Froilan vs Pan Oriental Shipping

Facts:
Plaintiff, Fernando Froilan filed a complaint against the defendant-appellant, Pan Oriental Shipping
Co., alleging that he purchased from the Shipping Commission the vessel for P200,000, paying
P50,000 down 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 in favor of the Shipping
Commission. For various reasons, among them the non-payment of the installments, the Shipping
Commission tool possession of said vessel and considered the contract of sale cancelled. The
Shipping Commission chartered and delivered said vessel to the defendant-appellant 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 with the Shipping Commission. Plaintiff had
repeatedly demanded from the Pan Oriental Shipping Co. the possession of the vessel in question
but the latter refused to do so.

Plaintiff, prayed that, upon the approval of the bond accompanying his complaint, a writ of replevin
be issued for the seizure of said vessel with all its equipment and appurtenances, and that after
hearing, he be adjudged to have the rightful possession thereof . 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 to this restoration of 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 may have thereon.
Plaintiff paid the required cash of P10,000.00 and as Pan Oriental refused to surrender possession
of the vessel, he filed an action to recover possession thereof and 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.
Discussions:
When the government enters into a contract, for the State is then deem to have divested itself of the
mantle of sovereign immunity and descended to the level of the ordinary individual. Having done so,
it becomes subject to judicial action and processes.
Rulings:

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.