G.R. No. 220262. August 28, 2019 (Case Brief / Digest)

# Isla LPG Corporation vs. Leyte Development Company, Inc.

**Title:** Isla LPG Corporation vs. Leyte Development Company, Inc.

1. **2005:** Pilipinas Shell Petroleum Corporation (Shell) and Leyte Development Company, Inc. (LDCI) entered into a Distributorship Agreement making LDCI the distributor of Shellane LPG products in Tacloban City and Southern Leyte, effective for three years starting February 1, 2005, renewable and on a month-to-month basis post-expiry with a 90-day termination notice.

2. **February 1, 2008:** The Agreement was renewed for three more years.

3. **Before March 2011:** LDCI assumed distributorship from Dondon Chua, expanding its area to Ormoc, Isabel, Merida, Palompon, and Biliran for a goodwill buyout of approximately P5 Million, making LDCI certified as Shell’s exclusive distributor in Leyte.

4. **September 12, 2011:** Shell’s General Manager informed LDCI of Shell’s share sale in Shell Gas (LPG) Philippines, Inc. to Isla Petroleum and Gas, assuring no immediate impact on LDCI’s ability to purchase LPG products.

5. **January 27, 2012:** Sale completion, renaming Shell Gas (LPG) Philippines, Inc. to Isla LPG Corporation (Isla).

6. **January 30, 2012:** Isla formally confirmed the acquisition and subsequent name change.

7. **Post-acquisition:** Isla rebranded Shellane LPG to “Solane,” causing delays in product availability and affecting LDCI’s sales during peak periods due to slow rebranding.

8. **2012:** LDCI reported territorial encroachment issues and lack of price support from Isla, meeting occurred but Isla later terminated the Distributorship Agreement effective January 12, 2013, appointing Supreme Star Oil as the new distributor.

9. **January 2013:** LDCI lost business and filed for Declaratory Relief, dismissed due to termination of the Agreement without prejudice.

10. **March 11, 2013:** LDCI filed for breach of contract and damages, obtaining a Writ of Preliminary Injunction from RTC-Makati.

11. **March 2013:** Isla filed a Motion for Reconsideration, Shell filed a Motion to Dismiss which were denied, reaffirming the preliminary injunction.

12. **January 16, 2014:** RTC-Makati reaffirmed denial of reconsideration despite LDCI’s pending similar complaint in RTC-Tacloban.

13. **August 23, 2013:** RTC-Makati issued an Order denying motion to dismiss based on litis pendentia (pending litigation of identical issues elsewhere).

14. **February 24, 2015:** CA affirmed RTC-Makati’s decisions, holding that both RTC-Makati and RTC-Tacloban cases involve the same issue (validity of Agreement termination).

15. **August 5, 2015:** CA denied Isla’s Motion for Reconsideration.

16. **Supreme Court:** Isla filed a Petition for Review on Certiorari.

1. Whether the case before RTC-Makati should be dismissed on the ground of litis pendentia due to the similar pending case in RTC-Tacloban.

**Court’s Decision:**
1. **Existence of Forum Shopping:** The Supreme Court determined that forum shopping was committed because:
a. **Identity of Parties:** Both cases involved the same parties (LDCI and its affiliates vs. Isla and Shell and their officers).
b. **Identity of Rights and Reliefs:** Both complaints sought similar reliefs related to the alleged termination of the Distributorship Agreement.
c. **Res Judicata:** Judgement in either court would affect the other case.

2. **Priority Rule:** General rule of dismissing the second-filed case applied, because the first action was not proven to be preemptive or less appropriate:
a. **Retaining the first case:** The first-filed action (RTC-Makati) delved into the root contractual issue, making it more appropriate for litigating parties’ rights.

3. **Conclusion:** The Supreme Court affirmed CA’s decision, confirming RTC-Makati’s jurisdiction and ruling against dismissal due to forum shopping, upholding that the first-filed case is appropriate for determining rights.

1. **Forum Shopping Elements:** The presence of (a) identity of parties, (b) identity of rights asserted and reliefs prayed for, and (c) judgment in one case amounts to res judicata in the other case.
2. **Priority in time rule:** Generally, the first-filed action is retained unless it was filed to preempt or is less appropriate.
3. **Proper Forum Selection:** The continued litigation in the first forum (RTC-Makati), where more comprehensive reliefs involving contractual validity can be adjudicated.

**Class Notes:**
– **Key Concepts:**
1. **Forum Shopping:** Involving identical parties, rights, and potential res judicata across multiple courts.
2. **Litis Pendentia:** Grounds for dismissal if forum shopping is evident.
3. **Priority in Time Rule:** Applied to maintain judicial order and efficacy.

– **Key Statutes & Principles:**
1. **Rule 45 of the Rules of Court:** Proper for addressing legal questions such as forum shopping.
2. **Res Judicata:** Precludes re-litigation of identical issues.
3. **Preliminary Injunction:** Prevents ongoing harm during litigation.

– **Application:**
– **Procedural Strategy:** Avoid parallel filings over same issues to prevent litis pendentia.
– **Judicial Efficiency:** Ensures legal disputes are resolved comprehensively within one jurisdiction to avoid conflicting judgements.

**Historical Background:**
– **Corporate Acquisitions Impact:** Industry realignment exemplified by Shell’s transfer of assets and restructuring under Isla Petroleum and Gas, affecting longstanding distributor agreements.
– **Contractual Disputes in Commercial Law:** Reflecting common conflicts in distributorship and branding, highlighted by rebranding transitions and business continuity post-acquisition.


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