The Supreme Court in Dizon Copper Silver Mines, Inc. v. Dr. Luis D. Dizon, ruled against Dizon Copper’s mineral production sharing agreement (MPSA) applications, emphasizing the state’s role in supervising the exploration and utilization of mineral resources. The Court found that Dizon Copper failed to validly exercise its preferential rights to enter into a mineral agreement with the government within the prescribed period, leading to the abandonment of its mining claims. This decision underscores the importance of strict compliance with mining laws and regulations, clarifying the rights and obligations of mining claim holders seeking to convert their claims into MPSAs, and highlighting the state’s authority in granting mineral agreements.

Lost Claims: Examining Preferential Rights in Mining Agreements

This case revolves around conflicting claims over mining areas in San Marcelino, Zambales. Celestino Dizon, in 1935, filed declarations of location over 57 mining claims. Later, Dizon Copper Silver Mines, Inc. was formed, with Celestino and his son, Dr. Luis Dizon, as incorporators. Celestino assigned these mining claims to Dizon Copper in 1967. In 1975, Dizon Copper entered into an operating agreement with Benguet Corporation, authorizing them to explore and operate the mining claims.

In 1978, a mining lease application was filed, resulting in the government issuing five Mining Lease Contracts (MLCs) in 1980, expiring on January 31, 2005. Benguet filed an MPSA application (MPSA-P-III-16) in 1991, seeking to place existing mining claims under production sharing agreements. In 1995, the Philippine Mining Act was enacted. Benguet and Dizon Copper terminated their operating agreement in 1997, and in 2004, Benguet assigned MPSA-P-III-16 to Dizon Copper. Dizon Copper then requested the inclusion of the six mining claims under MLCs in MPSA-P-III-16.

Despite the pending MPSA-P-III-16, Dizon Copper filed another MPSA application (MPSA-P-III-03-05) in 2005, covering all 57 mining claims. Dr. Luis Dizon also filed an MPSA application (MPSA-P-III-05-05) that included the six mining claims under MLCs. The DENR Secretary declared Dizon Copper’s MPSA applications void ab initio but deemed Dr. Dizon’s application valid. The Office of the President reversed this decision, but the Court of Appeals reinstated the DENR Secretary’s orders, leading to the Supreme Court case.

The central issue was whether the Court of Appeals erred in reinstating the DENR Secretary’s orders, which nullified Dizon Copper’s MPSA applications while validating Dr. Dizon’s. Dizon Copper argued that Benguet had the authority to file MPSA-P-III-16, and that MPSA-P-III-03-05 should not be entirely nullified due to the MLCs covering only a small portion of the area. The Supreme Court denied Dizon Copper’s petition, upholding the Court of Appeals’ decision. The court addressed the validity of MPSA-P-III-16 and MPSA-P-III-03-05 separately, emphasizing compliance with the Philippine Mining Act of 1995 and its implementing rules.

Regarding MPSA-P-III-16, the Court found it invalid because Benguet, as a mere operator, lacked the authority to file the application without proper authorization from the mining claim holders. The Court emphasized that Benguet’s authority under the Operating Agreement did not extend to filing MPSA applications. The Court dissected the specific clauses of the Operating Agreement cited by Dizon Copper, clarifying that they did not grant Benguet the power to initiate MPSA applications. For instance, the authority to “acquire real rights” was limited to those outlined in the Development Program, which did not include MPSA applications.

The Court also clarified that while the Letter dated 14 June 1991 signified Dizon Copper’s conformity with Benguet’s proposal, it did not constitute valid authorization because there was no showing that Dizon Copper’s board of directors approved Benguet’s proposal to file an MPSA application. The Court emphasized the significant shift in mining policy introduced by the 1987 Constitution, which requires the State to have full control and supervision over the exploration, development, and utilization of natural resources. This policy shift made it unlikely that Dizon Copper and Benguet contemplated the execution of MPSAs as part of their Operating Agreement, which was executed way back in 1975.

Moreover, the Court underscored the significance of the DENR’s Memorandum, which excluded a substantial portion of the area covered by MPSA-P-III-16 due to its location within a reforestation project and forest reserve. The legal implications of the invalidity of MPSA-P-III-16 are far-reaching. The Court then discussed the effect of the invalidity of MPSA-P-III-16 on the mining claims of Dizon Copper and its rights thereto, referencing the relevant provisions of Republic Act No. 7942 and its IRR. The Court differentiated between the six mining claims under MLCs and the 51 mining claims not covered by MLCs, applying Sections 112 and 113 of Republic Act No. 7942, respectively.

For the six mining claims under MLCs, Section 112 of Republic Act No. 7942 applied, providing for the non-impairment and continued recognition of existing valid mining leases until their expiration on January 31, 2005. As for the 51 mining claims not covered by MLCs, Section 113 of Republic Act No. 7942 applied, granting preferential rights to holders of existing mining claims to enter into mineral agreements with the government within two years from the law’s implementing rules. The Court referenced DENR Memorandum Order (M.O.) No. 97-07, which set a deadline of September 15, 1997, for holders of existing mining claims to file mineral agreement applications.

The Court concluded that the invalidity of MPSA-P-III-16 meant that Dizon Copper failed to validly exercise its preferential rights under Section 113 of Republic Act No. 7942, resulting in the abandonment of its mining claims as of September 15, 1997. Consequently, the assignment of MPSA-P-III-16 in favor of Dizon Copper was deemed inconsequential, and Dizon Copper’s MPSA-P-III-03-05 was considered a new application without any preferential right. In summary, the Court emphasized that the failure to comply with the statutory deadline resulted in the loss of preferential rights and the abandonment of mining claims.

Finally, the Court addressed Dizon Copper’s argument that the Court of Appeals erred in sustaining the DENR’s approval of Dr. Dizon’s MPSA-P-III-05-05 into MPSA No. 227-2006-III. The Court invoked the doctrine of primary jurisdiction, stating that the DENR Secretary has the exclusive and primary jurisdiction to approve mineral agreements. The Court deferred to the DENR Secretary’s expertise and discretion, finding no evidence of arbitrariness or abuse of discretion in approving Dr. Dizon’s MPSA. The Court emphasized that the DENR Secretary’s decision was based on the evaluation of the DENR MGB Regional Office III, which found that Dizon Copper’s MPSA-P-III-03-05 was filed when the mining claims were still under subsisting MLCs.

In conclusion, the Supreme Court upheld the DENR Secretary’s decision to approve Dr. Dizon’s MPSA, emphasizing the DENR’s authority to determine which mining applicant is more qualified for a mining agreement. This decision underscores the importance of adhering to mining laws and regulations, highlighting the state’s role in mineral resource management.

FAQs

What was the key issue in this case?	The key issue was whether the Court of Appeals erred in reinstating the DENR Secretary’s orders, which nullified Dizon Copper’s MPSA applications while validating Dr. Dizon’s.
Why was Dizon Copper’s MPSA-P-III-16 deemed invalid?	MPSA-P-III-16 was deemed invalid because Benguet, as a mere operator, lacked the authority to file the application without proper authorization from the mining claim holders.
What is the significance of Section 113 of Republic Act No. 7942?	Section 113 of Republic Act No. 7942 grants preferential rights to holders of existing mining claims to enter into mineral agreements with the government within two years from the law’s implementing rules.
What was the deadline for holders of existing mining claims to file mineral agreement applications?	The deadline for holders of existing mining claims to file mineral agreement applications was September 15, 1997, as per DENR Memorandum Order No. 97-07.
What was the consequence of failing to exercise preferential rights within the prescribed period?	Failing to exercise preferential rights within the prescribed period resulted in the abandonment of the mining claims.
What is the doctrine of primary jurisdiction?	The doctrine of primary jurisdiction states that courts defer to the decisions of administrative offices and agencies by reason of their expertise and experience in matters assigned to them.
Why did the Supreme Court uphold the DENR Secretary’s approval of Dr. Dizon’s MPSA?	The Supreme Court upheld the DENR Secretary’s approval of Dr. Dizon’s MPSA, citing the DENR’s authority to determine which mining applicant is more qualified for a mining agreement and finding no abuse of discretion in the Secretary’s decision.
What is an MPSA?	A Mineral Production Sharing Agreement (MPSA) is one of the mineral agreements innovated by the 1987 Constitution by which the State takes on a broader and more dynamic role in the exploration, development and utilization of the country’s mineral resources.

The Supreme Court’s decision in this case reaffirms the state’s authority in granting mineral agreements and underscores the importance of strict compliance with mining laws and regulations. By emphasizing the need for proper authorization and adherence to deadlines, the Court has set a clear precedent for future mining disputes. This ruling will likely influence how mining companies and claim holders approach mineral agreement applications and underscores the necessity for seeking expert legal counsel in navigating the complexities of Philippine mining law.

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: Dizon Copper Silver Mines, Inc. vs. Dr. Luis D. Dizon, G.R. No. 183573, July 18, 2012