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.

FACTS

Petitioner Industrial Enterprises, Inc. (IEI) was granted a coal operating contract by the government for two coal blocks in Eastern Samar. Pursuant to a government rationalization plan favoring respondent Marinduque Mining and Industrial Corporation (MMIC) as the logical operator for the broader area, IEI and MMIC executed a Memorandum of Agreement (MOA) whereby IEI assigned its rights to MMIC. IEI later filed an action for rescission of the MOA in the Regional Trial Court (RTC) of Makati, alleging MMIC’s breach for taking premature possession, discontinuing work, failing to apply for adjacent blocks, and refusing to pay agreed reimbursements and assume IEI’s loan. IEI prayed for the contract’s return and its conversion to a development contract. The RTC granted a summary judgment, rescinding the MOA and ordering the Bureau of Energy Development (BED) to affirm and convert IEI’s contract.
The Court of Appeals reversed the RTC. It held that the summary judgment was improper due to genuine factual issues and, more critically, that the RTC lacked jurisdiction over the action. The appellate court ruled that under Presidential Decree No. 1206, the BED possesses the specialized authority to decide controversies relating to coal exploration and development.

ISSUE

Whether the civil court (RTC) has jurisdiction over the suit for rescission of the Memorandum of Agreement concerning a coal operating contract, or if jurisdiction lies primarily with the administrative agency, the Bureau of Energy Development.

RULING

The Supreme Court denied the petition, affirming the Court of Appeals. The Court held that the doctrine of primary jurisdiction applies, vesting initial competence in the BED, not the civil courts. While the action was framed as an ordinary rescission suit, the relief sought was inextricably tied to the regulatory governance of coal resources. IEI’s core objective was the reversion of the coal operating contract and the directive for the BED to convert it and grant additional blocks. These matters involve technical determinations—such as aligning operations with the national coal development program and rationalizing supply-demand balance—which are placed by law within the special competence of the BED.
Under P.D. No. 1206, the BED is tasked with establishing an integrated national program for fossil fuel exploration and development, regulating all related activities. The interpretation of contracts and determination of rights under such a regulatory scheme are no longer uniquely judicial functions. Courts must yield to the agency’s primary jurisdiction to ensure uniformity, consistency, and the application of specialized expertise. Consequently, the judicial process should be suspended pending the BED’s resolution of the technical and administrative issues underlying the dispute. The propriety of the summary judgment was thus rendered moot. The case was remanded for suspension pending referral to the BED.