PNB VS Ca GR 118357

G.R. No.
118357 May 6, 1997
PHILIPPINE NATIONAL BANK, petitioner,

vs.
COURT OF APPEALS and INDUSTRIAL ENTERPRISES, INC., respondents.
FACTS:
Industrial Enterprises, Inc. (IEI) previously the Marinduque Mining and Industrial Corporation
(MMIC) entered into a coal operating contract with the Bureau of Energy Development (BED), with
Cabarrus and then Minister of Energy Geronimo Velasco as signatories. The contract was pursuant to
the Coal Development Act of 1976 (P.D. No. 972, as amended) and covered 2,000 hectares of two (2)
coal blocks in Barrio Carbon, Magsaysay, Eastern Samar.
Then IEI filed another coal operating contract covering 3 coal blocks adjacent to the first two
coal blocks. All of these coal blocks were collectively known as Giporlos Coal Project. Sometime in April,
1982, Minister Velasco informed Cabarrus that IEI's application for exploration of the three (3) coal
blocks had been disapproved and that, instead, the contract would be awarded to MMIC.
IEI assigned to MMIC all its rights and interests under the July 27, 1979 coal operating contract.
This agreement was brought before the knowledge of BED through a memorandum of agreement. Then
MMIC took over possession and control of the two (2) coal blocks even before the MOA was finalized.
However, instead of continuing the exploration and development work actively pursued by IEI, MMIC
completely stopped all works and dismissed the work force thereon, leaving only a caretaker crew.
IEI then filed a complaint against MMIC and Minister Velasco for rescission of the MOA and
damages, with allegations that MMIC 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 complying with any of its
obligations under the said agreement.
On July 13, 1981, for various credit accommodations secured from the Philippine National Bank
(PNB), aggregating to four billion pesos (P4,000,000,000.00) excluding interest and charges as of
November 30, 1980, as well as from the DBP, amounting to two billion pesos (P2,000,000,000.00), MMIC
entered into a Mortgage Trust Agreement (MTA) whereby it constituted a mortgage pari passu of its
assets in favor of PNB and DBP.
MMIC defaulted in the payment of its loan obligation with PNB and DBP which, as of July 15,
1984 stood at P23.55 billion. As a consequence, thereof, PNB and DBP simultaneously filed in the
provinces of Rizal, Samar, Negros and Surigao, joint petitions for sale on foreclosure under Act Nos. 1508
and 3135, of the MMIC assets.
On August 15, 1984, IEI advised PNB and DBP that the purchase price of the Giporlos Coal
Project that it had assigned to MMIC per the MOA, was still unpaid. However, despite said notice, the
foreclosure sale proceeded as scheduled and the various machineries and equipment of MMIC were
sold to PNB as the sole bidder for P33,940,940.00.
The lower court decided that that PNB is equally guilty of bad faith because it was advised
beforehand that the heavy equipment and movable property which are part of the Giporlos Coal Project
were still unpaid; however, despite that actual knowledge or information, the said defendant bank
proceeded to extrajudicially foreclose the mortgage on the said properties.
The lower court’s decision was appealed before CA. It was then dismissed by the CA for lack of
jurisdiction and that the case against defendant PNB was remanded to the lower court for further
proceedings.
Thus, the cause of this petition.
ISSUE:
Whether the MOA signed between MMCI and PNB is a contract of sale and that covered the chattel
mortgaged to petitioner.
RULING:
MOA is in fact a contract of sale even if it was expressly a contract for the assignment of rights
and interests. By the MOA, private respondent obligated itself to transfer ownership of the coal
operating contract and the properties found therein. The coal operating contract is a determinate thing
as it has been particularly designated in the MOA. The subject of the coal operating contract was
physically segregated from all other pieces of coal-rich Eastern Samar property by the technical
description attached to said contract. A list of the equipment and machineries found on the property
might not have been attached to the MOA but these were itemized with specificity in private
respondent's letter of August 15, 1984.
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.
Since the MOA was actually a contract of sale, MMIC acquired ownership over the Giporlos
Project when private respondent delivered it to MMIC. Under the Civil Code, unless the contract
contains a stipulation that ownership of the thing sold shall not pass to the purchaser until he has fully
paid the price, ownership of the thing sold shall be transferred to the vendee upon the actual or
constructive delivery thereof. In other words, payment of the purchase price is not essential to the
transfer of ownership as long as the property sold has been delivered. Such delivery (traditio) operated
to divest the vendor of title to the property which may not be regained or recovered until and unless the
contract is resolved or rescinded in accordance with law.
NOTES:
 Under Art. 1458 of the Civil Code, by the contract of sale, one of the contracting parties
obligates himself to transfer the ownership of and to deliver a determinate thing, and the other
to pay therefor a price certain in money or its equivalent
 In assignments, a consideration is not always a requisite, unlike in sales. Thus, an assignee may
maintain an action based on his title and it is immaterial whether or not he paid any
consideration therefor. Furthermore, in an assignment, title is transferred but possession need
not be delivered.
 ASSIGNMENT DIFFERENTIATED FROM SALE. — In assignments, a consideration is not always a
requisite, unlike in sales. Thus, an assignee may maintain an action based on his title and it is
immaterial whether or not he paid any consideration therefor. Furthermore, in an assignment,
title is transferred but possession need not be delivered.

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G.R. No.

118357 May 6, 1997

PHILIPPINE NATIONAL BANK, petitioner,

Thus, the cause of this petition.

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