Case Summary (G.R. No. 224395)
Petitioner
Tsuneishi Heavy Industries (Cebu), Inc., a ship repair and dry-docking company that rendered services on M/T MIS-1 and other vessels.
Respondent
MIS Maritime Corporation, owner of M/T MIS-1, which contracted with Tsuneishi for dry-docking and repair services.
Key Dates
• March 22, 2006 – Repair and dry-dock agreement executed
• March 23, 2006 – Vessel dry-docked at Tsuneishi yard
• April 2006 – Engine test revealed burnt crank journal and hairline cracks
• September 2006 – Tsuneishi delivered vessel back to MIS
• November 6, 2006 – Agreement for Final Price signed by MIS
• April 10, 2008 – Tsuneishi filed complaint in RTC for maritime lien enforcement and attachment
• April 15, 2008; July 7, 2008; December 11, 2008 – RTC issued and subsequently affirmed three attachment orders
• October 7, 2009; August 26, 2010 – CA reversed the RTC orders
• April 4, 2018 – Supreme Court decision
Applicable Law
• 1987 Philippine Constitution
• Rules of Court: Rule 45 (petition for review on certiorari); Rule 57 (writ of preliminary attachment)
• Ship Mortgage Decree (P.D. 1521), Section 21 (maritime lien for repairs, supplies, use of dry dock)
Facts
- MIS engaged Tsuneishi to dry-dock and repair its vessel M/T MIS-1. After services and a subsequent engine test, the engine suffered damage traced to defective lubrication. Tsuneishi denied responsibility but paid for parts as a goodwill gesture.
- Tsuneishi billed MIS US$318,571.50; MIS refused payment and counterclaimed US$471,462.60 for lost income during the vessel’s off-hire period, seeking set-off and additional payment.
- Tsuneishi delivered the vessel in September 2006; MIS signed a final price agreement in November 2006 but still withheld payment.
- Tsuneishi filed an in rem complaint in the RTC on admiralty jurisdiction to enforce its maritime lien under Section 21 of the Ship Mortgage Decree and sought a writ of preliminary attachment alleging fraud in MIS’ refusal.
- The RTC issued the writ without hearing, attaching MIS’ condominium units, bank deposits, receivables, and the vessel itself. MIS moved to discharge and for reconsideration; all RTC orders were denied.
Issues
- Whether a maritime lien under Section 21 of the Ship Mortgage Decree may be enforced by a writ of preliminary attachment under Rule 57.
- Whether Tsuneishi proved the requisites for that writ—namely, a sworn allegation of fraud with particularity and that MIS had no sufficient security.
Supreme Court Ruling
- On enforcement procedure: A maritime lien grants the lienholder the right to an action in rem for sale of the vessel to satisfy the debt. A writ of preliminary attachment is itself a provisional lien under Rule 57 and is not the exclusive or necessary means to enforce a maritime lien. Because a maritime lien already operates “as attachment,” resort to Rul
Case Syllabus (G.R. No. 224395)
Procedural History
- Petitioner Tsuneishi Heavy Industries (Cebu), Inc. (“Tsuneishi”) filed a petition for review on certiorari under Rule 45 of the Rules of Court.
- The petition assails the Court of Appeals (CA) Decision in CA-G.R. CEB-SP No. 03956 dated October 7, 2009 and its Resolution dated August 26, 2010.
- The CA had reversed three Orders of the Regional Trial Court (RTC), Branch 7, Cebu City dated April 15, 2008; July 7, 2008; and December 11, 2008, which issued and maintained a writ of preliminary attachment.
- The CA found that the RTC acted with grave abuse of discretion in issuing the attachment writs and denied Tsuneishi’s motion for reconsideration.
Facts
- On March 22, 2006, MIS Maritime Corporation (“MIS”) contracted Tsuneishi to dry dock and repair its vessel M/T MIS-1.
- The vessel was dry docked on March 23, 2006 and services were rendered.
- About one month later, while still in dry dock, an engine test revealed smoke from a burnt crank journal and hairline cracks due to defective lubrication.
- Tsuneishi maintained no fault in the damage but, as a gesture of goodwill, paid for a new crankshaft, crankpin, and main bearings.
- Tsuneishi billed MIS US$318,571.50 for dry-docking and repair; MIS refused payment and demanded US$471,462.60 for lost income during six months of downtime.
- MIS sought to set off its claim against Tsuneishi’s bill and insisted on an additional US$152,891.10 after set-off; Tsuneishi refused.
- The vessel was delivered back to MIS in September 2006; MIS signed an Agreement for Final Price on November 6, 2006, but still refused to pay.
Contractual Provisions
- The parties’ March 22, 2006 Agreement incorporated Section 21 of the Ship Mortgage Decree (P.D. 1521), granting Tsuneishi a maritime lien for dry-docking and repair services.
- Paragraph 9 of the contract empowered Tsuneishi, upon MIS’s default, to take possession, control, and custody of the vessel and its accessories and to dispose of the same to satisfy the unpaid repair bill.
Invocation of Maritime Lien and Attachment
- On April 10, 2008, Tsuneishi filed a complaint in the RTC invoking admiralty jurisdiction to enforce a maritime lien under Section 21 of P.D. 1521 and prayed for an arrest order or writ of preliminary attachment under Rule 57 of the Rules of Court.
- Tsuneishi alleged fraud in MIS’s performance, argued that credit was given to th