Environmental Law Finals

Environmental Law Finals
La Bigal Blaan vs. Ramos

The present petition for mandamus and prohibition assails the
constitutionality of Republic Act No. 7942, 5otherwise known as the
PHILIPPINE MINING ACT OF 1995, along with the Implementing Rules
and Regulations issued pursuant thereto, Department of Environment and
Natural Resources (DENR) Administrative Order 96-40, and of the
Financial and Technical Assistance Agreement (FTAA) entered into on
March 30, 1995 by the Republic of the Philippines and WMC (Philippines),
Inc. (WMCP), a corporation organized under Philippine laws.
On July 25, 1987, then President Corazon C. Aquino issued Executive Order
(E.O.) No. 2796 authorizing the DENR Secretary to accept, consider and
evaluate proposals from foreign-owned corporations or foreign investors for
contracts or agreements involving either technical or financial assistance for
large-scale exploration, development, and utilization of minerals, which,
upon appropriate recommendation of the Secretary, the President may
execute with the foreign proponent. In entering into such proposals, the
President shall consider the real contributions to the economic growth and
general welfare of the country that will be realized, as well as the
development and use of local scientific and technical resources that will be
promoted by the proposed contract or agreement. Until Congress shall
determine otherwise, large-scale mining, for purpose of this Section, shall
mean those proposals for contracts or agreements for mineral resources
exploration, development, and utilization involving a committed capital
investment in a single mining unit project of at least Fifty Million Dollars in
United States Currency (US $50,000,000.00).7
On March 3, 1995, then President Fidel V. Ramos approved R.A. No. 7942
to "govern the exploration, development, utilization and processing of all
mineral resources."8 R.A. No. 7942 defines the modes of mineral
agreements for mining operations,9 outlines the procedure for their filing and
approval,10 assignment/transfer11and withdrawal,12 and fixes their terms.13
Similar provisions govern financial or technical assistance agreements.14
The law prescribes the qualifications of contractors 15 and grants them certain
rights, including timber,16 water17and easement18 rights, and the right to
possess explosives.19 Surface owners, occupants, or concessionaires are
forbidden from preventing holders of mining rights from entering private
lands and concession areas.20 A procedure for the settlement of conflicts is
likewise provided for.21
The Act restricts the conditions for exploration,22 quarry23 and other24
permits. It regulates the transport, sale and processing of minerals, 25 and
promotes the development of mining communities, science and mining
technology,26 and safety and environmental protection.27

The government's share in the agreements is spelled out and allocated, 28
taxes and fees are imposed,29incentives granted.30 Aside from penalizing
certain acts,31 the law likewise specifies grounds for the cancellation,
revocation and termination of agreements and permits.32
On April 9, 1995, 30 days following its publication on March 10, 1995 in
Malaya and Manila Times, two newspapers of general circulation, R.A. No.
7942 took effect.33 Shortly before the effectivity of R.A. No. 7942, however,
or on March 30, 1995, the President entered into an FTAA with WMCP
covering 99,387 hectares of land in South Cotabato, Sultan Kudarat, Davao
del Sur and North Cotabato.34
On August 15, 1995, then DENR Secretary Victor O. Ramos issued DENR
Administrative Order (DAO) No. 95-23, s. 1995, otherwise known as the
Implementing Rules and Regulations of R.A. No. 7942. This was later
repealed by DAO No. 96-40, s. 1996 which was adopted on December 20,
1996.
On January 10, 1997, counsels for petitioners sent a letter to the DENR
Secretary demanding that the DENR stop the implementation of R.A. No.
7942 and DAO No. 96-40,35 giving the DENR fifteen days from receipt 36 to
act thereon. The DENR, however, has yet to respond or act on petitioners'
letter.37
Petitioners thus filed the present petition for prohibition and mandamus,
with a prayer for a temporary restraining order. They allege that at the time
of the filing of the petition, 100 FTAA applications had already been filed,
covering an area of 8.4 million hectares, 38 64 of which applications are by
fully foreign-owned corporations covering a total of 5.8 million hectares,
and at least one by a fully foreign-owned mining company over offshore
areas.39
Petitioners claim that the DENR Secretary acted without or in excess of
jurisdiction:
I
x x x in signing and promulgating DENR Administrative Order No. 96-40
implementing Republic Act No. 7942, the latter being unconstitutional in
that it allows fully foreign owned corporations to explore, develop, utilize
and exploit mineral resources in a manner contrary to Section 2, paragraph
4, Article XII of the Constitution;
II
that it allows the taking of private property without the determination of
public use and for just compensation;
III

that it violates Sec. 1, Art. III of the Constitution;
IV
that it allows enjoyment by foreign citizens as well as fully foreign owned
corporations of the nation's marine wealth contrary to Section 2, paragraph 2
of Article XII of the Constitution;
V
that it allows priority to foreign and fully foreign owned corporations in the
exploration, development and utilization of mineral resources contrary to
Article XII of the Constitution;
VI
that it allows the inequitable sharing of wealth contrary to Sections [sic] 1,
paragraph 1, and Section 2, paragraph 4[,] [Article XII] of the Constitution;
VII
x x x in recommending approval of and implementing the Financial and
Technical Assistance Agreement between the President of the Republic of
the Philippines and Western Mining Corporation Philippines Inc. because
the same is illegal and unconstitutional.40
They pray that the Court issue an order:
(a) Permanently enjoining respondents from acting on any application
for Financial or Technical Assistance Agreements;
(b) Declaring the Philippine Mining Act of 1995 or Republic Act No.
7942 as unconstitutional and null and void;
(c) Declaring the Implementing Rules and Regulations of the Philippine
Mining Act contained in DENR Administrative Order No. 96-40 and all
other similar administrative issuances as unconstitutional and null and
void; and
(d) Cancelling the Financial and Technical Assistance Agreement issued
to Western Mining Philippines, Inc. as unconstitutional, illegal and null
and void.41
Impleaded as public respondents are Ruben Torres, the then Executive
Secretary, Victor O. Ramos, the then DENR Secretary, and Horacio Ramos,
Director of the Mines and Geosciences Bureau of the DENR. Also
impleaded is private respondent WMCP, which entered into the assailed
FTAA with the Philippine Government. WMCP is owned by WMC
Resources International Pty., Ltd. (WMC), "a wholly owned subsidiary of

Western Mining Corporation Holdings Limited, a publicly listed major
Australian mining and exploration company."42 By WMCP's information, "it
is a 100% owned subsidiary of WMC LIMITED."43
Respondents, aside from meeting petitioners' contentions, argue that the
requisites for judicial inquiry have not been met and that the petition does
not comply with the criteria for prohibition and mandamus. Additionally,
respondent WMCP argues that there has been a violation of the rule on
hierarchy of courts.
After petitioners filed their reply, this Court granted due course to the
petition. The parties have since filed their respective memoranda.
WMCP subsequently filed a Manifestation dated September 25, 2002
alleging that on January 23, 2001, WMC sold all its shares in WMCP to
Sagittarius Mines, Inc. (Sagittarius), a corporation organized under
Philippine laws.44 WMCP was subsequently renamed "Tampakan Mineral
Resources Corporation."45 WMCP claims that at least 60% of the equity of
Sagittarius is owned by Filipinos and/or Filipino-owned corporations while
about 40% is owned by Indophil Resources NL, an Australian company. 46 It
further claims that by such sale and transfer of shares, "WMCP has ceased to
be connected in any way with WMC."47
By virtue of such sale and transfer, the DENR Secretary, by Order of
December 18, 2001,48 approved the transfer and registration of the subject
FTAA from WMCP to Sagittarius. Said Order, however, was appealed by
Lepanto Consolidated Mining Co. (Lepanto) to the Office of the President
which upheld it by Decision of July 23, 2002. 49Its motion for reconsideration
having been denied by the Office of the President by Resolution of
November 12, 2002,50 Lepanto filed a petition for review51 before the Court
of Appeals. Incidentally, two other petitions for review related to the
approval of the transfer and registration of the FTAA to Sagittarius were
recently resolved by this Court.52
It bears stressing that this case has not been rendered moot either by the
transfer and registration of the FTAA to a Filipino-owned corporation or by
the non-issuance of a temporary restraining order or a preliminary injunction
to stay the above-said July 23, 2002 decision of the Office of the President. 53
The validity of the transfer remains in dispute and awaits final judicial
determination. This assumes, of course, that such transfer cures the FTAA's
alleged unconstitutionality, on which question judgment is reserved.
WMCP also points out that the original claimowners of the major
mineralized areas included in the WMCP FTAA, namely, Sagittarius,
Tampakan Mining Corporation, and Southcot Mining Corporation, are all
Filipino-owned corporations,54 each of which was a holder of an approved
Mineral Production Sharing Agreement awarded in 1994, albeit their
respective mineral claims were subsumed in the WMCP FTAA; 55 and that
these three companies are the same companies that consolidated their
interests in Sagittarius to whom WMC sold its 100% equity in WMCP.56
WMCP concludes that in the event that the FTAA is invalidated, the MPSAs
of the three corporations would be revived and the mineral claims would
revert to their original claimants.57
These circumstances, while informative, are hardly significant in the
resolution of this case, it involving the validity of the FTAA, not the possible
consequences of its invalidation.
Of the above-enumerated seven grounds cited by petitioners, as will be
shown later, only the first and the last need be delved into; in the latter, the
discussion shall dwell only insofar as it questions the effectivity of E. O. No.
279 by virtue of which order the questioned FTAA was forged.
I. Before going into the substantive issues, the procedural questions posed
by respondents shall first be tackled.
REQUISITES FOR JUDICIAL REVIEW
When an issue of constitutionality is raised, this Court can exercise its power
of judicial review only if the following requisites are present:
(1) The existence of an actual and appropriate case;
(2) A personal and substantial interest of the party raising the
constitutional question;
(3) The exercise of judicial review is pleaded at the earliest opportunity;
and
(4) The constitutional question is the lis mota of the case. 58
Respondents claim that the first three requisites are not present.
Section 1, Article VIII of the Constitution states that "(j)udicial power
includes the duty of the courts of justice to settle actual controversies
involving rights which are legally demandable and enforceable." The power
of judicial review, therefore, is limited to the determination of actual cases
and controversies.59
An actual case or controversy means an existing case or controversy that is
appropriate or ripe for determination, not conjectural or anticipatory, 60 lest
the decision of the court would amount to an advisory opinion.61 The power
does not extend to hypothetical questions62 since any attempt at abstraction
could only lead to dialectics and barren legal questions and to sterile
conclusions unrelated to actualities.63
"Legal standing" or locus standi has been defined as a personal and
substantial interest in the case such that the party has sustained or will
sustain direct injury as a result of the governmental act that is being
challenged,64alleging more than a generalized grievance.65 The gist of the
question of standing is whether a party alleges "such personal stake in the
outcome of the controversy as to assure that concrete adverseness which
sharpens the presentation of issues upon which the court depends for
illumination of difficult constitutional questions."66Unless a person is
injuriously affected in any of his constitutional rights by the operation of
statute or ordinance, he has no standing.67
Petitioners traverse a wide range of sectors. Among them are La Bugal
B'laan Tribal Association, Inc., a farmers and indigenous people's
cooperative organized under Philippine laws representing a community
actually affected by the mining activities of WMCP, members of said
cooperative,68 as well as other residents of areas also affected by the mining
activities of WMCP.69 These petitioners have standing to raise the
constitutionality of the questioned FTAA as they allege a personal and
substantial injury. They claim that they would suffer "irremediable
displacement"70 as a result of the implementation of the FTAA allowing
WMCP to conduct mining activities in their area of residence. They thus
meet the appropriate case requirement as they assert an interest adverse to
that of respondents who, on the other hand, insist on the FTAA's validity.
In view of the alleged impending injury, petitioners also have standing to
assail the validity of E.O. No. 279, by authority of which the FTAA was
executed.
Public respondents maintain that petitioners, being strangers to the FTAA,
cannot sue either or both contracting parties to annul it. 71 In other words,
they contend that petitioners are not real parties in interest in an action for
the annulment of contract.
Public respondents' contention fails. The present action is not merely one for
annulment of contract but for prohibition and mandamus. Petitioners allege
that public respondents acted without or in excess of jurisdiction in
implementing the FTAA, which they submit is unconstitutional. As the case
involves constitutional questions, this Court is not concerned with whether
petitioners are real parties in interest, but with whether they have legal
standing. As held in Kilosbayan v. Morato:72
x x x. "It is important to note . . . that standing because of its constitutional
and public policy underpinnings, is very different from questions relating to
whether a particular plaintiff is the real party in interest or has capacity to
sue. Although all three requirements are directed towards ensuring that only
certain parties can maintain an action, standing restrictions require a partial
consideration of the merits, as well as broader policy concerns relating to the
proper role of the judiciary in certain areas.
Standing is a special concern in constitutional law because in some cases
suits are brought not by parties who have been personally injured by the
operation of a law or by official action taken, but by concerned citizens,
taxpayers or voters who actually sue in the public interest. Hence, the
question in standing is whether such parties have "alleged such a personal
stake in the outcome of the controversy as to assure that concrete

adverseness which sharpens the presentation of issues upon which the court
so largely depends for illumination of difficult constitutional questions."
As earlier stated, petitioners meet this requirement.
The challenge against the constitutionality of R.A. No. 7942 and DAO No.
96-40 likewise fulfills the requisites of justiciability. Although these laws
were not in force when the subject FTAA was entered into, the question as to
their validity is ripe for adjudication.
The WMCP FTAA provides: 14.3 Future Legislation: Any term and
condition more favourable to Financial &Technical Assistance Agreement
contractors resulting from repeal or amendment of any existing law or
regulation or from the enactment of a law, regulation or administrative order
shall be considered a part of this Agreement.
It is undisputed that R.A. No. 7942 and DAO No. 96-40 contain provisions
that are more favorable to WMCP, hence, these laws, to the extent that they
are favorable to WMCP, govern the FTAA.
In addition, R.A. No. 7942 explicitly makes certain provisions apply to preexisting agreements. SEC. 112. Non-impairment of Existing
Mining/Quarrying Rights. x x x That the provisions of Chapter XIV on
government share in mineral production-sharing agreement and of Chapter
XVI on incentives of this Act shall immediately govern and apply to a
mining lessee or contractor unless the mining lessee or contractor indicates
his intention to the secretary, in writing, not to avail of said provisions x x x
Provided, finally, That such leases, production-sharing agreements, financial
or technical assistance agreements shall comply with the applicable
provisions of this Act and its implementing rules and regulations.
As there is no suggestion that WMCP has indicated its intention not to avail
of the provisions of Chapter XVI of R.A. No. 7942, it can safely be
presumed that they apply to the WMCP FTAA.
Misconstruing the application of the third requisite for judicial review that
the exercise of the review is pleaded at the earliest opportunity WMCP
points out that the petition was filed only almost two years after the
execution of the FTAA, hence, not raised at the earliest opportunity.
The third requisite should not be taken to mean that the question of
constitutionality must be raised immediately after the execution of the state
action complained of. That the question of constitutionality has not been
raised before is not a valid reason for refusing to allow it to be raised later.73
A contrary rule would mean that a law, otherwise unconstitutional, would
lapse into constitutionality by the mere failure of the proper party to
promptly file a case to challenge the same.
PROPRIETY OF PROHIBITION AND MANDAMUS
Before the effectivity in July 1997 of the Revised Rules of Civil Procedure,
Section 2 of Rule 65 read: SEC. 2. Petition for prohibition. When the

proceedings of any tribunal, corporation, board, or person, whether
exercising functions judicial or ministerial, are without or in excess of its or
his jurisdiction, or with grave abuse of discretion, and there is no appeal or
any other plain, speedy, and adequate remedy in the ordinary course of law,
a person aggrieved thereby may file a verified petition in the proper court
alleging the facts with certainty and praying that judgment be rendered
commanding the defendant to desist from further proceeding in the action or
matter specified therein.
Prohibition is a preventive remedy.74 It seeks a judgment ordering the
defendant to desist from continuing with the commission of an act perceived
to be illegal.75
The petition for prohibition at bar is thus an appropriate remedy. While the
execution of the contract itself may be fait accompli, its implementation is
not. Public respondents, in behalf of the Government, have obligations to
fulfill under said contract. Petitioners seek to prevent them from fulfilling
such obligations on the theory that the contract is unconstitutional and,
therefore, void.
The propriety of a petition for prohibition being upheld, discussion of the
propriety of the mandamus aspect of the petition is rendered unnecessary.
HIERARCHY OF COURTS
The contention that the filing of this petition violated the rule on hierarchy
of courts does not likewise lie. The rule has been explained thus:
Between two courts of concurrent original jurisdiction, it is the lower court
that should initially pass upon the issues of a case. That way, as a particular
case goes through the hierarchy of courts, it is shorn of all but the important
legal issues or those of first impression, which are the proper subject of
attention of the appellate court. This is a procedural rule borne of experience
and adopted to improve the administration of justice.
This Court has consistently enjoined litigants to respect the hierarchy of
courts. Although this Court has concurrent jurisdiction with the Regional
Trial Courts and the Court of Appeals to issue writs of certiorari, prohibition,
mandamus, quo warranto, habeas corpus and injunction, such concurrence
does not give a party unrestricted freedom of choice of court forum. The
resort to this Court's primary jurisdiction to issue said writs shall be allowed
only where the redress desired cannot be obtained in the appropriate courts
or where exceptional and compelling circumstances justify such invocation.
We held in People v. Cuaresma that:
A becoming regard for judicial hierarchy most certainly indicates that
petitions for the issuance of extraordinary writs against first level
("inferior") courts should be filed with the Regional Trial Court, and those
against the latter, with the Court of Appeals. A direct invocation of the
Supreme Court's original jurisdiction to issue these writs should be allowed

only where there are special and important reasons therefor, clearly and
specifically set out in the petition. This is established policy. It is a policy
necessary to prevent inordinate demands upon the Court's time and attention
which are better devoted to those matters within its exclusive jurisdiction,
and to prevent further over-crowding of the Court's docket x x x. 76
[Emphasis supplied.]
The repercussions of the issues in this case on the Philippine mining
industry, if not the national economy, as well as the novelty thereof,
constitute exceptional and compelling circumstances to justify resort to this
Court in the first instance.
In all events, this Court has the discretion to take cognizance of a suit which
does not satisfy the requirements of an actual case or legal standing when
paramount public interest is involved.77 When the issues raised are of
paramount importance to the public, this Court may brush aside
technicalities of procedure.78
II. Petitioners contend that E.O. No. 279 did not take effect because its
supposed date of effectivity came after President Aquino had already lost her
legislative powers under the Provisional Constitution.
And they likewise claim that the WMC FTAA, which was entered into
pursuant to E.O. No. 279, violates Section 2, Article XII of the Constitution
because, among other reasons:
(1) It allows foreign-owned companies to extend more than mere
financial or technical assistance to the State in the exploitation,
development, and utilization of minerals, petroleum, and other mineral
oils, and even permits foreign owned companies to "operate and manage
mining activities."
(2) It allows foreign-owned companies to extend both technical and
financial assistance, instead of "either technical or financial assistance."
To appreciate the import of these issues, a visit to the history of the pertinent
constitutional provision, the concepts contained therein, and the laws
enacted pursuant thereto, is in order. Section 2, Article XII reads in full: Sec.
2. All lands of the public domain, waters, minerals, coal, petroleum, and
other mineral oils, all forces of potential energy, fisheries, forests or timber,
wildlife, flora and fauna, and other natural resources are owned by the State.
With the exception of agricultural lands, all other natural resources shall not
be alienated. The exploration, development, and utilization of natural
resources shall be under the full control and supervision of the State. The
State may directly undertake such activities or it may enter into coproduction, joint venture, or production-sharing agreements with Filipino
citizens, or corporations or associations at least sixty per centum of whose
capital is owned by such citizens. Such agreements may be for a period not
exceeding twenty-five years, renewable for not more than twenty-five years,
and under such terms and conditions as may be provided by law. In cases of
water rights for irrigation, water supply, fisheries, or industrial uses other
than the development of water power, beneficial use may be the measure
and limit of the grant.
The State shall protect the nation's marine wealth in its archipelagic waters,
territorial sea, and exclusive economic zone, and reserve its use and
enjoyment exclusively to Filipino citizens.
The Congress may, by law, allow small-scale utilization of natural resources
by Filipino citizens, as well as cooperative fish farming, with priority to
subsistence fishermen and fish-workers in rivers, lakes, bays, and lagoons.
The President may enter into agreements with foreign-owned corporations
involving 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.
THE SPANISH REGIME AND THE REGALIAN DOCTRINE
The first sentence of Section 2 embodies the Regalian doctrine or jura
regalia. Introduced by Spain into these Islands, this feudal concept is based
on the State's power of dominium, which is the capacity of the State to own
or acquire property.79
In its broad sense, the term "jura regalia" refers to royal rights, or those
rights which the King has by virtue of his prerogatives. In Spanish law, it
refers to a right which the sovereign has over anything in which a subject
has a right of property or propriedad. These were rights enjoyed during
feudal times by the king as the sovereign.
The theory of the feudal system was that title to all lands was originally held
by the King, and while the use of lands was granted out to others who were
permitted to hold them under certain conditions, the King theoretically
retained the title. By fiction of law, the King was regarded as the original
proprietor of all lands, and the true and only source of title, and from him all
lands were held. The theory of jura regalia was therefore nothing more than
a natural fruit of conquest.80
The Philippines having passed to Spain by virtue of discovery and
conquest,81 earlier Spanish decrees declared that "all lands were held from
the Crown."82
The Regalian doctrine extends not only to land but also to "all natural wealth
that may be found in the bowels of the earth." 83 Spain, in particular,
recognized the unique value of natural resources, viewing them, especially

minerals, as an abundant source of revenue to finance its wars against other
nations.84 Mining laws during the Spanish regime reflected this
perspective.85
THE AMERICAN OCCUPATION AND THE CONCESSION
REGIME
By the Treaty of Paris of December 10, 1898, Spain ceded "the archipelago
known as the Philippine Islands" to the United States. The Philippines was
hence governed by means of organic acts that were in the nature of charters
serving as a Constitution of the occupied territory from 1900 to 1935. 86
Among the principal organic acts of the Philippines was the Act of Congress
of July 1, 1902, more commonly known as the Philippine Bill of 1902,
through which the United States Congress assumed the administration of the
Philippine Islands.87 Section 20 of said Bill reserved the disposition of
mineral lands of the public domain from sale. Section 21 thereof allowed the
free and open exploration, occupation and purchase of mineral deposits not
only to citizens of the Philippine Islands but to those of the United States as
well:
Sec. 21. That all valuable mineral deposits in public lands in the Philippine
Islands, both surveyed and unsurveyed, are hereby declared to be free and
open to exploration, occupation and purchase, and the land in which they are
found, to occupation and purchase, by citizens of the United States or of said
Islands: Provided, That when on any lands in said Islands entered and
occupied as agricultural lands under the provisions of this Act, but not
patented, mineral deposits have been found, the working of such mineral
deposits is forbidden until the person, association, or corporation who or
which has entered and is occupying such lands shall have paid to the
Government of said Islands such additional sum or sums as will make the
total amount paid for the mineral claim or claims in which said deposits are
located equal to the amount charged by the Government for the same as
mineral claims.
Unlike Spain, the United States considered natural resources as a source of
wealth for its nationals and saw fit to allow both Filipino and American
citizens to explore and exploit minerals in public lands, and to grant patents
to private mineral lands.88 A person who acquired ownership over a parcel of
private mineral land pursuant to the laws then prevailing could exclude other
persons, even the State, from exploiting minerals within his property.89Thus,
earlier jurisprudence90 held that:
A valid and subsisting location of mineral land, made and kept up in
accordance with the provisions of the statutes of the United States, has the
effect of a grant by the United States of the present and exclusive possession
of the lands located, and this exclusive right of possession and enjoyment
continues during the entire life of the location. x x x.

The discovery of minerals in the ground by one who has a valid mineral
location perfects his claim and his location not only against third persons,
but also against the Government. x x x.
The Regalian doctrine and the American system, therefore, differ in one
essential respect. Under the Regalian theory, mineral rights are not included
in a grant of land by the state; under the American doctrine, mineral rights
are included in a grant of land by the government.91
Section 21 also made possible the concession (frequently styled "permit",
license" or "lease")92 system.93 This was the traditional regime imposed by
the colonial administrators for the exploitation of natural resources in the
extractive sector (petroleum, hard minerals, timber, etc.).94
Under the concession system, the concessionaire makes a direct equity
investment for the purpose of exploiting a particular natural resource within
a given area.95 Thus, the concession amounts to complete control by the
concessionaire over the country's natural resource, for it is given exclusive
and plenary rights to exploit a particular resource at the point of extraction. 96
In consideration for the right to exploit a natural resource, the concessionaire
either pays rent or royalty, which is a fixed percentage of the gross
proceeds.97
Later statutory enactments by the legislative bodies set up in the Philippines
adopted the contractual framework of the concession.98 For instance, Act No.
2932,99 approved on August 31, 1920, which provided for the exploration,
location, and lease of lands containing petroleum and other mineral oils and
gas in the Philippines, and Act No. 2719, 100 approved on May 14, 1917,
which provided for the leasing and development of coal lands in the
Philippines, both utilized the concession system.101
THE 1935 CONSTITUTION AND THE NATIONALIZATION OF
NATURAL RESOURCES
By the Act of United States Congress of March 24, 1934, popularly known
as the Tydings-McDuffie Law, the People of the Philippine Islands were
authorized to adopt a constitution.102 On July 30, 1934, the Constitutional
Convention met for the purpose of drafting a constitution, and the
Constitution subsequently drafted was approved by the Convention on
February 8, 1935.103 The Constitution was submitted to the President of the
United States on March 18, 1935.104 On March 23, 1935, the President of the
United States certified that the Constitution conformed substantially with the
provisions of the Act of Congress approved on March 24, 1934. 105On May
14, 1935, the Constitution was ratified by the Filipino people.106
The 1935 Constitution adopted the Regalian doctrine, declaring all natural
resources of the Philippines, including mineral lands and minerals, to be
property belonging to the State.107 As adopted in a republican system, the
medieval concept of jura regalia is stripped of royal overtones and

ownership of the land is vested in the State.108
Section 1, Article XIII, on Conservation and Utilization of Natural
Resources, of the 1935 Constitution provided:
SECTION 1. All agricultural, timber, and mineral lands of the public
domain, waters, minerals, coal, petroleum, and other mineral oils, all
forces of potential energy, and other natural resources of the Philippines
belong to the State, and their disposition, exploitation, development, or
utilization shall be limited to citizens of the Philippines, or to
corporations or associations at least sixty per centum of the capital of
which is owned by such citizens, subject to any existing right, grant,
lease, or concession at the time of the inauguration of the Government
established under this Constitution. Natural resources, with the
exception of public agricultural land, shall not be alienated, and no
license, concession, or lease for the exploitation, development, or
utilization of any of the natural resources shall be granted for a period
exceeding twenty-five years, except as to water rights for irrigation,
water supply, fisheries, or industrial uses other than the development of
water power, in which cases beneficial use may be the measure and the
limit of the grant.
The nationalization and conservation of the natural resources of the country
was one of the fixed and dominating objectives of the 1935 Constitutional
Convention.109 One delegate relates: There was an overwhelming sentiment
in the Convention in favor of the principle of state ownership of natural
resources and the adoption of the Regalian doctrine. State ownership of
natural resources was seen as a necessary starting point to secure recognition
of the state's power to control their disposition, exploitation, development,
or utilization. The delegates of the Constitutional Convention very well
knew that the concept of State ownership of land and natural resources was
introduced by the Spaniards, however, they were not certain whether it was
continued and applied by the Americans. To remove all doubts, the
Convention approved the provision in the Constitution affirming the
Regalian doctrine.
The adoption of the principle of state ownership of the natural resources and
of the Regalian doctrine was considered to be a necessary starting point for
the plan of nationalizing and conserving the natural resources of the country.
For with the establishment of the principle of state ownership of the natural
resources, it would not be hard to secure the recognition of the power of the
State to control their disposition, exploitation, development or utilization.110
The nationalization of the natural resources was intended (1) to insure their
conservation for Filipino posterity; (2) to serve as an instrument of national
defense, helping prevent the extension to the country of foreign control
through peaceful economic penetration; and (3) to avoid making the

Philippines a source of international conflicts with the consequent danger to
its internal security and independence.111
The same Section 1, Article XIII also adopted the concession system,
expressly permitting the State to grant licenses, concessions, or leases for the
exploitation, development, or utilization of any of the natural resources.
Grants, however, were limited to Filipinos or entities at least 60% of the
capital of which is owned by Filipinos.lawph!l.ne+
The swell of nationalism that suffused the 1935 Constitution was radically
diluted when on November 1946, the Parity Amendment, which came in the
form of an "Ordinance Appended to the Constitution," was ratified in a
plebiscite.112 The Amendment extended, from July 4, 1946 to July 3, 1974,
the right to utilize and exploit our natural resources to citizens of the United
States and business enterprises owned or controlled, directly or indirectly, by
citizens of the United States:113
Notwithstanding the provision of section one, Article Thirteen, and section
eight, Article Fourteen, of the foregoing Constitution, during the effectivity
of the Executive Agreement entered into by the President of the Philippines
with the President of the United States on the fourth of July, nineteen
hundred and forty-six, pursuant to the provisions of Commonwealth Act
Numbered Seven hundred and thirty-three, but in no case to extend beyond
the third of July, nineteen hundred and seventy-four, the disposition,
exploitation, development, and utilization of all agricultural, timber, and
mineral lands of the public domain, waters, minerals, coals, petroleum, and
other mineral oils, all forces and sources of potential energy, and other
natural resources of the Philippines, and the operation of public utilities,
shall, if open to any person, be open to citizens of the United States and to
all forms of business enterprise owned or controlled, directly or indirectly,
by citizens of the United States in the same manner as to, and under the
same conditions imposed upon, citizens of the Philippines or corporations or
associations owned or controlled by citizens of the Philippines.
The Parity Amendment was subsequently modified by the 1954 Revised
Trade Agreement, also known as the Laurel-Langley Agreement, embodied
in Republic Act No. 1355.114
THE PETROLEUM ACT OF 1949 AND THE CONCESSION
SYSTEM
In the meantime, Republic Act No. 387,115 also known as the Petroleum Act
of 1949, was approved on June 18, 1949.
The Petroleum Act of 1949 employed the concession system for the
exploitation of the nation's petroleum resources. Among the kinds of
concessions it sanctioned were exploration and exploitation concessions,
which respectively granted to the concessionaire the exclusive right to
explore for116 or develop117 petroleum within specified areas.

Concessions may be granted only to duly qualified persons 118 who have
sufficient finances, organization, resources, technical competence, and skills
necessary to conduct the operations to be undertaken.119
Nevertheless, the Government reserved the right to undertake such work
itself.120 This proceeded from the theory that all natural deposits or
occurrences of petroleum or natural gas in public and/or private lands in the
Philippines belong to the State.121 Exploration and exploitation concessions
did not confer upon the concessionaire ownership over the petroleum lands
and petroleum deposits.122 However, they did grant concessionaires the right
to explore, develop, exploit, and utilize them for the period and under the
conditions determined by the law.123
Concessions were granted at the complete risk of the concessionaire; the
Government did not guarantee the existence of petroleum or undertake, in
any case, title warranty.124
Concessionaires were required to submit information as maybe required by
the Secretary of Agriculture and Natural Resources, including reports of
geological and geophysical examinations, as well as production reports. 125
Exploration126 and exploitation127 concessionaires were also required to
submit work programs.lavvphi1.net
Exploitation concessionaires, in particular, were obliged to pay an annual
exploitation tax,128 the object of which is to induce the concessionaire to
actually produce petroleum, and not simply to sit on the concession without
developing or exploiting it.129 These concessionaires were also bound to pay
the Government royalty, which was not less than 12% of the petroleum
produced and saved, less that consumed in the operations of the
concessionaire.130 Under Article 66, R.A. No. 387, the exploitation tax may
be credited against the royalties so that if the concessionaire shall be actually
producing enough oil, it would not actually be paying the exploitation tax.131
Failure to pay the annual exploitation tax for two consecutive years, 132 or the
royalty due to the Government within one year from the date it becomes
due,133 constituted grounds for the cancellation of the concession. In case of
delay in the payment of the taxes or royalty imposed by the law or by the
concession, a surcharge of 1% per month is exacted until the same are
paid.134
As a rule, title rights to all equipment and structures that the concessionaire
placed on the land belong to the exploration or exploitation
concessionaire.135 Upon termination of such concession, the concessionaire
had a right to remove the same.136
The Secretary of Agriculture and Natural Resources was tasked with
carrying out the provisions of the law, through the Director of Mines, who
acted under the Secretary's immediate supervision and control. 137 The Act
granted the Secretary the authority to inspect any operation of the

concessionaire and to examine all the books and accounts pertaining to
operations or conditions related to payment of taxes and royalties.138
The same law authorized the Secretary to create an Administration Unit and
a Technical Board.139 The Administration Unit was charged, inter alia, with
the enforcement of the provisions of the law.140 The Technical Board had,
among other functions, the duty to check on the performance of
concessionaires and to determine whether the obligations imposed by the
Act and its implementing regulations were being complied with.141
Victorio Mario A. Dimagiba, Chief Legal Officer of the Bureau of Energy
Development, analyzed the benefits and drawbacks of the concession system
insofar as it applied to the petroleum industry:
Advantages of Concession. Whether it emphasizes income tax or royalty, the
most positive aspect of the concession system is that the State's financial
involvement is virtually risk free and administration is simple and
comparatively low in cost. Furthermore, if there is a competitive allocation
of the resource leading to substantial bonuses and/or greater royalty coupled
with a relatively high level of taxation, revenue accruing to the State under
the concession system may compare favorably with other financial
arrangements.
Disadvantages of Concession. There are, however, major negative aspects to
this system. Because the Government's role in the traditional concession is
passive, it is at a distinct disadvantage in managing and developing policy
for the nation's petroleum resource. This is true for several reasons. First,
even though most concession agreements contain covenants requiring
diligence in operations and production, this establishes only an indirect and
passive control of the host country in resource development. Second, and
more importantly, the fact that the host country does not directly participate
in resource management decisions inhibits its ability to train and employ its
nationals in petroleum development. This factor could delay or prevent the
country from effectively engaging in the development of its resources.
Lastly, a direct role in management is usually necessary in order to obtain a
knowledge of the international petroleum industry which is important to an
appreciation of the host country's resources in relation to those of other
countries.142
Other liabilities of the system have also been noted:
x x x there are functional implications which give the concessionaire great
economic power arising from its exclusive equity holding. This includes,
first, appropriation of the returns of the undertaking, subject to a modest
royalty; second, exclusive management of the project; third, control of
production of the natural resource, such as volume of production, expansion,
research and development; and fourth, exclusive responsibility for
downstream operations, like processing, marketing, and distribution. In

short, even if nominally, the state is the sovereign and owner of the natural
resource being exploited, it has been shorn of all elements of control over
such natural resource because of the exclusive nature of the contractual
regime of the concession. The concession system, investing as it does
ownership of natural resources, constitutes a consistent inconsistency with
the principle embodied in our Constitution that natural resources belong to
the state and shall not be alienated, not to mention the fact that the
concession was the bedrock of the colonial system in the exploitation of
natural resources.143
Eventually, the concession system failed for reasons explained by Dimagiba:
Notwithstanding the good intentions of the Petroleum Act of 1949, the
concession system could not have properly spurred sustained oil exploration
activities in the country, since it assumed that such a capital-intensive, high
risk venture could be successfully undertaken by a single individual or a
small company. In effect, concessionaires' funds were easily exhausted.
Moreover, since the concession system practically closed its doors to
interested foreign investors, local capital was stretched to the limits. The old
system also failed to consider the highly sophisticated technology and
expertise required, which would be available only to multinational
companies.144
A shift to a new regime for the development of natural resources thus
seemed imminent.
PRESIDENTIAL DECREE NO. 87, THE 1973 CONSTITUTION AND
THE SERVICE CONTRACT SYSTEM
The promulgation on December 31, 1972 of Presidential Decree No. 87, 145
otherwise known as The Oil Exploration and Development Act of 1972
signaled such a transformation. P.D. No. 87 permitted the government to
explore for and produce indigenous petroleum through "service contracts."146
"Service contracts" is a term that assumes varying meanings to different
people, and it has carried many names in different countries, like "work
contracts" in Indonesia, "concession agreements" in Africa, "productionsharing agreements" in the Middle East, and "participation agreements" in
Latin America.147 A functional definition of "service contracts" in the
Philippines is provided as follows:
A service contract is a contractual arrangement for engaging in the
exploitation and development of petroleum, mineral, energy, land and other
natural resources by which a government or its agency, or a private person
granted a right or privilege by the government authorizes the other party
(service contractor) to engage or participate in the exercise of such right or
the enjoyment of the privilege, in that the latter provides financial or
technical resources, undertakes the exploitation or production of a given
resource, or directly manages the productive enterprise, operations of the

exploration and exploitation of the resources or the disposition of marketing
or resources.148
In a service contract under P.D. No. 87, service and technology are furnished
by the service contractor for which it shall be entitled to the stipulated
service fee.149 The contractor must be technically competent and financially
capable to undertake the operations required in the contract.150
Financing is supposed to be provided by the Government to which all
petroleum produced belongs.151 In case the Government is unable to finance
petroleum exploration operations, the contractor may furnish services,
technology and financing, and the proceeds of sale of the petroleum
produced under the contract shall be the source of funds for payment of the
service fee and the operating expenses due the contractor.152 The contractor
shall undertake, manage and execute petroleum operations, subject to the
government overseeing the management of the operations.153 The contractor
provides all necessary services and technology and the requisite financing,
performs the exploration work obligations, and assumes all exploration risks
such that if no petroleum is produced, it will not be entitled to
reimbursement.154 Once petroleum in commercial quantity is discovered, the
contractor shall operate the field on behalf of the government.155
P.D. No. 87 prescribed minimum terms and conditions for every service
contract.156 It also granted the contractor certain privileges, including
exemption from taxes and payment of tariff duties,157 and permitted the
repatriation of capital and retention of profits abroad.158
Ostensibly, the service contract system had certain advantages over the
concession regime.159 It has been opined, though, that, in the Philippines, our
concept of a service contract, at least in the petroleum industry, was
basically a concession regime with a production-sharing element.160
On January 17, 1973, then President Ferdinand E. Marcos proclaimed the
ratification of a new Constitution.161Article XIV on the National Economy
and Patrimony contained provisions similar to the 1935 Constitution with
regard to Filipino participation in the nation's natural resources. Section 8,
Article XIV thereof provides:
Sec. 8. All lands of the public domain, waters, minerals, coal, petroleum and
other mineral oils, all forces of potential energy, fisheries, wildlife, and other
natural resources of the Philippines belong to the State. With the exception
of agricultural, industrial or commercial, residential and resettlement lands
of the public domain, natural resources shall not be alienated, and no license,
concession, or lease for the exploration, development, exploitation, or
utilization of any of the natural resources shall be granted for a period
exceeding twenty-five years, renewable for not more than twenty-five years,
except as to water rights for irrigation, water supply, fisheries, or industrial
uses other than the development of water power, in which cases beneficial
use may be the measure and the limit of the grant.
While Section 9 of the same Article maintained the Filipino-only policy in
the enjoyment of natural resources, it also allowed Filipinos, upon authority
of the Batasang Pambansa, to enter into service contracts with any person or
entity for the exploration or utilization of natural resources.
Sec. 9. The disposition, exploration, development, exploitation, or utilization
of any of the natural resources of the Philippines shall be limited to citizens,
or to corporations or associations at least sixty per centum of which is
owned by such citizens. The Batasang Pambansa, in the national interest,
may allow such citizens, corporations or associations to enter into service
contracts for financial, technical, management, or other forms of assistance
with any person or entity for the exploration, or utilization of any of the
natural resources. Existing valid and binding service contracts for financial,
technical, management, or other forms of assistance are hereby recognized
as such. [Emphasis supplied.]
The concept of service contracts, according to one delegate, was borrowed
from the methods followed by India, Pakistan and especially Indonesia in
the exploration of petroleum and mineral oils.162 The provision allowing
such contracts, according to another, was intended to "enhance the proper
development of our natural resources since Filipino citizens lack the needed
capital and technical know-how which are essential in the proper
exploration, development and exploitation of the natural resources of the
country."163
The original idea was to authorize the government, not private entities, to
enter into service contracts with foreign entities. 164 As finally approved,
however, a citizen or private entity could be allowed by the National
Assembly to enter into such service contract. 165 The prior approval of the
National Assembly was deemed sufficient to protect the national interest.166
Notably, none of the laws allowing service contracts were passed by the
Batasang Pambansa. Indeed, all of them were enacted by presidential decree.
On March 13, 1973, shortly after the ratification of the new Constitution, the
President promulgated Presidential Decree No. 151.167 The law allowed
Filipino citizens or entities which have acquired lands of the public domain
or which own, hold or control such lands to enter into service contracts for
financial, technical, management or other forms of assistance with any
foreign persons or entity for the exploration, development, exploitation or
utilization of said lands.168
Presidential Decree No. 463,169 also known as The Mineral Resources
Development Decree of 1974, was enacted on May 17, 1974. Section 44 of
the decree, as amended, provided that a lessee of a mining claim may enter
into a service contract with a qualified domestic or foreign contractor for the
exploration, development and exploitation of his claims and the processing

and marketing of the product thereof.
Presidential Decree No. 704170 (The Fisheries Decree of 1975), approved on
May 16, 1975, allowed Filipinos engaged in commercial fishing to enter into
contracts for financial, technical or other forms of assistance with any
foreign person, corporation or entity for the production, storage, marketing
and processing of fish and fishery/aquatic products.171
Presidential Decree No. 705172 (The Revised Forestry Code of the
Philippines), approved on May 19, 1975, allowed "forest products licensees,
lessees, or permitees to enter into service contracts for financial, technical,
management, or other forms of assistance . . . with any foreign person or
entity for the exploration, development, exploitation or utilization of the
forest resources."173
Yet another law allowing service contracts, this time for geothermal
resources, was Presidential Decree No. 1442,174 which was signed into law
on June 11, 1978. Section 1 thereof authorized the Government to enter into
service contracts for the exploration, exploitation and development of
geothermal resources with a foreign contractor who must be technically and
financially capable of undertaking the operations required in the service
contract.
Thus, virtually the entire range of the country's natural resources from
petroleum and minerals to geothermal energy, from public lands and forest
resources to fishery products was well covered by apparent legal authority
to engage in the direct participation or involvement of foreign persons or
corporations (otherwise disqualified) in the exploration and utilization of
natural resources through service contracts.175
THE 1987 CONSTITUTION AND TECHNICAL OR FINANCIAL
ASSISTANCE AGREEMENTS
After the February 1986 Edsa Revolution, Corazon C. Aquino took the reins
of power under a revolutionary government. On March 25, 1986, President
Aquino issued Proclamation No. 3, 176 promulgating the Provisional
Constitution, more popularly referred to as the Freedom Constitution. By
authority of the same Proclamation, the President created a Constitutional
Commission (CONCOM) to draft a new constitution, which took effect on
the date of its ratification on February 2, 1987.177
The 1987 Constitution retained the Regalian doctrine. The first sentence of
Section 2, Article XII states: "All lands of the public domain, waters,
minerals, coal, petroleum, and other mineral oils, all forces of potential
energy, fisheries, forests or timber, wildlife, flora and fauna, and other
natural resources are owned by the State."
Like the 1935 and 1973 Constitutions before it, the 1987 Constitution, in the
second sentence of the same provision, prohibits the alienation of natural
resources, except agricultural lands.

The third sentence of the same paragraph is new: "The exploration,
development and utilization of natural resources shall be under the full
control and supervision of the State." The constitutional policy of the State's
"full control and supervision" over natural resources proceeds from the
concept of jura regalia, as well as the recognition of the importance of the
country's natural resources, not only for national economic development, but
also for its security and national defense. 178 Under this provision, the State
assumes "a more dynamic role" in the exploration, development and
utilization of natural resources.179
Conspicuously absent in Section 2 is the provision in the 1935 and 1973
Constitutions authorizing the State to grant licenses, concessions, or leases
for the exploration, exploitation, development, or utilization of natural
resources. By such omission, the utilization of inalienable lands of public
domain through "license, concession or lease" is no longer allowed under
the 1987 Constitution.180
Having omitted the provision on the concession system, Section 2 proceeded
to introduce "unfamiliar language":181
The State may directly undertake such activities or it may enter into coproduction, joint venture, or production-sharing agreements with Filipino
citizens, or corporations or associations at least sixty per centum of whose
capital is owned by such citizens.
Consonant with the State's "full supervision and control" over natural
resources, Section 2 offers the State two "options."182 One, the State may
directly undertake these activities itself; or two, it may enter into coproduction, joint venture, or production-sharing agreements with Filipino
citizens, or entities at least 60% of whose capital is owned by such citizens.
A third option is found in the third paragraph of the same section:
The Congress may, by law, allow small-scale utilization of natural resources
by Filipino citizens, as well as cooperative fish farming, with priority to
subsistence fishermen and fish-workers in rivers, lakes, bays, and lagoons.
While the second and third options are limited only to Filipino citizens or, in
the case of the former, to corporations or associations at least 60% of the
capital of which is owned by Filipinos, a fourth allows the participation of
foreign-owned corporations. The fourth and fifth paragraphs of Section 2
provide:
The President may enter into agreements with foreign-owned corporations
involving 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.
Although Section 2 sanctions the participation of foreign-owned
corporations in the exploration, development, and utilization of natural
resources, it imposes certain limitations or conditions to agreements with
such corporations.
First, the parties to FTAAs. Only the President, in behalf of the State,
may enter into these agreements, and only with corporations. By
contrast, under the 1973 Constitution, a Filipino citizen, corporation or
association may enter into a service contract with a "foreign person or
entity."
Second, the size of the activities: only large-scale exploration,
development, and utilization is allowed. The term "large-scale usually
refers to very capital-intensive activities."183
Third, the natural resources subject of the activities is restricted to
minerals, petroleum and other mineral oils, the intent being to limit
service contracts to those areas where Filipino capital may not be
sufficient.184
Fourth, consistency with the provisions of statute. The agreements must
be in accordance with the terms and conditions provided by law.
Fifth, Section 2 prescribes certain standards for entering into such
agreements. The agreements must be based on real contributions to
economic growth and general welfare of the country.
Sixth, the agreements must contain rudimentary stipulations for the
promotion of the development and use of local scientific and technical
resources.
Seventh, the notification requirement. The President shall notify
Congress of every financial or technical assistance agreement entered
into within thirty days from its execution.
Finally, the scope of the agreements. While the 1973 Constitution
referred to "service contracts for financial, technical, management, or
other forms of assistance" the 1987 Constitution provides for
"agreements. . . involving either financial or technical assistance." It
bears noting that the phrases "service contracts" and "management or
other forms of assistance" in the earlier constitution have been omitted.
By virtue of her legislative powers under the Provisional Constitution, 185
President Aquino, on July 10, 1987, signed into law E.O. No. 211
prescribing the interim procedures in the processing and approval of
applications for the exploration, development and utilization of minerals.
The omission in the 1987 Constitution of the term "service contracts"
notwithstanding, the said E.O. still referred to them in Section 2 thereof:
Sec. 2. Applications for the exploration, development and utilization of

mineral resources, including renewal applications and applications for
approval of operating agreements and mining service contracts, shall be
accepted and processed and may be approved x x x. [Emphasis supplied.]
The same law provided in its Section 3 that the "processing, evaluation and
approval of all mining applications . . . operating agreements and service
contracts . . . shall be governed by Presidential Decree No. 463, as amended,
other existing mining laws, and their implementing rules and
regulations. . . ."
As earlier stated, on the 25th also of July 1987, the President issued E.O.
No. 279 by authority of which the subject WMCP FTAA was executed on
March 30, 1995.
On March 3, 1995, President Ramos signed into law R.A. No. 7942. Section
15 thereof declares that the Act "shall govern the exploration, development,
utilization, and processing of all mineral resources." Such declaration
notwithstanding, R.A. No. 7942 does not actually cover all the modes
through which the State may undertake the exploration, development, and
utilization of natural resources.
The State, being the owner of the natural resources, is accorded the primary
power and responsibility in the exploration, development and utilization
thereof. As such, it may undertake these activities through four modes:
The State may directly undertake such activities.
(2) The State may enter into co-production, joint venture or productionsharing agreements with Filipino citizens or qualified corporations.
(3) Congress may, by law, allow small-scale utilization of natural
resources by Filipino citizens.
(4) For the large-scale exploration, development and utilization of
minerals, petroleum and other mineral oils, the President may enter into
agreements with foreign-owned corporations involving technical or
financial assistance.186
Except to charge the Mines and Geosciences Bureau of the DENR with
performing researches and surveys,187and a passing mention of governmentowned or controlled corporations,188 R.A. No. 7942 does not specify how the
State should go about the first mode. The third mode, on the other hand, is
governed by Republic Act No. 7076189 (the People's Small-Scale Mining Act
of 1991) and other pertinent laws.190 R.A. No. 7942 primarily concerns itself
with the second and fourth modes.
Mineral production sharing, co-production and joint venture agreements are
collectively classified by R.A. No. 7942 as "mineral agreements." 191 The
Government participates the least in a mineral production sharing agreement
(MPSA). In an MPSA, the Government grants the contractor 192 the exclusive
right to conduct mining operations within a contract area 193 and shares in the
gross output.194 The MPSA contractor provides the financing, technology,

management and personnel necessary for the agreement's implementation.195
The total government share in an MPSA is the excise tax on mineral
products under Republic Act No. 7729,196 amending Section 151(a) of the
National Internal Revenue Code, as amended.197
In a co-production agreement (CA),198 the Government provides inputs to
the mining operations other than the mineral resource,199 while in a joint
venture agreement (JVA), where the Government enjoys the greatest
participation, the Government and the JVA contractor organize a company
with both parties having equity shares.200 Aside from earnings in equity, the
Government in a JVA is also entitled to a share in the gross output. 201 The
Government may enter into a CA202 or JVA203 with one or more contractors.
The Government's share in a CA or JVA is set out in Section 81 of the law:
The share of the Government in co-production and joint venture agreements
shall be negotiated by the Government and the contractor taking into
consideration the: (a) capital investment of the project, (b) the risks
involved, (c) contribution of the project to the economy, and (d) other
factors that will provide for a fair and equitable sharing between the
Government and the contractor. The Government shall also be entitled to
compensations for its other contributions which shall be agreed upon by the
parties, and shall consist, among other things, the contractor's income tax,
excise tax, special allowance, withholding tax due from the contractor's
foreign stockholders arising from dividend or interest payments to the said
foreign stockholders, in case of a foreign national and all such other taxes,
duties and fees as provided for under existing laws.
All mineral agreements grant the respective contractors the exclusive right
to conduct mining operations and to extract all mineral resources found in
the contract area.204 A "qualified person" may enter into any of the mineral
agreements with the Government.205 A "qualified person" is
any citizen of the Philippines with capacity to contract, or a corporation,
partnership, association, or cooperative organized or authorized for the
purpose of engaging in mining, with technical and financial capability to
undertake mineral resources development and duly registered in accordance
with law at least sixty per centum (60%) of the capital of which is owned by
citizens of the Philippines x x x.206
The fourth mode involves "financial or technical assistance agreements." An
FTAA is defined as "a contract involving financial or technical assistance for
large-scale exploration, development, and utilization of natural resources." 207
Any qualified person with technical and financial capability to undertake
large-scale exploration, development, and utilization of natural resources in
the Philippines may enter into such agreement directly with the Government
through the DENR.208 For the purpose of granting an FTAA, a legally
organized foreign-owned corporation (any corporation, partnership,

association, or cooperative duly registered in accordance with law in which
less than 50% of the capital is owned by Filipino citizens) 209 is deemed a
"qualified person."210
Other than the difference in contractors' qualifications, the principal
distinction between mineral agreements and FTAAs is the maximum
contract area to which a qualified person may hold or be granted. 211 "Largescale" under R.A. No. 7942 is determined by the size of the contract area, as
opposed to the amount invested (US $50,000,000.00), which was the
standard under E.O. 279.
Like a CA or a JVA, an FTAA is subject to negotiation. 212 The Government's
contributions, in the form of taxes, in an FTAA is identical to its
contributions in the two mineral agreements, save that in an FTAA:
The collection of Government share in financial or technical assistance
agreement shall commence after the financial or technical assistance
agreement contractor has fully recovered its pre-operating expenses,
exploration, and development expenditures, inclusive.213
III. Having examined the history of the constitutional provision and statutes
enacted pursuant thereto, a consideration of the substantive issues presented
by the petition is now in order.
THE EFFECTIVITY OF EXECUTIVE ORDER NO. 279
Petitioners argue that E.O. No. 279, the law in force when the WMC FTAA
was executed, did not come into effect.
E.O. No. 279 was signed into law by then President Aquino on July 25,
1987, two days before the opening of Congress on July 27, 1987. 214 Section
8 of the E.O. states that the same "shall take effect immediately." This
provision, according to petitioners, runs counter to Section 1 of E.O. No.
200,215 which provides:
SECTION 1. Laws shall take effect after fifteen days following the
completion of their publication either in the Official Gazette or in a
newspaper of general circulation in the Philippines, unless it is otherwise
provided.216[Emphasis supplied.]
On that premise, petitioners contend that E.O. No. 279 could have only
taken effect fifteen days after its publication at which time Congress had
already convened and the President's power to legislate had ceased.
Respondents, on the other hand, counter that the validity of E.O. No. 279
was settled in Miners Association of the Philippines v. Factoran, supra. This
is of course incorrect for the issue in Miners Association was not the validity
of E.O. No. 279 but that of DAO Nos. 57 and 82 which were issued
pursuant thereto.
Nevertheless, petitioners' contentions have no merit.
It bears noting that there is nothing in E.O. No. 200 that prevents a law from
taking effect on a date other than even before the 15-day period after its
publication. Where a law provides for its own date of effectivity, such date
prevails over that prescribed by E.O. No. 200. Indeed, this is the very
essence of the phrase "unless it is otherwise provided" in Section 1 thereof.
Section 1, E.O. No. 200, therefore, applies only when a statute does not
provide for its own date of effectivity.
What is mandatory under E.O. No. 200, and what due process requires, as
this Court held in Taada v. Tuvera,217 is the publication of the law for
without such notice and publication, there would be no basis for the
application of the maxim "ignorantia legis n[eminem] excusat." It would be
the height of injustice to punish or otherwise burden a citizen for the
transgression of a law of which he had no notice whatsoever, not even a
constructive one.
While the effectivity clause of E.O. No. 279 does not require its publication,
it is not a ground for its invalidation since the Constitution, being "the
fundamental, paramount and supreme law of the nation," is deemed written
in the law.218 Hence, the due process clause,219 which, so Taada held,
mandates the publication of statutes, is read into Section 8 of E.O. No. 279.
Additionally, Section 1 of E.O. No. 200 which provides for publication
"either in the Official Gazette or in a newspaper of general circulation in the
Philippines," finds suppletory application. It is significant to note that E.O.
No. 279 was actually published in the Official Gazette220 on August 3, 1987.
From a reading then of Section 8 of E.O. No. 279, Section 1 of E.O. No.
200, and Taada v. Tuvera, this Court holds that E.O. No. 279 became
effective immediately upon its publication in the Official Gazette on August
3, 1987.
That such effectivity took place after the convening of the first Congress is
irrelevant. At the time President Aquino issued E.O. No. 279 on July 25,
1987, she was still validly exercising legislative powers under the
Provisional Constitution.221 Article XVIII (Transitory Provisions) of the
1987 Constitution explicitly states:
Sec. 6. The incumbent President shall continue to exercise legislative
powers until the first Congress is convened.
The convening of the first Congress merely precluded the exercise of
legislative powers by President Aquino; it did not prevent the effectivity of
laws she had previously enacted.
There can be no question, therefore, that E.O. No. 279 is an effective, and a
validly enacted, statute.
THE CONSTITUTIONALITY OF THE WMCP FTAA
Petitioners submit that, in accordance with the text of Section 2, Article XII
of the Constitution, FTAAs should be limited to "technical or financial
assistance" only. They observe, however, that, contrary to the language of
the Constitution, the WMCP FTAA allows WMCP, a fully foreign-owned

mining corporation, to extend more than mere financial or technical
assistance to the State, for it permits WMCP to manage and operate every
aspect of the mining activity. 222
Petitioners' submission is well-taken. It is a cardinal rule in the interpretation
of constitutions that the instrument must be so construed as to give effect to
the intention of the people who adopted it.223 This intention is to be sought in
the constitution itself, and the apparent meaning of the words is to be taken
as expressing it, except in cases where that assumption would lead to
absurdity, ambiguity, or contradiction.224 What the Constitution says
according to the text of the provision, therefore, compels acceptance and
negates the power of the courts to alter it, based on the postulate that the
framers and the people mean what they say.225 Accordingly, following the
literal text of the Constitution, assistance accorded by foreign-owned
corporations in the large-scale exploration, development, and utilization of
petroleum, minerals and mineral oils should be limited to "technical" or
"financial" assistance only.
WMCP nevertheless submits that the word "technical" in the fourth
paragraph of Section 2 of E.O. No. 279 encompasses a "broad number of
possible services," perhaps, "scientific and/or technological in basis." 226 It
thus posits that it may also well include "the area of management or
operations . . . so long as such assistance requires specialized knowledge or
skills, and are related to the exploration, development and utilization of
mineral resources."227
This Court is not persuaded. As priorly pointed out, the phrase "management
or other forms of assistance" in the 1973 Constitution was deleted in the
1987 Constitution, which allows only "technical or financial assistance."
Casus omisus pro omisso habendus est. A person, object or thing omitted
from an enumeration must be held to have been omitted intentionally.228 As
will be shown later, the management or operation of mining activities by
foreign contractors, which is the primary feature of service contracts, was
precisely the evil that the drafters of the 1987 Constitution sought to
eradicate.
Respondents insist that "agreements involving technical or financial
assistance" is just another term for service contracts. They contend that
the proceedings of the CONCOM indicate "that although the
terminology 'service contract' was avoided [by the Constitution], the
concept it represented was not." They add that "[t]he concept is
embodied in the phrase 'agreements involving financial or technical
assistance.'"229 A
It is also my understanding that service contracts involving foreign
corporations or entities are resorted to only when no Filipino enterprise
or Filipino-controlled enterprise could possibly undertake the

exploration or exploitation of our natural resources and that
compensation under such contracts cannot and should not equal what
should pertain to ownership of capital. In other words, the service
contract should not be an instrument to circumvent the basic provision,
that the exploration and exploitation of natural resources should be truly
for the benefit of Filipinos.
Thank you, and I vote yes.233 [
This Court is likewise not persuaded.
As earlier noted, the phrase "service contracts" has been deleted in the 1987
Constitution's Article on National Economy and Patrimony. If the
CONCOM intended to retain the concept of service contracts under the 1973
Constitution, it could have simply adopted the old terminology ("service
contracts") instead of employing new and unfamiliar terms ("agreements . . .
involving either technical or financial assistance"). Such a difference
between the language of a provision in a revised constitution and that of a
similar provision in the preceding constitution is viewed as indicative of a
difference in purpose.235 If, as respondents suggest, the concept of "technical
or financial assistance" agreements is identical to that of "service contracts,"
the CONCOM would not have bothered to fit the same dog with a new
collar. To uphold respondents' theory would reduce the first to a mere
euphemism for the second and render the change in phraseology
meaningless.
An examination of the reason behind the change confirms that technical or
financial assistance agreements are not synonymous to service contracts.
[T]he Court in construing a Constitution should bear in mind the object
sought to be accomplished by its adoption, and the evils, if any, sought to be
prevented or remedied. A doubtful provision will be examined in light of the
history of the times, and the condition and circumstances under which the
Constitution was framed. The object is to ascertain the reason which induced
the framers of the Constitution to enact the particular provision and the
purpose sought to be accomplished thereby, in order to construe the whole as
to make the words consonant to that reason and calculated to effect that
purpose.236
As the following question of Commissioner Quesada and Commissioner
Villegas' answer shows the drafters intended to do away with service
contracts which were used to circumvent the capitalization (60%-40%)
requirement:
In a subsequent discussion, Commissioner Villegas allayed the fears of
Commissioner Quesada regarding the participation of foreign interests
in Philippine natural resources, which was supposed to be restricted to
Filipinos.
MS. QUESADA. Another point of clarification is the phrase "and

utilization of natural resources shall be under the full control and
supervision of the State." In the 1973 Constitution, this was limited to
citizens of the Philippines; but it was removed and substituted by "shall
be under the full control and supervision of the State." Was the concept
changed so that these particular resources would be limited to citizens
of the Philippines? Or would these resources only be under the full
control and supervision of the State; meaning, noncitizens would have
access to these natural resources? Is that the understanding?
MR. VILLEGAS. No, Mr. Vice-President, if the Commissioner reads
the next sentence, it states:
Such activities may be directly undertaken by the State, or it may enter into
co-production, joint venture, production-sharing agreements with Filipino
citizens.
So we are still limiting it only to Filipino citizens.
MS. QUESADA. Going back to Section 3, the section suggests that:
The exploration, development, and utilization of natural resources may be
directly undertaken by the State, or it may enter into co-production, joint
venture or production-sharing agreement with . . . corporations or
associations at least sixty per cent of whose voting stock or controlling
interest is owned by such citizens.
Lines 25 to 30, on the other hand, suggest that in the large-scale exploration,
development and utilization of natural resources, the President with the
concurrence of Congress may enter into agreements with foreign-owned
corporations even for technical or financial assistance.
I wonder if this part of Section 3 contradicts the second part. I am raising
this point for fear that foreign investors will use their enormous capital
resources to facilitate the actual exploitation or exploration, development
and effective disposition of our natural resources to the detriment of Filipino
investors. I am not saying that we should not consider borrowing money
from foreign sources. What I refer to is that foreign interest should be
allowed to participate only to the extent that they lend us money and give us
technical assistance with the appropriate government permit. In this way, we
can insure the enjoyment of our natural resources by our own people.
MR. VILLEGAS. Actually, the second provision about the President does
not permit foreign investors to participate. It is only technical or financial
assistance they do not own anything but on conditions that have to be
determined by law with the concurrence of Congress. So, it is very
restrictive.
If the Commissioner will remember, this removes the possibility for service
contracts which we said yesterday were avenues used in the previous regime
to go around the 60-40 requirement.238 [Emphasis supplied.]

The present Chief Justice, then a member of the CONCOM, also referred to
this limitation in scope in proposing an amendment to the 60-40
requirement:
The Commission had just approved the Preamble. In the Preamble we
clearly stated that the Filipino people are sovereign and that one of the
objectives for the creation or establishment of a government is to conserve
and develop the national patrimony. The implication is that the national
patrimony or our natural resources are exclusively reserved for the Filipino
people. No alien must be allowed to enjoy, exploit and develop our natural
resources. As a matter of fact, that principle proceeds from the fact that our
natural resources are gifts from God to the Filipino people and it would be a
breach of that special blessing from God if we will allow aliens to exploit
our natural resources.
I voted in favor of the Jamir proposal because it is not really exploitation
that we granted to the alien corporations but only for them to render
financial or technical assistance. It is not for them to enjoy our natural
resources. Madam President, our natural resources are depleting; our
population is increasing by leaps and bounds. Fifty years from now, if we
will allow these aliens to exploit our natural resources, there will be no more
natural resources for the next generations of Filipinos. It may last long if we
will begin now. Since 1935 the aliens have been allowed to enjoy to a
certain extent the exploitation of our natural resources, and we became
victims of foreign dominance and control. The aliens are interested in
coming to the Philippines because they would like to enjoy the bounty of
nature exclusively intended for Filipinos by God.
And so I appeal to all, for the sake of the future generations, that if we have
to pray in the Preamble "to preserve and develop the national patrimony for
the sovereign Filipino people and for the generations to come," we must at
this time decide once and for all that our natural resources must be reserved
only to Filipino citizens.
The opinion of another member of the CONCOM is persuasive 240 and leaves
no doubt as to the intention of the framers to eliminate service contracts
altogether. He writes:
Paragraph 4 of Section 2 specifies large-scale, capital-intensive, highly
technological undertakings for which the President may enter into contracts
with foreign-owned corporations, and enunciates strict conditions that
should govern such contracts. x x x.
This provision balances the need for foreign capital and technology with the
need to maintain the national sovereignty. It recognizes the fact that as long
as Filipinos can formulate their own terms in their own territory, there is no
danger of relinquishing sovereignty to foreign interests.
Are service contracts allowed under the new Constitution? No. Under the
new Constitution, foreign investors (fully alien-owned) can NOT participate
in Filipino enterprises except to provide: (1) Technical Assistance for highly
technical enterprises; and (2) Financial Assistance for large-scale
enterprises.
The intent of this provision, as well as other provisions on foreign
investments, is to prevent the practice (prevalent in the Marcos government)
of skirting the 60/40 equation using the cover of service
contracts.241[Emphasis supplied.]
Furthermore, it appears that Proposed Resolution No. 496, 242 which was the
draft Article on National Economy and Patrimony, adopted the concept of
"agreements . . . involving either technical or financial assistance" contained
in the "Draft of the 1986 U.P. Law Constitution Project" (U.P. Law draft)
which was taken into consideration during the deliberation of the
CONCOM.243 The former, as well as Article XII, as adopted, employed the
same terminology, as the comparative table below shows:
DRAFT OF THE
UP LAW
CONSTITUTION
PROJECT
PROPOSED
RESOLUTION NO.
496 OF THE
CONSTITUTIONAL
COMMISSION
ARTICLE XII OF
THE 1987
CONSTITUTION
Sec. 1. All lands of

the public domain,
waters, minerals,
coal, petroleum and
other mineral oils,
all
forces
of
potential
energy,
fisheries, flora and
fauna and other
natural resources of
the Philippines are
owned by the State.
With the exception
of
agricultural
lands, all other
natural resources

the public domain,
waters,
minerals,
coal, petroleum and
other mineral oils, all
forces of potential
energy,
fisheries,
forests, flora and
fauna, and other
natural resources are
owned by the State.
With the exception of
agricultural lands, all
other
natural
resources shall not be
alienated.
The

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
shall
not
be
alienated.
The
exploration,
development and
utilization
of
natural resources
shall be under the
full control and
supervision of the
State.
Such
activities may be
directly undertaken
by the state, or it
may enter into coproduction,
joint
venture, production
sharing agreements
with
Filipino
citizens
or
corporations
or
associations sixty
per cent of whose
voting stock or
controlling interest
is owned by such
citizens
for
a
period of not more
than
twenty-five
years, renewable
for not more than
twenty-five years
and under such
terms
and
conditions as may
be provided by law.
In case as to water
rights for irrigation,
water
supply,
fisheries,
or
exploration,
development,
and
utilization of natural
resources shall be
under the full control
and supervision of the
State. Such activities
may
be
directly
undertaken by the
State, or it may enter
into
co-production,
joint
venture,
production-sharing
agreements
with
Filipino citizens or
corporations
or
associations at least
sixty per cent of
whose voting stock or
controlling interest is
owned
by
such
citizens.
Such
agreements shall be
for a period of
twenty-five
years,
renewable for not
more than twenty-five
years, and under such
term and conditions
as may be provided
by law. In cases of
water
rights
for
irrigation,
water
supply, fisheries or
industrial uses other
than the development
for water power,
beneficial use may be
the measure and limit
alienated.
The
exploration,
development,
and
resources shall be
under the full control
and supervision of the
State. The State may
directly
undertake
such activities or it
may enter into coproduction,
joint
venture,
or
production-sharing
agreements
with
Filipino citizens, or
corporations
or
associations at least
sixty per centum of
whose
capital
is
owned
by
such
citizens.
Such
agreements may be
for a period not
exceeding twenty-five
years, renewable for
not more than twentyfive years, and under
such
terms
and
conditions as may be
provided by law. In
case 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
industrial
uses
other than the
development
of
water
power,
beneficial use may
be the measure and
limit of the grant.
The
National
Assembly may by
law allow small
scale utilization of
natural resources
by
Filipino
citizens.
The
National
Assembly, may, by
two-thirds vote of
all its members by
special law provide
the
terms
and
conditions
under
which a foreignowned corporation
may enter into
agreements
with
the
government
involving
either
technical
or
financial
assistance
for
large-scale
exploration,
development,
or
utilization
of
natural resources.
[Emphasis
supplied.]
of the grant.
The Congress may by
law allow small-scale
resources by Filipino
citizens, as well as
cooperative
fish
farming in rivers,
lakes,
bays,
and
lagoons.
The President with
the concurrence of
Congress, by special
law, shall provide the
terms and conditions
under
which
a
foreign-owned
corporation may enter
into agreements with
the
government
involving
either
technical
or
financial assistance
for
large-scale
exploration,
development,
and
resources. [Emphasis
supplied.]
of the grant.
The Congress may,
by law, allow smallscale 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.
The insights of the proponents of the U.P. Law draft are, therefore,
instructive in interpreting the phrase "technical or financial assistance."
In his position paper entitled Service Contracts: Old Wine in New Bottles?,
Professor Pacifico A. Agabin, who was a member of the working group that
prepared the U.P. Law draft, criticized service contracts for they "lodge
exclusive management and control of the enterprise to the service contractor,
which is reminiscent of the old concession regime. Thus, notwithstanding
the provision of the Constitution that natural resources belong to the State,
and that these shall not be alienated, the service contract system renders
nugatory the constitutional provisions cited."244 He elaborates:
Looking at the Philippine model, we can discern the following vestiges of
the concession regime, thus:
1. Bidding of a selected area, or leasing the choice of the area to the
interested party and then negotiating the terms and conditions of the
contract; (Sec. 5, P.D. 87)
2. Management of the enterprise vested on the contractor, including
operation of the field if petroleum is discovered; (Sec. 8, P.D. 87)
3. Control of production and other matters such as expansion and
development;
4. Responsibility for downstream operations marketing, distribution,
and processing may be with the contractor (Sec. 8);
5. Ownership of equipment, machinery, fixed assets, and other
properties remain with contractor (Sec. 12, P.D. 87);
6. Repatriation of capital and retention of profits abroad guaranteed to
the contractor (Sec. 13, P.D. 87); and
7. While title to the petroleum discovered may nominally be in the name
of the government, the contractor has almost unfettered control over its
disposition and sale, and even the domestic requirements of the country
is relegated to a pro rata basis.
In short, our version of the service contract is just a rehash of the old
concession regime x x x. Some people have pulled an old rabbit out of a
magician's hat, and foisted it upon us as a new and different animal.
The service contract as we know it here is antithetical to the principle of

sovereignty over our natural resources restated in the same article of the
[1973] Constitution containing the provision for service contracts. If the
service contractor happens to be a foreign corporation, the contract would
also run counter to the constitutional provision on nationalization or
Filipinization, of the exploitation of our natural resources.245 [Emphasis
supplied. Underscoring in the original.]
Professor Merlin M. Magallona, also a member of the working group, was
harsher in his reproach of the system:
x x x the nationalistic phraseology of the 1935 [Constitution] was retained
by the [1973] Charter, but the essence of nationalism was reduced to hollow
rhetoric. The 1973 Charter still provided that the exploitation or
development of the country's natural resources be limited to Filipino citizens
or corporations owned or controlled by them. However, the martial-law
Constitution allowed them, once these resources are in their name, to enter
into service contracts with foreign investors for financial, technical,
management, or other forms of assistance. Since foreign investors have the
capital resources, the actual exploitation and development, as well as the
effective disposition, of the country's natural resources, would be under their
direction, and control, relegating the Filipino investors to the role of secondrate partners in joint ventures.
Through the instrumentality of the service contract, the 1973 Constitution
had legitimized at the highest level of state policy that which was prohibited
under the 1973 Constitution, namely: the exploitation of the country's
natural resources by foreign nationals. The drastic impact of [this]
constitutional change becomes more pronounced when it is considered that
the active party to any service contract may be a corporation wholly owned
by foreign interests. In such a case, the citizenship requirement is completely
set aside, permitting foreign corporations to obtain actual possession,
control, and [enjoyment] of the country's natural resources. 246[Emphasis
supplied.]
Accordingly, Professor Agabin recommends that:
Recognizing the service contract for what it is, we have to expunge it from
the Constitution and reaffirm ownership over our natural resources. That is
the only way we can exercise effective control over our natural resources.
This should not mean complete isolation of the country's natural resources
from foreign investment. Other contract forms which are less derogatory to
our sovereignty and control over natural resources like technical assistance
agreements, financial assistance [agreements], co-production agreements,
joint ventures, production-sharing could still be utilized and adopted
without violating constitutional provisions. In other words, we can adopt
contract forms which recognize and assert our sovereignty and ownership
over natural resources, and where the foreign entity is just a pure contractor
instead of the beneficial owner of our economic resources.247[Emphasis
supplied.]
Still another member of the working group, Professor Eduardo Labitag,
proposed that:
2. Service contracts as practiced under the 1973 Constitution should be
discouraged, instead the government may be allowed, subject to
authorization by special law passed by an extraordinary majority to enter
into either technical or financial assistance. This is justified by the fact that
as presently worded in the 1973 Constitution, a service contract gives full
control over the contract area to the service contractor, for him to work,
manage and dispose of the proceeds or production. It was a subterfuge to get
around the nationality requirement of the constitution.248 [Emphasis
supplied.]
In the annotations on the proposed Article on National Economy and
Patrimony, the U.P. Law draft summarized the rationale therefor, thus:
5. The last paragraph is a modification of the service contract provision
found in Section 9, Article XIV of the 1973 Constitution as amended. This
1973 provision shattered the framework of nationalism in our fundamental
law (see Magallona, "Nationalism and its Subversion in the Constitution").
Through the service contract, the 1973 Constitution had legitimized that
which was prohibited under the 1935 constitutionthe exploitation of the
country's natural resources by foreign nationals. Through the service
contract, acts prohibited by the Anti-Dummy Law were recognized as
legitimate arrangements. Service contracts lodge exclusive management and
control of the enterprise to the service contractor, not unlike the old
concession regime where the concessionaire had complete control over the
country's natural resources, having been given exclusive and plenary rights
to exploit a particular resource and, in effect, having been assured of
ownership of that resource at the point of extraction (see Agabin, "Service
Contracts: Old Wine in New Bottles"). Service contracts, hence, are
antithetical to the principle of sovereignty over our natural resources, as well
as the constitutional provision on nationalization or Filipinization of the
exploitation of our natural resources.
Under the proposed provision, only technical assistance or financial
assistance agreements may be entered into, and only for large-scale
activities. These are contract forms which recognize and assert our
sovereignty and ownership over natural resources since the foreign entity is
just a pure contractor and not a beneficial owner of our economic resources.
The proposal recognizes the need for capital and technology to develop our
natural resources without sacrificing our sovereignty and control over such
resources by the safeguard of a special law which requires two-thirds vote of
all the members of the Legislature. This will ensure that such agreements
will be debated upon exhaustively and thoroughly in the National Assembly
to avert prejudice to the nation.249[Emphasis supplied.]
The U.P. Law draft proponents viewed service contracts under the 1973
Constitution as grants of beneficial ownership of the country's natural
resources to foreign owned corporations. While, in theory, the State owns
these natural resources and Filipino citizens, their beneficiaries service
contracts actually vested foreigners with the right to dispose, explore for,
develop, exploit, and utilize the same. Foreigners, not Filipinos, became the
beneficiaries of Philippine natural resources. This arrangement is clearly
incompatible with the constitutional ideal of nationalization of natural
resources, with the Regalian doctrine, and on a broader perspective, with
Philippine sovereignty.
The proponents nevertheless acknowledged the need for capital and
technical know-how in the large-scale exploitation, development and
utilization of natural resources the second paragraph of the proposed draft
itself being an admission of such scarcity. Hence, they recommended a
compromise to reconcile the nationalistic provisions dating back to the 1935
Constitution, which reserved all natural resources exclusively to Filipinos,
and the more liberal 1973 Constitution, which allowed foreigners to
participate in these resources through service contracts. Such a compromise
called for the adoption of a new system in the exploration, development, and
utilization of natural resources in the form of technical agreements or
financial agreements which, necessarily, are distinct concepts from service
contracts.
The replacement of "service contracts" with "agreements involving either
technical or financial assistance," as well as the deletion of the phrase
"management or other forms of assistance," assumes greater significance
when note is taken that the U.P. Law draft proposed other equally crucial
changes that were obviously heeded by the CONCOM. These include the
abrogation of the concession system and the adoption of new "options" for
the State in the exploration, development, and utilization of natural
resources. The proponents deemed these changes to be more consistent with
the State's ownership of, and its "full control and supervision" (a phrase also
employed by the framers) over, such resources. The Project explained:
3. In line with the State ownership of natural resources, the State should take
a more active role in the exploration, development, and utilization of natural
resources, than the present practice of granting licenses, concessions, or
leases hence the provision that said activities shall be under the full control
and supervision of the State. There are three major schemes by which the
State could undertake these activities: first, directly by itself; second, by
virtue of co-production, joint venture, production sharing agreements with
Filipino citizens or corporations or associations sixty per cent (60%) of the

voting stock or controlling interests of which are owned by such citizens; or
third, with a foreign-owned corporation, in cases of large-scale exploration,
development, or utilization of natural resources through agreements
involving either technical or financial assistance only. x x x.
At present, under the licensing concession or lease schemes, the government
benefits from such benefits only through fees, charges, ad valorem taxes and
income taxes of the exploiters of our natural resources. Such benefits are
very minimal compared with the enormous profits reaped by theses
licensees, grantees, concessionaires. Moreover, some of them disregard the
conservation of natural resources and do not protect the environment from
degradation. The proposed role of the State will enable it to a greater share
in the profits it can also actively husband its natural resources and engage
in developmental programs that will be beneficial to them.
4. Aside from the three major schemes for the exploration, development, and
utilization of our natural resources, the State may, by law, allow Filipino
citizens to explore, develop, utilize natural resources in small-scale. This is
in recognition of the plight of marginal fishermen, forest dwellers, gold
panners, and others similarly situated who exploit our natural resources for
their daily sustenance and survival.250
Professor Agabin, in particular, after taking pains to illustrate the similarities
between the two systems, concluded that the service contract regime was but
a "rehash" of the concession system. "Old wine in new bottles," as he put it.
The rejection of the service contract regime, therefore, is in consonance with
the abolition of the concession system.
In light of the deliberations of the CONCOM, the text of the Constitution,
and the adoption of other proposed changes, there is no doubt that the
framers considered and shared the intent of the U.P. Law proponents in
employing the phrase "agreements . . . involving either technical or financial
assistance."
While certain commissioners may have mentioned the term "service
contracts" during the CONCOM deliberations, they may not have been
necessarily referring to the concept of service contracts under the 1973
Constitution. As noted earlier, "service contracts" is a term that assumes
different meanings to different people.251 The commissioners may have been
using the term loosely, and not in its technical and legal sense, to refer, in
general, to agreements concerning natural resources entered into by the
Government with foreign corporations. These loose statements do not
necessarily translate to the adoption of the 1973 Constitution provision
allowing service contracts.
It is true that, as shown in the earlier quoted portions of the proceedings in
CONCOM, in response to Sr. Tan's question, Commissioner Villegas
commented that, other than congressional notification, the only difference

between "future" and "past" "service contracts" is the requirement of a
general law as there were no laws previously authorizing the same. 252
However, such remark is far outweighed by his more categorical statement
in his exchange with Commissioner Quesada that the draft article "does not
permit foreign investors to participate" in the nation's natural resources
which was exactly what service contracts did except to provide "technical
or financial assistance."253
In the case of the other commissioners, Commissioner Nolledo himself
clarified in his work that the present charter prohibits service contracts. 254
Commissioner Gascon was not totally averse to foreign participation, but
favored stricter restrictions in the form of majority congressional
concurrence.255 On the other hand, Commissioners Garcia and Tadeo may
have veered to the extreme side of the spectrum and their objections may be
interpreted as votes against any foreign participation in our natural resources
whatsoever.
WMCP cites Opinion No. 75, s. 1987,256 and Opinion No. 175, s. 1990257 of
the Secretary of Justice, expressing the view that a financial or technical
assistance agreement "is no different in concept" from the service contract
allowed under the 1973 Constitution. This Court is not, however, bound by
this interpretation. When an administrative or executive agency renders an
opinion or issues a statement of policy, it merely interprets a pre-existing
law; and the administrative interpretation of the law is at best advisory, for it
is the courts that finally determine what the law means.258
In any case, the constitutional provision allowing the President to enter into
FTAAs with foreign-owned corporations is an exception to the rule that
participation in the nation's natural resources is reserved exclusively to
Filipinos. Accordingly, such provision must be construed strictly against
their enjoyment by non-Filipinos. As Commissioner Villegas emphasized,
the provision is "very restrictive."259 Commissioner Nolledo also remarked
that "entering into service contracts is an exception to the rule on protection
of natural resources for the interest of the nation and, therefore, being an
exception, it should be subject, whenever possible, to stringent
rules."260Indeed, exceptions should be strictly but reasonably construed; they
extend only so far as their language fairly warrants and all doubts should be
resolved in favor of the general provision rather than the exception.261
With the foregoing discussion in mind, this Court finds that R.A. No. 7942
is invalid insofar as said Act authorizes service contracts. Although the
statute employs the phrase "financial and technical agreements" in
accordance with the 1987 Constitution, it actually treats these agreements as
service contracts that grant beneficial ownership to foreign contractors
contrary to the fundamental law.
Section 33, which is found under Chapter VI (Financial or Technical

Assistance Agreement) of R.A. No. 7942 states:
SEC. 33. Eligibility.Any qualified person with technical and financial
capability to undertake large-scale exploration, development, and utilization
of mineral resources in the Philippines may enter into a financial or
technical assistance agreement directly with the Government through the
Department. [Emphasis supplied.]
"Exploration," as defined by R.A. No. 7942,
means the searching or prospecting for mineral resources by geological,
geochemical or geophysical surveys, remote sensing, test pitting, trending,
drilling, shaft sinking, tunneling or any other means for the purpose of
determining the existence, extent, quantity and quality thereof and the
feasibility of mining them for profit.262
A legally organized foreign-owned corporation may be granted an
exploration permit,263 which vests it with the right to conduct exploration for
all minerals in specified areas,264 i.e., to enter, occupy and explore the
same.265Eventually, the foreign-owned corporation, as such permittee, may
apply for a financial and technical assistance agreement.266
"Development" is the work undertaken to explore and prepare an ore body
or a mineral deposit for mining, including the construction of necessary
infrastructure and related facilities.267
"Utilization" "means the extraction or disposition of minerals."268 A
stipulation that the proponent shall dispose of the minerals and byproducts
produced at the highest price and more advantageous terms and conditions
as provided for under the implementing rules and regulations is required to
be incorporated in every FTAA.269
A foreign-owned/-controlled corporation may likewise be granted a mineral
processing permit.270 "Mineral processing" is the milling, beneficiation or
upgrading of ores or minerals and rocks or by similar means to convert the
same into marketable products.271
An FTAA contractor makes a warranty that the mining operations shall be
conducted in accordance with the provisions of R.A. No. 7942 and its
implementing rules272 and for work programs and minimum expenditures
and commitments.273 And it obliges itself to furnish the Government records
of geologic, accounting, and other relevant data for its mining operation.274
"Mining operation," as the law defines it, means mining activities involving
exploration, feasibility, development, utilization, and processing.275
The underlying assumption in all these provisions is that the foreign
contractor manages the mineral resources, just like the foreign contractor in
a service contract.
Furthermore, Chapter XII of the Act grants foreign contractors in FTAAs the
same auxiliary mining rights that it grants contractors in mineral agreements
(MPSA, CA and JV).276 Parenthetically, Sections 72 to 75 use the term

"contractor," without distinguishing between FTAA and mineral agreement
contractors. And so does "holders of mining rights" in Section 76. A foreign
contractor may even convert its FTAA into a mineral agreement if the
economic viability of the contract area is found to be inadequate to justify
large-scale mining operations,277provided that it reduces its equity in the
corporation, partnership, association or cooperative to forty percent
(40%).278
Finally, under the Act, an FTAA contractor warrants that it "has or has
access to all the financing, managerial, and technical expertise. . . ." 279 This
suggests that an FTAA contractor is bound to provide some management
assistance a form of assistance that has been eliminated and, therefore,
proscribed by the present Charter.
By allowing foreign contractors to manage or operate all the aspects of the
mining operation, the above-cited provisions of R.A. No. 7942 have in effect
conveyed beneficial ownership over the nation's mineral resources to these
contractors, leaving the State with nothing but bare title thereto.
Moreover, the same provisions, whether by design or inadvertence, permit a
circumvention of the constitutionally ordained 60%-40% capitalization
requirement for corporations or associations engaged in the exploitation,
development and utilization of Philippine natural resources.
In sum, the Court finds the following provisions of R.A. No. 7942 to be
violative of Section 2, Article XII of the Constitution:
(1) The proviso in Section 3 (aq), which defines "qualified person," to
wit:
Provided, That a legally organized foreign-owned corporation shall be
deemed a qualified person for purposes of granting an exploration
permit, financial or technical assistance agreement or mineral
processing permit.
(2) Section 23,280 which specifies the rights and obligations of an
exploration permittee, insofar as said section applies to a financial or
technical assistance agreement,
(3) Section 33, which prescribes the eligibility of a contractor in a
financial or technical assistance agreement;
(4) Section 35,281 which enumerates the terms and conditions for every
financial or technical assistance agreement;
(5) Section 39,282 which allows the contractor in a financial and
technical assistance agreement to convert the same into a mineral
production-sharing agreement;
(6) Section 56,283 which authorizes the issuance of a mineral processing
permit to a contractor in a financial and technical assistance agreement;
The following provisions of the same Act are likewise void as they are
dependent on the foregoing provisions and cannot stand on their own:

(1) Section 3 (g),284 which defines the term "contractor," insofar as it
applies to a financial or technical assistance agreement.
Section 34,285 which prescribes the maximum contract area in a financial
or technical assistance agreements;
Section 36,286 which allows negotiations for financial or technical
assistance agreements;
Section 37,287 which prescribes the procedure for filing and evaluation
of financial or technical assistance agreement proposals;
Section 38,288 which limits the term of financial or technical assistance
agreements;
Section 40,289 which allows the assignment or transfer of financial or
technical assistance agreements;
Section 41,290 which allows the withdrawal of the contractor in an
FTAA;
The second and third paragraphs of Section 81,291 which provide for the
Government's share in a financial and technical assistance agreement;
and
Section 90,292 which provides for incentives to contractors in FTAAs
insofar as it applies to said contractors;
When the parts of the statute are so mutually dependent and connected as
conditions, considerations, inducements, or compensations for each other, as
to warrant a belief that the legislature intended them as a whole, and that if
all could not be carried into effect, the legislature would not pass the residue
independently, then, if some parts are unconstitutional, all the provisions
which are thus dependent, conditional, or connected, must fall with them.293
There can be little doubt that the WMCP FTAA itself is a service contract.
Section 1.3 of the WMCP FTAA grants WMCP "the exclusive right to
explore, exploit, utilise[,] process and dispose of all Minerals products and
by-products thereof that may be produced from the Contract Area."294 The
FTAA also imbues WMCP with the following rights:
(b) to extract and carry away any Mineral samples from the Contract
area for the purpose of conducting tests and studies in respect thereof;
(c) to determine the mining and treatment processes to be utilised during
the Development/Operating Period and the project facilities to be
constructed during the Development and Construction Period;
(d) have the right of possession of the Contract Area, with full right of
ingress and egress and the right to occupy the same, subject to the
provisions of Presidential Decree No. 512 (if applicable) and not be
prevented from entry into private ands by surface owners and/or
occupants thereof when prospecting, exploring and exploiting for
minerals therein;
(f) to construct roadways, mining, drainage, power generation and

transmission facilities and all other types of works on the Contract Area;
(g) to erect, install or place any type of improvements, supplies,
machinery and other equipment relating to the Mining Operations and
to use, sell or otherwise dispose of, modify, remove or diminish any and
all parts thereof;
(h) enjoy, subject to pertinent laws, rules and regulations and the rights
of third Parties, easement rights and the use of timber, sand, clay, stone,
water and other natural resources in the Contract Area without cost for
the purposes of the Mining Operations;
(i) have the right to mortgage, charge or encumber all or part of its
interest and obligations under this Agreement, the plant, equipment and
infrastructure and the Minerals produced from the Mining Operations;
All materials, equipment, plant and other installations erected or placed on
the Contract Area remain the property of WMCP, which has the right to deal
with and remove such items within twelve months from the termination of
the FTAA.296
Pursuant to Section 1.2 of the FTAA, WMCP shall provide "[all] financing,
technology, management and personnel necessary for the Mining
Operations." The mining company binds itself to "perform all Mining
Operations . . . providing all necessary services, technology and financing in
connection therewith,"297 and to "furnish all materials, labour, equipment and
other installations that may be required for carrying on all Mining
Operations."298> WMCP may make expansions, improvements and
replacements of the mining facilities and may add such new facilities as it
considers necessary for the mining operations.299
These contractual stipulations, taken together, grant WMCP beneficial
ownership over natural resources that properly belong to the State and are
intended for the benefit of its citizens. These stipulations are abhorrent to the
1987 Constitution. They are precisely the vices that the fundamental law
seeks to avoid, the evils that it aims to suppress. Consequently, the contract
from which they spring must be struck down.
In arguing against the annulment of the FTAA, WMCP invokes the
Agreement on the Promotion and Protection of Investments between the
Philippine and Australian Governments, which was signed in Manila on
January 25, 1995 and which entered into force on December 8, 1995.
x x x. Article 2 (1) of said treaty states that it applies to investments
whenever made and thus the fact that [WMCP's] FTAA was entered into
prior to the entry into force of the treaty does not preclude the Philippine
Government from protecting [WMCP's] investment in [that] FTAA.
Likewise, Article 3 (1) of the treaty provides that "Each Party shall
encourage and promote investments in its area by investors of the other
Party and shall [admit] such investments in accordance with its Constitution,
Laws, regulations and investment policies" and in Article 3 (2), it states that
"Each Party shall ensure that investments are accorded fair and equitable
treatment." The latter stipulation indicates that it was intended to impose an
obligation upon a Party to afford fair and equitable treatment to the
investments of the other Party and that a failure to provide such treatment by
or under the laws of the Party may constitute a breach of the treaty. Simply
stated, the Philippines could not, under said treaty, rely upon the
inadequacies of its own laws to deprive an Australian investor (like
[WMCP]) of fair and equitable treatment by invalidating [WMCP's] FTAA
without likewise nullifying the service contracts entered into before the
enactment of RA 7942 such as those mentioned in PD 87 or EO 279.
This becomes more significant in the light of the fact that [WMCP's] FTAA
was executed not by a mere Filipino citizen, but by the Philippine
Government itself, through its President no less, which, in entering into said
treaty is assumed to be aware of the existing Philippine laws on service
contracts over the exploration, development and utilization of natural
resources. The execution of the FTAA by the Philippine Government assures
the Australian Government that the FTAA is in accordance with existing
Philippine laws.300 The invalidation of the subject FTAA, it is argued, would
constitute a breach of said treaty which, in turn, would amount to a violation
of Section 3, Article II of the Constitution adopting the generally accepted
principles of international law as part of the law of the land. One of these
generally accepted principles is pacta sunt servanda, which requires the
performance in good faith of treaty obligations.
Even assuming arguendo that WMCP is correct in its interpretation of the
treaty and its assertion that "the Philippines could not . . . deprive an
Australian investor (like [WMCP]) of fair and equitable treatment by
invalidating [WMCP's] FTAA without likewise nullifying the service
contracts entered into before the enactment of RA 7942 . . .," the annulment
of the FTAA would not constitute a breach of the treaty invoked. For this
decision herein invalidating the subject FTAA forms part of the legal system
of the Philippines.301 The equal protection clause302 guarantees that such
decision shall apply to all contracts belonging to the same class, hence,
upholding rather than violating, the "fair and equitable treatment" stipulation
in said treaty.
One other matter requires clarification. Petitioners contend that, consistent
with the provisions of Section 2, Article XII of the Constitution, the
President may enter into agreements involving "either technical or financial
assistance" only. The agreement in question, however, is a technical and
financial assistance agreement.
Petitioners' contention does not lie. To adhere to the literal language of the
Constitution would lead to absurd consequences.303 As WMCP correctly put

it:
x x x such a theory of petitioners would compel the government (through the
President) to enter into contract with two (2) foreign-owned corporations,
one for financial assistance agreement and with the other, for technical
assistance over one and the same mining area or land; or to execute two (2)
contracts with only one foreign-owned corporation which has the capability
to provide both financial and technical assistance, one for financial
assistance and another for technical assistance, over the same mining area.
Such an absurd result is definitely not sanctioned under the canons of
constitutional construction.304 [Underscoring in the original.]
Surely, the framers of the 1987 Charter did not contemplate such an absurd
result from their use of "either/or." A constitution is not to be interpreted as
demanding the impossible or the impracticable; and unreasonable or absurd
consequences, if possible, should be avoided.305 Courts are not to give words
a meaning that would lead to absurd or unreasonable consequences and a
literal interpretation is to be rejected if it would be unjust or lead to absurd
results.306 That is a strong argument against its adoption.307 Accordingly,
petitioners' interpretation must be rejected.
The foregoing discussion has rendered unnecessary the resolution of the
other issues raised by the petition.
WHEREFORE, the petition is GRANTED. The Court hereby declares
unconstitutional and void:
(1) The following provisions of Republic Act No. 7942:
(a) The proviso in Section 3 (aq),
(b) Section 23,
(c) Section 33 to 41,
(d) Section 56,
(e) The second and third paragraphs of Section 81, and
(f) Section 90.
(2) All provisions of Department of Environment and Natural Resources
Administrative Order 96-40, s. 1996 which are not in conformity with
this Decision, and
(3) The Financial and Technical Assistance Agreement between the
Government of the Republic of the Philippines and WMC Philippines,
Inc.
REPUBLIC VS. RAMOS
A mining license that contravenes a mandatory provision of the law under
which it is granted is void. Being a mere privilege, a license does not vest
absolute rights in the holder. Thus, without offending the due process and
the non-impairment clauses of the Constitution, it can be revoked by the
State in the public interest.

The Case
Before us is a Petition for Review1 under Rule 45 of the Rules of Court,
seeking to nullify the May 29, 2001 Decision2 and the September 6, 2001
Resolution3 of the Court of Appeals (CA) in CA-GR SP No. 46878. The CA
disposed as follows:
"WHEREFORE, premises considered, the appealed Decision is hereby
AFFIRMED in toto."4
The questioned Resolution denied petitioners Motion for Reconsideration.
On the other hand, trial courts Decision, which was affirmed by the CA,
had disposed as follows:
"WHEREFORE, judgment is hereby rendered as follows:
1. Declaring that the cancellation of License No. 33 was done without
jurisdiction and in gross violation of the Constitutional right of the
petitioners against deprivation of their property rights without due
process of law and is hereby set aside.
2. Declaring that the petitioners right to continue the exploitation of
the marble deposits in the area covered by License No. 33 is maintained
for the duration of the period of its life of twenty-five (25) years, less
three (3) years of continuous operation before License No. 33 was
cancelled, unless sooner terminated for violation of any of the
conditions specified therein, with due process.
3. Making the Writ of preliminary injunction and the Writ of
Preliminary Mandatory Injunction issued as permanent.
4. Ordering the cancellation of the bond filed by the Petitioners in the
sum of 1 Million.
5. Allowing the petitioners to present evidence in support of the
damages they claim to have suffered from, as a consequence of the
summary cancellation of License No. 33 pursuant to the agreement of
the parties on such dates as maybe set by the Court; and
6. Denying for lack of merit the motions for contempt, it appearing that
actuations of the respondents were not contumacious and intended to
delay the proceedings or undermine the integrity of the Court.
The Facts
The CA narrated the facts as follows:
"The four (4) petitioners, namely, Dr. Lourdes S. Pascual, Dr. Pedro De la
Concha, Alejandro De La Concha, and Rufo De Guzman, after having been
granted permission to prospect for marble deposits in the mountains of Biakna-Bato, San Miguel, Bulacan, succeeded in discovering marble deposits of
high quality and in commercial quantities in Mount Mabio which forms part
of the Biak-na-Bato mountain range.
"Having succeeded in discovering said marble deposits, and as a result of
their tedious efforts and substantial expenses, the petitioners applied with the
Bureau of Mines, now Mines and Geosciences Bureau, for the issuance of
the corresponding license to exploit said marble deposits.
"After compliance with numerous required conditions, License No. 33 was
issued by the Bureau of Mines in favor of the herein petitioners.
"Shortly after Respondent Ernesto R. Maceda was appointed Minister of the
Department of Energy and Natural Resources (DENR), petitioners License
No. 33 was cancelled by him through his letter to ROSEMOOR MINING
AND DEVELOPMENT CORPORATION dated September 6, 1986 for the
reasons stated therein. Because of the aforesaid cancellation, the original
petition was filed and later substituted by the petitioners AMENDED
PETITION dated August 21, 1991 to assail the same.
"Also after due hearing, the prayer for injunctive relief was granted in the
Order of this Court dated February 28, 1992. Accordingly, the corresponding
preliminary writs were issued after the petitioners filed their injunction bond
in the amount of ONE MILLION PESOS (P1,000,000.00).
"On September 27, 1996, the trial court rendered the herein questioned
decision."6
The trial court ruled that the privilege granted under respondents license
had already ripened into a property right, which was protected under the due
process clause of the Constitution. Such right was supposedly violated when
the license was cancelled without notice and hearing. The cancellation was
said to be unjustified, because the area that could be covered by the four
separate applications of respondents was 400 hectares. Finally, according to
the RTC, Proclamation No. 84, which confirmed the cancellation of the
license, was an ex post facto law; as such, it violated Section 3 of Article
XVIII of the 1987 Constitution.
On appeal to the Court of Appeals, herein petitioners asked whether PD 463
or the Mineral Resources Development Decree of 1974 had been violated by
the award of the 330.3062 hectares to respondents in accordance with
Proclamation No. 2204. They also questioned the validity of the cancellation
of respondents Quarry License/Permit (QLP) No. 33.
Ruling of the Court of Appeals
Sustaining the trial court in toto, the CA held that the grant of the quarry
license covering 330.3062 hectares to respondents was authorized by law,
because the license was embraced by four (4) separate applications -- each
for an area of 81 hectares. Moreover, it held that the limitation under
Presidential Decree No. 463 -- that a quarry license should cover not more
than 100 hectares in any given province -- was supplanted by Republic Act
No. 7942,7 which increased the mining areas allowed under PD 463.
It also ruled that the cancellation of respondents license without notice and
hearing was tantamount to a deprivation of property without due process of
law. It added that under the clause in the Constitution dealing with the nonimpairment of obligations and contracts, respondents license must be
respected by the State. Hence, this Petition.8
Issues
Petitioners submit the following issues for the Courts consideration:
"(1) [W]hether or not QLP No. 33 was issued in blatant contravention of
Section 69, P.D. No. 463; and (2) whether or not Proclamation No. 84 issued
by then President Corazon Aquino is valid. The corollary issue is whether or
not the Constitutional prohibition against ex post facto law applies to
Proclamation No. 84"9
The Courts Ruling
The Petition has merit.
First Issue: Validity of License
Respondents contend that the Petition has no legal basis, because PD 463
has already been repealed.10 In effect, they ask for the dismissal of the
Petition on the ground of mootness.
PD 463, as amended, pertained to the old system of exploration,
development and utilization of natural resources through licenses,
concessions or leases.11 While these arrangements were provided under the
193512 and the 197313 Constitutions, they have been omitted by Section 2 of
Article XII of the 1987 Constitution.14
With the shift of constitutional policy toward "full control and supervision of
the State" over natural resources, the Court in Miners Association of the
Philippines v. Factoran Jr. 15 declared the provisions of PD 463 as contrary to
or violative of the express mandate of the 1987 Constitution. The said
provisions dealt with the lease of mining claims; quarry permits or licenses
covering privately owned or public lands; and other related provisions on
lease, licenses and permits.
RA 7942 or the Philippine Mining Act of 1995 embodies the new
constitutional mandate. It has repealed or amended all laws, executive
orders, presidential decrees, rules and regulations -- or parts thereof -- that
are inconsistent with any of its provisions.16
It is relevant to state, however, that Section 2 of Article XII of the 1987
Constitution does not apply retroactively to a "license, concession or lease"
granted by the government under the 1973 Constitution or before the
effectivity of the 1987 Constitution on February 2, 1987.17 As noted in
Miners Association of the Philippines v. Factoran Jr., the deliberations of the
Constitutional Commission18 emphasized the intent to apply the said
constitutional provision prospectively.
While RA 7942 has expressly repealed provisions of mining laws that are
inconsistent with its own, it nonetheless respects previously issued valid and
existing licenses, as follows:
"SECTION 5. Mineral Reservations. When the national interest so

requires, such as when there is a need to preserve strategic raw materials
for industries critical to national development, or certain minerals for
scientific, cultural or ecological value, the President may establish
mineral reservations upon the recommendation of the Director through
the Secretary. Mining operations in existing mineral reservations and
such other reservations as may thereafter be established, shall be
undertaken by the Department or through a contractor: Provided, That a
small scale-mining cooperative covered by Republic Act No. 7076 shall
be given preferential right to apply for a small-scale mining agreement
for a maximum aggregate area of twenty-five percent (25%) of such
mineral reservation, subject to valid existing mining/quarrying rights as
provided under Section 112 Chapter XX hereof. All submerged lands
within the contiguous zone and in the exclusive economic zone of the
Philippines are hereby declared to be mineral reservations.
"SECTION 7. Periodic Review of Existing Mineral Reservations.
The Secretary shall periodically review existing mineral reservations for
the purpose of determining whether their continued existence is
consistent with the national interest, and upon his recommendation, the
President may, by proclamation, alter or modify the boundaries thereof
or revert the same to the public domain without prejudice to prior
existing rights."
"SECTION 18. Areas Open to Mining Operations. Subject to any
existing rights or reservations and prior agreements of all parties, all
mineral resources in public or private lands, including timber or
forestlands as defined in existing laws, shall be open to mineral
agreements or financial or technical assistance agreement applications.
Any conflict that may arise under this provision shall be heard and
resolved by the panel of arbitrators."
"SECTION 19. Areas Closed to Mining Applications. -- Mineral
agreement or financial or technical assistance agreement applications
shall not be allowed:
(a) In military and other government reservations, except upon prior
written clearance by the government agency concerned;
(b) Near or under public or private buildings, cemeteries,
archeological and historic sites, bridges, highways, waterways,
railroads, reservoirs, dams or other infrastructure projects, public or
private works including plantations or valuable crops, except upon
written consent of the government agency or private entity
concerned;
(c) In areas covered by valid and existing mining rights;
(d) In areas expressly prohibited by law;
(e) In areas covered by small-scale miners as defined by law unless

with prior consent of the small-scale miners, in which case a royalty
payment upon the utilization of minerals shall be agreed upon by
the parties, said royalty forming a trust fund for the socioeconomic
development of the community concerned; and
(f) Old growth or virgin forests, proclaimed watershed forest
reserves, wilderness areas, mangrove forests, mossy forests,
national parks, provincial/municipal forests, parks, greenbelts,
game refuge and bird sanctuaries as defined by law and in areas
expressly prohibited under the National Integrated Protected Areas
System (NIPAS) under Republic Act No. 7586, Department
Administrative Order No. 25, series of 1992 and other laws."
"SECTION 112. Non-impairment of Existing Mining/ Quarrying
Rights. All valid and existing mining lease contracts,
permits/licenses, leases pending renewal, mineral production-sharing
agreements granted under Executive Order No. 279, at the date of
effectivity of this Act, shall remain valid, shall not be impaired, and
shall be recognized by the Government: Provided, That the provisions
of Chapter XIV on government share in mineral production-sharing
agreement and of Chapter XVI on incentives of this Act shall
immediately govern and apply to a mining lessee or contractor unless
the mining lessee or contractor indicates his intention to the secretary, in
writing, not to avail of said provisions: Provided, further, That no
renewal of mining lease contracts shall be made after the expiration of
its term: Provided, finally, That such leases, production-sharing
agreements, financial or technical assistance agreements shall comply
with the applicable provisions of this Act and its implementing rules and
regulations.
"SECTION 113. Recognition of Valid and Existing Mining Claims and
Lease/Quarry Application. Holders of valid and existing mining
claims, lease/quarry applications shall be given preferential rights to
enter into any mode of mineral agreement with the government within
two (2) years from the promulgation of the rules and regulations
implementing this Act." (Underscoring supplied)
Section 3(p) of RA 7942 defines an existing mining/quarrying right as "a
valid and subsisting mining claim or permit or quarry permit or any mining
lease contract or agreement covering a mineralized area granted/issued
under pertinent mining laws." Consequently, determining whether the
license of respondents falls under this definition would be relevant to fixing
their entitlement to the rights and/or preferences under RA 7942. Hence, the
present Petition has not been mooted.
Petitioners submit that the license clearly contravenes Section 69 of PD 463,
because it exceeds the maximum area that may be granted. This incipient
violation, according to them, renders the license void ab initio.
Respondents, on the other hand, argue that the license was validly granted,
because it was covered by four separate applications for areas of 81 hectares
each.
The license in question, QLP No. 33,19 is dated August 3, 1982, and it was
issued in the name of Rosemoor Mining Development Corporation. The
terms of the license allowed the corporation to extract and dispose of
marbleized limestone from a 330.3062-hectare land in San Miguel, Bulacan.
The license is, however, subject to the terms and conditions of PD 463, the
governing law at the time it was granted; as well as to the rules and
regulations promulgated thereunder.20 By the same token, Proclamation No.
2204 -- which awarded to Rosemoor the right of development, exploitation,
and utilization of the mineral site -- expressly cautioned that the grant was
subject to "existing policies, laws, rules and regulations."21
The license was thus subject to Section 69 of PD 463, which reads:
"Section 69. Maximum Area of Quarry License Notwithstanding the
provisions of Section 14 hereof, a quarry license shall cover an area of
not more than one hundred (100) hectares in any one province and not
more than one thousand (1,000) hectares in the entire Philippines."
(Italics supplied)
The language of PD 463 is clear. It states in categorical and mandatory terms
that a quarry license, like that of respondents, should cover a maximum of
100 hectares in any given province. This law neither provides any exception
nor makes any reference to the number of applications for a license. Section
69 of PD 463 must be taken to mean exactly what it says. Where the law is
clear, plain, and free from ambiguity, it must be given its literal meaning and
applied without attempted interpretation.22
Moreover, the lower courts ruling is evidently inconsistent with the fact that
QLP No. 33 was issued solely in the name of Rosemoor Mining and
Development Corporation, rather than in the names of the four individual
stockholders who are respondents herein. It likewise brushes aside a basic
postulate that a corporation has a separate personality from that of its
stockholders.23
The interpretation adopted by the lower courts is contrary to the purpose of
Section 69 of PD 463. Such intent to limit, without qualification, the area of
a quarry license strictly to 100 hectares in any one province is shown by the
opening proviso that reads: "Notwithstanding the provisions of Section 14
hereof x x x." The mandatory nature of the provision is also underscored by
the use of the word shall. Hence, in the application of the 100-hectare-perprovince limit, no regard is given to the size or the number of mining claims
under Section 14, which we quote:
"SECTION 14. Size of Mining Claim. -- For purposes of registration of

a mining claim under this Decree, the Philippine territory and its shelf
are hereby divided into meridional blocks or quadrangles of one-half
minute (1/2) of latitude and longitude, each block or quadrangle
containing area of eighty-one (81) hectares, more or less.
"A mining claim shall cover one such block although a lesser area may
be allowed if warranted by attendant circumstances, such as
geographical and other justifiable considerations as may be determined
by the Director: Provided, That in no case shall the locator be allowed to
register twice the area allowed for lease under Section 43 hereof."
(Italics supplied)
Clearly, the intent of the law would be brazenly circumvented by ruling that
a license may cover an area exceeding the maximum by the mere
expediency of filing several applications. Such ruling would indirectly
permit an act that is directly prohibited by the law.
Second Issue: Validity of Proclamation No. 84
Petitioners also argue that the license was validly declared a nullity and
consequently withdrawn or terminated. In a letter dated September 15, 1986,
respondents were informed by then Minister Ernesto M. Maceda that their
license had illegally been issued, because it violated Section 69 of PD 463;
and that there was no more public interest served by the continued existence
or renewal of the license. The latter reason, they added, was confirmed by
the language of Proclamation No. 84. According to this law, public interest
would be served by reverting the parcel of land that was excluded by
Proclamation No. 2204 to the former status of that land as part of the Biakna-Bato national park.
They also contend that Section 74 of PD 463 would not apply, because
Minister Macedas letter did not cancel or revoke QLP No. 33, but merely
declared the latters nullity. They further argue that respondents waived
notice and hearing in their application for the license.
On the other hand, respondents submit that, as provided for in Section 74 of
PD 463, their right to due process was violated when their license was
cancelled without notice and hearing. They likewise contend that
Proclamation No. 84 is not valid for the following reasons: 1) it violates the
clause on the non-impairment of contracts; 2) it is an ex post facto law
and/or a bill of attainder; and 3) it was issued by the President after the
effectivity of the 1987 Constitution.
This Court ruled on the nature of a natural resource exploration permit,
which was akin to the present respondents license, in Southeast Mindanao
Gold Mining Corporation v. Balite Portal Mining Cooperative,24which held:
"x x x. As correctly held by the Court of Appeals in its challenged
decision, EP No. 133 merely evidences a privilege granted by the State,
which may be amended, modified or rescinded when the national

interest so requires. This is necessarily so since the exploration,
development and utilization of the countrys natural mineral resources
are matters impressed with great public interest. Like timber permits,
mining exploration permits do not vest in the grantee any permanent or
irrevocable right within the purview of the non-impairment of contract
and due process clauses of the Constitution, since the State, under its
all-encompassing police power, may alter, modify or amend the same,
in accordance with the demands of the general welfare."25
This same ruling had been made earlier in Tan v. Director of Forestry26 with
regard to a timber license, a pronouncement that was reiterated in Ysmael v.
Deputy Executive Secretary,27 the pertinent portion of which reads:
"x x x. Timber licenses, permits and license agreements are the principal
instruments by which the State regulates the utilization and disposition
of forest resources to the end that public welfare is promoted. And it can
hardly be gainsaid that they merely evidence a privilege granted by the
State to qualified entities, and do not vest in the latter a permanent or
irrevocable right to the particular concession area and the forest
products therein. They may be validly amended, modified, replaced or
rescinded by the Chief Executive when national interests so require.
Thus, they are not deemed contracts within the purview of the due
process of law clause [See Sections 3(ee) and 20 of Pres. Decree No.
705, as amended. Also, Tan v. Director of Forestry, G.R. No. L-24548,
October 27, 1983, 125 SCRA 302]."28 (Italics supplied)
In line with the foregoing jurisprudence, respondents license may be
revoked or rescinded by executive action when the national interest so
requires, because it is not a contract, property or a property right protected
by the due process clause of the Constitution. 29 Respondents themselves
acknowledge this condition of the grant under paragraph 7 of QLP No. 33,
which we quote:
"7. This permit/license may be revoked or cancelled at any time by the
Director of Mines and Geo-Sciences when, in his opinion public
interests so require or, upon failure of the permittee/licensee to comply
with the provisions of Presidential Decree No. 463, as amended, and the
rules and regulations promulgated thereunder, as well as with the terms
and conditions specified herein; Provided, That if a permit/license is
cancelled, or otherwise terminated, the permittee/licensee shall be liable
for all unpaid rentals and royalties due up to the time of the termination
or cancellation of the permit/license[.]"30 (Italics supplied)
The determination of what is in the public interest is necessarily vested in
the State as owner of all mineral resources. That determination was based on
policy considerations formally enunciated in the letter dated September 15,
1986, issued by then Minister Maceda and, subsequently, by the President

through Proclamation No. 84. As to the exercise of prerogative by Maceda,
suffice it to say that while the cancellation or revocation of the license is
vested in the director of mines and geo-sciences, the latter is subject to the
formers control as the department head. We also stress the clear prerogative
of the Executive Department in the evaluation and the consequent
cancellation of licenses in the process of its formulation of policies with
regard to their utilization. Courts will not interfere with the exercise of that
discretion without any clear showing of grave abuse of discretion.31
Moreover, granting that respondents license is valid, it can still be validly
revoked by the State in the exercise of police power. 32 The exercise of such
power through Proclamation No. 84 is clearly in accord with jura regalia,
which reserves to the State ownership of all natural resources. 33 This
Regalian doctrine is an exercise of its sovereign power as owner of lands of
the public domain and of the patrimony of the nation, the mineral deposits of
which are a valuable asset.34
Proclamation No. 84 cannot be stigmatized as a violation of the nonimpairment clause. As pointed out earlier, respondents license is not a
contract to which the protection accorded by the non-impairment clause may
extend.35 Even if the license were, it is settled that provisions of existing
laws and a reservation of police power are deemed read into it, because it
concerns a subject impressed with public welfare.36 As it is, the nonimpairment clause must yield to the police power of the state.37
We cannot sustain the argument that Proclamation No. 84 is a bill of
attainder; that is, a "legislative act which inflicts punishment without judicial
trial."38 Its declaration that QLP No. 33 is a patent nullity 39 is certainly not a
declaration of guilt. Neither is the cancellation of the license a punishment
within the purview of the constitutional proscription against bills of
attainder.
Too, there is no merit in the argument that the proclamation is an ex post
facto law. There are six recognized instances when a law is considered as
such: 1) it criminalizes and punishes an action that was done before the
passing of the law and that was innocent when it was done; 2) it aggravates a
crime or makes it greater than it was when it was committed; 3) it changes
the punishment and inflicts one that is greater than that imposed by the law
annexed to the crime when it was committed; 4) it alters the legal rules of
evidence and authorizes conviction upon a less or different testimony than
that required by the law at the time of the commission of the offense; 5) it
assumes the regulation of civil rights and remedies only, but in effect
imposes a penalty or a deprivation of a right as a consequence of something
that was considered lawful when it was done; and 6) it deprives a person
accused of a crime of some lawful protection to which he or she become
entitled, such as the protection of a former conviction or an acquittal or the

proclamation of an amnesty.40 Proclamation No. 84 does not fall under any
of the enumerated categories; hence, it is not an ex post facto law.
It is settled that an ex post facto law is limited in its scope only to matters
criminal in nature.41 Proclamation 84, which merely restored the area
excluded from the Biak-na-Bato national park by canceling respondents
license, is clearly not penal in character.
Finally, it is stressed that at the time President Aquino issued Proclamation
No. 84 on March 9, 1987, she was still validly exercising legislative powers
under the Provisional Constitution of 1986. 42 Section 1 of Article II of
Proclamation No. 3, which promulgated the Provisional Constitution,
granted her legislative power "until a legislature is elected and convened
under a new Constitution." The grant of such power is also explicitly
recognized and provided for in Section 6 of Article XVII of the 1987
Constitution.43
WHEREFORE, this Petition is hereby GRANTED and the appealed
Decision of the Court of Appeals SET ASIDE. No costs.
Oposa vs. Factoran
In a broader sense, this petition bears upon the right of Filipinos to a
balanced and healthful ecology which the petitioners dramatically associate
with the twin concepts of "inter-generational responsibility" and "intergenerational justice." Specifically, it touches on the issue of whether the said
petitioners have a cause of action to "prevent the misappropriation or
impairment" of Philippine rainforests and "arrest the unabated hemorrhage
of the country's vital life support systems and continued rape of Mother
Earth."
The controversy has its genesis in Civil Case No. 90-77 which was filed
before Branch 66 (Makati, Metro Manila) of the Regional Trial Court
(RTC), National Capital Judicial Region. The principal plaintiffs therein,
now the principal petitioners, are all minors duly represented and joined by
their respective parents. Impleaded as an additional plaintiff is the Philippine
Ecological Network, Inc. (PENI), a domestic, non-stock and non-profit
corporation organized for the purpose of, inter alia, engaging in concerted
action geared for the protection of our environment and natural resources.
The original defendant was the Honorable Fulgencio S. Factoran, Jr., then
Secretary of the Department of Environment and Natural Resources
(DENR). His substitution in this petition by the new Secretary, the
Honorable Angel C. Alcala, was subsequently ordered upon proper motion
by the petitioners. 1 The complaint 2 was instituted as a taxpayers' class suit 3
and alleges that the plaintiffs "are all citizens of the Republic of the
Philippines, taxpayers, and entitled to the full benefit, use and enjoyment of
the natural resource treasure that is the country's virgin tropical forests." The
same was filed for themselves and others who are equally concerned about
the preservation of said resource but are "so numerous that it is
impracticable to bring them all before the Court." The minors further
asseverate that they "represent their generation as well as generations yet
unborn." 4 Consequently, it is prayed for that judgment be rendered:
. . . ordering defendant, his agents, representatives and other
persons acting in his behalf to
(1) Cancel all existing timber license agreements in the country;
(2) Cease and desist from receiving, accepting, processing,
renewing or approving new timber license agreements.
and granting the plaintiffs ". . . such other reliefs just and equitable under the
premises." 5
The complaint starts off with the general averments that the Philippine
archipelago of 7,100 islands has a land area of thirty million (30,000,000)
hectares and is endowed with rich, lush and verdant rainforests in which
varied, rare and unique species of flora and fauna may be found; these
rainforests contain a genetic, biological and chemical pool which is
irreplaceable; they are also the habitat of indigenous Philippine cultures
which have existed, endured and flourished since time immemorial;
scientific evidence reveals that in order to maintain a balanced and healthful
ecology, the country's land area should be utilized on the basis of a ratio of
fifty-four per cent (54%) for forest cover and forty-six per cent (46%) for
agricultural, residential, industrial, commercial and other uses; the distortion
and disturbance of this balance as a consequence of deforestation have
resulted in a host of environmental tragedies, such as (a) water shortages
resulting from drying up of the water table, otherwise known as the
"aquifer," as well as of rivers, brooks and streams, (b) salinization of the
water table as a result of the intrusion therein of salt water, incontrovertible
examples of which may be found in the island of Cebu and the Municipality
of Bacoor, Cavite, (c) massive erosion and the consequential loss of soil
fertility and agricultural productivity, with the volume of soil eroded
estimated at one billion (1,000,000,000) cubic meters per annum
approximately the size of the entire island of Catanduanes, (d) the
endangering and extinction of the country's unique, rare and varied flora and
fauna, (e) the disturbance and dislocation of cultural communities, including
the disappearance of the Filipino's indigenous cultures, (f) the siltation of
rivers and seabeds and consequential destruction of corals and other aquatic
life leading to a critical reduction in marine resource productivity, (g)
recurrent spells of drought as is presently experienced by the entire country,
(h) increasing velocity of typhoon winds which result from the absence of
windbreakers, (i) the floodings of lowlands and agricultural plains arising
from the absence of the absorbent mechanism of forests, (j) the siltation and
shortening of the lifespan of multi-billion peso dams constructed and
operated for the purpose of supplying water for domestic uses, irrigation and
the generation of electric power, and (k) the reduction of the earth's capacity
to process carbon dioxide gases which has led to perplexing and catastrophic
climatic changes such as the phenomenon of global warming, otherwise
known as the "greenhouse effect."
Plaintiffs further assert that the adverse and detrimental consequences of
continued and deforestation are so capable of unquestionable demonstration
that the same may be submitted as a matter of judicial notice. This
notwithstanding, they expressed their intention to present expert witnesses
as well as documentary, photographic and film evidence in the course of the
trial.
As their cause of action, they specifically allege that:
CAUSE OF ACTION
7. Plaintiffs replead by reference the foregoing allegations.
8. Twenty-five (25) years ago, the Philippines had some sixteen
(16) million hectares of rainforests constituting roughly 53% of the
country's land mass.
9. Satellite images taken in 1987 reveal that there remained no more
than 1.2 million hectares of said rainforests or four per cent (4.0%)
of the country's land area.
10. More recent surveys reveal that a mere 850,000 hectares of
virgin old-growth rainforests are left, barely 2.8% of the entire land
mass of the Philippine archipelago and about 3.0 million hectares of
immature and uneconomical secondary growth forests.
11. Public records reveal that the defendant's, predecessors have
granted timber license agreements ('TLA's') to various corporations
to cut the aggregate area of 3.89 million hectares for commercial
logging purposes.
A copy of the TLA holders and the corresponding areas covered is
hereto attached as Annex "A".
12. At the present rate of deforestation, i.e. about 200,000 hectares
per annum or 25 hectares per hour nighttime, Saturdays,
Sundays and holidays included the Philippines will be bereft of
forest resources after the end of this ensuing decade, if not earlier.
13. The adverse effects, disastrous consequences, serious injury and
irreparable damage of this continued trend of deforestation to the
plaintiff minor's generation and to generations yet unborn are
evident and incontrovertible. As a matter of fact, the environmental
damages enumerated in paragraph 6 hereof are already being felt,

experienced and suffered by the generation of plaintiff adults.
14. The continued allowance by defendant of TLA holders to cut
and deforest the remaining forest stands will work great damage
and irreparable injury to plaintiffs especially plaintiff minors and
their successors who may never see, use, benefit from and enjoy
this rare and unique natural resource treasure.
This act of defendant constitutes a misappropriation and/or
impairment of the natural resource property he holds in trust for the
benefit of plaintiff minors and succeeding generations.
15. Plaintiffs have a clear and constitutional right to a balanced and
healthful ecology and are entitled to protection by the State in its
capacity as the parens patriae.
16. Plaintiff have exhausted all administrative remedies with the
defendant's office. On March 2, 1990, plaintiffs served upon
defendant a final demand to cancel all logging permits in the
country.
A copy of the plaintiffs' letter dated March 1, 1990 is hereto
attached as Annex "B".
17. Defendant, however, fails and refuses to cancel the existing
TLA's to the continuing serious damage and extreme prejudice of
plaintiffs.
18. The continued failure and refusal by defendant to cancel the
TLA's is an act violative of the rights of plaintiffs, especially
plaintiff minors who may be left with a country that is desertified
(sic), bare, barren and devoid of the wonderful flora, fauna and
indigenous cultures which the Philippines had been abundantly
blessed with.
19. Defendant's refusal to cancel the aforementioned TLA's is
manifestly contrary to the public policy enunciated in the Philippine
Environmental Policy which, in pertinent part, states that it is the
policy of the State
(a) to create, develop, maintain and improve conditions under
which man and nature can thrive in productive and enjoyable
harmony with each other;
(b) to fulfill the social, economic and other requirements of present
and future generations of Filipinos and;
(c) to ensure the attainment of an environmental quality that is
conductive to a life of dignity and well-being. (P.D. 1151, 6 June
1977)
20. Furthermore, defendant's continued refusal to cancel the
aforementioned TLA's is contradictory to the Constitutional policy
of the State to
a. effect "a more equitable distribution of opportunities, income and
wealth" and "make full and efficient use of natural resources (sic)."
(Section 1, Article XII of the Constitution);
b. "protect the nation's marine wealth." (Section 2, ibid);
c. "conserve and promote the nation's cultural heritage and
resources (sic)" (Section 14, Article XIV,id.);
d. "protect and advance the right of the people to a balanced and
healthful ecology in accord with the rhythm and harmony of
nature." (Section 16, Article II, id.)
21. Finally, defendant's act is contrary to the highest law of
humankind the natural law and violative of plaintiffs' right to
self-preservation and perpetuation.
22. There is no other plain, speedy and adequate remedy in law
other than the instant action to arrest the unabated hemorrhage of
the country's vital life support systems and continued rape of
Mother Earth. 6
On 22 June 1990, the original defendant, Secretary Factoran, Jr., filed a
Motion to Dismiss the complaint based on two (2) grounds, namely: (1) the
plaintiffs have no cause of action against him and (2) the issue raised by the
plaintiffs is a political question which properly pertains to the legislative or
executive branches of Government. In their 12 July 1990 Opposition to the
Motion, the petitioners maintain that (1) the complaint shows a clear and
unmistakable cause of action, (2) the motion is dilatory and (3) the action
presents a justiciable question as it involves the defendant's abuse of
discretion.
On 18 July 1991, respondent Judge issued an order granting the
aforementioned motion to dismiss. 7 In the said order, not only was the
defendant's claim that the complaint states no cause of action against him
and that it raises a political question sustained, the respondent Judge
further ruled that the granting of the relief prayed for would result in the
impairment of contracts which is prohibited by the fundamental law of the
land.
Plaintiffs thus filed the instant special civil action for certiorari under Rule
65 of the Revised Rules of Court and ask this Court to rescind and set aside
the dismissal order on the ground that the respondent Judge gravely abused
his discretion in dismissing the action. Again, the parents of the plaintiffsminors not only represent their children, but have also joined the latter in
this case. 8
On 14 May 1992, We resolved to give due course to the petition and

required the parties to submit their respective Memoranda after the Office of
the Solicitor General (OSG) filed a Comment in behalf of the respondents
and the petitioners filed a reply thereto.
Petitioners contend that the complaint clearly and unmistakably states a
cause of action as it contains sufficient allegations concerning their right to a
sound environment based on Articles 19, 20 and 21 of the Civil Code
(Human Relations), Section 4 of Executive Order (E.O.) No. 192 creating
the DENR, Section 3 of Presidential Decree (P.D.) No. 1151 (Philippine
Environmental Policy), Section 16, Article II of the 1987 Constitution
recognizing the right of the people to a balanced and healthful ecology, the
concept of generational genocide in Criminal Law and the concept of man's
inalienable right to self-preservation and self-perpetuation embodied in
natural law. Petitioners likewise rely on the respondent's correlative
obligation per Section 4 of E.O. No. 192, to safeguard the people's right to a
healthful environment.
It is further claimed that the issue of the respondent Secretary's alleged grave
abuse of discretion in granting Timber License Agreements (TLAs) to cover
more areas for logging than what is available involves a judicial question.
Anent the invocation by the respondent Judge of the Constitution's nonimpairment clause, petitioners maintain that the same does not apply in this
case because TLAs are not contracts. They likewise submit that even if
TLAs may be considered protected by the said clause, it is well settled that
they may still be revoked by the State when the public interest so requires.
On the other hand, the respondents aver that the petitioners failed to allege
in their complaint a specific legal right violated by the respondent Secretary
for which any relief is provided by law. They see nothing in the complaint
but vague and nebulous allegations concerning an "environmental right"
which supposedly entitles the petitioners to the "protection by the state in its
capacity as parens patriae." Such allegations, according to them, do not
reveal a valid cause of action. They then reiterate the theory that the question
of whether logging should be permitted in the country is a political question
which should be properly addressed to the executive or legislative branches
of Government. They therefore assert that the petitioners' resources is not to
file an action to court, but to lobby before Congress for the passage of a bill
that would ban logging totally.
As to the matter of the cancellation of the TLAs, respondents submit that the
same cannot be done by the State without due process of law. Once issued, a
TLA remains effective for a certain period of time usually for twenty-five
(25) years. During its effectivity, the same can neither be revised nor
cancelled unless the holder has been found, after due notice and hearing, to
have violated the terms of the agreement or other forestry laws and
regulations. Petitioners' proposition to have all the TLAs indiscriminately

cancelled without the requisite hearing would be violative of the
requirements of due process.
Before going any further, We must first focus on some procedural matters.
Petitioners instituted Civil Case No. 90-777 as a class suit. The original
defendant and the present respondents did not take issue with this matter.
Nevertheless, We hereby rule that the said civil case is indeed a class suit.
The subject matter of the complaint is of common and general interest not
just to several, but to all citizens of the Philippines. Consequently, since the
parties are so numerous, it, becomes impracticable, if not totally impossible,
to bring all of them before the court. We likewise declare that the plaintiffs
therein are numerous and representative enough to ensure the full protection
of all concerned interests. Hence, all the requisites for the filing of a valid
class suit under Section 12, Rule 3 of the Revised Rules of Court are present
both in the said civil case and in the instant petition, the latter being but an
incident to the former.
This case, however, has a special and novel element. 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. 9 Such rhythm and harmony indispensably include, inter alia, the
judicious disposition, utilization, management, renewal and conservation of
the country's 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. 10 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.
The locus standi of the petitioners having thus been addressed, We shall now
proceed to the merits of the petition.
After a careful perusal of the complaint in question and a meticulous
consideration and evaluation of the issues raised and arguments adduced by
the parties, We do not hesitate to find for the petitioners and rule against the
respondent Judge's challenged order for having been issued with grave abuse
of discretion amounting to lack of jurisdiction. The pertinent portions of the

said order reads as follows: After a careful and circumspect evaluation of the
Complaint, the Court cannot help but agree with the defendant. For although
we believe that plaintiffs have but the noblest of all intentions, it (sic) fell
short of alleging, with sufficient definiteness, a specific legal right they are
seeking to enforce and protect, or a specific legal wrong they are seeking to
prevent and redress (Sec. 1, Rule 2, RRC). Furthermore, the Court notes that
the Complaint is replete with vague assumptions and vague conclusions
based on unverified data. In fine, plaintiffs fail to state a cause of action in
its Complaint against the herein defendant.
Furthermore, the Court firmly believes that the matter before it,
being impressed with political color and involving a matter of
public policy, may not be taken cognizance of by this Court without
doing violence to the sacred principle of "Separation of Powers" of
the three (3) co-equal branches of the Government.
The Court is likewise of the impression that it cannot, no matter
how we stretch our jurisdiction, grant the reliefs prayed for by the
plaintiffs, i.e., to cancel all existing timber license agreements in the
country and to cease and desist from receiving, accepting,
processing, renewing or approving new timber license agreements.
For to do otherwise would amount to "impairment of contracts"
abhored (sic) by the fundamental law. 11
We do not agree with the trial court's conclusions that the plaintiffs failed to
allege with sufficient definiteness a specific legal right involved or a specific
legal wrong committed, and that the complaint is replete with vague
assumptions and conclusions based on unverified data. A reading of the
complaint itself belies these conclusions.
The complaint focuses on one specific fundamental legal right the right
to a balanced and healthful ecology which, for the first time in our nation's
constitutional history, is solemnly incorporated in the fundamental law.
Section 16, Article II of the 1987 Constitution explicitly provides: Sec. 16.
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.
This right unites with the right to health which is provided for in the
preceding section of the same article: Sec. 15. The State shall
protect and promote the right to health of the people and instill
health consciousness among them.
While the right to a balanced and healthful ecology is to be found under the
Declaration of Principles and State Policies and not under the Bill of Rights,
it does not follow that it is less important than any of the civil and political
rights enumerated in the latter. Such a right belongs to a different category
of rights altogether for it concerns nothing less than self-preservation and
self-perpetuation aptly and fittingly stressed by the petitioners the

advancement of which may even be said to predate all governments and
constitutions. As a matter of fact, these basic rights need not even be written
in the Constitution for they are assumed to exist from the inception of
humankind. If they are now explicitly mentioned in the fundamental charter,
it is because of the well-founded fear of its framers that unless the rights to a
balanced and healthful ecology and to health are mandated as state policies
by the Constitution itself, thereby highlighting their continuing importance
and imposing upon the state a solemn obligation to preserve the first and
protect and advance the second, the day would not be too far when all else
would be lost not only for the present generation, but also for those to come
generations which stand to inherit nothing but parched earth incapable of
sustaining life.
The right to a balanced and healthful ecology carries with it the correlative
duty to refrain from impairing the environment. During the debates on this
right in one of the plenary sessions of the 1986 Constitutional Commission,
the following exchange transpired between Commissioner Wilfrido
Villacorta and Commissioner Adolfo Azcuna who sponsored the section in
question:
The said right implies, among many other things, the judicious management
and conservation of the country's forests.
Without such forests, the ecological or environmental balance would be
irreversiby disrupted.
Conformably with the enunciated right to a balanced and healthful ecology
and the right to health, as well as the other related provisions of the
Constitution concerning the conservation, development and utilization of the
country's natural resources, 13 then President Corazon C. Aquino
promulgated on 10 June 1987 E.O. No. 192, 14 Section 4 of which expressly
mandates that the Department of Environment and Natural Resources "shall
be the primary government agency responsible for the conservation,
management, development and proper use of the country's environment and
natural resources, specifically forest and grazing lands, mineral, resources,
including those in reservation and watershed areas, and lands of the public
domain, as well as the licensing and regulation of all natural resources as
may be provided for by law in order to ensure equitable sharing of the
benefits derived therefrom for the welfare of the present and future
generations of Filipinos." Section 3 thereof makes the following statement
of policy:
Sec. 3. Declaration of Policy. It is hereby declared the policy of
the State to ensure the sustainable use, development, management,
renewal, and conservation of the country's forest, mineral, land, off-
shore areas and other natural resources, including the protection and
enhancement of the quality of the environment, and equitable
access of the different segments of the population to the
development and the use of the country's natural resources, not only
for the present generation but for future generations as well. It is
also the policy of the state to recognize and apply a true value
system including social and environmental cost implications
relative to their utilization, development and conservation of our
natural resources.
This policy declaration is substantially re-stated it Title XIV, Book IV of the
Administrative Code of 1987, 15specifically in Section 1 thereof which reads:
Sec. 1. Declaration of Policy. (1) The State shall ensure, for the
benefit of the Filipino people, the full exploration and development
as well as the judicious disposition, utilization, management,
renewal and conservation of the country's forest, mineral, land,
waters, fisheries, wildlife, off-shore areas and other natural
resources, consistent with the necessity of maintaining a sound
ecological balance and protecting and enhancing the quality of the
environment and the objective of making the exploration,
development and utilization of such natural resources equitably
accessible to the different segments of the present as well as future
generations.
(2) The State shall likewise recognize and apply a true value system
that takes into account social and environmental cost implications
relative to the utilization, development and conservation of our
natural resources.
The above provision stresses "the necessity of maintaining a sound
ecological balance and protecting and enhancing the quality of the
environment." Section 2 of the same Title, on the other hand, specifically
speaks of the mandate of the DENR; however, it makes particular reference
to the fact of the agency's being subject to law and higher authority. Said
section provides:
Sec. 2. Mandate. (1) The Department of Environment and
Natural Resources shall be primarily responsible for the
implementation of the foregoing policy.
(2) It shall, subject to law and higher authority, be in charge of
carrying out the State's constitutional mandate to control and
supervise the exploration, development, utilization, and
conservation of the country's natural resources.
Both E.O. NO. 192 and the Administrative Code of 1987 have set the
objectives which will serve as the bases for policy formulation, and have
defined the powers and functions of the DENR.
It may, however, be recalled that even before the ratification of the 1987
Constitution, specific statutes already paid special attention to the
"environmental right" of the present and future generations. On 6 June 1977,
P.D. No. 1151 (Philippine Environmental Policy) and P.D. No. 1152
(Philippine Environment Code) were issued. The former "declared a
continuing policy of the State (a) to create, develop, maintain and improve
conditions under which man and nature can thrive in productive and
enjoyable harmony with each other, (b) to fulfill the social, economic and
other requirements of present and future generations of Filipinos, and (c) to
insure the attainment of an environmental quality that is conducive to a life
of dignity and well-being." 16 As its goal, it speaks of the "responsibilities of
each generation as trustee and guardian of the environment for succeeding
generations." 17 The latter statute, on the other hand, gave flesh to the said
policy.
Thus, the right of the petitioners (and all those they represent) to a balanced
and healthful ecology is as clear as the DENR's duty under its mandate
and by virtue of its powers and functions under E.O. No. 192 and the
Administrative Code of 1987 to protect and advance the said right.
A denial or violation of that right by the other who has the corelative duty or
obligation to respect or protect the same gives rise to a cause of action.
Petitioners maintain that the granting of the TLAs, which they claim was
done with grave abuse of discretion, violated their right to a balanced and
healthful ecology; hence, the full protection thereof requires that no further
TLAs should be renewed or granted.
A cause of action is defined as: an act or omission of one party in violation
of the legal right or rights of the other; and its essential elements are legal
right of the plaintiff, correlative obligation of the defendant, and act or
omission of the defendant in violation of said legal right. 18
It is settled in this jurisdiction that in a motion to dismiss based on the
ground that the complaint fails to state a cause of action, 19 the question
submitted to the court for resolution involves the sufficiency of the facts
alleged in the complaint itself. No other matter should be considered;
furthermore, the truth of falsity of the said allegations is beside the point for
the truth thereof is deemed hypothetically admitted. The only issue to be
resolved in such a case is: admitting such alleged facts to be true, may the
court render a valid judgment in accordance with the prayer in the
complaint? 20 InMilitante vs. Edrosolano, 21 this Court laid down the rule that
the judiciary should "exercise the utmost care and circumspection in passing
upon a motion to dismiss on the ground of the absence thereof [cause of
action] lest, by its failure to manifest a correct appreciation of the facts
alleged and deemed hypothetically admitted, what the law grants or
recognizes is effectively nullified. If that happens, there is a blot on the legal
order. The law itself stands in disrepute."

After careful examination of the petitioners' complaint, We find the
statements under the introductory affirmative allegations, as well as the
specific averments under the sub-heading CAUSE OF ACTION, to be
adequate enough to show, prima facie, the claimed violation of their rights.
On the basis thereof, they may thus be granted, wholly or partly, the reliefs
prayed for. It bears stressing, however, that insofar as the cancellation of the
TLAs is concerned, there is the need to implead, as party defendants, the
grantees thereof for they are indispensable parties.
The foregoing considered, Civil Case No. 90-777 be said to raise a political
question. Policy formulation or determination by the executive or legislative
branches of Government is not squarely put in issue. What is principally
involved is the enforcement of a right vis-a-vis policies already formulated
and expressed in legislation. It must, nonetheless, be emphasized that the
political question doctrine is no longer, the insurmountable obstacle to the
exercise of judicial power or the impenetrable shield that protects executive
and legislative actions from judicial inquiry or review. The second paragraph
of section 1, Article VIII of the Constitution states that: Judicial power
includes the duty of the courts of justice to settle actual controversies
involving rights which are legally demandable and enforceable, and to
determine whether or not there has been a grave abuse of discretion
amounting to lack or excess of jurisdiction on the part of any branch or
instrumentality of the Government.
Commenting on this provision in his book, Philippine Political Law, 22 Mr.
Justice Isagani A. Cruz, a distinguished member of this Court, says: The first
part of the authority represents the traditional concept of judicial power,
involving the settlement of conflicting rights as conferred as law. The second
part of the authority represents a broadening of judicial power to enable the
courts of justice to review what was before forbidden territory, to wit, the
discretion of the political departments of the government. As worded, the
new provision vests in the judiciary, and particularly the Supreme Court, the
power to rule upon even the wisdom of the decisions of the executive and
the legislature and to declare their acts invalid for lack or excess of
jurisdiction because tainted with grave abuse of discretion. The catch, of
course, is the meaning of "grave abuse of discretion," which is a very elastic
phrase that can expand or contract according to the disposition of the
judiciary.
In Daza vs. Singson, 23 Mr. Justice Cruz, now speaking for this Court, noted:
In the case now before us, the jurisdictional objection becomes even
less tenable and decisive. The reason is that, even if we were to
assume that the issue presented before us was political in nature, we
would still not be precluded from revolving it under the expanded
jurisdiction conferred upon us that now covers, in proper cases,

even the political question. Article VII, Section 1, of the
Constitution clearly provides: . . .
The last ground invoked by the trial court in dismissing the complaint is the
non-impairment of contracts clause found in the Constitution. The court a
quo declared that:
The Court is likewise of the impression that it cannot, no matter
how we stretch our jurisdiction, grant the reliefs prayed for by the
plaintiffs, i.e., to cancel all existing timber license agreements in the
country and to cease and desist from receiving, accepting,
processing, renewing or approving new timber license agreements.
For to do otherwise would amount to "impairment of contracts"
abhored (sic) by the fundamental law. 24
We are not persuaded at all; on the contrary, We are amazed, if not shocked,
by such a sweeping pronouncement. In the first place, the respondent
Secretary did not, for obvious reasons, even invoke in his motion to dismiss
the non-impairment clause. If he had done so, he would have acted with
utmost infidelity to the Government by providing undue and unwarranted
benefits and advantages to the timber license holders because he would have
forever bound the Government to strictly respect the said licenses according
to their terms and conditions regardless of changes in policy and the
demands of public interest and welfare. He was aware that as correctly
pointed out by the petitioners, into every timber license must be read Section
20 of the Forestry Reform Code (P.D. No. 705) which provides:
. . . Provided, That when the national interest so requires, the
President may amend, modify, replace or rescind any contract,
concession, permit, licenses or any other form of privilege granted
herein . . .
Needless to say, all licenses may thus be revoked or rescinded by
executive action. It is not a contract, property or a property right
protested by the due process clause of the Constitution. In Tan vs.
Director of Forestry, 25 this Court held:
. . . A timber license is an instrument by which the State regulates
the utilization and disposition of forest resources to the end that
public welfare is promoted. A timber license is not a contract within
the purview of the due process clause; it is only a license or
privilege, which can be validly withdrawn whenever dictated by
public interest or public welfare as in this case.
A license is merely a permit or privilege to do what otherwise
would be unlawful, and is not a contract between the authority,
federal, state, or municipal, granting it and the person to whom it is
granted; neither is it property or a property right, nor does it create a
vested right; nor is it taxation (37 C.J. 168). Thus, this Court held
that the granting of license does not create irrevocable rights,
neither is it property or property rights (People vs. Ong Tin, 54
O.G. 7576).
We reiterated this pronouncement in Felipe Ysmael, Jr. & Co., Inc. vs.
Deputy Executive Secretary: Timber licenses, permits and license
agreements are the principal instruments by which the State regulates the
utilization and disposition of forest resources to the end that public welfare
is promoted. And it can hardly be gainsaid that they merely evidence a
privilege granted by the State to qualified entities, and do not vest in the
latter a permanent or irrevocable right to the particular concession area and
the forest products therein. They may be validly amended, modified,
replaced or rescinded by the Chief Executive when national interests so
require. Thus, they are not deemed contracts within the purview of the due
process of law clause [See Sections 3(ee) and 20 of Pres. Decree No. 705, as
amended. Also, Tan v. Director of Forestry, G.R. No. L-24548, October 27,
1983, 125 SCRA 302].
Since timber licenses are not contracts, the non-impairment clause, which
reads:
Sec. 10. No law impairing, the obligation of contracts shall be
passed. 27
In the second place, even if it is to be assumed that the same are contracts,
the instant case does not involve a law or even an executive issuance
declaring the cancellation or modification of existing timber licenses. Hence,
the non-impairment clause cannot as yet be invoked. Nevertheless, granting
further that a law has actually been passed mandating cancellations or
modifications, the same cannot still be stigmatized as a violation of the nonimpairment clause. This is because by its very nature and purpose, such as
law could have only been passed in the exercise of the police power of the
state for the purpose of advancing the right of the people to a balanced and
healthful ecology, promoting their health and enhancing the general welfare.
In Abe vs. Foster Wheeler
Corp. 28 this Court stated:
The freedom of contract, under our system of government, is not
meant to be absolute. The same is understood to be subject to
reasonable legislative regulation aimed at the promotion of public
health, moral, safety and welfare. In other words, the constitutional
guaranty of non-impairment of obligations of contract is limited by
the exercise of the police power of the State, in the interest of
public health, safety, moral and general welfare.
The reason for this is emphatically set forth in Nebia vs. New York, 29 quoted
in Philippine American Life Insurance Co. vs. Auditor General, 30 to wit:
Under our form of government the use of property and the making
of contracts are normally matters of private and not of public
concern. The general rule is that both shall be free of governmental
interference. But neither property rights nor contract rights are
absolute; for government cannot exist if the citizen may at will use
his property to the detriment of his fellows, or exercise his freedom
of contract to work them harm. Equally fundamental with the
private right is that of the public to regulate it in the common
interest.
In short, the non-impairment clause must yield to the police power of the
state. 31
Finally, it is difficult to imagine, as the trial court did, how the nonimpairment clause could apply with respect to the prayer to enjoin the
respondent Secretary from receiving, accepting, processing, renewing or
approving new timber licenses for, save in cases of renewal, no contract
would have as of yet existed in the other instances. Moreover, with respect
to renewal, the holder is not entitled to it as a matter of right.
WHEREFORE, being impressed with merit, the instant Petition is hereby
GRANTED, and the challenged Order of respondent Judge of 18 July 1991
dismissing Civil Case No. 90-777 is hereby set aside. The petitioners may
therefore amend their complaint to implead as defendants the holders or
grantees of the questioned timber license agreements.
No pronouncement as to costs. SO ORDERED.
MUSTANG LUMBER vs. COURT OF APPEALS

The first and third case, G.R. No. 104988 and G.R. No. 123784, were
originally assigned to the Second and Third Divisions of the Court,
respectively. They were subsequently consolidated with the second, a case of
the Court en banc.
Petitioner, a domestic corporation with principal office at Nos. 1350-1352
Juan Luna Street, Tondo, Manila, and with a Lumberyard at Fortune Street,
Fortune Village, Paseo de Blas, Valenzuela, Metro Manila, was duly
registered as a lumber dealer with the Bureau of Forest Development (BFD)
under Certificate of Registration No. NRD-4-092590-0469. Its permit as
such was to expire on 25 September 1990.

Respondent Secretary Fulgencio S. Factoran, Jr., and respondent Atty.
Vincent A. Robles were, during all the time material to these cases, the
Secretary of the Department of Environment and Natural Resources (DENR)
and the Chief of the Special Actions and Investigation Division (SAID) of
the DENR, respectively.
The material operative facts are as follows:
On 1 April 1990, acting on an information that a huge stockpile of narra
flitches, shorts, and slabs were seen inside the lumberyard of the petitioner
in Valenzuela, Metro Manila, the SAID organized a team of foresters and
policemen and sent it to conduct surveillance at the said lumberyard. In the
course thereof, the team members saw coming out from the lumberyard the
petitioner's truck, with Plate No. CCK-322, loaded with lauan and almaciga
lumber of assorted sizes and dimensions. Since the driver could not produce
the required invoices and transport documents, the team seized the truck
together with its cargo and impounded them at the DENR compound at
Visayas Avenue, Quezon City. 1 The team was not able to gain entry into the
premises because of the refusal of the owner. 2
On 3 April 1990, the team was able to secure a search warrant from
Executive Judge Adriano R. Osorio of the Regional Trial Court (RTC) of
Valenzuela, Metro Manila. By virtue thereof, the team seized on that date
from the petitioner's lumberyard four truckloads of narra shorts, trimmings,
and slabs; a negligible number of narra lumber; and approximately 200,000
board feet of lumber and shorts of various species including almaciga and
supa. 3
On 4 April 1990, the team returned to the premises of the petitioner's
lumberyard in Valenzuela and placed under administrative seizure the
remaining stockpile of almaciga, supa, and lauan lumber with a total volume
of 311,000 board feet because the petitioner failed to produce upon demand
the corresponding certificate of lumber origin, auxiliary invoices, tally
sheets, and delivery receipts from the source of the invoices covering the
lumber to prove the legitimacy of their source and origin. 4
Parenthetically, it may be stated that under an administrative seizure the
owner retains the physical possession of the seized articles. Only an
inventory of the articles is taken and signed by the owner or his
representative. The owner is prohibited from disposing them until further
orders. 5
On 10 April 1990, counsel for the petitioner sent a letter to Robles
requesting an extension of fifteen days from 14 April 1990 to produce the

required documents covering the seized articles because some of them,
particularly the certificate of lumber origin, were allegedly in the Province
of Quirino Robles denied the motion on the ground that the documents being
required from the petitioner must accompany the lumber or forest products
placed under seizure. 6
On 11 April 1990, Robles submitted his memorandum-report recommending
to Secretary Factoran the following:
1. Suspension and subsequent cancellation of the lumber Dealer's
Permit of Mustang Lumber, Inc. for operating an unregistered
lumberyard and resaw mill and possession of Almaciga Lumber (a
banned specie) without the required documents;
2. Confiscation of the lumber seized at the Mustang Lumberyard
including the truck with Plate No. CCK-322 and the lumber loaded
herein [sic] now at the DENR compound in the event its owner fails
to submit documents showing legitimacy of the source of said
lumber within ten days from date of seizure;
3. Filing of criminal charges against Mr. Ri Chuy Po, owner of
Mustang Lumber Inc. and Mr. Ruiz, or if the circumstances warrant
for illegal possession of narra and almaciga lumber and shorts if
and when recommendation no. 2 pushes through;
4. Confiscation of Trucks with Plate No. CCS-639 and CDV. 458 as
well as the lumber loaded therein for transport lumber using
"recycled" documents. 7
On 23 April 1990, Secretary Factoran issued an order suspending
immediately the petitioner's lumber-dealer's permit No. NRD-4-0925900469 and directing the petitioner to explain in writing within fifteen days
why its lumber-dealer's permit should not be cancelled.
On the same date, counsel for the petitioner sent another letter to Robles
informing the latter that the petitioner had already secured the required
documents and was ready to submit them. None, however, was submitted. 8
On 3 May 1990, Secretary Factoran issued another order wherein, after
reciting the events which took place on 1 April and 3 April 1990, he ordered
"CONFISCATED in favor of the government to be disposed of in
accordance with law" the approximately 311,000 board feet of lauan, supa,
and almaciga lumber, shorts, and sticks found inside the petitioner's
lumberyard. 9
On 11 July 1990, the petitioner filed with the RTC of Manila a petition for
certiorari and prohibition with a prayer for a restraining order or preliminary
injunction against Secretary Fulgencio S. Factoran, Jr., and Atty. Vincent A.
Robles. The case (hereinafter, the FIRST CIVIL CASE) was docketed as
Civil Case No. 90-53648 and assigned to Branch 35 of the said court. The
petitioner questioned therein (a) the seizure on 1 April 1990, without any
search and seizure order issued by a judge, of its truck with Plate No. CCK322 and its cargo of assorted lumber consisting of apitong, tanguile, and
lauan of different sizes and dimensions with a total value of P38,000.00; and
(b) the orders of Secretary Factoran of 23 April 1990 for lack of prior notice
and hearing and of 3 May 1990 for violation of Section 2, Article III of the
Constitution.
On 17 September 1990, in response to reports that violations of P.D. No. 705
(The Revised Forestry Code of the Philippines), as amended, were
committed and acting upon instruction of Robles and under Special Order
No. 897, series of 1990, a team of DENR agents went to the business
premises of the petitioner located at No. 1352 Juan Luna Street, Tondo,
Manila. The team caught the petitioner operating as a lumber dealer
although its lumber-dealer's permit had already been suspended or 23 April
1990. Since the gate of the petitioner's lumberyard was open, the team went
inside and saw an owner-type jeep with a trailer loaded with lumber. Upon
investigation, the team was informed that the lumber loaded on the trailer
was to be delivered to the petitioner's customer. It also came upon the sales
invoice covering the transaction. The members of the team then introduced
themselves to the caretaker, one Ms. Chua, who turned out to be the wife of
the petitioner's president and general manager, Mr. Ri Chuy Po, who was
then out of town. The team's photographer was able to take photographs of
the stockpiles of lumber including newly cut ones, fresh dust around sawing
or cutting machineries and equipment, and the transport vehicles loaded with
lumber. The team thereupon effected a constructive seizure of approximately
20,000 board feet of lauan lumber in assorted sizes stockpiled in the
premises by issuing a receipt
therefor. 10
As a consequence of this 17 September 1990 incident, the petitioner filed
with the RTC of Manila a petition forcertiorari and prohibition. The case
(hereinafter, the SECOND CIVIL CASE) was docketed as Civil Case No. 9054610 and assigned to Branch 24 of the said court.
In the meantime, Robles filed with the Department of Justice (DOJ) a
complaint against the petitioner's president and general manager, Ri Chuy
Po, for violation of Section 68 of P.D. No. 705, as amended by E.O. No.
277. After appropriate preliminary investigation, the investigating
prosecutor, Claro Arellano, handed down a resolution 11whose dispositive
portion reads:
WHEREFORE, premises considered, it is hereby recommended
that an information be filed against respondent Ri Chuy Po for
illegal possession of approximately 200,000 bd. ft. of lumber
consisting of almaciga and supa and for illegal shipment of
almaciga and lauan in violation of Sec. 68 of PD 705 as amended
by E.O. 277, series of 1987.
It is further recommended that the 30,000 bd. ft. of narra shorts,
trimmings and slabs covered by legal documents be released to the
rightful owner, Malupa. 12
This resolution was approved by Undersecretary of Justice Silvestre H.
Bello III, who served as Chairman of the Task Force on Illegal Logging." 13
On the basis of that resolution, an information was filed on 5 June 1991 by
the DOJ with Branch 172 of the RTC of Valenzuela, charging Ri Chuy Po
with the violation of Section 58 of P.D. No. 705, as amended, which was
docketed as Criminal Case No. 324-V-91 (hereinafter, the CRIMINAL
CASE). The accusatory portion of the information reads as follows:
That on or about the 3rd day of April 1990, or prior to or
subsequent thereto, within the premises and vicinity of Mustang
Lumber, Inc. in Fortune Village, Valenzuela, Metro Manila, and
within the jurisdiction of this Honorable Court, the above-named
accused, did then and there wilfully, feloniously and unlawfully
have in his possession truckloads of almaciga and lauan and
approximately 200,000 bd. ft. of lumber and shorts of various
species including almaciga and supa, without the legal documents
as required under existing forest laws and
regulations. 14
On 7 June 1991, Branch 35 of the RTC of Manila rendered its decision 15 in
the FIRST CIVIL CASE, the dispositive portion of which reads:
WHEREFORE, judgment in this case is rendered as follows:
1. The Order of Respondent Secretary of the DENR, the Honorable
Fulgencio S. Factoran, Jr., dated 3 May 1990 ordering the
confiscation in favor of the Government the approximately 311,000
board feet of Lauan, supa, end almaciga Lumber, shorts and sticks,
found inside and seized from the Lumberyard of the petitioner at
Fortune Drive, Fortune Village, Paseo de Blas, Valenzuela, Metro
Manila, on April 4, 1990 (Exhibit 10), is hereby set aside and
vacated, and instead the respondents are required to report and
bring to the Hon. Adriano Osorio, Executive Judge, Regional Trial
Court, NCR, Valenzuela, Metro Manila, the said 311,000 board feet
of Lauan, supa and almaciga Lumber, shorts and sticks, to be dealt
with as directed by Law;

2. The respondents are required to initiate and prosecute the
appropriate action before the proper court regarding the Lauan and
almaciga lumber of assorted sizes and dimensions Loaded in
petitioner's truck bearing Plate No. CCK-322 which were seized on
April 1, 1990;
3. The Writ of Preliminary Injunction issued by the Court on
August 2, 1990 shall be rendered functus oficio upon compliance by
the respondents with paragraphs 1 and 2 of this judgment;.
4. Action on the prayer of the petitioner that the Lauan, supa and
almaciga lumber, shorts and sticks mentioned above in paragraphs 1
and 2 of this judgment be returned to said petitioner is withheld in
this case until after the proper court has taken cognizance and
determined how those Lumber, shorts and sticks should be disposed
of; and
5. The petitioner is ordered to pay the costs.
SO ORDERED.
In resolving the said case, the trial court held that the warrantless search and
seizure on 1 April 1990 of the petitioner's truck, which was moving out from
the petitioner's lumberyard in Valenzuela, Metro Manila, loaded with large
volumes of lumber without covering document showing the legitimacy of its
source or origin did not offend the constitutional mandate that search and
seizure must be supported by a valid warrant. The situation fell under one of
the settled and accepted exceptions where warrantless search and seizure is
justified, viz., a search of a moving vehicle. 16 As to the seizure of a large
volume of almaciga, supa, and lauan lumber and shorts effected on 4 April
1990, the trial court ruled that the said seizure was a continuation of that
made the previous day and was still pursuant to or by virtue of the search
warrant issued by Executive Judge Osorio whose validity the petitioner did
not even question. 17And, although the search warrant did not specifically
mention almaciga, supa, and lauan lumber and shorts, their seizure was valid
because it is settled that the executing officer is not required to ignore
contrabands observed during the conduct of the
search. 18
The trial court, however, set aside Secretary Factoran's order of 3 May 1990
ordering the confiscation of the seized articles in favor of the Government
for the reason that since the articles were seized pursuant to the search
warrant issued by Executive Judge Osorio they should have been returned to
him in compliance with the directive in the warrant.
As to the propriety of the 23 April 1990 order of Secretary Factoran, the trial
court ruled that the same had been rendered moot and academic by the
expiration of the petitioner's lumber dealer's permit on 25 September 1990, a

fact the petitioner admitted in its memorandum.
The petitioner forthwith appealed from the decision in the FIRST CIVIL
CASE to the Court of Appeals, which docketed the appeal as CA-G.R. SP
No. 25510.
On 7 July 1991, accused Ri Chuy Po filed in the CRIMINAL CASE a
Motion to Quash and/or to Suspend Proceedings based on the following
grounds: (a) the information does not charge an offense, for possession
oflumber, as opposed to timber, is not penalized in Section 68 of P.D. No.
705, as amended, and even grantingarguendo that lumber falls within the
purview of the said section, the same may not be used in evidence against
him for they were taken by virtue of an illegal seizure; and (b) Civil Case
No. 90-53648 of Branch 35 of the RTC of Manila, the FIRST CIVIL CASE,
then pending before the Court of Appeals, which involves the legality of the
seizure, raises a prejudicial question. 19
The prosecution opposed the motion alleging that lumber is included in
Section 68 of P.D. No. 705, as amended, and possession thereof without the
required legal documents is penalized therein. It referred to Section 3.2 of
DENR Administrative Order No. 19, series of 1989, for the definitions of
timber and lumber, and then argued that exclusion of lumber from Section
68 would defeat the very purpose of the law, i.e., to minimize, if not halt,
illegal logging that has resulted in the rapid denudation of our forest
resources. 20
In her order of 16 August 1991 in the CRIMINAL CASE, 21 respondent
Judge Teresita Dizon-Capulong granted the motion to quash and dismissed
the case on the ground that "possession of lumber without the legal
documents required by forest laws and regulations is not a crime. 22
Its motion for reconsideration having been denied in the order of 18 October
1991, 23 the People filed a petition forcertiorari with this Court in G.R. No.
106424, wherein it contends that the respondent Judge acted with grave
abuse of discretion in granting the motion to quash and in dismissing the
case.
On 29 November 1991, the Court of Appeals rendered a decision 24 in CAG.R. SP No. 25510 dismissing for lack of merit the petitioner's appeal from
the decision in the FIRST CIVIL CASE and affirming the trial court's
rulings on the issues raised. As to the claim that the truck was not carrying
contraband articles since there is no law punishing the possession oflumber,
and that lumber is not timber whose possession without the required legal
documents is unlawful under P.D. No. 705, as amended, the Court of
Appeals held:
This undue emphasis on lumber or the commercial nature of the
forest product involved has always been foisted by those who claim
to be engaged in the legitimate business of lumber dealership. But

what is important to consider is that when appellant was required to
present the valid documents showing its acquisition and lawful
possession of the lumber in question, it failed to present any despite
the period of extension granted to it. 25
The petitioner's motion to reconsider the said decision was denied by the
Court of Appeals in its resolution of 3 March 1992. 26 Hence, the petitioner
came to this Court by way of a petition for review on certiorari in G.R. No.
104988, which was filed on 2 May 1992. 27
On 24 September 1992, Branch 24 of the RTC of Manila handed down a
decision in the SECOND CIVIL CASE dismissing the petition for certiorari
and prohibition because (a) the petitioner did not exhaust administrative
remedies; (b) when the seizure was made on 17 September 1990 the
petitioner could not lawfully sell lumber, as its license was still under
suspension; (c) the seizure was valid under Section 68-A of P.D. No. 705, as
amended; and (d) the seizure was justified as a warrantless search and
seizure under Section 80 of P.D. No. 705, as amended.
The petitioner appealed from the decision to the Court of Appeals, which
docketed the appeal as CA-G.R. SP No.33778.
In its decision 28 of 31 July 1995, the Court of Appeals dismissed the
petitioner's appeal in CA-G.R. SP No. 33778 for lack of merit and sustained
the grounds relied upon by the trial court in dismissing the SECOND CIVIL
CASE. Relying on the definition of "lumber" by Webster, viz., "timber or
logs, especially after being prepared for the market," and by the Random
House Dictionary of the English Language, viz., "wood, esp. when suitable
or adapted for various building purposes," the respondent Court held that
since wood is included in the definition of forest product in Section 3(q) of
P.D. No. 705, as amended, lumber is necessarily included in Section 68
under the term forest product.
The Court of Appeals further emphasized that a forest officer or employee
can seize the forest product involved in a violation of Section 68 of P.D. No.
705 pursuant to Section 80 thereof, as amended by P.D. No. 1775, which
provides in part as follows:
Sec. 80. Arrest, Institution of Criminal Actions. -- A forest officer or
employee of the Bureau or any personnel of the Philippine
Constabulary/Integrated National Police shall arrest even without
warrant any person who has committed or is committing in his
presence any of the offenses defined in this chapter. He shall also
seize and confiscate, in favor of the Government, the tools and
equipment used in committing the offense, or the forest products

cut, gathered or taken by the offender in the process of committing
the offense.
Among the offenses punished in the chapter referred to in said Section 80
are the cutting, gathering, collection, or removal of timber or other forest
products or possession of timber or other forest products without the
required legal documents.
Its motion to reconsider the decision having been denied by the Court of
Appeals in the resolution of 6 February 1996, the petitioner filed with this
Court on 27 February 1996 a petition for review on certiorari in G.R.
No.123784.
We shall now resolve these three cases starting with G.R. No. 106424 with
which the other two were consolidated.
G.R. No. 106424
The petitioner had moved to quash the information in Criminal Case No.
324-V-91 on the ground that it does not charge an offense. Respondent
Judge Dizon-Capulong granted the motion reasoning that the subject matter
of the information in the CRIMINAL CASE is LUMBER, which is neither
"timber" nor "other forest product" under Section 68 of P.D. No. 705, as
amended, and hence, possession thereof without the required legal
documents is not prohibited and penalized under the said section.
Under paragraph (a), Section 3, Rule 117 of the Rules of Court, an
information may be quashed on the ground that the facts alleged therein do
not constitute an offense. It has been said that "the test for the correctness of
this ground is the sufficiency of the averments in the information, that is,
whether the facts alleged, if hypothetically admitted, constitute the elements
of the
offense, 29 and matters aliunde will not be considered." Anent the sufficiency
of the information, Section 6, Rule 110 of the Rules of Court requires, inter
alia, that the information state the acts or omissions complained of as
constituting the offense.
Respondent Ri Chuy Po is charged with the violation of Section 68 of P.D.
No. 705, as amended by E.O. No. 277, which provides:
Sec. 68. Cutting, Gathering and/or collecting Timber, or Other
Forest Products Without License. -- Any person who shall cut,
gather, collect, remove timber or other forest products from any
forest land, or timber from alienable or disposable public land, or
from private land, without any authority, or possess timber or other
forest products without the legal documents as required under
existing forest laws and regulations, shall be punished with the
penalties imposed under Articles 309 and 310 of the Revised Penal
Code: Provided, That in the case of partnerships, associations, or
corporations, the officers who ordered the cutting, gathering,

collection or possession shall be liable, and if such officers are
aliens, they shall, in addition to the penalty, be deported without
further proceedings on the part of the Commission on Immigration
and Deportation.
The Court shall further order the confiscation in favor of the
government of the timber or any forest products cut, gathered,
collected, removed, or possessed, as well as the machinery,
equipment, implements and tools illegally used in the area where
the timber or forest products are found.
Punished then in this section are (1) the cutting, gathering, collection, or
removal of timber or other forest products from the places therein
mentioned without any authority; and (b) possession of timber forest
products without the legal documents as required under existing forest
laws and regulations.
Indeed, the word lumber does not appear in Section 68. But conceding ex
gratia that this omission amounts to an exclusion of lumber from the
section's coverage, do the facts averred in the information in the CRIMINAL
CASE validly charge a violation of the said section?
A cursory reading of the information readily leads us to an infallible
conclusion that lumber is not solely its subject matter. It is evident therefrom
that what are alleged to be in the possession of the private respondent,
without the required legal documents, are truckloads of
(1) almaciga and lauan; and
(2) approximately 200,000 bd. ft. of lumber and shorts of
various species including almaciga and supa.
The "almaciga and lauan" specifically mentioned in no. (1) are not
described as "lumber." They cannot refer to the "lumber" in no. (2)
because they are separated by the words "approximately 200,000 bd. ft."
with the conjunction "and," and not with the preposition "of." They
must then be raw forest products or, more specifically, timbers under
Section 3(q) of P.D. No. 705, as amended, which reads:
Sec. 3. Definitions. -xxx xxx xxx
(q) Forest product means timber, firewood, bark, tree top,
resin, gum, wood, oil, honey, beeswax, nipa, rattan, or
other forest plant, the associated water, fish game, scenic,
historical, recreational and geological resources in forest
lands.
It follows then that lumber is only one of the items covered by the
information. The public and the private respondents obviously
miscomprehended the averments in the information. Accordingly, even if
lumber is not included in Section 68, the other items therein as noted above
fall within the ambit of the said section, and as to them, the information
validly charges an offense.
Our respected brother, Mr. Justice Jose C. Vitug, suggests in his dissenting
opinion that this Court go beyond the four corners of the information for
enlightenment as to whether the information exclusively refers to lumber.
With the aid of the pleadings and the annexes thereto, he arrives at the
conclusion that "only lumber has been envisioned in the indictment."
The majority is unable to subscribe to his view. First, his proposition
violates the rule that only the facts alleged in the information vis-a-vis the
law violated must be considered in determining whether an information
charges an offense.
Second, the pleadings and annexes he resorted to are insufficient to justify
his conclusion. On the contrary, the Joint Affidavit of Melencio Jalova, Jr.,
and Araman Belleng, which is one of the annexes he referred to, 30 cannot
lead one to infer that what the team seized was all lumber. Paragraph 8
thereof expressly states:
8. That when inside the compound, the team found
approximately four (4) truckloads ofnarra shorts,
trimmings and slabs and a negligible amount of narra
lumber, and approximately 200,000 bd. ft. of lumber and
shorts of various species including almaciga and supa
which are classified as prohibited wood species. (emphasis
supplied)
In the same vein, the dispositive portion of the resolution 31 of the
investigating prosecutor, which served as the basis for the filing of the
information, does not limit itself to lumber; thus:
WHEREFORE, premises considered, it is hereby recommended
that an information be filed against respondent Ri Chuy Po for
illegal possession of 200,000 bd. ft. of lumber consisting of
almaciga and supa and for illegal shipment of almaciga and lauan
in violation of Sec. 63 of PD 705 as amended by E.O. 277, series of
1987. (emphasis supplied)
The foregoing disquisitions should not, in any manner, be construed as an
affirmance of the respondent Judge's conclusion that lumber is excluded
from the coverage of Section 68 of P.D. No. 705, as amended, and thus
possession thereof without the required legal documents is not a crime. On
the contrary, this Court rules that such possession is penalized in the said
section because lumber is included in the term timber.
The Revised Forestry Code contains no definition of either timber or
lumber. While the former is included in forest products as defined in
paragraph (q) of Section 3, the latter is found in paragraph (aa) of the same
section in the definition of "Processing plant," which reads:
(aa) Processing plant is any mechanical set-up, machine or
combination of machine used for the processing of logs
and other forest raw materials into lumber, veneer,
plywood, wallbond, blockboard, paper board, pulp, paper
or other finished wood products.
This simply means that lumber is a processed log or processed forest
raw material. Clearly, the Code uses the term lumber in its ordinary or
common usage. In the 1993 copyright edition of Webster's Third New
International Dictionary, lumber is defined, inter alia, as "timber or logs
after being prepared for the market."32 Simply put, lumber is a
processed log or timber.
It is settled that in the absence of legislative intent to the contrary, words and
phrases used in a statute should be given their plain, ordinary, and common
usage meaning. 33 And insofar as possession of timber without the required
legal documents is concerned, Section 68 of P.D. No. 705, as amended,
makes no distinction between raw or processed timber. Neither should we.
Ubi lex non distinguere debemus.
Indisputably, respondent Judge Teresita Dizon-Capulong of Branch 172 of
the RTC of Valenzuela, Metro Manila, committed grave abuse of discretion
in granting the motion to quash the information in the CRIMINAL CASE
and in dismissing the said case.
G.R. No. 104988
We find this petition to be without merit. The petitioner has miserably failed
to show that the Court of Appeals committed any reversible error in its
assailed decision of 29 November 1991.
It was duly established that on 1 April 1990, the petitioner's truck with Plate
No. CCK-322 was coming out from the petitioner's lumberyard loaded with
lauan and almaciga lumber of different sizes and dimensions which were not
accompanied with the required invoices and transport documents. The
seizure of such truck and its cargo was a valid exercise of the power vested
upon a forest officer or employee by Section 80 of P.D. No. 705, as amended
by P.D. No. 1775. Then, too, as correctly held by the trial court and the
Court of Appeals in the FIRST CIVIL CASE, the search was conducted on a
moving vehicle. Such a search could be lawfully conducted without a search
warrant.
Search of a moving vehicle is one of the five doctrinally accepted exceptions
to the constitutional mandate 34 that no search or seizure shall be made
except by virtue of a warrant issued by a judge after personally determining
the existence of probable cause. The other exceptions are (3) search as an
incident to a lawful arrest, (2) seizure of evidence in plain view, (3) customs
searches, and (4) consented warrantless search. 35

We also affirm the rulings of both the trial court and the Court of Appeals
that the search on 4 April 1990 was a continuation of the search on 3 April
1990 done under and by virtue of the search warrant issued on 3 April 1990
by Executive Judge Osorio. Under Section 9, Rule 126 of the Rules of
Court, a search warrant has a lifetime of ten days. Hence, it could be served
at any time within the said period, and if its object or purpose cannot be
accomplished in one day, the same may be continued the following day or
days until completed. Thus, when the search under a warrant on one day was
interrupted, it may be continued under the same warrant the following day,
provided it is still within the ten-day period. 36
As to the final plea of the petitioner that the search was illegal because
possession of lumber without the required legal documents is not illegal
under Section 68 of P.D. No. 705, as amended, since lumber is neither
specified therein nor included in the term forest product, the same hardly
merits further discussion in view of our ruling in G.R. No. 106424.
G.R. No. 123784
The allegations and arguments set forth in the petition in this case palpally
fail to shaw prima facie that a reversible error has been committed by the
Court of Appeals in its challenged decision of 31 July 1995 and resolution of
6 February 1996 in CA-G.R. SP No. 33778. We must, forthwith, deny it for
utter want of merit. There is no need to require the respondents to comment
on the petition.
The Court of Appeals correctly dismissed the petitioner's appeal from the
judgment of the trial court in the SECOND CIVIL CASE. The petitioner
never disputed the fact that its lumber-dealer's license or permit had been
suspended by Secretary Factoran on 23 April 1990. The suspension was
never lifted, and since the license had only a lifetime of up to 25 September
1990, the petitioner has absolutely no right to possess, sell, or otherwise
dispose of lumber. Accordingly, Secretary Factoran or his authorized
representative had the authority to seize the Lumber pursuant to Section 68A of P.D. No. 705, as amended, which provides as follows:
Sec. 68-A Administrative Authority of the Department Head or his
Duly Authorized Representative to Order Confiscation. -- In all
cases of violations of this Code or other forest laws, rules and
regulations, the Department Head or his duly authorized
representative may order the confiscation of any forest products
illegally cut, gathered, removed, or possessed or abandoned. . . .
The petitioner's insistence that possession or sale of lumber is not penalized
must also fail view of our disquisition and ruling on the same issue in G.R.
No. 106424. Besides, the issue is totally irrelevant in the SECOND CIVIL
CASE which involves administrative seizure as a consequence of the
violation of the suspension of the petitioner's license as lumber dealer.
All told then, G.R. No. 104988 and G.R. No. 123784 are nothing more than
rituals to cover up blatant violations of the Revised Forestry Code of the
Philippines (P.D. No. 705), as amended. They are presumably trifling
attempts to block the serious efforts of the DENR to enforce the decree,
efforts which deserve the commendation of the public in light of the urgent
need to take firm and decisive action against despoilers of our forests whose
continuous destruction only ensures to the generations to come, if not the
present, an inheritance of parched earth incapable of sustaining life. The
Government must not tire in its vigilance to protect the environment by
prosecuting without fear or favor any person who dares to violate our laws
for the utilization and protection of our forests.
WHEREFORE, judgment is hereby rendered
1. (a) GRANTING the petition in G.R. No. 106424; (b) SETTING
ASIDE and ANNULLING, for having been rendered with grave
abuse of discretion, the challenged orders of 16 August 1991 and 18
October 1991 of respondent Judge Teresita Dizon-Capulong,
Branch 172, Regional Trial Court of Valenzuela, Metro Manila, in
Criminal Case No. 324-V-91, entitled "People of the Philippines vs.
Ri Chuy Po"; (c) REINSTATING the information in the said
criminal case; and (d) DIRECTING the respondent Judge or her
successor to hear and decide the case with purposeful dispatch; and
2. DENYING the petitions in G.R. No. 104988 and in G. R. No.
123784 for utter failure of the petitioner to show that the respondent
Court of Appeals committed any reversible error in the challenged
decisions of 29 November 1991 in CA-G.R. SP No. 25510 in the
FIRST CIVIL CASE and of 31 July 1995 in CA-G.R. SP No. 33778
on the SECOND CIVIL CASE. Costs against the petitioner in each
of these three cases. SO ORDERED.
MONGE vs. PEOPLE
This is a Petition for Review 1 under Rule 45 of the Rules of Court whereby
petitioner Galo Monge (petitioner) assails the Decision 2 of the Court of
Appeals dated 28 June 2005 which affirmed his conviction as well as the
discharge of accused Edgar Potencio (Potencio) as a state witness.
The factual antecedents follow. On 20 July 1994, petitioner and Potencio
were found by barangay tanods Serdan and Molina in possession of and
transporting three (3) pieces of mahogany lumber in Barangay Santo
Domingo, Iriga City. Right there and then, the tanods demanded that they be
shown the requisite permit and/or authority from the Department of

Environment and Natural Resources (DENR) but neither petitioner nor
Potencio was able to produce any.3 Petitioner fled the scene in that instant
whereas Potencio was brought to the police station for interrogation, and
thereafter, to the DENR-Community Environment and Natural Resources
Office (DENR-CENRO).4 The DENR-CENRO issued a seizure receipt for
the three pieces of lumber indicating that the items, totaling 77 board feet of
mahogany valued at P1,925.00, had been seized from Potencio.5 Later on,
petitioner was arrested, but Potencios whereabouts had been unknown since
the time of the seizure6 until he surfaced on 3 January 1998.7
An information was filed with the Regional Trial Court of Iriga City, Branch
35 charging petitioner and Potencio with violation of Section 688 of
Presidential Decree (P.D.) No. 705,9 as amended by Executive Order (E.O.)
No. 277, series of 1997. The inculpatory portion of the information reads:
That on or about the 20th day of [July 1994], at about 9:30 oclock in the
morning, in Barangay Sto. Domingo, Iriga City, Philippines and within
the jurisdiction of this Honorable Court, the above-named accused,
conspiring, confederating with each other, without any authority of law,
nor armed with necessary permit/license or other documents, with intent
to gain, did then and there willfully, unlawfully and feloniously,
transport and have in their possession three (3) pieces of Mahogany of
assorted [dimension] with a[n] appropriate volume of seventy-seven
(77) board feet or point eighteen (0.18) cubic meter with a total market
value of P1,925.00, Philippine currency, to the damage and prejudice of
the DENR in the aforesaid amount.
CONTRARY TO LAW.10
At the 26 November 1996 arraignment, petitioner entered a negative plea.11
Trial ensued. On 17 June 1997, Serdan testified on the circumstances of the
apprehension but for failing to appear in court for cross examination, his
testimony was stricken out.12 On 16 January 1998, Potencio was discharged
to be used as a state witness on motion of the prosecutor.13 Accordingly, he
testified on the circumstances of the arrest but claimed that for a promised
fee he was merely requested by petitioner, the owner of the log, to assist him
in hauling the same down from the mountain. Potencios testimony was
materially corroborated by Molina.14 Petitioner did not contest the
allegations, except that it was not he but Potencio who owned the lumber.
He lamented that contrary to what Potencio had stated in court, it was the
latter who hired him to bring the log from the site to the sawmill where the
same was to be sawn into pieces.15
The trial court found petitioner guilty as charged. Petitioner was imposed
nine (9) years, four (4) months and one (1) day to ten (10) years and eight
(8) months of prision mayor in its medium and maximum periods and
ordered to pay the costs.16

Aggrieved, petitioner elevated the case to the Court of Appeals where he
challenged the discharge of Potencio as a state witness on the ground that
the latter was not the least guilty of the offense and that there was no
absolute necessity for his testimony.17 The appellate court dismissed this
challenge and affirmed the findings of the trial court. However, it modified
the penalty to an indeterminate prison sentence of six (6) years of prision
correccionalas minimum to ten (10) years and eight (8) months of prision
mayor as maximum.18 His motion for reconsideration was denied, hence the
present appeal whereby petitioner reiterates his challenge against the
discharge of Potencio.
The petition is utterly unmeritorious.
Petitioner and Potencio were caught in flagrante delicto transporting, and
thus in possession of, processed mahogany lumber without proper authority
from the DENR. Petitioner has never denied this fact. But in his attempt to
exonerate himself from liability, he claims that it was Potencio, the owner of
the lumber, who requested his assistance in hauling the log down from the
mountain and in transporting the same to the sawmill for processing. The
contention is unavailing.
Section 68 of P.D. No. 705, as amended by E.O. No. 277, criminalizes two
distinct and separate offenses, namely: (a) the cutting, gathering, collecting
and removing of timber or other forest products from any forest land, or
timber from alienable or disposable public land, or from private land without
any authority; and (b) the possession of timber or other forest products
without the legal documents required under existing laws and
regulations.19DENR Administrative Order No. 59 series of 1993 specifies
the documents required for the transport of timber and other forest products.
Section 3 thereof materially requires that the transport of lumber be
accompanied by a certificate of lumber origin duly issued by the DENRCENRO. In the first offense, the legality of the acts of cutting, gathering,
collecting or removing timber or other forest products may be proven by the
authorization duly issued by the DENR. In the second offense, however, it is
immaterial whether or not the cutting, gathering, collecting and removal of
forest products are legal precisely because mere possession of forest
products without the requisite documents consummates the crime.20
It is thus clear that the fact of possession by petitioner and Potencio of the
subject mahogany lumber and their subsequent failure to produce the
requisite legal documents, taken together, has already given rise to criminal
liability under Section 68 of P.D. No. 705, particularly the second act
punished thereunder. The direct and affirmative testimony of Molina and
Potencio as a state witness on the circumstances surrounding the
apprehension well establishes petitioners liability. Petitioner cannot take
refuge in his denial of ownership over the pieces of lumber found in his
possession nor in his claim that his help was merely solicited by Potencio to
provide the latter assistance in transporting the said lumber. P.D. No. 705 is
a special penal statute that punishes acts essentially malum prohibitum. As
such, in prosecutions under its provisions, claims of good faith are by no
means reliable as defenses because the offense is complete and criminal
liability attaches once the prohibited acts are committed. 21 In other words,
mere possession of timber or other forest products without the proper legal
documents, even absent malice or criminal intent, is illegal. 22 It would
therefore make no difference at all whether it was petitioner himself or
Potencio who owned the subject pieces of lumber.
Considering the overwhelming body of evidence pointing to nothing less
than petitioners guilt of the offense charged, there is no cogent reason to
reverse his conviction.
Petitioners challenge against Potencios discharge as a state witness must
also fail. Not a few cases established the doctrine that the discharge of an
accused so he may turn state witness is left to the exercise of the trial courts
sound discretion23 limited only by the requirements set forth in Section 17, 24
Rule 119 of the Rules of Court. Thus, whether the accused offered to be
discharged appears to be the least guilty and whether there is objectively an
absolute necessity for his testimony are questions that lie within the domain
of the trial court, it being competent to resolve issues of fact. The
discretionary judgment of the trial court with respect this highly factual
issue is not to be interfered with by the appellate courts except in case of
grave abuse of discretion.25 No such grave abuse is present in this case.
Suffice it to say that issues relative to the discharge of an accused must be
raised in the trial court as they cannot be addressed for the first time on
appeal.26
Moreover and more importantly, an order discharging an accused from the
information in order that he may testify for the prosecution has the effect of
an acquittal.27 Once the discharge is ordered by the trial court, any future
development showing that any or all of the conditions provided in Section
17, Rule 119 have not actually been fulfilled will not affect the legal
consequence of an acquittal.28 Any witting or unwitting error of the
prosecution, therefore, in moving for the discharge and of the court in
granting the motionno question of jurisdiction being involvedwill not
deprive the discharged accused of the benefit of acquittal and of his right
against double jeopardy. A contrary rule would certainly be unfair to the
discharged accused because he would then be faulted for a failure
attributable to the prosecutor. It is inconceivable that the rule has adopted the
abhorrent legal policy of placing the fate of the discharged accused at the
mercy of anyone who may handle the prosecution. 29 Indeed, the only
instance where the testimony of a discharged accused may be disregarded is

when he deliberately fails to testify truthfully in court in accordance with his
commitment,30 as provided for in Section 18, Rule 119. Potencio lived up to
his commitment and for that reason, petitioners challenge against his
discharge must be dismissed. WHEREFORE, the petition is DENIED and
the assailed decision of the Court of Appeals is AFFIRMED.
TIGOY vs. COURT OF APPEALS
This is a petition for review under Rule 45 of the Rules of Court assailing
the decision and resolution, dated March 6, 2000 and August 23, 2000,
respectively, of the Court of Appeals in CA-G.R. CR No. 20864 entitled
"People of the Philippines v. Nestor Ong and Rodolfo Tigoy," acquitting
Nestor Ong for insufficiency of evidence, while convicting Rodolfo Tigoy
for violating Section 68 of Presidential Decree (P.D.) No. 705 or the Revised
Forestry Code of the Philippines, as amended by Executive Order (E.O.) No.
277, Series of 1987, in relation to Articles 309 and 310 of the Revised Penal
Code.
The facts of the case are as follows:
On August 3, 1993, Nestor Ong, who had been engaged in the trucking
business in Iligan City since 1986, was allegedly introduced by his friend
Gamad Muntod to Lolong Bertodazo who signified his intent to rent the
trucks of Ong to transport construction materials from Larapan, Lanao del
Norte to Dipolog City. A Contract to Transport was supposedly entered into
between Ong and Bertodazo, the salient portions of which state:
1. That the party of the First Part is an owner of Cargo Trucks with
place of business at Iligan City;
2. That the party of the Second Part is a businessman dealing in buy and
sell of General Merchandise, dry goods and construction materials;
3. That the party of the Second Part will engage the services of the two
(2) cargo trucks of the party of the First Part;
4. That the services agreed upon should be rendered by the party of the
First Part on August 3, 1993 from Larapan, Linamon, Lanao del Norte
to Dipolog City for an agreed amount of TEN THOUSAND
(P10,000.00) Pesos per truck or a total of TWENTY THOUSAND
(P20,000.00) Pesos, Philippine Currency for the carriage of cement and
other merchandise owned by the party of the Second Part;
5. That any legal controversy involving the cargo or of and when the
cargo trucks are not actually used for the purpose herein stipulated, it is
agreed that the same is the sole responsibility of the party of the Second
Part without any liability of the party of the First Part.1
In the evening of October 3, 1993, Ong allegedly ordered Nestor Sumagang
and petitioner Rodolfo Tigoy who had been employed by him as truck
drivers for two (2) years and ten (10) years, respectively, to bring the two
trucks to Lolong Bertodazo in Larapan, Lanao del Norte which is about
fifteen (15) minutes away from Iligan City. He instructed the two drivers to
leave the trucks in Larapan for the loading of the construction materials by
Lolong Bertodazo, and to go back at dawn for the trip to Dipolog City. Thus,
after meeting with Bertodazo, Sumagang and petitioner Tigoy allegedly
went home to return to Larapan at four oclock in the morning the next day.
When they arrived, the trucks had been laden with bags of cement and were
half-covered with canvas.2 Before departing, they allegedly checked the
motor oil, water, engine and tires of the trucks to determine if the same were
in good condition.
That same morning of October 4, 1993, Senior Inspector Rico Lacay Tome
(then Deputy Chief of Police of Ozamis City), while escorting Provincial
Director Dionisio Coloma at the ICC Arts Center in Ozamis City, along with
the members of the Special Operation Group, received a dispatch from the
466th PNP Company situated at Barangay Bongbong, Ozamis City,
informing him that two trucks, a blue and green loaded with cement, that
were going towards Ozamis City did not stop at the checkpoint. Upon
receiving the report, Tome, along with PO2 Peter Paul Nuqui and PO3
Bienvenido Real, boarded their patrol vehicle, a mini cruiser jeep, to
intercept the two trucks at Lilian Terminal, Ozamis City.3
At the Lilian Terminal, PO2 Nuqui, who was the only one in uniform among
the police officers, flagged down the two trucks but the same just sped away
and proceeded towards the direction of Oroquieta City. Aboard their patrol
vehicle, they chased the trucks and overtook the same at Barangay Manabay.
They blocked the road with their vehicle causing the two trucks to stop.
According to Senior Inspector Tome, he asked the driver who had alighted
from the green truck why he did not stop at the checkpoint but the latter did
not answer. When he inquired what was loaded in the truck, the driver
replied that there is "S.O.P," which means grease money in street parlance. 4
This raised the suspicion of Tome that the trucks were loaded with "hot
items."
Meanwhile, the blue truck which had been speeding behind the green truck
and was being driven by Sumagang was intercepted by PO3 Real. Upon
inspection, the police officers discovered piles of sawn lumber beneath the
cement bags in both trucks. Tome inquired if the drivers had a permit for the
lumber but the latter could not produce any.
The drivers were brought and turned over to the investigator at the City Hall
in Ozamis City. The truckmen, namely, Felix Arante and Doro Lopez, and
another passenger whom Tigoy identified as Lolong Bertodazo, who were
riding with them in the trucks, were not investigated. According to Nuqui,
they did not notice that the group had left. It was later learned that they were
instructed by Sumagang to inform Nestor Ong of the incident.

Afterwards, the group of Tome proceeded back to the ICC Arts Center and
informed the Provincial Director of the apprehension. Meanwhile, the
drivers, Tigoy and Sumagang, were detained at the Ozamis City Police
Station while Arante and Lopez were released.5
Meanwhile, Ermelo delos Santos, Chief of the Department of Environment
and Natural Resources Community and Environment and Natural
Resources Office (DENR-CENRO),6 after receiving a call from the Ozamis
City Police Station that two trucks were apprehended transporting sawn
lumber without a permit and were brought to the City Hall, sent Rolando
Dingal, Forester of the DENR, together with Teodoro Echavez, Juanito
Taruc and Lucio Penaroya, to investigate.
Petitioner Tigoy and Sumagang presented to Dingal the registration papers
of the two trucks and appearing therein was the name of Nestor Ong as the
owner. After ascertaining that the sawn lumber loaded on the two trucks did
not have supporting documents, Dingal and his companions scaled the
subject lumber and prepared a tally sheet. Loaded in the blue Nissan tenwheeler truck were 229 pieces of lumber with a total volume of 6,232.46
board feet; and, in the green Isuzu eight-wheeler truck, 333 pieces of lumber
with a total volume of 5,095.5 board feet.7 Consequently, the lumber and the
vehicles were seized upon the order of the DENR Regional Executive
Director.8
On October 6, 1993, an Information was filed against Nestor Ong,
Sumagang, Lolong Bertodazo and petitioner Tigoy for possession of forest
products without legal permit, thus:
That on or about the 4th day of August, 1993 at Barangay Catadman,
Ozamiz City, Philippines, and within the jurisdiction of this Honorable
Court, the above-named accused, conspiring and confederating together and
mutually helping each other, for a common design, did then and there
willfully, unlawfully, feloniously and illegally possess and transport without
the necessary legal documents nor permit from the lawful authorities, sawn
dipterocarp lumbers (Philippine Mahogany), in the following manner, to wit:
accused Nestor Ong, being the owner of 2 ten wheeler trucks with Plate Nos.
GDA-279 and PNH-364 facilitated and allowed the use and transport of
above-stated sawn [lumber] from Larapan, Lanao del Norte, but intercepted
by the PNP authorities in Ozamiz City; while the accused Lolong Bertodazo
facilitated the loading and transport of said sawn lumbers, while accused
Nestor Sumagang y Lacson drove the Nissan 10 wheeler cargo truck bearing
Plate No. GDA-279 which was loaded with 333 pieces of said sawn
dipterocarp lumbers (Philippine Mahogany) of assorted sizes equivalent [to]
5,095.5 board feet which was concealed under piled bags of cement, which
lumbers [were] valued at P134, 242.36; while accused Rodolfo Tigoy drove
the 8 wheeler Isuzu truck bearing Plate No. ONH-364, which was loaded
and transported with 229 pieces of sawn dipterocarp lumbers (Philippine
Mahogany) of assorted sizes equivalent to 6,232.46 board feet which was
concealed under piled bags of cement which lumbers [were] valued at
P92,316.77 or total value of P226,559.13, without, however, causing
damage to the government, inasmuch as the aforestated lumbers were
recovered.
CONTRARY to Section 68 of Presidential Decree 705, as amended by
Executive Order No. 277, Series of 1987, in relation to Article 309 and 310
of the Revised Penal Code.9
Ong and petitioner Tigoy entered pleas of not guilty during the arraignment.
Sumagang died after the case was filed while the other co-accused, Lolong
Bertodazo, was not arrested and has remained at large.
On October 11, 1996, the Regional Trial Court rendered its Decision, the
dispositive portion of which reads: WHEREFORE, finding accused Nestor
Ong and Rodolfo Tigoy [GUILTY] beyond reasonable doubt of possession
of dipterocarp lumber [VALUED] at more than P22,000.00 without the legal
documents as required by existing laws and regulations, penalized as
qualified theft, this Court sentences them to an indeterminate penalty of ten
(10) years and one (1) day of prision mayor to eighteen (18) years and three
(3) months of reclusion temporal. The lumber and the conveyances used are
forfeited in favor of the government. With costs.
The DENR is ordered to sell/dispose of the lumber and conveyances in
accordance with the existing laws, WITHOUT DELAY. Let the Court of
Appeals, Fourteenth Division, before which accused Ongs appeal of this
Courts denial of his action for replevin relative to his trucks is pending, be
furnished with a copy of this judgment.
With costs. SO ORDERED.10
Declaring that "constructive possession" of unlicensed lumber is not within
the contemplation of Section 68 of P.D. No. 705, and for failure by the
prosecution to prove the complicity of Ong, the Court of Appeals rendered
its decision on March 6, 2000 modifying the ruling of the lower court, thus:
WHEREFORE, the judgment appealed from is hereby MODIFIED in that
accused-appellant Nestor Ong is acquitted for insufficiency of evidence and
his two (2) trucks are ordered returned to him. The conviction of Rodolfo
Tigoy is upheld and the decision dated October 11, 1996 is AFFIRMED in
all respects.
SO ORDERED.11
On March 24, 2000, petitioner filed with the Court of Appeals a Motion for
Reconsideration praying for his acquittal but the same was denied on August
23, 2000.
Hence, this petition, with the following assignment of errors:
I.
THE COURT OF APPEALS ERRED IN FINDING "COLLUSION"

BETWEEN LOLONG BERTODAZO AND PETITIONER TIGOY;
II. THE COURT OF APPEALS ERRED IN COMPLETELY
DISREGARDING THE AFFIDAVIT OF LOLONG BERTODAZO
AGAINST HIS PENAL INTEREST
III. THE COURT OF APPEALS ERRED IN FINDING PETITIONER
TIGOY TO HAVE KNOWLEDGE OF THE LUMBER HE WAS
TRANSPORTING; AND,
IV. THE COURT OF APPEALS ERRED IN FINDING THAT
PETITIONER TIGOY HAD ACTUAL AND PHYSICAL
POSSESSION OF THE UNDOCUMENTED LUMBER.12
Stated otherwise, the core issue presented is whether or not petitioner Tigoy
is guilty of conspiracy in possessing or transporting lumber without the
necessary permit in violation of the Revised Forestry Code of the
Philippines.
Section 68 of P.D. No. 705, as amended by E.O. No. 277, otherwise known
as the Revised Forestry Code of the Philippines, provides:
Section 68. Cutting, Gathering and/or Collecting Timber or Other Forest
Products Without License. Any person who shall cut, gather, collect,
remove timber or other forest products from any forest land, or timber from
alienable or disposable public land, or from private land, without any
authority, or possess timber or other forest products without the legal
documents as required under existing forest laws and regulations, shall be
punished with the penalties imposed under Articles 309 and 310 of the
Revised Penal Code. . . .
There are two ways of violating Section 68 of the above Code: 1) by cutting,
gathering and/or collecting timber or other forest products without a license;
and, 2) by possessing timber or other forest products without the required
legal documents.
Petitioner was charged with and convicted of transporting lumber without a
permit which is punishable under Section 68 of the Code. He, Sumagang
and the rest of their companions were apprehended by the police officersin
flagrante delicto as they were transporting the subject lumber from Larapan
to Dipolog City.
Petitioner maintains that he could not have conspired with Lolong Bertodazo
as he did not know about the unlicensed lumber in the trucks. He believed
that what he was transporting were bags of cement in view of the contract
between Ong and Bertodazo. Also, he was not around when Bertodazo
loaded the trucks with the lumber hidden under the bags of cement.
This contention by petitioner, however, was not believed by the lower court.
In declaring that petitioner connived with Bertodazo in transporting the
subject lumber, the court a quo noted:

x x x The evidence of the prosecution established that the two drivers of
accused Ong refused to stop at a checkpoint, a fact admitted by both in their
affidavit, Exhs. "E" and "E-2". Likewise, the two drivers refused to stop on
the national highway near a bus terminal when required by a uniformed
policeman. When finally accosted, one of the drivers, whom witness Tome
identified as the driver of the green truck, Sumagang, but who actually was
Tigoy (as he was the driver of the green truck and who came to the road
block first, being the lead driver) offered "S.O.P." which to witness Tome
meant that the trucks were carrying "hot items."
Why would the drivers refuse to stop when required? Did they fear
inspection of their cargo? Why would "S.O.P." (which in street parlance is
grease money) be offered to facilitate the passage of the trucks? The only
logical answer to all these questions is that the drivers knew that they were
carrying contraband lumber. This Court believes that the drivers had
knowledge of the fact that they were transporting and were in possession of
undocumented lumber in violation of law.13
In offenses considered as mala prohibita or when the doing of an act is
prohibited by a special law such as in the present case, the commission of
the prohibited act is the crime itself. It is sufficient that the offender has the
intent to perpetrate the act prohibited by the special law, and that it is done
knowingly and consciously.14
Direct proof of previous agreement to commit an offense is not necessary to
prove conspiracy.15 Conspiracy may be proven by circumstantial evidence. 16
It may be deduced from the mode, method and manner by which the offense
is perpetrated, or inferred from the acts of the accused when such acts point
to a joint purpose and design, concerted action and community of interest. 17
It is not even required that the participants have an agreement for an
appreciable period to commence it.18
Petitioners actions adequately show that he intentionally participated in the
commission of the offense for which he had been charged and found guilty
by both the trial court and the Court of Appeals.
Finding that petitioners conviction was reached without arbitrariness and
with sufficient basis, this Court upholds the same. The Court accords high
respect to the findings of facts of the trial court, its calibration of the
collective testimonies of the witnesses, its assessment of the probative
weight of the evidence of the parties as well as its conclusions 19 especially
when these are in agreement with those of the Court of Appeals, which is the
case here. As a matter of fact, factual findings of the trial court, when
adopted and confirmed by the Court of Appeals, are generally final and
conclusive.20
WHEREFORE, the petition is DENIED and the Decision and Resolution,
dated March 6, 2000 and August 23, 2000, respectively, of the Court of
Appeals in CA-G.R. CR No. 20864 are hereby AFFIRMED. Costs against
petitioner.
CALUB vs. COURT OF APPEALS
For review is the decision1 dated May 27, 1994, of the Court of Appeals in
CA-G.R. SP No. 29191, denying the petition filed by herein petitioners for
certiorari, prohibition and mandamus, in order to annul the Order dated May
27, 1992, by the Regional Trial Court of Catbalogan, Samar. Said Order had
denied petitioners' (a) Motion to Dismiss the replevin case filed by herein
private respondents, as well as (b) petitioners Motion for Reconsideration of
the Order of said trial court dated April 24, 1992, granting an application for
a Writ of replevin.2
The pertinent facts of the case, borne by the records, are as follows:
On January 28, 1992, the Forest Protection and Law Enforcement Team of
the Community Environment and Natural Resources Office (CENRO) of the
DENR apprehended two (2) motor vehicles, described as follows:
1. Motor Vehicle with Plate No. HAK-733 loaded with one thousand
and twenty six (1,026) board feet of illegally sourced lumber valued at
P8,544.75, being driven by one Pio Gabon and owned by [a certain]
Jose Vargas.
2. Motor Vehicle with Plate No. FCN-143 loaded with one thousand two
hundred twenty four and ninety seven (1,224.97) board feet of illegallysourced lumber valued at P9,187.27, being driven by one Constancio
Abuganda and owned by [a certain] Manuela Babalcon. . . .3
Constancio Abuganda and Pio Gabon, the drivers of the vehicles, failed to
present proper documents and/or licenses. Thus, the apprehending team
seized and impounded the vehicles and its load of lumber at the DENRPENR (Department of Environment and Natural Resources-Provincial
Environment and Natural Resources) Office in Catbalogan. 4 Seizure receipts
were issued but the drivers refused to accept the receipts. 5 Felipe Calub,
Provincial Environment and Natural Resources Officer, then filed before the
Provincial Prosecutor's Office in Samar, a criminal complaint against
Abuganda, in Criminal Case No. 3795, for violation of Section 68 [78],
Presidential Decree 705 as amended by Executive Order 277, otherwise
known as the Revised Forestry Code.6
On January 31, 1992, the impounded vehicles were forcibly taken by Gabon
and Abuganda from the custody of the DENR, prompting DENR Officer
Calub this time to file a criminal complaint for grave coercion against
Gabon and Abuganda. The complaint was, however, dismissed by the Public
Prosecutor.7
On February 11, 1992, one of the two vehicles, with plate number FCN 143,
was again apprehended by a composite team of DENR-CENR in Catbalogan

and Philippine Army elements of the 802nd Infantry Brigade at Barangay
Buray, Paranas, Samar. It was again loaded with forest products with an
equivalent volume of 1,005.47 board feet, valued at P10,054.70. Calub duly
filed a criminal complaint against Constancio Abuganda, a certain Abegonia,
and several John Does, in Criminal Case No. 3625, for violation of Section
68 [78], Presidential Decree 705 as amended by Executive Order 277,
otherwise known as the Revised Forestry Code.8
In Criminal Cases Nos. 3795 and 3625, however, Abegonia and Abuganda
were acquitted on the ground of reasonable doubt. But note the trial court
ordered that a copy of the decision be furnished the Secretary of Justice, in
order that the necessary criminal action may be filed against Noe Pagarao
and all other persons responsible for violation of the Revised Forestry Code.
For it appeared that it was Pagarao who chartered the subject vehicle and
ordered that cut timber be loaded on it.9
Subsequently, herein private respondents Manuela Babalcon, the vehicle
owner, and Constancio Abuganda, the driver, filed a complaint for the
recovery of possession of the two (2) impounded vehicles with an
application for replevin against herein petitioners before the RTC of
Catbalogan. The trial court granted the application for replevin and issued
the corresponding writ in an Order dated April 24, 1992. 10 Petitioners filed a
motion to dismiss which was denied by the trial court. 11
Thus, on June 15, 1992, petitioners filed with the Supreme Court the present
Petition for Certiorari, Prohibition and Mandamus with application for
Preliminary Injunction and/or a Temporary Restraining Order. The Court
issued a TRO, enjoining respondent RTC judge from conducting further
proceedings in the civil case for replevin; and enjoining private respondents
from taking or attempting to take the motor vehicles and forest products
seized from the custody of the petitioners. The Court further instructed the
petitioners to see to it that the motor vehicles and other forest products
seized are kept in a secured place and protected from deterioration, said
property being in custodia legis and subject to the direct order of the
Supreme Court. 12 In a Resolution issued on September 28, 1992, the Court
referred said petition to respondent appellate court for appropriate
disposition. 13
On May 27, 1994, the Court of Appeals denied said petition for lack of
merit. It ruled that the mere seizure of a motor vehicle pursuant to the
authority granted by Section 68 [78] of P.D. No. 705 as amended by E.O.
No. 277 does not automatically place said conveyance in custodia legis.
According to the appellate court, such authority of the Department Head of
the DENR or his duly authorized representative to order the confiscation and
disposition of illegally obtained forest products and the conveyance used for
that purpose is not absolute and unqualified. It is subject to pertinent laws,

regulations, or policies on that matter, added the appellate court. The DENR
Administrative Order No. 59, series of 1990, is one such regulation, the
appellate court said. For it prescribes the guidelines in the confiscation,
forfeiture and disposition of conveyances used in the commission of
offenses penalized under Section 68 [78] of P.D. No. 705 as amended by
E.O. No. 277. 14
Additionally, respondent Court of Appeals noted that the petitioners failed to
observe the procedure outlined in DENR Administrative Order No. 59,
series of 1990. They were unable to submit a report of the seizure to the
DENR Secretary, to give a written notice to the owner of the vehicle, and to
render a report of their findings and recommendations to the Secretary.
Moreover, petitioners' failure to comply with the procedure laid down by
DENR Administrative Order No. 59, series of 1990, was confirmed by the
admission of petitioners' counsel that no confiscation order has been issued
prior to the seizure of the vehicle and the filing of the replevin suit.
Therefore, in failing to follow such procedure, according to the appellate
court, the subject vehicles could not be considered in custodia legis. 15
Respondent Court of Appeals also found no merit in petitioners' claim that
private respondents' complaint for replevin is a suit against the State.
Accordingly, petitioners could not shield themselves under the principle of
state immunity as the property sought to be recovered in the instant suit had
not yet been lawfully adjudged forfeited in favor of the government.
Moreover, according to respondent appellate court, there could be no
pecuniary liability nor loss of property that could ensue against the
government. It reasoned that a suit against a public officer who acted
illegally or beyond the scope of his authority could not be considered a suit
against the State; and that a public officer might be sued for illegally seizing
or withholding the possession of the property of another. 16
Respondent court brushed aside other grounds raised by petitioners based on
the claim that the subject vehicles were validly seized and held in custody
because they were contradicted by its own findings. 17 Their petition was
found without merit. 18
Now, before us, the petitioners assign the following errors: 19
(1) THE COURT OF APPEALS ERRED IN HOLDING THAT MERE
SEIZURE OF A CONVEYANCE PURSUANT TO SECTION 68-A
[78-A] OF P.D. NO. 705 AS AMENDED BY EXECUTIVE ORDER
277 DOES NOT PLACE SAID CONVEYANCE IN CUSTODIA
LEGIS;
(2) THE COURT OF APPEALS ERRED IN NOT HOLDING THAT
THE OPERATIVE ACT GIVING RISE FOR THE SUBJECT
CONVEYANCE TO BE IN CUSTODIA LEGIS IS ITS LAWFUL
SEIZURE BY THE DENR PURSUANT TO SECTION 68-A [78-A]

OF P.D. NO. 705, AS AMENDED BY E.O. NO. 277; AND
(3) THE COURT OF APPEALS ERRED IN HOLDING THAT THE
COMPLAINT FOR REPLEVIN AGAINST THE PETITIONERS IS
NOT A SUIT AGAINST THE STATE.
In brief, the pertinent issues for our consideration are:
(1) Whether or not the DENR-seized motor vehicle, with plate number
FCN 143, is in custodia legis.
(2) Whether or not the complaint for the recovery of possession of
impounded vehicles, with an application for replevin, is a suit against
the State.
We will now resolve both issues.
The Revised Forestry Code authorizes the DENR to seize all conveyances
used in the commission of an offense in violation of Section 78. Section 78
states:
Sec. 78. Cutting, Gathering, and/or Collecting Timber, or Other Forest
Products without License. Any person who shall cut, gather, collect,
remove timber or other forest products from any forestland, or timber
from alienable or disposable public land, or from private land, without
any authority, or possess timber or other forest products without the
legal documents as required under existing forest laws and regulations,
shall be punished with the penalties imposed under Articles 309 and 310
of the Revised Penal Code. . .
The Court shall further order the confiscation in favor of the
government of the timber or any forest products cut, gathered, collected,
removed, or possessed, as well as the machinery, equipment,
implements and tools illegally used in the area where the timber or
forest products are found.
This provision makes mere possession of timber or other forest products
without the accompanying legal documents unlawful and punishable with
the penalties imposed for the crime of theft, as prescribed in Articles 309310 of the Revised Penal Code. In the present case, the subject vehicles were
loaded with forest products at the time of the seizure. But admittedly no
permit evidencing authority to possess and transport said load of forest
products was duly presented. These products, in turn, were deemed illegally
sourced. Thus there was a prima facie violation of Section 68 [78] of the
Revised Forestry Code, although as found by the trial court, the persons
responsible for said violation were not the ones charged by the public
prosecutor.
The corresponding authority of the DENR to seize all conveyances used in
the commission of an offense in violation of Section 78 of the Revised
Forestry Code is pursuant to Sections 78-A and 89 of the same Code. They
read as follows:
Sec. 78-A. Administrative Authority of the Department Head or His
Duly Authorized Representative to Order Confiscation. In all cases of
violation of this Code or other forest laws, rules and regulations, the
Department Head or his duly authorized representative, may order the
confiscation of any forest products illegally cut, gathered, removed, or
possessed or abandoned, and all conveyances used either by land, water
or air in the commission of the offense and to dispose of the same in
accordance with pertinent laws, regulations or policies on the matter.
Sec. 89. Arrest; Institution of criminal actions. A forest officer or
employee of the Bureau [Department] or any personnel of the Philippine
Constabulary/Philippine National Police shall arrest even without
warrant any person who has committed or is committing in his presence
any of the offenses defined in this Chapter. He shall also seize and
confiscate, in favor of the Government, the tools and equipment used in
committing the offense. . . [Emphasis supplied.]
Note that DENR Administrative Order No. 59, series of 1990, implements
Sections 78-A and 89 of the Forestry Code, as follows:
Sec. 2. Conveyances Subject to Confiscation and Forfeiture. All
conveyances used in the transport of any forest product obtained or
gathered illegally whether or not covered with transport documents,
found spurious or irregular in accordance with Sec. 68-A [78-A] of P.D.
No. 705, shall be confiscated in favor of the government or disposed of
in accordance with pertinent laws, regulations or policies on the matter.
Sec. 4. Who are Authorized to Seize Conveyance. The Secretary or
his duly authorized representative such as the forest officers and/or
natural resources officers, or deputized officers of the DENR
areauthorized to seize said conveyances subject to policies and
guidelines pertinent thereto. Deputized military personnel and officials
of other agencies apprehending illegal logs and other forest products
and their conveyances shall notify the nearest DENR field offices, and
turn oversaid forest products and conveyances for proper action and
disposition. In case where the apprehension is made by DENR field
officer, the conveyance shall be deposited with the nearest
CENRO/PENRO/RED Office as the case may be, for safekeeping
wherever it is most convenient and secured. [Emphasis supplied.]
Upon apprehension of the illegally-cut timber while being transported
without pertinent documents that could evidence title to or right to
possession of said timber, a warrantless seizure of the involved vehicles and
their load was allowed under Section 78 and 89 of the Revised Forestry
Code.
Note further that petitioners' failure to observe the procedure outlined in
DENR Administrative Order No. 59, series of 1990 was justifiably

explained. Petitioners did not submit a report of the seizure to the Secretary
nor give a written notice to the owner of the vehicle because on the 3rd day
following the seizure, Gabon and Abuganda, drivers of the seized vehicles,
forcibly took the impounded vehicles from the custody of the DENR. Then
again, when one of the motor vehicles was apprehended and impounded for
the second time, the petitioners, again were not able to report the seizure to
the DENR Secretary nor give a written notice to the owner of the vehicle
because private respondents immediately went to court and applied for a
writ of replevin. The seizure of the vehicles and their load was done upon
their apprehension for a violation of the Revised Forestry Code. It would be
absurd to require a confiscation order or notice and hearing before said
seizure could be effected under the circumstances.
Since there was a violation of the Revised Forestry Code and the seizure was
in accordance with law, in our view the subject vehicles were validly
deemed in custodia legis. It could not be subject to an action for replevin.
For it is property lawfully taken by virtue of legal process and considered in
the custody of the law, and not otherwise. 20
In Mamanteo, et. al. v. Deputy Sheriff Magumun, A.M. No. P-98-1264,
promulgated on July 28, 1999, the case involves property to be seized by a
Deputy Sheriff in a replevin suit. But said property were already impounded
by the DENR due to violation of forestry laws and, in fact, already forfeited
in favor of the government by order of the DENR. We said that such
property was deemed in custodia legis. The sheriff could not insist on
seizing the property already subject of a prior warrant of seizure. The
appropriate action should be for the sheriff to inform the trial court of the
situation by way of partial Sheriff's Return, and wait for the judge's
instructions on the proper procedure to be observed.
Note that property that is validly deposited in custodia legis cannot be the
subject of a replevin suit. In Mamanteo v. Deputy Sheriff Magumun, we
elucidated further:
. . . the writ of replevin has been repeatedly used by unscrupulous
plaintiffs to retrieve their chattel earlier taken for violation of the Tariff
and Customs Code, tax assessment, attachment or execution. Officers of
the court, from the presiding judge to the sheriff, are implored to be
vigilant in their execution of the law otherwise, as in this case, valid
seizure and forfeiture proceedings could easily be undermined by the
simple devise of a writ of replevin. . . 21
On the second issue, is the complaint for the recovery of possession of the
two impounded vehicles, with an application for replevin, a suit against the
State?
Well established is the doctrine that the State may not be sued without its
consent. 22 And a suit against a public officer for his official acts is, in effect,
a suit against the State if its purpose is to hold the State ultimately liable.
23
However, the protection afforded to public officers by this doctrine
generally applies only to activities within the scope of their authority in
good faith and without willfulness, malice or corruption. 24 In the present
case, the acts for which the petitioners are being called to account were
performed by them in the discharge of their official duties. The acts in
question are clearly official in nature. 25 In implementing and enforcing
Sections 78-A and 89 of the Forestry Code through the seizure carried out,
petitioners were performing their duties and functions as officers of the
DENR, and did so within the limits of their authority. There was no malice
nor bad faith on their part. Hence, a suit against the petitioners who
represent the DENR is a suit against the State. It cannot prosper without the
State's consent.
Given the circumstances in this case, we need not pursue the Office of the
Solicitor General's line for the defense of petitioners concerning exhaustion
of administrative remedies. We ought only to recall that exhaustion must be
raised at the earliest time possible, even before filing the answer to the
complaint or pleading asserting a claim, by a motion to dismiss. 26 If not
invoked at the proper time, this ground for dismissal could be deemed
waived and the court could take cognizance of the case and try it. 27
ACCORDINGLY, the Petition is GRANTED, and the assailed Decision of
the Court of Appeals in CA-G.R. SP No. 29191 is SET ASIDE.1wphi1
Consequently, the Order issued by the Regional Trial Court of Catbalogan,
dated May 27, 1992, and the Writ of replevin issued in the Order dated April
24, 1992, are ANNULLED. The Sheriff of the Regional Trial Court of
Catbalogan, Branch 29, is directed to take possession of the subject motor
vehicle, with plate number FCN 143, for delivery to the custody of and
appropriate disposition by petitioners. Let a copy of this decision be
provided the Honorable Secretary of Justice for his appropriate action,
against any and all persons responsible for the abovecited violation of the
Revised Forestry Code.
Costs against private respondents.1wphi1.nt
SO ORDERED.

Environmental Law Finals

Hochgeladen von

Dokumentinformationen

Copyright

Verfügbare Formate

Dieses Dokument teilen

Dokument teilen oder einbetten

Freigabeoptionen

Stufen Sie dieses Dokument als nützlich ein?

Sind diese Inhalte unangemessen?

Copyright:

Verfügbare Formate

Environmental Law Finals

Hochgeladen von

Copyright:

Verfügbare Formate

Environmental Law Finals

La Bigal Blaan vs. Ramos

technology,26 and safety and environmental protection.27

x x x in signing and promulgating DENR Administrative Order No. 96-40

Resources International Pty., Ltd. (WMC), "a wholly owned subsidiary of

stake in the outcome of the controversy as to assure that concrete

Section 2 of Rule 65 read: SEC. 2. Petition for prohibition. When the

Supreme Court's original jurisdiction to issue these writs should be allowed

recognized the unique value of natural resources, viewing them, especially

continues during the entire life of the location. x x x.

medieval concept of jura regalia is stripped of royal overtones and

through peaceful economic penetration; and (3) to avoid making the

explore for116 or develop117 petroleum within specified areas.

granted the Secretary the authority to inspect any operation of the

downstream operations, like processing, marketing, and distribution. In

resource, or directly manages the productive enterprise, operations of the

exploration, development and exploitation of his claims and the processing

resources, except agricultural lands.

scientific and technical resources.

Sec. 2. Applications for the exploration, development and utilization of

gross output.194 The MPSA contractor provides the financing, technology,

organized foreign-owned corporation (any corporation, partnership,

the Constitution, the WMCP FTAA allows WMCP, a fully foreign-owned

or Filipino-controlled enterprise could possibly undertake the

MS. QUESADA. Another point of clarification is the phrase "and

to go around the 60-40 requirement.238 [Emphasis supplied.]

Sec. 1. All lands of

Sec. 3. All lands of

Sec. 2. All lands of

The President shall

The service contract as we know it here is antithetical to the principle of

Filipino citizens or corporations or associations sixty per cent (60%) of the

commented that, other than congressional notification, the only difference

Section 33, which is found under Chapter VI (Financial or Technical

(MPSA, CA and JV).276 Parenthetically, Sections 72 to 75 use the term

dependent on the foregoing provisions and cannot stand on their own:

(f) to construct roadways, mining, drainage, power generation and

Constitution would lead to absurd consequences.303 As WMCP correctly put

State in the public interest.

"SECTION 5. Mineral Reservations. When the national interest so

(e) In areas covered by small-scale miners as defined by law unless

"SECTION 14. Size of Mining Claim. -- For purposes of registration of

which may be amended, modified or rescinded when the national

1986, issued by then Minister Maceda and, subsequently, by the President

entitled, such as the protection of a former conviction or an acquittal or the

damages enumerated in paragraph 6 hereof are already being felt,

On 14 May 1992, We resolved to give due course to the petition and

regulations. Petitioners' proposition to have all the TLAs indiscriminately

of discretion amounting to lack of jurisdiction. The pertinent portions of the

self-perpetuation aptly and fittingly stressed by the petitioners the

order. The law itself stands in disrepute."

jurisdiction conferred upon us that now covers, in proper cases,

MUSTANG LUMBER vs. COURT OF APPEALS

such was to expire on 25 September 1990.

requesting an extension of fifteen days from 14 April 1990 to produce the

with as directed by Law;

expiration of the petitioner's lumber dealer's permit on 25 September 1990, a

to be engaged in the legitimate business of lumber dealership. But

equipment used in committing the offense, or the forest products

corporations, the officers who ordered the cutting, gathering,

searches, and (4) consented warrantless search. 35

shown the requisite permit and/or authority from the Department of

ordered to pay the costs.16

instance where the testimony of a discharged accused may be disregarded is