Nordic Asia Limited vs. Court of Appeals

A mortgagee of a vessel does not possess the direct and immediate legal interest required for intervention in a collection suit for maritime liens filed by crew members where the mortgagee seeks merely to oppose the crew's claims without asserting its own mortgage foreclosure claim, since any effect on the mortgagee is contingent upon successful foreclosure and insufficiency of proceeds; however, the simultaneous pursuit of related remedies before the Court of Appeals does not constitute forum shopping where the party disclosed the existence of the other case and there is no showing of bad faith or deliberate intent to mislead the courts.

The case arises from competing claims against the vessel M/V "Fylyppa": a mortgage claim by foreign lenders (petitioners) who financed the vessel's purchase, and maritime lien claims by crew members (respondents) for unpaid wages. When the vessel owner defaulted on the loan, the mortgagees initiated extrajudicial foreclosure proceedings while the crew members simultaneously filed a collection case, leading to procedural disputes over the mortgagees' right to intervene in the crew members' suit and allegations of forum shopping.

• On May 26, 1981, Sextant Maritime, S.A. borrowed US$5,300,000 from petitioners Nordic Asia Limited and Bankers Trust Company to purchase the vessel M/V "Fylyppa," constituting a First Preferred Mortgage over the vessel in favor of petitioners as security.
• Sextant Maritime defaulted on the loan, prompting petitioners to institute extrajudicial foreclosure proceedings under Presidential Decree No. 1521.
• On the same day the foreclosure proceedings were instituted, respondents Nam Ung Marine Co., Ltd. (manning agent) and twenty-seven (27) crew members filed a collection case before the RTC of Manila to claim preferred maritime liens consisting of unpaid wages, overtime pay, allowances, and other benefits under the Code of Commerce and P.D. 1521, causing the arrest of the vessel.
• Petitioners filed a motion for leave to intervene in the collection case, alleging they held a mortgage over the vessel and sought to oppose the crew members' claims; the motion was granted and petitioners discharged the attachment by posting a counterbond.
• After other defendants defaulted, the RTC directed respondents to present evidence ex-parte in four separate hearings; petitioners, though admitted as intervenors, did not attend any hearing but later filed a motion to lift the order of default and/or expunge the ex-parte evidence.
• The RTC rendered a decision ordering the defendants to pay the crewmen's wages and Nam Ung Marine Ltd.'s agency fees, directing the counterbond posted by petitioners to answer for the awards.
• Petitioners appealed the RTC decision to the Court of Appeals (Appeal Case) and separately assailed the order of execution pending appeal (Certiorari Case); the Court of Appeals affirmed the execution order (which became final) and subsequently affirmed the RTC decision in the main appeal.
• The Supreme Court initially dismissed the petition for review on certiorari on June 10, 2003, finding that petitioners had no right to intervene and were guilty of forum shopping.

• Petitioners contend that their cause of action springs from the bloated and exaggerated claims of respondents, which would leave nothing to answer for their mortgage claims, and thus they should be allowed to intervene even if only to oppose the claims.
• They cite International Banking Corp. v. Pilar Corrales to argue that a lien or statutory right of preference clothes them with legal interest in the subject matter.
• They cite Joaquin v. Herrera to argue that their intervention was pro interesse suo, allowing them to assert a property right without becoming formal plaintiffs or defendants.
• They argue that they disclosed the existence of the Appeal Case when filing the Certiorari Case, and thus should not be considered guilty of forum shopping due to absence of bad faith or deliberate intent to mislead.

• Procedural:
  • Whether petitioners are guilty of forum shopping for simultaneously filing the Certiorari Case and the Appeal Case before the Court of Appeals.
• Substantive Issues:
  • Whether petitioners possess the requisite legal interest in the matter in litigation to justify intervention.
  • Whether the requisites for intervention under the Rules of Court are present in this case.

• Procedural:
  • The Court reconsidered and removed the finding of forum shopping. While petitioners assailed the main decision in the Certiorari Case and the execution pending appeal in the Appeal Case, they disclosed the existence of the earlier case when filing the second one. Considering the absence of bad faith or deliberate intention to mislead the courts, the acts fall short of forum shopping.
• Substantive:
  • The Court denied the motion for reconsideration regarding the lack of legal interest to intervene. Legal interest must be of such direct and immediate character that the intervenor will gain or lose by direct legal operation of the judgment. As co-creditors, petitioners are not parties liable for the crew members' claims, and their remedies as unpaid mortgagees remain preserved because the collection case will not preclude foreclosure of the vessel. Any adverse effect on petitioners is contingent upon successful foreclosure and insufficiency of proceeds, making the interest indirect.
  • The second requisite for intervention also fails: petitioners' rights are adequately protected through their separate extrajudicial foreclosure proceeding, while the rights of the original plaintiffs (crew members) have been unduly delayed by the prolonged litigation caused by the intervenors.
  • The cases cited by petitioners are distinguished: in International Banking Corp., the intervenor had a superior right and sought to enforce its own claims and foreclose, whereas herein petitioners merely sought to oppose claims without asserting their mortgage; in Joaquin, the intervenor asserted his own right to the property, whereas herein petitioners only sought to oppose without asserting their unpaid mortgage.

• Requirements for Intervention — Intervention requires (a) a legal interest in the matter in litigation, and (b) consideration of whether the adjudication of the original parties' rights may be delayed or prejudiced, or whether the intervenor's rights may be protected in a separate proceeding.
• Legal Interest in Intervention — Legal interest must be in the matter in litigation and of such direct and immediate character that the intervenor will either gain or lose by direct legal operation and effect of the judgment; a merely contingent or indirect interest is insufficient.
• Intervention pro interesse suo — A mode of intervention wherein a stranger seeks to intervene to assert a property right which is the subject matter of litigation without becoming a formal plaintiff or defendant, which requires asserting one's own right, not merely opposing another's claim.
• Forum Shopping — The act of seeking a more friendly forum; while disclosure of related pending cases does not automatically exculpate a party, the absence of bad faith or deliberate intent to mislead the courts may negate a finding of forum shopping.

• "Legal interest, which entitles a person to intervene, must be in the matter in litigation and of such direct and immediate character that the intervenor will either gain or lose by direct legal operation and effect of the judgment."
• "Ordinarily, as held by the Court, 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 such party who is obviously and deliberately seeking a more friendly forum for his case."

• International Banking Corp. v. Pilar Corrales, et al., 10 Phil 435 (1908) — Distinguished; intervention was allowed because the intervenor had a superior right of preference and sought to enforce his own claims against the defendant and to foreclose on the subject property.
• Joaquin v. Herrera, 37 Phil. 705 (1918) — Distinguished; the intervenor sought to oppose the plaintiff's application and to assert his own right to the property.
• Magsaysay-Labrador v. Court of Appeals, 180 SCRA 266 (1989) — Cited for the requisites of intervention and the definition of legal interest.
• Republic v. De los Angeles, 41 SCRA 422 (1971) — Cited for the requirement that every complaint must state the ultimate facts upon which the party relies for his cause of action.
• United Special Watchman Agency v. Court of Appeals, G.R. No. 152476, July 8, 2003 — Cited for the doctrine that disclosure of related cases does not automatically exculpate a party from forum shopping if the party is obviously and deliberately seeking a more friendly forum.

• Presidential Decree No. 1521 (Ship Mortgage Decree of 1978) — Governs the extrajudicial foreclosure of ship mortgages and the preferred maritime liens of crew members.
• Code of Commerce — Provides the statutory basis for the preferred maritime liens of crew members for unpaid wages.