SUPREME COURT REPORTS ANNOTATED Mercado vs. Allied Banking Corporation G.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 2085 are Law; of Property; for the the Civil to a or their they Contracts; Validity Code the principal of Mortgages; a the Essential following and the Requisites Mortgage.Article

attorney is necessary in cases where real rights over immovable property are created or conveyed. In the SPA to executed by Perla in favor sell, alienate, registered authorized strict mortgage, in Julian Perlas [t]o or of Julian on 28 lease name. exercise ownership this and The any or over SPA deal SPA all the by the May 1992, the latter was conferred with the authority otherwise the different pieces of real and personal property likewise acts The of

dominion and due Same;

enumerates contracts of

identified properties, and rights and interest therein. existence Same; execution of In Perla was not denied or challenged by petitioners. Same; Same; cases where terms of the contract are clear as to leave no room for interpretation, resort to circumstantial evidence to ascertain the true intent of the the parties, terms is of not the countenanced.In _______________ * THIRD DIVISION. 445 cases where 1

essential requisites: Art. 2085. The following requisites essential of pledge (2) That mortgage: (1) That they be constituted to secure the fulfillment thing obligation; (3) and pledgor or mortgagor be the absolute owner of the pledged the of that mortgaged; or property, be That in the the persons the for free the absence constituting disposal thereof, pledge mortgage have

contract are clear as

legally

authorized

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 VOL. 528, JULY 27, 2007 445 Mercado vs. Allied Banking Corporation 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

to

leave

no

room

for

interpretation,

resort

to

other

powers

and

duties

are

excluded.Equally

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 meaning of of the its contracting shall parties, control. the When literal the stipulation

relevant is the rule that a power of attorney must be strictly construed and pursued. The instrument will be held to nor grant deviate all only from such those the powers may power which neither of are go specified beyond in an therein, and the agent

attorney. are

Where powers and duties are specified and defined instrument, powers and duties 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 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 While [the] the mortgagee, thus: 2

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 seeming enforced, Same; not as assumed The is to it simply true be or merely to must that avoid be the and hardships. meaning presumed Where

contracting parties know their scope and effects. Same; Same; Same; powers 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

446 446 SUPREME COURT REPORTS ANNOTATED Mercado vs. Allied Banking Corporation one who buys from the registered owner does not need to look behind the certificate of title, one who buys of from but [the] all one factual who is not [the] registered for owner is expected to examine not only the certificate title circumstances necessary [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 banking banking strenuously when when the the mortgagee principle mortgagee in the is is is case a a bank bank of or or a a v. institution.This institution. Thus, applied more

involving expected status security PETITION

registered to

lands. due

banking

institution

is

exercise

diligence

before

entering

into a mortgage contract. The ascertainment of the or condition of a property for for a loan review must on be offered to it as a of standard the and

indispensable part of its operations. certiorari decision and resolution of the Court of Appeals. The facts are stated in the opinion of the Court. Quasha, petitioners. Francisco Gerardo C. Llamas and Paul A. 3 Bernardino for respondent. CHICO-NAZARIO, J.: Before Certiorari this Court is a Petition for Review on of Ancheta, Pea and Nolasco for

under Rule 45 of the Revised Rules

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, 2007 447 Mercado vs. Allied Banking Corporation

Cruz

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

seeking 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 portion of real estate mortgage constituted on TCT of the assailed Court of Appeals Decision No. RT-18206 (106338) null and void. The dispositive

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 Square Certificates Meters, of Title Nos. Square T-536183,522 Meters, TT-468103,953

53140177 Square _______________ 1 Penned by Associate Associate Fernanda Justice Justices Delilah Josefina VidallonGuevaraconcurring. 4

thus reads: WHEREFORE, the appealed decision is REVERSED and SET ASIDE, are and of in a new Perla judgment N. is hereby (Perla). of the entered dismissing the [petitioners] complaint.4 Petitioners real heirs situated on duly the Mercado provinces is a Perla, during her lifetime, owned several pieces of property different hand, as Philippines. Respondent, institution other banking the

Magtolis Salonga

with and

LampasPeralta,

Rollo, pp. 44-59. 2 Id., at pp. 61-64. 3 Id., at pp. 71-84. 4 Id., at p. 59. 448 448 SUPREME COURT REPORTS ANNOTATED Mercado vs. Allied Banking Corporation Meters, Mindoro; b) Susana Heights, Muntinlupa covered by Transfer Certificates of Title Nos. T-108954600 Square Meters T-21403263 Square Meters, T4680739 Square Meters of the Registry of Deeds of Oriental

authorized

such

under

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:

and RT-106338805 Square Meters of the Registry of Deeds of Pasig (now Makati); c) Personal property No. 1983 Car with Vehicle Make Registration R-16381; Model 1983;

Still the

using sum

the of

subject

property

as

security,

Julian by a

obtained an additional loan from the respondent in P5,000,000.00, evidenced Promissory Note6 he executed on 5 February 1997 as another real estate mortgage (REM). It appears, in however, the SPA that as there TCT was No. no RT property 18206

Toyota; Engine No. T- 2464 2. To sign for and in my behalf any act of strict dominion quit-claims, and Nos. Deeds and in over or ownership and any sale, of in disposition, including rights in General of DEL mortgage, lease or any waiver the parcels and in person of other transactions relinquishment land situated of the with

identified

(106338) and registered with the Registry of Deeds of Quezon City. What was _______________ 5 Susana Heights, Muntinlupa covered by Transfer 5

Trias, Cavite, covered by Transfer Certificates of Title T-112254 of the T-112255 conjunction ATTY. Registry his F. Cavite, co-owner Certificates of Title Nos. T-108954690 square meters; and RT-106338805 square meters of the Registry of Deeds of Pasig (now Makati); 6 Id., at pp. 106-109. 449 VOL. 528, JULY 27, 2007 449 Mercado vs. Allied Banking Corporation identified 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

AUGUSTO

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 mortgage which 805 of of P3,000,000.00, on a parcel secured No. land of by with with real an the estate area constituted covers square TCT RT-18206

(106338)

meters,

registered

Registry of Deeds of Quezon City (subject property).5

foreclosure which was

proceedings

over

the at

subject public

property auction

and the auction sale of the subject property be also nullified. In its Answer with Compulsory contrary Counterclaim,10 to petitioners respondent averred that,

subsequently

sold

wherein the respondent was declared as the highest bidder as shown in the Sheriffs Certificate of Sale dated 15 January 1998.7 On 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 SPA, not at covered the by time the the SPA loan and that the said were

allegations, the SPA in favor of Julian included the subject property, covered by one _______________ 7 Id., at p. 73 8 Id., at p. 74. 9 Id., at pp. 74-75. 10 Id., at pp. 96-103. 450 450 SUPREME COURT REPORTS ANNOTATED Mercado vs. Allied Banking Corporation of the titles specified in paragraph 1(b) thereof, TCT No. RT106338 registered with the Registry of Deeds of Pasig (now Makati). The subject under property TCT TCT No. No. was TTpurportedly TCT registered previously (106338). 6

obligations

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.8 Petitioners dated 23 likewise January alleged 1996, that notified together the with the of copy of the Revocation of SPA, Perla, in a Letter Registry 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.9 In 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

106338, and was only subsequently reconstituted as RT-18206 Moreover, 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 declaring 2003, the the RTC rendered over a the Decision REM constituted

(106338) of the Registry of Deeds of Quezon City as NULL and VOID; 2. Declaring the Sheriffs 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, 2007 451 Mercado vs. Allied Banking Corporation 3. Ordering the defendant on Registry Entry on Nos. TCT of Deeds of Quezon City to cancel the annotation of Real Estate Mortgages 18206 and appearing PE-4543/RTNo. RT18206 2012/RT-18206 7

subject property null and void, for Julian was not authorized by the terms of the SPA to mortgage the same. The court pursuant a quo to the likewise and void ordered REM, be that the sale foreclosure conducted proceedings the auction

(106338) of the Registry of Deeds of Quezon City; 4. Ordering the [respondent] Bank to deliver/return to the [petitioners] M. represented the by their attorney-in-fact Duplicate Alfredo Perez, original Owners

nullified. is

The dispositive portion of the Decision reads: WHEREFORE, premises considered, judgment hereby rendered in favor of the [herein petitioners] and against the [herein respondent] Bank: 1. and Declaring the Real Estate Entry Mortgages constituted registered under Nos. PE-4543/RT-18206

Copy of TCT No. RT-18206 (106338) free from the encumbrances referred to above; and 5. Ordering the the [respondent] amount of Bank to pay as the for [petitioners] P100,000.00

and 2012/RT-18206 annotated on TCT No. RT-18206

attorneys fees plus cost of the suit.

The other claim for damages and counterclaim are hereby DENIED for lack of merit.11 Aggrieved, 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 court of the REM that constituted Perla over the the subject subject property on the strength of the SPA. The appellate declared intended 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 several rendered issues, OR NOT by which the Court of Appeals as raising follows: I WHETHER THERE WAS A VALID MORTGAGE PROPERTY. II WHETHER OR NOT THERE WAS A VALID REVOCATION OF THE SPA. _______________ CONSTITUTED OVER SUBJECT are summarized 452 SUPREME COURT REPORTS ANNOTATED Mercado vs. Allied Banking Corporation III WHETHER OR NOT THE RESPONDENT WAS A MORTGAGEE-IN-GOOD FAITH. For Civil a mortgage Code to be valid, the Article 2085 of the enumerates following essential 11 Id., at p. 84. 452

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) and That in the have the persons the free constituting disposal that of thereof, the they pledge be or mortgage their property, legally 8

absence

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 with obligations the from respondent of the to which he secured The VOL. 528, JULY 27, 2007 453 Mercado vs. Allied Banking Corporation ized 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. There property a special or whether identified is no the question power in SPA, therefore to the so SPA. as that the Julian pieces as was of to 9 vested with the in mortgage was to mortgage a Julian third and subject the It property. loan was,

property mortgaged was owned by his wife, Perla, considered between party obligations thus, a respondent.

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 Julians loan obligations with respondent, we proceed to determining if she duly authorized Julian to do so on her behalf. Under rights Article over 1878 of the Civil Code, are power of attorney is necessary in cases where real immovable property created 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 Perlas name. The SPA likewise author_______________ 12 Paragraph 12 of Article 1878, Civil Code of the Philippines. 453

identified the

However, among render

subject

property

those Julians

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, Mindoro; 3,953 located with (2) at the Calapan, Registry No. located Oriental of at with Mindoro, of an area and of registered Deeds Oriental Oriental

TCT

T-46810,

square

meters,

Calapan,

Mindoro, and registered with the Registry of Deeds

of Oriental Mindoro; (3) TCT No. T-53140, with an area Deeds with of of an 177 square meters, (4) and located TCT at No. Calapan, T-21403, at the with Oriental Mindoro, and registered with the Registry of Oriental area of Oriental Mindoro; 263 Mindoro, square meters, registered located

Mercado vs. Allied Banking Corporation subject property on is the unenforceable other hand, for having been its done without authority. Respondent, mainly hinges 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. RT18206 (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. and 106338, not and the property the covered by both certificates of title is actually situated in Quezon City Pasig. From 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 Perlas clear intention. After an examination of the literal terms of the SPA, we find that to the the subject therein. subject property There property was is not no among obvious by TCT those enumerated 10

Calapan,

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 Property Toyota, the of Pasig consisting No. and Engine property (now of Makati); a 1983 Model Tand Car (8) with 1983, Nowhere No. Personal Vehicle Make is RT it

Registration

R-16381, No.

2464. by

stated in the SPA that Julians authority extends to subject covered TCT 18206 (106338) registered with the Registry of Deeds of Quezon City. Consequently, the act of Julian of constituting a mortgage over the 454 454 SUPREME COURT REPORTS ANNOTATED

reference

covered

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 attribute executed instrument such of such the is alleged SPA bare of when any the to therein. We cannot to Perla of suggestive the that who the of intent effect, language adopt to intention

stipulation shall control. When the language of the contract is explicit, leaving no doubt as to the intention of the drafters, the courts its main import. abstract The justice clear nor terms the may of rule the on not read contract liberal

into it [in] any other intention that would contradict should never be the subject matter of interpretation. Neither interpretation justifies the creation of a contract for the parties which they did not make themselves or the imposition not as upon one The is to party or true be to a contract to must that or be the 11 obligation seeming enforced, assumed it simply merely avoid

indication

intention. and

Contrariwise, convincing

theory advanced by the respondent, in the absence clear evidence would run afoul of the express tenor of the SPA and thus defeat Perlas 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 455 Mercado vs. Allied Banking Corporation Incorporated 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

hardships.

meaning presumed

contracting parties know their scope and effects.14 Equally relevant is the rule that a power of attorney must which be are strictly specified Where construed therein, and and and pursued. the agent are The may instrument will be held to grant only those powers neither go beyond nor attorney.15 deviate from the power of duties specified

powers

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 granted are excluded.16 This is but in accord beyond the powers expressly given with and the disinclination of courts to enlarge the authority

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. 15 453. 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. 456 456 SUPREME COURT REPORTS ANNOTATED Mercado vs. Allied Banking Corporation Even 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 Angeles v. Philippine National Railways (PNR), G.R. No. 150128, 31 August 2006, 500 SCRA 444,

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 and be terms, brought and to ruin, this is such not excessive authority must be set down in the most formal explicit when 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 Registry RT-18206 stripped property. the by of TCT Deeds No. of 106338 Pasig registered (now with with is the the of the from its Makati) the to

same as the subject property covered by TCT No. (106338) of It registered Registry verify Deeds of Quezon City. The records of the case are supporting failed of to proofs any respondents claim that the two titles cover the same present certification to support Registries Deeds concerned 12

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 and and Deeds closely of Pasig (now the Makati) technical of and RT-18206 of the (106338) of the Registry of Deeds of Quezon City, comparing descriptions that the properties covered by the said TCTs. The bare sweeping statement respondent

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. 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, 2007 457 Mercado vs. Allied Banking Corporation Assuming 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 respondents 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 the agency. of may Such the revoke the agency at will, and compel the agent to return the document In this evidencing case, the revocation agency or may be express or implied (Article 1920, supra). revocation 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 property that any attempt by TCT to mortgage or sell the covered No. [RT-18206] 106338 13

located at No. 21 Hillside Drive, Blue Ridge, Quezon City must have the full consent documented in the form of a at special the power Philippine of attorney duly authenticated 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 always as far to as the revocations notice. existence actual and legal effect is concerned since actual notice is superior constructive The notice of the revocation relayed to defendant Registry of Deeds of Quezon City is not denied by either the Registry of Deeds In which of Quezon there City or the no defendant Bank. case, appears

reason why Section 52 of the Property Registration Decree Section order, (P.D. 52. No. 1529) should notice or not upon apply to the situation. Said Section 52 of P.D. No. 1529 provides: Constructive registration. affecting Every conveyance, mortgage, lease, lien, attachment, judgment, instrument entry 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 the 458 458 SUPREME COURT REPORTS ANNOTATED Mercado vs. Allied Banking Corporation time It of such registering, that at filing the Bank was or time was on entering. the first at (Pres. loan on the Decree No. 1529, Section 53) (emphasis ours) thus developed with 12, transaction December defendant 1996, there effected

revocation

letter

was

received

by

the

Register

of

Deeds of Quezon City on February 7, 1996.19 Given 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. RT18206 (106338), as the RTC pointed out, neither the Registry denied Quezon come of that City. across Deeds Perlas of Quezon 23 City nor respondent letter was January would if it 1996 have 14

received by and filed with the Registry of Deeds of Respondent said the letter subject undoubtedly diligently and the indeed

investigated

property

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, verified respondent authority claims over to the have subject carefully property Julians

record

Office of the Register of Deeds of Quezon City that the special power of attorney granted Julian, Sr. by Perla had been rendering revoked. Julian, That Sr. notice, without works authority as to constructive notice to third parties of its being filed, effectively act for and in behalf of Perla as of the date the

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, 2007 459 Mercado vs. Allied Banking Corporation ered 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. that From was the foregoing, respondent to concluded a Julian indeed authorized constitute

palpable

difference

between

the

TCT

numbers

referred to in the real estate mortgages and Julians SPA, coupled with the fact that the said TCTs are registered cities, in the Registries put of Deeds of on different guard. should have respondent

Respondents 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, identification [Settled registered than This what rule, is and of the the which the rule [is significantly being person to its x on affected mortgaged. dealing inquire face but x the In with property that] not is title not it is a

Arrofo v. Quio,20 we have elucidated that: lands required] further of a go 15

Torrens while

indicates. admits x that not

however, Thus, with

absolute true, lands or which

exceptions. person settled close

dealing rule his that

registered

need

beyond the certificate of title, it is likewise a wella purchaser to facts mortgagee should cannot put a eyes

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-106338805 Square Meters of the Registry of Deeds of Pasig now Makati. The

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 vendors or mortgagors title, will not make him an innocent purchaser for value, if it after_______________ 20 G.R. No. 145794, 26 January 2005, 449 SCRA 284. 460 460 SUPREME COURT REPORTS ANNOTATED Mercado vs. Allied Banking Corporation wards 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 the SPA, patent defect in the now scope claim of to Julians be an authority, easily discernable from the plain terms of respondent cannot innocent mortgagee. Further, in the case of Abad v. Guimba,21 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] one who buys from the registered owner does not need to look behind the certificate of title, one the flaws who buys owner of title for the to from is title of the [the] but the one to all who is not not [the] only registered necessary in capacity the expected examine

certificate

factual

circumstances or the law in [the] instant itself 16

[one] to determine if there are any transferor, Although as the land.

transfer rule

case does not involve a sale but only a mortgage, same applies inasmuch includes a mortgagee in the term purchaser.22 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,23 we ruled: Respondent, however, is not an ordinary mortgagee; it and is a mortgagee-bank. it is expected in its lands. due As to A such, exercise banking unlike including before private care those is entering individuals, involving expected greater

prudence to

dealings, diligence

registered

institution

exercise

into a mortgage contract. The ascertainment of the status or condition of a property offered to it as _______________

Thus, even granting for the sake of argument that 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, 2007 461 Mercado vs. Allied Banking Corporation security for a loan must be a standard and indispensable part of its operations.24 Hence, 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 to the with most with Where Julian rigid only with utmost its its in in caution. As a bank, respondent must subject all its transactions business and of is scrutiny, interest since and acted impressed public the subject property and the one identified in the SPA are one and the same, it would not elevate respondents status to that of an innocent mortgagee. As a banking that institution, respondent jurisprudence should stringently more requires take

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 respondent of the acted agents with dealing the with these. degree Had of required

diligence, it could have acquired knowledge of the letter dated 23 January 1996 sent by Perla to the Registry the of Deeds The into the of Quezon of City the which recorded to the same. failure respondent surrounding 17

investigate

circumstances

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 the RTC. It and not null is best to and void, as reiterate that ruled by the said

fiduciary character requires high standards of integrity performance.25 Julian and respondent the undue haste in granting the mortgage loans in favor disregarding apparent defects the latters authority as agent, it failed to discharge the degree of diligence required of it as a banking corporation.

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. 462 462 SUPREME COURT REPORTS ANNOTATED Mercado vs. Allied Banking Corporation Perla without the latters authority and consequently, unenforceable Code. cannot unless entered be they into under Article by or a in 1403(1) are proper because excess of the in they Civil which court, are or Unenforceable enforced are without contracts those

with

the

Registry and

of the

Deeds auction in are

of

Quezon the of and the the of

City

are

unenforceable. proceedings property however, unenforceable is

Consequently,

foreclosure subject these This, of the

sale null to

conducted contracts without

pursuance

void. right

prejudice

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 Trial No. Court 82636, of with are are hereby City, REVERSED. 220, real RT void in The Civil estate 18206 but Decision dated 23 September 2003 of the Regional Quezon Branch that TCT the No. and Case No. Q-99-37145, is hereby REINSTATED and AFFIRMED mortgages (106338) modification over not null constituted 18

action either of

ratified,

authority

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 Perlas by the other of contracting the by same, Julian party.27 the over real the Without estate subject ratification

UNENFORCEABLE. No costs. _______________ 26 Article 1403, Civil Code of the Philippines. 27 Article 1317, Civil Code of the Philippines. 463

mortgages

constituted

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

VOL. 528, JULY 27, 2007 463 Agfha, Incorporated vs. Court of Tax Appeals SO ORDERED. Ynares-Santiago Petition That of granted, trial (Chairperson), and Austria-Martinez reversed. with and Nachura, JJ., concur. judgment court resolution and reinstated affirmed

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 [Mercado Finance vs. Corporation, Banking 379 SCRA 490 [2002]) o0o Allied Corporation, 528 SCRA 444(2007)] 19

* SECOND DIVISION. 167 SUPREME COURT REPORTS ANNOTATED National Court G.R. No. 75640. April 5, 1990.* NATIONAL FOOD AUTHORITY, (NFA), petitioner, vs. INTERMEDIATE Civil Law; APPELLATE Agents COURT, apparent SUPERIOR representation (SG) SHIPPING CORPORATION, respondents. Agency; yields to the principals true representation and the contract is considered as entered into between the principal and third person.Consequently when things belonging Shipping to the principal are (in dealt this with, case, the Superior agent is The facts are stated in the opinion of the Court. Zapanta, Gloton & Ulejorada for petitioner. Sison, 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: Ortiz & Associates for private Corporation) Food Authority vs. Intermediate Appellate VOL. 184, APRIL 5, 1990 167 National Court 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. PETITION for certiorari to review the decision of the then Intermediate Appellate Court. Coquia, J. 20 Food Authority vs. Intermediate Appellate

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 agents apparent representation yields to the principals 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 ______________

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 attorneys

Penned

by

Justice of

Jorge Justice

R.

Coquia Floreliana

with

the

concurring

votes

Castro-

Bartolome and Justice Bienvenido C. Ejercito. 2 Penned by Judge Ricardo D. Pronove, Jr. 168 168 SUPREME COURT REPORTS ANNOTATED National Court Upon completion plaintiff of on the delivery 17, of rice at wrote its a 21 destination, October 1979, Food Authority vs. Intermediate Appellate

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 from the to port defendant of San National Jose, Grains Authority Occidental

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 and for freightage but also claims for to demurrage P93,538.70. On the November payment was 16, its for the 5, 1979, plaintiff and the other vessel defendant that the wrote again be Sea on to could defendant NGA, this time specifically requesting that freightage owner E). 1979 In of charges MV NGA it made to it and not to defendant Medalla because plaintiff Runner not (Exhibit reply, because stevedoring charges amounting

Mindoro, to Malabon, Metro Manila. ________________

November grant

informed

plaintiff

request

contract

transport NGA that and he

the was F).

rice

was as

entered a on mere

into did

by not

defendant disclose plaintiff 1979, of 19,

The

appellate NFA or of

court

affirmed a rule

the lone case

judgment issue falls for it (Art.

of to in is

the wit: the Art. not

defendant Medalla who acting Thereupon

lower court, hence, this appeal by way of certiorari, petitioner whether exception It is submitting the general by not the instant within

agent

(Exhibit

November

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 of 4, 1979, plaintiff to wrote by defendant defendant the Medalla demanding that he turn over to plaintiff the amount NFA. demand. Plaintiff was therefore constrained to file the instant complaint. Defendant-appellant National Food Authority admitted that it entered 8,550 into a contract MV rice of of with Gil Medalla Runner defendant P27,000.00 paid him Defendant Medalla, however, ignored

provided NFA the that rule

1883 of the Civil Code of the Philippines. contended under the petitioner to liable exception 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)n 169 VOL. 184, APRIL 5, 1990 169 National Court undisclosed 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 NFAs contention holds no water. It is an undisputed fact that Gil Medalla was a commission Food Authority vs. Intermediate Appellate 22

whereby transported

plaintiffs

vessel sacks

Sea said

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)

agent which

of

respondent the

Superior MV

Shipping Sea

Corporation that

entered

into

between

the

principal

and

the

third

owned

vessel

Runner

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. 170 170 SUPREME COURT REPORTS ANNOTATED Labrador vs. Court of Appeals Note.Exhibit A does not create an agency between Perlas, as principal, and Vizconde, as agent for the sale of the formers ring but merely guaranteed the civil obligation of Pagulayan to pay Perlas the value of the ring in the event of Pagulayans failure to return said article. (Vizconde vs. Intermediate Appellate Court, 149 SCRA 226.) 23

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 as the if person the with whom were he his has own, contracted, the principal. The provision of this article shall be understood to be without prejudice to the actions between the principal and agent. Consequently, when things belonging to the principal (in dealt this case, the Superior agent is Shipping bound Corporation) to the are with, principal transaction

except when the contract involves things belonging to

although he does not assume the character of such agent and appears acting in his own name. In other words, the agents apparent representation yields to the principals true representation and that, in reality and in effect, the contract must be considered as

o0o

[National

Food

Authority

vs.

Intermediate

SUPREME COURT REPORTS ANNOTATED Eurotech Industrial Technologies, Inc. vs. Cuizon G.R. No. 167552. April 23, 2007.* EUROTECH respondents. Agency; The underlying principle of the contract of agency services a is to accomplish results by using the of othersto do a great variety of things of agency, service or on The a or behalf person to of binds do another principle great himself with of to in the the of and 24 INDUSTRIAL TECHNOLOGIES, INC., petitioner, vs. EDWIN CUIZON and ERWIN CUIZON,

Appellate Court, 184 SCRA 166(1990)]

like selling, buying, manufacturing, and transporting.In contract render latters the some consent. of something

representation

underlying do a

contract of agency is to accomplish results by using services like othersto variety things selling, buying, manufacturing,

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 that is, the the basis agent of acts agency for and is on representation,

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 presencequi facit per alium facit per se. 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 1897 party with whom he the he contracts; not Exceptions.Article liable to the reinforces with whom

585 Eurotech Industrial Technologies, Inc. vs. Cuizon 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. Same; Managers; The position of manager is unique in The that it presupposes of EDWIN of the grant of broad states as the in powers that sales that it 25 with which to conduct the business of the principal. Deed Assignment signed manager clearly thereon is respondent the position

manager of Impact Systems. As discussed elsewhere, unique 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

familiar doctrine that an agent, who acts as such, is personally 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, 2007

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 take is not note say of that a third that in person this both can recover from both the principal and the agent.We likewise petitioner the to fact case, from seeking recover

say that a third person can recover from both the principal and the agent. 586 586 SUPREME COURT REPORTS ANNOTATED Eurotech Industrial Technologies, Inc. vs. Cuizon Same; 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 avails did stands of the to be benefited we right or injured that by the judgment in the suit, or suit.As any the party declare nor entitled to the respondent any liability 26

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. presents binds The the second part of the the the said agent limits provision himself of his situations or he when exceeds

EDWIN acted within his authority as an agent, who not acquire incur 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 exclusion as a defendant the party in the entitled to the suit before the avails of the suit. In this respect, we sustain his court a quo.

becomes liable to a third party when he expressly himself 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

PETITION

for

review

on

certiorari

of

the

decision VOL. 521, APRIL 23, 2007 587 Eurotech Industrial Technologies, Inc. vs. Cuizon for The 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

and resolution of the Court of Appeals. The facts are stated in the opinion of the Court. Nilo G. Ahat for petitioner. Zosa respondents. CHICO-NAZARIO, J.: Before assailing March T. Us the 2005 is a petition of for the SP review Court No. by of certiorari Appeals entitled, and Quijano Law Offices

has as one of its customers Impact Systems Sales (Impact owned Systems) by which is a sole proprietorship (ERWIN). respondent ERWIN Cuizon

Decision1 in CA-G.R.

dated 10 August 2004 and its Resolution2 dated 17 71397 Eurotech Industrial Technologies, Inc. v. Hon. Antonio 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. 3336. 2 Id., at pp. 3739. 3 Id., at pp. 8384. 587

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 ninety-one to buy various products allegedly amounting to thousand petitioner three one with hundred unit of thirty-eight pump a 27

(P91,338.00) pesos. Subsequently, respondents sought from at the sludge valued When P250,000.00 sludge without EDWIN respondents from fully de making the settled

down payment of fifty thousand pesos (P50,000.00).4 pump their and arrived having Alberto United their Kingdom, petitioner refused to deliver the same to respondents respondent indebtedness to petitioner. Thus, on 28 June 1995, Jesus, general

manager

of

petitioner,

executed

Deed

of

3.)

That

the

ASSIGNEE

does

hereby

accept

this

Assignment of receivables in favor of petitioner, the pertinent part of which states: 1.) That ASSIGNOR5 has an outstanding receivables from Toledo Power Corporation SIXTY in the amount of THREE HUNDRED FIVE THOUSAND

assignment.7 Following the execution of the Deed of Assignment, petitioner delivered to respondents the sludge pump as shown by Invoice No. to of from the 12034 dated 30 June 1995.8 Allegedly despite proceeded unbeknownst the to existence collect petitioner, Deed of Toledo respondents, Assignment, Company

(P365,000.00) PESOS as payment for the purchase of one unit of Selwood Spate 100D Sludge Pump; 2.) said the That said ASSIGNOR from Toledo does hereby ASSIGN, in TRANSFER, and CONVEY unto the ASSIGNEE6 the receivables amount of Power Corporation SIXTY THREE HUNDRED FIVE

Power

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, petitioners 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 attorneys fees.11 Because final for sum of of respondents money, attachment failure to with abide a by said for demand letter, petitioner damages, against instituted herein complaint 28

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. 6 588 588 SUPREME COURT REPORTS ANNOTATED Eurotech Industrial Technologies, Inc. vs. Cuizon Referring to petitioner Eurotech Industrial Technologies, Inc.

application

preliminary

respondents

before the Regional Trial Court of Cebu City.12

On

January prayer

1997, for

the the

trial issuance

court of

granted writ filed of his

Systems indebtedness to petitioner which, according to him, amounted to only P220,000.00.16 By way of special and that of in this and affirmative he his his very 1.3 is defenses, not a real which with respondent was was this acting the fact. to EDWIN as alleged

petitioners On 25

preliminary attachment.13 June 1997, respondent EDWIN Answer14 wherein he admitted petitioners 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. 3841. 589 VOL. 521, APRIL 23, 2007 589 Eurotech Industrial Technologies, Inc. vs. Cuizon petitioner however, between disputed January the and April amount 1995.15 of He, total Impact

party in interest in this case. According to him, he mere agent Systems, of 1.2 was principal, transaction Impact In

petitioner and the latter support points paragraphs

much aware of petitioner petitioners of

argument,

Complaint stating 1.2. Defendant Erwin H. Cuizon, is of legal age, married, as a resident Systems office City, other Edwin of Cebu City. He is the for proprietor of a single proprietorship business known Impact with Cebu and Sales located where (Impact at he 46-A may of is the of Systems del be brevity), Street, Court. 1.3. Defendant B. Cuizon 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.17 On 26 June 1998, petitioner The filed trial a court Motion to Declare Defendant ERWIN in Default with Motion for Summary Judgment. granted summons Rosario served 29

processes

Honorable

petitioners motion to declare respondent ERWIN in default but it for his failure despite Order the petitioners of to the answer opportunity motion 31 for August of within the prescribed judgment 2001.19 period denied in its granted18 summary 2001 the and

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 acted Sales; of in Assignment, behalf that of or [Impact] defendant Systems Edwin Sale is B. a Cuizon Systems represented [Impact]

scheduled the pre-trial of the case on 16 October However, conduct pre-trial conference was deferred pending the _______________ 15 Id., at p. 38. 16 Ibid. 17 Id., at p. 1. 18 Id., at p. 50. 19 Id., at p. 61. 590 590 SUPREME COURT REPORTS ANNOTATED Eurotech Industrial Technologies, Inc. vs. Cuizon resolution After by the the filing in defenses trial court trial court of support and of the special and affirmative defenses raised by respondent EDWIN.20 respondent of his its petitioners EDWINs special assailed and Order opposition22 Memorandum21 affirmative thereto, the

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 a solely down of by defendant of Erwin H. that Cuizon, Annex that made payment Annex P50,000.00 thereby 30

H is dated June 30, 1995 or two days after the execution G, showing [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

rendered

subject Cuizon

contract in

was of

entered his

into

by

Edwin

B.

now states:

assailed

Decision finding the in

of no

the viable Order

Court legal dated

of

Appeals to the 29,

excess

powers

since

[Impact]

Systems Sales made a down payment of P50,000.00 two days later. In view of the Foregoing, B. Cuizon the be Court directs as that party defendant Edwin dropped

WHEREFORE, reverse public or

ground by January

modify

conclusions

reached

respondent

his

2002, it is hereby AFFIRMED.24 Petitioners motion for reconsideration was denied by the appellate court in its Resolution promulgated on 17 March 2005. Hence, the present petition raising,

defendant.23 _______________ 20 Edwin Cuizons counsel requested that the

as sole ground for its allowance, the following: THE COURT OF ERROR EDWIN APPEALS WHEN CUIZON, IT COMMITTED RULED AS AGENT A OF REVERSIBLE RESPONDENT THAT 31

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. 8286. 22 Memorandum dated 16 November 2001; id., at pp. 8791. 23 Id., at pp. 9596. 591 VOL. 521, APRIL 23, 2007 591 Eurotech Industrial Technologies, Inc. vs. Cuizon Aggrieved 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

IMPACT SYSTEMS SALES/ERWIN CUIZON, IS NOT PERSONALLY LIABLE, BECAUSE HE HAS NEITHER ACTED NOR BEYOND DID THE HE SCOPE OF HIS IN AGENCY THE PARTICIPATE

PERPETUATION OF A FRAUD.25 To support its argument, petitioner points to Article 1897 of the New Civil Code which states: Art. 1897. The liable unless the limits agent to he of who the his acts party as with binds such is not he or personally contracts, exceeds whom himself

expressly

authority

without

giving

such party sufficient notice of his powers.

Petitioner contends that the Court of Appeals failed to appreciate the effect of ERWINs act of collecting the receivables from the the said Toledo Power of did the not Corporation Deed revoke of the notwithstanding Systems. ER_______________ 24 Rollo, p. 35. 25 Id., at p. 17. 592 592 SUPREME COURT REPORTS ANNOTATED Eurotech Industrial Technologies, Inc. vs. Cuizon WINs action repudiated EDWINs 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.26 Petitioner selling Systems also contends unit of the that it fell victim to to the fraudulent scheme of respondents who induced it into the one sludge Deed pump of Impact and signing Assignment. While existence collection

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 fullblooded brothers whose successive contravening acts bore the obvious signs of conspiracy to defraud petitioner.27 In 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 the even to petitioner of as it said is alleged in the Complaint that he is being sued in his capacity as sales manager the 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 latters some service or on The or behalf to of do something with of principle in the the representation another 32

Assignment signed by EDWIN on behalf of Impact agency relations of respondents, petitioner insists that

consent.29

underlying

contract of agency is to accomplish results by using

the

services

of

othersto

do

great

variety

of

The

elements the of a

of

the or

contract implied, (2) in act

of of the

agency the object to

are: is a

(1) to the third

things like selling, _______________ 26 Id., at pp. 2122. 27 Id., at pp. 2526. 28 Id., at pp. 98114. 29 Article 1868 of the Civil Code. 593 VOL. 521, APRIL 23, 2007 593 Eurotech Industrial Technologies, Inc. vs. Cuizon buying, 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 acts have for the and on behalf of the same legal effect as if principal they on matters within the scope of his authority and said 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 presencequi facit per alium facit per se.33

consent, establish execution

express

parties

relationship; juridical

relation

person; (3) the agent acts as a representative and not for himself; (4) the agent acts within the scope of his authority.34 In this case, of the the parties agency as of do not and present dispute EDWIN dispute his the as is existence respondents agent. whether when he The relationship the of between

ERWIN only signed

principal

cause the

respondent

EDWIN Deed

exceeded

authority thereby 33

Assignment that

binding himself personally to pay the obligations to petitioner. EDWIN Petitioner firmly the believes authority respondent by his acted beyond granted

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., 594 594 SUPREME COURT REPORTS ANNOTATED Eurotech Industrial Technologies, Inc. vs. Cuizon whom he contracts. two The same when provision, an agent however, becomes presents instances 385 Phil. 453, 465; 328 SCRA 717, 728 (2000).

The

Deed

of EDWIN of

Assignment signed manager

clearly thereon is as

states the in

that sales

respondent the position

manager of Impact Systems. As discussed elsewhere, unique 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 and to the of judgment which and are discretion incidental to his in or care 34 transactions appurtenant concerns

business

entrusted

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.35 Applying 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

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.

amount of fifty thousand pesos (P50,000.00) as down payment on 3 with March 1995,37 which it still persisted in in the negotiating petitioner culminated

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 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. presents binds The the second part of the the the said agent limits provision himself of his 35

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, 2007 595 Eurotech Industrial Technologies, Inc. vs. Cuizon of its receivables from Toledo Power Company on 28 June 1995.38 The Impact mind significant amount of time to spent on the negotiation for the sale of the sludge pump no underscores in in our Systems perseverance that respondent of get hold of the said equipment. There is, therefore, doubt EDWINs was participation the Deed Assignment

situations or he

when exceeds

becomes liable to a third party when he expressly himself 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 _______________

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

38 Annex G of the Complaint; id., at p. 17. 39 Philippine Products Company v. Primateria Societe Anonyme 40 De Pour Leon on Le and Commerce De Leon, Agency, Exterieur, Jr., 122 Phil. and (1999 698, 702; 15 SCRA 301, 305 (1965). Comments Trusts Cases 596 596 SUPREME COURT REPORTS ANNOTATED Eurotech Industrial Technologies, Inc. vs. Cuizon As 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, petition is premises and considered, the the present dated 10 Partnership, and

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 representation essence of of it agency is being that the the 36 another, evident

edition), p. 512.

obligations contracted are for and on behalf of the principala 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, 2007

DENIED

Decision

August 2004 and Resolution dated 17 March 2005 of the Court of Appeals in CA-G.R. SP No. 71397,

597 People vs. Guillermo The 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)] G.R. Nos. 152613 & 152628. November 20, 2009.* APEX MINING CO., INC., petitioner, vs. SOUTHEAST MINDANAO GOLD MINING CORP., THE MINES MINING MONKAYO MINERS ADJUDICATION REGULATORY INTEGRATED COMMUNAL DACUDAO, COOPERATIVE, CATA-PANG, FRANCISCO ASION, BOARD, BOARD SMALL PORTAL PROVINCIAL SCALE MINING 37

(PMRB-DAVAO),

ASSOCIATION, INC., ROSENDO VILLAFLOR, BALITE COOPERATIVE, GOLD ALTAMERA, RENATO GLORIA, MINERS THELMA BASMILLO, EDWIN REYNALDO DAVAO UNITED MINERS COOPERATIVE, ANTONIO PUTING-BATO ROMEO GALANG, LUIS

YOBIDO,

EDUARDO

MACARIO

HERNANDEZ,

CARUBIO, ROBERTO BUNIA_______________

REYNALDO CARUBIO, ROBERTO BUNIALES, RUDY * EN BANC. 101 VOL. 605, NOVEMBER 20, 2009 101 Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp. LES, RUDY ESPORTONO, ROMEO CASTILLO, JOSE REA, GIL GANADO, and JOEL PRIMITIVA LICAYAN, LETICIA ALQUEZA BRILLANTES MANAGEMENT ESPORTONO, ROMEO CASTILLO, JOSE REA, GIL GANADO, and JOEL PRIMITIVA LICAYAN, LETICIA ALQUEZA MINING BRILLANTES MANAGEMENT

CORPORATION, respondents. G.R. Nos. 152870-71. November 20, 2009.* THE MINES ADJUDICATION THE and HON. DIRECTOR vs. BOARD O. AND ITS MEMBERS, (Member) (Member), Mines MINING SOUTHEAST APEX MINING BOARD, SCALE MINERS and VICTOR RAMOS RAMOS gold the does

(Chairman), UNDERSECRETARY VIRGILIO MARCELO HORACIO petitioners, Mining; of the southeast mindanao Without aspirant

MINING CORPORATION, respondents. G.R. Nos. 152619-20. November 20, 2009.* BALITE MINDANAO CO., INC., COMMUNAL petitioner, MINING MINES GOLD THE PORTAL vs. CORP., COOPERATIVE,

mining corporation, respondent. Regalian State, any Doctrine; mining imprimatur 38

not have any definitive right over the mineral land because unlike a private landholding, mineral land is owned with 102 102 SUPREME COURT REPORTS ANNOTATED Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp. a by the State permit. and the same cannot equates be its alienated to any private person.SEM likens EP 133 building SEM likewise supposed rights attached to the exploration

ADJUDICATION SMALL

PROVINCIAL MINING REGULATORY BOARD (PMRBDAVAO), MINERS VILLAFLOR, MONKAYO INTEGRATED INC., UNITED ASSOCIATION, DAVAO ROSENDO

COOPERATIVE, ANTONIO DACUDAO, PUTING-BATO GOLD MINERS COOPERATIVE, ROMEO ALTAMERA, THELMA BASMILLO, GLORIA, CATA-PANG, EDWIN LUIS GALANG, YOBIDO, MACARIO RENATO EDUARDO HERNANDEZ, FRANCISCO ASION,

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 not own State without mineral cannot and 1987 Constitutions, by their discoverer. if he has on of The national wealth, discoverer with right any or such locator all the as mineral resources, are owned by the State and can only develop and utilize said minerals for his benefit has the land be complied him the a such State, private private requirements set forth by applicable laws and if the conferred imprimatur because, alienated through mining permits, concessions or agreements. In other words, aspirant does not have any definitive right over the unlike to any landholding, person as mineral land is owned by the State, and the same explicitly stated in Section 2, Article XIV of the 1987 Constitution: Same; right only Same; that because Exploration; Southeast Marcopper Exploration Mindanao Mining Permit; Gold The Mining (MMC)

exploration, only because MMC was a mere holder of an exploration did as not the permit. the As by previously MMC to explained, in the was SEM SEM permit, acquire rights inherent

assignment

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 39 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 not

Corporation (SEM) acquired was limited to exploration Corporation 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

103 VOL. 605, NOVEMBER 20, 2009 103 Apex 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 and holder Same; carry v. to utilize still be given the permit has priority in over with An the the in the governments area. that terms An the and permit be Court consideration in the granting of the right to develop minerals is to merely comply Same; exploration inchoate,

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; grantee Assistance Same; is Same; vested only while Agreement Same; with a An exploration right to and permit conduct Technical Production the or

exploration

Financial

(FTAA)

Mineral

Sharing Agreement (MPSA) contractor is authorized to extract and carry off the mineral resources that may be to discovered EP 133, in since the their area.This transfer argument was is not legal meritorious. SEM did not acquire the rights attached without effect. Granting for the sake of argument that SEM was a valid transferee of the permit, its right is not that of a is mining vested to contractor. with An exploration right off to the permit conduct mineral grantee is the 40

exploration only, while an FTAA or MPSA contractor authorized extract and carry 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 government the requirements agencies. Upon permit from the this to has appropriate approval, file an obtaining

conditions embodied in the permit. Same; off Ramos, the Same; exploration that does not amount to an authorization to extract and mineral SCRA resources 1 may this discovered.In La Bugal-Blaan Tribal Association, Inc. 445 (2004) emphasized: Pursuant to Section 20 of RA 7942, an exploration permit merely grants to a qualified person

exploration

holder

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. 104 104 SUPREME COURT REPORTS ANNOTATED Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp. Same; Same; ruled Same; that Same; the The of Court a a has natural valid consistently nature that SEM

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, amended national license validly when Court which or an by exploration the President suitably an the by thus: permit of the can be a validly when mere be The and and 41 Republic permit of the

interests amended national

necessitate.As exploration President suitably

privilege,

can

Republic

interests

necessitate. permits

instructed the

Timber

licenses, the

resource exploration permit is analogous to that of a license.Assuming arguendo has exploration permit, it cannot assert any mining right over the disputed area, since the State has taken over the mining 2002. nature operations The of a Court therein, has pursuant to Proclamation No. 297 issued by the President on 25 November that v. 426 in the consistently ruled natural resource exploration Corporation, Like right

license agreements are the principal instruments by State regulates utilization disposition of forest resources to the end that the public welfare is promoted. x x x They may be validly amended, Same; modified, replaced Same; in of or Five rescinded by the for Chief Executive when national interests so require. Same; Same; requirements lands Decree acquiring that under mining rights 13 reserved Presidential under No.

permit is analogous to that of a license. In Republic Rosemoor SCRA the Mining and Development Court or 517 (2004) any this articulated: irrevocable

Presidential Decree No. 463.It is instructive to note Section 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

timber permits, mining exploration permits do not vest grantee permanent within the purview of the non-impairment of contract

agency conduct

concerned prospecting,

that

has

the and

prerogative exploitation

to of

license

or

concession)

approved

by

the

DENR

exploration

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 power of is well-settled judicial review that when if questions the of constitutionality are raised, the court can exercise its only following requisites are present: (1) an actual and appropriate case exists; (2) there is a personal and substantial interest question; pleaded Statutes; of (3) at the the the party earliest raising of the judicial and two constitutional review (4) is the 42

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 105 VOL. 605, NOVEMBER 20, 2009 105 Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp. [2006]), mining agency outlines rights in the five requirements lands under for acquiring reserved Presidential an and to the undertake such operations. PNOC-EDC v. Veneracion, Jr., 509 SCRA 93

exercise

opportunity; Where

constitutional question is the lis mota of the case. Statutory Construction; statutes are of contrary tenor or of different dates but are of equal theoretical application to a particular case, the one the specially other.It one designed is that of a therefor there is matter should are in prevail in two and acts over legal or the rudimentary where which the principle

Decree No. 463: (1) a prospecting permit from the that has permit of jurisdiction over from the the land; (2) of Mines exploration the area Bureau deposit, (4) a

Geo-Sciences (BMGS); (3) if the exploration reveals presence from commercial reservation; application grant by BMGS by the permit holder for the exclusion of the the President of the application to exclude the area from the reservation; and (5) a mining agreement (lease,

hermeneutics provisions, and certainly

special

particular

involves

question,

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 of any conflict, it Or where the was latter passed two shall prior prevail to are the of regardless general whether

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 will. In being the a later at Act bar, No. Applying expression there 3092, the is of no the cited legislative law and later case

question that Republic Act No. 7942 was signed into than Act Republic No. Administrative Code of 1987, Republic Act No. 7586 Republic 6657. 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 43 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 legitimate may be to defect and in the registration.The claimant by the right of a in existing either envisioned DENR

statute.

statutes

contrary tenor or of different dates but are of equal theoretical application to a particular case, the one specially other. 106 106 SUPREME COURT REPORTS ANNOTATED Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp. Same; Same; If two or more laws of different dates and date of contrary prevail will.The tenors being are a of equal theoretical of application to a particular case, the statute of later must later rule expression of legislative settled statutory designed therefor should prevail over the

Proclamation 297 (i.e., Mining operations in the area undertaken directly, may if subject a payment of contractor, just compensation that subject to existing

be due to legitimate and existing claimants, or thru qualified rights, any) is a real right acquired over time by a person

who the

discovered mining the of

mineral

deposits,

and

was

first

to

Teodulo Corporation.

C.

Gabor,

Jr.

for

Marcopper

Mining

stake his claim through location and registration with recorder. location be mineral Under and Philippine registration by actual The mining of a laws, mining and is who which are essentially patterned after Anglo-American models, claim extraction must followed exploration person

Jesus T. Albacete for Provincial Regulatory Board of Davao. Agabin, Versola and Layaoen Law Offices and Quasha, Ancheta, Pea and Nolasco Law Office for Southeast Mindanao Gold Mining Corporation. Martin T. Lu for Camilo Banad, et al. Kapunan, 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 Courts 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 Corporation use and or benefit its of duly Marcopper authorized Mining (MMC) 44 Imperial, Panaguiton and Bongolan for

deposits.

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, 2009 107 Apex 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.

agents. Since SEM did not claim or submit evidence that it was a designated agent of MMC, the latter

cannot ruled 108 108

be that

considered the

as

an of

agent EP

of

the

former violated

having now

been within of to

overtaken the to the

by

the

said of

proclamation. Executive mining the rules private petitioners laws, award

that can use EP 133 and benefit from it. It also transfer 133 Presidential Decree

Thus, it was held in the Assailed Decision that it is prerogative undertake disputed subject and to private entities provided area the the to Department operations operations Apex and and directly or

including applicable that

Balite,

SUPREME COURT REPORTS ANNOTATED Apex 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 Natural of the Department (DENR). of Environment the and Resources Moreover, Assailed

regulations,

these

entities are qualified. SEM also filed a Motion for Referral of Case to the Court En Banc August 2006. Apex, for its part, filed a Motion for Clarification of the Assailed on Decision, the praying that the Court that elucidate Decisions pronouncement 45 and for Oral Arguments dated 22

Decision pointed out that EP 133 expired by nonrenewal 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 known directly over 5 as by of the the Republic Mining State or Act Act through Gold No. of a 7942, 1995, otherwise mining the as

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. 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

operations in mineral reservations may be undertaken contractor, Rush Area Court deemed the issue of ownership of priority right the contested Diwalwal

to 109

direct

MGB

to

accept

its

application

for

an

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

exploration permit.

VOL. 605, NOVEMBER 20, 2009 109 Apex 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 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 acquired a Southeast vested right Mindanao over the Mining disputed Corp. area, principal issues to be discussed by the

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 declaring the the issuance of Proclamation as mineral No. 297 disputed area reservation

outweighs the claims of SEM, Apex Mining Co. Inc. and Balite Communal Portal Mining Cooperative over the Diwalwal Gold Rush Area. 5. Whether 6. Assuming Proclamation the issue of the legality/constitutionality of of Proclamation No. 297 was belatedly raised. that No. the 297 legality/constitutionality timely raised, was whether 46

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; and f. Section 110 2, Subsection 2.1.2 of Executive Order No. 318 dated 9 June 2004.

110 SUPREME COURT REPORTS ANNOTATED Apex 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 Rights Over the Diwalwal Gold Rush Area Petitioner over the SEM vigorously area. argues It claims that that Apex the Mining Co., Inc. v. Garcia1 vested in MMC mining rights disputed mining rights that MMC acquired under the said case were the ones assigned to SEM, and not the right to explore under MMCs 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 Courts 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. In 1916, McDaniel, i.e., petroleum, petitioner on an therein, unoccupied located public minerals,

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, 2009 111 Apex 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 47

Natural

Resources, for the had mining that Bill will

was of

about claims that, over claim is

to of the

grant the a There, in is

the

that and lands,

the

mining

claim is

must so Bill of

have

been

perfected the the for, free

application overlapping petitioner. locator, where Court the he his ruled

lease mining vested claims the of

therein being

respondent, subject valid land the the not had the under

when the Philippine Bill of 1902 was still in force effect. the This Philippine Bill of other because, 1902 unlike subsequent laws that prohibit the alienation of mining sanctioned provisions open and of alienation of mining lands to private individuals. The Philippine among exploration, 1902 contained the and many things,

Petitioner

argued right

public

were

located.

mining 1902, by that

perfected property and

Philippine and

highest sense of that term, which may be sold and conveyed, The Court pass descent, since claim therefore subject to the disposal of the Government. then declared his petitioner under already perfected mining

occupation

purchase

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 48 unsurveyed x x x to be free and open to exploration, occupation, and 112 112 SUPREME COURT REPORTS ANNOTATED Apex 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

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 Bill a of perfected 1902 no hence, mining longer such claim under formed part claim the of Philippine the not public come

domain;

mining

does

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

and

locates but

a not

plot

of

ground one

measuring, thousand

where feet in

_______________ 4 Atok Big-Wedge Mining Co. v. Intermediate

possible,

exceeding,

length by one thousand feet in breadth, in as nearly a rectangular form as possible.5 Second, the mining locator mining location annual rights, has to record within Lastly, rights work the the thirty he to mineral (30) must claim days comply in with the the the and recorder thereof.6 actual namely, after

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, 2009 113 Apex 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 the rights and public and private lands belonged to while, had nonetheless, already been recognizing existing mineral the under state that

requirement.7

Complete

mining

explore,

develop

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 perfected by virtue of the Philippine Bill of 1902, since they were already considered private properties of the locators.9 Commonwealth 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.

49

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.11 In 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, SEMs 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 MMC mining EP or 133, SEM respectively, could the have were issued a the to MMC. Considering these facts, there is no possibility that acquired of perfected Philippine claim under auspices

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. 114 114 SUPREME COURT REPORTS ANNOTATED Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp. tional wealth, such as mineral resources, are owned by the State or and locator not can by their discoverer. and The utilize discoverer only develop 50

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, mining over without aspirant the the does imprimatur not have because, land of any the unlike State, a any right definitive

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 permit 133 with the a building rights permit. a SEM private likewise equates its supposed rights attached to the exploration with that

mineral

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: All lands With natural of public domain, of shall waters, minerals lands, xxx all and all other natural resources are owned by the State. other the exception agricultural not be resources alienated.

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 115 VOL. 605, NOVEMBER 20, 2009 115 Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp. authority in contravention of the provision of the 51

(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 ASSIGNEE, TRANSFERS received the and by the ASSIGNOR hereby unto the from the ASSIGNOR CONVEYS ASSIGNS, ASSIGNEE

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 rights assuming attached as arguendo in EP property permit that SEM obtained cannot under the be the ripen 133, rights does said rights

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 permit. limited during to the the assignment right only that was SEM an exploration was a was Clearly, acquired MMC

considered An

protected

fundamental law. exploration not automatically into a right to extract and utilize the minerals; much less does it develop into a vested right. The holder of an exploration exploration permit works only on has the the area right to as conduct awarded.

exploration,

because

Presidential

Decree No.

463

defined

exploration

mere holder of an exploration permit. As previously

the examination and investigation of lands supposed

to

contain

valuable

minerals,

by

drilling,

trenching, 116 SUPREME COURT REPORTS ANNOTATED Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp. In La Bugal-Blaan 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 Such exploration a to permit extract for all minerals not carry off in the specified to an mineral 52 areas. does and amount

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 and holder in the to utilize still be given the permit has priority in over with the the in the Decree governments area. that terms No. An the and 463, consideration in the granting of the right to develop minerals is to of merely comply exploration inchoate,

authorization

resources that may be discovered. x x x. Pursuant to Section 24 of RA 7942, an exploration permit the grantee file who with determines the MGB a the commercial of viability of a mining area may, within the term of permit, declaration by with other a mining project exclusive project feasibility and an accompanied compliance or any work other mineral

conditions embodied in the permit. This is manifest language Presidential thus: Sec. 8. x x x The right to exploit therein shall be awarded conditions approved persons 116 or by as by the the President under by such the terms That and and the recommended Secretary who Director

program for development. The approval of the mining feasibility right to requirements of RA 7942 vests in the grantee the MPSA 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

Provided, undertook

corporations

prospecting

and exploration of said area shall be given priority.

Courts

ruling

in

Southeast

Mindanao

Gold

Mining

117 Apex 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, 53

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 petitioners rights under EP No. 133 be regarded as total and absolute. As correctly privilege amended, held by the by or Court the of Appeals which when given the in its be challenged decision, EP No. 133 merely evidences a granted modified SEM State, may rescinded be national to 133

interest so requires. x x x. (Underscoring supplied.) Unfortunately, cannot priority EP develop and exploit the area covered by 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, 2009

which merits protection by the due process clause of the Constitution. SEM cites La Bugal-Blaan 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

because, as discussed in the assailed Decision, EP

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 of the was without its legal right is effect. not Granting that of a is for the sake of argument that SEM was a valid transferee permit, An mining vested extract be permit project contractor. FTAA and or carry still exploration contractor mineral area.15 permit is grantee

Apex 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, prospective have But entered again, the into is exploration cannot contract qualified any not permit yet or to be grantee deemed agreement apply for (or to with an 54 contractor)

with the right to conduct exploration only, while an MPSA off in has authorized to that An with exploration the mining the the resources may

discovered holder

to comply

the State x x x.16 SEM 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

feasibility and other require_______________ 14 Supra note 12 at 895. 15 Southeast pp. 682-683. 118 118 SUPREME COURT REPORTS ANNOTATED Mindanao Gold Mining Corporation v. Balite Portal Mining Cooperative, supra note 13 at

it of the same permit has no legal value. More importantly, assuming arguendo that SEM has a has valid exploration over 25 permit, the it cannot assert any mining right over the disputed area, since the State taken to on mining No. operations 297 issued The therein, by the has pursuant President Proclamation

November

2002.

Court

consistently license. Like right since power, In

ruled

that

the v.

nature Rosemoor

of

a Mining

natural and do of

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 by the the public Chief welfare is promoted. when xxx They may be validly amended, modified, replaced or rescinded Executive national interests so require.18 Recognizing the importance of the countrys natural resources, defense, not Section only 5 of for its national security Act economic and national No. 7942 55 development, but also for

resource exploration permit is analogous to that of a Republic permits, the State, alter, with Development Corporation, this Court articulated: timber within the may mining of its or exploration the permits not vest in the grantee any permanent or irrevocable purview under modify the non-impairment contract and due process clauses of the Constitution, all-encompassing amend of the the police in general same,

accordance

demands

welfare.17 (Emphasis supplied.) _______________ 16 Id. 17 G.R. 517, 530. 119 VOL. 605, NOVEMBER 20, 2009 119 Apex 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 No. 149927, 30 March 2004, 426 SCRA

Republic

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 to for preserve to scientific, Reservations.When raw or materials or ecological the for certain national industries minerals the interest so requires, such as when there is a need strategic cultural critical national development,

value,

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 mining about by unregulated causing small to medium-scale operations ecological,

7942. It can either directly undertake the exploration, development entities. control utilization SEMs such and the the the utilization Executive resources permit, of the minerals now found has and area, is is still in therein, or it can enter into agreements with qualified Since over of Department in the exploration, development disputed that No. it 297

health and peace and order problems, the President, on 25 November 2002, issued Proclamation No. 297, which and declared as an fiat the was area aimed as at a mineral critical preventing reservation area. the This further environmentally

exploration power

assuming

valid, has been effectively withdrawn. The exercise of through Proclamation 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 lands 2 of of the the 1987 Constitution water, emphasizes: SEC. 2. All public domain, minerals, coal, petroleum, and other mineral oils, all 56

executive dissipation

_______________ 18 Id. 120 120 SUPREME COURT REPORTS ANNOTATED Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp. of the natural balance environment and rationalizing the mining operations in the area in order to attain an orderly between socio-economic growth and The area being a mineral environmental protection.

forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural resources are be owned by the The State. With the exception of and agricultural lands, all other natural resources shall not alienated. exploration, development, 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

reservation, the Executive Department has full control over it pursuant to Section 5 of Republic Act No.

associations capital is supplied.)

at

least by

sixty

per

centum citizens.

of

whose

SEM

claims

that

the

approval

requirement

under not

owned

such

(Emphasis

Section 97 of Presidential

Decree No. 463 is

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 57 to the The well fundamental issues the on law health of because and the the

Furthermore, said proclamation cannot be denounced as offensive State is sanctioned to do so in the exercise of its police and power.19 order, as peace forest decadence

resources brought about by unregulated mining in the _______________ 19 Id., at p. 531. 121 VOL. 605, NOVEMBER 20, 2009 121 Apex 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 in Favor of SEM Violated Section 97 of Presidential Decree No. 463 and the Terms and Conditions Set Forth in the Permit

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.) 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.20 Pursuant 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 116 (1995). 122 122 SUPREME COURT REPORTS ANNOTATED Apex 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 by extract the all mineral continued and deposits vertically found on or to underneath the surface of his mining claims covered lease, process, downward; the remove, otherwise utilize mineral Association of the Philippines, Inc. v.

contract exploitation and

for of

the his

exploration, claims shall and be

development the processing by

and and the

marketing of the product thereof, subject to the rules regulations that promulgated Director, with the approval of the Secretary x x x. (Emphases supplied.) In other words, the lessees 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 from proper covered mining the by claim or An term the contract duly other area permit interest is is, derived by the thus, 58 exploration the permit any issued

Factoran, Jr., 310 Phil. 113, 130; 240 SCRA 100,

authority.

exploration

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 utilizeare transferred obtained permit, It is or from thus, assigned, the DENR be cannot prior approval An must be the Secretary. assigned exploration

without

imprimatur of the Secretary of the DENR. instructive to note that under Decree of forest No. 463, in of the are minerals Section 13 of prospecting prohibited, and reservations, except agency Presidential exploration such with as the

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

government the

reservations,

permission

government

concerned. that 123 has

It the

is

the

government to

agency

concerned prospecting,

and

(5)

mining

agreement

(lease,

license

or

prerogative

conduct

concession) approved by the DENR Secretary. Here, MMC met the first and second requirements and obtained an exploration permit over the disputed forest reserved to the land. Although that MMC it is still has to to prove government qualified

exploration and

VOL. 605, NOVEMBER 20, 2009 123 Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp. exploitation of such reserved lands.21 It is only in instances case mining allowed the wherein Bureau by the said of that government cannot to qualified agency, in may this said be such Mines, undertake undertake

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 No. to follow The Section logic is 97 not of Presidential to Decree If a 463. hard discern.

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 a to explore, exploration his develop permit and utilize), who with is more yet to reason will this proscription apply with extra force to mere holder in exhibit qualifications conducting mining 59

operations

persons

government

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;

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 EDC) v.

Development Jr.,

Corporation No.

(PNOC30

resources, for be modern

and

make

it and

imperative

that

persons techniques

Veneracion,

G.R.

129820,

possessing the financial resources and technical skills exploratory to and development the of our encouraged undertake exploitation exploration, mineral

November 2006, 509 SCRA 93, 106. 22 Id., at pp. 107-110. 124 124 SUPREME COURT REPORTS ANNOTATED Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp. entities or individuals possessing the resources and capability and is in for are the vital for to undertake mining and operations. Mining industry is a major support of the national economy continuous national mining exploratory to and intensified For exploration, this reason, persons techniques exploration, natural development and wise utilization of mining resources development. operations, and Presidential Decree No. 463 makes it imperative that awarding modern only possessing the financial resources and technical skill development the of the encouraged undertake

development resources;

The Court has said that a preamble is the key to understanding the statute, written to open the minds of the makers and the to the the mischiefs that that is are are to to be be and 60 remedied, such, purposes itself

accomplished, by the provisions of the statute.23 As when statute ambiguous difficult to interpret, the preamble may be resorted to as a key to understanding the statute. Indubitably, agency fall into be as the without to the the scrutiny by of the government would-be which of the qualifications of the

transferee of an exploration permit, the same may hands non-qualified to the entities, would the counter-productive development development utilization of

the mining industry. It cannot be overemphasized that exploration, and countrys natural resources are matters vital to the public interest and the general welfare; hence, their regulation must _______________

development

utilization

countrys

resources. The preamble of Presidential Decree No. 463 provides thus: WHEREAS, effective and continuous mining operations require considerable outlays of capital and

23 Estrada 125

v.

Escritor,

455

Phil.

411,

569;

408

the the

execution governing the or

of

the statute, old

Deed

of

Assignment as the

on

16

SCRA 1 (2003).

February 1994, Executive Order No. 27925 became inasmuch was latter license, by the abrogated mining systemi.e., espoused

VOL. 605, NOVEMBER 20, 2009 125 Apex 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 nations security, but they also ensure the countrys survival as a viable and sovereign republic.24 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 or the Philippine Mining Act of 1995), which provides that: Sec. 25. Transfer 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

concession former.

leasewhich

This contention is not well taken. While Presidential Decree the No. 463 law has already been remains of approval ruled in repealed by Executive Order No. 279, the administrative aspect of former the still of nonetheless or the DENR. prior As applicable. exploration of the 61 Miners Hence, permits Secretary transfer needs the assignment

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 Factoran, Association Jr., 310 of the 113, Philippines, 130-131; 240 Inc. v.

Phil.

SCRA

100, 114-115 (1995). 25 Promulgated on 25 July 1987. 26 Supra note 24 at 130. 126

considered as conditions and essential parts of this 126 SUPREME COURT REPORTS ANNOTATED Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp. disallowed Constitution. by Article By XII, of Section the 2 said of the 1987 virtue constitutional permit; 2. That permittee shall maintain a complete record of all activities therein and accounting to of all expenditures and incurred subject periodic inspection

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 62

mandate and its implementing law, Executive Order No. 279, which superseded Executive Order No. 211, the No. provisions 463, as dealing amended, on license, other concession, existing or lease of mineral resources under Presidential Decree and mining laws are deemed repealed and, therefore, ceased to operate as the governing law. In other words, in all other No. areas 463, as did of administration and and other management existing of mineral lands, the provisions of Presidential Decree amended, mining laws, still govern. (Emphasis supplied.) Not only 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:27 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

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 _______________ 27 Records, Vol. 2, pp. 84-85. 127

included the power to prescribe terms and conditions VOL. 605, NOVEMBER 20, 2009 127 Apex 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 It must and be shall be used that No. for mineral Section which of exploration 9028 was EP of of the 133, the purposes only and for no other purpose. noted Decree statute Secretary, under 463, the the Presidential applicable the DENR 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 thereto. down MMC the terms SEM and did conditions not attendant the and dispute

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 part of conditions. the grant Indubitably, of the MMC wholeheartedly agreed to 63 accepted these terms and conditions, which formed permit. MMC abide by these conditions. It must be accentuated

during

issuance

through

Director

that a party to a contract cannot deny its validity, without outrage to ones _______________ 28 Executive Officer.The Secretary, through 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

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. 128 128

SUPREME COURT REPORTS ANNOTATED Apex 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 welldefined contractual relationship, it is imperative that they should honor and adhere as the stated in their parties to their rights contracts, and and obligations between because be

6 July 1994. MMC or SEM, however, never renewed EP 133 either prior to or after its expiration. Thus, EP With MMC Area. The Assailed Decision Resolved Facts and Issues That Transpired after the Promulgation of Apex Mining Co., Inc. v. Garcia 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, 2009 129 Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp. 64 133 the lost expired any by right non-renewal of to EP 133 the on on 6 6 July July Gold 1994. 1994, Rush expiration

Diwalwal

obligations arising from these have the force of law contracting should complied with in good faith.31 Condition Number 6 categorically states that the permit shall be for the exclusive the use and of EP that of the benefit 133, the of is MMC a are former This under this or its duly authorized agents. While it may be true that SEM, assignee of agent its 100% bereft is Court the subsidiary of the any duly cannot permit. the corporation evidence authorized to honor MMC, records latter.

showing

condone such utter disregard on the part of MMC obligations violated Undoubtedly, 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 having condition,

assignment of EP 133 to SEM is void and has no

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 with permit registered the to then its Declarations while by by the the of Location was of Taking 463, (DOL) a Forest into which BMGS, MMC granted

promulgated.

These

subsequent

events,

which

were

not attendant in Apex Mining Co., Inc. v. Garcia33 dated 16 July 1991, are the following: (1) (2) the expiration of EP 133 by non-renewal on 6 the transfer/assignment of EP 133 to SEM on July 1994; 16 February 1994 which was done in violation to the condition of EP 133 proscribing its transfer; (3) the transfer/assignment legal effect for of EP 133 PD to SEM is without violating 463 which

prospect permit

Bureau BMGS. No.

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. 130 130 SUPREME COURT REPORTS ANNOTATED Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp. Moreover, Court, through (now in Southeast Associate retired), Mindanao Gold Mining YnaresMining Corporation v. Balite Portal Mining Cooperative,34 the Justice declared Consuelo that Apex Santiago 65

Development (BFD) and was subsequently granted an exploration consideration Presidential Decree

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

Co., Inc. v. Garcia did not deal with the issues of the expiration can of the EP 133 and the case validity of the any transfer of EP 133 to SEM, viz: Neither Apex Mining foreclose 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 rights proper certainly whether remained What is Apex over Mining the case disputed settled area the by issue availing by of of law, who the it between Apex and Marcopper validly acquired mining procedural requisites mandated

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 Neither be is considered it as a precedent rights to of resolve or settle claims of persons/entities not parties hereto. intended to unsettle persons/entities which have been acquired or which may have accrued _______________ 34 Supra note 13 at 681. 131 VOL. 605, NOVEMBER 20, 2009 131 Apex 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 of Proclamation Is Raised Belatedly In its last-ditch that effort to salvage No. its 297, case, issued SEM by contends Proclamation 66

did not deal EP No. 133

with the question raised by had already to that its in expired transfer the and by

the oppositors in the Consolidated Mines cases, i.e., valid more subsequent revealing is

Marcopper to petitioner. (Emphasis supplied.) 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, as in these cases, are not settled by the same. A portion of the disposition of the Apex Mining Co.,

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 of well-settled judicial that review when only if questions the of constitutionality are raised, the court can exercise its power following requisites are present: (1) an actual and appropriate case exists; (2) there is a personal and substantial interest question; pleaded of (3) at the the the party earliest raising of the judicial and constitutional review (4) is the exercise

In the instant case, it must be pointed out that in the Reply to on Respondent 20 May SEMs 2003, Consolidated mentioned Comment filed MAB

Proclamation No. 297, which was is_______________ 35 Matibag v. Benipayo, 429 Phil. 554, 578-579; 380 SCRA 49, 68 (2002). 132 132 SUPREME COURT REPORTS ANNOTATED Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp. sued on 25 to November the MAB, 2002. has This proclamation, SEMs claim according rendered 67

opportunity;

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 promulgatedi.e., in SEMs 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

constitutional question is the lis mota of the case. Taking into consideration the foregoing requisites of judicial requisite question pleadings, review, is of it is readily The clear be be that is the that at at third the the the absent. general must not rule

constitutionality it may

raised raised

earliest opportunity, so that if it is not raised in the ordinarily trial; and if not raised in the trial court, it will not be considered on appeal.35

filed on 22 August 2006that 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.36 In fact, this Court, when it rendered the Decision it merely entitled recognized it to that a The the questioned proclamation of its came from a co-equal branch of government, which strong presumption of constitutionality.37 presumption

133 VOL. 605, NOVEMBER 20, 2009 133 Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp. Proclamation No. 297 Is in Harmony with Article XII, Section 4, of the Constitution At any rate, even if this Court were to consider the arguments belatedly raised by SEM, said arguments are not meritorious. SEM asserts that Article and XII, Section the 4 of the as 68 Constitution, bars the President from excluding forest reserves/reservations proclaiming same 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 parks, specific marking Thereafter, diminished, to limits of forest their forest by lands lands law. logging and on and The in national the clearly such boundaries

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 38 Mirasol Highways, of v. G.R. the Philippines of v. Ermita, Public 8 June G.R. Works 2006, No. and 490 169777, 20 April 2006, 488 SCRA 1, 66. Department No. 158793,

ground. nor

national parks shall be conserved and may not be increased determine, except prohibit Congress shall provide, for such periods as it may measures endangered forests and in watershed areas.

SCRA 318, 347-348.

The

above-quoted

provision

says

that

the

area

Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp. x x x Sec. 4, Art. XII of the 1987 Constitution, on the other hand, the parks, provides limits clearly is that of done, their Congress forest the except lands area also of boundaries shall and on thus by the determine national the not enact specific marking this or Once

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. 134 134 SUPREME COURT REPORTS ANNOTATED

ground. be a

covered by said forest lands and national parks may expanded law reduced the congressional legislation. Since Congress has yet to determining specific limits 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 forests and the preservation of national parks. This was brought about by the drafters awareness and fear of the continuing destruction of this countrys 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 69

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 it the as and the a to further mining mineral resolve operations reservation of health the therein in order the and by to declaring prevent

Apex 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 What end may same is that be reasons more, the why the subject has constitutional the

degradation

forest peace

environment

and order problems that beset the area. A closer examination of Section 4, Article XII of the Constitution there is a Proclamation maintain and nothing No. rational Proclamation 297, a No. 297 to reveals the attain that two. and contradictory and orderly between balance

provision is in place. jurisprudence countrys recognized natural policy of multiple land use in our laws towards the precious resources and rationally explored, developed, utilized 70

measure

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, 2009 135

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 and of with due regard of to other in protection, surface forest development or exploitation utilization mineral

may

be

undertaken with

by the

a rules

qualified and

person

in

accordance

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 Philippine Law Act No. 7942 Act of Otherwise 1995, is Known the as the Mining Applicable

resources. Location, prospecting, exploration, utilization resources 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/reser-va-tions, are allowed, viz: Mining mineral operations reservations in reserved may be lands other by than the undertaken

Determined 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 71

Department, subject _______________ 42 PICOP 136 136 SUPREME COURT REPORTS ANNOTATED Apex 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 Resources, Inc. v. Base Metals Mineral

of the Administrative Code of 1987, Section 5(a) of Republic Act No. 7586,44 and Section 4(a) of Republic Act No. 6657.45 Citing 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

Resources Corporation, supra note 39 at 419.

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, 2009 137 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 SEM

thereof submits

except that the

with

the

concurrence provision is

of the

Congress. (Underscoring supplied.) foregoing 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, 72 Title I, Book III of the Administrative Code of 1987, which partly recites: The President shall have the power to reserve for settlement purposes, or any public of the use, lands and of for specific public domain, the public

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 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 by law or proclamation. (Emphases

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 the in withdrawn majority Section or or of 11, it of disestablished, the members in of turn, its or of its the boundaries respective Congress. under shall the take modified as warranted by a study and sanctioned by boards for the protected area as herein established shall, a advise area Disestablishment System protected

by

Congress

before militate

any

forest

reserve the

can

be of

reclassified,

against

validity

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 as use agriculture. lands after No to the area, the Agusan-Davao-Surigao discussed, mineral The remain mineral metes intact land and even is Forest Reserve since, earlier policy. a reservations bounds if, of and can exist a the forest said 73

modification

boundary

within forest reserves because of the multiple land reservation within

effect pursuant to an act of Congress. 47 All alienable and disposable lands of the public domain devoted lands to of or shall suitable or be for reclassification agricultural 138 138 SUPREME COURT REPORTS ANNOTATED Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp. forest mineral undertaken

located

thereafter

declared as a mineral reservation. More to the point, a perusal of Republic Act No. 3092, An Act to Amend Code Certain of Sections of the was Revised Administrative 1917, which

approval of this Act until Congress, taking into

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 namely: two statutes are to of remain the subject to the set specific purpose. The tenor of the cited provisions, the President Philippines shall

apart forest reserves and the reserved land shall thereafter statutes. case, remain, These speaks do of not as way future apply as back to in on public forest this 27 reservations to be declared, pursuant to these two provisions reservations which earlier was declared such,

critical for

to

national

development, or

or

certain

minerals the

scientific,

cultural

ecological

value,

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

proclaimed

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, shall developmental have determined and by equity law, the

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 not to rule of are contemporaneous, as Hence, statutory it has become that the Legislature is an established one 74

considerations,

specific limits of the public domain. 139 VOL. 605, NOVEMBER 20, 2009 139 Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp. Sec. 5. Mineral to preserve Reservations.When raw materials the for national industries interest so requires, such as when there is a need strategic

be presumed to have intended a conflict. construction where 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 of any conflict, it the was latter passed shall prior prevail to the regardless whether

general

statute.

Or

where

two

statutes

are

of

of

mineral

reservations

only.

Said

provision

grants

contrary tenor or of different dates but are of equal theoretical application to a particular case, the one specially 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, Act are general and laws. Section 14 of 1 of the Republic No. 3092 Section designed therefor should prevail over the

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 The establishment areas or and Extent of the System. of the and operationalization in the

System shall involve the following: (a) All islands 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 managed and historical landmark, as protected as and landscape/seascape designated as initial well identified of the 75

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 they 140 140 SUPREME COURT REPORTS ANNOTATED Apex 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

virgin forests hereby

before the effectivity

of this Act are

components

System. The initial components of the System shall be governed by existing laws, rules and regulations, not inconsistent with this Act. Glaring in the the foregoing initial enumeration of of the areas NIPAS comprising component

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 Similarly, can Proclamation 4(a) of No. 297 possibly Act No. violate 6657 said law. Section Republic cannot be made applicable to the instant case. Section 4(a) of Republic Act No. 6657 reads: 141 VOL. 605, NOVEMBER 20, 2009 141 Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp. All alienable and to of this disposable or shall Act suitable or be until forest lands for of the public No to the into equity law, the domain devoted lands of agriculture. lands after taking and by

determined by law the specific limits of the public domain. instant A cursory reading as of there this has provision been will no readily show that the same is not relevant to the controversy, 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 case, the statute of later date must prevail being a later expression of legislative will.48 In the case Act at No. bar, 7942 there was is no question into law that later 76 Republic signed

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 Seek Relief from This Court Camilo Banad of lands forest until or mineral lands shall into have and his group admit that they are members of the Balite Cooperative. They, however, claim that they are _______________

reclassification agricultural approval account specific supplied.)

mineral undertaken Congress,

ecological, shall of the limits

developmental have determined domain. public

considerations,

(Underscoring

Section 4(a) of Republic Act No. 6657 prohibits the reclassification agricultural Congress

full 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. 142 142 SUPREME COURT REPORTS ANNOTATED Apex 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 cases this are Court the to contest only no SEM, the decision in in the and the of the appellate court. The petitioners personality instant Apex. instant

control and

of

the

State the said

through

the

executive in the

branch

place

pronouncement

proper perspective as the declaration in La BugalBLaan, which states that The Article sufficient restrain, concept XII to of control be the and adopted to the the control; in Section less to 2 of must give taken State govern mean but power than direct, of the

dictatorial,

all-encompassing regulate

nevertheless

affairs

extractive enterprise.50 Apex states that the subject portion of the assailed Decision could send a chilling effect to potential 77 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 Apex the that is the State of cannot the directly following State can undertake mining operations. Moreover, portion in apprehensive questioned DecisionThe

MAB,

Balite

Consequently,

having

also opt to award mining operations in the mineral reservation to private enti_______________ 50 Supra note 12 at 1093. 143

cases, they cannot seek any relief from this Court. Apexs Motion for Clarification and Balites Manifestation and Motion In its Motion for Clarification, Apex desires that the Court elucidate the assailed Decisions pronouncement that mining operations, are now, therefore within the

VOL. 605, NOVEMBER 20, 2009 143 Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp. ties including petitioner Apex and Balite, if it wishes. It avers that be the phrase if to it mean wishes a may blanket even whimsically formers interpreted for an

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 Also, that shall to wit: SEC. 5. Mineral to 144 144 SUPREME COURT REPORTS ANNOTATED Apex 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. preserve Reservations.When raw materials the for national industries mining this interest so requires, such as when there is a need strategic critical to national development, or certain centum Section the be of 5 whose of capital is Act in the owned No. by such states of citizens. x x x. (Emphasis supplied.) Republic by 7942 mining operations mineral reservations

authority of the administrative authority to reject the application exploration permit 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 In by the State Balite of prays the industry in the disputed area to the exclusion of the private sector. addition, that Court direct MGB to accept Balites application for an exploration permit. Contrary to the contention of Apex and Balite, the fourth paragraph the to of Section 2, Article the operations mere clearer XII of the Constitution and Section 5 of Republic Act No. 7942 sanctions department, as an mineral State, undertake and not This through mining as is a executive directly, of the by regulator

undertaken

Department

Environment and Natural Resources or a contractor, 78

operator

undertakings.

made

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, Act No. undertake the Constitution, allows the operations. as well as La Republic to Bugal7942, executive department

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 power 145 VOL. 605, NOVEMBER 20, 2009 145 Apex 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. SEMs Manifestation and Motion dated 25 January 2007 SEM wants to emphasize or that its predecessor-inwith the interest, mandatory Marcopper MMC, complied 79 interfere. to direct But until then, the Court to has no said administrative body accept

mining

Besides,

BLaan, cited by Apex, did not refer to the fourth sentence of Section 2, Article XII of the Constitution, but to the third x sentence of the said provision, which states: SEC. 2. 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.

the application of any qualified applicant.

exploration work

program, required under

EP 133, by 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 with Neither with parties the did the that Marcopper violated the terms under EP 133, among other violations, by not complying program. compliance mandatory it present exploration evidence for work the work

_______________ 51 Multi-Realty Development Corporation v. Makati

Tuscany Condominium Corporation, G.R. No. 146726, 16 June 2006, 491 SCRA 9, 23. 146 146 SUPREME COURT REPORTS ANNOTATED Apex 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 since assignment this of EP 133 by MMC to SEM, the the was assignment not by was effected vested of without over right 80

appreciation of the lower tribunals. Hence, the nonmandatory exploration 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 July assailed Decision in did not overturn Co., the Inc. 16 v. 1991 Decision Apex Mining

approval of the Secretary of DENR; 2. SEM disputed did area acquire its the of EP right its to has because supposed

extinguished the

expiration 133 by

exploration SEM. a In

permit and by its violation of the condition prohibiting assignment even MMC SEM addition, assuming that 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

Garcia. The former was decided on facts and issues that were not attendant in the latter, such as the expiration of EP 133,

control 3. The

of

the

State

through under 463

the

Executive 97 to of the

VOL. 605, NOVEMBER 20, 2009 147 Apex 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: 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/mani-festation ask the Court to direct the Mines and Geo-Sciences Bureau to accept their respective DENIED; 3. The January 4. The should operations Manifestation 2007 State, it so in of and Urgent Motion dated 25 Southeast the may Mindanao Executive now area to Gold Mining applications for exploration permits, are 81

Department; approval requirement No. Section Presidential Decree applies

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 the 147 mining Department operations that in has the the prerogative area to to a accept such applications, if ever it decides to award disputed private entity;

Corporation is DENIED. through desire, the Department, mining qualified any award

disputed

entities pending thereto.

it

may it,

determine. taking into

The

Mines

and the

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 the and Balite has event that the any priority right to explore, by the develop and mine the Diwalwal Gold Rush Area in State, represented 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 82

Geosciences Bureau may process exploration permits before consideration applicable mining laws, rules and regulations relative SO ORDERED. Puno (C.J.), Carpio, Carpio-Morales, Leonardo-De Castro, Brion, Del Castillo, Abad and Villarama, Jr., JJ., concur. Corona, Leave. Nachura, J., No part. Bersamin, J., With separate opinion. 148 148 SUPREME COURT REPORTS ANNOTATED Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp. SEPARATE OPINION BERSAMIN, J.: I concur with Honorable Minita V. Chico-Nazarios 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 Velasco, Jr. and Peralta, JJ., On Official

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, 2009 149 Apex 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 situated in the municipalities of Monkayo and Cateel. It later became known since brought On 21 as the the early Diwalwal 1980s by the Gold been Rush Area. by It has stormed conflicts claimants and his

of

gold

in

Mount

Diwata,

filed

Declaration

of

Location (DOL) for six mining claims in the area. Camilo Banad and some other natives pooled their skills On 12 and resources and organized Mining the Balite Communal Portal Mining Cooperative (Balite). December 1983, Apex Corporation (Apex) entered into operating agreements with Banad and his group. From November 1983 to for February mining 1984, locations several over individual applications

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) and filed his 16 DOLs After its or mining realizing claims that is for the a areas area forest adjacent to the area covered by the DOL of Banad group. by encompassed mining claims 83

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

about

numerous Camilo

mining Banad

scrambling for gold that lies beneath its bosom. November 1983, group, who claimed to have first discovered traces

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). 150 150 SUPREME COURT REPORTS ANNOTATED Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp. Discovering and April the the existence of the of several mining miners Petition claims in for the the proliferation before small-scale BMG a

the BFD and not through registration of a DOL with the BMG. On 23 September 1986, Apex filed a motion to dismiss MMCs 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 On Apex the 9 BMG December mining claims and not through BMG MMCs the filing of application for permit to prospect with the BFD. 1986, and dismissed permit to MMCs explore 84 petition on the ground that the area covered by the was not a forest reservation. It further declared null and void MMCs EP 133 and sustained the validity of Apex mining claims over the disputed area. MMC appealed the adverse order of Environment 1987, after and due of BMG to the Natural hearing, Resources the DENR Department (DENR). On 15 April reversed the 9 December 1996 order of BMG and declared MMCs EP 133 valid and subsisting. Apex DENR On 27 filed a Motion was 1989, for Reconsideration denied. of the with Apex the then which July subsequently the Office

area covered by EP 133, MMC thus filed on 11 1986 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 existing Forest that of Apex forest Reserve) pursuant to were under within an established No. 369 No. and and 463, reservation Presidential (Agusan-Davao-Surigao Decree

Proclamation

filed an appeal before the Office of the President. President, for Legal through Assistant Executive Secretary

acquisition of mining rights within a forest reserve is through the application for a permit to prospect with

Affairs,

Cancio

C.

Garcia,

dismissed

Apexs

appeal

entities

filed

applications

for

Mineral

Production

and affirmed the DENR ruling. Apex filed a Petition for Certiorari before this Court. The July Apex Petition 1991, was docketed as a G.R. No. 92605 against a forest acquiring entitled, Apex Mining Co., Inc. v. Garcia. On 16 this Court the the rendered disputed proper Decision area is in holding that

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 The No. (DUMC) for the Petition 8-8-94. and admission was Davao Balite of their as MPSA RED Miners and 85

reserve; 151

hence,

procedure

mining rights therein is by initially

VOL. 605, NOVEMBER 20, 2009 151 Apex 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 Factoran, 1991, Jr. then DENR Secretary Department Fulgencio issued

Application. Mines Case Cooperative

docketed

United intervened

likewise sought the cancellation of EP 133. On 16 February 1994, MMC assigned EP 133 to Southeast Mindanao Gold Mining Corporation (SEM), a On domestic 14 June corporation which is alleged the to be a an 100% -owned subsidiary of MMC. 1994, Balite filed with BMG 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

Administrative Order No. 66 (DAO No. 66) declaring 729 hectares of the areas covered by the AgusanDavao-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

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 SEMs MMC. MPSA SEMs application application and was the Deed of Assignment over EP 133 executed in its favor by designated MPSA Application No. 128 (MPSAA 128). After publication of SEMs application, the following filed before the BMG their adverse claims or oppositions: a) 152 152 SUPREME COURT REPORTS ANNOTATED Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp. b) c) d) e) f) MAC MAC Case Case No. No. 005(XI)Davao 006(XI)Balite United Integrated Miners Small Cooperative; Scale Miners Cooperative; MAC Case No. 007(XI)Monkayo Integrated Small MAC Case No. 008(XI)Paper Industries Scale Miners Association, Inc. (MISSMA); Corporation of the Philippines; MAC Case No. 009(XI)Rosendo Villafor, et al.; MAC Case No. 004 (XI)JB Management Mining Corporation;

g) h) i) j) k) To (a) (b)

MAC Case No. 010(XI)Antonio Dacudao; MAC Case No. 011(XI)Atty. Jose T. Amacio; MAC MAC Case Case No. No. 012(XI)Puting-Bato 016(XI)Balite Gold Miners Portal

Cooperative; Communal Mining Cooperative; MAC Case No. 97-01(XI)Romeo Altamera, et al. address the matter, the DENR constituted a

Panel of Arbitrators (PA) to resolve the following: The adverse claims on MPSAA No. 128; and The Petition to Cancel EP 133 filed by

Rosendo Villaflor docketed as RED Case No. 8-8-94. On 13 June 1997, the PA rendered a resolution in RED Mines Case No. 8-8-94. As to the Petition for Cancellation relied Garcia under on and of the EP ruling 133 in that of issued Apex EP the to MMC, Co., was the Inc. PA v. and Mines Mining 133 86

opined 99

valid

subsisting. It also declared that the BMG Director, Section Consolidated Administrative Order implementing Presidential Decree No. 463, was authorized to issue exploration permits and to renew the same without limit. With respect No. to 128, the the adverse PA claims ruled on SEMs adverse MPSAA that

claimants petitions were not filed in accordance with the existing rules and regulations governing adverse

claims submit

because the

the

adverse plan for

claimants the

failed

to

minerals from the ground, and that they were largescale 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 133s 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 over the the validity of EP area 133 as for an being entirely irrelevant, the MAB proceeded to treat SEMs MPSA application disputed

sketch

containing an

technical claim that

description of their respective claims, which was a mandatory an overlap153 VOL. 605, NOVEMBER 20, 2009 153 Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp. ping of the area occupied by them and the area applied for by illegal SEM. It added activities that at the the adverse contested claimants were not claim owners but mere occupants conducting mining 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 smallscale 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 Peoples Small-Scale Mining Act of 1991), as they were not duly licensed by the DENR to engage in the extraction or removal of requirement adverse would allow the PA to determine if indeed there is

87

new and distinct application. It approved the MPSA application, No. 66, Diwalwal excluding which area as the area 729 segregated hectares by within DAO the smalldeclared

3. A

moratorium

on

all

mining

and

mining-related and other

activities, is hereby imposed until such time that all necessary procedures, licenses, permits, requisites as provided for by RA 7076, the Mining Act and its Implementing Rules and Regulations and all other pertinent with, measures laws, the and rules and regulations have are been complied protection and appropriate safeguards environmental

non-forest

lands

open for

scale mining. The MAB resolved: WHEREFORE, PREMISES CONSIDERED, the decision of the Panel of Arbitrators dated 13 June 1997 is hereby VACATED 154 154 SUPREME COURT REPORTS ANNOTATED Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp. 1. SEMs the MPSA application of the is hereby Act given and due its course subject to the full and strict compliance of provisions Mining Implementing Rules and Regulations; 2. The area covered by DAO 66, series of 1991, actually occupied and actively mined by the smallscale 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; and a new one entered in the records of the case as follows:

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 SEMs strict and full compliance with all the requirements of the Mining Act and its Implementing and actively Rules mining and the Regulations, and the concurrence of the small-scale miners actually occupying 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 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, paragraph, the contract between JB [JB Management Mining Corporation] and SEM is hereby 88

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 The Court cases as of Appeals SP consolidated 155 VOL. 605, NOVEMBER 20, 2009 155 Apex 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 of fact the EP that agent 133 SEM of in is MMC favor a by virtue of its the of assignment purported of SEM 100% and remanded CA-G.R.

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 MMCs mining rights were validly transferred to SEM prior to its expiration. The Court of Appeals also ruled that MMCs right to explore under EP 133 is a property right which the 1987 MMCs right Constitution failure of to to protects proceed did because No. and with not its 369, which the cannot be and not of 89 divested without the holders consent. It stressed that extraction its was 11 utilization minerals diminish failure Section vested

No. 61215 and No. 61216.

explore

attributable to it. Reading Proclamation Commonwealth Act 137, and Sections 6, 7, and 8 of Presidential Decree No. 463, the Court of Appeals concluded it is the that the issuance of who forest has DAO the No. 66 power was to done by the DENR Secretary beyond his power for President from the sole withdraw purposes. reserve the established of under 729

Proclamation No. 369 as non-forest land for mining Accordingly, segregation hectares of mining areas from the coverage of EP 133 by the MAB was unfounded. The Court in of Appeals also DAO faulted No. 66 the DENR he Secretary implementing when

subsidiary

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 MMCs duly

awarded were As to not

the

729

hectares as of

segregated

from

the under the

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 Valley, hectares and and DENR rush as located in the Monkayo, same Order ordering as No. the 90 critical Compostela mineral area. in the proclaimed

coverage area of EP 133 to other corporations who qualified petitions small-scale Villaflor and miners Republic Act No. 7076. the company, Court of Appeals argued that their failure to submit the sketch plan to the PA, which is a jurisdictional requirement, stated the was fatal to their appeal. It likewise claims, Villaflor and companys mining

reservation

environmentally

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: 156 156 SUPREME COURT REPORTS ANNOTATED Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp. WHEREFORE, Southeast premises considered, Mining the Petition of is Mindanao Gold Corporation

Subsequently, Diwalwal

Administrative area and

2002-18 was issued declaring an emergency situation gold 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 MININGS [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

GRANTED while the Petition of Rosendo Villaflor, et al., is DENIED for lack of merit. The Decision of the Panel of Arbitrators ASIDE and dated 13 June as 1997 is and AFFIRMED in toto and the assailed MAB Decision is hereby VOID. SET declared NULL

WHETHER OR NOT APEX HAS A SUPERIOR AND PREFERENTIAL OVER THE THE RIGHT TO 4,941 STAKE ITS CLAIM ENTIRE HECTARES IN AGAINST LAW

HAD III

IN

FACT

SUBMITTED

ON

TIME

WAS

VALID DISMISSAL OF BALITES ADVERSE CLAIM. WHETHER AND OR NOT THE ACTUAL OCCUPATION OF BALITE

SEM AND THE OTHER CLAIMANTS PURSUANT TO TIME-HONORED PRINCIPLE MINING 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, 2009 157 Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp. I WHETHER OR NOT THE MPSA OF SEM WHICH WAS FILED NINE (9) DAYS LATE (JUNE 23, 1994) FROM WHICH II WHETHER PANEL CLAIM BALITE OF OF OR NOT THE ON DISMISSAL OF THE THE THE BY THE THAT ARBITRATORS BALITE TO ADVERSE REQUIRED THE WAS FILING FILED OF ON THE JUNE MPSA 14, OF 1994 BALITE HAS A

SMALL-MINING

OPERATIONS

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 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 133 The NO. AS 66, WELL PROCLAMATION AS OTHER raised by NO. 297, AND EXECUTIVE ORDER 217 CAN OUTWEIGH EP NO. ADVERSE petitioners CLAIMS may be OVER THE DIWALWAL GOLD RUSH AREA. common issues summarized as follows: G.R. No. 152870-71, the MAB submits two issues, to wit: 91

PREFERENTIAL RIGHT OVER THAT OF BALITE.

GROUND

FAILED

SUBMIT

SKETCH PLAN DESPITE THE FACT THAT BALITE,

I. Whether

or

not

the

Court

of

Appeals

erred

in

program, its duty

to to

complete submit it an

exploration

work,

and

to

upholding the validity and continuous existence of EP 133 as well as its transfer to SEM; 158 158 SUPREME COURT REPORTS ANNOTATED Apex 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; and III. Whether executive Proclamation or No. not 297, the subsequent as the acts of the of department such issuance

declare a mining feasibility. Second, it reneged on Environmental to comply Compliance with the Certificate. Third, failed

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, SEMs MPSA application should have been evaluated on its own merit. As Apex ruling takes exception the to the of upholding validity regards vested the Court over of Appeals the recognition area, of SEMs right disputed Apex 92

and DAO No. 2002-18 can

outweigh Apex and Balites claims over the Diwalwal Gold Rush Area. On the of first issue, Court Appeals

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 right over of the actually area. undertaking MMC, Apex exploration claims, work to within the reserved lands in order to acquire priority failed conduct the necessary exploration work, thus, MMC

MMCs 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 MMC violated failed to four conditions with in the its permit. First, work comply mandatory

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 SEMs MPSA application. 159 VOL. 605, NOVEMBER 20, 2009 159 Apex 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 the condition or of his the exploration permit stating It that it shall be for the exclusive use and benefit of permittee duly authorized agents. added that while MMC is the permittee, SEM cannot be considered as MMCs duly designated agent as there is no proof on in record its authorizing SEM to or represent MMC business dealings

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 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. 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 297 in 25, has 2002 was a constitutionallyhectares Valley, may of and be sanctioned act. Proclamation mineral x x x. land Mining excluded 8,100 Monkayo, Compostela in the area 93 No. 7942 or requiring transfer of his approval for permit a to valid be assignment exploration

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

has declared that: operations 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 to 160 160 SUPREME COURT REPORTS ANNOTATED Apex 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 (DAO) Rush and undertake Area existing 297 if and the DENR State in Administrative elects the to the Diwalwal Order directly Gold to to State 2002-18 mining (but

Yet, the decision states that: The issue on is who has priority overtaken right by over the with acts of the the the disputed area deemed above

subsequent both being

developments

particularly

issuance of Proclamation 297 and DAO No. 2002-18, constitutionally-sanctioned Executive Branch. Mining operations in the Diwalwal Mineral Reservation are now, therefore, within the full control State of can the State through the executive the area the for certain branch. Pursuant to Section 5 of Republic Act No. 7942, the either and directly utilization undertake of the exploration, or it can 94 development

enter into agreements with qualified entities, viz: SEC. 5. Mineral to for preserve to scientific, Reservations.When raw or materials or ecological national industries minerals the interest so requires, such as when there is a need strategic cultural critical national development,

value,

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

operations nonetheless If

requires the that State the

pay just compensation that may be due to legitimate claimants). 297 chooses existing outsource mining operations to a service contractor, Proclamation mandates rights should still be recognized and honored.

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 161 VOL. 605, NOVEMBER 20, 2009 161 Apex 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 Apex and to private if entities it including The petitioners Balite, wishes.

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 I also a new order that claim of these of peace, development are have its and prosperity in the Diwalwal Gold Rush Area. submit in the the questions case. SEM We and entirely already parent 95 justiciable eliminated present

company, Marcopper Mining Corporation (MMC), due to the latters 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 land existing dispute, 162 open right who to of can Forest Reserve mining as non-forest operations) in the this void small-scale the remaining SEM

exercise of this prerogative lies with the Executive Department over which courts will not interfere. That the aforequoted the passage of the has decision, generated particularly highlighted portion,

interpretation by the parties causes me to pause in order to ask whether the issuance of Proclamation 297 over declaring the the disputed Gold area as a and mineral which reservation outweighs the claims of Apex and Balite Diwalwal Rush Area;

necessitate a final and definitive determination of the claimants and fill replace

created by the expiration of EP 133.

register 162 SUPREME COURT REPORTS ANNOTATED Apex 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 in a legitimate Proclamation subject be thru if a or by a and 297 to due existing (i.e., claimant Mining of just and right a valid

his and

mining existing

claim right

and

who

subsequently of technical

explores the area and extracts mineral deposits has regardless defect in the registration. Which between Apex and Balite has priority? On the one hand, Apex rests its claim to priority on the that precept is of first-in-time, first-in-right, by 137 a principle 1 of Act), explicitly Act recognized (C.A.) No. Section (Mining

Presidential Decree (P.D.) No. 99-A, which amended Commonwealth which provides: Whenever there is a conflict between claim owners over a mining claim, whether mineral or non-mineral, the any locator defect of in the form claim or who first registered shall have his the claim with the proper mining registrar, notwithstanding technicality, exclusive right to possess, exploit, explore, develop and operate such mining claim. 163 VOL. 605, NOVEMBER 20, 2009 163 Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp. Apex argues that Proclamation 297 does not extinguish its existing right over Diwalwal Gold Rush 96

envisioned the DENR

operations in the area may be undertaken either by directly, that payment to is qualified a who with compensation existing subject acquired through recorder. Under Philippine mining laws, which are essentially patterned by actual after Anglo-American and who models, extraction is first to the of location mineral and and registration of a mining claim must be followed exploration The person deposits. locate to may legitimate real

claimants, existing time over

contractor, discovered the mining

rights,

any) person

mineral deposits, and was first to stake his claim location and registration

Area, because: (1) it conducted exploration work in the area from 1983 to 1991; (2) it spent a total of P15 alone; admitted On June SEM; R.A. the million and by other on (3) the exploration its petition in Court and for this states development intervention case, that for right which it a filed ahead over work was was on of the are

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, of rights Balite of IPs, is not and entitled of those to preference to by the virtue of IPRA. I must point out that IPRA speaks belonging 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 Peoples Rights Act of 1997. 163 VOL. 605, NOVEMBER 20, 2009 163 Apex 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 97

indicative of its existing right over the disputed area. hand, its it had Balite 14, and No. 1994 Sharing that 8371 application an existing its Mineral

Production

Agreement

(MPSA)

disputed area by virtue of its native title right under (IPRA),2 because members indigenous peoples (IPs) belonging to the four tribes of Mangguangan, Manobo, Mandaya and Dibabawon. During the oral arguments, Balites counsel described Balite IPs as a cooperative to the four for everybody, thus for its members were comprised of nomads, lowlanders, and belonging tribes mentioned. Balite further asserts that it is a small-scale mining cooperative, as defined under R.A. No. 7076, and is thus Under entitled the to apply for it 25% should percent be of the who Diwalwal mineral reservation. circumstances, Apex should be recognized as the claimant with priority, with or without Proclamation 297.

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 from the in negotiating of the the terms and conditions for the sharing of profit and other benefits arising utilization 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 MMCs 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 Mining of EP 133, and and the admission as RED of its MPSA (entitled Rosendo Villaflor, et al. v. Marcopper Corporation docketed MINES Case No. 8-8-94). The petition was referred to the Panel of Arbitrator (PA) pursuant to R.A. No. 7942. Yet, Balites application for an MPSA, although filed prior to SEMs application, did not qualify Balite as a first locator Apex earlier and had than registrant registered either of its a mining claim, the other because much claims or with any

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, follow it is his also and the important and mining. discoverer that The or the claimant with stage registrant must actual of an discovery registration final first

exploration bestow upon

exploration, development and utilization is crucial to existing right that he can invoke against the whole world, even against the government. 165 VOL. 605, NOVEMBER 20, 2009 165 Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp. Apex met the requirements of discovery, registration, actual exploration and mining. In 1982, it explored and developed within the the area Diwalwal its mine covered mineral site to by its claims It the from a located in of and gold reservation. facilitate

98

constructed mining tunnels, access roads and bridges around bullions to the extraction and processing of gold ores. It sold tons to the Philippine coffers. government It 1982 to 1992, and remitted millions of pesos in tax revenues national operated

Bureau of Mines and Geo-Sciences (BMG) in 1982, Balite, claimant.

modern

gold

processing

plant,

as

contrasted

from

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. 166 166 SUPREME COURT REPORTS ANNOTATED Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp. Fifthly: That the Court in Apex Mining Co., Inc. v. Garcia DENR affirmed nullifying the and decision of the OP and the 99 rendering inoperative Apexs

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 Nations economic growth and development. For this time, reason, the Philippines first-in-right involving of the postulate conflicting foregoing, adheres not only claims, Apex has to the first-inin but an resolving also in

disputes In view

determining existing rights of claimants. 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 dated over that the of area the to the exclusion of other MMC, claimants, because the registration of its claims preother claimants, including

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-inright. The right of Apex to be recognized herein is distinct operator from of its the right DOLs, as a registered that owner the and considering former

arises from a vacuum resulting from the extinction and nullification of MMCs EP 133. Conclusion

I vote to grant the motion for clarification of Apex Mining priority mineral pursuant superior Motions Co., right to Inc., to and to modify develop Diwalwal 297, State to the and Gold decision utilize Rush only to by the Area the declaring that Apex Mining Co., Inc. has an existing explore, in of the the deposits right for

Proclamation

subject

directly

explore, for and

develop and utilize. Reconsideration of Apex denied; Co., Motion Inc. Clarification Mining

Manifestation and Motion of Balite Communal Portal Mining Cooperative denied; Manifestation and Urgent Motion dated 25 January 2007 of Southern Mindanao Gold award Mining mining Corporation operations denied; in State may to now any disputed area 100

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 o0o Development Mining Corporation Co., Inc. (PNOC-EDC) Southeast

vs. Veneracion, Jr., 509 SCRA 93 [2006]) [Apex vs. Mindanao Gold Mining Corp., 605 SCRA 100(2009)]

DAVAO), G.R. Nos. 152613 & No. 152628. June 23, 2006.* APEX MINING CO., INC., petitioner, vs. SOUTHEAST MINDANAO GOLD MINING CORP., THE MINES MINING MONKAYO MINERS ADJUDICATION REGULATORY INTEGRATED COMMUNAL DACUDAO, COOPERATIVE, CATAPANG, FRANCISCO ASION, CARUBIO, GANADO, and JOEL LUIS BOARD, BOARD SMALL PORTAL PROVINCIAL SCALE MINING MINERS

MONKAYO

INTEGRATED INC.,

SMALL

SCALE MINERS

ASSOCIATION, DAVAO

ROSENDO

VILLAFLOR,

UNITED

COOPERATIVE, ANTONIO DACUDAO, PUTING-BATO GOLD MINERS COOPERATIVE, ROMEO ALTAMERA, THELMA BASMILLO, GLORIA, CATAPANG, EDWIN LUIS GALANG, YOBIDO, MACARIO RENATO EDUARDO HERNANDEZ, FRANCISCO ASION,

(PMRB-DAVAO),

ASSOCIATION, INC., ROSENDO VILLAFLOR, BALITE COOPERATIVE, GOLD ALTAMERA, RENATO GLORIA, MINERS THELMA BASMILLO, EDWIN RUDY DAVAO UNITED MINERS COOPERATIVE, ANTONIO PUTING-BATO ROMEO GALANG,

REYNALDO CARUBIO, ROBERTO BUNIALES, RUDY ESPORTONO, ROMEO CASTILLO, JOSE REA, GIL GANADO, PRIMITIVA LICAYAN, LETICIA ALQUEZA _______________ * FIRST DIVISION. 356 356 SUPREME COURT REPORTS ANNOTATED Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp. and JOEL BRILLANTES MANAGEMENT MINING 101

YOBIDO,

EDUARDO

MACARIO

HERNANDEZ, BUNIALES, LETICIA

REYNALDO

ROBERTO PRIMITIVA

ESPORTONO, ROMEO CASTILLO, JOSE REA, GIL LICAYAN, ALQUEZA MINING BRILLANTES MANAGEMENT

CORPORATION, respondents. G.R. Nos. 152619-20. June 23, 2006.* BALITE MINDANAO CO., INC., COMMUNAL petitioner, MINING MINES GOLD THE PORTAL vs. CORP., APEX MINING SOUTHEAST MINING BOARD, COOPERATIVE,

CORPORATION, respondents. G.R. Nos. 152870-71. June 23, 2006.* THE MINES ADJUDICATION THE HON. BOARD O. AND ITS MEMBERS, VICTOR RAMOS

ADJUDICATION

PROVINCIAL MINING REGULATORY BOARD (PMRB-

(Chairman), UNDERSECRETARY VIRGILIO MARCELO

(Member) (Member),

and

DIRECTOR vs.

HORACIO

RAMOS MINDANAO

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) citation when of the findings evidence are on conclusions without specific

petitioners,

SOUTHEAST

GOLD MINING CORPORATION, respondent. Appeals; The established rule is that in the exercise of the Supreme Courts 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 exercise the are of conclusive the not and binding rule Courts trier of is on the of Court; in does the not review, Exceptions.The Court established Supreme being a that

which they are based; (9) when the facts set forth in the petition as well as in the petitioners 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 not manifestly by overlooked the parties, certain relevant if facts 102 disputed which, properly

power facts,

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 the recognized findings or is by are jurisprudence, grounded (2) to when absurd of wit: on or the (1) [w]hen entirely speculation, inference impossible; (4)

considered, would justify a different conclusion. _______________ * FIRST DIVISION. 357 VOL. 492, JUNE 23, 2006 357 Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp. Natural power minerals Resources; of vested on Mines; the Administrative over Director mineral of Law; lands The and administration

surmises made (3) when

conjectures; is grave

manifestly mistaken, there

abuse

discretion;

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

Mines

includes

the

power 90

to of

prescribe

terms

and

conditions No. of of 463, EP BMG,

in the 133, is

on

its

behalf,

and

the

agent

consents

so

as

to

granting exploration permits to qualified entities.Under Section the Presidential during the through Decree applicable DENR statute issuance Director

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 agency to agent exist, of it the is latter. essential For that a contract the of principal

Secretary,

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 and under the in Mining granting Act. This power permits of to administration includes the power to prescribe terms conditions exploration qualified entities. Thus, in the grant of EP 133 in favor of the MMC, the Director of the BMG acted within Same; The his power in laying down the terms and conditions attendant thereto. Same; fact Corporation that an Law; entity the Agency; may former a that be is the Elements; a a 100% duly of mere

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 103

subsidiary corporation of another corporation does not necessarily authorized agency to mean agent exist, of it that the is latterfor contract

proving that agency is extant in a certain case rests in the party who sets forth such allegation. This is based on the princi358

essential

principal

consents that the other party, the agent, shall act

the 358 SUPREME COURT REPORTS ANNOTATED Apex 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; Permit, Where who the an was entity earlier or is not an an agent by of a the corporation granted transfer Exploration

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 the principal. While in assignment, takes the there place is of total the transfer or relinquishment of right by the assignor to assignee.The Same; assignee Same; assignor and is no longer bound to the latter. 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 condition, mining operations. entities Without or such a non-qualified individuals could 104

assignment

made

latter in favor of the former is null and void for directly contravening the terms and conditions of the grant agency of is said Exploration from Permit; The concept agency, of the distinct assignmentin

agent acts not on his own but on behalf of his principal, while in assignment, there is total transfer or relinquishment the of right by the assignor it is to the assignee.In of agency instant exists Petitions, between incumbent so as to

upon either MMC or SEM to prove that a contract actually them 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

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 359 VOL. 492, JUNE 23, 2006 359 Apex 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 being to the a its existence.We of Appeals of subsidiary cannot theory MMC, law, by lend that is recognition SEM, artificial and Court 100% by 100% subsidiary of another corporation is automatically an agent of the lattera corpora-

it

may to

be the

related.

Resultantly, SEM Same; is

absent a

any

clear and of

proof Same;

contrary, Same;

separate Doctrine

distinct entity from MMC. Same; Same; 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 invokes is the utilized doctrine to circumvent of piercing the the 105 condition of non-transferability.The Court of Appeals pathetically 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 recognized. or a mere of True, the two entities should mask or of not may be be the of corporate a person

removed when the corporation is just an alter ego conduit 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

automatically an agent of MMC. A corporation is an being created operation of authorized It is an personality having law or and the right of succession and the powers, attributes, properties to by its law expressly existence. with a incident invested artificial separate being

distinct from those of the persons composing it as well as from that of any other legal entity to which

is to be applied. Only in cases where the corporate fiction was misused to such an extent that injustice, fraud or crime Thus, was a committed subsidiary against another, may in be was disregard of its rights may the veil be pierced and removed. done by the this latter corporation made to answer for the liabilities and/or illegalities the parent corporation if the former may is have in entered place in into. order In to other organized for the purpose of evading obligations that words, and doctrine expose

SEM to avail itself of this doctrine and to approve the validity of illegal the act assignment which Same; of is is what tantamount the to sanctioning Same; approval doctrine prior of

precisely seeks to forestall. Same; of Same; the Same; the Absent Department Secretary

Environment and Natural Resources, the assignment of an Exploration Permit is without legal effect.The records the the are bereft of any Decree the that be of dispute indication No. 463, the with the that which the is or to prior Quite assignment bears the imprimatur of the Secretary of DENR. Presidential law mining the SEM explicitly of of a mining governing when requires rights, Secretary did not area, assignment transfer the right the was 106

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 360 360 SUPREME COURT REPORTS ANNOTATED Apex 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, of the is application utilized to of the foregoing the doctrine condition is of unwarranted. The assignment of the permit in favor SEM circumvent non-transferability of the exploration permit. To allow

executed, assignment explore approval

including

must

DENR.

conspicuously,

allegation

that the Deed of Assignment was made without the prior approval of the Secretary of DENR. Absent the prior effect approval for of the the Secretary of DENR, provision the of assignment of EP 133, was, therefore, without legal violating mandatory Presidential Decree No. 463. Same; Same; Same; The DENR Secretary has no power to convert forest reserves of into the non-forest applicable reserves.Against the backdrop

statutes which govern the issuance of DAO No. 66, this Court is constrained was to rule not in that said administrative order issued accordance

through

direct or

undertaking venture, by

or

by or into

entering

into

cowith

production, agreements,

joint

production-sharing agreement

entering

with the laws. Inescapably, DAO No. 66, declaring 729 hectares of the areas covered by the AgusanDavao-Surigao open to Forest Reserve mining as non-forest is null land and small-scale operations,

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 enter either into directly and undertake of with for its the the area qualified national security Act exploration, or it can entities. economic and national No. 7942 107 development utilization

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 utilization role of in the the exploration, resources development of the and natural country.

agreements not only 5 of

Recognizing the importance of the countrys natural resources, defense, development, but also for Section

Republic

With this policy, the State may pursue full control and supervision of the exploration, development 361 VOL. 492, JUNE 23, 2006 361 Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp. and utilization The of the countrys open to natural the mineral are resources. options State

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 particularly and DAO sanctioned operations

by with No.

the the of

above

subsequent of both being

developments 297 constitutionally-

362 362 SUPREME COURT REPORTS ANNOTATED Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp. erations in the mineral reservation to private entities including The Executive 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 Jesus L. T. Cantos Albacite for Davao for United Miners Mining Cooperative, et al. Provincial Regulatory Board of Davao. Martin T. Lu for Rosendo Villaflor, et al. Rodolfo Clarence C. D. Rapista Guerrero for and Balite Cesar Communal T. Jayme Portal Mining Cooperative. for Apex Mining Co., Inc. Kapunan, Imperial, Paraguiton & Bongolan for MISMA. 108 petitioners of Apex this over and Balite, if lies courts it wishes. the not will exercise prerogative which with

issuance the

Proclamation Branch.

2002-18,

acts in the

Executive Mineral

Mining are

Diwalwal

Reservation

now, therefore, within the full control of the State through the executive branch. Pursuant to Section 5 of Republic of Act the No. the 7942, or the it State can can enter either and into directly utilization undertake exploration, development

area

Department

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, of i.e., the to undertake directly Rush the mining As operations Diwalwal Gold Area.

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 interest be in guided settling only on by this the demands as of public as its option, well

material and logistic feasibility. The State can also opt to award mining op-

Quasha, Ancheta, Pea & 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-Davao-Surigao Forest Reserve consisting of approximately 1,927,400 hectares.1 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.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, 2006 363 Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.

since brought On of

the

early

1980s by the

been

stormed

by

conflicts claimants and his of

about

numerous Camilo filed

mining Banad a

scrambling for gold that lies beneath its bosom. 21 gold November in Mount 1983, Diwata, group, who claimed to have first discovered traces Declaration Location (DOL) for six mining claims in the area. Camilo Banad and some other natives pooled their skills On and 1984, the 12 his and resources and organized Mining 1983 the Balite Communal Portal Mining Cooperative (Balite).3 December group. several 1983, Apex Corporation to for February mining with the (Apex) entered into operating agreements with Banad From November individual gold rush applications area were 109

locations over mineral land covering certain parts of Diwalwal filed Bureau of Mines and Geo-Sciences (BMG). On 2 February 1984, Marcopper Mining Corporation (MMC) and filed his 16 DOLs After its or mining realizing claims that is for the a areas area forest adjacent to the area covered by the DOL of Banad group. by encompassed mining claims

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. 364 364 SUPREME COURT REPORTS ANNOTATED Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp. Discovering and April the the existence of the of several mining miners Petition claims in for the the proliferation before small-scale BMG a

the areas covered by its EP 133 and the mining claims existing Forest that of Apex forest Reserve) pursuant to were under within an established No. 369 No. and and 463,4 reservation Presidential (Agusan-Davao-Surigao Decree

Proclamation

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 MMCs 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 On Apex the 9 BMG December mining claims and not through BMG MMCs the filing of application for permit to prospect with the BFD. 1986, and dismissed permit to MMCs explore petition on the ground that the area covered by the was not a forest reservation. It further declared null and void MMCs EP 133 and sustained the validity of Apex mining claims over the disputed area. MMC appealed Department (DENR). the of adverse order and of BMG to the Environment Natural Resources 110

area covered by EP 133, MMC thus filed on 11 1986 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

On

15

April

1987,

after

due

hearing,

the

DENR

Apex filed a Petition for Certiorari before this Court. The July Apex Petition 1991, was docketed as a G.R. No. 92605 against a forest for a acquiring entitled, Apex Mining Co., Inc. v. Garcia.6 On 16 this Court the is the rendered disputed by proper Decision area is in holding rights that

reversed the 9 December 1996 order of BMG and declared MMCs EP 133 valid and subsisting. _______________ 4 a) Sec. In 13. Areas or Closed other by to Mining Location.No reservations Government

reserve; mining

hence,

procedure initially

prospecting and exploration shall be allowed: military, when Government the proper except authorized

therein

applying

permit to prospect with the BFD and not through a registration of DOL with the BMG. On 27 December Factoran, 1991, Jr. then DENR Secretary Department Fulgencio issued

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, 2006 365 Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp. Apex DENR On 27 filed a Motion was 1989, C. for Reconsideration denied. of the with Apex the then which July Cancio subsequently the Office

Administrative Order No. 66 (DAO No. 66) declaring 729 hectares of the areas covered by the AgusanDavao-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, for several mining entities filed applications Mineral Production 111

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.

filed an appeal before the Office of the President. President, for Legal appeal through Affairs, Assistant Executive Secretary

Garcia,5dismissed

Apexs

and affirmed the DENR ruling.

_______________ 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 shall that applicants submit for MPSA the applications 366 366 SUPREME COURT REPORTS ANNOTATED Apex 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 The No. (DUMC) for the Petition 8-8-94. and admission was Davao Balite of their as MPSA RED Miners and Application. Mines Case Cooperative docketed comply and before

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 SEMs MMC. MPSA SEMs application application and was the Deed of Assignment over EP 133 executed in its favor by designated MPSA 112 Application No. 128 (MPSAA 128). After publication of SEMs application, the following filed before the BMG their adverse claims or oppositions: a) MAC Case No. 004 (XI)JB Management Mining Corporation; b) c) MAC MAC Case Case No. No. 005(XI)Davao 006(XI)Balite United Integrated Miners Small Cooperative; Scale Miners Cooperative; d) MAC Case No. 007(XI)Monkayo Integrated Small Scale Miners 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.;

proper authority.

United intervened

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.

g) MAC Case No. 010(XI)Antonio Dacudao; 367 VOL. 492, JUNE 23, 2006 367 Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp. h) MAC Case No. 011(XI)Atty. Jose T. Amacio; i) j) MAC MAC Case Case No. No. 012(XI)Puting-Bato 016(XI)Balite Gold Miners Portal Cooperative; Communal Mining Cooperative; k) MAC Case No. 97-01(XI)Romeo Altamera, et al.8 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. 8-8-94.9 On 13 June 1997, the PA rendered a resolution in RED Mines Case No. 8-8-94. As to the Petition for Cancellation relied on Garcia,10and under of the EP ruling opined 99 133 in that of issued Apex EP the to MMC, Co., was the Inc. PA v. and Mines Mining 133

No. 463, was authorized to issue exploration permits and to renew the same without limit. With respect No. to 128, the the adverse PA claims ruled on SEMs adverse MPSAA that

claimants petitions were not filed in accordance with the existing rules and regulations governing adverse claims submit because the the adverse plan for claimants the failed to sketch containing an technical claim that

description of their respective claims, which was a mandatory requirement adverse 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. 368 368 SUPREME COURT REPORTS ANNOTATED Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp. 113

valid

subsisting. It also declared that the BMG Director, Section Consolidated Administrative Order implementing Presidential Decree

pants

conducting

illegal

mining

activities

at

the

secondary in importance to the latter. Dealing with the question on EP 133s 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 of DAO other No. 34 defines citizens, small-scale voluntarily miners form as a Filipino citizens who individually or in the company Filipino 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 orebearing materials from the ground. 13 Rollo of G.R. Nos. 152870-71, p. 161. 369 VOL. 492, JUNE 23, 2006 369 Apex 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 114

contested area since only MMC or its assignee SEM had valid mining claims over the area as enunciated in Apex Mining that as Co., the Inc. adverse Order v. Garcia.11 claimants No. 34 under Also, were (DAO as it not No. the maintained qualified Department Republic

small-scale

miners

DENR

Administrative No. 7076

34),12 or the Implementing Rules and Regulation of Act (otherwise known Peoples 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 Expoloration Permit No. 133 is hereby reiterated and all the adverse claims against MPSAA No. 128 are DISMISSED.13 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

irrelevant, the MAB proceeded to treat SEMs MPSA application application, No. 66, Diwalwal over the disputed the area 729 area as an entirely by within DAO the smallthe new and distinct application. It approved the MPSA excluding which area as segregated hectares declared

all

other

pertinent with, measures

laws, the and

rules

and

regulations have

are been

complied protection

and

appropriate safeguards

environmental

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

non-forest PREMISES

lands

open for

scale mining. The MAB resolved: WHEREFORE, CONSIDERED, 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. the SEMs MPSA application of the is hereby Act given and due its course subject to the full and strict compliance of provisions Mining Implementing Rules and Regulations; 2. The area covered by DAO 66, series of 1991, actually occupied and actively mined by the smallscale 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 and other activities, is hereby imposed until such time that all necessary procedures, licenses, permits,

agreement beneficial to all. In the event of SEMs strict and full compliance with all the requirements of the Mining Act and its Implementing and actively Rules mining and the 115 Regulations, and the concurrence of the small-scale miners actually occupying 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. 370 370 SUPREME COURT REPORTS ANNOTATED Apex Mining Co., Inc. vs. Southeast Mindanao

requisites as provided for by RA 7076, the Mining Act and its Implementing Rules and Regulations and

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 The Court cases dated and as 13 of Appeals SP consolidated In the the PA remanded Decision15 declared null CA-G.R. March the

EP

133

on

July

1994,

the

Court

of

Appeals

deemed it relevant to declare EP 133 as valid since MMCs mining rights were validly transferred to SEM prior to its expiration. The Court of Appeals also ruled that MMCs right to explore under EP 133 is a property right which the 1987 MMCs right Constitution failure of to to protects proceed did because No. and with not its 369, which the cannot be and not of divested without the holders consent. It stressed that extraction its was 11 utilization minerals diminish failure Section vested

explore

attributable to it. Reading Proclamation Commonwealth Act 137, and Sections 6, 7, and 8 of Presidential De_______________ 15 Penned by Associate Justice Alicia L. Santos 116

No. 61215 and No. 61216. assailed and 2002, MAB the Court of Appeals affirmed in toto the decision of void decision. The Court of Appeals, banking on the premise that the SEM is of fact the EP that agent 133 SEM of in is MMC favor a by virtue of its the of assignment purported of SEM 100% and

with Associate Justices Cancio C. Garcia and Marina L. Buzon, concurring. 371 VOL. 492, JUNE 23, 2006 371 Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp.

subsidiary

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 MMCs duly designated agent. Thus, despite the non-renewal of

cree No. 463, the Court of Appeals concluded that the issuance of DAO No. his 66 was done for it by is the the DENR Secretary beyond power

al., is DENIED for lack of merit. The Decision of the Panel of Arbitrators ASIDE and dated 13 June as 1997 is and AFFIRMED in toto and the assailed MAB Decision is hereby VOID.16 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 Valley, hectares and and as located in the Monkayo, same as critical 117 Compostela mineral proclaimed SET declared NULL

President who has the sole power to withdraw from the forest reserve established under Proclamation No. 369 as non-forest the land for of mining 729 purposes. of Accordingly, segregation hectares

mining areas from the coverage of EP 133 by the MAB was unfounded. The Court in the of Appeals 729 also DAO faulted No. 66 segregated the DENR he the under the Secretary awarded were As to not the implementing when from

hectares as of

coverage area of EP 133 to other corporations who qualified petitions small-scale Villaflor and miners Republic Act No. 7076. company, Court of Appeals argued that their failure to submit the sketch plan to the PA, which is a jurisdictional requirement, stated the was fatal to their appeal. It likewise claims, Villaflor and companys mining

reservation

environmentally

area. Subsequently, DENR Administrative Order _______________ 16 Rollo of G.R. Nos. 152619-20, p. 55. 372 372 SUPREME COURT REPORTS ANNOTATED Apex 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

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, Southeast premises considered, Mining the Petition of is Mindanao Gold Corporation

GRANTED while the Petition of Rosendo Villaflor, et

the 2003

stoppage was the

of

all by

mining the in the

operations

therein. the to Rush

I WHETHER OR NOT THE MPSA OF SEM WHICH WAS FILED NINE (9) DAYS LATE (JUNE 23, 1994) FROM WHICH II WHETHER OR NOT THE ON DISMISSAL OF THE THE THE BY THE THAT 118 THE WAS FILING FILED OF ON THE JUNE MPSA 14, OF 1994 BALITE HAS A

Thereafter, Executive Order No. 217 dated 17 June issued President which Diwalwal creating is tasked Gold National address Area. In G.R. No. 152613 and No. 152628, Apex raises the following issues: I WHETHER OR NOT SOUTHEAST MINDANAO GOLD MININGS [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 OVER THE THAT THE RIGHT TO 4,941 STAKE ITS CLAIM AGAINST LAW IN ENTIRE HECTARES IN IS PANEL CLAIM BALITE HAD IN _______________ 17 Rollo of G.R. No. 152613 and No. 152628, p. 731. 373 VOL. 492, JUNE 23, 2006 373 Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp. OF OF ARBITRATORS BALITE TO ADVERSE REQUIRED Task Force situation Diwalwal

PREFERENTIAL RIGHT OVER THAT OF BALITE.

GROUND

FAILED

SUBMIT

SKETCH PLAN DESPITE THE FACT THAT BALITE,

SEM AND THE OTHER CLAIMANTS PURSUANT TO TIME-HONORED PRIORITY IN PRINCIPLE TIME MINING PRIORITY

RIGHT.17 In G.R. No. 152619-20, Balite anchors its petition on the following grounds:

FACT III

SUBMITTED

ON

TIME

WAS

VALID

The I.

common or

issues not

raised the

by of

petitioners Appeals

may erred

be in

DISMISSAL OF BALITES ADVERSE CLAIM.

summarized as follows: Whether Court upholding the validity and continuous existence of EP

WHETHER AND

OR

NOT

THE

ACTUAL

OCCUPATION OF BALITE

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; and III. Whether or No. not 297, the such subsequent as the acts of the of executive department issuance

SMALL-MINING

OPERATIONS

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.18 In 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 133 NO. AS 66, WELL PROCLAMATION AS OTHER NO. 297, AND EXECUTIVE ORDER 217 CAN OUTWEIGH EP NO. ADVERSE CLAIMS OVER THE DIWALWAL GOLD RUSH AREA.19 G.R. No. 152870-71, the MAB submits two issues, to wit:

Proclamation

and DAO No. 2002-18 can

outweigh Apex and Balites claims over the Diwalwal Gold Rush Area. _______________ 18 Id., at pp. 703-704. 19 Rollo of G.R. Nos. 152870-71, p. 916. 374 374 SUPREME COURT REPORTS ANNOTATED Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp. On the of first issue, Apex ruling takes exception the to the of Court Appeals upholding validity 119

MMCs 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 MMC violated failed to to to four conditions with in the its permit. First, work to comply mandatory work, and

The within 2.

following two (2)

shall years of

submit from

their the

LOIs

and of

MPSAs DENR mining quarry whose perfected

effectivity

A.O. 57 or until July 17, 1991. Declaration and Location other (DOL) holders, lease applicants, exploration mining have permitees, applicants not been

applicants mining/quarry No. 57.

program, its duty

complete submit it an

exploration

applications

declare a mining feasibility. Second, it reneged on Environmental to comply Compliance with the Certificate. Third, failed

prior to the effectivity of DENR Administrative Order 2. All holders of DOL acquired after the effectivity of DENR A.O. No. 57. x x x x Failure to submit letters within of the intent and MPSA period applications/proposals prescribed 120

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 _______________

shall cause the abandonment of mining, quarry and sand and gravel claims. 375 VOL. 492, JUNE 23, 2006

20 On

Otherwise the

known Of

as

the

Procedural Production

Guidelines Sharing

375 Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp. holders Intent July prior of and 1991. to its exploration a It MPSA said permits application that because to to file not EP a later 133 SEMs Letter than of 17

Award

Mineral

Agreement (MPSA) Through Negotiation provides: Section 3. Submission of Letter of Intent (LOIs) and MPSAs.

expired MPSA

assignment

SEM,

application should have been evaluated on its own merit. As regards vested the Court over of Appeals the recognition area, of SEMs right disputed Apex

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 agent of SEM did EP not 133 make is not the latter the to duly the authorized agent of MMC since the concept of an under equivalent 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 376 376 SUPREME COURT REPORTS ANNOTATED Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp. Act No. 794221 requiring his approval for a valid that SEM did not assignment 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 Courts power of review, the Court not being a trier of facts, does not normally embark on or transfer of exploration permit to be

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 right over of the actually area. undertaking MMC, Apex exploration claims, work to within the reserved lands in order to acquire priority failed 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 SEMs MPSA application. Similarly, the MAB underscores acquire any right from MMC by virtue of the transfer of EP 133 because the transfer directly violates the express the condition or of his the exploration permit stating It that it shall be for the exclusive use and benefit of permittee duly authorized agents. added that while MMC is the permittee, SEM cannot be considered as MMCs duly designated agent as there is no proof on record authorizing SEM to

121

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 (1) rule, [w]hen however, the admits are of exceptions entirely when absurd abuse based as on the or of on

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, G.R. Inc. No. v. National 15 Labor June v. v. 122

recognized by jurisprudence, to wit: findings or is when grounded (2) mistaken, is grave is speculation, inference impossible; discretion; surmises (3) (4) when conjectures; there the

Relations 23 428 377 The

Commission, Insular 79, Life 86;

149281, Company,

made

manifestly

2005, 460 SCRA 220, 227. Assurance Manila Ltd. Court of Appeals, G.R. No. 126850, 28 April 2004, SCRA Electric Company Benamira, G.R. No. 145271, 14 July 2005, 463

judgment

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 evidence facts set are on conclusions which they in the without petition citation as well of as specific the the in are based; (9) when

VOL. 492, JUNE 23, 2006 377 Apex Mining Co., Inc. vs. Southeast Mindanao 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 Appeals National like in findings Labor the are at odds it to is those this of the Just Relations foregoing Commission case, (NLRC).

forth

petitioners 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 when certain the by Court the of facts evidence Appeals not on record; by and (11) manifestly overlooked the parties,

relevant

disputed

Courts

considered view that a re-evaluation of the attendant facts surrounding that the the present findings case of the is appropriate are in considering I At the threshold, it is an undisputed fact that MMC assigned pursuant EP 1. 133 That to to is the SEM a all its of the shall rights under EP dated terms the 133 16 and work Deed to Assignment following abide by MAB

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 319. 24 Manila Electric Company v. Benamira, Id. 25 Records, Vol. 2, pp. 351-353. 26 Id., at pp. 84-85. 378 378 SUPREME COURT REPORTS ANNOTATED Apex 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 as responsibility to on the for part of the that government expenditures exploration 331, 347-348; Aguirre v. Court of Appeals,

conflict with that of the Court of Appeals.

February 1994.25 subject conditions:26: permittee 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 therein and accounting to of all expenditures and incurred subject periodic inspection

G.R. No. 122249, 29 January 2004, 421 SCRA 310,

123

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

might have been incurred, or as to other damages that might have been suffered by the permittee; and 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. Under Section 9027 of Presidential Decree No. 463, the is applicable charged statute during out the the issuance said law. of EP 133, the DENR Secretary, through Director of BMG, with carrying 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 permits BMG of administration includes the power to prescribe terms and conditions in granting exploration to qualified entities. Thus, in the grant of acted within his 6 power in laying states down that the the EP 133 in favor of the MMC, the Director of the terms and conditions attendant thereto. Condition number categorically 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 agency to agent exist, of it the is latter. essential For that a contract the of principal

consents that _______________ 27 Executive OfficerThe 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, 2006 379 Apex 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; 124

(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 matter by is of that in the elements to The a burden of be case of agency proving rests in is a or that the factual proven agency needs established

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. 380 380 SUPREME COURT REPORTS ANNOTATED Apex 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: 125

evidence. extant

certain

party who sets forth such allegation. This is based on the principle that he who alleges a fact has the burden of proving that the it.31 It must to likewise this be fact emphasized evidence prove

must be clear, positive and convincing.32 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 in an favor authorized agent of SEM is null of MMC, and void it goes as it without directly saying that the assignment or transfer of the permit

1. That for ONE PESO (P1.00) and other valuable consideration ASSIGNEE, TRANSFERS received the and by the ASSIGNOR hereby unto the from the ASSIGNOR CONVEYS ASSIGNS, ASSIGNEE

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, 2006 381 Apex 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 the corporation powers, is an artificial and being created by operation of law, having the right of succession and attributes, properties expressly authorized by law or incident to its existence.36 It is 126

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.35 Bearing 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 formers transfer under SEM agent. of the the all permit Such rights in It assignment and favor is of not involved MMC thus, actual have making grant of obligations SEM, a

permittee.

mere

authority to SEM, as an agent of MMC, to use the permit. It is a total abdication of MMCs rights over the permit. Hence, the assignment in 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

an artificial being invested by law with a personality separate composing and it distinct as well from as those from of the of persons other that any

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 Company, Bank 430 v. Andrada 882, Electric 894; & Engineering Phil. 381

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 two that SEM should is not just be be a business recognized. removed conduit True, when of the the

SCRA 244, 254 (2002). 382 382 SUPREME COURT REPORTS ANNOTATED Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp. fiction was misused to such an extent that injustice, fraud or crime Thus, was a committed subsidiary against another, may in be was disregard of its rights may the veil be pierced and removed. done by the this latter corporation made to answer for the liabilities and/or illegalities the parent corporation if the former may is have in entered in into. order In to other organized for the purpose of evading obligations that words, and doctrine place expose 127

MMC, hence, the distinct legal personalities of the entities corporate mask may

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 committed a shield a for fraud, illegality or inequity this against third person.39 However,

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.

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. To our mind, is of the application The of the foregoing of the doctrine condition and to unwarranted. assignment of of the the

capability 383

to continue the mining operations

of the

lessee and that the assignor has complied

permit in favor of SEM is utilized to circumvent the non-transferability the validity exploration is permit. To allow SEM to avail itself of this doctrine approve assignment 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 1974, Decree No. 463, as enacted the on 17 May otherwise known Mineral Resources

VOL. 492, JUNE 23, 2006 383 Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp. with all the That obligations such transfer of or the lease: Provided, shall be further, assignment

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 the the records DENR. are bereft of any indication No. 463, the that which the is or assignment bears the imprimatur of the Secretary of Presidential law explicitly Decree the that governing when requires assignment transfer was 128

Development Decree, which governed the old system of exploration, development, and utilization of mineral resources 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 through license, concession or lease

executed,

assignment explore approval a

of of

mining the SEM

rights, Secretary

including be of dispute

the

right the

to

384 SUPREME COURT REPORTS ANNOTATED Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp. With MMC Area. the lost SEM, expiration any on right the of to other EP 133 hand, on has 6 July Gold not 1994, Rush the Diwalwal

mining

area, did

must not

with the

prior Quite

DENR.

conspicuously,

allegation

that the Deed of Assignment was made without the prior approval of the Secretary of DENR. Absent the prior effect An approval for added of the the Secretary of DENR, provision fatal the of to assignment of EP 133, was, therefore, without legal violating significant mandatory Presidential Decree No. 463. omission proved MMC/SEMs 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,

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. II The Court of Appeals theorizes that DAO No. 66 was issued beyond the the power power to of the lands DENR from Secretary since withdraw 129

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

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 nonforest 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

withdraw forest reserves found to be more valuable for their mineral contents than for the purpose for which same the into reservation non-forest was made A and convert the reserves. similar provision

Secretary of Agriculture and Natural Resources.42 However, 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 than be for more the valuable purpose for for their mineral the contents which

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 SEC. to 8. be withdrawn from and within the coverage of thereof. Reserved have Section 8 of Presidential Decree No. 463 reads: Exploration lands Exploitation reservations, Lands.When which 130

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, 2006 385 Apex 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

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

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

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 and take possession of the first one to the area and the occupy 386 386 SUPREME COURT REPORTS ANNOTATED Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp. For its part, Balite argues that with the issuance of DAO No. 66, its occupation in the contested area, particularly that its 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 in the 729 hectares small-scale mining area, has entitled it to file its MPSA. Balite claims MPSA application should have been given preference over that of SEM because it was filed

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 portions 1,927,400 which had hectares, been were withdrawn from settlement and disposition, excluding, however, lands; WHEREAS, gold deposits have been found within the area and covered by Proclamation small to No. 369, in the Municipality of Monkayo, Compostela Valley Province, unregulated 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 the degradation health and of the environment and order and to resolve peace problems those certified and/or shall be classified and certified as non-forest 131

first to record its mining claims over the area.

spawned by the unregulated mining operations in the said area; WHEREAS, addressed area reservation; WHEREAS, after giving due notice, the Director of Mines and Geosciences conducted public hearings on September 387 VOL. 492, JUNE 23, 2006 387 Apex 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), of the the the President Director Secretary and when mineral may, of of upon Mines the the and recommendation Geosciences, and Natural so interest 6, 9 and 11, 2002 to allow the concerned sectors and communities to air their by these the problems may be of a effectively in the mineral rationalizing mining operations

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, President I, of GLORIA the MACAPAGALupon ARROYO, Philippines,

through

establishment

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 132 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 x with 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

through requires,

Environment national reservations

Resources,

establish

where mining operations shall be undertaken by the Department directly or thru a contractor;

environmental effectivity assumed of the a of

and the more

social 1987 dynamic With

fund,

to

implement the

the State

Article SEC.

XII, 2. All

Section lands

2, of

of the

the

1987

Constitution, waters,

intent and provisions of this Proclamation. Upon the Constitution, role in the the exploration, State may

specifically states: public domain, 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 be owned by the The State. With the exception of and agricultural lands, all other natural resources shall not alienated. exploration, development, utilization of natural resources shall be under the full

development and utilization of the natural resources country.43 this policy, pursue full control and supervision of the exploration, development and utilization of the coun_______________ 43 Miners Association of the Philippines, Inc. v. Hon. Factoran, 388 388 SUPREME COURT REPORTS ANNOTATED Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp. trys natural mineral resources. The options open to the State are into through direct or undertaking joint by or by or into entering coproduction, agreements, venture, entering Jr., 310 Phil. 113, 130-131; 240 SCRA 100, 114 (1995).

control and supervision of the State. The State may directly undertake such activities, or it may enter into co-production, associations at joint least venture, sixty or per production-sharing centum of whose agreements with Filipino citizens, or corporations or 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 x The President may enter for oils into agreements with foreign-owned corporations involving either technical or financial and other assistance and mineral large-scale of minerals, to according exploration, petroleum, general the development, utilization 133

production-sharing

agreement with foreign-owned corporations for largescale exploration, development and utilization.44 Thus,

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 countrys natural resources, defense, not Section only 5 of for its national security Act economic and national No. 7942 development, but also for

Area The

and issue

ordering on is who

the has

stoppage priority overtaken

of right by

all

mining the the the

operations therein. over the with acts of disputed area deemed above

subsequent both being

developments

particularly

issuance of Proclamation 297 and DAO No. 2002-18, constitutionally-sanctioned Executive Branch. Mining operations in the Diwalwal Mineral Reservation are now, therefore, within the full control of can the State through the executive the area branch. Pursuant to Section 5 of Republic Act No. 7942, the State either and directly utilization undertake of the exploration, or it can 134 development SEC. 5.

Republic

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, 2006 389 Apex 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 No. the 297, intent the and DENR provisions Secretary of Proclamation issued

enter into agreements with qualified entities, viz.: Mineral Reservations.When raw or materials or ecological the for certain national industries minerals the interest so requires, such as when there is a need to for preserve to scientific, strategic cultural critical national development,

value,

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.

DAO No. 2002-18 dated 12 August 2002 declaring an emergency situation in the Diwalwal 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 interest 390 390 SUPREME COURT REPORTS ANNOTATED Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining Corp. bility.45 entities The in State the can also opt to and award to Balite, will mining private if it not operations mineral reservation Apex which be in guided settling only on by this the demands as of public as its option, well

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 Secretarys 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 Santiago, 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 colony States, was the the prevailing Royal mining of law May, in the 1867, (C.J., Chairperson), and Callejo, YnaresSr., JJ., Austria-Martinez 135

material and logistic feasi-

including

petitioners over

wishes. The exercise of this prerogative lies with the Executive interfere. WHEREFORE, premises considered, the Petitions of Apex, Balite and the MAB are PARTIALLY GRANTED, thus: Department courts

Decree

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)]

SUPREME COURT REPORTS ANNOTATED Angeles vs. Philippine National Railways (PNR) G.R. No. 150128. August 31, 2006.* LAUREANO T. ANGELES, petitioner, vs. PHILIPPINE NATIONAL Civil party; Law; he RAILWAYS Contracts; cannot (PNR) AND Normally, or be RODOLFO the agent the (in FLORES,1 respondents. Agency; sue exists, has neither rights nor liabilities as against the third thus sued third on contract.Where agency the partys 136

this case, PNRs) 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, _______________

also recognizes that when one has a right assigned * 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, 2006 445 Angeles 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 The the principal, rule as an assignee action of of to such be and contract. recognizes requiring of every rights 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 provides shall to that be the jointly.Article 1374 of the Civil the read doubtful various and ones stipulations that sense of a interpreted together, which Code

contract attributing

may result from all of them taken jointly. In fine, the real intention of the parties is primarily to be determined from clear the that from whole the the language used When and put gathered into waived the or instrument. which 137

context of the letter as a whole, it is abundantly rights Romualdez 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 the Code provides that contracting acts parties, shall be to judge the their principally intention of and In contemporaneous considered.

prosecuted in the name of the real party-in-interest assignment action

subsequent

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 446 446 SUPREME COURT REPORTS ANNOTATED Angeles 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. to grant A only power those of attorney must be strictly specified construed and pursued. The instrument will be held powers which are 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 Quezon of City, the Regional 79, Trial which Court (RTC) of the Branch dismissed 138

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, 2006 447 Angeles vs. Philippine National Railways (PNR) thereat 2. commenced dated by the petitioner 17, against the herein respondents; and Resolution3 September 2001, denying the petitioners motion for reconsideration. The facts: On May 5, 1980, the respondent Philippine National Railways Romualdez WHERE at IS (PNR) informed a certain that Gaudencio it has (Romualdez, basis, and stated letter to the hereinafter) PNRs 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 The Lizette R. Wijanco mentioned in the letter was Lizette wife. Wijanco-Angeles, That very the same PNR to petitioners dayMay transfer now 26, the deceased location of 1980Lizette 139

accepted the latters offer to buy, on an AS IS, scrap/unserviceable per price, date metric ton, rails located in Del Carmen and Lubao, Pampanga P1,300.00 the a P2,100.00 purchase Atty. respectively, for the total amount of P96,600.00. After paying Acting Romualdez PNRs 26, addressed Cipriano Bearing Dizon,

requested

withdrawal for the reason that the _______________ 3 Id., at p. 75. 448 448

Purchasing

Agent.

May

1980, the letter reads: Dear Atty. Dizon:

SUPREME COURT REPORTS ANNOTATED Angeles 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 rails allowed in Lizette to withdraw scrap/unserviceable suspended as the Murcia, in Capas view of

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-ininterest, 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 the PNR, per been the withdrawal of scrap or unserviceable rails awarded to him and not an assignee to the latters 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 CA 449 VOL. 500, AUGUST 31, 2006 449 Angeles vs. Philippine National Railways (PNR) in its resolution of September 17, 2001, denying the petitioners motion for reconsideration. 140

and San Miguel, Tarlac instead. However, the PNR subsequently what it withdrawal considered documentary discrepancies

coupled by reported pilferages of over P500,000.00 worth of PNR scrap properties in Tarlac. Consequently, refund of the however, tons worth of the spouses of pay, rails amount to Angeles alleging had that demanded The as that amount P96,000.00.

refused

delivery receipt duly signed by Lizette, 54.658 metric unserviceable an already exceeds withdrawn which, at P2,100.00 per metric ton, were P114,781.80, claim for refund. On August 10, 1988, the spouses Angeles filed suit against the PNR and its corporate secretary, Rodolfo Flores, City. deliver In among it, 46 others, for specific that of PNR performance be directed and to damages before the Regional Trial Court of Quezon they metric prayed tons scrap/unserviceable rails

and to pay them damages and attorneys fees.

Hence, courts plaintiffs

the

petitioners that

present and

recourse his

on

the as they

party-in-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 real 450 450 SUPREME COURT REPORTS ANNOTATED Angeles vs. Philippine National Railways (PNR) party-in-interest and may maintain an action upon to a of we such claim or right.4 Upon scrutiny of the subject Romualdezs once rails, apparent and not that an Lizette was to act letter as Atty. Cipriano Dizon dated May 26, 1980, it is at just representative of Romualdez assignee. in the For withdrawal perspective, 141

submission that the CA erred in affirming the trial holding petitioner spouse, a quo, had no cause of action as

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 Atty. meant Dizon to May of 26, 1980 or letter has it of be Romualdez taken: the was effect to it of the PNR should

designate,

designating, Lizette W. Angeles as a mere agent or as an assignee of his (Romualdezs) interest in the scrap rails awarded to San Juanico Enterprises? The CAs 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 partys (in this case, PNRs) 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

reproduce the contents of said letter:

This is to inform you as President of San Juanico Enterprises, LIZETTE R. representative For this reason, that in I I have x the have authorized x x to be withdrawal given her the the my of bearer, lawful the WIJANCO

differently, he intended to limit Lizettes role in the scrap transaction to being the representative of his interest therein. _______________ 4 451 VOL. 500, AUGUST 31, 2006 451 Angeles vs. Philippine National Railways (PNR) Petitioner submits that the second paragraph of the Romualdez letter, statingI 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. Wijancoclarifies that Lizette was intended to be an assignee, and not a mere agent. We the are not persuaded. omitted which an As it were, the petitioner preceding the whole conveniently important have phrase put 142 Uy v. Court of Appeals, G.R. No. 120465,

scrap/unserviceable rails awarded to me. ORIGINAL COPY of the AWARD, dated May 5, 1980 and O.R. No. 8706855 dated May 20, 1980 which will indicate my If waiver Lizette of was rights, without interests legal and participation to sue in and favor of LIZETTE R. WIJANCO. (Emphasis added) standing 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 agent or Romualdez makes letter much of the fact not It that the to terms in the stress, attorney-in-fact were used September 9, 1999, 314 SCRA 69.

aforestated.

bears

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 Romualdezs 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

paragraph

would

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 enable Article

the her

original to of

copy

of the

the

contract as

award

to

452 SUPREME COURT REPORTS ANNOTATED Angeles vs. Philippine National Railways (PNR) The fact of agency was, as the trial court aptly

withdraw the Civil

rails

Romualdezs that the

authorized representative. 1374 Code provides 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 clear of rate, of that the any the the agency doubt by letter as a whole, it is abundantly furtherance At any rights which that the his Romualdez he intent letter had of was

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 by of the CA, trial are, court, as a adopted rule, final and and confirmed the 143

waived or ceded in favor of Lizette were those in relation as the to way established for the withdrawal of the rails. Romualdez generated

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, shall be their contemporaneous considered. and In subsequent other acts in principally words,

case of doubt, resort may be made to the situation, surroundings, and relations of the parties. 452

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 agents authority.7 A 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, 2006 453 Angeles 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.9 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.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 be to read something not intended, let alone written in the Romualdez letter. Finally, the petitioners 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 144

under the estoppel principle. In earlier proceedings, petitioner himself admitted petition in his is complaint DENIED that it the was Romualdez who paid this amount. WHEREFORE, the and 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. 454 454 SUPREME COURT REPORTS ANNOTATED Quesada 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)]

145

* FIRST DIVISION. 351 VOL. 223, JUNE 14, 1993 351 Prudential Bank vs. Court of Appeals ered as entered into between the principal and the third person. A bank is liable for wrongful acts of 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 secretly of his authority his even authority though and the agent is to abusing attempting 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 will officers not be and agent to as worthy by of the confidence permitted profit 146

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 the is liable to is innocent made in third the persons where representation

perpetrate a fraud upon his principal or some other person for his own ultimate benefit.Conformably, we have declared is liable in for countless decisions that by the the principal obligations contracted

agent. The agents apparent representation yields to the principals true representation and the contract is consid________________

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

Eduardo C. Tutaan for private respondent. CRUZ, J.: We deal here with another controversy involving the integrity of a bank. The 352 352 SUPREME COURT REPORTS ANNOTATED Prudential Bank vs. Court of Appeals Aurora F. Cruz,** Bank at at with its her sister in as co-depositor, Avenue, For this invested P200,000.00 in Central Bank bills with the Prudential for 63 branch Quezon interest. Quezon City, on June 23, 1986. The placement was days 13.75% annual 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 147 complaint in this case arose when private respondent

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 banks 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 it, in it the and defense bank thus that she the had trust itself to already she had further withdrawn reposed violated

subjected

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.

to whom Cruz was referred and who was apparently in charge of such transactions.3 Upon maturity of the placement on August 25, 1986, Cruz returned a to the bank to roll-over the the or renew of of of of her investment. Quimbo, who again attended to her, prepared also Credit a to minus Cruz after was Memo4 Debit cover the asked of crediting for amount amount interest a P200,000.00 in Cruzs savings account passbook. She prepared Memo the P196,122.88 P200,000.00 P3,877.02.5 This time, to sign Withdrawal interest. another Debit bank After was Slip6 for P196,122.98, representing the amount to be re-invested bank. Memo.8 On and October sought of 27, to 1986, her Cruz returned to the she withdraw her P200,000.00. however, deduction days Sale7 later, and the prepaid received of the Quimbo explained this was a new requirement of the Several of Cruz a Confirmation copy re-investment

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, 1993 353 Prudential Bank vs. Court of Appeals was and no copy the Debit on file of the Confirmation of Sale Memo allegedly was this issued not to her by for Cruz herself by available 148

prepaid

Quimbo. past

Quimbo

questioning as she had not been reporting for the week. Shocked information, became hysterical and burst into tears. The branch manager, Roman Santos, assured her that he would look into the matter.9 Every 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 himself.10 the bank Finally, which was Cruz sent received the bank by a Santos

verification

records,

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.

demand amount

letter of

dated

November plus

12,

1986 In

for a

the reply

________________ 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. 354 354 SUPREME COURT REPORTS ANNOTATED Prudential Bank vs. Court of Appeals amounts: 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; 3. P20,000.00, as exemplary damages; and 4. P25,000.00, as reasonable attorneys 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. 149

P200,000.00

interest.11

dated November 20, 1986, the banks 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 sent amicably.12 letter Increasingly worried, Cruz another

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.14 Cruzs 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 attorneys 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

The

judgment

of

the

Court

of

Appeals16

is

now

as

part

of

the

banks

new

procedure

of

re-

faulted in this

petition, mainly

on the ground that

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 355 Prudential Bank vs. Court of Appeals assured Especially her in the Confirmation are the of Sale and the Debit Memo later issued to her by Quimbo. persuasive following observations of the trial court:17 What 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 150

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 it. The basic issues are factual. The private respondent claims she has not yet collected her investment of P200,000.00 contention of the and has submitted of in proof and her of the claim their Debit and Cruz the Confirmation The petitioner Sale to be merely temporizing to delay enforcement of the liability clearly established against

Memo issued to her by Quimbo on the official forms bank. to the denies points Withdrawal Slip, which it says

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

the contrary, this amount, which is the price of the Central claimed Bank by bills plaintiff rolled Aurora over, F. indicates Cruz, she that, did as not

bank she

itself and by its had previously

own employees with whom Such dealings had not

dealt.

been questioned before, much less invalidated. There was absolutely no reason why she should not have accepted employer. _______________ 17 Decision of RTC Judge Rodolfo A. Ortiz, pp. 78. 356 their authority to act on behalf of their

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 withdrawal was that slip is the after amount the deducting indicated same therefrom in the the Cruz pre-

356 SUPREME COURT REPORTS ANNOTATED Prudential Bank vs. Court of Appeals It is also worthy of noteand wonderthat although the bank impleaded Quimbo in a third-party

exactly

amount

151

re-investing

paid interest. The bank has also not succeeded in impugning the authenticity These are of the Confirmation not of Sale to the and the Debit Memo which were made on its official forms. admittedly available 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

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 that that under under had the the rules. No less remarkably, it did not call on her to testify on its behalf, claimed witness considering by to it, show she circumstances the best withdrawn would Cruz have been actually

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 the Code article on cited by only the of the observation that respondent the court on the the

had

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 whoeverwas 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 and P200,000.00 reflected in placement the when it of 152 matured pursuant to the terms of her investment as acknowledged 357 VOL. 223, JUNE 14, 1993 357 Prudential Bank vs. Court of Appeals amount 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 Confirmation Sale. The failure of the bank to deliver the

agents liability falls under the heading in the Civil quasidelicts. On other hand, 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 is for all resultant damages thereof, which which may is be contractual,

reasonably attributed to the non-performance of the obligation, x x x. x x x Because of the bad faith of the defendant/third-party plaintiff plaintiffs, in the its breach latter are, of its contract with to the an therefore, entitled

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

who does Code thus:

a thing by

an agent is

considered as

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

doing it himself. This rule is affirmed by the Civil 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, agent if the the principal former is solidarity the liable latter to with act the as allowed

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. 358 358 SUPREME COURT REPORTS ANNOTATED Prudential Bank vs. Court of Appeals Application 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.

though he had full powers. Conformably, we have declared in countless decisions that the principal is liable for obligations contracted by the agent. The agents apparent representation yields to the principals true representation and the contract is considered as entered into between the principal and the third person.18 A of bank is liable of for wrongful officers in acts their of its officers done in the interests of the bank or in the course dealings the 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

153

It

would to

appear us present her

from that

the the

facts at the it

established was trial made or

in the than to initial even

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 for its a integrity. loan or The ordinary making red in a customer bank) applying does not and even the

case eager

before

petitioner

less the

Quimbo

establish

liability

although

effortwhich it did not pursueto hold her answerable in the third-party complaint. What ever happened to her from does the not appear in the the record. the bank Her absence of to Cruz. her have By proceedings misdeed, had been feeds suspicion seems by

deposit (and so himself extending the loan to the bother the with tape the requirements finicky conditions

possible money

which

studiously ignored by its insistence that the missing actually withdrawn 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 had faith in denying Cruz by the obligation banks she was claiming against it. It was obvious that an irregularity been committed the 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,

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 meaningless 359 VOL. 223, JUNE 14, 1993 359 Domagas vs. Malana or have no binding effect, they should, however, not be used for covering up the fault of bank employees when they blunder or, worse, intentionally cheat him. The misdeeds of such employees must be readily acknowledged and rectified without delay. 154

The

bank

must

always does

act not

in feel

good the

faith. need

The for a

ordinary

customer

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. Grio-Aquino, concur. Petition denied. Appealed judgment affirmed. o0o [Prudential Bank vs. Court of Appeals, 223 SCRA 350(1993)] VOL. 376, FEBRUARY 6, 2002 239 Dominion Insurance Corporation vs. Court of Appeals G.R. No. 129919. February 6, 2002.* DOMINION vs. INSURANCE OF CORPORATION, petitioner, S. COURT APPEALS, RODOLFO 155 Bellosillo and Quiason, JJ.,

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 an the On of another, latter. the The part intention with basis of the to from the for consent agency or or is an or authority must be

* 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, 3 J., ponente, Original Salome A. Montoya Case 8855, and pp. Maximiano C. Asuncion, JJ., concurring. Decision, Record, Civil 358-361. 240 240 SUPREME COURT REPORTS ANNOTATED Dominion Insurance Corporation vs. Court of Appeals Guevarra (Guevarra) the sum of P156,473.90 156

representation. intention

principal, appoint his

there

actual

naturally

inferrable

words

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 R.S. Guevarra. PARDO, J.: The Case This is an appeal via certiorari1 from the decision of the Court of Appeals2 affirming the decision3 of the Regional Pampanga, Trial Court, Branch ordered 44, San Fernando, Dominion which petitioner G. Maglalang for private respondent

representing the total amount advanced by Guevarra in the payment of the claims of Dominions clients. The Facts The facts, as found by the Court of Appeals, are as follows: On January 25, 1991, plaintiff Rodolfo S. Guevarra instituted against Plaintiff his Civil sought as Case to No. recover manager 8855 for sum the to of money sum of defendant Dominion Insurance thereunder of Corporation.

Insurance Corporation (Dominion) to pay Rodolfo S. _______________

P156,473.90 which he claimed to have advanced in capacity defendant satisfy certain claims filed by defendants clients.

In

its

traverse,

defendant

denied

any

liability

to

to him by defendants counsel which instructed him to have request for postponement. declared as in Plaintiffs default. counsel This was objected to the desired postponement and moved to defendant granted by the trial court in the following order: ORDER When this case was called for pre-trial this

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 17, 1992, dates: October 29, 18, 1992, 1991, November 28, 12, 1991, March 29, 1991, December 12, 1991, January January February 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, thirdparty 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

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 vigorously 241 VOL. 376, FEBRUARY 6, 2002 241 Dominion Insurance Corporation vs. Court of Appeals objected that the to any postponement corporation on be the ground as that in the note is but a mere scrap of paper and moved defendant declared 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 157

of the defendant Corporation, the defendant Dominion Insurance default 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 additional 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 pretrial conference and was that to due to an had unavoidable sent his was circumstance of On his counsel on July 8 on and July a supplemental 13, 1992. The offer of exhibits exhibits Corporation plaintiff is is hereby allowed declared to (as) in his and present

merit and that it further failed to allege or specify the facts constituting his meritorious defense. On time September counsel for 28, 1992 to defendant the trial at moved that of for the Merit reconsideration of the aforesaid order. For the first revealed his was his court the reason nonappearance illness. An pre-trial

evidence on June 16, 1992 at 9:00 oclock in the

conference

Affidavit

executed by its Executive Vice-President purporting to explain its meritorious defense was attached to the said Motion. 13, Just the same, the trial in an court Order denied dated said November 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 ad242 242 trial court denied SUPREME COURT REPORTS ANNOTATED Dominion Insurance Corporation vs. Court of Appeals vanced by plaintiff in the payment of the claims of defendants clients; 158 1992,

were admitted in evidence in an order dated July

representative on that date to inform the trial court inability 25, appear. the The Motion vehemently opposed by plaintiff. August 1992 defendants motion for reasons, among others, that it was neither verified nor supported by an affidavit of

2. The defendant to pay plaintiff P10,000.00 as and by way of attorneys 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.4 On 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.8 Hence, this appeal.9 The Issues The issues and raised (2) are: his whether (1) whether as respondent agent for is Guevarra Guevarra petitioner, acted within authority VOL. 376, FEBRUARY 6, 2002 243 Dominion Insurance Corporation vs. Court of Appeals other, with the consent or authority of the latter.10 The part basis of to the of for agency principal, appoint12 agent, such there intent, is or representation.11 must an be an intention be is On the the there actual naturally to no 4 Petition, Annex B, Rollo, pp. 12-18, at pp. 1215. 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). 243 159

respondent

entitled to reimbursement of amounts he paid out of his personal money in settling the claims of several insured. The Courts Ruling The 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_______________

intention part of

inferrable from his words or actions;13 and on the must there an intention generally accept the appointment and act on it,14 and in the absence agency.15

A perusal of the Special Power of Attorney16 would show to that into petitioner a (represented by third-party Despite was the defendant Austria) and respondent Guevarra intended enter principal-agent that what agency. relationship. the word special in the title of the document, the contents actually That existing the reveal a we, under was The constituted terms of

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. 244 244 SUPREME COURT REPORTS ANNOTATED 160

general FIRST and as RSG

agreement read: CONTINENTAL by virtue of the ASSURANCE laws x x of x the do COMPANY, INC.,17 a corporation duly organized and Republic of the Philippines, x x x represented by undersigned appoint Regional Manager, hereby Guevarra Insurance Services

represented by Mr. Rodolfo Guevarra x x x to be our Agency Manager in San Fdo., for our place and stead, things: 1. To conduct, sign, manager (sic), carry on and transact Bonding and Insurance business as usually pertain MOTOR BONDING to a with Agency the Office, or FIRE, our MARINE, and written CAR, PERSONAL right, upon ACCIDENT, prior to do and perform the following acts and

consent, to appoint agents and sub-agents.

Dominion Insurance Corporation vs. Court of Appeals 3. and To give to demand, effectual which sue, for (sic) and FIRST INC.,18 collect, discharge may deposit, for all enforce payment, deliver and transfer for and receive receipts the money CONTINENTAL hereafter

Article (1) To

1878. make

Special such x x x of The

powers as

of are

attorney not

are

necessary in the following cases: payments usually considered as acts of administration; x x x The payment x x x claims is not of it an claims of a act is of not (15) Any other act of strict dominion. administration. Power of settlement neither is

ASSURANCE

COMPANY,

become due, owing payable or transferable to said Corporation by reason of or in connection with the above-mentioned appointment. 4. To receive for with notices, and in summons, behalf and all in all the of legal COMPANY, and the legal FIRST INC., in processes connection The

included among the acts enumerated in the Special Attorney, character similar to the _______________ 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 a special Jurisprudence on the Civil Code of the Philippines, Vol. V (1997), p. 405, citing 6 Llerena 137. 245 VOL. 376, FEBRUARY 6, 2002 245 Dominion Insurance Corporation vs. Court of Appeals is 161

CONTINENTAL

ASSURANCE actions

proceedings of it the

against the said Corporation.19 [Emphasis supplied] agency comprises but, couched business terms, principal,20 general

limited only to acts of administration.21 A general power permits the agent to do all acts for which the law does not require 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:

acts enumerated therein. A special power of attorney is required before respondent Guevarra could settle the insurance claims of the insured. Respondent embodied enumerates duties x x x 1. You are and Agreement23 Guevarras in the the dated authority February of as to 18, agency settle of claims is Memorandum Management 1987 which for Guevarras manager

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 Manager26 [Emphasis supplied] _______________

scope

respondent

responsibilities x x x hereby given

San Fernando, Pampanga, as follows: x x x 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 x x x In settling the authority is given you on TPPI claims settlement. x x x claims to x x x24 mentioned pay,25 from above, states respondent that the

23 Original Record, Civil Case No. 8855, pp. 236237. 24 Original Record, Civil Case No. 8855, pp. 236237, at p. 236. 25 Original Record, Civil Case No. 8855, p. 299. 26 Original Record, Civil Case No. 8855, p. 299. 246 246 SUPREME COURT REPORTS ANNOTATED Dominion Insurance Corporation vs. Court of Appeals The not instruction be any of petitioner as the principal Guevarra could was 162

Guevarras authority is further limited by the written standard payment authority shall which come respondent Guevarras

revolving fund or collection. The authority to pay is worded as follows: This is to authorize you the of to withdraw amount assured from of your revolving on the fund/collection __________ PESOS

clearer.

Respondent

_____________ (P________) representing the payment claim __________

authorized to pay the claim of the insured, but the

payment

shall

come

from

the

revolving

fund

or

In this case, when the risk insured against occurred, petitioners liability as insurer Release from that the the arose. of This obligation Loss who of and were the was extinguished when respondent Guevarra paid the claims paid. Thus, to the extent obligation 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 247 of the insurance claims could best be proven by the Release of 163 and obtained Receipts Claim insured Subrogation

collection in his possession. Having deviated from the instructions of the principal, the be expenses that respondent from Guevarra incurred in the settlement of the claims of the insured may not reimbursed 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) to If avail the agent of acted the in contravention derived of from the the principals instructions, unless the latter should wish himself benefits x x x law from on agency prohibits obtaining reimbursement, contract; x x x However, respondent x x x while the Guevarra

VOL. 376, FEBRUARY 6, 2002 247 Dominion Insurance Corporation vs. Court of Appeals Claim 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 as in the in possession the of respondent of account Guevarra reflected statement

his right to recover may still be justified under the general law on obligations and contracts. Article 1236, second paragraph, Civil Code, provides: Whoever debtor without pays he for another paid, or may except against demand that the if will from he of the paid the what the has

knowledge

debtor, he can recover only insofar as the payment has been beneficial to the debtor.

dated July 11, 1990 would be deducted from the above amount. The outstanding balance and the production/remittance for the period corresponding is the to the claims may was P3,604.84. Deducting this from P116,276.95, we get P112,672.11. The Fallo IN VIEW WHEREOF, and that of we the DENY Regional the Trial in petition. Court, that However, we MODIFY the decision of the Court of Appeals28 Branch 44, San Fernando, Pampanga,29 This amount that be reimbursed to respondent Guevarra.

Structural o0o

and

Steel

Fabricators,

Inc.

vs.

Court

of

Appeals, 296 SCRA 631 [1998])

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

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 petitioners 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 agents laws general to principles the of agency of of govern the by relation between the corporation and its officers or subject or articles incorporation, law. (San relevant provisions Juan

164