DESAMA - v - GOZUN

DIDIPIO EARTH-SAVERS’ MULTI-PURPOSE ASSOCIATION, INCORPORATED (DESAMA), et. al. vs. ELISEA GOZUN, in her capacity as SECRETARY of the DEPARTMENT OF ENVIRONMENT and NATURAL RESOURCES (DENR), et. al.

FIRST DIVISION, G.R. No. 157882, March 30, 2006, CHICO-NAZARIO, J.

Doctrine:

Where a property interest is merely restricted because the continued use thereof would be injurious to public welfare, or where property is destroyed because its continued existence would be injurious to public interest, there is no compensable taking. However, when a property interest is appropriated and applied to some public purpose, there is compensable taking.

A regulation which substantially deprives the owner of his proprietary rights and restricts the beneficial use and enjoyment for public use amounts to compensable taking. 

The taking to be valid must be for public use. Public use as a requirement for the valid exercise of the power of eminent domain is now synonymous with public interest, public benefit, public welfare and public convenience. It includes the broader notion of indirect public benefit or advantage. Public use as traditionally understood as "actual use by the public" has already been abandoned. Mining industry plays a pivotal role in the economic development of the country and is a vital tool in the government’s thrust of accelerated recovery. Irrefragably, mining is an industry which is of public benefit.

Facts:

This petition for prohibition and mandamus under Rule 65 of the Rules of Court assails the constitutionality of Republic Act No. 7942 / Philippine Mining Act of 1995, together with the IRR and of the Financial and Technical Assistance Agreement (FTAA) entered into in 1994 by the Republic of the Philippines and Arimco Mining Corporation (AMC), a corporation established under the laws of Australia and owned by its nationals.

In 1987, then President Corazon Aquino promulgated EO No. 279 which authorized the DENR Secretary to accept, consider and evaluate proposals from foreign-owned corporations or foreign investors for contracts of agreements involving either technical or financial assistance for large-scale exploration, development, and utilization of minerals, which, upon appropriate recommendation of the Secretary, the President may execute with the foreign proponent.

In 1995, then President Fidel Ramos signed into law Rep. Act No. 7942 / Philippine Mining Act of 1995. Then DENR Secretary Victor Ramos issued DENR Administrative Order (DAO) No. 23-1995, containing the implementing guidelines of Rep. Act No. 7942. This was soon superseded by DAO No. 96-40-1996. Previously, however, in 1994, President Ramos executed FTAA with AMC over a land area covering the provinces of Nueva Vizcaya and Quirino. Included in this area is Barangay Dipidio, Kasibu, Nueva Vizcaya.

Subsequently, AMC consolidated with Climax Mining Limited to form a single company that now goes under the new name of Climax-Arimco Mining Corporation (CAMC), the controlling 99% of stockholders of which are Australian nationals.

In 2001, counsels for petitioners filed a demand letter addressed to then DENR Secretary Heherson Alvarez, for the cancellation of the CAMC FTAA for the primary reason that Rep. Act No. 7942 and its IRR DAO 96-40 are unconstitutional. The Office of the Executive Secretary was also furnished a copy of the said letter. There being no response to both letters, another letter of the same content was sent to President Gloria Arroyo. This letter was indorsed to the DENR Secretary and eventually referred to the Panel of Arbitrators of the Mines and Geosciences Bureau (MGB), Tuguegarao, Cagayan, for further action.

In 2002, counsels for petitioners received a letter from the Panel of Arbitrators of the MGB requiring the petitioners to comply with the Rules of the Panel of Arbitrators before the letter may be acted upon. Yet again, counsels for petitioners sent President Arroyo another demand letter. Said letter was again forwarded to the DENR Secretary who referred the same to the MGB, Quezon City.

In a letter, the MGB rejected the demand of counsels for petitioners for the cancellation of the CAMC FTAA. Petitioners thus filed the present petition for prohibition and mandamus, with a prayer for a temporary restraining order.

Issues:

1.       Whether or not Republic Act No. 7942 and the CAMC FTAA are void because they allow the unjust and unlawful taking of property without payment of just compensation, in violation of Section 9, Article III of the Constitution. (Main issue in relation to class topic)

2.       Whether or not the Mining Act and its IRR are void and unconstitutional for sanctioning an unconstitutional administrative process of determining just compensation.

3.       Whether or not the State, through Republic Act No. 7942 and the CAMC FTAA, abdicated its primary responsibility to the full control and supervision over natural resources.

4.       Whether or not the respondents’ interpretation of the role of wholly foreign and foreign-owned corporations in their involvement in mining enterprises, violates paragraph 4, section 2, Article XII of the Constitution.

5.       Whether or not the 1987 constitution prohibits service contracts.

Ruling:

First Substantive Issue: Validity of Section 76 of Rep. Act No. 7942 and DAO 96-40

(Main issue in relation to class topic)

Petitioners: Section 76 of Rep. Act No. 7942 and Section 107 of DAO 96-40 allow the unlawful and unjust "taking" of private property for private purpose in contradiction with Section 9, Article III of the 1987 Constitution mandating that private property shall not be taken except for public use and the corresponding payment of just compensation. DENR, through the Mining Act and its IRR, cannot, on its own, permit entry into a private property and allow taking of land without payment of just compensation. Republic v. Vda. de Castellvi defines "taking" under the concept of eminent domain as entering upon private property for more than a momentary period, and, under the warrant or color of legal authority, devoting it to a public use, or otherwise informally appropriating or injuriously affecting it in such a way as to substantially oust the owner and deprive him of all beneficial enjoyment thereof. Petitioners claim that the entry into a private property by CAMC, pursuant to its FTAA, is for more than a momentary period, i.e., for 25 years, and renewable for another 25 years; that the entry into the property is under the warrant or color of legal authority pursuant to the FTAA executed between the government and CAMC; and that the entry substantially ousts the owner or possessor and deprives him of all beneficial enjoyment of the property. Petitioners question the exercise of the power of eminent domain as unwarranted because respondents failed to prove that the entry into private property is devoted for public use. Assuming arguendo that there is no absolute, physical taking, at the very least, Section 76 establishes a legal easement upon the surface owners, occupants and concessionaires of a mining contract area sufficient to deprive them of enjoyment and use of the property and that such burden imposed by the legal easement falls within the purview of eminent domain. In National Power Corporation v. Gutierrez, easement of right-of-way imposed against the use of the land for an indefinite period is a taking under the power of eminent domain.

Public respondents: Section 76 is not a taking provision but a valid exercise of the police power and by virtue of which, the state may prescribe regulations to promote the health, morals, peace, education, good order, safety and general welfare of the people. By entering private lands and concession areas, FTAA holders do not oust the owners thereof nor deprive them of all beneficial enjoyment of their properties as the said entry merely establishes a legal easement upon surface owners, occupants and concessionaires of a mining contract area.

 Court: Taking in Eminent Domain Distinguished from Regulation in Police Power

Taking in Eminent Domain	Regulation in Police Power
Inherent right of the state (and of those entities to which the power has been lawfully delegated) to condemn private property to public use upon payment of just compensation.	Power of the state to promote public welfare by restraining and regulating the use of liberty and property.

ü  Where a property interest is merely restricted because the continued use thereof would be injurious to public welfare, or where property is destroyed because its continued existence would be injurious to public interest, there is no compensable taking. However, when a property interest is appropriated and applied to some public purpose, there is compensable taking. Fr. Joaquin Bernas, SJ: in the exercise of its police power regulation, the state restricts the use of private property, but none of the property interests in the bundle of rights which constitute ownership is appropriated for use by or for the benefit of the public. Use of the property by the owner was limited, but no aspect of the property is used by or for the public. The deprivation of use can in fact be total and it will not constitute compensable taking if nobody else acquires use of the property or any interest therein.

ü  While the power of eminent domain often results in the appropriation of title to or possession of property, it need not always be the case. Taking may include trespass without actual eviction of the owner, material impairment of the value of the property or prevention of the ordinary uses for which the property was intended such as the establishment of an easement. A regulation which substantially deprives the owner of his proprietary rights and restricts the beneficial use and enjoyment for public use amounts to compensable taking. 

The CAMC FTAA grants in favor of CAMC the right of possession of the Exploration Contract Area, the full right of ingress and egress and the right to occupy the same. It also bestows CAMC the right not to be prevented from entry into private lands by surface owners or occupants thereof when prospecting, exploring and exploiting minerals therein. The entry referred to in Section 76 is not just a simple right-of-way which is ordinarily allowed under the provisions of the Civil Code.  Without a doubt, taking occurs once mining operations commence.

In Republic v. Castellvi, the requisites of taking in eminent domain include:

(1) the expropriator must enter a private property;

(2) the entry must be for more than a momentary period.

(3) the entry must be under warrant or color of legal authority;

(4) the property must be devoted to public use or otherwise informally appropriated or injuriously affected;

(5) the utilization of the property for public use must be in such a way as to oust the owner and deprive him of beneficial enjoyment of the property.

Court: Section 76 of Rep. Act No. 7942 is a Taking Provision

While this Court declares that the assailed provision is a taking provision, this does not mean that it is unconstitutional on the ground that it allows taking of private property without the determination of public use and the payment of just compensation.

The taking to be valid must be for public use. Public use as a requirement for the valid exercise of the power of eminent domain is now synonymous with public interest, public benefit, public welfare and public convenience. It includes the broader notion of indirect public benefit or advantage. Public use as traditionally understood as "actual use by the public" has already been abandoned. Mining industry plays a pivotal role in the economic development of the country and is a vital tool in the government’s thrust of accelerated recovery. Irrefragably, mining is an industry which is of public benefit.

Petitioners: state’s discretion to decide when to take private property is reduced contractually by Section 13.5 of the CAMC FTAA. The government is reduced to a sub-contractor upon the request of the private respondent, and on account of the foregoing provision, the contractor can compel the government to exercise its power of eminent domain thereby derogating the latter’s power to expropriate property.

Court: The provision of the FTAA in question lays down the ways and means by which the foreign-owned contractor, disqualified to own land, identifies to the government the specific surface areas within the FTAA contract area to be acquired for the mine infrastructure. The government then acquires ownership of the surface land areas on behalf of the contractor, through a voluntary transaction in order to enable the latter to proceed to fully implement the FTAA. Eminent domain is not yet called for at this stage since there are still various avenues by which surface rights can be acquired other than expropriation. The FTAA provision under attack merely facilitates the implementation of the FTAA given to CAMC and shields it from violating the Anti-Dummy Law. There is also no basis for the claim that the Mining Law and its implementing rules and regulations do not provide for just compensation in expropriating private properties. Section 76 of Rep. Act No. 7942 and Section 107 of DAO 96-40 provide for the payment of just compensation.

Second Substantive Issue: Power of Courts to Determine Just Compensation

Petitioners: Rep. Act No. 7942 and Section 107 of DAO 96-40 encroach on the power of the trial courts to determine just compensation in eminent domain cases inasmuch as the same determination of proper compensation are cognizable only by the Panel of Arbitrators.

Court: Implementing Section 76 of Rep. Act No. 7942, Section 105 of DAO 96-40 in cases where there is disagreement to the compensation or where there is no agreement, the matter shall be brought before the Panel of Arbitrators. Section 206 of the implementing rules and regulations provides an aggrieved party the remedy to appeal the decision of the Panel of Arbitrators to the Mines Adjudication Board, and the latter’s decision may be reviewed by the Supreme Court by filing a petition for review on certiorari. There is nothing in the provisions of the assailed law and its IRR that exclude the courts from their jurisdiction to determine just compensation in expropriation proceedings involving mining operations. There is nothing wrong with the grant of primary jurisdiction by the Panel of Arbitrators or the Mines Adjudication Board to determine in a preliminary matter the reasonable compensation due the affected landowners or occupants. The original and exclusive jurisdiction of the courts to decide determination of just compensation remains intact despite the preliminary determination made by the administrative agency. Judicial proceedings are not a continuation of the administrative determination.

INSTANT PETITION FOR PROHIBITION AND MANDAMUS IS HEREBY DISMISSED. SECTION 76 OF REPUBLIC ACT NO. 7942 AND SECTION 107 OF DAO 96-40; REPUBLIC ACT NO. 7942 AND ITS IMPLEMENTING RULES AND REGULATIONS CONTAINED IN DAO 96-40 – INSOFAR AS THEY RELATE TO FINANCIAL AND TECHNICAL ASSISTANCE AGREEMENTS REFERRED TO IN PARAGRAPH 4 OF SECTION 2 OF ARTICLE XII OF THE CONSTITUTION ARE NOT UNCONSTITUTIONAL.

Third Substantive Issue: Sufficient Control by the State Over Mining Operations

Petitioners Rep. Act No. 7942, as well as its IRR, makes it possible for FTAA contracts to cede over to a fully foreign-owned corporation full control and management of mining enterprises, with the result that the State is allegedly reduced to a passive regulator dependent on submitted plans and reports, with weak review and audit powers. The State is not acting as the supposed owner of the natural resources for and on behalf of the Filipino people; it practically has little effective say in the decisions made by the enterprise. In effect, petitioners asserted that the law, the implementing regulations, and the CAMC FTAA cede beneficial ownership of the mineral resources to the foreign contractor.

Court: In La Bugal-B’Laan Tribal Association, Inc. v. Ramos, RA 7942 provides for the state’s control and supervision over mining operations. Its provisions establish the mechanism of inspection and visitorial rights over mining operations and institute reportorial requirements. The setup under RA 7942 and DAO 96-40 hardly relegates the State to the role of a "passive regulator" dependent on submitted plans and reports. On the contrary, the government agencies concerned are empowered to approve or disapprove -- hence, to influence, direct and change -- the various work programs and the corresponding minimum expenditure commitments for each of the exploration, development and utilization phases of the mining enterprise. Once these plans and reports are approved, the contractor is bound to comply with its commitments therein.  the FTAA contractor is not free to do whatever it pleases and get away with it; on the contrary, it will have to follow the government line if it wants to stay in the enterprise. Ineluctably then, RA 7942 and DAO 96-40 vest in the government more than a sufficient degree of control and supervision over the conduct of mining operations.

Fourth Substantive Issue: The Proper Interpretation of the Constitutional Phrase "Agreements Involving Either Technical or Financial Assistance

Petitioners: In interpreting the first and fourth paragraphs of Section 2, Article XII of the Constitution, petitioners set forth the argument that foreign corporations are barred from making decisions on the conduct of operations and the management of the mining project.

Court: In La Bugal-B’Laan Tribal Association, Inc. v. Ramos. The word "involving," when understood in the sense of "including," as in including technical or financial assistance, necessarily implies that there are activities other than those that are being included. In other words, if an agreement includes technical or financial assistance, there is apart from such assistance -- something else already in, and covered or may be covered by, the said agreement. It allows for the possibility that matters, other than those explicitly mentioned, could be made part of the agreement. Thus, we are now led to the conclusion that the use of the word "involving" implies that these agreements with foreign corporations are not limited to mere financial or technical assistance. The difference in sense becomes very apparent when we juxtapose "agreements for technical or financial assistance" against "agreements including technical or financial assistance." This much is unalterably clear in a verba legis approach. If the real intention of the drafters was to confine foreign corporations to financial or technical assistance and nothing more, their language would have certainly been so unmistakably restrictive and stringent as to leave no doubt in anyone’s mind about their true intent

Fifth Substantive Issue: Service Contracts Not Deconstitutionalized

Petitioners: Service contract regime under the 1973 Constitution is expressly prohibited under the 1987 Constitution as the term service contracts found in the former was deleted in the latter to avoid the circumvention of constitutional prohibitions that were prevalent in the 1987 Constitution. According to them, the framers of the 1987 Constitution only intended for foreign-owned corporations to provide either technical assistance or financial assistance.

Court: The 1987 Constitution allows the continued use of service contracts with foreign corporations as contractors who would invest in and operate and manage extractive enterprises, subject to the full control and supervision of the State; this time, however, safety measures were put in place to prevent abuses of the past regime. As written by the framers and ratified and adopted by the people, the Constitution allows the continued use of service contracts with foreign corporations -- as contractors who would invest in and operate and manage extractive enterprises, subject to the full control and supervision of the State -- sans the abuses of the past regime. The purpose is clear: to develop and utilize our mineral, petroleum and other resources on a large scale for the immediate and tangible benefit of the Filipino people.

Procedural question: Whether or not eminent domain claim is not ripe for adjudication as petitioners fail to allege that CAMC has actually taken their properties nor do they allege that their property rights have been endangered or are in danger on account of CAMC’s FTAA / Whether or not issue of eminent domain is not a justiciable controversy.

A justiciable controversy is defined as a definite and concrete dispute touching on the legal relations of parties having adverse legal interests which may be resolved by a court of law through the application of a law.  For the courts to exercise the power of judicial review, the following must be extant (1) there must be an actual case calling for the exercise of judicial power; (2) the question must be ripe for adjudication; and (3) the person challenging must have the "standing."

ü  There exists a live controversy involving a clash of legal rights as Rep. Act No. 7942 has been enacted, DAO 96-40 has been approved and an FTAAs have been entered into. The FTAA holders have already been operating in various provinces of the country. Among them is CAMC which operates in the provinces of Nueva Vizcaya and Quirino where numerous individuals including the petitioners are imperiled of being ousted from their landholdings in view of the CAMC FTAA. The court cannot await the adverse consequences of the law in order to consider the controversy actual and ripe for judicial intervention. Even a singular violation of the Constitution and/or the law is enough to awaken judicial duty.

ü  Didipio Earth-Savers’ Multi-Purpose Association, Inc., an organization of farmers and indigenous peoples organized under Philippine laws, representing a community actually affected by the mining activities of CAMC, as well as other residents of areas affected by the mining activities of CAMC. These petitioners have the standing to raise the constitutionality of the questioned FTAA as they allege a personal and substantial injury.

ü  Besides, the transcendental importance of the issues raised and the magnitude of the public interest involved will have a bearing on the country’s economy which is to a greater extent dependent upon the mining industry. Also affected by the resolution of this case are the proprietary rights of numerous residents in the mining contract areas as well as the social existence of indigenous peoples which are threatened.

Based on these considerations, this Court deems it proper to take cognizance of the instant petition.

Note: I made this case digest when I was still a law student. The ones posted on my blog were not due for submission as part of any academic requirement. I want to remind you that there is no substitute to reading the full text of the case! Use at your own risk.