Agency and Partnership

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SUPREME COURT REPORTS ANNOTATEDMercado vs. Allied Banking CorporationG.R. No. 171460. July 27 2007.*LILLIAN N. MERCADO, CYNTHIA M. FEKARIS, and JULIAN MERCADO, JR., represented by their Attorney-In-Fact, ALFREDO M. PEREZ, petitioners, vs. ALLIED BANKING CORPORATION, respondent.Civil Law; Property; Contracts; Mortgages; Essential Requisites for the Validity of a Mortgage.—Article 2085 of the Civil Code enumerates the following essential requisites: Art. 2085. The following requisites are essential to the contracts of pledge and mortgage: (1) That they be constituted to secure the fulfillment of a principal obligation; (2) That the pledgor or mortgagor be the absolute owner of the thing pledged or mortgaged; (3) That the persons constituting the pledge or mortgage have the free disposal of their property, and in the absence thereof, that they be legally authorized for the purpose. Third persons who are not parties to the principal obligation may secure the latter by pledging or mortgaging their own property.Same; Same; Same; Same; A special power of attorney is necessary in cases where real rights over immovable property are created or conveyed.—Under Article 1878 of the Civil Code, a special power of attorney is necessary in cases where real rights over immovable property are created or conveyed. In the SPA executed by Perla in favor of Julian on 28 May 1992, the latter was conferred with the authority to “sell, alienate, mortgage, lease and deal otherwise” the different pieces of real and personal property registered in Perla’s name. The SPA likewise authorized Julian “[t]o exercise any or all acts of strict dominion or ownership” over the identified properties, and rights and interest therein. The existence and due execution of this SPA by Perla was not denied or challenged by petitioners.Same; Same; Same; Same; In cases where the terms of the contract are clear as to leave no room for interpretation, resort to circumstantial evidence to ascertain the true intent of the parties, is not countenanced.—In cases where the terms of the contract are clear as_______________

* THIRD DIVISION.445

VOL. 528, JULY 27, 2007445Mercado vs. Allied Banking Corporationto leave no room for interpretation, resort to circumstantial evidence to ascertain the true intent of the parties, is not countenanced. As aptly stated in the case of JMA House, Incorporated v. Sta. Monica Industrial and Development Corporation, 500 SCRA 526 (2006), thus: [T]he law is that if the terms of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of its stipulation shall control. When the language of the contract is explicit, leaving no doubt as to the intention of the drafters, the courts may not read into it [in] any other intention that would contradict its main import. The clear terms of the contract should never be the subject matter of interpretation. Neither abstract justice nor the rule on liberal interpretation justifies the creation of a contract for the parties which they did not make themselves or the imposition upon one party to a contract or obligation not assumed simply or merely to avoid seeming hardships. The true meaning must be enforced, as it is to be presumed that the contracting parties know their scope and effects.Same; Same; Same; Same; Where powers and duties are specified and defined in an instrument, all such powers and duties are limited and are confined to those which are specified and defined, and all other powers and duties are excluded.—Equally relevant is the rule that a power of attorney must be strictly construed and pursued. The instrument will be held to grant only those powers which are specified therein, and the agent may neither go beyond nor deviate from the power of attorney. Where powers and duties are specified and defined in an instrument, all such powers and duties are limited and are confined to those which are specified and defined, and all other powers and duties are excluded. This is but in accord with the disinclination of courts to enlarge the authority granted

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beyond the powers expressly given and those which incidentally flow or derive therefrom as being usual and reasonably necessary and proper for the performance of such express powers.Same; Same; Same; Same; Where the mortgagee does not directly deal with the registered owner of real property, the law requires that a higher degree of prudence be exercised by the mortgagee.—In the case of Abad v. Guimba, 465 SCRA 356 (2005), we laid down the principle that where the mortgagee does not directly deal with the registered owner of real property, the law requires that a higher degree of prudence be exercised by the mortgagee, thus: While [the]446

446SUPREME COURT REPORTS ANNOTATEDMercado vs. Allied Banking Corporationone who buys from the registered owner does not need to look behind the certificate of title, one who buys from [the] one who is not [the] registered owner is expected to examine not only the certificate of title but all factual circumstances necessary for [one] to determine if there are any flaws in the title of the transferor, or in [the] capacity to transfer the land. Although the instant case does not involve a sale but only a mortgage, the same rule applies inasmuch as the law itself includes a mortgagee in the term “purchaser.”Same; Same; Same; Same; Principle is applied more strenuously when the mortgagee is a bank or a banking institution.—This principle is applied more strenuously when the mortgagee is a bank or a banking institution. Thus, in the case of Cruz v. Bancom Finance Corporation, 379 SCRA 490 (2002), we ruled: Respondent, however, is not an ordinary mortgagee; it is a mortgagee-bank. As such, unlike private individuals, it is expected to exercise greater care and prudence in its dealings, including those involving registered lands. A banking institution is expected to exercise due diligence before entering into a mortgage contract. The ascertainment of the status or condition of a

property offered to it as security for a loan must be a standard and indispensable part of its operations.PETITION for review on certiorari of the decision and resolution of the Court of Appeals.The facts are stated in the opinion of the Court.     Quasha, Ancheta, Peña and Nolasco for petitioners.     Francisco Gerardo C. Llamas and Paul A. Bernardino for respondent.CHICO-NAZARIO, J.:

Before this Court is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court, filed by petitioners Lillian N. Mercado, Cynthia M. Fekaris and Julian Mercado, Jr., represented by their Attorney-In-Fact, Alfredo M. Perez,447

VOL. 528, JULY 27, 2007447Mercado vs. Allied Banking Corporationseeking to reverse and set aside the Decision1 of the Court of Appeals dated 12 October 2005, and its Resolution2 dated 15 February 2006 in CA-G.R. CV No. 82636. The Court of Appeals, in its assailed Decision and Resolution, reversed the Decision3 of the Regional Trial Court (RTC) of Quezon City, Branch 220 dated 23 September 2003, declaring the deeds of real estate mortgage constituted on TCT No. RT-18206 (106338) null and void. The dispositive portion of the assailed Court of Appeals Decision thus reads:“WHEREFORE, the appealed decision is REVERSED and SET ASIDE, and a new judgment is hereby entered dismissing the [petitioners] complaint.”4Petitioners are heirs of Perla N. Mercado (Perla). Perla, during her lifetime, owned several pieces of real property situated in different provinces of the Philippines.Respondent, on the other hand, is a banking institution duly authorized as such under the Philippine laws.On 28 May 1992, Perla executed a Special Power of Attorney (SPA) in favor of her husband, Julian D. Mercado (Julian) over several pieces of real property registered under her name, authorizing the latter to perform the following acts:

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“1. To act in my behalf, to sell, alienate, mortgage, lease and deal otherwise over the different parcels of land described hereinafter, to wit:a) Calapan, Oriental Mindoro Properties covered by Transfer Certificates of Title Nos. T-53618–3,522 Square Meters, T-46810–3,953 Square Meters, T-53140–177 Square_______________

1 Penned by Associate Justice Delilah Vidallon-Magtolis with Associate Justices Josefina Guevara-Salonga and Fernanda LampasPeralta, concurring. Rollo, pp. 44-59.2 Id., at pp. 61-64.3 Id., at pp. 71-84.4 Id., at p. 59.448

448SUPREME COURT REPORTS ANNOTATEDMercado vs. Allied Banking CorporationMeters, T-21403–263 Square Meters, T- 46807–39 Square Meters of the Registry of Deeds of Oriental Mindoro;b) Susana Heights, Muntinlupa covered by Transfer Certificates of Title Nos. T-108954–600 Square Meters and RT-106338–805 Square Meters of the Registry of Deeds of Pasig (now Makati);c) Personal property – 1983 Car with Vehicle Registration No. R-16381; Model 1983; Make – Toyota; Engine No. T- 2464”2. To sign for and in my behalf any act of strict dominion or ownership any sale, disposition, mortgage, lease or any other transactions including quit-claims, waiver and relinquishment of rights in and over the parcels of land situated in General Trias, Cavite, covered by Transfer Certificates of Title Nos. T-112254 and T-112255 of the Registry of Deeds of Cavite, in conjunction with his co-owner and in the person ATTY. AUGUSTO F. DEL ROSARIO;3. To exercise any or all acts of strict dominion or ownership over the above-mentioned properties, rights and interest therein.” (Emphasis supplied.)

On the strength of the aforesaid SPA, Julian, on 12 December 1996, obtained a loan from the respondent in the amount of P3,000,000.00, secured by real estate mortgage constituted on TCT No. RT-18206 (106338) which covers a parcel of land with an area of 805 square meters, registered with the Registry of Deeds of Quezon City (subject property).5Still using the subject property as security, Julian obtained an additional loan from the respondent in the sum of P5,000,000.00, evidenced by a Promissory Note6 he executed on 5 February 1997 as another real estate mortgage (REM).It appears, however, that there was no property identified in the SPA as TCT No. RT – 18206 (106338) and registered with the Registry of Deeds of Quezon City. What was_______________

5 Susana Heights, Muntinlupa covered by Transfer Certificates of Title Nos. T-108954–690 square meters; and RT-106338–805 square meters of the Registry of Deeds of Pasig (now Makati);6 Id., at pp. 106-109.449

VOL. 528, JULY 27, 2007449Mercado vs. Allied Banking Corporationidentified in the SPA instead was the property covered by TCT No. RT-106338 registered with the Registry of Deeds of Pasig.Subsequently, Julian defaulted on the payment of his loan obligations. Thus, respondent initiated extrajudicial foreclosure proceedings over the subject property which was subsequently sold at public auction wherein the respondent was declared as the highest bidder as shown in the Sheriff’s Certificate of Sale dated 15 January 1998.7On 23 March 1999, petitioners initiated with the RTC an action for the annulment of REM constituted over the subject property on the ground that the same was not covered by the SPA and that the said SPA, at the time the

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loan obligations were contracted, no longer had force and effect since it was previously revoked by Perla on 10 March 1993, as evidenced by the Revocation of SPA signed by the latter.8Petitioners likewise alleged that together with the copy of the Revocation of SPA, Perla, in a Letter dated 23 January 1996, notified the Registry of Deeds of Quezon City that any attempt to mortgage or sell the subject property must be with her full consent documented in the form of an SPA duly authenticated before the Philippine Consulate General in New York.9In the absence of authority to do so, the REM constituted by Julian over the subject property was null and void; thus, petitioners likewise prayed that the subsequent extra-judicial foreclosure proceedings and the auction sale of the subject property be also nullified.In its Answer with Compulsory Counterclaim,10 respondent averred that, contrary to petitioner’s allegations, the SPA in favor of Julian included the subject property, covered by one_______________

7 Id., at p. 738 Id., at p. 74.9 Id., at pp. 74-75.10 Id., at pp. 96-103.450

450SUPREME COURT REPORTS ANNOTATEDMercado vs. Allied Banking Corporationof the titles specified in paragraph 1(b) thereof, TCT No. RT106338 registered with the Registry of Deeds of Pasig (now Makati). The subject property was purportedly registered previously under TCT No. T-106338, and was only subsequently reconstituted as TCT RT-18206 (106338). Moreover, TCT No. T-106338 was actually registered with the Registry of Deeds of Quezon City and not before the Registry of Deeds of Pasig (now Makati). Respondent explained that the discrepancy in the designation of the Registry of Deeds in the SPA was merely an error that must

not prevail over the clear intention of Perla to include the subject property in the said SPA. In sum, the property referred to in the SPA Perla executed in favor of Julian as covered by TCT No. 106338 of the Registry of Deeds of Pasig (now Makati) and the subject property in the case at bar, covered by RT – 18206 (106338) of the Registry of Deeds of Quezon City, are one and the same.On 23 September 2003, the RTC rendered a Decision declaring the REM constituted over the subject property null and void, for Julian was not authorized by the terms of the SPA to mortgage the same. The court a quo likewise ordered that the foreclosure proceedings and the auction sale conducted pursuant to the void REM, be nullified. The dispositive portion of the Decision reads:“WHEREFORE, premises considered, judgment is hereby rendered in favor of the [herein petitioners] and against the [herein respondent] Bank:1. Declaring the Real Estate Mortgages constituted and registered under Entry Nos. PE-4543/RT-18206 and 2012/RT-18206 annotated on TCT No. RT-18206 (106338) of the Registry of Deeds of Quezon City as NULL and VOID;2. Declaring the Sheriff’s Sale and Certificate of Sale under FRE No. 2217 dated January 15, 1998 over the property covered by TCT No. RT-18206 (106338) of the Registry of Deeds of Quezon City as NULL and VOID;451

VOL. 528, JULY 27, 2007451Mercado vs. Allied Banking Corporation3. Ordering the defendant Registry of Deeds of Quezon City to cancel the annotation of Real Estate Mortgages appearing on Entry Nos. PE-4543/RT-18206 and 2012/RT-18206 on TCT No. RT18206 (106338) of the Registry of Deeds of Quezon City;4. Ordering the [respondent] Bank to deliver/return to the [petitioners] represented by their attorney-in-fact Alfredo M. Perez, the original Owner’s Duplicate Copy of TCT No. RT-18206 (106338) free from the encumbrances referred to above; and

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5. Ordering the [respondent] Bank to pay the [petitioners] the amount of P100,000.00 as for attorney’s fees plus cost of the suit.The other claim for damages and counterclaim are hereby DENIED for lack of merit.”11Aggrieved, respondent appealed the adverse Decision before the Court of Appeals.In a Decision dated 12 October 2005, the Court of Appeals reversed the RTC Decision and upheld the validity of the REM constituted over the subject property on the strength of the SPA. The appellate court declared that Perla intended the subject property to be included in the SPA she executed in favor of Julian, and that her subsequent revocation of the said SPA, not being contained in a public instrument, cannot bind third persons.The Motion for Reconsideration interposed by the petitioners was denied by the Court of Appeals in its Resolution dated 15 February 2006.Petitioners are now before us assailing the Decision and Resolution rendered by the Court of Appeals raising several issues, which are summarized as follows:I WHETHER OR NOT THERE WAS A VALID MORTGAGE CONSTITUTED OVER SUBJECT PROPERTY.II WHETHER OR NOT THERE WAS A VALID REVOCATION OF THE SPA._______________

11 Id., at p. 84.452

452SUPREME COURT REPORTS ANNOTATEDMercado vs. Allied Banking CorporationIII WHETHER OR NOT THE RESPONDENT WAS A MORTGAGEE-IN-GOOD FAITH.For a mortgage to be valid, Article 2085 of the Civil Code enumerates the following essential requisites:“Art. 2085. The following requisites are essential to the contracts of pledge and mortgage:

(1) That they be constituted to secure the fulfillment of a principal obligation;(2) That the pledgor or mortgagor be the absolute owner of the thing pledged or mortgaged;(3) That the persons constituting the pledge or mortgage have the free disposal of their property, and in the absence thereof, that they be legally authorized for the purpose.Third persons who are not parties to the principal obligation may secure the latter by pledging or mortgaging their own property.”In the case at bar, it was Julian who obtained the loan obligations from respondent which he secured with the mortgage of the subject property. The property mortgaged was owned by his wife, Perla, considered a third party to the loan obligations between Julian and respondent. It was, thus, a situation recognized by the last paragraph of Article 2085 of the Civil Code afore-quoted. However, since it was not Perla who personally mortgaged her own property to secure Julian’s loan obligations with respondent, we proceed to determining if she duly authorized Julian to do so on her behalf.Under Article 1878 of the Civil Code, a special power of attorney is necessary in cases where real rights over immovable property are created or conveyed.12 In the SPA executed by Perla in favor of Julian on 28 May 1992, the latter was conferred with the authority to “sell, alienate, mortgage, lease and deal otherwise” the different pieces of real and personal property registered in Perla’s name. The SPA likewise author-_______________

12 Paragraph 12 of Article 1878, Civil Code of the Philippines.453

VOL. 528, JULY 27, 2007453Mercado vs. Allied Banking Corporationized Julian “[t]o exercise any or all acts of strict dominion or ownership” over the identified properties, and rights and

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interest therein. The existence and due execution of this SPA by Perla was not denied or challenged by petitioners.There is no question therefore that Julian was vested with the power to mortgage the pieces of property identified in the SPA. However, as to whether the subject property was among those identified in the SPA, so as to render Julian’s mortgage of the same valid, is a question we still must resolve.Petitioners insist that the subject property was not included in the SPA, considering that it contained an exclusive enumeration of the pieces of property over which Julian had authority, and these include only: (1) TCT No. T-53618, with an area of 3,522 square meters, located at Calapan, Oriental Mindoro, and registered with the Registry of Deeds of Oriental Mindoro; (2) TCT No. T-46810, with an area of 3,953 square meters, located at Calapan, Oriental Mindoro, and registered with the Registry of Deeds of Oriental Mindoro; (3) TCT No. T-53140, with an area of 177 square meters, located at Calapan, Oriental Mindoro, and registered with the Registry of Deeds of Oriental Mindoro; (4) TCT No. T-21403, with an area of 263 square meters, located at Calapan, Oriental Mindoro, and registered with the Registry of Deeds of Oriental Mindoro; (5) TCT No. T-46807, with an area of 39 square meters, located at Calapan, Oriental Mindoro, and registered with the Registry of Deeds of Oriental Mindoro; (6) TCT No. T-108954, with an area of 690 square meters and located at Susana Heights, Muntinlupa; (7) RT-106338 – 805 Square Meters registered with the Registry of Deeds of Pasig (now Makati); and (8) Personal Property consisting of a 1983 Car with Vehicle Registration No. R-16381, Model – 1983, Make – Toyota, and Engine No. T- 2464. Nowhere is it stated in the SPA that Julian’s authority extends to the subject property covered by TCT No. RT – 18206 (106338) registered with the Registry of Deeds of Quezon City. Consequently, the act of Julian of constituting a mortgage over the454

454SUPREME COURT REPORTS ANNOTATED

Mercado vs. Allied Banking Corporationsubject property is unenforceable for having been done without authority.Respondent, on the other hand, mainly hinges its argument on the declarations made by the Court of Appeals that there was no property covered by TCT No. 106338 registered with the Registry of Deeds of Pasig (now Makati); but there exists a property, the subject property herein, covered by TCT No. RT-18206 (106338) registered with the Registry of Deeds of Quezon City. Further verification would reveal that TCT No. RT-18206 is merely a reconstitution of TCT No. 106338, and the property covered by both certificates of title is actually situated in Quezon City and not Pasig. From the foregoing circumstances, respondent argues that Perla intended to include the subject property in the SPA, and the failure of the instrument to reflect the recent TCT Number or the exact designation of the Registry of Deeds, should not defeat Perla’s clear intention.After an examination of the literal terms of the SPA, we find that the subject property was not among those enumerated therein. There is no obvious reference to the subject property covered by TCT No. RT-18206 (106338) registered with the Registry of Deeds of Quezon City.There was also nothing in the language of the SPA from which we could deduce the intention of Perla to include the subject property therein. We cannot attribute such alleged intention to Perla who executed the SPA when the language of the instrument is bare of any indication suggestive of such intention. Contrariwise, to adopt the intent theory advanced by the respondent, in the absence of clear and convincing evidence to that effect, would run afoul of the express tenor of the SPA and thus defeat Perla’s true intention.In cases where the terms of the contract are clear as to leave no room for interpretation, resort to circumstantial evidence to ascertain the true intent of the parties, is not countenanced. As aptly stated in the case of JMA House,455

VOL. 528, JULY 27, 2007

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455Mercado vs. Allied Banking CorporationIncorporated v. Sta. Monica Industrial and Development Corporation,13 thus:“[T]he law is that if the terms of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of its stipulation shall control. When the language of the contract is explicit, leaving no doubt as to the intention of the drafters, the courts may not read into it [in] any other intention that would contradict its main import. The clear terms of the contract should never be the subject matter of interpretation. Neither abstract justice nor the rule on liberal interpretation justifies the creation of a contract for the parties which they did not make themselves or the imposition upon one party to a contract or obligation not assumed simply or merely to avoid seeming hardships. The true meaning must be enforced, as it is to be presumed that the contracting parties know their scope and effects.”14Equally relevant is the rule that a power of attorney must be strictly construed and pursued. The instrument will be held to grant only those powers which are specified therein, and the agent may neither go beyond nor deviate from the power of attorney.15 Where powers and duties are specified and defined in an instrument, all such powers and duties are limited and are confined to those which are specified and defined, and all other powers and duties are excluded.16 This is but in accord with the disinclination of courts to enlarge the authority granted beyond the powers expressly given and those which incidentally flow or derive therefrom as being usual and reasonably necessary and proper for the performance of such express powers.17_______________

13 G.R. No. 154156, 31 August 2006, 500 SCRA 526.14 Id., at pp. 545-546.15 Angeles v. Philippine National Railways (PNR), G.R. No. 150128, 31 August 2006, 500 SCRA 444, 453.

16 Bank of the Philippine Islands v. De Coster, 49 Phil. 574, 589 (1926) as cited in Philippine National Bank v. Sta. Maria, 139 Phil. 781, 786; 29 SCRA 303, 308 (1969).17 Philippine National Bank v. Sta. Maria, id.456

456SUPREME COURT REPORTS ANNOTATEDMercado vs. Allied Banking CorporationEven the commentaries of renowned Civilist Manresa18 supports a strict and limited construction of the terms of a power of attorney:“The law, which must look after the interests of all, cannot permit a man to express himself in a vague and general way with reference to the right he confers upon another for the purpose of alienation or hypothecation, whereby he might be despoiled of all he possessed and be brought to ruin, such excessive authority must be set down in the most formal and explicit terms, and when this is not done, the law reasonably presumes that the principal did not mean to confer it.”In this case, we are not convinced that the property covered by TCT No. 106338 registered with the Registry of Deeds of Pasig (now Makati) is the same as the subject property covered by TCT No. RT-18206 (106338) registered with the Registry of Deeds of Quezon City. The records of the case are stripped of supporting proofs to verify the respondent’s claim that the two titles cover the same property. It failed to present any certification from the Registries of Deeds concerned to support its assertion. Neither did respondent take the effort of submitting and making part of the records of this case copies of TCTs No. RT-106338 of the Registry of Deeds of Pasig (now Makati) and RT-18206 (106338) of the Registry of Deeds of Quezon City, and closely comparing the technical descriptions of the properties covered by the said TCTs. The bare and sweeping statement of respondent that the properties covered by the two certificates of title are one and the same contains nothing but empty imputation of a fact that could hardly be given any evidentiary weight by this Court.

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Having arrived at the conclusion that Julian was not conferred by Perla with the authority to mortgage the subject property under the terms of the SPA, the real estate mortgages Julian executed over the said property are therefore unenforceable._______________

18 Vol. II, p. 60.457

VOL. 528, JULY 27, 2007457Mercado vs. Allied Banking CorporationAssuming arguendo that the subject property was indeed included in the SPA executed by Perla in favor of Julian, the said SPA was revoked by virtue of a public instrument executed by Perla on 10 March 1993. To address respondent’s assertion that the said revocation was unenforceable against it as a third party to the SPA and as one who relied on the same in good faith, we quote with approval the following ruling of the RTC on this matter:“Moreover, an agency is extinguished, among others, by its revocation (Article 1999, New Civil Code of the Philippines). The principal may revoke the agency at will, and compel the agent to return the document evidencing the agency. Such revocation may be express or implied (Article 1920, supra).In this case, the revocation of the agency or Special Power of Attorney is expressed and by a public document executed on March 10, 1993.The Register of Deeds of Quezon City was even notified that any attempt to mortgage or sell the property covered by TCT No. [RT-18206] 106338 located at No. 21 Hillside Drive, Blue Ridge, Quezon City must have the full consent documented in the form of a special power of attorney duly authenticated at the Philippine Consulate General, New York City, N.Y., U.S.A.The non-annotation of the revocation of the Special Power of Attorney on TCT No. RT-18206 is of no consequence as far as the revocation’s existence and legal effect is concerned since actual notice is always superior to constructive notice.

The actual notice of the revocation relayed to defendant Registry of Deeds of Quezon City is not denied by either the Registry of Deeds of Quezon City or the defendant Bank. In which case, there appears no reason why Section 52 of the Property Registration Decree (P.D. No. 1529) should not apply to the situation. Said Section 52 of P.D. No. 1529 provides:“Section 52. Constructive notice upon registration.—Every conveyance, mortgage, lease, lien, attachment, order, judgment, instrument or entry affecting registered land shall, if registered, filed or entered in the Office of the Register of Deeds for the province or city where the land to which it relates lies, be constructive notice to all persons from the458

458SUPREME COURT REPORTS ANNOTATEDMercado vs. Allied Banking Corporationtime of such registering, filing or entering. (Pres. Decree No. 1529, Section 53) (emphasis ours)It thus developed that at the time the first loan transaction with defendant Bank was effected on December 12, 1996, there was on record at the Office of the Register of Deeds of Quezon City that the special power of attorney granted Julian, Sr. by Perla had been revoked. That notice, works as constructive notice to third parties of its being filed, effectively rendering Julian, Sr. without authority to act for and in behalf of Perla as of the date the revocation letter was received by the Register of Deeds of Quezon City on February 7, 1996.”19Given that Perla revoked the SPA as early as 10 March 1993, and that she informed the Registry of Deeds of Quezon City of such revocation in a letter dated 23 January 1996 and received by the latter on 7 February 1996, then third parties to the SPA are constructively notified that the same had been revoked and Julian no longer had any authority to mortgage the subject property. Although the revocation may not be annotated on TCT No. RT-18206 (106338), as the RTC pointed out, neither the Registry of Deeds of

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Quezon City nor respondent denied that Perla’s 23 January 1996 letter was received by and filed with the Registry of Deeds of Quezon City. Respondent would have undoubtedly come across said letter if it indeed diligently investigated the subject property and the circumstances surrounding its mortgage.The final issue to be threshed out by this Court is whether the respondent is a mortgagee-in-good faith. Respondent fervently asserts that it exercised reasonable diligence required of a prudent man in dealing with the subject property.Elaborating, respondent claims to have carefully verified Julian’s authority over the subject property which was validly contained in the SPA. It stresses that the SPA was annotated at the back of the TCT of the subject property. Finally, after conducting an investigation, it found that the property cov-_______________

19 Rollo, pp. 80-81.459

VOL. 528, JULY 27, 2007459Mercado vs. Allied Banking Corporationered by TCT No. 106338, registered with the Registry of Deeds of Pasig (now Makati) referred to in the SPA, and the subject property, covered by TCT No. 18206 (106338) registered with the Registry of Deeds of Quezon City, are one and the same property. From the foregoing, respondent concluded that Julian was indeed authorized to constitute a mortgage over the subject property.We are unconvinced. The property listed in the real estate mortgages Julian executed in favor of PNB is the one covered by “TCT#RT-18206(106338).” On the other hand, the Special Power of Attorney referred to TCT No. “RT-106338–805 Square Meters of the Registry of Deeds of Pasig now Makati.” The palpable difference between the TCT numbers referred to in the real estate mortgages and Julian’s SPA, coupled with the fact that the said TCTs are registered in the Registries of Deeds of different cities,

should have put respondent on guard. Respondent’s claim of prudence is debunked by the fact that it had conveniently or otherwise overlooked the inconsistent details appearing on the face of the documents, which it was relying on for its rights as mortgagee, and which significantly affected the identification of the property being mortgaged. In Arrofo v. Quiño,20 we have elucidated that:“[Settled is the rule that] a person dealing with registered lands [is not required] to inquire further than what the Torrens title on its face indicates. This rule, however, is not absolute but admits of exceptions. Thus, while it is true, x x x that a person dealing with registered lands need not go beyond the certificate of title, it is likewise a well-settled rule that a purchaser or mortgagee cannot close his eyes to facts which should put a reasonable man on his guard, and then claim that he acted in good faith under the belief that there was no defect in the title of the vendor or mortgagor. His mere refusal to face up the fact that such defect exists, or his willful closing of his eyes to the possibility of the existence of a defect in the vendor’s or mortgagor’s title, will not make him an innocent purchaser for value, if it after-_______________

20 G.R. No. 145794, 26 January 2005, 449 SCRA 284.460

460SUPREME COURT REPORTS ANNOTATEDMercado vs. Allied Banking Corporationwards develops that the title was in fact defective, and it appears that he had such notice of the defect as would have led to its discovery had he acted with the measure of precaution which may be required of a prudent man in a like situation.”By putting blinders on its eyes, and by refusing to see the patent defect in the scope of Julian’s authority, easily discernable from the plain terms of the SPA, respondent cannot now claim to be an innocent mortgagee.Further, in the case of Abad v. Guimba,21 we laid down the principle that where the mortgagee does not directly deal

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with the registered owner of real property, the law requires that a higher degree of prudence be exercised by the mortgagee, thus:“While [the] one who buys from the registered owner does not need to look behind the certificate of title, one who buys from [the] one who is not [the] registered owner is expected to examine not only the certificate of title but all factual circumstances necessary for [one] to determine if there are any flaws in the title of the transferor, or in [the] capacity to transfer the land. Although the instant case does not involve a sale but only a mortgage, the same rule applies inasmuch as the law itself includes a mortgagee in the term “purchaser.”22This principle is applied more strenuously when the mortgagee is a bank or a banking institution. Thus, in the case of Cruz v. Bancom Finance Corporation,23 we ruled:“Respondent, however, is not an ordinary mortgagee; it is a mortgagee-bank. As such, unlike private individuals, it is expected to exercise greater care and prudence in its dealings, including those involving registered lands. A banking institution is expected to exercise due diligence before entering into a mortgage contract. The ascertainment of the status or condition of a property offered to it as_______________

21 G.R. No. 157002, 29 July 2005, 465 SCRA 356.22 Id., at pp. 368-369.23 429 Phil. 225; 379 SCRA 490 (2002).461

VOL. 528, JULY 27, 2007461Mercado vs. Allied Banking Corporationsecurity for a loan must be a standard and indispensable part of its operations.”24Hence, considering that the property being mortgaged by Julian was not his, and there are additional doubts or suspicions as to the real identity of the same, the respondent bank should have proceeded with its

transactions with Julian only with utmost caution. As a bank, respondent must subject all its transactions to the most rigid scrutiny, since its business is impressed with public interest and its fiduciary character requires high standards of integrity and performance.25 Where respondent acted in undue haste in granting the mortgage loans in favor of Julian and disregarding the apparent defects in the latter’s authority as agent, it failed to discharge the degree of diligence required of it as a banking corporation.Thus, even granting for the sake of argument that the subject property and the one identified in the SPA are one and the same, it would not elevate respondent’s status to that of an innocent mortgagee. As a banking institution, jurisprudence stringently requires that respondent should take more precautions than an ordinary prudent man should, to ascertain the status and condition of the properties offered as collateral and to verify the scope of the authority of the agents dealing with these. Had respondent acted with the required degree of diligence, it could have acquired knowledge of the letter dated 23 January 1996 sent by Perla to the Registry of Deeds of Quezon City which recorded the same. The failure of the respondent to investigate into the circumstances surrounding the mortgage of the subject property belies its contention of good faith.On a last note, we find that the real estate mortgages constituted over the subject property are unenforceable and not null and void, as ruled by the RTC. It is best to reiterate that the said mortgage was entered into by Julian on behalf of_______________

24 Id., at p. 239; p. 505.25 THE GENERAL BANKING LAW OF 2000, Section 2.462

462SUPREME COURT REPORTS ANNOTATEDMercado vs. Allied Banking Corporation

11

Perla without the latter’s authority and consequently, unenforceable under Article 1403(1) of the Civil Code. Unenforceable contracts are those which cannot be enforced by a proper action in court, unless they are ratified, because either they are entered into without or in excess of authority or they do not comply with the statute of frauds or both of the contracting parties do not possess the required legal capacity.26 An unenforceable contract may be ratified, expressly or impliedly, by the person in whose behalf it has been executed, before it is revoked by the other contracting party.27 Without Perla’s ratification of the same, the real estate mortgages constituted by Julian over the subject property cannot be enforced by any action in court against Perla and/or her successors in interest.In sum, we rule that the contracts of real estate mortgage constituted over the subject property covered by TCT No. RT – 18206 (106338) registered with the Registry of Deeds of Quezon City are unenforceable. Consequently, the foreclosure proceedings and the auction sale of the subject property conducted in pursuance of these unenforceable contracts are null and void. This, however, is without prejudice to the right of the respondent to proceed against Julian, in his personal capacity, for the amount of the loans.WHEREFORE, IN VIEW OF THE FOREGOING, the instant petition is GRANTED. The Decision dated 12 October 2005 and its Resolution dated 15 February 2006 rendered by the Court of Appeals in CA-G.R. CV No. 82636, are hereby REVERSED. The Decision dated 23 September 2003 of the Regional Trial Court of Quezon City, Branch 220, in Civil Case No. Q-99-37145, is hereby REINSTATED and AFFIRMED with modification that the real estate mortgages constituted over TCT No. RT – 18206 (106338) are not null and void but UNENFORCEABLE. No costs._______________

26 Article 1403, Civil Code of the Philippines.27 Article 1317, Civil Code of the Philippines.463

VOL. 528, JULY 27, 2007

463Agfha, Incorporated vs. Court of Tax AppealsSO ORDERED.     Ynares-Santiago (Chairperson), Austria-Martinez and Nachura, JJ., concur.Petition granted, judgment and resolution reversed. That of trial court reinstated and affirmed with modification.Note.—Unlike private individuals a mortgagee-bank is expected to exercise greater care and prudence in its dealings including those involving registered lands. (Cruz vs. Bancom Finance Corporation, 379 SCRA 490 [2002])——o0o—— [Mercado vs. Allied Banking Corporation, 528 SCRA 444(2007)]

12

SUPREME COURT REPORTS ANNOTATEDNational Food Authority vs. Intermediate Appellate CourtG.R. No. 75640. April 5, 1990.*NATIONAL FOOD AUTHORITY, (NFA), petitioner, vs. INTERMEDIATE APPELLATE COURT, SUPERIOR (SG) SHIPPING CORPORATION, respondents.Civil Law; Agency; Agent’s apparent representation yields to the principal’s true representation and the contract is considered as entered into between the principal and third person.—Consequently when things belonging to the principal (in this case, Superior Shipping Corporation) are dealt with, the agent is bound to the principal although he does not assume the character of such agent and appears acting in his own name. In other words, the agent’s apparent representation yields to the principal’s true representation and that, in reality and in effect, the contract must be considered as entered into between the principal and the third person (Sy Juco and Viardo v. Sy______________

* SECOND DIVISION.167

VOL. 184, APRIL 5, 1990167National Food Authority vs. Intermediate Appellate CourtJuco, 40 Phil. 634). Corollarily, if the principal can be obliged to perform his duties under the contract, then it can also

demand the enforcement of its rights arising from the contract.PETITION for certiorari to review the decision of the then Intermediate Appellate Court. Coquia, J.

The facts are stated in the opinion of the Court.     Zapanta, Gloton & Ulejorada for petitioner.     Sison, Ortiz & Associates for private respondents.PARAS, J.:

This is a petition for review on certiorari made by National Food Authority (NFA for brevity) then known as the National Grains Authority or NGA from the decision1 of the Intermediate Appellate Court affirming the decision2 of the trial court, the decretal portion of which reads:“WHEREFORE, defendants Gil Medalla and National Food Authority are ordered to pay jointly and severally the plaintiff:a. the sum of P25,974.90, with interest at the legal rate from October 17, 1979 until the same is fully paid; and,b. the sum of P10,000.00 as and for attorney’s fees.“Costs against both defendants.“SO ORDERED.” (p. 22, Rollo)Hereunder are the undisputed facts as established by the then Intermediate Appellate Court (now Court of Appeals), viz:“On September 6, 1979 Gil Medalla, as commission agent of the plaintiff Superior Shipping Corporation, entered into a contract for hire of ship known as “MV Sea Runner” with defendant National Grains Authority. Under the said contract Medalla obligated to transport on the “MV Sea Runner” 8,550 sacks of rice belonging to defendant National Grains Authority from the port of San Jose, Occidental Mindoro, to Malabon, Metro Manila.________________

1 Penned by Justice Jorge R. Coquia with the concurring votes of Justice Floreliana Castro-Bartolome and Justice Bienvenido C. Ejercito.2 Penned by Judge Ricardo D. Pronove, Jr.

13

168

168SUPREME COURT REPORTS ANNOTATEDNational Food Authority vs. Intermediate Appellate Court“Upon completion of the delivery of rice at its destination, plaintiff on October 17, 1979, wrote a letter requesting defendant NGA that it be allowed to collect the amount stated in its statement of account (Exhibit “D”). The statement of account included not only a claim for freightage but also claims for demurrage and stevedoring charges amounting to P93,538.70.“On November 5, 1979, plaintiff wrote again defendant NGA, this time specifically requesting that the payment for freightage and other charges be made to it and not to defendant Medalla because plaintiff was the owner of the vessel “MV Sea Runner” (Exhibit “E”). In reply, defendant NGA on November 16, 1979 informed plaintiff that it could not grant its request because the contract to transport the rice was entered into by defendant NGA and defendant Medalla who did not disclose that he was acting as a mere agent of plaintiff (Exhibit “F”). Thereupon on November 19, 1979, defendant NGA paid defendant Medalla the sum of P25,974.90, for freight services in connection with the shipment of 8,550 sacks of rice (Exhibit “A”).“On December 4, 1979, plaintiff wrote defendant Medalla demanding that he turn over to plaintiff the amount of P27,000.00 paid to him by defendant NFA. Defendant Medalla, however, ‘ignored the demand.’“Plaintiff was therefore constrained to file the instant complaint.“Defendant-appellant National Food Authority admitted that it entered into a contract with Gil Medalla whereby plaintiff’s vessel ‘MV Sea Runner’ transported 8,550 sacks of rice of said defendant from San Jose, Mindoro to Manila.“For services rendered, the National Food Authority paid Gil Medalla P27,000.00 for freightage.“Judgment was rendered in favor of the plaintiff. Defendant National Food Authority appealed to this court on the sole

issue as to whether it is jointly and severally liable with defendant Gil Medalla for freightage.” (pp. 61-62, Rollo)The appellate court affirmed the judgment of the lower court, hence, this appeal by way of certiorari, petitioner NFA submitting a lone issue to wit: whether or not the instant case falls within the exception of the general rule provided for in Art. 1883 of the Civil Code of the Philippines.It is contended by petitioner NFA that it is not liable under the exception to the rule (Art. 1883) since it had no knowledge of the fact of agency between respondent Superior Shipping and Medalla at the time when the contract was entered into between them (NFA and Medalla). Petitioner submits that “(A)n169

VOL. 184, APRIL 5, 1990169National Food Authority vs. Intermediate Appellate Courtundisclosed principal cannot maintain an action upon a contract made by his agent unless such principal was disclosed in such contract. One who deals with an agent acquires no right against the undisclosed principal.”Petitioner NFA’s contention holds no water. It is an undisputed fact that Gil Medalla was a commission agent of respondent Superior Shipping Corporation which owned the vessel “MV Sea Runner” that transported the sacks of rice belonging to petitioner NFA. The context of the law is clear. Art. 1883, which is the applicable law in the case at bar provides:“Art. 1883. If an agent acts in his own name, the principal has no right of action against the persons with whom the agent has contracted; neither have such persons against the principal.“In such case the agent is the one directly bound in favor of the person with whom he has contracted, as if the transaction were his own, except when the contract involves things belonging to the principal.“The provision of this article shall be understood to be without prejudice to the actions between the principal and agent.”

14

Consequently, when things belonging to the principal (in this case, Superior Shipping Corporation) are dealt with, the agent is bound to the principal although he does not assume the character of such agent and appears acting in his own name. In other words, the agent’s apparent representation yields to the principal’s true representation and that, in reality and in effect, the contract must be considered as entered into between the principal and the third person (Sy Juco and Viardo v. Sy Juco, 40 Phil. 634). Corollarily, if the principal can be obliged to perform his duties under the contract, then it can also demand the enforcement of its rights arising from the contract.WHEREFORE, PREMISES CONSIDERED, the petition is hereby DENIED and the appealed decision is hereby AFFIRMED.SO ORDERED.     Melencio-Herrera (Chairman), Padilla, Sarmiento and Regalado, JJ., concur.Petition denied. Decision affirmed.170

170SUPREME COURT REPORTS ANNOTATEDLabrador vs. Court of AppealsNote.—Exhibit “A” does not create an agency between Perlas, as principal, and Vizconde, as agent for the sale of the former’s ring but merely guaranteed the civil obligation of Pagulayan to pay Perlas the value of the ring in the event of Pagulayan’s failure to return said article. (Vizconde vs. Intermediate Appellate Court, 149 SCRA 226.)——o0o—— [National Food Authority vs. Intermediate Appellate Court, 184 SCRA 166(1990)]

SUPREME COURT REPORTS ANNOTATEDEurotech Industrial Technologies, Inc. vs. CuizonG.R. No. 167552. April 23, 2007.*EUROTECH INDUSTRIAL TECHNOLOGIES, INC., petitioner, vs. EDWIN CUIZON and ERWIN CUIZON, respondents.Agency; The underlying principle of the contract of agency is to accomplish results by using the services of others—to do a great variety of things like selling, buying, manufacturing, and transporting.—In a contract of agency, a person binds himself to render some service or to do something in representation or on behalf of another with the latter’s consent. The underlying principle of the contract of agency is to accomplish results by using the services of others—to do a great variety of things like selling, buying, manufacturing, and transporting. Its purpose is to extend the personality of the principal or the party for whom another acts and from whom he or she derives the authority to act. It is said that the basis of agency is representation, that is, the agent acts for and on behalf of the principal on matters within the scope of his authority and said acts have the same legal effect as if they were personally executed by the principal. By this legal fiction, the actual or real absence of the principal is converted into his legal or juridical presence—qui facit per alium facit per se.

15

Same; Elements.—The elements of the contract of agency are: (1) consent, express or implied, of the parties to establish the relationship; (2) the object is the execution of a juridical act in relation to a third person; (3) the agent acts as a representative and not for himself; (4) the agent acts within the scope of his authority.Same; Article 1897 of the Civil Code reinforces the familiar doctrine that an agent, who acts as such, is not personally liable to the party with whom he contracts; Exceptions.—Article 1897 reinforces the familiar doctrine that an agent, who acts as such, is not personally liable to the party with whom he contracts. The same provision, however, presents two instances when an agent becomes personally liable to a third person. The first is when he expressly binds himself to the obligation and the second is when he exceeds his authority. In_______________

* THIRD DIVISION.585

VOL. 521, APRIL 23, 2007585Eurotech Industrial Technologies, Inc. vs. Cuizonthe last instance, the agent can be held liable if he does not give the third party sufficient notice of his powers. We hold that respondent EDWIN does not fall within any of the exceptions contained in this provision.Same; Managers; The position of manager is unique in that it presupposes the grant of broad powers with which to conduct the business of the principal.—The Deed of Assignment clearly states that respondent EDWIN signed thereon as the sales manager of Impact Systems. As discussed elsewhere, the position of manager is unique in that it presupposes the grant of broad powers with which to conduct the business of the principal, thus: The powers of an agent are particularly broad in the case of one acting as a general agent or manager; such a position presupposes a degree of confidence reposed and investiture with liberal powers for the exercise of judgment and discretion in

transactions and concerns which are incidental or appurtenant to the business entrusted to his care and management. In the absence of an agreement to the contrary, a managing agent may enter into any contracts that he deems reasonably necessary or requisite for the protection of the interests of his principal entrusted to his management. x x x.Same; In case of excess of authority by the agent, the law does not say that a third person can recover from both the principal and the agent.—We likewise take note of the fact that in this case, petitioner is seeking to recover both from respondents ERWIN, the principal, and EDWIN, the agent. It is well to state here that Article 1897 of the New Civil Code upon which petitioner anchors its claim against respondent EDWIN “does not hold that in case of excess of authority, both the agent and the principal are liable to the other contracting party.” To reiterate, the first part of Article 1897 declares that the principal is liable in cases when the agent acted within the bounds of his authority. Under this, the agent is completely absolved of any liability. The second part of the said provision presents the situations when the agent himself becomes liable to a third party when he expressly binds himself or he exceeds the limits of his authority without giving notice of his powers to the third person. However, it must be pointed out that in case of excess of authority by the agent, like what petitioner claims exists here, the law does not say that a third person can recover from both the principal and the agent.586

586SUPREME COURT REPORTS ANNOTATEDEurotech Industrial Technologies, Inc. vs. CuizonSame; Actions; Parties; Words and Phrases; An agent acting within his authority as such, who did not acquire any right nor incur any liability arising from a Deed, is not a real property in interest who should be impleaded; A real party in interest is one who stands to be benefited or injured by the judgment in the suit, or the party entitled to the avails of the suit.—As we declare that respondent EDWIN acted

16

within his authority as an agent, who did not acquire any right nor incur any liability arising from the Deed of Assignment, it follows that he is not a real party in interest who should be impleaded in this case. A real party in interest is one who “stands to be benefited or injured by the judgment in the suit, or the party entitled to the avails of the suit.” In this respect, we sustain his exclusion as a defendant in the suit before the court a quo.PETITION for review on certiorari of the decision and resolution of the Court of Appeals.The facts are stated in the opinion of the Court.     Nilo G. Ahat for petitioner.     Zosa and Quijano Law Offices for respondents.CHICO-NAZARIO, J.:

Before Us is a petition for review by certiorari assailing the Decision1 of the Court of Appeals dated 10 August 2004 and its Resolution2 dated 17 March 2005 in CA-G.R. SP No. 71397 entitled, “Eurotech Industrial Technologies, Inc. v. Hon. Antonio T. Echavez.” The assailed Decision and Resolution affirmed the Order3 dated 29 January 2002 rendered by Judge Antonio T. Echavez ordering the dropping of respondent EDWIN Cuizon (EDWIN) as a party defendant in Civil Case No. CEB-19672._______________

1 Penned by Associate Justice Vicente L. Yap with Associate Justices Arsenio J. Magpale and Ramon M. Bato, Jr., concurring; Rollo, pp. 33–36.2 Id., at pp. 37–39.3 Id., at pp. 83–84.587

VOL. 521, APRIL 23, 2007587Eurotech Industrial Technologies, Inc. vs. CuizonThe generative facts of the case are as follows:Petitioner is engaged in the business of importation and distribution of various European industrial equipment for customers here in the Philippines. It has as one of its

customers Impact Systems Sales (“Impact Systems”) which is a sole proprietorship owned by respondent ERWIN Cuizon (ERWIN). Respondent EDWIN is the sales manager of Impact Systems and was impleaded in the court a quo in said capacity.From January to April 1995, petitioner sold to Impact Systems various products allegedly amounting to ninety-one thousand three hundred thirty-eight (P91,338.00) pesos. Subsequently, respondents sought to buy from petitioner one unit of sludge pump valued at P250,000.00 with respondents making a down payment of fifty thousand pesos (P50,000.00).4 When the sludge pump arrived from the United Kingdom, petitioner refused to deliver the same to respondents without their having fully settled their indebtedness to petitioner. Thus, on 28 June 1995, respondent EDWIN and Alberto de Jesus, general manager of petitioner, executed a Deed of Assignment of receivables in favor of petitioner, the pertinent part of which states:“1.) That ASSIGNOR5 has an outstanding receivables from Toledo Power Corporation in the amount of THREE HUNDRED SIXTY FIVE THOUSAND (P365,000.00) PESOS as payment for the purchase of one unit of Selwood Spate 100D Sludge Pump;2.) That said ASSIGNOR does hereby ASSIGN, TRANSFER, and CONVEY unto the ASSIGNEE6 the said receivables from Toledo Power Corporation in the amount of THREE HUNDRED SIXTY FIVE THOUSAND (P365,000.00) PESOS which receivables the ASSIGNOR is the lawful recipient;_______________

4 Annex “H” of the Complaint; Records, p. 18.5 Referring to Impact Systems Sales.6 Referring to petitioner Eurotech Industrial Technologies, Inc.588

588SUPREME COURT REPORTS ANNOTATEDEurotech Industrial Technologies, Inc. vs. Cuizon

17

3.) That the ASSIGNEE does hereby accept this assignment.”7Following the execution of the Deed of Assignment, petitioner delivered to respondents the sludge pump as shown by Invoice No. 12034 dated 30 June 1995.8Allegedly unbeknownst to petitioner, respondents, despite the existence of the Deed of Assignment, proceeded to collect from Toledo Power Company the amount of P365,135.29 as evidenced by Check Voucher No. 09339 prepared by said power company and an official receipt dated 15 August 1995 issued by Impact Systems.10 Alarmed by this development, petitioner made several demands upon respondents to pay their obligations. As a result, respondents were able to make partial payments to petitioner. On 7 October 1996, petitioner’s counsel sent respondents a final demand letter wherein it was stated that as of 11 June 1996, respondents’ total obligations stood at P295,000.00 excluding interests and attorney’s fees.11 Because of respondents’ failure to abide by said final demand letter, petitioner instituted a complaint for sum of money, damages, with application for preliminary attachment against herein respondents before the Regional Trial Court of Cebu City.12On 8 January 1997, the trial court granted petitioner’s prayer for the issuance of writ of preliminary attachment.13On 25 June 1997, respondent EDWIN filed his Answer14 wherein he admitted petitioner’s allegations with respect to the sale transactions entered into by Impact Systems and_______________

7 Annex “G” of the Complaint; Records, p. 17.8 Annex “H” of the Complaint; id., at p. 18.9 Annex “I” of the Complaint; id., at p. 19.10 Annex “J” of the Complaint; id., at p. 20.11 Annex “L” of the Complaint; id., at p. 22.12 The case was raffled off to Branch 8 of the RTC Cebu City.13 Records, p. 27.14 Id., at pp. 38–41.589

VOL. 521, APRIL 23, 2007589Eurotech Industrial Technologies, Inc. vs. Cuizonpetitioner between January and April 1995.15 He, however, disputed the total amount of Impact Systems’ indebtedness to petitioner which, according to him, amounted to only P220,000.00.16By way of special and affirmative defenses, respondent EDWIN alleged that he is not a real party in interest in this case. According to him, he was acting as mere agent of his principal, which was the Impact Systems, in his transaction with petitioner and the latter was very much aware of this fact. In support of this argument, petitioner points to paragraphs 1.2 and 1.3 of petitioner’s Complaint stating—“1.2. Defendant Erwin H. Cuizon, is of legal age, married, a resident of Cebu City. He is the proprietor of a single proprietorship business known as Impact Systems Sales (“Impact Systems” for brevity), with office located at 46-A del Rosario Street, Cebu City, where he may be served summons and other processes of the Honorable Court.1.3. Defendant Edwin B. Cuizon is of legal age, Filipino, married, a resident of Cebu City. He is the Sales Manager of Impact Systems and is sued in this action in such capacity.”17On 26 June 1998, petitioner filed a Motion to Declare Defendant ERWIN in Default with Motion for Summary Judgment. The trial court granted petitioner’s motion to declare respondent ERWIN in default “for his failure to answer within the prescribed period despite the opportunity granted”18 but it denied petitioner’s motion for summary judgment in its Order of 31 August 2001 and scheduled the pre-trial of the case on 16 October 2001.19 However, the conduct of the pre-trial conference was deferred pending the_______________

15 Id., at p. 38.16 Ibid.17 Id., at p. 1.

18

18 Id., at p. 50.19 Id., at p. 61.590

590SUPREME COURT REPORTS ANNOTATEDEurotech Industrial Technologies, Inc. vs. Cuizonresolution by the trial court of the special and affirmative defenses raised by respondent EDWIN.20After the filing of respondent EDWIN’s Memorandum21 in support of his special and affirmative defenses and petitioner’s opposition22 thereto, the trial court rendered its assailed Order dated 29 January 2002 dropping respondent EDWIN as a party defendant in this case. According to the trial court—“A study of Annex “G” to the complaint shows that in the Deed of Assignment, defendant Edwin B. Cuizon acted in behalf of or represented [Impact] Systems Sales; that [Impact] Systems Sale is a single proprietorship entity and the complaint shows that defendant Erwin H. Cuizon is the proprietor; that plaintiff corporation is represented by its general manager Alberto de Jesus in the contract which is dated June 28, 1995. A study of Annex “H” to the complaint reveals that [Impact] Systems Sales which is owned solely by defendant Erwin H. Cuizon, made a down payment of P50,000.00 that Annex “H” is dated June 30, 1995 or two days after the execution of Annex “G”, thereby showing that [Impact] Systems Sales ratified the act of Edwin B. Cuizon; the records further show that plaintiff knew that [Impact] Systems Sales, the principal, ratified the act of Edwin B. Cuizon, the agent, when it accepted the down payment of P50,000.00. Plaintiff, therefore, cannot say that it was deceived by defendant Edwin B. Cuizon, since in the instant case the principal has ratified the act of its agent and plaintiff knew about said ratification. Plaintiff could not say that the subject contract was entered into by Edwin B. Cuizon in excess of his powers since [Impact] Systems Sales made a down payment of P50,000.00 two days later.In view of the Foregoing, the Court directs that defendant Edwin B. Cuizon be dropped as party defendant.”23

_______________

20 Edwin Cuizon’s counsel requested that the Special and Affirmative Defenses in his Answer be treated as his Motion to Dismiss; Order dated 16 October 2001; id., at p. 78.21 Id., at pp. 82–86.22 Memorandum dated 16 November 2001; id., at pp. 87–91.23 Id., at pp. 95–96.591

VOL. 521, APRIL 23, 2007591Eurotech Industrial Technologies, Inc. vs. CuizonAggrieved by the adverse ruling of the trial court, petitioner brought the matter to the Court of Appeals which, however, affirmed the 29 January 2002 Order of the court a quo. The dispositive portion of the now assailed Decision of the Court of Appeals states:“WHEREFORE, finding no viable legal ground to reverse or modify the conclusions reached by the public respondent in his Order dated January 29, 2002, it is hereby AFFIRMED.”24Petitioner’s motion for reconsideration was denied by the appellate court in its Resolution promulgated on 17 March 2005. Hence, the present petition raising, as sole ground for its allowance, the following:THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR WHEN IT RULED THAT RESPONDENT EDWIN CUIZON, AS AGENT OF IMPACT SYSTEMS SALES/ERWIN CUIZON, IS NOT PERSONALLY LIABLE, BECAUSE HE HAS NEITHER ACTED BEYOND THE SCOPE OF HIS AGENCY NOR DID HE PARTICIPATE IN THE PERPETUATION OF A FRAUD.25To support its argument, petitioner points to Article 1897 of the New Civil Code which states:“Art. 1897. The agent who acts as such is not personally liable to the party with whom he contracts, unless he expressly binds himself or exceeds the limits of his authority without giving such party sufficient notice of his powers.”Petitioner contends that the Court of Appeals failed to appreciate the effect of ERWIN’s act of collecting the

19

receivables from the Toledo Power Corporation notwithstanding the existence of the Deed of Assignment signed by EDWIN on behalf of Impact Systems. While said collection did not revoke the agency relations of respondents, petitioner insists that ER-_______________

24 Rollo, p. 35.25 Id., at p. 17.592

592SUPREME COURT REPORTS ANNOTATEDEurotech Industrial Technologies, Inc. vs. CuizonWIN’s action repudiated EDWIN’s power to sign the Deed of Assignment. As EDWIN did not sufficiently notify it of the extent of his powers as an agent, petitioner claims that he should be made personally liable for the obligations of his principal.26Petitioner also contends that it fell victim to the fraudulent scheme of respondents who induced it into selling the one unit of sludge pump to Impact Systems and signing the Deed of Assignment. Petitioner directs the attention of this Court to the fact that respondents are bound not only by their principal and agent relationship but are in fact full-blooded brothers whose successive contravening acts bore the obvious signs of conspiracy to defraud petitioner.27In his Comment,28 respondent EDWIN again posits the argument that he is not a real party in interest in this case and it was proper for the trial court to have him dropped as a defendant. He insists that he was a mere agent of Impact Systems which is owned by ERWIN and that his status as such is known even to petitioner as it is alleged in the Complaint that he is being sued in his capacity as the sales manager of the said business venture. Likewise, respondent EDWIN points to the Deed of Assignment which clearly states that he was acting as a representative of Impact Systems in said transaction.We do not find merit in the petition.

In a contract of agency, a person binds himself to render some service or to do something in representation or on behalf of another with the latter’s consent.29 The underlying principle of the contract of agency is to accomplish results by using the services of others—to do a great variety of things like selling,_______________

26 Id., at pp. 21–22.27 Id., at pp. 25–26.28 Id., at pp. 98–114.29 Article 1868 of the Civil Code.593

VOL. 521, APRIL 23, 2007593Eurotech Industrial Technologies, Inc. vs. Cuizonbuying, manufacturing, and transporting.30 Its purpose is to extend the personality of the principal or the party for whom another acts and from whom he or she derives the authority to act.31 It is said that the basis of agency is representation, that is, the agent acts for and on behalf of the principal on matters within the scope of his authority and said acts have the same legal effect as if they were personally executed by the principal.32 By this legal fiction, the actual or real absence of the principal is converted into his legal or juridical presence—qui facit per alium facit per se.33The elements of the contract of agency are: (1) consent, express or implied, of the parties to establish the relationship; (2) the object is the execution of a juridical act in relation to a third person; (3) the agent acts as a representative and not for himself; (4) the agent acts within the scope of his authority.34In this case, the parties do not dispute the existence of the agency relationship between respondents ERWIN as principal and EDWIN as agent. The only cause of the present dispute is whether respondent EDWIN exceeded his authority when he signed the Deed of Assignment thereby binding himself personally to pay the obligations to petitioner. Petitioner firmly believes that respondent EDWIN

20

acted beyond the authority granted by his principal and he should therefore bear the effect of his deed pursuant to Article 1897 of the New Civil Code.We disagree.Article 1897 reinforces the familiar doctrine that an agent, who acts as such, is not personally liable to the party with_______________

30 Reuschlein and Gregory, Agency and Partnership (1979 edition), p. 1.31 3 Am Jur 2d, §1.32 Padilla, Agency Text and Cases, (1986 edition), p. 2.33 He who acts through another acts by or for himself; id., at §2.34 Yu Eng Cho v. Pan American World Airways, Inc., 385 Phil. 453, 465; 328 SCRA 717, 728 (2000).594

594SUPREME COURT REPORTS ANNOTATEDEurotech Industrial Technologies, Inc. vs. Cuizonwhom he contracts. The same provision, however, presents two instances when an agent becomes personally liable to a third person. The first is when he expressly binds himself to the obligation and the second is when he exceeds his authority. In the last instance, the agent can be held liable if he does not give the third party sufficient notice of his powers. We hold that respondent EDWIN does not fall within any of the exceptions contained in this provision.The Deed of Assignment clearly states that respondent EDWIN signed thereon as the sales manager of Impact Systems. As discussed elsewhere, the position of manager is unique in that it presupposes the grant of broad powers with which to conduct the business of the principal, thus:“The powers of an agent are particularly broad in the case of one acting as a general agent or manager; such a position presupposes a degree of confidence reposed and investiture with liberal powers for the exercise of judgment and discretion in transactions and concerns which are incidental or appurtenant to the business entrusted to his

care and management. In the absence of an agreement to the contrary, a managing agent may enter into any contracts that he deems reasonably necessary or requisite for the protection of the interests of his principal entrusted to his management. x x x.”35Applying the foregoing to the present case, we hold that Edwin Cuizon acted well-within his authority when he signed the Deed of Assignment. To recall, petitioner refused to deliver the one unit of sludge pump unless it received, in full, the payment for Impact Systems’ indebtedness.36 We may very well assume that Impact Systems desperately needed the sludge pump for its business since after it paid the amount of fifty thousand pesos (P50,000.00) as down payment on 3 March 1995,37 it still persisted in negotiating with petitioner which culminated in the execution of the Deed of Assignment_______________

35 3 Am Jur 2d, §91, p. 602.36 Records, p. 2.37 Annex “H” of the Complaint; Records, p. 18.595

VOL. 521, APRIL 23, 2007595Eurotech Industrial Technologies, Inc. vs. Cuizonof its receivables from Toledo Power Company on 28 June 1995.38 The significant amount of time spent on the negotiation for the sale of the sludge pump underscores Impact Systems’ perseverance to get hold of the said equipment. There is, therefore, no doubt in our mind that respondent EDWIN’s participation in the Deed of Assignment was “reasonably necessary” or was required in order for him to protect the business of his principal. Had he not acted in the way he did, the business of his principal would have been adversely affected and he would have violated his fiduciary relation with his principal.We likewise take note of the fact that in this case, petitioner is seeking to recover both from respondents ERWIN, the principal, and EDWIN, the agent. It is well to state here that

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Article 1897 of the New Civil Code upon which petitioner anchors its claim against respondent EDWIN “does not hold that in case of excess of authority, both the agent and the principal are liable to the other contracting party.”39 To reiterate, the first part of Article 1897 declares that the principal is liable in cases when the agent acted within the bounds of his authority. Under this, the agent is completely absolved of any liability. The second part of the said provision presents the situations when the agent himself becomes liable to a third party when he expressly binds himself or he exceeds the limits of his authority without giving notice of his powers to the third person. However, it must be pointed out that in case of excess of authority by the agent, like what petitioner claims exists here, the law does not say that a third person can recover from both the principal and the agent.40_______________

38 Annex “G” of the Complaint; id., at p. 17.39 Philippine Products Company v. Primateria Societe Anonyme Pour Le Commerce Exterieur, 122 Phil. 698, 702; 15 SCRA 301, 305 (1965).40 De Leon and De Leon, Jr., Comments and Cases on Partnership, Agency, and Trusts (1999 edition), p. 512.596

596SUPREME COURT REPORTS ANNOTATEDEurotech Industrial Technologies, Inc. vs. CuizonAs we declare that respondent EDWIN acted within his authority as an agent, who did not acquire any right nor incur any liability arising from the Deed of Assignment, it follows that he is not a real party in interest who should be impleaded in this case. A real party in interest is one who “stands to be benefited or injured by the judgment in the suit, or the party entitled to the avails of the suit.”41 In this respect, we sustain his exclusion as a defendant in the suit before the court a quo.WHEREFORE, premises considered, the present petition is DENIED and the Decision dated 10 August 2004 and

Resolution dated 17 March 2005 of the Court of Appeals in CA-G.R. SP No. 71397, affirming the Order dated 29 January 2002 of the Regional Trial Court, Branch 8, Cebu City, is AFFIRMED.Let the records of this case be remanded to the Regional Trial Court, Branch 8, Cebu City, for the continuation of the proceedings against respondent ERWIN CUIZON.SO ORDERED.     Ynares-Santiago (Chairperson), Austria-Martinez, Callejo, Sr. and Nachura, JJ., concur.Petition denied, judgment and resolution affirmed.Notes.—The essence of agency being the representation of another, it is evident that the obligations contracted are for and on behalf of the principal—a consequence of this representation is the liability of the principal for the acts of his agent performed within the limits of his authority that is equivalent to the performance by the principal himself who should answer therefor. (Tan vs. G.V.T. Engineering Services, 489 SCRA 93 [2006])_______________

41 Rule 3, §1 of the Revised Rules of Court.597

VOL. 521, APRIL 23, 2007597People vs. GuillermoThe general principles of agency govern the relation between the corporation and its officers or agents—when authorized, their acts bind the corporation, otherwise, their acts cannot bind it. (Yasuma vs. De Villa, 499 SCRA 466 [2006])——o0o—— [Eurotech Industrial Technologies, Inc. vs. Cuizon, 521 SCRA 584(2007)]

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G.R. Nos. 152613 & 152628. November 20, 2009.*APEX MINING CO., INC., petitioner, vs. SOUTHEAST MINDANAO GOLD MINING CORP., THE MINES ADJUDICATION BOARD, PROVINCIAL MINING REGULATORY BOARD (PMRB-DAVAO), MONKAYO INTEGRATED SMALL SCALE MINERS ASSOCIATION, INC., ROSENDO VILLAFLOR, BALITE COMMUNAL PORTAL MINING COOPERATIVE, DAVAO UNITED MINERS COOPERATIVE, ANTONIO DACUDAO, PUTING-BATO GOLD MINERS COOPERATIVE, ROMEO ALTAMERA, THELMA CATAPANG, LUIS GALANG, RENATO BASMILLO, FRANCISCO YOBIDO, EDUARDO GLORIA, EDWIN ASION, MACARIO HERNANDEZ, REYNALDO CARUBIO, ROBERTO BUNIA-_______________

* EN BANC.101

VOL. 605, NOVEMBER 20, 2009101

Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.LES, RUDY ESPORTONO, ROMEO CASTILLO, JOSE REA, GIL GANADO, PRIMITIVA LICAYAN, LETICIA ALQUEZA and JOEL BRILLANTES MANAGEMENT MINING CORPORATION, respondents.G.R. Nos. 152619-20. November 20, 2009.*BALITE COMMUNAL PORTAL MINING COOPERATIVE, petitioner, vs. SOUTHEAST MINDANAO GOLD MINING CORP., APEX MINING CO., INC., THE MINES ADJUDICATION BOARD, PROVINCIAL MINING REGULATORY BOARD (PMRB-DAVAO), MONKAYO INTEGRATED SMALL SCALE MINERS ASSOCIATION, INC., ROSENDO VILLAFLOR, DAVAO UNITED MINERS COOPERATIVE, ANTONIO DACUDAO, PUTING-BATO GOLD MINERS COOPERATIVE, ROMEO ALTAMERA, THELMA CATAPANG, LUIS GALANG, RENATO BASMILLO, FRANCISCO YOBIDO, EDUARDO GLORIA, EDWIN ASION, MACARIO HERNANDEZ, REYNALDO CARUBIO, ROBERTO BUNIALES, RUDY ESPORTONO, ROMEO CASTILLO, JOSE REA, GIL GANADO, PRIMITIVA LICAYAN, LETICIA ALQUEZA and JOEL BRILLANTES MANAGEMENT MINING CORPORATION, respondents.G.R. Nos. 152870-71. November 20, 2009.*THE MINES ADJUDICATION BOARD AND ITS MEMBERS, THE HON. VICTOR O. RAMOS (Chairman), UNDERSECRETARY VIRGILIO MARCELO (Member) and DIRECTOR HORACIO RAMOS (Member), petitioners, vs. southeast mindanao gold mining corporation, respondent.Mines and Mining; Regalian Doctrine; Without the imprimatur of the State, any mining aspirant does not have any definitive right over the mineral land because unlike a private landholding, mineral land is owned by the State and the same cannot be alienated to any private person.—SEM likens EP 133 with a building permit. SEM likewise equates its supposed rights attached to the exploration102

102SUPREME COURT REPORTS ANNOTATED

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Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.permit with the rights that a private property land owner has to said landholding. This analogy has no basis in law. As earlier discussed, under the 1935, 1973 and 1987 Constitutions, national wealth, such as mineral resources, are owned by the State and not by their discoverer. The discoverer or locator can only develop and utilize said minerals for his own benefit if he has complied with all the requirements set forth by applicable laws and if the State has conferred on him such right through permits, concessions or agreements. In other words, without the imprimatur of the State, any mining aspirant does not have any definitive right over the mineral land because, unlike a private landholding, mineral land is owned by the State, and the same cannot be alienated to any private person as explicitly stated in Section 2, Article XIV of the 1987 Constitution:Same; Same; Exploration; Exploration Permit; The right that Southeast Mindanao Gold Mining Corporation (SEM) acquired was limited to exploration only because Marcopper Mining Corporation (MMC) was a mere holder of an exploration permit.—It is evident that what MMC had over the disputed area during the assignment was an exploration permit. Clearly, the right that SEM acquired was limited to exploration, only because MMC was a mere holder of an exploration permit. As previously explained, SEM did not acquire the rights inherent in the permit, as the assignment by MMC to SEM was done in violation of the condition stipulated in the permit, and the assignment was effected without the approval of the proper authority in contravention of the provision of the mining law governing at that time. In addition, the permit expired on 6 July 1994. It is, therefore, quite clear that SEM has no right over the area.Same; Same; Same; Same; An exploration permit does not automatically ripen into a right to extract and utilize the minerals much less does it develop into a vested right; Exploration Defined.—An exploration permit does not automatically ripen into a right to extract and utilize the

minerals; much less does it develop into a vested right. The holder of an exploration permit only has the right to conduct exploration works on the area awarded. Presidential Decree No. 463 defined exploration as “the examination and investigation of lands supposed to contain valuable minerals, by drilling, trenching, shaft sinking, tunneling, test pitting and other means, for the purpose of probing the presence of mineral deposits and the extent thereof.” Exploration does not103

VOL. 605, NOVEMBER 20, 2009103Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.include development and exploitation of the minerals found. Development is defined by the same statute as the steps necessarily taken to reach an ore body or mineral deposit so that it can be mined, whereas exploitation is defined as “the extraction and utilization of mineral deposits.” An exploration permit is nothing more than a mere right accorded to its holder to be given priority in the government’s consideration in the granting of the right to develop and utilize the minerals over the area. An exploration permit is merely inchoate, in that the holder still has to comply with the terms and conditions embodied in the permit.Same; Same; Same; Same; An exploration permit does not amount to an authorization to extract and carry off the mineral resources that may be discovered.—In La Bugal-B’laan Tribal Association, Inc. v. Ramos, 445 SCRA 1 (2004) this Court emphasized: Pursuant to Section 20 of RA 7942, an exploration permit merely grants to a qualified person the right to conduct exploration for all minerals in specified areas. Such a permit does not amount to an authorization to extract and carry off the mineral resources that may be discovered. x x x.Same; Same; Same; Same; An exploration permit grantee is vested with the right to conduct exploration only while a Financial and Technical Assistance Agreement (FTAA) or

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Mineral Production Sharing Agreement (MPSA) contractor is authorized to extract and carry off the mineral resources that may be discovered in the area.—This argument is not meritorious. SEM did not acquire the rights attached to EP 133, since their transfer was without legal effect. Granting for the sake of argument that SEM was a valid transferee of the permit, its right is not that of a mining contractor. An exploration permit grantee is vested with the right to conduct exploration only, while an FTAA or MPSA contractor is authorized to extract and carry off the mineral resources that may be discovered in the area. An exploration permit holder still has to comply with the mining project feasibility and other requirements under the mining law. It has to obtain approval of such accomplished requirements from the appropriate government agencies. Upon obtaining this approval, the exploration permit holder has to file an application for an FTAA or an MPSA and have it approved also. Until the MPSA application of SEM is approved, it cannot lawfully claim that it possesses the rights of an MPSA or FTAA holder.104

104SUPREME COURT REPORTS ANNOTATEDApex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.Same; Same; Same; Same; The Court has consistently ruled that the nature of a natural resource exploration permit is analogous to that of a license.—Assuming arguendo that SEM has a valid exploration permit, it cannot assert any mining right over the disputed area, since the State has taken over the mining operations therein, pursuant to Proclamation No. 297 issued by the President on 25 November 2002. The Court has consistently ruled that the nature of a natural resource exploration permit is analogous to that of a license. In Republic v. Rosemoor Mining and Development Corporation, 426 SCRA 517 (2004) this Court articulated: Like timber permits, mining exploration permits do not vest in the grantee any permanent or irrevocable right within the purview of the non-impairment of contract

and due process clauses of the Constitution, since the State, under its all-encompassing police power, may alter, modify or amend the same, in accordance with the demands of the general welfare.Same; Same; Same; Same; As a mere license or privilege, an exploration permit can be validly amended by the President of the Republic when national interests suitably necessitate.—As a mere license or privilege, an exploration permit can be validly amended by the President of the Republic when national interests suitably necessitate. The Court instructed thus: 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 the public welfare is promoted. x x x They may be validly amended, modified, replaced or rescinded by the Chief Executive when national interests so require.Same; Same; Same; Same; Five requirements for acquiring mining rights in reserved lands under Presidential Decree No. 463.—It is instructive to note that under Section 13 of Presidential Decree No. 463, the prospecting and exploration of minerals in government reservations, such as forest reservations, are prohibited, except with the permission of the government agency concerned. It is the government agency concerned that has the prerogative to conduct prospecting, exploration and exploitation of such reserved lands. It is only in instances wherein said government agency, in this case the Bureau of Mines, cannot undertake said mining operations that qualified persons may be allowed by the government to undertake such operations. PNOC-EDC v. Veneracion, Jr., 509 SCRA 93105

VOL. 605, NOVEMBER 20, 2009105Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.[2006]), outlines the five requirements for acquiring mining rights in reserved lands under Presidential Decree No. 463: (1) a prospecting permit from the agency that has jurisdiction over the land; (2) an exploration permit from the

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Bureau of Mines and Geo-Sciences (BMGS); (3) if the exploration reveals the presence of commercial deposit, application to BMGS by the permit holder for the exclusion of the area from the reservation; (4) a grant by the President of the application to exclude the area from the reservation; and (5) a mining agreement (lease, license or concession) approved by the DENR Secretary.Constitutional Law; Courts; Power of Judicial Review; Requisites before the court can exercise its power of judicial review when questions of constitutionality are raised.—It is well-settled that when questions of constitutionality are raised, the court can exercise its power of judicial review only if the following requisites are present: (1) an actual and appropriate case exists; (2) there is a personal and substantial interest of the party raising the constitutional question; (3) the exercise of judicial review is pleaded at the earliest opportunity; and (4) the constitutional question is the lis mota of the case.Statutes; Statutory Construction; Where two statutes are of contrary tenor or of different dates but are of equal theoretical application to a particular case, the one specially designed therefor should prevail over the other.—It is a rudimentary principle in legal hermeneutics that where there are two acts or provisions, one of which is special and particular and certainly involves the matter in question, the other general, which, if standing alone, would include the matter and thus conflict with the special act or provision, the special act must as intended be taken as constituting an exception to the general act or provision, especially when such general and special acts or provisions are contemporaneous, as the Legislature is not to be presumed to have intended a conflict. Hence, it has become an established rule of statutory construction that where one statute deals with a subject in general terms, and another deals with a part of the same subject in a more detailed way, the two should be harmonized if possible; but if there is any conflict, the latter shall prevail regardless of whether it was passed prior to the general statute. Or where two statutes are of contrary tenor or of different dates but are of

equal theoretical application to a particular case, the one specially designed therefor should prevail over the other.106

106SUPREME COURT REPORTS ANNOTATEDApex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.Same; Same; If two or more laws of different dates and of contrary tenors are of equal theoretical application to a particular case, the statute of later date must prevail being a later expression of legislative will.—The settled rule of statutory construction is that if two or more laws of different dates and of contrary tenors are of equal theoretical application to a particular case, the statute of later date must prevail being a later expression of legislative will. In the case at bar, there is no question that Republic Act No. 7942 was signed into law later than Republic Act No. 3092, the Administrative Code of 1987, Republic Act No. 7586 and Republic Act No. 6657. Applying the cited principle, the provisions of Republic Act No. 3092, the Administrative Code of 1987, Republic Act No. 7586 and Republic Act No. 6657 cited by SEM must yield to Section 5 of Republic Act No. 7942.BERSAMIN, J., Separate Opinion:Mines and Mining; Exploration; The person who is first to locate and register his mining claim and who subsequently explores the area and extracts mineral deposits has a valid and existing right regardless of technical defect in the registration.—The right of a legitimate and existing claimant envisioned in Proclamation 297 (i.e., “Mining operations in the area may be undertaken either by the DENR directly, subject to payment of just compensation that may be due to legitimate and existing claimants, or thru a qualified contractor, subject to existing rights, if any”) is a real right acquired over time by a person who discovered mineral deposits, and was first to stake his claim through location and registration with the mining recorder. Under Philippine mining laws, which are essentially patterned after Anglo-American models, the location and registration of a mining

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claim must be followed by actual exploration and extraction of mineral deposits. The person who is first to locate and register his mining claim and who subsequently explores the area and extracts mineral deposits has a valid and existing right regardless of technical defect in the registration.MOTIONS FOR RECONSIDERATION of a decision of the Supreme Court.   The facts are stated in the resolution of the Court.107

VOL. 605, NOVEMBER 20, 2009107Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.  Jose S. Songco, Clarence D. Guerrero and Cesar Edwin T. Jayme; and Puyat, Jacinto & Santos for Apex Mining Company, Inc.  Rapista, Rapista and Ancog Law Office for Balite Communal Portal Mining Cooperative.  Teodulo C. Gabor, Jr. for Marcopper Mining Corporation.  Jesus T. Albacete for Provincial Regulatory Board of Davao.  Agabin, Versola and Layaoen Law Offices and Quasha, Ancheta, Peña and Nolasco Law Office for Southeast Mindanao Gold Mining Corporation.  Martin T. Lu for Camilo Banad, et al.  Kapunan, Imperial, Panaguiton and Bongolan for MISMA.  Amado Cantos for Davao United Miners Corporation, et al.R E S O L U T I O N

CHICO-NAZARIO, J.:This resolves the motion for reconsideration dated 12 July 2006, filed by Southeast Mindanao Gold Mining Corporation (SEM), of this Court’s Decision dated 23 June 2006 (Assailed Decision). The Assailed Decision held that the assignment of Exploration Permit (EP) 133 in favor of SEM violated one of the conditions stipulated in the permit, i.e., that the same shall be for the exclusive use and benefit of Marcopper Mining Corporation (MMC) or its duly authorized agents. Since SEM did not claim or submit evidence that it was a designated agent of MMC, the latter cannot be considered

as an agent of the former that can use EP 133 and benefit from it. It also ruled that the transfer of EP 133 violated Presidential Decree108

108SUPREME COURT REPORTS ANNOTATEDApex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.No. 463, which requires that the assignment of a mining right be made with the prior approval of the Secretary of the Department of Environment and Natural Resources (DENR). Moreover, the Assailed Decision pointed out that EP 133 expired by non-renewal since it was not renewed before or after its expiration.The Assailed Decision likewise upheld the validity of Proclamation No. 297 absent any question against its validity. In view of this, and considering that under Section 5 of Republic Act No. 7942, otherwise known as the “Mining Act of 1995,” mining operations in mineral reservations may be undertaken directly by the State or through a contractor, the Court deemed the issue of ownership of priority right over the contested Diwalwal Gold Rush Area as having been overtaken by the said proclamation. Thus, it was held in the Assailed Decision that it is now within the prerogative of the Executive Department to undertake directly the mining operations of the disputed area or to award the operations to private entities including petitioners Apex and Balite, subject to applicable laws, rules and regulations, and provided that these private entities are qualified.SEM also filed a Motion for Referral of Case to the Court En Banc and for Oral Arguments dated 22 August 2006.Apex, for its part, filed a Motion for Clarification of the Assailed Decision, praying that the Court elucidate on the Decision’s pronouncement that “mining operations, are now, therefore within the full control of the State through the executive branch.” Moreover, Apex asks this Court to order the Mines and Geosciences Board (MGB) to accept its application for an exploration permit.

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In its Manifestation and Motion dated 28 July 2006, Balite echoes the same concern as that of Apex on the actual takeover by the State of the mining industry in the disputed area to the exclusion of the private sector. In addition, Balite prays for this Court to direct MGB to accept its application for an exploration permit.109

VOL. 605, NOVEMBER 20, 2009109Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.Camilo Banad, et al., likewise filed a motion for reconsideration and prayed that the disputed area be awarded to them.In the Resolution dated 15 April 2008, the Court En Banc resolved to accept the instant cases. The Court, in a resolution dated 29 April 2008, resolved to set the cases for Oral Argument on 1 July 2008.During the Oral Argument, the Court identified the following principal issues to be discussed by the parties:1. Whether the transfer or assignment of Exploration Permit (EP) 133 by MMC to SEM was validly made without violating any of the terms and conditions set forth in Presidential Decree No. 463 and EP 133 itself.2. Whether Southeast Mindanao Mining Corp. acquired a vested right over the disputed area, which constitutes a property right protected by the Constitution.3. Whether the assailed Decision dated 23 June 2006 of the Third Division in this case is contrary to and overturns the earlier Decision of this Court in Apex v. Garcia (G.R. No. 92605, 16 July 1991, 199 SCRA 278).4. Whether the issuance of Proclamation No. 297 declaring the disputed area as mineral reservation outweighs the claims of SEM, Apex Mining Co. Inc. and Balite Communal Portal Mining Cooperative over the Diwalwal Gold Rush Area.5. Whether the issue of the legality/constitutionality of Proclamation No. 297 was belatedly raised.

6. Assuming that the legality/constitutionality of Proclamation No. 297 was timely raised, whether said proclamation violates any of the following:a. Article XII, Section 4 of the Constitution;b. Section 1 of Republic Act No. 3092;c. Section 14 of the Administrative Code of 1987;d. Section 5(a) of Republic Act No. 7586;e. Section 4(a) of Republic Act No. 6657; andf. Section 2, Subsection 2.1.2 of Executive Order No. 318 dated 9 June 2004.110

110SUPREME COURT REPORTS ANNOTATEDApex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.After hearing the arguments of the parties, the Court required them to submit their respective memoranda. Memoranda were accordingly filed by SEM, Apex, Balite and Mines Adjudication Board (MAB).We shall resolve the second issue before dwelling on the first, third and the rest of the issues.MMC or SEM Did Not Have Vested RightsOver the Diwalwal Gold Rush AreaPetitioner SEM vigorously argues that Apex Mining Co., Inc. v. Garcia1 vested in MMC mining rights over the disputed area. It claims that the mining rights that MMC acquired under the said case were the ones assigned to SEM, and not the right to explore under MMC’s EP 133. It insists that mining rights, once obtained, continue to subsist regardless of the validity of the exploration permit; thus, mining rights are independent of the exploration permit and therefore do not expire with the permit. SEM insists that a mining right is a vested property right that not even the government can take away. To support this thesis, SEM cites this Court’s ruling in McDaniel v. Apacible and Cuisia2 and in Gold Creek Mining Corporation v. Rodriguez,3 which were decided in 1922 and 1938, respectively.McDaniel and Gold Creek Mining Corporation are not in point.

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In 1916, McDaniel, petitioner therein, located minerals, i.e., petroleum, on an unoccupied public land and registered his mineral claims with the office of the mining recorder pursuant to the Philippine Bill of 1902, where a mining claim locator, soon after locating the mine, enjoyed possessory rights with respect to such mining claim with or without a_______________

1 G.R. No. 92605, 16 July 1991, 199 SCRA 278.2 42 Phil. 749 (1922).3 66 Phil. 259 (1938).111

VOL. 605, NOVEMBER 20, 2009111Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.patent therefor. In that case, the Agriculture Secretary, by virtue of Act No. 2932, approved in 1920, which provides that “all public lands may be leased by the then Secretary of Agriculture and Natural Resources,” was about to grant the application for lease of therein respondent, overlapping the mining claims of the subject petitioner. Petitioner argued that, being a valid locator, he had vested right over the public land where his mining claims were located. There, the Court ruled that the mining claim perfected under the Philippine Bill of 1902, is “property in the highest sense of that term, which may be sold and conveyed, and will pass by descent, and is not therefore subject to the disposal of the Government.” The Court then declared that since petitioner had already perfected his mining claim under the Philippine Bill of 1902, a subsequent statute, i.e., Act No. 2932, could not operate to deprive him of his already perfected mining claim, without violating his property right.Gold Creek Mining reiterated the ruling in McDaniel that a perfected mining claim under the Philippine Bill of 1902 no longer formed part of the public domain; hence, such mining claim does not come within the prohibition against the alienation of natural resources under Section 1, Article XII of the 1935 Constitution.

Gleaned from the ruling on the foregoing cases is that for this law to apply, it must be established that the mining claim must have been perfected when the Philippine Bill of 1902 was still in force and effect. This is so because, unlike the subsequent laws that prohibit the alienation of mining lands, the Philippine Bill of 1902 sanctioned the alienation of mining lands to private individuals. The Philippine Bill of 1902 contained provisions for, among many other things, the open and free exploration, occupation and purchase of mineral deposits and the land where they may be found. It declared “all valuable mineral deposits in public lands in the Philippine Islands, both surveyed and unsurveyed x x x to be free and open to exploration, occupation, and112

112SUPREME COURT REPORTS ANNOTATEDApex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.purchase, and the land in which they are found to occupation and purchase, by citizens of the United States, or of said Islands x x x.”4 Pursuant to this law, the holder of the mineral claim is entitled to all the minerals that may lie within his claim, provided he does three acts: First, he enters the mining land and locates a plot of ground measuring, where possible, but not exceeding, one thousand feet in length by one thousand feet in breadth, in as nearly a rectangular form as possible.5 Second, the mining locator has to record the mineral claim in the mining recorder within thirty (30) days after the location thereof.6 Lastly, he must comply with the annual actual work requirement.7 Complete mining rights, namely, the rights to explore, develop and utilize, are acquired by a mining locator by simply following the foregoing requirements.With the effectivity of the 1935 Constitution, where the regalian doctrine was adopted, it was declared that all natural resources of the Philippines, including mineral lands and minerals, were property belonging to the State.8 Excluded, however, from the property of public domain were the mineral lands and minerals that were located and

29

perfected by virtue of the Philippine Bill of 1902, since they were already considered private properties of the locators.9Commonwealth Act No. 137 or the Mining Act of 1936, which expressly adopted the regalian doctrine following the provision of the 1935 Constitution, also proscribed the alienation of mining lands and granted only lease rights to mining claimants, who were prohibited from purchasing the mining claim itself._______________

4 Atok Big-Wedge Mining Co. v. Intermediate Appellate Court, 330 Phil. 244, 262; 261 SCRA 528, 546-547 (1996).5 Id., at p. 262.6 Id.7 Id., at p. 263.8 Id.9 Id., at p. 264.113

VOL. 605, NOVEMBER 20, 2009113Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.When Presidential Decree No. 463, which revised Commonwealth Act No. 137, was in force in 1974, it likewise recognized the regalian doctrine embodied in the 1973 Constitution. It declared that all mineral deposits and public and private lands belonged to the state while, nonetheless, recognizing mineral rights that had already been existing under the Philippine Bill of 1902 as being beyond the purview of the regalian doctrine.10 The possessory rights of mining claim holders under the Philippine Bill of 1902 remained intact and effective, and such rights were recognized as property rights that the holders could convey or pass by descent.11In the instant cases, SEM does not aver or prove that its mining rights had been perfected and completed when the Philippine Bill of 1902 was still the operative law. Surely, it is impossible for SEM to successfully assert that it acquired mining rights over the disputed area in accordance with the

same bill, since it was only in 1984 that MMC, SEM’s predecessor-in-interest, filed its declaration of locations and its prospecting permit application in compliance with Presidential Decree No. 463. It was on 1 July 1985 and 10 March 1986 that a Prospecting Permit and EP 133, respectively, were issued to MMC. Considering these facts, there is no possibility that MMC or SEM could have acquired a perfected mining claim under the auspices of the Philippine Bill of 1902. Whatever mining rights MMC had that it invalidly transferred to SEM cannot, by any stretch of imagination, be considered “mining rights” as contemplated under the Philippine Bill of 1902 and immortalized in McDaniel and Gold Creek Mining.SEM likens EP 133 with a building permit. SEM likewise equates its supposed rights attached to the exploration permit with the rights that a private property land owner has to said landholding. This analogy has no basis in law. As earlier discussed, under the 1935, 1973 and 1987 Constitutions, na-_______________

10 Id.11 Id., at pp. 267-268.114

114SUPREME COURT REPORTS ANNOTATEDApex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.tional wealth, such as mineral resources, are owned by the State and not by their discoverer. The discoverer or locator can only develop and utilize said minerals for his own benefit if he has complied with all the requirements set forth by applicable laws and if the State has conferred on him such right through permits, concessions or agreements. In other words, without the imprimatur of the State, any mining aspirant does not have any definitive right over the mineral land because, unlike a private landholding, mineral land is owned by the State, and the same cannot be

30

alienated to any private person as explicitly stated in Section 2, Article XIV of the 1987 Constitution:“All lands of public domain, waters, minerals x x x and all other natural resources are owned by the State. With the exception of agricultural lands, all other natural resources shall not be alienated.” (Emphases supplied.)Further, a closer scrutiny of the deed of assignment in favor of SEM reveals that MMC assigned to the former the rights and interests it had in EP 133, thus:“1. That for ONE PESO (P1.00) and other valuable consideration received by the ASSIGNOR from the ASSIGNEE, the ASSIGNOR hereby ASSIGNS, TRANSFERS and CONVEYS unto the ASSIGNEE whatever rights or interest the ASSIGNOR may have in the area situated in Monkayo, Davao del Norte and Cateel, Davao Oriental, identified as Exploration Permit No. 133 and Application for a Permit to Prospect in Bunawan, Agusan del Sur respectively.” (Emphasis supplied.)It is evident that what MMC had over the disputed area during the assignment was an exploration permit. Clearly, the right that SEM acquired was limited to exploration, only because MMC was a mere holder of an exploration permit. As previously explained, SEM did not acquire the rights inherent in the permit, as the assignment by MMC to SEM was done in violation of the condition stipulated in the permit, and the assignment was effected without the approval of the proper115

VOL. 605, NOVEMBER 20, 2009115Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.authority in contravention of the provision of the mining law governing at that time. In addition, the permit expired on 6 July 1994. It is, therefore, quite clear that SEM has no right over the area.Even assuming arguendo that SEM obtained the rights attached in EP 133, said rights cannot be considered as property rights protected under the fundamental law.

An exploration permit does not automatically ripen into a right to extract and utilize the minerals; much less does it develop into a vested right. The holder of an exploration permit only has the right to conduct exploration works on the area awarded. Presidential Decree No. 463 defined exploration as “the examination and investigation of lands supposed to contain valuable minerals, by drilling, trenching, shaft sinking, tunneling, test pitting and other means, for the purpose of probing the presence of mineral deposits and the extent thereof.” Exploration does not include development and exploitation of the minerals found. Development is defined by the same statute as the steps necessarily taken to reach an ore body or mineral deposit so that it can be mined, whereas exploitation is defined as “the extraction and utilization of mineral deposits.” An exploration permit is nothing more than a mere right accorded to its holder to be given priority in the government’s consideration in the granting of the right to develop and utilize the minerals over the area. An exploration permit is merely inchoate, in that the holder still has to comply with the terms and conditions embodied in the permit. This is manifest in the language of Presidential Decree No. 463, thus:“Sec. 8. x x x The right to exploit 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 persons or corporations who undertook prospecting and exploration of said area shall be given priority.”116

116SUPREME COURT REPORTS ANNOTATEDApex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.In La Bugal-B’laan Tribal Association, Inc. v. Ramos,12 this Court emphasized:“Pursuant to Section 20 of RA 7942, an exploration permit merely grants to a qualified person the right to conduct exploration for all minerals in specified areas. Such a permit

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does not amount to an authorization to extract and carry off the mineral resources that may be discovered. x x x.Pursuant to Section 24 of RA 7942, an exploration permit grantee who determines the commercial viability of a mining area may, within the term of the permit, file with the MGB a declaration of mining project feasibility accompanied by a work program for development. The approval of the mining project feasibility and compliance with other requirements of RA 7942 vests in the grantee the exclusive right to an MPSA or any other mineral agreement, or to an FTAA.” (Underscoring ours.)The non-acquisition by MMC or SEM of any vested right over the disputed area is supported by this Court’s ruling in Southeast Mindanao Gold Mining Corporation v. Balite Portal Mining Cooperative:13“Clearly then, the Apex Mining case did not invest petitioner with any definite right to the Diwalwal mines which it could now set up against respondent BCMC and other mining groups.Incidentally, it must likewise be pointed out that under no circumstances may petitioner’s rights under EP No. 133 be regarded as total and absolute. As correctly held by the Court of Appeals in its challenged decision, EP No. 133 merely evidences a privilege granted by the State, which may be amended, modified or rescinded when the national interest so requires.” x x x. (Underscoring supplied.)Unfortunately, SEM cannot be given priority to develop and exploit the area covered by EP 133 because, as discussed in the assailed Decision, EP 133 expired by non-renewal on 6_______________

12 486 Phil. 754, 828-829; 445 SCRA 1, 138-139 (2004).13 429 Phil. 668, 682; 380 SCRA 145, 155 (2002).117

VOL. 605, NOVEMBER 20, 2009117Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.

July 1994. Also, as already mentioned, the transfer of the said permit to SEM was without legal effect because it was done in contravention of Presidential Decree No. 463 which requires prior approval from the proper authority. Simply told, SEM holds nothing for it to be entitled to conduct mining activities in the disputed mineral land.SEM wants to impress on this Court that its alleged mining rights, by virtue of its being a transferee of EP 133, is similar to a Financial and Technical Assistance Agreement (FTAA) of a foreign contractor, which merits protection by the due process clause of the Constitution. SEM cites La Bugal-B’laan Tribal Association, Inc. v. Ramos,14 as follows:“To say that an FTAA is just like a mere timber license or permit and does not involve contract or property rights which merit protection by the due process clause of the Constitution, and may therefore be revoked or cancelled in the blink of an eye, is to adopt a well-nigh confiscatory stance; at the very least, it is downright dismissive of the property rights of businesspersons and corporate entities that have investments in the mining industry, whose investments, operations and expenditures do contribute to the general welfare of the people, the coffers of government, and the strength of the economy. x x x.”Again, this argument is not meritorious. SEM did not acquire the rights attached to EP 133, since their transfer was without legal effect. Granting for the sake of argument that SEM was a valid transferee of the permit, its right is not that of a mining contractor. An exploration permit grantee is vested with the right to conduct exploration only, while an FTAA or MPSA contractor is authorized to extract and carry off the mineral resources that may be discovered in the area.15 An exploration permit holder still has to comply with the mining project feasibility and other require-_______________

14 Supra note 12 at 895.15 Southeast Mindanao Gold Mining Corporation v. Balite Portal Mining Cooperative, supra note 13 at pp. 682-683.118

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118SUPREME COURT REPORTS ANNOTATEDApex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.ments under the mining law. It has to obtain approval of such accomplished requirements from the appropriate government agencies. Upon obtaining this approval, the exploration permit holder has to file an application for an FTAA or an MPSA and have it approved also. Until the MPSA application of SEM is approved, it cannot lawfully claim that it possesses the rights of an MPSA or FTAA holder, thus:“x x x prior to the issuance of such FTAA or mineral agreement, the exploration permit grantee (or prospective contractor) cannot yet be deemed to have entered into any contract or agreement with the State x x x.”16But again, SEM is not qualified to apply for an FTAA or any mineral agreement, considering that it is not a holder of a valid exploration permit, since EP 133 expired by non-renewal and the transfer to it of the same permit has no legal value.More importantly, assuming arguendo that SEM has a valid exploration permit, it cannot assert any mining right over the disputed area, since the State has taken over the mining operations therein, pursuant to Proclamation No. 297 issued by the President on 25 November 2002. The Court has consistently ruled that the nature of a natural resource exploration permit is analogous to that of a license. In Republic v. Rosemoor Mining and Development Corporation, this Court articulated:“Like timber permits, mining exploration permits do not vest in the grantee any permanent or irrevocable right within the purview of the non-impairment of contract and due process clauses of the Constitution, since the State, under its all-encompassing police power, may alter, modify or amend the same, in accordance with the demands of the general welfare.”17 (Emphasis supplied.)_______________

16 Id.17 G.R. No. 149927, 30 March 2004, 426 SCRA 517, 530.

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VOL. 605, NOVEMBER 20, 2009119Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.As a mere license or privilege, an exploration permit can be validly amended by the President of the Republic when national interests suitably necessitate. The Court instructed thus:“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 the public welfare is promoted. x x x They may be validly amended, modified, replaced or rescinded by the Chief Executive when national interests so require.”18Recognizing the importance of the country’s natural resources, not only for national economic development, but also for its security and national defense, Section 5 of Republic Act No. 7942 empowers the President, when the national interest so requires, to establish mineral reservations where mining operations shall be undertaken directly by the State or through a contractor, viz.:“SEC. 5. Mineral Reservations.—When the national interest so requires, such as when there is a need to preserve strategic raw materials for industries critical to national development, or certain minerals for scientific, cultural or ecological value, the President may establish mineral reservations upon the recommendation of the Director through the Secretary. Mining operations in existing mineral reservations and such other reservations as may thereafter be established, shall be undertaken by the Department or through a contractor x x x.” (Emphasis supplied.)Due to the pressing concerns in the Diwalwal Gold Rush Area brought about by unregulated small to medium-scale mining operations causing ecological, health and peace and order problems, the President, on 25 November 2002, issued Proclamation No. 297, which declared the area as a mineral reservation and as an environmentally critical area.

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This executive fiat was aimed at preventing the further dissipation_______________

18 Id.120

120SUPREME COURT REPORTS ANNOTATEDApex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.of the natural environment and rationalizing the mining operations in the area in order to attain an orderly balance between socio-economic growth and environmental protection. The area being a mineral reservation, the Executive Department has full control over it pursuant to Section 5 of Republic Act No. 7942. It can either directly undertake the exploration, development and utilization of the minerals found therein, or it can enter into agreements with qualified entities. Since the Executive Department now has control over the exploration, development and utilization of the resources in the disputed area, SEM’s exploration permit, assuming that it is still valid, has been effectively withdrawn. The exercise of such power through Proclamation No. 297 is in accord with jura regalia, where the State exercises its sovereign power as owner of lands of the public domain and the mineral deposits found within. Thus, Article XII, Section 2 of the 1987 Constitution emphasizes:“SEC. 2. All lands of the public domain, water, minerals, coal, petroleum, and other mineral oils, all forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural resources are owned by the State. With the exception of agricultural lands, all other natural resources shall not be alienated. The exploration, development, and utilization of natural resources shall be under the full control and supervision of the State. The State may directly undertake such activities, or it may enter into co-production, joint venture, or product-sharing agreements with Filipino citizens, or corporations or associations at least

sixty per centum of whose capital is owned by such citizens.” (Emphasis supplied.)Furthermore, said proclamation cannot be denounced as offensive to the fundamental law because the State is sanctioned to do so in the exercise of its police power.19 The issues on health and peace and order, as well the decadence of the forest resources brought about by unregulated mining in the_______________

19 Id., at p. 531.121

VOL. 605, NOVEMBER 20, 2009121Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.area, are matters of national interest. The declaration of the Chief Executive making the area a mineral reservation, therefore, is sanctioned by Section 5 of Republic Act No. 7942.The Assignment of EP No. 133 by MMC inFavor of SEM Violated Section 97 of Presi-dential Decree No. 463 and the Terms and Conditions Set Forth in the PermitSEM claims that the approval requirement under Section 97 of Presidential Decree No. 463 is not applicable to this case, because MMC neither applied for nor was granted a mining lease contract. The said provision states:“SEC. 97. Assignment of Mining Rights.—A mining lease contract or any interest therein shall not be transferred, assigned, or subleased without the prior approval of the Secretary: Provided, that such transfer, assignment or sublease may be made only to a qualified person possessing the resources and capability to continue the mining operations of the lessee and that the assignor has complied with all the obligations of the lease: Provided, further, That such transfer or assignment shall be duly registered with the office of the mining recorder concerned.” (Emphasis supplied.)

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Exploration Permit 133 was issued in favor of MMC on 10 March 1986, when Presidential Decree No. 463 was still the governing law. Presidential Decree No. 463 pertains to the old system of exploration, development and utilization of natural resources through “license, concession or lease.”20Pursuant to this law, a mining lease contract confers on the lessee or his successors the right to extract, to remove, process and utilize the mineral deposits found on or underneath the surface of his mining claims covered by the lease. The lessee may also enter into a service contract for the exploration,_______________

20 Miners Association of the Philippines, Inc. v. Factoran, Jr., 310 Phil. 113, 130; 240 SCRA 100, 116 (1995).122

122SUPREME COURT REPORTS ANNOTATEDApex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.development and exploitation of the minerals from the lands covered by his lease, to wit:“SEC. 44. A mining lease contract shall grant to the lessee, his heirs, successors, and assigns the right to extract all mineral deposits found on or underneath the surface of his mining claims covered by the lease, continued vertically downward; to remove, process, and otherwise utilize the mineral deposits for his own benefit; and to use the lands covered by the lease for the purpose or purposes specified therein x x x That a lessee may on his own or through the Government, enter into a service contract… for the exploration, development and exploitation of his claims and the processing and marketing of the product thereof, subject to the rules and regulations that shall be promulgated by the Director, with the approval of the Secretary x x x.” (Emphases supplied.)In other words, the lessee’s interests are not only limited to the extraction or utilization of the minerals in the contract area, but also to include the right to explore and develop

the same. This right to explore the mining claim or the contract area is derived from the exploration permit duly issued by the proper authority. An exploration permit is, thus, covered by the term “any other interest therein.” Section 97 is entitled, “Assignment of Mining Rights.” This alone gives a hint that before mining rights—namely, the rights to explore, develop and utilize—are transferred or assigned, prior approval must be obtained from the DENR Secretary. An exploration permit, thus, cannot be assigned without the imprimatur of the Secretary of the DENR.It is instructive to note that under Section 13 of Presidential Decree No. 463, the prospecting and exploration of minerals in government reservations, such as forest reservations, are prohibited, except with the permission of the government agency concerned. It is the government agency concerned that has the prerogative to conduct prospecting, exploration and123

VOL. 605, NOVEMBER 20, 2009123Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.exploitation of such reserved lands.21 It is only in instances wherein said government agency, in this case the Bureau of Mines, cannot undertake said mining operations that qualified persons may be allowed by the government to undertake such operations. PNOC-EDC v. Veneracion, Jr.22 outlines the five requirements for acquiring mining rights in reserved lands under Presidential Decree No. 463: (1) a prospecting permit from the agency that has jurisdiction over the land; (2) an exploration permit from the Bureau of Mines and Geo-Sciences (BMGS); (3) if the exploration reveals the presence of commercial deposit, application to BMGS by the permit holder for the exclusion of the area from the reservation; (4) a grant by the President of the application to exclude the area from the reservation; and (5) a mining agreement (lease, license or concession) approved by the DENR Secretary.

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Here, MMC met the first and second requirements and obtained an exploration permit over the disputed forest reserved land. Although MMC still has to prove to the government that it is qualified to develop and utilize the subject mineral land, as it has yet to go through the remaining process before it can secure a lease agreement, nonetheless, it is bound to follow Section 97 of Presidential Decree No. 463. The logic is not hard to discern. If a lease holder, who has already demonstrated to the government his capacity and qualifications to further develop and utilize the minerals within the contract area, is prohibited from transferring his mining rights (rights to explore, develop and utilize), with more reason will this proscription apply with extra force to a mere exploration permit holder who is yet to exhibit his qualifications in conducting mining operations. The rationale for the approval requirement under Section 97 of Presidential Decree No. 463 is not hard to see. Exploration permits are strictly granted to_______________

21 PNOC-Energy Development Corporation (PNOC-EDC) v. Veneracion, Jr., G.R. No. 129820, 30 November 2006, 509 SCRA 93, 106.22 Id., at pp. 107-110.124

124SUPREME COURT REPORTS ANNOTATEDApex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.entities or individuals possessing the resources and capability to undertake mining operations. Mining industry is a major support of the national economy and the continuous and intensified exploration, development and wise utilization of mining resources is vital for national development. For this reason, Presidential Decree No. 463 makes it imperative that in awarding mining operations, only persons possessing the financial resources and technical skill for modern exploratory and development techniques are encouraged to undertake the exploration,

development and utilization of the country’s natural resources. The preamble of Presidential Decree No. 463 provides thus:“WHEREAS, effective and continuous mining operations require considerable outlays of capital and resources, and make it imperative that persons possessing the financial resources and technical skills for modern exploratory and development techniques be encouraged to undertake the exploration, development and exploitation of our mineral resources;”The Court has said that a “preamble” is the key to understanding the statute, written to open the minds of the makers to the mischiefs that are to be remedied, and the purposes that are to be accomplished, by the provisions of the statute.23 As such, when the statute itself is ambiguous and difficult to interpret, the preamble may be resorted to as a key to understanding the statute.Indubitably, without the scrutiny by the government agency as to the qualifications of the would-be transferee of an exploration permit, the same may fall into the hands of non-qualified entities, which would be counter-productive to the development of the mining industry. It cannot be overemphasized that the exploration, development and utilization of the country’s natural resources are matters vital to the public interest and the general welfare; hence, their regulation must_______________

23 Estrada v. Escritor, 455 Phil. 411, 569; 408 SCRA 1 (2003).125

VOL. 605, NOVEMBER 20, 2009125Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.be of utmost concern to the government, since these natural resources are not only critical to the nation’s security, but they also ensure the country’s survival as a viable and sovereign republic.24

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The approval requirement of the Secretary of the DENR for the assignment of exploration permits is bolstered by Section 25 of Republic Act No. 7942 (otherwise known as the Philippine Mining Act of 1995), which provides that:“Sec. 25. Transfer or Assignment.—An exploration permit may be transferred or assigned to a qualified person subject to the approval of the Secretary upon the recommendation of the Director.”SEM further posits that Section 97 of Presidential Decree No. 463, which requires the prior approval of the DENR when there is a transfer of mining rights, cannot be applied to the assignment of EP 133 executed by MMC in favor of SEM because during the execution of the Deed of Assignment on 16 February 1994, Executive Order No. 27925 became the governing statute, inasmuch as the latter abrogated the old mining system—i.e., license, concession or lease—which was espoused by the former.This contention is not well taken. While Presidential Decree No. 463 has already been repealed by Executive Order No. 279, the administrative aspect of the former law nonetheless remains applicable. Hence, the transfer or assignment of exploration permits still needs the prior approval of the Secretary of the DENR. As ruled in Miners Association of the Philippines, Inc. v. Factoran, Jr.:26“Presidential Decree No. 463, as amended, pertains to the old system of exploration, development and utilization of natural resources through “license, concession or lease” which, however, has been_______________

24 Miners Association of the Philippines, Inc. v. Factoran, Jr., 310 Phil. 113, 130-131; 240 SCRA 100, 114-115 (1995).25 Promulgated on 25 July 1987.26 Supra note 24 at 130.126

126SUPREME COURT REPORTS ANNOTATEDApex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.

disallowed by Article XII, Section 2 of the 1987 Constitution. By virtue of the said constitutional mandate and its implementing law, Executive Order No. 279, which superseded Executive Order No. 211, the provisions dealing on “license, concession, or lease” of mineral resources under Presidential Decree No. 463, as amended, and other existing mining laws are deemed repealed and, therefore, ceased to operate as the governing law. In other words, in all other areas of administration and management of mineral lands, the provisions of Presidential Decree No. 463, as amended, and other existing mining laws, still govern.” (Emphasis supplied.)Not only did the assignment of EP 133 to SEM violate Section 97 of Presidential Decree No. 463, it likewise transgressed one of the conditions stipulated in the grant of the said permit. The following terms and conditions attached to EP 133 are as follows:271. That the permittee shall abide by the work program submitted with the application or statements made later in support thereof, and which shall be considered as conditions and essential parts of this permit;2. That permittee shall maintain a complete record of all activities and accounting of all expenditures incurred therein subject to periodic inspection and verification at reasonable intervals by the Bureau of Mines at the expense of the applicant;3. That the permittee shall submit to the Director of Mines within 15 days after the end of each calendar quarter a report under oath of a full and complete statement of the work done in the area covered by the permit;4.  That the term of this permit shall be for two (2) years to be effective from this date, renewable for the same period at the discretion of the Director of Mines and upon request of the applicant;5.  That the Director of Mines may at any time cancel this permit for violation of its provision or in case of trouble or breach of peace arising in the area subject hereof by reason of conflicting interests without any responsibility on the part of the government as_______________

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27 Records, Vol. 2, pp. 84-85.127

VOL. 605, NOVEMBER 20, 2009127Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.to expenditures for exploration that might have been incurred, or as to other damages that might have been suffered by the permittee;6. That this permit shall be for the exclusive use and benefit of the permittee or his duly authorized agents and shall be used for mineral exploration purposes only and for no other purpose.It must be noted that under Section 9028 of Presidential Decree No. 463, which was the applicable statute during the issuance of EP 133, the DENR Secretary, through the Director of the Bureau of Mines and Geosciences, was charged with carrying out the said law. Also, under Commonwealth Act No. 136, also known as “An Act Creating the Bureau of Mines,” which was approved on 7 November 1936, the Director of Mines had the direct charge of the administration of the mineral lands and minerals; and of the survey, classification, lease or any other form of concession or disposition thereof under the Mining Act.29 This power of administration included the power to prescribe terms and conditions in granting exploration permits to qualified entities.Thus, in the grant of EP 133 in favor of the MMC, the Director of the BMG acted within his power in laying down the terms and conditions attendant thereto. MMC and SEM did not dispute the reasonableness of said conditions.Quite conspicuous is the fact that neither MMC nor SEM denied that they were unaware of the terms and conditions attached to EP 133. MMC and SEM did not present any evidence that they objected to these conditions. Indubitably, MMC wholeheartedly accepted these terms and conditions, which formed part of the grant of the permit. MMC agreed to abide by these conditions. It must be accentuated that a

party to a contract cannot deny its validity, without outrage to one’s_______________

28  Executive Officer.—The Secretary, through the Director, shall be the Executive Officer charged with carrying out the provisions of this Decree. x x x.29 Section 3, Commonwealth Act No. 136.128

128SUPREME COURT REPORTS ANNOTATEDApex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.sense of justice and fairness, after enjoying its benefits.30 Where parties have entered into a well-defined contractual relationship, it is imperative that they should honor and adhere to their rights and obligations as stated in their contracts, because obligations arising from these have the force of law between the contracting parties and should be complied with in good faith.31 Condition Number 6 categorically states that the permit shall be for the exclusive use and benefit of MMC or its duly authorized agents. While it may be true that SEM, the assignee of EP 133, is a 100% subsidiary corporation of MMC, records are bereft of any evidence showing that the former is the duly authorized agent of the latter. This Court cannot condone such utter disregard on the part of MMC to honor its obligations under the permit. Undoubtedly, having violated this condition, the assignment of EP 133 to SEM is void and has no legal effect.To boot, SEM squandered whatever rights it assumed it had under EP 133. On 6 July 1993, EP 133 was extended for twelve more months or until 6 July 1994. MMC or SEM, however, never renewed EP 133 either prior to or after its expiration. Thus, EP 133 expired by non-renewal on 6 July 1994. With the expiration of EP 133 on 6 July 1994, MMC lost any right to the Diwalwal Gold Rush Area.The Assailed Decision Resolved Facts and Issues That Transpired after the Promulga-tion of Apex Mining Co., Inc. v. Garcia

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SEM asserts that the 23 June 2006 Decision reversed the 16 July 1991 Decision of the Court en banc entitled, “Apex Mining Co., Inc. v. Garcia.”32_______________

30 Premiere Development Bank v. Court of Appeals, 471 Phil. 704, 716; 427 SCRA 686 (2004).31 Id.32 Supra note 1 at 284.129

VOL. 605, NOVEMBER 20, 2009129Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.   The assailed Decision DID NOT overturn the 16 July 1991 Decision in Apex Mining Co., Inc. v. Garcia.It must be pointed out that what Apex Mining Co., Inc. v. Garcia resolved was the issue of which, between Apex and MMC, availed itself of the proper procedure in acquiring the right to prospect and to explore in the Agusan-Davao-Surigao Forest Reserve. Apex registered its Declarations of Location (DOL) with the then BMGS, while MMC was granted a permit to prospect by the Bureau of Forest Development (BFD) and was subsequently granted an exploration permit by the BMGS. Taking into consideration Presidential Decree No. 463, which provides that “mining rights within forest reservation can be acquired by initially applying for a permit to prospect with the BFD and subsequently for a permit to explore with the BMGS,” the Court therein ruled that MMC availed itself of the proper procedure to validly operate within the forest reserve or reservation.While it is true that Apex Mining Co., Inc. v. Garcia settled the issue of which between Apex and MMC was legally entitled to explore in the disputed area, such rights, though, were extinguished by subsequent events that transpired after the decision was promulgated. These subsequent events, which were not attendant in Apex Mining Co., Inc. v. Garcia33 dated 16 July 1991, are the following:(1) the expiration of EP 133 by non-renewal on 6 July 1994;

(2) the transfer/assignment of EP 133 to SEM on 16 February 1994 which was done in violation to the condition of EP 133 proscribing its transfer;(3) the transfer/assignment of EP 133 to SEM is without legal effect for violating PD 463 which mandates that the assignment of mining rights must be with the prior approval of the Secretary of the DENR._______________

33 Supra note 1 at 283-284.130

130SUPREME COURT REPORTS ANNOTATEDApex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.  Moreover, in Southeast Mindanao Gold Mining Corporation v. Balite Portal Mining Cooperative,34 the Court, through Associate Justice Consuelo Ynares-Santiago (now retired), declared that Apex Mining Co., Inc. v. Garcia did not deal with the issues of the expiration of EP 133 and the validity of the transfer of EP 133 to SEM, viz:“Neither can the Apex Mining case foreclose any question pertaining to the continuing validity of EP No. 133 on grounds which arose after the judgment in said case was promulgated. While it is true that the Apex Mining case settled the issue of who between Apex and Marcopper validly acquired mining rights over the disputed area by availing of the proper procedural requisites mandated by law, it certainly did not deal with the question raised by the oppositors in the Consolidated Mines cases, i.e., whether EP No. 133 had already expired and remained valid subsequent to its transfer by Marcopper to petitioner.” (Emphasis supplied.)What is more revealing is that in the Resolution dated 26 November 1992, resolving the motion for reconsideration of Apex Mining Co., Inc. v. Garcia, the Court clarified that the ruling on the said decision was binding only between Apex and MMC and with respect the particular issue raised therein. Facts and issues not attendant to the said decision,

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as in these cases, are not settled by the same. A portion of the disposition of the Apex Mining Co., Inc. v. Garcia Resolution dated 26 November 1992 decrees:“x x x The decision rendered in this case is conclusive only between the parties with respect to the particular issue herein raised and under the set of circumstances herein prevailing. In no case should the decision be considered as a precedent to resolve or settle claims of persons/entities not parties hereto. Neither is it intended to unsettle rights of persons/entities which have been acquired or which may have accrued_______________

34 Supra note 13 at 681.131

VOL. 605, NOVEMBER 20, 2009131Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.upon reliance on laws passed by the appropriate agencies.” (Emphasis supplied.)The Issue of the Constitutionality ofProclamation Is Raised BelatedlyIn its last-ditch effort to salvage its case, SEM contends that Proclamation No. 297, issued by President Gloria Macapagal-Arroyo and declaring the Diwalwal Gold Rush Area as a mineral reservation, is invalid on the ground that it lacks the concurrence of Congress as mandated by Section 4, Article XII of the Constitution; Section 1 of Republic Act No. 3092; Section 14 of Executive Order No. 292, otherwise known as the Administrative Code of 1987; Section 5(a) of Republic Act No. 7586, and Section 4(a) of Republic Act No. 6657.It is well-settled that when questions of constitutionality are raised, the court can exercise its power of judicial review only if the following requisites are present: (1) an actual and appropriate case exists; (2) there is a personal and substantial interest of the party raising the constitutional question; (3) the exercise of judicial review is pleaded at the

earliest opportunity; and (4) the constitutional question is the lis mota of the case.Taking into consideration the foregoing requisites of judicial review, it is readily clear that the third requisite is absent. The general rule is that the question of constitutionality must be raised at the earliest opportunity, so that if it is not raised in the pleadings, ordinarily it may not be raised at the trial; and if not raised in the trial court, it will not be considered on appeal.35In the instant case, it must be pointed out that in the Reply to Respondent SEM’s Consolidated Comment filed on 20 May 2003, MAB mentioned Proclamation No. 297, which was is-_______________

35 Matibag v. Benipayo, 429 Phil. 554, 578-579; 380 SCRA 49, 68 (2002).132

132SUPREME COURT REPORTS ANNOTATEDApex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.sued on 25 November 2002. This proclamation, according to the MAB, has rendered SEM’s claim over the contested area moot, as the President has already declared the same as a mineral reservation and as an environmentally critical area. SEM did not put to issue the validity of said proclamation in any of its pleadings despite numerous opportunities to question the same. It was only after the assailed Decision was promulgated—i.e., in SEM’s Motion for Reconsideration of the questioned Decision filed on 13 July 2006 and its Motion for Referral of the Case to the Court En Banc and for Oral Arguments filed on 22 August 2006—that it assailed the validity of said proclamation.Certainly, posing the question on the constitutionality of Proclamation No. 297 for the first time in its Motion for Reconsideration is, indeed, too late.36In fact, this Court, when it rendered the Decision it merely recognized that the questioned proclamation came from a

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co-equal branch of government, which entitled it to a strong presumption of constitutionality.37 The presumption of its constitutionality stands inasmuch as the parties in the instant cases did not question its validity, much less present any evidence to prove that the same is unconstitutional. This is in line with the precept that administrative issuances have the force and effect of law and that they benefit from the same presumption of validity and constitutionality enjoyed by statutes.38_______________

36 Umali v. Executive Secretary Guingona, Jr., 365 Phil. 77, 87; 305 SCRA 533, 542 (1999).37 Senate of the Philippines v. Ermita, G.R. No. 169777, 20 April 2006, 488 SCRA 1, 66.38 Mirasol v. Department of Public Works and Highways, G.R. No. 158793, 8 June 2006, 490 SCRA 318, 347-348.133

VOL. 605, NOVEMBER 20, 2009133Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.Proclamation No. 297 Is in Harmony withArticle XII, Section 4, of the ConstitutionAt any rate, even if this Court were to consider the arguments belatedly raised by SEM, said arguments are not meritorious.SEM asserts that Article XII, Section 4 of the Constitution, bars the President from excluding forest reserves/reservations and proclaiming the same as mineral reservations, since the power to de-classify them resides in Congress.Section 4, Article XII of the Constitution reads:“The Congress shall as soon as possible, determine by law the specific limits of forest lands and national parks, marking clearly their boundaries on the ground. Thereafter, such forest lands and national parks shall be conserved and may not be increased nor diminished, except by law. The Congress shall provide, for such periods as it may

determine, measures to prohibit logging in endangered forests and in watershed areas.”The above-quoted provision says that the area covered by forest lands and national parks may not be expanded or reduced, unless pursuant to a law enacted by Congress. Clear in the language of the constitutional provision is its prospective tenor, since it speaks in this manner: “Congress shall as soon as possible.” It is only after the specific limits of the forest lands shall have been determined by the legislature will this constitutional restriction apply. SEM does not allege nor present any evidence that Congress had already enacted a statute determining with specific limits forest lands and national parks. Considering the absence of such law, Proclamation No. 297 could not have violated Section 4, Article XII of the 1987 Constitution. In PICOP Resources, Inc. v. Base Metals Mineral Resources Corporation,39 the Court had the occasion to similarly rule in this fashion:_______________

39 G.R. No. 163509, 6 December 2006, 510 SCRA 400, 416.134

134SUPREME COURT REPORTS ANNOTATEDApex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.“x x x 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.”Section 4, Article XII of the Constitution, addresses the concern of the drafters of the 1987 Constitution about

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forests and the preservation of national parks. This was brought about by the drafters’ awareness and fear of the continuing destruction of this country’s forests.40 In view of this concern, Congress is tasked to fix by law the specific limits of forest lands and national parks, after which the trees in these areas are to be taken care of.41 Hence, these forest lands and national parks that Congress is to delimit through a law could be changed only by Congress.In addition, there is nothing in the constitutional provision that prohibits the President from declaring a forest land as an environmentally critical area and from regulating the mining operations therein by declaring it as a mineral reservation in order to prevent the further degradation of the forest environment and to resolve the health and peace and order problems that beset the area.A closer examination of Section 4, Article XII of the Constitution and Proclamation No. 297 reveals that there is nothing contradictory between the two. Proclamation No. 297, a measure to attain and maintain a rational and orderly balance between socio-economic growth and environmental pro-_______________

40 Records of the Constitutional Commission, Vol. III, pp. 592-593.41 Id.135

VOL. 605, NOVEMBER 20, 2009135Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.tection, jibes with the constitutional policy of preserving and protecting the forest lands from being further devastated by denudation. In other words, the proclamation in question is in line with Section 4, Article XII of the Constitution, as the former fosters the preservation of the forest environment of the Diwalwal area and is aimed at preventing the further degradation of the same. These objectives are the very

same reasons why the subject constitutional provision is in place.What is more, jurisprudence has recognized the policy of multiple land use in our laws towards the end that the country’s precious natural resources may be rationally explored, developed, utilized and conserved.42 It has been held that forest reserves or reservations can at the same time be open to mining operations, provided a prior written clearance by the government agency having jurisdiction over such reservation is obtained. In other words mineral lands can exist within forest reservations. These two terms are not anti-thetical. This is made manifest if we read Section 47 of Presidential Decree No. 705 or the Revised Forestry Code of the Philippines, which provides:“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.” (Emphasis supplied.)Also, Section 6 of Republic Act No. 7942 or the Mining Act of 1995, states that mining operations in reserved lands other than mineral reservations, such as forest reserves/reserva-tions, are allowed, viz:“Mining operations in reserved lands other than mineral reservations may be undertaken by the Department, subject_______________

42 PICOP Resources, Inc. v. Base Metals Mineral Resources Corporation, supra note 39 at 419.136

136SUPREME COURT REPORTS ANNOTATEDApex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.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

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rules and regulations promulgated by the Secretary.” (Emphasis supplied.)Since forest reservations can be made mineral lands where mining operations are conducted, then there is no argument that the disputed land, which lies within a forest reservation, can be declared as a mineral reservation as well.Republic Act No. 7942 Otherwise Known as the “Philippine Mining Act of 1995,” is the Applicable LawDetermined to rivet its crumbling cause, SEM then argues that Proclamation No. 297 is invalid, as it transgressed the statutes governing the exclusion of areas already declared as forest reserves, such as Section 1 of Republic Act No. 3092,43 Section 14 of the Administrative Code of 1987, Section 5(a) of Republic Act No. 7586,44 and Section 4(a) of Republic Act No. 6657.45Citing Section 1 of Republic Act No. 3092, which provides as follows:“Upon the recommendation of the Director of Forestry, with the approval of the Department Head, the President of the Philippines shall set apart forest reserves which shall include denuded forest lands from the public lands and he shall by proclamation declare the establishment of such forest reserves and the boundaries thereof, and thereafter such forest reserves shall not be entered, or otherwise disposed of, but shall remain indefinitely as such for forest uses.The President of the Philippines may, in like manner upon the recommendation of the Director of Forestry, with the approval of the Department head, by proclamation, modify the boundaries_______________

43 Approved on 17 August 1961.44 Approved on 1 June 1992, this statute is known as the “National Integrated Protected Areas System Act of 1992.”45 This Act is known as the “Comprehensive Agrarian Reform Law of 1998.” It took effect on 15 June 1988.137

VOL. 605, NOVEMBER 20, 2009137

Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.of any such forest reserve to conform with subsequent precise survey but not to exclude any portion thereof except with the concurrence of Congress.” (Underscoring supplied.)SEM submits that the foregoing provision is the governing statute on the exclusion of areas already declared as forest reserves. Thus, areas already set aside by law as forest reserves are no longer within the proclamation powers of the President to modify or set aside for any other purposes such as mineral reservation.To bolster its contention that the President cannot disestablish forest reserves into mineral reservations, SEM makes reference to Section 14, Chapter 4, Title I, Book III of the Administrative Code of 1987, which partly recites:“The President shall have the power to reserve for settlement or public use, and for specific public purposes, any of the lands of the public domain, the use of which is not otherwise directed by law. The reserved land shall thereafter remain subject to the specific public purpose indicated until otherwise provided by law or proclamation.” (Emphases supplied.)SEM further contends that Section 7 of Republic Act No. 7586,46 which declares that the disestablishment of a protected area shall be done by Congress, and Section 4(a) of Republic Act No. 6657,47 which in turn requires a law passed_______________

46 Disestablishment as Protected Area.—When in the opinion of the DENR a certain protected area should be withdrawn or disestablished, or its boundaries modified as warranted by a study and sanctioned by the majority of the members of the respective boards for the protected area as herein established in Section 11, it shall, in turn, advise Congress. Disestablishment of a protected area under the System or modification of its boundary shall take effect pursuant to an act of Congress.47 All alienable and disposable lands of the public domain devoted to or suitable for agriculture. No reclassification of

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forest or mineral lands to agricultural lands shall be undertaken after the approval of this Act until Congress, taking into138

138SUPREME COURT REPORTS ANNOTATEDApex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.by Congress before any forest reserve can be reclassified, militate against the validity of Proclamation No. 297.Proclamation No. 297, declaring a certain portion of land located in Monkayo, Compostela Valley, with an area of 8,100 hectares, more or less, as a mineral reservation, was issued by the President pursuant to Section 5 of Republic Act No. 7942, also known as the “Philippine Mining Act of 1995.”Proclamation No. 297 did not modify the boundaries of the Agusan-Davao-Surigao Forest Reserve since, as earlier discussed, mineral reservations can exist within forest reserves because of the multiple land use policy. The metes and bounds of a forest reservation remain intact even if, within the said area, a mineral land is located and thereafter declared as a mineral reservation.More to the point, a perusal of Republic Act No. 3092, “An Act to Amend Certain Sections of the Revised Administrative Code of 1917,” which was approved on 17 August 1961, and the Administrative Code of 1987, shows that only those public lands declared by the President as reserved pursuant to these two statutes are to remain subject to the specific purpose. The tenor of the cited provisions, namely: “the President of the Philippines shall set apart forest reserves” and “the reserved land shall thereafter remain,” speaks of future public reservations to be declared, pursuant to these two statutes. These provisions do not apply to forest reservations earlier declared as such, as in this case, which was proclaimed way back on 27 February 1931, by Governor General Dwight F. Davis under Proclamation No. 369.

Over and above that, Section 5 of Republic Act No. 7942 authorizes the President to establish mineral reservations, to wit:_______________

account ecological, developmental and equity considerations, shall have determined by law, the specific limits of the public domain.

139

VOL. 605, NOVEMBER 20, 2009139Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.“Sec. 5. Mineral Reservations.—When the national interest so requires, such as when there is a need to preserve strategic raw materials for industries critical to national development, or certain minerals for scientific, cultural or ecological value, the President may establish mineral reservations upon the recommendation of the Director through the Secretary. Mining operations in existing mineral reservations and such other reservations as may thereafter be established, shall be undertaken by the Department or through a contractor x x x.” (Emphasis supplied.)It is a rudimentary principle in legal hermeneutics that where there are two acts or provisions, one of which is special and particular and certainly involves the matter in question, the other general, which, if standing alone, would include the matter and thus conflict with the special act or provision, the special act must as intended be taken as constituting an exception to the general act or provision, especially when such general and special acts or provisions are contemporaneous, as the Legislature is not to be presumed to have intended a conflict.Hence, it has become an established rule of statutory construction that where one statute deals with a subject in general terms, and another deals with a part of the same subject in a more detailed way, the two should be harmonized if possible; but if there is any conflict, the latter

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shall prevail regardless of whether it was passed prior to the general statute. Or where two statutes are of contrary tenor or of different dates but are of equal theoretical application to a particular case, the one specially designed therefor should prevail over the other.It must be observed that Republic Act No. 3092, “An Act to Amend Certain Sections of the Revised Administrative Code of 1917,” and the Administrative Code of 1987, are general laws. Section 1 of Republic Act No. 3092 and Section 14 of the Administrative Code of 1987 require the concurrence of Congress before any portion of a forest reserve can be validly excluded therefrom. These provisions are broad since they140

140SUPREME COURT REPORTS ANNOTATEDApex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.deal with all kinds of exclusion or reclassification relative to forest reserves, i.e., forest reserve areas can be transformed into all kinds of public purposes, not only the establishment of a mineral reservation. Section 5 of Republic Act No. 7942 is a special provision, as it specifically treats of the establishment of mineral reservations only. Said provision grants the President the power to proclaim a mineral land as a mineral reservation, regardless of whether such land is also an existing forest reservation.Sec. 5(a) of Republic Act No. 7586 provides:“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.”Glaring in the foregoing enumeration of areas comprising the initial component of the NIPAS System under Republic Act No. 7586 is the absence of forest reserves. Only protected areas enumerated under said provision cannot be modified. Since the subject matter of Proclamation No. 297 is a forest reservation proclaimed as a mineral reserve, Republic Act No. 7586 cannot possibly be made applicable. Neither can Proclamation No. 297 possibly violate said law.Similarly, Section 4(a) of Republic Act No. 6657 cannot be made applicable to the instant case.Section 4(a) of Republic Act No. 6657 reads:141

VOL. 605, NOVEMBER 20, 2009141Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.“All alienable and disposable lands of the public domain devoted to or suitable for agriculture. No reclassification of forest or mineral lands to agricultural lands shall be undertaken after the approval of this Act until Congress, taking into account ecological, developmental and equity considerations, shall have determined by law, the specific limits of the public domain.” (Underscoring supplied.)Section 4(a) of Republic Act No. 6657 prohibits the reclassification of forest or mineral lands into agricultural lands until Congress shall have determined by law the specific limits of the public domain. A cursory reading of this provision will readily show that the same is not relevant to the instant controversy, as there has been no reclassification of a forest or mineral land into an agricultural land.Furthermore, the settled rule of statutory construction is that if two or more laws of different dates and of contrary tenors are of equal theoretical application to a particular

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case, the statute of later date must prevail being a later expression of legislative will.48In the case at bar, there is no question that Republic Act No. 7942 was signed into law later than Republic Act No. 3092, the Administrative Code of 1987,49 Republic Act No. 7586 and Republic Act No. 6657. Applying the cited principle, the provisions of Republic Act No. 3092, the Administrative Code of 1987, Republic Act No. 7586 and Republic Act No. 6657 cited by SEM must yield to Section 5 of Republic Act No. 7942.Camilo Banad, et al., Cannot SeekRelief from This CourtCamilo Banad and his group admit that they are members of the Balite Cooperative. They, however, claim that they are_______________

48 Philippine National Bank v. Cruz, G.R. No. 80593, 18 December 1989, 180 SCRA 206, 213.49 This law is dated 25 July 1987.142

142SUPREME COURT REPORTS ANNOTATEDApex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.distinct from Balite and move that this Court recognize them as prior mining locators.Unfortunately for them, this Court cannot grant any relief they seek. Records reveal that although they were parties to the instant cases before the Court of Appeals, they did not file a petition for review before this Court to contest the decision of the appellate court. The only petitioners in the instant cases are the MAB, SEM, Balite and Apex. Consequently, having no personality in the instant cases, they cannot seek any relief from this Court.Apex’s Motion for Clarification andBalite’s Manifestation and MotionIn its Motion for Clarification, Apex desires that the Court elucidate the assailed Decision’s pronouncement that “mining operations, are now, therefore within the full control

of the State through the executive branch” and place the said pronouncement in the proper perspective as the declaration in La Bugal-B’Laan, which states that—“The concept of control adopted in Section 2 of Article XII must be taken to mean less than dictatorial, all-encompassing control; but nevertheless sufficient to give the State the power to direct, restrain, regulate and govern the affairs of the extractive enterprise.”50Apex states that the subject portion of the assailed Decision could send a chilling effect to potential investors in the mining industry, who may be of the impression that the State has taken over the mining industry, not as regulator but as an operator. It is of the opinion that the State cannot directly undertake mining operations.Moreover, Apex is apprehensive of the following portion in the questioned Decision—“The State can also opt to award mining operations in the mineral reservation to private enti-_______________

50 Supra note 12 at 1093.143

VOL. 605, NOVEMBER 20, 2009143Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.ties including petitioner Apex and Balite, if it wishes.” It avers that the phrase “if it wishes” may whimsically be interpreted to mean a blanket authority of the administrative authority to reject the former’s application for an exploration permit even though it complies with the prescribed policies, rules and regulations.Apex likewise asks this Court to order the MGB to accept its application for an exploration permit.Balite echoes the same concern as that of Apex on the actual take-over by the State of the mining industry in the disputed area to the exclusion of the private sector. In addition, Balite prays that this Court direct MGB to accept Balite’s application for an exploration permit.

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Contrary to the contention of Apex and Balite, the fourth paragraph of Section 2, Article XII of the Constitution and Section 5 of Republic Act No. 7942 sanctions the State, through the executive department, to undertake mining operations directly, as an operator and not as a mere regulator of mineral undertakings. This is made clearer by the fourth paragraph of Section 2, Article XII of the 1987 Constitution, which provides in part:“SEC. 2. x x x The State may directly undertake such activities, or it may enter into co-production, joint venture, or production-sharing agreements with Filipino citizens, or corporations or associations at least sixty per centum of whose capital is owned by such citizens. x x x.” (Emphasis supplied.)Also, Section 5 of Republic Act No. 7942 states that the mining operations in mineral reservations shall be undertaken by the Department of Environment and Natural Resources or a contractor, to wit:“SEC. 5. Mineral Reservations.—When the national interest so requires, such as when there is a need to preserve strategic raw materials for industries critical to national development, or certain144

144SUPREME COURT REPORTS ANNOTATEDApex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.minerals for scientific, cultural or ecological value, the President may establish mineral reservations upon the recommendation of the Director through the Secretary. Mining operations in existing mineral reservations and such other reservations as may thereafter be established, shall be undertaken by the Department or through a contractor x x x.” (Emphasis supplied.)Undoubtedly, the Constitution, as well as Republic Act No. 7942, allows the executive department to undertake mining operations. Besides, La Bugal-B’Laan, cited by Apex, did not refer to the fourth sentence of Section 2, Article XII of the

Constitution, but to the third sentence of the said provision, which states:“SEC. 2. x x x The exploration, development, and utilization of natural resources shall be under the full control and supervision of the State. x x x.”Pursuant to Section 5 of Republic Act No. 7942, the executive department has the option to undertake directly the mining operations in the Diwalwal Gold Rush Area or to award mining operations therein to private entities. The phrase “if it wishes” must be understood within the context of this provision. Hence, the Court cannot dictate this co-equal branch to choose which of the two options to select. It is the sole prerogative of the executive department to undertake directly or to award the mining operations of the contested area.Even assuming that the proper authority may decide to award the mining operations of the disputed area, this Court cannot arrogate unto itself the task of determining who, among the applicants, is qualified. It is the duty of the appropriate administrative body to determine the qualifications of the applicants. It is only when this administrative body whimsically denies the applications of qualified applicants that the Court may interfere. But until then, the Court has no power to direct said administrative body to accept the application of any qualified applicant.145

VOL. 605, NOVEMBER 20, 2009145Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.In view of this, the Court cannot grant the prayer of Apex and Balite asking the Court to direct the MGB to accept their applications pending before the MGB.SEM’s Manifestation and Motiondated 25 January 2007SEM wants to emphasize that its predecessor-in-interest, Marcopper or MMC, complied with the mandatory exploration work program, required under EP 133, by

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attaching therewith quarterly reports on exploration work from 20 June 1986 to March 1994.It must be observed that this is the very first time at this very late stage that SEM has presented the quarterly exploration reports. From the early phase of this controversy, SEM did not disprove the arguments of the other parties that Marcopper violated the terms under EP 133, among other violations, by not complying with the mandatory exploration work program. Neither did it present evidence for the appreciation of the lower tribunals. Hence, the non-compliance with the mandatory exploration work program was not made an issue in any stage of the proceedings. The rule is that an issue that was not raised in the lower court or tribunal cannot be raised for the first time on appeal, as this would violate the basic rules of fair play, justice and due process.51 Thus, this Court cannot take cognizance of the issue of whether or not MMC complied with the mandatory work program.In sum, this Court finds:1. The assailed Decision did not overturn the 16 July 1991 Decision in Apex Mining Co., Inc. v. Garcia. The former was decided on facts and issues that were not attendant in the latter, such as the expiration of EP 133,_______________

51 Multi-Realty Development Corporation v. Makati Tuscany Condominium Corporation, G.R. No. 146726, 16 June 2006, 491 SCRA 9, 23.146

146SUPREME COURT REPORTS ANNOTATEDApex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.the violation of the condition embodied in EP 133 prohibiting its assignment, and the unauthorized and invalid assignment of EP 133 by MMC to SEM, since this assignment was effected without the approval of the Secretary of DENR;2. SEM did not acquire vested right over the disputed area because its supposed right was extinguished by the

expiration of its exploration permit and by its violation of the condition prohibiting the assignment of EP 133 by MMC to SEM. In addition, even assuming that SEM has a valid exploration permit, such is a mere license that can be withdrawn by the State. In fact, the same has been withdrawn by the issuance of Proclamation No. 297, which places the disputed area under the full control of the State through the Executive Department;3. The approval requirement under Section 97 of Presidential Decree No. 463 applies to the assignment of EP 133 by MMC to SEM, since the exploration permit is an interest in a mining lease contract;4. The issue of the constitutionality and the legality of Proclamation No. 297 was raised belatedly, as SEM questions the same for the first time in its Motion for Reconsideration. Even if the issue were to be entertained, the said proclamation is found to be in harmony with the Constitution and other existing statutes;5. The motion for reconsideration of Camilo Banad, et al. cannot be passed upon because they are not parties to the instant cases;6. The prayers of Apex and Balite asking the Court to direct the MGB to accept their applications for exploration permits cannot be granted, since it is the Executive Department that has the prerogative to accept such applications, if ever it decides to award the mining operations in the disputed area to a private entity;147

VOL. 605, NOVEMBER 20, 2009147Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.7. The Court cannot pass upon the issue of whether or not MMC complied with the mandatory exploration work program, as such was a non-issue and was not raised before the Court of Appeals and the lower tribunals.WHEREFORE, premises considered, the Court holds:

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1. The Motions for Reconsideration filed by Camilo Banad, et al. and Southeast Mindanao Gold Mining Corporation are DENIED for lack of merit;2. The Motion for Clarification of Apex Mining Co., Inc. and the Manifestation and Motion of the Balite Communal Portal Mining Cooperative, insofar as these motions/manifestation ask the Court to direct the Mines and Geo-Sciences Bureau to accept their respective applications for exploration permits, are DENIED;3. The Manifestation and Urgent Motion dated 25 January 2007 of Southeast Mindanao Gold Mining Corporation is DENIED.4. The State, through the Executive Department, should it so desire, may now award mining operations in the disputed area to any qualified entities it may determine. The Mines and Geosciences Bureau may process exploration permits pending before it, taking into consideration the applicable mining laws, rules and regulations relative thereto.SO ORDERED.Puno (C.J.), Carpio, Carpio-Morales, Leonardo-DeCastro, Brion, Del Castillo, Abad and Villarama, Jr., JJ., concur.Corona, Velasco, Jr. and Peralta, JJ., On Official Leave.Nachura, J., No part.Bersamin, J., With separate opinion.148

148SUPREME COURT REPORTS ANNOTATEDApex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.SEPARATE OPINIONBERSAMIN, J.:I concur with Honorable Minita V. Chico-Nazario’s disposition of the challenges posed by the motion for reconsideration and manifestation and urgent motion dated January 25, 2007 filed by Southeast Mindanao Gold Mining Corporation (SEM); the motion for clarification dated July 18, 2006 filed by Apex Mining (Apex); and the manifestation and motion

dated July 28, 2006 filed by Balite Communal Portal Mining Cooperative (Balite).Yet, I feel compelled to write in order to suggest that we should look at and determine which between Apex and Balite has any priority right to explore, develop and mine the Diwalwal Gold Rush Area in the event that the State, represented by the Executive Department, decides either to develop and mine the area directly, or to outsource the task to a service contractor. I am sure that doing so will preclude further litigations from arising. I feel that such an approach can only further the intent and letter of Section 1,1 Rule 36, of the Rules of Court to determine the merits of the case, not leaving anything undetermined.Antecedents

The relevant antecedents excellently recounted in the decision are adopted herein for purposes of giving this separate opinion the requisite backdrop, viz.:_______________

1 Section 1. Rendition of judgments and final orders.—A judgment or final order determining the merits of the case shall be in writing personally and directly prepared by the judge, stating clearly and distinctly the facts and the law on which it is based, signed by him, and filed with the clerk of the court. (1a) 149

VOL. 605, NOVEMBER 20, 2009149Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.“On 27 February 1931, Governor General Dwight F. Davis issued Proclamation No. 369, establishing the Agusan-Davao-Surigao Forest Reserve consisting of approximately 1,927,400 hectares.The disputed area, a rich tract of mineral land, is inside the forest reserve located at Monkayo, Davao del Norte, and Cateel, Davao Oriental, consisting of 4,941.6759 hectares. This mineral land is encompassed by Mt. Diwata, which is

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situated in the municipalities of Monkayo and Cateel. It later became known as the “Diwalwal Gold Rush Area.” It has since the early 1980’s been stormed by conflicts brought about by the numerous mining claimants scrambling for gold that lies beneath its bosom.On 21 November 1983, Camilo Banad and his group, who claimed to have first discovered traces of gold in Mount Diwata, filed a Declaration of Location (DOL) for six mining claims in the area.Camilo Banad and some other natives pooled their skills and resources and organized the Balite Communal Portal Mining Cooperative (Balite).On 12 December 1983, Apex Mining Corporation (Apex) entered into operating agreements with Banad and his group.From November 1983 to February 1984, several individual applications for mining locations over mineral land covering certain parts of the Diwalwal gold rush area were filed with the Bureau of Mines and Geo-Sciences (BMG).On 2 February 1984, Marcopper Mining Corporation (MMC) filed 16 DOLs or mining claims for areas adjacent to the area covered by the DOL of Banad and his group. After realizing that the area encompassed by its mining claims is a forest reserve within the coverage of Proclamation No. 369 issued by Governor General Davis, MMC abandoned the same and instead applied for a prospecting permit with the Bureau of Forest Development (BFD).On 1 July 1985, BFD issued a Prospecting Permit to MMC covering an area of 4,941.6759 hectares traversing the municipalities of Monkayo and Cateel, an area within the forest reserve under Proclamation No. 369. The permit embraced the areas claimed by Apex and the other individual mining claimants.On 11 November 1985, MMC filed Exploration Permit Application No. 84-40 with the BMG. On 10 March 1986, the BMG issued to MCC Exploration Permit No. 133 (EP 133).150

150SUPREME COURT REPORTS ANNOTATED

Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.Discovering the existence of several mining claims and the proliferation of small-scale miners in the area covered by EP 133, MMC thus filed on 11 April 1986 before the BMG a Petition for the Cancellation of the Mining Claims of Apex and Small Scale Mining Permit Nos. (x-1)-04 and (x-1)-05 which was docketed as MAC No. 1061. MMC alleged that the areas covered by its EP 133 and the mining claims of Apex were within an established and existing forest reservation (Agusan-Davao-Surigao Forest Reserve) under Proclamation No. 369 and that pursuant to Presidential Decree No. 463, acquisition of mining rights within a forest reserve is through the application for a permit to prospect with the BFD and not through registration of a DOL with the BMG.On 23 September 1986, Apex filed a motion to dismiss MMC’s petition alleging that its mining claims are not within any established or proclaimed forest reserve, and as such, the acquisition of mining rights thereto must be undertaken via registration of DOL with the BMG and not through the filing of application for permit to prospect with the BFD.On 9 December 1986, BMG dismissed MMC’s petition on the ground that the area covered by the Apex mining claims and MMC’s permit to explore was not a forest reservation. It further declared null and void MMC’s EP 133 and sustained the validity of Apex mining claims over the disputed area.MMC appealed the adverse order of BMG to the Department of Environment and Natural Resources (DENR).On 15 April 1987, after due hearing, the DENR reversed the 9 December 1996 order of BMG and declared MMC’s EP 133 valid and subsisting.Apex filed a Motion for Reconsideration with the DENR which was subsequently denied. Apex then filed an appeal before the Office of the President. On 27 July 1989, the Office of the President, through Assistant Executive Secretary for Legal Affairs, Cancio C. Garcia, dismissed Apex’s appeal and affirmed the DENR ruling.Apex filed a Petition for Certiorari before this Court. The Petition was docketed as G.R. No. 92605 entitled, “Apex Mining Co., Inc. v. Garcia.” On 16 July 1991, this Court

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rendered a Decision against Apex holding that the disputed area is a forest reserve; hence, the proper procedure in acquiring mining rights therein is by initially151

VOL. 605, NOVEMBER 20, 2009151Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.applying for a permit to prospect with the BFD and not through a registration of DOL with the BMG.On 27 December 1991, then DENR Secretary Fulgencio Factoran, Jr. issued Department Administrative Order No. 66 (DAO No. 66) declaring 729 hectares of the areas covered by the Agusan-Davao-Surigao Forest Reserve as non-forest lands and open to small-scale mining purposes.As DAO No. 66 declared a portion of the contested area open to small scale miners, several mining entities filed applications for Mineral Production Sharing Agreement (MPSA).On 25 August 1993, Monkayo Integrated Small Scale Miners Association (MISSMA) filed an MPSA application which was denied by the BMG on the grounds that the area applied for is within the area covered by MMC EP 133 and that the MISSMA was not qualified to apply for an MPSA under DAO No. 82, Series of 1990.On 5 January 1994, Rosendo Villaflor and his group filed before the BMG a Petition for Cancellation of EP 133 and for the admission of their MPSA Application. The Petition was docketed as RED Mines Case No. 8-8-94. Davao United Miners Cooperative (DUMC) and Balite intervened and likewise sought the cancellation of EP 133.On 16 February 1994, MMC assigned EP 133 to Southeast Mindanao Gold Mining Corporation (SEM), a domestic corporation which is alleged to be a 100% -owned subsidiary of MMC.On 14 June 1994, Balite filed with the BMG an MPSA application within the contested area that was later on rejected.

On 23 June 1994, SEM filed an MPSA application for the entire 4,941.6759 hectares under EP 133, which was also denied by reason of the pendency of RED Mines Case No. 8-8-94. On 1 September 1995, SEM filed another MPSA application.On 20 October 1995, BMG accepted and registered SEM’s MPSA application and the Deed of Assignment over EP 133 executed in its favor by MMC. SEM’s application was designated MPSA Application No. 128 (MPSAA 128). After publication of SEM’s application, the following filed before the BMG their adverse claims or oppositions:a) MAC Case No. 004 (XI)—JB Management Mining Corporation;152

152SUPREME COURT REPORTS ANNOTATEDApex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.b) MAC Case No. 005(XI)—Davao United Miners Cooperative;c) MAC Case No. 006(XI)—Balite Integrated Small Scale Miner’s Cooperative;d) MAC Case No. 007(XI)—Monkayo Integrated Small Scale Miner’s Association, Inc. (MISSMA);e) MAC Case No. 008(XI)—Paper Industries Corporation of the Philippines;f) MAC Case No. 009(XI)—Rosendo Villafor, et al.;g) MAC Case No. 010(XI)—Antonio Dacudao;h) MAC Case No. 011(XI)—Atty. Jose T. Amacio;i) MAC Case No. 012(XI)—Puting-Bato Gold Miners Cooperative;j) MAC Case No. 016(XI)—Balite Communal Portal Mining Cooperative;k) MAC Case No. 97-01(XI)—Romeo Altamera, et al.To address the matter, the DENR constituted a Panel of Arbitrators (PA) to resolve the following:(a) The adverse claims on MPSAA No. 128; and(b) The Petition to Cancel EP 133 filed by Rosendo Villaflor docketed as RED Case No. 8-8-94.

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On 13 June 1997, the PA rendered a resolution in RED Mines Case No. 8-8-94. As to the Petition for Cancellation of EP 133 issued to MMC, the PA relied on the ruling in Apex Mining Co., Inc. v. Garcia and opined that EP 133 was valid and subsisting. It also declared that the BMG Director, under Section 99 of the Consolidated Mines Administrative Order implementing Presidential Decree No. 463, was authorized to issue exploration permits and to renew the same without limit.With respect to the adverse claims on SEM’s MPSAA No. 128, the PA ruled that adverse claimants’ petitions were not filed in accordance with the existing rules and regulations governing adverse claims because the adverse claimants failed to submit the sketch plan containing the technical description of their respective claims, which was a mandatory requirement for an adverse claim that would allow the PA to determine if indeed there is an overlap-153

VOL. 605, NOVEMBER 20, 2009153Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.ping of the area occupied by them and the area applied for by SEM. It added that the adverse claimants were not claim owners but mere occupants conducting illegal mining activities at the contested area since only MMC or its assignee SEM had valid mining claims over the area as enunciated in Apex Mining Co., Inc. v. Garcia. Also, it maintained that the adverse claimants were not qualified as small-scale miners under DENR Department Administrative Order No. 34 (DAO No. 34), or the Implementing Rules and Regulation of Republic Act No. 7076 (otherwise known as the “People’s Small-Scale Mining Act of 1991”), as they were not duly licensed by the DENR to engage in the extraction or removal of minerals from the ground, and that they were large-scale miners. The decretal portion of the PA resolution pronounces:

VIEWED IN THE LIGHT OF THE FOREGOING, the validity of Exploration Permit No. 133 is hereby reiterated and all the adverse claims against MPSAA No. 128 are DISMISSED.Undaunted by the PA ruling, the adverse claimants appealed to the Mines Adjudication Board (MAB). In a Decision dated 6 January 1998, the MAB considered erroneous the dismissal by the PA of the adverse claims filed against MMC and SEM over a mere technicality of failure to submit a sketch plan. It argued that the rules of procedure are not meant to defeat substantial justice as the former are merely secondary in importance to the latter. Dealing with the question on EP 133’s validity, the MAB opined that said issue was not crucial and was irrelevant in adjudicating the appealed case because EP 133 has long expired due to its non-renewal and that the holder of the same, MMC, was no longer a claimant of the Agusan-Davao-Surigao Forest Reserve having relinquished its right to SEM. After it brushed aside the issue of the validity of EP 133 for being irrelevant, the MAB proceeded to treat SEM’s MPSA application over the disputed area as an entirely new and distinct application. It approved the MPSA application, excluding the area segregated by DAO No. 66, which declared 729 hectares within the Diwalwal area as non-forest lands open for small-scale mining. The MAB resolved:WHEREFORE, PREMISES CONSIDERED, the decision of the Panel of Arbitrators dated 13 June 1997 is hereby VACATED and a new one entered in the records of the case as follows:154

154SUPREME COURT REPORTS ANNOTATEDApex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.1. SEM’s MPSA application is hereby given due course subject to the full and strict compliance of the provisions of the Mining Act and its Implementing Rules and Regulations;2. The area covered by DAO 66, series of 1991, actually occupied and actively mined by the small-scale miners on or before August 1, 1987 as determined by the Provincial

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Mining Regulatory Board (PMRB), is hereby excluded from the area applied for by SEM;3. A moratorium on all mining and mining-related activities, is hereby imposed until such time that all necessary procedures, licenses, permits, and other requisites as provided for by RA 7076, the Mining Act and its Implementing Rules and Regulations and all other pertinent laws, rules and regulations are complied with, and the appropriate environmental protection measures and safeguards have been effectively put in place;4. Consistent with the spirit of RA 7076, the Board encourages SEM and all small-scale miners to continue to negotiate in good faith and arrive at an agreement beneficial to all. In the event of SEM’s strict and full compliance with all the requirements of the Mining Act and its Implementing Rules and Regulations, and the concurrence of the small-scale miners actually occupying and actively mining the area, SEM may apply for the inclusion of portions of the areas segregated under paragraph 2 hereof, to its MPSA application. In this light, subject to the preceding paragraph, the contract between JB [JB Management Mining Corporation] and SEM is hereby recognized.Dissatisfied, the Villaflor group and Balite appealed the decision to this Court. SEM, aggrieved by the exclusion of 729 hectares from its MPSA application, likewise appealed. Apex filed a Motion for Leave to Admit Petition for Intervention predicated on its right to stake its claim over the Diwalwal gold rush which was granted by the Court. These cases, however, were remanded to the Court of Appeals for proper disposition pursuant to Rule 43 of the 1997 Rules of Civil Procedure. The Court of Appeals consolidated the remanded cases as CA-G.R. SP No. 61215 and No. 61216.155

VOL. 605, NOVEMBER 20, 2009155Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.

In the assailed Decision dated 13 March 2002, the Court of Appeals affirmed in toto the decision of the PA and declared null and void the MAB decision.The Court of Appeals, banking on the premise that the SEM is the agent of MMC by virtue of its assignment of EP 133 in favor of SEM and the purported fact that SEM is a 100% subsidiary of MMC, ruled that the transfer of EP 133 was valid. It argued that since SEM is an agent of MMC, the assignment of EP 133 did not violate the condition therein prohibiting its transfer except to MMC’s duly designated agent. Thus, despite the non-renewal of EP 133 on 6 July 1994, the Court of Appeals deemed it relevant to declare EP 133 as valid since MMC’s mining rights were validly transferred to SEM prior to its expiration.The Court of Appeals also ruled that MMC’s right to explore under EP 133 is a property right which the 1987 Constitution protects and which cannot be divested without the holder’s consent. It stressed that MMC’s failure to proceed with the extraction and utilization of minerals did not diminish its vested right to explore because its failure was not attributable to it.Reading Proclamation No. 369, Section 11 of Commonwealth Act 137, and Sections 6, 7, and 8 of Presidential Decree No. 463, the Court of Appeals concluded that the issuance of DAO No. 66 was done by the DENR Secretary beyond his power for it is the President who has the sole power to withdraw from the forest reserve established under Proclamation No. 369 as non-forest land for mining purposes. Accordingly, the segregation of 729 hectares of mining areas from the coverage of EP 133 by the MAB was unfounded.The Court of Appeals also faulted the DENR Secretary in implementing DAO No. 66 when he awarded the 729 hectares segregated from the coverage area of EP 133 to other corporations who were not qualified as small-scale miners under Republic Act No. 7076.As to the petitions of Villaflor and company, the Court of Appeals argued that their failure to submit the sketch plan to the PA, which is a jurisdictional requirement, was fatal to their appeal. It likewise stated the Villaflor and company’s

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mining claims, which were based on their alleged rights under DAO No. 66, cannot stand as DAO No. 66 was null and void. The dispositive portion of the Decision decreed:156

156SUPREME COURT REPORTS ANNOTATEDApex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.WHEREFORE, premises considered, the Petition of Southeast Mindanao Gold Mining Corporation is GRANTED while the Petition of Rosendo Villaflor, et al., is DENIED for lack of merit. The Decision of the Panel of Arbitrators dated 13 June 1997 is AFFIRMED in toto and the assailed MAB Decision is hereby SET ASIDE and declared as NULL and VOID.Hence, the instant Petitions for Review on Certiorari under Rule 45 of the Rules of Court filed by Apex, Balite and MAB.During the pendency of these Petitions, President Gloria Macapagal-Arroyo issued Proclamation No. 297 dated 25 November 2002. This proclamation excluded an area of 8,100 hectares located in Monkayo, Compostela Valley, and proclaimed the same as mineral reservation and as environmentally critical area. Subsequently, DENR Administrative Order No. 2002-18 was issued declaring an emergency situation in the Diwalwal gold rush area and ordering the stoppage of all mining operations therein. Thereafter, Executive Order No. 217 dated 17 June 2003 was issued by the President creating the National Task Force Diwalwal which is tasked to address the situation in the Diwalwal Gold Rush Area.In G.R. No. 152613 and No. 152628, Apex raises the following issues:IWHETHER OR NOT SOUTHEAST MINDANAO GOLD MINING’S [SEM] E.P. 133 IS NULL AND VOID DUE TO THE FAILURE OF MARCOPPER TO COMPLY WITH THE TERMS AND CONDITIONS PRESCRIBED IN EP 133.IIWHETHER OR NOT APEX HAS A SUPERIOR AND PREFERENTIAL RIGHT TO STAKE IT’S CLAIM OVER THE

ENTIRE 4,941 HECTARES AGAINST SEM AND THE OTHER CLAIMANTS PURSUANT TO THE TIME-HONORED PRINCIPLE IN MINING LAW THAT “PRIORITY IN TIME IS PRIORITY IN RIGHT.”In G.R. No. 152619-20, Balite anchors its petition on the following grounds:157

VOL. 605, NOVEMBER 20, 2009157Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.IWHETHER OR NOT THE MPSA OF SEM WHICH WAS FILED NINE (9) DAYS LATE (JUNE 23, 1994) FROM THE FILING OF THE MPSA OF BALITE WHICH WAS FILED ON JUNE 14, 1994 HAS A PREFERENTIAL RIGHT OVER THAT OF BALITE.IIWHETHER OR NOT THE DISMISSAL BY THE PANEL OF ARBITRATORS OF THE ADVERSE CLAIM OF BALITE ON THE GROUND THAT BALITE FAILED TO SUBMIT THE REQUIRED SKETCH PLAN DESPITE THE FACT THAT BALITE, HAD IN FACT SUBMITTED ON TIME WAS A VALID DISMISSAL OF BALITE’S ADVERSE CLAIM.IIIWHETHER OR NOT THE ACTUAL OCCUPATION AND SMALL-MINING OPERATIONS OF BALITE PURSUANT TO DAO 66 IN THE 729 HECTARES WHICH WAS PART OF THE 4,941.6759 HECTARES COVERED BY ITS MPSA WHICH WAS REJECTED BY THE BUREAU OF MINES AND GEOSCIENCES WAS ILLEGAL.In G.R. No. 152870-71, the MAB submits two issues, to wit:IWHETHER OR NOT EP NO. 133 IS STILL VALID AND SUBSISTING.IIWHETHER OR NOT THE SUBSEQUENT ACTS OF THE GOVERNMENT SUCH AS THE ISSUANCE OF DAO NO. 66, PROCLAMATION NO. 297, AND EXECUTIVE ORDER 217 CAN OUTWEIGH EP NO. 133 AS WELL AS OTHER ADVERSE CLAIMS OVER THE DIWALWAL GOLD RUSH AREA.

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The common issues raised by petitioners may be summarized as follows:I. Whether or not the Court of Appeals erred in upholding the validity and continuous existence of EP 133 as well as its transfer to SEM;158

158SUPREME COURT REPORTS ANNOTATEDApex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.II. Whether or not the Court of Appeals erred in declaring that the DENR Secretary has no authority to issue DAO No. 66; andIII. Whether or not the subsequent acts of the executive department such as the issuance of Proclamation No. 297, and DAO No. 2002-18 can outweigh Apex and Balite’s claims over the Diwalwal Gold Rush Area.On the first issue, Apex takes exception to the Court of Appeals’ ruling upholding the validity of MMC’s EP 133 and its subsequent transfer to SEM asserting that MMC failed to comply with the terms and conditions in its exploration permit, thus, MMC and its successor-in-interest SEM lost their rights in the Diwalwal Gold Rush Area. Apex pointed out that MMC violated four conditions in its permit. First, MMC failed to comply with the mandatory work program, to complete exploration work, and to declare a mining feasibility. Second, it reneged on its duty to submit an Environmental Compliance Certificate. Third, it failed to comply with the reportorial requirements. Fourth, it violated the terms of EP 133 when it assigned said permit to SEM despite the explicit proscription against its transfer.Apex likewise emphasizes that MMC failed to file its MPSA application required under DAO No. 82 which caused its exploration permit to lapse because DAO No. 82 mandates holders of exploration permits to file a Letter of Intent and a MPSA application not later than 17 July 1991. It said that because EP 133 expired prior to its assignment to SEM, SEM’s MPSA application should have been evaluated on its own merit.

As regards the Court of Appeals recognition of SEM’s vested right over the disputed area, Apex bewails the same to be lacking in statutory bases. According to Apex, Presidential Decree No. 463 and Republic Act No. 7942 impose upon the claimant the obligation of actually undertaking exploration work within the reserved lands in order to acquire priority right over the area. MMC, Apex claims, failed to conduct the necessary exploration work, thus, MMC and its successor-in-interest SEM lost any right over the area.In its Memorandum, Balite maintains that EP 133 of MMC, predecessor-in-interest of SEM, is an expired and void permit which cannot be made the basis of SEM’s MPSA application.159

VOL. 605, NOVEMBER 20, 2009159Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.Similarly, the MAB underscores that SEM did not acquire any right from MMC by virtue of the transfer of EP 133 because the transfer directly violates the express condition of the exploration permit stating that “it shall be for the exclusive use and benefit of the permittee or his duly authorized agents.” It added that while MMC is the permittee, SEM cannot be considered as MMC’s duly designated agent as there is no proof on record authorizing SEM to represent MMC in its business dealings or undertakings, and neither did SEM pursue its interest in the permit as an agent of MMC. According to the MAB, the assignment by MMC of EP 133 in favor of SEM did not make the latter the duly authorized agent of MMC since the concept of an agent under EP 133 is not equivalent to the concept of assignee. It finds fault in the assignment of EP 133 which lacked the approval of the DENR Secretary in contravention of Section 25 of Republic Act No. 7942 requiring his approval for a valid assignment or transfer of exploration permit to be valid.SEM, on the other hand, counters that the errors raised by petitioners Apex, Balite and the MAB relate to factual and

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evidentiary matters which this Court cannot inquire into in an appeal by certiorari.”Effects of the Decision

The decision affirms the application in this jurisdiction of the Regalian Doctrine, which means that the State has dominion over all agricultural, timber and mineral lands. It also affirms that Proclamation 297 dated November 25, 2002 was a constitutionally-sanctioned act.Proclamation 297 has excluded 8,100 hectares of mineral land in Monkayo, Compostela Valley, and has declared that:“x x x. Mining operations in the area may be undertaken either by the DENR directly, subject to payment of just compensation that may be due to legitimate and existing claimants, or thru a qualified contractor, subject to existing rights, if any.”It is clear that under the Proclamation 297 regime of exploration, development and utilization of mineral resources within the Diwalwal Gold Rush Area, the State is bound to160

160SUPREME COURT REPORTS ANNOTATEDApex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.either pay lawful claimants just compensation (should it elect to operate the mine directly), or to honor existing rights (should it choose to outsource mining operations to a service contractor). The priority right of an interested party is only deemed superseded by Proclamation 297 and DENR Administrative Order (DAO) 2002-18 if the State elects to directly undertake mining operations in the Diwalwal Gold Rush Area (but nonetheless requires the State to pay just compensation that may be due to legitimate and existing claimants). If the State chooses to outsource mining operations to a service contractor, Proclamation 297 mandates that the existing rights should still be recognized and honored.Yet, the decision states that:

“The issue on who has priority right over the disputed area is deemed overtaken by the above subsequent developments particularly with the issuance of Proclamation 297 and DAO No. 2002-18, both being constitutionally-sanctioned acts of the Executive Branch. Mining operations in the Diwalwal Mineral Reservation are now, therefore, within the full control of the State through the executive branch. Pursuant to Section 5 of Republic Act No. 7942, the State can either directly undertake the exploration, development and utilization of the area or it can enter into agreements with qualified entities, viz:SEC. 5. Mineral Reservations.—When the national interest so requires, such as when there is a need to preserve strategic raw materials for industries critical to national development, or certain minerals for scientific, cultural or ecological value, the President may establish mineral reservations upon the recommendation of the Director through the Secretary. Mining operations in existing mineral reservations and such other reservations as may thereafter be established, shall be undertaken by the Department or through a contractor x x x.”It is now up to the Executive Department whether to take the first option, i.e., to undertake directly the mining operations of the Diwalwal Gold Rush Area. As already ruled, the State may not be precluded from considering a direct takeover of the mines, if it is the only plausible remedy in161

VOL. 605, NOVEMBER 20, 2009161Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.sight to the gnawing complexities generated by the gold rush. The State need be guided only by the demands of public interest in settling on this option, as well as its material and logistic feasibility. The State can also opt to award mining operations in the mineral reservation to private entities including petitioners Apex and Balite, if it wishes. The exercise of this prerogative lies with the Executive Department over which courts will not interfere.”

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That the aforequoted passage of the decision, particularly the highlighted portion, has generated interpretation by the parties causes me to pause in order to ask whether the issuance of Proclamation 297 declaring the disputed area as a mineral reservation outweighs the claims of Apex and Balite over the Diwalwal Gold Rush Area; and which between Apex and Balite will have priority once the Government opts to award mining operations in the mineral reservation to private entities, including Apex and Balite, if it so wishes.I humbly submit that the answers to these questions should be given by the Court now, not later, if we are to prevent another round of litigation that will surely undermine the efforts of the Government to establish a new order of peace, development and prosperity in the Diwalwal Gold Rush Area.I also submit that these questions are entirely justiciable in the present case. We have already eliminated the claim of SEM and its parent company, Marcopper Mining Corporation (MMC), due to the latter’s numerous violations of the terms of Exploration Permit (EP) 133, which meanwhile expired without being renewed. The issuance of Proclamation 297, and the declaration by this Court of the nullity of DAO No. 66 (declaring 729 hectares within the Agusan-Davao-Surigao Forest Reserve as non-forest land open to small-scale mining operations) necessitate a final and definitive determination of the existing right of the remaining claimants in this dispute, who can replace SEM and fill the void created by the expiration of EP 133.162

162SUPREME COURT REPORTS ANNOTATEDApex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.I have no difficulty in understanding from the decision that the remaining claimants are Apex and Balite.Submissions

The right of a legitimate and existing claimant envisioned in Proclamation 297 (i.e., “Mining operations in the area may

be undertaken either by the DENR directly, subject to payment of just compensation that may be due to legitimate and existing claimants, or thru a qualified contractor, subject to existing rights, if any”) is a real right acquired over time by a person who discovered mineral deposits, and was first to stake his claim through location and registration with the mining recorder.Under Philippine mining laws, which are essentially patterned after Anglo-American models, the location and registration of a mining claim must be followed by actual exploration and extraction of mineral deposits. The person who is first to locate and register his mining claim and who subsequently explores the area and extracts mineral deposits has a valid and existing right regardless of technical defect in the registration.Which between Apex and Balite has priority?On the one hand, Apex rests its claim to priority on the precept of first-in-time, first-in-right, a principle that is explicitly recognized by Section 1 of Presidential Decree (P.D.) No. 99-A, which amended Commonwealth Act (C.A.) No. 137 (Mining Act), which provides:“Whenever there is a conflict between claim owners over a mining claim, whether mineral or non-mineral, the locator of the claim who first registered his claim with the proper mining registrar, notwithstanding any defect in form or technicality, shall have the exclusive right to possess, exploit, explore, develop and operate such mining claim.”163

VOL. 605, NOVEMBER 20, 2009163Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.Apex argues that Proclamation 297 does not extinguish its existing right over Diwalwal Gold Rush Area, because: (1) it conducted exploration work in the area from 1983 to 1991; (2) it spent a total of P15 million on exploration and development work alone; and (3) its petition for intervention was admitted by the Court in this case, which was indicative of its existing right over the disputed area.

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On the other hand, Balite states that it filed on June 14, 1994 its application for a Mineral Production Sharing Agreement (MPSA) ahead of SEM; and that it had an existing right over the disputed area by virtue of its native title right under R.A. No. 8371 (IPRA),2 because its members are indigenous peoples (IPs) belonging to the four tribes of Mangguangan, Manobo, Mandaya and Dibabawon.During the oral arguments, Balite’s counsel described Balite as a “cooperative for everybody,” for its members were comprised of nomads, lowlanders, and IPs belonging to the four tribes thus mentioned. Balite further asserts that it is a small-scale mining cooperative, as defined under R.A. No. 7076, and is thus entitled to apply for 25% percent of the Diwalwal mineral reservation.Under the circumstances, it should be Apex who should be recognized as the claimant with priority, with or without Proclamation 297.Firstly: Being a cooperative whose principal purpose is to engage in the business of mining, and not in the protection of the rights and interest of cultural minorities, Balite is not entitled to preference by virtue of IPRA. I must point out that IPRA speaks of rights of IPs, and of those belonging to the Indigenous Cultural Communities (ICCs), but does not include a cooperative like Balite. Under Sec. 7(b) of IPRA, only IPs and ICCs have the right to “manage and conserve natural resources within the territories and uphold the responsibili-_______________

2 Indigenous People’s Rights Act of 1997.163

VOL. 605, NOVEMBER 20, 2009163Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.ties for future generations; to benefit and share the profits from the allocation and utilization of natural resources.” IPs and ICCs have also the “right to negotiate the terms and conditions for the exploration of natural resources.”

I hasten to clarify, however, that in order to protect the rights of its IP members over certain portions of the Diwalwal mineral reservation, Balite may represent its IP members in negotiating the terms and conditions for the sharing of profit and other benefits arising from the utilization of the mineral deposits that lay beneath their ancestral land with the service contractor chosen by the State, but it cannot directly undertake exploration, development and mining in the Diwalwal mineral reservation.Secondly: Upon learning of MMC’s assignment of its EP 133 to SEM, Balite filed with the Regional Executive Director of the Department of Environment and Natural Resources (DENR) a petition seeking the cancellation of EP 133, and the admission of its MPSA (entitled Rosendo Villaflor, et al. v. Marcopper Mining Corporation and docketed as RED MINES Case No. 8-8-94). The petition was referred to the Panel of Arbitrator (PA) pursuant to R.A. No. 7942.Yet, Balite’s application for an MPSA, although filed prior to SEM’s application, did not qualify Balite as a first locator and registrant of a mining claim, because Apex had registered its claims with the Bureau of Mines and Geo-Sciences (BMG) in 1982, much earlier than either Balite, or any other claimant.Thirdly: While discovery and prior registration of a mining claim with the mining recorder pave the way for a claimant to acquire a priority right over mineral land, it is also important that the claimant must follow his discovery and registration with actual exploration and mining. The final stage of exploration, development and utilization is crucial to bestow upon the discoverer or first registrant an existing right that he can invoke against the whole world, even against the government.165

VOL. 605, NOVEMBER 20, 2009165Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.

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Apex met the requirements of discovery, registration, actual exploration and mining. In 1982, it explored and developed the area covered by its claims located within the Diwalwal mineral reservation. It constructed mining tunnels, access roads and bridges in and around its mine site to facilitate the extraction and processing of gold ores. It sold tons of gold bullions to the Philippine government from 1982 to 1992, and remitted millions of pesos in tax revenues to the national coffers. It operated a modern gold processing plant, as contrasted from gold panners who used crude mining techniques to extract gold ores.Fourthly: The primordial consideration for granting or recognizing the existence of real rights over mineral lands is discovery. The State rewards the discoverer of mineral deposits for his labor and perseverance, and encourages other persons to search for more minerals and sources of renewable energy to propel the Nation’s economic growth and development. For this reason, the Philippines adheres to the first-in-time, first-in-right postulate not only in resolving disputes involving conflicting claims, but also in determining existing rights of claimants.In view of the foregoing, Apex has an existing priority right in the Diwalwal mineral reservation by virtue of first-in-time, first-in-right, for having performed the requisite acts of location and registration, followed by actual exploration and mining. Although it did not follow the procedure for registering its mining claim laid down in the Apex Mining Co., Inc. v. Garcia (G.R. No. 92605, July 16, 1991, 199 SCRA 278), Apex is not barred from acquiring a superior right over the area to the exclusion of other claimants, because the registration of its claims pre-dated that of the other claimants, including MMC, and because by express provision of law (i.e., Sec. 1 of P.D. No. 99-A, which amended C.A. No. 137, Mining Act, supra) no defect in form or technicality should bar the priority.166

166SUPREME COURT REPORTS ANNOTATED

Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.Fifthly: That the Court in Apex Mining Co., Inc. v. Garcia affirmed the decision of the OP and the DENR nullifying and rendering inoperative Apex’s mining claims or declarations of location (DOLs) is of no moment. The priority right of Apex that this Court ought to recognize herein, which the State must honor, does not emanate from the DOLs, but is predicated on the principle of first-in-time, first-in-right. The right of Apex to be recognized herein is distinct from its right as a registered owner and operator of the DOLs, considering that the former arises from a vacuum resulting from the extinction and nullification of MMC’s EP 133.Conclusion

I vote to grant the motion for clarification of Apex Mining Co., Inc., and to modify the decision by declaring that Apex Mining Co., Inc. has an existing priority right to explore, develop and utilize the mineral deposits in the Diwalwal Gold Rush Area pursuant to Proclamation 297, subject only to the superior right of the State to directly explore, develop and utilize.Motions for Reconsideration denied; Motion for Clarification of Apex Mining Co., Inc. and Manifestation and Motion of Balite Communal Portal Mining Cooperative denied; Manifestation and Urgent Motion dated 25 January 2007 of Southern Mindanao Gold Mining Corporation denied; State may now award mining operations in disputed area to any qualified entities.Note.—As a general rule, prospecting and exploration of minerals in a government reservation is prohibited under Section 13 of Presidential Decree No. 463. (PNOC-Energy Development Corporation (PNOC-EDC) vs. Veneracion, Jr., 509 SCRA 93 [2006])——o0o——  [Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp., 605 SCRA 100(2009)]

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G.R. Nos. 152613 & No. 152628. June 23, 2006.*APEX MINING CO., INC., petitioner, vs. SOUTHEAST MINDANAO GOLD MINING CORP., THE MINES ADJUDICATION BOARD, PROVINCIAL MINING REGULATORY BOARD (PMRB-DAVAO), MONKAYO INTEGRATED SMALL SCALE MINERS ASSOCIATION, INC., ROSENDO VILLAFLOR, BALITE COMMUNAL PORTAL MINING COOPERATIVE, DAVAO UNITED MINERS COOPERATIVE, ANTONIO DACUDAO, PUTING-BATO GOLD MINERS COOPERATIVE, ROMEO ALTAMERA, THELMA CATAPANG, LUIS GALANG, RENATO BASMILLO, FRANCISCO YOBIDO, EDUARDO GLORIA, EDWIN ASION, MACARIO HERNANDEZ, REYNALDO CARUBIO, ROBERTO BUNIALES, RUDY ESPORTONO, ROMEO CASTILLO, JOSE REA, GIL GANADO, PRIMITIVA LICAYAN, LETICIA ALQUEZA and JOEL

BRILLANTES MANAGEMENT MINING CORPORATION, respondents.G.R. Nos. 152619-20. June 23, 2006.*BALITE COMMUNAL PORTAL MINING COOPERATIVE, petitioner, vs. SOUTHEAST MINDANAO GOLD MINING CORP., APEX MINING CO., INC., THE MINES ADJUDICATION BOARD, PROVINCIAL MINING REGULATORY BOARD (PMRB-DAVAO), MONKAYO INTEGRATED SMALL SCALE MINERS ASSOCIATION, INC., ROSENDO VILLAFLOR, DAVAO UNITED MINERS COOPERATIVE, ANTONIO DACUDAO, PUTING-BATO GOLD MINERS COOPERATIVE, ROMEO ALTAMERA, THELMA CATAPANG, LUIS GALANG, RENATO BASMILLO, FRANCISCO YOBIDO, EDUARDO GLORIA, EDWIN ASION, MACARIO HERNANDEZ, REYNALDO CARUBIO, ROBERTO BUNIALES, RUDY ESPORTONO, ROMEO CASTILLO, JOSE REA, GIL GANADO, PRIMITIVA LICAYAN, LETICIA ALQUEZA_______________

* FIRST DIVISION.356

356SUPREME COURT REPORTS ANNOTATEDApex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.and JOEL BRILLANTES MANAGEMENT MINING CORPORATION, respondents.G.R. Nos. 152870-71. June 23, 2006.*THE MINES ADJUDICATION BOARD AND ITS MEMBERS, THE HON. VICTOR O. RAMOS (Chairman), UNDERSECRETARY VIRGILIO MARCELO (Member) and DIRECTOR HORACIO RAMOS (Member), petitioners, vs. SOUTHEAST MINDANAO GOLD MINING CORPORATION, respondent.Appeals; The established rule is that in the exercise of the Supreme Court’s power of review, the Court not being a trier of facts, does not normally embark on a re-examination of the evidence presented by the contending parties during the trial of the case considering that the findings of facts of the Court of Appeals are conclusive and binding on the Court; Exceptions.—The established rule is that in the

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exercise of the Supreme Court’s power of review, the Court not being a trier of facts, does not normally embark on a re-examination of the evidence presented by the contending parties during the trial of the case considering that the findings of facts of the Court of Appeals are conclusive and binding on the Court. This rule, however, admits of exceptions as recognized by jurisprudence, to wit: (1) [w]hen the findings are grounded entirely on speculation, surmises or conjectures; (2) when the inference made is manifestly mistaken, absurd or impossible; (3) when there is grave abuse of discretion; (4) when the judgment is based on misapprehension of facts; (5) when the findings of facts are conflicting; (6) when in making its findings the Court of Appeals went beyond the issues of the case, or its findings are contrary to the admissions of both the appellant and the appellee; (7) when the findings are contrary to the trial court; (8) when the findings are conclusions without citation of specific evidence on which they are based; (9) when the facts set forth in the petition as well as in the petitioner’s main and reply briefs are not disputed by the respondent; (10) when the findings of fact are premised on the supposed absence of evidence and contradicted by the evidence on record; and (11) when the Court of Appeals manifestly overlooked certain relevant facts not disputed by the parties, which, if properly considered, would justify a different conclusion._______________

* FIRST DIVISION.357

VOL. 492, JUNE 23, 2006357Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.Natural Resources; Mines; Administrative Law; The power of administration over mineral lands and minerals vested on the Director of Mines includes the power to prescribe terms and conditions in granting exploration permits to qualified entities.—Under Section 90 of Presidential Decree No. 463,

the applicable statute during the issuance of EP 133, the DENR Secretary, through Director of BMG, is charged with carrying out the said law. Also, under Commonwealth Act No. 136, also known as “An Act Creating The Bureau of Mines,” which was approved on 7 November 1936, the Director of Mines has the direct charge of the administration of the mineral lands and minerals, and of the survey, classification, lease or any other form of concession or disposition thereof under the Mining Act. This power of administration includes the power to prescribe terms and conditions in granting exploration permits to qualified entities. Thus, in the grant of EP 133 in favor of the MMC, the Director of the BMG acted within his power in laying down the terms and conditions attendant thereto.Same; Same; Corporation Law; Agency; Elements; The mere fact that an entity may be a 100% subsidiary corporation of another corporation does not necessarily mean that the former is a duly authorized agent of the latter—for a contract of agency to exist, it is essential that the principal consents that the other party, the agent, shall act on its behalf, and the agent consents so as to act.—Condition number 6 categorically states that the permit shall be for the exclusive use and benefit of MMC or its duly authorized agents. While it may be true that SEM, the assignee of EP 133, is a 100% subsidiary corporation of MMC, records are bereft of any evidence showing that the former is the duly authorized agent of the latter. For a contract of agency to exist, it is essential that the principal consents that the other party, the agent, shall act on its behalf, and the agent consents so as to act. In the case of Yu Eng Cho v. Pan American World Airways, Inc., 328 SCRA 717, 728 (2000), this Court had the occasion to set forth the elements of agency, viz.: (1) consent, express or implied, of the parties to establish the relationship; (2) the object is the execution of a juridical act in relation to a third person; (3) the agent acts as a representative and not for himself; (4) the agent acts within the scope of his authority. The existence of the elements of agency is a factual matter that needs to be established or proven by evidence. The burden of proving

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that agency is extant in a certain case rests in the party who sets forth such allegation. This is based on the princi-358

358SUPREME COURT REPORTS ANNOTATEDApex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.ple that he who alleges a fact has the burden of proving it. It must likewise be emphasized that the evidence to prove this fact must be clear, positive and convincing.Same; Same; Same; Same; Assignment; Words and Phrases; Where an entity is not an agent of a corporation who was earlier granted an Exploration Permit, the assignment or transfer made by the latter in favor of the former is null and void for directly contravening the terms and conditions of the grant of said Exploration Permit; The concept of agency is distinct from assignment—in agency, the agent acts not on his own but on behalf of his principal, while in assignment, there is total transfer or relinquishment of right by the assignor to the assignee.—In the instant Petitions, it is incumbent upon either MMC or SEM to prove that a contract of agency actually exists between them so as to allow SEM to use and benefit from EP 133 as the agent of MMC. SEM did not claim nor submit proof that it is the designated agent of MMC to represent the latter in its business dealings or undertakings. SEM cannot, therefore, be considered as an agent of MMC which can use EP 133 and benefit from it. Since SEM is not an authorized agent of MMC, it goes without saying that the assignment or transfer of the permit in favor of SEM is null and void as it directly contravenes the terms and conditions of the grant of EP 133. Furthermore, the concept of agency is distinct from assignment. In agency, the agent acts not on his own behalf but on behalf of his principal. While in assignment, there is total transfer or relinquishment of right by the assignor to the assignee.The assignee takes the place of the assignor and is no longer bound to the latter.Same; Same; Same; Same; Same; Exploration permits are strictly granted to entities or individuals possessing the

resources and capability to undertake mining operations.—The condition stipulating that the permit is for the exclusive use of the permittee or its duly authorized agent is not without any reason. Exploration permits are strictly granted to entities or individuals possessing the resources and capability to undertake mining operations. Without such a condition, non-qualified entities or individuals could circumvent the strict requirements under the law by the simple expediency acquiring the permit from the original permittee.Same; Same; Same; Same; Same; The Court cannot lend recognition to the Court of Appeals’ theory that a 100% subsidiary of another corporation is automatically an agent of the latter—a corpora-359

VOL. 492, JUNE 23, 2006359Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.tion is an artificial being created by operation of law, having the right of succession and the powers, attributes, and properties expressly authorized by law or incident to its existence.—We cannot lend recognition to the Court of Appeals’ theory that SEM, being a 100% subsidiary of MMC, is automatically an agent of MMC. A corporation is an artificial being created by operation of law, having the right of succession and the powers, attributes, and properties expressly authorized by law or incident to its existence. It is an artificial being invested by law with a personality separate and distinct from those of the persons composing it as well as from that of any other legal entity to which it may be related. Resultantly, absent any clear proof to the contrary, SEM is a separate and distinct entity from MMC.Same; Same; Same; Same; Same; Doctrine of Piercing the Veil of Corporate Fiction; The doctrine of piercing the corporate veil cannot be used as a vehicle to commit prohibited acts because these acts are the ones which the doctrine seeks to prevent—the assignment of the Exploration Permit in favor of another corporation is utilized

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to circumvent the condition of non-transferability.—The Court of Appeals pathetically invokes the doctrine of piercing the corporate veil to legitimize the prohibited transfer or assignment of EP 133. It stresses that SEM is just a business conduit of MMC, hence, the distinct legal personalities of the two entities should not be recognized. True, the corporate mask may be removed when the corporation is just an alter ego or a mere conduit of a person or of another corporation. For reasons of public policy and in the interest of justice, the corporate veil will justifiably be impaled only when it becomes a shield for fraud, illegality or inequity committed against a third person. However, this Court has made a caveat in the application of the doctrine of piercing the corporate veil. Courts should be mindful of the milieu where it is to be applied. Only in cases where the corporate fiction was misused to such an extent that injustice, fraud or crime was committed against another, in disregard of its rights may the veil be pierced and removed. Thus, a subsidiary corporation may be made to answer for the liabilities and/or illegalities done by the parent corporation if the former was organized for the purpose of evading obligations that the latter may have entered into. In other words, this doctrine is in place in order to expose and hold liable a corporation which commits illegal acts and use the corporate fiction to avoid liability from the said acts. The doctrine of piercing the corporate veil cannot therefore be used as a vehicle to360

360SUPREME COURT REPORTS ANNOTATEDApex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.commit prohibited acts because these acts are the ones which the doctrine seeks to prevent. To our mind, the application of the foregoing doctrine is unwarranted. The assignment of the permit in favor of SEM is utilized to circumvent the condition of non-transferability of the exploration permit. To allow SEM to avail itself of this doctrine and to approve the validity of the assignment is

tantamount to sanctioning illegal act which is what the doctrine precisely seeks to forestall.Same; Same; Same; Same; Same; Absent prior approval of the Secretary of the Department of Environment and Natural Resources, the assignment of an Exploration Permit is without legal effect.—The records are bereft of any indication that the assignment bears the imprimatur of the Secretary of the DENR. Presidential Decree No. 463, which is the governing law when the assignment was executed, explicitly requires that the transfer or assignment of mining rights, including the right to explore a mining area, must be with the prior approval of the Secretary of DENR. Quite conspicuously, SEM did not dispute the allegation that the Deed of Assignment was made without the prior approval of the Secretary of DENR. Absent the prior approval of the Secretary of DENR, the assignment of EP 133, was, therefore, without legal effect for violating the mandatory provision of Presidential Decree No. 463.Same; Same; Same; The DENR Secretary has no power to convert forest reserves into non-forest reserves.—Against the backdrop of the applicable statutes which govern the issuance of DAO No. 66, this Court is constrained to rule that said administrative order was issued not in accordance with the laws. Inescapably, DAO No. 66, declaring 729 hectares of the areas covered by the Agusan-Davao-Surigao Forest Reserve as non-forest land open to small-scale mining operations, is null and void as, verily, the DENR Secretary has no power to convert forest reserves into non-forest reserves.Same; Same; Upon the effectivity of the 1987 Constitution, the State assumed a more dynamic role in the exploration, development and utilization of the natural resources of the country.—Upon the effectivity of the 1987 Constitution, the State assumed a more dynamic role in the exploration, development and utilization of the natural resources of the country. With this policy, the State may pursue full control and supervision of the exploration, development361

VOL. 492, JUNE 23, 2006

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361Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.and utilization of the country’s natural mineral resources. The options open to the State are through direct undertaking or by entering into co-production, joint venture, or production-sharing agreements, or by entering into agreement with foreign-owned corporations for large-scale exploration, development and utilization.Same; Same; Mining operations in the Diwalwal Mineral Reservation are now within the full control of the State through the executive branch, and pursuant to Section 5 of Republic Act No. 7942, the State can either directly undertake the exploration, development and utilization of the area or it can enter into agreements with qualified entities.—Recognizing the importance of the country’s natural resources, not only for national economic development, but also for its security and national defense, Section 5 of Republic Act No. 7942 empowers the President, when the national interest so requires, to establish mineral reservations where mining operations shall be undertaken directly by the State or through a contractor. To implement the intent and provisions of Proclamation No. 297, the DENR Secretary issued DAO No. 2002-18 dated 12 August 2002 declaring an emergency situation in the Diwalwal Gold Rush Area and ordering the stoppage of all mining operations therein. The issue on who has priority right over the disputed area is deemed overtaken by the above subsequent developments particularly with the issuance of Proclamation 297 and DAO No. 2002-18, both being constitutionally-sanctioned acts of the Executive Branch. Mining operations in the Diwalwal Mineral Reservation are now, therefore, within the full control of the State through the executive branch. Pursuant to Section 5 of Republic Act No. 7942, the State can either directly undertake the exploration, development and utilization of the area or it can enter into agreements with qualified entities.Same; Same; The State may not be precluded from considering a direct takeover of the mines, if it is the only plausible remedy in sight to the gnawing complexities

generated by the gold rush.—It is now up to the Executive Department whether to take the first option, i.e., to undertake directly the mining operations of the Diwalwal Gold Rush Area. As already ruled, the State may not be precluded from considering a direct takeover of the mines, if it is the only plausible remedy in sight to the gnawing complexities generated by the gold rush. The State need be guided only by the demands of public interest in settling on this option, as well as its material and logistic feasibility. The State can also opt to award mining op-362

362SUPREME COURT REPORTS ANNOTATEDApex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.erations in the mineral reservation to private entities including petitioners Apex and Balite, if it wishes. The exercise of this prerogative lies with the Executive Department over which courts will not interfere.PETITIONS for review on certiorari of a decision of the Court of Appeals.The facts are stated in the opinion of the Court.     Amado L. Cantos for Davao United Miners Cooperative, et al.     Jesus T. Albacite for Provincial Mining Regulatory Board of Davao.     Martin T. Lu for Rosendo Villaflor, et al.     Rodolfo C. Rapista for Balite Communal Portal Mining Cooperative.     Clarence D. Guerrero and Cesar T. Jayme for Apex Mining Co., Inc.     Kapunan, Imperial, Paraguiton & Bongolan for MISMA.     Quasha, Ancheta, Peña & Nolasco Law Office for Southeast Mindanao Gold Mining Corporation.CHICO-NAZARIO, J.:

On 27 February 1931, Governor General Dwight F. Davis issued Proclamation No. 369, establishing the Agusan-

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Davao-Surigao Forest Reserve consisting of approximately 1,927,400 hectares.1The disputed area, a rich tract of mineral land, is inside the forest reserve located at Monkayo, Davao del Norte, and Cateel, Davao Oriental, consisting of 4,941.6759 hectares.2 This mineral land is encompassed by Mt. Diwata, which is situated in the municipalities of Monkayo and Cateel. It later became known as the “Diwalwal Gold Rush Area.” It has_______________

1 Records, Vol. 2, pp. 7-11.2 Id., Vol.1, p. 90.363

VOL. 492, JUNE 23, 2006363Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.since the early 1980’s been stormed by conflicts brought about by the numerous mining claimants scrambling for gold that lies beneath its bosom.On 21 November 1983, Camilo Banad and his group, who claimed to have first discovered traces of gold in Mount Diwata, filed a Declaration of Location (DOL) for six mining claims in the area.Camilo Banad and some other natives pooled their skills and resources and organized the Balite Communal Portal Mining Cooperative (Balite).3On 12 December 1983, Apex Mining Corporation (Apex) entered into operating agreements with Banad and his group. From November 1983 to February 1984, several individual applications for mining locations over mineral land covering certain parts of the Diwalwal gold rush area were filed with the Bureau of Mines and Geo-Sciences (BMG).On 2 February 1984, Marcopper Mining Corporation (MMC) filed 16 DOLs or mining claims for areas adjacent to the area covered by the DOL of Banad and his group. After realizing that the area encompassed by its mining claims is a forest reserve within the coverage of Proclamation No. 369 issued by Governor General Davis, MMC abandoned the same and

instead applied for a prospecting permit with the Bureau of Forest Development (BFD).On 1 July 1985, BFD issued a Prospecting Permit to MMC covering an area of 4,941.6759 hectares traversing the municipalities of Monkayo and Cateel, an area within the forest reserve under Proclamation No. 369. The permit embraced the areas claimed by Apex and the other individual mining claimants.On 11 November 1985, MMC filed Exploration Permit Application No. 84-40 with the BMG. On 10 March 1986, the BMG issued to MCC Exploration Permit No. 133 (EP 133)._______________

3 Rollo of G.R. Nos. 152619-20, p. 68.364

364SUPREME COURT REPORTS ANNOTATEDApex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.Discovering the existence of several mining claims and the proliferation of small-scale miners in the area covered by EP 133, MMC thus filed on 11 April 1986 before the BMG a Petition for the Cancellation of the Mining Claims of Apex and Small Scale Mining Permit Nos. (x-1)-04 and (x-1)-05 which was docketed as MAC No. 1061. MMC alleged that the areas covered by its EP 133 and the mining claims of Apex were within an established and existing forest reservation (Agusan-Davao-Surigao Forest Reserve) under Proclamation No. 369 and that pursuant to Presidential Decree No. 463,4 acquisition of mining rights within a forest reserve is through the application for a permit to prospect with the BFD and not through registration of a DOL with the BMG.On 23 September 1986, Apex filed a motion to dismiss MMC’s petition alleging that its mining claims are not within any established or proclaimed forest reserve, and as such, the acquisition of mining rights thereto must be undertaken via registration of DOL with the BMG and not through the filing of application for permit to prospect with the BFD.

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On 9 December 1986, BMG dismissed MMC’s petition on the ground that the area covered by the Apex mining claims and MMC’s permit to explore was not a forest reservation. It further declared null and void MMC’s EP 133 and sustained the validity of Apex mining claims over the disputed area. MMC appealed the adverse order of BMG to the Department of Environment and Natural Resources (DENR).On 15 April 1987, after due hearing, the DENR reversed the 9 December 1996 order of BMG and declared MMC’s EP 133 valid and subsisting._______________

4 Sec. 13. Areas Closed to Mining Location.—No prospecting and exploration shall be allowed:a) In military, or other Government reservations except when authorized by the proper Government agency concerned; x x x. (Apex Mining Co., Inc. v. Garcia, G.R. No. 92605, 16 July 1991, 199 SCRA 278, 284).365

VOL. 492, JUNE 23, 2006365Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.Apex filed a Motion for Reconsideration with the DENR which was subsequently denied. Apex then filed an appeal before the Office of the President. On 27 July 1989, the Office of the President, through Assistant Executive Secretary for Legal Affairs, Cancio C. Garcia,5dismissed Apex’s appeal and affirmed the DENR ruling.Apex filed a Petition for Certiorari before this Court. The Petition was docketed as G.R. No. 92605 entitled, “Apex Mining Co., Inc. v. Garcia.”6 On 16 July 1991, this Court rendered a Decision against Apex holding that the disputed area is a forest reserve; hence, the proper procedure in acquiring mining rights therein is by initially applying for a permit to prospect with the BFD and not through a registration of DOL with the BMG.On 27 December 1991, then DENR Secretary Fulgencio Factoran, Jr. issued Department Administrative Order No. 66

(DAO No. 66) declaring 729 hectares of the areas covered by the Agusan-Davao-Surigao Forest Reserve as non-forest lands and open to small-scale mining purposes.As DAO No. 66 declared a portion of the contested area open to small scale miners, several mining entities filed applications for Mineral Production Sharing Agreement (MPSA).On 25 August 1993, Monkayo Integrated Small Scale Miners Association (MISSMA) filed an MPSA application which was denied by the BMG on the grounds that the area applied for is within the area covered by MMC EP 133 and that the MISSMA was not qualified to apply for an MPSA under DAO No. 82,7Series of 1990._______________

5 Now Associate Justice of the Supreme Court.6 Supra note 4.7 It provides for the procedural guidelines on the award of MPSA through negotiation. It further sets forth the requirements that applicants for MPSA applications shall comply and submit before the proper authority.366

366SUPREME COURT REPORTS ANNOTATEDApex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.On 5 January 1994, Rosendo Villaflor and his group filed before the BMG a Petition for Cancellation of EP 133 and for the admission of their MPSA Application. The Petition was docketed as RED Mines Case No. 8-8-94. Davao United Miners Cooperative (DUMC) and Balite intervened and likewise sought the cancellation of EP 133.On 16 February 1994, MMC assigned EP 133 to Southeast Mindanao Gold Mining Corporation (SEM), a domestic corporation which is alleged to be a 100% -owned subsidiary of MMC.On 14 June 1994, Balite filed with the BMG an MPSA application within the contested area that was later on rejected.

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On 23 June 1994, SEM filed an MPSA application for the entire 4,941.6759 hectares under EP 133, which was also denied by reason of the pendency of RED Mines Case No. 8-8-94. On 1 September 1995, SEM filed another MPSA application.On 20 October 1995, BMG accepted and registered SEM’s MPSA application and the Deed of Assignment over EP 133 executed in its favor by MMC. SEM’s application was designated MPSA Application No. 128 (MPSAA 128). After publication of SEM’s application, the following filed before the BMG their adverse claims or oppositions:a) MAC Case No. 004 (XI)—JB Management Mining Corporation;b) MAC Case No. 005(XI)—Davao United Miners Cooperative;c) MAC Case No. 006(XI)—Balite Integrated Small Scale Miner’s Cooperative;d) MAC Case No. 007(XI)—Monkayo Integrated Small Scale Miner’s Association, Inc. (MISSMA);e) MAC Case No. 008(XI)—Paper Industries Corporation of the Philippines;f) MAC Case No. 009(XI)—Rosendo Villafor, et al.;g) MAC Case No. 010(XI)—Antonio Dacudao;367

VOL. 492, JUNE 23, 2006367Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.h) MAC Case No. 011(XI)—Atty. Jose T. Amacio;i) MAC Case No. 012(XI)—Puting-Bato Gold Miners Cooperative;j) MAC Case No. 016(XI)—Balite Communal Portal Mining Cooperative;k) MAC Case No. 97-01(XI)—Romeo Altamera, et al.8To address the matter, the DENR constituted a Panel of Arbitrators (PA) to resolve the following:(a) The adverse claims on MPSAA No. 128; and(b) The Petition to Cancel EP 133 filed by Rosendo Villaflor docketed as RED Case No. 8-8-94.9

On 13 June 1997, the PA rendered a resolution in RED Mines Case No. 8-8-94. As to the Petition for Cancellation of EP 133 issued to MMC, the PA relied on the ruling in Apex Mining Co., Inc. v. Garcia,10and opined that EP 133 was valid and subsisting. It also declared that the BMG Director, under Section 99 of the Consolidated Mines Administrative Order implementing Presidential Decree No. 463, was authorized to issue exploration permits and to renew the same without limit.With respect to the adverse claims on SEM’s MPSAA No. 128, the PA ruled that adverse claimants’ petitions were not filed in accordance with the existing rules and regulations governing adverse claims because the adverse claimants failed to submit the sketch plan containing the technical description of their respective claims, which was a mandatory requirement for an adverse claim that would allow the PA to determine if indeed there is an overlapping of the area occupied by them and the area applied for by SEM. It added that the adverse claimants were not claim owners but mere occu-_______________

8 Rollo of G.R. Nos. 152870-71, pp. 144-146.9 Id., at p. 76.10 Supra note 4.368

368SUPREME COURT REPORTS ANNOTATEDApex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.pants conducting illegal mining activities at the contested area since only MMC or its assignee SEM had valid mining claims over the area as enunciated in Apex Mining Co., Inc. v. Garcia.11 Also, it maintained that the adverse claimants were not qualified as small-scale miners under DENR Department Administrative Order No. 34 (DAO No. 34),12 or the Implementing Rules and Regulation of Republic Act No. 7076 (otherwise known as the “People’s Small-Scale Mining Act of 1991”), as they were not duly licensed by the DENR

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to engage in the extraction or removal of minerals from the ground, and that they were large-scale miners. The decretal portion of the PA resolution pronounces:“VIEWED IN THE LIGHT OF THE FOREGOING, the validity of Expoloration Permit No. 133 is hereby reiterated and all the adverse claims against MPSAA No. 128 are DISMISSED.”13Undaunted by the PA ruling, the adverse claimants appealed to the Mines Adjudication Board (MAB). In a Decision dated 6 January 1998, the MAB considered erroneous the dismissal by the PA of the adverse claims filed against MMC and SEM over a mere technicality of failure to submit a sketch plan. It argued that the rules of procedure are not meant to defeat substantial justice as the former are merely secondary in importance to the latter. Dealing with the question on EP 133’s validity, the MAB opined that said issue was not crucial and was irrelevant in adjudicating the appealed case because EP 133 has long expired due to its non-renewal and that the holder of the same, MMC, was no longer a claimant of the Agusan-Davao-Surigao Forest Reserve having_______________

11 Id.12 DAO No. 34 defines small-scale miners as “Filipino citizens who individually or in the company of other Filipino citizens, voluntarily form a cooperative duly licensed by the DENR to engage, under the terms and conditions of a contract/license in the extraction or removal of minerals or ore-bearing materials from the ground.”13 Rollo of G.R. Nos. 152870-71, p. 161.369

VOL. 492, JUNE 23, 2006369Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.relinquished its right to SEM. After it brushed aside the issue of the validity of EP 133 for being irrelevant, the MAB proceeded to treat SEM’s MPSA application over the disputed area as an entirely new and distinct application. It approved the MPSA application, excluding the area

segregated by DAO No. 66, which declared 729 hectares within the Diwalwal area as non-forest lands open for small-scale mining. The MAB resolved:“WHEREFORE, PREMISES CONSIDERED, the decision of the Panel of Arbitrators dated 13 June 1997 is hereby VACATED and a new one entered in the records of the case as follows:1. SEM’s MPSA application is hereby given due course subject to the full and strict compliance of the provisions of the Mining Act and its Implementing Rules and Regulations;2. The area covered by DAO 66, series of 1991, actually occupied and actively mined by the small-scale miners on or before August 1, 1987 as determined by the Provincial Mining Regulatory Board (PMRB), is hereby excluded from the area applied for by SEM;3. A moratorium on all mining and mining-related activities, is hereby imposed until such time that all necessary procedures, licenses, permits, and other requisites as provided for by RA 7076, the Mining Act and its Implementing Rules and Regulations and all other pertinent laws, rules and regulations are complied with, and the appropriate environmental protection measures and safeguards have been effectively put in place;4. Consistent with the spirit of RA 7076, the Board encourages SEM and all small-scale miners to continue to negotiate in good faith and arrive at an agreement beneficial to all. In the event of SEM’s strict and full compliance with all the requirements of the Mining Act and its Implementing Rules and Regulations, and the concurrence of the small-scale miners actually occupying and actively mining the area, SEM may apply for the inclusion of portions of the areas segregated under paragraph 2 hereof, to its MPSA application. In this light, subject to the preceding paragraph, the contract between JB [JB Management Mining Corporation] and SEM is hereby recognized.”14_______________

14 Rollo of G.R. Nos. 152870-71, pp. 141-142.370

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370SUPREME COURT REPORTS ANNOTATEDApex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.Dissatisfied, the Villaflor group and Balite appealed the decision to this Court. SEM, aggrieved by the exclusion of 729 hectares from its MPSA application, likewise appealed. Apex filed a Motion for Leave to Admit Petition for Intervention predicated on its right to stake its claim over the Diwalwal gold rush which was granted by the Court. These cases, however, were remanded to the Court of Appeals for proper disposition pursuant to Rule 43 of the 1997 Rules of Civil Procedure. The Court of Appeals consolidated the remanded cases as CA-G.R. SP No. 61215 and No. 61216.In the assailed Decision15 dated 13 March 2002, the Court of Appeals affirmed in toto the decision of the PA and declared null and void the MAB decision.The Court of Appeals, banking on the premise that the SEM is the agent of MMC by virtue of its assignment of EP 133 in favor of SEM and the purported fact that SEM is a 100% subsidiary of MMC, ruled that the transfer of EP 133 was valid. It argued that since SEM is an agent of MMC, the assignment of EP 133 did not violate the condition therein prohibiting its transfer except to MMC’s duly designated agent. Thus, despite the non-renewal of EP 133 on 6 July 1994, the Court of Appeals deemed it relevant to declare EP 133 as valid since MMC’s mining rights were validly transferred to SEM prior to its expiration.The Court of Appeals also ruled that MMC’s right to explore under EP 133 is a property right which the 1987 Constitution protects and which cannot be divested without the holder’s consent. It stressed that MMC’s failure to proceed with the extraction and utilization of minerals did not diminish its vested right to explore because its failure was not attributable to it.Reading Proclamation No. 369, Section 11 of Commonwealth Act 137, and Sections 6, 7, and 8 of Presidential De-_______________

15 Penned by Associate Justice Alicia L. Santos with Associate Justices Cancio C. Garcia and Marina L. Buzon, concurring.371

VOL. 492, JUNE 23, 2006371Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.cree No. 463, the Court of Appeals concluded that the issuance of DAO No. 66 was done by the DENR Secretary beyond his power for it is the President who has the sole power to withdraw from the forest reserve established under Proclamation No. 369 as non-forest land for mining purposes. Accordingly, the segregation of 729 hectares of mining areas from the coverage of EP 133 by the MAB was unfounded.The Court of Appeals also faulted the DENR Secretary in implementing DAO No. 66 when he awarded the 729 hectares segregated from the coverage area of EP 133 to other corporations who were not qualified as small-scale miners under Republic Act No. 7076.As to the petitions of Villaflor and company, the Court of Appeals argued that their failure to submit the sketch plan to the PA, which is a jurisdictional requirement, was fatal to their appeal. It likewise stated the Villaflor and company’s mining claims, which were based on their alleged rights under DAO No. 66, cannot stand as DAO No. 66 was null and void. The dispositive portion of the Decision decreed:“WHEREFORE, premises considered, the Petition of Southeast Mindanao Gold Mining Corporation is GRANTED while the Petition of Rosendo Villaflor, et al., is DENIED for lack of merit. The Decision of the Panel of Arbitrators dated 13 June 1997 is AFFIRMED in toto and the assailed MAB Decision is hereby SET ASIDE and declared as NULL and VOID.”16Hence, the instant Petitions for Review on Certiorari under Rule 45 of the Rules of Court filed by Apex, Balite and MAB.

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During the pendency of these Petitions, President Gloria Macapagal-Arroyo issued Proclamation No. 297 dated 25 November 2002. This proclamation excluded an area of 8,100 hectares located in Monkayo, Compostela Valley, and proclaimed the same as mineral reservation and as environmentally critical area. Subsequently, DENR Administrative Order_______________

16 Rollo of G.R. Nos. 152619-20, p. 55.372

372SUPREME COURT REPORTS ANNOTATEDApex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.No. 2002-18 was issued declaring an emergency situation in the Diwalwal gold rush area and ordering the stoppage of all mining operations therein. Thereafter, Executive Order No. 217 dated 17 June 2003 was issued by the President creating the National Task Force Diwalwal which is tasked to address the situation in the Diwalwal Gold Rush Area.In G.R. No. 152613 and No. 152628, Apex raises the following issues:I

WHETHER OR NOT SOUTHEAST MINDANAO GOLD MINING’S [SEM] E.P. 133 IS NULL AND VOID DUE TO THE FAILURE OF MARCOPPER TO COMPLY WITH THE TERMS AND CONDITIONS PRESCRIBED IN EP 133.II

WHETHER OR NOT APEX HAS A SUPERIOR AND PREFERENTIAL RIGHT TO STAKE IT’S CLAIM OVER THE ENTIRE 4,941 HECTARES AGAINST SEM AND THE OTHER CLAIMANTS PURSUANT TO THE TIME-HONORED PRINCIPLE IN MINING LAW THAT “PRIORITY IN TIME IS PRIORITY IN RIGHT.”17In G.R. No. 152619-20, Balite anchors its petition on the following grounds:

I

WHETHER OR NOT THE MPSA OF SEM WHICH WAS FILED NINE (9) DAYS LATE (JUNE 23, 1994) FROM THE FILING OF THE MPSA OF BALITE WHICH WAS FILED ON JUNE 14, 1994 HAS A PREFERENTIAL RIGHT OVER THAT OF BALITE.II

WHETHER OR NOT THE DISMISSAL BY THE PANEL OF ARBITRATORS OF THE ADVERSE CLAIM OF BALITE ON THE GROUND THAT BALITE FAILED TO SUBMIT THE REQUIRED SKETCH PLAN DESPITE THE FACT THAT BALITE, HAD IN_______________

17 Rollo of G.R. No. 152613 and No. 152628, p. 731.373

VOL. 492, JUNE 23, 2006373Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.FACT SUBMITTED ON TIME WAS A VALID DISMISSAL OF BALITE’S ADVERSE CLAIM.III

WHETHER OR NOT THE ACTUAL OCCUPATION AND SMALL-MINING OPERATIONS OF BALITE PURSUANT TO DAO 66 IN THE 729 HECTARES WHICH WAS PART OF THE 4,941.6759 HECTARES COVERED BY ITS MPSA WHICH WAS REJECTED BY THE BUREAU OF MINES AND GEOSCIENCES WAS ILLEGAL.18In G.R. No. 152870-71, the MAB submits two issues, to wit:I

WHETHER OR NOT EP NO. 133 IS STILL VALID AND SUBSISTING.II

WHETHER OR NOT THE SUBSEQUENT ACTS OF THE GOVERNMENT SUCH AS THE ISSUANCE OF DAO NO. 66, PROCLAMATION NO. 297, AND EXECUTIVE ORDER 217 CAN

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OUTWEIGH EP NO. 133 AS WELL AS OTHER ADVERSE CLAIMS OVER THE DIWALWAL GOLD RUSH AREA.19The common issues raised by petitioners may be summarized as follows:I. Whether or not the Court of Appeals erred in upholding the validity and continuous existence of EP 133 as well as its transfer to SEM;II. Whether or not the Court of Appeals erred in declaring that the DENR Secretary has no authority to issue DAO No. 66; andIII. Whether or not the subsequent acts of the executive department such as the issuance of Proclamation No. 297, and DAO No. 2002-18 can outweigh Apex and Balite’s claims over the Diwalwal Gold Rush Area._______________

18 Id., at pp. 703-704.19 Rollo of G.R. Nos. 152870-71, p. 916.374

374SUPREME COURT REPORTS ANNOTATEDApex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.On the first issue, Apex takes exception to the Court of Appeals’ ruling upholding the validity of MMC’s EP 133 and its subsequent transfer to SEM asserting that MMC failed to comply with the terms and conditions in its exploration permit, thus, MMC and its successor-in-interest SEM lost their rights in the Diwalwal Gold Rush Area. Apex pointed out that MMC violated four conditions in its permit. First, MMC failed to comply with the mandatory work program, to complete exploration work, and to declare a mining feasibility. Second, it reneged on its duty to submit an Environmental Compliance Certificate. Third, it failed to comply with the reportorial requirements. Fourth, it violated the terms of EP 133 when it assigned said permit to SEM despite the explicit proscription against its transfer.

Apex likewise emphasizes that MMC failed to file its MPSA application required under DAO No. 8220 which caused its exploration permit to lapse because DAO No. 82 mandates_______________

20 Otherwise known as the Procedural Guidelines On the Award Of Mineral Production Sharing Agreement (MPSA) Through Negotiation provides:Section 3. Submission of Letter of Intent (LOIs) and MPSAs.The following shall submit their LOIs and MPSAs within two (2) years from the effectivity of DENR A.O. 57 or until July 17, 1991.2. Declaration of Location (DOL) holders, mining lease applicants, exploration permitees, quarry applicants and other mining applicants whose mining/quarry applications have not been perfected prior to the effectivity of DENR Administrative Order No. 57.2. All holders of DOL acquired after the effectivity of DENR A.O. No. 57.x x x xFailure to submit letters of intent and MPSA applications/proposals within the prescribed period shall cause the abandonment of mining, quarry and sand and gravel claims.375

VOL. 492, JUNE 23, 2006375Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.holders of exploration permits to file a Letter of Intent and a MPSA application not later than 17 July 1991. It said that because EP 133 expired prior to its assignment to SEM, SEM’s MPSA application should have been evaluated on its own merit.As regards the Court of Appeals recognition of SEM’s vested right over the disputed area, Apex bewails the same to be lacking in statutory bases. According to Apex, Presidential Decree No. 463 and Republic Act No. 7942 impose upon the claimant the obligation of actually undertaking exploration

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work within the reserved lands in order to acquire priority right over the area. MMC, Apex claims, failed to conduct the necessary exploration work, thus, MMC and its successor-in-interest SEM lost any right over the area.In its Memorandum, Balite maintains that EP 133 of MMC, predecessor-in-interest of SEM, is an expired and void permit which cannot be made the basis of SEM’s MPSA application.Similarly, the MAB underscores that SEM did not acquire any right from MMC by virtue of the transfer of EP 133 because the transfer directly violates the express condition of the exploration permit stating that “it shall be for the exclusive use and benefit of the permittee or his duly authorized agents.” It added that while MMC is the permittee, SEM cannot be considered as MMC’s duly designated agent as there is no proof on record authorizing SEM to represent MMC in its business dealings or undertakings, and neither did SEM pursue its interest in the permit as an agent of MMC. According to the MAB, the assignment by MMC of EP 133 in favor of SEM did not make the latter the duly authorized agent of MMC since the concept of an agent under EP 133 is not equivalent to the concept of assignee. It finds fault in the assignment of EP 133 which lacked the approval of the DENR Secretary in contravention of Section 25 of Republic376

376SUPREME COURT REPORTS ANNOTATEDApex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.Act No. 794221 requiring his approval for a valid assignment or transfer of exploration permit to be valid.SEM, on the other hand, counters that the errors raised by petitioners Apex, Balite and the MAB relate to factual and evidentiary matters which this Court cannot inquire into in an appeal by certiorari.The established rule is that in the exercise of the Supreme Court’s power of review, the Court not being a trier of facts, does not normally embark on a re-examination of the

evidence presented by the contending parties during the trial of the case considering that the findings of facts of the Court of Appeals are conclusive and binding on the Court.22 This rule, however, admits of exceptions as recognized by jurisprudence, to wit:“(1) [w]hen the findings are grounded entirely on speculation, surmises or conjectures; (2) when the inference made is manifestly mistaken, absurd or impossible; (3) when there is grave abuse of discretion; (4) when the judgment is based on misapprehension of facts; (5) when the findings of facts are conflicting; (6) when in making its findings the Court of Appeals went beyond the issues of the case, or its findings are contrary to the admissions of both the appellant and the appellee; (7) when the findings are contrary to the trial court; (8) when the findings are conclusions without citation of specific evidence on which they are based; (9) when the facts set forth in the petition as well as in the petitioner’s main and reply briefs are not disputed by the respondent; (10) when the findings of fact are premised on the supposed absence of evidence and contradicted by the evidence on record; and (11) when the Court of Appeals manifestly overlooked certain relevant facts not disputed by the parties, which, if properly considered, would justify a different conclusion.”23_______________

21 Republic Act No. 7942 is also known as the “Philippine Mining Act of 1995.”22 New City Builders, Inc. v. National Labor Relations Commission, G.R. No. 149281, 15 June 2005, 460 SCRA 220, 227.23 The Insular Life Assurance Company, Ltd. v. Court of Appeals, G.R. No. 126850, 28 April 2004, 428 SCRA 79, 86; Manila Electric Company v. Benamira, G.R. No. 145271, 14 July 2005, 463377

VOL. 492, JUNE 23, 2006377Apex Mining Co., Inc. vs. Southeast Mindanao

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Gold Mining Corp.Also, in the case of Manila Electric Company v. Benamira,24 the Court in a Petition for Review on Certiorari, deemed it proper to look deeper into the factual circumstances of the case since the Court of Appeal’s findings are at odds to those of the National Labor Relations Commission (NLRC). Just like in the foregoing case, it is this Court’s considered view that a re-evaluation of the attendant facts surrounding the present case is appropriate considering that the findings of the MAB are in conflict with that of the Court of Appeals.I

At the threshold, it is an undisputed fact that MMC assigned to SEM all its rights under EP 133 pursuant to a Deed of Assignment dated 16 February 1994.25EP 133 is subject to the following terms and conditions:26:1. That the permittee shall abide by the work program submitted with the application or statements made later in support thereof, and which shall be considered as conditions and essential parts of this permit;2. That permittee shall maintain a complete record of all activities and accounting of all expenditures incurred therein subject to periodic inspection and verification at reasonable intervals by the Bureau of Mines at the expense of the applicant;3. That the permittee shall submit to the Director of Mines within 15 days after the end of each calendar quarter a report under oath of a full and complete statement of the work done in the area covered by the permit;4. That the term of this permit shall be for two (2) years to be effective from this date, renewable for the same period at the discretion of the Director of Mines and upon request of the applicant;_______________

SCRA 331, 347-348; Aguirre v. Court of Appeals, G.R. No. 122249, 29 January 2004, 421 SCRA 310, 319.24 Manila Electric Company v. Benamira, Id.25 Records, Vol. 2, pp. 351-353.26 Id., at pp. 84-85.

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378SUPREME COURT REPORTS ANNOTATEDApex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.5. That the Director of Mines may at any time cancel this permit for violation of its provision or in case of trouble or breach of peace arising in the area subject hereof by reason of conflicting interests without any responsibility on the part of the government as to expenditures for exploration that might have been incurred, or as to other damages that might have been suffered by the permittee; and6. That this permit shall be for the exclusive use and benefit of the permittee or his duly authorized agents and shall be used for mineral exploration purposes only and for no other purpose.Under Section 9027 of Presidential Decree No. 463, the applicable statute during the issuance of EP 133, the DENR Secretary, through Director of BMG, is charged with carrying out the said law. Also, under Commonwealth Act No. 136, also known as “An Act Creating The Bureau of Mines,” which was approved on 7 November 1936, the Director of Mines has the direct charge of the administration of the mineral lands and minerals, and of the survey, classification, lease or any other form of concession or disposition thereof under the Mining Act.28 This power of administration includes the power to prescribe terms and conditions in granting exploration permits to qualified entities. Thus, in the grant of EP 133 in favor of the MMC, the Director of the BMG acted within his power in laying down the terms and conditions attendant thereto.Condition number 6 categorically states that the permit shall be for the exclusive use and benefit of MMC or its duly authorized agents. While it may be true that SEM, the assignee of EP 133, is a 100% subsidiary corporation of MMC, records are bereft of any evidence showing that the former is the duly authorized agent of the latter. For a contract of agency to exist, it is essential that the principal consents that

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_______________

27 Executive Officer—The Secretary, through the Director, shall be the Executive Officer charged with carrying out the provisions of this Decree. x x x.28 COMMONWEALTH ACT No. 136, Section 3.379

VOL. 492, JUNE 23, 2006379Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.the other party, the agent, shall act on its behalf, and the agent consents so as to act.29 In the case of Yu Eng Cho v. Pan American World Airways, Inc.,30 this Court had the occasion to set forth the elements of agency, viz.:(1) consent, express or implied, of the parties to establish the relationship;(2) the object is the execution of a juridical act in relation to a third person;(3) the agent acts as a representative and not for himself;(4) the agent acts within the scope of his authority.The existence of the elements of agency is a factual matter that needs to be established or proven by evidence. The burden of proving that agency is extant in a certain case rests in the party who sets forth such allegation. This is based on the principle that he who alleges a fact has the burden of proving it.31 It must likewise be emphasized that the evidence to prove this fact must be clear, positive and convincing.32In the instant Petitions, it is incumbent upon either MMC or SEM to prove that a contract of agency actually exists between them so as to allow SEM to use and benefit from EP 133 as the agent of MMC. SEM did not claim nor submit proof that it is the designated agent of MMC to represent the latter in its business dealings or undertakings. SEM cannot, therefore, be considered as an agent of MMC which can use EP 133 and benefit from it. Since SEM is not an authorized agent of MMC, it goes without saying that the assignment or transfer of the permit in favor of SEM is null and void as it

directly contravenes the terms and conditions of the grant of EP 133._______________

29 People v. Yabut, G.R. No. L-42902, 29 April 1977, 76 SCRA 624, 630.30 G.R. No. 123560, 27 March 2000, 328 SCRA 717, 728.31 Asia Traders Insurance Corporation v. Court of Appeals, G.R. No. 152537, 16 February 2004, 423 SCRA 114, 120.32 Id.380

380SUPREME COURT REPORTS ANNOTATEDApex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.Furthermore, the concept of agency is distinct from assignment. In agency, the agent acts not on his own behalf but on behalf of his principal.33 While in assignment, there is total transfer or relinquishment of right by the assignor to the assignee.34 The assignee takes the place of the assignor and is no longer bound to the latter. The deed of assignment clearly stipulates:1. That for ONE PESO (P1.00) and other valuable consideration received by the ASSIGNOR from the ASSIGNEE, the ASSIGNOR hereby ASSIGNS, TRANSFERS and CONVEYS unto the ASSIGNEE whatever rights or interest the ASSIGNOR may have in the area situated in Monkayo, Davao del Norte and Cateel, Davao Oriental, identified as Exploration Permit No. 133 and Application for a Permit to Prospect in Bunawan, Agusan del Sur respectively.35Bearing in mind the just articulated distinctions and the language of the Deed of Assignment, it is readily obvious that the assignment by MMC of EP 133 in favor of SEM did not make the latter the former’s agent. Such assignment involved actual transfer of all rights and obligations MMC have under the permit in favor of SEM, thus, making SEM the permittee. It is not a mere grant of authority to SEM, as an agent of MMC, to use the permit. It is a total abdication of MMC’s rights over the permit. Hence, the assignment in

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question did not make SEM the authorized agent of MMC to make use and benefit from EP 133.The condition stipulating that the permit is for the exclusive use of the permittee or its duly authorized agent is not without any reason. Exploration permits are strictly granted to entities or individuals possessing the resources and capability to undertake mining operations. Without such a condi-_______________

33 Yu Eng Cho v. Pan American World Airways, Inc., supra note 30.34 Philippine National Bank v. Court of Appeals, 338 Phil. 795, 817-818; 272 SCRA 291, 312 (1997).35 Records, Vol. 2, p. 352.381

VOL. 492, JUNE 23, 2006381Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.tion, non-qualified entities or individuals could circumvent the strict requirements under the law by the simple expediency acquiring the permit from the original permittee.We cannot lend recognition to the Court of Appeals’ theory that SEM, being a 100% subsidiary of MMC, is automatically an agent of MMC.A corporation is an artificial being created by operation of law, having the right of succession and the powers, attributes, and properties expressly authorized by law or incident to its existence.36 It is an artificial being invested by law with a personality separate and distinct from those of the persons composing it as well as from that of any other legal entity to which it may be related.37 Resultantly, absent any clear proof to the contrary, SEM is a separate and distinct entity from MMC.The Court of Appeals pathetically invokes the doctrine of piercing the corporate veil to legitimize the prohibited transfer or assignment of EP 133. It stresses that SEM is just a business conduit of MMC, hence, the distinct legal

personalities of the two entities should not be recognized. True, the corporate mask may be removed when the corporation is just an alter ego or a mere conduit of a person or of another corporation.38 For reasons of public policy and in the interest of justice, the corporate veil will justifiably be impaled only when it becomes a shield for fraud, illegality or inequity committed against a third person.39 However, this Court has made a caveat in the application of the doctrine of piercing the corporate veil. Courts should be mindful of the milieu where it is to be applied. Only in cases where the corporate_______________

36 CORPORATION CODE, Section 2.37 Yu v. National Labor Relations Commission, 315 Phil. 107, 123; 245 SCRA 134, 144 (1995).38 Lim v. Court of Appeals, 380 Phil. 60, 76; 323 SCRA 102, 118 (2000).39 Philippine National Bank v. Andrada Electric & Engineering Company, 430 Phil. 882, 894; 381 SCRA 244, 254 (2002).382

382SUPREME COURT REPORTS ANNOTATEDApex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.fiction was misused to such an extent that injustice, fraud or crime was committed against another, in disregard of its rights may the veil be pierced and removed. Thus, a subsidiary corporation may be made to answer for the liabilities and/or illegalities done by the parent corporation if the former was organized for the purpose of evading obligations that the latter may have entered into. In other words, this doctrine is in place in order to expose and hold liable a corporation which commits illegal acts and use the corporate fiction to avoid liability from the said acts. The doctrine of piercing the corporate veil cannot therefore be used as a vehicle to commit prohibited acts because these acts are the ones which the doctrine seeks to prevent.

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To our mind, the application of the foregoing doctrine is unwarranted. The assignment of the permit in favor of SEM is utilized to circumvent the condition of non-transferability of the exploration permit. To allow SEM to avail itself of this doctrine and to approve the validity of the assignment is tantamount to sanctioning illegal act which is what the doctrine precisely seeks to forestall.Quite apart from the above, a cursory consideration of the mining law pertinent to the case, will, indeed, demonstrate the infraction committed by MMC in its assignment of EP 133 to SEM.Presidential Decree No. 463, enacted on 17 May 1974, otherwise known as the Mineral Resources Development Decree, which governed the old system of exploration, development, and utilization of mineral resources through “license, concession or lease” prescribed:SEC. 97. Assignment of Mining Rights.—A mining lease contract or any interest therein shall not be transferred, assigned, or subleased without the prior approval of the Secretary: Provided, That such transfer, assignment or sublease may be made only to a qualified person possessing the resources and capability to continue the mining operations of the lessee and that the assignor has complied383

VOL. 492, JUNE 23, 2006383Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.with all the obligations of the lease: Provided, further, That such transfer or assignment shall be duly registered with the office of the mining recorder concerned. (Emphasis supplied.)The same provision is reflected in Republic Act No. 7942, otherwise known as the Philippine Mining Act of 1995, which is the new law governing the exploration, development and utilization of the natural resources, which provides:SEC. 25. Transfer or Assignment.—An exploration permit may be transferred or assigned to a qualified person subject

to the approval of the Secretary upon the recommendation of the Director.The records are bereft of any indication that the assignment bears the imprimatur of the Secretary of the DENR. Presidential Decree No. 463, which is the governing law when the assignment was executed, explicitly requires that the transfer or assignment of mining rights, including the right to explore a mining area, must be with the prior approval of the Secretary of DENR. Quite conspicuously, SEM did not dispute the allegation that the Deed of Assignment was made without the prior approval of the Secretary of DENR. Absent the prior approval of the Secretary of DENR, the assignment of EP 133, was, therefore, without legal effect for violating the mandatory provision of Presidential Decree No. 463.An added significant omission proved fatal to MMC/SEM’s cause. While it is true that the case of Apex Mining Co., Inc. v. Garcia40 settled the issue of which between Apex and MMC validly acquired mining rights over the disputed area, such rights, though, had been extinguished by subsequent events. Records indicate that on 6 July 1993, EP 133 was extended for 12 months or until 6 July 1994.41 MMC never renewed its permit prior and after its expiration. Thus, EP 133 expired by non-renewal._______________

40 Supra note 4.41 Records, Vol. 2, p. 255.384

384SUPREME COURT REPORTS ANNOTATEDApex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.With the expiration of EP 133 on 6 July 1994, MMC lost any right to the Diwalwal Gold Rush Area. SEM, on the other hand, has not acquired any right to the said area because the transfer of EP 133 in its favor is invalid. Hence, both MMC and SEM have not acquired any vested right over the 4,941.6759 hectares which used to be covered by EP 133.

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II

The Court of Appeals theorizes that DAO No. 66 was issued beyond the power of the DENR Secretary since the power to withdraw lands from forest reserves and to declare the same as an area open for mining operation resides in the President.Under Proclamation No. 369 dated 27 February 1931, the power to convert forest reserves as non-forest reserves is vested with the DENR Secretary. Proclamation No. 369 partly states:From this reserve shall be considered automatically excluded all areas which had already been certified and which in the future may be proclaimed as classified and certified lands and approved by the Secretary of Agriculture and Natural Resources.42However, a subsequent law, Commonwealth Act No. 137, otherwise known as “The Mining Act” which was approved on 7 November 1936 provides:Sec. 14. Lands within reservations for purposes other than mining, which, after such reservation is made, are found to be more valuable for their mineral contents than for the purpose for which the reservation was made, may be withdrawn from such reservations by the President with the concurrence of the National Assembly, and thereupon such lands shall revert to the public domain and be subject to disposition under the provisions of this Act._______________

42 Id., at p. 7.385

VOL. 492, JUNE 23, 2006385Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.Unlike Proclamation No. 369, Commonwealth Act No. 137 vests solely in the President, with the concurrence of the National Assembly, the power to withdraw forest reserves found to be more valuable for their mineral contents than

for the purpose for which the reservation was made and convert the same into non-forest reserves. A similar provision can also be found in Presidential Decree No. 463 dated 17 May 1974, with the modifications that (1) the declaration by the President no longer requires the concurrence of the National Assembly and (2) the DENR Secretary merely exercises the power to recommend to the President which forest reservations are to be withdrawn from the coverage thereof. Section 8 of Presidential Decree No. 463 reads:SEC. 8. Exploration and Exploitation of Reserved Lands.—When lands within reservations, which have been established for purposes other than mining, are found to be more valuable for their mineral contents, they may, upon recommendation of the Secretary be withdrawn from such reservation by the President and established as a mineral reservation.Against the backdrop of the applicable statutes which govern the issuance of DAO No. 66, this Court is constrained to rule that said administrative order was issued not in accordance with the laws. Inescapably, DAO No. 66, declaring 729 hectares of the areas covered by the Agusan-Davao-Surigao Forest Reserve as non-forest land open to small-scale mining operations, is null and void as, verily, the DENR Secretary has no power to convert forest reserves into non-forest reserves.III

It is the contention of Apex that its right over the Diwalwal gold rush area is superior to that of MMC or that of SEM because it was the first one to occupy and take possession of the area and the first to record its mining claims over the area.386

386SUPREME COURT REPORTS ANNOTATEDApex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.

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For its part, Balite argues that with the issuance of DAO No. 66, its occupation in the contested area, particularly in the 729 hectares small-scale mining area, has entitled it to file its MPSA. Balite claims that its MPSA application should have been given preference over that of SEM because it was filed ahead.The MAB, on the other hand, insists that the issue on who has superior right over the disputed area has become moot and academic by the supervening events. By virtue of Proclamation No. 297 dated 25 November 2002, the disputed area was declared a mineral reservation.Proclamation No. 297 excluded an area of 8,100 hectares located in Monkayo, Compostela Valley, and proclaimed the same as mineral reservation and as environmentally critical area, viz.:WHEREAS, by virtue of Proclamation No. 369, series of 1931, certain tracts of public land situated in the then provinces of Davao, Agusan and Surigao, with an area of approximately 1,927,400 hectares, were withdrawn from settlement and disposition, excluding, however, those portions which had been certified and/or shall be classified and certified as non-forest lands;WHEREAS, gold deposits have been found within the area covered by Proclamation No. 369, in the Municipality of Monkayo, Compostela Valley Province, and unregulated small to medium-scale mining operations have, since 1983, been undertaken therein, causing in the process serious environmental, health, and peace and order problems in the area;WHEREAS, it is in the national interest to prevent the further degradation of the environment and to resolve the health and peace and order problems spawned by the unregulated mining operations in the said area;WHEREAS, these problems may be effectively addressed by rationalizing mining operations in the area through the establishment of a mineral reservation;WHEREAS, after giving due notice, the Director of Mines and Geosciences conducted public hearings on September 6, 9 and 11, 2002 to allow the concerned sectors and communities to air their

387

VOL. 492, JUNE 23, 2006387Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.views regarding the establishment of a mineral reservation in the place in question;WHEREAS, pursuant to the Philippine Mining Act of 1995 (RA 7942), the President may, upon the recommendation of the Director of Mines and Geosciences, through the Secretary of Environment and Natural Resources, and when the national interest so requires, establish mineral reservations where mining operations shall be undertaken by the Department directly or thru a contractor;WHEREAS, as a measure to attain and maintain a rational and orderly balance between socio-economic growth and environmental protection, the President may, pursuant to Presidential Decree No. 1586, as amended, proclaim and declare certain areas in the country as environmentally critical;NOW, THEREFORE, I, GLORIA MACAPAGAL-ARROYO, President of the Philippines, upon recommendation of the Secretary of the Department of Environment and Natural Resources (DENR), and by virtue of the powers vested in me by law, do hereby exclude certain parcel of land located in Monkayo, Compostela Valley, and proclaim the same as mineral reservation and as environmentally critical area, with metes and bound as defined by the following geographical coordinates;x x x xwith an area of Eight Thousand One Hundred (8,100) hectares, more or less. Mining operations in the area may be undertaken either by the DENR directly, subject to payment of just compensation that may be due to legitimate and existing claimants, or thru a qualified contractor, subject to existing rights, if any.The DENR shall formulate and issue the appropriate guidelines, including the establishment of an environmental and social fund, to implement the intent and provisions of

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this Proclamation. Upon the effectivity of the 1987 Constitution, the State assumed a more dynamic role in the exploration, development and utilization of the natural resources of the country.43 With this policy, the State may pursue full control and supervision of the exploration, development and utilization of the coun-_______________

43 Miners Association of the Philippines, Inc. v. Hon. Factoran, Jr., 310 Phil. 113, 130-131; 240 SCRA 100, 114 (1995).388

388SUPREME COURT REPORTS ANNOTATEDApex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.try’s natural mineral resources. The options open to the State are through direct undertaking or by entering into coproduction, joint venture, or production-sharing agreements, or by entering into agreement with foreign-owned corporations for large-scale exploration, development and utilization.44 Thus, Article XII, Section 2, of the 1987 Constitution, specifically states:SEC. 2. All lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural resources are owned by the State. With the exception of agricultural lands, all other natural resources shall not be alienated. The exploration, development, and utilization of natural resources shall be under the full control and supervision of the State. The State may directly undertake such activities, or it may enter into co-production, joint venture, or production-sharing agreements with Filipino citizens, or corporations or associations at least sixty per centum of whose capital is owned by such citizens. Such agreements may be for a period not exceeding twenty-five years, renewable for not more than twenty-five years, and under such terms and conditions as may be provided by law. x x x

x x x xThe President may enter into agreements with foreign-owned corporations involving either technical or financial assistance for large-scale exploration, development, and utilization of minerals, petroleum, and other mineral oils according to the general terms and conditions provided by law, based on real contributions to the economic growth and general welfare of the country. x x x (Italics supplied.)Recognizing the importance of the country’s natural resources, not only for national economic development, but also for its security and national defense, Section 5 of Republic Act No. 7942 empowers the President, when the national interest_______________

44 Id.; Southeast Mindanao Gold Mining Corporation v. Balite Portal Mining Cooperative, 429 Phil. 668, 683; 380 SCRA 145, 156 (2002).389

VOL. 492, JUNE 23, 2006389Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.so requires, to establish mineral reservations where mining operations shall be undertaken directly by the State or through a contractor.To implement the intent and provisions of Proclamation No. 297, the DENR Secretary issued DAO No. 2002-18 dated 12 August 2002 declaring an emergency situation in the Diwalwal Gold Rush Area and ordering the stoppage of all mining operations therein.The issue on who has priority right over the disputed area is deemed overtaken by the above subsequent developments particularly with the issuance of Proclamation 297 and DAO No. 2002-18, both being constitutionally-sanctioned acts of the Executive Branch. Mining operations in the Diwalwal Mineral Reservation are now, therefore, within the full control of the State through the executive branch. Pursuant to Section 5 of Republic Act No. 7942, the State can either

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directly undertake the exploration, development and utilization of the area or it can enter into agreements with qualified entities, viz.:SEC. 5. Mineral Reservations.—When the national interest so requires, such as when there is a need to preserve strategic raw materials for industries critical to national development, or certain minerals for scientific, cultural or ecological value, the President may establish mineral reservations upon the recommendation of the Director through the Secretary. Mining operations in existing mineral reservations and such other reservations as may thereafter be established, shall be undertaken by the Department or through a contractor x x x.It is now up to the Executive Department whether to take the first option, i.e., to undertake directly the mining operations of the Diwalwal Gold Rush Area. As already ruled, the State may not be precluded from considering a direct takeover of the mines, if it is the only plausible remedy in sight to the gnawing complexities generated by the gold rush. The State need be guided only by the demands of public interest in settling on this option, as well as its material and logistic feasi-390

390SUPREME COURT REPORTS ANNOTATEDApex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.bility.45 The State can also opt to award mining operations in the mineral reservation to private entities including petitioners Apex and Balite, if it wishes. The exercise of this prerogative lies with the Executive Department over which courts will not interfere.WHEREFORE, premises considered, the Petitions of Apex, Balite and the MAB are PARTIALLY GRANTED, thus:1. We hereby REVERSE and SET ASIDE the Decision of the Court of Appeals, dated 13 March 2002, and hereby declare that EP 133 of MMC has EXPIRED on 7 July 1994 and that its subsequent transfer to SEM on 16 February 1994 is VOID.

2. We AFFIRM the finding of the Court of Appeals in the same Decision declaring DAO No. 66 illegal for having been issued in excess of the DENR Secretary’s authority. Consequently, the State, should it so desire, may now award mining operations in the disputed area to any qualified entity it may determine. No costs.SO ORDERED.     Panganiban (C.J., Chairperson), Ynares-Santiago, Austria-Martinez and Callejo, Sr., JJ., concur.Petitions partially granted.Notes.—A deed of sale for a piece of land in favor of an alien is null and void for being contrary to law. (Ong Ching Po vs. Court of Appeals, 239 SCRA 341 [1994])Before the cession of the Philippine Islands to the United States, the prevailing mining law in the colony was the Royal Decree of May, 1867, otherwise known as The Spanish Mining Law. (Atok Big-Wedge Mining Company vs. Intermediate Appellate Court, 261 SCRA 528 [1996]) [Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp., 492 SCRA 355(2006)]

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SUPREME COURT REPORTS ANNOTATEDAngeles vs. Philippine National Railways (PNR)G.R. No. 150128. August 31, 2006.*LAUREANO T. ANGELES, petitioner, vs. PHILIPPINE NATIONAL RAILWAYS (PNR) AND RODOLFO FLORES,1 respondents.Civil Law; Contracts; Agency; Normally, the agent has neither rights nor liabilities as against the third party; he cannot thus sue or be sued on the contract.—Where agency exists, the third party’s (in this case, PNR’s) liability on a contract is to the principal and not to the agent and the relationship of the third party to the principal is the same as that in a contract in which there is no agent. Normally,_______________

* SECOND DIVISION.1 As filed, the petition impleads the Court of Appeals as among the respondents. Pursuant to Sec. 4, Rule 45, the CA need not be impleaded.445

VOL. 500, AUGUST 31, 2006445Angeles vs. Philippine National Railways (PNR)the agent has neither rights nor liabilities as against the third party. He cannot thus sue or be sued on the contract. Since a contract may be violated only by the parties thereto as against each other, the real party-in-interest, either as

plaintiff or defendant in an action upon that contract must, generally, be a contracting party.Agency; Assignee; The legal situation is different where an agent is constituted as an assignee.—The legal situation is, however, different where an agent is constituted as an assignee. In such a case, the agent may, in his own behalf, sue on a contract made for his principal, as an assignee of such contract. The rule requiring every action to be prosecuted in the name of the real party-in-interest recognizes the assignment of rights of action and also recognizes that when one has a right assigned to him, he is then the real party-in-interest and may maintain an action upon such claim or right.Civil Law; Contracts; Article 1374 of the Civil Code provides that the various stipulations of a contract shall be read and interpreted together, attributing to the doubtful ones that sense which may result from all of them taken jointly.—Article 1374 of the Civil Code provides that the various stipulations of a contract shall be read and interpreted together, attributing to the doubtful ones that sense which may result from all of them taken jointly. In fine, the real intention of the parties is primarily to be determined from the language used and gathered from the whole instrument. When put into the context of the letter as a whole, it is abundantly clear that the rights which Romualdez waived or ceded in favor of Lizette were those in furtherance of the agency relation that he had established for the withdrawal of the rails. At any rate, any doubt as to the intent of Romualdez generated by the way his letter was couched could be clarified by the acts of the main players themselves. Article 1371 of the Civil Code provides that to judge the intention of the contracting parties, their contemporaneous and subsequent acts shall be principally considered. In other words, in case of doubt, resort may be made to the situation, surroundings, and relations of the parties.Powers of Attorney; A power of attorney is only but an instrument in writing by which a person, as principal, appoints another as his agent and confers upon him the authority to perform certain

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446

446SUPREME COURT REPORTS ANNOTATEDAngeles vs. Philippine National Railways (PNR)specified acts on behalf of the principal.—A power of attorney is only but an instrument in writing by which a person, as principal, appoints another as his agent and confers upon him the authority to perform certain specified acts on behalf of the principal. The written authorization itself is the power of attorney, and this is clearly indicated by the fact that it has also been called a “letter of attorney.” Its primary purpose is not to define the authority of the agent as between himself and his principal but to evidence the authority of the agent to third parties with whom the agent deals.The letter under consideration is sufficient to constitute a power of attorney. Except as may be required by statute, a power of attorney is valid although no notary public intervened in its execution. A power of attorney must be strictly construed and pursued. The instrument will be held to grant only those powers which are specified therein, and the agent may neither go beyond nor deviate from the power of attorney.PETITION for review on certiorari of the decision and resolution of the Court of Appeals.

The facts are stated in the opinion of the Court.     Vicente D. Millora for petitioner.     Dionisio D. Ramos and Frolin H. Remoquillo for respondent PNR.GARCIA, J.:

Under consideration is this petition for review under Rule 45 of the Rules of Court assailing and seeking to set aside the following issuances of the Court of Appeals (CA) in CA-G.R. CV No. 54062,to wit:1. Decision2 dated June 4, 2001, affirming an earlier decision of the Regional Trial Court (RTC) of Quezon City, Branch 79, which dismissed the complaint for specific performance and damages

_______________

2 Penned by Associate Justice Martin S. Villarama, Jr., with Associate Justices Conrado M. Vasquez, Jr. and Alicia L. Santos, concurring; Rollo, pp. 46-53.447

VOL. 500, AUGUST 31, 2006447Angeles vs. Philippine National Railways (PNR)thereat commenced by the petitioner against the herein respondents; and2. Resolution3 dated September 17, 2001, denying the petitioner’s motion for reconsideration.The facts:On May 5, 1980, the respondent Philippine National Railways (PNR) informed a certain Gaudencio Romualdez (Romualdez, hereinafter) that it has accepted the latter’s offer to buy, on an “AS IS, WHERE IS” basis, the PNR’s scrap/unserviceable rails located in Del Carmen and Lubao, Pampanga at P1,300.00 and P2,100.00 per metric ton, respectively, for the total amount of P96,600.00. After paying the stated purchase price, Romualdez addressed a letter to Atty. Cipriano Dizon, PNR’s Acting Purchasing Agent. Bearing date May 26, 1980, the letter reads:Dear Atty. Dizon:

This is to inform you as President of San Juanico Enterprises, that I have authorized the bearer, LIZETTE R. WIJANCO of No. 1606 Aragon St., Sta. Cruz, Manila, to be my lawful representative in the withdrawal of the scrap/unserviceable rails awarded to me.For this reason, I have given her the ORIGINAL COPY of the AWARD, dated May 5, 1980 and O.R. No. 8706855 dated May 20, 1980 which will indicate my waiver of rights, interests and participation in favor of LIZETTE R. WIJANCO.Thank you for your cooperation.Very truly yours,           (Sgd.) Gaudencio Romualdez

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The Lizette R. Wijanco mentioned in the letter was Lizette Wijanco-Angeles, petitioner’s now deceased wife. That very same day—May 26, 1980—Lizette requested the PNR to transfer the location of withdrawal for the reason that the_______________

3 Id., at p. 75.448

448SUPREME COURT REPORTS ANNOTATEDAngeles vs. Philippine National Railways (PNR)scrap/unserviceable rails located in Del Carmen and Lubao, Pampanga were not ready for hauling. The PNR granted said request and allowed Lizette to withdraw scrap/unserviceable rails in Murcia, Capas and San Miguel, Tarlac instead. However, the PNR subsequently suspended the withdrawal in view of what it considered as documentary discrepancies coupled by reported pilferages of over P500,000.00 worth of PNR scrap properties in Tarlac.Consequently, the spouses Angeles demanded the refund of the amount of P96,000.00. The PNR, however, refused to pay, alleging that as per delivery receipt duly signed by Lizette, 54.658 metric tons of unserviceable rails had already been withdrawn which, at P2,100.00 per metric ton, were worth P114,781.80, an amount that exceeds the claim for refund.On August 10, 1988, the spouses Angeles filed suit against the PNR and its corporate secretary, Rodolfo Flores, among others, for specific performance and damages before the Regional Trial Court of Quezon City. In it, they prayed that PNR be directed to deliver 46 metric tons of scrap/unserviceable rails and to pay them damages and attorney’s fees.Issues having been joined following the filing by PNR, et al., of their answer, trial ensued. Meanwhile, Lizette W. Angeles passed away and was substituted by her heirs, among whom is her husband, herein petitioner Laureno T. Angeles.On April 16, 1996, the trial court, on the postulate that the spouses Angeles are not the real parties-in-interest,

rendered judgment dismissing their complaint for lack of cause of action. As held by the court, Lizette was merely a representative of Romualdez in the withdrawal of scrap or unserviceable rails awarded to him and not an assignee to the latter’s rights with respect to the award.Aggrieved, the petitioner interposed an appeal with the CA, which, as stated at the threshold hereof, in its decision of June 4, 2001, dismissed the appeal and affirmed that of the trial court. The affirmatory decision was reiterated by the CA449

VOL. 500, AUGUST 31, 2006449Angeles vs. Philippine National Railways (PNR)in its resolution of September 17, 2001, denying the petitioner’s motion for reconsideration.Hence, the petitioner’s present recourse on the submission that the CA erred in affirming the trial court’s holding that petitioner and his spouse, as plaintiffs a quo, had no cause of action as they were not the real parties-in-interest in this case.We DENY the petition.At the crux of the issue is the matter of how the aforequoted May 26, 1980 letter of Romualdez to Atty. Dizon of the PNR should be taken: was it meant to designate, or has it the effect of designating, Lizette W. Angeles as a mere agent or as an assignee of his (Romualdez’s) interest in the scrap rails awarded to San Juanico Enterprises? The CA’s conclusion, affirmatory of that of the trial court, is that Lizette was not an assignee, but merely an agent whose authority was limited to the withdrawal of the scrap rails, hence, without personality to sue.Where agency exists, the third party’s (in this case, PNR’s) liability on a contract is to the principal and not to the agent and the relationship of the third party to the principal is the same as that in a contract in which there is no agent. Normally, the agent has neither rights nor liabilities as against the third party. He cannot thus sue or be sued on the contract. Since a contract may be violated only by the parties thereto as against each other, the real party-in-

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interest, either as plaintiff or defendant in an action upon that contract must, generally, be a contracting party.The legal situation is, however, different where an agent is constituted as an assignee. In such a case, the agent may, in his own behalf, sue on a contract made for his principal, as an assignee of such contract. The rule requiring every action to be prosecuted in the name of the real party-in-interest recognizes the assignment of rights of action and also recognizes that when one has a right assigned to him, he is then the real450

450SUPREME COURT REPORTS ANNOTATEDAngeles vs. Philippine National Railways (PNR)party-in-interest and may maintain an action upon such claim or right.4Upon scrutiny of the subject Romualdez’s letter to Atty. Cipriano Dizon dated May 26, 1980, it is at once apparent that Lizette was to act just as a “representative” of Romualdez in the “withdrawal of rails,” and not an assignee. For perspective, we reproduce the contents of said letter:“This is to inform you as President of San Juanico Enterprises, that I have authorized the bearer, LIZETTE R. WIJANCO x x x to be my lawful representative in the withdrawal of the scrap/unserviceable rails awarded to me.For this reason, I have given her the ORIGINAL COPY of the AWARD, dated May 5, 1980 and O.R. No. 8706855 dated May 20, 1980 which will indicate my waiver of rights, interests and participation in favor of LIZETTE R. WIJANCO.” (Emphasis added)If Lizette was without legal standing to sue and appear in this case, there is more reason to hold that her petitioner husband, either as her conjugal partner or her heir, is also without such standing.Petitioner makes much of the fact that the terms “agent” or “attorney-in-fact” were not used in the Romualdez letter aforestated. It bears to stress, however, that the words “principal” and “agent,” are not the only terms used to designate the parties in an agency relation. The agent may

also be called an attorney, proxy, delegate or, as here, representative.It cannot be over emphasized that Romualdez’s use of the active verb “authorized,” instead of “assigned,” indicated an intent on his part to keep and retain his interest in the subject matter. Stated a bit differently, he intended to limit Lizette’s role in the scrap transaction to being the representative of his interest therein._______________

4 Uy v. Court of Appeals, G.R. No. 120465, September 9, 1999, 314 SCRA 69.451

VOL. 500, AUGUST 31, 2006451Angeles vs. Philippine National Railways (PNR)Petitioner submits that the second paragraph of the Romualdez letter, stating—“I have given [Lizette] the original copy of the award x x x which will indicate my waiver of rights, interests and participation in favor of Lizette R. Wijanco”—clarifies that Lizette was intended to be an assignee, and not a mere agent.We are not persuaded. As it were, the petitioner conveniently omitted an important phrase preceding the paragraph which would have put the whole matter in context. The phrase is “For this reason,” and the antecedent thereof is his (Romualdez) having appointed Lizette as his representative in the matter of the withdrawal of the scrap items. In fine, the key phrase clearly conveys the idea that Lizette was given the original copy of the contract award to enable her to withdraw the rails as Romualdez’s authorized representative.Article 1374 of the Civil Code provides that the various stipulations of a contract shall be read and interpreted together, attributing to the doubtful ones that sense which may result from all of them taken jointly. In fine, the real intention of the parties is primarily to be determined from the language used and gathered from the whole instrument. When put into the context of the letter as a whole, it is

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abundantly clear that the rights which Romualdez waived or ceded in favor of Lizette were those in furtherance of the agency relation that he had established for the withdrawal of the rails.At any rate, any doubt as to the intent of Romualdez generated by the way his letter was couched could be clarified by the acts of the main players themselves. Article 1371 of the Civil Code provides that to judge the intention of the contracting parties, their contemporaneous and subsequent acts shall be principally considered. In other words, in case of doubt, resort may be made to the situation, surroundings, and relations of the parties.452

452SUPREME COURT REPORTS ANNOTATEDAngeles vs. Philippine National Railways (PNR)The fact of agency was, as the trial court aptly observed,5 confirmed in subsequent letters from the Angeles spouses in which they themselves refer to Lizette as “authorized representative” of San Juanico Enterprises. Mention may also be made that the withdrawal receipt which Lizette had signed indicated that she was doing so in a representative capacity. One professing to act as agent for another is estopped to deny his agency both as against his asserted principal and third persons interested in the transaction which he engaged in.Whether or not an agency has been created is a question to be determined by the fact that one represents and is acting for another. The appellate court, and before it, the trial court, had peremptorily determined that Lizette, with respect to the withdrawal of the scrap in question, was acting for Romualdez. And with the view we take of this case, there were substantial pieces of evidence adduced to support this determination. The desired reversal urged by the petitioner cannot, accordingly, be granted. For, factual findings of the trial court, adopted and confirmed by the CA, are, as a rule, final and conclusive and may not be disturbed on appeal.6 So it must be here.

Petitioner maintains that the Romualdez letter in question was not in the form of a special power of attorney, implying that the latter had not intended to merely authorize his wife, Lizette, to perform an act for him (Romualdez). The contention is specious. In the absence of statute, no form or method of execution is required for a valid power of attorney; it may be in any form clearly showing on its face the agent’s authority.7A power of attorney is only but an instrument in writing by which a person, as principal, appoints another as his agent_______________

5 RTC Decision, pp. 17-18; Rollo, pp. 71-72.6 Lubos v. Galupo, G.R. No. 139136, January 16, 2002, 373 SCRA 618.7 3 Am Jur. 2d, Agency, Sec. 25.453

VOL. 500, AUGUST 31, 2006453Angeles vs. Philippine National Railways (PNR)and confers upon him the authority to perform certain specified acts on behalf of the principal. The written authorization itself is the power of attorney, and this is clearly indicated by the fact that it has also been called a “letter of attorney.” Its primary purpose is not to define the authority of the agent as between himself and his principal but to evidence the authority of the agent to third parties with whom the agent deals.8 The letter under consideration is sufficient to constitute a power of attorney. Except as may be required by statute, a power of attorney is valid although no notary public intervened in its execution.9A power of attorney must be strictly construed and pursued. The instrument will be held to grant only those powers which are specified therein, and the agent may neither go beyond nor deviate from the power of attorney.10 Contextually, all that Lizette was authorized to do was to withdraw the unserviceable/scrap railings. Allowing her authority to sue therefor, especially in her own name, would

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be to read something not intended, let alone written in the Romualdez letter.Finally, the petitioner’s claim that Lizette paid the amount of P96,000.00 to the PNR appears to be a mere afterthought; it ought to be dismissed outright under the estoppel principle. In earlier proceedings, petitioner himself admitted in his complaint that it was Romualdez who paid this amount.WHEREFORE, the petition is DENIED and the assailed decision of the CA is AFFIRMED.Costs against the petitioner.SO ORDERED.     Puno (Chairperson), Sandoval-Gutierrez and Azcuna, JJ., concur._______________

8 Ibid. Sec. 23.9 Reyes v. Santiago, CA-G.R. No. 47996-7-R, Nov. 27, 1975.10 3 Am. Jur. 2d, Agency, Sec. 31.454

454SUPREME COURT REPORTS ANNOTATEDQuesada vs. Department of Justice     Corona, J., On Leave.Petition denied, assailed decision affirmed.Note.—Parties may freely stipulate their duties and obligations which perforce would be binding on them. (National Sugar Trading vs. Philippine National Bank, 396 SCRA 528 [2003])——o0o—— [Angeles vs. Philippine National Railways (PNR), 500 SCRA 444(2006)]

G.R. No. 108957. June 14, 1993.*PRUDENTIAL BANK, petitioner, vs. THE COURT OF APPEALS, AURORA CRUZ, respondents.Commercial Law; Banks or Banking Institutions; A banking corporation is liable to innocent third persons where the representation is made in the course of its business by an agent acting within the general scope of his authority even though the agent is secretly abusing his authority and attempting to perpetrate a fraud upon his principal or some other person for his own ultimate benefit.—Conformably, we have declared in countless decisions that the principal is liable for obligations contracted by the agent. The agent’s apparent representation yields to the principal’s true representation and the contract is consid-________________

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* FIRST DIVISION.351

VOL. 223, JUNE 14, 1993351Prudential Bank vs. Court of Appealsered as entered into between the principal and the third person. A bank is liable for wrongful acts of its officers done in the interests of the bank or in the course of dealings of the officers in their representative capacity but not for acts outside the scope of their authority. (9 c.q.s. p. 417) A bank holding out its officers and agent as worthy of confidence will not be permitted to profit by the frauds they may thus be enabled to perpetrate in the apparent scope of their employment; nor will it be permitted to shirk its responsibility for such frauds, even though no benefit may accrue to the bank therefrom (10 Am Jur 2d, p. 114). Accordingly, a banking corporation is liable to innocent third persons where the representation is made in the course of its business by an agent acting within the general scope of his authority even though, in the particular case, the agent is secretly abusing his authority and attempting to perpetrate a fraud upon his principal or some other person, for his own ultimate benefit (McIntosh v. Dakota Trust Co., 52 ND 752, 204 NW 818, 40 ALR 1021.)Same; Same; Civil Law; Damages; Petitioner is liable for moral and exemplary damages when it acted in bad faith in denying Cruz the obligation she was claiming against it.—We agree with the lower courts that the petitioner acted in bad faith in denying Cruz the obligation she was claiming against it. It was obvious that an irregularity had been committed by the bank’s personnel, but instead of repairing the injury to Cruz by immediately restoring her money to her, it sought to gloss over the anomaly in its own operations. Cruz naturally suffered anxious moments and mental anguish over the loss of the investment. The amount of P200,000.00 is not small even by present standards. By unjustly withholding it from her on the unproved defense that she had already withdrawn it, the bank violated the

trust she had reposed in it and thus subjected itself to further liability for moral and exemplary damages.PETITION for review of the decision of the Court of Appeals.

The facts are stated in the opinion of the Court.     Monique Q. Ignacio for petitioner.     Eduardo C. Tutaan for private respondent.CRUZ, J.:

We deal here with another controversy involving the integrity of a bank.The complaint in this case arose when private respondent352

352SUPREME COURT REPORTS ANNOTATEDPrudential Bank vs. Court of AppealsAurora F. Cruz,** with her sister as co-depositor, invested P200,000.00 in Central Bank bills with the Prudential Bank at its branch in Quezon Avenue, Quezon City, on June 23, 1986. The placement was for 63 days at 13.75% annual interest. For this purpose, the amount of P196,122.88 was withdrawn from the depositors’ Savings Account No. 2546 and applied to the investment. The difference of P3,877.07 represented the pre-paid interest.The transaction was evidenced by a Confirmation of Sale1 delivered to Cruz two days later, together with a Debit Memo2 in the amount withdrawn and applied to the confirmed sale. These documents were issued by Susan Quimbo, the employee of the bank to whom Cruz was referred and who was apparently in charge of such transactions.3Upon maturity of the placement on August 25, 1986, Cruz returned to the bank to “roll-over” or renew her investment. Quimbo, who again attended to her, prepared a Credit Memo4 crediting the amount of P200,000.00 in Cruz’s savings account passbook. She also prepared a Debit Memo for the amount of P196,122.88 to cover the re-investment of P200,000.00 minus the prepaid interest of P3,877.02.5

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This time, Cruz was asked to sign a Withdrawal Slip6 for P196,122.98, representing the amount to be re-invested after deduction of the prepaid interest. Quimbo explained this was a new requirement of the bank. Several days later, Cruz received another Confirmation of Sale7 and a copy of the Debit Memo.8On October 27, 1986, Cruz returned to the bank and sought to withdraw her P200,000.00. After verification of her records, however, she was informed that the investment appeared to have been already withdrawn by her on August 25, 1986. There_______________

** The petitioner is not related to the ponente.1 Decision of RTC Judge Rodolfo A. Ortiz, p. 3.2 Decision of RTC Judge Rodolfo A. Ortiz, p. 3.3 Rollo, p. 28.4 Decision of RTC Judge Rodolfo A. Ortiz, p. 4.5 Rollo, p. 29.6 Rollo, p. 29.7 Rollo, p. 29.8 Rollo, p. 29.353

VOL. 223, JUNE 14, 1993353Prudential Bank vs. Court of Appealswas no copy on file of the Confirmation of Sale and the Debit Memo allegedly issued to her by Quimbo. Quimbo herself was not available for questioning as she had not been reporting for the past week. Shocked by this information, Cruz became hysterical and burst into tears. The branch manager, Roman Santos, assured her that he would look into the matter.9Every day thereafter, Cruz went to the bank to inquire about her request to withdraw her investment. She received no definite answer, not even to the letter she wrote the bank which was received by Santos himself.10 Finally, Cruz sent the bank a demand letter dated November 12, 1986 for the amount of P200,000.00 plus interest.11 In a reply dated

November 20, 1986, the bank’s Vice President Lauro J. Jocson said that there appeared to be an anomaly and requested Cruz to defer court action as they hoped to settle the matter amicably.12 Increasingly worried, Cruz sent another letter reiterating her demand.13 This time the reply of the bank was unequivocal and negative. She was told that her request had to be denied because she had already withdrawn the amount she was claiming.14Cruz’s reaction was to file a complaint for breach of contract against Prudential Bank in the Regional Trial Court of Quezon City. She demanded the return of her money with interest, plus damages and attorney’s fees. In its answer, the bank denied liability, insisting that Cruz had withdrawn her investment. The bank also instituted a third-party complaint against Quimbo, who did not file an answer and was declared in default.15 The bank, however, did not present any evidence against her.After trial, Judge Rodolfo A. Ortiz rendered judgment in favor of the plaintiffs and disposed as follows:ACCORDINGLY, judgment is hereby rendered ordering the defendant/third-party plaintiff to pay to the plaintiffs the following________________

9 Rollo, p. 30.10 Rollo, p. 30.11 Rollo, p. 30.12 Rollo, p. 31.13 Rollo, p. 31.14 Rollo, p. 31.15 Rollo, p. 36.354

354SUPREME COURT REPORTS ANNOTATEDPrudential Bank vs. Court of Appealsamounts:1. P200,000.00, plus interest thereon at the rate of 13.75% per annum from October 27, 1986, until fully paid;2. P30,000.00, as moral damages;

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3. P20,000.00, as exemplary damages; and4. P25,000.00, as reasonable attorney’s fees.The counterclaim and the third-party complaint of the defendant/ third-party plaintiff are dismissed.With costs against the defendant/third-party plaintiff.The decision was affirmed in toto on appeal to the respondent court.The judgment of the Court of Appeals16 is now faulted in this petition, mainly on the ground that the bank should not have been found liable for a quasi-delict when it was sued for breach of contract.The petition shall fail. The petitioner is quibbling. It appears to be merely temporizing to delay enforcement of the liability clearly established against it.The basic issues are factual. The private respondent claims she has not yet collected her investment of P200,000.00 and has submitted in proof of their contention the Confirmation of Sale and the Debit Memo issued to her by Quimbo on the official forms of the bank. The petitioner denies her claim and points to the Withdrawal Slip, which it says Cruz has not denied having signed. It also contends that the Confirmation of Sale and the Debit Memo are fake and should not have been given credence by the lower courts.The findings of the trial court on these issues have been affirmed by the respondent court and we see no reason to disturb them. The petitioner has not shown that they have been reached arbitrarily or in disregard of the evidence of record. On the contrary, we find substantial basis for the conclusion that the private respondents signed the Withdrawal Slip only as part of the bank’s new procedure of re-investment. She did not actually receive the amount indicated therein, which she was made to understand was being re-invested in her name. The bank itself so_______________

16 Rollo, pp. 39-46.355

VOL. 223, JUNE 14, 1993

355Prudential Bank vs. Court of Appealsassured her in the Confirmation of Sale and the Debit Memo later issued to her by Quimbo.Especially persuasive are the following observations of the trial court:17What is more, it could not be that plaintiff Aurora F. Cruz withdrew only the amount of P196,122.98 from their savings account, if her only intention was to make such a withdrawal. For, if, indeed, it was the desire of the plaintiffs to withdraw their money from the defendant/third-party plaintiff, they could have withdrawn an amount in round figures. Certainly, it is unbelievable that their withdrawal was in the irregular amount of P196,122.98 if they really received it. On the contrary, this amount, which is the price of the Central Bank bills rolled over, indicates that, as claimed by plaintiff Aurora F. Cruz, she did not receive this money, but it was left by her with the defendant/ third-party plaintiff in order to buy Central Bank bills placement for another sixty-three (63) days, for which she signed a withdrawal slip at the instance of third-party defendant Susan Quimbo who told her that it was a new bank requirement for the roll-over of a matured placement which she trustingly believed.Indeed, the bank has not explained the remarkable coincidence that the amount indicated in the withdrawal slip is exactly the same amount Cruz was re-investing after deducting therefrom the pre-paid interest.The bank has also not succeeded in impugning the authenticity of the Confirmation of Sale and the Debit Memo which were made on its official forms. These are admittedly not available to the general public or even its depositors and are handled only by its personnel. Even assuming that they were not signed by its authorized officials, as it claims, there was no obligation on the part of Cruz to verify their authority because she had the right to presume it. The documents had been issued in the office of the bank itself and by its own employees with whom she had previously dealt. Such dealings had not been questioned before, much less invalidated. There was absolutely no reason why she should

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not have accepted their authority to act on behalf of their employer._______________

17 Decision of RTC Judge Rodolfo A. Ortiz, pp. 7-8.356

356SUPREME COURT REPORTS ANNOTATEDPrudential Bank vs. Court of AppealsIt is also worthy of note—and wonder—that although the bank impleaded Quimbo in a third-party complaint, it did not pursue its suit even when she failed to answer and was declared in default. The bank did not introduce evidence against her although it could have done so under the rules. No less remarkably, it did not call on her to testify on its behalf, considering that under the circumstances claimed by it, she would have been the best witness to show that Cruz had actually withdrawn her P200,000.00 placement. Instead, the bank chose to rely on its other employees whose testimony was less direct and categorical than the testimony Quimbo could have given.We do not find that the Court of Appeals held the bank liable on a quasi-delict. The argument of the petitioner on this issue is pallid, to say the least, consisting as it does only of the observation that the article cited by the respondent court on the agent’s liability falls under the heading in the Civil Code on quasidelicts. On the other hand, the respondent court clearly declared that:The defendant/third-party plaintiff being liable for the return of the P200,000.00 placement of the plaintiffs, the extent of the liability of the defendant/third-party plaintiff for damages resultant thereof, which is contractual, is for all damages which may be reasonably attributed to the non-performance of the obligation, x x x.x x xBecause of the bad faith of the defendant/third-party plaintiff in its breach of its contract with the plaintiffs, the latter are, therefore, entitled to an award of moral damages x x x (Emphasis supplied)

There is no question that the petitioner was made liable for its failure or refusal to deliver to Cruz the amount she had deposited with it and which she had a right to withdraw upon its maturity. That investment was acknowledged by its own employees, who had the apparent authority to do so and so could legally bind it by its acts vis-a-vis Cruz. Whatever might have happened to the investment—whether it was lost or stolen by whoever—was not the concern of the depositor. It was the concern of the bank.As far as Cruz was concerned, she had the right to withdraw her P200,000.00 placement when it matured pursuant to the terms of her investment as acknowledged and reflected in the Confirmation of Sale. The failure of the bank to deliver the357

VOL. 223, JUNE 14, 1993357Prudential Bank vs. Court of Appealsamount to her pursuant to the Confirmation of Sale constituted its breach of their contract, for which it should be held liable.The liability of the principal for the acts of the agent is not even debatable. Law and jurisprudence are clearly and absolutely against the petitioner.Such liability dates back to the Roman Law maxim, Qui per alium facit per seipsum facere videtur. “He who does a thing by an agent is considered as doing it himself.” This rule is affirmed by the Civil Code thus:“Art. 1910. The principal must comply with all the obligations which the agent may have contracted within the scope of his authority.Art. 1911. Even when the agent has exceeded his authority, the principal is solidarity liable with the agent if the former allowed the latter to act as though he had full powers.Conformably, we have declared in countless decisions that the principal is liable for obligations contracted by the agent. The agent’s apparent representation yields to the principal’s true representation and the contract is

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considered as entered into between the principal and the third person.18A bank is liable for wrongful acts of its officers done in the interests of the bank or in the course of dealings of the officers in their representative capacity but not for acts outside the scope of their authority. (9 c.q.s. p. 417) A bank holding out its officers and agent as worthy of confidence will not be permitted to profit by the frauds they may thus be enabled to perpetrate in the apparent scope of their employment; nor will it be permitted to shirk its responsibility for such frauds, even though no benefit may accrue to the bank therefrom (10 Am Jur 2d, p. 114). Accordingly, a banking corporation is liable to innocent third persons where the representation is made in the course of its business by an agent acting within the general scope of his authority even though, in the particular case, the agent is secretly abusing his authority and attempting to perpetrate a fraud upon his principal or some other person, for his own ultimate benefit (McIntosh v. Dakota Trust Co., 52 ND 752, 204 NW 818, 40 ALR 1021.)_______________

18 National Food Authority vs. Intermediate Appellate Court, 184 SCRA 166.358

358SUPREME COURT REPORTS ANNOTATEDPrudential Bank vs. Court of AppealsApplication of these principles is especially necessary because banks have a fiduciary relationship with the public and their stability depends on the confidence of the people in their honesty and efficiency. Such faith will be eroded where banks do not exercise strict care in the selection and supervision of its employees, resulting in prejudice to their depositors.It would appear from the facts established in the case before us that the petitioner was less than eager to present Quimbo at the trial or even to establish her liability although it made the initial effort—which it did not pursue—to hold

her answerable in the third-party complaint. What ever happened to her does not appear in the record. Her absence from the proceedings feeds the suspicion of her possible misdeed, which the bank seems to have studiously ignored by its insistence that the missing money had been actually withdrawn by Cruz. By such insistence, the bank is absolving not only itself but also, in effect and by extension, the disappeared Quimbo who apparently has much to explain.We agree with the lower courts that the petitioner acted in bad faith in denying Cruz the obligation she was claiming against it. It was obvious that an irregularity had been committed by the bank’s personnel, but instead of repairing the injury to Cruz by immediately restoring her money to her, it sought to gloss over the anomaly in its own operations.Cruz naturally suffered anxious moments and mental anguish over the loss of the investment. The amount of P200,000.00 is not small even by present standards. By unjustly withholding it from her on the unproved defense that she had already withdrawn it, the bank violated the trust she had reposed in it and thus subjected itself to further liability for moral and exemplary damages.If a person dealing with a bank does not read the fine print in the contract, it is because he trusts the bank and relies on its integrity. The ordinary customer applying for a loan or even making a deposit (and so himself extending the loan to the bank) does not bother with the red tape requirements and the finicky conditions in the documents he signs. His feeling is that he does not have to be wary of the bank because it will deal with him fairly and there is no reason to suspect its motives. This is an attitude the bank must justify.While this is not to say that bank regulations are meaningless359

VOL. 223, JUNE 14, 1993359Domagas vs. Malanaor have no binding effect, they should, however, not be used for covering up the fault of bank employees when they

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blunder or, worse, intentionally cheat him. The misdeeds of such employees must be readily acknowledged and rectified without delay. The bank must always act in good faith. The ordinary customer does not feel the need for a lawyer by his side every time he deals with a bank because he is certain that it is not a predator or a potential adversary. The bank should show that there is really no reason for any apprehension because it truly deserves his faith in it.WHEREFORE, the petition is DENIED and the appealed decision is AFFIRMED, with costs against the petitioner. It is so ordered.     Griño-Aquino, Bellosillo and Quiason, JJ., concur.Petition denied. Appealed judgment affirmed.——o0o—— [Prudential Bank vs. Court of Appeals, 223 SCRA 350(1993)]

VOL. 376, FEBRUARY 6, 2002

239Dominion Insurance Corporation vs. Court of AppealsG.R. No. 129919. February 6, 2002.*DOMINION INSURANCE CORPORATION, petitioner, vs. COURT OF APPEALS, RODOLFO S. GUEVARRA, and FERNANDO AUSTRIA, respondents.Civil Law; Contracts; Agency; The basis for agency is representation; There must be an actual intention by the principal to appoint and on the part of the agent an intention to accept the appointment and act on it, otherwise there is generally no agency.—By the contract of agency, a person binds himself to render some service or to do something in representation or on behalf of another, with the consent or authority of the latter. The basis for agency is representation. On the part of the principal, there must be an actual intention to appoint or an intention naturally inferrable from his words or actions; and on the part of the agent, there must be an intention to accept the appointment and act on it, and in the absence of such intent, there is generally no agency.PETITION for review on certiorari of a decision of the Court of Appeals.

The facts are stated in the opinion of the Court.     Romeo G. Maglalang for private respondent R.S. Guevarra.PARDO, J.:

The CaseThis is an appeal via certiorari1 from the decision of the Court of Appeals2 affirming the decision3 of the Regional Trial Court, Branch 44, San Fernando, Pampanga, which ordered petitioner Dominion Insurance Corporation (Dominion) to pay Rodolfo S._______________

* FIRST DIVISION.1 Under Rule 45, Revised Rules of Court.2 In CA-G.R. CV No. 40803, promulgated on July 19, 1996, Petition, Annex “B”, pp. 12-18. Godardo A. Jacinto, J.,

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ponente, Salome A. Montoya and Maximiano C. Asuncion, JJ., concurring.3 Decision, Original Record, Civil Case 8855, pp. 358-361.240

240SUPREME COURT REPORTS ANNOTATEDDominion Insurance Corporation vs. Court of AppealsGuevarra (Guevarra) the sum of P156,473.90 representing the total amount advanced by Guevarra in the payment of the claims of Dominion’s clients.The FactsThe facts, as found by the Court of Appeals, are as follows:“On January 25, 1991, plaintiff Rodolfo S. Guevarra instituted Civil Case No. 8855 for sum of money against defendant Dominion Insurance Corporation. Plaintiff sought to recover thereunder the sum of P156,473.90 which he claimed to have advanced in his capacity as manager of defendant to satisfy certain claims filed by defendant’s clients.“In its traverse, defendant denied any liability to plaintiff and asserted a counterclaim for P249,672.53, representing premiums that plaintiff allegedly failed to remit.“On August 8, 1991, defendant filed a third-party complaint against Fernando Austria, who, at the time relevant to the case, was its Regional Manager for Central Luzon area.“In due time, third-party defendant Austria filed his answer.“Thereafter the pre-trial conference was set on the following dates: October 18, 1991, November 12, 1991, March 29, 1991, December 12, 1991, January 17, 1992, January 29, 1992, February 28, 1992, March 17, 1992 and April 6, 1992, in all of which dates no pre-trial conference was held. The record shows that except for the settings on October 18, 1991, January 17, 1992 and March 17, 1992 which were cancelled at the instance of defendant, third-party defendant and plaintiff, respectively, the rest were postponed upon joint request of the parties.“On May 22, 1992 the case was again called for pre-trial conference. Only plaintiff and counsel were present. Despite due notice, defendant and counsel did not appear, although

a messenger, Roy Gamboa, submitted to the trial court a handwritten note sent to him by defendant’s counsel which instructed him to request for postponement. Plaintiffs counsel objected to the desired postponement and moved to have defendant declared as in default. This was granted by the trial court in the following order:“ORDER

“When this case was called for pre-trial this afternoon only plaintiff and his counsel Atty. Romeo Maglalang appeared. When shown a note dated May 21, 1992 addressed to a certain Roy who was requested to ask for postponement, Atty. Maglalang vigorously241

VOL. 376, FEBRUARY 6, 2002241Dominion Insurance Corporation vs. Court of Appealsobjected to any postponement on the ground that the note is but a mere scrap of paper and moved that the defendant corporation be declared as in default for its failure to appear in court despite due notice.“Finding the verbal motion of plaintiff ’s counsel to be meritorious and considering that the pre-trial conference has been repeatedly postponed on motion of the defendant Corporation, the defendant Dominion Insurance Corporation is hereby declared (as) in default and plaintiff is allowed to present his evidence on June 16, 1992 at 9:00 o’clock in the morning.“The plaintiff and his counsel are notified of this order in open court.“SO ORDERED.“Plaintiff presented his evidence on June 16, 1992. This was followed by a written offer of documentary exhibits on July 8 and a supplemental offer of additional exhibits on July 13, 1992. The exhibits were admitted in evidence in an order dated July 17, 1992.“On August 7, 1992 defendant corporation filed a ‘MOTION TO LIFT ORDER OF DEFAULT.’ It alleged therein that the failure of counsel to attend the pre-trial conference was ‘due

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to an unavoidable circumstance’ and that counsel had sent his representative on that date to inform the trial court of his inability to appear. The Motion was vehemently opposed by plaintiff.“On August 25, 1992 the trial court denied defendant’s motion for reasons, among others, that it was neither verified nor supported by an affidavit of merit and that it further failed to allege or specify the facts constituting his meritorious defense.“On September 28, 1992 defendant moved for reconsideration of the aforesaid order. For the first time counsel revealed to the trial court that the reason for his nonappearance at the pre-trial conference was his illness. An Affidavit of Merit executed by its Executive Vice-President purporting to explain its meritorious defense was attached to the said Motion. Just the same, in an Order dated November 13, 1992, the trial court denied said Motion.“On November 18, 1992, the court a quo rendered judgment as follows:“WHEREFORE, premises considered, judgment is hereby rendered ordering:“1. The defendant Dominion Insurance Corporation to pay plaintiff the sum of P156,473.90 representing the total amount ad-242

242SUPREME COURT REPORTS ANNOTATEDDominion Insurance Corporation vs. Court of Appealsvanced by plaintiff in the payment of the claims of defendant’s clients;“2. The defendant to pay plaintiff P10,000.00 as and by way of attorney’s fees;“3. The dismissal of the counter-claim of the defendant and the third-party complaint;“4. The defendant to pay the costs of suit.”4On December 14, 1992, Dominion appealed the decision to the Court of Appeals.5

On July 19, 1996, the Court of Appeals promulgated a decision affirming that of the trial court.6 On September 3, 1996, Dominion filed with the Court of Appeals a motion for reconsideration.7 On July 16, 1997, the Court of Appeals denied the motion.8Hence, this appeal.9The IssuesThe issues raised are: (1) whether respondent Guevarra acted within his authority as agent for petitioner, and (2) whether respondent Guevarra is entitled to reimbursement of amounts he paid out of his personal money in settling the claims of several insured.The Court’s RulingThe petition is without merit.By the contract of agency, a person binds himself to render some service or to do something in representation or on behalf of an-_______________

4 Petition, Annex “B”, Rollo, pp. 12-18, at pp. 12-15.5 Notice of Appeal, Original Record, Civil Case No. 8855, p. 362.6 Petition, Annex “B”, Rollo, pp. 12-18.7 CA Rollo, pp. 99-112.8 Petition, Annex “A”, Rollo, p. 10.9 Filed on September 8, 1997, Rollo, pp. 20-50. On January 31, 2000, we resolved to give due course to the petition (Rollo, pp. 79-80).243

VOL. 376, FEBRUARY 6, 2002243Dominion Insurance Corporation vs. Court of Appealsother, with the consent or authority of the latter.10 The basis for agency is representation.11 On the part of the principal, there must be an actual intention to appoint12 or an intention naturally inferrable from his words or actions;13 and on the part of the agent, there must be an intention to accept the appointment and act on it,14 and in the absence of such intent, there is generally no agency.15

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A perusal of the Special Power of Attorney16 would show that petitioner (represented by third-party defendant Austria) and respondent Guevarra intended to enter into a principal-agent relationship. Despite the word “special” in the title of the document, the contents reveal that what was constituted was actually a general agency. The terms of the agreement read:“That we, FIRST CONTINENTAL ASSURANCE COMPANY, INC.,17 a corporation duly organized and existing under and by virtue of the laws of the Republic of the Philippines, x x x represented by the undersigned as Regional Manager, x x x do hereby appoint RSG Guevarra Insurance Services represented by Mr. Rodolfo Guevarra x x x to be our Agency Manager in San Fdo., for our place and stead, to do and perform the following acts and things:“1. To conduct, sign, manager (sic), carry on and transact Bonding and Insurance business as usually pertain to a Agency Office, or FIRE, MARINE, MOTOR CAR, PERSONAL ACCIDENT, and BONDING with the right, upon our prior written consent, to appoint agents and sub-agents.“2.To accept, underwrite and subscribed (sic) cover notes or Policies of Insurance and Bonds for and on our behalf._______________

10 Article 1869, Civil Code.11 Bordador v. Luz, 347 Phil. 654, 662; 283 SCRA 374 (1997).12 Victorias Milling Co., Inc. v. Court of Appeals, 333 SCRA 663, 675 (2000), citing Connell v. McLoughlin, 28 Or. 230; 42 P. 218.13 Victorias Milling Co., Inc. v. Court of Appeals, 333 SCRA 663, 675 (2000), citing Halladay v. Underwood, 90 Ill. App. 130.14 Victorias Milling Co., Inc. v. Court of Appeals, 333 SCRA 663, 675 (2000), citing Internal Trust Co. v. Bridges, 57 F. 753.15 Victorias Milling Co., Inc. v. Court of Appeals, 333 SCRA 663, 675 (2000), citing Security Co. v. Graybeal, 85 Iowa 543, 52 N.W. 497.16 Original Record, Civil Case No. 8855, p. 235.

17 Now Dominion Insurance Corporation.244

244SUPREME COURT REPORTS ANNOTATEDDominion Insurance Corporation vs. Court of Appeals“3. To demand, sue, for (sic) collect, deposit, enforce payment, deliver and transfer for and receive and give effectual receipts and discharge for all money to which the FIRST CONTINENTAL ASSURANCE COMPANY, INC.,18 may hereafter become due, owing payable or transferable to said Corporation by reason of or in connection with the above-mentioned appointment.“4. To receive notices, summons, and legal processes for and in behalf of the FIRST CONTINENTAL ASSURANCE COMPANY, INC., in connection with actions and all legal proceedings against the said Corporation.”19 [Emphasis supplied]The agency comprises all the business of the principal,20 but, couched in general terms, it is limited only to acts of administration.21A general power permits the agent to do all acts for which the law does not require a special power.22 Thus, the acts enumerated in or similar to those enumerated in the Special Power of Attorney do not require a special power of attorney.Article 1878, Civil Code, enumerates the instances when a special power of attorney is required. The pertinent portion that applies to this case provides that:“Article 1878. Special powers of attorney are necessary in the following cases:“(1) To make such payments as are not usually considered as acts of administration; “x x x      x x x      x x x“(15) Any other act of strict dominion.”The payment of claims is not an act of administration. The settlement of claims is not included among the acts enumerated in the Special Power of Attorney, neither is it of a character similar to the_______________

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18 Now Dominion Insurance Corporation.19 Original Record, Civil Case No. 8855, p. 235.20 Article 1876, Civil Code.21 Article 1877, Civil Code.22 Tolentino, Arturo M., Commentaries and Jurisprudence on the Civil Code of the Philippines, Vol. V (1997), p. 405, citing 6 Llerena 137.245

VOL. 376, FEBRUARY 6, 2002245Dominion Insurance Corporation vs. Court of Appealsacts enumerated therein. A special power of attorney is required before respondent Guevarra could settle the insurance claims of the insured.Respondent Guevarra’s authority to settle claims is embodied in the Memorandum of Management Agreement23 dated February 18, 1987 which enumerates the scope of respondent Guevarra’s duties and responsibilities as agency manager for San Fernando, Pampanga, as follows:“x x x      x x x      x x x“1. You are hereby given authority to settle and dispose of all motor car claims in the amount of P5,000.00 with prior approval of the Regional Office.“2.Full authority is given you on TPPI claims settlement. “x x x      x x x      x x x”24In settling the claims mentioned above, respondent Guevarra’s authority is further limited by the written standard authority to pay,25 which states that the payment shall come from respondent Guevarra’s revolving fund or collection. The authority to pay is worded as follows:“This is to authorize you to withdraw from your revolving fund/collection the amount of PESOS _____________ (P________) representing the payment on the __________ claim of assured __________ under Policy No. ______ in that accident of _______________ at ________________.“It is further expected, release papers will be signed and authorized by the concerned and attached to the

corresponding claim folder after effecting payment of the claim.“(sgd.) FERNANDO C. AUSTRIA Regional Manager”26[Emphasis supplied]_______________

23 Original Record, Civil Case No. 8855, pp. 236-237.24 Original Record, Civil Case No. 8855, pp. 236-237, at p. 236.25 Original Record, Civil Case No. 8855, p. 299.26 Original Record, Civil Case No. 8855, p. 299.246

246SUPREME COURT REPORTS ANNOTATEDDominion Insurance Corporation vs. Court of AppealsThe instruction of petitioner as the principal could not be any clearer. Respondent Guevarra was authorized to pay the claim of the insured, but the payment shall come from the revolving fund or collection in his possession.Having deviated from the instructions of the principal, the expenses that respondent Guevarra incurred in the settlement of the claims of the insured may not be reimbursed from petitioner Dominion. This conclusion is in accord with Article 1918, Civil Code, which states that:“The principal is not liable for the expenses incurred by the agent in the following cases:“(1) If the agent acted in contravention of the principal’s instructions, unless the latter should wish to avail himself of the benefits derived from the contract;“x x x      x x x      x x x”However, while the law on agency prohibits respondent Guevarra from obtaining reimbursement, his right to recover may still be justified under the general law on obligations and contracts.Article 1236, second paragraph, Civil Code, provides:“Whoever pays for another may demand from the debtor what he has paid, except that if he paid without the knowledge or against the will of the debtor, he can recover

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only insofar as the payment has been beneficial to the debtor.”In this case, when the risk insured against occurred, petitioner’s liability as insurer arose. This obligation was extinguished when respondent Guevarra paid the claims and obtained Release of Claim Loss and Subrogation Receipts from the insured who were paid.Thus, to the extent that the obligation of the petitioner has been extinguished, respondent Guevarra may demand for reimbursement from his principal. To rule otherwise would result in unjust enrichment of petitioner.The extent to which petitioner was benefited by the settlement of the insurance claims could best be proven by the Release of247

VOL. 376, FEBRUARY 6, 2002247Dominion Insurance Corporation vs. Court of AppealsClaim Loss and Subrogation Receipts27 which were attached to the original complaint as Annexes C-2, D-1, E-1, F-1, G-1, H-1, I-1 and J-1, in the total amount of P116,276.95.However, the amount of the revolving fund/collection that was then in the possession of respondent Guevarra as reflected in the statement of account dated July 11, 1990 would be deducted from the above amount.The outstanding balance and the production/remittance for the period corresponding to the claims was P3,604.84. Deducting this from P116,276.95, we get P112,672.11. This is the amount that may be reimbursed to respondent Guevarra.The FalloIN VIEW WHEREOF, we DENY the petition. However, we MODIFY the decision of the Court of Appeals28 and that of the Regional Trial Court, Branch 44, San Fernando, Pampanga,29 in that petitioner is ordered to pay respondent Guevarra the amount of P112,672.11 representing the total amount advanced by the latter in the payment of the claims of petitioner’s clients.

No costs in this instance.SO ORDERED.     Davide, Jr. (C.J., Chairman), Puno, Kapunan and Ynares-Santiago, JJ., concur.Petition denied, judgment modified.Note.—The general principles of agency govern the relation between the corporation and its officers or agents subject to the articles of incorporation, by laws or relevant provisions of law. (San Juan Structural and Steel Fabricators, Inc. vs. Court of Appeals, 296 SCRA 631 [1998])——o0o——

_______________ [Dominion Insurance Corporation vs. Court of Appeals, 376 SCRA 239(2002)]