G.R. No. 168834 - Pilipinas Shell Petroleum Corp. vs. Licup

The dispute originated from a contractual relationship between Pilipinas Shell Petroleum Corporation (“petitioner Shell”) and Sergio Licup (“respondent Licup”) governed by the Sublease and Dealership Agreement (SLDA) and a Lease Agreement.
Respondent Licup initiated a Complaint for Specific Performance Plus Damages with Prayer for TRO and Preliminary Injunction against Shell, which was docketed as Civil Case No. 95-413 in the Regional Trial Court (RTC) of Makati City, Branch 61.
The RTC, in its Decision dated 11 December 2000, ruled in favor of respondent Licup and ordered Shell to pay:

Actual damages in the form of P50,000.00 per month (covering loss of earnings and associated expenses);
Moral damages amounting to P500,000.00;
Exemplary damages amounting to P500,000.00; and
Attorney’s fees computed from various components, including acceptance fee, professional fee, and court appearance fee.

The RTC decision also declared the SLDA and the Lease Agreement terminated effective upon finality of the decision, while also prescribing the observance of certain post-termination rights on both sides.

Petitioner Shell, aggrieved by the RTC decision, filed an appeal to the Court of Appeals (CA) under CA-G.R. CV No. 69954.
The CA affirmed the RTC decision on 18 November 2004, holding that Shell’s notification to Licup of its intention to terminate the SLDA—without stating any cause—was a violation of the express terms of the contract.
Following the CA decision, Shell filed a Motion for Reconsideration, which was denied on 11 July 2005.

Seeking to avoid prolonged litigation and reduce further legal expenses, the parties jointly filed a Joint Motion to Render Judgment Based on a Compromise Agreement.
Essential components of the Compromise Agreement included:

Confirmation that respondent Licup had received a settlement payment in the gross sum of Php7,500,000.00, evidenced by Manager’s Check No. 24405 dated 14 August 2006.
A full, complete, absolute, and final settlement and waiver of any and all claims that Licup might have against Shell arising from their contractual dealings and the subject matter of Civil Case No. 95-413.
Provisions concerning the removal of Shell’s trademarks, signage, pumps, and other related materials from Licup’s station, including a mandatory three-day closure for removal and stipulations regarding repainting and discontinuation of the Shell trade name usage.
An explicit agreement that the settlement amount and terms would fully satisfy and extinguish any awards or claims previously granted or that might be granted in relation to the RTC decision and its affirmation by the CA.
An undertaking by Shell to file the necessary pleading with the Supreme Court to withdraw its petition, thus effectively closing the litigation matter.

Petitioner Shell, not satisfied with the CA’s decisions, filed a Petition for Review on Certiorari before the Supreme Court seeking reversal of both the CA decision (dated 18 November 2004) and the subsequent denial of reconsideration (dated 11 July 2005).
The Supreme Court was tasked with evaluating:

The propriety of Shell’s unilateral notice of termination under the SLDA without a stated cause;
The legal effect and validity of the Compromise Agreement in view of prevailing laws, morals, good customs, public order, and public policy.

Whether Shell’s act of notifying respondent Licup of its intention to terminate the SLDA without stating a cause constituted a breach of contractual obligations as expressly provided for in the agreement.
Whether the Compromise Agreement executed by the parties, which provided for the payment of Php7,500,000.00 and the comprehensive settlement of all claims arising from the contractual relationship, is valid and enforceable.
Whether the prior awards and orders rendered by the RTC (and affirmed by the CA) are now fully and finally satisfied and extinguished by virtue of the parties’ settlement, thereby warranting the withdrawal of any further proceedings.