BENGUET CORPORATION vs. DENR and J.G.
and (2) whether Benguet violated the RAWOP justifying
REALTY AND MINING CORPORATION
Benguet and J.G. Realty entered into a Royalty
Agreement with Option to Purchase (RAWOP), wherein
J.G. Realty was acknowledged as the owner of four
mining claims. The parties also executed a Supplemental
Agreement. The mining claims were covered by MPSA
Application jointly filed by J.G. Realty as claimowner
and Benguet as operator.
In the RAWOP, Benguet obligated itself to perfect the
rights to the mining claims and/or otherwise acquire the
mining rights to the mineral claims. Within 24 months
from the execution of the RAWOP, Benguet should also
cause the examination of the mining claims for the
purpose of determining whether or not they are worth
developing with reasonable probability of profitable
production. Benguet undertook also to furnish J.G.
Realty with a report on the examination, within a
reasonable time after the completion of the examination.
Also within the examination period, Benguet shall
conduct all necessary exploration in accordance with a
prepared exploration program. If it chooses to do so and
before the expiration of the examination period, Benguet
may undertake to develop the mining claims upon
written notice to J.G. Realty. Benguet must then place
the mining claims into commercial productive stage
within 24 months from the written notice It is also
provided in the RAWOP that if the mining claims were
placed in commercial production by Benguet, J.G.
Realty should be entitled to a royalty of five percent
(5%) of net realizable value, and to royalty for any
production done by Benguet whether during the
examination or development periods.
Executive Vice-President of Benguet issued a letter
informing J.G. Realty of its intention to develop the
mining claims. However, J.G. Realty sent a letter to the
President of Benguet informing the latter that it was
terminating the RAWOP for failure to perform the
obligations set forth in the RAWOP, among others.
Realty allegedly refused to collect such checks from
Benguet. Thus, Benguet posited that there was no valid
ground for the termination of the RAWOP. It also
reminded J.G. Realty that it should submit the
disagreement to arbitration rather than unilaterally
terminating the RAWOP.
J.G. Realty filed a Petition for Declaration of
Nullity/Cancellation of the RAWOP with the Panel of
Arbitrators (POA)
POA issued a Decision, dwelling upon the issues of (1)
whether the arbitrators had jurisdiction over the case;
the unilateral cancellation of the RAWOP by J.G.
Realty. The dispositive portion stated:
WHEREFORE, premises considered, the June
01, 1987 [RAWOP] and its Supplemental
Agreement is hereby declared cancelled and
without effect. BENGUET is hereby excluded
from the joint MPSA Application over the
mineral claims denominated as "BONITO-I",
"BONITO-II", "BONITO-III" and "BONITO-
IV".
SO ORDERED.
Benguet filed a Notice of Appeal with the MAB. MAB
issued the assailed Decision.
ISSUE: Should the controversy have first been
submitted to arbitration before the POA took cognizance
of the case?
RULING: RA 7942 or the "Philippine Mining Act of
1995" states, "A petition for review by certiorari and
question of law may be filed by the aggrieved party with
the SC within 30 days from receipt of the order or
decision of the [MAB]."
However, SC has already invalidated such provision,
ruling that a decision of the MAB must first be appealed
to the CA under Rule 43 of the RoC, before recourse to
SC may be had.
Petitioner having failed to properly appeal to the CA
under Rule 43, the decision of the MAB has become
final and executory. On this ground alone, the instant
petition must be denied.
The case should have first been brought to
voluntary arbitration before the POA
The RAWOP pertinently provide: Any disputes,
between BENGUET and the OWNER with reference to
anything whatsoever pertaining to this Agreement that
cannot be amicably settled by them shall not be cause of
any action of any kind whatsoever in any court or
administrative agency but shall, upon notice of one party
to the other, be referred to a Board of Arbitrators
consisting of three (3) members, one to be selected by
BENGUET, another to be selected by the OWNER and
the third to be selected by the aforementioned two
arbitrators so appointed.
In RA 9285 or the "Alternative Dispute Resolution Act
of 2004," the Congress reiterated the efficacy of
arbitration as an alternative mode of dispute resolution
by stating that domestic arbitration shall still be
governed by RA 876. Clearly, a contractual stipulation
that requires prior resort to voluntary arbitration before
the parties can go directly to court is not illegal and is in
fact promoted by the State.
Moreover, the contention that RA 7942 prevails over RA
876 presupposes a conflict between the two laws. Such
is not the case here. To reiterate, availment of voluntary
arbitration before resort is made to the courts or quasi-
judicial agencies of the government is a valid contractual
stipulation that must be adhered to by the parties. As
stated in Secs. 6 and 7 of RA 876, in the event a case
that should properly be the subject of voluntary
arbitration is erroneously filed with the courts or quasi-
judicial agencies, on motion of the defendant, the court
or quasi-judicial agency shall determine whether such
contractual provision for arbitration is sufficient and
effective. If in affirmative, the court or quasi-judicial
agency shall then order the enforcement of said
provision. In BF Corporation v. CA, we already ruled:
In this connection, it bears stressing that the
lower court has not lost its jurisdiction over the
case. Section 7 of RA 876 provides that
proceedings therein have only been stayed. After
the special proceeding of arbitration has been
pursued and completed, then the lower court
may confirm the award made by the arbitrator. 22
J.G. Realty’s contention, that prior resort to arbitration is
unavailing in the instant case because the POA’s
mandate is to arbitrate disputes involving mineral
agreements, is misplaced. A distinction must be made
between voluntary and compulsory arbitration. In Ludo
and Luym Corporation v. Saordino, the Court had the
occasion to distinguish between the two types of
arbitrations:
Comparatively, in Reformist Union of R.B.
Liner, Inc. vs. NLRC, compulsory arbitration has
been defined both as "the process of settlement
of labor disputes by a government agency
which has the authority to investigate and to
make an award which is binding on all the
parties, and as a mode of arbitration where the
parties are compelled to accept the resolution of
their dispute through arbitration by a third
party." While a voluntary arbitrator is not part
of the governmental unit or labor
department’s personnel, said arbitrator renders
arbitration services provided for under labor
laws.23 (Emphasis supplied.)
There is a clear distinction between compulsory and
voluntary arbitration. The arbitration provided by the
POA is compulsory, while the nature of the arbitration
provision in the RAWOP is voluntary, not involving any
government agency. Thus, J.G. Realty’s argument on
this matter must fail.
As to J.G. Realty’s contention that the provisions of RA
876 cannot apply to the instant case which involves an
administrative agency, it must be pointed out that
Section 11.01 of the RAWOP states that:
[Any controversy with regard to the contract]
shall not be cause of any action of any kind
whatsoever in any court or administrative
agency but shall, upon notice of one party to the
other, be referred to a Board of Arbitrators
consisting of three (3) members, one to be
selected by BENGUET, another to be selected
by the OWNER and the third to be selected by
the aforementioned two arbiters so appointed. 24
POA is a quasi-judicial body which forms part of the
DENR, an administrative agency. Hence, the provision
on mandatory resort to arbitration, freely entered into by
the parties, must be held binding against them.25
In sum, POA has no jurisdiction over the dispute which
is governed by RA 876, the arbitration law.
However, Benguet is already estopped from questioning
the POA’s jurisdiction. As it were, when J.G. Realty
filed DENR Case, Benguet filed its answer and
participated in the proceedings before the POA; when
the adverse March 19, 2001 POA Decision was
rendered, it filed an appeal with the MAB in Mines
Administrative Case and again participated in the MAB
proceedings.