Jorge Gonzales and Panel of Arbitrators vs. Climax Mining Ltd.

, Climax-
Arimco Mining Corp. and Australiasian Philippines Mining Inc.

AND

Jorge Gonzales vs. Hon. Oscar Pimentel (RTC Br. 148, Makati City) and
Climax-Arimco Mining Corp.

Facts:

This is a resolution of the Motion for Reconsideration filed by Jorge

Gonzales and a partial MR by Climax.

Jorge Gonzales had filed a complaint to nullify the Addendum

Contract in the DENR Panel of Arbitrators.
The DENR Panel said they had jurisdiction. Climax contested it to
the CA. CA ruled in Climaxs favor. So Jorge went to the SC.
However, the SC denied Jorge Gonzales petition because the
DENR panel of arbitrators had no jurisdiction over the complaint
for the annulment of the Addendum Contract on grounds of fraud
and violation of the Constitution. The action should have been
brought before the regular courts.
Both Jorge and Climax Mining filed MRs.
Gonzales in his MR said:
o The DENR Panel of Arbitrators had jurisdiction because it
was a mining dispute.
o The court failed to rule on issues he raised before the
DENR Panel and the timeliness of its filing.
Climax in its MR said:
o The case should not be brought for arbitration under RA
876 (The Arbitration Law)
o The arbitration clause in the Addendum Contract should be
treated as an agreement independent of the other terms of
the contracts. The rescission of the main contract should
not void the duty to arbitrate.
o Gonzales has to prove the alleged invalidity of the
Addendum Contract
o The court should clarify its judgment that the case is not
arbitrable where the challenge to the arbitration
agreement has been sustained by final judgment.

In the second case, Climax-Arimco filed a petition to compel

arbitration in the RTC of Makati.
 Earlier, they saent Gonzales a Demand for Arbitration pursuant
to Clause 19.1 of the Addendum Contract and in accordance with
Sec. 5 of RA 876.
Gonzales filed an Answer questioning the validity of the
Addendum Contract containing the arbitration clause in view of
Climax-Arimcos acts of fraud, oppression and violation of the
Constitution. Clause 19.1 is then null and void ab ignitio and
legally inexistent.
Gonzales filed a motion to set the case for pre-trial, which was
granted by the Court.
Climax-Arimco filed an MR saying that the motion does not need
to be set for hearing, it only needs to be summarily resolved
within 10 days from hearings.
The judge granted Climax-Arimcos motion and directed the
partners to arbitration, and also appointing a retired CA justice as
the sole arbitrator.
Thus, Gonzales questions the RTC Orders requiring him to
proceed with the arbitration proceedings as sought by Climax-
Arimco Mining Corp through a Rule 65 petition.
Gonzales invokes Sec. 6 of RA 876 and Sec. 24 of RA 9285 or the
Alternative Dispute Resolution Act of 2004 which says that the
court shouldnt refer the parties to arbitration right away if there
is an issue as to the nullity of the arbitration clause/agreement. It
should be first determined by the court first before referring to
arbitration in a pre-trial hearing.
Climax-Arimco assails the mode of review availed of by Gonzales.
Certiorari proceedings should be limited to questions of law and
timely filed. Gonzales did not file within the 15-day period.

Issue: WON it was proper for the RTC to compel arbitration and order
the parties to arbitrate even though the defendant had raised the twin
issues of validity and nullity of the Addendum contract (and the
arbitration clause)

WON the question of validity of the Addendum Contract bears upon the
applicability or enforceability of the arbitration clause contained
therein.

Held:
o Certiorari in the 2nd case is dismissed for being filed out time and
wrong mode of appeal. Should have been Rule 45.
o Judge Pimentel acted in accordance with the procedure when he
ordered Gonzales to proceed with arbitration and appointed a
sole arbitrator after determining that there was an arbitration
agreement. No grave abuse of discretion.
o Arbitration, as an alternative mode of settling disputes, has long
been recognized and accepted in our jurisdiction. The Civil Code
is explicit on the matter. R.A. No. 876 also expressly authorizes
arbitration of domestic disputes. Foreign arbitration, as a system
of settling commercial disputes of an international character, was
likewise recognized when the Philippines adhered to the United
Nations "Convention on the Recognition and the Enforcement of
Foreign Arbitral Awards of 1958," under the 10 May 1965
Resolution No. 71 of the Philippine Senate, giving reciprocal
recognition and allowing enforcement of international arbitration
agreements between parties of different nationalities within a
contracting state. 34 The enactment of R.A. No. 9285 on 2 April
2004 further institutionalized the use of alternative dispute
resolution systems, including arbitration, in the settlement of
disputes.
o A contract is required for arbitration to take place and to
be binding.
o The special proceeding under Sec. 6 of RA 876 is the procedural
mechanism for the enforcement of the contract to arbitrate.
o R.A. No. 876 explicitly confines the court's authority only to the
determination of whether or not there is an agreement in
writing providing for arbitration.
o If there is an agreement,
The court shall issue an order "summarily directing
the parties to proceed with the arbitration in
accordance with the terms thereof."
o If there is no agreement,
The court, upon the other hand, finds that no such
agreement exists, "the proceeding shall be
dismissed."
o The doctrine of separability, or severability enunciates that an
arbitration agreement is independent of the main
contract.
o The arbitration agreement does not automatically terminate
when the main contract (CONTAINER contract) of which it is part
comes to an end
o Even if the main contract is invalid, the arbitration
clause/agreement still remains valid and enforceable.
o The separability of the arbitration clause is confirmed in Art.
16(1) of the UNCITRAL Model Law and Art. 21 (2) of the
UNCITRAL Arbitration Rules.
o Also, the imputation of fraud must be on the arbitration clause
itself. If only the container contract is being assailed, then they
will not be entitled to trial.
o Gonzales petition for certiorari should be dismissed because:
 o The proceeding in RA 876 is only to determine if an
arbitration agreement exists
o The separability of the arbitration clausemeans that the
validity/invalidity of the addendum contract will not affect
the enforceability of the agreement to arbitrate.

How does the decision above affect the first case?

o The validity of the contract containing the agreement to submit

to arbitration does not affect the applicability of the arbitration
clause itself.
o The allegations of fraud and misrepresentation in the execution
of the Addendum Contract are within the jurisdiction of the court.
o However, Gonzales' complaint did not give any factual facts or
particulars relative to the allegations.
o These are factual issues that is not within the SC to decide. Thus,
Jorges MR is denied.

DISPOSTIVE:
HEREFORE, the Petition for Certiorari in G.R. No. 167994 is DISMISSED.
Such dismissal effectively renders superfluous formal action on the
Motion for Partial Reconsideration and/or Clarification filed by Climax
Mining Ltd., et al. in G.R. No. 161957.

The Motion for Reconsideration filed by Jorge Gonzales in G.R. No.

161957 is DENIED WITH FINALITY. SO ORDERED.