G.R. No. 179918 SHELL PHILIPPINES EXPLORATION B.V., represented by its Managing Director, Jeremy Cliff, Petitioner,......

Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 179918               September 8, 2010

SHELL PHILIPPINES EXPLORATION B.V., represented by its Managing Director, Jeremy Cliff, Petitioner,
vs.
EFREN JALOS, JOVEN CAMPANG, ARNALDO MIJARES, CARLITO TRIVINO, LUCIANO ASERON, CHARLITO ALDOVINO, ROBERTO FADERA, RENATO MANTALA, GERTRUDES MENESES, NORBERTO HERNANDEZ, JOSE CABASE, DANILO VITTO, EDWIN MARIN, SAMUEL MARIN, ARMANDO MADERA, EDGARDO MARINO, HERMINO RELOX, ROLANDO TARROBACO, ERNESTO RELOX, ROSALITO RUGAS, ELDIE DIMALIBOT, PLARIDEL MUJE, REYMUNDO CARMONA, RONILO RIOFLORIDO, LEONIDES MANCIA, JONAR GERANCE, RODEL CASAPAO, CARMENCITA MENDOZA, SEVERINO MEDRANO, EDWIN MENDOZA, DOMINEZ SANTIAGO, ROGER MUJE, REYNALDO MORALES, WILLIAM MENDOZA, NELSON SOLIS, ALBERTO MATRE, MARGARITO GADO, BONIFACIO LEOTERIO, NEMESIO PEREZ, JR., ARIEL MENDOZA, PEPITO MENDOZA, SALVADOR FALCULAN, JR., CEASAR ROBLEDO, SUZIMO CERNA, VIRGILIO VATAL, JIMMY ALBAO, CRISANTO SABIDA, LAUDRINO MIRANDA, LEOPOLDO MISANA, JIMMY DELACION, FREJEDO MAGPILI, ROLANDO DIMALIBOT, PEDRO MAPALAD, FAUSTINO BALITOSTOS, LEONARDO DIMALIBOT, MARIANO MAGYAYA, RAUL MIRANO, ERNESTO MATRE, ROMEO ROBLEDO, GILBERT SADICON, ROMEO SIENA, NESTOR SADICON, NOEL SIENA, REDENTER CAMPANG, ARNEL HERNENDEZ, RESTITUTO BAUTISTA, JOSE MUJE, DANILO BILARMINO, ADRIAN MAGANGO, VALERIANO SIGUE, BERNIE MORALES, JOSEPH SALAZAR, PABLITO MENDOZA, JR., ERWIN BAUTISTA, RUBEN BAUTISTA, ALEXANDER ROVERO, EDUARDO QUARTO, RUBEN RIOFLORIDO, NESTOR DELACION, SEVERINO MEDRANO, JOEY FAJECULAY, NICOLAS MEDRANO, FELIX MEDRANO, RODELIO CASAPAO, FELIPE LOLONG, MARCELINO LOLONG, ELDY DIMALIBOT, ROBERTO CASAPAO, SIMEON CASAPAO, HENRY DIMALIBOT, RONALDO MORALES, PEPING CASAPAO, JOEL GERANCE, JAYREE DIMALIBOT, MARIO DIMALIBOT, SANTO DIMALIBOT, ZERAPIN DIMALIBOT, FLORENCIO ROVERO, Respondents.

D E C I S I O N

ABAD, J.:

This case is about a question of jurisdiction over an action against a petroleum contractor, whose pipeline operation has allegedly driven the fish away from coastal areas, inflicting loss of earnings among fishermen.

The Facts and the Case

On December 11, 1990 petitioner Shell Philippines Exploration B.V. (Shell) and the Republic of the Philippines entered into Service Contract 38 for the exploration and extraction of petroleum in northwestern Palawan. Two years later, Shell discovered natural gas in the Camago-Malampaya area and pursued its development of the well under the Malampaya Natural Gas Project. This entailed the construction and installation of a pipeline from Shell’s production platform to its gas processing plant in Batangas. The pipeline spanned 504 kilometers and crossed the Oriental Mindoro Sea.

On May 19, 2003, respondents Efren Jalos, Joven Campang, Arnaldo Mijares, and 75 other individuals (Jalos, et al) filed a complaint for damages¹ against Shell before the Regional Trial Court (RTC), Branch 41, Pinamalayan, Oriental Mindoro. Jalos, et al claimed that they were all subsistence fishermen from the coastal barangay of Bansud, Oriental Mindoro whose livelihood was adversely affected by the construction and operation of Shell’s natural gas pipeline.

Jalos, et al claimed that their fish catch became few after the construction of the pipeline. As a result, their average net income per month fell from a high of P4,848.00 to only P573.00. They said that "the pipeline greatly affected biogenically hard-structured communities such as coral reefs and led [to] stress to the marine life in the Mindoro Sea." They now have to stay longer and farther out at sea to catch fish, as the pipeline’s operation has driven the fish population out of coastal waters.²

Instead of filing an answer, Shell moved for dismissal of the complaint. It alleged that the trial court had no jurisdiction over the action, as it is a "pollution case" under Republic Act (R.A.) 3931, as amended by Presidential Decree (P.D.) 984 or the Pollution Control Law. Under these statutes, the Pollution Adjudication Board (PAB) has primary jurisdiction over pollution cases and actions for related damages.³

Shell also claimed that it could not be sued pursuant to the doctrine of state immunity without the State’s consent. Shell said that under Service Contract 38, it served merely as an agent of the Philippine government in the development of the Malampaya gas reserves.

Moreover, said Shell, the complaint failed to state a cause of action since it did not specify any actionable wrong or particular act or omission on Shell’s part that could have caused the alleged injury to Jalos, et al. The complaint likewise failed to comply with requirements of a valid class suit, verification and certification against forum shopping, and the requisites for a suit brought by pauper litigants.⁴

On March 24, 2004 the RTC dismissed the complaint. It ruled that the action was actually pollution-related, although denominated as one for damages. The complaint should thus be brought first before the PAB, the government agency vested with jurisdiction over pollution-related cases.⁵

Jalos, et al assailed the RTC’s order through a petition for certiorari⁶ before the Court of Appeals (CA). In due course, the latter court reversed such order and upheld the jurisdiction of the RTC over the action. It said that Shell was not being sued for committing pollution, but for constructing and operating a natural gas pipeline that caused fish decline and considerable reduction in the fishermen’s income. The claim for damages was thus based on a quasi-delict over which the regular courts have jurisdiction.

The CA also rejected Shell’s assertion that the suit was actually against the State. It observed that the government was not even impleaded as party defendant. It gave short shrift to Shell’s insistence that, under the service contract, the government was solidarily liable with Shell for damages caused to third persons. Besides, the State should be deemed to have given its consent to be sued when it entered into the contract with Shell.

The CA also held that the complaint sufficiently alleged an actionable wrong. Jalos, et al invoked their right to fish the sea and earn a living, which Shell had the correlative obligation to respect. Failure to observe such obligation resulted in a violation of the fishermen’s rights and thus gave rise to a cause of action for damages.⁷

Finally, the CA held that Jalos, et al substantially complied with the technical requirements for filing the action. But since they failed to prove the requisites of a class suit, only those who have verified the complaint should be deemed party plaintiffs.⁸

Shell moved for reconsideration of the CA’s decision but the same was denied.⁹ Hence, it filed this petition for review under Rule 45.

The Issues Presented

The case presents the following issues:

1. Whether or not the complaint is a pollution case that falls within the primary jurisdiction of the PAB;
2. Whether or not the complaint sufficiently alleges a cause of action against Shell; and
3. Whether or not the suit is actually against the State and is barred under the doctrine of state immunity.

The Court’s Rulings

First. Although the complaint of Jalos, et al does not use the word "pollution" in describing the cause of the alleged fish decline in the Mindoro Sea, it is unmistakable based on their allegations that Shell’s pipeline produced some kind of poison or emission that drove the fish away from the coastal areas. While the complaint did not specifically attribute to Shell any specific act of "pollution," it alleged that "the pipeline greatly affected biogenically hard-structured communities such as coral reefs and led [to] stress to the marine life in the Mindoro Sea."¹⁰ This constitutes "pollution" as defined by law.

Section 2(a) of P.D. 984 defines "pollution" as "any alteration of the physical, chemical and biological properties of any water x x x as will or is likely to create or render such water x x x harmful, detrimental or injurious to public health, safety or welfare or which will adversely affect their utilization for domestic, commercial, industrial, agricultural, recreational or other legitimate purposes."

It is clear from this definition that the stress to marine life claimed by Jalos, et al is caused by some kind of pollution emanating from Shell’s natural gas pipeline. The pipeline, they said, "greatly affected" or altered the natural habitat of fish and affected the coastal waters’ natural function as fishing grounds. Inevitably, in resolving Jalos, et al’s claim for damages, the proper tribunal must determine whether or not the operation of the pipeline adversely altered the coastal waters’ properties and negatively affected its life sustaining function. The power and expertise needed to determine such issue lies with the PAB.

Executive Order 192 (1987) transferred to the PAB the powers and functions of the National Pollution and Control Commission provided in R.A. 3931, as amended by P.D. 984.¹¹ These empowered the PAB to "[d]etermine the location, magnitude, extent, severity, causes and effects" of water pollution.¹² Among its functions is to "[s]erve as arbitrator for the determination of reparation, or restitution of the damages and losses resulting from pollution." In this regard, the PAB has the power to conduct hearings,¹³ impose penalties for violation of P.D. 984,¹⁴ and issue writs of execution to enforce its orders and decisions.¹⁵ The PAB’s final decisions may be reviewed by the CA under Rule 43 of the Rules of Court.¹⁶

Jalos, et al had, therefore, an administrative recourse before filing their complaint with the regular courts.¹⁷ The laws creating the PAB and vesting it with powers are wise. The definition of the term "pollution" itself connotes the need for specialized knowledge and skills, technical and scientific, in determining the presence, the cause, and the effects of pollution. These knowledge and skills are not within the competence of ordinary courts.¹⁸ Consequently, resort must first be made to the PAB, which is the agency possessed of expertise in determining pollution-related matters.1avvphil

To this extent, the failure of Jalos, et al to allege in their complaint that they had first taken resort to PAB before going to court means that they failed to state a cause of action that the RTC could act on. This warranted the dismissal of their action.¹⁹

Second. Still, Shell points out that the complaint also states no cause of action because it failed to specify any actionable wrong or particular act or omission on Shell’s part. The Court cannot agree.

As mentioned above, the complaint said that the natural gas pipeline’s construction and operation "greatly affected" the marine environment, drove away the fish, and resulted in reduced income for Jalos, et al. True, the complaint did not contain some scientific explanation regarding how the construction and operation of the pipeline disturbed the waters and drove away the fish from their usual habitat as the fishermen claimed. But lack of particulars is not a ground for dismissing the complaint.

A cause of action is the wrongful act or omission committed by the defendant in violation of the primary rights of the plaintiff.²⁰ Its elements consist of: (1) a right existing in favor of the plaintiff, (2) a duty on the part of the defendant to respect the plaintiff’s right, and (3) an act or omission of the defendant in violation of such right.²¹ To sustain a motion to dismiss for lack of cause of action, however, the complaint must show that the claim for relief does not exist and not only that the claim was defectively stated or is ambiguous, indefinite or uncertain.²²

Here, all the elements of a cause of action are present. First, Jalos, et al undoubtedly had the right to the preferential use of marine and fishing resources which is guaranteed by no less than the Constitution.²³ Second, Shell had the correlative duty to refrain from acts or omissions that could impair Jalos, et al’s use and enjoyment of the bounties of the seas. Lastly, Shell’s construction and operation of the pipeline, which is an act of physical intrusion into the marine environment, is said to have disrupted and impaired the natural habitat of fish and resulted in considerable reduction of fish catch and income for Jalos, et al.

Thus, the construction and operation of the pipeline may, in itself, be a wrongful act that could be the basis of Jalos, et al’s cause of action. The rules do not require that the complaint establish in detail the causal link between the construction and operation of the pipeline, on the one hand, and the fish decline and loss of income, on the other hand, it being sufficient that the complaint states the ultimate facts on which it bases its claim for relief. The test for determining the sufficiency of a cause of action rests on whether the complaint alleges facts which, if true, would justify the relief demanded.²⁴ In this case, a valid judgment for damages can be made in favor of Jalos, et al, if the construction and operation of the pipeline indeed caused fish decline and eventually led to the fishermen’s loss of income, as alleged in the complaint.

Third. Shell claims that it cannot be sued without the State’s consent under the doctrine of state immunity from suit. But, to begin with, Shell is not an agent of the Republic of the Philippines. It is but a service contractor for the exploration and development of one of the country’s natural gas reserves. While the Republic appointed Shell as the exclusive party to conduct petroleum operations in the Camago-Malampayo area under the State’s full control and supervision,²⁵ it does not follow that Shell has become the State’s "agent" within the meaning of the law.

An agent is a person who binds himself to render some service or to do something in representation or on behalf of another, with the consent or authority of the latter.²⁶ The essence of an agency is the agent’s ability to represent his principal and bring about business relations between the latter and third persons.²⁷ An agent’s ultimate undertaking is to execute juridical acts that would create, modify or extinguish relations between his principal and third persons.²⁸ It is this power to affect the principal’s contractual relations with third persons that differentiates the agent from a service contractor.

Shell’s main undertaking under Service Contract 38 is to "[p]erform all petroleum operations and provide all necessary technology and finance" as well as other connected services²⁹ to the Philippine government. As defined under the contract, petroleum operation means the "searching for and obtaining Petroleum within the Philippines", including the "transportation, storage, handling and sale" of petroleum whether for export or domestic consumption.³⁰ Shell’s primary obligation under the contract is not to represent the Philippine government for the purpose of transacting business with third persons. Rather, its contractual commitment is to develop and manage petroleum operations on behalf of the State.

Consequently, Shell is not an agent of the Philippine government, but a provider of services, technology and financing³¹ for the Malampaya Natural Gas Project. It is not immune from suit and may be sued for claims even without the State’s consent. Notably, the Philippine government itself recognized that Shell could be sued in relation to the project. This is evident in the stipulations agreed upon by the parties under Service Contract 38.

Article II, paragraph 8, Annex "B" of Service Contract 38³² states that legal expenses, including "judgments obtained against the Parties or any of them on account of the Petroleum Operations", can be recovered by Shell as part of operating expenses to be deducted from gross proceeds. Article II, paragraph 9B of the same document allows a similar recovery for "[a]ll actual expenditures incurred and paid by CONTRACTOR [Shell] in settlement of any and all losses, claims, damages, judgments, and any other expenses not covered by insurance, including legal services." This signifies that the State itself acknowledged the suability of Shell. Since payment of claims and damages pursuant to a judgment against Shell can be deducted from gross proceeds, the State will not be required to perform any additional affirmative act to satisfy such a judgment.

In sum, while the complaint in this case sufficiently alleges a cause of action, the same must be filed with the PAB, which is the government agency tasked to adjudicate pollution-related cases. Shell is not an agent of the State and may thus be sued before that body for any damages caused by its operations. The parties may appeal the PAB’s decision to the CA. But pending prior determination by the PAB, courts cannot take cognizance of the complaint.

WHEREFORE, the Court GRANTS the petition and REVERSES the decision of the Court of Appeals in CA-G.R. CV 82404 dated November 20, 2006. Respondent Efren Jalos, et al’s complaint for damages against Shell Philippines Exploration B.V. in Civil Case P-1818-03 of the Regional Trial Court, Branch 41, Pinamalayan, Oriental Mindoro is ordered DISMISSED without prejudice to its refiling with the Pollution Adjudication Board or PAB.

SO ORDERED.

ROBERTO A. ABAD
Associate Justice

WE CONCUR:

ANTONIO T. CARPIO
Associate Justice

DIOSDADO M. PERALTA Associate Justice

MARIANO C. DEL CASTILLO* Associate Justice

JOSE CATRAL MENDOZA
Associate Justice

A T T E S T A T I O N

I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

ANTONIO T. CARPIO
Associate Justice
Chairperson, Second Division

C E R T I F I C A T I O N

Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson’s Attestation, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

RENATO C. CORONA
Chief Justice

Footnotes

^* Designated as additional member in lieu of Associate Justice Antonio Eduardo B. Nachura, per raffle dated June 7, 2010.

¹ Docketed as Civil Case P-1818-03 (also referred to as Civil Case R-1818-03 in some parts of the records).

² Rollo, p. 119.
³ Id. at 141-143.
⁴ Id. at 146-157.
⁵ Id. at 114.
⁶ Docketed as CA-G.R. CV 82404.
⁷ Rollo, pp. 96-100.
⁸ Id. at 102.
⁹ Id. at 108-110.

¹⁰ Biogenic means "essential to life and its maintenance." (Webster’s Third New International Dictionary, Unabridged, p. 218.)

¹¹ Estrada v. Court of Appeals, 484 Phil. 730, 742 (2004).
¹² P.D. 984, Section 6(a).
¹³ Id., Section 6(d).
¹⁴ Id., Section (9).
¹⁵ Id., Section 7(d).
¹⁶ Id., Section 7(c).

¹⁷ The Alexandra Condominium Corporation v. Laguna Lake Development Authority, G.R. No. 169228, September 11, 2009, 599 SCRA 452, 461.

¹⁸ Mead v. Hon. Argel, 200 Phil. 650, 662 (1982).
¹⁹ Supra note 11, at 739.

²⁰ Remedial Law Compendium, Vol. I (2002 Ed.), Justice Florenz D. Regalado. p. 66.

²¹ Luzon Development Bank v. Conquilla, G.R. No. 163338, September 21, 2005, 470 SCRA 533, 546.

²² Philippine Bank of Communications v. Trazo, G.R. No. 165500, August 30, 2006, 500 SCRA 242, 255.

²³ Article XIII, Section 7 provides:

SEC. 7. The State shall protect the rights of subsistence fishermen, especially of local communities, to the preferential use of the communal marine and fishing resources, both inland and offshore. It shall provide support to such fishermen through appropriate technology and research, adequate financial, production, and marketing assistance, and other services. The State shall also protect, develop, and conserve such resources. The protection shall extend to offshore fishing grounds of subsistence fishermen against foreign intrusion. Fishworkers shall receive a just share from their labor in the utilization of marine and fishing resources.

²⁴ Raytheon International, Inc. v. Rouzie, Jr., G.R. No. 162894, February 26, 2008, 546 SCRA 555, 565.

²⁵ Rollo, p. 378.
²⁶ Civil Code of the Philippines, Article 1869.

²⁷ Philex Mining Corporation v. Commissioner of Internal Revenue, G.R. No. 148187, April 16, 2008, 551 SCRA 428, 442.

²⁸ Nielson & Company, Inc. v. Lepanto Consolidated Mining Company, 135 Phil. 532, 541 (1968).

²⁹ Rollo, p. 384.
³⁰ Id. at 380.

³¹ See Sections 6 and 7, Presidential Decree 87 or The Oil Exploration and Development Act of 1972.

³² Rollo, p. 403. The stipulation reads in full:
"8. Legal Expenses.

All costs and expenses of litigation, or legal service otherwise necessary or expedient for the protection of the joint interests, including attorney’s fees and expenses as hereinafter provided, together with all judgments obtained against the Parties or any of them on account of the Petroleum Operations, and actual expenses incurred in securing evidence for the purpose of defending against the Operations of the subject matter of the Contract. In the event actions or claims affecting interests under the Contract shall be handled by the legal staff not otherwise charged to Operating Expenses of one or more of the Parties, a charge commensurate with the cost of providing and furnishing such services may be made against Operating Expenses."

DOCUMENT SHARED FROM

---

The TRUTH will set you FREE.

CARMELITA T. PANGANIBAN, petitioner, vs. PILIPINAS SHELL PETROLEUM CORPORATION, respondent.

FIRST DIVISION

[G.R. No. 131471. January 22, 2003]

CARMELITA T. PANGANIBAN, petitioner, vs. PILIPINAS SHELL PETROLEUM CORPORATION, respondent.

D E C I S I O N

CARPIO, J.:

The Case

Before us is a petition for review assailing the Decision[1] of the Court of Appeals dated November 12, 1997 in CA-G.R. SP No. 44673 dismissing the appeal of petitioner.The questioned decision affirmed the order of the Regional Trial Court of Makati City, Branch 137, in Case No. 95-1010 dismissing petitioners petition for declaratory relief on the ground of litis pendentia.

The Antecedent Facts

On August 7, 1990, Carmelita Panganiban (petitioner for brevity) entered into a Sublease and Dealer Agreement (SLDA for brevity) with Pilipinas Shell Petroleum Corporation (private respondent for brevity). Through the SLDA, private respondent subleased to petitioner a gasoline station located at 427 Samson Road, EDSA, Caloocan City. The period of the sublease as stipulated in the SLDA is as follows:

5. Effectivity Date. Duration and Termination of Agreement.

This Agreement may be terminated by SHELL at any time during the first six (6) months from the date of approval by ERB of the application of the DEALER to operate this station, on any of the following grounds: failure of the DEALER to meet any of the conditions stipulated in this Agreement, lack of appropriate personal attention/presence in the operation of the station, or poor volume performance of the station, the evaluation and determination of which shall be at the exclusive discretion of SHELL. Such decision of termination by SHELL shall be accepted by the DEALER, who hereby agrees that another dealer shall be appointed by SHELL and approved by BEU or other appropriate government agency. If this agreement is not terminated during the first six (6) months, it shall continue to be in effect for another period of 4 years, unless otherwise terminated as herein provided in paragraph 5(3). The parties agree that this Agreement is, however, co-terminus with SHELLs lease on the site referred to under paragraph 1 of this Agreement notwithstanding the total 5-year period aforementioned.[2]

Private respondent is not the owner of the lot subject of the sublease. Private respondent was only leasing the lot from its owner, Serafin Vasquez, pursuant to a Lease Agreement dated February 27, 1987. The Lease Agreement was effective from January 1, 1987 to December 31, 2002 or for a period of 15 years.

In a letter dated June 14, 1995, private respondent notified petitioner that the SLDA was expiring on July 31, 1995. Private respondent then advised petitioner to wind up her business on or before July 31, 1995.

Believing that the SLDA had not yet expired and was still effective until December 31, 2002, petitioner continued to pay rentals for the gasoline station. Private respondent refused to accept the payments.

On July 10, 1995, petitioner filed a petition for declaratory relief with Branch 137 of the Regional Trial Court of Makati City. The case was docketed as Case No. 95-1010.

On August 30, 1995, private respondent filed its Answer.

On April 26, 1996, private respondent filed an unlawful detainer case against petitioner with the Metropolitan Trial Court of Caloocan City. The case was docketed as Civil Case No. 22645.

On April 30, 1996, or eight months after it submitted its Answer in Case No. 95-1010 with the Regional Trial Court, private respondent filed a Manifestation with Motion to Dismiss in the same case. Private respondent claimed that the issue of the renewal of the lease should be raised in the unlawful detainer case pending before the Metropolitan Trial Court.

On August 1, 1996, during the preliminary conference of the unlawful detainer case, petitioner moved for the suspension of the proceedings since the other case filed with the Regional Trial Court involved the same parties and issues. The Metropolitan Trial Court denied petitioners motion and the court ordered the parties to submit their position papers.

On September 25, 1996, the Metropolitan Trial Court issued its Decision in the unlawful detainer case in favor of private respondent, thus:

WHEREFORE, premises considered, judgment is hereby rendered, ordering:

1. the defendant and all persons or parties claiming rights under her to vacate the subject subleased premises and peacefully surrender possession thereof to the plaintiff;

2. the said defendant to pay the plaintiff as follows:

a) the amount of P52,500.00 per month from August 1, 1995 until the said premises is fully vacated by defendant and returned to plaintiff;

b) the amount of P20,000.00 as plaintiffs reduced attorneys fees; and

c) the costs of suit.

The counterclaim of the defendant is dismissed for lack of merit.

IT IS SO ORDERED.[3]

Petitioner appealed from the decision of the Metropolitan Trial Court. The appeal is now pending with the Regional Trial Court of Caloocan City, Branch 124, docketed as Civil Case No. C-17726.

On February 21, 1997, the Regional Trial Court ordered the dismissal of the petition for declaratory relief. The Order reads:

Considering that there has been a breach of the Sublease and Dealer Agreement (SLDA) on the part of the petitioner (lessee therein) as said lease had supposedly expired on 31 July 1995, and that, consequently, an ejectment has already been filed against petitioner by respondent before the Metropolitan Trial Court of Kalookan City, so that this petition is no longer proper under thecircumstances, and considering further that the issue on possession can be threshed out in said ejectment case based on the jurisprudence in Rosales vs. CFI of Lanao del Norte, Br. III, 154 SCRA 153, this petition is dismissed.[4]

Petitioner filed a motion for reconsideration of the Order. Because of petitioners failure to appear at the hearing on her motion for reconsideration, the Regional Trial Court on April 11, 1997 denied the motion for reconsideration.

On May 13, 1997, petitioner filed a petition for review under Rule 45 of the Rules of Court with the Supreme Court. The petition assailed the February 21, 1997 Order of the Regional Trial Court dismissing Case No. 95-1010. The petition was docketed as G.R. No. 128984.

On June 25, 1997, the Supreme Court issued a Resolution referring the petition for certiorari to the Court of Appeals. The petition was referred to the Court of Appeals because the appellate court has concurrent jurisdiction with the Court and petitioner failed to cite a special or important reason for the Court to take immediate cognizance of the petition.

On November 12, 1997, the Court of Appeals denied the petition for certiorari. The dispositive portion of the Decision reads:

THE FOREGOING CONSIDERED, and not being sufficient in substance, herein Petition for Certiorari is hereby dismissed.[5]

The Ruling of the Court of Appeals

The Court of Appeals upheld the order of the trial court dismissing the petition for declaratory relief on the ground of litis pendentia. The appellate court ruled that in dismissing the petition for declaratory relief, the Regional Trial Court correctly applied the doctrine laid down in Rosales v. Court of First Instance of Lanao del Norte.[6]The Court of Appeals also considered University Physicians Services, Inc. v. Court of Appeals[7] as a case parallel to the present case. In ruling that the case for declaratory relief should be abated in favor of the case for unlawful detainer, the Court of Appeals quoted the pertinent portions of Rosales[8] and University Physicians Services, Inc.[9]

In disregarding petitioners contention that it is this Court that has jurisdiction over her petition, the Court of Appeals pointed out that it was merely yielding to this Courts June 25, 1997 Resolution ordering the appellate court to decide the case on the merits. This Court referred the petition to the Court of Appeals because the appellate court has concurrent jurisdiction with this Court and there is no special or important reason for this Court to take immediate cognizance of the case.

The Issues

The sole issue raised by petitioner in this case is:

THE COURT OF APPEALS ERRED IN AFFIRMING RTC-MAKATIS DISMISSAL OF CIVIL CASE NO. 95-1010 ON MOTION OF SHELL ON THE GROUND OF LITIS PENDENTIA WHICH WAS FILED LONG AFTER SHELL HAD FILED ITS ANSWER.[10]

The Ruling of the Court

We find no merit in the petition.

The Court of Appeals correctly applied Rosales[11] and University Physicians Services, Inc.[12] in sustaining the dismissal of the action for declaratory relief to give way to the ejectment suit.

In Rosales,[13] the real issue between the parties, the lessor and the lessee, was whether the contract of lease they entered into had already prescribed. The lessee filed an action for the continued enforcement of the lease contract and for damages with the Court of First Instance of Iligan City. The lessor in turn filed a case for unlawful detainer with the City Court of Iligan City. The lessor filed with the Court of First Instance a motion to dismiss the complaint of the lessee because of the pendency of the ejectment case. The lessee for his part moved for the dismissal of the ejectment suit also on the ground of litis pendentia contending that the case he had filed earlier should be decided first before the lessors complaint could be entertained. In deciding which case should take precedence, the Court cited the ruling in Pardo v. Encarnacion,[14] to wit:

At any rate, while the said case before the Court of First Instance of Cavite appears to be one for specific performance with damages, it cannot be denied that the real issue between the parties is whether or not the lessee should be allowed to continue occupying the land as lessee.

The situation is not novel to Us.

It has been settled in a number of cases that the right of a lessee to occupy the land leased as against the demand of the lessor should be decided under Rule 70 (formerly 72) of the Rules of Court.

There is no merit to the contention that the lessees supposed right to a renewal of the lease contract can not be decided in the ejectment suit. In the case of Teodoro v. Mirasol, supra, this Court held that if the plaintiff has any right to the extension of the lease at all, such right is a proper and legitimate issue that could be raised in the unlawful detainer case because it may be used as a defense to the action. In other words, the matter raised in the Court of First instance of Cavite may be threshed out in the ejectment suit, in consonance with the principle prohibiting multiplicity of suits. And the mere fact that the unlawful detainer case was filed later, would not change the situation to depart from the application of the foregoing rule.

It is to be noted that the Rules do not require as a ground for dismissal of a complaint that there is a prior pending action. They provide that there is pending action, not a pending prior action.The fact that the unlawful detainer suit was of a later date is no bar to the dismissal of the present action. (Teodoro, Jr. v. Mirasol, supra.)

In University Physicians Services, Inc.,[15] the Court also had to resolve which of two cases, one for damages and one for ejectment, filed in two different courts involving the same parties and subject matter, should take precedence over the other. In settling this issue, the Court also relied on Pardo v. Encarnacion, citing the discussion quoted above. The Court further declared in University Physicians Services, Inc. that:

The issue of whether private respondent had the right to occupy the subject apartment unit should therefore be properly threshed out in an ejectment suit and not in an action for damages where the question of possession is likewise the primary issue to be resolved.

We cannot simply ignore the fact that private respondent, after her unjustified refusal to vacate the premises, was aware that an ejectment case against her was forthcoming. It is therefore evident that the filing of the complaint for damages and preliminary injunction was but a canny and preemptive maneuver intended to block the action for ejectment which petitioner was to take against private respondent.

The matter raised in the Regional Trial Court of Manila may be properly determined in the ejectment suit before the Metropolitan Trial Court, in consonance with the rule prohibiting multiplicity of suits. And the mere fact that the unlawful detainer suit was filed later than the one for damages does not change the situation of the parties (Rosales vs. CFI, 154 SCRA 153 [1987]).

Petitioner insists that the doctrine laid down in Rosales and University Physicians Services, Inc. is not applicable to this case. Rather, the case law applicable is that laid down in J.M. Tuason & Co., Inc. v. Rafor,[16] Ruiz, Jr. v. Court of Appeals[17] and Heirs of Mariano Lagutan v. Icao[18] which essentially establish the doctrine that a motion to dismiss must be filed within the time to answer. Petitioner further points out that private respondent filed the motion to dismiss some eight months after it had already filed an answer in Case No. 95-1010, the action for declaratory relief. This, according to petitioner, is a violation of Section 1, Rule 16 of the Rules of Court mandating that the motion to dismiss must be filed within the time for but before the filing of the answer to the complaint.

We are not persuaded.

The requirement that a motion to dismiss should be filed within the time for filing the answer is not absolute. Even after an answer has been filed, a defendant can still file a motion to dismiss on the following grounds: (1) lack of jurisdiction, (2) litis pendentia (3) lack of cause of action, and (4) discovery during trial of evidence that would constitute a ground for dismissal.[19] Litis pendentia is also one of the grounds that authorize a court to dismiss a case motu proprio.[20]

The cases relied upon by petitioner, namely, J.M. Tuason & Co., Inc., Ruiz, Jr. and Heirs of Mariano Lagutan, are not squarely in point. The motions to dismiss in these cases were also predicated on the grounds that would have permitted the filing of a motion to dismiss even after an answer had already been filed. However, in each of the three cases, the Court found the elements of the exceptional grounds invoked in the motions to dismiss to be insufficient. Thus, in J.M. Tuason & Co., Inc., Ruiz, Jr.and Heirs of Mariano Lagutan, the Court applied the general rule that a party who has filed his answer is already estopped from filing a motion to dismiss.

The present case is different from J.M. Tuason & Co., Inc., Ruiz, Jr., and Heirs of Mariano Lagutan. In this case, the bona fide existence of litis pendentia is beyond dispute. The following requisites of litis pendentia are present in this case: (a) the identity of parties, or at least such as representing the same interests in both actions; (b) the identity of rights asserted and relief prayed for, the relief being founded on the same facts; and (c) the identity of the two cases such that judgment in one, regardless of which party is successful, would amount to res judicata in the other.[21]

Petitioner questions the preference given by the Regional Trial Court and the Court of Appeals to the unlawful detainer case filed by private respondent. Petitioner maintains that based on priority in time, the action for declaratory relief, the case filed earlier, should not have been abated in favor of the ejectment suit, a case filed much later.

Litis pendentia as a ground for the dismissal of a civil action refers to that situation wherein another action is pending between the same parties for the same cause of actions and that the second action becomes unnecessary and vexatious.[22] We have set the relevant factors that a court must consider when it has to determine which case should be dismissed given the pendency of two actions. These are:

(1) the date of filing, with preference generally given to the first action filed to be retained;

(2) whether the action sought to be dismissed was filed merely to preempt the latter action or to anticipate its filing and lay the basis for its dismissal; and

(3) whether the action is the appropriate vehicle for litigating the issues between the parties.[23]

The mere fact that the action for declaratory relief was filed earlier than the case for unlawful detainer does not necessarily mean that the first case will be given preference. Rosales and University Physicians Services, Inc. clearly place a premium on the two other factors. In Cruz v. Court of Appeals,[24] we have ruled that the earlier case can be dismissed in favor of the later case if the later case is the more appropriate forum for the ventilation of the issues between the parties.

An action for unlawful detainer is filed by a person from whom possession of any land or building is unlawfully withheld by another after the expiration or termination of the latters right to hold possession under a contract, express or implied.[25] Clearly, the interpretation of a provision in the SLDA as to when the SLDA would expire is the key issue that would determine petitioners right to possess the gasoline service station. When the primary issue to be resolved is physical possession, the issue should be threshed out in the ejectment suit, and not in any other case such as an action for declaratory relief to avoid multiplicity of suits.

There is a more compelling reason for the dismissal of the action for declaratory relief. The Metropolitan Trial Court had already resolved the unlawful detainer case in favor of private respondent even before the Regional Trial Court dismissed the action for declaratory relief. The Metropolitan Trial Court issued its Decision on September 25, 1996 and this decision is now on appeal.[26] The Regional Trial Court dismissed the action for declaratory relief on February 21, 1997 based on the April 30, 1996 Motion to Dismiss filed by private respondent that raised the ground of litis pendentia. Based on the record, it appears that private respondent failed to inform the Regional Trial Court of the decision of the Metropolitan Trial Court on the unlawful detainer case. The significance of the earlier resolution of the unlawful detainer case, however, will not escape our attention.

Indeed, the action for declaratory relief had become vexatious. It would have been an exercise in futility for the Regional Trial Court to continue the proceedings in the action for declaratory relief when the Metropolitan Trial Court had already ruled that the term of the SLDA was for only five years or until July 31, 1995.[27] Moreover, the decision of the Metropolitan Trial Court once it attains finality would amount to res judicata. The proper forum for petitioner to clarify the provision of the SLDA on the expiration of the term of the contract is in her appeal of the decision of the Metropolitan Trial Court in the unlawful detainer case.

Petitioner erroneously believes that the unlawful detainer case should have been dismissed because private respondent was already guilty of laches when it filed the ejectment suit 269 days from July 31, 1995, the date private respondent claims the SLDA expired. A complaint for unlawful detainer should be filed within one year after such unlawful deprivation or withholding of possession occurs.[28] When the action is to terminate the lease because of the expiration of its term, it is upon the expiration of the term of the lease that the lessee is already considered to be unlawfully withholding the property.[29] The expiration of the term of the lease immediately gives rise to a cause of action for unlawful detainer.[30] In such a case, a demand to vacate is no longer necessary.[31] Private respondent therefore had one year or 365 days from July 31, 1995 to file the case for unlawful detainer. Laches definitely had not yet set in when private respondent filed the unlawful detainer case 269 days after the expiration of the SLDA.Private respondent did not sleep on its right when it filed the unlawful detainer case well within the prescriptive period for filing the action.

Petitioner implores us to reconsider the application of Rosales[32] and University Physicians Services, Inc.[33] to this case because this will, in the words of petitioner, open a floodgate of abuses.[34] Petitioner claims that this can happen where an earlier case filed by the lessee is already submitted for resolution and the lessor belatedly files an ejectment suit to create a cause to dismiss the earlier case based on litis pendentia.

Petitioners contention is unfounded.

The action for declaratory relief was not yet submitted for resolution when private respondent filed the action for unlawful detainer. There is also no proof that private respondent filed the ejectment suit in anticipation of the early resolution of the action for declaratory relief. Private respondent was not out to frustrate the impending resolution of the action for declaratory relief when it filed the ejectment suit. In fact, the unlawful detainer case was already decided upon by the Metropolitan Trial Court even before the Regional Trial Court dismissed the action for declaratory relief. It appears that it is petitioner who wants to avoid the adverse ruling in the unlawful detainer case by insisting that the action for declaratory relief be given preference even after the ejectment suit was already decided. The abuse feared by petitioner does not apply in this case and yet, petitioner urges us to reevaluate the applicability of a doctrine based on a feared hypothetical abuse. This, we cannot do. We can only rule upon actual controversies, not on scenarios that a party merely conjures to suit her interest.

WHEREFORE, the petition is DENIED for lack of merit. Costs against petitioner.

SO ORDERED.

Davide, Jr., C.J., (Chairman), Vitug, Ynares-Santiago and Azcuna, JJ., concur.

---

[1] Penned by Associate Justice Bernardo LL. Salas with Associate Justices Angelina Sandoval-Gutierrez and Marina L. Buzon, concurring, Sixteenth Division.

[2] Rollo, pp. 47-48.

[3] Rollo, pp. 158-159.

[4] Ibid., p. 101.

[5] Ibid., pp. 44-45.

[6] 154 SCRA 153 (1987), Rollo, p. 40.

[7] 233 SCRA 86 (1994), Rollo p. 42.

[8] Supra.

[9] Supra.

[10] Rollo, p. 20.

[11] Supra, see note 6.

[12] Supra, see note 7.

[13] Supra, see note 6.

[14] 22 SCRA 632 (1968).

[15] Supra, see note 7.

[16] 5 SCRA 478 (1962), Rollo, p. 26.

[17] 220 SCRA 490 (1993), Rollo, p. 26.

[18] 224 SCRA 9 (1993), Rollo, p. 26.

[19] Obando v. Figueras, 322 SCRA 148 (2000).

[20] Rudolf Lietz Holdings, Inc. v. The Registry of Deeds of Paraaque City, 344 SCRA 680 (2000).

[21] Casil v. Court of Appeals, 285 SCRA 264 (1998).

[22] Feliciano v. Court of Appeals, 287 SCRA 61 (1998).

[23] Cruz v. Court of Appeals, 309 SCRA 714 (1999).

[24] Ibid.

[25] Javelosa v. Court of Appeals, 265 SCRA 493 (1996).

[26] The appeal is pending with Branch 124 of the Regional Trial Court of Caloocan City.

[27] Rollo, p. 158.

[28] Section 1, Rule 70 of the Rules of Court.

[29] Roxas v. Alcantara, 113 SCRA 21 (1982).

[30] Ibid.

[31] Ibid.

[32] Supra, see note 6.

[33] Supra, see note 7.

[34] Rollo, p. 26.

DOCUMENT CREDIT :sc.judiciary.gov.ph/

The TRUTH will set you FREE.