Apex Mining Co., Inc. v. Southeast Mindanao Gold Mining Corp.

(2006)

Facts:The case involves the Diwalwal Gold Rush Area (Diwalwal), a rich tract of mineral landlocated inside the Agusan-Davao-Surigao Forest Reserve in Davao del Norte and Davao Oriental. Sincethe early 1980s, Diwalwal has been stormed by conflicts brought about by numerous mining claims over it.On March 10, 1986, Marcopper Mining Corporation (MMC) was granted an Exploration Permit(EP 133) by the Bureau of Mines and Geo-Sciences (BMG). A long battle ensued between Apex andMMC with the latter seeking the cancellation of the mining claims of Apex on the ground that suchmining claims were within a forest reservation (Agusan-Davao-Surigao Forest Reserve) and thus theacquisition on mining rights should have been through an application for a permit to prospect with theBFD and not through registration of a DOL with the BMG. When it reached the SC in 1991, the Courtruled against Apex holding that the area is a forest reserve and thus it should have applied for a permit to prospect with the BFD.On February 16 1994, MMC assigned all its rights to EP 133 to Southeast Mindanao GoldMining Corporation (SEM), a domestic corporation which is alleged to be a 100%-owned subsidiary of MMC. Subsequently, BMG registered SEMs Mineral Production Sharing Agreement (MPSA)application and the Deed of Assignment. Several oppositions were filed. The Panel of Arbitrators created by the DENR upheld the validity of EP 133. During the pendency of the case, DENR AO No. 2002-18 was issued declaring anemergency situation in the Diwalwal Gold Rush Area and ordering the stoppage of all miningoperations therein. Issues:1.

W/N EP 133 and its subsequent transfer to SEM is valid. 2.

W/N the DENR Secretary has authority to issue DAO 66 declaring 729 hectares of the areascovered by the Agusan-Davao-Surigao Forest Reserve as non-forest lands and open to small-scale mining purposes.3.

Who (among petitioners Apex and Balite) has priority right over Diwalwal? Held/Ratio:1.

INVALID. One of the terms and conditions of EP 133 is: That this permit shall be for the exclusive use and benefit of the permit tee or his duly authorized agents and shall be used for mineral exploration purposes only and for no other purpose. While it may be true that SEM is a100% subsidiary corporation of MMC, there is no showing that the former is the duly authorizedagent of the latter. As such, the assignment is null and void as it directly contravenes the termsand conditions of the grant of EP 133.a.

The Deed of Assignment was a total abdication of MMCs rights over the permit. It is not amere grant of authority to SEM as agent. b.

Reason for the stipulation. Exploration permits are strictly granted to entities or individuals possessing the resources and capability to undertake mining operations. Without such acondition, non-qualified entities or individuals could circumvent the strict requirementsunder the law by the simple expediency of acquiring the permit from the original permittee.c.

Separate personality. The fact that SEM is a 100% subsidiary of MMC does notautomatically make it an agent of MMC. A corporation is an artificial being invested by lawwith a personality separate and distinct from persons composing it as well as from that of anyother legal entity to which it may be related. Absent any clear proof to the contrary, SEM is aseparate and distinct entity from MMC.d.

Doctrine of piercing the corporate veil inapplicable. Only in cases where the corporatefiction was used as a shield for fraud, illegality or inequity may the veil be pierced andremoved. The doctrine of piercing the corporate veil cannot therefore be used as a vehicle tocommit prohibited acts. The assignment of the permit in favor of SEM is utilized tocircumvent the condition of nontransferability of the exploration permit. To allow SEM to

avail itself of this doctrine and to approve the validity of the assignment is tantamount tosanctioning an illegal act which is what the doctrine precisely seeks to forestall.e.

PD 463 requires approval of Secretary of DENR. Also, PD 463 (Mineral ResourcesDevelopment Decree), which is the governing law when the assignment was executed,explicitly requires that the transfer or assignment of mining rights, including the right toexplore a mining area, must be with the prior approval of the Secretary of DENR. Such is not present in this case.f.

EP 133 expired by non-renewal. Although EP 133 was extended for 12 months until July 6,1994, MMC never renewed its permit prior and after its expiration.With the expiration of EP 133 on July 6, 1994, MMC lost any right to the Diwalwal Gold RushArea. SEM, on the other hand, has not acquired any right to the said area because the transfer of EP 133 in its favor is invalid. Hence, both MMC and SEM have not acquired any vested rightover the area covered by EP 133.2.

NO. The DENR Secretary has no power to convert forest reserves into non-forest reserves. Such power is vested with the President. The DENR Secretary may only recommend to the Presidentwhich forest reservations are to be withdrawn from the coverage thereof. Thus, DAO No. 66 isnull and void for having been issued in excess of the DENR Secretarys authority.3.

(Since its been held that neither MMC nor SEM has any right over Diwalwal, it is thusnecessary to make a determination of the existing right of the remaining claimants, petitioners Apex and Balite, in the dispute.)

The issue on who has priority right over Diwalwal is deemedovertaken by the issuance of Proclamation 297 and DAO No. 2002-18, both beingconstitutionally-sanctioned acts of the Executive Branch . Mining operations in the DiwalwalMineral Reservation are now, therefore, within the full control of the State through theexecutive branch.

Pursuant to Sec. 5 of RA 7942, the State can either: (1) directly undertake theexploration, development and utilization of the area or (2) opt to award mining operations in themineral reservation to private entities including petitioners Apex and Balite, if it wishes. Theexercise of this prerogative lies with the Executive Department over which courts will notinterfere.