Basiana Mining Exploration Corporation vs. Honorable Secretary of the Department of Environment and Natural Resources

The DENR Secretary’s approval of a Mineral Production Sharing Agreement is an exercise of administrative, not quasi-judicial, power; it is therefore not reviewable by the Court of Appeals under Rule 43 or Rule 65, and any challenge to the agreement must first be pursued before the DENR Secretary and, on appeal, the Office of the President.

Basiana Mining Exploration Corporation (BMEC), headed by Rodney O. Basiana, applied for a Mineral Production Sharing Agreement (MPSA) with the Department of Environment and Natural Resources (DENR) over nickel and other minerals in Tubay and Jabonga, Agusan del Norte. Pending approval, BMEC assigned its rights and interests to Manila Mining Corporation, which later assigned them to SR Metals, Inc. (SRMI); Basiana and SRMI then executed a Memorandum of Agreement for technical and geological tests, exploration, and small-scale mining. The dispute arose against the backdrop of the DENR Secretary’s authority under the Revised Administrative Code of 1987 and the Philippine Mining Act of 1995 to approve and cancel mineral agreements, and the MGB Panel of Arbitrators’ jurisdiction over certain mining protests.

Petitioner Basiana Mining Exploration Corporation (BMEC), headed by its President Rodney O. Basiana, applied on July 31, 1997 for a Mineral Production Sharing Agreement (MPSA) with the Department of Environment and Natural Resources (DENR) for the extraction of nickel and other minerals covering an area of 6,642 hectares in Tubay and Jabonga, Agusan del Norte, docketed as MPSA (XIII)-00014. Pending approval of its application, BMEC, on April 29, 2000, assigned to Manila Mining Corporation (Manila Mining) all its rights and interest in MPSA (XIII)-00014, with Manila Mining acknowledging BMEC as the real and true owner of said application. Manila Mining, in turn, assigned on October 17, 2005 its rights and interest to SR Metals, Inc. (SRMI). A day later, or on October 18, 2005, Basiana and SRMI executed a Memorandum of Agreement where SRMI agreed, among others, to undertake technical and geological tests, exploration and small-scale mining operations of the site subject of MPSA (XIII)-00014.

Necessary permits and certificates were then issued by the DENR and the Provincial Government of Agusan del Norte to SRMI, San R Construction Corporation (San R) and Galeo Equipment Corporation (Galeo). Consequently, SRMI, using BMEC’s application, applied for an MPSA for the extraction of nickel, iron and cobalt on a 591-ha area in Tubay, Agusan del Norte, docketed as APSA-000014-XIII. On November 24, 2006, the DENR Secretary issued a cease and desist order against the mining operations due to excess in annual production, maximum capitalization and labor cost to equipment utilization. The Minerals Development Council, on December 7, 2006, also advised SRMI, San R and Galeo to immediately stop all mining activities in Tubay, which were conducted under the pretext of small-scale mining.

Basiana then filed a complaint before the Regional Trial Court of Butuan City on May 15, 2007 for rescission of contract, abuse of rights and damages against SRMI, docketed as Civil Case No. 5728. For its part, BMEC, then already known as BMDC, also filed a complaint for breach of trust, accounting and conveyance of proceeds, judicial confirmation of declaration of partial nullity of contract and termination of trust, and abuse of rights with damages against SRMI, San R, Galeo, et al. on July 13, 2007, docketed as Civil Case No. 5746.

Subsequently, the Director of the Mines and Geosciences Bureau (MGB), on January 10, 2008, recommended the approval of APSA-000014-XIII filed by SRMI. Thus, BMEC and Basiana filed with the MGB Panel of Arbitrators (MGB-POA) a petition to deny and/or disapprove and/or declare the nullity of the application for MPSA and/or cancellation, revocation and termination of MPSA. Pending resolution of the protest before the MGB-POA, the Republic of the Philippines, represented by the DENR Secretary, entered into MPSA No. 261-2008-XIII with SRMI for the development and commercial utilization of nickel, cobalt, iron and other associated mineral deposits in the 572.64-ha area in Tubay, Agusan del Norte.

Hence, the petitioners filed a petition for review with the Court of Appeals assailing the issuance of MPSA No. 261-2008-XIII on the grounds that there was clear violation of due process and the entire proceedings was railroaded and suited for the benefit of SRMI, and that the approval of the application is a patent nullity and/or absolutely without any factual and legal basis.

• Proper Remedy / Quasi-Judicial Function: Petitioners insisted that they made the proper recourse when they filed a petition for review with the Court of Appeals because the determination by the DENR Secretary as to the propriety of the MGB Director’s recommendation of approval and SRMI’s qualification to undertake development and its compliance with the law requires an exercise of its quasi-judicial function.
• Exhaustion of Administrative Remedies: Petitioners argued that the issue of whether they failed to exhaust their administrative remedies when they did not await the MGB-POA’s resolution of their protest involves questions of law.
• Inapplicability of Celestial Nickel Mining: Petitioners took exception to the Court of Appeals’ use of the Celestial Nickel Mining case, citing alleged differences. According to petitioners, in Celestial Nickel Mining, the Court did not make an issue on the remedy resorted to by Blue Ridge Mineral Corporation and instead delved on the merits of the case, thereby implying that the filing of a petition for certiorari resorted to by Blue Ridge was proper. Also, Celestial Nickel Mining did not rule into the action of the DENR Secretary in entering into the mining agreement because its issuance was not raised before the MGB Director and the DENR Secretary and neither was it presented before the Court of Appeals. This case, on the other hand, presents sufficient grounds why the DENR Secretary’s approval was illegal and tainted with grave abuse of discretion, that is, despite that the DENR Secretary and the MGB Director knew of the existence of the protest before the MGB-POA, the agreement was still entered into.
• Due Process and Patent Nullity: Petitioners assailed the issuance of MPSA No. 261-2008-XIII on the grounds that there was clear violation of due process and the entire proceedings was railroaded and suited for the benefit of SRMI, and that the approval of the application is a patent nullity and/or absolutely without any factual and legal basis.

• Authority of the DENR Secretary: SRMI argued that the DENR Secretary’s signing of MPSA No. 261-2008-XIII was within his authority and that the grounds raised by the petitioners are mere rehash of the arguments raised in the Court of Appeals.
• Forum Shopping: The Office of the Solicitor General, who appeared for the DENR Secretary, maintained that the Court of Appeals properly dismissed the petition on the ground of forum shopping.

• Nature of DENR Secretary’s Power: Whether the DENR Secretary’s approval of SRMI’s application and execution of MPSA No. 261-2008-XIII is an exercise of quasi-judicial power reviewable by the Court of Appeals under Rule 43 or Rule 65 of the Rules of Court.
• Primary Jurisdiction: Whether the DENR Secretary, rather than the courts, has primary jurisdiction to approve and cancel mining agreements such that petitioners should have sought cancellation of MPSA No. 261-2008-XIII before the DENR Secretary.
• Exhaustion of Administrative Remedies: Whether petitioners should have exhausted administrative remedies, including appeal to the Office of the President under A.O. No. 18, series of 1987, before seeking judicial review.

• Nature of DENR Secretary’s Power: No. The act of the DENR Secretary in approving SRMI’s application and entering into MPSA No. 261-2008-XIII is not an exercise of quasi-judicial power; hence, it cannot be reviewed by the Court of Appeals, whether by a petition for review under Rule 43 or a special civil action for certiorari under Rule 65 of the Rules of Court.
• Primary Jurisdiction: Yes. The DENR Secretary has primary jurisdiction to approve and cancel mining agreements; petitioners should have sought the cancellation of MPSA No. 261-2008-XIII before the DENR Secretary, not with the courts.
• Exhaustion of Administrative Remedies: Yes. The doctrine of exhaustion of administrative remedies bars recourse to the courts at the very first instance; petitioners should have appealed to the Office of the President under A.O. No. 18, series of 1987, instead of directly seeking review by the court.

• Nature of DENR Secretary’s Power: The Court distinguished administrative, quasi-legislative, and quasi-judicial powers. Administrative power is concerned with the work of applying policies and enforcing orders as determined by proper governmental organs. Quasi-judicial or adjudicatory power is the power to hear and determine questions of fact to which the legislative policy is to apply and to decide in accordance with the standards laid down by the law itself in enforcing and administering the same law. An agency performs adjudicatory functions when it renders decisions or awards that determine the rights of adversarial parties, which decisions or awards have the same effect as a judgment of the court. The DENR Secretary’s power to approve and enter into an MPSA is unmistakably administrative in nature as it springs from the mandate of the DENR under the Revised Administrative Code of 1987, which provides that the DENR shall 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. Under Section 41 of DENR Administrative Order (A.O.) No. 96-40, initial evaluation of an application for an MPSA is made by the MGB Regional Office in the area covered by the application; thereafter, the application is reviewed by the MGB Director for further evaluation; and it is only after the MGB Director has evaluated the application that the same is forwarded to the DENR Secretary for final evaluation and approval. In approving an MPSA, the DENR Secretary does not determine the legal rights and obligations of adversarial parties, which are necessary in adjudication. It is only after an application is approved that the right to undertake the project accrues on the applicant’s part, and until then, no rights or obligations can be enforced by or against any party. Neither does the DENR Secretary resolve conflicting claims; rather, what is involved is the determination whether a certain applicant complied with the conditions required by the law, and is financially and technically capable to undertake the contract, among others. Thus, the act is not quasi-judicial and cannot be reviewed by the Court of Appeals under Rule 43 or Rule 65.

• Primary Jurisdiction: Even assuming, for the sake of argument, that recourse to the courts may be had by the petitioners, the circumstances of this case do not warrant its intervention at this point. In their petition for review filed with the Court of Appeals, petitioners prayed that MPSA No. 261-2008-XIII be set aside and its implementation enjoined. In effect, petitioners seek a cancellation of MPSA No. 261-2008-XIII. The power to approve and enter into agreements or contracts rests primarily with the DENR Secretary; perforce, the power to cancel an MPSA likewise lies with the DENR Secretary. Such implied power of the DENR Secretary was upheld in Celestial Nickel Mining, which involved the cancellation of several mining lease contracts in favor of Macroasia Corporation. In acknowledging the DENR Secretary’s power to cancel mining agreements, the Court provided the reasons: (1) the DENR Secretary’s power to cancel mineral agreements emanates from his administrative authority, supervision, management, and control over mineral resources under Chapter I, Title XIV of Book IV of the Revised Administrative Code of 1987; (2) R.A. No. 7942 confers to the DENR Secretary specific authority over mineral resources, which includes the authority to enter into mineral agreements on behalf of the Government upon the recommendation of the Director and corollarily, the implied power to terminate mining or mineral contracts; (3) the power of control and supervision of the DENR Secretary over the MGB to cancel or recommend cancellation of mineral rights under R.A. No. 7942 demonstrates the authority of the DENR Secretary to cancel or approve the cancellation of mineral agreements; and (4) the DENR Secretary’s power to cancel mining rights or agreements can be inferred from Section 230, Chapter XXIV of DENR A.O. No. 96-40 on cancellation, revocation, and termination of a permit/mineral agreement/Financial and Technical Assistance Agreement. Given that it is the DENR Secretary that has the primary jurisdiction to approve and cancel mining agreements and contract, it is with the DENR Secretary that the petitioners should have sought the cancellation of MPSA No. 261-2008-XIII, and not with the courts. The doctrine of primary jurisdiction instructs that if a case is such that its determination requires the expertise, specialized training and knowledge of an administrative body, relief must first be obtained in an administrative proceeding before resort to the courts is had.

• Exhaustion of Administrative Remedies: The doctrine of exhaustion of administrative remedies bars recourse to the courts at the very first instance. The doctrine of non-exhaustion of administrative remedies requires that resort be first made with the administrative authorities in the resolution of a controversy falling under their jurisdiction before the controversy may be elevated to a court of justice for review. A premature invocation of a court’s intervention renders the complaint without cause of action and dismissible. The DENR Secretary, no doubt, is under the control of the President; thus, his decision is subject to review of the latter. Consequently, the petitioners should have appealed its case to the Office of the President under A.O. No. 18, series of 1987, instead of directly seeking review by the court.

• Administrative, Quasi-Legislative, and Quasi-Judicial Powers — Administrative power is concerned with the work of applying policies and enforcing orders as determined by proper governmental organs. Quasi-judicial or adjudicatory power is the power to hear and determine questions of fact to which the legislative policy is to apply and to decide in accordance with the standards laid down by the law itself in enforcing and administering the same law. An agency performs adjudicatory functions when it renders decisions or awards that determine the rights of adversarial parties, which decisions or awards have the same effect as a judgment of the court. The DENR Secretary’s approval of an MPSA is administrative because it does not determine the legal rights and obligations of adversarial parties; no rights or obligations accrue until approval, and the Secretary does not resolve conflicting claims but merely determines compliance with legal conditions and financial and technical capability.
• Primary Jurisdiction — If a case is such that its determination requires the expertise, specialized training and knowledge of an administrative body, relief must first be obtained in an administrative proceeding before resort to the courts is had. The DENR Secretary has primary jurisdiction to approve and cancel mining agreements; petitioners should have sought cancellation of MPSA No. 261-2008-XIII before the DENR Secretary, not with the courts.
• Exhaustion of Administrative Remedies — Resort must first be made with the administrative authorities in the resolution of a controversy falling under their jurisdiction before the controversy may be elevated to a court of justice for review. A premature invocation of a court’s intervention renders the complaint without cause of action and dismissible. Since the DENR Secretary is under the control of the President, petitioners should have appealed to the Office of the President under A.O. No. 18, series of 1987, instead of directly seeking review by the court.
• Administrative Nature of Mining Permits and Contracts — The powers granted to the Secretary of Agriculture and Commerce (natural resources) by law, such as granting of licenses, permits, leases and contracts, or approving, rejecting, reinstating, or canceling applications, are all executive and administrative in nature. Purely administrative and discretionary functions may not be interfered with by the courts. This distinction between executive or administrative primary powers and controversies or disagreements of civil or contractual nature between litigants, which are questions of a judicial nature, has been carried over under R.A. No. 7942 or the Philippine Mining Act of 1995.
• DENR Secretary’s Power to Cancel Mining Agreements — The DENR Secretary’s power to cancel mineral agreements emanates from his administrative authority, supervision, management, and control over mineral resources under Chapter I, Title XIV of Book IV of the Revised Administrative Code of 1987; R.A. No. 7942 confers specific authority over mineral resources, including the authority to enter into mineral agreements and the corollary implied power to terminate mining or mineral contracts; the power of control and supervision over the MGB demonstrates authority to cancel or approve cancellation of mineral agreements; and the power can be inferred from Section 230, Chapter XXIV of DENR A.O. No. 96-40.

• "Without stamping approval on the validity of MPSA No. 261-2008-XIII, the Court dismisses the petition for the simple reason that the petitioners' recourse to the CA was erroneous." — This passage states the dispositive posture and the narrow ground of dismissal: the Court did not rule on the MPSA’s validity but denied the petition because the petitioners chose the wrong forum.
• "First, the act of the DENR Secretary in approving SRMI's application and entering into MPSA No. 261-2008-XIII is not an exercise of its quasi-judicial power; hence, it cannot be reviewed by the CA, whether by a petition for review under Rule 43 or a special civil action for certiorari under Rule 65 of the Rules of Court." — This is the core holding on the nature of the DENR Secretary’s power and the consequent unavailability of Rule 43 and Rule 65 review.
• "In approving an MPSA, the DENR Secretary does not determine the legal rights and obligations of adversarial parties, which are necessary in adjudication. In fact, it is only after an application is approved that the right to undertake the project accrues on the applicant's part, and until then, no rights or obligations can be enforced by or against any party." — This passage explains why the approval is administrative rather than quasi-judicial: it does not adjudicate adversarial rights and obligations, and no enforceable rights accrue before approval.
• "Given that it is the DENR Secretary that has the primary jurisdiction to approve and cancel mining agreements and contract, it is with the DENR Secretary that the petitioners should have sought the cancellation of MPSA No. 261-2008-XIII, and not with the courts." — This passage articulates the doctrine of primary jurisdiction as applied to the cancellation of mining agreements.

• Celestial Nickel Mining Exploration Corporation vs. Macroasia Corporation, 565 Phil. 466 (2007) — Cited by the Court of Appeals and relied upon by the Supreme Court to uphold the DENR Secretary’s power to cancel existing mining agreements. The Court used it to support the conclusion that the power to cancel an MPSA lies with the DENR Secretary, and that petitioners should have sought cancellation before that office.
• Republic of the Philippines vs. Express Telecommunication Co., Inc., 424 Phil. 372 (2002) — Cited for the rule that the powers granted to the Secretary of Agriculture and Commerce (natural resources) by law, such as granting licenses, permits, leases and contracts, or approving, rejecting, reinstating, or canceling applications, are all executive and administrative in nature, and that purely administrative and discretionary functions may not be interfered with by the courts.
• Pearson vs. Intermediate Appellate Court, 356 Phil. 341 (1998) — Cited for the distinction between (1) the primary powers granted by law to the then Secretary of Agriculture and Natural Resources and bureau directors of an executive or administrative nature, such as granting licenses, permits, leases and contracts, or approving, rejecting, reinstating or cancelling applications, or deciding conflicting applications, and (2) controversies or disagreements of civil or contractual nature between litigants which are questions of a judicial nature that may be adjudicated only by the courts of justice.
• Narra Nickel Mining and Development Corporation vs. Redmont Consolidated Mines Corporation, G.R. No. 195580, April 21, 2014, 722 SCRA 382 — Cited for the doctrine of primary jurisdiction, which instructs that if a case is such that its determination requires the expertise, specialized training and knowledge of an administrative body, relief must first be obtained in an administrative proceeding before resort to the courts is had.
• The Alexandra Condominium Corporation vs. Laguna Lake Development Authority, 615 Phil. 516 (2009) — Cited for the doctrine of exhaustion of administrative remedies, which requires that resort be first made with the administrative authorities in the resolution of a controversy falling under their jurisdiction before the controversy may be elevated to a court of justice for review.

• Revised Administrative Code of 1987, Title XIV, Chapter I, Section 2 — Provides that the DENR shall 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. This was the basis for holding that the DENR Secretary’s power to approve and enter into an MPSA is administrative in nature.
• DENR Administrative Order No. 96-40, Chapter VI, Section 41 — Governs the evaluation of mineral agreement applications: initial evaluation is made by the MGB Regional Office, the application is reviewed by the MGB Director, and it is only after such evaluation that it is forwarded to the DENR Secretary for final evaluation and approval. This provision was cited to show that the approval process is administrative, not quasi-judicial.
• Republic Act No. 7942 (Philippine Mining Act of 1995) — The distinction between executive or administrative primary powers and controversies of a civil or contractual nature that are judicial in nature has been carried over under this law. It also confers to the DENR Secretary specific authority over mineral resources, including the authority to enter into mineral agreements on behalf of the Government upon the recommendation of the Director and the corollary implied power to terminate mining or mineral contracts.
• Presidential Decree No. 463 — Mentioned in relation to the issue in Celestial Nickel Mining on who has authority and jurisdiction to cancel existing mineral agreements under R.A. No. 7942 in relation to P.D. No. 463 and pertinent rules and regulations.
• DENR Administrative Order No. 96-40, Chapter XXIV, Section 230 — On cancellation, revocation, and termination of a permit/mineral agreement/Financial and Technical Assistance Agreement. The Court cited this as a basis from which the DENR Secretary’s power to cancel mining rights or agreements can be inferred.
• Administrative Order No. 18, series of 1987 — Prescribes the rules and regulations governing appeals to the Office of the President of the Philippines. The Court held that petitioners should have appealed to the Office of the President under this issuance instead of directly seeking review by the court.
• Rules of Court, Rule 43 and Rule 65 — Rule 43 governs petitions for review and Rule 65 governs special civil actions for certiorari. The Court held that neither remedy was available before the Court of Appeals because the DENR Secretary’s act of approving and entering into the MPSA was not an exercise of quasi-judicial power.

Velasco, Jr. (Chairperson), Peralta, Perez, and Jardeleza, JJ., concur.