G.R. No. 155014 November 11, 2005
Crescent Petroleum, Ltd. vs. M/V “Lok Maheshwari,” et al.

FACTS

Petitioner Crescent Petroleum, a Canadian corporation, supplied bunker fuels to the vessel M/V “Lok Maheshwari” in Vancouver, Canada, upon the order of respondent Portserv Limited, a Canadian sub-charterer. The vessel, owned by respondent Shipping Corporation of India (SCI), was under a chain of time charters. Crescent paid its supplier but was not paid by Portserv. The security checks were dishonored. In 1996, while the vessel was docked in Cebu, Crescent filed an action for sum of money with a prayer for attachment before the Regional Trial Court (RTC) of Cebu. The RTC granted the writ, and after respondents were declared in default, ruled in favor of Crescent, holding all respondents solidarily liable.
On appeal, respondents submitted documents including the charter parties and the bunker agreement, which contained a choice-of-law clause stipulating that New York law governs. The Court of Appeals reversed the RTC, dismissing the case for lack of jurisdiction. It held that the determination of whether a maritime lien attached to the vessel for the unpaid bunkers was a prejudicial question that must first be resolved under the proper foreign law, as the bunker agreement specified New York law and the supply occurred in Canada.

ISSUE

Whether the Philippine court has jurisdiction over the action in personam against the vessel owners and charterers for unpaid bunker fuels supplied abroad.

RULING

Yes, the Philippine court has jurisdiction. The Supreme Court reversed the Court of Appeals and reinstated the RTC decision. The action filed by Crescent was an in personam action for sum of money based on a quasi-contract against the vessel owners and charterers. Jurisdiction over such actions is determined by the rules on jurisdiction over the parties and the subject matter, which the RTC possessed. The existence of a maritime lien, which is an in rem claim against the vessel itself, is not a prerequisite for an in personam suit. The choice-of-law clause and the foreign elements of the transaction pertain to the applicable law governing the substantive rights and obligations of the parties, which is a matter of defense properly ventilated during trial. They do not affect the court’s jurisdiction, which is conferred by law. The Court of Appeals erred in treating the choice-of-law issue as jurisdictional. The case was remanded to the RTC to proceed with the trial on the merits, where the applicable law and defenses could be properly threshed out.