2/25/2018 SUPREME COURT REPORTS ANNOTATED VOLUME 184

426 SUPREME COURT REPORTS ANNOTATED

Industrial Enterprises, Inc. vs. Court of Appeals

*
G.R. No. 88550. April 18, 1990.

INDUSTRIAL ENTERPRISES, INC., petitioner, vs. THE

HON. COURT OF APPEALS, MARINDUQUE MINING
& INDUSTRIAL CORPORATION, THE HON.
GERONIMO VELASCO, in his capacity as Minister of
Energy AND PHILIPPINE NATIONAL BANK,
respondents.

Administrative Law; Contracts; Rescission of Contracts;

Jurisdiction; Continued efficacy of the coal-operating contract and
giving due course to application for coal blocks are matters within
the domain of Bureau of Energy Development.—While the action
filed by IEI sought the rescission of what appears to be an
ordinary civil contract cognizable by a civil court, the fact is that
the Memorandum of Agreement sought to be rescinded is derived
from a coal-operating contract and is inextricably tied up with the
right to develop coal-bearing lands and the determination of
whether or not the reversion of the coal operating contract over
the subject coal blocks to IEI would be in line with the integrated
national program for coal-development and with the objective of
rationalizing the country’s over-all coal-supply-demand balance.
IEI’s cause of action was not merely the rescission of a contract
but the reversion or return to it of the operation of the coal blocks.
Thus it was that in its Decision ordering the rescission of the
Agreement, the Trial Court, inter alia, declared the continued
efficacy of the coal-operating contract in IEI’s favor and directed
the BED to give due course to IEI’s application for three (3) more
coal blocks. These are matters properly falling within the domain
of the BED.
Same; Same; Bureau of Energy Development, Functions of.—
For the BED, as the successor to the Energy Development Board
(abolished by Sec. 11, P.D. No. 1206, dated 6 October 1977) is
tasked with the function of establishing a comprehensive and
integrated national program for the exploration, exploitation, and
development and extraction of fossil fuels, such as the country’s
coal resources; adopting a coal development program; regulating

http://www.central.com.ph/sfsreader/session/00000161ca36946300101283003600fb002c009e/t/?o=False 1/9
2/25/2018 SUPREME COURT REPORTS ANNOTATED VOLUME 184

all activities relative thereto; and undertaking by itself or through

service contracts such exploitation and development, all in the
interest of an effective and coordinated development of extracted
resources.
Same; Same; Powers and Functions of Energy Development
Board, transferred to Bureau of Energy Development.—That law
further pro-

_______________

* SECOND DIVISION.

427

VOL. 184, APRIL 18, 1990 427

Industrial Enterprises, Inc. vs. Court of Appeals

vides that the powers and functions of the defunct Energy

Development Board relative to the implementation of P.D. No.
972 on coal exploration and development have been transferred to
the BED, provided that coal operating contracts including the
transfer or assignment of interest in said contracts, shall require
the approval of the Secretary (Minister) of Energy (Sec. 12, P.D.
No. 1206).
Same; Same; Same; Doctrine of primary jurisdiction.—In
recent years, it has been the jurisprudential trend to apply the
doctrine of primary jurisdiction in many cases involving matters
that demand the special competence of administrative agencies. It
may occur that the Court has jurisdiction to take cognizance of a
particular case, which means that the matter involved is also
judicial in character. However, if the case is such that its
determination requires the expertise, specialized skills and
knowledge of the proper administrative bodies because technical
matters or intricate questions of fact are involved, then relief
must first be obtained in an administrative proceeding before a
remedy will be supplied by the courts even though the matter is
within the proper jurisdiction of a court. This is the doctrine of
primary jurisdiction. It applies “where a claim is originally
cognizable in the courts, and comes into play whenever
enforcement of the claim requires the resolution of issues which,
under a regulatory scheme, have been placed within the special
competence of an administrative body; in such case the judicial
process is suspended pending referral of such issues to the

http://www.central.com.ph/sfsreader/session/00000161ca36946300101283003600fb002c009e/t/?o=False 2/9
2/25/2018 SUPREME COURT REPORTS ANNOTATED VOLUME 184

administrative body for its view” (United States v. Western

Pacific Railroad Co., 352 U.S. 59, italics supplied).

PETITION to review the decision of the Court of

Appeals. Lapena, Jr., J.

The facts are stated in the opinion of the Court.

     Manuel M. Antonio and Dante Cortez for petitioner.
     Pelaez, Adriano & Gregorio for respondent MMIC.
     The Chief Legal Counsel for respondent PNB.

MELENCIO-HERRERA, J.:

This petition seeks the review and reversal of the Decision

of respondent Court of Appeals in CA-G.R. CV No.
12660,1 which ruled adversely against petitioner herein.

______________

1 Penned by Justice Nicolas P. Lapeña, Jr. and concurred in by Justices

Emeterio C. Cui and Justo P. Torres.

428

428 SUPREME COURT REPORTS ANNOTATED

Industrial Enterprises, Inc. vs. Court of Appeals

Petitioner Industrial Enterprises Inc. (IEI) was granted

a coal operating contract by the Government through the
Bureau of Energy Development (BED) for the exploration
of two coal blocks in Eastern Samar. Subsequently, IEI
also applied with the then Ministry of Energy for another
coal operating contract for the exploration of three
additional coal blocks which, together with the original two
blocks, comprised the so-called “Giporlos Area.”
IEI was later on advised that in line with the objective
of rationalizing the country’s over-all coal supply-demand
balance x x x the logical coal operator in the area should be
the Marinduque Mining and Industrial Corporation
(MMIC), which was already developing the coal deposit in
another area (Bagacay Area) and that the Bagacay and
Giporlos Areas should be awarded to MMIC (Rollo, p. 37).
Thus, IEI and MMIC executed a Memorandum of
Agreement whereby IEI assigned and transferred to MMIC
all its rights and interests in the two coal blocks which are
the subject of IEI’s coal operating contract.
Subsequently, however, IEI filed an action for rescission
of the Memorandum of Agreement with damages against
MMIC and the then Minister of Energy Geronimo Velasco
2
http://www.central.com.ph/sfsreader/session/00000161ca36946300101283003600fb002c009e/t/?o=False 3/9
2/25/2018 SUPREME COURT REPORTS ANNOTATED VOLUME 184
2
before the Regional Trial Court of Makati, Branch 150,
alleging that MMIC took possession of the subject coal
blocks even before the Memorandum of Agreement was
finalized and approved by the BED; that MMIC
discontinued work thereon; that MMIC failed to apply for a
coal operating contract for the adjacent coal blocks; and
that MMIC failed and refused to pay the reimbursements
agreed upon and to assume IEI’s loan obligation as
provided in the Memorandum of Agreement (Rollo, p. 38).
IEI also prayed that the Energy Minister be ordered to
approve the return of the coal operating contract from
MMIC to petitioner, with a written confirmation that said
contract is valid and effective, and, in due course, to
convert said contract from an exploration agreement to a
development/production or exploitation contract in IEI’s
favor.
Respondent, Philippine National Bank (PNB), was later
impleaded as co-defendant in an Amended Complaint when
the latter with the Development Bank of the Philippines
effected

__________________

2 Judge Benigno M. Puno, Presiding.

429

VOL. 184, APRIL 18, 1990 429

Industrial Enterprises, Inc. vs. Court of Appeals

extra-judicial foreclosures on certain mortgages,

particularly the Mortgage Trust Agreement, dated 13 July
1981, constituted in its favor by MMIC after the latter
defaulted in its obligation totalling around P22 million as
of 15 July 1984. The Court of Appeals eventually
dismissed the case against the PNB (Resolution, 21
September 1989).
Strangely enough, Mr. Jesus S. Cabarrus is the
President of both IEI and MMIC.
In a summary judgment, the Trial Court ordered the
rescission of the Memorandum of Agreement, declared the
continued efficacy of the coal operating contract in favor of
IEI; ordered the reversion of the two coal blocks covered by
the coal operating contract; ordered BED to issue its
written affirmation of the coal operating contract and to
expeditiously cause the conversion thereof from exploration
to development in favor of IEI; directed BED to give due
course to IEI’s application for a coal operating contract;
http://www.central.com.ph/sfsreader/session/00000161ca36946300101283003600fb002c009e/t/?o=False 4/9
2/25/2018 SUPREME COURT REPORTS ANNOTATED VOLUME 184

directed BED to give due course to IEI’s application for

three more coal blocks; and ordered the payment of
damages and rehabilitation expenses (Rollo, pp. 9-10).
In reversing the Trial Court, the Court of Appeals
held that the rendition of the summary judgment was not
proper since there were genuine issues in controversy
between the parties, and more importantly, that the Trial
Court had no jurisdiction over the action considering that,
under Presidential Decree No. 1206, it is the BED that has
the power to decide controversies relative to the
exploration, exploitation and development of coal blocks
(Rollo, pp. 43-44).
Hence, this petition, to which we resolved to give due
course and to decide.
Incidentally, the records disclose that during the
pendency of the appeal before the Appellate Court, the
suit against the then Minister of Energy was dismissed
and that, in the meantime, IEI had applied with the BED
for the development of certain coal blocks.
The decisive issue in this case is whether or not the civil
court has jurisdiction to hear and decide the suit for
rescission of the Memorandum of Agreement concerning a
coal operating contract over coal blocks. A corollary
question is whether or not respondent Court of Appeals
erred in holding that it is the Bureau of Energy
Development (BED) which has jurisdiction
430

430 SUPREME COURT REPORTS ANNOTATED

Industrial Enterprises, Inc. vs. Court of Appeals

over said action and not the civil court.

While the action filed by IEI sought the rescission of
what appears to be an ordinary civil contract cognizable by
a civil court, the fact is that the Memorandum of
Agreement sought to be rescinded is derived from a coal-
operating contract and is inextricably tied up with the right
to develop coal-bearing lands and the determination of
whether or not the reversion of the coal operating contract
over the subject coal blocks to IEI would be in line with the
integrated national program for coal-development and with
the objective of rationalizing the country’s over-all coal-
supply-demand balance, IEI’s cause of action was not
merely the rescission of a contract but the reversion or
return to it of the operation of the coal blocks. Thus it was
that in its Decision ordering the rescission of the
Agreement, the Trial Court, inter alia, declared the
http://www.central.com.ph/sfsreader/session/00000161ca36946300101283003600fb002c009e/t/?o=False 5/9
2/25/2018 SUPREME COURT REPORTS ANNOTATED VOLUME 184

continued efficacy of the coal-operating contract in IEI’s

favor and directed the BED to give due course to IEI’s
application for three (3) more coal blocks. These are
matters properly falling within the domain of the BED.
For the BED, as the successor to the Energy
Development Board (abolished by Sec. 11, P.D. No. 1206,
dated 6 October 1977) is tasked with the function of
establishing a comprehensive and integrated national
program for the exploration, exploitation, and development
and extraction of fossil fuels, such as the country’s coal
resources; adopting a coal development program;
regulating all activities relative thereto; and undertaking
by itself or through service contracts such exploitation and
development, all in the interest of an effective and
coordinated development of extracted resources.
Thus, the pertinent sections of P.D. No. 1206 provide:

“Sec. 6. Bureau of Energy Development. There is created in the

Department a Bureau of Energy Development, hereinafter
referred to in this Section as the Bureau, which shall have the
following powers and functions, among others:
“a. Administer a national program for the encouragement,
guidance, and whenever necessary, regulation of such business
activity relative to the exploration, exploitation, development, and
extraction of fossil fuels such as petroleum, coal, x x x.
“The decisions, orders, resolutions or actions of the Bureau
may be appealed to the Secretary whose decisions are final and
executory

431

VOL. 184, APRIL 18, 1990 431

Industrial Enterprises, Inc. vs. Court of Appeals

unless appealed to the President. (Italics supplied.)

That law further provides that the powers and functions of

the defunct Energy Development Board relative to the
implementation of P.D. No. 972 on coal exploration and
development have been transferred to the BED, provided
that coal operating contracts including the transfer or
assignment of interest in said contracts, shall require the
approval of the Secretary (Minister) of Energy (Sec. 12,
P.D. No. 1206).

“Sec. 12. x x x the powers and functions transferred to the Bureau

of Energy Development are:
xxx     xxx     xxx

http://www.central.com.ph/sfsreader/session/00000161ca36946300101283003600fb002c009e/t/?o=False 6/9
2/25/2018 SUPREME COURT REPORTS ANNOTATED VOLUME 184

“ii. The following powers and functions of the Energy

Development Board under PD No. 910 x x x
“(1) Undertake by itself or through other arrangements, such
as service contracts, the active exploration, exploitation,
development, and extraction of energy resources x x x.
(2) Regulate all activities relative to the exploration,
exploitation, development, and extraction of fossil and nuclear
fuels x x x (P.D. No. 1206) (Italics supplied.)

P.D. No. 972 also provides:

“Sec. 8. Each coal operating contract herein authorized shall x x x

be executed by the Energy Development Board.

Considering the foregoing statutory provisions, the

jurisdiction of the BED, in the first instance, to pass upon
any question involving the Memorandum of Agreement
between IEI and MMIC, revolving as its does around a coal
operating contract, should be sustained.
In recent years, it has been the jurisprudential trend to
apply the doctrine of primary jurisdiction in many cases
involving matters that demand the special competence of
administrative agencies. It may occur that the Court has
jurisdiction to take cognizance of a particular case, which
means that the matter involved is also judicial in
character. However, if the case is such that its
determination requires the expertise, specialized skills and
knowledge of the proper administrative bodies because
technical matters or intricate questions of facts are in-
432

432 SUPREME COURT REPORTS ANNOTATED

Industrial Enterprises, Inc. vs. Court of Appeals

volved, then relief must first be obtained in an

administrative proceeding before a remedy will be supplied
by the courts even though the matter is within the proper
jurisdiction of a court. This is the doctrine of primary
jurisdiction. It applies “where a claim is originally
cognizable in the courts, and comes into play whenever
enforcement of the claim requires the resolution of issues
which, under a regulatory scheme, have been placed within
the special competence of an administrative body; in such
case the judicial process is suspended pending referral of
such issues to the administrative body for its view” (United
States v. Western Pacific Railroad Co., 352 U.S. 59, italics
supplied).

http://www.central.com.ph/sfsreader/session/00000161ca36946300101283003600fb002c009e/t/?o=False 7/9
2/25/2018 SUPREME COURT REPORTS ANNOTATED VOLUME 184

Clearly, the doctrine of primary jurisdiction finds

application in this case since the question of what coal
areas should be exploited and developed and which entity
should be granted coal operating contracts over said areas
involves a technical determination by the BED as the
administrative agency in possession of the specialized
expertise to act on the matter. The Trial Court does not
have the competence to decide matters concerning
activities relative to the exploration, exploitation,
development and extraction of mineral resources like coal.
These issues preclude an initial judicial determination. It
behooves the courts to stand aside even when apparently
they have statutory power to proceed in recognition of the
primary jurisdiction of an administrative agency.

“One thrust of the multiplication of administrative agencies is

that the interpretation of contracts and the determination of
private rights thereunder is no longer a uniquely judicial function,
exercisable only by our regular courts” (Antipolo Realty Corp. vs.
National Housing Authority, 153 SCRA 399, at 407).

The application of the doctrine of primary jurisdiction,

however, does not call for the dismissal of the case below.
It need only be suspended until after the matters within
the competence of the BED are threshed out and
determined. Thereby, the principal purpose behind the
doctrine of primary jurisdiction is salutarily served.

“Uniformity and consistency in the regulation of business

entrusted to an administrative agency are secured, and the
limited

433

VOL. 184, APRIL 19, 1990 433

Salazar, Jr. vs. Commission on Elections

function of review by the judiciary are more rationally exercised,

by preliminary resort, for ascertaining and interpreting the
circumstances underlying legal issues, to agencies that are better
equipped than courts by specialization, by insight gained through
experience, and by more flexible procedure” (Far East Conference
v. United States, 342 U.S. 570).

With the foregoing conclusion arrived at, the question as to

the propriety of the summary judgment rendered by the
Trial Court becomes unnecessary to resolve.
WHEREFORE, the Court Resolved to DENY the
petition. No costs.

http://www.central.com.ph/sfsreader/session/00000161ca36946300101283003600fb002c009e/t/?o=False 8/9
2/25/2018 SUPREME COURT REPORTS ANNOTATED VOLUME 184

SO ORDERED.

          Paras, Padilla, Sarmiento and Regalado, JJ.,

concur.

Petition denied.

Note.—Act of respondent in submitting a single and

indivisible controversy to two different entities cannot be
permitted without making a mockery of justice. (Pilipinas
Shell Petroleum, Corp. vs. Oil Industry Commission, 145
SCRA 433.)

——o0o——

© Copyright 2018 Central Book Supply, Inc. All rights reserved.

http://www.central.com.ph/sfsreader/session/00000161ca36946300101283003600fb002c009e/t/?o=False 9/9