This case involves a gasoline station built on a land belonging to Mr. Samson and leased to a gasoline company (Shell) for a period of fifteen years or from January 1, 1987 to December 31, 2002. To operate said station, Shell entered into a sublease and dealership agreement (SLDA) with Carmen on August 7, 1990 for a period of five years from the date of approval by ERB of Carmen’s application to operate the station. The SLDA also provides that it shall be co-terminus with Shell’s lease of the site from Mr. Samson, notwithstanding the total five year period aforementioned.
On June 14, 1995, Shell notified Carmen that the SLDA was expiring on July 31, 1995 so she should wind up her business on or before said date. Carmen however believed that the SLDA had not yet expired and was still effective until December 31, 2002 which was the period stipulated between Shell and Mr. Samson the landowner. So she continued to pay rentals for the gasoline station. Shell however refused to accept payments.
Thus on July 10, 1995, Carmen filed a petition for declaratory relief in the Regional Trial Court (RTC) for the court to determine the correct expiration date of the SLDA whether, it was on July 31, 1995 or December 31, 2002. Shell answered this petition within the reglementary period. But on April 26, 1996 it filed its own case for unlawful detainer against Carmen in the Metropolitan Trial Court (MTC). Then on April 30, 1996 or eight months after filing its answer, Shell asked the RTC to dismiss the petition filed by Carmen for declaratory relief. Shell claimed that the issue of the renewal of the SLDA should be raised in the unlawful detainer case it filed before the MTC.
During the preliminary conference of the unlawful detainer case in the MTC on August 1, 1996, Carmen moved for its suspension since the other case she filed with the RTC involved the same parties and issues. The MTC however denied Carmen’s motion and then after the submission of position papers, rendered a decision in favor of Shell finding that the SLDA had already expired on July 31, 1995 and ordering Carmen and all person claiming rights under her to vacate the premises and pay the rentals until it is fully vacated. Carmen appealed the said decision.
In the meantime, on February 21, 1997, the RTC dismissed Carmen’s petition for declaratory relief on the ground of the pendency of the unlawful detainer case where the issue of the renewal of the lease or her right to further possess the gasoline station can be threshed out. This was affirmed by the Court of Appeals (CA).
Carmen questioned the preference given by the RTC and the CA to the unlawful detainer case filed by Shell. She maintained that based on priority in time, her action for declaratory relief, the case filed earlier, should not have been abated in favor of the ejectment suit, a case filed much later.
Was Carmen correct?
No.
The mere fact that the action for declaratory relief was filed earlier than the unlawful detainer does not necessarily mean that the first case will be given preference. The earlier case can be dismissed in favor of the later case if the later case is the more appropriate forum for the ventilation of the issues between the parties. An action for unlawful detainer is filed by a person from whom possession of any land or building is unlawfully withheld by another after the expiration or termination of the latter’s right to hold possession under a contract, express or implied. Clearly the interpretation of a provision in the SLDA as to when it would expire is the key issue that would determine Carmen’s right to possess the gasoline service satation. When the primary issue to be resolved is physical possession, the issue should be threshed out in the ejectment suit, and not in any other case, such as an action for declaratory relief, to avoid multiplicity of suits.
But the more compelling reason is that the MTC had already resolved the unlawful detainer case in favor of Shell even before the RTC dismissed the action for declaratory relief. It would have been an exercise in futility for the RTC to continue proceedings in the action for declaratory relief when the MTC had already ruled that the term of the SLDA was for only five years or until July 31, 1995. The proper forum for Carmen to clarify the provision of the SLDA on the expiration of the term of the contract is in her appeal of the decision of the MTC in the unlawful detainer case. It appears that it is Carmen who wants to avoid the adverse ruling in the unlawful detainer case by insisting that the action for declaratory relief be given preference even after the ejectment suit was already decided. (Panganiban vs. Pilipinas Shell Petroleum Corporation, G.R. 131471, January 22, 2003. 395 SCRA 624)