NORDIC ASIA LIMITED (NOW KNOWN AS DNC LIMITED) AND BANKERS TRUST COMPANY, PETITIONERS, VS. THE HONORABLE COURT OF APPEALS, NAM UNG MARINE CO., LTD., KIM JEONG SEONG, P. U. ULSTR…

Nordic Asia versus Nam Ung Marine

The Case

This is a petition for review on certiorari brought by Nordic Asia Limited, now known as DNC Limited, and Bankers Trust Company against Nam Ung Marine Company Limited, its crew members, and the vessel they served on. The petitioners were unpaid mortgagees of a vessel that had been mortgaged to them as security for a loan. The respondents were the manning agent and twenty-seven crew members who sued to collect their unpaid wages, overtime pay, allowances, and other benefits, and who caused the vessel to be arrested. The petitioners sought to intervene in that collection case, but the trial court and the Court of Appeals refused them, and the Supreme Court initially dismissed their petition. The case matters because it teaches the strict requirements for intervention, the meaning of direct and immediate legal interest, and the limits of the doctrine against forum shopping.

Procedural History

The respondents filed a collection case before the Regional Trial Court of Manila, claiming preferred maritime liens under the Code of Commerce and Presidential Decree Number 1521, the Ship Mortgage Decree of 1978. The petitioners moved for leave to intervene, and the trial court granted the motion. The trial court then declared all the defendants in default, except Jibfair Shipping, and allowed the respondents to present their evidence ex parte. The petitioners did not attend any of the four hearings. The trial court eventually rendered a decision ordering the defendants to pay the crewmen's wages and the manning agent's fees, and ordering the petitioners' counterbond to answer for the awards.

The petitioners appealed to the Court of Appeals, docketed as the Appeal Case. The trial court then issued an order of execution pending appeal, and the petitioners filed a separate action with the Court of Appeals to question that order, docketed as the Certiorari Case. The Court of Appeals first resolved the Certiorari Case, affirming the order of execution pending appeal except as to moral damages, attorney's fees, litigation expenses, and interest, and that decision became final and executory. The Court of Appeals then affirmed the trial court's decision in the Appeal Case and dismissed the appeal. The petitioners elevated the matter to the Supreme Court through a petition for review on certiorari. The Supreme Court, in its decision of June 10, 2003, dismissed the petition on two grounds: that the petitioners had no right to intervene, and that they were guilty of forum shopping. The petitioners filed a motion for reconsideration, which the Court resolved in this decision.

Facts

On May 26, 1981, Sextant Maritime, S.A. borrowed 5,300,000 US dollars from the petitioners Nordic Asia Limited and Bankers Trust Company. The loan was used to purchase the vessel M/V Fylyppa. As security, a First Preferred Mortgage over the vessel was constituted in favor of the petitioners. Sextant eventually defaulted, prompting the petitioners to institute extrajudicial foreclosure proceedings under Presidential Decree Number 1521.

By coincidence, on the same day that the extrajudicial foreclosure proceedings were instituted, the respondents Nam Ung Marine Company Limited, the manning agent of the vessel, and twenty-seven crew members filed a collection case before the Regional Trial Court of Manila. They claimed preferred maritime liens for unpaid wages, overtime pay, allowances, and other benefits for services rendered on board the vessel and for manning and provisioning it. After filing the complaint, the manning agent and the crewmen caused the arrest of the vessel.

Upon learning of the collection case, the petitioners filed a motion for leave to intervene, alleging that they held a mortgage over the vessel and that their intervention was only to oppose the crew members' allegedly unfounded and grossly exaggerated claims. Intervention was granted, and the petitioners discharged the attachment by posting a counterbond. The trial court declared the defendants in default, except Jibfair Shipping, and directed the respondents to present evidence ex parte. The petitioners did not attend any of the four hearings, and later filed a motion to lift the order of default and to expunge the ex parte evidence. The trial court rendered judgment in favor of the respondents and ordered the petitioners' counterbond to answer for the awards.

Issues

• Whether or not the petitioners had a legal interest in the matter in litigation sufficient to entitle them to intervene in the collection case.
• Whether or not the petitioners' intervention would unduly delay or prejudice the rights of the original parties, or whether their rights could be protected in a separate proceeding.
• Whether or not the petitioners were guilty of forum shopping.

Applicable Provisions

Rule 19, Section 1 of the Rules of Court, on who may intervene, provides:

Section 1. Who may intervene. A person who has a legal interest in the matter in litigation, or in the success of either of the parties, or an interest against both, or is so situated as to be adversely affected by a distribution or other disposition of property in the custody of the court or of an officer thereof may, with leave of court, be allowed to intervene in the action. The court shall consider whether or not the intervention will unduly delay or prejudice the adjudication of the rights of the original parties, and whether or not the intervenor's rights may be fully protected in a separate proceeding.

This provision supplies the two requirements the Court applied: a legal interest in the matter in litigation, and a consideration of delay or prejudice to the original parties and of whether the intervenor's rights may be protected in a separate proceeding.

Rule 7, Section 5 of the Rules of Court, on the certification against forum shopping, provides:

Section 5. Certification against forum shopping. The plaintiff or principal party shall certify under oath in the complaint or other initiatory pleading asserting a claim for relief, or in a sworn certification annexed thereto and simultaneously filed therewith: (a) that he has not theretofore commenced any action or filed any claim involving the same issues in any court, tribunal or quasi-judicial agency and, to the best of his knowledge, no such other action or claim is pending therein; (b) if there is such other pending action or claim, a complete statement of the present status thereof; and (c) if he should thereafter learn that the same or similar action or claim has been filed or is pending, he shall report that fact within five (5) days therefrom to the court wherein his aforesaid complaint or initiatory pleading has been filed.

This provision bears on the forum shopping issue, because the petitioners disclosed the existence of the earlier Appeal Case when they filed the Certiorari Case.

Ruling

On the first issue, the Court held that the petitioners failed to meet the requirement of legal interest. Legal interest, the Court said, must be in the matter in litigation and of such direct and immediate character that the intervenor will either gain or lose by the direct legal operation and effect of the judgment. The petitioners, being co-creditors, were not the parties liable for the claims of the manning agent and crewmen. Their remedies as unpaid mortgagees remained preserved, because the collection case would not preclude the foreclosure of the vessel. Any adverse effect on them was contingent upon two eventualities: the successful foreclosure on the vessel, and the proceeds of the sale being insufficient to cover the loan amount. The outcome of the collection case, therefore, had no direct effect on the petitioners.

On the second issue, the Court held that the petitioners' rights were already protected through their extrajudicial foreclosure proceeding, while the rights of the manning agent and crewmen, the original plaintiffs, had been unduly delayed or prejudiced. The trial court's decision, rendered on October 30, 1987, had not attained finality even though the actual judgment obligors did not appeal. The only parties prolonging the case were the intervenors, the petitioners themselves.

The Court distinguished the cases the petitioners relied upon. In the International Banking Corporation case, intervention was allowed because the intervenor had a superior right of preference over the subject property and sought to enforce his own claims and to foreclose on the property. The petitioners, by contrast, prayed to intervene on the basis of their secondary right as unpaid mortgagees merely to oppose the respondents' claims, not to enforce their own. In the Joaquin case, the intervenor sought to assert his own right by asking that the cockpit license be issued to him instead. The petitioners wanted only to oppose the respondents' claims without asserting their unpaid mortgage.

On the third issue, the Court reconsidered its earlier finding of forum shopping. It noted that the petitioners had informed the Court of Appeals, when they filed the Certiorari Case, of the earlier filing of the Appeal Case, and that there was an absence of bad faith or any deliberate intention to mislead the courts. The Court observed that ordinarily, even if a party admits in the certification of non-forum shopping the existence of other related cases pending before another body, this fact alone does not exculpate a party who is obviously and deliberately seeking a more friendly forum. But on the facts, the petitioners' acts fell short of forum shopping.

Doctrine

First, intervention requires a legal interest in the matter in litigation of such direct and immediate character that the intervenor will either gain or lose by the direct legal operation and effect of the judgment. A mere contingent interest, one that depends on future eventualities, is not enough. Second, the court must consider whether the intervention will unduly delay or prejudice the adjudication of the rights of the original parties, and whether the intervenor's rights may be fully protected in a separate proceeding. Third, a mortgagee who seeks only to oppose the claims of other creditors, without asserting or enforcing its own claim, does not possess the legal interest required for intervention. Fourth, the disclosure of a related pending case in the certification against forum shopping does not by itself exculpate a party from forum shopping, but where there is no bad faith or deliberate intention to mislead the courts, the finding of forum shopping may be reconsidered.

Disposition

The motion for reconsideration was partially granted: the finding that the petitioners were guilty of forum shopping was reconsidered and removed, and the decision was affirmed in all other respects, with no pronouncement as to costs.

Remember This

The single line worth memorizing is that legal interest for purposes of intervention must be direct and immediate, not contingent upon future eventualities. Examiners like to use this case to test the requirements for intervention under Rule 19 and the nuances of the forum shopping rule.