Fernando Froilan vs Pan Oriental Shipping Co.

written by Howard

G.R. No. L- 6060 – 95 Phil. 905 – Political Law – Constitutional Law – State Immunity from Suit – Waiver of Immunity – When the State initiates suit

In 1950, Fernando Froilan bought on installment a ship from the Shipping Commission (a government entity later named as the Shipping Administration). To secure the remaining balance, Froilan executed a mortgage agreement with the Shipping Commission. Froilan failed to pay the balance hence his ship was repossessed by the Shipping Commission which was later rented by Pan Oriental Shipping Co. On the basis that the members of the Cabinet under the Office of the President has reversed the Shipping Commission’s action on Froilan’s ship, he filed a complaint for replevin against Pan Oriental. Later, the Republic of the Philippines filed a complaint-in-intervention alleging that Froilan failed to pay the remaining balance to the Shipping Commission hence the ship should be in the possession of the Republic.  Pan Oriental filed a counterclaim against the Republic on the ground that the Republic has the duty to respect Pan Oriental’s possession by virtue of their rent (charter) agreement; that Pan Oriental made improvements to the ship; and that it incurred damages.

Thereafter, Froilan paid the Shipping Commission his remaining balance. As a result, the lower court dismissed the complaint-in-intervention. It likewise dismissed the counterclaim of Pan Oriental. Pan Oriental appealed the dismissal. The Republic is arguing that it is immune from suit, hence, the dismissal of the counterclaim is correct.

ISSUE: Whether or not the Republic is correct.

HELD: No. The filing of the complaint-in-intervention by the Republic is a waiver of non-suability. 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.

A State is immune from suit. But if it sues, it entitles the other party to set up his or her defense or claim against the State.

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