In Basiana Mining Exploration Corporation vs. The Honorable Secretary of the Department of Environment and Natural Resources, and SR Metals Inc., the Supreme Court addressed the proper venue and procedure for resolving disputes related to Mineral Production Sharing Agreements (MPSA). The Court ruled that the Department of Environment and Natural Resources (DENR) Secretary’s actions in approving or canceling MPSAs are administrative, not quasi-judicial, and that parties must first exhaust all administrative remedies before seeking judicial intervention. This means that parties aggrieved by the DENR Secretary’s decisions must first appeal to the Office of the President before resorting to the courts, ensuring administrative expertise is utilized and judicial intervention is a last resort.

Mining Agreements and Legal Pathways: Who Decides and How?

The case arose from a dispute between Basiana Mining Exploration Corporation (BMEC) and SR Metals Inc. (SRMI) over mining rights in Agusan del Norte. BMEC applied for a Mineral Production Sharing Agreement (MPSA) but later assigned its rights to Manila Mining Corporation, which in turn assigned them to SRMI. After the DENR Secretary entered into MPSA No. 261-2008-XIII with SRMI, BMEC challenged the issuance, arguing that it violated due process and lacked factual and legal basis. The central legal question was whether the DENR Secretary’s approval of the MPSA was an exercise of quasi-judicial power reviewable by the Court of Appeals (CA), and whether BMEC prematurely sought judicial intervention without exhausting administrative remedies.

The Supreme Court clarified the distinct powers of administrative agencies, differentiating between administrative, quasi-legislative, and quasi-judicial functions. Administrative power involves applying policies and enforcing orders. Quasi-judicial power, on the other hand, entails hearing and determining facts to apply legislative policy and decide in accordance with the law. The Court emphasized that the DENR Secretary’s role in approving and entering into an MPSA is administrative because it stems from the DENR’s mandate to control and supervise the exploration, development, utilization, and conservation of the country’s natural resources as outlined in the Revised Administrative Code of 1987. This determination does not involve adjudicating the rights of adversarial parties in the same way a court would; instead, it ensures that applicants meet legal requirements and possess the technical and financial capability to undertake the contract.

The Court underscored that the DENR Secretary does not resolve conflicting claims in approving an MPSA; rather, the focus is on an applicant’s compliance with legal conditions. It cited Republic of the Philippines v. Express Telecommunication Co., Inc., which stated that the powers granted to the Secretary of Agriculture and Commerce (natural resources) concerning licenses, permits, leases, and contracts are executive and administrative in nature. The Supreme Court reinforced this principle by quoting Pearson v. Intermediate Appellate Court:

Decisions of the Supreme Court on mining disputes have recognized a distinction between (1) the primary powers granted by pertinent provisions of law to the then Secretary of Agriculture and Natural Resources (and the bureau directors) of an executive or administrative nature, such as “granting of license, permits, lease and contracts, or approving, rejecting, reinstating or cancelling applications, or deciding conflicting applications,” and (2) controversies or disagreements of civil or contractual nature between litigants which are questions of a judicial nature that may be adjudicated only by the courts of justice.

This distinction is critical, as it determines the appropriate avenue for challenging such decisions. The Supreme Court held that BMEC should have first sought administrative remedies before going to court. Given that the DENR Secretary is under the President’s control, BMEC should have appealed to the Office of the President under Administrative Order No. 18, series of 1987.

Furthermore, the Court addressed the issue of primary jurisdiction. The doctrine of primary jurisdiction dictates that if a case requires the expertise and specialized knowledge of an administrative body, relief must first be sought in administrative proceedings before judicial intervention. Since the DENR Secretary has the primary authority to approve and cancel mining agreements, BMEC should have sought the cancellation of MPSA No. 261-2008-XIII from the DENR Secretary, not directly from the courts.

The Supreme Court also invoked the doctrine of exhaustion of administrative remedies, which requires parties to exhaust all available administrative channels before seeking judicial recourse. This doctrine prevents premature intervention by the courts and allows administrative agencies to resolve matters within their expertise. The failure to exhaust these remedies renders a complaint without cause of action and subject to dismissal, as it constitutes an encroachment on the jurisdiction of administrative agencies.

FAQs

What was the key issue in this case?	The key issue was whether the DENR Secretary’s decision to approve a Mineral Production Sharing Agreement (MPSA) is an exercise of quasi-judicial power, and whether the petitioners properly sought judicial review. The Supreme Court ruled that the DENR Secretary’s action was administrative, not quasi-judicial.
What is a Mineral Production Sharing Agreement (MPSA)?	An MPSA is an agreement where the government grants a contractor the exclusive right to conduct mining operations within a contract area, sharing in the production. It outlines the terms and conditions for mineral exploration, development, and utilization.
What does it mean to exhaust administrative remedies?	Exhausting administrative remedies means using all available procedures within an administrative agency before seeking judicial relief. It typically involves appealing decisions to higher administrative authorities before going to court.
Why is the doctrine of exhaustion of administrative remedies important?	This doctrine allows administrative agencies to correct their own errors, resolve disputes within their expertise, and prevent premature judicial intervention. It also ensures that courts only review cases after agencies have had the opportunity to address the issues.
What is the doctrine of primary jurisdiction?	The doctrine of primary jurisdiction dictates that if a case requires the specialized knowledge and expertise of an administrative body, the courts should defer to that body. It ensures that cases are first resolved by those with the necessary competence.
What recourse did Basiana Mining have if they disagreed with the DENR Secretary’s decision?	Basiana Mining should have appealed the DENR Secretary’s decision to the Office of the President before seeking judicial review. This is in accordance with Administrative Order No. 18, series of 1987, which governs appeals to the Office of the President.
What is the difference between administrative and quasi-judicial power?	Administrative power involves implementing policies and enforcing orders, while quasi-judicial power involves hearing and determining facts to apply the law. Quasi-judicial power affects the rights of specific parties, whereas administrative power is more general in application.
Who has the authority to cancel an MPSA?	The DENR Secretary has the primary authority to cancel an MPSA, as it is an implied power stemming from the authority to approve and enter into such agreements. This authority ensures consistent oversight and management of mineral resources.

In conclusion, the Supreme Court’s decision in Basiana Mining Exploration Corporation reinforces the importance of adhering to established administrative procedures before seeking judicial intervention in mining disputes. It highlights the administrative nature of the DENR Secretary’s powers in approving or canceling MPSAs and underscores the necessity of exhausting administrative remedies and respecting the primary jurisdiction of administrative agencies. This ruling ensures that disputes are resolved within the appropriate administrative framework, leveraging specialized expertise and preventing premature judicial intervention.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Basiana Mining Exploration Corporation vs. The Honorable Secretary of the Department of Environment and Natural Resources, and SR Metals Inc., G.R. No. 191705, March 07, 2016