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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]
PROCEDURAL GROUND
THE HONORABLE COURT OF APPEALS SHOULD HAVE SUMMARILY
DISMISSED RESPONDENTS PETITION A QUO FOR FAILURE TO COMPLY
WITH PROCEDURAL REQUIREMENTS.
i.
SUBSTANTIVE GROUND
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.
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.