FIRST DIVISION

[G.R. NO. 169332 : February 11, 2008]

ABS-CBN BROADCASTING CORPORATION, Petitioner, v. WORLD INTERACTIVE NETWORK SYSTEMS (WINS) JAPAN CO., LTD., Respondent.

D E C I S I O N

CORONA, J.:

This Petition for Review on Certiorari under Rule 45 of the Rules of Court seeks to set aside the February 16, 2005 decision1 and

August 16, 2005 resolution2 of the Court of Appeals (CA) in CA-G.R. SP No. 81940.

On September 27, 1999, petitioner ABS-CBN Broadcasting Corporation entered into a licensing agreement with respondent World Interactive Network Systems (WINS) Japan Co., Ltd., a foreign corporation licensed under the laws of Japan. Under the agreement, respondent was granted the exclusive license to distribute and sublicense the distribution of the television service known as "The Filipino Channel" (TFC) in Japan. By virtue thereof, petitioner undertook to transmit the TFC programming signals to respondent which the latter received through its decoders and distributed to its subscribers.

A dispute arose between the parties when petitioner accused respondent of inserting nine episodes of WINS WEEKLY, a weekly 35-minute community news program for Filipinos in Japan, into the TFC programming from March to May 2002.

3 Petitioner claimed

that these were "unauthorized insertions" constituting a material breach of their agreement. Consequently, on May 9, 2002,

4 petitioner notified respondent of its intention to terminate the agreement effective June 10, 2002.

Thereafter, respondent filed an arbitration suit pursuant to the arbitration clause of its agreement with petitioner. It contended that the airing of WINS WEEKLY was made with petitioner's prior approval. It also alleged that petitioner only threatened to terminate their agreement because it wanted to renegotiate the terms thereof to allow it to demand higher fees. Respondent also prayed for damages for petitioner's alleged grant of an exclusive distribution license to another entity, NHK (Japan Broadcasting Corporation).

5

The parties appointed Professor Alfredo F. Tadiar to act as sole arbitrator. They stipulated on the following issues in their terms of reference (TOR)

6 :

1. Was the broadcast of WINS WEEKLY by the claimant duly authorized by the respondent [herein petitioner]?cralawred

2. Did such broadcast constitute a material breach of the agreement that is a ground for termination of the agreement in accordance with Section 13 (a) thereof?cralawred

3. If so, was the breach seasonably cured under the same contractual provision of Section 13 (a)?cralawred

4. Which party is entitled to the payment of damages they claim and to the other reliefs prayed for?

xxx xxx xxx

The arbitrator found in favor of respondent.7 He held that petitioner gave its approval to respondent for the airing of WINS WEEKLY

as shown by a series of written exchanges between the parties. He also ruled that, had there really been a material breach of the agreement, petitioner should have terminated the same instead of sending a mere notice to terminate said agreement. The arbitrator found that petitioner threatened to terminate the agreement due to its desire to compel respondent to re-negotiate the terms thereof for higher fees. He further stated that even if respondent committed a breach of the agreement, the same was seasonably cured. He then allowed respondent to recover temperate damages, attorney's fees and one-half of the amount it paid as arbitrator's fee.

Petitioner filed in the CA a Petition for Review under Rule 43 of the Rules of Court or, in the alternative, a petition for certiorari under Rule 65 of the same Rules, with application for temporary restraining order and writ of preliminary injunction. It was docketed as CA-G.R. SP No. 81940. It alleged serious errors of fact and law and/or grave abuse of discretion amounting to lack or excess of jurisdiction on the part of the arbitrator.

Respondent, on the other hand, filed a petition for confirmation of arbitral award before the Regional Trial Court (RTC) of Quezon City, Branch 93, docketed as Civil Case No. Q-04-51822.

Consequently, petitioner filed a supplemental petition in the CA seeking to enjoin the RTC of Quezon City from further proceeding with the hearing of respondent's petition for confirmation of arbitral award. After the petition was admitted by the appellate court, the RTC of Quezon City issued an order holding in abeyance any further action on respondent's petition as the assailed decision of the arbitrator had already become the subject of an appeal in the CA. Respondent filed a motion for reconsideration but no resolution has been issued by the lower court to date.

8

On February 16, 2005, the CA rendered the assailed decision dismissing ABS-CBN's petition for lack of jurisdiction. It stated that as the TOR itself provided that the arbitrator's decision shall be final and unappealable and that no motion for reconsideration shall be filed, then the Petition for Review must fail. It ruled that it is the RTC which has jurisdiction over questions relating to arbitration. It held that the only instance it can exercise jurisdiction over an arbitral award is an appeal from the trial court's decision confirming, vacating or modifying the arbitral award. It further stated that a petition for certiorariunder Rule 65 of the Rules of Court is proper in arbitration cases only if the courts refuse or neglect to inquire into the facts of an arbitrator's award. The dispositive portion of the CA decision read:

WHEREFORE, the instant petition is hereby DISMISSED for lack of jurisdiction. The application for a writ of injunction and temporary restraining order is likewise DENIED. The Regional Trial Court of Quezon City Branch 93 is directed to proceed with the trial for the Petition for Confirmation of Arbitral Award.

SO ORDERED.

Petitioner moved for reconsideration. The same was denied. Hence, this petition.

Petitioner contends that the CA, in effect, ruled that: (a) it should have first filed a petition to vacate the award in the RTC and only in case of denial could it elevate the matter to the CA via a Petition for Review under Rule 43 and (b) the assailed decision implied that an aggrieved party to an arbitral award does not have the option of directly filing a Petition for Review under Rule 43 or a petition for certiorari under Rule 65 with the CA even if the issues raised pertain to errors of fact and law or grave abuse of discretion, as the case may be, and not dependent upon such grounds as enumerated under Section 24 (petition to vacate an arbitral award) of RA 876 (the Arbitration Law). Petitioner alleged serious error on the part of the CA.

The issue before us is whether or not an aggrieved party in a voluntary arbitration dispute may avail of, directly in the CA, a Petition for Review under Rule 43 or a petition forcertiorari under Rule 65 of the Rules of Court, instead of filing a petition to vacate the award in the RTC when the grounds invoked to overturn the arbitrator's decision are other than those for a petition to vacate an arbitral award enumerated under RA 876.

RA 876 itself mandates that it is the Court of First Instance, now the RTC, which has jurisdiction over questions relating to arbitration,

9 such as a petition to vacate an arbitral award.

Section 24 of RA 876 provides for the specific grounds for a petition to vacate an award made by an arbitrator:

Sec. 24. Grounds for vacating award. - In any one of the following cases,the court must make an order vacating the awardupon the petition of any party to the controversy when such party proves affirmatively that in the arbitration proceedings:

(a) The award was procured by corruption, fraud, or other undue means; or

(b) That there was evident partiality or corruption in the arbitrators or any of them; or

(c) That the arbitrators were guilty of misconduct in refusing to postpone the hearing upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; that one or more of the arbitrators was disqualified to act as such under section nine hereof, and willfully refrained from disclosing such disqualifications or of any other misbehavior by which the rights of any party have been materially prejudiced; or

(d) That the arbitrators exceeded their powers, or so imperfectly executed them, that a mutual, final and definite award upon the subject matter submitted to them was not made.

Based on the foregoing provisions, the law itself clearly provides that the RTC must issue an order vacating an arbitral award only "in any one of the . . . cases" enumerated therein. Under the legal maxim in statutory construction expressio unius est exclusio alterius, the explicit mention of one thing in a statute means the elimination of others not specifically mentioned. As RA 876 did not expressly provide for errors of fact and/or law and grave abuse of discretion (proper grounds for a Petition for Review under Rule 43 and a petition for certiorari under Rule 65, respectively) as grounds for maintaining a petition to vacate an arbitral award in the RTC, it necessarily follows that a party may not avail of the latter remedy on the grounds of errors of fact and/or law or grave abuse of discretion to overturn an arbitral award.

Adamson v. Court of Appeals10

gave ample warning that a petition to vacate filed in the RTC which is not based on the grounds enumerated in Section 24 of RA 876 should be dismissed. In that case, the trial court vacated the arbitral award seemingly based on grounds included in Section 24 of RA 876 but a closer reading thereof revealed otherwise. On appeal, the CA reversed the decision of the trial court and affirmed the arbitral award. In affirming the CA, we held:

The Court of Appeals, in reversing the trial court's decision held that the nullification of the decision of the Arbitration Committee was not based on the grounds provided by the Arbitration Law and that xxx private respondents (petitioners herein) have failed to substantiate with any evidence their claim of partiality. Significantly, even as respondent judge ruled against the arbitrator's award, he could not find fault with their impartiality and integrity. Evidently, the nullification of the award rendered at the case at bar was not made on the basis of any of the grounds provided by law.

xxx xxx xxx

It is clear, therefore, that the award was vacated not because of evident partiality of the arbitrators but because the latter interpreted the contract in a way which was not favorable to herein petitioners and because it considered that herein private respondents, by submitting the controversy to arbitration, was seeking to renege on its obligations under the contract.

xxx xxx xxx

It is clear then that the Court of Appeals reversed the trial court not because the latter reviewed the arbitration award involved herein, but because the respondent appellate court found that the trial court had no legal basis for vacating the award. (Emphasis supplied).

In cases not falling under any of the aforementioned grounds to vacate an award, the Court has already made several pronouncements that a Petition for Review under Rule 43 or a petition for certiorari under Rule 65 may be availed of in the CA. Which one would depend on the grounds relied upon by petitioner.

In Luzon Development Bank v. Association of Luzon Development Bank Employees,11

the Court held that a voluntary arbitrator is properly classified as a "quasi-judicial instrumentality" and is, thus, within the ambit of Section 9 (3) of the Judiciary Reorganization Act, as amended. Under this section, the Court of Appeals shall exercise:

xxx xxx xxx

(3) Exclusive appellate jurisdiction over all final judgments, decisions, resolutions, orders or awards of Regional Trial Courts and quasi-judicial agencies, instrumentalities, boards or commissions, including the Securities and Exchange Commission, the Employees' Compensation Commission and the Civil Service Commission, except those falling within the appellate jurisdiction of the Supreme Court in accordance with the Constitution, the Labor Code of the Philippines under Presidential Decree No. 442, as amended, the provisions of this Act and of subparagraph (1) of the third paragraph and subparagraph (4) of the fourth paragraph of Section 17 of the Judiciary Act of 1948. (Emphasis supplied)cralawlibrary

As such, decisions handed down by voluntary arbitrators fall within the exclusive appellate jurisdiction of the CA. This decision was taken into consideration in approving Section 1 of Rule 43 of the Rules of Court.

12 Thus:

SECTION 1. Scope. - This Rule shall apply to appeals from judgments or final orders of the Court of Tax Appeals and from awards, judgments, final orders or resolutions of or authorized by any quasi-judicial agency in the exercise of its quasi-judicial functions. Among these agencies are the Civil Service Commission, Central Board of Assessment Appeals, Securities and Exchange Commission, Office of the President, Land Registration Authority, Social Security Commission, Civil Aeronautics Board, Bureau of Patents, Trademarks and Technology Transfer, National Electrification Administration, Energy Regulatory Board, National Telecommunications Commission, Department of Agrarian Reform under Republic Act Number 6657, Government Service Insurance

System, Employees Compensation Commission, Agricultural Inventions Board, Insurance Commission, Philippine Atomic Energy Commission, Board of Investments, Construction Industry Arbitration Commission, and voluntary arbitrators authorized by law.(Emphasis supplied)cralawlibrary

This rule was cited in Sevilla Trading Company v. Semana,13

Manila Midtown Hotel v. Borromeo,14

and Nippon Paint Employees Union-Olalia v. Court of Appeals.

15 These cases held that the proper remedy from the adverse decision of a voluntary arbitrator, if

errors of fact and/or law are raised, is a Petition for Review under Rule 43 of the Rules of Court. Thus, petitioner's contention that it may avail of a Petition for Review under Rule 43 under the circumstances of this case is correct.

As to petitioner's arguments that a petition for certiorari under Rule 65 may also be resorted to, we hold the same to be in accordance with the Constitution and jurisprudence.

Section 1 of Article VIII of the 1987 Constitution provides that:

SECTION 1. The judicial power shall be vested in one Supreme Court and in such lower courts as may be established by law.

Judicial power includes the duty of the courts of justice to settle actual controversies involving rights which are legally demandable and enforceable, andto determine whether or not there has been a grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or instrumentality of the Government. (Emphasis supplied)cralawlibrary

As may be gleaned from the above stated provision, it is well within the power and jurisdiction of the Court to inquire whether any instrumentality of the Government, such as a voluntary arbitrator, has gravely abused its discretion in the exercise of its functions and prerogatives. Any agreement stipulating that "the decision of the arbitrator shall be final and unappealable" and "that no further judicial recourse if either party disagrees with the whole or any part of the arbitrator's award may be availed of" cannot be held to preclude in proper cases the power of judicial review which is inherent in courts.

16 We will not hesitate to review a voluntary

arbitrator's award where there is a showing of grave abuse of authority or discretion and such is properly raised in a petition for certiorari

17 and there is no appeal, nor any plain, speedy remedy in the course of law.

18

Significantly, Insular Savings Bank v. Far East Bank and Trust Company19

definitively outlined several judicial remedies an aggrieved party to an arbitral award may undertake:

(1) a petition in the proper RTC to issue an order to vacate the award on the grounds provided for in Section 24 of RA 876;

(2) a Petition for Review in the CA under Rule 43 of the Rules of Court on questions of fact, of law, or mixed questions of fact and law; andcralawlibrary

(3) a petition for certiorari under Rule 65 of the Rules of Court should the arbitrator have acted without or in excess of his jurisdiction or with grave abuse of discretion amounting to lack or excess of jurisdiction.

Nevertheless, although petitioner's position on the judicial remedies available to it was correct, we sustain the dismissal of its petition by the CA. The remedy petitioner availed of, entitled "alternative petition for review under Rule 43 or petition for certiorari under Rule 65," was wrong.

Time and again, we have ruled that the remedies of appeal and certiorari are mutually exclusive and not alternative or successive.20

Proper issues that may be raised in a Petition for Review under Rule 43 pertain to errors of fact, law or mixed questions of fact and law.

21 While a petition for certiorari under Rule 65 should only limit itself to errors of jurisdiction, that is, grave abuse of discretion

amounting to a lack or excess of jurisdiction.22

Moreover, it cannot be availed of where appeal is the proper remedy or as a substitute for a lapsed appeal.

23

In the case at bar, the questions raised by petitioner in its alternative petition before the CA were the following:

A. THE SOLE ARBITRATOR COMMITTED SERIOUS ERROR AND/OR GRAVELY ABUSED HIS DISCRETION IN RULING THAT THE BROADCAST OF "WINS WEEKLY" WAS DULY AUTHORIZED BY ABS-CBN.

B. THE SOLE ARBITRATOR COMMITTED SERIOUS ERROR AND/OR GRAVELY ABUSED HIS DISCRETION IN RULING THAT THE UNAUTHORIZED BROADCAST DID NOT CONSTITUTE MATERIAL BREACH OF THE AGREEMENT.

C. THE SOLE ARBITRATOR COMMITTED SERIOUS ERROR AND/OR GRAVELY ABUSED HIS DISCRETION IN RULING THAT WINS SEASONABLY CURED THE BREACH.

D. THE SOLE ARBITRATOR COMMITTED SERIOUS ERROR AND/OR GRAVELY ABUSED HIS DISCRETION IN RULING THAT TEMPERATE DAMAGES IN THE AMOUNT OF P1,166,955.00 MAY BE AWARDED TO WINS.

E. THE SOLE ARBITRATOR COMMITTED SERIOUS ERROR AND/OR GRAVELY ABUSED HIS DISCRETION IN AWARDING ATTORNEY'S FEES IN THE UNREASONABLE AMOUNT AND UNCONSCIONABLE AMOUNT OF P850,000.00.

F. THE ERROR COMMITTED BY THE SOLE ARBITRATOR IS NOT A SIMPLE ERROR OF JUDGMENT OR ABUSE OF DISCRETION. IT IS GRAVE ABUSE OF DISCRETION TANTAMOUNT TO LACK OR EXCESS OF JURISDICTION.

A careful reading of the assigned errors reveals that the real issues calling for the CA's resolution were less the alleged grave abuse of discretion exercised by the arbitrator and more about the arbitrator's appreciation of the issues and evidence presented by the parties. Therefore, the issues clearly fall under the classification of errors of fact and law - questions which may be passed upon by the CA via a Petition for Review under Rule 43. Petitioner cleverly crafted its assignment of errors in such a way as to straddle both judicial remedies, that is, by alleging serious errors of fact and law (in which case a Petition for Review under Rule 43 would be proper) and grave abuse of discretion (because of which a petition for certiorari under Rule 65 would be permissible).

It must be emphasized that every lawyer should be familiar with the distinctions between the two remedies for it is not the duty of the courts to determine under which rule the petition should fall.

24 Petitioner's ploy was fatal to its cause. An appeal taken either to

this Court or the CA by the wrong or inappropriate mode shall be dismissed.25

Thus, thealternative petition filed in the CA, being an inappropriate mode of appeal, should have been dismissed outright by the CA.

WHEREFORE, the petition is hereby DENIED. The February 16, 2005 decision and August 16, 2005 resolution of the Court of Appeals in CA-G.R. SP No. 81940 directing the Regional Trial Court of Quezon City, Branch 93 to proceed with the trial of the petition for confirmation of arbitral award is AFFIRMED.

Costs against petitioner.

SO ORDERED.

SECOND DIVISION

[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.

D E C I S I O N

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] a Complaint

[7] 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 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.

[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 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.

G.R. No. 161957 January 22, 2007

JORGE GONZALES and PANEL OF ARBITRATORS, Petitioners, vs. CLIMAX MINING LTD., CLIMAX-ARIMCO MINING CORP., and AUSTRALASIAN PHILIPPINES MINING INC.,Respondents.

x--------------------------------------------------------------------------------- x

G.R. No. 167994 January 22, 2007

JORGE GONZALES, Petitioner, vs. HON. OSCAR B. PIMENTEL, in his capacity as PRESIDING JUDGE of BR. 148 of the REGIONAL TRIAL COURT of MAKATI CITY, and CLIMAX-ARIMCO MINING CORPORATION, Respondents.

R E S O L U T I O N

TINGA, J.:

This is a consolidation of two petitions rooted in the same disputed Addendum Contract entered into by the parties. In G.R. No. 161957, the Court in its Decision of 28 February 2005

1 denied the Rule 45 petition of petitioner Jorge Gonzales (Gonzales). It held

that the DENR Panel of Arbitrators had no jurisdiction over the complaint for the annulment of the Addendum Contract on grounds of fraud and violation of the Constitution and that the action should have been brought before the regular courts as it involved judicial issues. Both parties filed separate motions for reconsideration. Gonzales avers in his Motion for Reconsideration

2 that the

Court erred in holding that the DENR Panel of Arbitrators was bereft of jurisdiction, reiterating its argument that the case involves a mining dispute that properly falls within the ambit of the Panels authority. Gonzales adds that the Court failed to rule on other issues he raised relating to the sufficiency of his complaint before the DENR Panel of Arbitrators and the timeliness of its filing.

Respondents Climax Mining Ltd., et al., (respondents) filed their Motion for Partial Reconsideration and/or Clarification3 seeking

reconsideration of that part of the Decision holding that the case should not be brought for arbitration under Republic Act (R.A.) No. 876, also known as the Arbitration Law.

4 Respondents, citing American jurisprudence

5 and the UNCITRAL Model Law,

6 argue that the

arbitration clause in the Addendum Contract should be treated as an agreement independent of the other terms of the contract, and that a claimed rescission of the main contract does not avoid the duty to arbitrate. Respondents add that Gonzaless argument relating to the alleged invalidity of the Addendum Contract still has to be proven and adjudicated on in a proper proceeding; that is, an action separate from the motion to compel arbitration. Pending judgment in such separate action, the Addendum Contract remains valid and binding and so does the arbitration clause therein. Respondents add that the holding in the Decision that "the case should not be brought under the ambit of the Arbitration Law" appears to be premised on Gonzaless having "impugn*ed+ the existence or validity" of the addendum contract. If so, it supposedly conveys the idea that Gonzaless unilateral repudiation of the contract or mere allegation of its invalidity is all it takes to avoid arbitration. Hence, respondents submit that the courts holding that "the case should not be brought under the ambit of the Arbitration Law" be understood or clarified as operative only where the challenge to the arbitration agreement has been sustained by final judgment.

Both parties were required to file their respective comments to the other partys motion for reconsideration/clarification.

7 Respondents filed their Comment on 17 August 2005,

8 while Gonzales filed his only on 25 July 2006.

9

On the other hand, G.R. No. 167994 is a Rule 65 petition filed on 6 May 2005, or while the motions for reconsideration in G.R. No. 161957

10 were pending, wherein Gonzales challenged the orders of the Regional Trial Court (RTC) requiring him to proceed with the

arbitration proceedings as sought by Climax-Arimco Mining Corporation (Climax-Arimco).

On 5 June 2006, the two cases, G.R. Nos. 161957 and 167994, were consolidated upon the recommendation of the Assistant Division Clerk of Court since the cases are rooted in the same Addendum Contract.

We first tackle the more recent case which is G.R. No. 167994. It stemmed from the petition to compel arbitration filed by respondent Climax-Arimco before the RTC of Makati City on 31 March 2000 while the complaint for the nullification of the Addendum Contract was pending before the DENR Panel of Arbitrators. On 23 March 2000, Climax-Arimco had sent Gonzales a Demand for Arbitration pursuant to Clause 19.1

11 of the Addendum Contract and also in accordance with Sec. 5 of R.A. No. 876. The

petition for arbitration was subsequently filed and Climax-Arimco sought an order to compel the parties to arbitrate pursuant to the said arbitration clause. The case, docketed as Civil Case No. 00-444, was initially raffled to Br. 132 of the RTC of Makati City, with Judge Herminio I. Benito as Presiding Judge. Respondent Climax-Arimco filed on 5 April 2000 a motion to set the application to compel arbitration for hearing.

On 14 April 2000, Gonzales filed a motion to dismiss which he however failed to set for hearing. On 15 May 2000, he filed an Answer with Counterclaim,

12 questioning the validity of the Addendum Contract containing the arbitration clause. Gonzales alleged that the

Addendum Contract containing the arbitration clause is void in view of Climax-Arimcos acts of fraud, oppression and violation of the Constitution. Thus, the arbitration clause, Clause 19.1, contained in the Addendum Contract is also null and void ab initio and legally inexistent.1awphi1.net

On 18 May 2000, the RTC issued an order declaring Gonzaless motion to dismiss moot and academic in view of the filing of his Answer with Counterclaim.

13

On 31 May 2000, Gonzales asked the RTC to set the case for pre-trial.14

This the RTC denied on 16 June 2000, holding that the petition for arbitration is a special proceeding that is summary in nature.

15 However, on 7 July 2000, the RTC granted Gonzaless

motion for reconsideration of the 16 June 2000 Order and set the case for pre-trial on 10 August 2000, it being of the view that Gonzales had raised in his answer the issue of the making of the arbitration agreement.

16

Climax-Arimco then filed a motion to resolve its pending motion to compel arbitration. The RTC denied the same in its 24 July 2000 order.

On 28 July 2000, Climax-Arimco filed a Motion to Inhibit Judge Herminio I. Benito for "not possessing the cold neutrality of an impartial judge."

17 On 5 August 2000, Judge Benito issued an Order granting the Motion to Inhibit and ordered the re-raffling of the

petition for arbitration.18

The case was raffled to the sala of public respondent Judge Oscar B. Pimentel of Branch 148.

On 23 August 2000, Climax-Arimco filed a motion for reconsideration of the 24 July 2000 Order.19

Climax-Arimco argued that R.A. No. 876 does not authorize a pre-trial or trial for a motion to compel arbitration but directs the court to hear the motion summarily and resolve it within ten days from hearing. Judge Pimentel granted the motion and directed the parties to arbitration. On 13

February 2001, Judge Pimentel issued the first assailed order requiring Gonzales to proceed with arbitration proceedings and appointing retired CA Justice Jorge Coquia as sole arbitrator.

20

Gonzales moved for reconsideration on 20 March 2001 but this was denied in the Order dated 7 March 2005.21

Gonzales thus filed the Rule 65 petition assailing the Orders dated 13 February 2001 and 7 March 2005 of Judge Pimentel. Gonzales contends that public respondent Judge Pimentel acted with grave abuse of discretion in immediately ordering the parties to proceed with arbitration despite the proper, valid, and timely raised argument in his Answer with Counterclaim that the Addendum Contract, containing the arbitration clause, is null and void. Gonzales has also sought a temporary restraining order to prevent the enforcement of the assailed orders directing the parties to arbitrate, and to direct Judge Pimentel to hold a pre-trial conference and the necessary hearings on the determination of the nullity of the Addendum Contract.

In support of his argument, Gonzales invokes Sec. 6 of R.A. No. 876:

Sec. 6. Hearing by court.A party aggrieved by the failure, neglect or refusal of another to perform under an agreement in writing providing for arbitration may petition the court for an order directing that such arbitration proceed in the manner provided for in such agreement. Five days notice in writing of the hearing of such application shall be served either personally or by registered mail upon the party in default. The court shall hear the parties, and upon being satisfied that the making of the agreement or such failure to comply therewith is not in issue, shall make an order directing the parties to proceed to arbitration in accordance with the terms of the agreement. If the making of the agreement or default be in issue the court shall proceed to summarily hear such issue. If the finding be that no agreement in writing providing for arbitration was made, or that there is no default in the proceeding thereunder, the proceeding shall be dismissed. If the finding be that a written provision for arbitration was made and there is a default in proceeding thereunder, an order shall be made summarily directing the parties to proceed with the arbitration in accordance with the terms thereof.

The court shall decide all motions, petitions or applications filed under the provisions of this Act, within ten (10) days after such motions, petitions, or applications have been heard by it.

Gonzales also cites Sec. 24 of R.A. No. 9285 or the "Alternative Dispute Resolution Act of 2004:"

Sec. 24. Referral to Arbitration.A court before which an action is brought in a matter which is the subject matter of an arbitration agreement shall, if at least one party so requests not later than the pre-trial conference, or upon the request of both parties thereafter, refer the parties to arbitration unless it finds that the arbitration agreement is null and void, inoperative or incapable of being performed.

According to Gonzales, the above-quoted provisions of law outline the procedure to be followed in petitions to compel arbitration, which the RTC did not follow. Thus, referral of the parties to arbitration by Judge Pimentel despite the timely and properly raised issue of nullity of the Addendum Contract was misplaced and without legal basis. Both R.A. No. 876 and R.A. No. 9285 mandate that any issue as to the nullity, inoperativeness, or incapability of performance of the arbitration clause/agreement raised by one of the parties to the alleged arbitration agreement must be determined by the court prior to referring them to arbitration. They require that the trial court first determine or resolve the issue of nullity, and there is no other venue for this determination other than a pre-trial and hearing on the issue by the trial court which has jurisdiction over the case. Gonzales adds that the assailed 13 February 2001 Order also violated his right to procedural due process when the trial court erroneously ruled on the existence of the arbitration agreement despite the absence of a hearing for the presentation of evidence on the nullity of the Addendum Contract.

Respondent Climax-Arimco, on the other hand, assails the mode of review availed of by Gonzales. Climax-Arimco cites Sec. 29 of R.A. No. 876:

Sec. 29. Appeals.An appeal may be taken from an order made in a proceeding under this Act, or from a judgment entered upon an award through certiorari proceedings, but such appeals shall be limited to questions of law. The proceedings upon such an appeal, including the judgment thereon shall be governed by the Rules of Court in so far as they are applicable.

Climax-Arimco mentions that the special civil action for certiorari employed by Gonzales is available only where there is no appeal or any plain, speedy, and adequate remedy in the ordinary course of law against the challenged orders or acts. Climax-Arimco then points out that R.A. No. 876 provides for an appeal from such orders, which, under the Rules of Court, must be filed within 15 days from notice of the final order or resolution appealed from or of the denial of the motion for reconsideration filed in due time.

Gonzales has not denied that the relevant 15-day period for an appeal had elapsed long before he filed this petition for certiorari. He cannot use the special civil action of certiorari as a remedy for a lost appeal.

Climax-Arimco adds that an application to compel arbitration under Sec. 6 of R.A. No. 876 confers on the trial court only a limited and special jurisdiction, i.e., a jurisdiction solely to determine (a) whether or not the parties have a written contract to arbitrate, and (b) if the defendant has failed to comply with that contract. Respondent cites La Naval Drug Corporation v. Court of Appeals,

22 which

holds that in a proceeding to compel arbitration, "*t+he arbitration law explicitly confines the courts authority only to pass upon the issue of whether there is or there is no agreement in writing providing for arbitration," and "[i]n the affirmative, the statute ordains that the court shall issue an order summarily directing the parties to proceed with the arbitration in accordance with the terms thereof."

23Climax-Arimco argues that R.A. No. 876 gives no room for any other issue to be dealt with in such a proceeding, and that

the court presented with an application to compel arbitration may order arbitration or dismiss the same, depending solely on its finding as to those two limited issues. If either of these matters is disputed, the court is required to conduct a summary hearing on it. Gonzaless proposition contradicts both the trial courts limited jurisdiction and the summary nature of the proceeding itself.

Climax-Arimco further notes that Gonzaless attack on or repudiation of the Addendum Contract also is not a ground to deny effect to the arbitration clause in the Contract. The arbitration agreement is separate and severable from the contract evidencing the parties commercial or economic transaction, it stresses. Hence, the alleged defect or failure of the main contract is not a ground to deny enforcement of the parties arbitration agreement. Even the party who has repudiated the main contract is not prevented from enforcing its arbitration provision. R.A. No. 876 itself treats the arbitration clause or agreement as a contract separate from the commercial, economic or other transaction to be arbitrated. The statute, in particular paragraph 1 of Sec. 2 thereof, considers the arbitration stipulation an independent contract in its own right whose enforcement may be prevented only on grounds which legally make the arbitration agreement itself revocable, thus:

Sec. 2. Persons and matters subject to arbitration.Two or more persons or parties may submit to the arbitration of one or more arbitrators any controversy existing, between them at the time of the submission and which may be the subject of an action, or the parties to any contract may in such contract agree to settle by arbitration a controversy thereafter arising between them. Such submission or contract shall be valid, enforceable and irrevocable, save upon such grounds as exist at law for the revocation of any contract.

x x x x

The grounds Gonzales invokes for the revocation of the Addendum Contractfraud and oppression in the execution thereofare also not grounds for the revocation of the arbitration clause in the Contract, Climax-Arimco notes. Such grounds may only be raised by way of defense in the arbitration itself and cannot be used to frustrate or delay the conduct of arbitration proceedings. Instead, these should be raised in a separate action for rescission, it continues.

Climax-Arimco emphasizes that the summary proceeding to compel arbitration under Sec. 6 of R.A. No. 876 should not be confused with the procedure in Sec. 24 of R.A. No. 9285. Sec. 6 of R.A. No. 876 refers to an application to compel arbitration where the courts authority is limited to resolving the issue of whether there is or there is no agreement in writing providing for arbitration, while Sec. 24 of R.A. No. 9285 refers to an ordinary action which covers a matter that appears to be arbitrable or subject to arbitration under the arbitration agreement. In the latter case, the statute is clear that the court, instead of trying the case, may, on request of either or both parties, refer the parties to arbitration, unless it finds that the arbitration agreement is null and void, inoperative or incapable of being performed. Arbitration may even be ordered in the same suit brought upon a matter covered by an arbitration agreement even without waiting for the outcome of the issue of the validity of the arbitration agreement. Art. 8 of the UNCITRAL Model Law

24 states that where a court before which an action is brought in a matter which is subject of an arbitration agreement

refers the parties to arbitration, the arbitral proceedings may proceed even while the action is pending.

Thus, the main issue raised in the Petition for Certiorari is whether it was proper for the RTC, in the proceeding to compel arbitration under R.A. No. 876, to order the parties to arbitrate even though the defendant therein has raised the twin issues of validity and nullity of the Addendum Contract and, consequently, of the arbitration clause therein as well. The resolution of both Climax-Arimcos Motion for Partial Reconsideration and/or Clarification in G.R. No. 161957 and Gonzaless Petition for Certiorari in G.R. No. 167994 essentially turns on whether the question of validity of the Addendum Contract bears upon the applicability or enforceability of the arbitration clause contained therein. The two pending matters shall thus be jointly resolved.

We address the Rule 65 petition in G.R. No. 167994 first from the remedial law perspective. It deserves to be dismissed on procedural grounds, as it was filed in lieu of appeal which is the prescribed remedy and at that far beyond the reglementary period. It is elementary in remedial law that the use of an erroneous mode of appeal is cause for dismissal of the petition for certiorari and it

has been repeatedly stressed that a petition for certiorari is not a substitute for a lost appeal. As its nature, a petition for certiorari lies only where there is "no appeal," and "no plain, speedy and adequate remedy in the ordinary course of law."

25 The Arbitration

Law specifically provides for an appeal by certiorari, i.e., a petition for review under certiorari under Rule 45 of the Rules of Court that raises pure questions of law.

26 There is no merit to Gonzaless argument that the use of the permissive term "may" in Sec. 29,

R.A. No. 876 in the filing of appeals does not prohibit nor discount the filing of a petition for certiorari under Rule 65.27

Proper interpretation of the aforesaid provision of law shows that the term "may" refers only to the filing of an appeal, not to the mode of review to be employed. Indeed, the use of "may" merely reiterates the principle that the right to appeal is not part of due process of law but is a mere statutory privilege to be exercised only in the manner and in accordance with law.

Neither can BF Corporation v. Court of Appeals28

cited by Gonzales support his theory. Gonzales argues that said case recognized and allowed a petition for certiorari under Rule 65 "appealing the order of the Regional Trial Court disregarding the arbitration agreement as an acceptable remedy."

29 The BF Corporation case had its origins in a complaint for collection of sum of money filed by

therein petitioner BF Corporation against Shangri-la Properties, Inc. (SPI). SPI moved to suspend the proceedings alleging that the construction agreement or the Articles of Agreement between the parties contained a clause requiring prior resort to arbitration before judicial intervention. The trial court found that an arbitration clause was incorporated in the Conditions of Contract appended to and deemed an integral part of the Articles of Agreement. Still, the trial court denied the motion to suspend proceedings upon a finding that the Conditions of Contract were not duly executed and signed by the parties. The trial court also found that SPI had failed to file any written notice of demand for arbitration within the period specified in the arbitration clause. The trial court denied SPI's motion for reconsideration and ordered it to file its responsive pleading. Instead of filing an answer, SPI filed a petition for certiorari under Rule 65, which the Court of Appeals, favorably acted upon. In a petition for review before this Court, BF Corporation alleged, among others, that the Court of Appeals should have dismissed the petition for certiorari since the order of the trial court denying the motion to suspend proceedings "is a resolution of an incident on the merits" and upon the continuation of the proceedings, the trial court would eventually render a decision on the merits, which decision could then be elevated to a higher court "in an ordinary appeal."

30

The Court did not uphold BF Corporations argument. The issue raised before the Court was whether SPI had taken the proper mode of appeal before the Court of Appeals. The question before the Court of Appeals was whether the trial court had prematurely assumed jurisdiction over the controversy. The question of jurisdiction in turn depended on the question of existence of the arbitration clause which is one of fact. While on its face the question of existence of the arbitration clause is a question of fact that is not proper in a petition for certiorari, yet since the determination of the question obliged the Court of Appeals as it did to interpret the contract documents in accordance with R.A. No. 876 and existing jurisprudence, the question is likewise a question of law which may be properly taken cognizance of in a petition for certiorari under Rule 65, so the Court held.

31

The situation in B.F. Corporation is not availing in the present petition. The disquisition in B.F. Corporation led to the conclusion that in order that the question of jurisdiction may be resolved, the appellate court had to deal first with a question of law which could be addressed in a certiorari proceeding. In the present case, Gonzaless petition raises a question of law, but not a question of jurisdiction. Judge Pimentel acted in accordance with the procedure prescribed in R.A. No. 876 when he ordered Gonzales to proceed with arbitration and appointed a sole arbitrator after making the determination that there was indeed an arbitration agreement. It has been held that as long as a court acts within its jurisdiction and does not gravely abuse its discretion in the exercise thereof, any supposed error committed by it will amount to nothing more than an error of judgment reviewable by a timely appeal and not assailable by a special civil action of certiorari.

32 Even if we overlook the employment of the wrong remedy in the

broader interests of justice, the petition would nevertheless be dismissed for failure of Gonzalez to show grave abuse of discretion.

Arbitration, as an alternative mode of settling disputes, has long been recognized and accepted in our jurisdiction. The Civil Code is explicit on the matter.

33 R.A. No. 876 also expressly authorizes arbitration of domestic disputes. Foreign arbitration, as a system of

settling commercial disputes of an international character, was likewise recognized when the Philippines adhered to the United Nations "Convention on the Recognition and the Enforcement of Foreign Arbitral Awards of 1958," under the 10 May 1965 Resolution No. 71 of the Philippine Senate, giving reciprocal recognition and allowing enforcement of international arbitration agreements between parties of different nationalities within a contracting state.

34 The enactment of R.A. No. 9285 on 2 April 2004

further institutionalized the use of alternative dispute resolution systems, including arbitration, in the settlement of disputes.

Disputes do not go to arbitration unless and until the parties have agreed to abide by the arbitrators decision. Necessarily, a contract is required for arbitration to take place and to be binding. R.A. No. 876 recognizes the contractual nature of the arbitration agreement, thus:

Sec. 2. Persons and matters subject to arbitration.Two or more persons or parties may submit to the arbitration of one or more arbitrators any controversy existing, between them at the time of the submission and which may be the subject of an action, or the parties to any contract may in such contract agree to settle by arbitration a controversy thereafter arising between them. Such

submission or contract shall be valid, enforceable and irrevocable, save upon such grounds as exist at law for the revocation of any contract.

Such submission or contract may include question arising out of valuations, appraisals or other controversies which may be collateral, incidental, precedent or subsequent to any issue between the parties.

A controversy cannot be arbitrated where one of the parties to the controversy is an infant, or a person judicially declared to be incompetent, unless the appropriate court having jurisdiction approve a petition for permission to submit such controversy to arbitration made by the general guardian or guardian ad litem of the infant or of the incompetent. [Emphasis added.]

Thus, we held in Manila Electric Co. v. Pasay Transportation Co.35

that a submission to arbitration is a contract. A clause in a contract providing that all matters in dispute between the parties shall be referred to arbitration is a contract,

36 and in Del Monte

Corporation-USA v. Court of Appeals37

that "[t]he provision to submit to arbitration any dispute arising therefrom and the relationship of the parties is part of that contract and is itself a contract. As a rule, contracts are respected as the law between the contracting parties and produce effect as between them, their assigns and heirs."

38

The special proceeding under Sec. 6 of R.A. No. 876 recognizes the contractual nature of arbitration clauses or agreements. It provides:

Sec. 6. Hearing by court.A party aggrieved by the failure, neglect or refusal of another to perform under an agreement in writing providing for arbitration may petition the court for an order directing that such arbitration proceed in the manner provided for in such agreement. Five days notice in writing of the hearing of such application shall be served either personally or by registered mail upon the party in default. The court shall hear the parties, and upon being satisfied that the making of the agreement or such failure to comply therewith is not in issue, shall make an order directing the parties to proceed to arbitration in accordance with the terms of the agreement. If the making of the agreement or default be in issue the court shall proceed to summarily hear such issue. If the finding be that no agreement in writing providing for arbitration was made, or that there is no default in the proceeding thereunder, the proceeding shall be dismissed. If the finding be that a written provision for arbitration was made and there is a default in proceeding thereunder, an order shall be made summarily directing the parties to proceed with the arbitration in accordance with the terms thereof.

The court shall decide all motions, petitions or applications filed under the provisions of this Act, within ten days after such motions, petitions, or applications have been heard by it. [Emphasis added.]

This special proceeding is the procedural mechanism for the enforcement of the contract to arbitrate. The jurisdiction of the courts in relation to Sec. 6 of R.A. No. 876 as well as the nature of the proceedings therein was expounded upon in La Naval Drug Corporation v. Court of Appeals.

39 There it was held that R.A. No. 876 explicitly confines the court's authority only to the

determination of whether or not there is an agreement in writing providing for arbitration. In the affirmative, the statute ordains that the court shall issue an order "summarily directing the parties to proceed with the arbitration in accordance with the terms thereof." If the court, upon the other hand, finds that no such agreement exists, "the proceeding shall be dismissed."

40 The cited

case also stressed that the proceedings are summary in nature.41

The same thrust was made in the earlier case of Mindanao Portland Cement Corp. v. McDonough Construction Co. of Florida

42 which held, thus:

Since there obtains herein a written provision for arbitration as well as failure on respondent's part to comply therewith, the court a quo rightly ordered the parties to proceed to arbitration in accordance with the terms of their agreement (Sec. 6, Republic Act 876). Respondent's arguments touching upon the merits of the dispute are improperly raised herein. They should be addressed to the arbitrators. This proceeding is merely a summary remedy to enforce the agreement to arbitrate. The duty of the court in this case is not to resolve the merits of the parties' claims but only to determine if they should proceed to arbitration or not. x x x x

43

Implicit in the summary nature of the judicial proceedings is the separable or independent character of the arbitration clause or agreement. This was highlighted in the cases of Manila Electric Co. v. Pasay Trans. Co.

44 and Del Monte Corporation-USA v. Court of

Appeals.45

The doctrine of separability, or severability as other writers call it, enunciates that an arbitration agreement is independent of the main contract. The arbitration agreement is to be treated as a separate agreement and the arbitration agreement does not automatically terminate when the contract of which it is part comes to an end.

46

The separability of the arbitration agreement is especially significant to the determination of whether the invalidity of the main contract also nullifies the arbitration clause. Indeed, the doctrine denotes that the invalidity of the main contract, also referred to as the "container" contract, does not affect the validity of the arbitration agreement. Irrespective of the fact that the main contract is invalid, the arbitration clause/agreement still remains valid and enforceable.

47

The separability of the arbitration clause is confirmed in Art. 16(1) of the UNCITRAL Model Law and Art. 21(2) of the UNCITRAL Arbitration Rules.

48

The separability doctrine was dwelt upon at length in the U.S. case of Prima Paint Corp. v. Flood & Conklin Manufacturing Co.49

In that case, Prima Paint and Flood and Conklin (F & C) entered into a consulting agreement whereby F & C undertook to act as consultant to Prima Paint for six years, sold to Prima Paint a list of its customers and promised not to sell paint to these customers during the same period. The consulting agreement contained an arbitration clause. Prima Paint did not make payments as provided in the consulting agreement, contending that F & C had fraudulently misrepresented that it was solvent and able for perform its contract when in fact it was not and had even intended to file for bankruptcy after executing the consultancy agreement. Thus, F & C served Prima Paint with a notice of intention to arbitrate. Prima Paint sued in court for rescission of the consulting agreement on the ground of fraudulent misrepresentation and asked for the issuance of an order enjoining F & C from proceeding with arbitration. F & C moved to stay the suit pending arbitration. The trial court granted F & Cs motion, and the U.S. Supreme Court affirmed.

The U.S. Supreme Court did not address Prima Paints argument that it had been fraudulently induced by F & C to sign the consulting agreement and held that no court should address this argument. Relying on Sec. 4 of the Federal Arbitration Actwhich provides that "if a party [claims to be] aggrieved by the alleged failure x x x of another to arbitrate x x x, [t]he court shall hear the parties, and upon being satisfied that the making of the agreement for arbitration or the failure to comply therewith is not in issue, the court shall make an order directing the parties to proceed to arbitration x x x. If the making of the arbitration agreement or the failure, neglect, or refusal to perform the same be in issue, the court shall proceed summarily to the trial thereof"the U.S. High Court held that the court should not order the parties to arbitrate if the making of the arbitration agreement is in issue. The parties should be ordered to arbitration if, and only if, they have contracted to submit to arbitration. Prima Paint was not entitled to trial on the question of whether an arbitration agreement was made because its allegations of fraudulent inducement were not directed to the arbitration clause itself, but only to the consulting agreement which contained the arbitration agreement.

50 Prima Paint held that

"arbitration clauses are separable from the contracts in which they are embedded, and that where no claim is made that fraud was directed to the arbitration clause itself, a broad arbitration clause will be held to encompass arbitration of the claim that the contract itself was induced by fraud."

51

There is reason, therefore, to rule against Gonzales when he alleges that Judge Pimentel acted with grave abuse of discretion in ordering the parties to proceed with arbitration. Gonzaless argument that the Addendum Contract is null and void and, therefore the arbitration clause therein is void as well, is not tenable. First, the proceeding in a petition for arbitration under R.A. No. 876 is limited only to the resolution of the question of whether the arbitration agreement exists. Second, the separability of the arbitration clause from the Addendum Contract means that validity or invalidity of the Addendum Contract will not affect the enforceability of the agreement to arbitrate. Thus, Gonzaless petition for certiorari should be dismissed.

This brings us back to G.R. No. 161957. The adjudication of the petition in G.R. No. 167994 effectively modifies part of the Decision dated 28 February 2005 in G.R. No. 161957. Hence, we now hold that the validity of the contract containing the agreement to submit to arbitration does not affect the applicability of the arbitration clause itself. A contrary ruling would suggest that a partys mere repudiation of the main contract is sufficient to avoid arbitration. That is exactly the situation that the separability doctrine, as well as jurisprudence applying it, seeks to avoid. We add that when it was declared in G.R. No. 161957 that the case should not be brought for arbitration, it should be clarified that the case referred to is the case actually filed by Gonzales before the DENR Panel of Arbitrators, which was for the nullification of the main contract on the ground of fraud, as it had already been determined that the case should have been brought before the regular courts involving as it did judicial issues.

The Motion for Reconsideration of Gonzales in G.R. No. 161957 should also be denied. In the motion, Gonzales raises the same question of jurisdiction, more particularly that the complaint for nullification of the Addendum Contract pertained to the DENR Panel of Arbitrators, not the regular courts. He insists that the subject of his complaint is a mining dispute since it involves a dispute concerning rights to mining areas, the Financial and Technical Assistance Agreement (FTAA) between the parties, and it also involves claimowners. He adds that the Court failed to rule on other issues he raised, such as whether he had ceded his claims over the mineral deposits located within the Addendum Area of Influence; whether the complaint filed before the DENR Panel of Arbitrators alleged ultimate facts of fraud; and whether the action to declare the nullity of the Addendum Contract on the ground of fraud has prescribed.1avvphi1.net

These are the same issues that Gonzales raised in his Rule 45 petition in G.R. No. 161957 which were resolved against him in the Decision of 28 February 2005. Gonzales does not raise any new argument that would sway the Court even a bit to alter its holding that the complaint filed before the DENR Panel of Arbitrators involves judicial issues which should properly be resolved by the regular courts. He alleged fraud or misrepresentation in the execution of the Addendum Contract which is a ground for the annulment of a voidable contract. Clearly, such allegations entail legal questions which are within the jurisdiction of the courts.

The question of whether Gonzales had ceded his claims over the mineral deposits in the Addendum Area of Influence is a factual question which is not proper for determination before this Court. At all events, moreover, the question is irrelevant to the issue of jurisdiction of the DENR Panel of Arbitrators. It should be pointed out that the DENR Panel of Arbitrators made a factual finding in its Order dated 18 October 2001, which it reiterated in its Order dated 25 June 2002, that Gonzales had, "through the various agreements, assigned his interest over the mineral claims all in favor of [Climax-Arimco]" as well as that without the complainant [Gonzales] assigning his interest over the mineral claims in favor of [Climax-Arimco], there would be no FTAA to speak of."

52 This

finding was affirmed by the Court of Appeals in its Decision dated 30 July 2003 resolving the petition for certiorari filed by Climax-Arimco in regard to the 18 October 2001 Order of the DENR Panel.

53

The Court of Appeals likewise found that Gonzaless complaint alleged fraud but did not provide any particulars to substantiate it. The complaint repeatedly mentioned fraud, oppression, violation of the Constitution and similar conclusions but nowhere did it give any ultimate facts or particulars relative to the allegations.

54

Sec. 5, Rule 8 of the Rules of Court specifically provides that in all averments of fraud, the circumstances constituting fraud must be stated with particularity. This is to enable the opposing party to controvert the particular facts allegedly constituting the same. Perusal of the complaint indeed shows that it failed to state with particularity the ultimate facts and circumstances constituting the alleged fraud. It does not state what particulars about Climax-Arimcos financial or technical capability were misrepresented, or how the misrepresentation was done. Incorporated in the body of the complaint are verbatim reproductions of the contracts, correspondence and government issuances that reportedly explain the allegations of fraud and misrepresentation, but these are, at best, evidentiary matters that should not be included in the pleading.

As to the issue of prescription, Gonzaless claims of fraud and misrepresentation attending the execution of the Addendum Contract are grounds for the annulment of a voidable contract under the Civil Code.

55 Under Art. 1391 of the Code, an action for annulment

shall be brought within four years, in the case of fraud, beginning from the time of the discovery of the same. However, the time of the discovery of the alleged fraud is not clear from the allegations of Gonzaless complaint. That being the situation coupled with the fact that this Court is not a trier of facts, any ruling on the issue of prescription would be uncalled for or even unnecessary.

WHEREFORE, the Petition for Certiorari in G.R. No. 167994 is DISMISSED. Such dismissal effectively renders superfluous formal action on the Motion for Partial Reconsideration and/or Clarification filed by Climax Mining Ltd., et al. in G.R. No. 161957.

The Motion for Reconsideration filed by Jorge Gonzales in G.R. No. 161957 is DENIED WITH FINALITY.

SO ORDERED.

G.R. No. 198075 September 4, 2013

KOPPEL, INC. (formerly known as KPL AIRCON, INC.), Petitioner, vs. MAKATI ROTARY CLUB FOUNDATION, INC., Respondent.

D E C I S I O N

PEREZ, J.:

This case is an appeal1 from the Decision

2 dated 19 August 2011 of the Court of Appeals in C.A.-G.R. SP No. 116865.

The facts:

The Donation

Fedders Koppel, Incorporated (FKI), a manufacturer of air-conditioning products, was the registered owner of a parcel of land located at Km. 16, South Superhighway, Paraaque City (subject land).

3 Within the subject land are buildings and other

improvements dedicated to the business of FKI.4

In 1975, FKI5 bequeathed the subject land (exclusive of the improvements thereon) in favor of herein respondent Makati Rotary Club

Foundation, Incorporated by way of a conditional donation.6 The respondent accepted the donation with all of its conditions.

7 On 26

May1975, FKI and the respondent executed a Deed of Donation8evidencing their consensus.

The Lease and the Amended Deed of Donation

One of the conditions of the donation required the respondent to lease the subject land back to FKI under terms specified in their Deed of Donation.

9 With the respondents acceptance of the donation, a lease agreement between FKI and the respondent was,

therefore, effectively incorporated in the Deed of Donation.

Pertinent terms of such lease agreement, as provided in the Deed of Donation , were as follows:

1. The period of the lease is for twenty-five (25) years,10

or until the 25th of May 2000;

2. The amount of rent to be paid by FKI for the first twenty-five (25) years is P40,126.00 per annum .11

The Deed of Donation also stipulated that the lease over the subject property is renewable for another period of twenty-five (25) years " upon mutual agreement" of FKI and the respondent.

12 In which case, the amount of rent shall be determined in accordance

with item 2(g) of the Deed of Donation, viz:

g. The rental for the second 25 years shall be the subject of mutual agreement and in case of disagreement the matter shall be referred to a Board of three Arbitrators appointed and with powers in accordance with the Arbitration Law of the Philippines, Republic Act 878, whose function shall be to decide the current fair market value of the land excluding the improvements, provided, that, any increase in the fair market value of the land shall not exceed twenty five percent (25%) of the original value of the land donated as stated in paragraph 2(c) of this Deed. The rental for the second 25 years shall not exceed three percent (3%) of the fair market value of the land excluding the improvements as determined by the Board of Arbitrators.

13

In October 1976, FKI and the respondent executed an Amended Deed of Donation14

that reiterated the provisions of the Deed of Donation , including those relating to the lease of the subject land.

Verily, by virtue of the lease agreement contained in the Deed of Donation and Amended Deed of Donation , FKI was able to continue in its possession and use of the subject land.

2000 Lease Contract

Two (2) days before the lease incorporated in the Deed of Donation and Amended Deed of Donation was set to expire, or on 23 May 2000, FKI and respondent executed another contract of lease ( 2000 Lease Contract )

15covering the subject land.