Industrial Enterprises, Inc. (IEI) v.

Court of Appeals 106

GR No. 88550, 18 April 1990, Melencio-Herrera, J.
Digested by Jett Bruno • Law 123 – Admin. Law
Topic: Doctrine of Primary Jurisdiction

IEI was granted coal operating contract but it was later on advised that the coal operator in the
area subject of the contract should be MMIC. IEC and MMIC executed a MOA transferring to
the latter all the former’s rights and interest in the contract. IEI filed action for rescission of
MOA. TC rescinded the MOA; CA reversed, saying that it’s BED, not the TC, which has
jurisdiction over the action. SC held that the BED has jurisdiction. Under PD 1206, the powers
and functions of EDB in coal exploration and development have been transferred to BED. Also,
under the doctrine of primary jurisdiction, BED has the expertise, so the court must first defer to
its determination. The case below is suspended.

FACTS
 PET IEI was granted a coal operating contract by the Bureau of Energy Development
(BED) for exploration of 2 coal blocks in Eastern Samar
 IEI was later on advised that to rationalize the country’s coal supply-and-demand
balance, the coal operator in the area should be the Marinduque Mining and Industrial
Corp. (MMIC)
 So IEI and MMIC executed a MOA where IEI assigned and transferred to MMIC all
rights and interests in the 2 coal blocks subject of IEI’s coal operating contract
 Subsequently, IEI filed action for rescission of MOA with damages against MMIC and
Ministry of Energy before the RTC. IEI also prayed that Energy Minister be ordered to
approve the return of coal operating contract from MMIC to IEI
 TC summary judgment ordered the rescission of MOA and ordered the reversion of 2
coal blocks covered by the coal operating contract
 CA reversed: TC had no jurisdiction over the action since under PD 1206, it is the BED
that has the power to decide controversies relative to the exploration, exploitation and
development of coal blocks

ISSUES & HOLDING

 WON the civil court has jurisdiction to hear and decide the suit for rescission of the
MOA concerning a coal operating contract over coal blocks? – Yes but court must first
defer to BED; judicial determination suspended
 WON CA erred in holding that it is the BED which has jurisdiction over the action and
not the civil court? – NO.

RATIO
 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
  BED, as the successor to the Energy Development Board (EDB) (abolished by PD 1206),
is tasked with the function of establishing a comprehensive and integrated national
program for the exploration, exploitation and development and extraction of fossil fuels;
adopting a coal devt program; regulating all activities relative thereto; undertaking by
itself or through service contracts such exploitation and development1
 PD 1206 provides that the powers and functions of the defunct EDB on the
implementation of PD 972 on coal exploration and devt have been transferred to BED,
provided that coal operating contracts including the transfer or assignment of interest in
said contracts shall require approval of Secretary of Energy2 3
 Considering the foregoing, BED’s jurisdiction, in the first instance, to pass upon any
question involving the MOA between IEI and MMIC, a coal-operating contract, should
be sustained

 Doctrine of Primary Jurisdiction (DPJ)

It may occur that the Court has jurisdiction to take cognizance of a particular case (matter
involved is also judicial). But if the determination of the case requires the expertise,
specialized skills and knowledge of the proper admin bodies because technical matters or
intricate questions of facts are involved, then relief must be first obtained in an admin
proceeding before a remedy will be supplied by the courts (even though the matter is
within the proper jurisdiction of a court).

 DPJ applies 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 which has specialized expertise to act on
it. These issues preclude an initial judicial determination
 TC does not have competence to decide matters concerning activities on exploration,
exploitation, development and extraction of coal
 BUT case is NOT dismissed, only suspended, until after the matters within the
competence of BED are determined.

DISPOSITIVE
Petition denied

1 Sec. 6, PD 1206 BED shall have the ff powers and functions: 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 and coal
2 Sec. 12, PD 1206

powers and functions transferred to BED:(1) Undertake by itself or through other arrangements, such as
service contracts, the active exploration, exploitation, development, and extraction of energy resources
(2) Regulate all activities relative to the exploration, exploitation, development and extraction of fossil and
nuclear fuels
3 Sec. 8, PD 972

Each coal operating contract herein authorized shall be executed by the EDB