22 PNB Vs CA
22 PNB Vs CA
This is a petition for review on certiorari of the Decision 1 of the Court 4. MMIC then took over possession and control of the two (2) coal
of Appeals affirming in toto the November 27, 1992 decision 2 of the blocks even before the MOA was finalized. However, instead of
Regional Trial Court of Makati, Branch 150 which disposed of Civil continuing the exploration and development work actively
Case No. 8109, "Industrial Enterprises, Inc. v. Marinduque Mining and pursued by IEI, MMIC completely stopped all works and dismissed
Industrial Corporation, Geronimo Velasco (in his capasity as the then the work force thereon, leaving only a caretaker crew. Because of
Minister of Energy) and Philippine National Bank," an action for these, IEI then made written demands to MMIC, pursuant to the
rescission of contract and damages. MOA, for the reimbursement of all costs and expenses it had incurred
on the project which, as of July 31, 1983, had amounted to P31.66M
FACTS: (thru SGV auditing Company).
1. Marinduque Mining and Industrial Corporation (MMIC) was 5. In view of MMIC's failure to comply with its obligations under the
founded by Jesus S. Cabarrus in 1949. Four years later or in 1953, MOA, IEI filed a complaint against MMIC and Minister Velasco for
Cabarrus established J. Cabarrus, Inc. which was renamed Industrial rescission of the MOA and damages, with allegations that MMIC
Enterprises, Inc. (IEI). acted in gross and evident bad faith in entering into the MOA when
it had no intention at all to operate the two (2) coal blocks and of
2. IEI entered into a coal operating contract with the Bureau of complying with any of its obligations under the said agreement.
Energy Development (BED), with Cabarrus and then Minister of
Energy Geronimo Velasco as signatories. The contract covered two 6. Meanwhile, on July 13, 1981, for various credit
(2) coal blocks in Barrio Carbon, Magsaysay, Eastern Samar. Then IEI accommodations secured from the Philippine National Bank
filed another coal operating contract covering 3 coal blocks adjacent (PNB), aggregating to four billion pesos (P4,000,000,000.00)
to the first two coal blocks. All of these coal blocks were collectively excluding interest and charges as of November 30, 1980, as well
known as Giporlos Coal Project. Sometime in April, 1982, Minister as from the DBP, amounting to two billion pesos
Velasco informed Cabarrus that IEI's application for exploration of (P2,000,000,000.00), MMIC entered into a Mortgage Trust
the three (3) coal blocks had been disapproved and that, instead, Agreement (MTA) whereby it constituted a mortgage pari passu of
the contract would be awarded to MMIC. its assets in favor of PNB and DBP.
9. On August 15, 1984, IEI advised PNB and DBP that the purchase WON the MOA signed between MMCI and PNB is a contract of
price of the Giporlos Coal Project that it had assigned to MMIC per sale. (Whether or not the chattels mortgaged to petitioner were
the MOA, was still unpaid. However, despite said notice, the covered by the MOA so as to legally subject the same chattels to
foreclosure sale proceeded as scheduled and the various machineries MMIC's ownership and, eventually, to the foreclosure proceedings.)
and equipment of MMIC were sold to PNB as the sole bidder for
P33,940,940.00. RULING:
10. In its letter of September 20, 1984 to PNB and DBP, IEI requested The Supreme Court ruled in the affirmative.
that the movable properties in the Giporlos Coal Project which were
detailed in a list attached to its August 15, 1984 letter to said banks, A. While the MOA was expressly a contract for the assignment of
be excluded from the foreclosed assets of MMIC as the purchase rights and interests, it is in fact a contract of sale.
price thereof under the MOA had remained unpaid. IEI further
informed PNB and DBP that a suit for rescission of the assignment of Under Art. 1458 of the Civil Code, by the contract of sale,
the Giporlos Coal Project to MMIC (and damages) had been filed one of the contracting parties obligates himself to transfer
before the Regional Trial Court of Makati. the ownership of and to deliver a determinate thing, and the
other to pay therefor a price certain in money or its
11. The lower decided that that PNB is equally guilty of bad faith equivalent.
because it was advised beforehand that the heavy equipment and
movable property which are part of the Giporlos Coal Project were By the MOA, private respondent obligated itself to transfer
still unpaid; however, despite that actual knowledge or information, ownership of the coal operating contract and the properties
PNB vs CA, Contract of Sale Page | 2
found therein. The coal operating contract is a determinate of the thing sold shall be transferred to the vendee upon the
thing as it has been particularly designated in the MOA. actual or constructive delivery thereof.
The subject of the coal operating contract was physically In other words, payment of the purchase price is not
segregated from all other pieces of coal-rich Eastern Samar essential to the transfer of ownership as long as the
property by the technical description attached to said property sold has been delivered.
contract. A list of the equipment and machineries found on
the property might not have been attached to the MOA but Such delivery (traditio) operated to divest the vendor of title
these were itemized with specificity in private respondent's to the property which may not be regained or recovered until
letter of August 15, 1984. and unless the contract is resolved or rescinded in accordance
with law.
B. If the MOA merely embodied an assignment of rights over the
coal-operating contract and the properties found in the Giporlos
Project and not a sale thereof, then private respondent would not
have insisted on the payment of MMIC's obligations under the
MOA by attaching a statement of account to most of its demand
letters.