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[G.R. No. 161957.

February 28, 2005]

JORGE GONZALES and PANEL OF ARBITRATORS, petitioners, vs.


CLIMAX MINING LTD., CLIMAX-ARIMCO MINING CORP., and
AUSTRALASIAN PHILIPPINES MINING INC., respondents.
DECISION
TINGA, J.:

Petitioner Jorge Gonzales, as claimowner of mineral deposits located


within the Addendum Area of Influence in Didipio, 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).[1] Under the Addendum Contract, Arimco Mining
Corporation would apply to the Government of the Philippines for permission
to mine the claims as the Governments contractor under a Financial and
Technical Assistance Agreement(FTAA). On 20 June 1994, Arimco Mining
Corporation obtained the FTAA[2] and carried out work under the FTAA.

Respondents executed the Operating and Financial Accommodation


Contract[3] (between Climax-Arimco Mining Corporation and Climax Mining
Ltd., as first parties, and Australasian Philippines Mining Inc., as second party)
dated 23 December 1996 and Assignment, Accession Agreement[4] (between
Climax-Arimco Mining Corporation and Australasian Philippines Mining Inc.)
dated 3 December 1996. Respondent Climax Mining Corporation (Climax)
and respondent Australasian Philippines Mining Inc. (APMI) entered into
a Memorandum of Agreement[5] dated 1 June 1991 whereby the former
transferred its FTAA to the latter.
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,
[6]
[7]
a Complaint 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 attorneys 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 releifs 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.[8]
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 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.[9]
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.[10]
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.[11] 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 violation 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. [12] 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,[13] 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 petitioners motion for reconsideration for
lack of merit.[14]

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.

i.

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.
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.

The issues for resolution in this petition for review are:


(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 certioraris 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.
(d) Whether the dispute between the parties should be brought for
arbitration under Rep. Act No. 876.
Let us deal first with procedural matters.
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 petitioners 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 Secretarys
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 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 nonforum 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. [15] 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.[16]
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.
[17]
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.
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.[18] A judicial question is raised when the
determination of the question involves the exercise of a judicial function; that
is, the question involves the determination of what the law is and what the
legal rights of the parties are with respect to the matter in controversy.[19]
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.[20] 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.[21] The Court of Appeals, in its questioned decision, correctly
stated that the Panels jurisdiction is limited only to those mining disputes
which raise questions of fact or matters requiring the application of
technological knowledge and experience.[22]
In Pearson v. Intermediate Appellate Court,[23] this Court observed that the
trend has been to make the adjudication of mining cases a purely
administrative matter.[24] Decisions[25] 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.

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 andFebruary 28, 1989 Agreement, and
acting in a fraudulent and oppressive manner against petitioner and practicing
fraud and deception against the Government.[26] Petitioner alleged in
hisComplaint 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.[27]
It is apparent that the Panel of Arbitrators is bereft of jurisdiction over
the Complaint filed by petitioner. The basic issue in petitioners 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 petitioners
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.[28] They can be ratified.[29]
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:[30]
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;
....
(7) Those expressly prohibited or declared void by law.
....
Petitioner asserts that for circumventing and being in patent violation of the
Constitution, the Addendum Contract, the FTAA 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 theAddendum 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 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,[31] 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.[32] 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.[33]
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.

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 Contractwhich 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.
Puno, (Chairman), Austria-Martinez, Callejo, Sr., and Chico-Nazario,
JJ., concur.