DIGEST: G.R. No. 161957.

February 28, 2005

Petitioner; Jorge Gonzales, claim owner of mineral deposits located within the addendum area
of influence in Didipio in the province of Quirino and Nueva Vizcaya.
Respondent: Climax Mining Ltd. Climax Mining Corp and Australasian Philippines Mining Inc.
Facts:
Petitioner entered into a co-production, joint venture and production sharing letter
agreement designated as May 14, 1987 Letter of Intent with Geophilippines Inv. And Inmex Ltd.
Under the agreement, petitioner granted Geophilippines the exclusive right to explore
and survey the mining claims for a period of 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 February 28, 1989 the parties on the May 14, 1987 Letter of Intent renegotiated
extending the period to another 3 years. On March 9, 1991, Gonzales, Arimco Mining
Corp, Geophilippines Inc, Inmex Ltd and Aumex Phil signed a doc. Designated as
Addendum May 14, 1987 Letter of Intent and February 28, 1989 Agreement with
express adhesion thereto addendum contract.
Under the Addendum Contract, Arimco Mining Corp would apply to the government of
the Philippines for permission to mine the claims as the Govt. Contractor under FTAA.
On June 20, 1994, Arimco obtained the FTAA and carried out work under the same.
Respondent executed the Operating and Financial Accommodation Contract b/w
Climax Arimco Mining Corp and Climax Mining Ltd. As 1 st parties and Austarlian
Philippines Mining Inc. as 2nd party and assignment, accession agreement b/w Climax
Arimco Mining Corp and Australasian Philippines Mining Inc.
Respondent Climax Mining Corp and respondent Australian Phil Mining Inc. entered
into a memorandum of agreement dated June 1, 1991 whereby the former transferred
its PTAA to the latter.
On Nov. 8, 1999, Gonzales filed before the Panel of Arbitration Region II, Mines and
Bureau of the DENR against respondent Climax Mining Corp and respondent
Austarlian Phil. Mining, a complaint seeking declaration of nullity or termination of
Addendum Contract, FTAA, Operating and Financial Accommodation Contract, the
assignment, accession, agreement and MOA.
Gonzales prayed for damages, attorneys fee, TRO, Preliminary Injunction for further
implementation of the questioned agreements on the grounds of fraud, oppression and
violation of Sec. 2 Art. XII of Consti.
On Feb. 21, 2001, PA dismissed the case for lack of jurisdiction.
Gonzales filed an MR and the same was granted on the belief of the Panel of
Arbitration that the case involved a dispute involving rights to mining areas and a
dispute involving surface owners , occupants and claim owners/concessionaries.
Respodent filed for MR but it was denied. A petition for certiorari was then filed before
the CA. The CA then granted the petition and held that the PA does not have
jurisdiction over the complaint. That the jurisdiction of PA is limited only to resolution of
mining disputes, defined as those which raises a question of fact or matter requiring
the technical knowledge and experience of mining authorities. That no averments were

made relating to the acts constituting fraud and oppression and that the action has
already prescribed. It opinioned that the case should have been settled through
arbitration under RA NO. 876 as stated in clause 19.1 of the Addendum Contract.
Petitioner then filed a petition for review on certiorari.
ISSUES RAISED:
WON there was forum shopping on the part of respondent.
WON respondent Climax had authority to file petition considering that the signor was
not authorized to sign the same in behalf of Climax.
WON the complaint filed by petitioner raises a mining dispute w/c PA has jurisdiction.
WON the dispute be brought for arbitration under RA No. 876.
HELD:
On the procedural matters: 1. The court held that the contention of the petitioner cannot be
determined from 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. That 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.
2. The court agrees with the contention of the petitioner as 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.
3. The court held that 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.
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.
4. 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.