Case Summary (G.R. No. 179918)
Petitioner and Respondent Roles
Shell: Service contractor under Service Contract 38 with the Republic of the Philippines to perform petroleum operations, provide technology and financing, and develop Malampaya gas reserves. Respondents: Subsistence fishermen claiming loss of income (average net monthly income allegedly reduced from P4,848.00 to P573.00) due to environmental impacts attributed to Shell’s pipeline construction and operation.
Key Dates and Procedural Posture
Service Contract 38 executed December 11, 1990; discovery of natural gas occurred approximately two years later; complaint for damages filed May 19, 2003 before the Regional Trial Court (RTC), Branch 41, Pinamalayan, Oriental Mindoro; RTC dismissed complaint March 24, 2004 for being a pollution-related action within the primary jurisdiction of the Pollution Adjudication Board (PAB); Court of Appeals (CA) reversed and allowed RTC jurisdiction (decision November 20, 2006); Supreme Court granted Shell’s Rule 45 petition and reversed the CA on September 8, 2010, dismissing the RTC case without prejudice to refiling with the PAB.
Applicable Law and Constitutional Basis
Constitutional provision cited: 1987 Constitution, Article XIII, Section 7 (protecting rights of subsistence fishermen and preferential use of communal marine and fishing resources). Statutory and regulatory framework: Republic Act No. 3931 as amended by Presidential Decree No. 984 (Pollution Control Law); Executive Order No. 192 (transfer of powers to PAB); Presidential Decree No. 87 (Oil Exploration and Development Act of 1972) as referenced for contractor obligations; procedural rules cited include Rule 43 (review of PAB decisions by the CA) and Rule 45 (petition to the Supreme Court).
Factual Allegations and Nature of Complaint
Respondents alleged that the pipeline “greatly affected biogenically hard-structured communities such as coral reefs” and caused stress to marine life in the Mindoro Sea, thereby altering the coastal waters’ biological properties, displacing fish from traditional grounds, and causing substantial reduction of fishing income. The complaint characterized the harm in terms of environmental alteration and economic loss but did not use the term “pollution” explicitly nor provide detailed scientific causal mechanisms.
Issue 1 — Whether the Complaint Is a Pollution Case Under PAB Jurisdiction
The Court analyzed whether the allegations fit the statutory definition of “pollution” under P.D. 984, Section 2(a), which covers any alteration of physical, chemical, and biological properties of water that renders it harmful or adversely affects its utilization. The Court found that the respondents’ allegations—that the pipeline altered the marine habitat and caused stress to marine life—constituted pollution within that definition. Given that resolution of whether the pipeline operation altered the water’s properties and the extent of such effects requires technical and scientific determinations, these matters fall squarely within the PAB’s specialized competence as provided by P.D. 984 and Executive Order 192. The PAB is empowered to determine location, magnitude, extent, causes and effects of water pollution, to serve as arbitrator for reparation and restitution, to conduct hearings, impose penalties, and issue writs of execution; its final decisions are reviewable by the CA under Rule 43. Because the complaint raised pollution-related questions, the Court held that administrative recourse to the PAB was a prerequisite and that the RTC lacked jurisdiction to take cognizance of the complaint until the PAB’s determination.
Issue 2 — Sufficiency of the Complaint to State a Cause of Action
Shell argued the complaint failed to specify an actionable wrong or particular acts/omissions. The Court applied the established test for a cause of action: existence of a plaintiff’s right, a corresponding duty on defendant, and an act or omission violating that right. The Court concluded that respondents adequately alleged each element: (1) a constitutionally protected right of subsistence fishermen to preferential use of communal marine resources (Article XIII, Section 7); (2) Shell’s correlative duty not to impair that right; and (3) the construction and operation of the pipeline as an alleged act intruding upon and disrupting the marine environment, resulting in decreased catches and income. The Court emphasized that dismissal for failure to state a cause of action requires showing that no claim exists, not merely that the complaint lacks particulars; alleging ultimate facts which, if proven, would justify relief is sufficient. Thus, the complaint, on its face, stated a cause of action for damages.
Issue 3 — Whether the Suit Is Barred by State Immunity Because Shell Is an Agent of the State
Shell contended it could not be sued without State consent because it acted as an agent of the Republic under Service Contract 38. The Court rejected characterization of Shell as the State’s agent in the legal sense. It distinguished a service contractor’s obligations to perform petroleum operations, provide technology and financing, and manage development from agency, whose essence is the power to represent a principal and affect the principal’s juridical relations with third persons. Shell’s contractual responsibilities did not vest it with authority to bind the State or transact on its behalf; rather, Shell provided services and undertook operations under the State’s supervision. The Court further noted that Service Contract 38’s provisions—specifically clauses allo
Case Syllabus (G.R. No. 179918)
Citation and Court
- Reported at 644 Phil. 662; Second Division, G.R. No. 179918, decided September 8, 2010.
- Decision authored by Justice Abad; Justices Carpio, Peralta, Del Castillo (designated as additional member in lieu of Associate Justice Antonio Eduardo B. Nachura per raffle dated June 7, 2010), and Mendoza concurred.
Parties
- Petitioner: Shell Philippines Exploration B.V., represented by its Managing Director, Jeremy Cliff.
- Respondents: 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, and others identified as respondents.
Nature of the Case
- Central legal question: Jurisdiction over an action for damages filed by coastal fishermen against a petroleum contractor (Shell) whose pipeline operation allegedly drove fish away from coastal areas, causing loss of earnings.
- The dispute involves whether the action is within the primary jurisdiction of the Pollution Adjudication Board (PAB) under pollution-control statutes, whether the complaint states a cause of action against Shell, and whether Shell is immune from suit as an agent of the State.
Facts
- On December 11, 1990, Shell and the Republic entered into Service Contract 38 for petroleum exploration and extraction in northwestern Palawan.
- In 1992 Shell discovered natural gas in the Camago-Malampaya area and developed the Malampaya Natural Gas Project.
- The project required construction and installation of a natural gas 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, Efren Jalos, Joven Campang, Arnaldo Mijares, and 75 other individuals (collectively “Jalos, et al.”) filed a complaint for damages against Shell in the Regional Trial Court (RTC), Branch 41, Pinamalayan, Oriental Mindoro (Civil Case P-1818-03).
- Plaintiffs alleged they were subsistence fishermen from coastal barangay Bansud whose livelihood was adversely affected by the pipeline’s construction and operation.
- They claimed a marked decline in fish catch after pipeline construction and a decrease in average net monthly income from P4,848.00 to P573.00.
- They 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,” forcing them to travel farther to fish.
Procedural History
- Shell moved to dismiss the RTC complaint, arguing lack of jurisdiction because the case was a “pollution case” under R.A. 3931 as amended by P.D. 984, vested in the PAB; asserted state immunity by claiming agency status; and alleged the complaint failed to state a cause of action and did not meet class suit, verification, forum-shopping, and pauper-litigant requisites.
- On March 24, 2004, the RTC dismissed the complaint, ruling the action was pollution-related and should be brought before the PAB.
- Jalos, et al. filed a petition for certiorari with the Court of Appeals (CA), docketed as CA-G.R. CV 82404.
- The CA reversed the RTC, holding the RTC had jurisdiction: the claim was a quasi-delict for damages (ordinary courts’ jurisdiction); Shell was not the State; the State had consented to suit by contract; and the complaint sufficiently alleged a wrong and substantially complied with technical filing requirements (though only verified plaintiffs were proper class members).
- Shell’s motion for reconsideration to the CA was denied.
- Shell filed a petition for review under Rule 45 to the Supreme Court.
Issues Presented
- Whether the complaint is a pollution case that falls within the primary jurisdiction of the Pollution Adjudication Board (PAB).
- Whether the complaint sufficiently alleges a cause of action against Shell.
- Whether the suit is effectively against the State and barred by the doctrine of state immunity.
Court’s Ruling — Primary Jurisdiction of PAB (First)
- The Supreme Court concluded that, although the complaint did not use the word “pollution,” the allegations unambiguously asserted that Shell’s pipeline produced some poison or emission that drove fish away from coastal areas.
- The complaint’s claim 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” falls within the statutory definition of “pollution.”
- Section 2(a) of P.D. 984 defines “pollution” as any alteration of the physical, chemical and biological properties of water that renders it harmful or adversely affects its utilization for legitimate purposes.
- Determination of whether the pipeline altered the coastal waters’ properties and life-sustaining function requires the specialized power and expertise of the PAB.
- Executive Order 192 (1987) transferred powers and funct