Fernando Froilan vs. Pan Oriental Shipping Co., Republic of the Philippines
Fernando Froilan vs. Pan Oriental Shipping Co., Republic of the Philippines
Case Title and Citation
Fernando A. Froilan, plaintiff-appellee, vs. Pan Oriental Shipping Co., defendant-appellant, Republic of the Philippines, intervenor-appellee.
G.R. No. L-6060, September 30, 1954
Supreme Court - En Banc
Ponente: Paras, C.J.
Facts
- February 3, 1951: Plaintiff Fernando A. Froilan filed a complaint against Pan Oriental Shipping Co. alleging he purchased vessel FS-197 from the Shipping Commission for P200,000, paid P50,000 down, executed a chattel mortgage to secure the balance, and that the Shipping Commission later took possession and chartered the vessel to Pan Oriental; Froilan sought issuance of a writ of replevin and recovery of possession.
- February 3, 1951: Lower court issued the writ of replevin and divested Pan Oriental of possession.
- March 1, 1951: Pan Oriental filed its answer denying Froilan’s right to possession, alleging the Cabinet’s restoration of Froilan’s rights was null or that Froilan had not complied with conditions precedent, and claiming damages and necessary/useful expenses on the vessel; Pan Oriental asserted a right to retain possession until expenses were reimbursed.
- November 10, 1951: Republic of the Philippines filed a complaint in intervention alleging Froilan had not paid the balance due to the Shipping Commission/Administration (total claimed P162,142.95 excluding dry-docking expenses by Pan Oriental) and sought delivery of the vessel to the Board of Liquidators or extrajudicial foreclosure under the Chattel Mortgage Law.
- November 29, 1951: Pan Oriental answered the complaint in intervention asserting a bare-boat charter with option to purchase executed June 16, 1949, and claiming necessary/useful expenses and a right of retention.
- November 29, 1951: Froilan tendered a check for P162,576.96 to the Board of Liquidators; the Board treated it as a deposit “pending the issuance of an order” of the court.
- December 7, 1951: Government brought the payment and surrounding circumstances to the lower court’s attention.
- February 1952: Lower court held Froilan’s payment discharged his obligation to the Government and dismissed the complaint in intervention, expressly reserving determination of the controversy between Froilan and Pan Oriental. That order became final as no appeal was taken from it.
- May 10, 1952: Republic moved to dismiss Pan Oriental’s counterclaim against it on grounds that the counterclaim: (a) was barred by prior judgment (the dismissal of the intervention), (b) stated no cause of action because the complaint in intervention contained no claim against Pan Oriental, and (c) the court lacked jurisdiction over the intervenor (state immunity). Pan Oriental opposed.
- July 1, 1952: Lower court granted the motion and dismissed Pan Oriental’s counterclaim.
- Pan Oriental appealed from the July 1, 1952 order dismissing its counterclaim.
Issues
- Is Pan Oriental’s counterclaim barred by the prior judgment dismissing the Government’s complaint in intervention?
- Does the absence of an express claim against the defendant in the complaint in intervention render Pan Oriental’s counterclaim without foundation?
- Does the Republic of the Philippines retain sovereign immunity such that the court lacks jurisdiction to entertain Pan Oriental’s counterclaim against it?
Ruling
- No - The counterclaim is not barred by the prior dismissal of the complaint in intervention. The counterclaim was filed before that dismissal and the dismissal expressly preserved the defendant’s rights as against the intervenor.
- No - The counterclaim is not without foundation merely because the complaint in intervention did not assert a claim against the defendant; a counterclaim is to be judged by its own allegations and is logically adverse to the intervention’s claim for possession.
- No - By filing a complaint in intervention the Republic waived any claim of nonsuability as to claims related to that proceeding; the State’s initiation of suit surrenders its privileged immunity status in that action.
Reasoning / Ratio Decidendi
- Prior judgment/bar: The Court noted Pan Oriental pleaded its counterclaim on November 29, 1951, before the dismissal of the intervention. The dismissal order of February 1952 reserved the rights of the defendant as against the intervenor and therefore did not extinguish Pan Oriental’s counterclaim. The Court relied on Rule 30, Section 2, Rules of Court, which provides that if a counterclaim is pleaded before a plaintiff’s motion to dismiss, the action should not be dismissed against the defendant’s objection unless the counterclaim can remain pending for independent adjudication. The order’s language preserving the defendant’s rights supports non-bar.
- Foundation of counterclaim: The Court held a counterclaim must be judged by its own allegations. The intervention sought possession of the vessel from the plaintiff, which is adverse to Pan Oriental’s assertion of a superior right to possession under its charter with option to purchase; thus the counterclaim asserted specific performance/delivery obligations against the intervenor and had a logical foundation irrespective of whether the intervention named the defendant.
- Sovereign immunity/ jurisdiction: The Court explained that when the State initiates suit (here by filing a complaint in intervention), it waives its privileged immunity from suit to the extent necessary to allow the defendant to assert counterclaims and defenses arising from the same controversy. The opinion cited the principle, as explained in Sinco’s Philippine Political Law and authorities such as U.S. v. Ringgold, that when the government sues to recover property or money, it would be rigid to deny the defendant the right to set up counterclaims in the same court rather than requiring application to the legislature. Thus the Government’s intervention constituted a waiver of nonsuability on the matters joined.
Doctrine / Legal Principle
- Filing a suit or complaint in intervention by the State effects a waiver of its privilege of nonsuability as to claims and counterclaims connected with that suit.
- A counterclaim filed prior to dismissal is not barred by a later dismissal if the dismissal order preserves the defendant’s rights against the intervenor; Rule 30, sec. 2, Rules of Court governs.
- A counterclaim must be evaluated on its own allegations and need not await explicit claim against the defendant in the opposing pleading to have foundation.
- The State, by suing, places itself on the same procedural plane as private litigants for purposes of defenses and counterclaims related to the action.
Disposition
- The order of the Court of First Instance dismissing the counterclaim of Pan Oriental Shipping Co. is reversed and set aside.
- The case is remanded to the lower court for further proceedings consistent with the opinion.
- No costs awarded.
Concurring / Dissenting Opinions
- Concurring: Justices Pablo, Padilla, Montemayor, Reyes, A., Jugo, Bautista Angelo, Concepcion, and Reyes, J.B.L.
- No dissenting opinion noted in the reported decision.
Significance / Notes
- Confirms that the State’s commencement of litigation waives sovereign immunity as to related counterclaims, permitting defendants to litigate related rights in the same forum.
- Clarifies procedural protection of counterclaims filed prior to motions to dismiss under Rule 30, sec. 2, Rules of Court.
- Reinforces that counterclaims are evaluated by their own factual and legal averments; the lack of an express claim against the defendant in the intervention does not by itself defeat a counterclaim asserting rights to the subject matter.
- Practical effect: preserved Pan Oriental’s ability to litigate its asserted right to possession and claims for expenses against the Republic and required the lower court to proceed with adjudication on those matters.
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