Atlas Consolidated Mining & Development Corporation vs. Court of Appeals

A stranger to a contract lacks standing to maintain declaratory relief to construe its validity, and a pending declaratory action involving a mining controversy was divested from the courts by the original and exclusive jurisdiction conferred on the Bureau of Mines by Presidential Decree No. 1281. The uncertainty must arise from an instrument to which the petitioner is an interested party, with no other adequate remedy available; where the dispute concerns mining property subject to different agreements and cancellation or enforcement of mining contracts, adjudication belongs exclusively to the Bureau even for actions filed before the Decree.

Atlas Consolidated Mining & Development Corporation operated as mining operator under royalty-based operating agreements with two sets of claim holders over mining claims in Toledo City, Cebu. Presidential Decree No. 99-A, Presidential Decree No. 309, and Presidential Decree No. 1281 successively channeled mining controversies to the Director of Mines/Bureau of Mines, culminating in Section 7 of Presidential Decree No. 1281 conferring original and exclusive jurisdiction, including over cancellation and enforcement of mining contracts.

On June 5, 1973, Atlas Consolidated Mining & Development Corporation entered into an operating agreement with the heirs of Manuel Cuenco and Jose P. Velez, collectively Cuenco-Velez, granting Atlas the right to explore, develop and operate twelve mining claims in Toledo City, Cebu in consideration of royalties. On June 17, 1973, Atlas entered into a similar operating agreement with Biga Copper Mines Exploration Company, a partnership of Pablo B. Gorosin, Francisco B. Gorosin, Pedro B. Gorosin and Vicente T. Garaygay, collectively the Biga Partners, covering thirty-one mining claims likewise in Toledo City.

Nine mining claims overlapped between the two grants. The overlap became the subject of Mines Administrative Cases Nos. V-727 and V-750, resolved by the Director of Mines on February 12, 1974 in favor of Cuenco-Velez, affirmed by the Secretary of Agriculture and Natural Resources on April 14, 1974 in DANR Cases Nos. 3936 and 3936-A, and appealed to the Office of the President as O.P. Case No. 0435. During pendency of that appeal, Cuenco-Velez and Biga Copper entered into a compromise agreement enabling Biga Copper to lay claim over the nine overlapping claims, submitted for presidential approval.

When Atlas began operating its Carmen Project including claims under both operating agreements, it received numerous letters from third parties claiming to be assignees of Biga Copper and the Biga Partners and demanding substitution for royalty payments. Upon verification, Atlas confirmed that before registration of the Articles of Partnership of Biga Copper, the Biga Partners had sold or assigned shares, rights, interests and participations to third parties, and that Biga Copper acting separately had likewise sold or assigned undivided shares and interests to third parties. Separately, Alejandro T. Escano informed Atlas that he was assignee of fifty percent of Cuenco-Velez rights in three mining claims retained by Cuenco-Velez under the compromise, while Cuenco-Velez advised Atlas that the Escano assignment had been revoked for failure to fulfill conditions.

Thereafter Atlas instituted declaratory relief in the Court of First Instance of Cebu, Branch 8, as Civil Case No. 16669-R, against Biga Copper, the Biga Partners, Cuenco-Velez and some thirty-one assignees, posing seven questions on to whom royalties should be paid, whether the unapproved compromise bound Atlas and prior assignees, whether pre- and post-registration assignments exceeding partnership shares were valid against Atlas, and which assignees were entitled. Respondents moved to dismiss, invoked Presidential Decree No. 1281 effective January 16, 1978 and a February 11, 1978 revocation letter, and later invoked a Bureau of Mines annulment suit, Special Case No. V-95, set January 22, 1979. The trial court retained the case, finding no mining controversy and no identity with the annulment action.

• Entitlement to Declaratory Relief: Petitioner argued that under the factual backdrop of overlapping claims, compromise agreement, and numerous pre- and post-registration assignments exceeding partnership interests, it was entitled as a matter of law to proceed with declaratory relief to determine to whom royalties under its operating agreements should be paid.
• Non-Cancellability of Operating Agreement: Petitioner maintained in supplemental opposition that Biga Copper had no right to unilaterally cancel their operating agreement by the February 11, 1978 letter, so jurisdiction was not lost on that ground.
• Intervenors Joining Petitioner: Intervenor Epifanio A. Anoos argued that the Court of Appeals violated due process by deciding without notice to the rest of the below parties and that the February 21, 1979 summary judgment in his favor had become final and executory for failure to appeal, while intervenors Cuenco-Velez argued their substantive and procedural due process was violated by non-impleader before the appellate court and that the appellate decision was not in accordance with law.

• Lack of Jurisdiction and Cause of Action: Respondents argued in the January 18, 1978 motion to dismiss that the court had no jurisdiction over the subject or nature of the suit and that the complaint stated no cause of action.
• Divestiture by Presidential Decree No. 1281: Respondents argued in the February 17, 1978 supplemental motion that the operating agreement had been revoked by letter dated February 11, 1978 and that by reason of rescission the trial court lost jurisdiction pursuant to Section 7, paragraphs A and C and Section 12 of Presidential Decree No. 1281.
• Pendency of Administrative Annulment: Respondents argued in the December 29, 1978 motion that the trial court had lost jurisdiction in view of the action for annulment of the Biga Copper-Atlas operating agreement filed with the Bureau of Mines as Special Case No. V-95.

• Standing for Declaratory Relief by Non-Party: Whether a person who is not a party to a contract may file a petition for declaratory relief and seek judicial interpretation of such contract.
• Divestiture of Jurisdiction by Presidential Decree No. 1281: Whether a trial court which had already taken cognizance of an action involving a mining controversy was divested of jurisdiction to hear and decide the case upon promulgation of Presidential Decree No. 1281.

• Standing for Declaratory Relief by Non-Party: No. Standing was lacking because Atlas was not a party to the deeds of assignment whose validity created the uncertainty, and only construction or validity under an instrument with no other adequate remedy supports declaratory relief.
• Divestiture of Jurisdiction by Presidential Decree No. 1281: Yes. Jurisdiction was divested immediately upon effectivity on January 16, 1978, the Decree being a remedial special law conferring original and exclusive jurisdiction over mining controversies on the Bureau of Mines with retroactive application to pending actions.

• Standing for Declaratory Relief by Non-Party: Declaratory relief lies only to determine questions of construction or validity arising under a deed, will, contract, written instrument, statute, ordinance, executive order or regulation, at the instance of an interested person, with judgment limited to declaration of rights and duties and justified only where no other adequate relief is available. Although Atlas was a party to the operating agreements, the ambiguity identified after evaluating its lengthy arguments was not in those agreements but in the validity of assignments by Biga Copper and Cuenco-Velez to third parties, to which Atlas was not a party. Reliance was placed on Tadeo vs. Provincial Fiscal of Pangasinan, denying a acknowledging notary standing, and United Central & Cellulose Labor Association (PLUM) vs. Santos, invoking Article 1311 of the Civil Code that contracts take effect only between parties. Other effective remedies such as interpleader remained to determine royalty entitlement with finality, and courts should refuse declaration where it would not terminate uncertainty or is not necessary and proper under Section 5, Rule 64 of the Revised Rules of Court.
• Divestiture of Jurisdiction by Presidential Decree No. 1281: Presidential Decree No. 99-A, Presidential Decree No. 309, and Presidential Decree No. 1281 progressively made Bureau adjudication original and exclusive, including under Section 7(a) mining property subject to different agreements with several operators and cancellation and/or enforcement of mining contracts, with inconsistent laws repealed under Section 12. The Atlas declaratory action fell within that ambit and was not distinct, such that parallel judicial and administrative cognizance would create obnoxious split jurisdiction condemned in Gonzales vs. Province of Iloilo. As a remedial procedural statute creating no new rights nor taking vested rights, the Decree applied retroactively to pending actions except final executory judgments, pursuant to Casabar vs. Sino Cruz, People vs. Sumilang, and Municipal Government of Coron, Palawan vs. Carino, to prevent choice of forum of convenience and to advance expert resolution. As a special law it prevailed over general jurisdictional statutes under De Jesus vs. People and BF Northwest Homeowners Association, Inc. vs. Intermediate Appellate Court, with agency construction entitled to weight, and Twin Peaks Mining Association vs. Navarro confirmed the trend to make mining adjudication purely administrative. Hence loss of jurisdiction flowed from effectivity itself, not from filing of the Bureau annulment suit, rendering the February 21, 1979 summary judgment null and void.

• Declaratory Relief — Nature and Limits — Declaratory relief is an action by a person interested under a deed, will, contract or other written instrument, or whose rights are affected by statute, ordinance, executive order or regulation, to determine questions of construction or validity and obtain a declaration of rights and duties thereunder, without extending to corrective relief. Applied to deny Atlas relief because the object sought exceeded mere construction of its own operating agreements and called for determining validity of third-party assignments.
• Standing — Interested Party; Contracts Take Effect Between Parties — One who is not a party to a contract cannot have the interest required as basis for declaratory relief, consistent with Article 1311 of the Civil Code that contracts take effect only between parties, as illustrated by Tadeo vs. Provincial Fiscal of Pangasinan and United Central & Cellulose Labor Association (PLUM) vs. Santos. Applied to hold Atlas, a non-party to the deeds of assignment, without standing despite its quandary over royalty payees.
• Declaratory Relief — Adequate Alternative Remedy and Discretion to Refuse — Such action must be justified where no other adequate relief is available, and courts should refuse declaration where it would not terminate uncertainty or is not necessary and proper under Section 5, Rule 64, Revised Rules of Court. Applied to point Atlas to interpleader to finally determine entitlement among Biga Copper, Cuenco-Velez and assignees.
• Bureau of Mines — Original and Exclusive Jurisdiction over Mining Controversies — Section 7 of Presidential Decree No. 1281 confers original and exclusive jurisdiction to hear and decide cases involving mining property subject to different agreements with several operators and cancellation and/or enforcement of mining contracts due to refusal to abide by terms. Applied to classify the Atlas declaratory questions on validity and enforcement of operating agreements and assignments as within Bureau cognizance.
• Remedial Statutes — Retroactive Application to Pending Actions — A remedial or procedural statute operating in furtherance of remedy or confirmation of existing rights, creating no new rights nor divesting vested rights, applies retroactively to pending actions except those already final and executory. Applied to divest the trial court immediately upon January 16, 1978 effectivity despite filing before the Decree.
• Special Law Prevails over General Law; Agency Construction; No Split Jurisdiction — Jurisdiction conferred by special statute prevails over that granted by general law; construction by enforcement officials deserves great weight absent absurdity; split jurisdiction over essentially the same subject matter is obnoxious to orderly administration of justice. Applied to prefer Bureau jurisdiction, respect its role in technically complex mining operations, and reject concurrent court proceedings.

• "It is quite plain that one who is not a party to a contract cannot have the interest in it that the rule requires as basis for a declaratory relief." — States the standing rule derived from Article 1311 and United Central & Cellulose Labor Association (PLUM) vs. Santos, grounding denial of Atlas capacity to construe third-party assignments.
• "the trial court is deemed to have lost jurisdiction to proceed with the declaratory action immediately upon the effectivity of Presidential Decree No. 1281 on January 16, 1978." — States the operative jurisdictional holding that divestiture flowed from the Decree itself rather than from the later Bureau annulment filing.
• "[t]he trend to make the adjudication of mining cases a purely administrative matter." — Borrowed from Twin Peaks Mining Association vs. Navarro to reinforce that Presidential Decree No. 1281 centralized mining controversies in the Bureau of Mines.

• Tadeo vs. Provincial Fiscal of Pangasinan, 4 SCRA 235 (1962) — Followed to deny standing to a non-party with no rights or duties under the instrument to be declared, here a notary to a deed of sale, analogous to Atlas vis-à-vis third-party assignments.
• United Central & Cellulose Labor Association (PLUM) vs. Santos, 45 SCRA 147 (1972) — Followed for the proposition under Article 1311 of the Civil Code that a non-party lacks the interest required for declaratory relief respecting a contract.
• Chan vs. Galang, 18 SCRA 345 (1966) — Cited for the corollary rule that declaratory action must be justified such that no other adequate remedy is available, supporting interpleader as the proper remedy.
• Gonzales vs. Province of Iloilo, 38 SCRA 209 (1971) — Applied to reject concurrent jurisdiction as analogous to split jurisdiction obnoxious to orderly administration of justice.
• Twin Peaks Mining Association vs. Navarro, 94 SCRA 768 (1979) — Cited as bolstering the administrative-centralization trend under Presidential Decree No. 1281, though distinguished on filing dates relative to the Decree.
• De Jesus vs. People, 120 SCRA 760 (1983); BF Northwest Homeowners Association, Inc. vs. Intermediate Appellate Court, 150 SCRA 543 (1987) — Applied for the principle that a special law on jurisdiction prevails over a general law.

• Section 7(a) and Cancellation/Enforcement Clause; Section 12, Presidential Decree No. 1281 — Confers on the Bureau of Mines original and exclusive jurisdiction over mining property subject to different agreements with several operators and over cancellation and/or enforcement of mining contracts, repealing inconsistent laws; applied to bring royalty, compromise, and assignment disputes within exclusive administrative cognizance.
• Section 2-3, Presidential Decree No. 99-A; Sections 1, 3, 5, Presidential Decree No. 309 — Established Bureau/ Director of Mines adjudication of mining controversies appealable to the Secretary and President and required pending judicial litigations to file adverse claims with the Bureau; traced to show progressive divestiture of judicial tribunals culminating in Presidential Decree No. 1281.
• Article 1311, Civil Code — Provides contracts take effect only between parties; used to deny Atlas interest to seek construction of assignments to which it was not a party.
• Section 5, Rule 64, Revised Rules of Court — Authorizes refusal of declaratory relief where declaration would not terminate uncertainty or is not necessary and proper; applied given availability of interpleader and pendency of Bureau cases.

Narvasa, Cruz, Griño-Aquino and Medialdea, JJ., concur.