JORGE GONZALES and PANEL OF ARBITRATORS, petitioners, vs. CLIMAX MINING LTD., CLIMAX-ARIMCO
MIN-ING CORP., and AUSTRALASIAN PHILIPPINES MINING INC., respondents.
Actions; Alternative Dispute Resolution; Arbitration; Forum Shopping; Pleadings and Practice; There is
no forum shopping where one is a petition for certiorari which raises the issue of whether or not there
was grave abuse of discretion while the other is a Petition to Compel for Arbitration seeking the
implementation of the arbitration clause in the agreement between the parties.—Petitioner claims that
respondents are guilty of forum-shopping for failing to disclose before this Court that they had filed a
Petition to Compel for Arbitration before the RTC of Makati City. However, it cannot be determined
from petitioner’s mere allegations in the Petition that the Petition to Compel for Arbitration instituted
by respondent Climax-Arimco, involves related causes of action and the grant of the same or
substantially the same reliefs as those involved in the instant case. Petitioner did not attach copies of
the Petition to Compel for Arbitration or any order or resolution of the RTC of Makati City related to that
case. Furthermore, it can be gleaned from the nature of the two actions that the issues in the case
before the RTC of Makati City and in the petition for certiorari before the Court of Appeals are different.
A petition for certiorari raises the issue of
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* SECOND DIVISION.
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608
whether or not there was grave abuse of discretion, while the Petition to Compel for Arbitration seeks
the implementation of the arbitration clause in the agreement between the parties.
Same; Same; Same; Same; Same; If the petitioner is a corporation, a board resolution authorizing a
corporate officer to execute the certification against forum shopping is necessary—a certification not
signed by a duly authorized person renders the petition subject to dismissal.—Under Section 3, Rule 46
of the Rules of Court, a petitioner is required to submit, together with the petition, a sworn certification
of non-forum shopping, and failure to comply with this requirement is sufficient ground for dismissal of
the petition. The requirement that petitioner should sign the certificate of non-forum shopping applies
even to corporations, the Rules of Court making no distinction between natural and juridical persons.
The signatory in the case of the corporation should be “a duly authorized director or officer of the
corporation” who has knowledge of the matter being certified. If, as in this case, the petitioner is a
corporation, a board resolution authorizing a corporate officer to execute the certification against forum
shopping is necessary. A certification not signed by a duly authorized person renders the petition subject
to dismissal. On this point, we have to agree with petitioner. There appears to be no subsequent
compliance with the requirement to attach a board resolution authorizing the signor Marianne M.
Manzanas to file the petition in behalf of respondent Climax. Respondent also failed to refute this in its
Comment. However, this latter issue becomes irrelevant in the light of our decision to deny this petition
for review for lack of jurisdiction by the Panel of Arbitrators over the complaint filed by petitioner, as
will be discussed below.
Same; Same; Same; Mining Claims; Words and Phrases; A judicial question is a question that is proper
for determination by the courts, as opposed to a moot question or one properly decided by the
executive or legislative branch while a mining dispute is a dispute involving (a) rights to mining areas, (b)
mineral agreements, FTAAs, or permits, and (c) surface owners, occupants and
claimholders/concessionaires.—A judicial question is a question that is proper for determination by the
courts, as opposed to a moot question or one properly decided by the executive or legislative branch. A
judicial question is raised when the determination of the question involves the exercise of a judicial
function; that is, the question involves the
609
609
Same; Same; Same; Same; The trend has been to make the adjudication of mining cases a purely
administrative matter.—In Pearson v. Intermediate Appellate Court, this Court observed that the trend
has been to make the adjudication of mining cases a purely administrative matter. Decisions of the
Supreme Court on mining disputes have recognized a distinction between (1) the primary powers
granted by pertinent provisions of law to the then Secretary of Agriculture and Natural Resources (and
the bureau directors) of an executive or administrative nature, such as granting of license, permits, lease
and contracts, or approving, rejecting, reinstating or canceling applications, or deciding conflicting
applications, and (2) controversies or disagreements of civil or contractual nature between litigants
which are questions of a judicial nature that may be adjudicated only by the courts of justice. This
distinction is carried on even in Rep. Act No. 7942.
Same; Same; Same; Same; Contracts; The resolution of the validity or voidness of the contracts remains
a legal or judicial question as it requires the exercise of judicial function.—Whether the case involves
void or voidable contracts is still a judicial question. It may, in some instances, involve questions of fact
especially with regard to the determination of the circumstances of the execution of the contracts. But
the resolution of the validity or voidness of the contracts remains a legal or judicial question as it
requires the exercise of judicial function. It requires the ascertainment of what laws are applicable to
the dispute, the interpretation and application of those laws, and the rendering of a judgment based
thereon. Clearly, the dispute is not a mining conflict. It is essentially judicial. The com-
610
610
plaint was not merely for the determination of rights under the mining contracts since the very validity
of those contracts is put in issue.
Same; Same; Same; Same; Same; The question of constitutionality is exclusively within the jurisdiction of
the courts to resolve as this would clearly involve the exercise of judicial power and a Panel of
Arbitrators does not have jurisdiction over such an issue since it does not involve the application of
technical knowledge and expertise relating to mining.—The Complaint is also not what is contemplated
by Rep. Act No. 7942 when it says the dispute should involve FTAAs. The Complaint is not exclusively
within the jurisdiction of the Panel of Arbitrators just because, or for as long as, the dispute involves an
FTAA. The Complaint raised the issue of the constitutionality of the FTAA, which is definitely a judicial
question. The question of constitutionality is exclusively within the jurisdiction of the courts to resolve
as this would clearly involve the exercise of judicial power. The Panel of Arbitrators does not have
jurisdiction over such an issue since it does not involve the application of technical knowledge and
expertise relating to mining. This the Panel of Arbitrators has even conceded in its Orders dated 18
October 2001 and 25 June 2002. At this juncture, it is worthy of note that in a case, which was resolved
only on 1 December 2004, this Court upheld the validity of the FTAA entered into by the Republic of the
Philippines and WMC (Philippines), Inc. and constitutionality of Rep. Act No. 7942 and DENR
Administrative Order 96-40. In fact, the Court took the case on an original petition, recognizing “the
exceptional character of the situation and the paramount public interest involved, as well as the
necessity for a ruling to put an end to the uncertainties plaguing the mining industry and the affected
communities as a result of doubts case upon the constitutionality and validity of the Mining Act, the
subject FTAA and future FTAAs, and the need to avert a multiplicity of suits.”
Same; Same; Same; Same; Same; Arbitration before the Panel of Arbitrators is proper only when there is
a disagreement between the parties as to some provisions of the contract between them, which needs
the interpretation and the application of that particular knowledge and expertise possessed by
members of that Panel—it is not proper when one of the parties repudiates the existence or validity of
such contract or agreement on the ground of fraud or oppression.—
611
611
Arbitration before the Panel of Arbitrators is proper only when there is a disagreement between the
parties as to some provisions of the contract between them, which needs the interpretation and the
application of that particular knowledge and expertise possessed by members of that Panel. It is not
proper when one of the parties repudiates the existence or validity of such contract or agreement on
the ground of fraud or oppression as in this case. The validity of the contract cannot be subject of
arbitration proceedings. Allegations of fraud and duress in the execution of a contract are matters
within the jurisdiction of the ordinary courts of law. These questions are legal in nature and require the
application and interpretation of laws and jurisprudence which is necessarily a judicial function.
Same; Same; Same; Same; The question of validity of the contract containing the agreement to submit
to arbitration will affect the applicability of the arbitration clause itself—a party cannot rely on the
contract and claim rights or obligations under it and at the same time impugn its existence or validity.—
We agree that the case should not be brought under the ambit of the Arbitration Law, but for a different
reason. The question of validity of the contract containing the agreement to submit to arbitration will
affect the applicability of the arbitration clause itself. A party cannot rely on the contract and claim
rights or obligations under it and at the same time impugn its existence or validity. Indeed, litigants are
enjoined from taking inconsistent positions. As previously discussed, the complaint should have been
filed before the regular courts as it involved issues which are judicial in nature.
PETITION for review on certiorari of the decision and resolution of the Court of Appeals.
TINGA, J.:
Petitioner Jorge Gonzales, as claimowner of mineral deposits located within the Addendum Area of
Influence in Didipio,
612
612
in the provinces of Quirino and Nueva Vizcaya, entered into a co-production, joint venture and/or
production-sharing letter-agreement designated as the May 14, 1987 Letter of Intent with
Geophilippines, Inc, and Inmex Ltd. Under the agreement, petitioner, as claimowner, granted to
Geophilippines, Inc. and Inmex Ltd. collectively, the exclusive right to explore and survey the mining
claims for a period of thirty-six (36) months within which the latter could decide to take an operating
agreement on the mining claims and/or develop, operate, mine and otherwise exploit the mining claims
and market any and all minerals that may be derived therefrom.
On 28 February 1989, the parties to the May 14, 1987 Letter of Intent renegotiated the same into the
February 28, 1989 Agreement whereby the exploration of the mining claims was extended for another
period of three years.
On 9 March 1991, petitioner Gonzales, Arimco Mining Corporation, Geophilippines Inc., Inmex Ltd., and
Aumex Philippines, Inc. signed a document designated as the Addendum to the May 14, 1987 Letter of
Intent and February 28, 1989 Agreement with Express Adhesion Thereto (hereafter, the Addendum
Contract).1Rollo, pp. 389-421. Under the Addendum Contract, Arimco Mining Corporation would apply
to the Government of the Philippines for permission to mine the claims as the Government’s contractor
under a Financial and Technical Assistance Agreement (FTAA). On 20 June 1994, Arimco Mining
Corporation obtained the FTAA2Id., at pp. 422-474. and carried out work under the FTAA.
Respondents executed the Operating and Financial Accommodation Contract3Id., at pp. 475-479.
(between Climax-Arimco Mining Corporation and Climax Mining Ltd., as first parties, and Australasian
Philippines Mining Inc., as second party) dated 23
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613
613
On 8 November 1999, petitioner Gonzales filed before the Panel of Arbitrators, Region II, Mines and
Geosciences Bureau of the Department of Environment and Natural Resources, against respondents
Climax-Arimco Mining Corporation (Climax-Arimco), Climax, and APMI,6Herein respondent Climax-
Arimco is the predecessor-in-interest of Arimco Mining Corporation. Respondents Climax-Arimco and
APMI are wholly owned and controlled subsidiaries of respondent Climax. Id., at pp. 330-331. a
Complaint7Id., at pp. 521-596. seeking the declaration of nullity or termination of the Addendum
Contract, the FTAA, the Operating and Financial Accommodation Contract, the Assignment, Accession
Agreement, and the Memorandum of Agreement. Petitioner Gonzales prayed for an unspecified amount
of actual and exemplary damages plus attorney’s fees and for the issuance of a temporary restraining
order and/or writ of preliminary injunction to restrain or enjoin respondents from further implementing
the questioned agreements. He sought said reliefs on the grounds of “FRAUD, OPPRESSION and/or
VIOLATION of Section 2, Article XII of the CONSTITUTION perpetrated by these foreign RESPONDENTS,
conspiring and confederating with one another and with each other….”8Id., at p. 521.
On 21 February 2001, the Panel of Arbitrators dismissed the Complaint for lack of jurisdiction. Petitioner
moved for reconsideration and this was granted on 18 October 2001, the
_______________
8 Id., at p. 521.
614
614
Panel believing that the case involved a dispute involving rights to mining areas and a dispute involving
surface owners, occupants and claim owners/concessionaires. According to the Panel, although the
issue raised in the Complaint appeared to be purely civil in nature and should be within the jurisdiction
of the regular courts, a ruling on the validity of the assailed contracts would result to the grant or denial
of mining rights over the properties; therefore, the question on the validity of the contract amounts to a
mining conflict or dispute. Hence, the Panel granted the Motion for Reconsideration with regard to the
issues of nullity, termination, withdrawal or damages, but with regard to the constitutionality of the
Addendum Agreement and FTAA, it held that it had no jurisdiction.9Id., at pp. 605-610.
Respondents filed their motion for reconsideration but this was denied on 25 June 2002. The Panel of
Arbitrators maintained that there was a mining dispute between the parties since the subject matter of
the Complaint arose from contracts between the parties which involve the exploration and exploitation
of minerals over the disputed area.10Id., at pp. 611-619.
Respondents assailed the orders of the Panel of Arbitrators via a petition for certiorari before the Court
of Appeals.
On 30 July 2003, the Court of Appeals granted the petition, declaring that the Panel of Arbitrators did
not have jurisdiction over the complaint filed by petitioner.11Penned by Justice Eliezer R. de los Santos,
concurred in by Justices Romeo A. Brawner and Jose C. Mendoza of the Twelfth division. Id., at pp. 492-
499. The jurisdiction of the Panel of Arbitrators, said the Court of Appeals, is limited only to the
resolution of mining disputes, defined as those which raise a question of fact or matter requiring the
technical knowledge and experience of mining authorities. It was found that the complaint alleged
fraud, oppression and viola-
_______________
11 Penned by Justice Eliezer R. de los Santos, concurred in by Justices Romeo A. Brawner and Jose C.
Mendoza of the Twelfth division. Id., at pp. 492-499.
615
VOL. 452, FEBRUARY 28, 2005
615
tion of the Constitution, which called for the interpretation and application of laws, and did not involve
any mining dispute. The Court of Appeals also observed that there were no averments relating to
particular acts constituting fraud and oppression. It added that since the Addendum Contract was
executed in 1991, the action to annul it should have been brought not later than 1995, as the
prescriptive period for an action for annulment is four years from the time of the discovery of the
fraud.12See Article 1391, Civil Code. When petitioner filed his complaint before the Panel in 1999, his
action had already prescribed. Also, the Court of Appeals noted that fraud and duress only make a
contract voidable,13See Article 1390 (2), Civil Code. not inexistent, hence the contract remains valid
until annulled. The Court of Appeals was of the opinion that the petition should have been settled
through arbitration under Republic Act No. 876 (The Arbitration Law) as stated in Clause 19.1 of the
Addendum Contract. The Court of Appeals therefore declared as invalid the orders dated 18 October
2001 and 25 June 2002 issued by the Panel of Arbitrators. On 28 January 2004, the Court of Appeals
denied petitioner’s motion for reconsideration for lack of merit.14Rollo, p. 501.
Petitioner filed on 22 March 2004 this Petition for Review on Certiorari Under Rule 45 assailing the
decision and resolution of the Court of Appeals. Petitioner raises the following issues:
A.
PROCEDURAL GROUND
THE HONORABLE COURT OF APPEALS SHOULD HAVE SUMMARILY DISMISSED RESPONDENTS’ PETITION
A QUO FOR FAILURE TO COMPLY WITH PROCEDURAL REQUIREMENTS.
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14 Rollo, p. 501.
616
616
WHETHER THE HONORABLE COURT OF APPEALS DEPARTED FROM THE RULES AND ESTABLISHED
JURISPRUDENCE WHEN IT DID NOT DISMISS THE PETITION A QUO DESPITE RESPONDENTS’ FAILURE TO
COMPLY WITH THE RULES ON DISCLOSURE IN THE “VERIFICATION AND CERTIFICATION” PORTION OF
THEIR PETITION A QUO.
ii.
WHETHER THE HONORABLE COURT OF APPEALS DEPARTED FROM THE RULES AND ESTABLISHED
JURISPRUDENCE WHEN IT DID NOT DISMISS THE PETITION A QUO FILED BY RESPONDENT CLIMAX
DESPITE THE LACK OF THE REQUISITE AUTHORITY TO FILE THE PETITION A QUO.
B.
SUBSTANTIVE GROUND
THE HONORABLE COURT OF APPEALS ERRED IN GRANTING THE PETITION A QUO FILED BY
RESPONDENTS AND IN DENYING MOTION FOR RECONSIDERATION FILED BY PETITIONER FOR UTTER
LACK OF BASIS IN FACT AND IN LAW.
i.
WHETHER THE HONORABLE COURT OF APPEALS DEPARTED FROM THE RULES AND ESTABLISHED
JURISPRUDENCE WHEN IT HELD THAT PETITIONER CEDED HIS CLAIMS OVER THE MINERAL DEPOSITS
LOCATED WITHIN THE ADDENDUM AREA OF INFLUENCE.
ii.
WHETHER THE HONORABLE COURT OF APPEALS DEPARTED FROM THE RULES AND ESTABLISHED
JURISPRUDENCE WHEN IT HELD THAT THE PANEL OF ARBITRATORS IS BEREFT OF JURISDICTION OVER
THE SUBJECT MATTER OF CASE NO. 058.
617
617
iii.
WHETHER THE HONORABLE COURT OF APPEALS DEPARTED FROM THE RULES AND ESTABLISHED
JURISPRUDENCE WHEN IT HELD THAT THE COMPLAINT FILED BY THE PETITIONER FAILED TO ALLEGE
ULTIMATE FACTS OR PARTICULARS OF FRAUD.
iv.
WHETHER THE HONORABLE COURT OF APPEALS DEPARTED FROM THE RULES AND ESTABLISHED
JURISPRUDENCE WHEN IT HELD THAT PETITIONER AND RESPONDENTS SHOULD SUBMIT TO
ARBITRATION UNDER R.A. 876.
v.
WHETHER THE HONORABLE COURT OF APPEALS DEPARTED FROM THE RULES AND ESTABLISHED
JURISPRUDENCE WHEN IT HELD THAT THE ACTION TO DECLARE THE NULLITY OF THE ADDENDUM
CONTRACT, FTAA, OFAC AND AAAA ON THE GROUND OF FRAUD HAS PRESCRIBED.
(a) Whether there was forum-shopping on the part of respondents for their failure to disclose to this
Court their filing of a Petition to Compel for Arbitration before the Regional Trial Court of Makati City,
Branch 148, which is currently pending.
(b) Whether counsel for respondent Climax had authority to file the petition for certiorari before the
Court of Appeals considering that the signor of the petition for certiorari’s Verification and Certification
of Non-forum Shopping was not authorized to sign the same in behalf of respondent Climax.
(c) Whether the complaint filed by petitioner raises a mining dispute over which the Panel of Arbitrators
has jurisdiction, or a judicial question which should properly be brought before the regular courts.
618
618
(d) Whether the dispute between the parties should be brought for arbitration under Rep. Act No. 876.
Petitioner claims that respondents are guilty of forum shopping for failing to disclose before this Court
that they had filed a Petition to Compel for Arbitration before the RTC of Makati City. However, it cannot
be determined from petitioner’s mere allegations in the Petition that the Petition to Compel for
Arbitration instituted by respondent Climax-Arimco, involves related causes of action and the grant of
the same or substantially the same reliefs as those involved in the instant case. Petitioner did not attach
copies of the Petition to Compel for Arbitration or any order or resolution of the RTC of Makati City
related to that case.
Furthermore, it can be gleaned from the nature of the two actions that the issues in the case before the
RTC of Makati City and in the petition for certiorari before the Court of Appeals are different. A petition
for certiorari raises the issue of whether or not there was grave abuse of discretion, while the Petition to
Compel for Arbitration seeks the implementation of the arbitration clause in the agreement between
the parties.
Petitioner next alleges that there was no authority granted by respondent Climax to the law firm of
Sycip Salazar Hernandez & Gatmaitan to file the petition before the Court of Appeals. There is allegedly
no Secretary’s Certificate from respondent Climax attached to the petition. The Verification and
Certification only contains a statement made by one Marianne M. Manzanas that she is “also the
authorized representative of [respondent Climax]” without presenting further proof of such authority.
Hence, it is argued that as to respondent Climax, the petition filed before the Court of Appeals is an
unauthorized act and the assailed orders of the Panel of Arbitrators have become final.
Under Section 3, Rule 46 of the Rules of Court, a petitioner is required to submit, together with the
petition, a sworn
619
619
certification of non-forum shopping, and failure to comply with this requirement is sufficient ground for
dismissal of the petition. The requirement that petitioner should sign the certificate of non-forum
shopping applies even to corporations, the Rules of Court making no distinction between natural and
juridical persons. The signatory in the case of the corporation should be “a duly authorized director or
officer of the corporation” who has knowledge of the matter being certified.15Zulueta v. Asia Brewery,
Inc., G.R. No. 138137, 8 March 2001, 354 SCRA 100. If, as in this case, the petitioner is a corporation, a
board resolution authorizing a corporate officer to execute the certification against forum-shopping is
necessary. A certification not signed by a duly authorized person renders the petition subject to
dismissal.16MC Engineering, Inc. v. National Labor Relations Commission, 412 Phil. 614; 360 SCRA 183
(2001).
On this point, we have to agree with petitioner. There appears to be no subsequent compliance with the
requirement to attach a board resolution authorizing the signor Marianne M. Manzanas to file the
petition in behalf of respondent Climax. Respondent also failed to refute this in its Comment.17Rollo,
pp. 669-670. However, this latter issue becomes irrelevant in the light of our decision to deny this
petition for review for lack of jurisdiction by the Panel of Arbitrators over the complaint filed by
petitioner, as will be discussed below.
We now come to the meat of the case which revolves mainly around the question of jurisdiction by the
Panel of Arbitrators: Does the Panel of Arbitrators have jurisdiction over the complaint for declaration of
nullity and/or termination of the subject contracts on the ground of fraud, oppression and violation of
the Constitution? This issue may be distilled into the more basic question of whether the Complaint
raises a mining dispute or a judicial question.
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15 Zulueta v. Asia Brewery, Inc., G.R. No. 138137, 8 March 2001, 354 SCRA 100.
16 MC Engineering, Inc. v. National Labor Relations Commission, 412 Phil. 614; 360 SCRA 183 (2001).
620
620
On the other hand, a mining dispute is a dispute involving (a) rights to mining areas, (b) mineral
agreements, FTAAs, or permits, and (c) surface owners, occupants and
claimholders/concessionaires.20Section 77, Rep. Act No. 7942, as amended. Under Republic Act No.
7942 (otherwise known as the Philippine Mining Act of 1995), the Panel of Arbitrators has exclusive and
original jurisdiction to hear and decide these mining disputes.21Ibid. The Court of Appeals, in its
questioned decision, correctly stated that the Panel’s jurisdiction is limited only to those mining disputes
which raise questions of fact or matters requiring the application of technological knowledge and
experience.22Citing Philex Mining Corporation v. Zaldivia, 150 Phil. 547; 43 SCRA 479 (1972).
In Pearson v. Intermediate Appellate Court,23356 Phil. 341; 295 SCRA 27. this Court observed that the
trend has been to make the adjudication of mining cases a purely administrative matter.24Citing Twin
Peaks Mining Association v. Philex Mining Corporation, No. L-49835, 18 December 1979, 94 SCRA 768.
Decisions25Pio v. Marcos, 155 Phil. 668; 56 SCRA 726 (1974); Philex Mining Corporation v. Zaldivia,
supra at note 22; Espinosa v. Makalintal, 79 Phil. 134. of the Supreme Court on mining disputes have
recognized a distinction between (1) the primary powers granted by perti-
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22 Citing Philex Mining Corporation v. Zaldivia, 150 Phil. 547; 43 SCRA 479 (1972).
24 Citing Twin Peaks Mining Association v. Philex Mining Corporation, No. L-49835, 18 December 1979,
94 SCRA 768.
25 Pio v. Marcos, 155 Phil. 668; 56 SCRA 726 (1974); Philex Mining Corporation v. Zaldivia, supra at note
22; Espinosa v. Makalintal, 79 Phil. 134.
621
621
The Complaint charged respondents with disregarding and ignoring the provisions of the Addendum
Contract, violating the purpose and spirit of the May 14, 1987 Letter of Intent and February 28, 1989
Agreement, and acting in a fraudulent and oppressive manner against petitioner and practicing fraud
and deception against the Government.26Rollo, p. 651. Petitioner alleged in his Complaint that under
the original agreements (the May 14, 1987 Letter of Intent and February 28, 1989 Agreement)
respondent Climax-Arimco had committed to complete the Bankable Feasibility Study by 28 February
1992, but the same was not accomplished. Instead, respondent Climax-Arimco, through false and
insidious representations and machinations by alleging technical and financial capacity, induced
petitioner to enter into the Addendum Contract and the FTAA in order to repeatedly extend the option
period within which to conduct the feasibility study. In essence, petitioner alleges that respondents,
conspiring and confederating with one another, misrepresented under the Addendum Contract and
FTAA that respondent Climax-Arimco possessed financial and technical capacity to put the project into
commercial production, when in truth it had no such qualification whatsoever to do so. By so doing,
respondents have allegedly caused damage not only to petitioner but also to the Republic of the
Philippines.27Id., at pp. 367, 590-591.
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26 Rollo, p. 651.
622
622
It is apparent that the Panel of Arbitrators is bereft of jurisdiction over the Complaint filed by petitioner.
The basic issue in petitioner’s Complaint is the presence of fraud or misrepresentation allegedly
attendant to the execution of the Addendum Contract and the other contracts emanating from it, such
that the contracts are rendered invalid and not binding upon the parties. It avers that petitioner was
misled by respondents into agreeing to the Addendum Contract. This constitutes fraud which vitiated
petitioner’s consent, and under Article 1390 of the Civil Code, is one of the grounds for the annulment of
a voidable contract. Voidable or annullable contracts, before they are set aside, are existent, valid, and
binding, and are effective and obligatory between the parties.28IV Tolentino, 1991 ed., p. 596. They can
be ratified.29Ibid.
Petitioner insists that the Complaint is actually one for the declaration of nullity of void contracts. He
argues that respondents, by their lack of financial and technical competence to carry out the mining
project, do not qualify to enter into a co-production, joint venture or production sharing agreement with
the Government, in circumvention of and in patent violation of the spirit and purpose of the
Constitution, particularly Section 2, Article XII thereof. Petitioner relies on the Civil Code for
support:30Rollo, p. 380.
Art. 1409. The following contracts are inexistent and void from the beginning:
(1) Those whose cause, object or purpose is contrary to law, morals, good customs, public order or
public policy;
....
....
_______________
29 Ibid.
30 Rollo, p. 380.
623
623
Gonzales vs. Climax Mining Ltd.
Petitioner asserts that for circumventing and being in patentviolation of the Constitution, the Addendum
Contract, theFTAA and the other contracts are void contracts. As such,they do not produce any effect
and cannot be ratified.
However, whether the case involves void or voidable contracts is still a judicial question. It may, in some
instances, involve questions of fact especially with regard to the determination of the circumstances of
the execution of the contracts. But the resolution of the validity or voidness of the contracts remains a
legal or judicial question as it requires the exercise of judicial function. It requires the ascertainment of
what laws are applicable to the dispute, the interpretation and application of those laws, and the
rendering of a judgment based thereon. Clearly, the dispute is not a mining conflict. It is essentially
judicial. The complaint was not merely for the determination of rights under the mining contracts since
the very validity of those contracts is put in issue.
The Complaint is not about a dispute involving rights to mining areas, nor is it a dispute involving
claimholders or concessionaires. The main question raised was the validity of the Addendum Contract,
the FTAA and the subsequent contracts. The question as to the rights of petitioner or respondents to the
mining area pursuant to these contracts, as well as the question of whether or not petitioner had ceded
his mining claims in favor of respondents by way of execution of the questioned contracts, is merely
corollary to the main issue, and may not be resolved without first determining the main issue. The
Complaint is also not what is contemplated by Rep. Act No. 7942 when it says the dispute should involve
FTAAs.
The Complaint is not exclusively within the jurisdiction of the Panel of Arbitrators just because, or for as
long as, the dispute involves an FTAA. The Complaint raised the issue of the constitutionality of the
FTAA, which is definitely a judicial question. The question of constitutionality is exclusively within the
jurisdiction of the courts to resolve as this would clearly involve the exercise of judicial power. The Panel
of
624
624
Arbitrators does not have jurisdiction over such an issue since it does not involve the application of
technical knowledge and expertise relating to mining. This the Panel of Arbitrators has even conceded in
its Orders dated 18 October 2001 and 25 June 2002. At this juncture, it is worthy of note that in a
case,31La Bugal-B’laan Tribal Association, Inc., et al. v. Victor O. Ramos, et al., G.R. No. 127882, 1
December 2004, 445 SCRA 1. which was resolved only on 1 December 2004, this Court upheld the
validity of the FTAA entered into by the Republic of the Philippines and WMC (Philippines), Inc. and
constitutionality of Rep. Act No. 7942 and DENR Administrative Order 96-40.32The Implementing Rules
and Regulations of Rep. Act No. 7942. In fact, the Court took the case on an original petition, recognizing
“the exceptional character of the situation and the paramount public interest involved, as well as the
necessity for a ruling to put an end to the uncertainties plaguing the mining industry and the affected
communities as a result of doubts case upon the constitutionality and validity of the Mining Act, the
subject FTAA and future FTAAs, and the need to avert a multiplicity of suits.”33Supra at note 31.
Arbitration before the Panel of Arbitrators is proper only when there is a disagreement between the
parties as to some provisions of the contract between them, which needs the interpretation and the
application of that particular knowledge and expertise possessed by members of that Panel. It is not
proper when one of the parties repudiates the existence or validity of such contract or agreement on
the ground of fraud or oppression as in this case. The validity of the contract cannot be subject of
arbitration proceedings. Allegations of fraud and duress in the execution of a contract are matters
within the jurisdiction of the ordinary courts of law. These questions are legal in nature and require the
application and interpretation of laws and jurisprudence which is necessarily a judicial function.
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31 La Bugal-B’laan Tribal Association, Inc., et al. v. Victor O. Ramos, et al., G.R. No. 127882, 1 December
2004, 445 SCRA 1.
625
625
Petitioner also disagrees with the Court of Appeals’ ruling that the case should be brought for
arbitration under Rep. Act 876, pursuant to the arbitration clause in the Addendum Contract which
states that “[a]ll disputes arising out of or in connection with the Contract, which cannot be settled
amicably among the Parties, shall finally be settled under R.A. 876.” He points out that respondents
Climax and APMI are not parties to the Addendum Contract and are thus not bound by the arbitration
clause in said contract.
We agree that the case should not be brought under the ambit of the Arbitration Law, but for a different
reason. The question of validity of the contract containing the agreement to submit to arbitration will
affect the applicability of the arbitration clause itself. A party cannot rely on the contract and claim
rights or obligations under it and at the same time impugn its existence or validity. Indeed, litigants are
enjoined from taking inconsistent positions. As previously discussed, the complaint should have been
filed before the regular courts as it involved issues which are judicial in nature.
WHEREFORE, in view of the foregoing, the Petition for Review on Certiorari Under Rule 45 is DENIED.
The Orders dated 18 October 2001 and 25 June 2002 of the Panel of Arbitrators are SET ASIDE. Costs
against petitioner Jorge Gonzales.
SO ORDERED.
Petition denied.
Note.—The potentials of arbitration as one of the alternative dispute resolution methods that are now
rightfully vaunted as “the wave of the future” in international relations, is recognized worldwide. (BF
Corporation vs. Court of Appeals, 288 SCRA 267 [1998])
——o0o—— Gonzales vs. Climax Mining Ltd., 452 SCRA 607, G.R. No. 161957 February 28, 2005