Case Digest (G.R. No. 202050) Core Legal Reasoning Model
Facts:
On August 6, 1976, respondent Keppel Philippines Holdings, Inc. (formerly Keppel Philippines Shipyard, Inc.) entered into an eleven-hectare lease agreement with Luzon Stevedoring Corporation (Lusteveco) covering land in Bauan, Batangas, for 25 years at P2.1 million, with rental fees convertible into equity and a firm and absolute option to purchase the land for P4.09 million at the end of the lease—provided Keppel attained 60% Filipino ownership under Philippine law. If unqualified by 2001, the lease would automatically renew for another 25 years and the option could be exercised up to the 30th year at a nominal P100 consideration. Lusteveco warranted not to sell or assign its rights without Keppel’s prior written consent. When PNOC acquired Lusteveco’s assets (annotating the lease on its title), Keppel did not object. On December 8, 2000, Keppel notified PNOC that it had reached the required Filipino equity and demanded to exercise its purchase option, but PNOC failed to compl
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Case Digest (G.R. No. 202050) Expanded Legal Reasoning Model
Facts:
- 1976 Lease Agreement and Option
- Keppel Philippines Holdings, Inc. (Keppel) and Luzon Stevedoring Corporation (Lusteveco) entered into a 25-year lease (6 August 1976) over 11 hectares in Bauan, Batangas, for P2.1 million; rental fees were convertible into Keppel equity.
- Under paragraph 5, Keppel had a “firm and absolute” option to purchase for P4.09 million at the end of 25 years if it then qualified (≥ 60% Filipino-owned); if unqualified, the lease auto-renewed another 25 years, with an option exercisable up to the 30th year at a nominal P100.
- Paragraph 6 prohibited Lusteveco from selling or assigning its rights during the lease without Keppel’s prior written consent.
- Assignment to PNOC
- In 1979, Lusteveco’s assets (including lease-option rights) were transferred to PNOC Dockyard & Engineering Corp. (PDEC) and eventually to PNOC; Keppel consented to annotate the Agreement on PNOC’s title.
- The Agreement was recorded as Entry No. 65340 on PNOC’s Transfer Certificate of Title No. T-50724.
- Keppel’s Exercise and Litigation
- December 2000: Keppel attained ≥ 60% Filipino shareholding, notified PNOC of its intent to exercise the purchase option; PNOC delayed.
- 26 September 2003: Keppel sued PNOC for specific performance; PNOC countered, alleging constitutional circumvention, lack of option consideration, and absence of privity.
- 12 January 2006: RTC of Batangas City ruled for Keppel, ordering PNOC to execute a deed of sale upon payment of P4.09 million.
- 19 December 2011 & 14 May 2012: CA affirmed the RTC decision in toto and denied reconsideration.
- PNOC elevated the case to the Supreme Court via Rule 45 (G.R. No. 202050).
Issues:
- Did the Agreement’s terms constitute a virtual sale designed to circumvent the constitutional ban on alien land ownership?
- Is the option to purchase supported by a separate, valuable consideration as required by Article 1479 of the Civil Code?
- If decided for Keppel, does Keppel meet the 60% Filipino-owned capital requirement per the Constitution and Gamboa v. Teves?
Ruling:
- (Subscriber-Only)
Ratio:
- (Subscriber-Only)
Doctrine:
- (Subscriber-Only)