VOL.

452, FEBRUARY 28, 2005 607

Gonzales vs. Climax Mining Ltd.
*
G.R. No. 161957. February 28, 2005.

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

_______________

* SECOND DIVISION.

608

608 SUPREME COURT REPORTS

ANNOTATED

Gonzales vs. Climax Mining Ltd.

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

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Gonzales vs. Climax Mining Ltd.

determination of what the law is and what the legal rights of the parties are with respect to the matter
in controversy. 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. 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. 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.
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 SUPREME COURT REPORTS

ANNOTATED
 Gonzales vs. Climax Mining Ltd.

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.—

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Gonzales vs. Climax Mining Ltd.

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.

The facts are stated in the opinion of the Court.

     Puno and Puno Law Offices for petitioner.
     Sycip, Salazar, Hernandez & Gatmaitan for respondents.

TINGA, J.:

Petitioner Jorge Gonzales, as claimowner of mineral deposits located within the Addendum Area
of Influence in Didipio,
612

612 SUPREME COURT REPORTS ANNOTATED

Gonzales vs. Climax Mining Ltd.

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
1
28, 1989 Agreement with Express Adhesion Thereto (hereafter,
the  Addendum Contract).   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
2
Agreement (FTAA). On 20
June 1994, Arimco Mining Corporation obtained the FTAA   and carried out work under the
FTAA. 3
Respondents executed the  Operating and Financial Accommodation Contract   (between
Climax-Arimco Mining Corporation and Climax Mining Ltd., as first parties, and Australasian
Philippines Mining Inc., as second party) dated 23

_______________
1 Rollo, pp. 389-421.
2 Id., at pp. 422-474.
3 Id., at pp. 475-479.

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VOL. 452, FEBRUARY 28, 2005 613

Gonzales vs. Climax Mining Ltd.

4
 4
December 1996 and  Assignment, Accession Agreement (between Climax-Arimco Mining
Corporation and Australasian Philippines Mining Inc.) dated 3 December 1996. Respondent
Climax Mining Corporation (Climax) and respondent 5
Australasian Philippines Mining, Inc.
(APMI) entered into a  Memorandum of Agreement   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,
against6 respondents7 Climax-Arimco Mining Corporation (Climax-Arimco), Climax, and
APMI,   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 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
8
RESPONDENTS, conspiring and confederating
with one another and with each other….”
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

_______________
4 Id., at pp. 480-483.
5 Id., at pp. 484-490.
6 Herein 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.
7 Id., at pp. 521-596.
8 Id., at p. 521.

614

614 SUPREME COURT REPORTS ANNOTATED

Gonzales vs. Climax Mining Ltd.

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 9to the constitutionality of the Addendum Agreement and FTAA, it held
that it had no jurisdiction.
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 10
the parties which involve the
exploration and exploitation of minerals over the disputed area.
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 11
that the Panel of
Arbitrators did not have jurisdiction over the complaint filed by petitioner. 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-

_______________
9 Id.,at pp. 605-610.
10 Id.,at pp. 611-619.
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.

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Gonzales vs. Climax Mining Ltd.

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
12
period for an action for annulment is four years from the time of the
discovery of the fraud.  When petitioner filed his complaint before the Panel in 1999, his action
had already prescribed.
13
Also, the Court of Appeals noted that fraud and duress only make a
contract voidable,  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 14
2004, the Court of Appeals denied
petitioner’s motion for reconsideration for lack of merit.
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 QUOFOR FAILURE TO COMPLY WITH PROCEDURAL REQUIREMENTS.

_______________
12 See Article 1391, Civil Code.
13 See Article 1390 (2), Civil Code.
14 Rollo, p. 501.

616

616 SUPREME COURT REPORTS ANNOTATED

Gonzales vs. Climax Mining Ltd.
 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.

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Gonzales vs. Climax Mining Ltd.

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 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 SUPREME COURT REPORTS ANNOTATED

Gonzales vs. Climax Mining Ltd.

(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 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 Arbitrationseeks 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
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VOL. 452, FEBRUARY 28, 2005 619

 Gonzales vs. Climax Mining Ltd.

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
15
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. 16
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
17
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.
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.

_______________
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).
17 Rollo, pp. 669-670.

620

620 SUPREME COURT REPORTS ANNOTATED

Gonzales vs. Climax Mining Ltd.

A judicial question is a question that is proper for determination by the courts,

18
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 determination of what 19the law is and what the legal rights of the
parties are with respect to the matter in controversy.
On the other hand, a mining dispute is a dispute involving (a) rights to mining areas, (b)
mineral agreements, FTAAs, 20
or permits, and (c) surface owners, occupants and
claimholders/concessionaires.  Under Republic Act No. 7942 (otherwise known as the Philippine
Mining Act of 1995), the Panel 21
of Arbitrators has exclusive and original jurisdiction to hear and
decide these mining disputes.  The Court of Appeals, in its questioned decision, correctly stated
that the Panel’s jurisdiction is limited only to those mining disputes which raise 22
questions of fact
or matters requiring the application of technological
23
knowledge and experience.
In Pearson v. Intermediate Appellate Court,   this Court observed that the24 trend has25 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 perti-
_______________
18 Black’s Law Dictionary, 8th Ed. (2004), p. 864.
19 Jose Agaton R. Sibal, Philippine Legal Encyclopedia (1986), p. 472.
20 Section 77, Rep. Act No. 7942, as amended.
21 Ibid.
22 Citing Philex Mining Corporation v. Zaldivia, 150 Phil. 547; 43 SCRA 479 (1972).
23 356 Phil. 341; 295 SCRA 27.
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

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Gonzales vs. Climax Mining Ltd.

nent 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  and  February 28, 1989 Agreement, and acting in a fraudulent and oppressive
26
manner
against petitioner and practicing fraud and deception against the Government. 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 Contractand 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, respondents27 have allegedly caused damage not only to petitioner but also to the Republic
of the Philippines.

_______________
26 Rollo, p. 651.
27 Id., at pp. 367, 590-591.

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622 SUPREME COURT REPORTS ANNOTATED

Gonzales vs. Climax Mining Ltd.
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 28aside, are existent, valid,
29
and binding, and are effective and obligatory
between the parties.  They can be ratified.
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,
30
particularly Section 2, Article XII thereof. Petitioner
relies on the Civil Code for support:
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.
....

_______________
28 IV Tolentino, 1991 ed., p. 596.
29 Ibid.
30 Rollo, p. 380.

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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
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624 SUPREME COURT REPORTS ANNOTATED

Gonzales vs. Climax Mining Ltd.

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
31
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),
32
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 the33Mining Act, the subject FTAA and future
FTAAs, and the need to avert a multiplicity of suits.”
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.

_______________
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.
32 The Implementing Rules and Regulations of Rep. Act No. 7942.
33 Supra at note 31.

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Gonzales vs. Climax Mining Ltd.

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.

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

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])

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626