for maritime purposes. The corporation sole a creature of ecclesiastical law - is an acceptable adversary and large fortunes
ride on its cases. The ordinary corporation is a "person" for purposes of the
adjudicatory processes, whether it represents proprietary, spiritual, aesthetic,
or charitable causes.
So it should be as respects valleys, alpine meadows, rivers, lakes, estuaries,
beaches, ridges, groves of trees, swampland, or even air that feels the
destructive pressures of modern technology and modem life. The river, for
example, is the living symbol of all the life it sustains or nourishesfish,
aquatic insects, water ouzels, otter, fisher, deer, elk, bear, and all other
animals, including man, who are dependent on it or who enjoy it for its sight, its
sound, or its life. The river as plaintiff speaks for the ecological unit of life that
is part of it. Those people who have a meaningful relation to that body of water
whether it be a fisherman, a canoeist, a zoologist, or a loggermust be able
to speak for the values which the river represents and which are threatened
with destruction.50 (Citations omitted.)
The primary reason animal rights advocates and environmentalists seek to give
animals and inanimate objects standing is due to the need to comply with the
strict requirements in bringing a suit to court. Our own 1997 Rules of Court
demand that parties to a suit be either natural or juridical persons, or entities
authorized by law. It further necessitates the action to be brought in the name
of the real party-in-interest, even if filed by a
representative, viz.:chanroblesvirtuallawlibrary
Rule 3
Parties to Civil Actions
Section 1. Who may be parties; plaintiff and defendant. - Only natural or
juridical persons, or entities authorized by law may be parties in a civil action.
The term "plaintiff may refer to the claiming party, the counter-claimant, the
cross-claimant, or the third (fourth, etc.)-party plaintiff. The term "defendant"
may refer to the original defending party, the defendant in a counterclaim, the
cross-defendant, or the third (fourth, etc.)-party defendant.

Sec. 2. Parties in interest. - A real party in interest is the party who stands to be
benefited or injured by the judgment in the suit, or the party entitled to the
avails of the suit. Unless otherwise authorized by law or these Rules, every
action must be prosecuted or defended in the name of the real party in
interest.
Sec. 3. Representatives as parties. - Where the action is allowed to be
prosecuted or defended by a representative or someone acting in a fiduciary
capacity, the beneficiary shall be included in the title of the case and shall be
deemed to be the real party in interest. A representative may be a trustee of an
express trust, a guardian, an executor or administrator, or a party authorized
by law or these Rules. An agent acting in his own name and for the benefit of
an undisclosed principal may sue or be sued without joining the principal
except when the contract involves things belonging to the principal.
It had been suggested by animal rights advocates and environmentalists that
not only natural and juridical persons should be given legal standing because of
the difficulty for persons, who cannot show that they by themselves are real
parties-in-interests, to bring actions in representation of these animals or
inanimate objects. For this reason, many environmental cases have been
dismissed for failure of the petitioner to show that he/she would be directly
injured or affected by the outcome of the case. However, in our
jurisdiction, locus standi in environmental cases has been given a more
liberalized approach. While developments in Philippine legal theory and
jurisprudence have not progressed as far as Justice Douglas's paradigm of legal
standing for inanimate objects, the current trend moves towards simplification
of procedures and facilitating court access in environmental cases.
Recently, the Court passed the landmark Rules of Procedure for
Environmental Cases,51 which allow for a "citizen suit," and permit any
Filipino citizen to file an action before our courts for violations of our
environmental laws:chanroblesvirtuallawlibrary
SEC. 5. Citizen suit. - Any Filipino citizen in representation of others,
including minors or generations yet unborn, may file an action to
enforce rights or obligations under environmental laws. Upon the filing
of a citizen suit, the court shall issue an order which shall contain a brief
description of the cause of action and the reliefs prayed for, requiring all
interested parties to manifest their interest to intervene in the case within
fifteen (15) days from notice thereof. The plaintiff may publish the order once in
a newspaper of a general circulation in the Philippines or furnish all affected
barangays copies of said order.
Citizen suits filed under R.A. No. 8749 and R.A. No. 9003 shall be governed by
their respective provisions.52 (Emphasis ours.)
Explaining the rationale for this rule, the Court, in the Annotations to the Rules
of Procedure for Environmental Cases, commented:chanroblesvirtuallawlibrary
Citizen suit. To further encourage the protection of the environment, the Rules
enable litigants enforcing environmental rights to file their cases as citizen
suits. This provision liberalizes standing for all cases filed enforcing
environmental laws and collapses the traditional rule on personal and direct

interest, on the principle that humans are stewards of nature. The


terminology of the text reflects the doctrine first enunciated inOposa v.
Factoran, insofar as it refers to minors and generations yet unborn.53 (Emphasis
supplied, citation omitted.)
Although this petition was filed in 2007, years before the effectivity of the Rules
of Procedure for Environmental Cases, it has been consistently held that rules
of procedure "may be retroactively applied to actions pending and
undetermined at the time of their passage and will not violate any right of a
person who may feel that he is adversely affected, inasmuch as there is no
vested rights in rules of procedure."54
Elucidating on this doctrine, the Court, in Systems Factors Corporation v.
National Labor Relations Commission55 held that:chanroblesvirtuallawlibrary
Remedial statutes or statutes relating to remedies or modes of procedure,
which do not create new or take away vested rights, but only operate in
furtherance of the remedy or confirmation of rights already existing, do not
come within the legal conception of a retroactive law, or the general rule
against retroactive operation of statutes. Statutes regulating the procedure of
the courts will be construed as applicable to actions pending and undetermined
at the time of their passage. Procedural laws are retroactive in that sense and
to that extent, x x x.
Moreover, even before the Rules of Procedure for Environmental Cases became
effective, this Court had already taken a permissive position on the issue
of locus standi in environmental cases. In Oposa, we allowed the suit to be
brought in the name of generations yet unborn "based on the concept of
intergenerational responsibility insofar as the right to a balanced and healthful
ecology is concerned."56Furthermore, we said that the right to a balanced and
healthful ecology, a right that does not even need to be stated in our
Constitution as it is assumed to exist from the inception of humankind, carries
with it the correlative duty to refrain from impairing the environment. 57
In light of the foregoing, the need to give the Resident Marine Mammals legal
standing has been eliminated by our Rules, which allow any Filipino citizen, as a
steward of nature, to bring a suit to enforce our environmental laws. It is worth
noting here that the Stewards are joined as real parties in the Petition and not
just in representation of the named cetacean species. The Stewards, Ramos
and Eisma-Osorio, having shown in their petition that there may be possible
violations of laws concerning the habitat of the Resident Marine Mammals, are
therefore declared to possess the legal standing to file this
petition.chanRoblesvirtualLawlibrary
Impleading Former President Gloria Macapagal-Arroyo as an Unwilling
Co-Petitioner
Petitioners Stewards in G.R. No. 180771 impleaded as an unwilling copetitioner former President Gloria Macapagal-Arroyo for the following reasons,
which we quote:chanroblesvirtuallawlibrary
Her Excellency Gloria Macapagal-Arroyo, also of legal age, Filipino and
resident of Malacaang Palace, Manila Philippines. Steward Gloria Macapagal-

Arroyo happens to be the incumbent President of the Philippine Islands. She is


personally impleaded in this suit as an unwilling co-petitioner by reason of her
express declaration and undertaking under the recently signed ASEAN Charter
to protect Your Petitioners' habitat, among others. She is meantime dominated
as an unwilling co-petitioner due to lack of material time in seeking her
signature and imprimatur hereof and due to possible legal complications that
may hereafter arise by reason of her official relations with public respondents
under the alter ego principle in political law.58cralawlawlibrary
This is incorrect.
Section 10, Rule 3 of the Rules of Court provides:chanroblesvirtuallawlibrary
Sec. 10. Unwilling co-plaintiff. - If the consent of any party who should be joined
as plaintiff can not be obtained, he may be made a defendant and the reason
therefor shall be stated in the complaint.
Under the foregoing rule, when the consent of a party who should be joined as
a plaintiff cannot be obtained, he or she may be made a party defendant to the
case. This will put the unwilling party under the jurisdiction of the Court, which
can properly implead him or her through its processes. The unwilling party's
name cannot be simply included in a petition, without his or her knowledge and
consent, as such would be a denial of due process.
Moreover, the reason cited by the petitioners Stewards for including former
President Macapagal-Arroyo in their petition, is not sufficient to implead her as
an unwilling co-petitioner. Impleading the former President as an unwilling copetitioner, for an act she made in the performance of the functions of her
office, is contrary to the public policy against embroiling the President in suits,
"to assure the exercise of Presidential duties and functions free from any
hindrance or distraction, considering that being the Chief Executive of the
Government is a job that, aside from requiring all of the office holder's time,
also demands undivided attention."59
Therefore, former President Macapagal-Arroyo cannot be impleaded as one of
the petitioners in this suit. Thus, her name is stricken off the title of this
case.chanRoblesvirtualLawlibrary
Main Issue:
Legality of Service Contract No. 46
Service Contract No. 46 vis-a-vis
Section 2, Article XII of the
1987 Constitution
Petitioners maintain that SC-46 transgresses the Jura Regalia Provision or
paragraph 1, Section 2, Article XII of the 1987 Constitution because JAPEX is
100% Japanese-owned.60 Furthermore, the FIDEC asserts that SC-46 cannot be
considered as a technical and financial assistance agreement validly executed
under paragraph 4 of the same provision.61 The petitioners claim that La BugalB'laan Tribal Association, Inc. v. Ramos62 laid down the guidelines for a valid
service contract, one of which is that there must exist a general law for oil

exploration before a service contract may be entered into by the Government.


The petitioners posit that the service contract in La Bugal is presumed to have
complied with the requisites of (a) legislative enactment of a general law after
the effectivity of the 1987 Constitution (such as Republic Act No. 7942, or the
Philippine Mining Law of 1995, governing mining contracts) and (b) presidential
notification. The petitioners thus allege that the ruling in La Bugal, which
involved mining contracts under Republic Act No. 7942, does not apply in this
case.63 The petitioners also argue that Presidential Decree No. 87 or the Oil
Exploration and Development Act of 1972 cannot legally justify SC-46 as it is
deemed to have been repealed by the 1987 Constitution and subsequent laws,
which enunciate new policies concerning the environment.64 In addition,
petitioners in G.R. No. 180771 claim that paragraphs 2 and 3 of Section 2,
Article XII of the 1987 Constitution mandate the exclusive use and enjoyment
by the Filipinos of our natural resources,65 and paragraph 4 does not speak of
service contracts but of FTAAs or Financial Technical Assistance Agreements. 66
The public respondents again controvert the petitioners' claims and asseverate
that SC-46 does not violate Section 2, Article XII of the 1987 Constitution. They
hold that SC-46 does not fall under the coverage of paragraph 1 but instead,
under paragraph 4 of Section 2, Article XII of the 1987 Constitution on FTAAs.
They also insist that paragraphs 2 and 3, which refer to the grant of exclusive
fishing right to Filipinos, are not applicable to SC-46 as the contract does not
grant exclusive fishing rights to JAPEX nor does it otherwise impinge on the
FIDEC's right to preferential use of communal marine and fishing resources.67
Ruling of the Court
On the legality of Service Contract No. 46
vis-a-vis Section 2, Article XII of the 1987 Constitution
The petitioners insist that SC-46 is null and void for having violated Section 2,
Article XII of the 1987 Constitution, which reads as
follows:chanroblesvirtuallawlibrary
Section 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 twentyfive 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.
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 fishworkers in rivers, lakes, bays, and lagoons.
The President may enter into agreements with foreign-owned
corporations involving either technical or financial assistance for
large-scale exploration, development, and 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. (Emphases ours.)
This Court has previously settled the issue of whether service contracts are still
allowed under the 1987 Constitution. In La Bugal, we held that the deletion of
the words "service contracts" in the 1987 Constitution did not amount to a ban
on them per se. In fact, in that decision, we quoted in length, portions of the
deliberations of the members of the Constitutional Commission (ConCom) to
show that in deliberating on paragraph 4, Section 2, Article XII, they were
actually referring to service contracts as understood in the 1973 Constitution,
albeit with safety measures to eliminate or minimize the abuses prevalent
during the martial law regime, to wit:chanroblesvirtuallawlibrary
Summation of the ConCom Deliberations
At this point, we sum up the matters established, based on a careful reading of
the ConCom deliberations, as follows:
In their deliberations on what was to become paragraph 4, the framers used
the termservice contracts in referring to agreements x x x involving either
technical or financial assistance.
They spoke of service contracts as the concept was understood in the 1973
Constitution.
It was obvious from their discussions that they were not about to ban or
eradicate service contracts.
Instead, they were plainly crafting provisions to put in place safeguards that
would eliminate or minimize the abuses prevalent during the marital law
regime. In brief, they were going to permit service contracts with foreign
corporations as contractors, but with safety measures to prevent abuses, as an
exception to the general norm established in the first paragraph of Section 2 of
Article XII. This provision reserves or limits to Filipino citizens and corporations
at least 60 percent of which is owned by such citizens the exploration,

development and utilization of natural resources.


This provision was prompted by the perceived insufficiency of Filipino capital
and the felt need for foreign investments in the EDU of minerals and petroleum
resources.
The framers for the most part debated about the sort of safeguards that would
be considered adequate and reasonable. But some of them, having more
"radical" leanings, wanted to ban service contracts altogether; for them, the
provision would permit aliens to exploit and benefit from the nation's natural
resources, which they felt should be reserved only for Filipinos.
In the explanation of their votes, the individual commissioners were heard by
the entire body. They sounded off their individual opinions, openly enunciated
their philosophies, and supported or attacked the provisions with fervor.
Everyone's viewpoint was heard.
In the final voting, the Article on the National Economy and Patrimony
including paragraph 4 allowing service contracts with foreign corporations as
an exception to the general norm in paragraph 1 of Section 2 of the same
article was resoundingly approved by a vote of 32 to 7, with 2 abstentions.
Agreements Involving Technical Or Financial Assistance Are Service
Contracts with Safeguards
From the foregoing, we are impelled to conclude that the phrase agreements
involving either technical or financial assistance, referred to in paragraph 4, are
in fact service contracts. But unlike those of the 1973 variety, the new ones are
between foreign corporations acting as contractors on the one hand; and on
the other, the government as principal or "owner" of the works. In the new
service contracts, the foreign contractors provide capital, technology and
technical know-how, and managerial expertise in the creation and operation of
large-scale mining/extractive enterprises; and the government, through its
agencies (DENR, MGB), actively exercises control and supervision over the
entire operation.68cralawlawlibrary
In summarizing the matters discussed in the ConCom, we established that
paragraph 4, with the safeguards in place, is the exception to
paragraph 1, Section 2 of Article XII. The following are the safeguards this
Court enumerated in La Bugal:chanroblesvirtuallawlibrary
Such service contracts may be entered into only with respect to minerals,
petroleum and other mineral oils. The grant thereof is subject to several
safeguards, among which are these requirements:
(1) The service contract shall be crafted in accordance with a general law that
will set standard or uniform terms, conditions and requirements, presumably to
attain a certain uniformity in provisions and avoid the possible insertion of
terms disadvantageous to the country.
(2) The President shall be the signatory for the government because,

supposedly before an agreement is presented to the President for signature, it


will have been vetted several times over at different levels to ensure that it
conforms to law and can withstand public scrutiny.
(3) Within thirty days of the executed agreement, the President shall report it to
Congress to give that branch of government an opportunity to look over the
agreement and interpose timely objections, if any.69cralawlawlibrary
Adhering to the aforementioned guidelines, this Court finds that SC-46 is
indeed null and void for noncompliance with the requirements of the 1987
Constitution.
1. The General Law on Oil Exploration
The disposition, exploration, development, exploitation, and utilization of
indigenous petroleum in the Philippines are governed by Presidential Decree
No. 87 or the Oil Exploration and Development Act of 1972. This was enacted
by then President Ferdinand Marcos to promote the discovery and production of
indigenous petroleum through the utilization of government and/or local or
foreign private resources to yield the maximum benefit to the Filipino people
and the revenues to the Philippine Government.70
Contrary to the petitioners' argument, Presidential Decree No. 87, although
enacted in 1972, before the adoption of the 1987 Constitution, remains to be a
valid law unless otherwise repealed, to wit:chanroblesvirtuallawlibrary
ARTICLE XVIII - TRANSITORY PROVISIONS
Section 3. All existing laws, decrees, executive orders, proclamations, letters
of instructions, and other executive issuances not inconsistent with this
Constitution shall remain operative until amended, repealed, or revoked.
If there were any intention to repeal Presidential Decree No. 87, it would have
been done expressly by Congress. For instance, Republic Act No. 7160, more
popularly known as the Local Government Code of 1991, expressly repealed a
number of laws, including a specific provision in Presidential Decree No.
87,viz.:chanroblesvirtuallawlibrary
SECTION 534. Repealing Clause. (a) Batas Pambansa Blg. 337, otherwise
known as the "Local Government Code," Executive Order No. 112 (1987), and
Executive Order No. 319 (1988) are hereby repealed.
(b) Presidential Decree Nos. 684, 1191, 1508 and such other decrees, orders,
instructions, memoranda and issuances related to or concerning the barangay
are hereby repealed.
(c) The provisions of Sections 2, 3, and 4 of Republic Act No. 1939 regarding
hospital fund; Section 3, a (3) and b (2) of Republic Act No. 5447 regarding the
Special Education Fund; Presidential Decree No. 144 as amended by
Presidential Decree Nos. 559 and 1741; Presidential Decree No. 231 as
amended; Presidential Decree No. 436 as amended by Presidential Decree No.
558; and Presidential Decree Nos. 381, 436, 464, 477, 526, 632, 752, and 1136
are hereby repealed and rendered of no force and effect.

(d) Presidential Decree No. 1594 is hereby repealed insofar as it governs


locally-funded projects.
(e) The following provisions are hereby repealed or amended insofar as they
are inconsistent with the provisions of this Code: Sections 2, 16 and 29 of
Presidential Decree No. 704; Section 12 of Presidential Decree No. 87, as
amended; Sections 52, 53, 66, 67, 68, 69, 70, 71, 72, 73, and 74 of Presidential
Decree No. 463, as amended; and Section 16 of Presidential Decree No. 972, as
amended, and
(f) All general and special laws, acts, city charters, decrees, executive orders,
proclamations and administrative regulations, or part or parts thereof which are
inconsistent with any of the provisions of this Code are hereby repealed or
modified accordingly. (Emphasis supplied.)
This Court could not simply assume that while Presidential Decree No. 87 had
not yet been expressly repealed, it had been impliedly repealed. As we held
in Villarea v. The Commission on Audit,71 "[i]mplied repeals are not lightly
presumed." It is a settled rule that when laws are in conflict with one another,
every effort must be exerted to reconcile them. In Republic of the Philippines v.
Marcopper Mining Corporation,72 we said:chanroblesvirtuallawlibrary
The two laws must be absolutely incompatible, and a clear finding thereof must
surface, before the inference of implied repeal may be drawn. The rule is
expressed in the maxim,interpretare et concordare leqibus est optimus
interpretendi, i.e., every statute must be so interpreted and brought into accord
with other laws as to form a uniform system of jurisprudence. The fundament is
that the legislature should be presumed to have known the existing laws on the
subject and not have enacted conflicting statutes. Hence, all doubts must be
resolved against any implied repeal, and all efforts should be exerted in order
to harmonize and give effect to all laws on the subject. (Citation omitted.)
Moreover, in cases where the statute seems to be in conflict with the
Constitution, but a construction that it is in harmony with the Constitution is
also possible, that construction should be preferred. 73 This Court,
in Pangandaman v. Commission on Elections74 expounding on this point,
pronounced:chanroblesvirtuallawlibrary
It is a basic precept in statutory construction that a statute should be
interpreted in harmony with the Constitution and that the spirit, rather than the
letter of the law determines its construction; for that reason, a statute must be
read according to its spirit and intent, x x x. (Citation omitted.)
Consequently, we find no merit in petitioners' contention that SC-46 is
prohibited on the ground that there is no general law prescribing the standard
or uniform terms, conditions, and requirements for service contracts involving
oil exploration and extraction.
But note must be made at this point that while Presidential Decree No. 87 may
serve as the general law upon which a service contract for petroleum
exploration and extraction may be authorized, as will be discussed below, the
exploitation and utilization of this energy resource in the present case may be
allowed only through a law passed by Congress, since the Taon Strait is a

NIPAS75 area.
2. President was not the signatory to SC-46 and the same was not
submitted to Congress
While the Court finds that Presidential Decree No. 87 is sufficient to satisfy the
requirement of a general law, the absence of the two other conditions, that the
President be a signatory to SC-46, and that Congress be notified of such
contract, renders it null and void.
As SC-46 was executed in 2004, its terms should have conformed not only to
the provisions of Presidential Decree No. 87, but also to those of the 1987
Constitution. The Civil Code provides:chanroblesvirtuallawlibrary
ARTICLE 1306. The contracting parties may establish such stipulations, clauses,
terms and conditions as they may deem convenient, provided they are not
contrary to law, morals, good customs, public order, or public policy. (Italics
ours.)
In Heirs of San Miguel v. Court of Appeals,76 this Court held
that:chanroblesvirtuallawlibrary
It is basic that the law is deemed written into every contract. Although a
contract is the law between the parties, the provisions of positive law which
regulate contracts are deemed written therein and shall limit and govern the
relations between the parties, x x x. (Citations omitted.)
Paragraph 4, Section 2, Article XII of the 1987 Constitution requires that the
President himself enter into any service contract for the exploration of
petroleum. SC-46 appeared to have been entered into and signed only by the
DOE through its then Secretary, Vicente S. Perez, Jr., contrary to the said
constitutional requirement. Moreover, public respondents have neither shown
nor alleged that Congress was subsequently notified of the execution of such
contract.
Public respondents' implied argument that based on the "alter ego principle,"
their acts are also that of then President Macapagal-Arroyo's, cannot apply in
this case. In Joson v. Torres,77 we explained the concept of the alter ego
principle or the doctrine of qualified political agency and its limit in this
wise:chanroblesvirtuallawlibrary
Under this doctrine, which recognizes the establishment of a single executive,
all executive and administrative organizations are adjuncts of the Executive
Department, the heads of the various executive departments are assistants
and agents of the Chief Executive, and, except in cases where the Chief
Executive is required by the Constitution or law to act in person or the
exigencies of the situation demand that he act personally, the
multifarious executive and administrative functions of the Chief Executive are
performed by and through the executive departments, and the acts of the
Secretaries of such departments, performed and promulgated in the regular
course of business, are, unless disapproved or reprobated by the Chief
Executive presumptively the acts of the Chief Executive. (Emphasis ours,
citation omitted.)

While the requirements in executing service contracts in paragraph 4, Section 2


of Article XII of the 1987 Constitution seem like mere formalities, they, in
reality, take on a much bigger role. As we have explained in La Bugal, they are
the safeguards put in place by the framers of the Constitution to "eliminate or
minimize the abuses prevalent during the martial law regime."78 Thus, they are
not just mere formalities, which will only render a contract unenforceable but
not void, if not complied with. They are requirements placed, not just in an
ordinary statute, but in the fundamental law, the non-observance of which will
nullify the contract. Elucidating on the concept of a "constitution," this Court,
inManila Prince Hotel v. Government Service Insurance
System,79 held:chanroblesvirtuallawlibrary
A constitution is a system of fundamental laws for the governance and
administration of a nation. It is supreme, imperious, absolute and unalterable
except by the authority from which it emanates. It has been defined as the
fundamental and paramount law of the nation. It prescribes the permanent
framework of a system of government, assigns to the different departments
their respective powers and duties, and establishes certain fixed principles on
which government is founded. The fundamental conception in other words is
that it is a supreme law to which all other laws must conform and in accordance
with which all private rights must be determined and all public authority
administered. Under the doctrine of constitutional supremacy, if a law
or contract violates any norm of the constitution that law or contract
whether promulgated by the legislative or by the executive branch or
entered into by private persons for private purposes is null and void
and without any force and effect. Thus, since the Constitution is the
fundamental, paramount and supreme law of the nation, it is deemed written
in every statute and contract. (Emphasis ours.)
As this Court has held in La Bugal, our Constitution requires that the President
himself be the signatory of service agreements with foreign-owned
corporations involving the exploration, development, and utilization of our
minerals, petroleum, and other mineral oils. This power cannot be taken lightly.
In this case, the public respondents have failed to show that the President had
any participation in SC-46. Their argument that their acts are actually the acts
of then President Macapagal-Arroyo, absent proof of her disapproval, must fail
as the requirement that the President herself enter into these kinds of contracts
is embodied not just in any ordinary statute, but in the Constitution itself. These
service contracts involving the exploitation, development, and utilization of our
natural resources are of paramount interest to the present and future
generations. Hence, safeguards were put in place to insure that the guidelines
set by law are meticulously observed and likewise to eradicate the corruption
that may easily penetrate departments and agencies by ensuring that the
President has authorized or approved of these service contracts herself.
Even under the provisions of Presidential Decree No. 87, it is required that the
Petroleum Board, now the DOE, obtain the President's approval for the
execution of any contract under said statute, as shown in the following
provision:chanroblesvirtuallawlibrary

SECTION 5. Execution of contract authorized in this Act. - Every contract herein


authorized shall, subject to the approval of the President, be executed by the
Petroleum Board created in this Act, after due public notice pre-qualification
and public bidding or concluded through negotiations. In case bids are
requested or if requested no bid is submitted or the bids submitted are rejected
by the Petroleum Board for being disadvantageous to the Government, the
contract may be concluded through negotiation.
In opening contract areas and in selecting the best offer for petroleum
operations, any of the following alternative procedures may be resorted to by
the Petroleum Board, subject to prior approval of the President [.]
Even if we were inclined to relax the requirement in La Bugal to harmonize the
1987 Constitution with the aforementioned provision of Presidential Decree No.
87, it must be shown that the government agency or subordinate official has
been authorized by the President to enter into such service contract for the
government. Otherwise, it should be at least shown that the President
subsequently approved of such contract explicitly. None of these circumstances
is evident in the case at bar.chanRoblesvirtualLawlibrary
Service Contract No. 46 vis-a-vis Other Laws
Petitioners in G.R. No. 180771 claim that SC-46 violates Section 27 of Republic
Act. No. 9147 or the Wildlife Resources Conservation and Protection Act, which
bans all marine exploration and exploitation of oil and gas deposits. They also
aver that Section 14 of Republic Act No. 7586 or the National Integrated
Protected Areas System Act of 1992 (NIPAS Act), which allows the exploration of
protected areas for the purpose of information-gathering, has been repealed by
Section 27 of Republic Act No. 9147. The said petitioners further claim that SC46 is anathema to Republic Act No. 8550 or the Philippine Fisheries Code of
1998, which protects the rights of the fisherfolk in the preferential use of
municipal waters, with the exception being limited only to research and survey
activities.80
The FIDEC, for its part, argues that to avail of the exceptions under Section 14
of the NIPAS Act, the gathering of information must be in accordance with a
DENR-approved program, and the exploitation and utilization of energy
resources must be pursuant to a general law passed by Congress expressly for
that purpose. Since there is neither a DENR-approved program nor a general
law passed by Congress, the seismic surveys and oil drilling operations were all
done illegally.81 The FIDEC likewise contends that SC-46 infringes on its right to
the preferential use of the communal fishing waters as it is denied free access
within the prohibited zone, in violation not only of the Fisheries Code but also of
the 1987 Constitutional provisions on subsistence fisherfolk and social
justice.82 Furthermore, the FIDEC believes that the provisions in Presidential
Decree No. 87, which allow offshore drilling even in municipal waters, should be
deemed to have been rendered inoperative by the provisions of Republic Act
No. 8550 and Republic Act No. 7160, which reiterate the social justice
provisions of the Constitution.83

The public respondents invoke the rules on statutory construction and argue
that Section 14 of the NIPAS Act is a more particular provision and cannot be
deemed to have been repealed by the more general prohibition in Section 27 of
Republic Act No. 9147. They aver that Section 14, under which SC-46 falls,
should instead be regarded as an exemption to Section 27.84
Addressing the claim of petitioners in G.R. No. 180771 that there was a
violation of Section 27 of Republic Act No. 9147, the public respondents assert
that what the section prohibits is the exploration of minerals, which as defined
in the Philippine Mining Act of 1995, exclude energy materials such as coal,
petroleum, natural gas, radioactive materials and geothermal energy. Thus,
since SC-46 involves oil and gas exploration, Section 27 does not apply. 85
The public respondents defend the validity of SC-46 and insist that it does not
grant exclusive fishing rights to JAPEX; hence, it does not violate the rule on
preferential use of municipal waters. Moreover, they allege that JAPEX has not
banned fishing in the project area, contrary to the FIDEC's claim. The public
respondents also contest the attribution of the declining fish catch to the
seismic surveys and aver that the allegation is unfounded. They claim that
according to the Bureau of Fisheries and Aquatic Resources' fish catch data, the
reduced fish catch started in the 1970s due to destructive fishing practices.86
Ruling of the Court
On the legality of Service Contract No. 46 vis-a-vis Other Laws
Although we have already established above that SC-46 is null and void for
being violative of the 1987 Constitution, it is our duty to still rule on the legality
of SC-46 vis-a-vis other pertinent laws, to serve as a guide for the Government
when executing service contracts involving not only the Taon Strait, but also
other similar areas. While the petitioners allege that SC-46 is in violation of
several laws, including international ones, their arguments focus primarily on
the protected status of the Taon Strait, thus this Court will concentrate on
those laws that pertain particularly to the Taon Strait as a protected seascape.
The Taon Strait is a narrow passage of water bounded by the islands of Cebu
in the East and Negros in the West. It harbors a rich biodiversity of marine life,
including endangered species of dolphins and whales. For this reason, former
President Fidel V. Ramos declared the Taon Strait as a protected seascape in
1998 by virtue of Proclamation No. 1234 - Declaring the Taon Strait situated in
the Provinces of Cebu, Negros Occidental and Negros Oriental as a Protected
Area pursuant to the NIP AS Act and shall be known as Taon Strait Protected
Seascape. During former President Joseph E. Estrada's time, he also constituted
the Taon Strait Commission via Executive Order No. 76 to ensure the optimum
and sustained use of the resources in that area without threatening its marine
life. He followed this with Executive Order No. 177,87 wherein he included the
mayor of Negros Occidental Municipality/City as a member of the Taon Strait
Commission, to represent the LGUs concerned. This Commission, however, was
subsequently abolished in 2002 by then President Gloria Macapagal-Arroyo, via
Executive Order No. 72.88

True to the constitutional policy that the "State shall protect and advance the
right of the people to a balanced and healthful ecology in accord with the
rhythm and harmony of nature,"89 Congress enacted the NIPAS Act to secure
the perpetual existence of all native plants and animals through the
establishment of a comprehensive system of integrated protected areas. These
areas possess common ecological values that were incorporated into a holistic
plan representative of our natural heritage. The system encompasses
outstandingly remarkable areas and biologically important public lands that are
habitats of rare and endangered species of plants and animals, biogeographic
zones and related ecosystems, whether terrestrial, wetland, or marine.90 It
classifies and administers all the designated protected areas to maintain
essential ecological processes and life-support systems, to preserve genetic
diversity, to ensure sustainable use of resources found therein, and to maintain
their natural conditions to the greatest extent possible.91 The following
categories of protected areas were established under the NIPAS
Act:chanroblesvirtuallawlibrary
a. Strict nature reserve;
b. Natural park;
c. Natural monument;
d. Wildlife sanctuary;
e. Protected landscapes and seascapes;
f. Resource reserve;
g. Natural biotic areas; and
h. Other categories established by law, conventions or international

agreements which the Philippine Government is a signatory. 92

Under Section 4 of the NIPAS Act, a protected area refers to portions of land
and water, set aside due to their unique physical and biological significance,
managed to enhance biological diversity and protected against human
exploitation.
The Taon Strait, pursuant to Proclamation No. 1234, was set aside and
declared a protected area under the category of Protected Seascape. The NIPAS
Act defines a Protected Seascape to be an area of national significance
characterized by the harmonious interaction of man and land while providing
opportunities for public enjoyment through recreation and tourism within the
normal lifestyle and economic activity of this areas;93 thus a management plan
for each area must be designed to protect and enhance the permanent
preservation of its natural conditions.94 Consistent with this endeavor is the
requirement that an Environmental Impact Assessment (EIA) be made prior to
undertaking any activity outside the scope of the management plan. Unless an
ECC under the EIA system is obtained, no activity inconsistent with the goals of

the NIPAS Act shall be implemented.95


The Environmental Impact Statement System (EISS) was established in 1978
under Presidential Decree No. 1586. It prohibits any person, partnership or
corporation from undertaking or operating any declared environmentally critical
project or areas without first securing an ECC issued by the President or his
duly authorized representative.96 Pursuant to the EISS, which called for the
proper management of environmentally critical areas,97 Proclamation No.
214698 was enacted, identifying the areas and types of projects to be
considered as environmentally critical and within the scope of the EISS, while
DENR Administrative Order No. 2003-30 provided for its Implementing Rules
and Regulations (IRR).
DENR Administrative Order No. 2003-30 defines an environmentally critical
area as "an area delineated as environmentally sensitive such that significant
environmental impacts are expected if certain types of proposed projects or
programs are located, developed, or implemented in it";99 thus, before
a project, which is "any activity, regardless of scale or magnitude, which may
have significant impact on the environment,"100 is undertaken in it, such project
must undergo an EIA to evaluate and predict the likely impacts of all its stages
on the environment.101 An EIA is described in detail as
follows:chanroblesvirtuallawlibrary
h. Environmental Impact Assessment (EIA) - process that involves evaluating
and predicting the likely impacts of a project (including cumulative
impacts) on the environment during construction, commissioning,
operation and abandonment. It also includes designing appropriate
preventive, mitigating and enhancement measures addressing these
consequences to protect the environment and the community's welfare.
The process is undertaken by, among others, the project proponent and/or
EIA Consultant, EMB, a Review Committee, affected communities and other
stakeholders.102
Under Proclamation No. 2146, the Taon Strait is an environmentally
critical area, having been declared as a protected area in 1998;
therefore, any activity outside the scope of its management plan may
only be implemented pursuant to an ECC secured after undergoing an
EIA to determine the effects of such activity on its ecological system.
The public respondents argue that they had complied with the procedures in
obtaining an ECC103 and that SC-46 falls under the exceptions in Section 14 of
the NIPAS Act, due to the following reasons:
1) The Taon Strait is not a strict nature reserve or natural park;
2) Exploration is only for the purpose of gathering information on possible
energy resources; and
3) Measures are undertaken to ensure that the exploration is being done with
the least damage to surrounding areas.104

We do not agree with the arguments raised by the public respondents.


Sections 12 and 14 of the NIPAS Act read:chanroblesvirtuallawlibrary
SECTION 12. Environmental Impact Assessment. - Proposals for activities
which are outside the scope of the management plan for protected areas shall
be subject to an environmental impact assessment as required by law before
they are adopted, and the results thereof shall be taken into consideration in
the decision-making process.
No actual implementation of such activities shall be allowed without the
required Environmental Compliance Certificate (ECC) under the Philippine
Environmental Impact Assessment (EIA) system. In instances where such
activities are allowed to be undertaken, the proponent shall plan and carry
them out in such manner as will minimize any adverse effects and take
preventive and remedial action when appropriate. The proponent shall be liable
for any damage due to lack of caution or indiscretion.
SECTION 14. Survey for Energy Resources. - Consistent with the policies
declared in Section 2 hereof, protected areas, except strict nature reserves and
natural parks, may be subjected to exploration only for the purpose of
gathering information on energy resources and only if such activity is carried
out with the least damage to surrounding areas. Surveys shall be conducted
only in accordance with a program approved by the DENR, and the result of
such surveys shall be made available to the public and submitted to the
President for recommendation to Congress. Any exploitation and utilization of
energy resources found within NIPAS areas shall be allowed only through a law
passed by Congress.
It is true that the restrictions found under the NIPAS Act are not without
exceptions. However, while an exploration done for the purpose of
surveying for energy resources is allowed under Section 14 of the
NIPAS Act, this does not mean that it is exempt from the requirement
to undergo an EIA under Section 12. In Sotto v. Sotto,105 this Court
explained why a statute should be construed as a
whole:chanroblesvirtuallawlibrary
A statute is passed as a whole and not in parts or sections and is animated by
one general purpose and intent. Consequently each part or section should be
construed in connection with every other part or section and so as to produce a
harmonious whole. It is not proper to confine the attention to the one section to
be construed. It is always an unsafe way of construing a statute or contract to
divide it by a process of etymological dissection, into separate words, and then
apply to each, thus separated from its context, some particular definition given
by lexicographers, and then reconstruct the instrument upon the basis of these
definitions. An instrument must always be construed as a whole, and the
particular meaning to be attached to any word or phrase is usually to be
ascertained from the context, the nature of the subject treated of and the
purpose or intention of the parties who executed the contract, or of the body
which enacted or framed the statute or constitution, x x x.
Surveying for energy resources under Section 14 is not an exemption
from complying with the EIA requirement in Section 12; instead,

Section 14 provides for additional requisites before any exploration


for energy resources may be done in protected areas.
The rationale for such additional requirements are incorporated in Section 2 of
the NIPAS Act, to wit:chanroblesvirtuallawlibrary
SECTION 2. Declaration of Policy - Cognizant of the profound impact of man's
activities on all components of the natural environment particularly the effect
of increasing population, resource exploitation and industrial advancement amd
recognizing the critical importance of protecting and maintaining the natural
biological and physical diversities of the environment notably on areas with
biologically unique features to sustain human life and development, as well as
plant and animal life, it is hereby declared the policy of the State to secure for
the Filipino people of present and future generations the perpetual existence of
all native plants and animals through the establishment of a comprehensive
system of integrated protected areas within the classification of national park
as provided for in the Constitution.
It is hereby recognized that these areas, although distinct in features, possess
common ecological values that may be incorporated into a holistic plan
representative of our natural heritage; that effective administration of this area
is possible only through cooperation among national government, local
government and concerned private organizations; that the use and enjoyment
of these protected areas must be consistent with the principles of biological
diversity and sustainable development.
To this end, there is hereby established a National Integrated Protected Areas
System (NIPAS), which shall encompass outstandingly remarkable areas and
biologically important public lands that are habitats of rare and endangered
species of plants and animals, biogeographic zones and related ecosystems,
whether terrestrial, wetland or marine, all of which shall be designated as
"protected areas."
The public respondents themselves admitted that JAPEX only started to secure
an ECC prior to the second sub-phase of SC-46, which required the drilling of an
oil exploration well. This means that when the seismic surveys were done in the
Taon Strait, no such environmental impact evaluation was done. Unless
seismic surveys are part of the management plan of the Taon Strait, such
surveys were dona in violation of Section 12 of the NIPAS Act and Section 4 of
Presidential Decree No. 1586, which provides:chanroblesvirtuallawlibrary
Section 4. Presidential Proclamation of Environmentally Critical Areas and
Projects. - The President of the Philippines may, on his own initiative or upon
recommendation of the National Environmental Protection Council, by
proclamation declare certain projects, undertakings or areas in the country as
environmentally critical. No person, partnership or corporation shall undertake
or operate any such declared environmentally critical project or area without
first securing an Environmental Compliance Certificate issued by the President
or his duly authorized representative. For the proper management of said
critical project or area, the President may by his proclamation reorganize such
government offices, agencies, institutions, corporations or instrumentalities
including the re-alignment of government personnel, and their specific

functions and responsibilities.


For the same purpose as above, the Ministry of Human Settlements shall: (a)
prepare the proper land or water use pattern for said critical project(s) or
area(s); (b) establish ambient environmental quality standards; (c) develop a
program of environmental enhancement or protective measures against
calamitous factors such as earthquakes, floods, water erosion and others, and
(d) perform such other functions as may be directed by the President from time
to time.
The respondents' subsequent compliance with the EISS for the second subphase of SC-46 cannot and will not cure this violation. The following penalties
are provided for under Presidential Decree No. 1586 and the NIPAS Act.
Section 9 of Presidential Decree No. 1586 provides for the penalty involving
violations of the ECC requirement:chanroblesvirtuallawlibrary
Section 9. Penalty for Violation. - Any person, corporation or partnership found
violating Section 4 of this Decree, or the terms and conditions in the issuance
of the Environmental Compliance Certificate, or of the standards, rules and
regulations issued by the National Environmental Protection Council pursuant to
this Decree shall be punished by thesuspension or cancellation of his/its
certificates and/or a fine in an amount not to exceed Fifty Thousand
Pesos (P50,000.00) for every violation thereof, at the discretion of the
National Environmental Protection Council. (Emphasis supplied.)
Violations of the NIPAS Act entails the following fines and/or imprisonment
under Section 21:chanroblesvirtuallawlibrary
SECTION 21. Penalties. - Whoever violates this Act or any rules and regulations
issued by the Department pursuant to this Act or whoever is found guilty by a
competent court of justice of any of the offenses in the preceding section shall
be fined in the amount of not less than Five thousand pesos (P5,000)
nor more than Five hundred thousand pesos (P500,000), exclusive of
the value of the thing damaged or imprisonment for not less than one
(1) year but not more than six (6) years, or both, as determined by the
court: Provided, that, if the area requires rehabilitation or restoration as
determined by the court, the offender shall be required to restore or
compensate for the restoration to the damages: Provided, further, that
court shall order the eviction of the offender from the land and the
forfeiture in favor of the Government of all minerals, timber or any
species collected or removed including all equipment, devices and
firearms used in connection therewith, and any construction or
improvement made thereon by the offender. If the offender is an
association or corporation, the president or manager shall be directly
responsible for the act of his employees and laborers: Provided, finally, that the
DENR may impose administrative fines and penalties consistent with
this Act. (Emphases supplied.)
Moreover, SC-46 was not executed for the mere purpose of gathering
information on the possible energy resources in the Taon Strait as it also
provides for the parties' rights and obligations relating to extraction and
petroleum production should oil in commercial quantities be found to exist in
the area.While Presidential Decree No. 87 may serve as the general law

upon which a service contract for petroleum exploration and


extraction may be authorized, the exploitation and utilization of this
energy resource in the present case may be allowed only through a
law passed by Congress, since the Taon Strait is a NIPAS area. 106Since
there is no such law specifically allowing oil exploration and/or
extraction in the Taon Strait, no energy resource exploitation and
utilization may be done in said protected seascape.
In view of the foregoing premises and conclusions, it is no longer necessary to
discuss the other issues raised in these consolidated petitions.cralawred
WHEREFORE, the Petitions in G.R. Nos. 180771 and 181527 are GRANTED,
Service Contract No. 46 is hereby declared NULL AND VOID for violating the
1987 Constitution, Republic Act No. 7586, and Presidential Decree No. 1586.
SO ORDERED.chanroblesvirtuallawlibrary
Sereno, C. J., Carpio, Velasco, Jr., Brion, Peralta, Bersamin, Del Castillo,
Villarama, Jr., Perez, Mendoza, Reyes, and Perlas-Bernabe, JJ., concur.
Leonen, J., see concurring opinion.
Jardeleza, J., no part prior OSG action

EN BANC
G.R. No. 207257, February 03, 2015
HON. RAMON JESUS P. PAJE, IN HIS CAPACITY AS SECRETARY OF THE
DEPARTMENT OF ENVIRONMENT AND NATURAL RESOURCES
(DENR), Petitioner, v. HON. TEODORO A. CASIO, HON. RAYMOND V.
PALATINO, HON. RAFAEL V. MARIANO, HON. EMERENCIANA A. DE
JESUS, CLEMENTE G. BAUTISTA, JR., HON. ROLEN C. PAULINO, HON.
EDUARDO PIANO, HON. JAMES DE LOS REYES, HON. AQUILINO Y.
CORTEZ, JR., HON. SARAH LUGERNA LIPUMANO-GARCIA, NORAIDA
VELARMINO, BIANCA CHRISTINE GAMBOA ESPINOS, CHARO SIMONS,
GREGORIO LLORCA MAGDARAOG, RUBELH PERALTA, ALEX CORPUS
HERMOSO, RODOLFO SAMBAJON, REV. FR. GERARDO GREGORIO P.
JORGE, CARLITO A. BALOY, OFELIA D. PABLO, MARIO ESQUILLO, ELLE
LATINAZO, EVANGELINE Q. RODRIGUEZ, JOHN CARLO DELOS
REYES,Respondents.
[G.R. NO. 207257]
REDONDO PENINSULA ENERGY, INC., Petitioner, v. HON. TEODORO A.
CASIO, HON. RAYMOND V. PALATINO, HON. RAFAEL V. MARIANO, HON.

EMERENCIANA A. DE JESUS, CLEMENTE G. BAUTISTA, JR., HON. ROLEN


C. PAULINO, HON. EDUARDO PIANO, HON. JAMES DE LOS REYES, HON.
AQUILINO Y. CORTEZ, JR., HON. SARAH LUGERNA LIPUMANO-GARCIA,
NORAIDA VELARMINO, BIANCA CHRISTINE GAMBOA ESPINOS, CHARO
SIMONS, GREGORIO LLORCA MAGDARAOG, RUBELH PERALTA, ALEX
CORPUS HERMOSO, RODOLFO SAMBAJON, REV. FR. GERARDO
GREGORIO P. JORGE, CARLITO A. BALOY, OFELIA D. PABLO, MARIO
ESQUILLO, ELLE LATINAZO, EVANGELINE Q. RODRIGUEZ, JOHN CARLO
DELOS REYES, RAMON JESUS P. PAJE, IN HIS CAPACITY AS SECRETARY
OF THE DEPARTMENT OF ENVIRONMENT AND NATURAL RESOURCES
AND SUBIC BAY METROPOLITAN AUTHORITY, Respondents.
[G.R. NO. 207276]
HON. TEODORO A. CASIO, HON. RAYMOND V. PALATINO, HON.
EMERENCIANA A. DE JESUS, CLEMENTE G. BAUTISTA, JR., HON. RAFAEL
V. MARIANO, HON. ROLEN C. PAULINO, HON. EDUARDO PIANO, HON.
JAMES DE LOS REYES, HON. AQUILINO Y. CORTEZ, JR., HON. SARAH
LUGERNA LIPUMANO-GARCIA, NORAIDA VELARMINO, BIANCA
CHRISTINE GAMBOA ESPINOS, CHARO SIMONS, GREGORIO LLORCA
MAGDARAOG, RUBELH PERALTA, ALEX CORPUS HERMOSA, RODOLFO
SAMBAJON, ET AL., Petitioners,
[G.R. NO. 207282]
RAMON JESUS P. PAJE IN HIS CAPACITY AS SECRETARY OF THE
DEPARTMENT OF ENVIRONMENT AND NATURAL RESOURCES, SUBIC BAY
METROPOLITAN AUTHORITY, AND REDONDO PENINSULA ENERGY,
INC., Respondents.
[G.R. NO. 207366]
SUBIC BAY METROPOLITAN AUTHORITY, Petitioner, v. HON. TEODORO A.
CASIO, HON. RAYMOND V. PALATINO, HON. RAFAEL V. MARIANO, HON.
EMERENCIANA A. DE JESUS, CLEMENTE G. BAUTISTA, JR., HON. ROLEN
C. PAULINO, HON EDUARDO PIANO, HON. JAMES DE LOS REYES, HON.
AQUILINO Y. CORTEZ, JR., HON. SARAH LUGERNA LIPUMANO-GARCIA,
NORAIDA VELARMINO, BIANCA CHRISTINE GAMBOA, GREGORIO
LLORCA MAGDARAOG, RUBELH PERALTA, ALEX CORPUS HERMOSO,
RODOLFO SAMBAJON, REV. FR. GERARDO GREGORIO P. JORGE, CARLITO
A. BALOY, OFELIA D. PABLO, MARIO ESQUILLO, ELLE LATINAZO,
EVANGELINE Q. RODRIGUEZ, JOHN CARLO DELOS REYES, HON. RAMON
JESUS P. PAJE, IN HIS CAPACITY AS SECRETARY OF THE DEPARTMENT OF
ENVIRONMENT AND NATURAL RESOURCES AND REDONDO PENINSULA
ENERGY, INC., Respondents.
DECISION
DEL CASTILLO, J.:

Before this Court are consolidated Petitions for Review on Certiorari1 assailing
the Decision2 dated January 30, 2013 and the Resolution3 dated May 22, 2013
of the Court of Appeals (CA) in CA-G.R. SP No. 00015, entitled Hon. Teodoro A.
Casio, et al. v. Hon. Ramon Jesus P. Paje, et al.
Factual Antecedents
In February 2006, Subic Bay Metropolitan Authority (SBMA), a government
agency organized and established under Republic Act No. (RA) 7227, 4 and
Taiwan Cogeneration Corporation (TCC) entered into a Memorandum of
Understanding (MOU) expressing their intention to build a power plant in Subic
Bay which would supply reliable and affordable power to Subic Bay Industrial
Park (SBIP).5chanRoblesvirtualLawlibrary
On July 28, 2006, SBMA and TCC entered into another MOU, whereby TCC
undertook to build and operate a coal-fired power plant.6 In the said MOU, TCC
identified 20 hectares of land at Sitio Naglatore, Mt. Redondo, Subic Bay
Freeport Zone (SBFZ) as the suitable area for the project and another site of
approximately 10 hectares to be used as an ash pond.7 TCC intends to lease the
property from SBMA for a term of 50 years with rent fixed at $3.50 per square
meter, payable in 10 equal 5-year installments.8chanRoblesvirtualLawlibrary
On April 4, 2007, the SBMA Ecology Center issued SBFZ Environmental
Compliance Certificate (ECC) No. EC-SBFZ-ECC-69-21-500 in favor of Taiwan
Cogeneration International Corporation (TCIC), a subsidiary of TCC, 9 for the
construction, installation, and operation of 2x150-MW Circulating Fluidized Bed
(CFB) Coal-Fired Thermal Power Plant
at Sitio Naglatore.10chanRoblesvirtualLawlibrary
On June 6, 2008, TCC assigned all its rights and interests under the MOU dated
July 28, 2006 to Redondo Peninsula Energy, Inc. (RP Energy), 11 a corporation
duly organized and existing under the laws of the Philippines with the primary
purpose of building, owning, and operating power plants in the Philippines,
among others.12 Accordingly, an Addendum to the said MOU was executed by
SBMA and RP Energy.13chanRoblesvirtualLawlibrary
RP Energy then contracted GHD Pty, Ltd. (GHD) to prepare an Environmental
Impact Statement (EIS) for the proposed coal-fired power plant and to assist RP
Energy in applying for the issuance of an ECC from the Department of
Environment and Natural Resources (DENR).14chanRoblesvirtualLawlibrary
On August 27, 2008, the Sangguniang Panglungsod of Olongapo City issued
Resolution No. 131, Series of 2008, expressing the city governments objection
to the coal-fired power plant as an energy source and urging the proponent to
consider safer alternative sources of energy for Subic
Bay.15chanRoblesvirtualLawlibrary
On December 22, 2008, the DENR, through former Secretary Jose L. Atienza, Jr.,
issued an ECC for the proposed 2x150-MW coal-fired power

plant.16chanRoblesvirtualLawlibrary
Sometime thereafter, RP Energy decided to include additional components in
its proposed coal-fired power plant. Due to the changes in the project design,
which involved the inclusion of a barge wharf, seawater intake breakwater,
subsea discharge pipeline, raw water collection system, drainage channel
improvement, and a 230kV double-circuit transmission line, 17 RP Energy
requested the DENR Environmental Management Bureau (DENR-EMB) to amend
its ECC.18 In support of its request, RP Energy submitted to the DENR-EMB an
Environmental Performance Report and Management Plan (EPRMP), which was
prepared by GHD.19chanRoblesvirtualLawlibrary
On June 8, 2010, RP Energy and SBMA entered into a Lease and Development
Agreement (LDA) over a 380,004.456-square meter parcel of land to be used
for building and operating the coal-fired power
plant.20chanRoblesvirtualLawlibrary
On July 8, 2010, the DENR-EMB issued an amended ECC (first amendment)
allowing the inclusion of additional components, among
others.21chanRoblesvirtualLawlibrary
Several months later, RP Energy again requested the DENR-EMB to amend the
ECC.22 Instead of constructing a 2x150-MW coal-fired power plant, as originally
planned, it now sought to construct a 1x300-MW coal-fired power plant.23 In
support of its request, RP Energy submitted a Project Description Report (PDR)
to the DENR-EMB.24chanRoblesvirtualLawlibrary
On May 26, 2011, the DENR-EMB granted the request and further amended the
ECC (second amendment).25chanRoblesvirtualLawlibrary
On August 1, 2011, the Sangguniang Panglalawigan of Zambales issued
Resolution No. 2011-149, opposing the establishment of a coal-fired thermal
power plant at Sitio Naglatore, Brgy. Cawag, Subic,
Zambales.26chanRoblesvirtualLawlibrary
On August 11, 2011, the Liga ng mga Barangay of Olongapo City issued
Resolution No. 12, Series of 2011, expressing its strong objection to the coalfired power plant as an energy source.27chanRoblesvirtualLawlibrary
On July 20, 2012, Hon. Teodoro A. Casio, Hon. Raymond V. Palatino, Hon.
Rafael V. Mariano, Hon. Emerenciana A. De Jesus, Clemente G. Bautista, Jr.,
Hon. Rolen C. Paulino, Hon. Eduardo Piano, Hon. James de los Reyes, Hon.
Aquilino Y. Cortez, Jr., Hon. Sarah Lugerna Lipumano-Garcia, Noraida Velarmino,
Bianca Christine Gamboa Espinos, Charo Simons, Gregorio Llorca Magdaraog,
Rubelh Peralta, Alex Corpus Hermoso, Rodolfo Sambajon, Rev. Fr. Gerardo
Gregorio P. Jorge, Carlito A. Baloy, Ofelia D. Pablo, Mario Esquillo, Elle Latinazo,
Evangeline Q. Rodriguez, and John Carlo delos Reyes (Casio Group) filed
before this Court a Petition for Writ of kalikasan against RP Energy, SBMA, and
Hon. Ramon Jesus P. Paje, in his capacity as Secretary of the

DENR.28chanRoblesvirtualLawlibrary
On July 31, 2012, this Court resolved, among others, to: (1) issue a Writ
of kalikasan; and (2) refer the case to the CA for hearing and reception of
evidence and rendition of judgment.29chanRoblesvirtualLawlibrary
While the case was pending, RP Energy applied for another amendment to its
ECC (third amendment) and submitted another EPRMP to the DENR-EMB,
proposing the construction and operation of a 2x300-MW coal-fired power
plant.30chanRoblesvirtualLawlibrary
On September 11, 2012, the Petition for Writ of kalikasan was docketed as CAG.R. SP No. 00015 and raffled to the Fifteenth Division of the CA.31 In the
Petition, the Casio Group alleged, among others, that the power plant project
would cause grave environmental damage;32 that it would adversely affect the
health of the residents of the municipalities of Subic, Zambales, Morong,
Hermosa, and the City of Olongapo;33 that the ECC was issued and the LDA
entered into without the prior approval of the concerned sanggunians as
required under Sections 26 and 27 of the Local Government Code (LGC); 34that
the LDA was entered into without securing a prior certification from the
National Commission on Indigenous Peoples (NCIP) as required under Section
59 of RA 8371 or the Indigenous Peoples Rights Act of 1997 (IPRA Law);35 that
Section 8.3 of DENR Administrative Order No. 2003-30 (DAO 2003-30) which
allows amendments of ECCs is ultra vires because the DENR has no authority to
decide on requests for amendments of previously issued ECCs in the absence
of a new EIS;36 and that due to the nullity of Section 8.3 of DAO 2003-30, all
amendments to RP Energys ECC are null and
void.37chanRoblesvirtualLawlibrary
On October 29, 2012, the CA conducted a preliminary conference wherein the
parties, with their respective counsels, appeared except for Hon. Teodoro A.
Casio, Hon. Rafael V. Mariano, Hon. Emerencia A. De Jesus, Clemente G.
Bautista, Mario Esquillo, Elle Latinazo, Evangeline Q. Rodriguez, and the
SBMA.38 The matters taken up during the preliminary conference were
embodied in the CAs Resolution dated November 5, 2012, to
wit:chanroblesvirtuallawlibrary
I. ISSUES
A. Petitioners (Casio Group)
1. Whether x x x the DENR Environmental Compliance Certificate (ECC x
x x) in favor of RP Energy for a 2x150 MW Coal-Fired Thermal Power Plant
Project (Power Plant, x x x ) and its amendment to 1x300 MW Power
Plant, and the Lease and Development Agreement between SBMA and RP
Energy complied with the Certification Precondition as required under
Section 59 of Republic Act No. 8371 or the Indigenous Peoples Rights Act
of 1997 (IPRA Law, x x x);

2. Whether x x x RP Energy can proceed with the construction and


operation of the 1x300 MW Power Plant without prior consultation with
and approval of the concerned local government units (LGUs, x x x ),
pursuant to Sections 26 and 27 of Republic Act No. 7160 or the Local
Government Code;
3. Whether x x x Section 8.3 of DENR Administrative Order No. 2003-30
(DAO No. 2003-30, x x x ) providing for the amendment of an ECC is null
and void for beingultra vires; and
4. Whether x x x the amendment of RP Energys ECC under Section 8.3 of
DAO No. 2003-30 is null and void.
B. Respondent RP Energy
1. Whether x x x Section 8.3 of DAO No. 2003-30 can be collaterally
attacked;
1.1 Whether x x x the same is valid until annulled;
2. Whether x x x petitioners exhausted their administrative remedies with
respect to the amended ECC for the 1x300 MW Power Plant;
2.1 Whether x x x the instant Petition is proper;
3. Whether x x x RP Energy complied with all the
procedures/requirements for the issuance of the DENR ECC and its
amendment;
3.1 Whether x x x a Certificate of Non-Overlap from the National
Commission on Indigenous Peoples is applicable in the instant case;
4. Whether x x x the LGUs approval under Sections 26 and 27 of the
Local Government Code is necessary for the issuance of the DENR ECC
and its amendments, and what constitutes LGU approval;
5. Whether x x x there is a threatened or actual violation of
environmental laws to justify the Petition;
5.1 Whether x x x the approved 1x300 MW Power Plant complied with the
accepted legal standards on thermal pollution of coastal waters, air
pollution, water pollution, and acid deposits on aquatic and terrestrial
ecosystems; and
6. Whether x x x the instant Petition should be dismissed for failure to
comply with the requirements of proper verification and certification of
non-forum shopping with respect to some petitioners.

C. Respondent DENR Secretary Paje


1. Whether x x x the issuance of the DENR ECC and its amendment in
favor of RP Energy requires compliance with Section 59 of the IPRA Law,
as well as Sections 26 and 27 of the Local Government Code;
2. Whether x x x Section 8.3 of DAO No. 2003-30 can be collaterally
attacked in this proceeding; and
3. Whether x x x Section 8.3 of DAO No. 2003-30 is valid.
II. ADMISSIONS/DENIALS
Petitioners, through Atty. Ridon, admitted all the allegations in RP Energys
Verified Return, except the following:ChanRoblesVirtualawlibrary
1. paragraphs 1.4 to 1.7;
2. paragraphs 1.29 to 1.32; and
3. paragraphs 1.33 to 1.37.
Petitioners made no specific denial with respect to the allegations of DENR
Secretary Pajes Verified Return. x x x
Respondent RP Energy proposed the following stipulations, which were all
admitted by petitioners, through Atty. Ridon, viz:chanroblesvirtuallawlibrary
1. The 1x300 MW Power Plant is not yet operational;
2. At present, there is no environmental damage;
3. The 1x300 MW Power Plant project is situated within the Subic Special
Economic Zone; and
4. Apart from the instant case, petitioners have not challenged the validity of
Section 8.3 of DAO No. 2003-30.
Public respondent DENR Secretary Paje did not propose any matter for
stipulation.39
Thereafter, trial ensued.
The Casio Group presented three witnesses, namely: (1) Raymond V. Palatino,
a two-term representative of the Kabataan Partylist in the House of
Representatives;40 (2) Alex C. Hermoso, the convenor of the ZambalesOlongapo City Civil Society Network, a director of the PREDA41 Foundation, and
a member of the Zambales Chapter of the Kaya Natin Movement and the
Zambales Chapter of the People Power Volunteers for Reform; 42 and (3) Ramon
Lacbain, the Vice-Governor of the Province of
Zambales.43chanRoblesvirtualLawlibrary
RP Energy presented five witnesses, namely: (1) Junisse P. Mercado (Ms.
Mercado), an employee of GHD and the Project Director of ongoing projects for
RP Energy regarding the proposed power plant project; 44 (2) Juha Sarkki (Engr.
Sarkki), a Master of Science degree holder in Chemical Engineering; 45(3) Henry

K. Wong, a degree holder of Bachelor of Science Major in Mechanical


Engineering from Worcester Polytechnic Institute;46 (4) Dr. Ely Anthony R.
Ouano (Dr. Ouano), a licensed Chemical Engineer, Sanitary Engineer, and
Environmental Planner in the Philippines;47 and (5) David C. Evangelista (Mr.
Evangelista), a Business Development Analyst working for RP
Energy.48chanRoblesvirtualLawlibrary
SBMA, for its part, presented its Legal Department Manager, Atty. Von F.
Rodriguez (Atty. Rodriguez).49chanRoblesvirtualLawlibrary
The DENR, however, presented no evidence.50chanRoblesvirtualLawlibrary
Meanwhile, on October 31, 2012, a Certificate of Non-Overlap (CNO) was issued
in connection with RP Energys application for the 2x300-MW coal-fired power
plant.51chanRoblesvirtualLawlibrary
On November 15, 2012, the DENR-EMB granted RP Energys application for the
third amendment to its ECC, approving the construction and operation of a
2x300-MW coal-fired power plant, among others.52chanRoblesvirtualLawlibrary
Ruling of the Court of Appeals
On January 30, 2013, the CA rendered a Decision denying the privilege of the
writ of kalikasan and the application for an environment protection order due to
the failure of the Casio Group to prove that its constitutional right to a
balanced and healthful ecology was violated or threatened.53 The CA likewise
found no reason to nullify Section 8.3 of DAO No. 2003-30. It said that the
provision was not ultra vires, as the express power of the Secretary of the
DENR, the Director and Regional Directors of the EMB to issue an ECC impliedly
includes the incidental power to amend the same.54 In any case, the CA ruled
that the validity of the said section could not be collaterally attacked in a
petition for a writ ofkalikasan.55chanRoblesvirtualLawlibrary
Nonetheless, the CA resolved to invalidate the ECC dated December 22, 2008
for non-compliance with Section 59 of the IPRA Law56 and Sections 26 and 27 of
the LGC57 and for failure of Luis Miguel Aboitiz (Mr. Aboitiz), Director of RP
Energy, to affix his signature in the Sworn Statement of Full Responsibility,
which is an integral part of the ECC.58 Also declared invalid were the ECC first
amendment dated July 8, 2010 and the ECC second amendment dated May 26,
2011 in view of the failure of RP Energy to comply with the restrictions set forth
in the ECC, which specifically require that any expansion of the project beyond
the project description or any change in the activity x x x shall be subject to a
new Environmental Impact Assessment.59 However, as to the ECC third
amendment dated November 15, 2012, the CA decided not to rule on its
validity since it was not raised as an issue during the preliminary
conference.60chanRoblesvirtualLawlibrary
The CA also invalidated the LDA entered into by SBMA and RP Energy as it was
issued without the prior consultation and approval of all the sanggunians

concerned as required under Sections 26 and 27 of the LGC,61 and in violation


of Section 59, Chapter VIII of the IPRA Law, which enjoins all departments and
other governmental agencies from granting any lease without a prior
certification that the area affected does not overlap with any ancestral
domain.62 The CA noted that no CNO was secured from the NCIP prior to the
execution of the LDA,63 and that the CNO dated October 31, 2012 was secured
during the pendency of the case and was issued in connection with RP Energys
application for a 2x300-MW coal-fired power
plant.64chanRoblesvirtualLawlibrary
Thus, the CA disposed of the case in this wise:chanroblesvirtuallawlibrary
WHEREFORE, premises considered, judgment is hereby rendered DENYING the
privilege of the writ of kalikasan and the application for an environmental
protection order. The prayer to declare the nullity of Section 8.3 of the DENR
Administrative Order No. 2003-30 for being ultra vires is DENIED; and the
following are all declared INVALID:
1. The Environmental Compliance Certificate (ECC Ref. Code: 0804-011-4021)
dated 22 December 2008 issued in favor of respondent Redondo Peninsula
Energy, Inc. by former Secretary Jose L. Atienza, Jr. of the Department of
Environment and Natural Resources;
2. The ECC first amendment dated 08 July 2010 and ECC second amendment
dated 26 May 2011, both issued in favor of respondent Redondo Peninsula
Energy, Inc. by OIC Director Atty. Juan Miguel T. Cuna of the Department of
Environment and Natural Resources, Environmental Management Bureau; and
3. The Lease and Development Agreement dated 08 June 2010 entered into by
respondents Subic Bay Metropolitan Authority and Redondo Peninsula Energy,
Inc. involving a parcel of land consisting of 380,004.456 square meters.
SO ORDERED.65
The DENR and SBMA separately moved for reconsideration.66 RP Energy filed a
Motion for Partial Reconsideration,67 attaching thereto a signed Statement of
Accountability.68 The Casio Group, on the other hand, filed Omnibus Motions
for Clarification and Reconsideration.69chanRoblesvirtualLawlibrary
On May 22, 2013, the CA issued a Resolution70 denying the aforesaid motions
for lack of merit. The CA opined that the reliefs it granted in its Decision are
allowed under Section 15, Rule 7 of the Rules of Procedure for Environmental
Cases as the reliefs enumerated therein are broad, comprehensive, and nonexclusive.71 In fact, paragraph (e) of the said provision allows the granting of
such other reliefs in consonance with the objective, purpose, and intent of
the Rules.72 SBMAs contention that the stoppage of a project for noncompliance with Section 59 of the IPRA Law may only be done by the
indigenous cultural communities or indigenous peoples was also brushed aside
by the CA as the Casio Group did not file a case under the IPRA Law but a

Petition for a Writ of kalikasan, which is available to all natural or juridical


persons whose constitutional right to a balanced and healthful ecology is
violated, or threatened to be violated.73 As to RP Energys belated submission
of a signed Statement of Accountability, the CA gave no weight and credence
to it as the belated submission of such document, long after the presentation of
evidence of the parties had been terminated, is not in accord with the rules of
fair play.74 Neither was the CA swayed by the argument that the omitted
signature of Luis Miguel Aboitiz is a mere formal defect, which does not affect
the validity of the entire document.75 The dispositive portion of the +
+Resolution reads:chanroblesvirtuallawlibrary
WHEREFORE, premises considered, respondents Subic Bay Metropolitan
Authoritys Motion for Reconsideration dated 18 February 2013, Department of
Environment and Natural Resources Secretary Ramon Jesus P. Pajes Motion for
Reconsideration dated 19 February 2013, and Redondo Peninsula Energy, Inc.s
Motion for Partial Reconsideration dated 22 February 2013, as well as
petitioners Omnibus Motions for Clarification and Reconsideration dated 25
February 2013, are all DENIED for lack of merit.
SO ORDERED.76
Unsatisfied, the parties appealed to this Court.
The Casio Groups arguments
The Casio Group, in essence, argues that it is entitled to a Writ of kalikasan as
it was able to prove that the operation of the power plant would cause
environmental damage and pollution, and that this would adversely affect the
residents of the provinces of Bataan and Zambales, particularly the
municipalities of Subic, Morong, Hermosa, and the City of Olongapo. It cites as
basis RP Energys EIS, which allegedly admits that acid rain may occur in the
combustion of coal;77 that the incidence of asthma attacks among residents in
the vicinity of the project site may increase due to exposure to suspended
particles from plant operations;78 and that increased sulfur oxides (SOx) and
nitrogen oxides (NOx) emissions may occur during plant operations.79 It also
claims that when the SBMA conducted Social Acceptability Policy Consultations
with different stakeholders on the proposed power plant, the results indicated
that the overall persuasion of the participants was a clear aversion to the
project due to environmental, health, economic and socio-cultural
concerns.80 Finally, it contends that the ECC third amendment should also be
nullified for failure to comply with the procedures and requirements for the
issuance of the ECC.81chanRoblesvirtualLawlibrary
The DENRs arguments
The DENR imputes error on the CA in invalidating the ECC and its amendments,
arguing that the determination of the validity of the ECC as well as its
amendments is beyond the scope of a Petition for a Writ of kalikasan.82 And
even if it is within the scope, there is no reason to invalidate the ECC and its

amendments as these were issued in accordance with DAO No. 2003-30. 83 The
DENR also insists that contrary to the view of the CA, a new EIS was no longer
necessary since the first EIS was still within the validity period when the first
amendment was requested, and that this is precisely the reason RP Energy was
only required to submit an EPRMP in support of its application for the first
amendment.84 As to the second amendment, the DENR-EMB only required RP
Energy to submit documents to support the proposed revision considering that
the change in configuration of the power plant project, from 2x150MW to
1x300MW, was not substantial.85 Furthermore, the DENR argues that no
permits, licenses, and/or clearances from other government agencies are
required in the processing and approval of the ECC.86 Thus, non-compliance
with Sections 26 and 27 of the LGC as well as Section 59 of the IPRA Law is not
a ground to invalidate the ECC and its amendments.87 The DENR further posits
that the ECC is not a concession, permit, or license but is a document certifying
that the proponent has complied with all the requirements of the EIS System
and has committed to implement the approved Environmental Management
Plan.88 The DENR invokes substantial justice so that the belatedly submitted
certified true copy of the ECC containing the signature of Mr. Aboitiz on the
Statement of Accountability may be accepted and accorded weight and
credence.89chanRoblesvirtualLawlibrary
SBMAs arguments
For its part, SBMA asserts that since the CA did not issue a Writ of kalikasan, it
should not have invalidated the LDA and that in doing so, the CA acted beyond
its powers.90 SBMA likewise puts in issue the legal capacity of the Casio Group
to impugn the validity of the LDA91 and its failure to exhaust administrative
remedies.92 In any case, SBMA contends that there is no legal basis to
invalidate the LDA as prior consultation under Sections 26 and 27 of the LGC is
not required in this case considering that the area is within the SBFZ.93 Under
RA 7227, it is the SBMA which has exclusive jurisdiction over projects and
leases within the SBFZ and that in case of conflict between the LGC and RA
7227, it is the latter, a special law, which must prevail.94 Moreover, the lack of
prior certification from the NCIP is also not a ground to invalidate a contract.95 If
at all, the only effect of non-compliance with the said requirement under
Section 59 of the IPRA Law is the stoppage or suspension of the
project.96 Besides, the subsequent issuance of a CNO has cured any legal defect
found in the LDA.97chanRoblesvirtualLawlibrary
RP Energys arguments
RP Energy questions the propriety of the reliefs granted by the CA considering
that it did not issue a writ of kalikasan in favor of the Casio Group.98 RP Energy
is of the view that unless a writ of kalikasan is issued, the CA has no power to
grant the reliefs prayed for in the Petition.99 And even if it does, the reliefs are
limited to those enumerated in Section 15, Rule 7 of the Rules of Procedure for
Environmental Cases and that the phrase such other reliefs in paragraph (e)
should be limited only to those of the same class or general nature as the four
other reliefs enumerated.100 As to the validity of the LDA, the ECC and its

amendments, the arguments of RP Energy are basically the same arguments


interposed by SBMA and the DENR. RP Energy maintains that the ECC and its
amendments were obtained in compliance with the DENR rules and
regulations;101 that a CNO is not necessary in the execution of an LDA and in
the issuance of the ECC and its amendments;102 and that prior approval of the
local governments, which may be affected by the project, are not required
because under RA 7227, the decision of the SBMA shall prevail in matters
affecting the Subic Special Economic Zone (SSEZ), except in matters involving
defense and security.103 RP Energy also raises the issue of non-exhaustion of
administrative remedies on the part of the Casio
Group.104chanRoblesvirtualLawlibrary
Preliminaries
This case affords us an opportunity to expound on the nature and scope of the
writ of kalikasan. It presents some interesting questions about law and justice
in the context of environmental cases, which we will tackle in the main body of
this Decision.
But we shall first address some preliminary matters, in view of the manner by
which the appellate court disposed of this case.
The Rules on the Writ of kalikasan,105 which is Part III of the Rules of Procedure
for Environmental Cases,106 was issued by the Court pursuant to its power to
promulgate rules for the protection and enforcement of constitutional
rights,107 in particular, the individuals right to a balanced and healthful
ecology.108 Section 1 of Rule 7 provides:chanroblesvirtuallawlibrary
Section 1. Nature of the writ. - The writ is a remedy available to a natural or
juridical person, entity authorized by law, peoples organization, nongovernmental organization, or any public interest group accredited by or
registered with any government agency, on behalf of persons whose
constitutional right to a balanced and healthful ecology is violated, or
threatened with violation by an unlawful act or omission of a public official or
employee, or private individual or entity, involving environmental damage of
such magnitude as to prejudice the life, health or property of inhabitants in two
or more cities or provinces.
The writ is categorized as a special civil action and was, thus, conceptualized
as an extraordinary remedy, which aims to provide judicial relief from
threatened or actual violation/s of the constitutional right to a balanced and
healthful ecology of a magnitude or degree of damage that transcends political
and territorial boundaries.109 It is intended to provide a stronger defense for
environmental rights through judicial efforts where institutional arrangements
of enforcement, implementation and legislation have fallen short110 and seeks
to address the potentially exponential nature of large-scale ecological
threats.111chanRoblesvirtualLawlibrary
Under Section 1 of Rule 7, the following requisites must be present to avail of

this extraordinary remedy: (1) there is an actual or threatened violation of the


constitutional right to a balanced and healthful ecology; (2) the actual or
threatened violation arises from an unlawful act or omission of a public official
or employee, or private individual or entity; and (3) the actual or threatened
violation involves or will lead to an environmental damage of such magnitude
as to prejudice the life, health or property of inhabitants in two or more cities or
provinces.
Expectedly, the Rules do not define the exact nature or degree of
environmental damage but only that it must be sufficiently grave, in terms of
the territorial scope of such damage, so as to call for the grant of this
extraordinary remedy. The gravity of environmental damage sufficient to grant
the writ is, thus, to be decided on a case-to-case basis.
If the petitioner successfully proves the foregoing requisites, the court shall
render judgment granting the privilege of the writ of kalikasan. Otherwise, the
petition shall be denied. If the petition is granted, the court may grant the
reliefs provided for under Section 15 of Rule 7, to
wit:chanroblesvirtuallawlibrary
Section 15. Judgment. - Within sixty (60) days from the time the petition is
submitted for decision, the court shall render judgment granting or denying the
privilege of the writ ofkalikasan.
The reliefs that may be granted under the writ are the following:
(a) Directing respondent to permanently cease and desist from committing acts
or neglecting the performance of a duty in violation of environmental laws
resulting in environmental destruction or damage;
(b) Directing the respondent public official, government agency, private person
or entity to protect, preserve, rehabilitate or restore the environment;
(c) Directing the respondent public official, government agency, private person
or entity to monitor strict compliance with the decision and orders of the court;
(d) Directing the respondent public official, government agency, or private
person or entity to make periodic reports on the execution of the final
judgment; and
(e) Such other reliefs which relate to the right of the people to a balanced and
healthful ecology or to the protection, preservation, rehabilitation or restoration
of the environment, except the award of damages to individual petitioners.
It must be noted, however, that the above enumerated reliefs are nonexhaustive. The reliefs that may be granted under the writ are broad,
comprehensive and non-exclusive.112chanRoblesvirtualLawlibrary
Prescinding from the above, the DENR, SBMA and RP Energy are one in arguing

that the reliefs granted by the appellate court, i.e. invalidating the ECC and its
amendments, are improper because it had denied the Petition for Writ
of kalikasan upon a finding that the Casio Group failed to prove the alleged
environmental damage, actual or threatened, contemplated under the Rules.
Ordinarily, no reliefs could and should be granted. But the question may be
asked, could not the appellate court have granted the Petition for Writ
of kalikasan on the ground of the invalidity of the ECC for failure to comply with
certain laws and rules?
This question is the starting point for setting up the framework of analysis
which should govern writ ofkalikasan cases.
In their Petition for Writ of kalikasan,113 the Casio Groups allegations, relative
to the actual or threatened violation of the constitutional right to a balanced
and healthful ecology, may be grouped into two.
The first set of allegations deals with the actual environmental damage that will
occur if the power plant project is implemented. The Casio Group claims that
the construction and operation of the power plant will result in (1) thermal
pollution of coastal waters, (2) air pollution due to dust and combustion gases,
(3) water pollution from toxic coal combustion waste, and (4) acid deposition in
aquatic and terrestrial ecosystems, which will adversely affect the residents of
the Provinces of Bataan and Zambales, particularly the Municipalities of Subic,
Morong and Hermosa, and the City of Olongapo.
The second set of allegations deals with the failure to comply with certain laws
and rules governing or relating to the issuance of an ECC and amendments
thereto. The Casio Group claims that the ECC was issued in violation of (1) the
DENR rules on the issuance and amendment of an ECC, particularly, DAO 200330 and the Revised Procedural Manual for DAO 2003-30 (Revised Manual), (2)
Section 59 of the IPRA Law, and (3) Sections 26 and 27 of the LGC. In addition,
it claims that the LDA entered into between SBMA and RP Energy violated
Section 59 of the IPRA Law.
As to the first set of allegations, involving actual damage to the environment, it
is not difficult to discern that, if they are proven, then the Petition for Writ
of kalikasan could conceivably be granted.
However, as to the second set of allegations, a nuanced approach is warranted.
The power of the courts to nullify an ECC existed even prior to the promulgation
of the Rules on the Writ of kalikasan for judicial review of the acts of
administrative agencies or bodies has long been recognized114 subject, of
course, to the doctrine of exhaustion of administrative
remedies.115chanRoblesvirtualLawlibrary
But the issue presented before us is not a simple case of reviewing the acts of
an administrative agency, the DENR, which issued the ECC and its
amendments. The challenge to the validity of the ECC was raised in the context

of a writ of kalikasan case. The question then is, can the validity of an ECC be
challenged via a writ of kalikasan?
We answer in the affirmative subject to certain qualifications.
As earlier noted, the writ of kalikasan is principally predicated on an actual or
threatened violation of the constitutional right to a balanced and healthful
ecology, which involves environmental damage of a magnitude that transcends
political and territorial boundaries. A party, therefore, who invokes the writ
based on alleged defects or irregularities in the issuance of an ECC must not
only allege and prove such defects or irregularities, but must also provide a
causal link or, at least, a reasonable connection between the defects or
irregularities in the issuance of an ECC and the actual or threatened violation of
the constitutional right to a balanced and healthful ecology of the magnitude
contemplated under the Rules. Otherwise, the petition should be dismissed
outright and the action re-filed before the proper forum with due regard to the
doctrine of exhaustion of administrative remedies. This must be so if we are to
preserve the noble and laudable purposes of the writ against those who seek to
abuse it.
An example of a defect or an irregularity in the issuance of an ECC, which could
conceivably warrant the granting of the extraordinary remedy of the writ
of kalikasan, is a case where there are serious and substantial
misrepresentations or fraud in the application for the ECC, which, if not
immediately nullified, would cause actual negative environmental impacts of
the magnitude contemplated under the Rules, because the government
agencies and LGUs, with the final authority to implement the project, may
subsequently rely on such substantially defective or fraudulent ECC in
approving the implementation of the project.
To repeat, in cases of defects or irregularities in the issuance of an ECC, it is not
sufficient to merely allege such defects or irregularities, but to show a causal
link or reasonable connection with the environmental damage of the magnitude
contemplated under the Rules. In the case at bar, no such causal link or
reasonable connection was shown or even attempted relative to the aforesaid
second set of allegations. It is a mere listing of the perceived defects or
irregularities in the issuance of the ECC. This would have been sufficient reason
to disallow the resolution of such issues in a writ of kalikasancase.
However, inasmuch as this is the first time that we lay down this principle, we
have liberally examined the alleged defects or irregularities in the issuance of
the ECC and find that there is only one group of allegations, relative to the ECC,
that can be reasonably connected to an environmental damage of the
magnitude contemplated under the Rules. This is with respect to the allegation
that there was no environmental impact assessment relative to the first and
second amendments to the subject ECC. If this were true, then the
implementation of the project can conceivably actually violate or threaten to
violate the right to a healthful and balanced ecology of the inhabitants near the
vicinity of the power plant. Thus, the resolution of such an issue could

conceivably be resolved in a writ of kalikasan case provided that the case does
not violate, or is an exception to the doctrine of exhaustion of administrative
remedies and primary jurisdiction.116chanRoblesvirtualLawlibrary
As to the claims that the issuance of the ECC violated the IPRA Law and LGC
and that the LDA, likewise, violated the IPRA Law, we find the same not to be
within the coverage of the writ of kalikasan because, assuming there was noncompliance therewith, no reasonable connection can be made to an actual or
threatened violation of the right to a balanced and healthful ecology of the
magnitude contemplated under the Rules.
To elaborate, the alleged lack of approval of the concerned sanggunians over
the subject project would not lead to or is not reasonably connected with
environmental damage but, rather, it is an affront to the local autonomy of
LGUs. Similarly, the alleged lack of a certificate precondition that the project
site does not overlap with an ancestral domain would not result in or is not
reasonably connected with environmental damage but, rather, it is an
impairment of the right of Indigenous Cultural Communities/Indigenous Peoples
(ICCs/IPs) to their ancestral domains. These alleged violations could be the
subject of appropriate remedies before the proper administrative bodies (like
the NCIP) or a separate action to compel compliance before the courts, as the
case may be. However, the writ ofkalikasan would not be the appropriate
remedy to address and resolve such issues.
Be that as it may, we shall resolve both the issues proper in a writ
of kalikasan case and those which are not, commingled as it were here,
because of the exceptional character of this case. We take judicial notice of the
looming power crisis that our nation faces. Thus, the resolution of all the issues
in this case is of utmost urgency and necessity in order to finally determine the
fate of the project center of this controversy. If we were to resolve only the
issues proper in a writ of kalikasan case and dismiss those not proper therefor,
that will leave such unresolved issues open to another round of protracted
litigation. In any case, we find the records sufficient to resolve all the issues
presented herein. We also rule that, due to the extreme urgency of the matter
at hand, the present case is an exception to the doctrine of exhaustion of
administrative remedies.117 As we have often ruled, in exceptional cases, we
can suspend the rules of procedure in order to achieve substantial justice, and
to address urgent and paramount State interests vital to the life of our
nation.cralawred
Issues
In view of the foregoing, we shall resolve the following issues:
1. Whether the Casio Group was able to prove that the construction and
operation of the power plant will cause grave environmental damage.
1.1 The alleged thermal pollution of coastal waters, air pollution due
.
to dust and combustion gases, water pollution from toxic coal

combustion waste, and acid deposition to aquatic and terrestrial


ecosystems that will be caused by the project.
1.2 The alleged negative environmental assessment of the project by
.
experts in a report generated during the social acceptability
consultations.
1.3 The alleged admissions of grave environmental damage in the EIS
.
itself of the project.
2.
3. Whether the ECC is invalid for lack of signature of Mr. Luis Miguel Aboitiz,
as representative of RP Energy, in the Statement of Accountability of the
ECC.
4. Whether the first and second amendments to the ECC are invalid for
failure to undergo a new environmental impact assessment (EIA) because
of the utilization of inappropriate EIA documents.
5. Whether the Certificate of Non-Overlap, under Section 59 of the IPRA
Law, is a precondition to the issuance of an ECC and the lack of its prior
issuance rendered the ECC invalid.
6. Whether the Certificate of Non-Overlap, under Section 59 of the IPRA
Law, is a precondition to the consummation of the Lease and
Development Agreement (LDA) between SBMA and RP Energy and the
lack of its prior issuance rendered the LDA invalid.
7. Whether compliance with Section 27, in relation to Section 26, of the LGC
(i.e., approval of the concerned sanggunian requirement) is necessary
prior to the implementation of the power plant project.
8. Whether the validity of the third amendment to the ECC can be resolved
in this case.
Ruling
The parties to this case appealed from the decision of the appellate court
pursuant to Section 16, Rule 7 of the Rules of Procedure for Environmental
Cases, viz:chanroblesvirtuallawlibrary
Section 16. Appeal. - Within fifteen (15) days from the date of notice of the
adverse judgment or denial of motion for reconsideration, any party may
appeal to the Supreme Court under Rule 45 of the Rules of Court. The appeal
may raise questions of fact.(Emphasis supplied)
It is worth noting that the Rules on the Writ of kalikasan allow the parties to
raise, on appeal, questions of fact and, thus, constitutes an exception to Rule
45 of the Rules of Court because of the extraordinary nature of the
circumstances surrounding the issuance of a writ of kalikasan. 118 Thus, we shall
review both questions of law and fact in resolving the issues presented in this

case.
We now rule on the above-mentioned issues in detail.cralawred
I.
Whether the Casio Group was able to prove that the construction and
operation of the power plant will cause grave environmental damage.
The alleged thermal pollution of
coastal waters, air pollution
due to dust and combustion
gases, water pollution from
toxic coal combustion waste,
and acid deposition in aquatic
and terrestrial ecosystems that
will be caused by the project.
As previously noted, the Casio Group alleged that the construction and
operation of the power plant shall adversely affect the residents of the
Provinces of Bataan and Zambales, particularly, the Municipalities of Subic,
Morong and Hermosa, and the City of Olongapo, as well as the sensitive
ecological balance of the area. Their claims of ecological damage may be
summarized as follows:
1. Thermal pollution of coastal waters. Due to the discharge of heated water
from the operation of the plant, they claim that the temperature of the
affected bodies of water will rise significantly. This will have adverse
effects on aquatic organisms. It will also cause the depletion of oxygen in
the water. RP Energy claims that there will be no more than a 3C
increase in water temperature but the Casio Group claims that a 1C to
2C rise can already affect the metabolism and other biological functions
of aquatic organisms such as mortality rate and reproduction.
2. Air pollution due to dust and combustion gases. While the Casio Group
admits that Circulating Fluidized Bed (CFB) Coal technology, which will be
used in the power plant, is a clean technology because it reduces the
emission of toxic gases, it claims that volatile organic compounds,
specifically, polycyclic aromatic hydrocarbons (PAHs) will also be emitted
under the CFB. PAHs are categorized as pollutants with carcinogenic and
mutagenic characteristics. Carbon monoxide, a poisonous gas, and
nitrous oxide, a lethal global warming gas, will also be produced.
3. Water pollution from toxic coal combustion waste. The waste from coal
combustion or the residues from burning pose serious environmental risk
because they are toxic and may cause cancer and birth defects. Their
release to nearby bodies of water will be a threat to the marine
ecosystem of Subic Bay. The project is located in a flood-prone area and
is near three prominent seismic faults as identified by Philippine Institute

of Volcanology and Seismology. The construction of an ash pond in an


area susceptible to flooding and earthquake also undermines SBMAs
duty to prioritize the preservation of the water quality in Subic Bay.
4. Acid deposition in aquatic and terrestrial ecosystems. The power plant
will release 1,888 tons of nitrous oxides and 886 tons of sulfur dioxide per
year. These oxides are responsible for acid deposition. Acid deposition
directly impacts aquatic ecosystems. It is toxic to fish and other aquatic
animals. It will also damage the forests near Subic Bay as well as the
wildlife therein. This will threaten the stability of the biological diversity of
the Subic Bay Freeport which was declared as one of the ten priority sites
among the protected areas in the Philippines and the Subic Watershed
and Forest Reserve. This will also have an adverse effect on tourism. 119
In its January 30, 2013 Decision, the appellate court ruled that the Casio
Group failed to prove the above allegations.
We agree with the appellate court.
Indeed, the three witnesses presented by the Casio Group are not experts on
the CFB technology or on environmental matters. These witnesses even
admitted on cross-examination that they are not competent to testify on the
environmental impact of the subject project. What is wanting in their
testimonies is their technical knowledge of the project design/implementation
or some other aspects of the project, even those not requiring expert
knowledge, vis--vis the significant negative environmental impacts which the
Casio Group alleged will occur. Clearly, the Casio Group failed to carry the
onus of proving the alleged significant negative environmental impacts of the
project. In comparison, RP Energy presented several experts to refute the
allegations of the Casio Group.
As aptly and extensively discussed by the appellate
court:chanroblesvirtuallawlibrary
Petitioners120 presented three (3) witnesses, namely, Palatino, Hermoso, and
Lacbain, all of whom are not experts on the CFB technology or even on
environmental matters. Petitioners did not present any witness from Morong or
Hermosa. Palatino, a former freelance writer and now a Congressman
representing the Kabataan Partylist, with a degree of BS Education major in
Social Studies, admitted that he is not a technical expert. Hermoso, a Director
of the PREDA foundation which is allegedly involved on environmental
concerns, and a member of Greenpeace, is not an expert on the matter subject
of this case. He is a graduate of BS Sociology and a practicing business director
involved in social development and social welfare services. Lacbain, incumbent
Vice-Governor of the Province of Zambales, an accounting graduate with a
Master in Public Administration, was a former Banco Filipino teller,
entertainment manager, disco manager, marketing manager and college
instructor, and is also not an expert on the CFB technology. Lacbain also

admitted that he is neither a scientist nor an expert on matters of the


environment.
Petitioners cited various scientific studies or articles and websites culled from
the internet. However, the said scientific studies and articles including the
alleged Key Observations and Recommendations on the EIS of the Proposed
RPE Project by Rex Victor O. Cruz (Exhibit DDDDD) attached to the Petition,
were not testified to by an expert witness, and are basically hearsay in nature
and cannot be given probative weight. The article purportedly written by Rex
Victor O. Cruz was not even signed by the said author, which fact was
confirmed by Palatino.
Petitioners witness, Lacbain, admitted that he did not personally conduct any
study on the environmental or health effects of a coal-fired power plant, but
only attended seminars and conferences pertaining to climate change; and that
the scientific studies mentioned in the penultimate whereas clause of
Resolution No. 2011-149 (Exhibit AAAAA) of the Sangguniang Panlalawigan of
Zambales is based on what he read on the internet, seminars he attended and
what he heard from unnamed experts in the field of environmental protection.
In his Judicial Affidavit (Exhibit HHHHH), Palatino stated that he was furnished
by the concerned residents the Key Observations and Recommendations on the
EIS of Proposed RPE Project by Rex Victor O. Cruz, and that he merely received
and read the five (5) scientific studies and articles which challenge the CFB
technology. Palatino also testified that: he was only furnished by the petitioners
copies of the studies mentioned in his Judicial Affidavit and he did not
participate in the execution, formulation or preparation of any of the said
documents; he does not personally know Rex Cruz or any of the authors of the
studies included in his Judicial Affidavit; he did not read other materials about
coal-fired power plants; he is not aware of the acceptable standards as far as
the operation of a coal-fired power plant is concerned; petitioner Velarmino was
the one who furnished him copies of the documents in reference to the MOU
and some papers related to the case; petitioner Peralta was the one who emailed to him the soft copy of all the documents [letters (a) to (o) of his Judicial
Affidavit], except the LGU Resolutions; and he has never been at the actual
Power Plant project site. It must be noted that petitioners Velarmino and Peralta
were never presented as witnesses in this case. In addition, Palatino did not
identify the said studies but simply confirmed that the said studies were
attached to the Petition.
Indeed, under the rules of evidence, a witness can testify only to those facts
which the witness knows of his or her personal knowledge, that is, which are
derived from the witness own perception. Concomitantly, a witness may not
testify on matters which he or she merely learned from others either because
said witness was told or read or heard those matters. Such testimony is
considered hearsay and may not be received as proof of the truth of what the
witness has learned. This is known as the hearsay rule. Hearsay is not limited
to oral testimony or statements; the general rule that excludes hearsay as
evidence applies to written, as well as oral statements. There are several

exceptions to the hearsay rule under the Rules of Court, among which are
learned treatises under Section 46 of Rule 130, viz:ChanRoblesVirtualawlibrary
SEC. 46. Learned treatises. -A published treatise, periodical or pamphlet on a
subject of history, law, science, or art is admissible as tending to prove the
truth of a matter stated therein if the court takes judicial notice, or a witness
expert in the subject testifies, that the writer of the statement in the treatise,
periodical or pamphlet is recognized in his profession or calling as expert in the
subject.
The alleged scientific studies mentioned in the Petition cannot be classified as
learned treatises. We cannot take judicial notice of the same, and no witness
expert in the subject matter of this case testified, that the writers of the said
scientific studies are recognized in their profession or calling as experts in the
subject.
In stark contrast, respondent RP Energy presented several witnesses on the
CFB technology.
In his Judicial Affidavit, witness Wong stated that he obtained a Bachelor of
Science, Major in Mechanical Engineering from Worcester Polytechnic Institute;
he is a Consulting Engineer of Steam Generators of URS; he was formerly
connected with Foster Wheeler where he held the positions of site
commissioning engineer, testing engineer, instrumentation and controls
engineer, mechanical equipment department manager, director of boiler
performance and mechanical design engineering and pulverized coal product
director. He explained that: CFB stands for Circulating Fluidized Bed; it is a
process by which fuel is fed to the lower furnace where it is burned in an
upward flow of combustion air; limestone, which is used as sulfur absorbent, is
also fed to the lower furnace along with the fuel; the mixture of fuel, ash, and
the boiler bed sorbent material is carried to the upper part of the furnace and
into a cyclone separator; the heavier particles which generally consist of the
remaining uncombusted fuel and absorbent material are separated in the
cyclone separator and are recirculated to the lower furnace to complete the
combustion of any unburned particles and to enhance SO2 capture by the
sorbent; fly ash and flue gas exit the cyclone and the fly ash is collected in the
electrostatic precipitator; furnace temperature is maintained in the range of
800 to 900 C by suitable heat absorbing surface; the fuel passes through a
crusher that reduces the size to an appropriate size prior to the introduction
into the lower furnace along with the limestone; the limestone is used as a SO2
sorbent which reacts with the sulfur oxides to form calcium sulfate, an inert and
stable material; air fans at the bottom of the furnace create sufficient velocity
within the steam generator to maintain a bed of fuel, ash, and limestone
mixture; secondary air is also introduced above the bed to facilitate circulation
and complete combustion of the mixture; the combustion process generates
heat, which then heats the boiler feedwater flowing through boiler tube bundles
under pressure; the heat generated in the furnace circuit turns the water to
saturated steam which is further heated to superheated steam; this
superheated steam leaves the CFB boiler and expands through a steam
turbine; the steam turbine is directly connected to a generator that turns and
creates electricity; after making its way through the steam turbine, the low-

pressure steam is exhausted downwards into a condenser; heat is removed


from the steam, which cools and condenses into water (condensate); the
condensate is then pumped back through a train of feedwater heaters to
gradually increase its temperature before this water is introduced to the boiler
to start the process all over again; and CFB technology has advantages over
pulverized coal firing without backend cleanup systems, i.e., greater fuel
flexibility, lower SO2 and NOx emissions. Moreover, Wong testified, inter alia,
that: CFBs have a wider range of flexibility so they can environmentally handle
a wider range of fuel constituents, mainly the constituent sulfur; and is capable
of handling different types of coal within the range of the different fuel
constituents; since CFB is the newer technology than the PC or stalker fire, it
has better environmental production; 50 percent of the electric generation in
the United States is still produced by coal combustion; and the CFB absorbs the
sulfur dioxide before it is emitted; and there will be a lower percentage of
emissions than any other technology for the coal.
In his Judicial Affidavit, Sarrki, stated that: he is the Chief Engineer for Process
Concept in Foster Wheeler; he was a Manager of Process Technology for Foster
Wheeler from 1995 to 2007; and he holds a Master of Science degree in
Chemical Engineering. He explained that: CFB boilers will emit PAHs but only in
minimal amounts, while BFB will produce higher PAH emissions; PAH is a
natural product of any combustion process; even ordinary burning, such as
cooking or driving automobiles, will have some emissions that are not
considered harmful; it is only when emissions are of a significant level that
damage may be caused; a CFB technology has minimal PAH emissions; the
high combustion efficiency of CFB technology, due to long residence time of
particles inside the boiler, leads to minimal emissions of PAH; other factors
such as increase in the excess air ratio[,] decrease in Ca/S, as well as decrease
in the sulfur and chlorine contents of coal will likewise minimize PAH
production; and CFB does not cause emissions beyond scientifically acceptable
levels. He testified, inter alia, that: the CFB technology is used worldwide; they
have a 50% percent share of CFB market worldwide; and this will be the first
CFB by Foster Wheeler in the Philippines; Foster Wheeler manufactures and
supplies different type[s] of boilers including BFB, but CFB is always applied on
burning coal, so they do not apply any BFB for coal firing; CFB has features
which have much better combustion efficiency, much lower emissions and it is
more effective as a boiler equipment; the longer the coal stays in the
combustion chamber, the better it is burned; eight (8) seconds is already
beyond adequate but it keeps a margin; in CFB technology, combustion
technology is uniform throughout the combustion chamber; high velocity is
used in CFB technology, that is vigorous mixing or turbulence; turbulence is
needed to get contact between fuel and combustion air; and an important
feature of CFB is air distribution.
In his Judicial Affidavit, Ouano stated that: he is a licensed Chemical Engineer,
Sanitary Engineer and Environmental Planner in the Philippines; he is also a
chartered Professional Engineer in Australia and a member of the colleges of
environmental engineers and chemical engineers of the Institution of Engineers
(Australia); he completed his Bachelor in Chemical Engineering in 1970, Master

of Environmental Engineering in 1972 and Doctor of Environmental Engineering


in 1974; he also graduated from the University of Sydney Law School with the
degree of Master of Environmental Law in 2002 and PhD in Law from Macquarie
University in 2007. He explained in his Judicial Affidavit that: the impacts
identified and analyzed in the EIA process are all potential or likely impacts;
there are a larger number of EIA techniques for predicting the potential
environmental impacts; it is important to note that all those methods and
techniques are only for predicting the potential environmental impacts, not the
real impacts; almost all environmental systems are non-linear and they are
subject to chaotic behavior that even the most sophisticated computer could
not predict accurately; and the actual or real environmental impact could only
be established when the project is in actual operation. He testified, inter alia,
that: the higher the temperature the higher the nitrous oxide emitted; in CFB
technology, the lower the temperature, the lower is the nitrogen oxide; and it
still has a nitrogen oxide but not as high as conventional coal; the CFB is the
boiler; from the boiler itself, different pollution control facilities are going to be
added; and for the overall plant with the pollution control facilities, the
particulate matters, nitrogen oxide and sulfur dioxide are under control.
(Citations omitted)121
We also note that RP Energy controverted in detail the afore-summarized
allegations of the Casio Group on the four areas of environmental damage
that will allegedly occur upon the construction and operation of the power
plant:
1. On thermal pollution of coastal waters.
As to the extent of the expected rise in water temperature once the power
plant is operational, Ms. Mercado stated in her Judicial Affidavit
thus:chanroblesvirtuallawlibrary
Q: What was the result of the Thermal Plume Modeling that was conducted for
RP Energy?
A: The thermal dispersion modeling results show that largest warming change
(0.95C above ambient) is observed in the shallowest (5 m) discharge
scenario. The warmest surface temperature change for the deepest (30 m)
scenario is 0.18C. All the simulated scenarios comply with the DAO 90-35
limit for temperature rise of 3C within the defined 70 x 70 m mixing zone.
The proposed power plant location is near the mouth of Subic Bay, thus the
tidal currents influence the behavior of thermal discharge plume. Since the
area is well-flushed, mixing and dilution of the thermal discharge is expected.
It also concluded that corals are less likely to be affected by the cooling water
discharge as corals may persist in shallow marine waters with temperatures
ranging from 18C to 36C. The predicted highest temperature of 30.75C, from
the 0.95C increase in ambient in the shallowest (5 m) discharge scenario, is
within this range.122
In the same vein, Dr. Ouano stated in his Judicial
Affidavit:chanroblesvirtuallawlibrary

Q: In page 41, paragraph 99 of the Petition, it was alleged that: x x x a


temperature change of 1C to 2C can already affect the metabolism and
other biological functions of aquatic organisms such as mortality rate and
reproduction. What is your expert opinion, if any, on this matter alleged by
the Petitioners?
A: Living organisms have proven time and again that they are very adaptable to
changes in the environment. Living organisms have been isolated in volcanic
vents under the ocean living on the acidic nutrient soup of sulfur and other
minerals emitted by the volcano to sub-freezing temperature in Antarctica. As
a general rule, metabolism and reproductive activity [increase] with
temperature until a maximum is reached after which [they decline]. For this
reason, during winter, animals hibernate and plants become dormant after
shedding their leaves. It is on the onset of spring that animals breed and
plants bloom when the air and water are warmer. At the middle of autumn
when the temperature drops to single digit, whales, fish, birds and other
living organisms, which are capable of migrating, move to the other end of
the globe where spring is just starting. In the processes of migration, those
migratory species have to cross the tropics where the temperature is not just
one or two degrees warmer but 10 to 20 degrees warmer.
When discussing the impact of 1 to 2 degrees temperature change and its
impact on the ecosystem, the most important factors to consider are (1)
Organism Type specifically its tolerance to temperature change (mammals
have higher tolerance); (2) Base Temperature it is the temperature over the
optimum temperature such that an increase will result in the decline in number
of the organisms; (3) Mobility or Space for Migration (i.e., an aquarium with
limited space or an open ocean that the organism can move to a space more
suited to [a] specific need, such as the migratory birds); and (4) Ecosystem
Complexity and Succession. The more complex the ecosystem the more stable
it is as succession and adaptation [are] more robust.
Normally, the natural variation in water temperature between early morning to
late afternoon could be several degrees (four to five degrees centigrade and up
to ten degrees centigrade on seasonal basis). Therefore, the less than one
degree centigrade change predicted by the GHD modeling would have minimal
impact.123chanRoblesvirtualLawlibrary
On cross-examination, Dr. Ouano further explained
ATTY. AZURA:
x x x When you say Organism Type you mentioned that mammals have a
higher tolerance for temperature change?
DR. OUANO:
Yes.
ATTY. AZURA:
What about other types of organisms, Dr. Ouano? Fish for example?

DR. OUANO:
Well, mammals have high tolerance because mammals are warm[-]blooded.
Now, when it comes to cold[-]blooded animals the tolerance is much lower. But
again when you are considering x x x fish [e]specially in open ocean you have
to remember that nature by itself is x x x very brutal x x x where there is
always the prey-predator relationship. Now, most of the fish that we have in
open sea [have] already a very strong adaptability mechanism. And in fact,
Kingman back in 1964 x x x studied the coal reef around the gulf of Oman
where the temperature variation on day to day basis varied not by 1 degree to
2 degrees but by almost 12 degrees centigrade. Now, in the Subic Bay area
which when youre looking at it between daytime variation, early dawn when it
is cold, the air is cold, the sea temperature, sea water is quite cold. Then by
3:00 oclock in the afternoon it starts to warm up. So the variation [in the] Subic
Bay area is around 2 to 4 degrees by natural variation from the sun as well as
from the current that goes around it. So when you are talking about what the
report has said of around 1 degree change, the total impact x x x on the fishes
will be minimal. x x x
ATTY. AZURA:
x x x So, you said, Dr. Ouano, that fish, while they have a much lower tolerance
for temperature variation, are still very adaptable. What about other sea life,
Dr. Ouano, for example, sea reptiles?
DR. OUANO:
Thats what I said. The most sensitive part of the marine ecology is physically
the corals because corals are non-migratory, they are fix[ed]. Second[ly] x x x
corals are also highly dependent on sunlight penetration. If they are exposed
out of the sea, they die; if they are so deep, they die. And that is why I cited
Kingman in his studies of coral adaptability [in] the sea of Oman where there
was a very high temperature variation, [they] survived.
ATTY. AZURA:
Would you be aware, Dr. Ouano, if Kingman has done any studies in Subic Bay?
DR. OUANO:
Not in Subic Bay but I have reviewed the temperature variation, natural
temperature variation from the solar side, the days side as well as the seasonal
variation. There are two types of variation since temperatures are very critical.
One is the daily, which means from early morning to around 3:00 oclock, and
the other one is seasonal variation because summer, December, January,
February are the cold months and then by April, May we are having warm
temperature where the temperature goes around 32-33 degrees; Christmas
time, it drops to around 18 to 20 degrees so it[']s a variation of around
seasonal variation of 14 degrees although some of the fish might even migrate
and that is why I was trying to put in corals because they are the ones that are
really fix[ed]. They are not in a position to migrate in this season.
ATTY. AZURA:
To clarify. You said that the most potentially sensitive part of the ecosystem

would be the corals.


DR. OUANO:
Or threatened part because they are the ones [that] are not in a position to
migrate.
ATTY AZURA:
In this case, Dr. Ouano, with respect to this project and the projected
temperature change, will the corals in Subic Bay be affected?
DR. OUANO:
As far as the outlet is concerned, they have established it outside the coral
area. By the time it reaches the coral area the temperature variation, as per
the GHD study is very small, it[]s almost negligible.
ATTY AZURA:
Specifically, Dr. Ouano, what does negligible mean, what level of variation are
we talking about?
DR. OUANO:
If you are talking about a thermometer, you might be talking about, normally
about .1 degrees centigrade. Thats the one that you could more or less
ascertain. x x x
ATTY. AZURA:
Dr. Ouano, you mentioned in your answer to the same question, Question 51,
that there is a normal variation in water temperature. In fact, you said there is
a variation throughout the day, daily and also throughout the year, seasonal.
Just to clarify, Dr. Ouano. When the power plant causes the projected
temperature change of 1 degree to 2 degrees Celsius this will be in addition to
existing variations? What I mean, Dr. Ouano, just so I can understand, how will
that work? How will the temperature change caused by the power plant work
with the existing variation?
DR. OUANO:
There is something like what we call the zonal mixing. This is an area of
approximately one or two hectares where the pipe goes out, the hot water goes
out. So that x x x, we have to accept x x x that [throughout it] the zone will be
a disturb[ed] zone. After that one or two hectares park the water temperature
is well mixed [so] that the temperature above the normal existing variation now
practically drops down to almost the normal
level.124chanRoblesvirtualLawlibrary
On air pollution due to dust and combustion gases.
To establish that the emissions from the operation of the power plant would be
compliant with the standards under the Clean Air Act,125 Ms. Mercado stated in
her Judicial Affidavit thus:chanroblesvirtuallawlibrary

271. Q: What was the result of the Air Dispersion Modeling that was
conducted for RP Energy?
A: The Air Dispersion Modeling predicted that the Power Plant Project will
produce the following emissions, which [are] fully compliant with the standards
set by DENR:

SO2
NO2
CO

Predicted GLC126 for 1-hr


averaging period
45.79 g/Nm3
100.8 g/Nm3
10 g/Nm3

CO

Predicted GLC for 8-hr


averaging period
0.19 mg/ncm

SO2
NO2

Predicted GLC for 24-hr


averaging period
17.11 g/Nm3
45.79 g/Nm3

SO2
NO2
CO

Predicted GLC for 1-yr


averaging period
6.12 g/Nm3
No standard
No standard

National Ambient Air Quality


Guideline Values
340 g/Nm3
260 g/Nm3
35 g/Nm3
National Ambient Air Quality
Guideline Values
10 g/Nm3
National Ambient Air Quality
Guideline Values
180 g/Nm3
150 g/Nm3
National Ambient Air Quality
Guideline Values
80 g/Nm3
-----

272. Q: What other findings resulted from the Air Dispersion Modeling,
if any?
A: It also established that the highest GLC to Clean Air Act Standards ratio
among possible receptors was located 1.6 km North NorthEast (NNE) of the
Power Plant Project. Further, this ratio was valued only at 0.434 or less than
half of the upper limit set out in the Clean Air Act. This means that the
highest air ambient quality disruption will happen only 1.6 km NNE of the
Power Plant Project, and that such disruption would still be compliant with the
standards imposed by the Clean Air Act.127
The Casio Group argued, however, that, as stated in the EIS, during upset
conditions, significant negative environmental impact will result from the
emissions. This claim was refuted by RP Energys witness during crossexamination:chanroblesvirtuallawlibrary

ATTY. AZURA:
If I may refer you to another page of the same annex, Ms. Mercado, thats page
202 of the same document, the August 2012. Fig. 2-78 appears to show, theres
a Table, Ms. Mercado, the first table, the one on top appears to show a
comparison in normal and upset conditions. I noticed, Ms. Mercado, that the
black bars are much higher than the bars in normal condition. Can you state
what this means?
MS. MERCADO:
It means there are more emissions that could potentially be released when it is
under upset condition.
ATTY. AZURA:
I also noticed, Ms. Mercado, at the bottom part of this chart there are Receptor
IDs, R1, R2, R3 and so forth and on page 188 of this same document, Annex 9Mercado, there is a list identifying these receptors, for example, Receptor 6,
Your Honor, appears to have been located in Olongapo City, Poblacion. Just so I
can understand, Ms. Mercado, does that mean that if upset condition[s] were to
occur, the Olongapo City Poblacion will be affected by the emissions?
MS. MERCADO:
All it means is that there will be higher emissions and a higher ground
concentration. But you might want to also pay attention to the y axis, it says
there GLC/CAA [Ground Level Concentration/Clean Air Act limit]. So it means
that even under upset conditions say for R6, the ground level concentration
for upset condition is still around .1 or 10% percent only of the Clean Air Act
limit. So its still much lower than the limit.
ATTY. AZURA:
But that would mean, would it not, Ms. Mercado, that in the event of upset
conditions[,] emissions would increase in the Olongapo City Poblacion?
MS. MERCADO:
Not emissions will increase. The emissions will be the same but the ground
level concentration, the GLC, will be higher if you compare normal versus
upset. But even if it[]s under upset conditions, it is still only around 10%
percent of the Clean Air Act Limit.
xxxx
J. LEAGOGO:
So you are trying to impress upon this Court that even if the plant is in an upset

condition, it will emit less than what the national standards dictate?
MS. MERCADO:
Yes, Your Honor.128chanRoblesvirtualLawlibrary
With respect to the claims that the power plant will release dangerous PAHs
and CO, Engr. Sarrki stated in his Judicial Affidavit
thus:ChanRoblesVirtualawlibrary
Q: In page 42, paragraph 102 of the Petition, the Petitioners alleged that Volatile
Organic Compounds (VOC) specifically Polycyclic Aromatic Hydrocarbon
(PAH) will be emitted even by CFB boilers. What can you say about this?
A: Actually, the study cited by the Petitioners does not apply to the present case
because it does not refer to CFB technology. The study refers to a laboratoryscale tubular Bubbling Fluidized Bed (BFB) test rig and not a CFB. CFB
boilers will emit PAHs but only in minimal amounts. Indeed, a BFB will
produce higher PAH emissions.
xxxx
Q: Why can the study cited by Petitioners not apply in the present case?
A: The laboratory-scale BFB used in the study only has one (1) air injection point
and does not replicate the staged-air combustion process of the CFB that RP
Energy will use. This staged-air process includes the secondary air. Injecting
secondary air into the system will lead to more complete combustion and
inhibits PAH production. There is a study entitled Polycyclic Aromatic
Hydrocarbon (PAH) Emissions from a Coal-Fired Pilot FBC System by Kunlei
Liu, Wenjun Han, Wei-Ping Pan, John T. Riley found in the Journal of Hazardous
Materials B84 (2001) where the findings are discussed.
Also, the small-scale test rig utilized in the study does not simulate the process
conditions (hydrodynamics, heat transfer characteristics, solid and gas mixing
behavior, etc.) seen in a large scale utility boiler, like those which would be
utilized by the Power Plant Project.
x
x
x
x
Q: Aside from residence time of particles and secondary air, what other factors,
if any, reduce PAH production?
A: Increase in the excess air ratio will also minimize PAH production.
Furthermore, decrease in Calcium to Sulfur moral ratio (Ca/S), as well as
decrease in the sulfur and chlorine contents of coal will likewise minimize
PAH production. This is also based on the study entitled Polycyclic Aromatic
Hydrocarbon (PAH) Emissions from a Coal-Fired Pilot FBC System by Kunlei
Liu, Wenjun Han, Wei-Ping Pan, John T. Riley.
In RP Energys Power Plant Project, the projected coal to be utilized has low
sulfur and chlorine contents minimizing PAH production. Also, due to optimum

conditions for the in-furnace SO2 capture, the Ca/S will be relatively low,
decreasing PAH production.
Q: In paragraph 104 of the Petition, it was alleged that Carbon monoxide (CO),
a poisonous, colorless and odorless gas is also produced when there is partial
oxidation or when there is not enough oxygen (O2) to form carbon dioxide
(CO2). What can you say about this?
A: CFB technology reduces the CO emissions of the Power Plant Project to safe
amounts. In fact, I understand that the projected emissions level of the Power
Plant Project compl[ies] with the International Finance Corporation (IFC)
standards. Furthermore, characteristics of CFB technology such as long
residence time, uniform temperature and high turbulence provide an
effective combustion environment which results [in] lower and safer CO
emissions.
Q: I have no further questions for you at the moment. Is there anything you wish
to add to the foregoing?
A: Yes. PAH is a natural product of ANY combustion process. Even ordinary
burning, such as cooking or driving automobiles, will have some emissions
that are not considered harmful. It is only when emissions are of a significant
level that damage may be caused.
Given that the Power Plant Project will utilize CFB technology, it will have
minimal PAH emissions. The high combustion efficiency of CFB technology, due
to the long residence time of particles inside the boiler, leads to the minimal
emissions of PAH. Furthermore, other factors such as increase in the excess air
ratio, decrease in Ca/S, as well as decrease in the sulfur and chlorine contents
of coal will likewise minimize PAH production. CFB does not cause emissions
beyond scientifically acceptable levels, and we are confident it will not result in
the damage speculated by the Petitioners.129
3. On water pollution from toxic coal combustion waste.
With regard to the claim that coal combustion waste produced by the plant will
endanger the health of the inhabitants nearby, Dr. Ouano stated in his Judicial
Affidavit thus:chanroblesvirtuallawlibrary
Q: In page 43, paragraph 110 of the Petition, it was alleged that: [s]olid coal
combustion waste is highly toxic and is said to cause birth defects and cancer
risks among others x x x. What is your expert opinion, if any, on this matter
alleged by the Petitioners?
A: Coal is geologically compressed remains of living organisms that roamed the
earth several million years ago. In the process of compression, some of the
minerals in the soil, rocks or mud, the geologic media for compression, are
also imparted into the compressed remains. If the compressing media of
mud, sediments and rocks contain high concentration of mercury, uranium,
and other toxic substances, the coal formed will likewise contain high
concentration of those substances. If the compressing materials have low
concentration of those substances, then the coal formed will likewise have
low concentration of those substances. If the coal does not contain excessive

quantities of toxic substances, the solid residues are even used in agriculture
to supply micronutrients and improve the potency of fertilizers. It is used
freely as a fill material in roads and other construction activities requiring
large volume of fill and as additive in cement manufacture. After all,
diamonds that people love to hang around their necks and keep close to the
chest are nothing more than the result of special geologic action, as those in
volcanic pipes on coal.130
RP Energy further argued, a matter which the Casio Group did not rebut or
refute, that the waste generated by the plant will be properly handled, to
wit:chanroblesvirtuallawlibrary
4.1.49 When coal is burned in the boiler furnace, two by-products are
generated - bottom and fly ash. Bottom ash consists of large and fused
particles that fall to the bottom of the furnace and mix with the bed media. Fly
ash includes fine-grained and powdery particles that are carried away by flue
gas into the electrostatic precipitator, which is then sifted and collected. These
by-products are non-hazardous materials. In fact, a coal power plants Fly Ash,
Bottom Ash and Boiler Slag have consequent beneficial uses which generate
significant environmental, economic, and performance benefits. Thus, fly ash
generated during the process will be sold and transported to cement
manufacturing facilities or other local and international industries.
4.1.50 RP Energy shall also install safety measures to insure that waste from
burning of coal shall be properly handled and stored.
4.1.51 Bottom ash will be continuously collected from the furnace and
transferred through a series of screw and chain conveyors and bucket elevator
to the bottom ash silo. The collection and handling system is enclosed to
prevent dust generation. Discharge chutes will be installed at the base of the
bottom ash silo for unloading. Open trucks will be used to collect ash through
the discharge chutes. Bottom ash will be sold, and unsold ash will be stored in
ash cells. A portion of the bottom ash will be reused as bed material through
the installation of a bed media regeneration system (or ash recycle). Recycled
bottom ash will be sieved using a vibrating screen and transported to a bed
material surge bin for re-injection into the boiler.
4.1.52 Fly ash from the electrostatic precipitator is pneumatically removed from
the collection hopper using compressed air and transported in dry state to the
fly ash silo. Two discharge chutes will be installed at the base of the fly ash silo.
Fly ash can either be dry-transferred through a loading spout into an enclosed
lorry or truck for selling, re-cycling, or wet-transferred through a wet unloader
into open dump trucks and transported to ash cells. Fly ash discharge will
operate in timed cycles, with an override function to achieve continuous
discharge if required. Fly ash isolation valves in each branch line will prevent
leakage and backflow into non-operating lines.
4.1.53 Approximately 120,000m will be required for the construction of the ash
cell. Ash will be stacked along the sloping hill, within a grid of excavations (i.e.

cells) with a 5m embankment. Excavated soils will be used for embankment


construction and backfill. To prevent infiltration [of] ash deposits into the
groundwater, a clay layer with minimum depth of 400mm will be laid at the
base of each cell. For every 1-m depth of ash deposit, a 10-cm soil backfill will
be applied to immobilize ash and prevent migration via wind. Ash cell walls will
be lined with high-density polyethylene to prevent seepage. This procedure and
treatment method is in fact suitable for disposal of toxic and hazardous
wastesalthough fly ash is not classified as toxic and hazardous materials.131
Anent the claims that the plant is susceptible to earthquake and landslides, Dr.
Ouano testified thus:chanroblesvirtuallawlibrary
J. LEAGOGO:
In terms of fault lines, did you study whether this project site is in any fault
line?
DR. OUANO:
There are some fault lines and in fact, in the Philippines it is very difficult to find
an area except Palawan where there is no fault line within 20 to 30
[kilometers]. But then fault lines as well as earthquakes really [depend] upon
your engineering design. I mean, Sto. Tomas University has withstood all the
potential earthquakes we had in Manila[,] even sometimes it[]s intensity 8 or
so because the design for it back in 1600 they are already using what we call
floating foundation. So if the engineering side for it[,] technology is there to
withstand the expected fault line [movement].
J. LEAGOGO:
What is the engineering side of the project? You said UST is floating.
DR. OUANO:
The foundation, that means to say you dont break
J. LEAGOGO:
Floating foundation. What about this, what kind of foundation?
DR. OUANO:
It will now depend on their engineering design, the type of equipment
J. LEAGOGO:
No, but did you read it in their report?
DR. OUANO:

It[]s not there in their report because it will depend on the supplier, the
equipment supplier.
J. LEAGOGO:
So it[]s not yet there?
DR. OUANO:
It[]s not yet there in the site but it is also covered in our Building Code what
are the intensities of earthquakes expected of the different areas in the
Philippines.
J. LEAGOGO:
Have you checked our geo-hazard maps in the Philippines to check on this
project site?
DR. OUANO:
Yes. It is included there in the EIA Report.
J. LEAGOGO:
It[]s there?
DR. OUANO:
It[]s there.132
4. On acid deposition in aquatic and terrestrial ecosystems.
Relative to the threat of acid rain, Dr. Ouano stated in his Judicial Affidavit,
thus:chanroblesvirtuallawlibrary
Q: In page 44, paragraph 114 of the Petition, it was alleged that the coal-fired
power plant will release 1,888 tons of nitrous oxides (NOx) per year and 886
tons of sulfur dioxide (SO2) per year. These oxides are the precursors to the
formation of sulfuric acid and nitric acid which are responsible for acid
deposition. What is your expert opinion on this matter alleged by the
Petitioners?
A: NO2 is found in the air, water and soil from natural processes such as
lightning, bacterial activities and geologic activities as well as from human
activities such as power plants and fertilizer usage in agriculture. SO2 is also
found in air, water and soil from bacterial, geologic and human activities.
NO2 and SO2 in the air are part of the natural nitrogen and sulfur cycle to

widely redistribute and recycle those essential chemicals for use by plants.
Without the NO2 and SO2 in the air, plant and animal life would be limited to
small areas of this planet where nitrogen and sulfur are found in abundance.
With intensive agricultural practices, nitrogen and sulfur are added in the soil
as fertilizers.
Acid rain takes place when the NO2 and SO2 concentration are excessive or
beyond those values set in the air quality standards. NO2 and SO2 in the air in
concentrations lower than those set in the standards have beneficial effect to
the environment and agriculture and are commonly known as micronutrients. 133
On clarificatory questions from the appellate court, the matter was further
dissected thus:chanroblesvirtuallawlibrary
J. LEAGOGO:
x x x The project will release 1,888 tons of nitrous oxide per year. And he said,
yes; that witness answered, yes, it will produce 886 tons of sulfur dioxide per
year. And he also answered yes, that these oxides are the precursors to the
formation of sulfuric acid and nitric acid. Now my clarificatory question is, with
this kind of releases there will be acid rain?
DR. OUANO:
No.
J. LEAGOGO:
Why?
DR. OUANO:
Because it[]s so dilute[d].
J. LEAGOGO:
It will?
DR. OUANO:
Because the acid concentration is so dilute[d] so that it is not going to cause
acid rain.
J. LEAGOGO:
The acid concentration is so diluted that it will not cause acid rain?
DR. OUANO:
Yes.
J. LEAGOGO:
What do you mean it[]s so diluted? How will it be diluted?
DR. OUANO:
Because it[]s going to be mixed with the air in the atmosphere; diluted in the
air in the atmosphere. And besides this 886 tons, this is not released in one go,

it is released almost throughout the year.


J. LEAGOGO:
You also answered in Question No. 61, acid rain takes place when the NO2
AND SO2 concentration are excessive. So when do you consider it as
excessive?
DR. OUANO:
That is something when you are talking about acid
J. LEAGOGO:
In terms of tons of nitrous oxide and tons of sulfur oxide, when do you consider
it as excessive?
DR. OUANO:
It is in concentration not on tons weight, Your Honor.
J. LEAGOGO:
In concentration?
DR. OUANO:
In milligrams per cubic meter, milligrams per standard cubic meter.
J. LEAGOGO:
So being an expert, what will be the concentration of this kind of 1,888 tons of
nitrous oxide? What will be the concentration in terms of your?
DR. OUANO:
If the concentration is in excess of something like 8,000 micrograms per
standard cubic meters, then there is already potential for acid rain.
J. LEAGOGO:
I am asking you, Dr. Ouano, you said it will release 1,888 tons of nitrous oxide?
DR. OUANO:
Yes.
J. LEAGOGO:
In terms of concentration, what will that be?
DR. OUANO:
In terms of the GHD study that will result [in] 19 milligrams per standard cubic
meters and the time when acid rain will start [is when the concentration gets]
around 8,000 milligrams per standard cubic meters. So we have 19 compared
to 8,000. So we are very, very safe.
J. LEAGOGO:
What about SO2?

DR. OUANO:
SO2, we are talking about ... you wont mind if I go to my codigo. For sulfur
dioxide this acid rain most likely will start at around 7,000 milligrams per
standard cubic meter but then sorry, it[]s around 3,400 micrograms per
cubic meter. That is the concentration for sulfur dioxide, and in our plant it will
be around 45 micrograms per standard cubic meter. So the acid rain will start
at 3,400 and the emission is estimated here to result to concentration of 45.7
micrograms.
J. LEAGOGO:
That is what GHD said in their report.
DR. OUANO:
Yes. So that is the factor of x x x safety that we have.134
Apart from the foregoing evidence, we also note that the above and other
environmental concerns are extensively addressed in RP Energys
Environmental Management Plan or Program (EMP). The EMP is a section in
the EIS that details the prevention, mitigation, compensation, contingency and
monitoring measures to enhance positive impacts and minimize negative
impacts and risks of a proposed project or undertaking.135 One of the
conditions of the ECC is that RP Energy shall strictly comply with and
implement its approved EMP. The Casio Group failed to contest, with proof, the
adequacy of the mitigating measures stated in the aforesaid EMP.
In upholding the evidence and arguments of RP Energy, relative to the lack of
proof as to the alleged significant environmental damage that will be caused by
the project, the appellate court relied mainly on the testimonies of experts,
which we find to be in accord with judicial precedents. Thus, we ruled in one
case:chanroblesvirtuallawlibrary
Although courts are not ordinarily bound by testimonies of experts, they may
place whatever weight they choose upon such testimonies in accordance with
the facts of the case. The relative weight and sufficiency of expert testimony is
peculiarly within the province of the trial court to decide, considering the ability
and character of the witness, his actions upon the witness stand, the weight
and process of the reasoning by which he has supported his opinion, his
possible bias in favor of the side for whom he testifies, the fact that he is a paid
witness, the relative opportunities for study and observation of the matters
about which he testifies, and any other matters which serve to illuminate his
statements. The opinion of the expert may not be arbitrarily rejected; it is to be
considered by the court in view of all the facts and circumstances in the case
and when common knowledge utterly fails, the expert opinion may be given
controlling effects (20 Am. Jur., 1056-1058). The problem of the credibility of
the expert witness and the evaluation of his testimony is left to the discretion
of the trial court whose ruling thereupon is not reviewable in the absence of an
abuse of that discretion.136
Hence, we sustain the appellate courts findings that the Casio Group failed to

establish the alleged grave environmental damage which will be caused by the
construction and operation of the power plant.
In another vein, we, likewise, agree with the observations of the appellate court
that the type of coal which shall be used in the power plant has important
implications as to the possible significant negative environmental impacts of
the subject project.137 However, there is no coal supply agreement, as of yet,
entered into by RP Energy with a third-party supplier. In accordance with the
terms and conditions of the ECC and in compliance with existing environmental
laws and standards, RP Energy is obligated to make use of the proper coal type
that will not cause significant negative environmental impacts.
The alleged negative environmental
assessment of the project by experts
in a report generated during the social
acceptability consultations
The Casio Group also relies heavily on a report on the social acceptability
process of the power plant project to bolster its claim that the project will cause
grave environmental damage. We purposely discuss this matter in this
separate subsection for reasons which will be made clear shortly.
But first we shall present the pertinent contents of this report.
According to the Casio Group, from December 7 to 9, 2011, the SBMA
conducted social acceptability policy consultations with different stakeholders
on RP Energys proposed 600 MW coal plant project at the Subic Bay Exhibition
and Convention Center. The results thereof are contained in a document
prepared by SBMA entitled Final Report: Social Acceptability Process for RP
Energy, Inc.s 600-MW Coal Plant Project (Final Report). We note that SBMA
adopted the Final Report as a common exhibit with the Casio Group in the
course of the proceedings before the appellate court.
The Final Report stated that there was a clear aversion to the concept of a coalfired power plant from the participants. Their concerns included environmental,
health, economic and socio-cultural factors. Pertinent to this case is the alleged
assessment, contained in the Final Report, of the potential effects of the project
by three experts: (1) Dr. Rex Cruz (Dr. Cruz), Chancellor of the University of the
Philippines, Los Baos and a forest ecology expert, (2) Dr. Visitacion Antonio, a
toxicologist, who related information as to public health; and (3) Andre Jon
Uychiaco, a marine biologist.
The Final Report stated these experts alleged views on the project,
thus:chanroblesvirtuallawlibrary
IV. Experts Opinion
xxxx
The specialists shared the judgment that the conditions were not present to

merit the operation of a coal-fired power plant, and to pursue and carry out the
project with confidence and assurance that the natural assets and ecosystems
within the Freeport area would not be unduly compromised, or that irreversible
damage would not occur and that the threats to the flora and fauna within the
immediate community and its surroundings would be adequately addressed.
The three experts were also of the same opinion that the proposed coal plant
project would pose a wide range of negative impacts on the environment, the
ecosystems and human population within the impact zone.
The specialists likewise deemed the Environment Impact Assessment (EIA)
conducted by RPEI to be incomplete and limited in scope based on the
following observations:
i.

The assessment failed to include areas 10km. to 50km. from the


operation site, although according to the panel, sulfur emissions could
extend as far as 40-50 km.

ii.

The EIA neglected to include other forests in the Freeport in its scope and
that there were no specific details on the protection of the endangered
flora and endemic fauna in the area. Soil, grassland, brush land, beach
forests and home gardens were also apparently not included in the study.

iii.

The sampling methods used in the study were limited and insufficient for
effective long-term monitoring of surface water, erosion control and
terrestrial flora and fauna.

The specialists also discussed the potential effects of an operational coal-fired


power plant [on] its environs and the community therein. Primary among these
were the following:
i.

Formation of acid rain, which would adversely affect the trees and
vegetation in the area which, in turn, would diminish forest cover. The
acid rain would apparently worsen the acidity of the soil in the Freeport.

ii.

Warming and acidification of the seawater in the bay, resulting in the bioaccumulation of contaminants and toxic materials which would
eventually lead to the overall reduction of marine productivity.

iii.

Discharge of pollutants such as Nitrous Oxide, Sodium Oxide, Ozone and


other heavy metals such as mercury and lead to the surrounding region,
which would adversely affect the health of the populace in the vicinity.

V. Findings
Based on their analyses of the subject matter, the specialists recommended
that the SBMA re-scrutinize the coal-fired power plant project with the following
goals in mind:

i.

To ensure its coherence and compatibility to [the] SBMA mandate, vision,


mission and development plans, including its Protected Area
Management Plan;

ii.

To properly determine actual and potential costs and benefits;

iii.

To effectively determine the impacts on environment and health; and

iv.

To ensure a complete and comprehensive impacts zone study.

The specialists also urged the SBMA to conduct a Comprehensive Cost And
Benefit Analysis Of The Proposed Coal Plant Project Relative To Each
Stakeholder Which Should Include The Environment As Provider Of Numerous
Environmental Goods And Services.
They also recommended an Integrated/Programmatic Environmental Impact
Assessment to accurately determine the environmental status of the Freeport
ecosystem as basis and reference in evaluating future similar projects. The
need for a more Comprehensive Monitoring System for the Environment and
Natural Resources was also reiterated by the panel.138
Of particular interest are the alleged key observations of Dr. Cruz on the EIS
prepared by RP Energy relative to the project:chanroblesvirtuallawlibrary
Key Observations and Recommendations on the EIS of Proposed RPE Project
Rex Victor O. Cruz
Based on SBMA SAP on December 7-9, 2011
1. The baseline vegetation analysis was limited only within the project site and
its immediate vicinity. No vegetation analysis was done in the brushland areas
in the peninsula which is likely to be affected in the event acid rain forms due
to emissions from the power plant.
2. The forest in the remaining forests in the Freeport was not considered as
impact zone as indicated by the lack of description of these forests and the
potential impacts the project might have on these forests. This appears to be a
key omission in the EIS considering that these forests are well within 40 to 50
km away from the site and that there are studies showing that the impacts of
sulphur emissions can extend as far as 40 to 50 km away from the source.
3. There are 39 endemic fauna and 1 endangered plant species (Molave) in the
proposed project site. There will be a need to make sure that these species are
protected from being damaged permanently in wholesale. Appropriate
measures such as ex situconservation and translocation if feasible must be
implemented.
4. The Project site is largely in grassland interspersed with some trees. These
plants if affected by acid rain or by sulphur emissions may disappear and have
consequences on the soil properties and hydrological processes in the area.

Accelerated soil erosion and increased surface runoff and reduced infiltration of
rainwater into the soil.
5. The rest of the peninsula is covered with brushland but were never included
as part of the impact zone.
6. There are home gardens along the coastal areas of the site planted to
ornamental and agricultural crops which are likely to be affected by acid rain.
7. There is also a beach forest dominated by aroma, talisai and agoho which
will likely be affected also by acid rain.
8. There are no Environmentally Critical Areas within the 1 km radius from the
project site. However, the Olongapo Watershed Forest Reserve, a protected
area is approximately 10 km southwest of the project site. Considering the
prevailing wind movement in the area, this forest reserve is likely to be affected
by acid rain if it occurs from the emission of the power plant. This forest
reserve is however not included as part of the potential impact area.
9. Soil in the project site and the peninsula is thin and highly acidic and
deficient in NPK with moderate to severe erosion potential. The sparse
vegetation cover in the vicinity of the project site is likely a result of the highly
acidic soil and the nutrient deficiency. Additional acidity may result from acid
rain that may form in the area which could further make it harder for the plants
to grow in the area that in turn could exacerbate the already severe erosion in
the area.
10. There is a need to review the proposal to ensure that the proposed project
is consistent with the vision for the Freeport as enunciated in the SBMA Master
Plan and the Protected Area Management Plan. This will reinforce the validity
and legitimacy of these plans as a legitimate framework for screening potential
locators in the Freeport. It will also reinforce the trust and confidence of the
stakeholders on the competence and authority of the SBMA that would
translate in stronger popular support to the programs implemented in the
Freeport.
11. The EGF and Trust Fund (Table 5.13) should be made clear that the amounts
are the minimum amount and that adequate funds will be provided by the
proponent as necessary beyond the minimum amounts. Furthermore the basis
for the amounts allocated for the items (public liability and rehabilitation) in
Trust Fund and in EGF (tree planting and landscaping, artificial reef
establishment) must be clarified. The specific damages and impacts that will be
covered by the TF and EGF must also be presented clearly at the outset to
avoid protracted negotiations in the event of actual impacts occurring in the
future.
12. The monitoring plan for terrestrial flora and fauna is not clear on the
frequency of measurement. More importantly, the proposed method of
measurement (sampling transect) while adequate for estimating the diversity

of indices for benchmarking is not sufficient for long[-]term monitoring. Instead,


long[-]term monitoring plots (at least 1 hectare in size) should be established to
monitor the long[-]term impacts of the project on terrestrial flora and fauna.
13. Since the proposed monitoring of terrestrial flora and fauna is limited to the
vicinity of the project site, it will be useful not only for mitigating and avoiding
unnecessary adverse impacts of the project but also for improving
management decisions if long[-]term monitoring plots for the remaining natural
forests in the Freeport are established. These plots will also be useful for the
study of the dynamic interactions of terrestrial flora and fauna with climate
change, farming and other human activities and the resulting influences on soil,
water, biodiversity, and other vital ecosystem services in the Freeport. 139
We agree with the appellate court that the alleged statements by these experts
cannot be given weight because they are hearsay evidence. None of these
alleged experts testified before the appellate court to confirm the pertinent
contents of the Final Report. No reason appears in the records of this case as to
why the Casio Group failed to present these expert witnesses.
We note, however, that these statements, on their face, especially the
observations of Dr. Cruz, raise serious objections to the environmental
soundness of the project, specifically, the EIS thereof. It brings to fore the
question of whether the Court can, on its own, compel the testimonies of these
alleged experts in order to shed light on these matters in view of the right at
stake not just damage to the environment but the health, well-being and,
ultimately, the lives of those who may be affected by the project.
The Rules of Procedure for Environmental Cases liberally provide the courts
with means and methods to obtain sufficient information in order to adequately
protect or safeguard the right to a healthful and balanced ecology. In Section 6
(l)140 of Rule 3 (Pre-Trial), when there is a failure to settle, the judge shall,
among others, determine the necessity of engaging the services of a qualified
expert as a friend of the court (amicus curiae). While, in Section 12141 of Rule 7
(Writ of kalikasan), a party may avail of discovery measures: (1) ocular
inspection and (2) production or inspection of documents or things. The
liberality of the Rules in gathering and even compelling information, specifically
with regard to the Writ of kalikasan, is explained in this
wise:chanroblesvirtuallawlibrary
[T]he writ of kalikasan was refashioned as a tool to bridge the gap between
allegation and proof by providing a remedy for would-be environmental litigants
to compel the production of information within the custody of the government.
The writ would effectively serve as a remedy for the enforcement of the right to
information about the environment. The scope of the fact-finding power could
be: (1) anything related to the issuance, grant of a government permit issued
or information controlled by the government or private entity and (2)
[i]nformation contained in documents such as environmental compliance
certificate (ECC) and other government records. In addition, the [w]rit may also
be employed to compel the production of information, subject to constitutional

limitations. This function is analogous to a discovery measure, and may be


availed of upon application for the writ.142
Clearly, in environmental cases, the power to appoint friends of the court in
order to shed light on matters requiring special technical expertise as well as
the power to order ocular inspections and production of documents or things
evince the main thrust of, and the spirit behind, the Rules to allow the court
sufficient leeway in acquiring the necessary information to rule on the issues
presented for its resolution, to the end that the right to a healthful and
balanced ecology may be adequately protected. To draw a parallel, in the
protection of the constitutional rights of an accused, when life or liberty is at
stake, the testimonies of witnesses may be compelled as an attribute of the
Due Process Clause. Here, where the right to a healthful and balanced ecology
of a substantial magnitude is at stake, should we not tread the path of caution
and prudence by compelling the testimonies of these alleged experts?
After due consideration, we find that, based on the statements in the Final
Report, there is no sufficiently compelling reason to compel the testimonies of
these alleged expert witnesses for the following reasons.
First, the statements are not sufficiently specific to point to us a flaw (or flaws)
in the study or design/implementation (or some other aspect) of the project
which provides a causal link or, at least, a reasonable connection between the
construction and operation of the project vis--vis potential grave
environmental damage. In particular, they do not explain why the
Environmental Management Plan (EMP) contained in the EIS of the project will
not adequately address these concerns.
Second, some of the concerns raised in the alleged statements, like acid rain,
warming and acidification of the seawater, and discharge of pollutants were, as
previously discussed, addressed by the evidence presented by RP Energy
before the appellate court. Again, these alleged statements do not explain why
such concerns are not adequately covered by the EMP of RP Energy.
Third, the key observations of Dr. Cruz, while concededly assailing certain
aspects of the EIS, do not clearly and specifically establish how these omissions
have led to the issuance of an ECC that will pose significant negative
environmental impacts once the project is constructed and becomes
operational. The recommendations stated therein would seem to suggest
points for improvement in the operation and monitoring of the project, but they
do not clearly show why such recommendations are indispensable for the
project to comply with existing environmental laws and standards, or how noncompliance with such recommendations will lead to an environmental damage
of the magnitude contemplated under the writ of kalikasan. Again, these
statements do not state with sufficient particularity how the EMP in the EIS
failed to adequately address these concerns.
Fourth, because the reason for the non-presentation of the alleged expert
witnesses does not appear on record, we cannot assume that their testimonies

are being unduly suppressed.


By ruling that we do not find a sufficiently compelling reason to compel the
taking of the testimonies of these alleged expert witnesses in relation to their
serious objections to the power plant project, we do not foreclose the possibility
that their testimonies could later on be presented, in a proper case, to more
directly, specifically and sufficiently assail the environmental soundness of the
project and establish the requisite magnitude of actual or threatened
environmental damage, if indeed present. After all, their sense of civic duty
may well prevail upon them to voluntarily testify, if there are truly sufficient
reasons to stop the project, above and beyond their inadequate claims in the
Final Report that the project should not be pursued. As things now stand,
however, we have insufficient bases to compel their testimonies for the reasons
already proffered.
The alleged admissions of grave
environmental damage in the EIS
of the project.
In their Omnibus Motions for Clarification and Reconsideration before the
appellate court and Petition for Review before this Court, the Casio Group
belatedly claims that the statements in the EIS prepared by RP Energy
established the significant negative environmental impacts of the project. They
argue in this manner:chanroblesvirtuallawlibrary
Acid Rain
35. According to RP Energys Environmental Impact Statement for its proposed
2 x 150 MW Coal-Fired Thermal Power Plant Project, acid rain may occur in the
combustion of coal, to wit
xxxx
During the operation phase, combustion of coal will result in emissions of
particulates SOx and NOx. This may contribute to the occurrence of acid rain
due to elevated SO2 levels in the atmosphere. High levels of NO2 emissions
may give rise to health problems for residents within the impact area.
xxxx
Asthma Attacks
36. The same EPRMP143 mentioned the incidence of asthma attacks [as a] result
of power plant operations, to wit
xxxx
The incidence of asthma attacks among residents in the vicinity of the project
site may increase due to exposure to suspended particulates from plant
operations.144
RP Energy, however, counters that the above portions of the EIS were quoted

out of context. As to the subject of acid rain, the EIS states in


full:chanroblesvirtuallawlibrary
Operation
During the operation phase, combustion of coal will result in emissions of
particulates, SOx and NOx. This may contribute to the occurrence of acid rain
due to elevated SO2 levels in the atmosphere. High levels of NO2 emissions
may give rise to health problems for residents within the impact area.
Emissions may also have an effect on vegetation (Section 4.1.4.2). However,
the use of CFBC technology is a built-in measure that results in
reduced emission concentrations. SOx emissions will be minimised by
the inclusion of a desulfurisation process, whilst NOx emissions will be
reduced as the coal is burned at a temperature lower than that
required to oxidise nitrogen.145 (Emphasis supplied)
As to the subject of asthma attacks, the EIS states in
full:chanroblesvirtuallawlibrary
The incidence of asthma attacks among residents in the vicinity of the project
site may increase due to exposure to suspended particulates from plant
operations. Coal and ash particulates may also become suspended and
dispersed into the air during unloading and transport, depending on wind speed
and direction. However, effect on air quality due to windblown coal
particulates will be insignificant as the coal handling system will have
enclosures (i.e. enclosed conveyors and coal dome) to eliminate the
exposure of coal to open air, and therefore greatly reduce the
potential for particulates from being carried away by wind (coal
handling systems, Section 3.4.3.3). In addition, the proposed process
will include an electrostatic precipitator that will remove fly ash from
the flue gas prior to its release through the stacks, and so particulates
emissions will be minimal.146 (Emphasis supplied)
We agree with RP Energy that, while the EIS discusses the subjects of acid rain
and asthma attacks, it goes on to state that there are mitigating measures that
will be put in place to prevent these ill effects. Quite clearly, the Casio Group
quoted piecemeal the EIS in such a way as to mislead this Court as to its true
and full contents.
We deplore the way the Casio Group has argued this point and we take this
time to remind it that litigants should not trifle with court processes. Along the
same lines, we note how the Casio Group has made serious allegations in its
Petition for Writ of kalikasan but failed to substantiate the same in the course of
the proceedings before the appellate court. In particular, during the preliminary
conference of this case, the Casio Group expressly abandoned its factual
claims on the alleged grave environmental damage that will be caused by the
power plant (i.e., air, water and land pollution) and, instead, limited itself to
legal issues regarding the alleged non-compliance of RP Energy with certain
laws and rules in the procurement of the ECC.147 We also note how the Casio

Group failed to comment on the subject Petitions before this Court, which led
this Court to eventually dispense with its comment.148 We must express our
disapproval over the way it has prosecuted its claims, bordering as it does on
trifling with court processes. We deem it proper, therefore, to admonish it to be
more circumspect in how it prosecutes its claims.
In sum, we agree with the appellate court that the Casio Group failed to
substantiate its claims that the construction and operation of the power plant
will cause environmental damage of the magnitude contemplated under the
writ of kalikasan. The evidence it presented is inadequate to establish the
factual bases of its claims.cralawred
II.
Whether the ECC is invalid for lack of signature of Mr. Luis Miguel Aboitiz (Mr.
Aboitiz), as representative of RP Energy, in the Statement of Accountability of
the ECC.
The appellate court ruled that the ECC is invalid because Mr. Aboitiz failed to
sign the Statement of Accountability portion of the ECC.
We shall discuss the correctness of this ruling on both procedural and
substantive grounds.
Procedurally, we cannot fault the DENR for protesting the manner by which the
appellate court resolved the issue of the aforesaid lack of signature. We agree
with the DENR that this issue was not among those raised by the Casio Group
in its Petition for Writ of kalikasan.149 What is more, this was not one of the
triable issues specifically set during the preliminary conference of this
case.150chanRoblesvirtualLawlibrary
How then did the issue of lack of signature arise?
A review of the voluminous records indicates that the matter of the lack of
signature was discussed, developed or surfaced only in the course of the
hearings, specifically, on clarificatory questions from the appellate court, to
wit:chanroblesvirtuallawlibrary
J. LEAGOGO:
I would also show to you your ECC, thats page 622 of the rollo. I am showing to
you this Environmental Compliance Certificate dated December 22, 2008
issued by Sec. Jose L. Atienza, Jr. of the DENR. This is your Exhibit 18. Would
you like to go over this? Are you familiar with this document?
MS. MERCADO:
Yes, it[]s my Annex 3, Your Honor.
J. LEAGOGO:
I would like to refer you to page 3 of the ECC dated December 22, 2008. Page 2

refers to the Environmental Compliance Certificate, ECC Ref. No. 0804-0114021. Thats page 2 of the letter dated December 22, 2008. And on page 3, Dr.
Julian Amador recommended approval and it was approved by Sec. Atienza. You
see that on page 3?
MS. MERCADO:
Yes, Your Honor.
J. LEAGOGO:
Okay. On the same page, page 3, theres a Statement of Accountability.
MS. MERCADO:
Yes, Your Honor.
J. LEAGOGO:
Luis, who is Luis Miguel Aboitiz?
MS. MERCADO:
During that time he was the authorized representative of RP Energy, Your
Honor.
J. LEAGOGO:
Now, who is the authorized representative of RP Energy?
MS. MERCADO:
It would be Mr. Aaron Domingo, I believe.
J. LEAGOGO:
Please tell the Court why this was not signed by Mr. Luis Miguel Aboitiz, the
Statement of Accountability?
Because the Statement of Accountability says, Mr. Luis Miguel Aboitiz,
Director, representing Redondo Peninsula Energy with office address located at
110 Legaspi Street, Legaspi Village, Makati City, takes full responsibility in
complying with all conditions in this Environmental Compliance Certificate
[ECC][.] Will you tell this Court why this was not signed?
MS. MERCADO:
It was signed, Your Honor, but this copy wasnt signed. My apologies, I was the
one who provided this, I believe, to the lawyers. This copy was not signed
because during.
J. LEAGOGO:
But this is your exhibit, this is your Exhibit 18 and this is not signed. Do you
agree with me that your Exhibit 18 is not signed by Mr. Aboitiz?
MS. MERCADO:
Thats correct, Your Honor.151

We find this line of questioning inadequate to apprise the parties that the lack
of signature would be a key issue in this case; as in fact it became decisive in
the eventual invalidation of the ECC by the appellate court.
Concededly, a court has the power to suspend its rules of procedure in order to
attain substantial justice so that it has the discretion, in exceptional cases, to
take into consideration matters not originally within the scope of the issues
raised in the pleadings or set during the preliminary conference, in order to
prevent a miscarriage of justice. In the case at bar, the importance of the
signature cannot be seriously doubted because it goes into the consent and
commitment of the project proponent to comply with the conditions of the ECC,
which is vital to the protection of the right to a balanced and healthful ecology
of those who may be affected by the project.
Nonetheless, the power of a court to suspend its rules of procedure in
exceptional cases does not license it to foist a surprise on the parties in a given
case. To illustrate, in oral arguments before this Court, involving sufficiently
important public interest cases, we note that individual members of the Court,
from time to time, point out matters that may not have been specifically
covered by the advisory (the advisory delineates the issues to be argued and
decided). However, a directive is given to the concerned parties to discuss the
aforesaid matters in their memoranda. Such a procedure ensures that, at the
very least, the parties are apprised that the Court has taken an interest in such
matters and may adjudicate the case on the basis thereof. Thus, the parties are
given an opportunity to adequately argue the issue or meet the issue head-on.
We, therefore, find that the appellate court should have, at the very least,
directed RP Energy and the DENR to discuss and elaborate on the issue of lack
of signature in the presentation of their evidence and memoranda, before
making a definitive ruling that the lack thereof invalidated the ECC. This is in
keeping with the basic tenets of due process.
At any rate, we shall disregard the procedural defect and rule directly on
whether the lack of signature invalidated the ECC in the interest of substantial
justice.
The laws governing the ECC, i.e., Presidential Decree No. (PD) 1151 and PD
1586, do not specifically state that the lack of signature in the Statement of
Accountability has the effect of invalidating the ECC. Unlike in wills or
donations, where failure to comply with the specific form prescribed by law
leads to its nullity,152 the applicable laws here are silent with respect to the
necessity of a signature in the Statement of Accountability and the effect of the
lack thereof. This is, of course, understandable because the Statement of
Accountability is a mere off-shoot of the rule-making powers of the DENR
relative to the implementation of PD 1151 and PD 1586. To determine,
therefore, the effect of the lack of signature, we must look at the significance
thereof under the Environmental Impact Assessment (EIA) Rules of the DENR
and the surrounding circumstances of this case.

To place this issue in its proper context, a helpful overview of the stages of the
EIA process, taken from the Revised Manual, is reproduced below:
Figure 1-3 Overview of Stages of the Philippine EIA Process 153

1.0 SCREENING

2.0 SCOPING

EIA STUDY and

Screening determines if a
project is covered or not
covered by the PEISS.154 If a
project is covered, screening
further determines what
document type the project
should prepare to secure the
needed approval, and what
the rest of the requirements
are in terms of EMB office of
application, endorsing and
decision authorities, duration
of processing.
Scoping is a Proponent-driven
multi-sectoral formal process
of determining the focused
Terms of Reference of the EIA
Study. Scoping identifies the
most significant
issues/impacts of a proposed
project, and then, delimits the
extent of baseline information
to those necessary to evaluate
and mitigate the impacts. The
need for and scope of an
Environmental Risk
Assessment (ERA) is also done
during the scoping session.
Scoping is done with the local
community through Public
Scoping and with a third party
EIA Review Committee (EIARC)
through Technical Scoping,
both with the participation of
the DENR-EMB. The process
results in a signed Formal
Scoping Checklist by the
review team, with final
approval by the EMB Chief.
The EIA Study involves a

3.0 REPORT
PREPARATION

EIA REPORT
4.0 REPORT and
EVALUATION

5.0 DECISION
MAKING

description of the proposed


project and its alternatives,
characterization of the project
environment, impact
identification and prediction,
evaluation of impact
significance, impact
mitigation, formulation of
Environmental Management
and Monitoring Plan, with
corresponding cost estimates
and institutional support
commitment. The study results
are presented in an EIA
Report for which an outline is
prescribed by EMB for every
major document type.
Review of EIA
Reports normally entails an
EMB procedural screening for
compliance with minimum
requirements specified during
Scoping, followed by a
substantive review of either
composed third party experts
commissioned by EMB as the
EIA Review Committee for
PEIS/EIS-based applications, or
DENR/EMB internal specialists,
the Technical Committee, for
IEE-based applications. EMB
evaluates the EIARC
recommendations and the
publics inputs during public
consultations/hearings in the
process of recommending a
decision on the application.
The EIARC Chair signs EIARC
recommendations including
issues outside the mandate of
the EMB. The entire EIA review
and evaluation process is
summarized in the Review
Process Report (RPR) of the
EMB, which includes a draft
decision document.
Decision Making involves

MONITORING.
6.0 VALIDATION, and
EVALUATION/
AUDIT

evaluation of EIA
recommendations and the
draft decision document,
resulting to the issuance of an
ECC, CNC or Denial Letter.
When approved, a covered
project is issued its certificate
of Environmental Compliance
Commitment (ECC) while an
application of a non-covered
project is issued a Certificate
of Non-Coverage (CNC).
Endorsing and deciding
authorities are designated by
AO 42, and further detailed in
this Manual for every report
type.Moreover, the Proponent
signs a sworn statement of full
responsibility on
implementation of its
commitments prior to the
release of the ECC. The ECC is
then transmitted to concerned
LGUs and other GAs for
integration into their decisionmaking process. The
regulated part of EIA
Review is limited to the
processes within EMB
control. The timelines for
the issuance of decision
documents provided for in
AO 42 and DAO 2003-30
are applicable only from
the time the EIA Report is
accepted for substantive
review to the time a
decision is issued on the
application.
Monitoring, Validation and
Evaluation/Audit stage
assesses performance of the
Proponent against the ECC and
its commitments in the
Environmental Management
and Monitoring Plans to ensure
actual impacts of the project
are adequately prevented or

mitigated.

The signing of the Statement of Accountability takes place at the DecisionMaking Stage. After a favorable review of its ECC application, the project
proponent, through its authorized representative, is made to sign a sworn
statement of full responsibility on the implementation of its commitments prior
to the official release of the ECC.
The definition of the ECC in the Revised Manual highlights the importance of
the signing of the Statement of Accountability:chanroblesvirtuallawlibrary
Environmental Compliance Certificate (ECC) - a certificate of Environmental
Compliance Commitment to which the Proponent conforms with, after DENREMB explains the ECC conditions, by signing the sworn undertaking of full
responsibility over implementation of specified measures which are
necessary to comply with existing environmental regulations or to
operate within best environmental practices that are not currently
covered by existing laws. It is a document issued by the DENR/EMB after a
positive review of an ECC application, certifying that the Proponent has
complied with all the requirements of the EIS System and has committed to
implement its approved Environmental Management Plan. The ECC also
provides guidance to other agencies and to LGUs on EIA findings and
recommendations, which need to be considered in their respective decisionmaking process.157 (Emphasis supplied)
As can be seen, the signing of the Statement of Accountability is an integral
and significant component of the EIA process and the ECC itself. The evident
intention is to bind the project proponent to the ECC conditions, which will
ensure that the project will not cause significant negative environmental
impacts by the implementation of specified measures which are necessary to
comply with existing environmental regulations or to operate within best
environmental practices that are not currently covered by existing laws.
Indeed, the EIA process would be a meaningless exercise if the project
proponent shall not be strictly bound to faithfully comply with the conditions
necessary to adequately protect the right of the people to a healthful and
balanced ecology.
Contrary to RP Energys position, we, thus, find that the signature of the project
proponents representative in the Statement of Accountability is necessary for
the validity of the ECC. It is not, as RP Energy would have it, a mere formality
and its absence a mere formal defect.
The question then is, was the absence of the signature of Mr. Aboitiz, as
representative of RP Energy, in the Statement of Accountability sufficient
ground to invalidate the ECC?

Viewed within the particular circumstances of this case, we answer in the


negative.
While it is clear that the signing of the Statement of Accountability is necessary
for the validity of the ECC, we cannot close our eyes to the particular
circumstances of this case. So often have we ruled that this Court is not merely
a court of law but a court of justice. We find that there are several
circumstances present in this case which militate against the invalidation of the
ECC on this ground.
We explain.
First, the reason for the lack of signature was not adequately taken into
consideration by the appellate court. To reiterate, the matter surfaced during
the hearing of this case on clarificatory questions by the appellate court,
viz:chanroblesvirtuallawlibrary
J. LEAGOGO:
Please tell the Court why this was not signed by Mr. Luis Miguel Aboitiz, the
Statement of Accountability?
Because the Statement of Accountability says, Mr. Luis Miguel Aboitiz,
Director, representing Redondo Peninsula Energy with office address located at
110 Legaspi Street, Legaspi Village, Makati City, takes full responsibility in
complying with all conditions in this Environmental Compliance Certificate
[ECC][.] Will you tell this Court why this was not signed?
MS. MERCADO:
It was signed, Your Honor, but this copy wasnt signed. My apologies, I
was the one who provided this, I believe, to the lawyers. This copy
was not signed because during
J. LEAGOGO:
But this is your exhibit, this is your Exhibit 18 and this is not signed. Do you
agree with me that your Exhibit 18 is not signed by Mr. Aboitiz?
MS. MERCADO:
Thats correct, Your Honor.158 (Emphasis supplied)
Due to the inadequacy of the transcript and the apparent lack of opportunity
for the witness to explain the lack of signature, we find that the witness
testimony does not, by itself, indicate that there was a deliberate or malicious
intent not to sign the Statement of Accountability.
Second, as previously discussed, the concerned parties to this case,
specifically, the DENR and RP Energy, were not properly apprised that the issue
relative to the lack of signature would be decisive in the determination of the
validity of the ECC. Consequently, the DENR and RP Energy cannot be faulted
for not presenting proof during the course of the hearings to squarely tackle

the issue of lack of signature.


Third, after the appellate court ruled in its January 30, 2013 Decision that the
lack of signature invalidated the ECC, RP Energy attached, to its Motion for
Partial Reconsideration, a certified true copy of the ECC, issued by the DENREMB, which bore the signature of Mr. Aboitiz. The certified true copy of the ECC
showed that the Statement of Accountability was signed by Mr. Aboitiz on
December 24, 2008.159chanRoblesvirtualLawlibrary
The authenticity and veracity of this certified true copy of the ECC was not
controverted by the Casio Group in its comment on RP Energys motion for
partial reconsideration before the appellate court nor in their petition before
this Court. Thus, in accordance with the presumption of regularity in the
performance of official duties, it remains uncontroverted that the ECC on file
with the DENR contains the requisite signature of Mr. Aboitiz in the Statement
of Accountability portion.
As previously noted, the DENR and RP Energy were not properly apprised that
the issue relative to the lack of signature would be decisive in the
determination of the validity of the ECC. As a result, we cannot fault RP Energy
for submitting the certified true copy of the ECC only after it learned that the
appellate court had invalidated the ECC on the ground of lack of signature in its
January 30, 2013 Decision.
We note, however, that, as previously discussed, the certified true copy of the
Statement of Accountability was signed by Mr. Aboitiz on December 24, 2008 or
two days after the ECCs official release on December 22, 2008. The aforediscussed rules under the Revised Manual, however, state that the proponent
shall sign the sworn statement of full responsibility on implementation of its
commitments prior to the release of the ECC. It would seem that the ECC was
first issued, then it was signed by Mr. Aboitiz, and thereafter, returned to the
DENR to serve as its file copy. Admittedly, there is lack of strict compliance with
the rules although the signature is present. Be that as it may, we find nothing
in the records to indicate that this was done with bad faith or inexcusable
negligence because of the inadequacy of the evidence and arguments
presented, relative to the issue of lack of signature, in view of the manner this
issue arose in this case, as previously discussed. Absent such proof, we are not
prepared to rule that the procedure adopted by the DENR was done with bad
faith or inexcusable negligence but we remind the DENR to be more
circumspect in following the rules it provided in the Revised Manual. Thus, we
rule that the signature requirement was substantially complied with pro hac
vice.
Fourth, we partly agree with the DENR that the subsequent letter-requests for
amendments to the ECC, signed by Mr. Aboitiz on behalf of RP Energy, indicate
its implied conformity to the ECC conditions. In practical terms, if future
litigation should occur due to violations of the ECC conditions, RP Energy would
be estopped from denying its consent and commitment to the ECC conditions
even if there was no signature in the Statement of Accountability. However, we

note that the Statement of Accountability precisely serves to obviate any doubt
as to the consent and commitment of the project proponent to the ECC
conditions. At any rate, the aforesaid letter-requests do additionally indicate RP
Energys conformity to the ECC conditions and, thus, negate a pattern to
maliciously evade accountability for the ECC conditions or to intentionally
create a loophole in the ECC to be exploited in a possible future litigation
over non-compliance with the ECC conditions.
In sum, we rule that the appellate court erred when it invalidated the ECC on
the ground of lack of signature of Mr. Aboitiz in the ECCs Statement of
Accountability relative to the copy of the ECC submitted by RP Energy to the
appellate court. While the signature is necessary for the validity of the ECC, the
particular circumstances of this case show that the DENR and RP Energy were
not properly apprised of the issue of lack of signature in order for them to
present controverting evidence and arguments on this point, as the matter only
developed during the course of the proceedings upon clarificatory questions
from the appellate court. Consequently, RP Energy cannot be faulted for
submitting the certified true copy of the ECC only after it learned that the ECC
had been invalidated on the ground of lack of signature in the January 30, 2013
Decision of the appellate court.
The certified true copy of the ECC, bearing the signature of Mr. Aboitiz in the
Statement of Accountability portion, was issued by the DENR-EMB and remains
uncontroverted. It showed that the Statement of Accountability was signed by
Mr. Aboitiz on December 24, 2008. Although the signing was done two days
after the official release of the ECC on December 22, 2008, absent sufficient
proof, we are not prepared to rule that the procedure adopted by the DENR was
done with bad faith or inexcusable negligence. Thus, we rule that the signature
requirement was substantially complied with pro hac vice.cralawred
III.
Whether the first and second amendments to the ECC are invalid for failure to
undergo a new environmental impact assessment (EIA) because of the
utilization of inappropriate EIA documents.
Upholding the arguments of the Casio Group, the appellate court ruled that
the first and second amendments to the ECC were invalid because the ECC
contained an express restriction that any expansion of the project beyond the
project description shall be the subject of a new EIA. It found that both
amendments failed to comply with the appropriate EIA documentary
requirements under DAO 2003-30 and the Revised Manual. In particular, it
found that the Environmental Performance Report and Management Plan
(EPRMP) and Project Description Report (PDR), which RP Energy submitted to
the DENR, relative to the application for the first and second amendments,
respectively, were not the proper EIA document type. Hence, the appellate
court ruled that the aforesaid amendments were invalid.
Preliminarily, we must state that executive actions carry presumptive validity

so that the burden of proof is on the Casio Group to show that the procedure
adopted by the DENR in granting the amendments to the ECC were done with
grave abuse of discretion. More so here because the administration of the EIA
process involves special technical skill or knowledge which the law has
specifically vested in the DENR.
After our own examination of DAO 2003-30 and the Revised Manual as well as
the voluminous EIA documents of RP Energy appearing in the records of this
case, we find that the appellate court made an erroneous interpretation and
application of the pertinent rules.
We explain.
As a backgrounder, PD 1151 set the Philippine Environment Policy. Notably, this
law recognized the right of the people to a healthful environment. 160 Pursuant
thereto, in every action, project or undertaking, which significantly affects the
quality of the environment, all agencies and instrumentalities of the national
government, including government-owned or -controlled corporations, as well
as private corporations, firms, and entities were required to prepare, file and
include a statement (i.e.,Environmental Impact Statement or EIS) containing:
(a) the environmental impact of the proposed action, project or undertaking;
(b) any adverse environmental effect which cannot be avoided should the
proposal be implemented;
(c) alternative to the proposed action;
(d) a determination that the short-term uses of the resources of the
environment are consistent with the maintenance and enhancement of the
long-term productivity of the same; and
(e) whenever a proposal involves the use of depletable or non-renewable
resources, a finding must be made that such use and commitment are
warranted.161chanRoblesvirtualLawlibrary
To further strengthen and develop the EIS, PD 1586 was promulgated, which
established the Philippine Environmental Impact Statement System (PEISS).
The PEISS is a systems-oriented and integrated approach to the EIS system to
ensure a rational balance between socio-economic development and
environmental protection for the benefit of present and future
generations.162 The ECC requirement is mandated under Section 4
thereof:chanroblesvirtuallawlibrary
SECTION 4. Presidential Proclamation of Environmentally Critical Areas and
Projects. The President of the Philippines may, on his own initiative or upon
recommendation of the National Environmental Protection Council, by
proclamation declare certain projects, undertakings or areas in the country as
environmentally critical. No person, partnership or corporation shall

undertake or operate any such declared environmentally critical


project or area without first securing an Environmental Compliance
Certificate issued by the President or his duly authorized
representative. x x x (Emphasis supplied)
The PEISS consists of the Environmental Impact Assessment (EIA) process,
which is mandatory for private or public projects that may significantly affect
the quality of the environment. It involves evaluating and predicting the likely
impacts of the project on the environment, designing appropriate preventive,
mitigating and enhancement measures addressing these consequences to
protect the environment and the communitys
welfare.163chanRoblesvirtualLawlibrary
PD 1586 was implemented by DAO 2003-30 which, in turn, set up a system or
procedure to determine when a project is required to secure an ECC and when
it is not. When an ECC is not required, the project proponent procures a
Certificate of Non-Coverage (CNC).164 As part of the EIA process, the project
proponent is required to submit certain studies or reports (i.e., EIA document
type) to the DENR-EMB, which will be used in the review process in assessing
the environmental impact of the project and the adequacy of the corresponding
environmental management plan or program to address such environmental
impact. This will then be part of the bases to grant or deny the application for
an ECC or CNC, as the case may be.
Table 1-4 of the Revised Manual summarizes the required EIA document type
for each project category. It classifies a project as belonging to group I, II, III, IV
or V, where:
I- Environmentally Critical Projects (ECPs) in either Environmentally Critical Area
(ECA) or Non-Environmentally Critical Area (NECA),
II- Non-Environmentally Critical Projects (NECPs) in ECA,
III- NECPs in NECA,
IV- Co-located Projects, and
V- Unclassified Projects.
The aforesaid table then further classifies a project, as pertinent to this case, as
belonging to category A, B or C, where:ChanRoblesVirtualawlibrary
A- new;
B- existing projects for modification or re-start up; and
C- operating projects without an ECC.
Finally, the aforesaid table considers whether the project is single or colocated.165 After which, it states the appropriate EIA document type needed for

the application for an ECC or CNC, as the case may be.


The appropriate EIA document type vis--vis a particular project depends on
the potential significant environmental impact of the project. At the highest
level would be an ECP, such as the subject project. The hierarchy of EIA
document type, based on comprehensiveness and detail of the study or report
contained therein, insofar as single projects are concerned, is as follows:
1. Environmental Impact Statement166 (EIS),
2. Initial Environmental Examination167 (IEE) Report,
3. Initial Environmental Examination168 (IEE) Checklist Report,
4. Environmental Performance Report and Management Plan 169 (EPRMP), and
5. Project Description170 (PD) or Project Description Report (PDR).
Thus, in the course of RP Energys application for an ECC, it was required by the
DENR-EMB to submit an EIS because the subject project is: an ECP, new and a
single project.
The present controversy, however, revolves around, not an application for an
ECC, but amendments thereto.
RP Energy requested the subject first amendment to its ECC due to its desire to
modify the project design through the inclusion of a barge wharf, seawater
intake breakwater, subsea discharge pipeline, raw water collection system,
drainage channel improvement and a 230-kV double transmission line. The
DENR-EMB determined that this was a major amendment and, thus, required
RP Energy to submit an EPRMP.
The Casio Group argued, and the appellate court sustained, that an EPRMP is
not the correct EIA document type based on the definition of an EPRMP in DAO
2003-30 and the Revised Manual.
In DAO 2003-30, an EPRMP is defined as:chanroblesvirtuallawlibrary
Environmental Performance Report and Management Plan (EPRMP)
documentation of the actual cumulative environmental impacts and
effectiveness of current measures for single projects that are already
operating but without ECC's, i.e., Category A-3. For Category B-3 projects, a
checklist form of the EPRMP would suffice;171 (Emphasis supplied)
Further, the table in Section 5 of DAO 2003-30 states that an EPRMP is required
for A-2: Existing and to be expanded (including undertakings that have
stopped operations for more than 5 years and plan to re-start with or without
expansion) and A-3: Operating without ECC.

On the other hand, the Revised Manual delineates when an EPRMP is the proper
EIA document type, thus:chanroblesvirtuallawlibrary
For operating projects with previous ECCs but planning or applying for
clearance to modify/expand or re-start operations, or for projects
operating without an ECCbut applying to secure one to comply with PD 1586
regulations, the appropriate document is not an EIS but an EIA Report
incorporating the projects environmental performance and its current
Environmental Management Plan. This report is x x x an x x
xEnvironmental Performance Report and Management Plan (EPRMP)
for single project applications x x x172 (Emphasis supplied)
In its Glossary, the Revised Manual defines an EPRMP
as:chanroblesvirtuallawlibrary
Environmental Performance Report and Management Plan (EPRMP) documentation of the actual cumulative environmental impacts and
effectiveness of current measures for single projects that are already
operating but without ECCs.173 (Emphasis supplied)
Finally, Table 1-4, in the Revised Manual, states that an EPRMP is required for
Item I-B: Existing Projects for Modification or Re-start up (subject to conditions
in Annex 2-1c) and I-C: Operating without ECC.
From these definitions and tables, an EPRMP is, thus, the required EIA
document type for an ECP-single project which is:chanroblesvirtuallawlibrary
1. Existing and to be expanded (including undertakings that have stopped
operations for more than 5 years and plan to re-start with or without
expansion);
2. Operating but without ECCs;
3. Operating projects with previous ECCs but planning or applying for clearance
to modify/expand or re-start operations; and
4. Existing projects for modification or re-start up.
It may be observed that, based from the above, DAO 2003-30 and the Revised
Manual appear to use the terms operating and existing interchangeably. In
the case at bar, the subject project has not yet been constructed although
there have been horizontal clearing operations at the project site.
On its face, therefore, the theory of the Casio Group, as sustained by the
appellate court that the EPRMP is not the appropriate EIA document type
seems plausible because the subject project is not: (1) operating/existing with a
previous ECC but planning or applying for modification or expansion, or (2)
operating but without an ECC. Instead, the subject project is an unimplemented
or a non-implemented, hence, non-operating project with a previous ECC but

planning for modification or expansion.


The error in the above theory lies in the failure to consider or trace
the applicable provisions of DAO 2003-30 and the Revised Manual on
amendments to an ECC.
The proper starting point in determining the validity of the subject first
amendment, specifically, the propriety of the EIA document type (i.e., EPRMP)
which RP Energy submitted in relation to its application for the aforesaid
amendment, must of necessity be the rules on amendments to an ECC.174 This
is principally found in Section 8.3, Article II of DAO 200303, viz:chanroblesvirtuallawlibrary
8.3 Amending an ECC
Requirements for processing ECC amendments shall depend on the nature of
the request but shall be focused on the information necessary to assess
the environmental impact of such changes.
8.3.1. Requests for minor changes to ECCs such as extension of deadlines for
submission of post-ECC requirements shall be decided upon by the endorsing
authority.
8.3.2. Requests for major changes to ECCs shall be decided upon by the
deciding authority.
8.3.3. For ECCs issued pursuant to an IEE or IEE checklist, the processing of the
amendment application shall not exceed thirty (30) working days; and for ECCs
issued pursuant to an EIS, the processing shall not exceed sixty (60) working
days. Provisions on automatic approval related to prescribed timeframes under
AO 42 shall also apply for the processing of applications to amend ECCs.
(Emphasis supplied)
Implementing the afore-quoted section, the Revised Manual pertinently states
in Section 2.2, paragraph 16:chanroblesvirtuallawlibrary
16) Application Process for ECC Amendments
Figure 2-4 presents how Proponents may request for minor or major changes in
their ECCs. Annex 2-1c provides a decision chart for the determination of
requirements for project modifications, particularly for delineating which
application scenarios will require EPRMP (which will be subject to Figure 2-1
process) or other support documentations (which will be subject to Figure 2-4
process).
Figure 2-4, in turn, provides:chanroblesvirtuallawlibrary
Figure 2-4. Flowchart on Request for ECC
Amendments175chanRoblesvirtualLawlibrary

Scenario 1: Request for Minor


Amendments
1. Typographical error
2. Extension of deadlines for
submission of post-ECC
requirement/s
3. Extension of ECC validity
4. Change in company
name/ownership
5. Decrease in land/project
area or production capacity
6. Other amendments deemed
minor at the discretion of
the EMB CO/RO Director

1 [Start]

Scenario 2: Request for


Major Amendments
1.

Expansion of project area w/in


catchment described in EIA
2. Increase in production capacity or
auxiliary component of the original
project
3. Change/s in process flow or
technology
4. Addition of new product
5. Integration of ECCs for similar or
dissimilar but contiguous projects
(NOTE: ITEM#5 IS PROPONENTS
OPTION, NOT EMBS)
6. Revision/Reformatting of ECC
Conditions
7. Other amendments deemed major
at the discretion of the EMB CO/RO
Director

1[Start]
Within three (3) years from ECC issuance
(for projects not started) OR at any time
during project implementation, the
Proponent prepares and submits to the
ECC-endorsing DENR-EMB office aLETTERREQUEST for ECC amendments, including
data/information, reports or documents to
substantiate the requested revisions.
2

Within three (3) years from ECC


issuance (for projects not
started)OR at any time during
project implementation, the
Proponent prepares and submits to
the ECC-endorsing DENR-EMB
office aLETTER-REQUEST for ECC
amendment, including
data/information, reports or
documents to substantiate the
requested revisions.

For projects that have started


implementation, EMB evaluates request
based on Annex 2-1c for various scenarios
of project modification. Documentary
requirements may range from a LetterRequest to an EPRMP to the EMB CO/RO
while for those with Programmatic ECC, a
PEPRMP may need to be submitted to the
EMB CO to support the request. It is
important to note that for operating
projects, the appropriate document is not
an EIS but an EIA Report incorporating the
projects historical environmental
performance and its current EMP, subject to
specific documentary requirements
detailed in Annex 2-1c for every
modification scenario.

3?

The ECC-endorsing EMB office


assigns a Case Handler to evaluate
the request

For EPRMP/PEPRMP-based requests, EMB


forms a Technical/Review Committee to
evaluate the request. For other requests, a
Case Handler may solely undertake the
evaluation. EMB CO and RO will process
P/EPRMP for PECC/ECC under Groups I and
II respectively. (Go to Figure 2-1)

4?

3?
ECC-endorsing Authority decides
on the Letter-Request, based on
CH recommendation
Maximum Processing Time to
Issuance of Decision
EMB CO
7 workdays
EMB RO
7 workdays

ECC-endorsing/issuing Authority (per Table


1-4) decides on Letter
Requests/EPRMP/PEPRMP/Other documents
based on EMB CH and/or Tech/Review
Committee recommendations.
Max Processing Time to Issuance of
Decision
CO
CO
RO
RO
PEPRMP EPRMP
PEPRMP EPRMP
120
90
60
30
workdays workdays workdays workday
s
Other document applications: max 30
workdays (EMB CO and RO)

Noteworthy in the above, which is pertinent to the issue at hand, is that the
amendment process squarely applies to projects not started, such as the
subject project, based on the phrase [w]ithin three (3) years from ECC
issuance (for projects not started) x x x.
Annex 2-1c, in turn, provides a Decision Chart for Determination of
Requirements For Project Modification. We reproduce below the first three
columns of Annex 2-1c, as are pertinent to the issue at
hand:ChanRoblesVirtualawlibrary
ANNEX 2-1c
DECISION CHART FOR DETERMINATION OF REQUIREMENTS
FOR PROJECT MODIFICATION178chanRoblesvirtualLawlibrary

Proposed Modifications Analysis of Proposed


to the Current Project
Modifications

Resulting Decision
Document/Type of EIA
Report Required
Operational projects, or
those which have
stopped
for ? 5 years and plan
to re-start
For Groups I and II
EIS-based Projects with
an
ECC applying for
modification

1.

Expansion of
land/project area w/in
catchment or
environment
described in the
original EIA Report

Since the modification ECC Amendment


will be in an area
/Letter Request with
already described and brief description of
evaluated in the
activities in the
original EIA Report,
additional area
incremental impacts
from additional land
development will have
been addressed in the
approved EMP

2.

Expansion of
It is assumed the
land/project area
modification proposal
OUTSIDE catchment or may have significant
environment
potential impacts due
described in the
to absence of prior

ECC Amendment
/Environmental
Performance Report
and Management Plan
(EPRMP)

original EIA Report

assessment as to how
the project may affect
the proposed
expansion area

3.

Increase in capacity or Non-exceedance of


auxiliary component of PDR (non covered
the original project
project) threshold is
which will either not assumed that impacts
entail exceedance of are not significant;
PDR (non-covered
Modification scenario
project)
and decision process
thresholds orEMP &
ERA can still address are applicable to both
impacts & risks arising non-implemented and
operating projects
from modification
issued ECCs

ECC Amendment
/Letter Request with brief
description of additional
capacity or component

4.

Increase in capacity or Exceedance of PDR


auxiliary component of (non-covered)
the original project
threshold is assumed
which will either
that impacts may be
exceed PDR (nonpotentially significant,
covered project)
particularly if
thresholds, or EMP & modification will result
ERA cannot address
to a next higher level
impacts and risks
of threshold range
arising from
modification

ECC Amendment
/Environmental
Performance Report and
Management
Plan (EPRMP)

Modification scenario
and decision process
are applicable to both
non-implemented and
operating projects with
or without issued ECCs
5.

Change/s in process
flow or technology

EMP and ERA can still ECC Amendment


address impacts & risks /Letter Request with
arising from
brief process
modification
description
EMP and ERA cannot
ECC Amendment
address impacts & risks /Environmental
arising from
Performance
modification
Report and Management
Plan (EPRMP)

6.

Additional component Activity is directly


ECC Amendment
or products which will lessening or mitigating /Letter Request with
enhance the
the projects impacts
consolidated Project

environment (e.g. due


to compliance to new
stringent
requirements) or
lessen impacts on the
environment (e.g. thru
utilization of waste
into new products)

on the environment.
However, to ensure
there is no component
in the modification
which fall under
covered project types,
EMB will require
disclosure of the
description of the
components and
process with which the
new product will be
developed.

Description Report
of new project
component and
integrated EMP

7.

Downgrade project
size or area or other
units of measure of
thresholds limits

No incremental
adverse impacts; may
result to lower project
threshold or may result
to non-coverage

From ECC Amendment to


Relief of ECC
Commitments
(Conversion to CNC):
/Letter-Request only

8.

Conversion to new
project type (e.g.
bunker-fired plant to
gas-fired)

Considered new
New ECC
application but with
/EIS
lesser data
requirements since
most facilities are
established;
environmental
performance in the
past will serve as
baseline; However, for
operating projects,
there may be need to
request for Relief from
ECC Commitment prior
to applying for new
project type to ensure
no balance of
environmental
accountabilities from
the current project

9.

Integration of ECCs for No physical change in


similar or contiguous project size/area; no
projects
change in
process/technology but
improved management
of continuous projects
(Note: Integration of
by having an
ECCs is at the option integrated planning
of the Proponent to
document in the form

ECC Amendment
/Letter Request with
consolidated Project
Description Report
and integrated EMP

request/apply)

or an integrated ECC
(ECC conditions will be
harmonized across
projects; conditions
relating to
requirements within
other agencies
mandates will be
deleted)

10. Revision/
Reformatting of ECC
Conditions

No physical change on ECC Amendment


the project but ECC
/Letter Request only
conditions relating to
requirements within
other agencies
mandates will be
deleted

We now apply these provisions to the case at bar.


To reiterate, the first amendment to the ECC was requested by RP Energy due
to its planned change of project design involving the inclusion of a barge wharf,
seawater intake breakwater, subsea discharge pipeline, raw water collection
system, drainage channel improvement and a 230-kV double transmission line.
The DENR-EMB determined179 that the proposed modifications involved a major
amendment because it will result in an increase in capacity or auxiliary
component, as per Scenario 2, Item #2 of Figure 2-4:
Scenario 2: Request for Major
Amendments
1. Expansion of project area w/in catchment described in EIA
2. Increase in production capacity or auxiliary cmponent of the
original project180
3. Change/s in process flow or technology
4. Addition of new product
5. Integration of ECCs for similar or dissimilar but contiguous projects
(NOTE: ITEM#5 IS PROPONENTS OPTION, NOT EMBS)
6. Revision/Reformatting of ECC Conditions
7. Other amendments deemed major at the discretion of the EMB
CO/RO Director
The Casio Group does not controvert this finding by the DENR-EMB and we
find the same reasonably supported by the evidence on record considering

that, among others, the construction of a 230-kV double transmission line


would result in major activities outside the project site which could have
significant environmental impacts.
Consequently, the amendment was considered as falling under Item#4 of
Annex 2-1c, and, thus, the appropriate EIA document type is an
EPRMP, viz:chanroblesvirtuallawlibrary
4.

Increase in capacity or
auxiliary component of
the original project which
will either exceed PDR
(non-covered project)
thresholds, or EMP & ERA
cannot address impacts
and risks arising from
modification

Exceedance of PDR (noncovered) thresholds is


assumed that impacts may be
potentially significant,
particularly if modification will
result to a next higher level of
threshold range

ECC
Amendment
/ Environmental
Performance
Report and
Management
Plan (EPRMP)182

Modification scenario and


decision process are
applicable to both nonimplemented and operating
projects with or without issued
ECCs
Note that the Chart expressly states that, [m]odification scenario and decision
process are applicable to both non-implemented and operating
projects with or without ECCs.183 To recall, the subject project has not been
constructed and is not yet operational, although horizontal clearing activities
have already been undertaken at the project site. Thus, the subject project may
be reasonably classified as a non-implemented project with an issued ECC,
which falls under Item#4 and, hence, an EPRMP is the appropriate EIA
document type.
This lengthy explanation brings us to a simple conclusion. The definitions in
DAO 2003-30 and the Revised Manual, stating that the EPRMP is applicable to
(1) operating/existing projects with a previous ECC but planning or applying for
modification or expansion, or (2) operating projects but without an ECC,
were not an exclusive list.
The afore-discussed provisions of Figure 2-4, in relation to Annex 2-1c, plainly
show that the EPRMP can, likewise, be used as an appropriate EIA document
type for a single, non-implemented project applying for a major amendment to
its ECC, involving an increase in capacity or auxiliary component, which will
exceed PDR (non-covered project) thresholds, or result in the inability of the
EMP and ERA to address the impacts and risks arising from the modification,
such as the subject project.

That the proposed modifications in the subject project fall under this class or
type of amendment was a determination made by the DENR-EMB and, absent a
showing of grave abuse of discretion, the DENR-EMBs findings are entitled to
great respect because it is the administrative agency with the special
competence or expertise to administer or implement the EIS System.
The apparent confusion of the Casio Group and the appellate court is
understandable. They had approached the issue with a legal training mindset
or background. As a general proposition, the definition of terms in a statute or
rule is controlling as to its nature and scope within the context of legal or
judicial proceedings. Thus, since the procedure adopted by the DENR-EMB
seemed to contradict or go beyond the definition of terms in the relevant
issuances, the Casio Group and the appellate court concluded that the
procedure was infirm.
However, a holistic reading of DAO 2003-30 and the Revised Manual will show
that such a legalistic approach in its interpretation and application is
unwarranted. This is primarily because the EIA process is a system, not a set of
rigid rules and definitions. In the EIA process, there is much room for flexibility
in the determination and use of the appropriate EIA document type as the
foregoing discussion has shown.184 To our mind, what should be controlling is
the guiding principle set in DAO 2003-30 in the evaluation of applications for
amendments to ECCs, as stated in Section 8.3 thereof: [r]equirements for
processing ECC amendments shall depend on the nature of the request but
shall be focused on theinformation necessary to assess the environmental
impact of such changes.185chanRoblesvirtualLawlibrary
This brings us to the next logical question, did the EPRMP provide the
necessary information in order for the DENR-EMB to assess the environmental
impact of RP Energys request relative to the first amendment?
We answer in the affirmative.
In the first place, the Casio Group never attempted to prove that the subject
EPRMP, submitted by RP Energy to the DENR-EMB, was insufficient for purposes
of evaluating the environmental impact of the proposed modifications to the
original project design. There is no claim that the data submitted were falsified
or misrepresented. Neither was there an attempt to subpoena the review
process documents of the DENR to establish that the grant of the amendment
to the ECC was done with grave abuse of discretion or to the grave prejudice of
the right to a healthful environment of those who will be affected by the
project. Instead, the Casio Group relied solely on the definition of terms in
DAO 2003-30 and the Revised Manual, which approach, as previously
discussed, was erroneous.
At any rate, we have examined the contents of the voluminous EPRMP
submitted by RP Energy and we find therein substantial sections explaining the
proposed changes as well as the adjustments that will be made in the
environmental management plan in order to address the potential

environmental impacts of the proposed modifications to the original project


design. These are summarized in the Project Fact Sheet186 of the EPRMP and
extensively discussed in Section 4187 thereof. Absent any claim or proof to the
contrary, we have no bases to conclude that these data were insufficient to
assess the environmental impact of the proposed modifications. In accordance
with the presumption of regularity in the performance of official duties, the
DENR-EMB must be deemed to have adequately assessed the environmental
impact of the proposed changes, before granting the request under the first
amendment to the subject ECC.
In sum, the Revised Manual permits the use of an EPRMP, as the appropriate
EIA document type, for major amendments to an ECC, even for an
unimplemented or non-implemented project with a previous ECC, such
as the subject project. Consequently, we find that the procedure adopted by
the DENR, in requiring RP Energy to submit an EPRMP in order to undertake the
environmental impact assessment of the planned modifications to the original
project design, relative to the first amendment to the ECC, suffers from no
infirmity.
We apply the same framework of analysis in determining the propriety of a
PDR, as the appropriate EIA document type, relative to the second amendment
to the subject ECC.
Again, the Casio Group, as sustained by the appellate court, relied on the
definitions of a PDR in DAO 2003-30 and the Revised
Manual:chanroblesvirtuallawlibrary
Project Description (PD) document, which may also be a chapter in an EIS,
that describes the nature, configuration, use of raw materials and natural
resources, production system, waste or pollution generation and control and
the activities of a proposed project. It includes a description of the use of
human resources as well as activity timelines, during the pre-construction,
construction, operation and abandonment phases. It is to be used for reviewing
co-located and single projects under Category C, as well as for Category D
projects.188chanRoblesvirtualLawlibrary
xxxx
a) For new projects: x x x For non-covered projects in Groups II and III, a x x x
Project Description Report (PDR) is the appropriate document to secure a
decision from DENR/EMB. The PDR is a must requirement for environmental
enhancement and mitigation projects in both ECAs (Group II) and NECAs (Group
III) to allow EMB to confirm the benign nature of proposed operations for
eventual issuance of a Certificate of Non-Coverage (CNC). All other Group III
(non-covered) projects do not need to submit PDRs application is at the option
of the Proponent should it need a CNC for its own purposes, e.g. financing prerequisite. For Group V projects, a PDR is required to ensure new
processes/technologies or any new unlisted project does not pose harm to the
environment. The Group V PDR is a basis for either issuance of a CNC or

classification of the project into its proper project group.


b) For operating projects with previous ECCs but planning or applying for
clearance to modify/expand or re-start operations, or for projects operating
without an ECC but applying to secure one to comply with PD 1586 regulations,
the appropriate document is not an EIS but an EIA Report incorporating the
projects environmental performance and its current Environmental
Management Plan. This report is either an (6) Environmental Performance
Report and Management Plan (EPRMP) for single project applications or
a(7) Programmatic EPRMP (PEPRMP) for co-located project applications.
However, for small project modifications, an updating of the project description
or the Environmental Management Plan with the use of the proponents
historical performance and monitoring records may
suffice. 189chanRoblesvirtualLawlibrary
xxxx
Project Description (PD) - document, which may also be a chapter in an EIS,
that describes the nature, configuration, use of raw materials and natural
resources, production system, waste or pollution generation and control and
the activities of a proposed project. It includes a description of the use of
human resources as well as activity timelines, during the pre-construction,
construction, operation and abandonment phases.190
We will no longer delve into the details of these definitions. Suffice it to state,
similar to the discussion on the EPRMP, that if we go by the strict limits of these
definitions, the PDR relative to the subject second amendment would not fall
squarely under any of the above.
However, again, these are not the only provisions governing the PDR in the
Revised Manual.
After the favorable grant of the first amendment, RP Energy applied for another
amendment to its ECC, this time in consideration of its plan to change the
configuration of the project from 2 x 150 MW to 1 x 300 MW. In practical terms,
this meant that the subject project will still produce 300 MW of electricity but
will now make use of only one boiler (instead of two) to achieve greater
efficiency in the operations of the plant. The DENR-EMB determined191 this
amendment to be minor, under Scenario 1, Item#6 of Figure 2-4:
Scenario 1: Request for Minor
Amendments
1. Typographical error
2. Extension of deadlines for submission of post-ECC requirement/s
3. Extension of ECC validity
4. Change in company name/ownership

5. Decrease in land/project area or production capacity


6. Other amendments deemed minor at the discretion of the EMB CO/RO

Director192

because (1) there is no increase in capacity; (2) it does not constitute any
significant impact; and (3) its EMP and ERA as specified in the submitted EPRMP
remain the same.193 Relative to Annex 2-1c, the requested amendment was, in
turn, determined to fall under Item#3:chanroblesvirtuallawlibrary
3.

Increase in capacity or
auxiliary component of the
original project which will
either not entail
exceedance of PDR (noncovered project) thresholds
or EMP & ERA can still
address impacts & risks
arising from modification

Non-exceedance of PDR
(non covered project)
thresholds is assumed that
impacts are not
significant;

ECC
Amendment
/ Letter Request
with brief
description of
additional
capacity
or component

Modification scenario and


decision process are
applicable to both nonimplemented and
operating projects issued
ECCs

We make the same observation, as before, that the above applies to an


unimplemented or non-implemented project with a previous ECC, like the
subject project. Although it may be noted that the proposed modification does
not squarely fall under Item#3, considering that, as previously mentioned,
there will be no increase in capacity relative to the second amendment, still, we
find nothing objectionable to this classification by the DENR-EMB, for it seems
plain enough that this classification was used because the modification was
deemed too minor to require a detailed project study like an EIS or EPRMP.
Since this is the classification most relevant and closely related to the intended
amendment, following the basic precept that the greater includes the lesser,
the DENR-EMB reasonably exercised its discretion in merely requiring a letter
request with a brief description of the modification.
As earlier noted, the PDR is the EIA document type with the least detail, and,
thus, applicable to such minor modifications. Thus, the DENR-EMB cannot be
faulted for requiring RP Energy to submit a PDR relative to its application for
the second amendment. Consequently, as before, we find that the Revised
Manual supports the procedure adopted by the DENR-EMB in requiring RP
Energy to submit a PDR in order to assess the environmental impact of the
planned modifications relative to the second amendment.
In their Petition before this Court, the Casio Group boldly asserts that [t]here
is nothing in the Project Description Report that provides an environmental

impact assessment of the effects of constructing and operating a single 300MW generating unit.196 However, to our dismay, as in their other serious
allegations in their Petition for Writ of kalikasan, the same is, likewise, baseless.
Apart from such a sweeping claim, the Casio Group has provided no evidence
or argument to back up the same.
An examination of the PDR readily reveals that it contains the details of the
proposed modifications197and an express finding that no significant
environmental impact will be generated by such modifications, as in fact it is
expected that the operation of the power plant will become more efficient as a
result of the change from 2 x 150 MW to 1 x 300 MW
configuration.198 Consequently, the PDR merely reiterates the same mitigating
measures that will presumably address the minor modifications to the project
design. Again, no evidence was presented to show substantial errors or
misrepresentations in these data or their inadequacy for providing the bases
for the DENR-EMB to assess the environmental impact of the proposed
modifications under the second amendment.
In fine, absent proof to the contrary, bearing in mind that allegations are not
proof, we sustain the procedure adopted by the DENR-EMB in requiring RP
Energy to submit a PDR and, on the basis thereof, approving the request for the
second amendment.
In another vein, we note that the appellate court proceeded from the erroneous
premise that the EIA is a document, when it repeatedly stated that the
amendments to the ECC require a new EIA, and not merely an EPRMP or PDR.
The appellate court relied on the proviso in the ECC, which stated that [a]ny
expansion of the project beyond the project description or any change in the
activity or transfer of location shall be subject to a new Environmental Impact
Assessment.199chanRoblesvirtualLawlibrary
However, as correctly pointed out by the DENR and RP Energy, the EIA is not a
document but a process:chanroblesvirtuallawlibrary
Environmental Impact Assessment (EIA) process that involves evaluating
and predicting the likely impacts of a project (including cumulative impacts) on
the environment during construction, commissioning, operation and
abandonment. It also includes designing appropriate preventive, mitigating and
enhancement measures addressing these consequences to protect the
environment and the community's welfare. The process is undertaken by,
among others, the project proponent and/or EIA Consultant, EMB, a Review
Committee, affected communities and other stakeholders.200(Emphasis
supplied)
When the proviso in the ECC, therefore, states that a new EIA shall be
conducted, this simply means that the project proponent shall be required to
submit such study or report, as warranted by the DENR Rules and
circumstances, which will sufficiently aid the DENR in making a new EIA and,
thus, determine whether to grant the proposed amendment (or project

modification). As we have seen, consistent with DAO 2003-30 and the Revised
Manual, the DENR required RP Energy to submit an EPRMP and a PDR relative
to the latters request involving the first and second amendments, respectively,
which led to the new EIA of the project in compliance with the proviso of the
ECC.
Verily, the various EIA documents, such as the EPRMP and PDR, are mere tools
used by the DENR to assess the environmental impact of a particular project.
These documents are flexibly used by the DENR, as the circumstances warrant,
in order to adequately assess the impacts of a new project or modifications
thereto. Being the administrative agency entrusted with the determination of
which EIA document type applies to a particular application for an amendment
to an ECC, falling as it does within its particular technical expertise, we must
accord great respect to its determination, absent a showing of grave abuse of
discretion or patent illegality.
In sum, we find that the appellate court erred when it ruled that the first and
second amendments to the subject ECC were invalid for failure to comply with
a new EIA and for violating DAO 2003-30 and the Revised Manual. The
appellate court failed to properly consider the applicable provisions in DAO
2003-30 and the Revised Manual on amendments to ECCs. Our examination of
the provisions on amendments to ECCs, as well as the EPRMP and PDR
themselves, shows that the DENR reasonably exercised its discretion in
requiring an EPRMP and a PDR for the first and second amendments,
respectively. Through these documents, which the DENR reviewed, a new EIA
was conducted relative to the proposed project modifications. Hence, absent
sufficient showing of grave abuse of discretion or patent illegality, relative to
both the procedure and substance of the amendment process, we uphold the
validity of these amendments.cralawred
IV.
Whether the Certificate of Non-Overlap (CNO), under Section 59 of the IPRA
Law, is a precondition to the issuance of an ECC and the lack of its prior
issuance rendered the ECC invalid.
The appellate court ruled that the ECC issued in favor of RP Energy on
December 22, 2008 is invalid because the CNO covering the subject project
was issued only on October 31, 2012 or almost four years from the time of
issuance of the ECC. Thus, the ECC was issued in violation of Section 59 of the
IPRA Law and its implementing rules which require that a CNO be obtained prior
to the issuance of a government agency of, among others, a license or permit.
In so ruling, the appellate court implicitly upheld the Casio Groups argument
that the ECC is a form of government license or permit pursuant to Section 4 of
PD 1586 which requires all entities to secure an ECC before (1) engaging in an
environmentally critical project or (2) implementing a project within an
environmentally critical area.
The DENR and RP Energy, however, argue that an ECC is not the license or

permit contemplated under Section 59 of the IPRA Law and its implementing
rules as may be deduced from the definition, nature and scope of an ECC under
DAO 2003-03 and the Revised Manual. The DENR explains that the issuance of
an ECC does not exempt the project proponent from securing other permits and
clearances as required under existing laws, including the CNO, and that the
final decision on whether a project will be implemented lies with the concerned
local government unit/s or the lead government agency which has sectoral
mandate to promote the government program where the project belongs.
We agree with the DENR and RP Energy.
Section 59, Chapter VIII of the IPRA Law provides:chanroblesvirtuallawlibrary
SEC. 59. Certification Precondition. All departments and other
governmental agencies shall henceforth be strictly enjoined from
issuing, renewing, or granting any concession, license or lease, or
entering into any production-sharing agreement, without prior certification
from the NCIP that the area affected does not overlap with any
ancestral domain. Such certification shall only be issued after a field-based
investigation is conducted by the Ancestral Domains Office of the area
concerned: Provided, That no certification shall be issued by the NCIP without
the free and prior informed and written consent of ICCs/IPs concerned:
Provided, further, That no department, government agency or governmentowned or -controlled corporation may issue new concession, license, lease, or
production sharing agreement while there is a pending application for a CADT:
Provided, finally, That the ICCs/IPs shall have the right to stop or suspend, in
accordance with this Act, any project that has not satisfied the requirement of
this consultation process. (Emphasis supplied)
While Section 9, Part II, Rule VIII of National Commission on Indigenous Peoples
(NCIP) Administrative Order No. 01-98201 states:chanroblesvirtuallawlibrary
SECTION 9. Certification Precondition Prior to Issuance of any Permits or
Licenses.
a. Need for Certification. No department of government or other agencies
shall issue, renew or grant any concession, license, lease, permit, or
enter into any production sharing agreement without a prior certification
from the NCIP that the area affected does not overlap any ancestral
domain.
b. Procedure for Issuance of Certification by NCIP.
1) The certification, above mentioned, shall be issued by the Ancestral Domain
Office, only after a field based investigation that such areas are not within any
certified or claimed ancestral domains.
2) The certification shall be issued only upon the free, prior, informed and
written consent of the ICCs/IPs who will be affected by the operation of such

concessions, licenses or leases or production-sharing agreements. A written


consent for the issuance of such certification shall be signed by at least a
majority of the representatives of all the households comprising the concerned
ICCs/IPs. (Emphasis supplied)
As may be deduced from its subtitle, Section 59 requires as a precondition,
relative to the issuance of any concession, license, lease or agreement over
natural resources, a certification issued by the NCIP that the area subject
thereof does not lie within any ancestral domain.202 This is in keeping with the
State policy to protect the rights of Indigenous Cultural
Communities/Indigenous Peoples (ICCs/IPs) to their ancestral domains in order
to ensure their economic, social and cultural well-being as well as to recognize
the applicability of customary laws governing property rights or relations in
determining the ownership and extent of such ancestral
domain.203chanRoblesvirtualLawlibrary
The IPRA Law and its implementing rules do not define the terms license and
permit so that resort to their plain or ordinary meaning in relation to the
intendment of the law is appropriate.
A license has been defined as a governmental permission to perform a
particular act (such as getting married), conduct a particular business or
occupation, operate machinery or vehicles after proving capacity and ability to
do so safely, or use property for a certain purpose204 while a permit has been
defined as a license or other document given by an authorized public official
or agency (building inspector, department of motor vehicles) to allow a person
or business to perform certain acts.205chanRoblesvirtualLawlibrary
The evident intention of Section 59, in requiring the CNO prior to the issuance
of a license or permit, is to prevent the implementation of a project that may
impair the right of ICCs/IPs to their ancestral domains. The law seeks to ensure
that a project will not overlap with any ancestral domain prior to its
implementation and thereby pre-empt any potential encroachment of, and/or
damage to the ancestral domains of ICCs/IPs without their prior and informed
consent.
With these considerations in mind, we now look at the definition, nature and
scope of an ECC in order to determine if it falls within the ambit of a license
or permit to which the CNO requirement, under Section 59 of the IPRA Law
and its implementing rules, finds application.
Section 4 of PD 1586 provides, in part:chanroblesvirtuallawlibrary
SECTION 4. Presidential Proclamation of Environmentally Critical Areas and
Projects. The President of the Philippines may, on his own initiative or upon
recommendation of the National Environmental Protection Council, by
proclamation declare certain projects, undertakings or areas in the country as
environmentally critical. No person, partnership or corporation shall
undertake or operate any such declared environmentally critical

project or area without first securing an Environmental Compliance


Certificate issued by the President or his duly authorized
representative. For the proper management of said critical project or area,
the President may by his proclamation reorganize such government offices,
agencies, institutions, corporations or instrumentalities including the realignment of government personnel, and their specific functions and
responsibilities. (Emphasis supplied)
While the above statutory provision reveals that the ECC is an indispensable
requirement before (1) the conduct of an environmentally critical project or (2)
the implementation of a project in an environmentally critical area, it does not
follow that the ECC is the license or permit contemplated under Section 59
of the IPRA Law and its implementing rules.
Section 3(d), Article I of DAO 2003-03 defines an ECC in this
wise:chanroblesvirtuallawlibrary
SECTION 3. Definition of Terms.
For the purpose of this Order, the following definitions shall be applied:
xxxx
d. Environmental Compliance Certificate (ECC) document issued by the
DENR/EMB after a positive review of an ECC application, certifying that based
on the representations of the proponent, the proposed project or undertaking
will not cause significant negative environmental impact. The ECC also certifies
that the proponent has complied with all the requirements of the EIS System
and has committed to implement its approved Environmental Management
Plan. The ECC contains specific measures and conditions that the project
proponent has to undertake before and during the operation of a project, and in
some cases, during the project's abandonment phase to mitigate identified
environmental impacts.
In turn, Section 1.0, paragraphs 3 and 6 of the Revised Manual provide, in
part:chanroblesvirtuallawlibrary
3) Purpose of the EIA Process
As a basic principle, EIA is used to enhance planning and guide decisionmaking. In this Manual, EIA is primarily presented in the context of a
requirement to integrate environmental concerns in the planning process of
projects at the feasibility stage. Through the EIA Process, adverse
environmental impacts of proposed actions are considerably reduced through a
reiterative review process of project siting, design and other alternatives, and
the subsequent formulation of environmental management and monitoring
plans. A positive determination by the DENR-EMB results to the issuance of an
Environmental Compliance Commitment (ECC) document, to be conformed to
by the Proponent and represents the projects Environmental Compliance

Certificate. The release of the ECC allows the project to proceed to the
next stage of project planning, which is the acquisition of approvals
from other government agencies and LGUs, after which the project
can start implementation.
xxxx
6) The EIA Process in Relation to Other Agencies Requirements
It is inherent upon the EIA Process to undertake a comprehensive and
integrated approach in the review and evaluation of environment-related
concerns of government agencies (GAs), local government units (LGUs) and the
general public. The subsequent EIA findings shall provide guidance and
recommendations to these entities as a basis for their decision making process.
a)
b)

c)

An Inter-agency MOA on EIS Streamlining was entered into in 1992 by


29 government agencies wherein ECC of covered projects was agreed
to be a pre-requisite of all other subsequent government approvals;
DENR Memo Circular No. 2007-08 issued on 13 July 2007 reiterates in
effect the intent of the MOA and reinforces the role of the ECC/CNC as
a guidance document to other agencies and LGUs, as follows:
i) No permits and/or clearances issued by other National
Government Agencies and Local Government Units shall be
required in the processing of ECC or CNC applications.
ii) The findings and recommendations of the EIA shall be transmitted
to relevant government agencies for them to integrate in their
decision making prior to the issuance of clearances, permits and
licenses under their mandates.
iii) The issuance of an ECC or CNC for a project under the EIS System
does not exempt the Proponent from securing other government
permits and clearances as required by other laws. The current
practice of requiring various permits, clearances and licenses only
constrains the EIA evaluation process and negates the purpose and
function of the EIA.
iv) Henceforth, all related previous instructions and other issuances
shall be made consistent with the Circular.
Permits, licenses and clearances are inclusive of other national and
local government approvals such as endorsements, resolutions,
certifications, plans and programs, which have to be cleared/approved
or other government documents required within the respective
mandates and jurisdiction of these agencies/LGUs.

xxxx
f)
The final decision whether a project will be implemented or not
lies either with the LGUs who have spatial jurisdiction over the
project or with the lead government agency who has sectoral
mandate to promote the government program where the
project belongs, e.g. DOE for energy projects; DENR-MGB for mining
projects. (Emphasis supplied)

As can be seen, the issuance of the ECC does not, by and of itself, authorize
the implementation of the project. Although it is indispensable before the
covered project can be commenced, as per Section 4 of PD 1586, the issuance
of the ECC does not, as of yet, result in the implementation of the project.
Rather, the ECC is intended to, among others, provide guidance or act as a
decision-making tool to other government agencies and LGUs which have the
final authority to grant licenses or permits, such as building permits or licenses
to operate, that will ultimately result in, or authorize the implementation of the
project or the conduct of specific activities.
As a consequence, we find that the CNO requirement under Section 59 of the
IPRA Law is not required to be obtained prior to the issuance of an ECC. As
previously discussed, Section 59 aims to forestall the implementation of a
project that may impair the right of ICCs/IPs to their ancestral domains, by
ensuring or verifying that a project will not overlap with any ancestral domain
prior to its implementation. However, because the issuance of an ECC does not
result in the implementation of the project, there is no necessity to secure a
CNO prior to an ECCs issuance as the goal or purpose, which Section 59 seeks
to achieve, is, at the time of the issuance of an ECC, not yet applicable.
In sum, we find that the ECC is not the license or permit contemplated under
Section 59 of the IPRA Law and its implementing rules. Hence, there is no
necessity to secure the CNO under Section 59 before an ECC may be issued
and the issuance of the subject ECC without first securing the aforesaid
certification does not render it invalid.cralawred
V.
Whether the Certificate of Non-Overlap (CNO), under Section 59 of the IPRA
Law, is a precondition to the consummation of the Lease and Development
Agreement (LDA) between SBMA and RP Energy and the lack of its prior
issuance rendered the LDA invalid.
We now turn to the applicability of Section 59 of the IPRA Law to the LDA
entered into between the SBMA and RP Energy on June 8, 2010. Similar to the
ECC, the LDA was entered into prior to the issuance of the CNO on October 31,
2012.
Before this Court, SBMA and RP Energy reiterate their arguments on why the
CNO is no longer necessary in the instant case, to wit:
1. Prior to entering into the LDA with RP Energy, SBMA entered into a lease
agreement with HHIC206-Philippines, Inc. and a CNO was already issued
therefor which, for all intents and purposes, is applicable to the area
leased by RP Energy being part of contiguous lots in Redondo Peninsula.

2. The site of the power plant project is very distant from the boundaries of
the lone area at the Subic Bay Freeport Zone covered by an Aeta
Communitys Certificate of Ancestral Domain Title (CADT).
3. There was no indigenous community within the vicinity of the project
area as stated in RP Energys EIS.
4. The land where the project is located was subsequently classified as
industrial by the SBMA.
5. The scoping/procedural screening checklist classified as not relevant
the issue of indigenous people.
6. Ms. Mercado, who was part of the team which prepared the EIS, testified
that she visited the project site ten or more times and did not see any
Aeta communities there.
7. Mr. Evangelista testified that the project site used to be a firing range of
the U.S. Armed Forces which would make it impossible to be a settlement
area of indigenous communities.
8. Atty. Rodriguez stated that the project site is not covered by a CADT and
that from the start of negotiations on the LDA, the SBMA Ecology Center
verified with the NCIP that there was no application for said area to be
covered by a CADT.
RP Energy further argues that, in any case, as a matter of prudence, it secured
a CNO from the NCIP. On October 31, 2012, the NCIP issued the subject CNO
over the project site, which should erase any doubt as to whether it overlaps
with an ancestral domain.
Upholding the arguments of the Casio Group, the appellate court ruled that
SBMA failed to comply with the CNO requirement and, thus, the LDA entered
into between SBMA and RP Energy is invalid. It rejected the reasons given by
SBMA and RP Energy, to wit:
1. RP Energys reliance on its own field investigation that no indigenous
community was found within the vicinity is unavailing because it was not
the field investigation by the NCIP required by the IPRA Law.
2. RP Energy acknowledged that Aetas were among the earliest settlers in
the municipality where the project will be built. Hence, it was not clearly
shown that in 2008, at the time the LDA was entered into, there were no
indigenous communities in the project site.
3. SBMAs representation that the project site is industrial relies on a letter
dated March 5, 2008 and the scoping checklist, which are hearsay
evidence.

4. The statements of Atty. Rodriguez have no probative value because he is


not an officer of SBMA Ecology Center or an officer of NCIP.
5. At the time the CNO was issued on October 31, 2012, and the field
investigation relative thereto was conducted by the NCIP, the project site
no longer reflected the actual condition on December 22, 2008 when the
LDA was entered into because the households which occupied the site
had already been relocated by then.
6. SBMA, prior to entering into a lease agreement with HHIC, secured a
CNO, but oddly did not do the same with respect to the lease agreement
with RP Energy, considering that both leases cover lands located within
the same peninsula. RP Energy appears to have been accorded a
different treatment.
7. The CNO issued in favor of HHIC cannot justify the lack of a CNO for the
power plant project because the two projects are situated in different
locations: the HHIC project is located in Sitio Agusuhin, while the power
plant project is located in Sitio Naglatore.
While we agree with the appellate court that a CNO should have been secured
prior to the consummation of the LDA between SBMA and RP Energy, and not
after, as was done here, we find that, under the particular circumstances of this
case, the subsequent and belated compliance with the CNO requirement does
not invalidate the LDA.
For convenience, and as starting point of our analysis, we reproduce Section 59
of the IPRA Law below:chanroblesvirtuallawlibrary
SEC. 59. Certification Precondition. All departments and other
governmental agencies shall henceforth be strictly enjoined from
issuing, renewing, or granting any concession, license or lease, or
entering into any production-sharing agreement, without prior certification
from the NCIP that the area affected does not overlap with any
ancestral domain. Such certification shall only be issued after a field-based
investigation is conducted by the Ancestral Domains Office of the area
concerned: Provided, That no certification shall be issued by the NCIP without
the free and prior informed and written consent of ICCs/IPs concerned:
Provided, further, That no department, government agency or governmentowned or -controlled corporation may issue new concession, license, lease, or
production sharing agreement while there is a pending application for a CADT:
Provided, finally, That the ICCs/IPs shall have the right to stop or suspend, in
accordance with this Act, any project that has not satisfied the requirement of
this consultation process. (Emphasis supplied)
The law is clear but its actual operation or application should not be interpreted
beyond the bounds of reason or practicality.
We explain.

Indeed, a CNO is required prior to the grant of a lease by all government


agencies, including the SBMA. Again, the evident intention is to prevent the
impairment of the right of ICCs/IPs to their ancestral domains. A lease, such as
the LDA under consideration, would result in, among others, granting RP
Energy the right to the use and enjoyment of the project site to the exclusion of
third parties.207 As such, the lease could conceivably encroach on an ancestral
domain if the CNO is not first obtained.
However, implicit in the operation of Section 59 is the practical reality that the
concerned government agency must make a preliminary determination on
whether or not to obtain the required certification in the first place. To expound,
a government agency, which wishes to lease part of its property located near
Padre Faura Street, Manila City could not, and should not be reasonably
expected to obtain the CNO, as it is obviously inapplicable to its planned lease.
In contrast, a government agency, which intends to lease a property in a valley
or mountainous region, where indigenous communities are known to reside,
conduct hunting activities, perform rituals, or carry out some other activities,
should be reasonably expected to secure the CNO prior to consummating the
planned lease with third persons.
Even if the indigenous community does not actually reside on the proposed
lease site, the government agency would still be required to obtain the
CNO precisely to rule out the possibility that the proposed lease site
encroaches upon an ancestral domain. The reason for this is that an ancestral
domain does not only cover the lands actually occupied by an indigenous
community, but all areas where they have a claim of ownership, through time
immemorial use, such as hunting, burial or worship grounds and to which they
have traditional access for their subsistence and other traditional
activities.208chanRoblesvirtualLawlibrary
The wording of the law itself seems to presuppose that if the concession, lease,
license or production-sharing agreement is over natural resources, then the
CNO should be first obtained. This is because the last term, production-sharing
agreement, normally refers to natural resources. But the problem arises as to
what should be considered natural resources; for a vacant lot, near Padre
Faura Street, or a forest land, in Mt. Banahaw, could both be considered as
natural resources, depending on the restrictive or expansive understanding of
that term.
After due consideration, we find that the proper rule of action, for purposes of
application of Section 59, is that all government offices should undertake
proper and reasonable diligence in making a preliminary determination on
whether to secure the CNO, bearing in mind the primordial State interest in
protecting the rights of ICCs/IPs to their ancestral domains. They should
consider the nature and location of the areas involved; the historical
background of the aforesaid areas relative to the occupation, use or claim of
ownership by ICCs/IPs; the present and actual condition of the aforesaid areas
like the existence of ICCs/IPs within the area itself or within nearby territories;

and such other considerations that would help determine whether a CNO
should be first obtained prior to granting a concession, lease, license or permit,
or entering into a production-sharing agreement.
If there are circumstances that indicate that a claim of ownership by ICCs/IPs
may be present or a claim of ownership may be asserted in the future, no
matter how remote, the proper and prudent course of action is to obtain the
CNO. In case of doubt, the doubt should be resolved in favor of securing the
CNO and, thus, the government agency is under obligation to secure the
aforesaid certification in order to protect the interests and rights of ICCs/IPs to
their ancestral domains. This must be so if we are to accord the proper respect
due to, and adequately safeguard the interests and rights of, our brothers and
sisters belonging to ICCs/IPs in consonance with the constitutional policy 209 to
promote and protect the rights of ICCS/IPs as fleshed out in the IPRA Law and
its implementing rules.
In the case at bar, we find, applying this rule of action, that the SBMA should
have first secured a CNO before entering into the LDA with RP Energy for the
following reasons.
First, the Subic area is historically known to be the home of our brothers and
sisters belonging to the Aeta communities. In particular, the EIS210 itself of RP
Energy noted that Aeta communities originally occupied the proposed project
site of the power plant. Thus, even if we assume that, at the time of the ocular
inspection of the proposed project site in 2008, there were no Aeta
communities seen thereat, as claimed by RP Energy, the exercise of reasonable
prudence should have moved SBMA and RP Energy to secure a CNO in order to
rule out the possibility that the project site may overlap with an ancestral
domain. This is especially so, in view of the observation previously made, that
lack of actual occupation by an indigenous community of the area does not
necessarily mean that it is not a part of an ancestral domain because the latter
encompasses areas that are not actually occupied by indigenous communities
but are used for other purposes like hunting, worship or burial grounds.
Second, SBMA and RP Energy claim that the SBMA Ecology Center verified with
the NCIP that the project site does not overlap with an ancestral domain.
However, the person, who allegedly did the verification, and the officer from
the NCIP, who was contacted in this alleged verification, were not presented in
court. Assuming that this verification did take place and that the SBMA Ecology
Center determined that there is no pending application for a CADT covering the
project site and that the presently recognized CADT of Aeta communities is too
far away from the project site, it still does not follow that the CNO under
Section 59 should have been dispensed with.
The acts of individual members of a government agency, who allegedly
checked with the NCIP that the project site does not overlap with an ancestral
domain, cannot substitute for the CNO required by law. The reason is obvious.
Such posture would circumvent the noble and laudable purposes of the law in
providing the CNO as the appropriate mechanism in order to validly and

officially determine whether a particular project site does not overlap with an
ancestral domain. It would open the doors to abuse because a government
agency can easily claim that it checked with the NCIP regarding any application
for an ancestral domain over a proposed project site while stopping short of
securing a CNO. To reiterate, the legally mandated manner to verify if a project
site overlaps with an ancestral domain is the CNO, and not through personal
verification by members of a government agency with the NCIP.
Third, that the project site was formerly used as the firing range of the U.S.
Armed Forces does not preclude the possibility that a present or future claim of
ancestral domain may be made over the aforesaid site. The concept of an
ancestral domain indicates that, even if the use of an area was interrupted by
the occupation of foreign forces, it may still be validly claimed to be an
ancestral domain.211chanRoblesvirtualLawlibrary
Fourth, that the project site was subsequently classified by the SBMA as
forming part of an industrial zone does not exempt it from the CNO
requirement. The change in the classification of the land is not an exception to
the CNO requirement under the IPRA Law. Otherwise, government agencies can
easily defeat the rights of ICCs/IPs through the conversion of land use.
Fifth, SBMA argues that the CNO issued to HHIC should, for all intents and
purposes, be applicable to RP Energy. However, as correctly ruled by the
appellate court, the CNO issued to HHICs shipyard cannot be extended to RP
Energys project site because they involve two different locations although
found within the same land mass. The CNO issued in favor of HHIC clearly
states that the findings in the CNO are applicable only to the shipyard location
of HHIC.
Last, the steps taken by SBMA, in securing a CNO prior to its lease agreement
with HHIC, was the proper and prudent course of action that should have been
applied to the LDA with RP Energy. It does not matter that HHIC itself asked for
the CNO prior to entering into a lease agreement with SBMA, as claimed by
SBMA, while RP Energy did not make such a request because, as we have
discussed, SBMA had the obligation, given the surrounding circumstances, to
secure a CNO in order to rule out the possibility that the project site overlapped
with an ancestral domain.
All in all, we find, applying the foregoing rule of action, that SBMA should have
secured a CNO before entering into the LDA with RP Energy. Considering that
Section 59 is a prohibitory statutory provision, a violation thereof would
ordinarily result in the nullification of the contract.212 However, we rule that the
harsh consequences of such a ruling should not be applied to the case at bar.
The reason is that this is the first time that we lay down the foregoing rule of
action so much so that it would be inequitable to retroactively apply its effects
with respect to the LDA entered into between SBMA and RP Energy. We also
note that, under the particular circumstances of this case, there is no showing
that SBMA and RP Energy had a deliberate or ill intent to escape, defeat or

circumvent the mandate of Section 59 of the IPRA Law. On the contrary, they
appear to have believed in good faith,albeit erroneously, that a CNO was no
longer needed because of the afore-discussed defenses they raised herein.
When the matter of lack of a CNO relative to the LDA was brought to their
attention, through the subject Petition for Writ of kalikasan filed by the Casio
Group, RP Energy, with the endorsement of SBMA, promptly undertook to
secure the CNO, which was issued on October 31, 2012 and stated that the
project site does not overlap with any ancestral
domain.213chanRoblesvirtualLawlibrary
Thus, absent proof to the contrary, we are not prepared to rule that SBMA and
RP Energy acted in bad faith or with inexcusable negligence, considering that
the foregoing rule of action has not heretofore been laid down by this Court. As
a result, we hold that the LDA should not be invalidated due to equitable
considerations present here.
By so ruling, we clarify that we reject RP Energys claim that the belated
submission of the CNO is an over compliance on its part. Quite the contrary,
as we have discussed, the CNO should have been first secured given the
surrounding circumstances of this case.
In the same vein, we reject SBMAs argument that the belated application for,
and submission of the CNO cured whatever defect the LDA had. We have
purposely avoided a ruling to the effect that a CNO secured subsequent to the
concession, lease, license, permit or production-sharing agreement will cure
the defect. Such a ruling would lead to abuse of the CNO requirement since the
defect can be cured anyway by a subsequent and belated application for a
CNO. Government agencies and third parties, either through deliberate intent
or negligence, may view it as an excuse not to timely and promptly secure the
CNO, even when the circumstances warrant the application for a CNO under
the afore-discussed rule of action, to the damage and prejudice of ICCs/IPs.
Verily, once the concession, lease, license or permit is issued, or the agreement
is entered into without the requisite CNO, consequent damages will have
already occurred if it later turns out that the site overlaps with an ancestral
domain. This is so even if the ICCs/IPs can have the project stopped upon
discovery that it overlapped with their ancestral domain under the
last proviso214 of Section 59. To prevent this evil, compliance with the CNO
requirement should be followed through the afore-discussed rule of action.
In sum, we rule that a CNO should have been secured prior to the
consummation of the LDA between SBMA and RP Energy. However, considering
that this is the first time we lay down the rule of action appropriate to the
application of Section 59, we refrain from invalidating the LDA due to equitable
considerations.cralawred
VI.
Whether compliance with Section 27, in relation to Section 26, of the LGC (i.e.,
approval of the concerned sanggunian requirement) is necessary prior to the

implementation of the power plant project.


Sustaining the arguments of the Casio Group, the appellate court ruled that
the subject project cannot be constructed and operated until after the prior
approval of the concerned sanggunian requirement, under Section 27 of the
LGC, is complied with. Hence, the ECC and LDA could not be validly granted
and entered into without first complying with the aforesaid provision. It held
that all the requisites for the application of the aforesaid provision are present.
As to the pertinent provisions of RA 7227 or The Bases Conversion and
Development Act of 1992, which grants broad powers of administration to the
SBMA over the Subic Special Economic Zone (SSEZ), the appellate court ruled
that RA 7227 contains a provision recognizing the basic autonomy of the LGUs
which joined the SSEZ. Thus, the LGC and RA 7227 should be harmonized
whereby the concerned sanggunians power to approve under Section 27 must
be respected.
The DENR impliedly agrees with the Casio Group that compliance with Section
27 is still required but without clearly elaborating its reasons therefor.
The SBMA and RP Energy, however, argue that the prior approval of the
concerned sanggunianrequirement, under Section 27, is inapplicable to the
subject project because it is located within the SSEZ. The LGC and RA 7227
cannot be harmonized because of the clear mandate of the SBMA to govern
and administer all investments and businesses within the SSEZ. Hence, RA
7227 should be deemed as carving out an exception to the prior approval of
the concerned sanggunian requirement insofar as the SSEZ is concerned.
We agree with the SBMA and RP Energy.
Preliminarily, we note that Sections 26 and 27 of the LGC contemplate two
requirements: (1) prior consultations and (2) prior approval of the
concerned sanggunian, viz:chanroblesvirtuallawlibrary
SECTION 26. Duty of National Government Agencies in the Maintenance of
Ecological Balance. It shall be the duty of every national agency or
government-owned or -controlled corporation authorizing or involved in the
planning and implementation of any project or program that may cause
pollution, climatic change, depletion of non-renewable resources, loss of
cropland, rangeland, or forest cover, and extinction of animal or plant species,
to consult with the local government units, nongovernmental organizations,
and other sectors concerned and explain the goals and objectives of the project
or program, its impact upon the people and the community in terms of
environmental or ecological balance, and the measures that will be undertaken
to prevent or minimize the adverse effects thereof. (Emphasis supplied)
SECTION 27. Prior Consultations Required. No project or program shall
be implemented by government authorities unless the consultations
mentioned in Sections 2 (c) and 26 hereof are complied with, and prior
approval of the sanggunian concerned is obtained: Provided, That

occupants in areas where such projects are to be implemented shall not be


evicted unless appropriate relocation sites have been provided, in accordance
with the provisions of the Constitution. (Emphasis supplied)
In the case at bar, the Casio Group only questions the alleged lack of the prior
approval of the concerned sanggunians under Section 27 of the LGC. Thus, we
shall limit our discussion to the resolution of this issue. (Parenthetically, we
note that prior consultations, as required by Section 26 of the LGC, appear to
have been complied with. This may be gleaned from the EIS of RP Energy which
contains the documentation of the extensive public consultations held, under
the supervision of the DENR-EMB, relative to the subject project, as required by
the EIA process,215as well as the social acceptability policy consultations
conducted by the SBMA, which generated the document entitled Final Report:
Social Acceptability Process for RP Energy, Inc.s 600-MW Coal Plant Project, as
noted and discussed in an earlier subsection.216)
We also note that the Casio Group argues that the approval of the
concerned sanggunian requirement was necessary prior to the issuance of the
ECC and the consummation of the LDA; the absence of which invalidated the
ECC and LDA.
We shall no longer discuss at length whether the approval of the
concerned sanggunian requirement must be complied with prior to the
issuance of an ECC. As discussed in an earlier subsection, the issuance of an
ECC does not, by itself, result in the implementation of the project. Hence, the
purpose or goal of Sections 26 and 27 of the LGC, like Section 59 of the IPRA
Law, does not yet obtain and, thus, the ECC may be issued even without prior
compliance with Sections 26 and 27 of the LGC.
We, thus, limit the discussion as to whether the approval of the
concerned sanggunian requirement should have been complied with prior to
the consummation of the LDA, considering that the LDA is part of the
implementation of the subject project and already vests in RP Energy the right
to the use and enjoyment of the project site, as in fact horizontal clearing
activities were already undertaken by RP Energy at the project site by virtue of
the LDA.
The prior approval of the concerned sanggunian requirement is an attribute and
implementation of the local autonomy granted to, and enjoyed by LGUs under
the Constitution.217 The LGU has the duty to protect its constituents and
interests in the implementation of the project. Hence, the approval of the
concerned sanggunian is required by law to ensure that local communities
partake in the fruits of their own backyard.218chanRoblesvirtualLawlibrary
For Section 27, in relation to Section 26, to apply, the following requisites must
concur: (1) the planning and implementation of the project or program is
vested in a national agency or government-owned and-controlled
corporation, i.e., national programs and/or projects which are to be
implemented in a particular local community; and (2) the project or program

may cause pollution, climatic change, depletion of non-renewable resources,


loss of cropland, rangeland, or forest cover, extinction of animal or plant
species, or call for the eviction of a particular group of people residing in the
locality where the project will be implemented.219chanRoblesvirtualLawlibrary
In the case at bar, the two requisites are evidently present: (1) the planning
and implementation of the subject project involves the Department of Energy,
DENR, and SBMA; and (2) the subject project may cause pollution, climatic
change, depletion of non-renewable resources, loss of cropland, rangeland, or
forest cover, and extinction of animal or plant species, or call for the eviction of
a particular group of people residing in the locality where the project will be
implemented. Hence, Section 27 of the LGC should ordinarily apply.
It is not disputed that no approval was sought from the
concerned sanggunians relative to the subject project. What is more, the
affected LGUs have expressed their strong oppositions to the project through
various sanggunian resolutions.220 However, it is also undisputed that the
subject project is located within the SSEZ and, thus, under the territorial
jurisdiction of the SBMA pursuant to RA 7227.
Thus, we are tasked to determine the applicability of the prior approval of the
concerned sanggunianrequirement, under Section 27 of the LGC, relative to a
project within the territorial jurisdiction of the SBMA under RA 7227.
RA 7227 was passed on March 13, 1992 in the aftermath of the Mount Pinatubo
eruption and the closure of the Subic Naval Base of the U.S. Armed Forces. It
sought to revive the affected areas by creating and developing the SSEZ into a
self-sustaining industrial, commercial, financial and investment center to
generate employment opportunities in and around the zone and to attract and
promote productive foreign investments.221 The SSEZ covered the City of
Olangapo and Municipality of Subic in the Province of Zambales and the lands
and its contiguous extensions occupied by the former U.S. Naval Base, which
traversed the territories of the Municipalities of Hermosa and Morong in the
Province of Bataan. Under Section 12 of RA 7227, the creation of the SSEZ was
made subject to the concurrence by resolution of the respective sanggunians of
the City of Olongapo and the Municipalities of Subic, Morong and
Hermosa, viz:chanroblesvirtuallawlibrary
SECTION 12. Subic Special Economic Zone. Subject to the concurrence by
resolution of the sangguniang panlungsod of the City of Olongapo and
the sangguniang bayan of the Municipalities of Subic, Morong and Hermosa,
there is hereby created a Special Economic and Free-port Zone consisting of
the City of Olongapo and the Municipality of Subic, Province of Zambales, the
lands occupied by the Subic Naval Base and its contiguous extensions as
embraced, covered, and defined by the 1947 Military Bases Agreement
between the Philippines and the United States of America as amended, and
within the territorial jurisdiction of the Municipalities of Morong and Hermosa,
Province of Bataan, hereinafter referred to as the Subic Special Economic Zone
whose metes and bounds shall be delineated in a proclamation to be issued by

the President of the Philippines. Within thirty (30) days after the approval of
this Act, each local government unit shall submit its resolution of concurrence
to join the Subic Special Economic Zone to the office of the President.
Thereafter, the President of the Philippines shall issue a proclamation defining
the metes and bounds of the Zone as provided herein.
Subsequently, the aforesaid sanggunians submitted their respective resolutions
of concurrence and the President issued Presidential Proclamation No. 532,
Series of 1995, defining the metes and bounds of the SSEZ.
In Executive Secretary v. Southwing Heavy Industries, Inc.,222 we described the
concept of SSEZ as a Freeport:chanroblesvirtuallawlibrary
The Freeport was designed to ensure free flow or movement of goods and
capital within a portion of the Philippine territory in order to attract investors to
invest their capital in a business climate with the least governmental
intervention. The concept of this zone was explained by Senator Guingona in
this wise:chanroblesvirtuallawlibrary
Senator Guingona. Mr. President, the special economic zone is successful in
many places, particularly Hong Kong, which is a free port. The difference
between a special economic zone and an industrial estate is simply expansive
in the sense that the commercial activities, including the establishment of
banks, services, financial institutions, agro-industrial activities, maybe
agriculture to a certain extent.
This delineates the activities that would have the least of government
intervention, and the running of the affairs of the special economic
zone would be run principally by the investors themselves, similar to a
housing subdivision, where the subdivision owners elect their
representatives to run the affairs of the subdivision, to set the
policies, to set the guidelines.
We would like to see Subic area converted into a little Hong Kong, Mr.
President, where there is a hub of free port and free entry, free duties
and activities to a maximum spur generation of investment and jobs.
While the investor is reluctant to come in the Philippines, as a rule, because of
red tape and perceived delays, we envision this special economic zone to be an
area where there will be minimum government interference.
The initial outlay may not only come from the Government or the Authority as
envisioned here, but from them themselves, because they would be
encouraged to invest not only for the land but also for the buildings and
factories. As long as they are convinced that in such an area they can do
business and reap reasonable profits, then many from other parts, both local
and foreign, would invest, Mr. President.223 (Emphasis in the original)
To achieve the above-mentioned purposes, the law created SBMA to administer

the SSEZ. In the process, SBMA was granted broad and enormous powers as
provided for under Section 13(b) of RA 7227:chanroblesvirtuallawlibrary
Sec. 13. The Subic Bay Metropolitan Authority.
xxxx
(b) Powers and functions of the Subic Bay Metropolitan Authority - The Subic
Bay Metropolitan Authority, otherwise known as the Subic Authority, shall have
the following powers and function:
(1) To operate, administer, manage and develop the ship repair and ship
building facility, container port, oil storage and refueling facility and Cubi Air
Base within the Subic Special Economic and Free-port Zone as a free market in
accordance with the policies set forth in Section 12 of this Act;
(2) To accept any local or foreign investment, business or enterprise,
subject only to such rules and regulations to be promulgated by the Subic
Authority in conformity with the policies of the Conversion Authority without
prejudice to the nationalization requirements provided for in the Constitution;
(3) To undertake and regulate the establishment, operation and
maintenance of utilities, other services and infrastructure in the Subic
Special Economic Zoneincluding shipping and related business, stevedoring
and port terminal services or concessions, incidental thereto and airport
operations in coordination with the Civil Aeronautics Board, and to fix just and
reasonable rates, fares charges and other prices therefor;
(4) To construct, acquire, own, lease, operate and maintain on its own
or through contract, franchise, license permits bulk purchase from the
private sector and build-operate transfer scheme or joint-venture the
required utilities and infrastructure in coordination with local government
units and appropriate government agencies concerned and in conformity with
existing applicable laws therefor;
(5) To adopt, alter and use a corporate seal; to contract, lease, sell, dispose,
acquire and own properties; to sue and be sued in order to carry out its duties
and functions as provided for in this Act and to exercise the power of eminent
domain for public use and public purpose;
(6) Within the limitation provided by law, to raise and/or borrow the necessary
funds from local and international financial institutions and to issue bonds,
promissory notes and other securities for that purpose and to secure the same
by guarantee, pledge, mortgage deed of trust, or assignment of its properties
held by the Subic Authority for the purpose of financing its projects and
programs within the framework and limitation of this Act;
(7) To operate directly or indirectly or license tourism related activities subject
to priorities and standards set by the Subic Authority including games and

amusements, except horse racing, dog racing and casino gambling which shall
continue to be licensed by the Philippine Amusement and Gaming Corporation
(PAGCOR) upon recommendation of the Conversion Authority; to maintain and
preserve the forested areas as a national park;
(8) To authorize the establishment of appropriate educational and medical
institutions;
(9) To protect, maintain and develop the virgin forests within the baselands,
which will be proclaimed as a national park and subject to a permanent total
log ban, and for this purpose, the rules and regulations of the Department of
Environment and Natural Resources and other government agencies directly
involved in the above functions shall be implemented by the Subic Authority;
(10) To adopt and implement measures and standards for environmental
pollution control of all areas within its territory, including but not limited to all
bodies of water and to enforce the same. For which purpose the Subic Authority
shall create an Ecology Center; and
(11) To exercise such powers as may be essential, necessary or incidental to
the powers granted to it hereunder as well as to carry out the policies and
objectives of this Act. (Emphasis supplied)
The Implementing Rules of RA 7227 further provide:chanroblesvirtuallawlibrary
Sec. 11. Responsibilities of the SBMA. Other than the powers and functions
prescribed in Section 10 of these Rules, the SBMA shall have the following
responsibilities:
(a) The SBMA shall exercise authority and jurisdiction over all economic activity
within the SBF224chanRoblesvirtualLawlibrary
xxxx
(f) Consistent with the Constitution, the SBMA shall have the following powers
to enforce the law and these Rules in the SBF:
xxxx
(8) to issue, alter, modify, suspend or revoke for cause, any permit, certificate,
license, visa or privilege allowed under the Act or these Rules;
xxxx
(11) to promulgate such other rules, regulations and circulars as may be
necessary, proper or incidental to carry out the policies and objectives of the
Act, these Rules, as well as the powers and duties of the SBMA thereunder. 225
As can be seen, the SBMA was given broad administrative powers over the

SSEZ and these necessarily include the power to approve or disapprove the
subject project, which is within its territorial jurisdiction. But, as previously
discussed, the LGC grants the concerned sanggunians the power to approve
and disapprove this same project. The SBMA asserts that its approval of the
project prevails over the apparent disapproval of the concerned sanggunians.
There is, therefore, a real clash between the powers granted under these two
laws.
Which shall prevail?
Section 12 of RA 7227 provides:ChanRoblesVirtualawlibrary
Sec. 12. Subic Special Economic Zone. x x x
The abovementioned zone shall be subjected to the following policies:
(a) Within the framework and subject to the mandate and limitations of the
Constitution and the pertinent provisions of the Local Government Code, the
Subic Special Economic Zone shall be developed into a self-sustaining,
industrial, commercial, financial and investment center to generate
employment opportunities in and around the zone and to attract and promote
productive foreign investments;
xxxx
(i) Except as herein provided, the local government units comprising the
Subic Special Economic Zone shall retain their basic autonomy and
identity. The cities shall be governed by their respective charters and the
municipalities shall operate and function in accordance with Republic Act No.
7160, otherwise known as the Local Government Code of 1991. (Emphasis
supplied)
This section sets out the basic policies underlying the creation of the SSEZ.
Indeed, as noted by the appellate court, Section 12(i) expressly recognizes the
basic autonomy and identity of the LGUs comprising the SSEZ. However, the
clause [e]xcept as herein provided unambiguously provides that the LGUs do
not retain their basic autonomy and identity when it comes to matters specified
by the law as falling under the powers, functions and prerogatives of the SBMA.
In the case at bar, we find that the power to approve or disapprove projects
within the SSEZ is one such power over which the SBMAs authority prevails
over the LGUs autonomy. Hence, there is no need for the SBMA to secure the
approval of the concerned sanggunians prior to the implementation of the
subject project.
This interpretation is based on the broad grant of powers to the SBMA over all
administrative matters relating to the SSEZ under Section 13 of RA 7227, as
afore-discussed. Equally important, under Section 14, other than those
involving defense and security, the SBMAs decision prevails in case of conflict

between the SBMA and the LGUs in all matters concerning the
SSEZ, viz.:chanroblesvirtuallawlibrary
Sec. 14. Relationship with the Conversion Authority and the Local Government
Units.
(a) The provisions of existing laws, rules and regulations to the
contrary notwithstanding, the Subic Authority shall exercise
administrative powers, rule-making and disbursement of funds over
the Subic Special Economic Zone in conformity with the oversight function
of the Conversion Authority.
(b) In case of conflict between the Subic Authority and the local
government units concerned on matters affecting the Subic Special
Economic Zone other than defense and security, the decision of the Subic
Authority shall prevail. (Emphasis supplied)
Clearly, the subject project does not involve defense or security, but rather
business and investment to further the development of the SSEZ. Such is in line
with the objective of RA 7227 to develop the SSEZ into a self-sustaining
industrial, commercial, financial and investment center. Hence, the decision of
the SBMA would prevail over the apparent objections of the
concerned sanggunians of the LGUs.
Significantly, the legislative deliberations on RA 7227, likewise, support and
confirm the foregoing interpretation. As earlier noted, Section 13 b(4) of RA
7227 provides:chanroblesvirtuallawlibrary
Sec. 13. The Subic Bay Metropolitan Authority.
xxxx
(b) Powers and functions of the Subic Bay Metropolitan Authority - The Subic
Bay Metropolitan Authority, otherwise known as the Subic Authority, shall have
the following powers and function:
xxxx
(4) To construct, acquire, own, lease, operate and maintain on its own or
through contract, franchise, license permits bulk purchase from the private
sector and build-operate transfer scheme or joint-venture the required utilities
and infrastructure in coordination with local government units and appropriate
government agencies concerned and in conformity with existing applicable
laws therefor;
In the Senate, during the period of amendments, when the provision which
would eventually become the afore-quoted Section 13 b(4) of RA 7227 was
under consideration, the following exchanges took
place:chanroblesvirtuallawlibrary

Senator Laurel. Mr. President.


The President. Senator Laurel is recognized.
Senator Laurel. Relative to line 27 up to line 31 of page 16, regarding the
provision to the effect that the Authority will have the following functions: to
construct, acquire, own, etcetera, that is all right.
My motion is that we amend this particular line, starting from the word
structures, by deleting the words that follow on line 31, which states: in
coordination with local government units and, and substitute the following in
place of those words: SUBJECT TO THE APPROVAL OF THE SANGGUNIAN
OF THE AFFECTED LOCAL GOVERNMENT UNITS AND IN COORDINATION
WITH.
So, this paragraph will read, as follows: to construct, own, lease, operate, and
maintain on its own or through contract, franchise, license permits, bulk
purchase from the private sector and build-operate-transfer scheme or joint
venture the required utilities and infrastructure SUBJECT TO THE APPROVAL OF
THE SANGGUNIAN OF THE AFFECTED LOCAL GOVERNMENT UNITS AND IN
coordination with appropriate government agencies concerned and in
conformity with existing applicable laws therefor.
The President. What does the Sponsor say?
Senator Shahani. I believe this would cripple the Authority. I would like
to remind our Colleagues that in the Board of Directors, the
representatives of the local government units that agree to join with
the Subic Special Economic Zone will be members of the Board so that
they will have a say, Mr. President. But if we say subject, that is a
very strong word. It really means that they will be the ones to
determine the policy.
So, I am afraid that I cannot accept this amendment, Mr. President.
Senator Laurel. May I respond or react, Mr. President.
The President. Yes.
Senator Laurel. The Constitution is there, very categorical in the promotion and
encouragement of local autonomy, and mandating Congress to enact the
necessary Local Government Code with emphasis on local autonomy.
We have now Section 27 of the new Local Government Code which actually
provides that for every project in any local government territory, the conformity
or concurrence of the Sanggunian of every such local government unit shall be
secured in the form of resolutionthe consent of the Sanggunian.
The President. Well, both sides have already been heard. There is the Laurel

amendment that would make the power of the Subic Bay Metropolitan
Authority to construct, acquire, own, lease, operate and maintain on its own or
through contract, franchise, license, permits, bulk purchases from private
sector, build-operate-and-transfer scheme, or joint venture, the required
utilities and infrastructure, subject to approval by the appropriate Sanggunian
of the local government concerned.
This amendment to the amendment has been rejected by the Sponsor. So, we
are voting now on this amendment.
As many as are in favor of the Laurel amendment, say Aye. (Few Senators:
Aye.)
Those who are against the said amendment, say Nay. (Several Senators: Nay.)
Senator Laurel. Mr. President, may I ask for a nominal voting.
The President. A nominal voting should be upon the request of one-fifth of the
Members of the House, but we can accommodate the Gentleman by asking for
a division of the House.
Therefore, those in favor of the Laurel amendment, please raise their right
hands. (Few Senators raised their right hands.)
Senator Laurel. I was asking, Mr. President, for a nominal voting.
The President. A nominal voting can be had only upon motion of one-fifth of the
Members of the Body.
Senator Laurel. That is correct, Mr. President. But this is such an important
issue being presented to us, because this question is related to the other
important issue, which is: May an elected public official of a particular
government unit, such as a town or municipality, participate as a member of
the Board of Directors of this particular zone.
The President. The ruling of the Chair stands. The division of the House is
hereby directed.
As many as are in favor of the Laurel amendment, please raised (sic) their right
hands. (Few Senators raised their right hands.)
As many as are against the said amendment, please do likewise. (Several
Senators raised their right hands.)
The amendment is lost.226 (Emphasis supplied)
Indubitably, the legislature rejected the attempts to engraft Section 27s prior
approval of the concernedsanggunian requirement under the LGC into RA 7227.
Hence, the clear intent was to do away with the approval requirement of the

concerned sanggunians relative to the power of the SBMA to approve or


disapprove a project within the SSEZ.
The power to create the SSEZ is expressly recognized in Section 117 of the
LGC, viz.:chanroblesvirtuallawlibrary
TITLE VIII.
Autonomous Special Economic Zones
SECTION 117. Establishment of Autonomous Special Economic Zones. The
establishment by law of autonomous special economic zones in selected areas
of the country shall be subject to concurrence by the local government units
included therein.
When the concerned sanggunians opted to join the SSEZ, they were, thus, fully
aware that this would lead to some diminution of their local autonomy in order
to gain the benefits and privileges of being a part of the SSEZ.
Further, the point of Senator Shahani that the representation of the concerned
LGUs in the Board of Directors will compensate for the diminution of their local
autonomy and allow them to be represented in the decision-making of the
SBMA is not lost on us. This is expressly provided for in Section 13(c) of RA
7227, viz:chanroblesvirtuallawlibrary
SECTION 13. The Subic Bay Metropolitan Authority.
xxxx
(c) Board of Directors. The powers of the Subic Authority shall be vested in
and exercised by a Board of Directors, hereinafter referred to as the Board,
which shall be composed of fifteen (15) members, to wit:
(1) Representatives of the local government units that concur to join
the Subic Special Economic Zone;
(2) Two (2) representatives from the National Government;
(3) Five (5) representatives from the private sector coming from the present
naval stations, public works center, ship repair facility, naval supply depot and
naval air station; and
(4) The remaining balance to complete the Board shall be composed of
representatives from the business and investment sectors. (Emphasis supplied)
SBMAs undisputed claim is that, during the board meeting when the subject
project was approved, except for one, all the representatives of the concerned
LGUs were present and voted to approve the subject project. 227 Verily, the
wisdom of the law creating the SSEZ; the wisdom of the choice of the

concerned LGUs to join the SSEZ; and the wisdom of the mechanism of
representation of the concerned LGUs in the decision-making process of the
SBMA are matters outside the scope of the power of judicial review. We can
only interpret and apply the law as we find it.
In sum, we find that the implementation of the project is not subject to the
prior approval of the concerned sanggunians, under Section 27 of the LGC, and
the SBMAs decision to approve the project prevails over the apparent
objections of the concerned sanggunians of the LGUs, by virtue of the clear
provisions of RA 7227. Thus, there was no infirmity when the LDA was entered
into between SBMA and RP Energy despite the lack of approval of the
concerned sanggunians.cralawred
VII.
Whether the validity of the third amendment to the ECC can be resolved by the
Court.
The Casio Group argues that the validity of the third amendment should have
been resolved by the appellate court because it is covered by the broad issues
set during the preliminary conference.
RP Energy counters that this issue cannot be resolved because it was expressly
excluded during the preliminary conference.
The appellate court sustained the position of RP Energy and ruled that this
issue was not included in the preliminary conference so that it cannot be
resolved without violating the right to due process of RP Energy.
We agree with the appellate court.
Indeed, the issue of the validity of the third amendment to the ECC was not
part of the issues set during the preliminary conference, as it appears at that
time that the application for the third amendment was still ongoing. The
following clarificatory questions during the aforesaid conference confirm
this, viz.:chanroblesvirtuallawlibrary
J. LEAGOGO:
So what are you questioning in your Petition?
ATTY. RIDON:
We are questioning the validity of the amendment, Your Honor.
J. LEAGOGO:
Which amendment?
ATTY. RIDON:
From 2 x 150 to 1 x 300, Your Honor.

J. LEAGOGO:
Your Petition does not involve the 2 x 300 which is still pending with the DENR.
Because you still have remedies there, you can make your noise there, you can
question it to your heart[]s content because it is still pending
xxxx
J. LEAGOGO:
Atty. Ridon, I go back to my question. Were not yet talking of the legal points
here. Im just talking of what are you questioning. You are questioning the 1 x
300?
ATTY. RIDON:
Yes, Your Honor.
J. LEAGOGO:
Because it was 2 x 150 and then 1 x 300?
ATTY. RIDON:
Yes, Your Honor.
J. LEAGOGO:
Up to that point?
ATTY. RIDON:
Yes, Your Honor.
J. LEAGOGO:
Because there is no amended ECC yet for the 2 x 300 or 600. Thats clear
enough for all of us.
ATTY. RIDON:
Yes, Your Honor.228
Given the invocation of the right to due process by RP Energy, we must sustain
the appellate courts finding that the issue as to the validity of the third
amendment cannot be adjudicated in this case.
Refutation of the Partial Dissent.
Justice Leonen partially dissents from the foregoing disposition on the following
grounds:
(a) Environmental cases, such as a petition for a writ of kalikasan, should not,
in general, be litigated viaa representative, citizen or class suit because of the
danger of misrepresenting the interests and thus, barring future action due
to res judicata of those not actually present in the prosecution of the case,
either because they do not yet exist, like the unborn generations, or because
the parties bringing suit do not accurately represent the interests of the group

they represent or the class to which they belong. As an exception, such


representative, citizen or class suit may be allowed subject to certain
conditions; and
(b) The amendments to the ECC, granted by the DENR in favor of RP Energy,
are void for failure to submit a new EIS in support of the applications for these
amendments to the subject ECC, and a petition for writ of kalikasan is not the
proper remedy to raise a defect in the ECC.
We disagree.cralawred
A.
Justice Leonens proposition that environmental cases should not, in general,
be litigated via a representative, citizen or class suit is both novel and groundbreaking. However, it is inappropriate to resolve such an important issue in this
case, in view of the requisites for the exercise of our power of judicial review,
because the matter was not raised by the parties so that the issue was not
squarely tackled and fully ventilated. The proposition will entail, as Justice
Leonen explains, an abandonment or, at least, a modification of our ruling in
the landmark case of Oposa v. Factoran.229 It will also require an amendment or
a modification of Section 5 (on citizen suits), Rule 2 of the Rules of Procedure
for Environmental Cases. Hence, it is more appropriate to await a case where
such issues and arguments are properly raised by the parties for the
consideration of the Court.cralawred
B.
Justice Leonen reasons that the amendments to the subject ECC are void
because the applications therefor were unsupported by an EIS, as required by
PD 1151 and PD 1586. The claim is made that an EIS is required by law, even if
the amendment to the ECC is minor, because an EIS is necessary to determine
the environmental impact of the proposed modifications to the original project
design. The DENR rules, therefore, which permit the modification of the original
project design without the requisite EIS, are void for violating PD 1151 and PD
1586.
We disagree.
Indeed, Section 4 of PD 1151 sets out the basic policy of requiring an EIS in
every action, project or undertaking that significantly affects the quality of the
environment, viz:chanroblesvirtuallawlibrary
SECTION 4. Environmental Impact Statements. Pursuant to the above
enunciated policies and goals, all agencies and instrumentalities of the national
government, including government-owned or -controlled corporations, as well
as private corporations, firms and entities shall prepare, file and include in
every action, project or undertaking which significantly affects the quality
of the environment a detailed statement on

(a) the environmental impact of the proposed action, project or undertaking;


(b) any adverse environmental effect which cannot be avoided should the
proposal be implemented;
(c) alternative to the proposed action;
(d) a determination that the short-term uses of the resources of the
environment are consistent with the maintenance and enhancement of the
long-term productivity of the same; and
(e) whenever a proposal involves the use of depletable or non-renewable
resources, a finding must be made that such use and commitment are
warranted.
Before an environmental impact statement is issued by a lead agency, all
agencies having jurisdiction over, or special expertise on, the subject matter
involved shall comment on the draft environmental impact statement made by
the lead agency within thirty (30) days from receipt of the same. (Emphasis
supplied)
As earlier stated, the EIS was subsequently developed and strengthened
through PD 1586 which established the Philippine Environmental Impact
Statement System. Sections 4 and 5 of PD 1586
provide:chanroblesvirtuallawlibrary
SECTION 4. Presidential Proclamation of Environmentally Critical Areas and
Projects. The President of the Philippines may, on his own initiative or upon
recommendation of the National Environmental Protection Council, by
proclamation declare certain projects, undertakings or areas in the country as
environmentally critical. No person, partnership or corporation shall
undertake or operate any such declared environmentally critical
project or area without first securing an Environmental Compliance
Certificate issued by the President or his duly authorized
representative. For the proper management of said critical project or area,
the President may by his proclamation reorganize such government offices,
agencies, institutions, corporations or instrumentalities including the realignment of government personnel, and their specific functions and
responsibilities.
For the same purpose as above, the Ministry of Human Settlements shall: (a)
prepare the proper land or water use pattern for said critical project(s) or
area(s); (b) establish ambient environmental quality standards; (c) develop a
program of environmental enhancement or protective measures against
calamituous factors such as earthquake, floods, water erosion and others, and
(d) perform such other functions as may be directed by the President from time
to time.
SECTION 5. Environmentally Non-Critical Projects. All other projects,
undertakings and areas not declared by the President as environmentally
critical shall be considered as non-critical and shall not be required to submit
an environmental impact statement. The National Environmental Protection

Council, thru the Ministry of Human Settlements may however require noncritical projects and undertakings to provide additional environmental
safeguards as it may deem necessary. (Emphasis supplied)
These laws were, in turn, implemented by DAO 2003-30 and the Revised
Manual.
As correctly noted by Justice Leonen, Presidential Proclamation No. 2146 was
subsequently issued which, among others, classified fossil-fueled power plants
as environmentally critical projects.
In conformity with the above-quoted laws and their implementing issuances,
the subject project, a coal power plant, was classified by the DENR as an
environmentally critical project, new and single. Hence, RP Energy was required
to submit an EIS in support of its application for an ECC. RP Energy thereafter
complied with the EIS requirement and the DENR, after review, evaluation and
compliance with the other steps provided in its rules, issued an ECC in favor of
RP Energy. As can be seen, the EIS requirement was duly complied with.
Anent Justice Leonens argument that the subsequent amendments to the ECC
were void for failure to prepare and submit a new EIS relative to these
amendments, it is important to note that PD 1586 does not state the procedure
to be followed when there is an application for an amendment to a previously
issued ECC. There is nothing in PD 1586 which expressly requires an EIS for an
amendment to an ECC.
In footnote 174 of the ponencia, it is stated:chanroblesvirtuallawlibrary
Parenthetically, we must mention that the validity of the rules providing for
amendments to the ECC was challenged by the Casio Group on the ground
that it is ultra vires before the appellate court. It argued that the laws
governing the ECC do not expressly permit the amendment of an ECC.
However, the appellate court correctly ruled that the validity of the rules
cannot be collaterally attacked. Besides, the power of the DENR to issue rules
on amendments of an ECC is sanctioned under the doctrine of necessary
implication. Considering that the greater power to deny or grant an ECC is
vested by law in the President or his authorized representative, the DENR,
there is no obstacle to the exercise of the lesser or implied power to amend the
ECC for justifiable reasons. This issue was no longer raised before this Court
and, thus, we no longer tackle the same here.
Because PD 1586 did not expressly provide the procedure to be followed in
case of an application for an amendment to a previously issued ECC, the DENR
exercised its discretion, pursuant to its delegated authority to implement this
law, in issuing DAO 2003-30 and the Revised Manual.
Justice Leonens argument effectively challenges the validity of the provisions
in DAO 2003-30 and the Revised Manual relative to amendments to an ECC for
being contrary to PD 1151 and 1586.

We disagree.
First, to repeat, there is nothing in PD 1586 which expressly requires an EIS for
an amendment to an ECC.
Second, as earlier noted, the proposition would constitute a collateral attack on
the validity of DAO 2003-30 and the Revised Manual, which is not allowed
under the premises. The Casio Group itself has abandoned this claim before
this Court so that the issue is not properly before this Court for its resolution.
Third, assuming that a collateral attack on the validity of DAO 2003-30 and the
Revised Manual can be allowed in this case, the rules on amendments appear
to be reasonable, absent a showing of grave abuse of discretion or patent
illegality.
Essentially, the rules take into consideration the nature of the amendment in
determining the proper Environmental Impact Assessment (EIA) document type
that the project proponent will submit in support of its application for an
amendment to its previously issued ECC. A minor amendment will require a
less detailed EIA document type, like a Project Description Report (PDR), while a
major amendment will require a more detailed EIA document type, like an
Environmental Performance Report and Management Plan (EPRMP) or even an
EIS.230chanRoblesvirtualLawlibrary
The rules appear to be based on the premise that it would be unduly
burdensome or impractical to require a project proponent to submit a detailed
EIA document type, like an EIS, for amendments that, upon preliminary
evaluation by the DENR, will not cause significant environmental impact. In
particular, as applied to the subject project, the DENR effectively determined
that it is impractical to require RP Energy to, in a manner of speaking, start
from scratch by submitting a new EIS in support of its application for the first
amendment to its previously issued ECC, considering that the existing EIS may
be supplemented by an EPRMP to adequately evaluate the environmental
impact of the proposed modifications under the first amendment. The same
reasoning may be applied to the PDR relative to the second amendment.
As previously discussed, the Casio Group failed to prove that the EPRMP and
PDR were inadequate to assess the environmental impact of the planned
modifications under the first and second amendments, respectively. On the
contrary, the EPRMP and PDR appeared to contain the details of the planned
modifications and the corresponding adjustments to be made in the
environmental management plan or mitigating measures in order to address
the potential impacts of these planned modifications. Hence, absent sufficient
proof, there is no basis to conclude that the procedure adopted by the DENR
was done with grave abuse of discretion.
Justice Leonens proposition would effectively impose a stringent requirement
of an EIS for each and every proposed amendment to an ECC, no matter how

minor the amendment may be. While this requirement would seem ideal, in
order to ensure that the environmental impact of the proposed amendment is
fully taken into consideration, the pertinent laws do not, however, expressly
require that such a procedure be followed. As already discussed, the DENR
appear to have reasonably issued DAO 2003-30 and the Revised Manual
relative to the amendment process of an ECC, by balancing practicality vis--vis
the need for sufficient information in determining the environmental impact of
the proposed amendment to an ECC. In fine, the Court cannot invalidate the
rules which appear to be reasonable, absent a showing of grave abuse of
discretion or patent illegality.
We next tackle Justice Leonens argument that a petition for certiorari, and not
a writ of kalikasan, is the proper remedy to question a defect in an ECC.
In general, the proper procedure to question a defect in an ECC is to follow the
appeal process provided in DAO 2003-30 and the Revised Manual. After
complying with the proper administrative appeal process, recourse may be
made to the courts in accordance with the doctrine of exhaustion of
administrative remedies. However, as earlier discussed, in exceptional cases, a
writ of kalikasan may be availed of to challenge defects in the
ECC provided that (1) the defects are causally linked or reasonably connected
to an environmental damage of the nature and magnitude contemplated under
the Rules on Writ ofkalikasan, and (2) the case does not violate, or falls under
an exception to, the doctrine of exhaustion of administrative remedies and/or
primary jurisdiction.
As previously discussed, in the case at bar, only the allegation with respect to
the lack of an EIA relative to the first and second amendments to the subject
ECC may be reasonably connected to such an environmental damage. Further,
given the extreme urgency of resolving the issue due to the looming power
crisis, this case may be considered as falling under an exception to the doctrine
of exhaustion of administrative remedies. Thus, the aforesaid issue may be
conceivably resolved in a writ of kalikasancase.
More importantly, we have expressly ruled that this case is an exceptional
case due to the looming power crisis, so that the rules of procedure may be
suspended in order to address issues which, ordinarily, the Court would not
consider proper in a writ of kalikasan case. Hence, all issues, including those
not proper in a writ of kalikasan case, were resolved here in order to forestall
another round of protracted litigation relative to the implementation of the
subject project.
Conclusion
We now summarize our findings:
1. The appellate court correctly ruled that the Casio Group failed to
substantiate its claims that the construction and operation of the power plant
will cause environmental damage of the magnitude contemplated under the

writ of kalikasan. On the other hand, RP Energy presented evidence to establish


that the subject project will not cause grave environmental damage, through its
Environmental Management Plan, which will ensure that the project will operate
within the limits of existing environmental laws and standards;
2. The appellate court erred when it invalidated the ECC on the ground of lack
of signature of Mr. Aboitiz in the ECCs Statement of Accountability relative to
the copy of the ECC submitted by RP Energy to the appellate court. While the
signature is necessary for the validity of the ECC, the particular circumstances
of this case show that the DENR and RP Energy were not properly apprised of
the issue of lack of signature in order for them to present controverting
evidence and arguments on this point, as the issue only arose during the
course of the proceedings upon clarificatory questions from the appellate court.
Consequently, RP Energy cannot be faulted for submitting the certified true
copy of the ECC only after it learned that the ECC had been invalidated on the
ground of lack of signature in the January 30, 2013 Decision of the appellate
court. The certified true copy of the ECC, bearing the signature of Mr. Aboitiz in
the Statement of Accountability portion, was issued by the DENR-EMB, and
remains uncontroverted. It showed that the Statement of Accountability was
signed by Mr. Aboitiz on December 24, 2008. Because the signing was done
after the official release of the ECC on December 22, 2008, we note that the
DENR did not strictly follow its rules, which require that the signing of the
Statement of Accountability should be done before the official release of the
ECC. However, considering that the issue was not adequately argued nor was
evidence presented before the appellate court on the circumstances at the
time of signing, there is insufficient basis to conclude that the procedure
adopted by the DENR was tainted with bad faith or inexcusable negligence. We
remind the DENR, however, to be more circumspect in following its rules. Thus,
we rule that the signature requirement was substantially complied with pro hac
vice.
3. The appellate court erred when it ruled that the first and second
amendments to the ECC were invalid for failure to comply with a new EIA and
for violating DAO 2003-30 and the Revised Manual. It failed to properly consider
the applicable provisions in DAO 2003-30 and the Revised Manual for
amendment to ECCs. Our own examination of the provisions on amendments to
ECCs in DAO 2003-30 and the Revised Manual, as well as the EPRMP and PDR
themselves, shows that the DENR reasonably exercised its discretion in
requiring an EPRMP and a PDR for the first and second amendments,
respectively. Through these documents, which the DENR reviewed, a new EIA
was conducted relative to the proposed project modifications. Hence, absent
sufficient showing of grave abuse of discretion or patent illegality, relative to
both the procedure and substance of the amendment process, we uphold the
validity of these amendments;
4. The appellate court erred when it invalidated the ECC for failure to comply
with Section 59 of the IPRA Law. The ECC is not the license or permit
contemplated under Section 59 of the IPRA Law and its implementing rules.
Hence, there is no necessity to secure the CNO under Section 59 before an ECC

may be issued, and the issuance of the subject ECC without first securing the
aforesaid certification does not render it invalid;
5. The appellate court erred when it invalidated the LDA between SBMA and RP
Energy for failure to comply with Section 59 of the IPRA Law. While we find that
a CNO should have been secured prior to the consummation of the LDA
between SBMA and RP Energy, considering that this is the first time we lay
down the rule of action appropriate to the application of Section 59, we refrain
from invalidating the LDA for reasons of equity;
6. The appellate court erred when it ruled that compliance with Section 27, in
relation to Section 26, of the LGC (i.e., approval of the concerned sanggunian
requirement) is necessary prior to issuance of the subject ECC. The issuance of
an ECC does not, by itself, result in the implementation of the project. Hence,
there is no necessity to secure prior compliance with the approval of the
concerned sanggunianrequirement, and the issuance of the subject ECC
without first complying with the aforesaid requirement does not render it
invalid. The appellate court also erred when it ruled that compliance with the
aforesaid requirement is necessary prior to the consummation of the LDA. By
virtue of the clear provisions of RA 7227, the project is not subject to the
aforesaid requirement and the SBMAs decision to approve the project prevails
over the apparent objections of the concerned sanggunians. Thus, the LDA
entered into between SBMA and RP Energy suffers from no infirmity despite the
lack of approval of the concerned sanggunians; and
7. The appellate court correctly ruled that the issue as to the validity of the
third amendment to the ECC cannot be resolved in this case because it was not
one of the issues set during the preliminary conference, and would, thus,
violate RP Energys right to due process.chanrobleslaw
WHEREFORE, the Court resolves to:
1. DENY the Petition in G.R. No. 207282; and
2. GRANT the Petitions in G.R. Nos. 207257, 207366 and 207276:
2.1. The January 30, 2013 Decision and May 22, 2013 Resolution of the
Court of Appeals in CA-G.R. SP No. 00015 are reversed and set aside;
2.2. The Petition for Writ of kalikasan, docketed as CA-G.R. SP No. 00015,
is denied for insufficiency of evidence;
2.3. The validity of the December 22, 2008 Environmental Compliance
Certificate, as well as the July 8, 2010 first amendment and the May
26, 2011 second amendment thereto, issued by the Department of
Environment and Natural Resources in favor of Redondo Peninsula
Energy, Inc., are upheld; and
2.4. The validity of the June 8, 2010 Lease and Development Agreement
between Subic Bay Metropolitan Authority and Redondo Peninsula
Energy, Inc. is upheld.

SO ORDERED.
Sereno, C.J., Carpio, Leonardo-De Castro, Peralta, Bersamin, Villarama, Jr.,
Perez, Mendoza, and Reyes, JJ., concur.
Velasco, Jr., J., please see concurring opinion.
Brion, J., on leave.
Perlas-Bernabe, J., I concur with the ponencia in denying the petition for writ of
kalikasan but asleft J. Leonen's view on the manner by which as ECC should be
assailed.
Leonen, J., see saparate concurring and dissenting opinion.
Jardeleza, J., no part.

EN BANC
G.R. No. 206510, September 16, 2014
MOST REV. PEDRO D. ARIGO, Vicar Apostolic of Puerto Princesa D.D.;
MOST REV. DEOGRACIAS S. INIGUEZ, JR., Bishop-Emeritus ofCaloocan,
FRANCES Q. QUIMPO, CLEMENTE G. BAUTISTA, JR., Kalikasan-PNE,
MARIA CAROLINA P. ARAULLO, RENATO M. REYES, JR.,
BagongAlyansang Makabayan, HON. NERI JAVIER COLMENARES,

BayanMuna Party-list, ROLAND G. SIMBULAN, PH.D., Junk


VFAMovement, TERESITA R. PEREZ, PH.D., HON. RAYMOND V.
PALATINO, Kabataan Party-list, PETER SJ. GONZALES, Pamalakaya,
GIOVANNI A. TAPANG, PH. D., Agham, ELMER C. LABOG, Kilusang Mayo
Uno, JOAN MAY E. SALVADOR, Gabriela, JOSE ENRIQUE A. AFRICA,
THERESA A. CONCEPCION, MARY JOAN A. GUAN, NESTOR T. BAGUINON,
PH.D., A. EDSEL F. TUPAZ, Petitioners, v. SCOTT H. SWIFT in his
capacity as Commander of the U.S. 7th Fleet, MARK A. RICE in his
capacity as Commanding Officer of the USS Guardian, PRESIDENT
BENIGNO S. AQUINO III in his capacity as Commander-in-Chief of the
Armed Forces of the Philippines, HON. ALBERT F. DEL
ROSARIO, Secretary, Department of Foreign Affairs, HON. PAQUITO
OCHOA, JR., Executive Secretary, Office of the President, HON.
VOLTAIRE T. GAZMIN, Secretary, Department of National Defense, HON.
RAMON JESUS P. PAJE, Secretary, Department of Environment and
Natural Resources, VICE ADMIRAL JOSE LUIS M. ALANO, Philippine
Navy Flag Officer in Command, Armed Forces of the
Philippines,ADMIRAL RODOLFO D. ISORENA, Commandant, Philippine
Coast Guard, COMMODORE ENRICO EFREN EVANGELISTA, Philippine
Coast Guard Palawan, MAJOR GEN. VIRGILIO O.
DOMINGO,Commandant of Armed Forces of the Philippines
Commandand LT. GEN. TERRY G. ROBLING, US Marine Corps Forces,
Pacific and Balikatan 2013 Exercise Co-Director, Respondents.
DECISION
VILLARAMA, JR., J.:

Before us is a petition for the issuance of a Writ of Kalikasan with prayer for the
issuance of a Temporary Environmental Protection Order (TEPO) under Rule 7 of
A.M. No. 09-6-8-SC, otherwise known as theRules of Procedure for
Environmental Cases (Rules), involving violations of environmental laws and
regulations in relation to the grounding of the US military ship USS
Guardian over the Tubbataha Reefs.
Factual Background
The name Tubbataha came from the Samal (seafaring people of southern
Philippines) language which means long reef exposed at low tide. Tubbataha
is composed of two huge coral atolls the north atoll and the south atoll and
the Jessie Beazley Reef, a smaller coral structure about 20 kilometers north of
the atolls. The reefs of Tubbataha and Jessie Beazley are considered part of
Cagayancillo, a remote island municipality of Palawan.1cralawlawlibrary
In 1988, Tubbataha was declared a National Marine Park by virtue of
Proclamation No. 306 issued by President Corazon C. Aquino on August 11,
1988. Located in the middle of Central Sulu Sea, 150 kilometers southeast of

Puerto Princesa City, Tubbataha lies at the heart of the Coral Triangle, the
global center of marine biodiversity.
In 1993, Tubbataha was inscribed by the United Nations Educational Scientific
and Cultural Organization (UNESCO) as a World Heritage Site. It was recognized
as one of the Philippines oldest ecosystems, containing excellent examples of
pristine reefs and a high diversity of marine life. The 97,030-hectare protected
marine park is also an important habitat for internationally threatened and
endangered marine species. UNESCO cited Tubbatahas outstanding universal
value as an important and significant natural habitat for in situ conservation of
biological diversity; an example representing significant on-going ecological
and biological processes; and an area of exceptional natural beauty and
aesthetic importance.2cralawlawlibrary
On April 6, 2010, Congress passed Republic Act (R.A.) No. 10067, 3 otherwise
known as the Tubbataha Reefs Natural Park (TRNP) Act of 2009 to ensure the
protection and conservation of the globally significant economic, biological,
sociocultural, educational and scientific values of the Tubbataha Reefs into
perpetuity for the enjoyment of present and future generations. Under the
no-take policy, entry into the waters of TRNP is strictly regulated and many
human activities are prohibited and penalized or fined, including fishing,
gathering, destroying and disturbing the resources within the TRNP. The law
likewise created the Tubbataha Protected Area Management Board (TPAMB)
which shall be the sole policy-making and permit-granting body of the TRNP.
The USS Guardian is an Avenger-class mine countermeasures ship of the US
Navy. In December 2012, the US Embassy in the Philippines requested
diplomatic clearance for the said vessel to enter and exit the territorial waters
of the Philippines and to arrive at the port of Subic Bay for the purpose of
routine ship replenishment, maintenance, and crew liberty. 4 On January 6,
2013, the ship left Sasebo, Japan for Subic Bay, arriving on January 13, 2013
after a brief stop for fuel in Okinawa, Japan.
On January 15, 2013, the USS Guardian departed Subic Bay for its next port of
call in Makassar, Indonesia. On January 17, 2013 at 2:20 a.m. while transiting
the Sulu Sea, the ship ran aground on the northwest side of South Shoal of the
Tubbataha Reefs, about 80 miles east-southeast of Palawan. No one was injured
in the incident, and there have been no reports of leaking fuel or oil.
On January 20, 2013, U.S. 7th Fleet Commander, Vice Admiral Scott Swift,
expressed regret for the incident in a press statement.5 Likewise, US
Ambassador to the Philippines Harry K. Thomas, Jr., in a meeting at the
Department of Foreign Affairs (DFA) on February 4, reiterated his regrets over
the grounding incident and assured Foreign Affairs Secretary Albert F. del
Rosario that the United States will provide appropriate compensation for
damage to the reef caused by the ship.6 By March 30, 2013, the US Navy-led
salvage team had finished removing the last piece of the grounded ship from
the coral reef.

On April 17, 2013, the above-named petitioners on their behalf and in


representation of their respective sector/organization and others, including
minors or generations yet unborn, filed the present petition against Scott H.
Swift in his capacity as Commander of the US 7th Fleet, Mark A. Rice in his
capacity as Commanding Officer of the USS Guardian and Lt. Gen. Terry G.
Robling, US Marine Corps Forces, Pacific and Balikatan 2013 Exercises CoDirector (US respondents); President Benigno S. Aquino III in his capacity as
Commander-in-Chief of the Armed Forces of the Philippines (AFP), DFA
Secretary Albert F. Del Rosario, Executive Secretary Paquito Ochoa, Jr.,
Secretary Voltaire T. Gazmin (Department of National Defense), Secretary Jesus
P. Paje (Department of Environment and Natural Resources), Vice-Admiral Jose
Luis M. Alano (Philippine Navy Flag Officer in Command, AFP), Admiral Rodolfo
D. Isorena (Philippine Coast Guard Commandant), Commodore Enrico Efren
Evangelista (Philippine Coast Guard-Palawan), and Major General Virgilio O.
Domingo (AFP Commandant), collectively the Philippine respondents.
The Petition
Petitioners claim that the grounding, salvaging and post-salvaging operations
of the USS Guardian cause and continue to cause environmental damage of
such magnitude as to affect the provinces of Palawan, Antique, Aklan,
Guimaras, Iloilo, Negros Occidental, Negros Oriental, Zamboanga del Norte,
Basilan, Sulu, and Tawi-Tawi, which events violate their constitutional rights to a
balanced and healthful ecology. They also seek a directive from this Court for
the institution of civil, administrative and criminal suits for acts committed in
violation of environmental laws and regulations in connection with the
grounding incident.
Specifically, petitioners cite the following violations committed by US
respondents under R.A. No. 10067: unauthorized entry (Section 19); nonpayment of conservation fees (Section 21); obstruction of law enforcement
officer (Section 30); damages to the reef (Section 20); and destroying and
disturbing resources (Section 26[g]). Furthermore, petitioners assail certain
provisions of the Visiting Forces Agreement (VFA) which they want this Court to
nullify for being unconstitutional.
The numerous reliefs sought in this case are set forth in the final prayer of the
petition, to wit:chanRoblesvirtualLawlibrary
1. WHEREFORE, in view of the foregoing, Petitioners respectfully pray that
the Honorable Court:chanRoblesvirtualLawlibrary
2. Immediately issue upon the filing of this petition a Temporary
Environmental Protection Order (TEPO) and/or a Writ of Kalikasan, which
shall, in particular,
a. Order Respondents and any person acting on their behalf, to cease
and desist all operations over the Guardian grounding incident;

b. Initially demarcating the metes and bounds of the damaged area as


well as an additional buffer zone;
c. Order Respondents to stop all port calls and war games under
Balikatan because of the absence of clear guidelines, duties, and
liability schemes for breaches of those duties, and require
Respondents to assume responsibility for prior and future
environmental damage in general, and environmental damage
under the Visiting Forces Agreement in particular.
d. Temporarily define and describe allowable activities of ecotourism,
diving, recreation, and limited commercial activities by fisherfolk
and indigenous communities near or around the TRNP but away
from the damaged site and an additional buffer zone;

3. After summary hearing, issue a Resolution extending the TEPO until


further orders of the Court;
4. After due proceedings, render a Decision which shall include, without
limitation:chanRoblesvirtualLawlibrary
a. Order Respondents Secretary of Foreign Affairs, following the
dispositive portion of Nicolas v. Romulo, to forthwith negotiate
with the United States representatives for the appropriate
agreement on [environmental guidelines and environmental
accountability] under Philippine authorities as provided in Art. V[ ]
of the VFA
b. Direct Respondents and appropriate agencies to commence
administrative, civil, and criminal proceedings against erring
officers and individuals to the full extent of the law, and to make
such proceedings public;
c. Declare that Philippine authorities may exercise primary and
exclusive criminal jurisdiction over erring U.S. personnel under the
circumstances of this case;
d. Require Respondents to pay just and reasonable compensation in
the settlement of all meritorious claims for damages caused to the
Tubbataha Reef on terms and conditions no less severe than those
applicable to other States, and damages for personal injury or
death, if such had been the case;
e. Direct Respondents to cooperate in providing for the attendance of
witnesses and in the collection and production of evidence,
including seizure and delivery of objects connected with the
offenses related to the grounding of the Guardian;

f. Require the authorities of the Philippines and the United States to


notify each other of the disposition of all cases, wherever heard,
related to the grounding of the Guardian;
g. Restrain Respondents from proceeding with any
purported restoration, repair, salvage or post salvage plan or plans,
including cleanup plans covering the damaged area of the
Tubbataha Reef absent a just settlement approved by the
Honorable Court;
h. Require Respondents to engage in stakeholder and LGU
consultations in accordance with the Local Government Code and
R.A. 10067;
i. Require Respondent US officials and their representatives to place a
deposit to the TRNP Trust Fund defined under Section 17 of RA
10067 as a bona fide gesture towards full reparations;
j. Direct Respondents to undertake measures to rehabilitate the areas
affected by the grounding of the Guardian in light of Respondents
experience in the Port Royale grounding in 2009, among other
similar grounding incidents;
k. Require Respondents to regularly publish on a quarterly basis and
in the name of transparency and accountability such environmental
damage assessment, valuation, and valuation methods, in all
stages of negotiation;
l. Convene a multisectoral technical working group to provide
scientific and technical support to the TPAMB;
m. Order the Department of Foreign Affairs, Department of National
Defense, and the Department of Environment and Natural
Resources to review the Visiting Forces Agreement and the Mutual
Defense Treaty to consider whether their provisions allow for the
exercise of erga omnes rights to a balanced and healthful ecology
and for damages which follow from any violation of those rights;
n. Narrowly tailor the provisions of the Visiting Forces Agreement for
purposes of protecting the damaged areas of TRNP;
o. Declare the grant of immunity found in Article V (Criminal
Jurisdiction) and Article VI of the Visiting Forces Agreement
unconstitutional for violating equal protection and/or for violating
the preemptory norm of nondiscrimination incorporated as part of
the law of the land under Section 2, Article II, of the Philippine
Constitution;
p. Allow for continuing discovery measures;
q. Supervise marine wildlife rehabilitation in the Tubbataha Reefs in all
other respects; and

5. Provide just and equitable environmental rehabilitation measures and


such other reliefs as are just and equitable under the
premises.7 (Underscoring supplied.)
Since only the Philippine respondents filed their comment8 to the petition,
petitioners also filed a motion for early resolution and motion to proceed ex
parte against the US respondents.9cralawlawlibrary
Respondents Consolidated Comment
In their consolidated comment with opposition to the application for a TEPO and
ocular inspection and production orders, respondents assert that: (1) the
grounds relied upon for the issuance of a TEPO or writ of Kalikasan have
become fait accompli as the salvage operations on the USS Guardian were
already completed; (2) the petition is defective in form and substance; (3) the
petition improperly raises issues involving the VFA between the Republic of the
Philippines and the United States of America; and (4) the determination of the
extent of responsibility of the US Government as regards the damage to the
Tubbataha Reefs rests exclusively with the executive branch.
The Courts Ruling
As a preliminary matter, there is no dispute on the legal standing of petitioners
to file the present petition.
Locus standi is a right of appearance in a court of justice on a given
question.10 Specifically, it is a partys personal and substantial interest in a
case where he has sustained or will sustain direct injury as a result of the act
being challenged, and calls for more than just a generalized
grievance.11 However, the rule on standing is a procedural matter which this
Court has relaxed for non-traditional plaintiffs like ordinary citizens, taxpayers
and legislators when the public interest so requires, such as when the subject
matter of the controversy is of transcendental importance, of overreaching
significance to society, or of paramount public interest.12cralawlawlibrary
In the landmark case of Oposa v. Factoran, Jr.,13 we recognized the public
right of citizens to a balanced and healthful ecology which, for the first time
in our constitutional history, is solemnly incorporated in the fundamental law.
We declared that the right to a balanced and healthful ecology need not be
written in the Constitution for it is assumed, like other civil and political rights
guaranteed in the Bill of Rights, to exist from the inception of mankind and it is
an issue of transcendental importance with intergenerational implications. Such
right carries with it the correlative duty to refrain from impairing the
environment.14cralawlawlibrary
On the novel element in the class suit filed by the petitioners minors in Oposa,

this Court ruled that not only do ordinary citizens have legal standing to sue for
the enforcement of environmental rights, they can do so in representation of
their own and future generations. Thus:chanRoblesvirtualLawlibrary
Petitioners minors assert that they represent their generation as well as
generations yet unborn. We find no difficulty in ruling that they can, for
themselves, for others of their generation and for the succeeding generations,
file a class suit. Their personality to sue in behalf of the succeeding
generations can only be based on the concept of intergenerational
responsibility insofar as the right to a balanced and healthful ecology
is concerned. Such a right, as hereinafter expounded, considers the rhythm
and harmony of nature.Nature means the created world in its entirety. Such
rhythm and harmony indispensably include, inter alia, the judicious disposition,
utilization, management, renewal and conservation of the countrys forest,
mineral, land, waters, fisheries, wildlife, off-shore areas and other natural
resources to the end that their exploration, development and utilization be
equitably accessible to the present as well as future generations. Needless to
say, every generation has a responsibility to the next to preserve that rhythm
and harmony for the full enjoyment of a balanced and healthful ecology. Put a
little differently, the minors assertion of their right to a sound environment
constitutes, at the same time, the performance of their obligation to ensure the
protection of that right for the generations to come.15 (Emphasis supplied.)
The liberalization of standing first enunciated in Oposa, insofar as it refers to
minors and generations yet unborn, is now enshrined in the Rules which allows
the filing of a citizen suit in environmental cases. The provision on citizen suits
in the Rules collapses the traditional rule on personal and direct interest, on
the principle that humans are stewards of nature.16cralawlawlibrary
Having settled the issue of locus standi, we shall address the more
fundamental question of whether this Court has jurisdiction over the US
respondents who did not submit any pleading or manifestation in this case.
The immunity of the State from suit, known also as the doctrine of sovereign
immunity or non-suability of the State,17 is expressly provided in Article XVI of
the 1987 Constitution which states:chanRoblesvirtualLawlibrary
Section 3. The State may not be sued without its consent.
In United States of America v. Judge Guinto,18 we discussed the principle of
state immunity from suit, as follows:chanRoblesvirtualLawlibrary
The rule that a state may not be sued without its consent, now expressed in
Article XVI, Section 3, of the 1987 Constitution, is one of the generally accepted
principles of international law that we have adopted as part of the law of our
land under Article II, Section 2. x x x.
Even without such affirmation, we would still be bound by the generally
accepted principles of international law under the doctrine of incorporation.
Under this doctrine, as accepted by the majority of states, such principles are

deemed incorporated in the law of every civilized state as a condition and


consequence of its membership in the society of nations. Upon its admission to
such society, the state is automatically obligated to comply with these
principles in its relations with other states.
As applied to the local state, the doctrine of state immunity is based on the
justification given by Justice Holmes that there can be no legal right against
the authority which makes the law on which the right depends.[Kawanakoa v.
Polybank, 205 U.S. 349] There are other practical reasons for the enforcement
of the doctrine. In the case of the foreign state sought to be impleaded
in the local jurisdiction, the added inhibition is expressed in the
maxim par in parem, non habet imperium. All states are sovereign
equals and cannot assert jurisdiction over one another. A contrary
disposition would, in the language of a celebrated case, unduly vex
the peace of nations. [De Haber v. Queen of Portugal, 17 Q. B. 171]
While the doctrine appears to prohibit only suits against the state without its
consent, it isalso applicable to complaints filed against officials of the
state for acts allegedly performed by them in the discharge of their
duties. The rule is that if the judgment against such officials will require the
state itself to perform an affirmative act to satisfy the same, such as the
appropriation of the amount needed to pay the damages awarded against
them, the suit must be regarded as against the state itself although it has not
been formally impleaded. [Garcia v. Chief of Staff, 16 SCRA 120] In such a
situation, the state may move to dismiss the complaint on the ground that it
has been filed without its consent.19 (Emphasis supplied.)
Under the American Constitution, the doctrine is expressed in the Eleventh
Amendment which reads:chanRoblesvirtualLawlibrary
The Judicial power of the United States shall not be construed to extend to any
suit in law or equity, commenced or prosecuted against one of the United
States by Citizens of another State, or by Citizens or Subjects of any Foreign
State.
In the case of Minucher v. Court of Appeals,20 we further expounded on the
immunity of foreign states from the jurisdiction of local courts, as
follows:chanRoblesvirtualLawlibrary
The precept that a State cannot be sued in the courts of a foreign state is a
long-standing rule of customary international law then closely identified with
the personal immunity of a foreign sovereign from suit and, with the
emergence of democratic states, made to attach not just to the person of the
head of state, or his representative, but also distinctly to the state itself in its
sovereign capacity. If the acts giving rise to a suit are those of a foreign
government done by its foreign agent, although not necessarily a
diplomatic personage, but acting in his official capacity, the complaint
could be barred by the immunity of the foreign sovereign from suit
without its consent.Suing a representative of a state is believed to be, in
effect, suing the state itself. The proscription is not accorded for the benefit of

an individual but for the State, in whose service he is, under the maxim - par in
parem, non habet imperium - thatall states are sovereign equals and cannot
assert jurisdiction over one another. The implication, in broad terms, is that if
the judgment against an official would require the state itself to perform an
affirmative act to satisfy the award, such as the appropriation of the amount
needed to pay the damages decreed against him, the suit must be regarded as
being against the state itself, although it has not been formally
impleaded.21 (Emphasis supplied.)
In the same case we also mentioned that in the case of diplomatic immunity,
the privilege is not an immunity from the observance of the law of the
territorial sovereign or from ensuing legal liability; it is, rather, an immunity
from the exercise of territorial jurisdiction.22cralawlawlibrary
In United States of America v. Judge Guinto,23 one of the consolidated cases
therein involved a Filipino employed at Clark Air Base who was arrested
following a buy-bust operation conducted by two officers of the US Air Force,
and was eventually dismissed from his employment when he was charged in
court for violation of R.A. No. 6425. In a complaint for damages filed by the said
employee against the military officers, the latter moved to dismiss the case on
the ground that the suit was against the US Government which had not given
its consent. The RTC denied the motion but on a petition for certiorariand
prohibition filed before this Court, we reversed the RTC and dismissed the
complaint. We held that petitioners US military officers were acting in the
exercise of their official functions when they conducted the buy-bust operation
against the complainant and thereafter testified against him at his trial. It
follows that for discharging their duties as agents of the United States, they
cannot be directly impleaded for acts imputable to their principal, which has
not given its consent to be sued.
This traditional rule of State immunity which exempts a State from being sued
in the courts of another State without the formers consent or waiver has
evolved into a restrictive doctrine which distinguishes sovereign and
governmental acts (jure imperii) from private, commercial and proprietary acts
(jure gestionis). Under the restrictive rule of State immunity, State immunity
extends only to acts jure imperii. The restrictive application of State immunity
is proper only when the proceedings arise out of commercial transactions of the
foreign sovereign, its commercial activities or economic
affairs.24cralawlawlibrary
In Shauf v. Court of Appeals,25 we discussed the limitations of the State
immunity principle, thus:chanRoblesvirtualLawlibrary
It is a different matter where the public official is made to account in
his capacity as such for acts contrary to law and injurious to the rights
of plaintiff.As was clearly set forth by Justice Zaldivar in Director of the
Bureau of Telecommunications, et al. vs. Aligaen, etc., et al.: Inasmuch as the
State authorizes only legal acts by its officers, unauthorized acts of government
officials or officers are not acts of the State, and an action against the officials

or officers by one whose rights have been invaded or violated by such acts, for
the protection of his rights, is not a suit against the State within the rule of
immunity of the State from suit. In the same tenor, it has been said that an
action at law or suit in equity against a State officer or the director of a State
department on the ground that, while claiming to act for the State, he violates
or invades the personal and property rights of the plaintiff, under an
unconstitutional act or under an assumption of authority which he does not
have, is not a suit against the State within the constitutional provision that the
State may not be sued without its consent. The rationale for this ruling is that
the doctrine of state immunity cannot be used as an instrument for
perpetrating an injustice.
xxxx
The aforecited authorities are clear on the matter. They state that the
doctrine of immunity from suit will not apply and may not be invoked
where the public official is being sued in his private and personal
capacity as an ordinary citizen. The cloak of protection afforded the officers
and agents of the government is removed the moment they are sued in their
individual capacity. This situation usually arises where the public official acts
without authority or in excess of the powers vested in him. It is a well-settled
principle of law that a public official may be liable in his personal private
capacity for whatever damage he may have caused by his act done
with malice and in bad faith, or beyond the scope of his authority or
jurisdiction.26 (Emphasis supplied.)
In this case, the US respondents were sued in their official capacity as
commanding officers of the US Navy who had control and supervision over
the USS Guardian and its crew. The alleged act or omission resulting in the
unfortunate grounding of the USS Guardian on the TRNP was committed while
they were performing official military duties. Considering that the satisfaction
of a judgment against said officials will require remedial actions and
appropriation of funds by the US government, the suit is deemed to be one
against the US itself. The principle of State immunity therefore bars the
exercise of jurisdiction by this Court over the persons of respondents Swift, Rice
and Robling.
During the deliberations, Senior Associate Justice Antonio T. Carpio took the
position that the conduct of the US in this case, when its warship entered a
restricted area in violation of R.A. No. 10067 and caused damage to the TRNP
reef system, brings the matter within the ambit of Article 31 of the United
Nations Convention on the Law of the Sea (UNCLOS). He explained that while
historically, warships enjoy sovereign immunity from suit as extensions of their
flag State, Art. 31 of the UNCLOS creates an exception to this rule in cases
where they fail to comply with the rules and regulations of the coastal State
regarding passage through the latters internal waters and the territorial sea.
According to Justice Carpio, although the US to date has not ratified the
UNCLOS, as a matter of long-standing policy the US considers itself bound by

customary international rules on the traditional uses of the oceans as


codified in UNCLOS, as can be gleaned from previous declarations by former
Presidents Reagan and Clinton, and the US judiciary in the case of United
States v. Royal Caribbean Cruise Lines, Ltd.27cralawlawlibrary
The international law of the sea is generally defined as a body of treaty rules
and customary norms governing the uses of the sea, the exploitation of its
resources, and the exercise of jurisdiction over maritime regimes. It is a branch
of public international law, regulating the relations of states with respect to the
uses of the oceans.28 The UNCLOS is a multilateral treaty which was opened
for signature on December 10, 1982 at Montego Bay, Jamaica. It was ratified by
the Philippines in 1984 but came into force on November 16, 1994 upon the
submission of the 60th ratification.
The UNCLOS is a product of international negotiation that seeks to balance
State sovereignty (mare clausum) and the principle of freedom of the high seas
(mare liberum).29 The freedom to use the worlds marine waters is one of the
oldest customary principles of international law.30 The UNCLOS gives to the
coastal State sovereign rights in varying degrees over the different zones of the
sea which are: 1) internal waters, 2) territorial sea, 3) contiguous zone, 4)
exclusive economic zone, and 5) the high seas. It also gives coastal States
more or less jurisdiction over foreign vessels depending on where the vessel is
located.31cralawlawlibrary
Insofar as the internal waters and territorial sea is concerned, the Coastal State
exercises sovereignty, subject to the UNCLOS and other rules of international
law. Such sovereignty extends to the air space over the territorial sea as well as
to its bed and subsoil.32cralawlawlibrary
In the case of warships,33 as pointed out by Justice Carpio, they continue to
enjoy sovereign immunity subject to the following
exceptions:chanRoblesvirtualLawlibrary
Article 30
Non-compliance by warships with the laws and regulations
of the coastal State
If any warship does not comply with the laws and regulations of the coastal
State concerning passage through the territorial sea and disregards any
request for compliance therewith which is made to it, the coastal State may
require it to leave the territorial sea immediately.
Article 31
Responsibility of the flag State for damage caused by a warship
or other government ship operated for non-commercial purposes
The flag State shall bear international responsibility for any loss or damage
to the coastal State resulting from the non-compliance by a warship or
other government ship operated for non-commercial purposes with the

laws and regulations of the coastal State concerning passage through


the territorial sea or with the provisions of this Convention or other rules of
international law.
Article 32
Immunities of warships and other government ships
operated for non-commercial purposes
With such exceptions as are contained in subsection A and in articles 30 and
31, nothing in this Convention affects the immunities of warships and other
government ships operated for non-commercial purposes. (Emphasis supplied.)
A foreign warships unauthorized entry into our internal waters with resulting
damage to marine resources is one situation in which the above provisions may
apply.But what if the offending warship is a non-party to the UNCLOS, as in this
case, the US?
An overwhelming majority over 80% -- of nation states are now members of
UNCLOS, but despite this the US, the worlds leading maritime power, has not
ratified it.
While the Reagan administration was instrumental in UNCLOS' negotiation and
drafting, the U.S. delegation ultimately voted against and refrained from
signing it due to concerns over deep seabed mining technology transfer
provisions contained in Part XI. In a remarkable, multilateral effort to induce
U.S. membership, the bulk of UNCLOS member states cooperated over the
succeeding decade to revise the objectionable provisions. The revisions
satisfied the Clinton administration, which signed the revised Part XI
implementing agreement in 1994. In the fall of 1994, President Clinton
transmitted UNCLOS and the Part XI implementing agreement to the Senate
requesting its advice and consent. Despite consistent support from President
Clinton, each of his successors, and an ideologically diverse array of
stakeholders, the Senate has since withheld the consent required for the
President to internationally bind the United States to UNCLOS.
While UNCLOS cleared the Senate Foreign Relations Committee (SFRC) during
the 108th and 110th Congresses, its progress continues to be hamstrung by
significant pockets of political ambivalence over U.S. participation in
international institutions. Most recently, 111th Congress SFRC Chairman Senator
John Kerry included voting out UNCLOS for full Senate consideration among
his highest priorities. This did not occur, and no Senate action has been taken
on UNCLOS by the 112th Congress.34chanrobleslaw
Justice Carpio invited our attention to the policy statement given by President
Reagan on March 10, 1983 that the US will recognize the rights of the other
states in the waters off their coasts, as reflected in the convention [UNCLOS],
so long as the rights and freedom of the United States and others under
international law are recognized by such coastal states, and President
Clintons reiteration of the US policy to act in a manner consistent with its

[UNCLOS] provisions relating to traditional uses of the oceans and to encourage


other countries to do likewise. Since Article 31 relates to the traditional uses
of the oceans, and if under its policy, the US recognize[s] the rights of the
other states in the watersoff their coasts, Justice Carpio postulates that there
is more reason to expect it to recognize the rights of other states in
their internal waters, such as the Sulu Sea in this case.
As to the non-ratification by the US, Justice Carpio emphasizes that the US
refusal to join the UNCLOS was centered on its disagreement with UNCLOS
regime of deep seabed mining (Part XI) which considers the oceans and deep
seabed commonly owned by mankind, pointing out that such has nothing to
do with its [the US] acceptance of customary international rules on
navigation.
It may be mentioned that even the US Navy Judge Advocate Generals Corps
publicly endorses the ratification of the UNCLOS, as shown by the following
statement posted on its official website:chanRoblesvirtualLawlibrary
The Convention is in the national interest of the United States because it
establishes stable maritime zones, including a maximum outer limit for
territorial seas; codifies innocent passage, transit passage, and archipelagic
sea lanes passage rights; works against jurisdictional creep by preventing
coastal nations from expanding their own maritime zones; and reaffirms
sovereign immunity of warships, auxiliaries and government aircraft.
xxxx
Economically, accession to the Convention would support our national interests
by enhancing the ability of the US to assert its sovereign rights over the
resources of one of the largest continental shelves in the world. Further, it is
the Law of the Sea Convention that first established the concept of a maritime
Exclusive Economic Zone out to 200 nautical miles, and recognized the rights
of coastal states to conserve and manage the natural resources in this
Zone.35chanrobleslaw
We fully concur with Justice Carpios view that non-membership in the UNCLOS
does not mean that the US will disregard the rights of the Philippines as a
Coastal State over its internal waters and territorial sea. We thus expect the US
to bear international responsibility under Art. 31 in connection with theUSS
Guardian grounding which adversely affected the Tubbataha reefs. Indeed, it is
difficult to imagine that our long-time ally and trading partner, which has been
actively supporting the countrys efforts to preserve our vital marine resources,
would shirk from its obligation to compensate the damage caused by its
warship while transiting our internal waters. Much less can we comprehend a
Government exercising leadership in international affairs, unwilling to comply
with the UNCLOS directive for all nations to cooperate in the global task to
protect and preserve the marine environment as provided in Article
197, viz:chanRoblesvirtualLawlibrary

Article 197
Cooperation on a global or regional basis
States shall cooperate on a global basis and, as appropriate, on a regional
basis, directly or through competent international organizations, in formulating
and elaborating international rules, standards and recommended practices and
procedures consistent with this Convention, for the protection and preservation
of the marine environment, taking into account characteristic regional features.
In fine, the relevance of UNCLOS provisions to the present controversy is
beyond dispute. Although the said treaty upholds the immunity of warships
from the jurisdiction of Coastal States while navigating the latters territorial
sea, the flag States shall be required to leave the territorial sea immediately if
they flout the laws and regulations of the Coastal State, and they will be liable
for damages caused by their warships or any other government vessel
operated for non-commercial purposes under Article 31.
Petitioners argue that there is a waiver of immunity from suit found in the VFA.
Likewise, they invoke federal statutes in the US under which agencies of the US
have statutorily waived their immunity to any action. Even under the common
law tort claims, petitioners asseverate that the US respondents are liable for
negligence, trespass and nuisance.
We are not persuaded.
The VFA is an agreement which defines the treatment of United States troops
and personnel visiting the Philippines to promote common security interests
between the US and the Philippines in the region. It provides for the guidelines
to govern such visits of military personnel, and further defines the rights of the
United States and the Philippine government in the matter of criminal
jurisdiction, movement of vessel and aircraft, importation and exportation of
equipment, materials and supplies.36 The invocation of US federal tort laws and
even common law is thus improper considering that it is the VFA which governs
disputes involving US military ships and crew navigating Philippine waters in
pursuance of the objectives of the agreement.
As it is, the waiver of State immunity under the VFA pertains only to criminal
jurisdiction and not to special civil actions such as the present petition for
issuance of a writ of Kalikasan. In fact, it can be inferred from Section 17, Rule 7
of the Rules that a criminal case against a person charged with a violation of an
environmental law is to be filed separately:chanRoblesvirtualLawlibrary
Sec. 17. Institution of separate actions.The filing of a petition for the issuance
of the writ of kalikasan shall not preclude the filing of separate civil, criminal or
administrative actions.
In any case, it is our considered view thata ruling on the application or nonapplication of criminal jurisdiction provisions of the VFA to US personnel who
may be found responsible for the grounding of theUSS Guardian, would be

premature and beyond the province of a petition for a writ of Kalikasan. We also
find it unnecessary at this point to determine whether such waiver of State
immunity is indeed absolute. In the same vein, we cannot grant damages
which have resulted from the violation of environmental laws. The Rules allows
the recovery of damages, including the collection of administrative fines under
R.A. No. 10067, in a separate civil suit or that deemed instituted with the
criminal action charging the same violation of an environmental
law.37cralawlawlibrary
Section 15, Rule 7 enumerates the reliefs which may be granted in a petition
for issuance of a writ ofKalikasan, to wit:chanRoblesvirtualLawlibrary
Sec. 15. Judgment.Within sixty (60) days from the time the petition is
submitted for decision, the court shall render judgment granting or denying the
privilege of the writ ofkalikasan.
The reliefs that may be granted under the writ are the
following:chanRoblesvirtualLawlibrary
(a) Directing respondent to permanently cease and desist from committing acts
or neglecting the performance of a duty in violation of environmental laws
resulting in environmental destruction or damage;
(b) Directing the respondent public official, government agency, private person
or entity to protect, preserve,rehabilitate or restore the environment;
(c) Directing the respondent public official, government agency, private person
or entity to monitor strict compliance with the decision and orders of the court;
(d) Directing the respondent public official, government agency, or private
person or entity to make periodic reports on the execution of the final
judgment; and
(e) Such other reliefs which relate to the right of the people to a balanced and
healthful ecology or to the protection,preservation, rehabilitation or restoration
of the environment,except the award of damages to individual
petitioners. (Emphasis supplied.)
We agree with respondents (Philippine officials) in asserting that this petition
has become moot in the sense that the salvage operation sought to be
enjoined or restrained had already been accomplished when petitioners sought
recourse from this Court. But insofar as the directives to Philippine respondents
to protect and rehabilitate the coral reef structure and marine habitat adversely
affected by the grounding incident are concerned, petitioners are entitled to
these reliefs notwithstanding the completion of the removal of the USS
Guardian from the coral reef.
However, we are mindful of the fact that the US and Philippine governments
both expressed readiness to negotiate and discuss the matter of compensation

for the damage caused by the USS Guardian. The US Embassy has also
declared it is closely coordinating with local scientists and experts in assessing
the extent of the damage and appropriate methods of rehabilitation.
Exploring avenues for settlement of environmental cases is not proscribed by
the Rules. As can be gleaned from the following provisions, mediation and
settlement are available for the consideration of the parties, and which dispute
resolution methods are encouraged by the court, to
wit:chanRoblesvirtualLawlibrary
RULE 3
xxxx
Sec. 3. Referral to mediation.At the start of the pre-trial conference, the court
shall inquire from the parties if they have settled the dispute; otherwise, the
court shall immediately refer the parties or their counsel, if authorized by their
clients, to the Philippine Mediation Center (PMC) unit for purposes of mediation.
If not available, the court shall refer the case to the clerk of court or legal
researcher for mediation.
Mediation must be conducted within a non-extendible period of thirty (30) days
from receipt of notice of referral to mediation.
The mediation report must be submitted within ten (10) days from the
expiration of the 30-day period.
Sec. 4. Preliminary conference.If mediation fails, the court will schedule the
continuance of the pre-trial. Before the scheduled date of continuance, the
court may refer the case to the branch clerk of court for a preliminary
conference for the following purposes:chanRoblesvirtualLawlibrary
(a) To assist the parties in reaching a settlement;
xxxx
Sec. 5. Pre-trial conference; consent decree.The judge shall put the parties
and their counsels under oath, and they shall remain under oath in all pre-trial
conferences.
The judge shall exert best efforts to persuade the parties to arrive at a
settlement of the dispute. The judge may issue a consent decree approving the
agreement between the parties in accordance with law, morals, public order
and public policy to protect the right of the people to a balanced and healthful
ecology.
xxxx
Sec. 10. Efforts to settle.The court shall endeavor to make the parties to agree

to compromise or settle in accordance with law at any stage of the proceedings


before rendition of judgment. (Underscoring supplied.)
The Court takes judicial notice of a similar incident in 2009 when a guidedmissile cruiser, the USS Port Royal, ran aground about half a mile off the
Honolulu Airport Reef Runway and remained stuck for four days. After spending
$6.5 million restoring the coral reef, the US government was reported to have
paid the State of Hawaii $8.5 million in settlement over coral reef damage
caused by the grounding.38cralawlawlibrary
To underscore that the US government is prepared to pay appropriate
compensation for the damage caused by the USS Guardian grounding, the US
Embassy in the Philippines has announced the formation of a US
interdisciplinary scientific team which will initiate discussions with the
Government of the Philippines to review coral reef rehabilitation options in
Tubbataha, based on assessments by Philippine-based marine scientists. The
US team intends to help assess damage and remediation options, in
coordination with the Tubbataha Management Office, appropriate Philippine
government entities, non-governmental organizations, and scientific experts
from Philippine universities.39cralawlawlibrary
A rehabilitation or restoration program to be implemented at the cost of the
violator is also a major relief that may be obtained under a judgment rendered
in a citizens suit under the Rules, viz:chanRoblesvirtualLawlibrary
RULE 5
Section 1. Reliefs in a citizen suit.If warranted, the court may grant to the
plaintiff proper reliefs which shall include the protection, preservation or
rehabilitation of the environment and the payment of attorneys fees, costs of
suit and other litigation expenses. It may also require the violator to submit a
program of rehabilitation or restoration of the environment, the costs of which
shall be borne by the violator, or to contribute to a special trust fund for that
purpose subject to the control of the court.
In the light of the foregoing, the Court defers to the Executive Branch on the
matter of compensation and rehabilitation measures through diplomatic
channels. Resolution of these issues impinges on our relations with another
State in the context of common security interests under the VFA. It is settled
that [t]he conduct of the foreign relations of our government is committed by
the Constitution to the executive and legislativethe political--departments
of the government, and the propriety of what may be done in the exercise of
this political power is not subject to judicial inquiry or
decision.40cralawlawlibrary
On the other hand, we cannot grant the additional reliefs prayed for in the
petition to order a review of the VFA and to nullify certain immunity provisions
thereof.

As held in BAYAN (Bagong Alyansang Makabayan) v. Exec. Sec. Zamora,41 the


VFA was duly concurred in by the Philippine Senate and has been recognized as
a treaty by the United States as attested and certified by the duly authorized
representative of the United States government. The VFA being a valid and
binding agreement, the parties are required as a matter of international law to
abide by its terms and provisions.42 The present petition under the Rules is not
the proper remedy to assail the constitutionality of its provisions.
WHEREFORE, the petition for the issuance of the privilege of the Writ
of Kalikasan is hereby DENIED.
No pronouncement as to costs.
SO ORDERED.cralawred
Carpio, Velasco, Jr., Leonardo-De Castro, Brion, Peralta, Bersamin, Del Castillo,
Perez, Reyes, andPerlas-Bernabe, JJ., concur.
Sereno, C.J., see concurring opinion.
Mendoza, J., on official leave.
Leonen, J., see separate concurring opinion.
Jardeleza, J., no part.

EN BANC
G.R. No. 199199, August 27, 2013
MARICRIS D. DOLOT, CHAIRMAN OF THE BAGONG ALYANSANG
MAKABAYAN-SORSOGON, Petitioner, v. HON. RAMON PAJE, IN HIS
CAPACITY AS THE SECRETARY OF THE DEPARTMENT OF ENVIRONMENT
AND NATURAL RESOURCES, REYNULFO A. JUAN, REGIONAL DIRECTOR,
MINES AND GEOSCIENCES BUREAU, DENR, HON. RAUL R. LEE,
GOVERNOR, PROVINCE OF SORSOGON, ANTONIO C. OCAMPO, JR.,
VICTORIA A. AJERO, ALFREDO M. AGUILAR, AND JUAN M. AGUILAR,
ANTONES ENTERPRISES, GLOBAL SUMMIT MINES DEV'T CORP., AND TR
ORE, Respondents.

DECISION
REYES, J.:

This is a petition for review on certiorari1 under Rule 45 of the Rules of Court
assailing the Order2 dated September 16, 2011 and Resolution3 dated October
18, 2011 issued by the Regional Trial Court (RTC) of Sorsogon, Branch 53. The
assailed issuances dismissed Civil Case No. 2011-8338 for Continuing
Mandamus, Damages and Attorneys Fees with Prayer for the Issuance of a
Temporary Environment Protection Order.
Antecedent Facts
On September 15, 2011, petitioner Maricris D. Dolot (Dolot), together with the
parish priest of the Holy Infant Jesus Parish and the officers of Alyansa Laban sa
Mina sa Matnog (petitioners), filed a petition for continuing mandamus,
damages and attorneys fees with the RTC of Sorsogon, docketed as Civil Case
No. 2011-8338.4 The petition contained the following pertinent allegations: (1)
sometime in 2009, they protested the iron ore mining operations being
conducted by Antones Enterprises, Global Summit Mines Development
Corporation and TR Ore in Barangays Balocawe and Bon-ot Daco, located in the
Municipality of Matnog, to no avail; (2) Matnog is located in the southern tip of
Luzon and there is a need to protect, preserve and maintain the geological
foundation of the municipality; (3) Matnog is susceptible to flooding and
landslides, and confronted with the environmental dangers of flood hazard,
liquefaction, ground settlement, ground subsidence and landslide hazard; (4)
after investigation, they learned that the mining operators did not have the
required permit to operate; (5) Sorsogon Governor Raul Lee and his
predecessor Sally Lee issued to the operators a small-scale mining permit,
which they did not have authority to issue; (6) the representatives of the
Presidential Management Staff and the Department of Environment and Natural
Resources (DENR), despite knowledge, did not do anything to protect the
interest of the people of Matnog;5 and (7) the respondents violated Republic Act
(R.A.) No. 7076 or the Peoples Small-Scale Mining Act of 1991, R.A. No. 7942 or
the Philippine Mining Act of 1995, and the Local Government Code.6 Thus, they
prayed for the following reliefs: (1) the issuance of a writ commanding the
respondents to immediately stop the mining operations in the Municipality of
Matnog; (2) the issuance of a temporary environment protection order or TEPO;
(3) the creation of an inter-agency group to undertake the rehabilitation of the
mining site; (4) award of damages; and (5) return of the iron ore, among
others.7cralaw virtualaw library
The case was referred by the Executive Judge to the RTC of Sorsogon, Branch
53 being the designated environmental court.8 In the Order9 dated September

16, 2011, the case was summarily dismissed for lack of jurisdiction.
The petitioners filed a motion for reconsideration but it was denied in the
Resolution10 dated October 18, 2011. Aside from sustaining the dismissal of the
case for lack of jurisdiction, the RTC11 further ruled that: (1) there was no final
court decree, order or decision yet that the public officials allegedly failed to
act on, which is a condition for the issuance of the writ of
continuing mandamus; (2) the case was prematurely filed as the petitioners
therein failed to exhaust their administrative remedies; and (3) they also failed
to attach judicial affidavits and furnish a copy of the complaint to the
government or appropriate agency, as required by the rules.12cralaw virtualaw
library
Petitioner Dolot went straight to this Court on pure questions of law.
Issues
The main issue in this case is whether the RTC-Branch 53 has jurisdiction to
resolve Civil Case No. 2011-8338. The other issue is whether the petition is
dismissible on the grounds that: (1) there is no final court decree, order or
decision that the public officials allegedly failed to act on; (2) the case was
prematurely filed for failure to exhaust administrative remedies; and (3) the
petitioners failed to attach judicial affidavits and furnish a copy of the
complaint to the government or appropriate agency.
Ruling of the Court
Jurisdiction and Venue
In dismissing the petition for lack of jurisdiction, the RTC, in its Order dated
September 16, 2011, apparently relied on SC Administrative Order (A.O.) No. 7
defining the territorial areas of the Regional Trial Courts in Regions 1 to 12, and
Administrative Circular (Admin. Circular) No. 23-2008, 13 designating the
environmental courts to try and decide violations of environmental laws x x
x committed within their respective territorial jurisdictions.14 Thus, it
ruled that its territorial jurisdiction was limited within the boundaries of
Sorsogon City and the neighboring municipalities of Donsol, Pilar, Castilla,
Casiguran and Juban and that it was bereft of jurisdiction to entertain, hear
and decide [the] case, as such authority rests before another co-equal
court.15cralaw virtualaw library
Such reasoning is plainly erroneous. The RTC cannot solely rely on SC A.O. No. 7
and Admin. Circular No. 23-2008 and confine itself within its four corners in
determining whether it had jurisdiction over the action filed by the petitioners.
None is more well-settled than the rule that jurisdiction, which is the power and

authority of the court to hear, try and decide a case, is conferred by law.16 It
may either be over the nature of the action, over the subject matter, over the
person of the defendants or over the issues framed in the pleadings.17 By virtue
of Batas Pambansa (B.P.) Blg. 129 or the Judiciary Reorganization Act of 1980,
jurisdiction over special civil actions for certiorari, prohibition and mandamus is
vested in the RTC. Particularly, Section 21(1) thereof provides that the RTCs
shall exercise original jurisdiction
in the issuance of writs of certiorari, prohibition, mandamus, quo
warranto, habeas corpus and injunction which may be enforced in any part
of their respective regions. (Emphasis ours)
A.O. No. 7 and Admin. Circular No. 23-2008 was issued pursuant to Section 18
of B.P. Blg. 129, which gave the Court authority to define the territory over
which a branch of the RTC shall exercise its authority. These administrative
orders and circulars issued by the Court merely provide for the venue where an
action may be filed. The Court does not have the power to confer jurisdiction on
any court or tribunal as the allocation of jurisdiction is lodged solely in
Congress.18 It also cannot be delegated to another office or agency of the
Government.19Section 18 of B.P. Blg. 129, in fact, explicitly states that the
territory thus defined shall be deemed to be the territorial area of the branch
concerned for purposes of determining the venue of all suits,
proceedings or actions. It was also clarified in Office of the Court
Administrator v. Judge Matas20 that
Administrative Order No. 3 [defining the territorial jurisdiction of the Regional
Trial Courts in the National Capital Judicial Region] and, in like manner, Circular
Nos. 13 and 19, did notper se confer jurisdiction on the covered regional trial
courts or its branches, such that non-observance thereof would nullify their
judicial acts. The administrative order merely defines the limits of the
administrative area within which a branch of the court may exercise its
authority pursuant to the jurisdiction conferred by Batas Pambansa Blg.
129.21cralaw virtualaw library
The RTC need not be reminded that venue relates only to the place of trial or
the geographical location in which an action or proceeding should be brought
and does not equate to the jurisdiction of the court. It is intended to
accord convenience to the parties, as it relates to the place of trial, and does
not restrict their access to the courts.22 Consequently, the RTCsmotu
proprio dismissal of Civil Case No. 2011-8338 on the ground of lack of
jurisdiction is patently incorrect.
At most, the error committed by the petitioners in filing the case with the RTC
of Sorsogon was that of improper venue. A.M. No. 09-6-8-SC or the Rules of
Procedure for Environmental Cases (Rules) specifically states that a special civil
action for continuing mandamus shall be filed with the [RTC] exercising
jurisdiction over the territory where the actionable neglect or omission
occurred x x x.23 In this case, it appears that the alleged actionable neglect or
omission occurred in the Municipality of Matnog and as such, the petition
should have been filed in the RTC of Irosin.24 But even then, it does not warrant

the outright dismissal of the petition by the RTC as venue may be


waived.25 Moreover, the action filed by the petitioners is not criminal in nature
where venue is an essential element of jurisdiction.26 In Gomez-Castillo v.
Commission on Elections,27 the Court even expressed that what the RTC should
have done under the circumstances was to transfer the case (an election
protest) to the proper branch. Similarly, it would serve the higher interest of
justice28 if the Court orders the transfer of Civil Case No. 2011 8338 to the RTC
of Irosin for proper and speedy resolution, with the RTC applying the Rules in its
disposition of the case.
At this juncture, the Court affirms the continuing applicability of Admin. Circular
No. 23-2008 constituting the different green courts in the country and setting
the administrative guidelines in the raffle and disposition of environmental
cases. While the designation and guidelines were made in 2008, the same
should operate in conjunction with the Rules.
A.M. No. 09-6-8-SC: Rules of Procedure for Environmental Cases
In its Resolution dated October 18, 2011, which resolved the petitioners
motion for reconsideration of the order of dismissal, the RTC further ruled that
the petition was dismissible on the following grounds: (1) there is no final court
decree, order or decision yet that the public officials allegedly failed to act on;
(2) the case was prematurely filed for failure to exhaust administrative
remedies; and (3) there was failure to attach judicial affidavits and furnish a
copy of the complaint to the government or appropriate agency. 29 The
respondents, and even the Office of the Solicitor General, in behalf of the public
respondents, all concur with the view of the RTC.
The concept of continuing mandamus was first introduced in Metropolitan
Manila Development Authority v. Concerned Residents of Manila Bay.30 Now
cast in stone under Rule 8 of the Rules, the writ of
continuing mandamus enjoys a distinct procedure than that of ordinary civil
actions for the enforcement/violation of environmental laws, which are covered
by Part II (Civil Procedure). Similar to the procedure under Rule 65 of the Rules
of Court for special civil actions for certiorari, prohibition and mandamus,
Section 4, Rule 8 of the Rules requires that the petition filed should be sufficient
in form and substance before a court may take further action; otherwise, the
court may dismiss the petition outright. Courts must be cautioned, however,
that the determination to give due course to the petition or dismiss it outright
is an exercise of discretion that must be applied in a reasonable manner in
consonance with the spirit of the law and always with the view in mind of
seeing to it that justice is served.31cralaw virtualaw library
Sufficiency in form and substance refers to the contents of the petition filed
under Rule 8, Section 1:

When any agency or instrumentality of the government or officer thereof


unlawfully neglects the performance of an act which the law specifically enjoins
as a duty resulting from an office, trust or station in connection with the
enforcement or violation of an environmental law rule or regulation or a right
therein, or unlawfully excludes another from the use or enjoyment of such right
and there is no other plain, speedy and adequate remedy in the ordinary
course of law, the person aggrieved thereby may file a verified petition in the
proper court, alleging the facts with certainty, attaching thereto supporting
evidence, specifying that the petition concerns an environmental law, rule or
regulation, and praying that judgment be rendered commanding the
respondent to do an act or series of acts until the judgment is fully satisfied,
and to pay damages sustained by the petitioner by reason of the malicious
neglect to perform the duties of the respondent, under the law, rules or
regulations. The petition shall also contain a sworn certification of non-forum
shopping.
On matters of form, the petition must be verified and must contain supporting
evidence as well as a sworn certification of non-forum shopping. It is also
necessary that the petitioner must be one who is aggrieved by an act or
omission of the government agency, instrumentality or its officer concerned.
Sufficiency of substance, on the other hand, necessitates that the petition must
contain substantive allegations specifically constituting an actionable neglect
or omission and must establish, at the very least, a prima facie basis for the
issuance of the writ, viz: (1) an agency or instrumentality of government or its
officer unlawfully neglects the performance of an act or unlawfully excludes
another from the use or enjoyment of a right; (2) the act to be performed by
the government agency, instrumentality or its officer is specifically enjoined by
law as a duty; (3) such duty results from an office, trust or station in connection
with the enforcement or violation of an environmental law, rule or regulation or
a right therein; and (4) there is no other plain, speedy and adequate remedy in
the course of law.32cralaw virtualaw library
The writ of continuing mandamus is a special civil action that may be availed of
to compel the performance of an act specifically enjoined by law. 33The
petition should mainly involve an environmental and other related
law, rule or regulation or a right therein. The RTCs mistaken notion on the
need for a final judgment, decree or order is apparently based on the definition
of the writ of continuing mandamus under Section 4, Rule 1 of the Rules, to wit:
(c) Continuing mandamus is a writ issued by a court in an environmental case
directing any agency or instrumentality of the government or officer thereof to
perform an act or series of acts decreed by final judgment which shall
remain effective until judgment is fully satisfied. (Emphasis ours)
The final court decree, order or decision erroneously alluded to by the RTC
actually pertains to the judgment or decree that a court would eventually
render in an environmental case for continuing mandamus and which judgment
or decree shall subsequently become final.

Under the Rules, after the court has rendered a judgment in conformity with
Rule 8, Section 7 and such judgment has become final, the issuing court still
retains jurisdiction over the case to ensure that the government agency
concerned is performing its tasks as mandated by law and to monitor the
effective performance of said tasks. It is only upon full satisfaction of the final
judgment, order or decision that a final return of the writ shall be made to the
court and if the court finds that the judgment has been fully implemented, the
satisfaction of judgment shall be entered in the court docket.34 A writ of
continuing mandamus is, in essence, a command of continuing compliance with
a final judgment as it permits the court to retain jurisdiction after judgment in
order to ensure the successful implementation of the reliefs mandated under
the courts decision.35cralaw virtualaw library
The Court, likewise, cannot sustain the argument that the petitioners should
have first filed a case with the Panel of Arbitrators (Panel), which has
jurisdiction over mining disputes under R.A. No. 7942.
Indeed, as pointed out by the respondents, the Panel has jurisdiction over
mining disputes.36 But the petition filed below does not involve a mining
dispute. What was being protested are the alleged negative environmental
impact of the small-scale mining operation being conducted by Antones
Enterprises, Global Summit Mines Development Corporation and TR Ore in the
Municipality of Matnog; the authority of the Governor of Sorsogon to issue
mining permits in favor of these entities; and the perceived indifference of the
DENR and local government officials over the issue. Resolution of these matters
does not entail the technical knowledge and expertise of the members of the
Panel but requires an exercise of judicial function. Thus, inOlympic Mines and
Development Corp. v. Platinum Group Metals Corporation,37 the Court stated
Arbitration before the Panel of Arbitrators is proper only when there is
a disagreement between the parties as to some provisions of the
contract between them, which needs the interpretation and the
application of that particular knowledge and expertise possessed by
members of that Panel. It is not proper when one of the parties repudiates
the existence or validity of such contract or agreement on the ground of fraud
or oppression as in this case. The validity of the contract cannot be subject of
arbitration proceedings. Allegations of fraud and duress in the execution of a
contract are matters within the jurisdiction of the ordinary courts of law. These
questions are legal in nature and require the application and
interpretation of laws and jurisprudence which is necessarily a judicial
function.38 (Emphasis supplied in the former and ours in the latter)
Consequently, resort to the Panel would be completely useless and
unnecessary.
The Court also finds that the RTC erred in ruling that the petition is infirm for
failure to attach judicial affidavits. As previously stated, Rule 8 requires that the
petition should be verified, contain supporting evidence and must be

accompanied by a sworn certification of non-forum shopping. There is nothing


in Rule 8 that compels the inclusion of judicial affidavits, albeit not prohibited. It
is only if the evidence of the petitioner would consist of testimony of witnesses
that it would be the time that judicial affidavits (affidavits of witnesses in the
question and answer form) must be attached to the petition/complaint.39cralaw
virtualaw library
Finally, failure to furnish a copy of the petition to the respondents is not a fatal
defect such that the case should be dismissed. The RTC could have just
required the petitioners to furnish a copy of the petition to the respondents. It
should be remembered that courts are not enslaved by technicalities, and
they have the prerogative to relax compliance with procedural rules of even the
most mandatory character, mindful of the duty to reconcile both the need to
speedily put an end to litigation and the parties right to an opportunity to be
heard.40cralaw virtualaw library
WHEREFORE, the petition is GRANTED. The Order dated September 16, 2011
and Resolution dated October 18, 2011 issued by the Regional Trial Court of
Sorsogon, Branch 53, dismissing Civil Case No. 2011-8338 are NULLIFIED AND
SET ASIDE. The Executive Judge of the Regional Trial Court of Sorsogon
is DIRECTED to transfer the case to the Regional Trial Court of Irosin, Branch
55, for further proceedings with dispatch. Petitioner Maricris D. Dolot is
also ORDERED to furnish the respondents with a copy of the petition and its
annexes within ten (10) days from receipt of this Decision and to submit its
Compliance with the RTC of Irosin.
SO ORDERED.
Sereno, C.J., Carpio, Velasco, Jr., Leonardo-De Castro, Peralta, Bersamin,
Castillo, Abad, Perez, Mendoza, Perlas-Bernabe, and Leonen, JJ., concur.
Brion, J., on leave.
Villarama, Jr., on official leave.

SECOND DIVISION
G.R. No. 149638, December 10, 2014

MONCAYO INTEGRATED SMALL-SCALE MINERS ASSOCIATION, INC.


[MISSMA], Petitioner, v.SOUTHEAST MINDANAO GOLD MINING CORP., JB.
MGT. MINING CORP., PICOP RESOURCES, INC., MT. DIWATA UPPER ULIP
MANDAYA TRIBAL COUNCIL, INC. AND BALITE INTEGRATED SMALLSCALE MINING CORP., (BISSMICO), Respondents.
[G.R. NO. 149916]
HON. ANTONIO H. CERILLES, IN HIS CAPACITY AS SECRETARY OF
DEPARTMENT OF ENVIRONMENT AND NATURAL
RESOURCES, Petitioner, v. SOUTHEAST MINDANAO GOLD MINING
CORPORATION (SMGMC) AND BALITE INTEGRATED SMALL-SCALE
MINING CORP., (BISSMICO), Respondents.
DECISION
LEONEN, J.:
These two consolidated cases involve the Diwalwal Gold Rush Area in Mt.
Diwata, Mindanao that has been embroiled in controversies since the mid1980s.1 The instant controversy focuses on the 729-hectare portion excluded
from respondent Southeast Mindanao Gold Mining Corporations Mineral
Production Sharing Agreement application, and declared as Peoples Small
Scale Mining Area. Due to supervening events, we declare the petitions moot
and academic.
Before us are two petitions for review2 assailing the Court of Appeals August
27, 2001 amended decision3 that annulled and set aside the Department of
Environment and Natural Resources (DENR) Secretarys September 20, 1999
decision4 for having been issued with grave abuse of discretion in excess of his
discretion.
Moncayo Integrated Small-Scale Miners Association, Inc. (MISSMA) filed the first
petition5 docketed as G.R. No. 149638. Then DENR Secretary Antonio H. Cerilles
filed the second petition docketed as G.R. No.
149916.6chanRoblesvirtualLawlibrary
The facts as summarized by the Court of Appeals
follow:7chanRoblesvirtualLawlibrary
On July 1, 1985, the Bureau of Forest Development issued to Marcopper Mining
Corporation (Marcopper) a prospecting permit (Permit to Prospect No. 755123185) covering 4,941 hectares within the Agusan-Davao-Surigao Forest
Reserve. This forest reserve was instituted by Proclamation No. 369 issued by
then Governor General Dwight F. Davis on February 27, 1931.
On March 10, 1986, the Bureau of Mines and Geo-Sciences issued to Marcopper
a permit to explore (EP 133) covering the same area.

On February 16, 1994, Marcopper assigned EP 133 to Southeast Mindanao Gold


Mining Corporation (SMGMC).
On December 19, 1995, the Mines and Geo-Sciences Bureau director ordered
the publication of SMGMCs application for Mineral Production Sharing
Agreement (MPSA No. 128) for the 4,941 hectares covered by EP 133.
JB Management Mining Corporation, Davao United Miners Cooperative, Balite
Integrated Small Scale Miners Cooperative, MISSMA, PICOP, Rosendo Villaflor,
et al., Antonio G. Dacudao, Puting Bato Gold Miners Cooperative, and Romeo
Altamera, et al. filed adverse claims against MPSA No.
128.8chanRoblesvirtualLawlibrary
The adverse claims were anchored on DENR Administrative Order No. 669 (DAO
No. 66) issued on December 27, 1991, declaring 729 hectares of the AgusanDavao-Surigao Forest Reserve as forest land open for small-scale mining
purposes, subject to existing and valid private rights.
The DENR constituted a panel of arbitrators pursuant to Section 77 of the
Philippine Mining Act of 1995 tasked to resolve the adverse claims against
MPSA No. 128.
The panel of arbitrators, in its decision dated June 13, 1997, reiterated the
validity of EP 133 and dismissed all adverse claims against MPSA No. 128. The
adverse claimants appealed to the Mines Adjudication Board.
The Mines Adjudication Board (MAB), in its decision10 dated January 6, 1998,
vacated the decision of the panel of arbitrators:chanroblesvirtuallawlibrary
WHEREFORE, PREMISES CONSIDERED, the decision of the Panel of
Arbitrators dated 13 June 1997 is hereby VACATED and a new one entered in
the records of the case as follows:
1. SEMs MPSA application is hereby given due course subject to the full and
strict compliance of the provisions of the Mining Act and its Implementing Rules
and Regulations.
2. The area covered by DAO 66, series of 1991, actually occupied and actively
mined by the small-scale miners on or before August 1, 1987 as determined by
the Provincial Mining Regulatory Board (PMRB), is hereby excluded from
the area applied for by SEM; (Emphasis supplied)
3. A moratorium on all mining and mining-related activities, is hereby imposed
until such time that all necessary procedures, licenses, permits and other
requisites as provided for by RA 7076, the Mining Act and its Implementing
Rules and Regulations and all other pertinent laws, rules and regulations are
complied with, and the appropriate environmental protection measures and
safeguards have been effectively put in place.

4. Consistent with the spirit of RA 7076, the Board encourages SEM and all
small-scale miners to continue to negotiate in good faith and arrive at an
agreement beneficial to all. In the event of SEMs strict and full compliance with
all the requirements of the Mining Act and its Implementing Rules and
Regulations, and the concurrence of the small-scale miners actually occupying
and actively mining the area, SEM may apply for the inclusion of portions of the
areas segregated under paragraph 2 hereof, to its MPSA application. In this
light, subject to the preceding paragraph, the contract between JB and SEM is
hereby recognized.
SO ORDERED.11
Both SMGMC and the adverse claimants questioned the Mines Adjudication
Boards decision before this court. These petitions were remanded to the Court
of Appeals as CA-G.R. SP Nos. 61215-16, later elevated to this court as G.R. No.
152613, G.R. No. 152628, G.R. Nos 152619-20, and G.R. Nos. 15287071.12chanRoblesvirtualLawlibrary
Meanwhile, independent of the MAB decision and the appeals to the Court of
Appeals and this court, the Provincial Mining Regulatory Board of Davao
proposed to declare a Peoples Small Scale Mining Area in accordance with the
MAB decision.13chanRoblesvirtualLawlibrary
On February 24, 1992, the notice for the proposed declaration was approved
and issued for publication to notify any and all oppositors or protestors. 14 Those
who filed oppositions included SMGMC, Picop Resources Incorporated, Mt.
Diwata-Upper Ulip Mandaya Tribal Council, and JB Management Mining
Corporation.15chanRoblesvirtualLawlibrary
The Provincial Mining Regulatory Board (PMRB), in its decision16 dated March
30, 1999, dismissed the oppositions for lack of merit, then segregated and
declared the 729-hectare gold rush area as People's Small Scale Mining
Area:chanroblesvirtuallawlibrary
WHEREFORE, in view of the foregoing premises, the instant protest/opposition
of herein Oppositors are hereby DISMISSED for lack of merit. This Board hereby
segregates and declares the 729-hectare gold rush area in Mt. Diwalwal
actually occupied and actively mined on or before August 1, 1987 as Peoples
Small-Scale Mining Area. Thereafter, the concerned local government unit
through the recommendation of this Board shall issue/execute the necessary
small-scale mining contract to qualified applicants upon compliance of the
requisites for small scale mining under R.A. 7076 and its implementing rules
and regulations.
SO ORDERED.17
Then DENR Secretary Antonio H. Cerilles, in his decision dated September 20,
1999, affirmed with modification the Provincial Mining and Regulatory Board
decision:18chanRoblesvirtualLawlibrary

WHEREFORE, premises considered, the Decision of the PMRB of Compostela


Valley dated March 30, 1999 is hereby AFFIRMED, subject to the following
modifications:
1. For effective management and equitable utilization of resources, the two
main areas of operations as described above of the 729 hectares shall be
delineated and embodied in a Memorandum of Agreement (MOA) among the
stakeholders concerned to ensure recognition of delineated boundaries and
rational operation of the concerned areas.
2. These two areas are divided as follows: a) Block I [Balete-Nang Area],
composed ofSub-Block A and Sub-Block B, intended for Blucor and Helica Group
of Tunnels, representing MISSMA, and for various qualified Small-Scale Miners
who are actually occupying and actively mining in the area and b) Block
II [Buenas-Tinago Area], intended for JB Management, and other qualified
Small-Scale Miners who are actually occupying and actively mining in the area.
3. Qualified Small-Scale Miners in each area, as maybe determined by the
PMRB, shall apply for Small Scale Mining Contracts with option thereafter to
apply for an MPSA.
4. Consistent with the provisions of DENR Memorandum Order No. 99-02,
mineral processing plants in the Diwalwal area shall be relocated to processing
zones duly designated by the DENR where appropriate tailings disposal
systems have been put in place.
5. The Natural Resources Development Corporation (NRDC), the corporate arm
of the DENR, shall extend the necessary technical expertise and supervision
over all mining and milling operations in the area, environmental clean-up and
rehabilitation activities, and the identification of alternative livelihood activities
for the families of small-scale miners and other residents in the area.
SO ORDERED.19 (Emphasis and underscoring in the original)
The DENR Secretary denied reconsideration on February 2, 2000. SMGMC filed
a petition under Rule 43 before the Court of Appeals.
The Court of Appeals, in its decision20 dated July 31, 2000, denied the petition.
The Court of Appeals discussed that since there being no injunction from the
Supreme Court which would prevent the enforcement of the MAB decision,
respondent DENR Secretary acted with propriety in issuing the assailed
decision which affirmed the PMRBs declaration of a Peoples Small Scale
Mining Area.21 It also denied the petition based on litis pendencia, considering
that the pending case before this court assailing the MAB decision involved a
prejudicial question.22chanRoblesvirtualLawlibrary
SMGMC and Balite Integrated Small-Scale Mining Corp. (BISSMICO) filed
separate motions for reconsideration.

The Court of Appeals, in its amended decision23 dated August 27, 2001, granted
the motions for reconsideration and, consequently, set aside and annulled the
DENR Secretary's decision for having been issued with grave abuse of
discretion in excess of his jurisdiction.24chanRoblesvirtualLawlibrary
The Court of Appeals limited its discussion on the propriety of the DENR
Secretarys decision.
It cited at length a memorandum dated March 27, 1998 by then DENR
Undersecretary, Antonio La Via, to support its finding that SMGMC may apply
and be entitled to a particular area within the 729 hectares potential coverage
of the Peoples Small-Scale Mining Area, subject to the fulfilment of several
conditions.25chanRoblesvirtualLawlibrary
The Court of Appeals found that the DENR Secretarys outright delineation of
the subject area in favor of certain entities contravenes the mandate of the
MAB Decision and the purpose of RA 7076 (Peoples Small-Scale Mining Act of
1991), inasmuch as it disenfranchises the petitioner and other small-scale
miners who may apply for and be awarded small-scale mining contracts by the
local government units upon recommendation of the PMRB after the fulfilment
of necessary conditions set forth in the law.26chanRoblesvirtualLawlibrary
Hence, these two petitions for review were filed assailing the Court of Appeals'
amended decision.
Petitioner MISSMA27 argues that the Court of Appeals should not have amended
its decision considering it already found SMGMC guilty of forum shopping
and litis pendencia.28chanRoblesvirtualLawlibrary
Petitioner MISSMA contends that the petition docketed as G.R. No. 132475
assailing the portion of the MABs decision that excluded the 729-hectare area
covered by DAO No. 66 from SMGMCs Mines Production Sharing Agreement
application29 involves the same issues as the present cases. MISSMA submits
that the ultimate objective of the two cases is [SMGMC] to solely obtain all
mining rights over the subject 729 hectare gold rush area, to the exclusion of
MISSMA and other claimants thereon.30chanRoblesvirtualLawlibrary
Petitioner MISSMA also argues that [i]n carrying out the function of declaring
and segregating gold rush areas for small-scale mining purposes [pursuant to
Republic Act No. 7076], both the PMRB, and upon review, the DENR Secretary,
may well act independently of the MAB, which, on the other hand is a quasijudicial body tasked to settle mining conflicts, disputes or claims[.]31 Moreover,
the DENR Secretarys decision only delineated and identified areas available for
small-scale mining contract applications. The decision did not make actual
awards.32chanRoblesvirtualLawlibrary
Petitioner Hon. Antonio H. Cerilles, in his capacity as then DENR
Secretary,33 similarly argues that the Court of Appeals should have maintained

its earlier decision dismissing the case due to forum shopping and litis
pendencia.34chanRoblesvirtualLawlibrary
In any event, petitioner DENR Secretary argues that he acted within authority
in modifying the PMRBs decision, citing Sections 24 and 26 of Republic Act No.
7076 on the DENR Secretarys power of direct supervision and
control.35chanRoblesvirtualLawlibrary
Petitioner DENR Secretary adds that [t]he division into two areas of the
segregated portion of 729-hectares small-scale mining area does not
contravene the mandate of the MAB decision and the purpose of R.A. No. 7076,
since there is no award yet of any license or permit made to any qualified
small-scale miner.36chanRoblesvirtualLawlibrary
Lastly, petitioner DENR Secretary contends that these petitions have been
mooted by (1) then President Macapagal-Arroyos issuance of Proclamation No.
297 excluding an area from Proclamation No. 369 and declaring this as a
mineral reservation and as an environmentally critical area, and (2) this courts
decision dated June 23, 2006 in G.R. Nos. 152613, 152628, 152619-20,
152870-71 declaring DAO No. 66 as void, declaring EP 133 as expired, and
underscoring the Executives power of supervision and control over the
exploration, development, and utilization of the countrys mineral
resources.37chanRoblesvirtualLawlibrary
Respondent SMGMC counters that no forum shopping or litis pendencia exists
as the present petitions emanated from the decision of the PMRB declaring the
729 hectares of timberland as Peoples Small-Scale Mining Area, while G.R. No.
132475 emanated from the decision of the MAB on the MPSA Application of
[SMGMC].38 Records also show that the case docketed as G.R. No. 132475 was
made known to this court.39chanRoblesvirtualLawlibrary
Respondent SMGMC quoted at length DENR Undersecretary La Vias
memorandum on the scope of the MAB decision.40chanRoblesvirtualLawlibrary
Respondent SMGMC submits that the DENR Secretarys decision practically
abandoned the MAB decision and fashioned his own formula for disaster, such
as mentioning the Blucor and Helica groups which were never parties before
the PMRB.41chanRoblesvirtualLawlibrary
Respondent BISSMICO admits and adopts respondent SMGMCs
memorandum.42chanRoblesvirtualLawlibrary
Respondent PICOP discusses the difference between forest reserves and
forest reservations under Presidential Decree No. 705, 43 and pursuant to
Republic Act No. 309244 enacted on June 17, 1961, stating that a law should
now be passed by Congress in order to reclassify areas in forest reserve to
another use.45chanRoblesvirtualLawlibrary
Even Executive Order No. 318 issued on June 9, 2004 on guiding principles in

Promoting Sustainable Forest Management in the Philippines provides that


[c]onversions of forestlands into non-forestry uses shall be allowed only
through an act of Congress and upon the recommendation of concerned
government agencies.46 Consequently, the PMRB has no authority to declare
the 729 hectares within the forest reserve as a Peoples Small-Scale Mining
Area.47chanRoblesvirtualLawlibrary
Respondent PICOP also argues that Proclamation No. 297 by then President
Macapagal-Arroyo was without congressional concurrence as required by
Republic Act No. 3092, thus, revocable.48 Its memorandum also includes
arguments on how Proclamation No. 297 was the first step in a series of
constitutional violations such as an agreement with ZTE NBN involving the
gold rush area.49chanRoblesvirtualLawlibrary
By resolution50 dated March 4, 2013, the parties were required to file
manifestations on subsequent developments that may help this court in the
immediate disposition of these cases, or that may render the cases moot and
academic.51chanRoblesvirtualLawlibrary
Petitioner DENR Secretary, through its counsel Office of the Solicitor General,
filed its compliance on May 16, 2013.52chanRoblesvirtualLawlibrary
Petitioner DENR Secretary submitted a copy of the letter53 dated April 24, 2013
of the Philippine Mining Development Corporation (PMDC), the government
office in charge of the Diwalwal area, containing details of the latest
development in the area. The letter54 provides a brief background, followed by
an enumeration of developments:chanroblesvirtuallawlibrary
I. PMDC 729 Area in the Diwalwal Mineral Reservation
. . . The Terms of Reference (TOR) for the 729 Bidding [partner of PMDC in the
exploration and development of the project area] was approved by the Board
on 3 March 2010.
On October 25, 2011, PMDC received an order from the Regional Trial Court . . .
enjoining [it] from bidding the Victory Tunnel and the 729-Area. PMDC filed a
Motion for Reconsideration [which] is still pending . . .
II. Tribal Mining Area (TRIMA) in the Diwalwal Mineral Reservation
On 26 June 2009, an Operating Agreement was entered into by PMDC and the
Indigenous Cultural Community (ICC) belonging to the Mandaya, Manobo,
Manguangan and Dibabawon tribes covering 2 parcels in the Diwalwal Mineral
Reservation having a total land area of 950 hectares.
....
PMDC requested NCIP to settle the issues of the tribal leadership and
representation with finality in order to guide PMDC and its operators/partners,

as well as other parties interested in assisting the tribe.


PMDC is still awaiting the final decision of NCIP. FF Cruz & Co., Inc. is still
actively pursuing its aforesaid Agreement with the ICC.
III. Other Areas in the Diwalwal Mineral Reservation
A. Upper Ulip Property
. . . area of One Thousand Six Hundred Twenty hectares (1,620 has.) has been
awarded, after a public bidding, to Paraiso Consolidated Mining Corporation
(PACOMINCO) on June 2009.
On 1 March 2012, the PMDC Board approved the extension of the period for
exploration activities for the Upper Ulip-Paraiso Parcel.
B. Letter V
. . . area of One Thousand Two Hundred Ninety Six hectares (1,296 has.) has
been awarded, after public bidding, to Black Stone Mineral Resources Inc.
(Blackstone) on March 2010.
Blackstone is currently in the process of securing the Free and Prior-Informed
Consent of the ICC in the Area with the assistance of NCIP. On 5 March 2013,
Blackstone entered into a Memorandum of Agreement with the Mandaya tribe
for the development of the Letter V parcel within the [sic] their ancestral
domain.
C. Higanteng Bato
. . . area of One Thousand Three Hundred Fifty Nine hectares (1,359 has.) has
been awarded, after a public bidding, to Carrascal Nickel Corporation (CNC) on
March 2010.
On 19 July 2012, the PMDC Board approved the assignment of the Rights and
Obligations of CNC in the Joint Operating Agreement to Giant Stone
Corporation.
IV. NRDC Area (729 Area, 600m asl)
[PMDC has] received reports that NRDC has awarded approximately 400
hectares of the area under their administration to JBMMC. However, despite
several requests for information relative to the aforementioned reports, the
NRDC has yet to provide PMDC of any official documents . . .55
Respondent SMGMC filed an explanation, manifestation, and compliance
discussing that on June 23, 2006, this courts First Division rendered a decision
in the consolidated petitions of Apex (G.R. Nos. 152613 and 152628), Balite
Communal Portal Cooperative (G.R. Nos. 152619-20), and MAB (G.R. Nos.

152870-71) ruling that EP 133 has expired by its non-renewal, that its transfer
to SMGMC was void, and that DAO No. 66 was illegal for having been issued in
excess of the DENR Secretarys authority. 56 On November 20, 2009, this court
En Banc denied reconsideration, and this decision became final and
executory.57chanRoblesvirtualLawlibrary
Respondent SMGMC also manifested that (a) the above decision and resolution,
(b) the issuance of Proclamation No. 297 dated November 25, 2002, excluding
8,100 hectares in Moncayo, Compostela Valley and proclaiming this area as a
mineral reservation and as an environmentally critical area, and (c) DAO No.
2002-18, are supervening developments that rendered moot and academic the
issues raised in the present petitions.58chanRoblesvirtualLawlibrary
Counsel for respondent MISSMA filed a manifestation stating that he has
exerted diligent efforts to communicate with MISSMA in relation to the March 4,
2013 resolution but this proved futile. Counsel is not in a position to manifest to
this court on subsequent developments, but he will continue his attempt to
communicate with MISSMA, and will submit the required manifestation should
he succeed.59chanRoblesvirtualLawlibrary
Counsel for respondent PICOP filed a similar
explanation/compliance.60chanRoblesvirtualLawlibrary
The issues for resolution may be summarized as
follows:chanroblesvirtuallawlibrary
I.

Whether the Court of Appeals can set aside the issue of forum shopping
and litis pendencia (SMGMC's petition in G.R. No. 132475), and dwell on
the merits;

II.

Whether the DENR Secretarys decision went beyond the PMRBs


decision, otherwise, whether the DENR Secretary can modify the PMRBs
decision; and

III.

Whether the DENR Secretarys modification to divide the 729 hectares


into two areas contravened the mandate of the MAB decision and the
purpose of Republic Act No. 7076.

Subsequent developments
Developments after these petitions had been filed in 2001 mooted this case.
The parties recognized these developments in their recent submissions.
Petitioner DENR Secretary raised that the petitions were mooted by (a) then
President Macapagal-Arroyos issuance of Proclamation No. 297, excluding an
area from Proclamation No. 369 and declaring this area as a mineral
reservation and as an environmentally critical area, and (b) this courts decision
dated June 23, 2006 in G.R. Nos. 152613, 152628, 152619-20, and 152870-71

declaring DAO No. 66 as void, declaring EP 133 as expired, and underscoring


the Executives power of supervision and control over the exploration,
development, and utilization of the countrys mineral
resources.61chanRoblesvirtualLawlibrary
Respondent SMGMC similarly manifested that Proclamation No. 297 dated
November 25, 2002 and this courts 2006 decision and 2009 resolution in G.R.
Nos. 152613 and 152628, G.R. Nos. 152619-20 and G.R. Nos. 152870-71
mooted the present cases.62chanRoblesvirtualLawlibrary
Proclamation No. 297 dated November 25, 2002 excluded an area of 8,100
hectares in Moncayo, Compostela Valley as a mineral reservation and as an
environmentally critical area:chanroblesvirtuallawlibrary
PROCLAMATION NO. 297
EXCLUDING A CERTAIN AREA FROM THE OPERATION OF PROCLAMATION NO.
369 DATED FEBRUARY 27, 1931, AND DECLARING THE SAME AS MINERAL
RESERVATION AND AS ENVIRONMENTALLY CRITICAL AREA
WHEREAS, Article XII, Section 2 of the Constitution provides that the
exploration, development, and utilization of natural resources shall be under
the full control and supervision of the State;
WHEREAS, by virtue of Proclamation No. 369, series of 1931, certain tracts of
public land situated in the then provinces of Davao, Agusan and Surigao, with
an area of approximately 1,927,400 hectares, were withdrawn from settlement
and disposition, excluding, however, those portions which had been certified
and/or shall be classified and certified as non-forest lands;
WHEREAS, gold deposits have been found within the area covered by
Proclamation No. 369, in the Municipality of Monkayo, Compostela Valley
Province, and unregulated small to medium-scale mining operations have,
since 1983, been undertaken therein, causing in the process serious
environmental, health, and peace and order problems in the area;
WHEREAS, it is in the national interest to prevent the further degradation of the
environment and to resolve the health and peace and order spawned by the
unregulated mining operations in the said area;
WHEREAS, these problems may be effectively addressed by rationalizing
mining operations in the area through the establishment of a mineral
reservation;
WHEREAS, after giving due notice, the Director of Mines and Geosciences
conducted public hearings on September 6, 9 and 11, 2002 to allow the
concerned sectors and communities to air their views regarding the
establishment of a mineral reservation in the place in question;

WHEREAS, pursuant to the Philippine Mining Act of 1995 (RA 7942), the
President may, upon the recommendation of the Director of Mines and
Geosciences, through the Secretary of Environment and Natural Resources, and
when the national interest so requires, establish mineral reservations where
mining operations shall be undertaken by the Department directly or thru a
contractor;
WHEREAS, as a measure to attain and maintain a rational and orderly balance
between socio-economic growth and environmental protection, the President
may, pursuant to Presidential Decree No. 1586, as amended, proclaim and
declare certain areas in the country as environmentally critical;
NOW, THEREFORE, I, GLORIA MACAPAGAL-ARROYO, President of the Philippines,
upon recommendation of the Department of Environment and Natural
Resources (DENR), and by virtue of the powers vested in me by law, do hereby
exclude certain parcel of land located in Monkayo, Compostela Valley, and
proclaim the same as mineral reservation and as environmentally critical area,
with metes and bound as defined by the following geographical
coordinates; . . . .
....
with an area of Eight Thousand One Hundred (8,100) hectares, more or less.
Mining operations in the area may be undertaken either by the DENR directly,
subject to payment of just compensation that may be due to legitimate and
existing claimants, or thru a qualified contractor, subject to existing rights, if
any.
The DENR shall formulate and issue the appropriate guidelines, including the
establishment of an environmental and social fund, to implement the intent
and provisions of this Proclamation.
Subsequently, DENR Administrative Order No. 2002-18 declared an emergency
situation on the Diwalwal gold rush area and ordered the stoppage of all mining
operations in the area.
Then President Macapagal-Arroyo issued Executive Order No. 217 dated June
17, 2003, creating the National Task Force Diwalwal to address the situation in
the Diwalwal gold rush area.
On June 23, 2006, this court promulgated Apex Mining v. SMGMC,63 ruling on
the petitions for review by Apex, Balite, and the MAB. This court declared that
EP 133 expired on July 7, 1994, and that its subsequent transfer to SMGMC on
February 16, 1994 was void.64 This court also affirmed the Court of Appeals
decision declaring DAO No. 66 as illegal for having been issued in excess of the
DENR Secretarys authority.65chanRoblesvirtualLawlibrary
On November 20, 2009, this court En Banc denied reconsideration in Apex

Mining v. SMGMC for lack of merit.66 This court reiterated that Marcoppers
assignment of EP 133 to SMGMC violated Section 97 of Presidential Decree No.
463 and the terms and conditions in the permit.67chanRoblesvirtualLawlibrary
This court also clarified that its June 23, 2006 decision did not overturn its July
16, 1991 decision inApex Mining v. Garcia68 for the following
reasons:69chanRoblesvirtualLawlibrary
First, the 1991 case of Apex Mining v. Garcia involved conflicting mining claims
between Apex and Marcopper over the 4,941 hectares disputed area in
Moncayo, Mindanao.70chanRoblesvirtualLawlibrary
This court in Apex Mining v. Garcia ruled that the disputed areas, being clearly
within a forest reserve, are not open to mining location,71 citing Sections 8 and
13 of Presidential Decree No. 463, as amended by Presidential Decree No.
1385.72 This court found that procedural requisites were complied with and
undertaken by MARCOPPER after it had ascertained that its mining claims were
found to be within the Agusan-Davao-Surigao Forest Reserve. On the other
hand, the mining claims and SSMPs of Apex being located within said forest
reserve are in violation of the law and therefore result in a failure to validly
acquire mining rights.73chanRoblesvirtualLawlibrary
Second, the 1991 Apex Mining v. Garcia case was decided on facts and issues
that were not attendant in [Apex Mining v. SMGMC], such as the expiration of
EP 133, the violation of the condition embodied in EP 133 prohibiting its
assignment, and the unauthorized and invalid assignment of EP 133 by
[Marcopper] to [SMGMC], since this assignment was effected without the
approval of the Secretary of DENR.74chanRoblesvirtualLawlibrary
This court also mentioned that in the November 26, 1992 resolution in Apex
Mining v. Garcia, this court clarified that its ruling was conclusive only
between the parties with respect to the particular issue herein raised and under
the set of circumstances herein prevailing[.] 75chanRoblesvirtualLawlibrary
Forum shopping and litis pendencia
Litis pendencia exists when the following elements are present: (a) the
identity of parties, or at least such as representing the same interests in both
actions; (b) the identity of rights asserted and relief prayed for, the relief being
founded on the same facts; and (c) the identity of the two cases such that
judgment in one, regardless of which party is successful, would amount to res
judicata in the other.76chanRoblesvirtualLawlibrary
The existence of litis pendencia also means that the rule against forum
shopping was violated.77chanRoblesvirtualLawlibrary
The Court of Appeals July 31, 2000 decision denied SMGMCs petition on the
ground of litis pendenciaand forum shopping considering the then pending case
docketed as G.R. No. 132475 assailing the January 6, 1998 MAB decision

recognizing DAO No. 66 by excluding the 729-hectare


area.78chanRoblesvirtualLawlibrary
The Court of Appeals August 27, 2001 amended decision maintain that
matters pertaining to the petitioners rights over the subject 729-hectare gold
rush area have been decided by the Mines Adjudication Board (MAB), which
decision is now with the Supreme Court for review[,]79 but it nevertheless
annulled the DENR Secretarys decision for having been issued with grave
abuse of discretion in excess of his jurisdiction.80chanRoblesvirtualLawlibrary
Respondent SMGMC argued in its memorandum that no forum shopping or litis
pendencia exists,81 but later conceded in its explanation, manifestation, and
compliance dated September 1, 2014 that supervening developments, such as
this courts 2006 decision and 2009 resolution in Apex Mining v.
SMGMC, mooted these cases.82chanRoblesvirtualLawlibrary
We do not need to decide on whether there was forum shopping or litis
pendencia. Apex Mining v. SMGMC mooted these petitions.
Moot and academic
Apex Mining v. SMGMC consists of two consolidated cases.83 SMGMC filed the
petition docketed as G.R. No. 132475 assailing the January 6, 1998 MAB
decision excluding the 729-hectares area and questioning the validity of DAO
No. 66. MISSMA and other mining claimants filed the other petition docketed as
G.R. No. 132528.84chanRoblesvirtualLawlibrary
These petitions were remanded to the Court of Appeals, consolidated as G.R. SP
Nos. 61215 and 61216.85 The Court of Appeals declared the MAB decision as
null and void.86chanRoblesvirtualLawlibrary
Consequently, Apex filed a petition docketed as G.R. Nos. 152613 and 152628;
Balite Communal Portal Mining Cooperative, Inc. filed a petition docketed as
G.R. Nos. 152619-20; and the MAB and its members filed a petition docketed as
G.R. Nos. 152870-71.87chanRoblesvirtualLawlibrary
All these petitions were consolidated, and this court rendered its decision
entitled Apex Mining v. SMGMCon June 23, 2006, and resolution on November
20, 2009. The 2006 decision held:chanroblesvirtuallawlibrary
WHEREFORE, premises considered, the Petitions of Apex, Balite and the MAB
are PARTIALLY GRANTED, thus:
1. We hereby REVERSE and SET ASIDE the Decision of the Court of Appeals,
dated 13 March 2002, and hereby declare that EP 133 of MMC has EXPIRED on
7 July 1994 and that its subsequent transfer to SEM on 16 February 1994 is
VOID.
2. We AFFIRM the finding of the Court of Appeals in the same Decision

declaring DAO No. 66 illegal for having been issued in excess of the DENR
Secretarys authority.
Consequently, the State, should it so desire, may now award mining operations
in the disputed area to any qualified entity it may determine. No costs.
SO ORDERED.88
This court denied the motions for reconsiderations, among others, in its 2009
resolution.89chanRoblesvirtualLawlibrary
Since this court declared that EP 133 expired and its transfer to SMGMC is void,
respondent SMGMC has no more basis to claim any right over the disputed 729
hectares in the Diwalwal gold rush area excluded from its MPSA.
Furthermore, since this court has declared that the DENR Secretary had no
authority to issue DAO No. 66 declaring 729 hectares of the Agusan-DavaoSurigao Forest Reserve as forest land open for small-scale mining purposes
subject to existing and valid private rights, both the PMRB decision, and the
DENR Secretarys decision affirming it with modification, are consequently
overturned for lack of basis in delineating the 729 hectares from the MPSA.
The 2009 resolution in Apex Mining v. SMGMC also ruled that the State,
through the Executive Department, should it so desire, may now award mining
operations in the disputed area to any qualified entities it may determine [and]
[t]he Mines and Geosciences Bureau may process exploration permits pending
before it, taking into consideration the applicable mining laws, rules and
regulations relative thereto.90chanRoblesvirtualLawlibrary
Indeed, then President Macapagal-Arroyo issued Proclamation No. 297
excluding an area in Moncayo, Compostela Valley, declaring this as a mineral
reservation and as an environmentally critical area. DENR Administrative Order
No. 2002-18 followed, declaring an emergency situation in this gold rush area
and ordering the stoppage of all mining operations. Executive Order No. 217
thereafter created the National Task Force Diwalwal.
Authority and functions
in mining activities
In any case, we discuss the powers of the different agencies in relation to
mining activities as laid down by the relevant laws.
Mines Adjudication Board
Chapter XIII (Settlement of Conflicts) of Republic Act No. 7942 known as the
Mining Act of 1995 provides for the powers of the panel of arbitrators and the
Mines Adjudication Board (MAB). Section 77 states that the panel shall have
exclusive and original jurisdiction to hear and decide on the
following:chanroblesvirtuallawlibrary

a. Disputes involving rights to mining areas;


b. Disputes involving mineral agreements or permits;
c. Disputes involving surface owners, occupants and claimholders/
concessionaires; and
d. Disputes pending before the Bureau and the Department at the date of

the effectivity of this Act.91

Section 78 provides for the MABs appellate jurisdiction over the decision or
order of the panel of arbitrators.92 Section 79 enumerates the MABs powers
and functions, including the power to conduct hearings on all matters within
its jurisdiction.93chanRoblesvirtualLawlibrary
Provincial Mining Regulatory Board
While the MABs jurisdiction covers the settlement of conflicts over mining
claims, the Provincial Mining Regulatory Board (PMRB) created under
Republic Act No. 7076 known as the Peoples Small-Scale Mining Act of 1991
granted powers that include functions more executive in nature such as
declaring and segregating areas for small-scale
mining.94chanRoblesvirtualLawlibrary
Section 24 of Republic Act No. 7076 provides for the PMRBs power to declare
and segregate existing gold-rich areas for small-scale mining but under the
direct supervision and control of the Secretary:chanroblesvirtuallawlibrary
Section 24. Provincial/ City Mining Regulatory Board. There is hereby created
under the direct supervision and control of the Secretary a provincial/city
mining regulatory board, herein called the Board, which shall be the
implementing agency of the Department, and shall exercise the following
powers and functions, subject to review by the Secretary:
(a)
(b)
(c)
(d)

Declare and segregate existing gold-rich areas for small-scale mining;


Reserve future gold and other mining areas for small-scale mining;
Award contracts to small-scale miners;
Formulate and implement rules and regulations related to small-scale
mining;
(e) Settle disputes, conflicts or litigations over conflicting claims within a
peoples small-scale mining area, an area that is declared a small mining
area; and
(f) Perform such other functions as may be necessary to achieve the goals and
objectives of this Act.95
Section 22 of DAO No. 3492, the implementing rules and regulations of
Republic Act No. 7076, similarly states that the Provincial/City Mining
Regulatory Board created under RA 7076 shall exercise the following powers
and functions, subject to review by the

Secretary[.]96chanRoblesvirtualLawlibrary
Section 6 of DAO No. 3492 also provides that [t]he Board created under RA
7076 shall have the authority to declare and set aside Peoples Small-Scale
Mining Areas in sites onshore suitable for small-scale mining operations subject
to review by the DENR Secretary thru the
Director[.]97chanRoblesvirtualLawlibrary
DENR Secretary
Section 26 of Republic Act No. 7076 reiterates the DENR Secretarys power of
control over the program and the activities of the small-scale miners within
the peoples small-scale mining area:chanroblesvirtuallawlibrary
Section 26. Administrative Supervision over the Peoples Small-scale Mining
Program. The Secretary through his representative shall exercise direct
supervision and control over the program and activities of the small-scale
miners within the peoples small-scale mining area.
The Secretary shall within ninety (90) days from the effectivity of this Act
promulgate rules and regulations to effectively implement the provisions of the
same. Priority shall be given to such rules and regulations that will ensure the
least disruption in the operations of the small-scale miners.98
Section 21.1 of DAO No. 3492, the implementing rules and regulations of
Republic Act No. 7076, states that the DENR Secretary has direct supervision
and control over the program and the activities of the small-scale miners within
the peoples small-scale mining area.99chanRoblesvirtualLawlibrary
This court has distinguished the power of control and the power of supervision
as follows:chanroblesvirtuallawlibrary
. . . In administrative law, supervision means overseeing or the power or
authority of an officer to see that subordinate officers perform their duties. If
the latter fail or neglect to fulfill them, the former may take such action or step
as prescribed by law to make them perform their duties. Control, on the
other hand, means the power of an officer to alter or modify or nullify
or set aside what a subordinate officer ha[s] done in the performance of
his duties and to substitute the judgment of the former for that of the
latter.100 (Emphasis supplied)
League of Provinces v. DENR101 discussed that the Local Government Code did
not fully devolve the enforcement of the small-scale mining law to the
provincial government, as its enforcement is subject to the supervision, control
and review of the DENR, which is in charge, subject to law and higher authority,
of carrying out the States constitutional mandate to control and supervise the
exploration, development, utilization of the countrys natural
resources.102chanRoblesvirtualLawlibrary

Since the DENR Secretary has power of control as opposed to power of


supervision, he had the power to affirm with modification the PMRBs decision.
Executive Department
The Constitution provides that [t]he State may directly undertake such
activities, or it may enter into co-production, joint venture, or productionsharing agreements with Filipino citizens, or corporations or associations at
least sixty per centum of whose capital is owned by such
citizens[.]103chanRoblesvirtualLawlibrary
Moreover, [t]he President may enter into agreements with foreign-owned
corporations involving either technical or financial assistance for large scale
exploration, development, and 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[.]104chanRoblesvirtualLawlibrary
Chapter II, Section 4 of Republic Act No. 7942 known as the Philippine Mining
Act of 1995 also provides as follows:chanroblesvirtuallawlibrary
SEC. 4. Ownership of Mineral Resources. Mineral resources are owned by the
State and the exploration, development, utilization, and processing thereof
shall be under its full control and supervision. The state may directly undertake
such activities or it may enter into mineral agreements with contractors.
The State shall recognize and protect the rights of the indigenous cultural
communities to their ancestral lands as provided for by the Constitution. 105
Section 5 of Republic Act No. 7942 on mineral reservations provides that
[m]ining operations in existing mineral reservations and such other
reservations as may thereafter be established, shall be undertaken by the
Department or through a contractor[.]106chanRoblesvirtualLawlibrary
Apex Mining v. SMGMC discussed that "Section 5 of Republic Act No. 7942 is a
special provision, as it specifically treats of the establishment of mineral
reservations only. Said provision grants the President the power to proclaim a
mineral land as a mineral reservation, regardless of whether such land is also
an existing forest reservation.107chanRoblesvirtualLawlibrary
In the 2002 case of Southeast Mindanao Gold Mining Corporation v. Balite
Portal Mining Cooperative108involving the same Diwalwal gold rush area, this
court discussed that the State may not be precluded from considering a direct
takeover of the mines, if it is the only plausible remedy in sight to the gnawing
complexities generated by the gold rush.109chanRoblesvirtualLawlibrary
Incidentally, we acknowledge that PICOP raised the validity of Proclamation No.
297 in its memorandum.110 It argues that Proclamation No. 297 by then
President Macapagal-Arroyo was without congressional concurrence as required

by Republic Act No. 3092, thus, revocable.111 The validity of Proclamation No.
297, however, is not an issue in these cases. This subsequent development was
not litigated, and this is not the proper case to assail its validity.chanrobleslaw
WHEREFORE, in view of the foregoing, the petitions are DENIED for being
moot and academic.
WE CONCUR:
Carpio, (Chairperson), Del Castillo, Villarama, Jr.,* and Mendoza, JJ., concur.

FIRST DIVISION
[G.R. No. 180882, February 27, 2013]
THE BAGUIO REGREENING MOVEMENT, INC., REPRESENTED BY ATTY.
ERDOLFO V. BALAJADIA; CITY ENVIRONMENT AND PARKS
MANAGEMENT OFFICE, REPRESENTED BY ITS OFFICER-IN-CHARGE,
CORDELIA C. LACSAMANA; AND THE BUSOL FOREST RESERVATION
TASK FORCE, REPRESENTED BY ITS TEAM LEADER, VICTOR
DICTAG, Petitioners, v. ATTY. BRAIN MASWENG, IN HIS CAPACITY AS
REGIONAL HEARING OFFICER, NCIP-CAR; ELIZABETH MAT-AN, FOR
HERSELF AND AS REPRESENTATIVE OF THE HEIRS OF RAFAEL; JUDITH
MARANES, FOR HERSELF AND AS REPRESENTATIVE OF THE HEIRS OF
MOLINTAS; HELEN LUBOS, FOR HERSELF AND AS REPRESENTATIVE OF
THE HEIRS OF KALOMIS; MAGDALENA GUMANGAN QUE, FOR HERSELF
AND AS REPRESENTATIVE OF THE HEIRS OF GUMANGAN; SPOUSES

ALEXANDER AMPAGUEY AND LUCIA AMPAGUEY; AND SPOUSES CARMEN


PANAYO AND MELANIO PANAYO, Respondents.
DECISION
LEONARDO-DE CASTRO, J.:
This is a Petition for Review on Certiorari under Rule 45 of the Revised Rule on
Civil Procedure assailing the Decision1 of the Court of Appeals dated April 30,
2007 in CA-G.R. SP No. 78570 insofar as it affirmed the issuances of National
Commission on Indigenous Peoples (NCIP) Hearing Officer Brain Masweng, and
the Resolution of the same court dated December 11, 2007 denying
petitioners Motion for Partial Reconsideration.
Herein private respondents Elizabeth Mat-an, Judith Maranes, Helen Lubos,
Magdalena Gumangan Que, spouses Alexander and Lucia Ampaguey, and
spouses Melanio and Carmen Panayo, claiming that their parents inherited from
their ancestors several parcels of land in what is now known as the Busol
Watershed Reservation, filed before the NCIP a Petition for Injunction, with an
application for a Temporary Restraining Order (TRO), and thereafter a Writ of
Preliminary Injunction seeking to enjoin the Baguio District Engineers Office,
the Office of the City Architect and Parks Superintendent, and petitioners The
Baguio Regreening Movement, Inc. and the Busol Task Force from fencing the
Busol Watershed Reservation.
In their Petition before the NCIP, private respondents claim that they are
members of the Ibaloi and Kankanaey tribes of Baguio City. Their ancestors
ownership of the properties now known as the Busol Watershed Reservation
was allegedly expressly recognized in Proclamation No. 15 issued by Governor
General Leonard Wood. As owners of said properties, their ancestors paid the
realty taxes thereon. The fencing project of petitioners would allegedly impede
their access to and from their residences, farmlands and water sources, and
dispossess them of their yard where tribal rituals and ceremonies are usually
held.
On October 21, 2002, NCIP Regional Hearing Officer Brain S. Masweng issued a
TRO, the dispositive portion of which reads:
WHEREFORE, finding the petition in order and that grave injustice may result
should the acts complained of be not immediately restrained, a Temporary
Restraining Order is hereby issued pursuant to Section 69 (d) of R.A. 8371,
ordering the respondents namely, the Baguio District Engineers Office,
represented by Engineer Nestor M. Nicolas, the Project Contractor, Mr. Pel-ey,
the Baguio Regreening Movement Inc., represented by Atty. Erdolfo V. Balajadia,
the Busol Task Force, represented by its Team Leader, Moises G. Anipew, the
Baguio City Architect and Parks Superintendent Office, represented by Arch.
Ignacio Estipona, and all persons acting for and their behalf (sic) of the
respondents[,] their agents and/or persons whomever acting for and their
behalf (sic), to refrain, stop, cease and desist from fencing and/or constructing

fences around and between the areas and premises of petitioners, ancestral
land claims, specifically identified in Proclamation No. 15 as Lot A with an area
of 143,190 square meters, included within the boundary lines, Lot B 77,855
square meters, included within the boundary lines, Lot C 121,115 square
meters, included within the boundary lines, Lot D 33,839 square meters,
included within the boundary lines, Lot E 87,903 square meters, included
within the boundary lines, Lot F 39,487 square meters, included within the
boundary lines, Lot G 11,620 square meters, included within the boundary
lines, Lot H 17,453 square meters, included within the boundary lines, Lot J
40,000 square meters, included within the boundary lines, all described and
embraced under Proclamation No. 15, the land embraced and described under
the approved plan No. 12064 of the then Director of Lands, containing an area
of 186, square meters surveyed for Gumangan, the land covered by LRC PSD
52910, containing an area of 77,849 square meters as surveyed for Emily
Kalomis, that land covered by survey plan 11935 Amd, containing an area of
263153 square meters as surveyed for Molintas, and that land covered by AP7489, containing an area of 155084 as surveyed for the heirs of Rafael.
This Restraining Order shall be effective for a period of twenty (20) days from
receipt hereof.
Meantime, the respondents are further ordered to show cause on November 5,
2002 (Tuesday) at 2:00 oclock in the afternoon, why petitioners prayer for the
issuance of a writ of preliminary injunction should not be granted.2
On November 6, 2002, Atty. Masweng denied petitioners motion to dissolve the
TRO, explaining that a TRO may be issued motu proprio where the matter is of
extreme urgency and the applicant will suffer grave injustice and irreparable
injury. He further stated that petitioners failed to comply with the procedure
laid down in Section 6, Rule 58 of the Rules of Court.
On November 12, 2002, Atty. Masweng issued an Order, the dispositive portion
of which states:
WHEREFORE, a writ of preliminary injunction is hereby issued against the
respondents, their agents, or persons acting for and in their behalves (sic),
ordering them to refrain, cease and desist from implementing their fencing
project during the pendancy (sic) of the above-entitled case in any portion of
petitioners ancestral land claims within the Busol Watershed Reservation. The
lands being identified under Proclamation No. 15 as lot[s] A, B, C, D, E,
F, G, H, and J, including the lands covered by Petitioners approved survey
plans as follows: that land identified and plotted under Survey Plan No. B.L.
FILE No. II-11836, September, 1916 surveyed for Gumangan; that land covered
by PSD-52910, May, 1921, surveyed for Emily Kalomis; that land covered by
survey plan II-11935 Amd, 1916, surveyed for Molintas; and that land covered
by Survey Plan No. AP 7489, March 1916, surveyed for the heirs of Rafael.
The writ of preliminary injunction shall be effective and shall be enforced only

upon petitioners compliance with the required injunctive bond of Twenty


Thousand Pesos (P20,000.00) each in compliance with Section 3, R.A. 8975. 3
Atty. Masweng ruled that the NCIP has jurisdiction over all claims and disputes
involving rights of Indigenous Cultural Communities (ICCs) and Indigenous
Peoples (IPs) and, in the exercise of its jurisdiction, may issue injunctive writs.
According to Atty. Masweng, the allegations in the verified petition show that
private respondents invoked the provisions of Republic Act No. 8371, otherwise
known as the Indigenous Peoples Rights Act of 1997 (IPRA), when they sought
to enjoin petitioners from fencing their ancestral lands within the Busol
Watershed Reservation. Petitioners fencing project violated Section 58 of the
IPRA, which requires the prior written consent of the affected ICCs/IPs. The
NCIP therefore has authority to hear the petition filed by private respondents
and to issue the injunctive writ. As regards petitioners contention that the
issuance of the TRO violated Presidential Decree No. 1818, Atty. Masweng
applied the Decision of this Court in Malaga v. Penachos, Jr.,4 and held that:
[R]espondents project of fencing the Busol Watershed is not in the exercise of
administrative discretion involving a very technical matter. This is so since the
implementation of the fencing project would traverse along lands occupied by
people who claim that they have a legal right over their lands. The fence would
actually cut across, divide, or segregate lands occupied by people. The effect
of it would fence in and fence out property claims. In this case, petitioners
invoke their constitutional rights to be protected against deprivation of property
without due process of law and of taking private property without just
compensation. Such situations involve pure question of law.5
As regards the invocation of res judicata by petitioners, Atty. Masweng held that
they failed to present copies of the Decisions supposedly rendered by the
Regional Trial Court and the Supreme Court.
On November 29, 2002, petitioners filed a Motion for Reconsideration of the
above Order. On June 20, 2003, Atty. Masweng denied said Motion on the
ground that the same was filed out of time.
Petitioners filed before the Court of Appeals a Petition for Certiorari, alleging
grave abuse of discretion on the part of Atty. Masweng in issuing the TRO and
the writ of preliminary injunction.
On April 30, 2007, the Court of Appeals rendered its Decision dismissing
petitioners Petition forCertiorari. The dispositive portion of the Decision is as
follows:
WHEREFORE, premises considered, the instant petition is DISMISSED and the
assailed orders of public respondent AFFIRMED. Nevertheless, private
respondents are hereby enjoined from (i) introducing constructions at the Busol
Watershed and Forest Reservation and (ii) engaging in activities that degrade
the resources therein until viable measures or programs for the maintenance,

preservation and development of said reservation are adopted pursuant to Sec.


58 of Rep. Act No. 8371.6
The Court of Appeals ruled that since the petition before the NCIP involves the
protection of private respondents rights to their ancestral domains in
accordance with Section 7(b), (c) and (g)7 of the IPRA, the NCIP clearly has
jurisdiction over the dispute pursuant to Section 66. The Court of Appeals also
upheld the conclusion of Atty. Masweng that the NCIP can issue injunctive writs
as a principal relief against acts adversely affecting or infringing on the rights
of ICCs or IPs, because (t)o rule otherwise would render NCIP inutile in
preventing acts committed in violation of the IPRA.8
As regards petitioners allegations that government reservations such as the
subject Busol Watershed cannot be the subject of ancestral domain claims, the
Court of Appeals pointed out that Section 589 of the IPRA in fact mandates the
full participation of ICCs/IPs in the maintenance, management, and
development of ancestral domains or portions thereof that are necessary for
critical watersheds. The IPRA, thus, gives the ICCs/IPs responsibility to
maintain, develop, protect, and conserve such areas with the full and effective
assistance of government agencies.10
Despite ruling in favor of private respondents, the Court of Appeals
nevertheless found merit in petitioners own application for injunction and
observed that certain activities by private respondents without regard for
environmental considerations could result in irreparable damage to the
watershed and the ecosystem. Thus, the Court of Appeals enjoined private
respondents from introducing constructions at the Busol Watershed and from
engaging in activities that degrade its resources, until viable measures or
programs for the maintenance, preservation and development of said
reservation are adopted pursuant to the aforementioned Section 58 of the IPRA.
Hence, the present Petition for Review wherein petitioners assert the following
grounds:
1. THE COURT OF APPEALS GRAVELY AND PATENTLY ERRED IN SUSTAINING THE
NCIPS ISSUANCE OF A TEMPORARY RESTRAINING ORDER AND WRIT OF
PRELIMINARY INJUNCTION DESPITE CLEAR AND PATENT VIOLATION OF P.D.
1818, SUPREME COURT CIRCULAR NO. 68-94 AND SUPREME COURT
ADMINISTRATIVE CIRCULAR NO. 11-2000;
2. THE COURT OF APPEALS GRAVELY AND PATENTLY ERRED IN AFFIRMING THE
ACT OF THE NCIP IN ISSUING A 20-DAYS TEMPORARY RESTRAINING ORDER EX
PARTE SANS THE MANDATORY NOTICE AND HEARING FOR THE ISSUANCE
THEREOF;
3. THE COURT OF APPEALS GRAVELY AND PATENTLY ERRED IN SUSTAINING THE
NCIPS ISSUANCE OF A WRIT OF PRELIMINARY INJUNCTION DESPITE ABSOLUTE
ABSENCE OF CLEAR, UNMISTAKABLE AND POSIT[I]VE LEGAL RIGHTS ON THE
PART OF THE APPLICANTS;

4. THE COURT OF APPEALS GRAVELY AND PATENTLY ERRED IN HOLDING THAT


THE NCIP HEARING OFFICER HAS JURISDICTION OVER A CASE OF INJUNCTION
INVOLVING A GOVERNMENT INFRASTRUCTURE PROJECT;
5. THE COURT OF APPEALS PATENTLY AND GRAVELY ERRED IN BRUSHING
ASIDESECTION 78, A SPECIAL PROVISION OF REPUBLIC ACT 8371 WHICH
EXCLUDES THE CITY OF BAGUIO FROM THE COVERAGE OF ANCESTRAL LAND
CLAIMS APPLICATIONS;
6. THE COURT OF APPEALS GRAVELY AND PATENTLY ERRED IN
UPHOLDING RULE XIII OF THE IMPLEMENTING RULES OF REPUBLIC ACT 8371,
EVEN IF THE PROVISIONS OF SAID RULE XIII CLEARLY OVERSTEPPED AND
EXCEEDED SECTION 78 OF R.A. 8371.11
TRO and Preliminary Injunction against
Government Infrastructure Projects
The governing law as regards the prohibition to issue restraining orders and
injunctions against government infrastructure projects is Republic Act No.
8975,12 which modified Presidential Decree No. 1818, the law cited by the
parties, upon its effectivity on November 26, 2000.13 Section 9 of Republic Act
No. 8975 provides:
Section 9. Repealing Clause. All laws, decrees, including Presidential Decree
Nos. 605, 1818 and Republic Act No. 7160, as amended, orders, rules and
regulations or parts thereof inconsistent with this Act are hereby repealed or
amended accordingly.
Thus, in GV Diversified International, Incorporated v. Court of Appeals,14 we
ruled that Presidential Decree No. 1818 have been effectively superseded by
Republic Act No. 8975. The prohibition is thus now delineated in Section 3 of
said latter law, which provides:
Section 3. Prohibition on the Issuance of Temporary Restraining Orders,
Preliminary Injunctions and Preliminary Mandatory Injunctions. No court,
except the Supreme Court, shall issue any temporary restraining order,
preliminary injunction or preliminary mandatory injunction against the
government, or any of its subdivisions, officials or any person or entity, whether
public or private, acting under the governments direction, to restrain, prohibit
or compel the following acts:
(a) Acquisition, clearance and development of the right-of-way and/or site or
location of any national government project;
(b) Bidding or awarding of contract/project of the national government as
defined under Section 2 hereof;
(c) Commencement, prosecution, execution, implementation, operation of any

such contract or project;


(d) Termination or rescission of any such contract/project; and
(e) The undertaking or authorization of any other lawful activity necessary for
such contract/project.
This prohibition shall apply to all cases, disputes or controversies instituted by
a private party, including but not limited to cases filed by bidders or those
claiming to have rights through such bidders involving such contract/project.
This prohibition shall not apply when the matter is of extreme urgency
involving a constitutional issue, such that unless a temporary restraining order
is issued, grave injustice and irreparable injury will arise. The applicant shall
file a bond, in an amount to be fixed by the court, which bond shall accrue in
favor of the government if the court should finally decide that the applicant
was not entitled to the relief sought.
If after due hearing the court finds that the award of the contract is null and
void, the court may, if appropriate under the circumstances, award the contract
to the qualified and winning bidder or order a rebidding of the same, without
prejudice to any liability that the guilty party may incur under the existing laws.
(Emphasis supplied.)
Should a judge violate the preceding section, Republic Act No. 8975 provides
the following penalty:
Section 6. Penal Sanction. In addition to any civil and criminal liabilities he
or she may incur under existing laws, any judge who shall issue a temporary
restraining order, preliminary injunction or preliminary mandatory injunction in
violation of Section 3 hereof, shall suffer the penalty of suspension of at least
sixty (60) days without pay. (Emphasis added.)
It is clear from the foregoing provisions that the prohibition covers only judges,
and does not apply to the NCIP or its hearing officers. In this respect, Republic
Act No. 8975 conforms to the coverage of Presidential Decree No. 605 15 and
Presidential Decree No. 1818,16 both of which enjoin only the courts.
Accordingly, we cannot nullify the assailed Orders on the ground of violation of
said laws.
The Courts Previous Decision in
G.R. No. 180206
On February 4, 2009, this Court promulgated its Decision in G.R. No. 180206, a
suit which involved several of the parties in the case at bar. In G.R. No.
180206, the City Mayor of Baguio City issued three Demolition Orders with
respect to allegedly illegal structures constructed by private respondents
therein on a portion of the Busol Forest Reservation. Private respondents filed
a Petition for Injunction with the NCIP. Atty. Masweng issued two temporary
restraining orders directing the City Government of Baguio to refrain from

enforcing said Demolition Orders and subsequently granted private


respondents application for a preliminary injunction. The Court of Appeals,
acting on petitioners Petition forCertiorari, affirmed the temporary restraining
orders and the writ of preliminary injunction.
This Court then upheld the jurisdiction of the NCIP on the basis of the
allegations in private respondents Petition for Injunction. It was similarly
claimed in said Petition for Injunction that private respondents were
descendants of Molintas and Gumangan whose claims over the portions of the
Busol Watershed Reservation had been recognized by Proclamation No. 15.
This Court thus ruled in G.R. No. 180206 that the nature of the action clearly
qualify it as a dispute or controversy over ancestral lands/domains of the
ICCs/IPs.17 On the basis of Section 69(d)18 of the IPRA and Section 82, Rule
XV19 of NCIP Administrative Circular No. 1-03, the NCIP may issue temporary
restraining orders and writs of injunction without any prohibition against the
issuance of the writ when the main action is for injunction. 20
On petitioners argument that the City of Baguio is exempt from the provisions
of the IPRA and, consequently, the jurisdiction of the NCIP, this Court ruled in
G.R. No. 180206 that said exemption cannot ipso facto be deduced from
Section 7821 of the IPRA because the law concedes the validity of prior land
rights recognized or acquired through any process before its effectivity. 22
Lastly, however, this Court ruled that although the NCIP has the authority to
issue temporary restraining orders and writs of injunction, it was not convinced
that private respondents were entitled to the relief granted by the
Commission.23 Proclamation No. 15 does not appear to be a definitive
recognition of private respondents ancestral land claim, as it merely identifies
the Molintas and Gumangan families asclaimants of a portion of the Busol
Forest Reservation, but does not acknowledge vested rights over the same.24
Since it is required before the issuance of a writ of preliminary injunction that
claimants show the existence of a right to be protected, this Court, in G.R. No.
180206, ultimately granted the petition of the City Government of Baguio and
set aside the writ of preliminary injunction issued therein.
In the case at bar, petitioners and private respondents present the very same
arguments and counter-arguments with respect to the writ of injunction against
the fencing of the Busol Watershed Reservation. The same legal issues are
thus being litigated in G.R. No. 180206 and in the case at bar, except that
different writs of injunction are being assailed. In both cases, petitioners claim
(1) that Atty. Masweng is prohibited from issuing temporary restraining orders
and writs of preliminary injunction against government infrastructure projects;
(2) that Baguio City is beyond the ambit of the IPRA; and (3) that private
respondents have not shown a clear right to be protected. Private respondents,
on the other hand, presented the same allegations in their Petition for
Injunction, particularly the alleged recognition made under Proclamation No. 15
in favor of their ancestors. While res judicata does not apply on account of the
different subject matters of the case at bar and G.R. No. 180206 (they assail
different writs of injunction, albeit issued by the same hearing officer), we are

constrained by the principle of stare decisis to grant the instant petition. The
Court explained the principle of stare decisis25 in Ting v. Velez-Ting26:
The principle of stare decisis enjoins adherence by lower courts to doctrinal
rules established by this Court in its final decisions. It is based on the principle
that once a question of law has been examined and decided, it should be
deemed settled and closed to further argument. Basically, it is a bar to any
attempt to relitigate the same issues, necessary for two simple reasons:
economy and stability. In our jurisdiction, the principle is entrenched in Article 8
of the Civil Code. (Citations omitted.)
We have also previously held that [u]nder the doctrine of stare decisis, once a
court has laid down a principle of law as applicable to a certain state of facts, it
will adhere to that principle and apply it to all future cases where the facts are
substantially the same.27
However, even though the principal action in the case at bar is denominated as
a petition for injunction, the relief prayed for and granted by the NCIP partakes
of the nature of a preliminary injunction in the sense that its effectivity would
cease the moment the NCIP issues its decision in an appropriate action. The
conclusions of this Court in both the case at bar and that in G.R. No. 180206 as
regards private respondents ancestral land claim should therefore be
considered provisional, as they are based merely on the allegations in the
complaint or petition and not on evidence adduced in a full-blown proceeding
on the merits by the proper tribunal. Private respondents are therefore not
barred from proving their alleged ancestral domain claim in the appropriate
proceeding, despite the denial of the temporary injunctive relief prayed for.
WHEREFORE, the present Petition for Review on Certiorari is
hereby GRANTED. The Decision and Resolution of the Court of Appeals in CAG.R. SP No. 78570 dated April 30, 2007 and December 11, 2007, respectively,
are REVERSED and SET ASIDE.
SO ORDERED.
Sereno, C.J., (Chairperson), Bersamin, Villarama, Jr., and Reyes, JJ., concur.

SECOND DIVISION
G.R. No. 179669, June 04, 2014
SR METALS, INC., SAN R MINING AND CONSTRUCTION CORP. AND
GALEO EQUIPMENT AND MINING COMPANY, INC., Petitioner, v. THE
HONORABLE ANGELO T. REYES, IN HIS CAPACITY AS SECRETARY OF
DEPARTMENT ENVIRONMENT AND NATURAL RESOURCES
(DENR),Respondent.
DECISION
DEL CASTILLO, J.:
In this Petition for Review on Certiorari, SR Metals, Inc., SAN R Mining and
Construction Corp., and Galeo Equipment and Mining Co., Inc. (hereinafter
referred to as 'mini corporations') assail the Decision1and Resolution2 dated July

4, 2007 and September 14 respectively, of the Court of Appeals (CA), in CA-G.R


SP No. 97127. The mining corporations fault the CA for (a) upholding the
validity of the provision of Presidential Decree (PD) No. 18993 which limits the
annual production/extraction of mineral ore in small-scale mining to 50,000
metric tons (MT) despite its being violative of the equal protection clause, and
(b) adopting the Mines and Geosciences Bureau's (MGB) definition of 'ore,'
which led the said court to conclude that the mining corporation had exceeded
the aforesaid 50,000-MT limit.
Factual Antecedents
On March 9, 2006, each of the petitioners was awarded a 2-year Small-Scale
Mining Permit4 (SSMP) by the Provincial Mining Regulatory Board of Agusan del
Norte; they were allowed to extract Nickel and Cobalt (Ni-Co) in a 20-hectare
mining site in Sitio Bugnang, Brgy. La Fraternidad, Tubay, Agusan del Norte.
These permits were granted after the Environmental Management Bureau
(EMB), Region XIII of the Department of Environment and Natural Resources
(DENR) issued on March 2, 2006 Environmental Compliance Certificates 5 with a
validity period of one year.
The mining corporations ECCs contain a restriction that the amount of Ni-Co
ore they are allowed to extract annually should not exceed 50,000 MTs
pursuant to Section 1 of PD 1899 which provides:ChanRoblesVirtualawlibrary
Section 1. Small-scale mining refers to any single unit mining operation having
an annual production of not more than 50,000 metric tons of ore x x x.
Subsequently, however, Agusan del Norte Governor, Erlpe John M. Amante
(Governor Amante), questioned the quantity of ore that had been mined and
shipped by the mining corporations. In reply, the mining corporations denied
having exceeded the extraction limit of 50,000 MTs.6 They explained that an
extracted mass contains only a limited amount/percentage of Ni-Co as the
latter is lumped with gangue, i.e., the unwanted rocks and minerals. And it is
only after the Ni-Co is separated from the gangue by means of a scientific
process should amount of the Ni-Co be measured and considered as ore.
Excluding the gangue, the mining corporations pegged the volume of Ni-Co ore
they had extracted from the time they start shipping the same in August 2006
until they filed their Petition before the CA in December 2006 at 1,699.66 MTs
of Ni-Co ore only.7cralawred
Having reservations with the mining corporations interpretation of the 50,000MT restriction, Governor Amante sought the opinion of the Department of
Justice (DOJ) on the matter.
Meanwhile, the EMB sent the mining corporations a Notice of
Violation8 informing them that they had exceeded the allowed annual volume of
150,000 MTs combined production as their stockpile inventory of Nickeliferous
ore had already total 177,297 dry metric tons (DMT). This was based on the
August 10, 2006 Inspection Report9 of the MGB Monitoring Team which

conducted an inspection after the DENR received complaints of violations of


small-scale mining laws and policies by the mining corporations. A technical
conference was thereafter held to hear the side of the mining corporations
anent their alleged over-extraction.
On November 26, 2004, DENR Secretary Angelo T. Reyes issued a Cease and
Desist Order10 (CDO) against the mining corporations suspending their
operations for their operations for the following
reasons:ChanRoblesVirtualawlibrary
1. The excess in 1) annual production of SR Metals, Inc., 2) maximum
capitalization, and, 3) labor cost to equipment utilization of 1:1 is, by itself, a
violation of existing laws.
2. The ECCs issued in favor of San R Construction Corporation and Galeo
Equipment Corporation have no legal basis and [are] therefore considered null
and void from the beginning. Similarly, the small scale mining permits that
were issued by reason of such ECCs are likewise null and void. 11
A few days later or on November 30, 2006, DOJ Secretary Raul M. Gonzalez
replied to Governor Amante citing DOJ Opinion No. 74, Series of 2006. 12 By
comparing PD 1899 to Republic Act (RA) No. 7076, 13 a subsequent law that
likewise defines small-scale mining, the DOJ opined that Section 1 of PD 1899 is
deemed to have been impliedly repealed by RA 7076 as nothing from the
provisions of the latter law mentions anything pertaining to an annual
production quota for small-scale mining. It
explained:ChanRoblesVirtualawlibrary
The definition of small scale mining under R.A. No. 7076 is clear and
categorical. Any mining activity that relies heavily on manual labor without use
of explosives or heavy mining equipment falls under said definition. It does not
mention any annual production quota or limitation. On the contrary, Section 12
thereof is explicit that the contractor, or, specifically, in this case, permit
holders or permitees, are entitled not only to the right to [mine], but also to
"extract and dispose of mineral ores (found therein) for commercial purposes
without specific limitation as to the nature of the mineral extracted or the
quantity thereof.
Moreover, while Section 13 of the law imposes certain duties and obligations
upon the contractor or permitee, nothing therein refers directly or otherwise to
production quota limitation. Additionally, even Section 10 thereof, which
provides for the extent [of] the mining area, does not limit production but only
the mining area and depth of the tunnel or adit which, as stated in the law shall
not (exceed) that recommended by the (EMB) director taking into account the
quantity of mineral deposits, among others. It is, however, silent on the
extent of the minings annual quota production. Thus, anything that is not in
the law cannot be interpreted as included in the law x x x14
Even assuming that the 50,000-MT ore limit in PD 1899 is still in force, the DOJ

categorically concluded that the term ore should be confined only to Ni-Co,
that is, excluding soil and other materials that are of no economic value to the
mining corporations. This is considering that their ECCs explicitly specified
50,000 MTs of Ni-Co ore.
The mining corporations then filed before the CA a Petition for Certiorari with
prayer for Temporary Restraining Order and/or Preliminary Injunction, imputing
grave abuse of discretion on the part of DENR in issuing the CDO. Relying on
the rationalizations on the rationalization made by the DOJ in its November 30,
2006 Opinion, they vehemently denied having over-extracted Ni-Co.
The Office of the Solicitor General (OSG), for its part, claimed that the CDO was
issued for ecological and health reasons and is a preventive measure against
disaster arising from multiple acts of over-extraction such as landslides,
mudslides and flooding. Also to be respected is the DENRs finding of the
mining corporations over-extraction because being the agency mandated to
implement the laws affecting the countrys natural resources, the DENR
possesses the necessary expertise to come up with such determination. For
the same reason, the DENR's definition of small-scale mining particularly that
under Mines Administrative Order (MAO) No. MRD-41 series of 1984, 15 must
also be sustained.
Furthermore, the OSG averred that the mining corporations concept of how to
measure NI-CO ore is flawed as this contradicts Section 2 of MAO No. MRD-41
which confines the 50,000-MT limit to run-of-mine
ore, viz.:ChanRoblesVirtualawlibrary
SECTION 2 - Who May Qualify for the Issuance of a Small Scale Mining Permit Any qualified person as defined in Sec. 1 of these Regulations, preferably claim
owners and applicants for or holders of quarry permits and/or licenses may be
issued a small scale mining permit provided that their mining operations,
whether newly-opened, existing or rehabilitated, involve:
(a) a single mining unit having an annual production not exceeding 50,0000
metric tons of run-of-mine ore, either an open cast mine working or a
subsurface mine working which is driven to such distance as safety conditions
and pracatices will allow;
xxxx
The OSG emphasized that in measuring an extraction, the only deduction
allowed from an extracted mass of ore is the weight of water, not the soil. It
quoted a letter16 Horacio C. Ramos of the MGB Central Office dated April 30,
2007 addressed to the OSG, which explained the definition of the phrase
50,000-metric ton extraction limit," to wit:ChanRoblesVirtualawlibrary

50,000 metric tons of run-of-mine per year;


the run[-]of[-]mine can either be wet or dry;

traditionally, the production rate for nickel is based on dry since the
water or moisture content has no value; and

thus, if the ore is wet, the weight of water is deducted from the total
weight of ores in the determination of the production rate, or for
shipment purposes.17

Ruling of the Court of Appeals


The CA denied the mining corporations Petition, not only because the ECCs
have been mooted by their expiration, but also due to its recognition of the
power of the DENR to issue the CDO as the agency reposed with the duty of
managing and conserving the country's resources under Executive Order
192.18 Anent the issue of whether the imposed limit under PD 1899 should be
upheld and whether there was over extraction, the CA had this to
say:ChanRoblesVirtualawlibrary
We agree with the OSGs argument that the 50,000[-]metric ton limit pertains
to the mined ore in its unprocessed form, including the soil and dirt. The OSG
argued that the DOJ Opinion is not binding upon the court and that the agency
which is tasked to implement the mining laws is the DENR. Citing the MGB
letter-reply, the OSG contended that the limit provided in RA 1899 subsists and
RA 7076 did not impliedly repeal the latter. The provisions in both laws are not
inconsistent with each other, both recognizing the DENRs authority to
promulgate rules and regulations for the implementation of mining laws.19
Furthermore, the said court gave credence to the MGBs April 30, 2007 opinion
on the definition of the 50,000-MT limit. Rejecting the claims of the mining
corporations, it said:ChanRoblesVirtualawlibrary
x x x Thus, the MAO not only buttresses the OSGs arguments as to what the
extraction limit pertains to, x x x it also contravenes [the mining corporations]
assertion that the extraction limit no longer exists and that, even if the limit
subsists, they [had] not exceeded the same because they [had] only extracted
around 1,600 metric tons. Indeed, for purposes of determining whether the
extraction is still within the allowable limits, only the weight of water is
deducted from the run-of-mine ore.20
The mining corporations moved for partial reconsideration where they again
relied heavily on the DOJ Opinion.21 They also attacked the validity of Section
1(1) of PD 1899 that sets the annual production limit of 50,000-MT on smallscale mining by arguing that it violates the equal protection clause of the
Constitution and that it is already repealed by RA 7076. Even granting that the
said limit is still in force, the mining corporations asserted the gangue should
not be included in measuring the extraction, since their ECCs clearly provide
that 50,000 MTs of Ni-Co ore, not 50,000 MTs of ore, can be extracted.
Ignoring their arguments, the CA stressed that the DENR is the primary

government agency responsible for the conservation, management,


development, and proper use of the country's mineral resources. It
reiterated:ChanRoblesVirtualawlibrary
This Court likewise declared that the MAO adopted the definition of small scale
mining in PD 1899, including the requirement of observing the extraction limit.
Together with the MGB's interpretation of the term run-of-mine ore, the MAO
supports the arguments of the OSG as to the extraction limit and controverts
[the mining corporations] assertion that no extraction limit exists and, if the
same subsists, they [had] not exceeded it.22
Hence, this Petition.
Issues
Two questions are posed before us. The first deals with the constitutionality of
Section 1, PD 1899 which, according to the mining corporations violates the
equal protection clause. They argue that there is no substantial distinction
between the miners covered under RA 7076, who can extract as much ore as
they can, and those covered under PD 1899 who were imposed an extraction
limit.
Another issue concerns the correct interpretation of the 50,000-MT limit. The
mining corporation insist on their version of how to compute the extraction.
To them, the computation of Ni-Co ore should be confined strictly to Ni-Co
component from which they derive economic value.
Our Ruling
Petitioners are governed by the annual
production limit under PD 1899.
Two different laws governing small-scale mining co-exist: PD 1899 and RA
7076.23 The controversy lies in the apparent conflicting provisions on the
definition of small-scale mining under the two laws. Section 1 of PD 1899
defines small-scale mining in this wise:ChanRoblesVirtualawlibrary
Small-scale mining refers to any single unit mining operation having an annual
production of not more than 50,000 metric tons of ore and satisfying the
following requisites:
1. The working is artisanal, whether open cast or shallow underground mining,
without the use of sophisticated mining equipment;
2. Minimal investment on infrastructures and processing plant;
3. Heavy reliance on manual labor; and

4. Owned, managed or controlled by an individual or entity qualified under


existing mining laws, rules and regulations.
On the other hand, under Section 3(b) of RA 7076, small-scale mining refers to
'mining activities which rely heavily on manual labor using simple implements
and methods and do not use explosives or heavy mining equipment.
Significantly, this definition does not provide for annual extraction limit unlike
in PD 1899.
DOJ Opinion No. 74, Series of 2006 concluded that as nothing from RA 7076
speaks of an annual production limit, Section 1 of PD 1899 should be
considered impliedly repealed by RA 7076, the later law. However, while these
two laws tackle the definition of what small-scale mining is, both have different
objects upon which the laws shall be applied to. PD 1899 applies to individuals,
partnerships and corporations while RA 7076 applies to cooperatives.24 There
are other differences between the two laws, but we cannot hastily conclude
that there is an implied repeal because of the omission. Both laws may stand.
Petitioners then construe the omission of the annual production limit in the
later law in the that sense that small-scale miners granted mining contracts
under RA 7076 can now conduct mineral extraction as much as they can while
the benefit of unlimited extraction is denied to those granted permits under PD
1899. According to them, such situation creates an invalid classification of
small-scale miners under the two laws, hence the attack on Section 1 of PD
1899 as being violative of the equal protection clause.
We do not, however, subscribe to the mining corporations averment that the
50,000-MTs production limit does not apply to small-scale miners under RA
7076. Recognizing the DENRs mandate to regulate the countrys natural
resources under EO 192,25 both PD 1899 and RA 7076 delegated to the DENR,
thru its Secretary, the power to promulgate the necessary IRRs to give effect to
the said laws.26cralawred
Significantly, the DENR in the exercise of such power had just recently resolved
the question on the production limit in small-scale mining. On July 5, 2007, it
issued DMC 2007-07 or Clarificatory Guidelines in the Implementation of the
Small-Scale Mining Laws. By imposing the annual production limit of 50,000
DMT to both SSMPs issued under PD 1899 and Small-Scale Mining Contracts
(SSMCs) under RA 7076, the DENR harmonized the two
laws, viz:ChanRoblesVirtualawlibrary
V. Maximum Annual Production
For metallic minerals, the maximum annual production under an
SSMP/SSMC shall be 50,000 dry metric tons (DMT[s]) of ore, while for
nonmetallic minerals, the maximum annual production shall be 50,000 DMT[s]
of the material itself, e.g., 50,000 DMT[s] of limestone, 50,000 DMT[s] of silica,
or 50,000 DMT[s] of perlite.

The maximum annual production above shall include low-grade and/or marginal
ore, and/or minerals or rocks that are intended for sampling and/or
metallurgical testing purpose/s."
With the 50,000-MT limit likewise imposed on small-scale miners under RA
7076, the issue raised on the violation of the equal protection clause is moot.
The fact is, the DENR treats all small-scale miners equally as the production
limit applies to all of them. There is therefore no more reason for the mining
corporations to not recognize and comply with the said limitation. It must be
stressed that the DENR is the government agency tasked with the duty of
managing and conserving the countrys resources; it is also the agency vested
with the authority to promulgate rules and regulations for the implementation
of mining laws.
The DENR, being the agency mandated
to protect the environment and the country's
natural resources, is authoritative on
interpreting the 50,000- MT limit.
MAO No. MRD-41 specifies measuring the run-of-mine ore, meaning the ore as
it emerges from the mine, i.e., before treatment.27 As explained by the DENRMGB Director, the ore is weighed only in DMT, excluding the water or moisture
content. Simply stated, included in the measurement are other materials
lumped with the sought-after mineral.
This definition is congruent with RA 7942 or The Philippine Mining Act of 1995.
Said law defines ore as naturally occurring substance or material from which
a mineral or element can be mined and/or processed for profit. 28 Clearly, the
law refers to ore in its unprocessed form, i.e., before the valuable mineral is
separate from the ore itself.
Also in Section V of the earlier mentioned DMC-2007-07, the DENR clarified the
50,000-MT limit by differentiating the measurement of metallic minerals from
nonmetallic ones. Noticeably, the metallic minerals are conservatively
measured compared to nonmetallic or industrial minerals for a reason.
Compared to metallic minerals, nonmetals are easily available when mined in
their raw/natural state, like limestone. As nonmetallics are produced from
natural aggregates, the production limit of 50,000 DMTs will be easily met. On
the other hand, metallic minerals, like Ni-Co are not easily available in their
pure form since they are sourced from ores which are mined. To extract these
metals of economic value, the gangue lumped with them have to be removed
by metallurgy. And in order to produce a ton of a metallic mineral sought for,
big volumes of gangue will have to be removed. As indicated by the mining
corporations' Summary of Shipments,29 it took 151,612 DMTs of ore to extract
only 1,699. DMTs of Ni-Co. Thus, 149,912.34 DMTs of ore are considered
waste. This means that if we are to subscribe to the mining corporations
interpretation of how to measure mined ore by measuring only the Ni-Co and
excluding the gangue, small-scale miners are virtually given the license to
continuously collect large volumes of ore until the 50,000 DMTs of Ni-Co limit is

met. It must be emphasized that mining, whether small or large-scale, raises


environmental concerns. To allow such a scenario will further cause damage to
the environment such as erosion and sedimentation, landslides, deforestation,
acid rock drainage, etc.30 As correctly argued by the Solicitor General,
extracting millions of DMTs of run-of-mine ore will mean irreversible
degradation of the natural resources and possible landslides and flashfloods.
It may be significant to state at this point that while the annual production limit
by measuring only the material itself may apply in small-scale nonmetallic
mining, the same cannot be true to metal mining for the reasons above stated.
Hence, the DENR saw it proper to conservatively measure the production of
metallic minerals apparently bearing in mind the more intense of such kind of
mining to the environment.
Anent the mining corporations contention that their ECCs specified that they
were allowed to extract 50,000 MTs of Ni-Co, such should not be taken literally
in the sense that the measurement should only be based on the Ni-Co in their
purest form. Their that they are to mine Ni-Co and not any other minerals.
This construction likewise applies to the respective SSMPs given them.
WHEREFORE, premises considered, the Petition is DENIED. The July 4, 2007
Decision and September 14, 2007 Resolution of the Court of Appeals in CA-G.R.
SP No. 97127 are hereby AFFIRMED in toto.
SO ORDERED.
Carpio, (Chairperson), Brion, and Perlas-Bernabe, JJ. concur.