PICOP V.

BASE METALS

and Superintendent of the Agusan Marsh and

Wildlife Sanctuary were submitted, as required.

G.R. No. 163509

December 6, 2006
FACTS:
In 1987, the Central Mindanao Mining and
Development Corporation (CMMCI) entered into a
Mines Operating Agreement with Banahaw Mining
and Development Corporation whereby the latter
agreed to act as Mine Operator for the
exploration,
development,
and
eventual
commercial operation of CMMCI's 18 mining
claims located in Agusan del Sur. Pursuant to the
terms of the Agreement, Banahaw Mining filed
applications for Mining Lease Contracts over the
mining claims with the Bureau of Mines. On April
29, 1988, Banahaw Mining was issued a Mines
Temporary Permit authorizing it to extract and
dispose of precious minerals found within its
mining claims. Since a portion of Banahaw
Mining's mining claims was located in petitioner
PICOP's logging concession in Agusan del Sur,
Banahaw Mining and petitioner PICOP entered
into a MOA whereby petitioner PICOP allowed
Banahaw Mining an access to its mining claims. In
1991, Banahaw Mining converted its mining
claims to applications for Mineral Production
Sharing Agreements (MPSA).
While the MPSA were pending, Banahaw
Mining, on December 18, 1996, decided to
sell/assign its rights and interests over 37 mining
claims in favor of private respondent Base Metals
Mineral Resources Corporation. The transfer
included those covered by its mining operating
agreement with CMMCI. Upon being informed of
the development, CMMCI, as claim owner,
immediately approved the assignment made by
Banahaw Mining in favor of private respondent
Base Metals, thereby recognizing private
respondent Base Metals as the new operator of its
claims. On March 10, 1997, private respondent
Base Metals amended Banahaw Mining's pending
MPSA applications with the Bureau of Mines to
substitute itself as applicant and to submit
additional documents in support of the application.
Area clearances from the DENR Regional Director

On November 18, 1997, petitioner PICOP

filed with the Mines Geo-Sciences Bureau (MGB),
an Opposition to private respondent Base Metals'
application because it violate the non-impairment
clause and will be prejudicial to herein petitioner.
The Panel Arbitrator initially ruled for petitioner,
but upon appeal to the Mines Adjudication Board,
judgment was in favor of respondent, CA affirmed
stating that the Presidential Warranty of
September 25, 1968 issued by then President
Ferdinand E. Marcos merely confirmed the timber
license granted to PICOP and warranted the
latter's peaceful and adequate possession and
enjoyment of its concession areas. It was only
given upon the request of the Board of
Investments to establish the boundaries of
PICOP's timber license agreement. The
Presidential Warranty did not convert PICOP's
timber license into a contract because it did not
create any obligation on the part of the
government in favor of PICOP. Thus, the nonimpairment clause finds no application.
Issue:
W/N the concession area of petitioner is
closed to mining activities and that the conversion
of the agreement into MPSA will run counter to the
non-impairment clause of the Constitution.
HELD:
NO, a Timber license agreement is not a
contract, but a mere privilege.
We should state at this juncture that the
policy of multiple land use is enshrined in our laws
towards the end that the country's natural
resources may be rationally explored, developed,
utilized and conserved. In like manner, RA 7942,
recognizing the equiponderance between mining
and timber rights, gives a mining contractor the
right to enter a timber concession and cut timber
therein provided that the surface owner or
concessionaire shall be properly compensated for
any damage done to the property as a
consequence of mining operations.

Page 1 of 16

Firstly, assuming that the area covered by

Base Metals' MPSA is a government reservation,
defined as proclaimed reserved lands for specific
purposes other than mineral reservations, such
does not necessarily preclude mining activities in
the area. Sec. 15(b) of DAO 96-40 provides that
government reservations may be opened for
mining applications upon prior written clearance
by the government agency having jurisdiction over
such reservation. Sec. 6 of RA 7942 also provides
that mining operations in reserved lands other
than mineral reservations may be undertaken by
the DENR, subject to certain limitations. Secondly,
RA 7942 does not disallow mining applications in
all forest reserves but only those proclaimed as
watershed forest reserves. There is no evidence
in this case that the area covered by Base Metals'
MPSA has been proclaimed as watershed forest
reserves. DENR Memorandum Order No. 03-98,
which provides the guidelines in the issuance of
area status and clearance or consent for mining
applications pursuant to RA 7942, provides that
timber or forest lands, military and other
government reservations, forest reservations,
forest reserves other than critical watershed forest
reserves, and existing DENR Project Areas within
timber or forest lands, reservations and reserves,
among others, are open to mining applications
subject to area status and clearance.

Lease Contracts over the mining claims with the

Bureau of Mines.
It was issued a Mines
Temporary Permit to extract and dispose minerals
within its mining claims. The permit was renewed
thrice.
Banahaw Mining and PICOP entered into
a Memorandum of Agreement recognizing each
others right to the area concerned since the
mining claims were within the logging concession
of PICOP.
These mining claims were later
converted to Mineral Production Sharing
Agreements (MPSA).
During the pendency of the MPSA,
Banahaw Mining sold/assigned its rights and
interests over 37mining claims, including those
covered with its agreement with CMMCI, in favor
of Base Metals.
CMMCI approved the
assignment and recognized Base Metals as the
new operator of the mining claims.

From Source Book:

Base Metals amended the pending MPSA

applications to substitute itself as applicant. The
required area clearances and documents were
submitted. However, PICOP filed an opposition to
Base Metals application on the following grounds:
(1) the approval will violate the constitutional
mandate against impairment of obligations in a
contract; and (2) PICOPs rights will be defeated
by the approval of the application. Base Metals,
on the other hand, contends that PICOP has no
rights over the mineral resources in the
concession area. The Panel Arbitrator set aside
the MPSA applications because the consent of
PICOP was not obtained in the assignment of
Banahaw Minings rights. The Mines Adjudication
Board (MAB)reinstated the MPSAs on appeal,
and the decision was later upheld by the Court of
Appeals. Hence, the present petition.

Facts:

Issue:

The Central Mindanao Mining and Development

Corporation (CMMCI) entered into a Mines
Operating Agreement with Banahaw Mining and
Development Corporation, wherein the latter will
serve as the Mine Operator of CMMCIs 18 mining
claims in Agusan del Sur. In accordance with the
Agreement, Banahaw Mining applied for Mining

Whether PICOPs logging concession within the

Agusan-Surigao-Davao
Forest
Reserve
established under Proclamation No. 369 is closed
to mining applications in accordance with Section
19 of RA No.7942.

Lastly, PICOP failed to present any

evidence that the area covered by the MPSA is a
protected wilderness area designated as an initial
component of the NIPAS pursuant to a law,
presidential decree, presidential proclamation or
executive order as required by RA 7586.

Ruling:

Page 2 of 16

No. The mere fact that the area is a

government reservation does not necessarily
prohibit mining activities in the area.
Assuming arguendo that the area of Base
Metals MPSA is a government reservation, this
fact does not necessarily prohibit mining activities
in the area. DAO 96-40, Section 15(b) allows
government reservations to be opened for mining
applications with a condition precedent of a prior
written clearance issued by the government
agency having jurisdiction over the reservation.
As provided in Section 6 of RA No. 7942, [m]ining
operations in reserved lands other than mineral
reservations may be undertaken by the DENR,
subject to certain limitations. RA No. 7942 only
prohibits mining applications in areas proclaimed
as watershed forest reserves.

However, the reinstatement of the MPSA

does not automatically result in its approval. There
should still be compliance with the requirements in
DAO
No.
96-40,
including
the
publication/posting/radio announcement of its
mineral agreement application.

In this case, the areas covered by the

MPSAs were not proclaimed as watershed forest
reserves. Assuming that it is, PD No. 463 (as
amended by PD No. 1385) provides that mining
rights may be acquired over forest reserves, such
as the Agusan-Davao-Surigao Forest Reserve by
applying for a prospecting permit, and
subsequently a permit to explore.
Section 18 [of] RA No. 7942 allows
mining even in timberland or forestry subject to
existingrights and reservations. x x x Similarly,
Section 47 of PD No. 705 permits mining
operations in forest lands which include the public
forest, the permanent forest or forest reserves,
and forest reservations, but there is no
requirement of prior consent of existing licensees.
Only prior notification before commencing mining
activities is required.
The SC also held that DENR
Memorandum Order No. 03-98 providing for the
guidelines in the issuance of area status and
clearance or consent for mining applications
pursuant to RA No. 7942, allows government
reservations to be open to mining applications
subject to area status and clearance.
The
required clearance and certifications have already
been issued to Base Metals and included in its
application.

Page 3 of 16

THIRD DIVISION
G.R. No. 163509

December 6, 2006

PICOP RESOURCES,
INC.,
petitioner,
vs.
BASE
METALS
MINERAL
RESOURCES
CORPORATION,
and
THE
MINES
ADJUDICATION BOARD, respondents.

Since a portion of Banahaw Mining's

mining claims was located in petitioner
PICOP's logging concession in Agusan
del Sur, Banahaw Mining and petitioner
PICOP entered into a Memorandum of
Agreement,
whereby,
in
mutual
recognition of each other's right to the
area concerned, petitioner PICOP allowed
Banahaw Mining an access/right of way to
its mining claims.
In 1991, Banahaw Mining converted its
mining claims to applications for Mineral
Production Sharing Agreements (MPSA
for brevity).

DECISION

TINGA, J.:
PICOP Resources, Inc. (PICOP) assails the
Decision1 of the Court of Appeals dated November
28, 2003 and its Resolution2 dated May 5, 2004,
which respectively denied its petition for review
and motion for reconsideration.
The undisputed facts quoted from the appellate
court's Decision are as follows:
In 1987, the Central Mindanao Mining and
Development Corporation (CMMCI for
brevity) entered into a Mines Operating
Agreement (Agreement for brevity) with
Banahaw Mining and Development
Corporation (Banahaw Mining for brevity)
whereby the latter agreed to act as Mine
Operator
for
the
exploration,
development, and eventual commercial
operation of CMMCI's eighteen (18)
mining claims located in Agusan del Sur.
Pursuant to the terms of the Agreement,
Banahaw Mining filed applications for
Mining Lease Contracts over the mining
claims with the Bureau of Mines. On April
29, 1988, Banahaw Mining was issued a
Mines Temporary Permit authorizing it to
extract and dispose of precious minerals
found within its mining claims. Upon its
expiration, the temporary permit was
subsequently renewed thrice by the
Bureau of Mines, the last being on June
28, 1991.

Page 4 of 16

While the MPSA were pending, Banahaw

Mining, on December 18, 1996, decided
to sell/assign its rights and interests over
thirty-seven (37) mining claims in favor of
private respondent Base Metals Mineral
Resources Corporation (Base Metals for
brevity). The transfer included mining
claims held by Banahaw Mining in its own
right as claim owner, as well as those
covered
by its mining operating
agreement with CMMCI.
Upon being informed of the development,
CMMCI, as claim owner, immediately
approved the assignment made by
Banahaw Mining in favor of private
respondent
Base
Metals,
thereby
recognizing private respondent Base
Metals as the new operator of its claims.
On March 10, 1997, private respondent
Base Metals amended Banahaw Mining's
pending MPSA applications with the
Bureau of Mines to substitute itself as
applicant and to submit additional
documents in support of the application.
Area clearances from the DENR Regional
Director and Superintendent of the
Agusan Marsh and Wildlife Sanctuary
were submitted, as required.
On October 7, 1997, private respondent
Base
Metals'
amended
MPSA
applications
were
published
in
accordance with the requirements of the
Mining Act of 1995.

On November 18, 1997, petitioner PICOP

filed with the Mines Geo-Sciences Bureau
(MGB), Caraga Regional Office No. XIII
an Adverse Claim and/or Opposition to
private
respondent
Base
Metals'
application on the following grounds:
I. THE APPROVAL OF THE
APPLICATION AND ISSUANCE
OF THE MPSA OF BASE
METALS WILL VIOLATE THE
CONSTITUTIONAL
MANDATE
AGAINST
IMPAIRMENT
OF
OBLIGATION IN A CONTRACT.
II. THE APPROVAL OF THE
APPLICATION WILL DEFEAT
THE RIGHTS OF THE HEREIN
ADVERSE CLAIMANT AND/OR
OPPOSITOR.

awarded in favor of PICOP for the

exclusive
possession
and
enjoyment of said areas.
As a Rejoinder, private respondent Base
Metals stated that:
1. it is seeking the right to extract
the mineral resources in the
applied areas. It is not applying
for any right to the forest
resources within the concession
areas of PICOP;
2. timber or forest lands are open
to Mining Applications;
3. the grant of the MPSA will not
violate the so called "presidential
fiat";

In its Answer to the Adverse Claim and/or

Opposition, private respondent Base
Metals alleged that:

4. the MPSA application of Base

Metals does not require the
consent of PICOP; and

a) the Adverse Claim was filed out

of time;

5. it signified its willingness to

enter into a voluntary agreement
with PICOP on the matter of
compensation for damages. In the
absence of such agreement, the
matter will be brought to the
Panel of Arbitration in accordance
with law.

b) petitioner PICOP has no rights

over the mineral resources on
their concession area. PICOP is
asserting a privilege which is not
protected by the non-impairment
clause of the Constitution;
c) the grant of the MPSA will not
impair the rights of PICOP nor
create confusion, chaos or
conflict.
Petitioner PICOP's Reply to the Answer
alleged that:
a) the Adverse Claim was filed
within the reglementary period;
b) the grant of MPSA will impair
the existing rights of petitioner
PICOP;
c) the MOA between PICOP and
Banahaw Mining provides for
recognition by Banahaw Mining of
the
Presidential
Warranty

Page 5 of 16

In refutation thereto, petitioner PICOP

alleged in its Rejoinder that:
a) the Adverse Claim filed thru
registered mail was sent on time
and as prescribed by existing
mining laws and rules and
regulations;
b) the right sought by private
respondent Base Metals is not
absolute but is subject to existing
rights, such as those which the
adverse claimant had, that have
to be recognized and respected in
a
manner
provided
and
prescribed by existing laws as will
be expounded fully later;

c) as a general rule, mining

applications within timber or forest
lands are subject to existing rights
as provided in Section 18 of RA
7942 or the Philippine Mining Act
of 1995 and it is an admitted fact
by the private respondent that
petitioner PICOP had forest rights
as per Presidential Warranty;
d) while the Presidential Warranty
did not expressly state exclusivity,
P.D. 705 strengthened the right of
occupation,
possession
and
control over the concession area;
e) the provisions of Section 19 of
the Act and Section 15 of IRR
expressly require the written
consent of the forest right holder,
PICOP.
After the submission of their respective
position paper, the Panel Arbitrator issued
an Order dated December 21, 1998, the
dispositive portion of which reads as:
WHEREFORE,
premises
considered, Mineral Production
Sharing Agreement Application
Nos. (XIII) 010, 011, 012 of Base
Metal Resources Corporation
should be set aside.
The disapproval of private respondent
Base Metals' MPSA was due to the
following reasons:
Anent the first issue the Panel
find (sic) and so hold (sic) that the
adverse claim was filed on time, it
being mailed on November 19,
1997, at Metro Manila as
evidenced by Registry Receipt
No. 26714. Under the law (sic)
the date of mailing is considered
the date of filing.
As to whether or not an MPSA
application can be granted on
area subject of an IFMA3 or
PTLA4 which is covered by a
Presidential Warranty, the panel
believes it can not, unless the

Page 6 of 16

grantee consents thereto. Without

the grantee's consent, the area is
considered closed to mining
location (sec. 19) (b) (No. 2),
DAO No. 96-40). The Panel
believe (sic) that mining location
in forest or timberland is allowed
only if such forest or timberland is
not leased by the government to a
qualified person or entity. If it is
leased the consent of the lessor is
necessary, in addition to the area
clearance to be issued by the
agency concerned before it is
subjected to mining operation.
Plantation is considered closed to
mining locations because it is off
tangent to mining. Both are
extremes. They can not exist at
the same time. The other must
necessarily stop before the other
operate.
On the other hand, Base Metals
Mineral Resources Corporation
can not insist the MPSA
application as assignee of
Banahaw. PICOP did not consent
to the assignment as embodied in
the agreement. Neither did it ratify
the
Deed
of
Assignment.
Accordingly, it has no force and
effect. Thus, for lack of consent,
the MPSA must fall.
On January 11, 1999, private respondent
Base Metals filed a Notice of Appeal with
public respondent MAB and alleged in its
Appeal Memorandum the following
arguments:
1. THE CONSENT OF PICOP IS
NOT NECESSARY FOR THE
APPROVAL OF BASE METALS'
MPSA APPLICATION.
2. EVEN ASSUMING SUCH
CONSENT IS
NECESSARY,
PICOP HAD CONSENTED TO
BASE
METALS'
MPSA
APPLICATION.
In Answer thereto,
alleged that:

petitioner

PICOP

1. Consent is necessary for the

approval of private respondent's
MPSA application;

After the filing of petitioner PICOP's Reply

Memorandum,
public
respondent
rendered the assailed decision setting
aside the Panel Arbitrator's order.
Accordingly, private respondent Base
Metals' MPSA's were reinstated and given
due course subject to compliance with the
pertinent requirements of the existing
rules and regulations.6

2. Provisions of Memorandum
Order No. 98-03 and IFMA 35 are
not applicable to the instant case;
3. Provisions of PD 7055 connotes
exclusivity for timber license
holders; and
4.
MOA
between
private
respondent's
assignor
and
adverse claimant provided for the
recognition of the latter's rightful
claim over the disputed areas.
Private respondent Base Metals claimed
in its Reply that:
1. The withholding of consent by
PICOP derogates the State's
power to supervise and control
the exploration, utilization and
development
of
all
natural
resources;
2. Memorandum Order No, 98-03,
not being a statute but a mere
guideline
imposed
by
the
Secretary of the Department of
Environment
and
Natural
Resources (DENR), can be
applied retroactively to MPSA
applications which have not yet
been finally resolved;
3. Even assuming that the
consent of adverse claimant is
necessary for the approval of
Base Metals' application (which is
denied), such consent had
already been given; and
4.
The
Memorandum
of
Agreement between adverse
claimant and Banahaw Mining
proves that the Agusan-Surigao
area had been used in the past
both for logging and mining
operations.

The Court of Appeals upheld the decision of the

MAB, ruling that the Presidential Warranty of
September 25, 1968 issued by then President
Ferdinand E. Marcos merely confirmed the timber
license granted to PICOP and warranted the
latter's peaceful and adequate possession and
enjoyment of its concession areas. It was only
given upon the request of the Board of
Investments to establish the boundaries of
PICOP's timber license agreement. The
Presidential Warranty did not convert PICOP's
timber license into a contract because it did not
create any obligation on the part of the
government in favor of PICOP. Thus, the nonimpairment clause finds no application.
Neither did the Presidential Warranty grant PICOP
the exclusive possession, occupation and
exploration of the concession areas covered. If
that were so, the government would have
effectively surrendered its police power to control
and supervise the exploration, development and
utilization of the country's natural resources.
On PICOP's contention that its consent is
necessary for the grant of Base Metals' MPSA,
the appellate court ruled that the amendment to
PTLA No. 47 refers to the grant of gratuitous
permits, which the MPSA subject of this case is
not. Further, the amendment pertains to the
cutting and extraction of timber for mining
purposes and not to the act of mining itself, the
intention of the amendment being to protect the
timber found in PICOP's concession areas.
The Court of Appeals noted that the reinstatement
of the MPSA does not ipso facto revoke, amend,
rescind or impair PICOP's timber license. Base
Metals still has to comply with the requirements
for the grant of a mining permit. The fact, however,
that Base Metals had already secured the
necessary Area Status and Clearance from the
DENR means that the areas applied for are not
closed to mining operations.

Page 7 of 16

In its Resolution7 dated May 5, 2004, the appellate

court denied PICOP's Motion for Reconsideration.
It ruled that PICOP failed to substantiate its
allegation that the area applied for is a forest
reserve and is therefore closed to mining
operations because it did not identify the particular
law which set aside the contested area as one
where mining is prohibited pursuant to applicable
laws.
The case is now before us for review.
In its Memorandum8 dated April 6, 2005, PICOP
presents the following issues: (1) the 2,756
hectares subject of Base Metals' MPSA are closed
to mining operations except upon PICOP's written
consent pursuant to existing laws, rules and
regulations and by virtue of the Presidential
Warranty; (2) its Presidential Warranty is protected
by the non-impairment clause of the Constitution;
and (3) it does not raise new issues in its petition.
PICOP asserts that its concession areas are
closed to mining operations as these are within
the
Agusan-Surigao-Davao
forest
reserve
established under Proclamation No. 369 of then
Gov. Gen. Dwight Davis. The area is allegedly
also part of permanent forest established under
Republic Act No. 3092 (RA 3092),9 and overlaps
the wilderness area where mining applications are
expressly prohibited under RA 7586.10 Hence, the
area is closed to mining operations under Sec.
19(f) of RA 7942.11
PICOP further asserts that to allow mining over a
forest or forest reserve would allegedly be
tantamount to changing the classification of the
land from forest to mineral land in violation of Sec.
4, Art. XII of the Constitution and Sec. 1 of RA
3092.
According to PICOP, in 1962 and 1963, blocks A,
B and C within the Agusan-Surigao-Davao forest
reserve under Proclamation No. 369 were
surveyed as permanent forest blocks in
accordance with RA 3092. These areas cover
PICOP's PTLA No. 47, part of which later became
IFMA No. 35. In turn, the areas set aside as
wilderness as in PTLA No. 47 became the initial
components of the NIPAS under Sec. 5(a) of RA
7586. When RA 7942 was signed into law, the
areas covered by the NIPAS were expressly
determined as areas where mineral agreements
or financial or technical assistance agreement
applications shall not be allowed. PICOP

concludes that since there is no evidence that the

permanent forest areas within PTLA No. 47 and
IFMA No. 35 have been set aside for mining
purposes, the MAB and the Court of Appeals
gravely erred in reinstating Base Metals' MPSA
and, in effect, allowing mining exploration and
mining-related activities in the protected areas.
PICOP further argues that under DENR
Administrative
Order
(DAO)
No.
96-40
implementing RA 7942, an exploration permit
must be secured before mining operations in
government reservations may be undertaken.
There being no exploration permit issued to
Banahaw Mining or appended to its MPSA, the
MAB and the Court of Appeals should not have
reinstated its application.
PICOP brings to the Court's attention the case of
PICOP Resources, Inc. v. Hon. Heherson T.
Alvarez,12 wherein the Court of Appeals ruled that
the Presidential Warranty issued to PICOP for its
TLA No. 43 dated July 29, 1969, a TLA distinct
from PTLA No. 47 involved in this case, is a valid
contract involving mutual prestations on the part
of the Government and PICOP.
The Presidential Warranty in this case is allegedly
not a mere confirmation of PICOP's timber license
but a commitment on the part of the Government
that in consideration of PICOP's investment in the
wood-processing business, the Government will
assure the availability of the supply of raw
materials at levels adequate to meet projected
utilization requirements. The guarantee that
PICOP will have peaceful and adequate
possession and enjoyment of its concession areas
is impaired by the reinstatement of Base Metals'
MPSA in that the latter's mining activities
underneath the area in dispute will surely
undermine PICOP's supply of raw materials on
the surface.
Base Metals' obtention of area status and
clearance from the DENR is allegedly immaterial,
even misleading. The findings of the DENR
Regional Disrector and the superintendent of the
Agusan Marsh and Wildlife Sanctuary are
allegedly misplaced because the area applied for
is not inside the Agusan Marsh but in a permanent
forest. Moreover, the remarks in the area status
itself should have been considered by the MAB
and the appellate court as they point out that the
application encroaches on surveyed timberland

Page 8 of 16

projects declared as permanent forests/forest

reserves.
Finally, PICOP insists that it has always
maintained that the forest areas of PTLA No. 47
and IFMA No. 35 are closed to mining operations.
The grounds relied upon in this petition are thus
not new issues but merely amplifications,
clarifications and detailed expositions of the
relevant constitutional provisions and statutes
regulating the use and preservation of forest
reserves, permanent forest, and protected
wilderness areas given that the areas subject of
the MPSA are within and overlap PICOP's PTLA
No. 47 and IFMA No. 35 which have been
classified and blocked not only as permanent
forest but also as protected wilderness area
forming an integral part of the Agusan-DavaoSurigao Forest Reserve.
In its undated Memorandum,13 Base Metals
contends that PICOP never made any reference
to land classification or the exclusion of the
contested area from exploration and mining
activities except in the motion for reconsideration
it filed with the Court of Appeals. PICOP's object
to the MPSA was allegedly based exclusively on
the ground that the application, if allowed to
proceed, would constitute a violation of the
constitutional proscription against impairment of
the obligation of contracts. It was upon this issue
that the appellate court hinged its Decision in
favor of Base Metals, ruling that the Presidential
Warranty merely confirmed PICOP's timber
license. The instant petition, which raises new
issues and invokes RA 3092 and RA 7586, is an
unwarranted departure from the settled rule that
only issues raised in the proceedings a quo may
be elevated on appeal.
Base Metals notes that RA 7586 expressly
requires that there be a prior presidential decree,
presidential proclamation, or executive order
issued by the President of the Philippines,
expressly proclaiming, designating, and setting
aside the wilderness area before the same may
be considered part of the NIPAS as a protected
area. Allegedly, PICOP has not shown that such
an express presidential proclamation exists
setting aside the subject area as a forest reserve,
and excluding the same from the commerce of
man.
PICOP also allegedly misquoted Sec. 19 of RA
7942 by placing a comma between the words

"watershed" and "forest" thereby giving an

altogether different and misleading interpretation
of the cited provision. The cited provision, in fact,
states that for an area to be closed to mining
applications, the same must be a watershed forest
reserve duly identified and proclaimed by the
President of the Philippines. In this case, no
presidential proclamation exists setting aside the
contested area as such.
Moreover, the Memorandum of Agreement
between Banahaw Mining and PICOP is allegedly
a clear and tacit recognition by the latter that the
area is open and available for mining activities
and that Banahaw Mining has a right to enter and
explore the areas covered by its mining claims.
Base Metals reiterates that the non-impairment
clause is a limit on the exercise of legislative
power and not of judicial or quasi-judicial power.
The Constitution prohibits the passage of a law
which enlarges, abridges or in any manner
changes the intention of the contracting parties.
The decision of the MAB and the Court of Appeals
are not legislative acts within the purview of the
constitutional
proscription.
Besides,
the
Presidential Warranty is not a contract that may
be impaired by the reinstatement of the MPSA. It
is a mere confirmation of PICOP's timber license
and draws its life from PTLA No. 47. Furthermore,
PICOP fails to show how the reinstatement of the
MPSA will impair its timber license.
Following the regalian doctrine, Base Metals
avers that the State may opt to enter into
contractual arrangements for the exploration,
development, and extraction of minerals even it
the same should mean amending, revising, or
even revoking PICOP's timber license. To require
the State to secure PICOP's prior consent before
it can enter into such contracts allegedly
constitutes an undue delegation of sovereign
power.
Base Metals further notes that Presidential
Decree No. 705 (PD 705), under which PTLA No.
47, IFMA No. 35 and the Presidential Warranty
were issued, requires notice to PICOP rather than
consent before any mining activity can be
commenced in the latter's concession areas.
The Office of the Solicitor General (OSG) filed a
Memorandum14 dated April 21, 2005 on behalf of
the MAB, contending that PICOP's attempt to
raise new issues, such as its argument that the

Page 9 of 16

contested area is classified as a permanent forest

and hence, closed to mining activities, is offensive
to due process and should not be allowed.
The OSG argues that a timber license is not a
contract within the purview of the due process and
non-impairment
clauses.
The
Presidential
Warranty merely guarantees PICOP's tenure over
its concession area and covers only the right to
cut, collect and remove timber therein. It is a mere
collateral undertaking and cannot amplify PICOP's
rights under its PTLA No. 47 and IFMA No. 35. To
hold that the Presidential Warranty is a contract
separate from PICOP's timber license effectively
gives the latter PICOP an exclusive, perpetual and
irrevocable right over its concession area and
impairs the State's sovereign exercise of its power
over the exploration, development, and utilization
of natural resources.
The case of PICOP Resources, Inc. v. Hon.
Heherson T. Alvarez, supra, cited by PICOP
cannot be relied upon to buttress the latter's claim
that a presidential warranty is a valid and
subsisting contract between PICOP and the
Government because the decision of the appellate
court in that case is still pending review before the
Court's Second Division.
The OSG further asserts that mining operations
are legally permissible over PICOP's concession
areas. Allegedly, what is closed to mining
applications under RA 7942 are areas proclaimed
as watershed forest reserves. The law does not
totally prohibit mining operations over forest
reserves. On the contrary, Sec. 18 of RA 7942
permits mining over forest lands subject to
existing rights and reservations, and PD 705
allows mining over forest lands and forest
reservations subject to State regulation and
mining laws. Sec. 19(a) of RA 7942 also provides
that mineral activities may be allowed even over
military and other government reservations as
long as there is a prior written clearance by the
government agency concerned.
The area status clearances obtained by Base
Metals also allegedly show that the area covered
by the MPSA is within timberland, unclassified
public forest, and alienable and disposable land.
Moreover, PICOP allegedly chose to cite portions
of Apex Mining Corporation v. Garcia,15 to make
it appear that the Court in that case ruled that
mining is absolutely prohibited in the AgusanSurigao-Davao Forest Reserve. In fact, the Court

held that the area is not open to mining location

because the proper procedure is to file an
application for a permit to prospect with the
Bureau of Forest and Development.
In addition, PICOP's claimed wilderness area has
not been designated as a protected area that
would operate to bar mining operations therein.
PICOP failed to prove that the alleged wilderness
area has been designated as an initial component
of the NIPAS pursuant to a law, presidential
decree, presidential proclamation or executive
order. Hence, it cannot correctly claim that the
same falls within the coverage of the restrictive
provisions of RA 7586.
The OSG points out that the Administrative Code
of 1917 which RA 3092 amended has been
completely repealed by the Administrative Code of
1978. Sec. 4, Art. XII of the 1987 Constitution, on
the other hand, provides that Congress shall
determine the specific limits of forest lands and
national parks, marking clearly their boundaries
on the ground. Once this is done, the area thus
covered by said forest lands and national parks
may not be expanded or reduced except also by
congressional legislation. Since Congress has yet
to enact a law determining the specific limits of the
forest lands covered by Proclamation No. 369 and
marking clearly its boundaries on the ground,
there can be no occasion that could give rise to a
violation of the constitutional provision.
Moreover, Clauses 10 and 14 of PICOP's IFMA
No. 35 specifically provides that the area covered
by the agreement is open for mining if public
interest so requires. Likewise, PTLA No. 47
provides that the area covered by the license
agreement may be opened for mining purposes.
Finally, the OSG maintains that pursuant to the
State's policy of multiple land use, R.A. No. 7942
provides for appropriate measures for a
harmonized utilization of the forest resources and
compensation for whatever damage done to the
property of the surface owner or concessionaire
as a consequence of mining operations. Multiple
land use is best demonstrated by the
Memorandum of Agreement between PICOP and
Banahaw Mining.
First, the procedural question of whether PICOP is
raising new issues in the instant petition. It is the
contention of the OSG and Base Metals that
PICOP's argument that the area covered by the

Page 10 of 16

MPSA is classified as permanent forest and

therefore closed to mining activities was raised for
the first time in PICOP's motion for
reconsideration with the Court of Appeals.
Our own perusal of the records of this case
reveals that this is not entirely true.
In its Adverse Claim and/or Opposition16 dated
November 19, 1997 filed with the MGB Panel of
Arbitrators, PICOP already raised the argument
that the area applied for by Base Metals is
classified as a permanent forest determined to be
needed for forest purposes pursuant to par. 6,
Sec. 3 of PD 705, as amended. PICOP then
proceeded to claim that the area should remain
forest land if the purpose of the presidential fiat
were to be followed. It stated:
Technically, the areas applied for by Base
Metals are classified as a permanent
forest being land of the public domain
determined to be needed for forest
purposes (Paragraph 6, Section 3 of
Presidential Decree No. 705, as
amended) If these areas then are
classified and determined to be needed
for forest purpose then they should be
developed and should remain as forest
lands.
Identifying,
delineating
and
declaring them for other use or uses
defeats the purpose of the aforecited
presidential fiats. Again, if these areas
would be delineated from Oppositor's
forest concession, the forest therein
would be destroyed and be lost beyond
recovery.17

It is true though that PICOP expounded on the

applicability of RA 3092, RA 7586, and RA 7942
for the first time in its motion for reconsideration of
the appellate court's Decision. It was only in its
motion for reconsideration that PICOP argued that
the area covered by PTLA No. 47 and IFMA No.
35 are permanent forest lands covered by RA
7586 which cannot be entered for mining
purposes, and shall remain indefinitely as such for
forest uses and cannot be excluded or diverted for
other uses except after reclassification through a
law enacted by Congress.
Even so, we hold that that the so-called new
issues raised by PICOP are well within the issues
framed by the parties in the proceedings a quo.
Thus, they are not, strictly speaking, being raised
for the first time on appeal. 20 Besides, Base
Metals and the OSG have been given ample
opportunity, by way of the pleadings filed with this
Court, to respond to PICOP's arguments. It is in
the best interest of justice that we settle the
crucial question of whether the concession area in
dispute is open to mining activities.
We should state at this juncture that the policy of
multiple land use is enshrined in our laws towards
the end that the country's natural resources may
be rationally explored, developed, utilized and
conserved. The Whereas clauses and declaration
of policies of PD 705 state:
WHEREAS,
proper
classification,
management and utilization of the lands
of the public domain to maximize their
productivity to meet the demands of our
increasing population is urgently needed;

Base Metals met this argument head on in its

Answer18 dated December 1, 1997, in which it
contended that PD 705 does not exclude mining
operations in forest lands but merely requires that
there be proper notice to the licensees of the
area.

WHEREAS, to achieve the above

purpose, it is necessary to reassess the
multiple uses of forest lands and
resources before allowing any utilization
thereof to optimize the benefits that can
be derived therefrom;

Again in its Petition19 dated January 25, 2003

assailing the reinstatement of Base Metals'
MPSA, PICOP argued that RA 7942 expressly
prohibits mining operations in plantation areas
such as PICOP's concession area. Hence, it
posited that the MGB Panel of Arbitrators did not
commit grave abuse of discretion when it ruled
that without PICOP's consent, the area is closed
to mining location.

Page 11 of 16

Sec. 2. Policies.The State

adopts the following policies:

hereby

a) The multiple uses of forest

lands shall be oriented to the
development
and
progress
requirements of the country, the

advancement of science and

technology, and the public
welfare;
In like manner, RA 7942, recognizing the
equiponderance between mining and timber
rights, gives a mining contractor the right to enter
a timber concession and cut timber therein
provided that the surface owner or concessionaire
shall be properly compensated for any damage
done to the property as a consequence of mining
operations. The pertinent provisions on auxiliary
mining rights state:
Sec. 72. Timber Rights.Any provision of
law to the contrary notwithstanding, a
contractor may be granted a right to cut
trees or timber within his mining areas as
may be necessary for his mining
operations subject to forestry laws, rules
and regulations: Provided, That if the land
covered by the mining area is already
covered by existing timber concessions,
the volume of timber needed and the
manner of cutting and removal thereof
shall be determined by the mines regional
director, upon consultation with the
contractor,
the
timber
concessionair/permittee and the Forest
Management Bureau of the Department:
Provided, further, That in case of
disagreement between the contractor and
the timber concessionaire, the matter
shall be submitted to the Secretary whose
decision shall be final. The contractor
shall perform reforestation work within his
mining area in accordance with forestry
laws, rules and regulations.

guarantee such compensation, the person

authorized to conduct mining operation
shall, prior thereto, post a bond with the
regional director based on the type of
properties, the prevailing prices in and
around the area where the mining
operations are to be conducted, with
surety or sureties satisfactory to the
regional director.
With the foregoing predicates, we shall now
proceed to analyze PICOP's averments.
PICOP contends that its concession area is within
the Agusan-Surigao-Davao Forest Reserve
established under Proclamation No. 369 and is
closed to mining application citing several
paragraphs of Sec. 19 of RA 7942.
The cited provision states:
Sec. 19 Areas Closed to Mining
Applications.Mineral
agreement
or
financial
or
technical
assistance
agreement applications shall not be
allowed:
(a) In military and other government
reservations, except upon prior written
clearance by the government agency
concerned;

(d) In areas expressly prohibited by law;

Sec. 76. Entry into Private Lands and

Concession Areas.Subject to prior
notification, holders of mining rights shall
not be prevented from entry into private
lands and concession areas by surface
owners, occupants, or concessionaires
when conducting mining operations
therein: Provided, That any damage done
to the property of the surface owner,
occupant, or concessionaire as a
consequence of such operations shall be
properly compensated as may be
provided for in the implementing rules and
regulations: Provided, further, That to

(f) Old growth or virgin forests,

proclaimed watershed forest reserves,
wilderness areas, mangrove forests,
mossy
forests,
national
parks,
provincial/municipal
forests,
parks,
greenbelts, game refuge and bird
sanctuaries as defined by law in areas
expressly prohibited under the National
Ingrated Protected Areas System (NIPAS)
under Republic Act No. 7586, Department
Administrative Order No. 25, series of
1992 and other laws. [emphasis supplied]
We analyzed each of the categories under which
PICOP claims that its concession area is closed to

Page 12 of 16

mining activities and conclude that PICOP's

contention must fail.
Firstly, assuming that the area covered by Base
Metals' MPSA is a government reservation,
defined as proclaimed reserved lands for specific
purposes other than mineral reservations, 21 such
does not necessarily preclude mining activities in
the area. Sec. 15(b) of DAO 96-40 provides that
government reservations may be opened for
mining applications upon prior written clearance
by the government agency having jurisdiction over
such reservation.
Sec. 6 of RA 7942 also provides that mining
operations in reserved lands other than mineral
reservations may be undertaken by the DENR,
subject to certain limitations. It provides:
Sec. 6. Other Reservations.Mining
operations in reserved lands other than
mineral reservations may be undertaken
by the Department, subject to limitations
as herein provided. In the event that the
Department cannot undertake such
activities, they may be undertaken by a
qualified person in accordance with the
rules and regulations promulgated by the
Secretary. The right to develop and utilize
the minerals found therein shall be
awarded by the President under such
terms and conditions as recommended by
the Director and approved by the
Secretary: Provided, That the party who
undertook the exploration of said
reservations shall be given priority. The
mineral land so awarded shall be
automatically
excluded
from
the
reservation during the term of the
agreement: Provided, further, That the
right of the lessee of a valid mining
contract existing within the reservation at
the time of its establishment shall not be
prejudiced or impaired.

the area is absolutely closed to mining activities.

Contrary to PICOP's obvious misreading of our
decision in Apex Mining Co., Inc. v. Garcia, supra,
to the effect that mineral agreements are not
allowed in the forest reserve established under
Proclamation 369, the Court in that case actually
ruled that pursuant to PD 463 as amended by PD
1385, one can acquire mining rights within forest
reserves, such as the Agusan-Davao-Surigao
Forest Reserve, by initially applying for a permit to
prospect with the Bureau of Forest and
Development and subsequently for a permit to
explore with the Bureau of Mines and
Geosciences.
Moreover, Sec. 18 RA 7942 allows mining even in
timberland or forestty subject to existing rights and
reservations. It provides:
Sec. 18. Areas Open to Mining
Operations.Subject to any existing
rights
or
reservations
and
prior
agreements of all parties, all mineral
resources in public or private lands,
including timber or forestlands as defined
in existing laws, shall be open to mineral
agreements or financial or technical
assistance agreement applications. Any
conflict that may arise under this provision
shall be heard and resolved by the panel
of arbitrators.
Similarly, Sec. 47 of PD 705 permits mining
operations in forest lands which include the public
forest, the permanent forest or forest reserves,
and forest reservations.22 It states:

Secondly, RA 7942 does not disallow mining

applications in all forest reserves but only those
proclaimed as watershed forest reserves. There is
no evidence in this case that the area covered by
Base Metals' MPSA has been proclaimed as
watershed forest reserves.
Even granting that the area covered by the MPSA
is part of the Agusan-Davao-Surigao Forest
Reserve, such does not necessarily signify that

Page 13 of 16

Sec. 47. Mining Operations.Mining

operations in forest lands shall be
regulated and conducted with due regard
to protection, development and utilization
of other surface resources. Location,
prospecting, exploration, utilization or
exploitation of mineral resources in forest
reservations shall be governed by mining
laws, rules and regulations. No location,
prospecting, exploration, utilization, or
exploitation of mineral resources inside
forest concessions shall be allowed
unless proper notice has been served
upon the licensees thereof and the prior
approval of the Director, secured.

Significantly, the above-quoted provision does not

require that the consent of existing licensees be
obtained but that they be notified before mining
activities may be commenced inside forest
concessions.

4. Red shade denotes alienable

and disposable land.24
IV. MPSA No. 012
Respectfully returned herewith is
the folder of Base Metals Mineral
Resources Corporation, applied
under Mineral Production Sharing
Agreement (MPSA (XIII) 012),
referred to this office per
memorandum dated August 5,
1997 for Land status certification
and the findings based on
available references file this
office, the site is within the
unclassified Public Forest of the
LGU, Rosario, Agusan del Sur.
The shaded portion is the
wilderness area of PICOP
Resources Incorporated (PRI),
Timber License Agreement.25

DENR Memorandum Order No. 03-98, which

provides the guidelines in the issuance of area
status and clearance or consent for mining
applications pursuant to RA 7942, provides that
timber or forest lands, military and other
government reservations, forest reservations,
forest reserves other than critical watershed forest
reserves, and existing DENR Project Areas within
timber or forest lands, reservations and reserves,
among others, are open to mining applications
subject to area status and clearance.
To this end, area status clearances or land status
certifications have been issued to Base Metals
relative to its mining right application, to wit:
II. MPSA No. 010

V. MPSA No. 013

1. Portion colored green is the
area covered by the aforestated
Timberland Project No. 31-E,
Block A and Project No. 59-C,
Block A, L.C. Map No. 2466
certified as such on June 30,
1961; and

1. The area status shaded green

falls within Timber Land, portion
of Project No. 31-E, Block-A,
Project No. 59-C, Block-A, L.C.
Map No. 2468 certified as such
on June 30, 1961;

2. Shaded brown
CADC claim.23

2. Colored brown denotes a

portion claimed as CADC areas;

represent

III. MPSA No. 011

3. Violet shade represent a part of

reforestation project of PRI
concession; and

1. The area applied covers the

Timberland, portion of Project No.
31-E, Block-E, L.C. Map No. 2468
and Project No. 36-A Block II,
Alienable and Disposable Land,
L.C. Map No. 1822, certified as
such on June 30, 1961 and
January 1, 1955, respectively;
2. The green shade is the
remaining portion of Timber Land
Project;
3. The portion colored brown is an
applied and CADC areas;

4. The yellow color is identical to

unclassified Public Forest of said
LGU and the area inclosed in Red
is the wilderness area of PICOP
Resources, Inc. (PRI), Timber
License Agreement.26
Thirdly, PICOP failed to present any evidence that
the area covered by the MPSA is a protected
wilderness area designated as an initial
component of the NIPAS pursuant to a law,
presidential decree, presidential proclamation or
executive order as required by RA 7586.
Sec. 5(a) of RA 7586 provides:

Page 14 of 16

Sec. 5. Establishment and Extent of the

System.The
establishment
and
operationalization of the System shall
involve the following:
(a) All areas or islands in the Philippines
proclaimed, designated or set aside,
pursuant to a law, presidential decree,
presidential proclamation or executive
order as national park, game refuge, bird
and wildlife sanctuary, wilderness area,
strict
nature
reserve,
watershed,
mangrove reserve, fish sanctuary, natural
and historical landmark, protected and
managed landscape/seascape as well as
identified virgin forests before the
effectivity of this Act are hereby
designated as initial components of the
System. The initial components of the
System shall be governed by existing
laws,
rules
and
regulations,
not
inconsistent with this Act.

concession area, and does not extend to the

utilization of other resources, such as mineral
resources, occurring within the concession.
The Presidential Warranty cannot be considered a
contract distinct from PTLA No. 47 and IFMA No.
35. We agree with the OSG's position that it is
merely a collateral undertaking which cannot
amplify PICOP's rights under its timber license.
Our definitive ruling in Oposa v. Factoran27 that a
timber license is not a contract within the purview
of the non-impairment clause is edifying. We
declared:

Although the above-cited area status and

clearances, particularly those pertaining to MPSA
Nos. 012 and 013, state that portions thereof are
within the wilderness area of PICOP, there is no
showing that this supposed wilderness area has
been proclaimed, designated or set aside as such,
pursuant to a law, presidential decree, presidential
proclamation or executive order. It should be
emphasized that it is only when this area has
been so designated that Sec. 20 of RA 7586,
which prohibits mineral locating within protected
areas, becomes operational.
From the foregoing, there is clearly no merit to
PICOP's contention that the area covered by Base
Metals' MPSA is, by law, closed to mining
activities.
Finally, we do not subscribe to PICOP's argument
that the Presidential Warranty dated September
25, 1968 is a contract protected by the nonimpairment clause of the 1987 Constitution.
An examination of the Presidential Warranty at
once reveals that it simply reassures PICOP of the
government's commitment to uphold the terms
and conditions of its timber license and
guarantees PICOP's peaceful and adequate
possession and enjoyment of the areas which are
the basic sources of raw materials for its wood
processing complex. The warranty covers only the
right to cut, collect, and remove timber in its

Page 15 of 16

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. In Tan vs. Director of
Forestry, this Court held:
"x x x A timber license is an
instrument by which the State
regulates the utilization and
disposition of forest resources to
the end that public welfare is
promoted. A timber license is
not a contract within the
purview of the due process
clause; it is only a license or a
privilege, which can be validly
withdrawn whenever dictated
by public interest or public
welfare as in this case.
'A license is merely a
permit or privilege to do
what otherwise would be
unlawful, and is not a
contract between the
authority, federal, state,
or municipal, granting it
and the person to whom it
is granted; neither is it a
property or a property
right, nor does it create a
vested right; nor is it
taxation' (C.J. 168). Thus,
this Court held that the
granting of license does
not create irrevocable
rights,
neither
is
it
property or property rights
(People vs. Ong Tin, 54
O.G. 7576). x x x"

We reiterated this pronouncement in

Felipe Ysmael, Jr. & Co., Inc. vs. Deputy
Executive Secretary:
"x x x Timber licenses, permits
and license agreements are the
principal instruments by which the
State regulates the utilization and
disposition of forest resources to
the end that public welfare is
promoted. And it can hardly be
gainsaid that they merely
evidence a privilege granted by
the State to qualified entities,
and do not vest in the latter a
permanent or irrevocable right
to the particular concession
area and the forest products
therein. They may be validly
amended, modified, replaced or
rescinded
by
the
Chief
Executive
when
national
interests so require. Thus, they
are not deemed contracts within
the purview of the due process of
law clause [See Sections 3(ee)
and 20 of Pres. Decree No. 705,
as amended. Also, Tan v. Director
of Forestry, G.R. No. L-24548,
October 27, 1983, 125 SCRA
302]."
Since
timber licenses are
not
contracts, the non-impairment clause,
which reads:

"Sec. 10. No law impairing the

obligation of contracts shall be
passed."
cannot be invoked.28 [emphasis supplied]
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.
In closing, we should lay emphasis on the fact that
the reinstatement of Base Metals' MPSA does not
automatically result in its approval. Base Metals
still has to comply with the requirements outlined
in
DAO
96-40,
including
the
publication/posting/radio announcement of its
mineral agreement application.
IN VIEW OF THE FOREGOING, the instant
petition is DENIED. The Decision of the Court of
Appeals November 28, 2003 is AFFIRMED. No
pronouncement as to costs.
SO ORDERED.
Quisumbing, J., Chairperson, Carpio, Carpio
Morales, and Velasco, Jr., JJ., concur.

Page 16 of 16