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

An exploration permit cannot be assigned or transferred to a subsidiary corporation absent proof of agency or the prior approval of the DENR Secretary, as required by mining law and the permit's terms; moreover, the DENR Secretary lacks the authority to withdraw lands from a forest reserve and declare them open to mining, such power residing solely in the President.

Proclamation No. 369, issued in 1931, established the Agusan-Davao-Surigao Forest Reserve. Within this reserve lies a 4,941.6759-hectare mineral land in Monkayo and Cateel, later known as the "Diwalwal Gold Rush Area," which has been the subject of intense conflict among mining claimants since the early 1980s. Camilo Banad and his group filed the first mining claims in 1983, later organizing Balite Communal Portal Mining Cooperative and entering operating agreements with Apex Mining Corporation. Marcopper Mining Corporation (MMC) subsequently filed adjacent claims, but upon realizing the area was a forest reserve, abandoned the claims and secured a Prospecting Permit from the Bureau of Forest Development, followed by Exploration Permit No. 133 (EP 133) from the Bureau of Mines and Geo-Sciences in 1986. A prior Supreme Court ruling in Apex Mining Co., Inc. v. Garcia settled that the disputed area is a forest reserve, thereby favoring MMC's acquisition route over Apex's. In 1991, the DENR Secretary issued Department Administrative Order No. 66 (DAO No. 66), segregating 729 hectares for small-scale mining. In 1994, MMC assigned EP 133 to its 100% subsidiary, SEM, which then filed a Mineral Production Sharing Agreement (MPSA) application. EP 133 expired in July 1994 without renewal.

• The Diwalwal Gold Rush Area: The disputed area, a rich tract of mineral land within the Agusan-Davao-Surigao Forest Reserve established by Proclamation No. 369, became known as the Diwalwal Gold Rush Area. Conflicts among numerous mining claimants have plagued the area since the early 1980s.
• Early Mining Claims: In November 1983, Camilo Banad and his group filed a Declaration of Location (DOL) for six mining claims. Banad's group later organized Balite Communal Portal Mining Cooperative (Balite) and entered into operating agreements with Apex Mining Corporation (Apex) in December 1983.
• MMC's Prospecting and Exploration Permits: Marcopper Mining Corporation (MMC) filed adjacent DOLs in February 1984 but abandoned them upon realizing the area was a forest reserve. MMC instead secured a Prospecting Permit from the Bureau of Forest Development in July 1985, followed by Exploration Permit No. 133 (EP 133) from the Bureau of Mines and Geo-Sciences in March 1986.
• Prior Supreme Court Ruling: After BMG initially favored Apex, the DENR and the Office of the President reversed the ruling in favor of MMC. Apex elevated the case to the Supreme Court (Apex Mining Co., Inc. v. Garcia), which ruled in 1991 that the disputed area is a forest reserve, thereby validating MMC's acquisition of mining rights via a prospecting permit rather than a DOL.
• DAO No. 66: In December 1991, DENR Secretary Fulgencio Factoran, Jr. issued Department Administrative Order No. 66, declaring 729 hectares within the forest reserve as non-forest lands open to small-scale mining purposes. This led several entities, including Balite, to file MPSA applications.
• Assignment of EP 133 and Expiration: On February 16, 1994, MMC assigned EP 133 to Southeast Mindanao Gold Mining Corporation (SEM), its alleged 100%-owned subsidiary, via a Deed of Assignment. EP 133 was extended for 12 months until July 6, 1994, but was never renewed, causing the permit to expire.
• Adverse Claims and MAB Ruling: SEM filed an MPSA application for the entire 4,941.6759 hectares. Multiple entities filed adverse claims. The Panel of Arbitrators (PA) upheld EP 133 and dismissed the adverse claims for technical defects. The Mines Adjudication Board (MAB) vacated the PA ruling, approved SEM's MPSA (excluding the 729 hectares under DAO 66), and imposed a moratorium.
• Supervening Executive Actions: During the pendency of the petitions, President Gloria Macapagal-Arroyo issued Proclamation No. 297 in November 2002, excluding 8,100 hectares in Monkayo and proclaiming the area a mineral reservation and environmentally critical area. DENR Administrative Order No. 2002-18 was subsequently issued, declaring an emergency and stopping all mining operations in Diwalwal.

• Validity of EP 133 and its Transfer: Apex argued that EP 133 is null and void due to MMC's failure to comply with mandatory work programs, Environmental Compliance Certificate requirements, and reportorial requirements. Apex maintained that MMC lost its rights by failing to file an MPSA application under DAO No. 82, causing the permit to lapse, and that the assignment to SEM violated the explicit proscription against transfer.
• Vested Rights: Apex asserted that MMC did not acquire a vested right over the area because Presidential Decree No. 463 and Republic Act No. 7942 impose an obligation to actually undertake exploration work, which MMC failed to do.
• Agency vs. Assignment: The MAB argued that SEM did not acquire any right from MMC because the assignment violated the condition that the permit be for the exclusive use of the permittee or its "duly authorized agents." SEM, as an assignee, is not an agent. Furthermore, the assignment lacked the prior approval of the DENR Secretary required under Section 25 of Republic Act No. 7942 and Section 97 of Presidential Decree No. 463.
• Preferential Right of Balite: Balite maintained that its MPSA application, filed nine days before SEM's, has preferential right. Balite argued that the PA's dismissal of its adverse claim for failure to submit a sketch plan was invalid because the plan was actually submitted on time.
• Legality of Occupation under DAO 66: Balite contended that its actual occupation and small-mining operations in the 729 hectares pursuant to DAO No. 66 were legal.
• Supervening Events: The MAB insisted that subsequent executive acts (DAO No. 66, Proclamation No. 297, Executive Order No. 217) outweigh EP 133 and other adverse claims over the area.

• Factual Issues Not Reviewable: SEM countered that the errors raised by petitioners relate to factual and evidentiary matters which the Supreme Court cannot inquire into in a Petition for Review on Certiorari under Rule 45, as the Court is not a trier of facts and the Court of Appeals' findings are conclusive and binding.
• Validity of Transfer via Agency/Piercing the Corporate Veil: SEM argued that the transfer of EP 133 was valid because SEM, as a 100% subsidiary of MMC, acted as its agent, thus satisfying the permit condition allowing use by "duly authorized agents." The Court of Appeals invoked the doctrine of piercing the corporate veil to legitimize the transfer, claiming SEM was merely a business conduit of MMC.

• Validity of EP 133 and its Transfer: Whether the Court of Appeals erred in upholding the validity and continuous existence of EP 133 as well as its transfer to SEM.
• Authority of the DENR Secretary: Whether the Court of Appeals erred in declaring that the DENR Secretary has no authority to issue DAO No. 66.
• Effect of Supervening Executive Acts: Whether the subsequent acts of the executive department such as the issuance of Proclamation No. 297, and DAO No. 2002-18 can outweigh Apex and Balite’s claims over the Diwalwal Gold Rush Area.

• Validity of EP 133 and its Transfer: The Court of Appeals was reversed. The transfer of EP 133 to SEM was declared void for contravening the permit's condition that it be for the exclusive use of the permittee or its duly authorized agent. Agency requires consent and representation, not mere subsidiary status; an assignee takes the place of the assignor and acts for itself, distinct from an agent acting for a principal. The doctrine of piercing the corporate veil cannot be used to sanction a prohibited act such as circumventing the non-transferability condition. Furthermore, the assignment lacked the mandatory prior approval of the DENR Secretary required under Section 97 of Presidential Decree No. 463 and Section 25 of Republic Act No. 7942. Finally, EP 133 expired on July 6, 1994, due to non-renewal, thereby extinguishing any rights of MMC or SEM over the area.
• Authority of the DENR Secretary: The Court of Appeals' finding that DAO No. 66 was issued ultra vires was affirmed. While Proclamation No. 369 initially allowed the Secretary of Agriculture and Natural Resources to classify lands, subsequent statutes—Commonwealth Act No. 137 and Presidential Decree No. 463—vested the power to withdraw forest reserves for mining purposes solely in the President. The DENR Secretary merely recommends; thus, the segregation of 729 hectares by DAO No. 66 was void.
• Effect of Supervening Executive Acts: The issue of who has priority right over the disputed area was rendered moot and academic by the issuance of Proclamation No. 297 and DAO No. 2002-18. Under Section 2, Article XII of the 1987 Constitution and Section 5 of Republic Act No. 7942, the State has full control and supervision over natural resources and may establish mineral reservations. Mining operations in the Diwalwal Mineral Reservation are now within the full control of the State, which may directly undertake operations or award them to qualified entities.

• Agency vs. Assignment in Mining Permits — Agency requires the agent to act on behalf of and in representation of the principal, whereas assignment involves a total transfer or relinquishment of right by the assignor to the assignee. A subsidiary corporation that receives an assignment of a permit is an assignee, not an authorized agent, and cannot avail of permit conditions allowing use by "duly authorized agents."
• Piercing the Corporate Veil — The corporate veil may be pierced when the corporation is a mere alter ego or conduit used to commit fraud, illegality, or inequity against a third person. However, the doctrine cannot be used as a vehicle to commit prohibited acts or circumvent permit conditions, as the doctrine precisely seeks to prevent such illegalities.
• State Control over Natural Resources — Under the 1987 Constitution and the Philippine Mining Act of 1995, the State has full control and supervision over the exploration, development, and utilization of natural resources. The President may establish mineral reservations when national interest requires, and operations therein shall be undertaken by the State directly or through a contractor.

• "The doctrine of piercing the corporate veil cannot therefore be used as a vehicle to commit prohibited acts because these acts are the ones which the doctrine precisely seeks to prevent."
• "Absent the prior approval of the Secretary of DENR, the assignment of EP 133, was, therefore, without legal effect for violating the mandatory provision of Presidential Decree No. 463."
• "The issue on who has priority right over the disputed area is deemed overtaken by the above subsequent developments particularly with the issuance of Proclamation 297 and DAO No. 2002-18, both being constitutionally-sanctioned acts of the Executive Branch. Mining operations in the Diwalwal Mineral Reservation are now, therefore, within the full control of the State through the executive branch."

• Apex Mining Co., Inc. v. Garcia, G.R. No. 92605, 16 July 1991 — Controlling precedent. Cited to establish that the disputed area is a forest reserve and that the proper procedure for acquiring mining rights therein is through a prospecting permit with the BFD, not a DOL with the BMG.
• Yu Eng Cho v. Pan American World Airways, Inc., G.R. No. 123560, 27 March 2000 — Followed. Cited for the elements of agency: (1) consent of the parties; (2) object is the execution of a juridical act; (3) agent acts as a representative; and (4) agent acts within the scope of authority.
• Manila Electric Company v. Benamira, G.R. No. 145271, 14 July 2005 — Followed. Cited to justify the Supreme Court's re-evaluation of facts, as an exception to the rule that the Court is not a trier of facts, due to conflicting findings between the Court of Appeals and the MAB.

• Section 97, Presidential Decree No. 463 (Mineral Resources Development Decree) — Provides that a mining lease contract or interest therein shall not be transferred or assigned without the prior approval of the Secretary of the DENR. Applied to invalidate the assignment of EP 133 to SEM due to lack of DENR Secretary approval.
• Section 25, Republic Act No. 7942 (Philippine Mining Act of 1995) — Provides that an exploration permit may be transferred or assigned to a qualified person subject to the approval of the Secretary upon recommendation of the Director. Applied to reinforce the requirement of DENR Secretary approval for the transfer of mining rights.
• Section 14, Commonwealth Act No. 137 (The Mining Act) — Vests in the President, with the concurrence of the National Assembly, the power to withdraw forest reservations found more valuable for mineral contents. Applied to demonstrate that the DENR Secretary lacks the power to convert forest reserves into non-forest reserves.
• Section 8, Presidential Decree No. 463 — Provides that lands within reservations more valuable for mineral contents may, upon recommendation of the Secretary, be withdrawn from the reservation by the President. Applied to further prove that the DENR Secretary exceeded authority in issuing DAO No. 66.
• Section 2, Article XII, 1987 Constitution — Declares that all natural resources are owned by the State and their exploration, development, and utilization shall be under the full control and supervision of the State. Applied to uphold the validity of Proclamation No. 297 and the State's takeover of the Diwalwal mineral reservation.
• Section 5, Republic Act No. 7942 — Empowers the President to establish mineral reservations when national interest requires. Applied to affirm that mining operations in the established mineral reservation are within the full control of the Executive Department.

Artemio V. Panganiban (Chief Justice), Consuelo Ynares-Santiago, Ma. Alicia Austria-Martinez, Romeo J. Callejo, Sr.