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Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-11897

October 31, 1964

FERNANDO A. FROILAN, plaintiff-appellee,
vs.
PAN ORIENTAL SHIPPING COMPANY, defendant-appellant,
REPUBLIC OF THE PHILIPPINES, and COMPANIA MARITIMA, intervenors-appellees.
Sycip, Salazar & Associates and Enrique Fernando & Emma Quisumbing-Fernando for
defendant-appellant.
The Government Corporate Counsel for intervenors-appellees.
Rafael Dinglasan for plaintiff-appellee.
BARRERA, J.:
On March 7, 1947, Fernando A. Froilan purchased from the Shipping Administration a boat
described as MV/FS 197 for the sum of P200, 000.00, with a down payment of P50, 000.00. To
secure payment of the unpaid balance of the purchase price, a mortgage was constituted on the
vessel in favor of the Shipping Administration in a contract which provides, among others, the
following:
In the event that the FIRST PARTY should elect to exercise its rights to rescind under the
terms of this contract, it shall have the right to take possession of the vessel herein sold in
the condition that it is at the time of rescission but in no case in a worse condition than
when originally delivered to the second party, ordinary wear and tear excepted and in
case at the time of rescission the condition of the vessel is not satisfactory to the FIRST
PARTY, it shall have the right to have the vessel reconditioned, repaired, dry-docked at
the expense of the SECOND PARTY. The same right is hereby granted to the FIRST
PARTY in case the SECOND PARTY should for any reason refuse or fail to comply with
this condition of sale and return the vessel herein sold in a condition not satisfactory to
the FIRST PARTY.
The right of rescission shall be considered as a cumulative remedy granted to the FIRST
PARTY and shall not in any way prejudice his right to demand immediate and complete
payment of the purchase price of the vessel under the terms herein provided, and to
demand and collect from the SECOND PARTY such damages caused by the noncompliance with this contract.
This contract was duly approved by the President of the Philippines.

Froilan appeared to have defaulted in spite of demands, not only in the payment of the first
installment on the unpaid balance of the purchase price and the interest thereon when they fell
due, but also failed in his express undertaking to pay the premiums on the insurance coverage of
the vessel, obliging the Shipping Administration to advance such payment to the insurance
company. Consequently, the Shipping Administration requested the Commissioner of Customs
on June 1, 1948 to refuse clearance on the vessel and the voyage thereof was ordered suspended.
Thereafter, Froilan asked for a reconsideration of the action taken by the Shipping
Administration, claiming that his failure to pay the required installments was due to the fact that
he was awaiting the decision of the President on the petition of the ship-owners for an extension
of the period of payment of the purchased vessels, which petition was favorably acted upon.
On July 3, 1948, the Shipping Administration and Froilan entered into an agreement whereby the
latter undertook to liquidate immediately all of his outstanding accounts, including the insurance
premiums, within 30 days, and have the vessel overhauled, and promised that in case of his
default, he shall "waive, any formal notice of demand and to redeliver the said vessel peaceably
and amicably without any other proceedings" (Exh. 39).
Again, Froilan failed to settle his accounts within the prescribed period, thus, the Shipping
Administration threatened to rescind the contract unless payment be immediately made. On
August 28, 1948, upon Froilan's request, the Shipping Administration agreed to release the vessel
on condition that the same would be overhauled and repaired and the accrued interest on the first
installment would be paid. The Administration also allowed the mortgagor to pay his overdue
accounts, amounting now to P48,500.00 in monthly installments, with warming that in case of
further default, it would immediately repossess the vessel and rescind the contract. Froilan failed
to pay. On January 17, 1949, the Shipping Administration required him to return the vessel or
else file a bond for P25,000.00 in five days. In a letter dated January 28, 1949, Froilan requested
that the period for filing the bond be extended to February 15, 1949, upon the express condition
and understanding that:
... . If I fail to file the required bond on the said date, February 15, 1949, to the
satisfaction of the Shipping Administration, I am willing to relinquish and I do hereby
relinquish any and all rights I have or may have on the said vessel including any
payments made thereon to the Shipping Administration, without prejudice to other rights
the Shipping Administration may have against me under the contract of sale executed in
my favor.
I wish to reiterate that if I fail to file the bond within the period I have requested, any and
all rights I have on the vessel and any payments made to the Shipping Administration
shall be considered automatically forfeited in favor of the Shipping Administration and
the ownership of the said vessel will be as it is hereby automatically transferred to the
Shipping Administration which is then hereby authorized to take immediate possession of
said vessel. (Exh. 66)
This letter of Froilan was submitted by the General Manager of the Shipping Administration to
the board of directors for proper consideration. By resolution of January 31, 1949, the petition

the Shipping Administration on April 1. 1949. Because the government was then spending for the guarding of the boat and subsistence of the crew-members since repossession. on February 18. 1949. But since the vessel was already cleared in favor of Pan Oriental prior to the receipt of the foregoing communication. On June 2. the General Manager of the Shipping Administration wrote the Collector of Customs of Manila. advising the latter that the Shipping Administration. Froilan offered to pay all his overdue accounts. to allow the Pan Oriental's operation of the vessel without prejudice to whatever action the President may take in the case. 93-A and 93-D). In accordance with this charter contract. 1949. and requesting the suspension of the clearance of the boat effective that date (Exh. 70). In the meantime. However. the General Manager of the Shipping Administration advised the Collector of Customs not to suspend the voyage of the vessel pending final decision on the appeal of Froilan. thereby re-transferring the ownership thereof to the government. to take immediate possession of the vessel and to suspend the unloading of all cargoes on the same until the owners thereof made the corresponding arrangement with the Shipping Administration. It should be noted that while his petition for reconsideration was denied on March 22. it does not appear when he formally formulated his appeal. Capt. Laconico and others.00. the Executive Office advised the Administration and the Commissioner of Customs not to dispose of the vessel in favor of another party pending final decision by the President on the appeal of Froilan (Exhs. as already stated. 1949. hereinafter referred to as Pan Oriental. the boat has being repossessed by the Shipping Administration and the title thereto re-registered in the name of the government.was granted subject specifically to the conditions set forth therein. On February 21. the Shipping Administration and the Pan Oriental formalized the charter agreement and signed a bareboat contract with option to purchase. accepted Pan Oriental's offer "in principle" subject to the condition that the latter shall cause the repair of the vessel. the vessel was delivered to the possession of Pan Oriental. the Shipping Administration denied his petition for reconsideration (of the rescission of the contract) on March 22. Froilan tried to explain his failure to comply with the obligations he assumed and asked that he be given another extension up to March 15. Froilan again failed to make good his promises. as he failed to fulfill even these offers made by him in these two communications. Similar manifestation. Then on March 8.000.. the boat was. and delivered to the Pan Oriental in virtue of the charter agreement. advancing the cost of labor and drydocking thereof. Froilan protested to the President against the charter of the vessel. terminated the contract with Froilan. 1949. containing the following pertinent provisions: . and allegedly in order to prevent its being made answerable for damages. or on February 22. but the title thereto was registered again in the name of the Shipping Administration. by action of its board. Pursuant to these instructions. Hence. 1949. and the Shipping Administration to furnish the necessary spare parts. On June 4. the General Manager directed its officers. not only actually repossessed. offered to charter said vessel FS-197 for a monthly rent of P3. 1949 to file the necessary bond. was also made by the Administration to the Executive Secretary. On February 22. 1949. In the meantime. Pan Oriental Shipping Co. On the same date. 1949.

or its extension by the OWNER the CHARTERER completes the payment.000. but the ownership thereof shall not be deemed transferred unless and until all the price of the vessel.00 to settle partially his overdue accounts and that reimbursement of the expenses incurred for the repair and drydocking of the vessel performed by Pan Oriental was to be made in accordance with future adjustment between him and the Shipping Administration (Exh. XII. APPROVAL OF THE PRESIDENT. On September 7. — The right of option to purchase the vessel at the price of P150.000. — This contract shall take effect only upon approval of His Excellency. stipulations. CHARTER HIRE.00 plus the amount expended for its present repairs is hereby granted to the CHARTERER within 120 days from the execution of this Contract. xxx xxx xxx XXI. or within the extension thereof by the OWNER. the Cabinet revoked the cancellation of Froilan's contract of sale and restored to him all his rights thereunder. The right to dispose of the vessel or terminate the Charter Party at its discretion is reserved to the OWNER. for any reason whatsoever. including any amount paid as Charter hire. 111). TRANSFER OF OWNERSHIP OF THE VESSEL. — The CHARTERER shall pay to the owner a monthly charter hire of THREE THOUSAND (P3. Froilan's request to the Executive Secretary that the Administration advance the payment of the expenses incurred by Pan Oriental in the drydocking and repair of the vessel.III. The period of option may be extended by the OWNER without in any way affecting the other provisions. 1949. and any other obligation due and payable to the OWNER under this contract. the formal bareboat charter with option to purchase filed on June 4. the President. XIII. the vessel shall be deemed conditionally sold to the purchaser.000. together with the interests thereon. unless otherwise extended by the OWNER. RIGHT OF OPTION TO PURCHASE. on condition that he would give not less than P10. have been fully paid by the CHARTERER. On September 6. 1949. — After the CHARTERER has exercised his right of option as provided in the preceding paragraph (XII).00) PESOS from date of delivery of the vessel. Later. If. without prejudice to the continuance of the Charter Party provisions of this contract. was granted on condition that Froilan assume to pay the same and file a bond to cover said undertaking (Exh. in favor of the Pan Oriental was returned to the General Manager of the Shipping Administration . I). and terms of this contract. pursuant to this reservation. TIME OF PAYMENT. of a total sum of not less than twenty-five percentum (25%) of said price of the vessel. before the expiration of the said period. This right shall be deemed exercised only if. payable in advance on or before the 5th of every current month until the return of the vessel to OWNER or purchase of the vessel by CHARTERER. the CHARTERER fails to exercise its option to purchase within the period stipulated. its right of option to purchase shall be deemed terminated. 1949.

for the reason that when the vessel was delivered to it. the court ordered the seizure of the vessel from Pan Oriental and its delivery to the plaintiff.00 upon delivery of the vessel to him. the Executive Secretary authorized the Administration to continue its charter contract with Pan Oriental in respect to FS-197 and enforce whatever rights it may still have under the original contract with Froilan (Exh. cover 25% of the cost of the vessel. This amount was accepted by the Administration as deposit. resolved to reconsider said previous resolution restoring him to his previous rights. And. As .00. including those imposed in the resolution of September 6. had also defaulted in payment and yet no action to rescind their contracts had been taken against them. and as Pan Oriental refused to surrender possession of the vessel. having been allowed to intervene in the proceeding. 13196) to recover possession thereof and to have him declared the rightful owner of said property. namely. 1949. and that he shall assume the expenses incurred for the repair and drydocking of the vessel (Exh. Defendant accordingly filed an answer. for his part. Pan Oriental protested to this restoration of Froilan's rights under the contract of sale. claiming to have a better right to the possession of the vessel by reason of a valid and subsisting contract in its favor. 1949 restoring Froilan to his rights under the conditions set forth therein. The Executive Secretary was also informed of the exercise by Pan Oriental of said option to purchase. 188). in view of the expenses it had incurred for the repair of the said vessel. and of its right of retention.00 to settle partially his overdue accounts and the filing of a bond to guarantee the reimbursement of the expenses incurred by the Pan Oriental in the drydocking and repair of the vessel. 122). And so the Cabinet. But Froilan again failed to comply with these conditions. on condition that he shall pay the sum of P10.000. also prayed for the possession of the vessel in order that the chattel mortgage constituted thereon may be foreclosed. not only expressed its unwillingness to relinquish possession of the vessel. Pan Oriental tried to question the validity of this order in a petition for certiorari filed in this Court (G.000. 1951. but the same was dismissed for lack of merit by resolution of February 22.000. the Cabinet resolved once more to restore Froilan to his rights under the original contract of sale.R.without action (not disapproval).00. considering Froilan's consistent failure to comply with his obligations. including the President-Treasurer of the Pan Oriental himself. The Republic of the Philippines. only because of the Cabinet resolution of September 6. however. that he shall continue paying the remaining installments due. 1950. Defendant Pan Oriental resisted said intervention. No. but also tendered the sum of P15. L-4577).00 on his overdue accounts and reimburse Pan Oriental of all its necessary expense on the vessel. 134). in a letter dated December 3. said amount to be credited to his outstanding accounts. claiming that other ship purchasers.000. he filed an action for replevin in the Court of First Instance of Manila (Civil Case No. Froilan paid the required cash of P10. the payment of P10. denying the averments of the complaint.000. Froilan having already relinquished whatever rights he may have thereon. together with its alleged expenses already made on the vessel. Froilan. Upon plaintiff's filing a bond of P400.00 which. Pan Oriental. the Shipping Administration had authority to dispose of the said property. subject to the final determination of Froilan's appeal by the President. as provided in the option granted in the bareboat contract (Exh. On August 25. 1949. petitioned anew for a reconsideration of this action of the Cabinet.000. He also offered to make a cash partial payment of P10.

On appeal by Pan Oriental to this Court (G.000. as purchaser of the vessel from Froilan. Subsequently. This counterclaim was denied by both plaintiff and intervenor Maritima. 1952. not only because the former could not have legally bound the vessel. L-6060). however. defendant set up a counterclaim for damages in the sum of P50. the lower court rendered a decision upholding Froilan's (and Compañia Maritima's) right to the ownership and possession of the FS-197. Froilan's right of ownership remained unaffected. said order was reversed and the case remanded to the lower court for further proceedings. the lower court held that. And. In its answer to the complaint in intervention. which passed to him upon execution of the contract. unpaid balance of the purchase price of the vessel and interest thereon. And the subsequent resolutions of the Cabinet. 1956. for the reason that the same should have been directed against intervenor Republic of the Philippines. was allowed to intervene in the proceedings (in the lower court). Compañia Maritima. was made without prejudice to the determination of defendant's right. the lower court by order of February 8. at the instigation and inducement of Compañia Maritima. and that the release and cancellation of the chattel mortgage did not "prejudge the question involved between the plaintiff and the defendant which is still the subject of determination in this case. but merely gave rise to the Shipping Administration's right either to foreclose the mortgage or rescind the contract by court action. intervenor Republic of the Philippines also moved for the dismissal of defendant's counterclaims against it. as the owner (Republic of the Philippines) under the same agreement was given the right to terminate the charter or dispose of the vessel anytime. said intervenor taking common cause with the plaintiff Froilan. on the ground that the order dismissing the complaint in intervention had already become final and it . which was granted by the court. It was ruled that Froilan's violations of the conditions of the contract of sale in his favor did not automatically deprive him of his right of ownership of the vessel. had the effect of terminating the charter agreement with the defendant. on the ground that it (defendant) was a possessor in bad faith. As the Shipping Administration failed to avail itself of any of these remedies. and (3) defendant's counterclaims said intervenor Republic. alleging that plaintiff secured the Cabinet resolutions and the writ of replevin. and upon plaintiff's presenting proof that he had made payment to the intervenor Republic of the Philippines. The court also dismissed (1) defendant's counterclaims against plaintiff Froilan and intervenor Compañia Maritima.R.576. On September 28. Thereafter. No. defendant demanded of the intervenor to comply with the latter's obligation to deliver the vessel pursuant to the provisions of the charter contract.counterclaim." In view of the dismissal of its complaint. vessel. resulting in its deprivation of possession of the. covering the insurance premiums. reaffirmed the same.00. and consequently. Said dismissal. but also due to the fact that said agreement has not been perfected for lack of approval by the President of the Philippines. (2) plaintiff's counterclaims against defendant. of the sum of P162. even assuming that the said charter contract was valid. the action of the Cabinet in cancelling or withdrawing the rescission of Froilan's contract. dismissed the complaint in intervention on the ground that the claim or demand therein had already been released. not entitled to damages. The charter contract between the Shipping Administration and defendant was declared null and void. restoring him to his rights under the said contract.96.

It is not disputed that appellant Pan Oriental took possession of the vessel in question after it had been repossessed by the Shipping Administration and title thereto reacquired by the government. waivers and representations made by Froilan. Taking into account the promises. The next question to be determined is whether there had been a valid and enforceable charter contract in favor of appellant Pan Oriental. the action of the Shipping Administration contravenes said provision of the law. As already held2judicial action is needed where there. the rescission of the contract without judicial action is proper. and operated the same from June 2. should he fall to fulfill what was incumbent upon him. the power to rescind the contract where a party incurs in default. 1949 after it had repaired the vessel until it was dispossessed . which did happen. upon delivery of the property to the latter. In other words. nevertheless. Nevertheless. The records conclusively show that notwithstanding the numerous opportunities given him. is absence of special provision in the contract granting to a party the right of rescission. provided therein that said party may rescind the contract as it may see fit in case of breach of the terms thereof by the mortgagor. Contrary to appellant's contention. There is no gainsaying the fact that there was continuous violation by Froilan of the terms of said contract of sale. This is not entirely correct. ownership of the vessel passed to Froilan. Under Article 11911 of the Civil Code. consequently. Appellee maintains however. and what was the effect thereon of the subsequent restoration to Froilan by the Cabinet. It is for this reason that Froilan was able to constitute a mortgage on the vessel in favor of the Administration. It is to be noted that unlike in the charter contract where it was specifically prescribed that ownership of the vessel shall be transferred to the vendee only upon full payment of the purchase price. the ownership of the thing sold passes to the vendee upon the actual or constructive delivery thereof (Art. is impliedly given to the injured party. no similar provision appears in the contract of sale in favor of Froilan. Pan Oriental brought the instant appeal. it is not always necessary for the injured party to resort to court for rescission of the contract. that the law contemplates of rescission of contract by judicial action and not a unilateral act by the injured party. to the extent that he agreed to the automatic transfer of ownership of the vessel to the Administration. to secure payment of the unpaid balance of the purchase price. new Civil Code). Froilan had been remiss in the fulfillment of his obligations thereunder. because there is also nothing in the law that prohibits the parties from entering into agreement that violation of the terms of the contract would cause cancellation thereof.was materially impossible for the latter to secure possession of the vessel. In the instant case. the lower court upheld his allegation that the Administration may not legally rescind the contract without filing the corresponding complaint in court. in case of reciprocal obligations. From this decision. while it may be true that the contract of sale did not expressly give to the mortgagee the right to cancel the agreement it was. must be sustained. In the absence of stipulation to the contrary. 1477. the ruling of the lower court that under the contract of sale with mortgage. even without court intervention. of his rights under the original contract of sale with mortgage.

without costs. authorizing the Shipping Administration to continue its charter contract with appellant. However. Civil Code). in virtue of a bareboat charter contract entered into between said company and the Shipping Administration. To the contention of plaintiff Froilan that the charter contract never became effective because it never received presidential approval. since it is not disputed that said appellant made useful and necessary expenses on the vessel. The same. the Cabinet resolutions purporting to restore Froilan to his former rights under the deed of sale. therefore. Case is remanded to the lower court for further proceedings in the matter of expenses. and the Republic of the Philippines3are declared liable for the reimbursement to appellant of its legitimate expenses. 1949 (Exh. they cannot be considered as equivalent to the act of approval of the President expressly required in cases involving disposition of these vessels. for which reason the complaint in intervention was dismissed as to Froilan. 1951. As it is by the concerted acts of defendants and intervenor Republic of the Philippines that appellant was deprived of the possession of the vessel over which appellant had a lien for his expenses. tendered the stipulated initial payment on January 16. since the intervenor Shipping Administration. Pan Oriental answers that the letter of the Executive Secretary dated December 3. cannot also be considered as an act of the President which is specifically required in all contracts relating to these vessels (Executive Order No. appellant is entitled to the refund of such expenses with the right to retain the vessel until he has been reimbursed therefor (Art. and since Pan Oriental has no capacity to question this actuation of the Shipping Administration because it had no valid contract in its favor. which may be exercised upon payment of a certain amount within a specified period. So ordered. 1950. Appellant now contends that having exercised the option. appellees Froilan. Modified in this manner. representing the government practically ratified its proposed contract with Froilan by receiving the full consideration of the sale to the latter. however. the subsequent Cabinet resolutions restoring Froilan's rights on the vessel violated its existing rights over the same property. series of 1946). was given the option to purchase the vessel. the decision appealed from is affirmed. as required therein. the resulting situation is that neither Froilan nor the Pan Oriental holds a valid contract over the vessel. Unless afterwards specifically adopted by the President as his own executive act. appellant as charterer. In the circumstances of this case. that said letter was signed by the Executive Secretary only and not under authority of the President. The President and Treasurer of the appellant company. In the same agreement. therefore. as allowed by law. Compañia Maritima. However. 31. Actions of the Cabinet are merely recommendatory or advisory in character. Pan Oriental cannot be considered a possessor in bad faith until after the institution of the instant case. 546. the decision of the lower court adjudicating the vessel to FroiIan and its successor Compañia Maritima. It is to be noted. must be sustained. satisfies such requirement (of presidential approval). Nevertheless.of the property on February 3. 118). with legal interest from the time of disbursement. under the circumstances already adverted to. . Upon the other hand. cannot be considered to have attached unto the charter contract the required consent of the Chief Executive for its validity.

No. L-8784.R. defendant and appellee. even after he had chosen fulfillment. FROILAN.. May 21. Paredes. He may also seek rescission. Dizon. The injured party may choose between the fulfillment and the rescission of the obligation.Bengzon. Footnotes 1 ART.6060..J. C. intervenor-appellee. 30. with the payment of damages in either case..Arellano Law Foundation Republic of the Philippines SUPREME COURT Manila EN BANC G.R. COMPANIA MARITIMA. v... Froilan v. 2 De la Rama Steamship Co. plaintiff-appellant. The court shall decree the rescission claimed. Tan. such dismissal was held not to preclude the determination of defendant's rights (G. Pan Oriental Shipping. 1958 FERNANDO A. No. 1191. unless there be just cause authorizing the fixing of a period. The power to rescind obligations is implied in reciprocal ones in case one of the obligors should not comply with what is incumbent upon him. if the latter should become impossible.R. Concepcion. Commissioner-appellee. and Zaldivar. took no part. L. Bautista Angelo. No. LOURDES REYES VDA. L-9791 April 28. PAN ORIENTAL SHIPPING Co. J. G. 1952. 1956. and intervenor may be held liable for defendant's counterclaim. The Lawphil Project . Regala and Makalintal.B. DE CAGUIAT. Bengzon.L. JJ. concur.P. Sept. JJ. 3 Although the complaint in intervention by the Republic of the Philippines was dismissed by order of the court of February 8.. 1954). vs. J. . Reyes.

Luis A. 1954. PARAS. the defendant filed an amended answer to the complaint and to the complaint in intervention." For such purpose. 34. to do or perform particular acts. that the amount charged is excessive. On September 4. however. the lower court in its order of September 3. upon ex-parte motion of the defendant.. 1954. The latter did not notify the plaintiff and the intervenor or their attorneys about the meeting time and place of the parties as regards the examinations of the accounts. Rule 34. section 13. nature and extent of the commissioner's services. 1952. "the motion is premature". 1954. Pan Oriental Shipping Co. setting up counterclaims against the plaintiff and the intervenor. or to receive and report evidence only and may fix the date for beginning and closing the hearings and for the filing of his report. granted ex-parte the aforesaid motion and ordered that the amount of P4.: On February 3. as compensation for services rendered by the commissioner. that the order of the lower court appointing the appellee as commissioner solely directed the latter to "examine the long accounts involved in the defendant's first. of the Rules of Court. the commissioner filed a motion for reconsideration without notice of hearing to the plaintiff and the intervenor.670 be paid by the plaintiff and the intervenor in equal shares. However. On April 7. the plaintiff filed a complaint. speaking of the authority that may be granted to a commissioner. order. not need the presence of the parties. Plaintiff Froilan appeals from the said. on the ground said proceedings were held without notice to and in the absence of the appellant and the intervenor. the Compania Maritima filed a complaint in intervention. in the Court of First Instance of Manila against the defendant. 1954. and that as provided by rules of Court No. J. Jose for appellee. On December 1. the compensation of the commissioner shall be taxed as costs against the defeated party and the court not having as yet made any pronouncement on the point. such as the examination of records of account without hearings. Enrique Caguiat and Quisumbing and Associates for appellant. After an opposition had been filed by the plaintiff and the intervenor. Appointed Enrique Caguiat as commissioner to examine the accounts involved in the counterclaims. The motion was accordingly held in abeyance. the defendant filed a motion for reference to a commissioner of the issues of fact involved in its counterclaims. the commissioner filed a motion for approval of his fees to which the plaintiff and the intervenor filed their answer alleging that there was no showing whatsoever as to the time. On August 6. 1950. specially when unnecessary. provides that the recorder may specify or limit the powers of the commissioner. Section 3. Froilan. The court in its order of July 29. 1951. dated September 4. C. the commissioner may be required to perform only a particular task. 1952. The appellant assails the validity of the commissioner's proceedings in the examination of the accounts in question. alleging that it is in possession of and the one operating the ship. for the delivery of a ship known as FS-197. second and third counterclaims alleged in its answer to the complaint in intervention of the Compania Maritima and the amended answer to the complaint of appellant Fernando A. 1954. the commissioner did. and in the absence of a judicial directive to hold hearings. the motion for reference was denied. having purchased it from the plaintiff. and may direct him to report only upon particular issues." Under this reglementary provision.Rafael Dinglasan. . It is noteworthy. On December 21.

Reyes. Montemayor.J. No.R. In view of the fact that the appellant and the intervenor had previously registered their stand that there was no showing as to the alleged service rendered by the appellee. G. L-51463 April 9. Bautista Angelo.R.670 in shares. L-51438 April 9. a hearing became indispensable. In granting.The next criticism made by the appellant is that the appellee did not personally... 1985 COMPAÑIA MARITIMA.. No. make the examination of the accounts in question and prepare the corresponding report. 1985 REPUBLIC OF THE PHILIPPINES (BOARD OF LlQUIDATORS). Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G. vs. The paramount consideration is that the commissioner assumes full responsibility for whatever is submitted to the court.L.. 1954. concur. L-50900 April 9. that the compensation sought was excessive. JJ. Respondents. concurs in the result. Reyes..B. COMPAÑIA MARITIMA and THE REPUBLIC OF THE PHILIPPINES (BOARD OF LIQUIDATORS). 1985 PAN ORIENTAL SHIPPING CO. So ordered without pronouncement as to costs. vs. without notice and hearing. .. A. G.. and ordering the appellant and the intervenor to pay P4. and that his service consisted merely of what the appellee termed "reviewing Mr. No. and Endencia. the same is not essential or required. Petitioner. Bengzon. Labrador. Estanislao's work". Felix. Concepcion. COURT OF APPEALS and PAN ORIENTAL SHIPPING CO.R. COURT OF APPEALS. appellee's motion for reconsideration filed on December 21. Petitioner. J. the lower court irregularly. Petitioner. however. vs. and that the approval and payment of the commisioner's fees were premature. J. Respondents. C. the order appealed from is hereby reversed and the lower court is ordered to set the incident in question for hearing. COURT OF APPEALS and PAN ORIENTAL SHIPPING CO. While personal attention was perhaps preferable or even desirable. Wherefore. Respondents.

. the boat was. a mortgage was constituted on the vessel in favor of the Shipping Administration .000. the General Manager (of the Shipping Administration) directed its officers . Pan-Oriental Shipping Co. to take immediate possession of the vessel and to suspend the unloading of all cargoes on the same until the owners thereof made the corresponding arrangement with the Shipping Administration. et al. 1964. Froilan purchased from the Shipping Administration a boat described as MV/FS-197 for the sum of P200. accepted Pan Oriental's offer "in principle" subject to the condition that the latter shag cause the repair of the vessel advancing the cost of labor and drydocking thereof.. . dated October 31. Fernando A. but also failed in his express undertaking to pay the premiums on the insurance coverage of the vessel obliging the Shipping Administration to advance such payment to the insurance company.00.. To secure payment of the unpaid balance of the purchase price.00. On February 22. not only actually repossessed. FROILAN appeared to have still incurred a series of defaults notwithstanding reconsiderations granted..000. chanroblesvirtualawlibrary chanrobles virtual law library xxx xxx xxx chanrobles virtual law library Th(e) contract was duly approved by the President of the Philippines. not only in the payment of the first installment on the unpaid balance of the purchase price and the interest thereon when they fell due. the vessel was delivered to the possession of Pan Oriental. respectively. and January 5. hereinafter referred to as Pan Oriental. . entitled "Fernando A. chanroblesvirtualawlibrary chanrobles virtual law library The antecedental background is narrated in the aforestated Decision. so much so that: On February 21. the pertinent portions of which read: chanrobles virtual law library On March 7. thereby re-transferring the ownership thereof to the government. 1949. December 16. Subsequently. but the title thereto was registered again in the name of the Shipping Administration..000.. 1965. November 23.. Pursuant to these instructions... 1966. 1949. 1949. J. 1967.: The above-entitled three (3) cases stemmed from the Decision of this Court. the Slopping Administration on April 1.MELENCIO-HERRERA. 1 and our four (4) subsequent Resolutions of August 27. and the Shipping Administration to furnish the necessary spare parts. Pan Oriental Shipping Co. 1947. 1966. In accordance with this charter contract. Because the government was then spending for the guarding of the boat and subsistence of the crew members since repossession. with a down payment of P50. chanroblesvirtualawlibrary chanrobles virtual law library Froilan appeared to have defaulted in spite of demands.00. offered to charter said vessel FS-197 for a monthly rent of P3. Froilan vs.

unless otherwise extended by the OWNER. CHARTER HIRE.After the CHARTERER has exercised his right of option as provided in the preceding paragraph (XII).000. chanroblesvirtualawlibrary chanrobles virtual law library If. 1949. or its extension by the OWNER. or on February 22. it does not appear when he formally formulated his appeal. RIGHT OF OPTION TO PURCHASE. the CHARTERER completes the payment. Froilan offered to pay all his overdue accounts. chanrobles virtual law library . the Shipping Administration and the Pan Oriental formalized the charter agreement and signed a bareboat contract with option to purchase. without prejudice to the continuance of the Charter Party provisions of this contract. the vessel shall be deemed conditionally sold to the purchaser. It should be noted that while his petition for reconsideration was denied on March 22. the CHARTERER fails to exercise its option to purchase within the period stipulated. 1949. . However.. 1949 to file the necessary bond. chanroblesvirtualawlibrary chanrobles virtual law library XIII. chanroblesvirtualawlibrary chanrobles virtual law library IV.The CHARTERER shall pay to the owner a monthly charter hire of THREE THOUSAND (P3. and terms of this contract. but the ownership thereof shag not be deemed transferred unless and until all the price of the vessel. and delivered to the Pan Oriental in virtue of the charter agreement. containing the following pertinent provisions: chanrobles virtual law library III.000. of a total sum of not less than twenty-five percentum (25%) of said price of the vessel. On June 2. . together with the interest thereon. The right to dispose of the vessel or terminate the Charter Party at its discretion is reserved to the OWNER. chanroblesvirtualawlibrary xxx xxx xxx chanrobles virtual law library chanrobles virtual law library On June 4. have been fully paid by the CHARTERER. payable in advance on or before the 5th of every current month until the return of the vessel to OWNER or purchase of the vessel by CHARTERER. TRANSFER OF OWNERSHIP OF THE VESSEL. 1949. stipulations. or within the extension thereof by the OWNER. TIME OF PAYMENT. In the meantime. Froilan tried to explain his failure to comply with the obligations he assumed and asked that he be given another extension up to March 15. as he failed to fulfill even these offers made by him in these two communications. and any other obligation due and payable to the OWNER under this contract. This right shall be deemed exercised only if.In the meantime. chanroblesvirtualawlibrary chanrobles virtual law library The period of option may be extended by the OWNER without in any way affecting the other provisions. as already stated. 1949. Then on March 8. for any reason whatsoever.The right of option to purchase the vessel at the price of P150.00 plus the amount expended for its present repairs is hereby granted to the CHARTERER within 120 days from the execution of this Contract. the Shipping Administration denied his petition for reconsideration (of the rescission of the contract) on March 22. its right of option to purchase shall be deemed terminated.00) PESOS from date of delivery of the vessel. before the expiration of the said period. Froilan protested to the President against the charter of the vessel. the boat has been repossessed by the Shipping Administration and the title thereto re-registered in the name of the government. including any amount paid as Charter hire.

000. 134). III). and as Pan Oriental refused to surrender possession of the vessel. on condition that he shall pay the sum of P10. And. 13196) to recover possession thereof and to have him declared the rightful owner of said property. in favor of the Pan Oriental was returned to the General Manager of the Shipping Administration without action (not disapproval).00 to settle partially as overdue accounts and that reimbursement of the expenses incurred for the repair and drydocking of the vessel performed by Pan Oriental was to be made in accordance with future adjustment between him and the Shipping Administration (Exh. the Cabinet revoked the cancellation of Froilan's contract of sale and restored to him all his rights thereunder. that he shall continue paying the remaining installments due. the Executive Secretary authorized the Administration to continue its charter contract with Pan Oriental in respect to FS-197 and enforce whatever rights it may still have under the original contract with Froilan (Exh.000. 1950. Froilan's request to the Executive Secretary that the Administration advance the payment of the expenses incurred by Pan Oriental in the drydocking and repair of the vessel. chanroblesvirtualawlibrary chanrobles virtual law library Upon plaintiff's filing a bond of P400. I). the payment of P10. for the reason that when the vessel was delivered to it.00 to settle partially his overdue accounts and the filing of a bond to guarantee the reimbursement of the expenses incurred by the Pan Oriental in the drydocking and repair of the vessel But Froilan again failed to comply with these conditions. in a letter dated December 3. . Later.000. the Cabinet resolved once more to restore Froilan to his rights under the original contract of sale. said amount to be credited to his outstanding accounts. 1949. APPROVAL OF THE PRESIDENT. 1949. only because of the Cabinet resolution of September 6. the formal bareboat charter with option to purchase filed on June 4. he filed an action for replevin in the Court of First Instance of Manila (Civil Case No. And so the Cabinet.xxx xxx xxx chanrobles virtual law library XXI. 188).00. chanroblesvirtualawlibrary chanrobles virtual law library On September 7.00 upon delivery of the vessel to him.00. Pan Oriental protested to this restoration of Froilan's rights under the contract of sale. pursuant to this reservation. 1949. the Shipping Administration had authority to dispose of the said property. chanroblesvirtualawlibrary xxx xxx xxx chanrobles virtual law library chanrobles virtual law library On August 25. resolved to reconsider said previous resolution restoring him to his previous rights. on condition that he would give not less than P1. 1949 restoring Froilan to his rights under the conditions set forth therein. Froilan paid the required cash of P10. and that he shall assume the expenses incurred for the repair and drydocking of the vessel (Exh. was granted on condition that Froilan assume to pay the same and file a bond to cover said undertaking (EXH. chanroblesvirtualawlibrary chanrobles virtual law library On September 6.This contract shall take effect only upon approval of His Excellency. Froilan having already relinquished whatever rights he may have thereon. namely.000. 1949. Pan Oriental tried to question the . the President. the court ordered the seizure of the vessel from Pan Oriental and its delivery to the plaintiff. considering Froilan's consistent failure to comply with his obligations. including those imposed in the resolution of September 6. 1949.000.

1956. appellant as charterer. Pan Oriental answers that the letter of the Executive Secretary dated December 3. chanroblesvirtualawlibrary chanrobles virtual law library . chanroblesvirtualawlibrary xxx xxx xxx chanrobles virtual law library chanrobles virtual law library It is not disputed that appellant Pan Oriental took possession of the vessel in question after it had been repossessed by the Shipping Administration and title thereto reacquired by the government. authorizing the Shipping Administration to continue its charter contract with appellant. the lower court rendered a decision upholding Froilan's (and Compañia Maritima's) right to the ownership and possession of the FS-197.00. cannot be considered to have attached unto the charter contract the required consent of the Chief Executive for its validity. claiming to have a better right to the possession of the vessel by reason of a valid and subsisting contract in its favor. chanroblesvirtualawlibrary xxx xxx xxx chanrobles virtual law library chanrobles virtual law library Subsequently. defendant set-up a counterclaim for damages in the sum of P50. satisfies such requirement (of presidential approval). defendant demanded of the intervenor to comply with the latter's obligation to deliver the vessel pursuant to the provisions of the charter contract. alleging that plaintiff secured the Cabinet resolutions and the writ of replevin. chanroblesvirtualawlibrary chanrobles virtual law library The Republic of the Philippines.000. 118). In the same agreement. 1949 after it had repaired the vessel until it was dispossessed of the property on February 3. denying the averments of the complaint. The same. tendered the stipulated initial payment on January 16. in view of the expenses it had incurred for the repair of the said vessel. and of its right of retention. Appellant now contends that having exercised the option. and operated the same from June 2. 1951. having been allowed to intervene in the proceeding. as purchaser of the vessel from Froilan. that said letter was signed by the Executive Secretary only and not under authority of the President. Defendant Pari Oriental resisted said intervention. at the instigation and inducement of Compania Maritima. therefore. This counterclaim was denied by both plaintiff and intervenor Maritima. was allowed to intervene in the proceedings (in the lower court). L-4577). chanroblesvirtualawlibrary chanrobles virtual law library On September 28. however. said intervenor taking common cause with the plaintiff Froilan. As counterclaim.validity of this order in a petition for certiorari filed in this Court (G. also prayed for the possession of the vessel in order that the chattel mortgage constituted thereon may be foreclosed. In its answer to the complaint in intervention.R. Defendant accordingly filed an answer. Compañia Maritima. resulting in its deprivation of possession of the vessel. The President and Treasurer of the appellant company. No. l950. 1949 (Exh. 1951. but the same was dismissed for lack of merit by resolution of February 22. the subsequent Cabinet resolutions restoring Froilan's rights on the vessel. in virtue of a bareboat charter contract entered into between said company and the Shipping Administration. To the contention of plaintiff Froffan that the charter contract never became effective because it never received presidential approval as required therein. violated its existing rights over the same property. which may be exercised upon payment of a certain amount within a specified period. It is to be noted. was given the option to purchase the vessel.

(Emphasis supplied). Pan Oriental cannot be considered as in bad faith until after the institution of the case. filed by appellant Pan Oriental to reconsider the ruling made in this case sustaining Froilan's right to ownership and possession of the vessel FS-197. Civil Code). and the Republic of the Philippines are declared liable for the reimbursement to appellant of its legitimate expenses. . with legal interest from the time of disbursement. appellees Froilan. since it is not disputed that said made useful and necessary expenses on the vessel. together with intervenor Republic of the Philippines. liable for reimbursement to appellant Pan Oriental of the latter's legitimate necessary expenses made on the vessel in question. ruled: In G.R. Froilan vs. As it is by the concerted acts of defendants and intervenor Republic of the Philippines that appellant was deprived of the possession of the vessel over which appellant had a lien for his expenses. without costs. Froilan. and holding that there was never a perfected contract between said movant and the intervenor Republic of the Philippines. and intervenor-appellee Compañia Maritima. No. Pan Oriental Shipping Co. the alleged approval of the charter contract or permission to proceed with said contract was given by the Executive Secretary in his own name and not under the authority of the President. the of the lower court adjudicating the vessel to Froilan and its successor Maritima. before us are (1) a motion. must be sus Nevertheless. and since Pan Oriental has no capacity to question this actuation of the Shipping Administration because it had no valid contract in its favor. for reconsideration of the decision insofar as it declared said movants. in resolving a Motion for Reconsideration filed by FROILAN and MARITIMA. this Court.xxx xxx xxx chanrobles virtual law library (Emphasis supplied) This Court then held: In the circumstances of this case. However.). appellant is entitled to the refund of such expenses with the light to retain the vessel until he has been reimbursed therefor (Art. under the already adverted to. Modified in this manner. since the intervenor Shipping Administration. the decision appealed from is affirmed. 546. chanroblesvirtualawlibrary chanrobles virtual law library 1. and (2) a motion by plaintiff-appellee Fernando A. for which reason the complaint in intervention was dismissed as to Froilan. 1965. the resulting situation is that neither Froilan nor the Pan Oriental holds a valid contract over the vessel. therefore. as allowed by law.Appellant Pan Oriental's Motion must be denied. chanroblesvirtualawlibrary chanrobles virtual law library . chanroblesvirtualawlibrary chanrobles virtual law library It may be remembered that in the instant case. On August 27. representing the government practically ratified its proposed contract with Froilan by receiving the full consideration of the sale to the latter. Compañia Maritima. However. Case is remanded to the lower court for further proceedings in the matter of expenses. So ordered. L-11897 (Fernando A.

alleging that the Resolution of this Court of August 27.second motion for reconsideration. appellees. for reimbursement to appellant of the necessary expenses incurred and expended by the latter on the said vessel. Fernando A. it must be required to pay reasonable rental for the use thereof. For this reason. 1966. minus the amount of rentals due from the appellant for the use thereof for the period it was actually operated by Pan Oriental. Froilan. 1964 is not in accordance with law. not only for reimbursement to Pan Oriental of the legitimate necessary expenses incurred on the vessel but also for payment of legal interest thereon. .xxx xxx xxx chanrobles virtual law library 2.which shall be deductible from whatever may be due and owing the said party by way of reimbursable necessary expenses and interest. (Emphasis supplied). considering that the writ of replevin. at the rate of P3. jointly and severally liable with the other appellees. the intervenor Compañia Maritima acquired the same property only on December 1. On November 23.00 a month . 1951. interest and rental.000. L-11817. No. which accepted the payment tendered by him (Froilan) notwithstanding its previous dealings with Pan Oriental. Anent. the Court RESOLVED to amend the ruling in this case by holding intervenor-appellee Compañia Maritima. chanroblesvirtualawlibrary chanrobles virtual law library Considering that foregoing motion as well as the opposition thereto by plaintiff-appellee and intervenor-appellee Compañia Maritima. appellant. acting on a second Motion for Reconsideration filed by PAN ORIENTAL. appellant's motion. The period of actual operation shall not include the time when the vessel was drydocked.the same rate specified as rental in the imperfected charter contract . which date shall be determined by the lower court. and that the modification of the judgment following the ex-parte motion for reconsideration of appellee Froilan is contrary to due process. was issued by the lower court on February 8. computed from the date of the defendant's dispossession of the property. vs.R. this Court resolved: In case G. 1951 at the instance of plaintiff Froilan and with the cooperation of intervenor Republic of the Philippines. chanroblesvirtualawlibrary chanrobles virtual law library Case is remanded to the court of origin for further proceedings on the matter of necessary expenses. 1949 to February 7. and whereas. 1951. Froilan and the Republic of the Philippines are declared jointly and severally liable. as defendant was in actual possession of the vessel from April 1. by virtue of which appellant Pan Oriental was divested of possession of the vessel FS-197. it is clear that only plaintiff Froilan and the intervenor Republic of the Philippines may be held responsible for the deprivation of defendant of its right to the retention of the property until fully reimbursed of the necessary expenditure made on the vessel. 1965 denying its motion for reconsideration of December 16. This rental shall commence from the time defendant Pan Oriental actually operated the vessel. et al. because of its actual knowledge of the circumstances surrounding the purchase by Froilan of the vessel in question from the Shipping Administrator. as directed in our decision and this resolution. However. the latter filed a .. Pan Oriental Shipping Company.

the sum of P40. this case has been ordered to be remanded to the Court of origin for further proceedings on the matter of necessary expenses. Considering that by virtue of our resolution dated August 27.797. and since evidence would have to be presented if the application for damages is allowed. 1951' until it is paid its useful and necessary expenses. Pursuant thereto.937. Rule 57).R. 1950. to deny the present motion for reconsideration and.00 . 3 On appeal by REPUBLIC and MARITIMA to the then Court of Appeals. there to be heard and decided as prescribed by law and the Rules.1966. second. 2 chanrobles virtual law library The amount of P6. et al) is a motion for reconsideration or Application for damages filed by respondent Pan Oriental Shipping Co. pursuant to Rule 60.72 a month from the time 'it was dispossessed on February 3. Section 20. After the evidence of the parties was received and assessed by a Commissioner. dated June 4. the Court orders the intervenor Compañia (plaintiff Fernando A. acting on PAN ORIENTAL's Motion for Reconsideration or Application for Damages on account of the wrongful issuance of the Writ of Replevin.On December 16. to refer the application to the trial court.937. 13196). this Court issued a Resolution as follows: Before us again in Case G. in view of the foregoing consideration. the case was remanded to the Court of First Instance of Manila. jointly and severally. the judgment appealed from is hereby MODIFIED as follows: chanrobles virtual law library Ordering intervenors-appellants Republic and Compañia Maritima. in relation to Rule 57.72 ordered to be paid monthly represented the lower Court's computation of damages of PAN ORIENTAL for deprivation of the right to retain the vessel.000.. Froilan's successor-in-interest) and intervenor Republic of the Philippines (Board of Liquidators) jointly and severally to pay defendant Pan Oriental Shipping Company the sum of P6.00 tendered by defendant Pan Oriental Shipping Company as provided in the option with legal interest from January 16. Pan Oriental Shipping Co.500. chanroblesvirtualawlibrary chanrobles virtual law library SO ORDERED. (See last sentence. allegedly on account of the wrongful issuance of the writ of replevin. judgment was promulgated decreeing.797. to pay appellee Pan Oriental Shipping Company the sum of P40. the date it was paid by the latter. 11897 (Fernando A. Section 10. 1949 with legal interest from the time of disbursement of said legitimate expenses. in the light of the foregoing pronouncements. Section 20 of the Revised Rules of Court. Branch VI (Civil Case No. interest and rentals.54 actual amount expended for the repairs and improvements prior to the operation of the vessel on June 1. 1951 until fully paid but there shah be deducted therefrom the amount of P59. said Court issued an Order. No.54 with legal interest from February 3. 1975. The Court also orders the intervenor Republic of the Philippines to return the sum of P15. first. the Court resolved. 1965. Froilan vs. the dispositive portion of which reads: WHEREFORE. WHEREFORE.

(2) in not holding that the obligation of the REPUBLIC to pay legal interest on the amount of useful and necessary expenses from February 3. one of the elements necessary is that the debts be liquidated.937. 1966. MARITIMA. jointly and severally. the sums ordered to be paid by MARITIMA and the REPUBLIC. The amount expended for repairs and improvements had yet to be determined by the Trial Court pursuant to the Decision of this Court promulgated on . 1951. aside from assailing the sums it was ordered to pay PAN-ORIENTAL. "with legal interest from January 16. to PAN-ORIENTAL are: (a) the sum of P6.72 a month from February 3. "with legal interest from February 3. 1951.representing the unpaid rentals due the Republic of the Philippines.00.000. 1965 and November 23. and AFFIRMED in all other respects. supra. jointly and severally. the parties filed their respective Petitions for Review now before us. 7 In this case. and (4) in not holding that the Trial Court had no jurisdiction to order the return of P15. the date of PAN-ORIENTAL's dispossession. It should be recalled that the deduction of rentals from the amount payable to PANORIENTAL by REPUBLIC was pursuant to this Court's Resolutions of August 27.937.54 is from February 3. 1951 had become stale and ineffective. jointly and severally. 5 and (c) the sum of P40. 1951. (3) in affirming the Order of the Trial Court that MARITIMA and REPUBLIC. all the elements for Compensation to take place were not present on the date of dispossession." minus the amount of P59.797. 4 (b) the sum of P15.000. In other words. and not from the time of disbursement and (b) the unpaid rentals due the Republic are deductible from the amount of expenses payable to PANORIENTAL. in the concept of damages for the deprivation of its right to retain the vessel. chanroblesvirtualawlibrary chanrobles virtual law library REPUBLIC attributes the following errors to the Appellate Court: (1) in not holding that compensation by operation of law took place as between REPUBLIC and PAN-ORIENTAL as of the date of dispossession." the date PAN-ORIENTAL had paid the same. REPUBLIC's Submissions 1) REPUBLIC maintains that compensation or set-off took place between it and PANORIENTAL as of February 3. or on February 3. 1950. 1951 until fully paid.797.00 to PAN-ORIENTAL.72 a month from the time it was dispossessed of the vessel on February 3. for its part. 1951.500. the date the latter was dispossessed of the vessel For compensation to take place.00 representing the unpaid rentals due the REPUBLIC 6 The legal rate of interest is made payable only on the last two amounts (b) and (c). (a) the date from which interest is to be paid on the amount of P40. chanroblesvirtualawlibrary chanrobles virtual law library For clarity. the date of dispossession.54 representing the expenses for repairs incurred by PANORIENTAL. 1951 until it is paid its useful and necessary expenses. it until it is paid its useful and necessary expenses". From the foregoing Decision. with REPUBLIC. echoed the theory of compensation and added that the question of damages on account of alleged wrongful replevin was not a proper subject of inquiry by the Trial Court when it determined the matter of necessary expenses. representing PAN-ORIENTAL's deposit with REPUBLIC for the purchase of the vessel. interest and rentals. pay to PAN-ORIENTAL the sum of P6.

702.00 should be deducted from the sum of useful expenses plus legal interest due.. Froilan and the REPUBLIC of the Philippines are declared jointly and severally liable..46 would still be owing by PAN-ORIENTAL to REPUBLIC. assuming that the latter amount would still be greater. That amount represents the damages for the wrongful issuance of the Writ of Replevin and was computed as follows: P4.132..804.October 31. 1965. by specific pronouncement of this Court in its Resolution of November 23. the legal interest payable from February 3.. representing useful expenses incurred by PAN-ORIENTAL. The obligation of REPUBLIC to reimburse PAN-ORIENTAL for expenses arose only after this Court had so ruled.500. the corresponding adjustments can be made depending on the totality of the respective amounts.72 a month ordered to be paid by REPUBLIC and MARITIMA to PAN-ORIENTAL until the latter is paid its useful and necessary expenses is likewise in order. did not deny the same but referred it instead to the Trial Court "there to be heard and decided" since evidence would have to be presented.797. in acting on PAN. supra. but also for payment of legal interest thereon.77 for loss of income by PAN-ORIENTAL plus P2.54. Deducting the latter amount from the former.ORIENTAL's application for damages in its Resolution of December 16. Rentals for the use of the vessel by PANORIENTAL were neither due and demandable at the time of dispossession but only after this Court had issued its Resolution of August 27. we find without basis REPUBLIC's allegation that PAN.54 was extinguished by compensation since the rentals payable by PAN-ORIENTAL amount to P59.797.00 while the expenses reach only P40.54 to PANORIENTAL was not extinguished by compensation. chanroblesvirtualawlibrary chanrobles virtual law library It should further be recalled that this Court." 9 Thus. .797. For this reason.500. 1964. 1966. 1951 on the sum of P40. REPUBLIC claims that P18. 1966. chanroblesvirtualawlibrary chanrobles virtual law library More. That argument loses sight of the fact that to the sum of P40. At the time of dispossession also.54. chanroblesvirtualawlibrary chanrobles virtual law library 2) Since we are holding that the obligation of REPUBLIC to pay P40.54 will still have to be added the legal rate of interest "from February 3.797. thus: . 3) The amount of P6. supra.797. 1965. the obligation of REPUBLIC to pay legal interest on said amount has neither become stale as REPUBLIC contends. Of special note is the fact that payment of that interest was the specific ruling of this Court in its Resolution of August 27.ORIENTAL's claim in the amount of P40. Moreover.95 as monthly depreciation of the vessel in lieu of the charter hire. PAN-ORIENTAL was still insisting on its right to purchase the vessel. Otherwise. 1951 until fully paid. of the legitimate necessary expenses incurred on the vessel. this Court found that PAN-ORIENTAL was "deprived of the possession of the vessel over which (it) had a lien for these expenses" 10 and that FROILAN and REPUBLIC "may be held responsible for the deprivation of defendant (PANORIENTAL) of its right to ." chanrobles virtual law library But although compensation by operation of law cannot take place as between REPUBLIC and PAN-ORIENTAL. not only for reimbursement to Pan Oriental.937. is also still unliquidated 8 since interest does not stop accruing "until the expenses are fully paid. the rentals payable by PAN-ORIENTAL in the amount of P59. computed from the date of the defendant's dispossession of the property .

. Plana. as provided in the option granted in the bareboat contract (Exhibit "C"). the judgment appealed from is hereby affirmed. it is but just that the deposit be returned.00 ordered by the Trial Court and affirmed by the Appellate Court was but just and proper. This amount was accepted by the Administration as deposit . that sum was tendered to REPUBLIC "which together with its (PAN-ORIENTAL's) alleged expenses already made on the vessel.30. Teehankee (Chairman). For the records show that an application for damages for wrongful replevin was filed both before this Court and thereafter before the Trial Court after this Tribunal specifically remanded the issue of those damages to the Trial Court there to be heard and decided pursuant to Rule 60. 12 It is futile to allege that PAN-ORIENTAL did not plead for the return of that amount since its prayer included other reliefs as may be just under the premises. Section 20. JJ. chanrobles virtual law library chanroblesvirtualawlibrary chanrobles virtual law library SO ORDERED.retention of the property until fully reimbursed on the necessary expenditures made on the vessel. we find that the appealed Decision of the Trial Court and of the then Court of Appeals is in consonance with the Decision and Resolutions of this Court. Courts may issue such orders of restitution as justice and equity may warrant." Since the purchase did not eventually materialize for reasons attributable to REPUBLIC. Jr. chanroblesvirtualawlibrary chanrobles virtual law library In a nutshell.267. concur. No costs.. cover 25% of the cost of the vessel.. 13 chanrobles virtual law library The matter of legal compensation which MARITIMA has also raised has been previously discussed. " 11 chanrobles virtual law library 4) There return of Pl5. Relova. As this Court found.797. PAN-ORIENTAL can no longer raise the alleged error of the Trial Court in computing the necessary and useful expenses at only P40.. chanroblesvirtualawlibrary ACCORDINGLY. and that the application for damages before the lower Court was but a mere adoption of a different method of presenting claims already litigated.000. Section 10 in relation to Rule 57. Gutierrez. . MARITIMA's Position We find no merit in MARITIMA's contention that the alleged damages on account of wrongful replevin was barred by res judicata. chanroblesvirtualawlibrary chanrobles virtual law library Parenthetically. since it did not appeal from that Court's Decision..54 when they should be P87. De la Fuente and Alampay.

chanrobles virtual law library chanrobles virtual law library chanrobles virtual law library 9 Decision. 8 Article 1279. Amended Record on Appeal. 53. 3 P. 1975. 1964. chanrobles virtual law library 10 Decision of October 31. Civil Code. chanrobles virtual law library 5 Ibid. chanrobles virtual law library 11 Resolution of August 27. chanrobles virtual law library . 1966. chanrobles virtual law library 2 Pp. chanrobles virtual law library 4 Trial Court's Order on June 4. Civil Code. 1965. Court of Appeals. 7 Article 1279. Civil Code. 6 Decision. Court of Appeals. 114-115. Original Record on Appeal.Endnotes: 1 SCRA 276 [1964]. chanrobles virtual law library chanrobles virtual law library 13 Resolution of December 16. 12 Article 1988.