PICOP Resources, Inc. vs. Base Metals Mineral Resources Corporation

A timber license and its accompanying Presidential Warranty are not contracts protected by the non-impairment clause of the Constitution, and forest reserves are not absolutely closed to mining applications unless specifically proclaimed as watershed forest reserves or designated as initial components of the National Integrated Protected Areas System (NIPAS) pursuant to law.

Central Mindanao Mining and Development Corporation (CMMCI) entered into a Mines Operating Agreement with Banahaw Mining and Development Corporation for 18 mining claims in Agusan del Sur. Banahaw Mining filed for Mining Lease Contracts and, subsequently, Mineral Production Sharing Agreements (MPSA). A portion of these claims overlapped with PICOP's logging concession, prompting a Memorandum of Agreement for right of way. In 1996, Banahaw Mining assigned its rights to Base Metals Mineral Resources Corporation, which amended the pending MPSA applications. PICOP filed an adverse claim and opposition, arguing that the MPSA would impair its existing rights under its Presidential Warranty and that the area was closed to mining.

• Mining Claims and Assignment: In 1987, CMMCI and Banahaw Mining entered an operating agreement for 18 mining claims. Banahaw secured temporary permits and applied for MPSA. On December 18, 1996, Banahaw assigned its rights and interests over 37 mining claims to Base Metals, an assignment approved by CMMCI.
• Overlap with PICOP Concession: A portion of the mining claims was located within PICOP's logging concession (PTLA No. 47, later IFMA No. 35) in Agusan del Sur. Banahaw and PICOP executed a Memorandum of Agreement granting Banahaw access and right of way.
• Adverse Claim: On March 10, 1997, Base Metals amended the pending MPSA applications to substitute itself as applicant. On November 18, 1997, PICOP filed an Adverse Claim and/or Opposition with the MGB, asserting that the MPSA would violate the constitutional mandate against impairment of obligation in a contract and defeat PICOP's rights.
• Panel of Arbitration Decision: The Panel of Arbitrator disapproved Base Metals' MPSA applications on December 21, 1998, ruling that the adverse claim was filed on time and that the area was closed to mining location without the grantee's consent, as mining and plantation cannot coexist.
• MAB and CA Rulings: Base Metals appealed to the MAB, which reversed the Panel and reinstated the MPSA applications. The Court of Appeals affirmed the MAB, holding that the Presidential Warranty was merely a confirmation of the timber license, not a contract, and did not grant exclusive possession. The CA also noted that mining is permissible in forest lands subject to existing rights and that Base Metals had secured the necessary area status clearances.

• Area Closed to Mining: PICOP argued that the 2,756 hectares subject of the MPSA are closed to mining operations under Section 19 of RA 7942 because they fall within the Agusan-Surigao-Davao forest reserve (Proclamation No. 369), permanent forest blocks (RA 3092), and a wilderness area (RA 7586), thus requiring PICOP's written consent.
• Non-Impairment of Contract: PICOP maintained that the Presidential Warranty is a valid contract guaranteeing PICOP peaceful and adequate possession and a supply of raw materials, and that allowing mining underneath the area would impair this contractual obligation.
• Lack of Exploration Permit: PICOP asserted that under DAO 96-40, an exploration permit must be secured before mining operations in government reservations may be undertaken, and no such permit was issued or appended to the MPSA.

• New Issues on Appeal: Base Metals and the OSG countered that PICOP's arguments regarding land classification (RA 3092, RA 7586) were raised for the first time on appeal and should be disallowed.
• No Presidential Proclamation: Base Metals argued that no presidential proclamation exists setting aside the contested area as a watershed forest reserve or as a protected area under the NIPAS, which is required to close the area to mining.
• Consent Not Required: Base Metals maintained that PICOP's consent is unnecessary for the MPSA; only notice is required under PD 705. Requiring consent would unduly delegate sovereign power and derogate the State's power over natural resources.
• Non-Impairment Clause Inapplicable: Base Metals argued that the non-impairment clause limits legislative power, not quasi-judicial actions. Furthermore, the Presidential Warranty is not a contract but a mere confirmation of the timber license.

• New Issues on Appeal: Whether PICOP is raising new issues on appeal regarding the land classification of the contested area.
• Area Closed to Mining: Whether the concession area is closed to mining applications under RA 7942, RA 7586, and related laws.
• Non-Impairment Clause: Whether the Presidential Warranty is a contract protected by the non-impairment clause of the Constitution.

• New Issues on Appeal: The issues were not deemed strictly new, PICOP having raised the argument regarding permanent forest classification before the Panel of Arbitrators. Even if specific statutes were expounded upon only in the motion for reconsideration before the CA, the issues fall within the framework of the proceedings a quo, and respondents were afforded ample opportunity to respond.
• Area Closed to Mining: The area is not closed to mining. Government reservations are open to mining upon prior written clearance. Forest reserves are closed to mining only if proclaimed as watershed forest reserves, a fact not established here. Wilderness areas are closed only if designated as NIPAS initial components by law, decree, or proclamation; no such designation was proven. The policy of multiple land use permits mining in forest lands subject to existing rights and compensation for damages.
• Non-Impairment Clause: The Presidential Warranty is not a contract protected by the non-impairment clause. It merely reassures PICOP of the government's commitment to uphold the timber license and guarantees peaceful possession for timber extraction; it does not extend to mineral resources. A timber license is a mere privilege, not a contract or property right, and can be revoked when dictated by public interest. Construing the warranty as assuring exclusive possession would result in the State's abdication of its sovereign power over natural resources.

• Timber License as Mere Privilege — A timber license is an instrument by which the State regulates the utilization and disposition of forest resources; it is not a contract, property, or property right protected by the due process or non-impairment clauses of the Constitution. It is a mere license or privilege that may be revoked or rescinded by executive action when dictated by public interest or public welfare.
• Multiple Land Use Policy — Forest lands may be utilized for both forestry and mining purposes. Mining operations in forest lands are allowed subject to existing rights, reservations, and prior agreements, provided that the surface owner or concessionaire is properly notified and compensated for any damage to their property as a consequence of mining operations.

• "Needless to say, all licenses may thus be revoked or rescinded by executive action. It is not a contract, property or a property right protected by the due process clause of the Constitution."
• "The Presidential Warranty cannot, in any manner, be construed as a contractual undertaking assuring PICOP of exclusive possession and enjoyment of its concession areas. Such an interpretation would result in the complete abdication by the State in favor of PICOP of the sovereign power to control and supervise the exploration, development and utilization of the natural resources in the area."

• Oposa v. Factoran, G.R. No. 101083, July 30, 1993 — Followed. Established the controlling doctrine that a timber license is not a contract within the purview of the due process or non-impairment clauses, but a mere privilege subject to executive revocation.
• Felipe Ysmael, Jr. & Co., Inc. vs. Deputy Executive Secretary — Followed. Reiterated that timber licenses, permits, and license agreements are mere privileges that do not vest permanent or irrevocable rights.
• Apex Mining Co., Inc. v. Garcia, 199 SCRA 278 (1991) — Distinguished. PICOP misread this case to absolutely prohibit mining in the Agusan-Surigao-Davao Forest Reserve; the Court clarified that it merely prescribed the procedure (filing for a prospecting permit) for acquiring mining rights within such reserves.
• Tan vs. Director of Forestry — Followed. Cited for the proposition that a timber license is an instrument of state regulation, not a contract.
• PICOP Resources, Inc. v. Hon. Heherson T. Alvarez — Distinguished/Rejected. The CA decision in this case, cited by PICOP to support the claim that a Presidential Warranty is a contract, could not be relied upon because it was still pending review before the Court's Second Division.

• Section 10, Article III, 1987 Constitution — Non-impairment clause. Held inapplicable because a timber license and its accompanying Presidential Warranty are not contracts.
• Section 4, Article XII, 1987 Constitution — Requires Congress to determine the specific limits of forest lands. Held not violated because Congress has yet to enact a law determining the specific limits of the forest lands covered by Proclamation No. 369.
• Section 19, Republic Act No. 7942 (Philippine Mining Act of 1995) — Enumerates areas closed to mining applications, including proclaimed watershed forest reserves and NIPAS areas. Held not to bar mining in the subject area because it lacks the specific proclamation or designation required.
• Section 18, Republic Act No. 7942 — Opens all mineral resources in public or private lands, including timber or forestlands, to mineral agreements subject to existing rights.
• Sections 72 & 76, Republic Act No. 7942 — Grants mining contractors the right to cut timber within mining areas and enter private lands and concession areas, subject to consultation, prior notification, and proper compensation for damages.
• Section 5(a), Republic Act No. 7586 (NIPAS Act) — Designates areas proclaimed by law or executive issuance as initial components of the NIPAS. Held inapplicable absent proof of such proclamation for the subject wilderness area.
• Section 47, Presidential Decree No. 705 (Revised Forestry Code) — Regulates mining operations in forest lands, requiring notice, not consent, of existing licensees.

Quisumbing, Carpio, Carpio Morales, Velasco, Jr.