148 SUPREME COURT REPORTS ANNOTATED

Gonzales vs. Climax Mining Ltd.

*
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.

*
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.

Alternative Dispute Resolution; Arbitration; R.A. No. 876; Appeals; Pleadings

and Practice; Statutory Construction; 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; The Arbitration Law specifically provides for an appeal by certiorari,
i.e., a petition for review on certiorari under Rule 45 of the Rules of Court that
raises pure questions of law; Proper interpretation of Sec. 29 of R.A. No. 876 shows
that the term “may” refers only to the filing of an appeal, not to the mode of review
to be employed—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.—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.” The Arbitration Law specifically provides for an appeal
by certiorari, i.e., a petition for review

_______________

* SPECIAL SECOND DIVISION.

 VOL. 512, JANUARY 22, 2007 149

Gonzales vs. Climax Mining Ltd.

under certiorari under Rule 45 of the Rules of Court that raises pure questions of
law. There is no merit to Gonzales’s 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. 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.

Arbitration; Conflict of Laws; Foreign arbitration, as a system of settling

commercial disputes of an international character, was recognized when the
Philippines adhered to the United Nations “Convention on the Recognition and the
Enforcement of Foreign Arbitral Awards of 1958.”—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. 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. 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.

Same; Disputes do not go to arbitration unless and until the parties have
agreed to abide by the arbitrator’s decision—necessarily, a contract is required for
arbitration to take place and to be binding.—Disputes do not go to arbitration
unless and until the parties have agreed to abide by the arbitrator’s 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
150 SUPREME COURT REPORTS ANNOTATED

Gonzales vs. Climax Mining Ltd.

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.

Doctrine of Separability or Severability; Words and Phrases; The doctrine of

separability, or severability as other writers call it, enunciates that an arbitration
agreement is independent of the main contract—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 which still remains valid and
enforceable.—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., 57 Phil. 600
(1932) and Del Monte Corporation-USA v. Court of Appeals, 351 SCRA 373
(2001). 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. 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.

Arbitration; R.A. No. 876; 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.—There is rea-
 VOL. 512, JANUARY 22, 2007 151

Gonzales vs. Climax Mining Ltd.

son, 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.
Gonzales’s 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, Gonzales’s petition for certiorari should be dismissed.

Same; Same; The Court now holds that the validity of the contract containing
the agreement to submit to arbitration does not affect the applicability of the
arbitration clause itself.—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
party’s 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.

Fraud; Pleadings and Practice; In all averments of fraud, the circumstances

constituting fraud must be stated with particularity to enable the opposing party to
controvert the particular facts allegedly constituting the same.—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 circum-
152 SUPREME COURT REPORTS ANNOTATED

Gonzales vs. Climax Mining Ltd.

stances constituting the alleged fraud. It does not state what particulars about
Climax-Arimco’s 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.

Voidable Contracts; Prescription; Under Article 1391 of the Civil 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.—As to the issue of
prescription, Gonzales’s 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. 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 Gonzales’s 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.

MOTION FOR RECONSIDERATION of a decision of the Supreme Court

and SPECIAL CIVIL ACTION in the Supreme Court. Certiorari.
The facts are stated in the resolution of the Court.
Asensi, Saguisag and Gonzales Law Offices for petitioners.
Roberto C. San Juan for respondent.

R E S O L U T I ON

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
 VOL. 512, JANUARY 22, 2007 153
Gonzales vs. Climax Mining Ltd.

1
2005 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 separate2 motions
for reconsideration. Gonzales avers in his Motion for Reconsideration 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 Panel’s 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
3
Partial Reconsideration and/or Clarification seeking reconsideration of that part
of the Decision holding that the case should not be brought for arbitration under
4
Republic Act (R.A.) No. 876, also known as the Arbitration Law.
Respondents, citing American jurispru-

_______________

1 Gonzales v. Climax Mining Ltd., G.R. No. 161957, 28 February 2005, 452 SCRA 607.
2 Rollo (G.R. No. 161957), pp. 715-741.
3 Id., at pp. 700-706.
4 The pertinent portion of the assailed decision reads:

Petitioner also disagrees with the Court of Ap p eals’ ruling that the case should be brought for
arbitration under Rep . Act [No.] 876, p ursuant to the arbitration clause in the Addendum Contract
which states that “[a]ll disp utes arising out of or in connection with the Contract, which cannot be
settled amicably among the Parties, shall finally be settled under R.A. No. 876.” He p oints out that
resp ondents Climax and APM I are not p arties 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
154 SUPREME COURT REPORTS ANNOTATED
Gonzales vs. Climax Mining Ltd.

5 6
dence and the UNCITRAL Model Law, 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 Gonzales’s 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 Gonzales’s having “impugn[ed] the existence or validity” of the
addendum contract. If so, it supposedly conveys the idea that Gonzales’s
unilateral repudiation of the contract or mere allegation of its invalidity is all it
takes to avoid arbitration. Hence, respondents submit that the court’s

_______________

question of validity of the contract containing the agreement to submit to arbitration will affect the
ap p licability of the arbitration clause itself. A p arty cannot rely on the contract and claim rights or
obligations under it and at the same time imp ugn its existence or validity . Indeed, litigants are
enjoined from taking inconsistent p ositions. As p reviously discussed, the comp laint should have
been filed before the regular courts as it involved issues which are judicial in nature. Rollo [G.R. No.
161957], p . 695.

5 4 AM JUR 2d, at 136, and AMERICAN LAW REPORTS,ANNOTATED, 3 ALR2d 425

to 426.
6 Art. 16(1) thereof states: “The arbitral tribunal may rule on its own jurisdiction,
including any objections with respect to the existence or validity of the arbitration
agreement. For that purpose, an arbitration clause which forms part of a contract shall be
treated as an agreement independent of the other terms of the contract. A decision by the
arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of
the arbitration clause.” The Model Law was adopted in Republic Act No. 9285 or the
“Alternative Dispute Resolution Act of 2004” (in Sec. 19 thereof).
 VOL. 512, JANUARY 22, 2007 155
Gonzales vs. Climax Mining Ltd.

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
7
party’s motion for reconsideration/clarification.
8
Respondents filed their
9
Comment on 17 August 2005, while Gonzales filed his only on 25 July 2006.
On the other hand, G.R. No. 167994 is a Rule 65 petition filed on106 May
2005, or while the motions for reconsideration in G.R. No. 161957 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
11
had sent Gonzales a Demand
for Arbitration pursuant to Clause 19.1 of the Addendum Contract and also in
accordance with

_______________

7 Resolution of 15 June 2005, Rollo (G.R. No. 161957), p. 767.

8 Id., at pp. 780-790.
9 Id., at pp. 832-838.
10 Rollo (G.R. No. 167994), pp. 3-24.
11 Clause 19.1 of the Addendum Contract, Rollo (G.R. No. 167994), p. 87. It reads: “All
disputes arising out of or in connection with the Contract, which cannot be settled
amicable among the Parties, shall be finally settled under Republic Act No. 876, otherwise
known as ‘The Arbitration Law,” as may be amended from time to time. It is agreed,
however, that at all events and notwithstanding
156 SUPREME COURT REPORTS ANNOTATED
Gonzales vs. Climax Mining Ltd.

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 ClimaxArimco 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
12
Counterclaim, 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-Arimco’s 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.

_______________

any provision of Republic Act No. 876, only one arbitrator shall be appointed by all the
Parties. For purposes of such appointment and at all proceedings hereunder, each of the
CLAIMOWNER and ARIMCO shall have one vote. AUMEX, GEOPHILIPPINES and
INMEX shall jointly have only one vote and, for purposes hereof, GEOPHILIPPINES and
INMEX hereby irrevocably constitute AUMEX as their attorney-in-fact, in their place,
name and stead, to exercise the voting right granted hereunder. If the CLAIMOWNER,
ARIMCO and AUMEX fail to agree on an arbitrator within 30 days from the date they first
begin considering persons to act as arbitrator, such arbitrator shall be appointed by the
appropriate court in accordance with Republic Act No. 876. The Parties agree that the
venue of the arbitration and all actions under the Contract shall be Metro Manila,
Philippines. The Parties further agree that the decision of the arbitrator shall be binding
and enforceable upon the Parties and that no judicial action may be instituted by any
Party against any other Party under the Contract except as provided in this Clause 19.1.”
12 Rollo (G.R. No. 167994), pp. 250-322.
 VOL. 512, JANUARY 22, 2007 157
Gonzales vs. Climax Mining Ltd.

On 18 May 2000, the RTC issued an order declaring Gonzales’s motion to

dismiss moot and academic in view of the filing of his Answer with
13
Counterclaim. 14
On 31 May 2000, Gonzales asked the RTC to set the case for pre-trial.
This the RTC denied on 16 June 2000, holding15that the petition for arbitration is
a special proceeding that is summary in nature. However, on 7 July 2000, the
RTC granted Gonzales’s 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 had16
raised in his answer the issue of the making of the arbitration
agreement.
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
17
I.
Benito for “not possessing the cold neutrality of an impartial judge.” On 5
August 2000, Judge Benito issued an Order granting18the Motion to Inhibit and
ordered the re-raffling of the petition for arbitration. 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
19
the 24 July 2000 Order. 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

_______________

13 Id., at p. 517.
14 Id., at pp. 518-520.
15 Id., at p. 525.
16 Id., at p. 526.
17 Id., at p. 381.
18 Id.
19 Id., at pp. 527-530.
158 SUPREME COURT REPORTS ANNOTATED
Gonzales vs. Climax Mining Ltd.

Pimentel issued the first assailed order requiring Gonzales to proceed with
arbitration proceedings and appointing retired CA Justice Jorge Coquia as sole
20
arbitrator.
Gonzales moved for reconsideration on 20 March 2001 but this was denied
21
in the Order dated 7 March 2005.
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

_______________

20 Id., at p p . 30-35.
21 Id., at p . 39.
 VOL. 512, JANUARY 22, 2007 159
Gonzales vs. Climax Mining Ltd.

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.
160 SUPREME COURT REPORTS ANNOTATED
Gonzales vs. Climax Mining Ltd.

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.
22
Climax-Arimco cites La Naval Drug Corporation v. Court of
Appeals, which holds that in a proceeding to compel arbitration, “[t]he
arbitration law explicitly confines the court’s 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 direct-

_______________

22 G.R. No. 103200, 31 August 1994, 236 SCRA 78.

 VOL. 512, JANUARY 22, 2007 161
Gonzales vs. Climax Mining Ltd.

ing the parties

23
to proceed with the arbitration in accordance with the terms
thereof.’ ” Climax-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. Gonzales’s proposition contradicts both the trial court’s limited jurisdiction
and the summary nature of the proceeding itself.
Climax-Arimco further notes that Gonzales’s 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.

_______________

23 Id., at p. 91.
162 SUPREME COURT REPORTS ANNOTATED
Gonzales vs. Climax Mining Ltd.

x x x x”

The grounds Gonzales invokes for the revocation of the Addendum Contract—
fraud and oppression in the execution thereof—are 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 court’s 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 the24validity of the arbitration agreement. Art. 8 of the UNCITRAL
Model Law 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.

_______________

24 Sec. 19 of R.A. No. 9258 adopts the UNCITRAL Model Law for international
commercial arbitration, while Sec. 33 of R.A. No. 9258 makes certain portions of the
UNCITRAL Model Law, including Art. 8, applicable to domestic arbitration.
 VOL. 512, JANUARY 22, 2007 163
Gonzales vs. Climax Mining Ltd.

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-Arimco’s
Motion for Partial Reconsideration and/or Clarification in G.R. No. 161957 and
Gonzales’s 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,”
25
and “no plain, speedy and adequate remedy in the ordinary course of
law.” 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
26
that raises pure questions of law. There is no merit to Gonzales’s

_______________

25 Nippon Paint Employees Union-Olalia v. Court of Appeals, G.R. No. 159010, 19

November 2004, 443 SCRA 286, 291.
26 Justice Romero, in his dissenting opinion in Asset Privatizatoin Trust v. Court of
Appeals, 360 Phil. 768, 824-825; 300 SCRA 579, 634 (1998), had occasion to discuss the
mode of review under Sec. 29 of R.A. No. 876:

The term “certiorari” in [Sec. 29 of R.A. No. 876] refers to an ordinary ap p eal under Rule 45, not
the sp ecial action of certiorari under Rule 65. It is an “ap p eal,” as Section 29 p ro
164 SUPREME COURT REPORTS ANNOTATED
Gonzales vs. Climax Mining Ltd.

argument that the use of the permissive term “may” in Sec. 29, R.A. No. 876 in
the filing of appeals does 27
not prohibit nor discount the filing of a petition for
certiorari under Rule 65. 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. 28
Neither can BF Corporation v. Court of Appeals 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 Regional29 Trial
Court disregarding the arbitration agreement as an acceptable remedy.” 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
agree-

_______________

claims. The proper forum for this action is, under the old and the new rules of
procedure, the Supreme Court. Thus, Section 2(c) of Rule 41 of the 1997 Rules of Civil
Procedure states that, “In all cases where only questions of law are raised or involved, the
appeal shall be to the Supreme Court by petition for review on certiorari in accordance
with Rule 45.” Moreover, Section 29 limits the appeal to “questions of law,” another
indication that it is referring to an appeal by certiorari under Rule 45 which, indeed, is the
customary manner of reviewing such issues. On the other hand, the extraordinary remedy
of certiorari under Rule 65 may be availed of by a party where there is “no appeal, nor any
plain, speedy, and adequate remedy in the course of law,” and under circumstances where
“a tribunal, board or officer exercising judicial functions, has acted without or in excess of
its or his jurisdiction, or with grave abuse of discretion.”
27 Rollo (G.R. No. 167994), pp. 364-365.
28 351 Phil. 508; 288 SCRA 267 (1998).
29 Rollo (G.R. No. 167994), p. 365.
 VOL. 512, JANUARY 22, 2007 165
Gonzales vs. Climax Mining Ltd.

ment 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
30
then be elevated to a higher court “in an ordinary appeal.”
The Court did not uphold BF Corporation’s 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

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30 Supra note 28, at pp. 518-519; pp. 278-279.

166 SUPREME COURT REPORTS ANNOTATED
Gonzales vs. Climax Mining Ltd.

properly taken cognizance of in a petition for certiorari under Rule 65, so the
31
Court held.
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, Gonzales’s 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
32
by a special civil action of certiorari. 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
33
and accepted in our jurisdiction. The Civil Code is explicit on the
matter. 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

_______________

31 Supra note 28 at pp. 520-521; p. 280.

32 Estate of Salud Jimenez v. Philippine Export Processing Zone, 402 Phil. 271, 284;
349 SCRA 240, 253 (2001).
33 CIVIL CODE, Book IV, Title XIV, Chapter 2.
 VOL. 512, JANUARY 22, 2007 167
Gonzales vs. Climax Mining Ltd.

enforcement of international arbitration34 agreements between parties of different

nationalities within a contracting state. 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 arbitrator’s 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.]
35
Thus, we held in Manila Electric Co. v. Pasay Transportation Co. that a
submission to arbitration is a contract. A

_______________

34 National Union Fire Insurance Company of Pittsburgh v. Stolt-Nielsen

Philippines, Inc., G.R. No. 87958, 26 April 1990, 184 SCRA 682.
35 57 Phil. 600 (1932).
168 SUPREME COURT REPORTS ANNOTATED
Gonzales vs. Climax Mining Ltd.

clause in a contract providing that all matters in dispute between the parties shall
36
be referred to arbitration
37
is a contract, and in Del Monte Corporation-USA
v. Court of Appeals 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
38
parties and produce effect as between them, their assigns and
heirs.”
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

_______________

36 Id., at p . 603.
37 404 Phil. 192; 351 SCRA 373 (2001).
38 Id., at p . 201; p . 381.
 VOL. 512, JANUARY 22, 2007 169
Gonzales vs. Climax Mining Ltd.

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 39
was expounded upon
in La Naval Drug Corporation v. Court of Appeals. 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,
40
finds that no such agreement exists,
“the proceeding shall be dismissed.” 41
The cited case also stressed that the
proceedings are summary in nature. The same thrust was made in the earlier
case of Mindanao Portland Cement Corp. v. McDonough Construction
42
Co. of Florida 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’
43
claims but
only to determine if they should proceed to arbitration or not. x x x x”

_______________

39 Supra note 22.

40 Supra note 22 at p. 91.
41 Id.
42 126 Phil. 78; 19 SCRA 808 (1967).
43 Id., at pp. 84-85; pp. 814-815.
170 SUPREME COURT REPORTS ANNOTATED
Gonzales vs. Climax Mining Ltd.

Implicit in the summary nature of the judicial proceedings is the separable or

independent character of the arbitration clause or agreement. 44This was
highlighted in the cases of Manila Electric Co. v. 45
Pasay Trans. Co. and Del
Monte Corporation-USA v. Court of Appeals.
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
46
comes to an end.
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 47
is
invalid, the arbitration clause/agreement still remains valid and enforceable.

_______________

44 Supra note 35.

45 Supra note 37.
46 P. Capper, International Arbitration: A Handbook (3rd ed., 2004), p. 12.
47 Id. Accordingly, the termination or avoidance (for example, following a fraudulent
misrepresentation) of a contract which was initially valid will not affect the validity of the
arbitration agreement. The doctrine also recognizes in this way the wish of the parties to
have disputes arising out of their contract settled by arbitration, even if that contract is no
longer in existence. Id., at p. 81.
In the U.S., a distinction has been drawn between legal doctrines relating to
enforceability of contracts and legal doctrines relating to whether a contract is formed.
Making this distinction, some courts have applied Prima Paint Corp. v. Flood and
ConKlin, infra note 49, to voidable-contract arguments, but not to no-contract
agreements involving for example forgery. S.J. Ware, infra note 50 at p. 49.
 VOL. 512, JANUARY 22, 2007 171
Gonzales vs. Climax Mining Ltd.

The separability of the arbitration clause is confirmed in Art. 16(1) of the

UNCITRAL48
Model Law and Art. 21(2) of the UNCITRAL Arbitration
Rules.
The separability doctrine was dwelt upon at length in the
49
U.S. case of Prima
Paint Corp. v. Flood & Conklin Manufacturing Co. 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 & C’s motion, and the
U.S. Supreme Court affirmed.
The U.S. Supreme Court did not address Prima Paint’s 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 Act—which 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

_______________

48 Supra note 46, at p. 81.

49 388 U.S. 395, 87 S.Ct. 1801, 18 L.Ed.2d 1270 (1967).
172 SUPREME COURT REPORTS ANNOTATED
Gonzales vs. Climax Mining Ltd.

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 50
only to the consulting
agreement which contained the arbitration agreement. 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
51
arbitration of the claim that the contract itself was induced by fraud.”
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. Gonzales’s 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, Gonzales’s 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,

_______________

50 S.J. Ware, Alternative Dispute Resolution (2001 ed.), pp. 45-46, citing Prima Paint,
supra.
51 Supra note 49, 380 U.S., at p. 404.
 VOL. 512, JANUARY 22, 2007 173
Gonzales vs. Climax Mining Ltd.

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 party’s 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.
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
174 SUPREME COURT REPORTS ANNOTATED
Gonzales vs. Climax Mining Ltd.

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 mineral52claims
in favor of [Climax-Arimco], there would be no FTAA to speak of.” This
finding was affirmed by the Court of Appeals in its Decision dated 30 July 2003
resolving the petition for certiorari filed by53 Climax-Arimco in regard to the 18
October 2001 Order of the DENR Panel.
The Court of Appeals likewise found that Gonzales’s 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 but54 nowhere did it give any ultimate facts or particulars relative to
the allegations.
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

_______________

52 Order of 25 June 2002, Rollo (G.R. No. 161957), p. 612.

53 Rollo (G.R. No. 161957), pp. 194-201.
54 Id., at p. 199.
 VOL. 512, JANUARY 22, 2007 175
Gonzales vs. Climax Mining Ltd.

that it failed to state with particularity the ultimate facts and circumstances
constituting the alleged fraud. It does not state what particulars about Climax-
Arimco’s 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, Gonzales’s claims of fraud and
misrepresentation attending the execution of the Addendum Contract 55
are
grounds for the annulment of a voidable contract under the Civil Code. 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 Gonzales’s 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.

Puno (C.J., Chairperson), Austria-Martinez, Callejo, Sr. and

Chico-Nazario, JJ., concur.

_______________

55 See CIVIL CODE, Art. 1390.

176 SUPREME COURT REPORTS ANNOTATED
Gonzales vs. Climax Mining Ltd.

Petition for Certiorari in G.R. No. 167994 dismissed, while Motion for
Reconsideration filed by Jorge Gonzales denied with finality.

Notes.—Even if there is an arbitration clause, there are instances when

referral to arbitration does not appear to be the most prudent action, such as
when the issue could not be speedily and efficiently resolved in its entirety if the
Court allowed simultaneous arbitration proceedings and trial, or suspension of
trial pending arbitration. (European Resources and Technologies, Inc. vs.
Ingenieuburo Birkhahn + Nolte, 435 SCRA 246 [2004])
An arbitration award is not absolute and without exceptions—where the
conditions described in Arts. 2038, 2039 and 2040 of the Civil Code
applicable to both compromises and arbitrations are obtaining, the arbitrators’
award may be annulled or rescinded. (National Power Corporation vs.
Alonzo-Legasto, 443 SCRA 342 [2004])

——o0o——