Source: http://lawlibrary.chanrobles.com/index.php?option=com_content&amp;view=article&amp;id=40346:g-r-no-128661-august-8,-2000-phil-national-bank-national-investment-dev-corp-v-court-of-appeals,-et-al&amp;catid=1396&amp;Itemid=566
Timestamp: 2019-04-18 18:50:16+00:00

Document:
PHILIPPINE NATIONAL BANK/NATIONAL INVESTMENT DEVELOPMENT CORPORATION, Petitioners, v. THE COURT OF APPEALS, CHINA BANKING CORPORATION, Respondents.
In this petition for review on certiorari under Rule 45 of the Rules of Court, petitioners seek the reversal of the 21 March 1997 decision 1 of the Court of Appeals in C.A.-G.R. No. CV-38131. The assailed decision set aside the Order 2 dated 4 March 1992 of the Regional Trial Court of Makati City, Branch 146 in Civil Case No. 7119 insofar as it dismissed the complaint-in-intervention of private respondent China Banking Corporation.
On June 15, 1979, PISC executed an Application and Agreement for Commercial Letter of Credit for $545,000.00 with private respondent CBC in favor of Citibank. Pursuant to this application and agreement, private respondent CBC issued on September 12, 1979 its Irrevocable Standby Letter of Credit No. 79/4174 for US$545,000.00 in favor of Citibank for account of PISC.
In the meantime, NIDC acquired the vessels as highest bidder in the foreclosure thereof initiated by PNB, NIDC having thereafter disposed of said vessels in favor of the National Steel Corporation (NSC).
Complaints in intervention were filed by and for Unitor Ships Services PTE, Ltd., IMO Industries AB, UDDVALLARVARVET AB, Hyundai, Shipyard Co., Lloyd’s, China bank, Chiang Tung Enterprises Co., Ltd., Pan Asia, Inc., and HANMF Marine Service, Co., Ltd., for recovery upon maritime liens against the proceeds of the sale of the foreclosed vessels. The parties concerned, except for intervenors Lloyd’s and China Bank, eventually submitted a Compromise Agreement dated July 12, 1989, and made the basis for the Decision of August 23, 1989.
As first stated, there now remain only Lloyd’s and China Bank claims in intervention, recovery upon which is covered by a PNB bank guarantee therefor if found matters of entitlement (sic) by said intervenors.
Intervenor China Bank’s claims are predicated on (i) a China Bank Standby Letter of Credit in favor of Citibank, N.A. purportedly to cover repair and partial conversion of M/V Asean Liberty, to the extent of US$242,225.00 paid by China Bank to Citibank, and said to be now owing by PISC together with stipulated interest; (ii) a China Bank loan of US$2,700,000.00 as evidenced by a promissory note, the loan proceeds said to have allowed PISC to reduce overhead expenses and afford it competitive advantage in overseas shipping, and to pay for bunker fuel, defray port expenses and storage, container rental and insurance, as well as salaries and wages of crew members; and (iii) a China bank commercial letter of credit to PISC in favor of Bank of America, particularly a BA Draft for US$648,002.54 said to have been applied towards vessel repair and conversion by the China Shipbuilding Corporation of Taiwan, together with stipulated interests due from PISC. China Bank’s claims are premised on the above as being preferred maritime liens. NIDC rejects said claims as not being maritime liens, much less preferred maritime liens.
Intervenor-claimant China Banking Corporation seeks recovery, as being in the nature of a preferred maritime lien, of the sum of US$3,890,227.53, representing the totality of loans extended by said intervenor-claimant said to have been expended in financing repair and conversion costs, for expenses and storage container rentals and insurance premium paid out by it.
Plaintiffs admit the recoverability of said claims as being in the nature of preferred maritime liens, whereas PNB-NIDC contests the said claims.
Plaintiffs, PNB-NIDC and intervenor-claimant Lloyd’s Register of Shipping stipulate and admit that the totality of its claims as fully supported by documentation already verified by the parties are in the sums of HK$65,930,00, UKC10,363.45 and P9,653.00.
ii.	Whether or not assuming recoverability thereon as being in the nature of maritime liens, such recovery may be allowed in relation with PNB’s being the mortgagee of the assets from which recovery is sought.
After the parties submitted their respective memoranda, the trial court issued on March 4, 1992 an Order dismissing the complaint-in-intervention filed by private respondent CBC for lack of merit. In dismissing the complaint-in-intervention, the trial court ruled that the claim of private respondent CBC was not a preferred maritime lien but was merely a loan extended to PISC by CBC.
a)	the trial court erred in holding that the loans extended by China Banking Corporation to the Philippine International Shipping Corporation did not create maritime liens.
b)	assuming that the loans are not themselves maritime liens, the trial court erred in holding that the China Banking Corporation did not acquire the maritime liens of Philippine International Shipping Corporation’s creditors by subrogation.
In the said decision, the appellate court held petitioners PNB/NIDC liable to CBC only for the amount of US$242,225.00, which was used for the repair and conversion of the M/V "Asean Liberty", as it was only this amount which CBC was able to prove as being a preferred maritime lien. Moreover, such amount was to be paid by petitioners PNB/NIDC from the proceeds of the foreclosure sale of the vessel M/V "Asean Liberty." Private respondent CBC’s other claims of US$648,000.54 and US$2.7 Million were found by the appellate court as not being in the nature of maritime liens and as such, recoverable only from PISC, not from herein petitioners PNB/NIDC.
WHETHER OR NOT THE COURT OF APPEALS HAS APPELLATE JURISDICTION TO ENTERTAIN AND PASS UPON THE APPEAL INTERPOSED BY PRIVATE RESPONDENT CBC FROM THE ORDER OF THE TRIAL COURT OF MARCH 4, 1992 WHICH INVOLVED PURE QUESTIONS OF LAW.
WHETHER OR NOT PRIVATE RESPONDENT CBC’S CLAIM FOR US$242,225.00 AS EVIDENCED BY ITS IRREVOCABLE LETTER OF CREDIT NO. 79/4174 OF SEPTEMBER 12, 1979 IS IN THE NATURE OF A MARITIME LIEN UNDER THE PROVISIONS OF P.D. NO. 1521; AND IF SO, WHETHER OR NOT SAID MARITIME LIEN IS PREFERRED OVER THE MORTGAGE LIEN OF PETITIONER PNB/NIDC ON THE FORECLOSED VESSEL M/V "ASEAN LIBERTY" .
"4.	Erroneous Appeals. — An appeal taken to either the Supreme Court or the Court of Appeals by the wrong or inappropriate mode shall be dismissed.
(c)	Raising issues purely of law in the Court of Appeals or appeal by wrong mode. — If an appeal under Rule 41 is taken from the Regional Trial Court to the Court of Appeals and therein the appellant raises only questions of law, the appeal shall be dismissed, issues purely of law not being reviewable by said court. . . .
From the cited provisions, it is clear that the Court of Appeals does not have jurisdiction over appeals from the Regional Trial Court that raise purely questions of law. Appeals of this nature should be raised to the Supreme Court. 16 Furthermore, transfer of erroneous appeals is not allowed and the tribunal which receives the erroneous appeal should perforce dismiss the same for lack of jurisdiction.
As such, even if, as in this case, the documentary evidence adduced by the parties was admitted without objection, a question of fact is still involved when the query necessarily invites the calibration of the whole evidence including the relevancy of surrounding circumstances and their relation to each other.
Stated differently, a question of law does not involve an examination of the probative value of the evidence presented by the litigants or any of them; otherwise, if such examination and re-evaluation of the evidence is called for, a question of fact is raised.
Verily, the issues raised by private respondent in the appellate court were cognizable by the said court, the issues being mixed questions of fact and law. Respondent court was therefore acting within its jurisdiction when it promulgated its questioned decision.
Under these provisions, any person furnishing repairs, supplies, or other necessaries to a vessel on credit will have a maritime lien on the said vessel. Such maritime lien, if it arose prior to the recording of a preferred mortgage lien, shall have priority over the said mortgage lien.
The foregoing provision of the contract agreement indubitably shows that credit was given to the vessel M/V "Asean Liberty" by Hongkong United Dockyards, Ltd. and as a result, a maritime lien in favor of Hongkong United Dockyards, Ltd. was constituted on the said vessel by virtue of Section 21 of the Ship Mortgage Decree of 1978.
Petitioners do not question the abovequoted rationale of the Court of Appeals. It takes exception however to the appellate court’s finding and conclusion that it was ultimately private respondent CBC which paid off the maritime lienor and that the US$545,000.00 advanced by Citibank was actually paid to the persons who furnished the repairs on the vessels. On this point, petitioners argue that the entirety of the documentary evidence of private respondent CBC does not show that the latter actually paid off the maritime lienholder for the repair of M/V "Asean Liberty" as required by Section 21 of the Ship Mortgage Act of 1978. 29 Furthermore, petitioners claim that the respondent court committed serious error in law when it considered and gave credence to the written deposition of Mr. George Lim, the President of PISC, as basis for the said finding considering that the same had earlier been denied admission by the trial court.
There is no merit in the contentions of petitioners.
In the presence of such documentary evidence, which were admitted without objection from the petitioners, we cannot say that the Court of Appeals resolved the issue arbitrarily. The appellate court’s finding that the amount sought to be recovered by petitioner was actually used for the repair and conversion of the vessel M/V "Asean Liberty" is based on substantial evidence.
Private respondent CBC, as guarantor, was itself subrogated to all the rights of Citibank as against PISC, the latter’s debtor. Article 2067 of the New Civil Code provides that" (t)he guarantor who pays is subrogated by virtue thereof to all the rights which the creditor had against the debtor." Private respondent, having paid off the debt of PISC to Citibank, was therefore, subrogated to all the rights Citibank had against its debtor PISC. Considering that Citibank had a maritime lien over the vessel M/V "Asean Liberty," private respondent was likewise subrogated to this right when it paid off Citibank under the contract of guarantee.
Having thus established that private respondent CBC possessed a maritime lien over the vessel M/V "Asean Liberty," the next issue is whether the said maritime lien is preferred over the mortgage lien of petitioners.
In the case at bench, petitioners’ mortgage lien arose on September 25, 1979 when the said mortgage was registered with the Philippine Coast Guard Headquarters. 38 As such, in order for the maritime lien of private respondent CBC to be preferred over the mortgage lien of petitioners, the same must have arisen prior to the recording of the mortgage on September 25, 1979.
On this point, petitioners argue that inasmuch as the Standby Letter of Credit was in the nature of a guarantee, the right of private respondent CBC to claim or to collect the maritime lien arose only at the time CBC actually paid off the said lien to Citibank on March 30, 1983. Otherwise stated, it is the contention of petitioners that private respondent CBC’s maritime lien under its Standby Letter of Credit No. 79/4174 arose only on March 30, 1983 when CBC actually paid off the outstanding obligation of PISC to Citibank. 39 Considering that its mortgage lien arose on September 25, 1979, petitioners thus conclude that its lien is preferred as against private respondent CBC’s maritime lien.
In the case at bench, the maritime lien over the vessel M/V "Asean Liberty" arose or was constituted at the time Hongkong United Drydocks, Ltd. made repairs on the said vessel on credit. As such, as early as March 12, 1979, the date of the contract for the repair and conversion of M/V "Asean Liberty," a maritime lien had already attached to the said vessel. When Citibank advanced the amount of US$242,225.00 for the purpose of paying off PISC’s debt to Hongkong United Dockyards, Ltd., it acquired the existing maritime lien over the vessel. When private respondent honored its contract of guarantee with Citibank on March 30, 1983, it likewise acquired by subrogation the maritime lien that was already existing over the vessel M/V "Asean Liberty." Thus, when private respondent CBC chose to exercise its right to the maritime lien during the proceedings in the trial court, it was actually enforcing a privilege that attached to the ship as early as March 12, 1979.
The maritime lien of private respondent CBC thus arose prior in time to the recording of petitioners’ mortgage on September 25, 1979. As such, the said maritime lien has priority over the said mortgage lien. Pursuant to Section 17 of the Ship Mortgage Decree of 1978, a "preferred mortgage lien shall have priority over all claims against the vessel" except, among others, "maritime liens arising prior in time to the recording of the preferred mortgage." The respondent court thus committed no reversible error when it ruled that the maritime lien of private respondent CBC is superior to the mortgage lien of petitioners.
Melo, Vitug, Panganiban, and Purisima, JJ., concur.
1.	Annex "A" of Petition; Rollo, pp. 30-53. Per Justice Salvador J. Valdez, Jr, with Justices Jaime M. Lantin and Corona Ibay-Somera, concurring.
2.	Penned by Judge Salvador S. Tensuan, C.A. Rollo, pp. 26-32.
3.	Petition, pp. 3-4; Rollo, pp. 10-11.
4.	Petition, p. 4; Rollo, p. 11.
5.	Memorandum for Private Respondent, p. 2; Rollo, p. 139.
7.	Memorandum for Private Respondent, pp. 2-3; Rollo, pp. 139-140.
9.	Petition, p. 4; Rollo, p. 11.
10.	Docketed as Civil Case No. 4068.
12.	Petition, p. 7; Rollo, p. 14.
14.	UDK-9748, 1 March 1990.
15.	Subject: Guidelines to be Observed in Appeals to the Court of Appeals and to the Supreme Court, dated March 9, 1990, based on the Resolution of the Court En Banc in UDK-9748 (Anacleto Murillo v. Rodolfo Consul), March 1, 1990.
16.	Roman Catholic Archbishop of Manila v. Court of Appeals, 258 SCRA 186.
17.	Please also see Section 17 (1) of the Judiciary Act of 1948.
19.	Petition, p. 12; Rollo, p. 19.
20.	China Banking Corporation’s Record on Appeal, p. 187.
29.	Petition, p. 17; Rollo, p. 24.
30.	Hernandez, Eduardo F. and Penasales, Antero A., Philippine Admiralty and Maritime Law, 1987 Edition, p. 133.
31.	70 Am. Jur. 2nd §552, p. 800.
32.	70 Am. Jur. 2nd § 561, p. 807.
35.	K.K. Shell Sekiyu Osaka Hatsubaisho v. Court of Appeals, 188 SCRA 145.
36.	Tan Chun Suy v. Court of Appeals, 212 SCRA 713.
37.	Chemphil Export and Import Corporation v. Court of Appeals, 251 SCRA 257.
38.	Petition, p. 4; Rollo, p. 11.
39.	Petition, p. 19; Rollo, p. 26.
40.	Agbayani, Aguedo F., Commentaries and Jurisprudence on the Commercial Laws of the Philippines, 1993 ed., Volume IV, pp. 699-700 citing 70 Am Jur 2nd, 472.

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