Title
Pilipinas Shell Foundation, Inc. vs. Fredeluces
Case
G.R. No. 174333
Decision Date
Apr 20, 2016
Residents of Sitio Agusuhin sued Shell for unlawful eviction and inadequate compensation during the Malampaya-Camago project. The Supreme Court dismissed the case, ruling respondents lacked ownership rights and quitclaims were valid.

Case Digest (G.R. No. 203335)
Expanded Legal Reasoning Model

Facts:

  • Background of the Project and Government Involvement
    • Pursuant to Presidential Decree No. 87 (the Oil Exploration and Development Act of 1972), the Philippine government entered into Service Contract No. 38 with Shell Philippines Exploration B.V.
    • The service contract was aimed at the exploration, development, and production of petroleum resources offshore, northwest of Palawan; this eventually led to the discovery of substantial natural gas deposits in the Malampaya-Camago area.
  • Construction and Site Identification
    • The exploration project necessitated the development of a shallow water platform off Palawan, which required two major components:
      • A concrete gravity structure to be built on the seabed.
      • A topside (platform deck) constructed in Singapore.
    • Shell Philippines Exploration B.V. sought a construction site in the Philippines for the concrete gravity structure and identified Subic, Zambales, as a viable location.
    • Representatives of the Subic Bay Metropolitan Authority were involved, and a 40-hectare site in Sitio Agusuhin was proposed as the location, which was part of a military reservation converted under Republic Act No. 7227 into the Subic Special Economic Zone.
  • Socio-economic Impact and Agreements with Affected Households
    • A socio-economic survey revealed approximately 200 households residing at or near the proposed construction site, with around 80 households needing relocation to accommodate the project.
    • In May 1998, the Subic Bay Metropolitan Authority and Shell Philippines Exploration B.V. entered into a Lease and Development Agreement, outlining:
      • The Authority’s obligation to relocate affected households.
      • Shell’s commitment to provide financial assistance, which was implemented through Pilipinas Shell Foundation, Inc.
    • By the end of May 1998, Pilipinas Shell Foundation, Inc. had concluded agreements with some of the affected households; however, compensation varied:
      • Some claimants voluntarily dismantled their houses in exchange for financial assistance.
      • Others were denied compensation on the basis that they could not prove residence in Sitio Agusuhin prior to the project.
  • The Filing of Complaints and Subsequent Allegations
    • On December 1, 2000, a Complaint for damages was filed before the Regional Trial Court of Olongapo City by respondents alleging:
      • They were lawful, long-time occupants of Sitio Agusuhin, having constructed their homes and introduced improvements such as fruit trees and other seasonal plants.
      • They were “effectively evicted” from their homes, allegedly in violation of their rights, after petitioners commenced construction.
      • The financial assistance provided was “insufficient” and, in some cases, obtained under pressure or coercion into signing quitclaims and waivers.
    • The damages claimed varied by respondent, with the total amount sought being approximately ₱68,255,000.00.
    • Respondents also moved to be allowed to litigate as pauper litigants, asserting that their income was minimal and that they did not own any real property.
  • Defendants’ Motion to Dismiss and the Alleged Grounds
    • Instead of filing an answer to the Complaint for damages, Shell Philippines Exploration B.V. and Pilipinas Shell Foundation, Inc. moved to dismiss the case on several grounds:
      • Litis pendentia, arguing that an earlier Complaint for sum of money had been filed by some respondents.
      • Failure to state a cause of action, asserting that the allegations did not support a claim for compensation.
      • Lack of a cause of action, particularly for respondents who were alleged not to have resided in Sitio Agusuhin (specifically Tomas M. Fredeluces and Ludivico F. Bon).
    • The defendants argued that:
      • Certain respondents (Dante U. Santos, Efren U. Santos, Miguel Santos, Ric U. Santos, and Bebiana San Pedro) were involved in a previously filed complaint and, through a Revocation of Special Power of Attorney, had withdrawn authorization for that suit.
      • Sitio Agusuhin was government property under Republic Act No. 7227, meaning that any claim based on property ownership was invalid, and quitclaims previously executed barred further claims.
  • Proceedings in Lower Courts
    • The trial court, Branch 72 of the Regional Trial Court of Olongapo City, granted the Motion to Dismiss on April 20, 2001, dismissing the Complaint for damages on grounds of:
      • Litis pendentia (pending litigation over substantially similar causes of action).
      • Failure to state a cause of action, especially as respondents were possessors in bad faith without a legal basis for claiming compensation.
    • The Court of Appeals:
      • Reinstated the Complaint for damages for most respondents, except for respondent Tomas M. Fredeluces, whose complaint was reaffirmed as dismissible due to lack of evidence regarding his residence in Sitio Agusuhin.
      • Addressed issues regarding whether the earlier Complaint (for sum of money) should preclude the damages suit and the validity of quitclaims.
    • Eventually, petitioners Pilipinas Shell Foundation, Inc. and Shell Philippines Exploration B.V. filed a Petition for Review on Certiorari before the Supreme Court, challenging the Court of Appeals’ decision.
  • Supreme Court’s Intervention and Final Determination
    • The Supreme Court focused on two central issues:
      • Whether the Complaint for damages should be dismissed on the ground of litis pendentia.
      • Whether the Complaint adequately stated a cause of action.
    • The Court examined:
      • The application of the rule that, in a motion to dismiss, only the ultimate facts alleged in the complaint are hypothetically admitted.
      • The exceptions to the hypothetical admission, including matters subject to judicial notice and evidence by stipulation.
    • Ultimately, the Supreme Court granted the Petition for Review on Certiorari, holding that:
      • With respect to respondent Bebiana San Pedro, the Complaint for damages was properly dismissed on the ground of litis pendentia.
      • For the remaining respondents, the Complaint failed to state a cause of action, as the allegations did not establish a right to compensation—given that the respondents were not landowners and had received or waived claims through quitclaims.

Issues:

  • Litis Pendentia
    • Whether the Complaint for damages is barred because of the prior filing and pending status of a Complaint for sum of money involving substantially identical parties, causes of action, and reliefs.
    • The determination rests on whether the elements of identity of parties, rights asserted, and relief sought have been met such that any ruling in the pending suit would constitute res judicata.
  • Failure to State a Cause of Action
    • Whether the allegations in the Complaint for damages, even when taken as true, are sufficient to establish a legally cognizable cause of action.
    • This includes the inquiry into whether:
      • The Complaint properly alleges the ultimate facts that give rise to a right against the defendants.
      • The respondents’ claims for compensation are legally tenable given that they are not the owners but possessors in bad faith, and whether their quitclaims precluded further claims.

Ruling:

  • (Subscriber-Only)

Ratio:

  • (Subscriber-Only)

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