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21. FERNANDO A. FROILAN (plaintiff- may have thereon.

Plaintiff paid the required

appellee) vs. PAN ORIENTAL SHIPPING CO. cash of P10,000.00 and as Pan Oriental refused
(defendant-appellant) and REPUBLIC OF THE to surrender possession of the vessel, he filed
PHILIPPINES (intervenor-appellee) an action to recover possession thereof and
FACTS: have him declared the rightful owner of said
Plaintiff, Froilan filed a complaint against the property.
defendant-appellant, Pan Oriental Shipping Co., The Republic of the Philippines was allowed to
alleging that he purchased from the Shipping intervene in said civil case praying for the
Commission the vessel for P200,000, paying possession of the vessel in order that the chattel
P50,000 down and agreeing to pay the balance mortgage constituted thereon may be
in installments. foreclosed.
MAIN ISSUE: The lower court erred in
To secure the payment of the balance of the dismissing the counterclaim on the ground of
purchase price, he executed a chattel mortgage alleged lack of jurisdiction over the intervenor
of said vessel in favor of the Shipping Republic of the Philippines (NON-SUABILITY
Commission. For various reasons, among them OF THE GOVERNMENT)
the non-payment of the installments, the OTHER ISSUES:
Shipping Commission tool possession of said A. The lower court erred in dismissing the
vessel and considered the contract of sale counterclaim on the ground of prior judgment.
B. The lower court erred in dismissing the
cancelled. The Shipping Commission chartered
counterclaim on the ground that the
and delivered said vessel to the defendant- counterclaim had no foundation because made
appellant Pan Oriental Shipping Co. subject to to a complaint in intervention that contained no
the approval of the President of the Philippines. claim against the defendant.
Plaintiff appealed the action of the Shipping
Commission to the President of the Philippines RULING: (FOR THE MAIN ISSUE)
and, in its meeting the Cabinet restored him to By filing its complaint in intervention the
Government in effect waived its right of
all his rights under his original contract with the
Shipping Commission. Plaintiff had repeatedly
demanded from the Pan Oriental Shipping Co. DOCTRINE: The immunity of the state from
the possession of the vessel in question but the suits does not deprive it of the right to sue
latter refused to do so. private parties in its own courts. The state as
plaintiff may avail itself of the different forms of
Plaintiff, prayed that, upon the approval of the actions open to private litigants. In short, by
taking the initiative in an action against a
bond accompanying his complaint, a writ of
private party, the state surrenders its
replevin be issued for the seizure of said vessel privileged position and comes down to the
with all its equipment and appurtenances, and level of the defendant. The latter automatically
that after hearing, he be adjudged to have the acquires, within certain limits, the right to set up
rightful possession thereof . The lower court whatever claims and other defenses he might
issued the writ of replevin prayed for by Froilan have against the state.
and by virtue thereof the Pan Oriental Shipping (When the government enters into a contract, for
the State is then deem to have divested itself of
Co. was divested of its possession of said
the mantle of sovereign immunity and
vessel. descended to the level of the ordinary individual.
Having done so, it becomes subject to judicial
Pan Oriental protested to this restoration of action and processes.)
Plaintiff‘s rights under the contract of sale, 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
A. The appellant's contention that its
counterclaim is not barred by prior
judgment (order of February 8, 1952,
dismissing the complaint in intervention)
1. because said counterclaim was filed
on November 29, 1951, before the
issuance of the order invoked; and
2. because in said order of February
8, the court dismissed the
complaint in intervention,
"without, of course, precluding
the determination of the right of
the defendant in the instant
case," and subject to the condition
that the "release and cancellation of
the chattel mortgage does not,
however, prejudge the question
involved between the plaintiff and
the defendant which is still the
subject of determination in this
B. The lower court also erred in holding
that, as the intervenor had not made
any claim against the defendant, the
latter's counterclaim had no
foundation. The complaint in
intervention sought to recover
possession of the vessel in question
from the plaintiff, and this claim is
logically adverse to the position
assumed by the defendant that it has a
better right to said possession than the
plaintiff who alleges in his complaint that
he is entitled to recover the vessel from
the defendant. At any rate a
counterclaim should be judged by its
own allegations, and not by the
averments of the adverse party.