FROILAN VS PAN ORIENTAL SHIPPING CO. (G.R. No. L-6060) Constitutional Law

ERNANDO A. FROILAN, plaintiff-appellee,

vs.

PAN ORIENTAL SHIPPING CO., defendant-appellant,

REPUBLIC OF THE PHILIPPINES, intervenor-appellee.

Ponente:

PARAS, C.J.:

Action:

Appeal from a decision of the lower courts

Facts:

Plaintiff, Fernando Froilan filed a complaint against Pan Oriental Shipping Co., alleging that he purchased from the Shipping Commission the vessel for P200,000 and agreeing to pay the balance in instalments. To secure the payment of the balance of the purchase price, he executed a chattel mortgage of said vessel. Due to the non-payment of the installments, the Shipping Commission took possession of said vessel and considered the contract of sale cancelled. The Shipping Commission chartered and delivered said vessel to the Pan Oriental Shipping Co. subject to the approval of the President of the Philippines. Plaintiff appealed the action of the Shipping Commission to the President of the Philippines and, in its meeting the Cabinet restored him to all his rights under his original contract.

Plaintiff, prayed that a writ of replevin be issued for the seizure of said vessel. The lower court issued the writ of replevin prayed for by Froilan and by virtue thereof the Pan Oriental Shipping Co. was divested of its possession of said vessel.

Pan Oriental protested for the reason that when the vessel was delivered to it, the Shipping Administration had authority to dispose of said authority to the property, Plaintiff having already relinquished whatever rights he may have thereon. Pan Oriental refused to surrender possession of the vessel, he filed an action to have him declared the rightful owner of said property. The Republic of the Philippines was allowed to intervene in said civil case praying for the possession of the in order that the chattel mortgage constituted thereon may be foreclosed.

Issues:

Whether or not the Court has jurisdiction over the intervenor with regard to the counterclaim.     

Ruling: the appealed order is hereby reversed and set aside and the case remanded to the lower court for further proceedings.

Ratio Decidendi:

Yes. The Supreme Court held that the government impliedly allowed itself to be sued when it filed a complaint in intervention for the purpose of asserting claim for affirmative relief against the plaintiff to the recovery of the vessel. The immunity of the state from suits does not deprive it of the right to sue private parties in its own courts. The state as plaintiff may avail itself of the different forms of actions open to private litigants. In short, by taking the initiative in an action against a private party, the state surrenders its privileged position and comes down to the level of the defendant. The latter automatically acquires, within certain limits, the right to set up whatever claims and other defenses he might have against the state.