exercised only on contracts made upon the

sea and to be executed thereon; Under the

American rule, the criterion in determining
whether a contract is maritime depends on
the nature and subject matter of the
contract, which rule has been adopted by
the Philippine Supreme Court; A contract
VOL. 474, NOVEMBER 11, 623
for furnishing supplies is maritime and
2005
within the jurisdiction of admiralty.—
Crescent Petroleum, Ltd. vs. M/V “Lok Under Batas Pambansa Bilang 129, as
Maheshwari” amended by Republic Act No. 7691, RTCs
exercise exclusive original jurisdiction “(i)n
*
G.R. No. 155014. November 11, 2005. all actions in admiralty and maritime where
the demand or claim exceeds two hundred
CRESCENT PETROLEUM, LTD., thousand
petitioner, vs. M/V “LOK
MAHESHWARI,” THE SHIPPING _______________
CORPORATION OF INDIA, and
PORTSERV LIMITED and/or * SECOND DIV ISION.
TRANSMAR SHIPPING, INC.,
respondents.
624

Courts; Jurisdictions; Admiralty and

Maritime Law; Two (2) tests have been used
to determine whether a case involving 624 SUPREME COURT REPORTS
contracts comes within the admiralty and ANNOTATED
maritime jurisdiction of a court—the
locational test and the subject matter test; Crescent Petroleum, Ltd. vs. M/V “Lok
Maheshwari”
The English rule follows the locational test
wherein maritime and admiralty
jurisdiction, within a few exceptions, is pesos (P200,000) or in Metro Manila, where
such demand or claim exceeds four hundred
thousand pesos (P400,000).” Two (2) tests Construction; Legal Research; The Ship
have been used to determine whether a case Mortgage Decree of 1978, which was
involving a contract comes within the patterned closely from the U.S. Ship
admiralty and maritime jurisdiction of a Mortgage Act of 1920 and the Liberian
court—the locational test and the subject Maritime Law relating to preferred
matter test. The English rule follows the mortgages, was enacted “to accelerate the
locational test wherein maritime and growth and development of the shipping
admiralty jurisdiction, with a few industry” and to extend the benefits
exceptions, is exercised only on contracts accorded to overseas shipping under PD 214
made upon the sea and to be executed to domestic shipping; U.S. jurisprudence
thereon. This is totally rejected under the finds relevance to determining whether P.D.
American rule where the criterion in No. 1521 applies in the present case.—P.D.
determining whether a contract is maritime No. 1521 or the Ship Mortgage Decree of
depends on the nature and subject matter of 1978 was enacted “to accelerate the growth
the contract, having reference to maritime and development of the shipping industry”
service and transactions. In International and “to extend the benefits accorded to
Harvester Company of the Philippines v. overseas shipping under Presidential Decree
Aragon, we adopted the American rule and No. 214 to domestic shipping.” It is
held that “(w)hether or not a contract is patterned closely from the U.S. Ship
maritime depends not on the place where Mortgage Act of 1920 and the Liberian
the contract is made and is to be executed, Maritime Law relating to preferred
making the locality the test, but on the mortgages. Notably, Sections 21, 22 and 23
subject matter of the contract, making the of P.D. No. 1521 or the Ship Mortgage
true criterion a maritime service or a Decree of 1978 are identical to Subsections
maritime transaction.” A contract for P, Q, and R, respectively, of the U.S. Ship
furnishing supplies like the one involved in Mortgage Act of 1920, which is part of the
this case is maritime and within the Federal Maritime Lien Act. Hence, U.S.
jurisdiction of admiralty. It may be invoked jurisprudence finds relevance to
before our courts through an action in rem determining whether P.D. No. 1521 or the
or quasi in rem or an action in personam. Ship Mortgage Decree of 1978 applies in the
Same; Same; Same; Ship Mortgage present case.
Decree of 1978 (P.D. No. 1521); Statutory
 Same; Same; Same; Same; Maritime Same; Same; Same; Same; Same; PD
Lien; Conflict of Laws; Balancing basic 1521 was enacted primarily to protect
interests—Canada is the place of the Filipino suppliers and was not intended to
wrongful act, of the allegiance or domicile create a lien from a contract for supplies
of the injured and the place of contract, between foreign entities delivered in a
while India is the law of the flag and the foreign port.— P.D. No. 1521 or the Ship
allegiance of the defendant shipowner—it is Mortgage Decree of 1978 is inapplicable
following the factors under Restatement
625 (Second) of Conflict of Laws. Like the
Federal Maritime Lien Act of the U.S., P.D.
No. 1521 or the Ship Mortgage Decree of
1978 was enacted primarily to protect
VOL. 474, NOVEMBER 11, 2005 625 Filipino suppliers and was not intended to
Crescent Petroleum, Ltd. vs. M/V “Lok create a lien from a contract for supplies
Maheshwari” between foreign entities delivered in a
foreign port.

inconceivable that the Philippine court has Same; Same; Same; Same; Same;
any interest in the case that outweighs the Opening up our courts to foreign supplies
interests of Canada or India for that matter. by granting them a maritime lien under our
—Out of the seven basic factors listed in the laws even if they are not entitled to a
case of Lauritzen, Philippine law only falls maritime lien under their laws will
under one—the law of the forum. All other encourage forum shopping.—Applying P.D.
elements are foreign—Canada is the place No. 1521 or the Ship Mortgage Decree of
of the wrongful act, of the allegiance or 1978 and rule that a maritime lien exists
domicile of the injured and the place of would not promote the public policy behind
contract; India is the law of the flag and the the enactment of the law to develop the
allegiance of the defendant shipowner. domestic shipping industry. Opening up our
Balancing these basic interests, it is courts to foreign suppliers by granting them
inconceivable that the Philippine court has a maritime lien under our laws even if they
any interest in the case that outweighs the are not entitled to a maritime lien under
interests of Canada or India for that matter. their laws will encourage forum shopping.
 Same; Same; Same; Same; Same; When dispute.—In light of the interests of the
the parties entered into a contract for various foreign elements involved, it is clear
supplies in Canada, they could not have that Canada has the most significant
intended the laws of a remote country like interest in this dispute. The injured party is
the Philippines to determine the creation of a Canadian corporation, the sub-charterer
a lien by a mere accident of the vessel’s which placed the orders for the supplies is
being in Philippine territory.—The also Canadian, the entity which physically
submission of petitioner is not in keeping delivered the bunker fuels is in Canada, the
with the reasonable expectation of the place of contracting and negotiation is in
parties to the contract. Indeed, when the Canada, and the supplies were delivered in
parties entered into a contract for supplies Canada. The arbitration clause contained in
in Canada, they could not have intended the Bunker Fuel Agreement which states
the laws of a remote country like the that New York law governs the
Philippines to determine the creation of a “construction, validity and performance” of
lien by the mere accident of the Vessel’s the contract is only a factor that may be
being in Philippine territory. considered in the choice-of-law analysis but
Same; Same; Same; Same; Same; In is not conclusive. As in the cases of Gulf
light of the various foreign interest Trading and Swedish Telecom, the lien that
involved, it is clear that Canada has the is the subject matter of this case arose by
most significant interest in this operation of law and not by contract
because the shipowner was not a party to
626
the contract under which the goods were
supplied.
Same; Same; Same; Same; Same; The
supplier’s insistence on enforcing a
626 SUPREME COURT REPORTS maritime lien before Philippine courts
ANNOTATED
depends on the existence of maritime lien
Crescent Petroleum, Ltd. vs. M/V “Lok under the proper law, and by erroneously
Maheshwari” claiming a maritime lien under Philippine
law instead of proving that a maritime lien
exists under Canadian law, such supplier
failed to establish a cause of action.—It is authorized to contract on behalf of the
well-settled that a party whose cause of vessel. These do not avail in the instant
action or defense depends upon a foreign case.
law has the burden of proving the foreign Same; Same; Same; Same; Same; While
law. Such foreign law is treated as a it is presumed when the master of the ship
question of fact to be properly pleaded and is the one who placed the order, it is not
proved. Petitioner Crescent’s insistence on disputed that in this
enforcing a maritime lien before our courts
depended on the existence of a maritime 627
lien under the proper law. By erroneously
claiming a maritime lien under Philippine
law instead of proving that a maritime lien
exists under Canadian law, petitioner VOL. 474, NOVEMBER 11, 2005 627
Crescent failed to establish a cause of
action. Crescent Petroleum, Ltd. vs. M/V “Lok
Maheshwari”
Same; Same; Same; Same; Same;
Doctrine of Processual Presumption;
case it was the sub-charterer which placed
Requisites for Maritime Liens on Necessaries
the orders to the supplier, hence, it is
to Exist.—Even if we apply the doctrine of
incumbent for the supplier to prove that the
processual presumption, the result will still
benefit was extended to the vessel.—It was
be the same. Under P.D. No. 1521 or the
not established that benefit was extended to
Ship Mortgage Decree of 1978, the
the vessel. While this is presumed when the
following are the requisites for maritime
master of the ship is the one who placed the
liens on necessaries to exist: (1) the
order, it is not disputed that in this case it
“necessaries” must have been furnished to
was the sub-charterer Portserv which
and for the benefit of the vessel; (2) the
placed the orders to petitioner Crescent.
“necessaries” must have been necessary for
Hence, the presumption does not arise and
the continuation of the voyage of the vessel;
it is incumbent upon petitioner Crescent to
(3) the credit must have been extended to
prove that benefit was extended to the
the vessel; (4) there must be necessity for
vessel. Petitioner did not.
the extension of the credit; and (5) the
necessaries must be ordered by persons
 Same; Same; Same; Same; Same; Where ship and that they were ordered by the
it was the sub-charterer which requested for master. This presumption does not arise in
the delivery of bunker fuels, the same does this case since the fuels were not ordered by
not establish that credit was extended to the the master and there was no proof of
vessel.—It was not established that credit necessity for the supplies.
was extended to the vessel. It is presumed Same; Same; Same; Same; Same; Words
that “in the absence of fraud or collusion, and Phrases; Clearly, a sub-charterer under
where advances are made to a captain in a a time charter, is not someone to whom the
foreign port, upon his request, to pay for management of the vessel has been
necessary repairs or supplies to enable his entrusted; A time charter is a contract for
vessel to prosecute her voyage, or to pay the use of a vessel for a specified period of
harbor dues, or for pilotage, towage and like time or for the duration of one or more
services rendered to the vessel, that they specified voyages wherein the owner of the
are made upon the credit of the vessel as time-chartered vessel retains possession and
well as upon that of her owners.” In this control through the master and crew who
case, it was the subcharterer Portserv which remains his employees.—The necessaries
requested for the delivery of the bunker were not ordered by persons authorized to
fuels. The issuance of two checks amounting contract in behalf of the vessel as provided
to US$300,000 in favor of petitioner under Section 22 of P.D. No. 1521 or the
Crescent prior to the delivery of the bunkers Ship Mortgage Decree of 1978—the
as security for the payment of the obligation managing owner, the ship’s husband,
weakens petitioner Crescent’s contention
that credit was extended to the Vessel. 628

Same; Same; Same; Same; Same; A

necessity of credit will be presumed where it
appears that the repairs and supplies were 628 SUPREME COURT REPORTS
necessary for the ship and that they were ANNOTATED
ordered by the master.—There was no proof
of necessity of credit. A necessity of credit Crescent Petroleum, Ltd. vs. M/V “Lok
will be presumed where it appears that the Maheshwari”
repairs and supplies were necessary for the
master or any person with whom the the November 28, 2001 Decision of the
management of the vessel at the port of Court 1of Appeals in CA-G.R. No. CV-
supply is entrusted. Clearly, Portserv, a 54920, which dismissed for “want of
sub-charterer under a time charter, is not jurisdiction” the instant case, and the
someone to whom the management of the September 3, 2002 Resolution
2
of the
vessel has been entrusted. A time charter is same appellate court, which denied
a contract for the use of a vessel for a petitioner’s motion for reconsideration,
specified period of time or for the duration of and (b) reinstatement
3
of the July 25,
one or more specified voyages wherein the 1996 Decision of the Regional Trial
owner of the time-chartered vessel retains Court (RTC) in Civil Case No. CEB-
possession and control through the master 18679, which held that respondents
and crew who remain his employees. Not were solidarily liable to pay petitioner
enjoying the presumption of authority, the sum prayed for in the complaint.
petitioner Crescent should have proved that
Portserv was authorized by the shipowner _______________
to contract for supplies. Petitioner failed.
1 Penned by Associate Justice Juan Q.

PETITION for review on certiorari of Enriquez, Jr., concurred in by Associate

the decision and resolution of the Justices Delilah Vidallon-Magtolis and Candido

Court of Appeals. V. Rivera; Rollo, pp. 72-81.

2 Penned by Associate Justice Juan Q.
The facts are stated in the opinion of Enriquez, Jr., concurred in by Associate
the Court. Justices Delilah Vidallon-Magtolis and Josefina
     Arthur D. Lim for petitioner. Guevara-Salonga; Id., pp. 83-85.
          Sycip, Salazar, Hernandez & 3 Penned by Judge Leonardo B. Canares,
Gatmaitan for respondent M/V Lok Regional Trial Court, Branch 10, Cebu City;
Maheshwari and the Shipping Id., pp. 87-90.
Corporation of India.
629
PUNO, J.:
VOL. 474, NOVEMBER 11, 629
This petition for review on certiorari 2005
under Rule 45 seeks the (a) reversal of
Crescent Petroleum, Ltd. vs. M/V “Lok granted and confirmed the request
Maheshwari” through an advice via facsimile dated
November 2, 1995. As security for the
The facts are as follows: Respondent payment of the bunker fuels and
M/V “Lok Maheshwari” (Vessel) is an related services, petitioner Crescent
oceangoing vessel of Indian registry received two (2) checks in the amounts
that is owned by respondent Shipping of US$100,000.00 and US$200,000.00.
Corporation of India (SCI), a Thus, petitioner Crescent contracted
corporation organized and existing with its supplier, Marine Petrobulk
under the laws of India and principally Limited (Marine Petrobulk), another
owned by the Government of India. It Canadian corporation, for the physical
was time-chartered by respondent SCI delivery of the bunker fuels to the
to Halla Merchant Marine Co. Ltd. Vessel.
(Halla), a South Korean company. On or about November 4, 1995,
Halla, in turn, sub-chartered the Marine Petrobulk delivered the
Vessel through a time charter to bunker fuels amounting to
Transmar Shipping, Inc. (Transmar). US$103,544 inclusive of barging and
Transmar further sub-chartered the demurrage charges to the Vessel at the
Vessel to Portserv Limited (Portserv). port of Pioneer Grain, Vancouver,
Both Transmar and Portserv are Canada. The Chief Engineer Officer of
corporations organized and existing the Vessel duly acknowledged and
under the laws of Canada. received the delivery receipt. Marine
On or about November 1, 1995, Petrobulk issued an invoice to
Portserv requested petitioner Crescent petitioner Crescent for the
Petroleum, Ltd. (Crescent), a US$101,400.00 worth of the bunker
corporation organized and existing fuels. Petitioner Crescent issued a
under the laws of Canada that is check for the same amount in favor of
engaged in the business of selling Marine Petrobulk, which check was
petroleum and oil products for the use duly encashed.
and operation of oceangoing vessels, to Having paid Marine Petrobulk,
deliver marine fuel oils (bunker fuels) petitioner Crescent issued a revised
to the Vessel. Petitioner Crescent invoice dated November 21, 1995 to
“Portserv Limited, and/or the Master, respondents Vessel and SCI, Portserv
and/or Owners, and/or Operators, and/or Transmar. The case was raffled
and/or Charterers of to Branch 10 and docketed as Civil
Case No. CEB-18679.
630
On May 3, 1996, the trial court
issued a writ of attachment against the
630 SUPREME COURT REPORTS Vessel with bond at P2,710,000.00.
ANNOTATED Petitioner Crescent withdrew its
prayer for a temporary restraining
Crescent Petroleum, Ltd. vs. M/V “Lok
order and posted the required bond.
Maheshwari”
On May 18, 1996, summonses were
served to respondents Vessel and SCI,
M/V ‘Lok Maheshwari’ ” in the amount and Portserv and/or Transmar
of US$103,544.00 with instruction to through the Master of the Vessel. On
remit the amount on or before May 28, 1996, respondents Vessel and
December 1, 1995. The period lapsed SCI, through Pioneer Insurance and
and several demands were made but Surety Corporation (Pioneer), filed an
no payment was received. Also, the urgent ex-parte motion to approve
checks issued to petitioner Crescent as Pioneer’s letter of undertaking, to
security for the payment of the bunker consider it as counter-bond and to
fuels were dishonored for insufficiency discharge the attachment. On May 29,
of funds. As a consequence, petitioner 1996, the trial court granted the
Crescent incurred additional expenses motion; thus, the letter of undertaking
of US$8,572.61 for interest, tracking was approved as counter-bond to
fees, and legal fees. discharge the attachment.
On May 2, 1996, while the Vessel For failing to file their respective
was docked at the port of Cebu City, answers and upon motion of petitioner
petitioner Crescent instituted before Crescent, the trial court declared
the RTC of Cebu City an action “for a respondents Vessel and SCI, Portserv
sum of money with prayer for and/or Transmar in default. Petitioner
temporary restraining order and writ Crescent was allowed to present its
of preliminary attachment” against evidence ex-parte.
 On July 25, 1996, the trial court SO ORDERED.”
rendered its decision in favor of
petitioner Crescent, thus: On August 19, 1996, respondents
Vessel and SCI appealed to the Court
631 of Appeals. They attached copies of the
charter parties between respondent
SCI and Halla, between Halla and
VOL. 474, NOVEMBER 11, 631
2005 Transmar, and between Transmar and
Portserv. They pointed out that
Crescent Petroleum, Ltd. vs. M/V “Lok Portserv was a time charterer and that
Maheshwari” there is a clause in the time charters
between respondent SCI and Halla,
“WHEREFORE, premises considered, and between Halla and Transmar,
judgment is hereby rendered in favor of which states that “the Charterers shall
plaintiff [Crescent] and against the provide and pay for all the fuel except
defendants [Vessel, SCI, Portserv and/or as otherwise agreed.” They submitted a
Transmar]. copy of Part II of the Bunker Fuel
Consequently, the latter are hereby Agreement between petitioner
ordered to pay plaintiff jointly and Crescent and Portserv containing a
solidarily, the following: stipulation that New York law governs
the “construction, validity and
(a) the sum of US$103,544.00, performance” of the contract. They
representing the outstanding likewise submitted certified copies of
obligation; the Commercial Instruments and
(b) interest of US$10,978.50 as of July Maritime Lien Act of the United States
3, 1996, plus additional interest at (U.S.), some U.S. cases, and some
18% per annum for the period Canadian cases to support their
thereafter, until the principal defense.
account is fully paid; On November 28, 2001, the Court of
(c) attorney’s fees of P300,000.00; and Appeals issued its assailed Decision,
(d) P200,000.00 as litigation expenses. which reversed that of the trial court,
viz.:
“WHEREFORE, premises considered, the 2. The principle of forum non
Decision dated July 25, 1996, issued by the conveniens is inapplicable to
Regional Trial Court of Cebu City, Branch the instant case;
10, is hereby REVERSED and SET ASIDE,
3. The trial court acquired
and a new one is entered DISMISSING the
jurisdiction over the subject
instant case for want of jurisdiction.”
matter of the instant case, as
632 well as over the res and over
the persons of the parties;
4. The enforcement of a maritime
632 SUPREME COURT REPORTS
lien on the subject vessel is
ANNOTATED
expressly granted by law. The
Crescent Petroleum, Ltd. vs. M/V “Lok Ship Mortgage Acts as well as
Maheshwari” the Code of Commerce provides
for relief to petitioner for its
The appellate court denied petitioner unpaid claim;
Crescent’s motion for reconsideration 5. The arbitration clause in the
explaining that it “dismissed the contract was not rigid or
instant action primarily on the ground inflexible but expressly allowed
of forum non conveniens considering petitioner to enforce its
that the parties are foreign maritime lien in Philippine
corporations which are not doing courts provided the vessel was
business in the Philippines.” in the Philippines;
Hence, this petition submitting the 6. The law of the state of New
following issues for resolution, viz.: York is inapplicable to the
present controversy as the
1. Philippine courts have same has not been properly
jurisdiction over a foreign pleaded and proved;
vessel found inside Philippine
7. Petitioner has legal capacity to
waters for the enforcement of a
sue before Philippine courts as
maritime lien against said
it is suing upon an isolated
vessel and/or its owners and
business transaction;
operators;
 8. Respondents were duly served actions in admiralty and maritime
summons although service of where the demand or claim exceeds two
summons upon respondents is hundred thousand pesos (P200,000) or
not a jurisdictional in Metro Manila, where such demand
requirement, the action being a or claim exceeds four hundred
suit quasi in rem; thousand pesos (P400,000).” Two (2)
9. The trial court’s decision has tests have been used to determine
factual and legal bases; and, whether a case involving a contract
10. The respondents should be comes within the admiralty and
held jointly and solidarily maritime jurisdiction of a court—the
liable. locational test and the subject matter
test. The English rule follows the
In a nutshell, this case is for the locational test wherein maritime and
satisfaction of unpaid supplies admiralty jurisdiction, with a few
furnished by a foreign supplier in a exceptions, is exercised only on
foreign port to a vessel of foreign contracts made upon the sea and to be
registry that is owned, chartered and executed thereon. This is totally
sub-chartered by foreign entities. rejected under the American rule
Under Batas Pambansa Bilang 129, where the criterion in determining
as amended by Republic Act No. 7691, whether a contract is maritime
RTCs exercise exclusive original depends on the nature and subject
jurisdiction “(i)n all matter of the contract, having
reference to4 maritime service and
633 transactions. In International
Harvester Company
5
of the Philippines
v. Aragon, we adopted the American
VOL. 474, NOVEMBER 11, 633
rule and held that “(w)hether or not a
2005
contract is maritime depends not on
Crescent Petroleum, Ltd. vs. M/V “Lok the place where the contract is made
Maheshwari” and is to be executed, making the
locality the test, but on the subject
matter of the contract, making the true
criterion a maritime service or a 634 SUPREME COURT REPORTS
maritime transaction.” ANNOTATED
A contract for furnishing supplies Crescent Petroleum, Ltd. vs. M/V “Lok
like the one involved in this case is Maheshwari”
maritime and6
within the jurisdiction of
admiralty. It may be invoked before also for the 8collection of any kind of lien
our courts through an action in rem or whatsoever.” In the Philippines, we have a
quasi 7in rem or an action in personam. complete legislation, both substantive and
Thus: adjective, under which to bring an action in
rem against a vessel for the purpose of
xxx enforcing liens. The substantive law is
“Articles 579 and 584 [of the Code of found in Article 580 of the Code of
Commerce] provide a method of collecting or Commerce. The procedural law is to be
enforcing not only the liens created under found in Article 584 of the same Code. The
Section 580 but result is, therefore, that in the Philippines
any vessel—even though it be a foreign
_______________ vessel—found in any port of this
Archipelago may be attached and sold
4 Hernandez, Eduardo F. and Peñasales, Antero
under the substantive law which defines
A., Philippine Admiralty and Maritime Law (1987
the right, and the procedural law contained
ed.), pp. 9-10, citing New England Mutual Marine
in the Code of Commerce 9
by which this
Insurance Co. v. Dunkan, 8 U.S. (11 Wall) 1 (1870).
right is to be enforced. x x x. But where
5 G.R. No. L-2372, August 26, 1949.
neither the law nor the contract between
6 2 C.J.S. Section 39, p. 100.
the parties creates any lien or charge upon
7 Agbayani, Aguedo F., Commentaries and
the vessel, the only way in which it can be
Jurisprudence on the Commercial Laws of the
seized before judgment is by pursuing the
Philippines IV (1987), p. 178; citing McMicking v. remedy relating to attachment under 10Rule
Banco Español-Filipino, 13 Phil. 429 (1909); 59 [now Rule 57] of the Rules of Court.
Ivanvich v. Odlin, 1 Phil. 284 (1902);and Heather v.
Steamer “San Nicholas,” 7 Phil. 532 (1907). But, is petitioner Crescent entitled to a
maritime lien under our laws?
634 Petitioner Crescent bases its claim of a
maritime lien on Sections 21, 22 and officers and agents of a vessel specified in
23 of Presidential Decree No. 1521 Section 22 of this
(P.D. No. 1521), also known as the Ship
Mortgage Decree of 1978, viz.: _______________

Sec. 21. Maritime Lien for Necessaries; 8 McMicking v. Banco Español-Filipino, Id.
persons entitled to such lien.—Any person 9 Ivanvich vs. Odlin & Pacific Lumber Co.,supra.
furnishing repairs, supplies, towage, use of 10 Heather vs. Steamer “San Nicholas,” supra.
dry dock or maritime railway, or other
necessaries, to any vessel, whether foreign 635
or domestic, upon the order of the owner of
such vessel, or of a person authorized by the VOL. 474, NOVEMBER 11, 2005 635
owner, shall have a maritime lien on the
Crescent Petroleum, Ltd. vs. M/V “Lok
vessel, which may be enforced by suit in
Maheshwari”
rem, and it shall be necessary to allege or
prove that credit was given to the vessel.
Decree shall be taken to include such
Sec. 22. Persons Authorized to Procure
officers and agents when appointed by a
Repairs, Supplies and Necessaries.—The
charterer, by an owner pro hac vice, or by
following persons shall be presumed to have
an agreed purchaser in possession of the
authority from the owner to procure repairs,
vessel; but nothing in this Decree shall be
supplies, towage, use of dry dock or marine
construed to confer a lien when the
railway, and other necessaries for the
furnisher knew, or by exercise of reasonable
vessel: The managing owner, ship’s
diligence could have ascertained, that
husband, master or any person to whom the
because of the terms of a charter party,
management of the vessel at the port of
agreement for sale of the vessel, or for any
supply is entrusted. No person tortuously or
other reason, the person ordering the
unlawfully in possession or charge of a
repairs, supplies, or other necessaries was
vessel shall have authority to bind the
without authority to bind the vessel
vessel.
therefor.
Sec. 23. Notice to Person Furnishing
Repairs, Supplies and Necessaries.—The Petitioner Crescent submits that these
provisions apply to both domestic and
foreign vessels, as well as domestic and accelerate the growth and development
foreign suppliers of necessaries. It of the shipping industry” and “to
contends that the use of the term “any extend the benefits accorded to
person” in Section 21 implies that the overseas shipping under Presidential 13
law is not restricted to domestic Decree No. 214 to domestic shipping.”
suppliers but also includes all persons It is pat-
who supply provisions and necessaries
to a vessel, whether foreign or _______________
domestic. It points out further that the
law does not indicate that the supplies 11 Rollo, p. 315.
or necessaries must be furnished in the 12 Id., p. 469.
Philippines in order to give petitioner 13 1st and 4th Whereas Clauses, P.D. No.
the right to seek enforcement 11
of the 1521.
lien with a Philippine court.
636
Respondents Vessel and SCI, on the
other hand, maintain that Section 21
of the P.D. No. 1521 or the Ship 636 SUPREME COURT REPORTS
Mortgage Decree of 1978 does not ANNOTATED
apply to a foreign supplier like Crescent Petroleum, Ltd. vs. M/V “Lok
petitioner Crescent as the provision Maheshwari”
refers only to a situation where the
person furnishing the supplies is
terned closely from the U.S. Ship
situated inside the territory of the
Mortgage Act of 1920 and the Liberian
Philippines and not where the
Maritime Law relating to preferred
necessaries were furnished in a foreign 14
12
mortgages. Notably, Sections 21, 22
jurisdiction like Canada.
and 23 of P.D. No. 1521 or the Ship
We find against petitioner Crescent.
Mortgage Decree of 1978 are identical
to Subsections P, Q, and R,
I. respectively, of the U.S. Ship Mortgage
Act of 1920, which is part of the
P.D. No. 1521 or the Ship Mortgage Federal Maritime Lien Act. Hence,
Decree of 1978 was enacted “to U.S. jurisprudence finds relevance to
determining whether P.D. No. 1521 or _______________
the Ship Mortgage Decree of 1978
14 See note 4, p. 133.
applies in the present case.
15 The Woudrichem, 278 F. 568.
The various tests used in the U.S. to
16 35 F. 907.
determine whether a maritime lien
17 230 F. 717.
exists are the following:
18 278 F. 568.
One. “In a suit to establish and
19 17 F.2d 308.
enforce a maritime lien for supplies
20 Dougherty, William F., “Multi-contact
furnished to a vessel in a foreign port,
analysis for a multinational industry: The
whether such lien exists, or whether
United States’ approach to choice of law
the court has or will exercise
analysis in the enforcement of maritime liens,”
jurisdiction, depends on the law of the
University of San Francisco Maritime Law
country where the supplies were
Journal (2000-2001), p. 89.
furnished,15
which must be pleaded and
21 345 U.S. 571 (1953).
proved.” This principle was laid down16
in the 1888 case of The Scotia,17 637
reiterated in The Kaiser Wilhelm 18
II
(1916), in The Woudrichem (1921)
19
and in The City of Atlanta (1924). VOL. 474, NOVEMBER 11, 637
Two. The Lauritzen-Romero- 2005
Rhoditis trilogy of cases, which Crescent Petroleum, Ltd. vs. M/V “Lok
replaced such single-factor Maheshwari”
methodologies
20
as the law of the place of
supply. 21 by Danish law and by the employer’s
In Lauritzen v. Larsen, a Danish contract with the Danish Seamen’s
seaman, while temporarily in New Union, of which he was a member.
York, joined the crew of a ship of While in Havana and in the course of
Danish flag and registry that is owned his employment, he was negligently
by a Danish citizen. He signed the injured. He sued the shipowner in a
ship’s articles providing that the rights federal district court in New York for
of the crew members would be damages under the Jones Act. In
governed holding that Danish law and not the
Jones Act was applicable, the Supreme office in New York and another office in
Court adopted a multiple-contact test New Orleans and whose stock is more
to determine, in the absence of a than 95% owned by a U.S. domiciliary
specific Congressional directive as to who is also a Greek citizen. The ship
the statute’s reach, which jurisdiction’s was engaged in regularly scheduled
law should be applied. The following runs between various ports of the U.S.
factors were considered: (1) place of the and the Middle East, Pakistan, and
wrongful act; (2) law of the flag; (3) India, with its entire income coming
allegiance or domicile of the injured; (4) from either originating or terminating
allegiance of the defendant shipowner; in the U.S. The contract of employment
(5) place of contract; (6) inaccessibility provided that Greek law and a Greek
of foreign forum; and (7) law of the collective bargaining agreement would
forum. apply between the employer and the
Several years after Lauritzen, the seaman and that all claims arising out
U.S. Supreme Court in the case of of the employment contract were to be
Romero v. International
22
Terminal adjudicated by a Greek court. The U.S.
Operating Co. again considered a Supreme Court
foreign seaman’s personal injury claim
under both the Jones Act and the _______________
general maritime law. The Court held
that the factors first announced in the 22 358 U.S. 354, 1959 AMC 832 (1959).
case of Lauritzen were applicable not 23 See Dougherty, p. 82.
only to personal injury claims arising 24 398 U.S. 306, 1970 AMC 994 (1970).
under the Jones Act but to all matters
638
arising 23 under maritime law in
general. 24
Hellenic Lines, Ltd. v. Rhoditis was 638 SUPREME COURT REPORTS
also a suit under the Jones Act by a ANNOTATED
Greek seaman injured aboard a ship of
Crescent Petroleum, Ltd. vs. M/V “Lok
Greek registry while in American
Maheshwari”
waters. The ship was operated by a
Greek corporation which has its largest
observed that of the seven factors listed action against the vessel M/V Ruth Venture to
in the Lauritzen test, four were in favor enforce a maritime lien. A Liberian sub-
of the shipowner and against charterer contracted for the supply of bunkers
jurisdiction. In arriving at the in London with Forsythe as its broker. The
conclusion that the Jones Act applies, bunkers were furnished to the vessel at
it ruled that the application of the Richards Bay, South Africa but was not paid.
Lauritzen test is not a mechanical one. The vessel was arrested in Portland, Oregon. In
It stated thus: “[t]he significance of one ruling that English law applies, it held that the
or more factors must be considered in Lauritzen/Rhoditis factors should be applied in
light of the national interest served by a balancing analysis. “[T]he choice of law
the assertion of Jones Act jurisdiction. questions involving maritime liens is to be
(footnote omitted) Moreover, the list of resolved by weighing and evaluating the points
seven factors in Lauritzen was not of contract between the transaction and the
intended to be exhaustive. x x x [T]he sovereign legal systems touched and affected by
shipowner’s base of operations is it… The interests of competing sovereigns may
another factor of importance in be taken into account without rejecting
determining whether the Jones Act is altogether the contacts the bar and the
applicable; and there well may be maritime industry are accustomed to weigh in
others.” making the initial determination of governing
The principles enunciated in these law.” Because English law disallows a lien for
maritime tort cases have been bunkers, the court held there was no lien.
extended to cases involving unpaid 26 1983 WL 602 (D.Or.) (1983). This involves
supplies and necessaries such as the a suit by a Singaporean corporation against a
cases of Forsythe International25 U.K., Panamanian vessel that is owned by Costa
Ltd. v. M/V Ruth Venture, and Ricans for supplies furnished in Singapore. The
Comoco Marine 26Services v. M/V El court, applying the Lauritzen factors, held that
Centroamericano. U.S. law did not apply to determine whether
there exists a maritime lien. The case was

_______________ dismissed under the doctrine of forum non

conveniens. (See Tetley, William, Maritime
25 633 F.Supp. 74 (1985). A British Liens, Mortgages and Conflict
corporation based in London brought an in rem
 639 delivered while the vessel was in U.S.
territory. The contract was executed in
London. It was held that because the
VOL. 474, NOVEMBER 11, 639
2005
bunker fuel was delivered to a foreign
flag vessel within the jurisdiction of
Crescent Petroleum, Ltd. vs. M/V “Lok the U.S., and because the invoice
Maheshwari” specified payment in the U.S., the
admiralty and maritime law of the U.S.
Three. The factors provided in applied. The U.S. Court of Appeals
Restatement (Second) of Conflicts of recognized the modern approach to
Law have also been applied, especially maritime conflict of law problems
in resolving cases brought under the introduced in the Lauritzen case.
Federal Maritime Lien Act. Their However, it observed that Lauritzen
application suggests that in the involved a torts claim under the Jones
absence of an effective choice of law by Act while the present claim involves an
the parties, the forum contacts to be alleged maritime lien arising from
considered include: (a) the place of unpaid supplies. It made a disclaimer
contracting; (b) the place of negotiation that its conclusion is limited to the
of the contract; (c) the place of unique circumstances surrounding a
performance; (d) the location of the maritime lien as well as the statutory
subject matter of the contract; and (e) directives found in the Maritime Lien
the domicile, residence, nationality, Statute and that the initial choice of
place of incorporation27 and place of law determination is significantly
business of the parties. affected by the statutory policies
In Gulf Trading and surrounding a maritime lien. It ruled
Transportation
28
Co. v. The Vessel Hoegh that the facts in the case call for the
Shield, an admiralty action in rem application of the Restatement
was brought by an American supplier (Second) of Conflicts of Law. The U.S.
against a vessel of Norwegian flag Court gave much significance to the
owned by a Norwegian Company and congressional intent in enacting the
chartered by a London time charterer Maritime Lien Statute to protect the
for unpaid fuel oil and marine diesel oil interests of
_______________ American Lien Statute will apply to
protect that supplier regardless of the
of Laws, University of San Francisco
place where the contract was formed or
Maritime Law Journal [Fall, 1993], p. 17.)
the nationality of the vessel.
27 Gulf Trading and Transportation Co. v.
The same principle was applied in
The Vessel Hoegh Shield, 658 F.2d 363 (1981).
the case of Swedish
29
Telecom Radio v.
28 Id.
M/V Discovery I where the American
640 court refused to apply the Federal
Maritime Lien Act to create a
maritime lien for goods and services
640 SUPREME COURT REPORTS supplied by foreign companies in
ANNOTATED foreign ports. In this case, a Swedish
Crescent Petroleum, Ltd. vs. M/V “Lok company supplied radio equipment in
Maheshwari” a Spanish port to refurbish a
Panamanian vessel damaged by fire.
American supplier of goods, services or Some of the contract negotiations
necessaries by making maritime liens occurred in Spain and the agreement
available where traditional services for supplies between the parties
are routinely rendered. It concluded indicated Swedish company’s
that the Maritime Lien Statute willingness to submit to Swedish law.
represents a relevant policy of the The ship was later sold under a
forum that serves the needs of the contract of purchase providing for the
international legal system as well as application of New York law and was
the basic policies underlying maritime arrested in the U.S. The U.S. Court of
law. The court also gave equal Appeals also held that while the
importance to the predictability of contacts-based framework set forth in
result and protection of justified Lauritzen was useful in the analysis of
expectations in a particular field of all maritime choice of law situations,
law. In the maritime realm, it is the factors were geared towards a
expected that when necessaries are seaman’s injury claim. As in Gulf
furnished to a vessel in an American Trading, the lien arose by operation of
port by an American supplier, the law because the ship’s owner was not a
party to the contract under which the application of P.D. No. 1521 or the
goods were supplied. As a result, the Ship Mortgage Decree of 1978 and
court found it more appropriate to hold that a maritime lien exists.
consider the factors contained in First. Out of the seven basic factors
Section 6 of the Restatement (Second) listed in the case of Lauritzen,
of Conflicts of Law. The U.S. Court Philippine law only falls under one—
held that the primary concern of the the law of the forum. All other
Federal Maritime Lien Act is the elements are foreign—Canada is the
protection of American suppliers of place of the wrongful act, of the
goods and services. allegiance or domicile of the injured
and the place of contract; India is the
_______________ law of the flag and the allegiance of the
defendant shipowner. Balancing these
29 712 F.Supp. 1542 (1988). basic interests, it is inconceivable that
the Philippine court has any interest
641
in the case that outweighs the interests
of Canada or India for that matter.
VOL. 474, NOVEMBER 11, 641 Second. P.D. No. 1521 or the Ship
2005 Mortgage Decree of 1978 is
inapplicable following the factors
Crescent Petroleum, Ltd. vs. M/V “Lok
under Restatement (Second) of Conflict
Maheshwari”
of Laws. Like the Federal Maritime
Lien Act of the U.S., P.D. No. 1521 or
The same factors were applied in the the Ship Mortgage Decree of 1978 was
case of30 Ocean Ship Supply, Ltd. v. M/V enacted primarily to protect Filipino
Leah. suppliers and was not intended to
create a lien from a contract for
II. supplies between foreign entities
delivered in a foreign port.
Finding guidance from the foregoing Third. Applying P.D. No. 1521 or
decisions, the Court cannot sustain the Ship Mortgage Decree of 1978 and
petitioner Crescent’s insistence on the rule that a maritime lien exists would
not promote the public policy behind
the enactment of the law to develop the
III.
domestic shipping industry. Opening
up our courts to foreign suppliers by But under which law should petitioner
granting them a maritime lien under Crescent prove the existence of its
our laws even if they are not entitled to maritime lien?
a maritime lien under their laws will In light of the interests of the
encourage forum shopping. various foreign elements involved, it is
Finally. The submission of clear that Canada has the most
petitioner is not in keeping with the significant interest in this dispute. The
reasonable expectation of the parties to injured party is a Canadian
the contract. Indeed, when the parties corporation, the subcharterer which
entered into a contract for supplies in placed the orders for the supplies is
Canada, they also Canadian, the entity which
physically delivered the bunker fuels is
_______________ in Canada, the place of contracting
and negotiation is in Canada, and the
30 729 F.2d 971 (1984).
supplies were delivered in Canada.
642 The arbitration clause contained in
the Bunker Fuel Agreement which
states that New York law governs the
642 SUPREME COURT REPORTS “construction, validity and
ANNOTATED
performance” of the contract is only a
Crescent Petroleum, Ltd. vs. M/V “Lok factor that may be considered in the
Maheshwari” choice-of-law analysis but is not
conclusive. As in the cases of Gulf
could not have intended the laws of a Trading and Swedish Telecom, the lien
remote country like the Philippines to that is the subject matter of this case
determine the creation of a lien by the arose by operation of law and not by
mere accident of the Vessel’s being in contract because the shipowner was
Philippine territory. not a party to the contract under which
the goods were supplied.
 It is worthy to note that petitioner It is well-settled that a party whose
Crescent never alleged and proved cause of action or defense depends
Canadian law as basis for the existence upon a foreign law has the burden of
of a maritime lien. To the end, it proving the foreign law. Such foreign
insisted on its theory that Philippine law is treated as a question of fact to be
32
law applies. Petitioner contends that properly pleaded and proved.
even if foreign law applies, since the Petitioner Crescent’s insistence on
same was not properly pleaded and enforcing a maritime lien before our
proved, such foreign law must be courts depended on the existence of a
presumed to be the same as Philippine maritime lien under the proper law. By
law pursuant to the doctrine of erroneously claiming a maritime lien
processual presumption. under Philippine law instead of
Thus, we are left with two choices: proving that a maritime lien exists
(1) dismiss the case for petitioner’s 31
under Canadian law, petitioner
failure to establish a cause of action Crescent 33
failed to establish a cause of
or (2) presume that action.
Even if we apply the doctrine of
_______________ processual presumption, the result will
still be the same. Under P.D. No. 1521
31 Coquia, J.R. and Aguiling-Pangalangan, or the Ship Mortgage Decree of 1978,
E., Conflict of Laws (2000), p. 129. the following are the requisites for
maritime liens on necessaries to exist:
643
(1) the “necessaries” must have been
furnished to and for the benefit of the
VOL. 474, NOVEMBER 11, 643 vessel; (2) the “necessaries” must have
2005 been necessary for the continuation of
Crescent Petroleum, Ltd. vs. M/V “Lok
the voyage of the vessel; (3) the credit
Maheshwari”
must have been extended to the vessel;
(4) there must be necessity for the
extension of the credit; and (5) the
Canadian law is the same as
necessaries must be ordered by persons
Philippine law. In either case, the case
authorized to contract on behalf of the
has to be dismissed. 34
 34
vessel. These do not avail in the Maheshwari”
instant case.
First. It was not established that Third. It was not established that
benefit was extended to the vessel. credit was extended to the vessel. It is
While this is presumed when the presumed that “in the absence of fraud
master of the ship is the one who or collusion, where advances are made
placed the order, it is not disputed that to a captain in a foreign port, upon his
in this case it was the sub-charterer request, to pay for necessary repairs or
Portserv which placed 35
the orders to supplies to enable his vessel to
petitioner Crescent. Hence, the prosecute her voyage, or to pay harbor
presumption does not arise and it is dues, or for pilotage, towage and like
incumbent upon petitioner Crescent to services rendered to the vessel, that
prove that benefit was extended to the they are made upon the credit of the
vessel. Petitioner did not. vessel as well as upon that of her
36
Second. Petitioner Crescent did not owners.” In this case, it was the sub-
show any proof that the marine charterer Portserv which requested for
products were necessary for the the delivery of the bunker fuels. The
continuation of the vessel. issuance of two checks amounting to
US$300,000 in favor of petitioner
_______________ Crescent prior to the delivery of the
bunkers as security for the payment of
32 Id., p. 121, citing Beale, The Conflict of
the obligation weakens petitioner
Laws, Section 621.2 (1935).
Crescent’s contention that credit was
33 See note 31.
extended to the Vessel.
34 Agbayani, p. 631.
We also note that when copies of the
35 TSN, p. 6.
charter parties were submitted by
644 respondents in the Court of Appeals,
the time charters between respondent
SCI and Halla and between Halla and
644 SUPREME COURT REPORTS Transmar were shown to contain a
ANNOTATED clause which states that “the
Crescent Petroleum, Ltd. vs. M/V “Lok Charterers shall provide and pay for
all the fuel except as otherwise 36 Agbayani, p. 631, citing 70 Am. Jur. 2d,
agreed.” This militates against 479.
petitioner Crescent’s position that
645
Portserv is authorized by the
shipowner to contract for supplies upon
the credit of the vessel. VOL. 474, NOVEMBER 11, 645
Fourth. There was no proof of 2005
necessity of credit. A necessity of credit
Crescent Petroleum, Ltd. vs. M/V “Lok
will be presumed where it appears that
Maheshwari”
the repairs and supplies were
necessary for the ship and that they
were ordered by the master. This trusted. A time charter is a contract for
presumption does not arise in this case the use of a vessel for a specified period
since the fuels were not ordered by the of time or for the duration of one or
master and there was no proof of more specified voyages wherein the
necessity for the supplies. owner of the time-chartered vessel
Finally. The necessaries were not retains possession and control through
ordered by persons authorized to the master37 and crew who remain his
contract in behalf of the vessel as employees. Not enjoying the
provided under Section 22 of P.D. No. presumption of authority, petitioner
1521 or the Ship Mortgage Decree of Crescent should have proved that
1978—the managing owner, the ship’s Portserv was authorized by the
husband, master or any person with shipowner to contract for supplies.
whom the management of the vessel at Petitioner failed.
the port of supply is entrusted. Clearly, A discussion on the principle of
Portserv, a sub-charterer under a time forum non conveniens is unnecessary.
charter, is not someone to whom the IN VIEW WHEREOF, the Decision
management of the vessel has been en- of the Court of Appeals in CA-G.R. No.
CV 54920, dated November 28, 2001,
and its subsequent Resolution of
_______________
September 3, 2002 are AFFIRMED.
The instant petition for review on
certiorari is DENIED for lack of merit. 646
Cost against petitioner.
SO ORDERED.

          Austria-Martinez, Callejo, Sr.

and Tinga, JJ., concur.
     Chico-Nazario, J.,On Leave.

Judgment and resolution affirmed, © Copyright 2021 Central Book Supply, Inc. All rights reserved.
petition denied.

Notes.—The party who claims the

applicability of a foreign law has the
burden of proof, and where said party
has failed to discharge the burden,
Philippine law applies. (Laureano vs.
Court of Appeals, 324 SCRA 414
[2000])
As a general rule, unlicensed
foreign non-resident corporations
cannot file suits in the Philippines.
(Subic Bay Metropolitan Authority vs.
Universal International Group of
Taiwan, 340 SCRA 359 [2000])

——o0o——

_______________

37 Litonjua Shipping Inc. v. National

Seamen Board, G.R. No. 51910, August 10,
1989, 176 SCRA 189.