Narra Nickel Mining and Development Corporation, et al. vs. Redmont Consolidated Mines Corporation

The Office of the President does not exercise quasi-judicial authority when it cancels or revokes an FTAA as the Republic’s contractual remedy; such act is a purely administrative exercise of a contractual right and is not appealable to the Court of Appeals under Rule 43. An FTAA is a government or public contract, and the Office of the President, as a contracting party, cannot adjudicate the contract’s own validity or cancellation as if it were an impartial tribunal.

Petitioners Narra Nickel Mining and Development Corporation, Tesoro Mining and Development, Inc., and McArthur Mining, Inc. are mining corporations that held or acquired mineral agreement and exploration permit applications over areas in Palawan and sought conversion of those applications into FTAAs. Respondent Redmont Consolidated Mines Corporation is a competing mining corporation that applied for an exploration permit over overlapping areas. The dispute concerns an FTAA, a government or public contract executed by the President on behalf of the Republic under the fourth paragraph of Section 2, Article XII of the 1987 Constitution and governed by Republic Act No. 7942, the Philippine Mining Act of 1995, and its Revised Implementing Rules and Regulations. Rule 43 of the Rules of Court supplies the procedural backdrop for appeals from quasi-judicial agencies to the Court of Appeals.

On November 8, 2006, Redmont filed an Application for an Exploration Permit over mining areas located in the Municipalities of Rizal, Bataraza, and Narra, Palawan. After an inquiry with the Department of Environment and Natural Resources, Redmont learned that the areas were already covered by existing Mineral Production Sharing Agreements and an Exploration Permit initially applied for by petitioners’ respective predecessors-in-interest with the Mines and Geosciences Bureau, Region IV-B, Office of the DENR.

Petitioner Narra Nickel acquired the application of MPSA-IV-I-12, covering an area of 3,277 hectares in Barangays Calategas and San Isidro, Narra, Palawan, from Alpha Resources and Development Corporation and Patricia Louise Mining and Development Corporation. On March 30, 2006, prior to Redmont’s EP application, Narra Nickel converted its MPSA into an FTAA application, denominated as AFTA-IVB-07. Petitioner Tesoro acquired the application of MPSA-AMA-IVB-154, formerly EPA-IVB-47, covering an area of 3,402 hectares in Barangays Malinao and Princesa Urduja, Narra, Palawan, from Sara Marie Mining, Inc. Tesoro sought conversion of its MPSA into an FTAA, but its application, AFTA-IVB-08, was filed subsequent to Redmont’s EP application, or sometime in May 2007. Petitioner McArthur acquired the application of MPSA-AMA-IVB-153, as well as EPA-IVB-44, covering areas of 1,782 hectares and 3,720 hectares in Barangays Sumbiling and Malatagao, Bataraza, Palawan, respectively, from Madridejos Mining Corporation, an assignee of Sara Marie Mining, Inc. McArthur also filed an application for FTAA conversion in May 2007, denominated as AFTA-IVB-09.

Upon the recommendation of then DENR Secretary Jose L. Atienza, Jr., through a memorandum dated November 9, 2009, petitioners’ FTAA applications were all approved on April 5, 2010. Consequently, on April 12, 2010, the Republic, represented by then Executive Secretary Leandro R. Mendoza, acting by authority of then President Gloria Macapagal-Arroyo, and petitioners executed an FTAA covering the subject areas, denominated as FTAA No. 05-2010-IVB (MIMAROPA).

Prior to the grant of petitioners’ applications for FTAA conversion and the execution of the FTAA, Redmont filed on January 2, 2007 three separate petitions for the denial of petitioners’ respective MPSA and/or EP applications before the Panel of Arbitrators of the DENR-MGB, docketed as DENR Case Nos. 2007-01, 2007-02, and 2007-03. Redmont’s primary argument was that petitioners were all controlled by their common majority stockholder, MBMI Resources, Inc., a 100% Canadian-owned corporation, and were thus disqualified from being grantees of MPSAs and/or EPs. The matter concerning the propriety of denying petitioners’ MPSAs and/or EPs in view of their nationality reached the Supreme Court in G.R. No. 195580. In its April 21, 2014 Decision, petitioners were declared to be foreign corporations under the application of the Grandfather Rule; petitioners’ motion for reconsideration was denied in the Court’s Resolution dated January 28, 2015.

Meanwhile, Redmont separately sought the cancellation and/or revocation of the executed FTAA through a Petition dated May 7, 2010 filed before the Office of the President, docketed as O.P. Case No. 10-E-229. Redmont asserted, among others, that the FTAA was highly anomalous and irregular, considering that petitioners and their mother company, MBMI, have a long history of violating and circumventing the Constitution and other laws due to their questionable activities in the Philippines and abroad. Petitioners opposed Redmont’s petition through a motion to dismiss, contending that: (a) there is no rule or law which grants an appeal from a memorandum of a department secretary; (b) the appeal was filed beyond the reglementary period; (c) the appeal was not perfected because copies of the appeal were not properly served on them; and (d) Redmont is not a real party-in-interest.

The Office of the President found, among others, that petitioners misrepresented that they were Filipino corporations qualified to engage in mining activities. The Court of Appeals sustained this finding.

• No Appeal from Department Secretary’s Memorandum: Petitioners contended that there is no rule or law which grants an appeal from a memorandum of a department secretary.
• Late Filing: Petitioners contended that the appeal was filed beyond the reglementary period.
• Improper Service: Petitioners contended that the appeal was not perfected because copies of the appeal were not properly served on them.
• Lack of Real Party-in-Interest: Petitioners contended that Redmont is not a real party-in-interest.

• Foreign Control and Disqualification: Redmont asserted that petitioners were all controlled by their common majority stockholder, MBMI Resources, Inc., a 100% Canadian-owned corporation, and were thus disqualified from being grantees of MPSAs and/or EPs.
• Anomalous and Irregular FTAA: Redmont asserted that the FTAA was highly anomalous and irregular because petitioners and their mother company, MBMI, have a long history of violating and circumventing the Constitution and other laws due to their questionable activities in the Philippines and abroad.

• CA Jurisdiction under Rule 43: Whether the Court of Appeals properly took cognizance of the appeal under Rule 43 from the Office of the President’s cancellation and/or revocation of the FTAA.
• Nature of the Office of the President’s Act: Whether the Office of the President’s cancellation and/or revocation of the FTAA was an exercise of quasi-judicial functions.
• Correctness of the CA Affirmance: Whether the Court of Appeals correctly affirmed on appeal the Office of the President’s cancellation and/or revocation of the FTAA.

• CA Jurisdiction under Rule 43: No. The Court of Appeals lacked appellate jurisdiction because Rule 43 applies only to appeals from a quasi-judicial agency in the exercise of its quasi-judicial functions.
• Nature of the Office of the President’s Act: No. The Office of the President’s cancellation and/or revocation was a purely administrative exercise of a contractual right under the FTAA, not an adjudication of rights before an impartial tribunal.
• Correctness of the CA Affirmance: No. Because the Court of Appeals had no jurisdiction, its Decision and Resolution are null and void; the merits of the cancellation were not reached.

• CA Jurisdiction under Rule 43: Rule 43, Section 1 of the Rules of Court allows appeals to the Court of Appeals only from judgments or final orders of the Court of Tax Appeals and from awards, judgments, final orders, or resolutions of or authorized by any quasi-judicial agency in the exercise of its quasi-judicial functions. The Office of the President is listed among the agencies covered, but coverage depends on the Office of the President acting in a quasi-judicial capacity. Quasi-judicial or administrative adjudicatory power is the power of the administrative agency to adjudicate the rights of persons before it. The administrative body exercises quasi-judicial power when it performs in a judicial manner an act which is essentially executive or administrative in nature, where the power to act in such manner is incidental to or reasonably necessary for the performance of the executive or administrative duty entrusted to it. The Office of the President’s cancellation and/or revocation of the FTAA was not an adjudication; it was an administrative function pursuant to the President’s authority to invoke the Republic’s right under paragraph a(iii), Section 17.2 of the FTAA. Hence, the Court of Appeals had no appellate jurisdiction.

• Nature of the Office of the President’s Act: An FTAA is a contract under Section 3(r) of Republic Act No. 7942, entered into by the President on the State’s behalf under the fourth paragraph of Section 2, Article XII of the 1987 Constitution. Because it involves large-scale exploration, development, and utilization of mineral resources, it is a government or public contract, generally subject to the same laws and regulations governing the validity and sufficiency of private contracts. It contains terms, conditions, and warranties under Section 35 of Republic Act No. 7942 and is negotiated under Section 36. La Bugal-Oposa recognized that an FTAA involves contract or property rights protected by due process and may not be revoked like a mere license. Celestial Nickel held that the DENR Secretary, not the Panel of Arbitrators, has jurisdiction to cancel existing mineral agreements, and that a petition for cancellation by an applicant based on violation of terms is not a dispute under Section 77(b) of Republic Act No. 7942 because the applicant is not a real party-in-interest. The Office of the President’s cancellation and/or revocation was an exercise of a contractual right that is purely administrative. As a contracting party, the Office of the President could not adjudicate a matter in which it was an interested party; the principle of mutuality of contracts under Article 1308 of the Civil Code forbids leaving the validity or compliance of a contract to the will of one party. Redmont’s participation did not convert the proceeding into a quasi-judicial one. The conversion procedure under Section 45 of the RIRR and the protest mechanism under Section 55 allowed third-party opposition only within a ten-day window and not in conversions; Redmont’s opposition was outside the prescribed procedure. For cancellation, Section 68 of the RIRR requires due process, while Section 77 of Republic Act No. 7942 gives the Panel of Arbitrators exclusive and original jurisdiction over mining disputes. Gonzales vs. Climax Mining Ltd. held that the Panel of Arbitrators has no jurisdiction over a complaint for declaration of nullity and/or termination of contracts on grounds of fraud, oppression, and violation of the Constitution, because that is a judicial question; mere involvement of an FTAA does not make the case a mining dispute. Here, the Office of the President cancelled the FTAA based on alleged misrepresentation. Under Section 99 of Republic Act No. 7942, statements in the FTAA are conditions and essential parts, and a material misrepresentation, if found by ordinary courts as in Gonzales upon a case duly instituted, would constitute breach of a contractual condition entitling the aggrieved party to cancel. No such complaint before ordinary courts was involved. Republic Act No. 7942 and the RIRR do not authorize the Office of the President to take cognizance of a quasi-judicial proceeding for cancellation of an existing FTAA, and no third-party petition for cancellation before the Office of the President is mentioned. Although the Office of the President has administrative control or supervision over subordinate agencies such as the Panel of Arbitrators, the Panel’s jurisdiction is limited to mining disputes and not judicial questions cognizable by ordinary courts. Thus, the Office of the President had no quasi-judicial power to adjudicate the propriety of the FTAA’s cancellation and/or revocation.

• Correctness of the CA Affirmance: Because the Office of the President did not exercise a quasi-judicial function, the Court of Appeals had no appellate jurisdiction under Rule 43. Its Decision and Resolution are null and void. The Court found it unnecessary to resolve the other ancillary issues.

• Quasi-Judicial Function vs. Administrative Function — Quasi-judicial or administrative adjudicatory power is the power of an administrative agency to adjudicate the rights of persons before it; it is exercised when the body performs in a judicial manner an act essentially executive or administrative in nature, where the power is incidental to or reasonably necessary for the performance of the executive or administrative duty entrusted to it. The Office of the President’s cancellation and/or revocation of the FTAA was not an adjudication but an administrative exercise of the Republic’s contractual right, so it was not a quasi-judicial function.

• FTAA as Government or Public Contract — An FTAA is defined by Section 3(r) of Republic Act No. 7942 as a contract involving financial or technical assistance for large-scale exploration, development, and utilization of mineral resources. It is entered into by the President on the State’s behalf under the 1987 Constitution and involves a matter of public concern, making it a government or public contract generally subject to the same laws and regulations governing the validity and sufficiency of private contracts. It involves contract or property rights protected by due process and may not be revoked like a mere license.

• Mutuality of Contracts — Under Article 1308 of the Civil Code, contracts must bind both contracting parties, and their validity or compliance cannot be left to the will of one of them. Because the Office of the President represents the Republic as a contracting party to the FTAA, it cannot adjudicate the contract’s own validity or cancellation as if it were an impartial tribunal.

• Jurisdiction of the Panel of Arbitrators over Mining Disputes — Under Section 77 of Republic Act No. 7942, the Panel of Arbitrators has exclusive and original jurisdiction to hear and decide mining disputes involving rights to mining areas, mineral agreements or permits, surface owners, occupants and claimholders/concessionaires, and disputes pending before the Bureau and the Department at the effectivity of the Act. Its jurisdiction is limited to mining disputes raising questions of fact or matters requiring the application of technological knowledge and experience; it does not extend to judicial questions such as the validity or termination of contracts on grounds of fraud, oppression, or violation of the Constitution. Mere involvement of an FTAA does not make a case a mining dispute.

• Rule 43 Appellate Jurisdiction — Rule 43, Section 1 of the Rules of Court permits appeals to the Court of Appeals only from a quasi-judicial agency in the exercise of its quasi-judicial functions. Absent such exercise, the Court of Appeals has no appellate jurisdiction, and any decision rendered is null and void.

• "Quasi-judicial or administrative adjudicatory power is the power of the administrative agency to adjudicate the rights of persons before it. The administrative body exercises its quasi-judicial power when it performs in a judicial manner an act which is essentially executive or administrative in nature, where the power to act in such manner is incidental to or reasonably necessary for the performance of the executive or administrative duty entrusted to it." — This passage supplies the controlling definition of quasi-judicial power used to determine whether the Office of the President’s act was appealable under Rule 43.

• "The OP's cancellation and/or revocation of the FTAA is obviously not an "adjudication" in the sense above-described. It cannot be likened to the judicial function of a court of justice, or even a quasi-judicial agency or office. The OP - at the instance of Redmont at that - was exercising an administrative function pursuant to the President's authority to invoke the Republic's right under paragraph a (iii), Section 17.2 of the FTAA..." — This passage states the core application of the quasi-judicial test to the Office of the President’s cancellation of the FTAA.

• "Thus, at least with respect to cases affecting an FTAA's validity, the Court holds that the OP has no quasi-judicial power to adjudicate the propriety of its cancellation/revocation. At the risk of belaboring the point, the FTAA is a contract to which the OP itself represents a party, i.e., the Republic. It merely exercised a contractual right by cancelling/revoking said agreement, a purely administrative action which should not be considered quasi-judicial in nature. Thus, absent the OP's proper exercise of a quasi-judicial function, the CA had no appellate jurisdiction over the case, and its Decision is, perforce, null and void." — This is the ratio decidendi: the Office of the President’s contractual cancellation was administrative, not quasi-judicial, and the Court of Appeals therefore lacked jurisdiction.

• Sargasso Construction & Development Corporation vs. Philippine Ports Authority, 637 Phil. 259 (2010) — Cited for the definition and treatment of a government or public contract, including the rule that contracts to which the government is a party are generally subject to the same laws and regulations governing the validity and sufficiency of private contracts.
• La Bugal-Oposa Tribal Association, Inc. vs. Ramos, 486 Phil. 754 (2004) — Cited to distinguish an FTAA from a mere license and to recognize that an FTAA involves contract or property rights protected by due process, such that it may not be revoked or cancelled in the blink of an eye.
• Celestial Nickel Mining Exploration Corporation vs. Macroasia Corporation, 565 Phil. 466 (2007) — Cited for the holding that the DENR Secretary, not the Panel of Arbitrators, has jurisdiction to cancel existing mineral agreements, and that a petition for cancellation by an applicant based on violation of terms is not a dispute under Section 77(b) of Republic Act No. 7942 because the applicant is not a real party-in-interest.
• Gonzales vs. Climax Mining Ltd., 492 Phil. 682 (2005) — Cited for the rule that the Panel of Arbitrators has no jurisdiction over a complaint for declaration of nullity and/or termination of contracts on grounds of fraud, oppression, and violation of the Constitution, because such matters are judicial questions; mere involvement of an FTAA does not make the case a mining dispute.
• Narra Nickel Mining and Development Corporation vs. Redmont Consolidated Mines Corporation, G.R. No. 195580, April 21, 2014, 722 SCRA 382 — Cited as the related prior case in which petitioners were declared foreign corporations under the Grandfather Rule; the motion for reconsideration was denied on January 28, 2015.
• Alcala vs. Villar, 461 Phil. 617 (2003) — Cited for the rule that the question of jurisdiction may be tackled motu proprio on appeal even if none of the parties raised it.
• Zamora vs. CA, 262 Phil. 298 (1990) — Cited for the rule that a court without jurisdiction cannot render a valid judgment.
• Bedol vs. Commission on Elections, 621 Phil. 498 (2009) — Cited for the definition of quasi-judicial or administrative adjudicatory power.
• Republic vs. Tramunion Corporation, G.R. No. 191590, April 21, 2014, 722 SCRA 273 — Cited for the definition of “adjudicate” and related terms in determining whether an act is quasi-judicial.
• Cariño vs. Commission on Human Rights, G.R. No. 96681, December 2, 1991, 204 SCRA 483 — Cited in connection with the definition of “adjudicate” as used in the quasi-judicial analysis.

• Section 1, Rule 43, Rules of Court — Provides that the Rule applies to appeals from judgments or final orders of the Court of Tax Appeals and from awards, judgments, final orders, or resolutions of or authorized by any quasi-judicial agency in the exercise of its quasi-judicial functions. Applied to hold that the Court of Appeals had no appellate jurisdiction because the Office of the President did not act quasi-judicially.
• Fourth paragraph, Section 2, Article XII, 1987 Constitution — Provides that the President may enter into agreements with foreign-owned corporations involving technical or financial assistance for large-scale exploration, development, and utilization of minerals, petroleum, and other mineral oils according to general terms and conditions provided by law. Cited as the basis for the State, through the President, to enter into an FTAA.
• Section 3(r), Republic Act No. 7942 — Defines a financial or technical assistance agreement as a contract involving financial or technical assistance for large-scale exploration, development, and utilization of mineral resources. Applied to classify the FTAA as a contract and, consequently, a government or public contract.
• Section 35, Republic Act No. 7942 — Refers to the terms and conditions of an FTAA. Cited to show that an FTAA involves terms, conditions, and warranties similar to private contracts.
• Section 36, Republic Act No. 7942 — Provides that an FTAA shall be negotiated by the Department and executed and approved by the President, who shall notify Congress within thirty days from execution and approval. Cited to describe the execution process of an FTAA.
• Section 77, Republic Act No. 7942 — Grants the Panel of Arbitrators exclusive and original jurisdiction to hear and decide mining disputes involving rights to mining areas, mineral agreements or permits, surface owners, occupants and claimholders/concessionaires, and disputes pending before the Bureau and the Department at the effectivity of the Act. Applied to show that the Panel’s jurisdiction is limited and does not cover judicial questions such as the validity or termination of contracts.
• Section 99, Republic Act No. 7942 — Provides that all statements made in the exploration permit, mining agreement, and financial or technical assistance agreement shall be considered as conditions and essential parts thereof. Applied to hold that a material misrepresentation, if found by ordinary courts upon a case duly instituted, would constitute breach of a contractual condition entitling the aggrieved party to cancel or revoke the agreement.
• Section 45, DENR Administrative Order No. 2010-21 (RIRR) — Governs conversion of an existing mineral agreement into an FTAA by filing a Letter of Intent with the Mines and Geosciences Bureau, complying with requirements within sixty days, and paying the conversion fee. Cited to describe the conversion procedure and the absence of a third-party protest mechanism in conversions.
• Section 55, DENR Administrative Order No. 2010-21 (RIRR) — Requires publication, posting, or radio announcement of an FTAA application and allows adverse claims, protests, or opposition within ten days from publication or the last date of posting or radio announcement, to be resolved by the Panel of Arbitrators; it exempts previously published valid and existing mining claims or FTAA applications originating from Exploration Permits that have undergone the publication requirement. Applied to hold that Redmont’s opposition was made beyond the prescribed procedure.
• Section 68, DENR Administrative Order No. 2010-21 (RIRR) — Provides that cancellation, revocation, or termination of an FTAA may only be done after due process. Cited in connection with the cancellation procedure.
• Article 1308, Civil Code — Provides that contracts must bind both contracting parties and that their validity or compliance cannot be left to the will of one of them. Applied to hold that the Office of the President, as a contracting party, cannot adjudicate the FTAA’s own validity or cancellation.
• Paragraph a(iii), Section 17.2, FTAA — Provides that the agreement may be terminated, after due process, for any intentional and materially false statement or omission of facts by a party. Cited as the contractual basis invoked by the Office of the President in cancelling and/or revoking the FTAA.
• Section 2, Chapter I, Title XIV, Book IV, Revised Administrative Code of 1987 — States the mandate of the Department of Environment and Natural Resources, subject to law and higher authority, to carry out the State’s constitutional mandate to control and supervise the exploration, development, utilization, and conservation of the country’s natural resources. Cited in the discussion of the DENR Secretary’s authority over mineral agreements.
• Sections 8 and 29, Republic Act No. 7942 — Confer specific authority on the DENR Secretary over mineral agreements, including authority to enter into mineral agreements on behalf of the Government upon the recommendation of the Director and to approve proposed mineral agreements. Cited to support the holding that the DENR Secretary, not the Panel of Arbitrators, has jurisdiction to cancel mineral agreements.

Sereno, C.J. (Chairperson), Leonardo-De Castro, Bersamin, and Perez, JJ., concur.