RepublicofthePhilippines

SUPREMECOURT
Manila
ENBANC
G.R.No.L11897October31,1964
FERNANDOA.FROILAN,plaintiffappellee,
vs.
PANORIENTALSHIPPINGCOMPANY,defendantappellant,
REPUBLICOFTHEPHILIPPINES,andCOMPANIAMARITIMA,intervenorsappellees.
Sycip,Salazar&AssociatesandEnriqueFernando&EmmaQuisumbingFernandofordefendantappellant.
TheGovernmentCorporateCounselforintervenorsappellees.
RafaelDinglasanforplaintiffappellee.
BARRERA,J.:
OnMarch7,1947,FernandoA.FroilanpurchasedfromtheShippingAdministrationaboatdescribedasMV/FS
197forthesumofP200,000.00,withadownpaymentofP50,000,00.Tosecurepaymentoftheunpaidbalanceof
thepurchaseprice,amortgagewasconstitutedonthevesselinfavoroftheShippingAdministrationinacontract
whichprovides,amongothers,thefollowing:
IntheeventthattheFIRSTPARTYshouldelecttoexerciseitsrightstorescindunderthetermsofthis
contract,itshallhavetherighttotakepossessionofthevesselhereinsoldintheconditionthatitisatthe
timeofrescissionbutinnocaseinaworseconditionthanwhenoriginallydeliveredtothesecondparty,
ordinarywearandtearexceptedandincaseatthetimeofrescissiontheconditionofthevesselisnot
satisfactorytotheFIRSTPARTY,itshallhavetherighttohavethevesselreconditioned,repaired,dry
dockedattheexpenseoftheSECONDPARTY.ThesamerightisherebygrantedtotheFIRSTPARTYin
casetheSECONDPARTYshouldforanyreasonrefuseorfailtocomplywiththisconditionofsaleand
returnthevesselhereinsoldinaconditionnotsatisfactorytotheFIRSTPARTY.
TherightofrescissionshallbeconsideredasacumulativeremedygrantedtotheFIRSTPARTYandshall
notinanywayprejudicehisrighttodemandimmediateandcompletepaymentofthepurchasepriceofthe
vesselunderthetermshereinprovided,andtodemandandcollectfromtheSECONDPARTYsuch
damagescausedbythenoncompliancewiththiscontract.
ThiscontractwasdulyapprovedbythePresidentofthePhilippines.
Froilanappearedtohavedefaultedinspiteofdemands,notonlyinthepaymentofthefirstinstallmentontheunpaid
balanceofthepurchasepriceandtheinterestthereonwhentheyfelldue,butalsofailedinhisexpressundertaking
topaythepremiumsontheinsurancecoverageofthevessel,obligingtheShippingAdministrationtoadvancesuch
paymenttotheinsurancecompany.Consequently,theShippingAdministrationrequestedtheCommissionerof
CustomsonJune1,1948torefuseclearanceonthevesselandthevoyagethereofwasorderedsuspended.
Thereafter,FroilanaskedforareconsiderationoftheactiontakenbytheShippingAdministration,claimingthathis
failuretopaytherequiredinstallmentswasduetothefactthathewasawaitingthedecisionofthePresidentonthe
petitionoftheshipownersforanextensionoftheperiodofpaymentofthepurchasedvessels,whichpetitionwas
favorablyactedupon.

OnJuly3,1948,theShippingAdministrationandFroilanenteredintoanagreementwherebythelatterundertookto
liquidateimmediatelyallofhisoutstandingaccounts,includingtheinsurancepremiums,within30days,andhave
thevesseloverhauled,andpromisedthatincaseofhisdefault,heshall"waive,anyformalnoticeofdemandandto
redeliverthesaidvesselpeaceablyandamicablywithoutanyotherproceedings"(Exh.39).
Again,Froilanfailedtosettlehisaccountswithintheprescribedperiod,thus,theShippingAdministration
threatenedtorescindthecontractunlesspaymentbeimmediatelymade.OnAugust28,1948,uponFroilan'srequest,
theShippingAdministrationagreedtoreleasethevesselonconditionthatthesamewouldbeoverhauledand
repairedandtheaccruedinterestonthefirstinstallmentwouldbepaid.TheAdministrationalsoallowedthe
mortgagortopayhisoverdueaccounts,amountingnowtoP48,500.00inmonthlyinstallments,withwarmingthatin
caseoffurtherdefault,itwouldimmediatelyrepossessthevesselandrescindthecontract.Froilanfailedtopay.On
January17,1949,theShippingAdministrationrequiredhimtoreturnthevesselorelsefileabondforP25,000.00in
fivedays.InaletterdatedJanuary28,1949,Froilanrequestedthattheperiodforfilingthebondbeextendedto
February15,1949,upontheexpressconditionandunderstandingthat:
....IfIfailtofiletherequiredbondonthesaiddate,February15,1949,tothesatisfactionoftheShipping
Administration,IamwillingtorelinquishandIdoherebyrelinquishanyandallrightsIhaveormayhave
onthesaidvesselincludinganypaymentsmadethereontotheShippingAdministration,withoutprejudice
tootherrightstheShippingAdministrationmayhaveagainstmeunderthecontractofsaleexecutedinmy
favor.
IwishtoreiteratethatifIfailtofilethebondwithintheperiodIhaverequested,anyandallrightsIhave
onthevesselandanypaymentsmadetotheShippingAdministrationshallbeconsideredautomatically
forfeitedinfavoroftheShippingAdministrationandtheownershipofthesaidvesselwillbeasitishereby
automaticallytransferredtotheShippingAdministrationwhichisthenherebyauthorizedtotakeimmediate
possessionofsaidvessel.(Exh.66)
ThisletterofFroilanwassubmittedbytheGeneralManageroftheShippingAdministrationtotheboardof
directorsforproperconsideration.ByresolutionofJanuary31,1949,thepetitionwasgrantedsubjectspecificallyto
theconditionssetforththerein.Froilanagainfailedtomakegoodhispromises.Hence,onFebruary18,1949,the
GeneralManageroftheShippingAdministrationwrotetheCollectorofCustomsofManila,advisingthelatterthat
theShippingAdministration,byactionofitsboard,terminatedthecontractwithFroilan,andrequestingthe
suspensionoftheclearanceoftheboateffectivethatdate(Exh.70).
OnFebruary21,1949,theGeneralManagerdirecteditsofficers,Capt.Laconicoandothers,totakeimmediate
possessionofthevesselandtosuspendtheunloadingofallcargoesonthesameuntiltheownersthereofmadethe
correspondingarrangementwiththeShippingAdministration.Pursuanttotheseinstructions,theboatwas,notonly
actuallyrepossessed,butthetitletheretowasregisteredagaininthenameoftheShippingAdministration,thereby
retransferringtheownershipthereoftothegovernment.
OnFebruary22,1949,PanOrientalShippingCo.,hereinafterreferredtoasPanOriental,offeredtochartersaid
vesselFS197foramonthlyrentofP3,000.00.Becausethegovernmentwasthenspendingfortheguardingofthe
boatandsubsistenceofthecrewmemberssincerepossession,theShippingAdministrationonApril1,1949,
acceptedPanOriental'soffer"inprinciple"subjecttotheconditionthatthelattershallcausetherepairofthevessel,
advancingthecostoflaboranddrydockingthereof,andtheShippingAdministrationtofurnishthenecessaryspare
parts.Inaccordancewiththischartercontract,thevesselwasdeliveredtothepossessionofPanOriental.
Inthemeantime,oronFebruary22,1949,Froilantriedtoexplainhisfailuretocomplywiththeobligationshe
assumedandaskedthathebegivenanotherextensionuptoMarch15,1949tofilethenecessarybond.Thenon
March8,Froilanofferedtopayallhisoverdueaccounts.However,ashefailedtofulfilleventheseoffersmadeby
himinthesetwocommunications,theShippingAdministrationdeniedhispetitionforreconsideration(ofthe
rescissionofthecontract)onMarch22,1949.Itshouldbenotedthatwhilehispetitionforreconsiderationwas

deniedonMarch22,itdoesnotappearwhenheformallyformulatedhisappeal.Inthemeantime,asalreadystated,
theboathasbeingrepossessedbytheShippingAdministrationandthetitletheretoreregisteredinthenameofthe
government,anddeliveredtothePanOrientalinvirtueofthecharteragreement.OnJune2,1949,Froilanprotested
tothePresidentagainstthecharterofthevessel.
Onthesamedate,theExecutiveOfficeadvisedtheAdministrationandtheCommissionerofCustomsnottodispose
ofthevesselinfavorofanotherpartypendingfinaldecisionbythePresidentontheappealofFroilan(Exhs.93A
and93D).ButsincethevesselwasalreadyclearedinfavorofPanOrientalpriortothereceiptoftheforegoing
communication,andallegedlyinordertopreventitsbeingmadeanswerablefordamages,theGeneralManagerof
theShippingAdministrationadvisedtheCollectorofCustomsnottosuspendthevoyageofthevesselpendingfinal
decisionontheappealofFroilan.Similarmanifestation,toallowthePanOriental'soperationofthevesselwithout
prejudicetowhateveractionthePresidentmaytakeinthecase,wasalsomadebytheAdministrationtothe
ExecutiveSecretary.
OnJune4,1949,theShippingAdministrationandthePanOrientalformalizedthecharteragreementandsigneda
bareboatcontractwithoptiontopurchase,containingthefollowingpertinentprovisions:
III.CHARTERHIRE,TIMEOFPAYMENT.TheCHARTERERshallpaytotheowneramonthly
charterhireofTHREETHOUSAND(P3,000.00)PESOSfromdateofdeliveryofthevessel,payablein
advanceonorbeforethe5thofeverycurrentmonthuntilthereturnofthevesseltoOWNERorpurchase
ofthevesselbyCHARTERER.
XII.RIGHTOFOPTIONTOPURCHASE.Therightofoptiontopurchasethevesselatthepriceof
P150,000.00plustheamountexpendedforitspresentrepairsisherebygrantedtotheCHARTERERwithin
120daysfromtheexecutionofthisContract,unlessotherwiseextendedbytheOWNER.Thisrightshall
bedeemedexercisedonlyif,beforetheexpirationofthesaidperiod,oritsextensionbytheOWNERthe
CHARTERERcompletesthepayment,includinganyamountpaidasCharterhire,ofatotalsumofnotless
thantwentyfivepercentum(25%)ofsaidpriceofthevessel.
TheperiodofoptionmaybeextendedbytheOWNERwithoutinanywayaffectingtheotherprovisions,
stipulations,andtermsofthiscontract.
If,foranyreasonwhatsoever,theCHARTERERfailstoexerciseitsoptiontopurchasewithintheperiod
stipulated,orwithintheextensionthereofbytheOWNER,itsrightofoptiontopurchaseshallbedeemed
terminated,withoutprejudicetothecontinuanceoftheCharterPartyprovisionsofthiscontract.Theright
todisposeofthevesselorterminatetheCharterPartyatitsdiscretionisreservedtotheOWNER.
XIII.TRANSFEROFOWNERSHIPOFTHEVESSEL.AftertheCHARTERERhasexercisedhisright
ofoptionasprovidedintheprecedingparagraph(XII),thevesselshallbedeemedconditionallysoldtothe
purchaser,buttheownershipthereofshallnotbedeemedtransferredunlessanduntilallthepriceofthe
vessel,togetherwiththeintereststhereon,andanyotherobligationdueandpayabletotheOWNERunder
thiscontract,havebeenfullypaidbytheCHARTERER.
xxxxxxxxx
XXI.APPROVALOFTHEPRESIDENT.ThiscontractshalltakeeffectonlyuponapprovalofHis
Excellency,thePresident.
OnSeptember6,1949,theCabinetrevokedthecancellationofFroilan'scontractofsaleandrestoredtohimallhis
rightsthereunder,onconditionthathewouldgivenotlessthanP10,000.00tosettlepartiallyhisoverdueaccounts
andthatreimbursementoftheexpensesincurredfortherepairanddrydockingofthevesselperformedbyPan
OrientalwastobemadeinaccordancewithfutureadjustmentbetweenhimandtheShippingAdministration(Exh.

I).Later,pursuanttothisreservation,Froilan'srequesttotheExecutiveSecretarythattheAdministrationadvance
thepaymentoftheexpensesincurredbyPanOrientalinthedrydockingandrepairofthevessel,wasgrantedon
conditionthatFroilanassumetopaythesameandfileabondtocoversaidundertaking(Exh.111).
OnSeptember7,1949,theformalbareboatcharterwithoptiontopurchasefiledonJune4,1949,infavorofthePan
OrientalwasreturnedtotheGeneralManageroftheShippingAdministrationwithoutaction(notdisapproval),only
becauseoftheCabinetresolutionofSeptember6,1949restoringFroilantohisrightsundertheconditionssetforth
therein,namely,thepaymentofP10,000.00tosettlepartiallyhisoverdueaccountsandthefilingofabondto
guaranteethereimbursementoftheexpensesincurredbythePanOrientalinthedrydockingandrepairofthevessel.
ButFroilanagainfailedtocomplywiththeseconditions.AndsotheCabinet,consideringFroilan'sconsistentfailure
tocomplywithhisobligations,includingthoseimposedintheresolutionofSeptember6,1949,resolvedto
reconsidersaidpreviousresolutionrestoringhimtohispreviousrights.And,inaletterdatedDecember3,1949,the
ExecutiveSecretaryauthorizedtheAdministrationtocontinueitschartercontractwithPanOrientalinrespectto
FS197andenforcewhateverrightsitmaystillhaveundertheoriginalcontractwithFroilan(Exh.188).
Froilan,forhispart,petitionedanewforareconsiderationofthisactionoftheCabinet,claimingthatothership
purchasers,includingthePresidentTreasurerofthePanOrientalhimself,hadalsodefaultedinpaymentandyetno
actiontorescindtheircontractshadbeentakenagainstthem.Healsoofferedtomakeacashpartialpaymentof
P10,000.00onhisoverdueaccountsandreimbursePanOrientalofallitsnecessaryexpenseonthevessel.Pan
Oriental,however,notonlyexpresseditsunwillingnesstorelinquishpossessionofthevessel,butalsotenderedthe
sumofP15,000.00which,togetherwithitsallegedexpensesalreadymadeonthevessel,cover25%ofthecostof
thevessel,asprovidedintheoptiongrantedinthebareboatcontract(Exh.122).Thisamountwasacceptedbythe
Administrationasdeposit,subjecttothefinaldeterminationofFroilan'sappealbythePresident.TheExecutive
SecretarywasalsoinformedoftheexercisebyPanOrientalofsaidoptiontopurchase.
OnAugust25,1950,theCabinetresolvedoncemoretorestoreFroilantohisrightsundertheoriginalcontractof
sale,onconditionthatheshallpaythesumofP10,000.00upondeliveryofthevesseltohim,saidamounttobe
creditedtohisoutstandingaccounts;thatheshallcontinuepayingtheremaininginstallmentsdue,andthatheshall
assumetheexpensesincurredfortherepairanddrydockingofthevessel(Exh.134).PanOrientalprotestedtothis
restorationofFroilan'srightsunderthecontractofsale,forthereasonthatwhenthevesselwasdeliveredtoit,the
ShippingAdministrationhadauthoritytodisposeofthesaidproperty,Froilanhavingalreadyrelinquishedwhatever
rightshemayhavethereon.FroilanpaidtherequiredcashofP10,000.00,andasPanOrientalrefusedtosurrender
possessionofthevessel,hefiledanactionforreplevinintheCourtofFirstInstanceofManila(CivilCaseNo.
13196)torecoverpossessionthereofandtohavehimdeclaredtherightfulownerofsaidproperty.
Uponplaintiff'sfilingabondofP400,000.00,thecourtorderedtheseizureofthevesselfromPanOrientalandits
deliverytotheplaintiff.PanOrientaltriedtoquestionthevalidityofthisorderinapetitionforcertiorarifiledin
thisCourt(G.R.No.L4577),butthesamewasdismissedforlackofmeritbyresolutionofFebruary22,1951.
Defendantaccordinglyfiledananswer,denyingtheavermentsofthecomplaint.
TheRepublicofthePhilippines,havingbeenallowedtointerveneintheproceeding,alsoprayedforthepossession
ofthevesselinorderthatthechattelmortgageconstitutedthereonmaybeforeclosed.DefendantPanOriental
resistedsaidintervention,claimingtohaveabetterrighttothepossessionofthevesselbyreasonofavalidand
subsistingcontractinitsfavor,andofitsrightofretention,inviewoftheexpensesithadincurredfortherepairof
thesaidvessel.Ascounterclaim,defendantdemandedoftheintervenortocomplywiththelatter'sobligationto
deliverthevesselpursuanttotheprovisionsofthechartercontract.
Thereafter,anduponplaintiff'spresentingproofthathehadmadepaymenttotheintervenorRepublicofthe
Philippines,ofthesumofP162,576.96,coveringtheinsurancepremiums,unpaidbalanceofthepurchasepriceof
thevesselandinterestthereon,thelowercourtbyorderofFebruary8,1952,dismissedthecomplaintinintervention
onthegroundthattheclaimordemandthereinhadalreadybeenreleased.Saiddismissal,however,wasmade
withoutprejudicetothedeterminationofdefendant'sright,andthatthereleaseandcancellationofthechattel

mortgagedidnot"prejudgethequestioninvolvedbetweentheplaintiffandthedefendantwhichisstillthesubjectof
determinationinthiscase."
Inviewofthedismissalofitscomplaint,intervenorRepublicofthePhilippinesalsomovedforthedismissalof
defendant'scounterclaimsagainstit,whichwasgrantedbythecourt.OnappealbyPanOrientaltothisCourt(G.R.
No.L6060),saidorderwasreversedandthecaseremandedtothelowercourtforfurtherproceedings.
Subsequently,CompaiaMaritima,aspurchaserofthevesselfromFroilan,wasallowedtointerveneinthe
proceedings(inthelowercourt),saidintervenortakingcommoncausewiththeplaintiffFroilan.Initsanswertothe
complaintinintervention,defendantsetupacounterclaimfordamagesinthesumofP50,000.00,allegingthat
plaintiffsecuredtheCabinetresolutionsandthewritofreplevin,resultinginitsdeprivationofpossessionofthe,
vessel,attheinstigationandinducementofCompaiaMaritima.Thiscounterclaimwasdeniedbybothplaintiffand
intervenorMaritima.
OnSeptember28,1956,thelowercourtrenderedadecisionupholdingFroilan's(andCompaiaMaritima's)rightto
theownershipandpossessionoftheFS197.ItwasruledthatFroilan'sviolationsoftheconditionsofthecontractof
saleinhisfavordidnotautomaticallydeprivehimofhisrightofownershipofthevessel,whichpassedtohimupon
executionofthecontract,butmerelygaverisetotheShippingAdministration'srighteithertoforeclosethe
mortgageorrescindthecontractbycourtaction.AstheShippingAdministrationfailedtoavailitselfofanyofthese
remedies,Froilan'srightofownershipremainedunaffected.AndthesubsequentresolutionsoftheCabinet,restoring
himtohisrightsunderthesaidcontract,reaffirmedthesame.ThechartercontractbetweentheShipping
Administrationanddefendantwasdeclarednullandvoid,notonlybecausetheformercouldnothavelegallybound
thevessel,butalsoduetothefactthatsaidagreementhasnotbeenperfectedforlackofapprovalbythePresidentof
thePhilippines.And,evenassumingthatthesaidchartercontractwasvalid,thelowercourtheldthat,astheowner
(RepublicofthePhilippines)underthesameagreementwasgiventherighttoterminatethecharterordisposeofthe
vesselanytime,theactionoftheCabinetincancellingorwithdrawingtherescissionofFroilan'scontract,hadthe
effectofterminatingthecharteragreementwiththedefendant.Thecourtalsodismissed(1)defendant's
counterclaimsagainstplaintiffFroilanandintervenorCompaiaMaritima,onthegroundthatit(defendant)wasa
possessorinbadfaith,andconsequently,notentitledtodamages;(2)plaintiff'scounterclaimsagainstdefendant,for
thereasonthatthesameshouldhavebeendirectedagainstintervenorRepublicofthePhilippines;and(3)
defendant'scounterclaimssaidintervenorRepublic,onthegroundthattheorderdismissingthecomplaintin
interventionhadalreadybecomefinalanditwasmateriallyimpossibleforthelattertosecurepossessionofthe
vessel.Fromthisdecision,PanOrientalbroughttheinstantappeal.
Contrarytoappellant'scontention,therulingofthelowercourtthatunderthecontractofsalewithmortgage,
ownershipofthevesselpassedtoFroilan,upondeliveryofthepropertytothelatter,mustbesustained.Itistobe
notedthatunlikeinthechartercontractwhereitwasspecificallyprescribedthatownershipofthevesselshallbe
transferredtothevendeeonlyuponfullpaymentofthepurchaseprice,nosimilarprovisionappearsinthecontract
ofsaleinfavorofFroilan.Intheabsenceofstipulationtothecontrary,theownershipofthethingsoldpassestothe
vendeeupontheactualorconstructivedeliverythereof(Art.1477,newCivilCode).ItisforthisreasonthatFroilan
wasabletoconstituteamortgageonthevesselinfavoroftheAdministration,tosecurepaymentoftheunpaid
balanceofthepurchaseprice.
ThereisnogainsayingthefactthattherewascontinuousviolationbyFroilanofthetermsofsaidcontractofsale.
Therecordsconclusivelyshowthatnotwithstandingthenumerousopportunitiesgivenhim,Froilanhadbeenremiss
inthefulfillmentofhisobligationsthereunder.Nevertheless,thelowercourtupheldhisallegationthatthe
Administrationmaynotlegallyrescindthecontractwithoutfilingthecorrespondingcomplaintincourt.
UnderArticle11911oftheCivilCode,incaseofreciprocalobligations,thepowertorescindthecontractwherea
partyincursindefault,isimpliedlygiventotheinjuredparty.Appelleemaintainshowever,thatthelaw
contemplatesofrescissionofcontractbyjudicialactionandnotaunilateralactbytheinjuredparty;consequently,
theactionoftheShippingAdministrationcontravenessaidprovisionofthelaw.Thisisnotentirelycorrect,because

thereisalsonothinginthelawthatprohibitsthepartiesfromenteringintoagreementthatviolationofthetermsof
thecontractwouldcausecancellationthereof,evenwithoutcourtintervention.Inotherwords,itisnotalways
necessaryfortheinjuredpartytoresorttocourtforrescissionofthecontract.Asalreadyheld 2judicialactionis
neededwherethere,isabsenceofspecialprovisioninthecontractgrantingtoapartytherightofrescission.
Intheinstantcase,whileitmaybetruethatthecontractofsaledidnotexpresslygivetothemortgageetherightto
canceltheagreementitwas,nevertheless,providedthereinthatsaidpartymayrescindthecontractasitmayseefit
incaseofbreachofthetermsthereofbythemortgagor.Takingintoaccountthepromises,waiversand
representationsmadebyFroilan,totheextentthatheagreedtotheautomatictransferofownershipofthevesselto
theAdministration,shouldhefalltofulfillwhatwasincumbentuponhim,whichdidhappen,therescissionofthe
contractwithoutjudicialactionisproper.
Thenextquestiontobedeterminediswhethertherehadbeenavalidandenforceablechartercontractinfavorof
appellantPanOriental,andwhatwastheeffectthereonofthesubsequentrestorationtoFroilanbytheCabinet,of
hisrightsundertheoriginalcontractofsalewithmortgage.
ItisnotdisputedthatappellantPanOrientaltookpossessionofthevesselinquestionafterithadbeenrepossessed
bytheShippingAdministrationandtitletheretoreacquiredbythegovernment,andoperatedthesamefromJune2,
1949afterithadrepairedthevesseluntilitwasdispossessedofthepropertyonFebruary3,1951,invirtueofa
bareboatchartercontractenteredintobetweensaidcompanyandtheShippingAdministration.Inthesame
agreement,appellantascharterer,wasgiventheoptiontopurchasethevessel,whichmaybeexercisedupon
paymentofacertainamountwithinaspecifiedperiod.ThePresidentandTreasureroftheappellantcompany,
tenderedthestipulatedinitialpaymentonJanuary16,1950.Appellantnowcontendsthathavingexercisedthe
option,thesubsequentCabinetresolutionsrestoringFroilan'srightsonthevesselviolateditsexistingrightsoverthe
sameproperty.TothecontentionofplaintiffFroilanthatthechartercontractneverbecameeffectivebecauseit
neverreceivedpresidentialapproval,asrequiredtherein,PanOrientalanswersthattheletteroftheExecutive
SecretarydatedDecember3,1949(Exh.118),authorizingtheShippingAdministrationtocontinueitscharter
contractwithappellant,satisfiessuchrequirement(ofpresidentialapproval).Itistobenoted,however,thatsaid
letterwassignedbytheExecutiveSecretaryonlyandnotunderauthorityofthePresident.Thesame,therefore,
cannotbeconsideredtohaveattacheduntothechartercontracttherequiredconsentoftheChiefExecutiveforits
validity.
Upontheotherhand,theCabinetresolutionspurportingtorestoreFroilantohisformerrightsunderthedeedofsale,
cannotalsobeconsideredasanactofthePresidentwhichisspecificallyrequiredinallcontractsrelatingtothese
vessels(ExecutiveOrderNo.31,seriesof1946).ActionsoftheCabinetaremerelyrecommendatoryoradvisoryin
character.UnlessafterwardsspecificallyadoptedbythePresidentashisownexecutiveact,theycannotbe
consideredasequivalenttotheactofapprovalofthePresidentexpresslyrequiredincasesinvolvingdispositionof
thesevessels.
Inthecircumstancesofthiscase,therefore,theresultingsituationisthatneitherFroilannorthePanOrientalholdsa
validcontractoverthevessel.However,sincetheintervenorShippingAdministration,representingthegovernment
practicallyratifieditsproposedcontractwithFroilanbyreceivingthefullconsiderationofthesaletothelatter,for
whichreasonthecomplaintininterventionwasdismissedastoFroilan,andsincePanOrientalhasnocapacityto
questionthisactuationoftheShippingAdministrationbecauseithadnovalidcontractinitsfavor,thedecisionof
thelowercourtadjudicatingthevesseltoFroiIananditssuccessorCompaiaMaritima,mustbesustained.
Nevertheless,underthecircumstancesalreadyadvertedto,PanOrientalcannotbeconsideredapossessorinbad
faithuntilaftertheinstitutionoftheinstantcase.However,sinceitisnotdisputedthatsaidappellantmadeuseful
andnecessaryexpensesonthevessel,appellantisentitledtotherefundofsuchexpenseswiththerighttoretainthe
vesseluntilhehasbeenreimbursedtherefor(Art.546,CivilCode).Asitisbytheconcertedactsofdefendantsand
intervenorRepublicofthePhilippinesthatappellantwasdeprivedofthepossessionofthevesseloverwhich
appellanthadalienforhisexpenses,appelleesFroilan,CompaiaMaritima,andtheRepublicofthePhilippines3are

declaredliableforthereimbursementtoappellantofitslegitimateexpenses,asallowedbylaw,withlegalinterest
fromthetimeofdisbursement.
Modifiedinthismanner,thedecisionappealedfromisaffirmed,withoutcosts.Caseisremandedtothelowercourt
forfurtherproceedingsinthematterofexpenses.Soordered.
Bengzon,C.J.,BautistaAngelo,Concepcion,Reyes,J.B.L.,Paredes,Bengzon,J.P.,andZaldivar,JJ.,concur.
Dizon,RegalaandMakalintal,JJ.,tooknopart.

Footnotes
1

ART.1191.Thepowertorescindobligationsisimpliedinreciprocalonesincaseoneoftheobligors
shouldnotcomplywithwhatisincumbentuponhim.Theinjuredpartymaychoosebetweenthefulfillment
andtherescissionoftheobligation,withthepaymentofdamagesineithercase.Hemayalsoseek
rescission,evenafterhehadchosenfulfillment,ifthelattershouldbecomeimpossible.
Thecourtshalldecreetherescissionclaimed,unlesstherebejustcauseauthorizingthefixingofaperiod.
2

DelaRamaSteamshipCo.v.Tan,G.R.No.L8784,May21,1956.

AlthoughthecomplaintininterventionbytheRepublicofthePhilippineswasdismissedbyorderofthe
courtofFebruary8,1952,suchdismissalwasheldnottoprecludethedeterminationofdefendant'srights
(G.R.No.L6060,Froilanv.PanOrientalShipping,Sept.30,1954),andintervenormaybeheldliablefor
defendant'scounterclaim.