THE CONCEPT OF THE STATE

G.R. No. 104226 August 12, 1993

CONCHITA ROMUALDEZ-YAP, petitioner, vs.THE CIVIL SERVICE COMMISSION and THE PHILIPPINE NATIONAL BANK, respondents.

Estelito P. Mendoza for petitioner.

The Solicitor General for the Civil Service Commission.

Domingo A. Santiago, Jr. for Philippine National Bank.

 

PADILLA, J.:

This is a special civil action for certiorari under Rule 65 of the Rules of Court, assailing Resolution No. 92-201 of the respondent Civil Service Commission, which upheld the petitioner's separation from the Philippine National Bank(PNB) as a result of the abolition of the Fund Transfer Department pursuant to a reorganization under Executive Order No. 80, dated 3 December 1986.

Petitioner Conchita Romualdez-Yap started working with the Philippine National Bank on 20 September 1972 as special assistant with the rank of Second Assistant Manager assigned to the office of the PNB President. After several promotions, she was appointed in 1983 Senior Vice President assigned to the Fund Transfer Department.

Starting 1 April 1986 up to 20 February 1987, petitioner filed several applications for leave of absence (due to medical reasons) which were duly approved. While she was on leave, Executive Order No. 80 (Revised Charter of the PNB) was approved on 3 December 1986. Said executive order authorized the restructure/reorganization and rehabilitation of PNB. Pursuant to the reorganization plan, the Fund Transfer Department was abolished and its functions transferred to the International Department.

Consequently, petitioner was notified of her separation from the service in a letter dated 30 January 1987, thus:

Pursuant to the Transitory Provision of the 1986 Revised Charter of the Bank, please be informed that Management has approved your separation from the service effective February 16, 1986. You shall be entitled to the regular benefits allowed under existing law. (emphasis supplied)

Please be informed further that under Sec. 37 of the Bank's 1986 Revised Charter, any officer or employee who feels aggrieved by any matter treated above may submit his case to the Civil Service Commission. 1

This letter was received by petitioner's secretary at the PNB head office on 16 February 1987.

Petitioner's first recorded appeal to the Civil Service Commission questioning her separation is a letter dated 4 August 1989. Then CSC Chairman Samilo N. Barlongay upheld the validity of her

separation from the service in a letter/opinion dated 30 August 1989 (this was allegedly received by petitioner only on 26 February 1990) stating thus:

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It may be mentioned in this connection, that inasmuch as you did not avail of the ERIP/Supplementary Retirement Plans adopted by the PNB in 1986, you have therefore lost your right thereto. Moreover, since you lack the required number of years of service to entitle you to retirement benefits under existing laws, you may be entitled to the return of your GSIS personal contributions. Considering further that you have exhausted all your accumulated leave credits as you went on leave of absence for the period from April 1, 1986 to February 20, 1987, there is no legal or valid basis to entitle you to payment of terminal leave.

Finally, pursuant to Section 16, Article XVIII of the Transitory Provisions of the 1987 Philippine Constitution, you may be entitled to payment of separation subject to auditing rules and regulations. 2

In her motion for reconsideration with the Civil Service Commission, dated 5 March 1990, questioning Chairman Barlongay's ruling, petitioner claimed:

1. The opinion/ruling was not fully supported by the evidence on record;

2. Errors of law prejudicial to the interest of the movant have been committed. She argued:

. . . that her separation from the service was illegal and was done in bad faith considering that her termination on February 16, 1986 was made effective prior to the effectivity of Executive Order No. 80 on December 3, 1986, which law authorized the reorganization of the PNB, and even before February 25, 1986, when President Corazon C. Aquino came into power. She further claims that although the notice of termination was dated January 30, 1987 it was only served upon her on February 16, 1987 when the new Constitution which guarantees security of tenure to public employees was already in effect. 3

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. . . the bad faith in her separation from the service in 1987 was evident from the recent restoration of the Fund Transfer Department as a separate and distinct unit from the International Department . . .4

Denying the motion for reconsideration, the Civil Service Commission in its aforecited Resolution No. 92-201, dated 30 January, 1992, ruled:

Sec. 33 of EO 80 (1986 Revised Charter of the PNB) provides:

Sec. 33. Authority to Reorganize. — In view of reduced operations contemplated under this charter in pursuance of the national policy expressed in the "Whereas" clause hereof, a reorganization of the Bank and a reduction in force are hereby authorized to achieve greater efficiency and economy in operations, including the adoption of a new staffing pattern to suit the reduced operations envisioned. The program of reorganization shall begin immediately after the approval of this Order,

and shall be completed within six (6) months and shall be fully implemented within eighteen (18) months thereafter." Clearly; as aforequoted, PNB was authorized to undergo reorganization and to effect a reduction in force to "achieve greater efficiency and economy in operations". It cannot, be disputed that reduction in force necessitates, among others, the abolition of positions/offices. The records show that prior to its reorganization, PNB originally had 7,537 positions which were reduced to 5,405 after the reorganization. Indeed, 2,132 positions were abolished, that is, the original positions in PNB were reduced by 28%. This reduction in force likewise included the senior officer positions, in PNB, which were reduced, thus:

Positions Incumbents Proposed Position

President 1 1 1Sr. Exec. VP 1 1 0Exec. VP 3 2 2Senior VP 12 11 7Vice Pres. 33 27 15

The position of movant Yap (SVP) was one among the original twelve (12) SVP positions. It was one among the five (5) SVP positions which were abolished. In fact, the FTD of which she was then the incumbent SVP, was merged with the International Department to which its functions were closedly related.

It should be noted that as ruled by the Supreme Court in Dario vs. Mison (G.R. NO. 81954):

Reorganizations in this jurisdiction have been regarded as valid provided they are pursued in good faith. As a general rule, a reorganization is carried out in "good faith" if it is for the purpose of economy or to make bureaucracy more efficient. In that event, no dismissal or separation actually occurs because the position itself ceases to exist. And in that case, security of tenure would not be a Chinese Wall. . . . .

. . . Good faith, as a component of a reorganization under a constitutional regime is judged from the facts of each case.

In the instant case, therefore, this Commission is inclined to believe that the reorganization of PNB was done in good faith. For indeed, the reorganization was pursued to achieve economy. It undertook reduction in force as a means to streamline the numbers of the workforce. It was incidental that movant Yap's position was one among those abolished. Movant Yap failed to substantiate her claim by clear and convincing evidence that the abolition of her position was a result of her close identification with the previous regime, being a sister of former First Lady Imelda Romualdez Marcos. This being so, and pursuant to the presumption of regularity in the performance of official functions, the abolition of movant Yap's position should be upheld. PNB, in the instant case, has clearly proved by substantial evidence that its act in terminating the services of some of its employees was done in good faith. 5

Overruling her imputation of bad faith, i.e. her separation was illegal because it took effect on 16 February 1986 or even before the promulgation of EO No. 80 on 3 December 1986, the CSC noted

that the year "1986" stated in the notice of her separation from the service was a typographical error. PNB submitted documents (p. 6 of Resolution No. 92-201) supporting its stand that the separation actually took effect on 16 February 1987.

On the issue of bad faith as related to the later restoration of the Fund Transfer Department, the subject CSC resolution adds:

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It may be mentioned that the recent restoration of the Fund Transfer Department, actually was a merger of the Fund Transfer Group, the Foreign Remittance Development and Coordinating Unit based on board Resolution No. 60 of March 12, 1991, or after the lapse of over four (4) years from the date it was abolished in 1987. Moreover, the restoration of the Fund Transfer Department and other offices in the PNB was primarily caused by the improved financial capability and present needs of the Bank. This improved financial condition of the PNB is evident from the 1990 Annual Report it submitted. It may be further stated that the re-established FTD is headed by a Vice President, a position much lower in rank than the former department headed by a Senior Vice President.

Furthermore, it should be noted that granting arguendo that movant Yap's termination from the service was tainted with bad faith, she however, is now barred from assailing the same as she did not seasonably assert her right thereto. Records show that she was separated from PNB on February 16, 1987 and it was only in 1989 or about 2 years thereafter when she brought this matter to this Commission. By her inaction in questioning her termination within a period of one year, she is considered to have acquiesced to her separation from the service and abandoned her right to the position. 6

In the present petition before the Court, the following issues are raised:

1. Existence of bad faith in the reorganization of the Philippine National Bank resulting in the separation from the service of petitioner.

2. Erroneous application of the Dario v. Mison doctrine vis-a-vis PNB's reorganization.

3. Erroneous application of the one (1) year prescriptive period for quo warranto proceedings in petitioner's case.

Dario v. Mison 7 laid down the requirement of good faith in the reorganization of a government bureau wherein offices are abolished. It says:

. . . Reorganizations in this jurisdiction have been regarded as valid provided they are pursued in good faith. As a general rule, a reorganization is carried out in "good faith" if it is for the purpose of economy or to make bureaucracy more efficient. In that event, no dismissal (in case of dismissal) or separation actually occurs because the position itself ceases to exist. And in that case, security of tenure would not be a Chinese wall. Be that as it may, if the "abolition," which is nothing else but a separation or removal, is done for political reasons or purposely to defeat security of tenure, or otherwise not in good faith, no valid "abolition" takes place and whatever "abolition" is done, is void ab initio. There is an invalid "abolition" as where there is merely a change of nomenclature of positions, or where claims of economy are

belied by the existence of ample funds. It is to be stressed that by predisposing a reorganization to the yardstick of good faith, we are not, as a consequence, imposing a "cause" for restructuring. Retrenchment in the course of a reorganization in good faith is still removal "not for cause" if by "cause" we refer to "grounds" or conditions that call for disciplinary action. Good faith, as a component of a reorganization under a constitutional regime, is judged from the facts of each case.

In Petitioner's case, the following instances are cited by her as indicia of bad faith:

1. The abolished department was later restored and the number of senior vice presidents was increased.

2. PNB did not follow the prescribed sequence of separation of employees from the service contained in Rep. Act No. 6656 which is:

Sec. 3. In the separation of personnel pursuant to reorganization, the following order of removal shall be followed:

(a) Casual employees with less than five (5) years of government service;

(b) Casual employees with five (5) years or more of government service;

(c) Employees holding temporary appointments; and

(d) Employees holding permanent appointments: Provided, That those in the same category as enumerated above, who are least qualified in terms of performance and merit shall be laid off first, length of service notwithstanding.

3. Petitioner was not extended preference in appointment to the positions in the new staffing pattern as mandated by Sec. 4 of Rep. Act 6656, her qualification and fitness for new positions were never evaluated or considered in violation of Sec. 27 of P.D. 807 which was incorporated as Sec. 29 Ch. 5 Subtitle A, Book V of the Administrative Code of 1987.

4. Lack of notice and bearing before separation from the service.

5. Petitioner was forced to take a leave of absence and prevented from reporting for work.

6. There is a discrepancy in the date of her separation from the service and the effectivity thereof.

7. PNB employees in the Fund Transfer Department identified with her were reassigned or frozen.

8. She is listed as having resigned instead of being separated or dismissed which was what actually happened.

9. The dismissal was politically motivated, she being a sister of Mrs. Imelda Romualdez Marcos, wife of deposed President Ferdinand Marcos.

Executive Order No. 80 conferred upon the PNB the authority to reorganize. The order was issued by then Pres. Corazon Aquino on 3 December 1986 while she was exercising the powers vested in the President of the Philippines by the Freedom Constitution. After 3 December 1986, what remained to be done was the implementation of the reorganization. There is no doubt as to the legal basis for PNB's reorganization. The real question is: was it done in good faith, tested by the Dario v. Mison doctrine?

To start with it is almost absurd for petitioner to insist that her termination from the service was antedated to 16 February 1986. At that time, the reorganization of PNB had not even been conceived. In most of PNB's pleadings, it has documented and supported its stand that the year of petitioner's separation is 1987 not 1986. The antedating of the termination date, aside from being clearly a typographical error, is a periphernal issue. The real issue is existence of bad faith consisting of tangible bureaucratic/management pressures exerted to ease her out of office. Bad faith has been defined as a state of mind affirmatively operating with furtive design or with some motive of self interest or ill will or for an ulterior purpose. 8 It is the performance of an act with the knowledge that the actor is violating the fundamental law or right, even without willful intent to injure or purposive malice to perpetrate a damnifying harm. 9

PNB's reorganization, to repeat, was by virtue of a valid law. At the time of reorganization, due to the critical financial situation of the bank, departments, positions and functions were abolished or merged. The abolition of the Fund Transfer Department (FTD) was deemed necessary. This, to the Court's mind, was a management prerogative exercised pursuant to a business judgment. At this point, a distinction can be made in ruling on the validity of a reorganization between a government bureau or office performing constituent functions (like the Customs) and a government-owned or controlled corporation performing ministrant functions (like the PNB).

Constituent function are those which constitute the very bonds of society and are compulsory in nature; ministrant functions are those undertaken by way of advancing the general interests of society, and are merely optional. Commercial or universal banking is, ideally, not a governmental but a private sector, endeavor. It is an optional function of government.

. . . The principles determining whether or not a government shall exercise certain of these optional functions are: (1) that a government should do for the public welfare those things which private capital would not naturally undertake and (2) that a government should do those things which by its very, nature it is better equipped to administer for the public welfare than is any private individual or group of individuals (Malcolm, The Government of the Philippine Islands, pp. 19-20)

From the above we may infer that, strictly speaking, there are functions which our government is required to exercise to promote its objectives as expressed in our Constitution and which are exercised by it as an attribute of sovereignty, and those which it may exercise to promote merely the welfare, progress and prosperity of the people. To this latter class belongs the organization of those corporations owned or controlled by the government to promote certain aspects of the economic life of our people such as the National Coconut Corporation. These are what we call government-owned or controlled corporations which may take on the form of a private enterprise or one organized with powers and formal characteristics of a private corporation under the Corporation Law. (Bacani vs. Nacoco, No, L-9657, November 29, 1956, 100 Phil. 468)

But a reorganization whether in a government bureau performing constituent functions or in a government-owned or controlled corporation performing ministrant functions must meet a common test, the test of good faith. In this connection, the philosophy behind PNB's reorganization is spelled out in the whereas clauses of Executive Order No. 80:

WHEREAS, within the context of the general policy there nevertheless exists a clear role for direct government-participation in the banking system, particularly in servicing the requirements of agriculture, small and medium scale industry, export development, and the government sector.

WHEREAS, in pursuit of this national policy there is need to restructure the government financial institutions, particularly the Philippine National Bank, to achieve a more efficient and effective use of available scarce resources, to improve its viability, and to avoid unfair competition with the private sector, and

WHEREAS, the reorganization and rehabilitation of the Philippine National Bank into a similar but stronger and more operationally viable bank is an important component of the nationalization programs for both the financial system and the government corporation sector; . . . .

Whether there was a hidden political agenda to persecute petitioner due to her consanguinial relation to Mrs. Imelda Romualdez Marcos, the widow of former President Marcos, is not clearly shown. On the other hand, it is entirely possible that, precisely because of such consanguinial relation, petitioner may have been the object of deferential, if not special treatment under the Marcos regime. It is part of the Filipino culture to extend such deferential, if not special treatment to close relatives of persons in power. Many times this is carried to unwholesome extremes. But a discontinuance of such deferential or special treatment in the wake of a change in government or administration is not bad faith per se. It may be merely putting things in their proper places.

Due to the restructuring — and this is empirically verifiable — PNB became once more a viable banking institution. The restoration of the FTD four years after it was abolished and its functions transferred to the International Department, can be attributed to the bank's growth after reorganizations, thereby negating malice or bad faith in that reorganization. The essence of good faith lies in an honest belief in the validity of one's right. 10 It consists of an honest intention to abstain from taking an unconscionable and unscrupulous advantage of another, its absence should be established by convincing evidence. 11

The records also clearly indicate that starting April 1986 to February 1987, petitioner went on leave of absence for medical reasons. While she was not reporting to the office, the bank's reorganization got underway. She continued, however, receiving her salaries, allowances, emoluments, honoraria and fees up to March 1987. Employees who were affected by the reorganization had the option to avail of the bank's Separation Benefits Plan/Early Retirement Plan (SBP/ERIP). Petitioner opted not to avail of such plan and instead submitted to the result of the bank's ongoing reorganization and management's discretion. If petitioner had the desire for continued employment with the bank, she could have asserted it for management's consideration. There is no proof on record that she affirmatively expressed willingness to be employed. Since she cannot rebut the CSC finding that her earliest appeal was made on 4 August 1989, there is no reason for this Court to hold that she did not sleep on her rights. On the contrary, her present argument that bad faith existed at the time of the abolition of the FTD because it was restored four years later is a little too late. Who could have predicted in 1986 or 1987 that PNB would be able to rise from its financial crisis and become a viable commercial bank again? The decision to abolish the FTD at the time it was abolished, to repeat, was a business judgment made in good faith.

PNB for its part submits that its reorganization was effected in good faith because —

a) There was not only a perceptible but substantial restructuring of the PNB hierarchy showing reduction of personnel, consolidation of offices and abolition of positions.

b) Two thousand one hundred thirty two (2,132) positions were abolished during the period from February 16, 1986 to January 14, 1987 leaving a lean workforce of five thousand four hundred five (5,405) as of latter date per B.R. No. 34 hereto attached as Annex "R".

c) The number of senior officers, including Senior Vice Presidents, was accordingly reduced.

Another issue raised by petitioner is PNB's alleged non-compliance with the mandate of Sections 2 and 4 of Rep. Act No. 6656. These Sections provide:

Sec. 2. No officer or employee in the career service shall be removed except for a valid cause and after due notice and hearing. A valid cause for removal exists when, pursuant to a bona fide reorganization, a position has been abolished or rendered redundant or there is a need to merge, divide, or consolidate positions in order to meet the exigencies of the service, or other lawful causes allowed by the Civil Service Law. The existence of any or some of the following circumstances may be considered as evidence of bad faith in the removals made as a result of reorganization, giving to a claim for reinstatement or reappointment by an aggrieved party.

(a) Where there is a significant increase in the number of positions in the new staffing pattern of the department or agency concerned;

(b) Where an office is abolished and another performing substantially the same functions is created;

(c) Where incumbents are replaced by those less qualified in terms of status of appointment, performance and merit;

(d) Where there is a reclassification of offices in the department or agency concerned and the reclassified offices perform substantially the same functions as the original offices;

(e) Where the removal violates the order of separation provided in Section 3 hereof.

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Sec. 4. Officers and employees holding permanent, appointments shall be given preference for appointment to the new position in the approved staffing pattern comparable to their former positions or in case there are not enough comparable positions, to positions next lower in rank.

No new employees shall be taken in until all permanent officers and employees have been appointed, including temporary and casual employees who possess the

necessary qualification requirements, among which is the appropriate civil service eligibility, for permanent appointment to positions in the approved staffing pattern, in case there are still positions to be filled, unless such positions are policy-determining, primarily confidential or highly technical in nature.

In the first place, Rep. Act No. 6656 cannot be invoked by petitioner because it took effect on 15 June 1987, or after PNB's reorganization had already been implemented. But assuming, ex gratia argumenti, that it is applicable here and petitioner must be accorded preferential right to appointment in the bank, PNB in its rejoinder impressively asserts:

Needless to say, there were various committees that were created in the implementation of the organizational restructuring of the Bank based on the foregoing policy guidelines. Each personnel to be retained was evaluated in terms of relative fitness and merit along with the other personnel of the Bank. Thus, when then SVP Federico Pascual was chosen to head the International Department from among other officers of the Bank, including Ms. Yap, his qualifications far exceeded those of the other candidates for the position.

We attach hereto as Annexes "G-1" and "G-2" the service records of Mr. Federico Pascual and Petitioner Ms. Yap, respectively, which clearly show that the qualifications of Mr. Pascual far exceed those of Petitioner Yap. Aside from being a lawyer having been a law graduate from the University of the Philippines, he is also a Bachelor of Arts degree holder from Ateneo de Manila and a Master of Laws graduate o Columbia Law School. He had studied Masteral Arts in Public Administration at the London School of Economics and had undergone extensive seminars since 1974 at the International Department and had been assigned in several foreign branches of the Bank. Before he resigned from the Bank, he held the second highest position of Executive Vice President and served as Acting President of the Bank before the incumbent president, President Gabriel Singson assumed his position.

On the other hand, the service record of Petitioner Yap will show that she only holds a Bachelor of Science in Commerce Degree from Assumption Convent and has undergone only one seminar on Management and Leadersbip Training Program. She entered the Bank service in 1972. (Rollo at pp. 312 to 313)

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The prayer in the petition at bar seeks petitioner's immediate reinstatement to her former position as senior vice president and head of the Fund Transfer Department, or reappointment to a position of comparable or equivalent rank without loss of seniority rights and pay, etc., under the bank's new staffing pattern.

A person claiming to be entitled to a public office or position usurped or unlawfully held or exercised by another may bring an action for quo warranto (Rule 66, Sec. 6, Rules of Court). The petitioner therein must show a clear legal right to the office allegedly held unlawfully by another. 12

An action for quo warranto should be brought within one (1) year after ouster from office; 13 the failure to institute the same within the reglementary period constitutes more than a sufficient basis for its dismissal 14 since it is not proper that the title to a public office be subjected to continued uncertainty . . . 15 An exception to this prescriptive period lies only if the failure to file the action can be attributed to the acts of a responsible government officer and not of the dismissed employee.  16

Measured by the above jurisprudence, petitioner's action may be said to be one for quo warranto, seeking reinstatement to her former position which at present is occupied by another. She cannot invoke De Tavera v.Phil. Tuberculosis Society, Inc., et. al. 17 and contend that there is no claim of usurpation of office, and that quo warrantomay be availed of to assert one's right to an office in the situation obtaining in the case at bar.

Santos v. CA, et. al. 18 and Magno v. PNNC Corp. 19 are invoked by petitioner to illustrate that this action is one for separation without just cause, hence, the prescriptive period is allegedly four (4) years in accordance with Article 1146 of the Civil Code. 20 We do not agree. Petitioner's separation from the service was due to the abolition of her office in implementation of a valid reorganization. This is not the unjustifiable cause which results in injury to the rights of a person contemplated by Article 1146. The abolition of the office was not a whimsical, thoughtless move. It was a thoroughly evaluated action for streamlining functions based on a rehabilitation plan. 21 At the time of the abolition of the Fund Transfer Department in 1986, foreign exchange losses of the bank amounted to P81.1 Million. 22 The head of office was a Senior Vice President. At the time of restoration of the department in 1991, it was headed by a vice president (lower in rank) and showed earnings of P2,620.0 Million. 23 Other departments abolished in 1986 were also subsequently restored.

Restoring petitioner to her previous position with backwages would be unjust enrichment to her, considering that she had abandoned or showed lack of interest in reclaiming the same position when the bank was not yet fully rehabilitated and she only insisted on reinstatement in August 1989 or two (2) years after her alleged unjustified separation.

To those who feel that their unjustified separation from the service is for a cause beyond their control, the aforecited Magno case teaches:

. . . while We fully recognize the special protection which the Constitution, labor laws, and social legislation accord the workingman, We cannot, however, alter or amend the law on prescription to relieve him of the consequences of his inaction. Vigilantibus, non dormientibus, jura subveniunt (Laws come to the assistance of the vigilant, not of the sleeping). His explanation that he could not have filed the complaint earlier because "he was prevented to do so beyond his control for the simple reason that private respondent have (sic) tried to circumvent the law by merely floating" him is very flimsy and does not even evoke sympathetic consideration, if at all it is proper and necessary. We note that petitioner herein is not an unlettered man; he seems to be educated and assertive of his rights and appears to be familiar with judicial procedures. He filed a motion for extension of time to file the petition and the petition itself without the assistance of counsel. We cannot believe that if indeed he had a valid grievance against PNCC he would not have taken immediate positive steps for its redress.

WHEREFORE, premises considered, the assailed CSC resolution is AFFIRMED. The petition is DISMISSED for failure to show grave abuse of discretion on the part of said CSC in rendering the questioned resolution. No pronouncement as to costs.

SO ORDERED.

G.R. Nos. L-55963 & 61045             February 27, 1991

SPOUSES JOSE FONTANILLA and VIRGINIA FONTANILLA, petitioners, vs.HONORABLE INOCENCIO D. MALIAMAN and NATIONAL IRRIGATION ADMINISTRATION, respondents.

NATIONAL IRRIGATION ADMINISTRATION, appellant, vs.SPOUSES JOSE FONTANILLA and VIRGINIA FONTANILLA, appellees.

R E S O L U T I O N

PARAS, J.:

In its Motion for Reconsideration 1 of the Court's Second Division decision in G.R. No. 55963 and G.R. No. 61045, the National Irrigation Administration (NIA, for brevity), through the Solicitor General, maintains that, on the strength of Presidential Decree No. 552 (which amended certain provisions of Republic Act 3601, the law creating the NIA) and the case of Angat River Irrigation System, et al. vs. Angat River Workers' Union, et al., 102 Phil. 790 "the NIA does not perform solely and primarily proprietary functions but is an agency of the government tasked with governmental functions, and is therefore not liable for the tortious act of its driver Hugo Garcia, who was not its special agent."

Although the majority opinion in the cited case of Angat System declares that the Angat System (like the NIA) exercised a governmental function because the nature of the powers and functions of said agency does not show that it was intended to "bring to the Government any special corporate benefit or pecuniary profit," there is a strong dissenting opinion penned by then Associate Justice and later Chief Justice Roberto Concepcion and concurred in by then Associate Justice J.B.L. Reyes which held the contrary view that the Angat River System is a government entity exercising proprietary functions. To buttress said stand, the former Chief Justice cited some authorities which will be useful in the proper resolution of this case.

Quoting from said dissenting opinion which cited McQuillin's The Law of Municipal Corporations, 3rd ed., Vol. 18, pp. 423424:

In undertaking to supply water at price, municipality is not performing governmental function but is engaged in trade, and is liable first as private company would be for any negligence in laying out of its pipes, in keeping them in repair, or in furnishing potable water through them. Harvard Furniture Co., Inc. vs. City of Cambridge, 320 Mass. 227, 68 N.E. (2d) 684.

Municipality in contracting to provide water supply acts under its proprietary power and not under its legislative, public or governmental powers. Farmers' State Bank vs. Conrad, 100 Mont. 415,47 P. (2d) 853.

In this connection, the opinion is that irrigation districts in the United States are basically identical to our irrigation systems under Act No. 2152. Because of such similarity, it is found appropriate to consider certain doctrines from American jurisprudence, which are as follows, to wit:

An irrigation district is a public quasi corporation, organized, however, to conduct a business for the private benefit of the owners of land within its limits. They are members of the corporation, control its affairs, and alone are benefited by its operations. It is, in the administration of its business, the owner of its system in a proprietary rather than a public capacity, and must assume and bear the burdens of proprietary ownership. (Nampa vs. Nampa & M. Irrig. Dist. 19 Idaho, 779,115 Pac. 979)

. . . the plaintiff sought damages for injuries to crops on his land during 1923, 1924, 1925, and 1926, caused by water seeping, percolating, and escaping from the defendant's canal. The defendant contended that irrigation districts were agencies of the state, and were, therefore, not liable for the negligent construction or operation of their canals or ditches. The court, after a careful review of the authorities defining an irrigation district, conceded that such a quasi public corporation possessed some governmental powers and exercised some governmental functions, but held that the construction and operation of its irrigation canals and ditches was a proprietary rather than a governmental function, and hence the district was responsible in damages for the negligent construction or operation of its canal system. (69 A.L.R., p. 1233)

It may not be amiss to state at this point that the functions of government have been classified into governmental or constituent and proprietary or ministrant. The former involves the exercise of sovereignty and considered as compulsory; the latter connotes merely the exercise of proprietary functions and thus considered as optional. The Solicitor General argues that the reasons presented by P.D. 552 for the existence of the NIA (the WHEREAS clauses of said decree) indubitably reveal that the responsibility vested in said agency concerns public welfare and public benefit, and is therefore an exercise of sovereignty. On the contrary, We agree with the former Chief Justice Concepcion in saying that the same purpose such as public benefit and public welfare may be found in the operation of certain enterprises (those engaged in the supply of electric power, or in supplying telegraphic, telephonic, and radio communication, or in the production and distribution of prime necessities, etc.) yet it is certain that the functions performed by such enterprises are basically proprietary in nature. Thus, as held in Holderbaum vs. Hidalgo County Water Improvement District (297 S.W. 865, aff'd in 11 S.W. [2d] 506) — cited in the dissenting opinion by Justice Concepcion:

. . . Primarily, a water improvement district is in no better position than a city is when exercising its purely local powers and duties. Its general purposes are not essentially public in their nature, but are only incidentally so; those purposes may be likened to those of a city which is operating a waterworks system, or an irrigation system. . . . A water improvement district can do nothing, it has and furnishes no facilities, for the administration of the sovereign government. Its officers have no power or authority to exercise any of the functions of the general government, or to enforce any of the laws of the state or any of its other subdivisions, or collect taxes other than those assessed by the district. They have no more power or authority than that of the officers of a private corporation organized for like purposes. As a practical matter, the primary objects and purposes of such district are of a purely local nature, for the district is created and operated for the sole benefit of its own members, and an analysis of those objects and purposes discloses that they directly benefit only the landowners who reside within and whose lands form a part of the district, to the exclusion of all other residents therein. It is true, of course, that the state and the general public are greatly benefited by the proper operation of the district, and to that extent its objects and accomplishments are public in their nature, but this characteristic is only

incidental to the primary and chief object of the corporation, which is the irrigation of lands forming a part of the district. It is obvious, then, that the purposes and duties of such districts do not come within the definition of public rights, purposes, and duties which would entitle the district to the exemption raised by the common law as a protection to corporations having a purely public purpose and performing essentially public duties.

Of equal importance is the case of National Waterworks and Sewerage Authority (NAWASA) vs. NWSA Consolidated Unions, 11 SCRA 766, which propounds the thesis that "the NAWASA is not an agency performing governmental functions; rather it performs proprietary functions . . . ." The functions of providing water supply and sewerage service are regarded as mere optional functions of government even though the service rendered caters to the community as a whole and the goal is for the general interest of society. The business of furnishing water supply and sewerage service, as held in the case of Metropolitan Water District vs. Court of Industrial Relations, et al., 91 Phil. 840, "may for all practical purposes be likened to an industry engaged in by coal companies, gas companies, power plants, ice plants, and the like." Withal, it has been enunciated that "although the State may regulate the service and rates of water plants owned and operated by municipalities, such property is not employed for governmental purposes and in the ownership and operation thereof the municipality acts in its proprietary capacity, free from legislative interference." (1 McQuillin, p. 683)

Like the NAWASA, the National Irrigation Administration was not created for purposes of local government. While it may be true that the NIA was essentially a service agency of the government aimed at promoting public interest and public welfare, such fact does not make the NIA essentially and purely a "government-function" corporation. NIA was created for the purpose of "constructing, improving, rehabilitating, and administering all national irrigation systems in the Philippines, including all communal and pump irrigation projects." Certainly, the state and the community as a whole are largely benefited by the services the agency renders, but these functions are only incidental to the principal aim of the agency, which is the irrigation of lands.

We must not lose sight of the fact that the NIA is a government agency invested with a corporate personality separate and distinct from the government, thus is governed by the Corporation Law. Section 1 of Republic Act No. 3601 provides:

Sec. 1. Name and Domicile — A body corporate is hereby created which shall be known as the National Irrigation Administration. . . . which shall be organized immediately after the approval of this Act. It shall have its principal seat of business in the City of Manila and shall have representatives in all provinces, for the proper conduct of its business. (Emphasis for emphasis).

Besides, Section 2, subsection b of P.D. 552 provides that:

(b) To charge and collect from the beneficiaries of the water from all irrigation systems constructed by or under its administration, such fees or administration charges as may be necessary to cover the cost of operation, maintenance and insurance, and to recover the cost of construction within a reasonable period of time to the extent consistent with government policy; to recover funds or portions thereof expended for the construction and/or rehabilitation of communal irrigation systems which funds shall accrue to a special fund for irrigation development under section 2 hereof;

Unpaid irrigation fees or administration charges shall be preferred liens first, upon the land benefited, and then on the crops raised thereon, which liens shall have preference over all other liens except for taxes on the land, and such preferred liens shall not be removed until

all fees or administration charges are paid or the property is levied upon and sold by the National Irrigation Administration for the satisfaction thereof. . . .

The same section also provides that NIA may sue and be sued in court. Thus,

b) . . . Judicial actions for the collection of unpaid irrigation fees or charges, drainage fees or other charges which the National Irrigation Administration is authorized to impose and collect, shall henceforth be governed by the provisions of the Rules of Court of the Philippines for similar actions, the provisions of other laws to the contrary notwithstanding.

x x x           x x x          x x x

(e) . . . .

x x x           x x x          x x x

All actions for the recovery of compensation and damages against the National Irrigation Administration under paragraphs (1), (2), and (3) hereof, shall be filed with a competent court within five (5) years from the date of entry of the land or destruction of the improvements or crops, after which period, the right of possession and/or ownership of the National Irrigation Administration shall be considered vested and absolute. All other actions for the recovery of compensation and damages to private property and improvements occasioned by the construction, operation and maintenance of irrigation facilities and other hydraulic structures under the administration of the National Irrigation Administration, which have accrued ten (10) or more years prior to the approval of this decree are deemed to have prescribed and are barred forever.

It has its own assets and liabilities. It also has corporate powers to be exercised by a Board of Directors. To quote Section 2, subsection (f):

(f) . . . and to transact such business, as are directly or indirectly necessary, incidental or conducive to the attainment of the above powers and objectives, including the power to establish and maintain subsidiaries, and in general, to exercise all the powers of a corporation under the Corporation Law, insofar as they are not inconsistent with the provisions of this Act. (Emphasis supplied).

On the basis of the foregoing considerations, We conclude that the National Irrigation Administration is a government agency with a juridical personality separate and distinct from the government. It is not a mere agency of the government but a corporate body performing proprietary functions. Therefore, it may be held liable for the damages caused by the negligent act of its driver who was not its special agent.

ACCORDINGLY, the Motion for Reconsideration dated January 26, 1990 is DENIED WITH FINALITY. The decision of this Court in G.R. No. 55963 and G.R. No. 61045 dated December 1, 1989 is hereby AFFIRMED.

G.R. No. 143377      February 20, 2001

SHIPSIDE INCORPORATED, petitioner, vs.THE HON. COURT OF APPEALS [Special Former Twelfth Division], HON. REGIONAL TRIAL COURT, BRANCH 26 (San Fernando City, La Union) & The REPUBLIC OF THE PHILIPPINES, respondents.

MELO, J.:

Before the Court is a petition for certiorari filed by Shipside Incorporated under Rule 65 of the 1997 Rules on Civil Procedure against the resolutions of the Court of Appeals promulgated on November 4, 1999 and May 23, 2000, which respectively, dismissed a petition for certiorari and prohibition and thereafter denied a motion for reconsideration.

The antecedent facts are, undisputed:

On October 29, 1958, Original Certificate of Title No. 0-381 was issued in favor of Rafael Galvez, over four parcels of land - Lot 1 with 6,571 square meters; Lot 2, with 16,777 square meters; Lot 3 with 1,583 square meters; and Lot 4, with 508 square meters.

On April 11, 1960, Lots No. 1 and 4 were conveyed by Rafael Galvez in favor of Filipina Mamaril, Cleopatra Llana, Regina Bustos, and Erlinda Balatbat in a deed of sale which was inscribed as Entry No. 9115 OCT No.0-381 on August 10, 1960. Consequently, Transfer Certificate No. T-4304 was issued in favor of the buyers covering Lots No. 1 and 4.

Lot No. 1 is described as:

A parcel of land (Lot 1, Plan PSU-159621, L.R. Case No. N-361; L.R.C. Record No. N-14012, situated in the Barrio of Poro, Municipality of San Fernando, Province of La Union, bounded on the NE, by the Foreshore; on the SE, by Public Land and property of the Benguet Consolidated Mining Company; on the SW, by properties of Rafael Galvez (US Military Reservation Camp Wallace) and Policarpio Munar; and on the NW, by an old Barrio Road. Beginning at a point marked "1" on plan, being S. 74 deg. 11'W., 2670.36 from B.L.L.M. 1, San Fernando, thence

S. 66 deg. 19'E., 134.95 m. to point 2; S.14 deg. 57'W., 11.79 m. to point 3;

S. 12 deg. 45'W., 27.00 m. to point 4; S. 12 deg. 45'W, 6.90 m. to point 5;

N. 69 deg., 32'W., 106.00 m. to point 6; N. 52 deg., 21'W., 36.85 m. to point 7;

N. 21 deg. 31'E., 42.01 m. to the point of beginning; containing an area of SIX THOUSAND FIVE HUNDRED AND SEVENTY - ONE (6,571) SQUARE METERS, more or less. All points referred to are indicated on the plan; and marked on the ground; bearings true, date of survey, February 4-21, 1957.

Lot No. 4 has the following technical description:

A parcel of land (Lot 4, Plan PSU-159621, L.R. Case No. N-361 L.R.C. Record No. N-14012), situated in the Barrio of Poro, Municipality of San Fernando, La Union. Bounded on the SE by the property of the Benguet Consolidated Mining Company; on the S. by property of Pelagia Carino; and on the NW by the property of Rafael Galvez (US Military Reservation, Camp Wallace). Beginning at a point marked "1" on plan, being S. deg. 24'W. 2591.69 m. from B.L.L.M. 1, San Fernando, thence S. 12 deg. 45'W., 73.03 m. to point 2; N. 79 deg. 59'W., 13.92 m. to point 3; N. 23 deg. 26'E., 75.00 m. to the point of beginning; containing an area of FIVE HUNDED AND EIGHT (508) SQUARE METERS, more or less. All points referred to are indicated in the plan and marked on the ground; bearings true, date of survey, February 4-21, 1957.

On August 16, 1960, Mamaril, et al. sold Lots No. 1 and 4 to Lepanto Consolidated Mining Company. The deed of sale covering the aforesaid property was inscribed as Entry No. 9173 on TCT No. T-4304. Subsequently, Transfer Certificate No. T-4314 was issued in the name of Lepanto Consolidated Mining Company as owner of Lots No. 1 and 4.

On February 1, 1963, unknown to Lepanto Consolidated Mining Company, the Court of First Instance of La Union, Second Judicial District, issued an Order in Land Registration Case No. N- 361 (LRC Record No. N-14012) entitled "Rafael Galvez, Applicant, Eliza Bustos, et al., Parties-In-Interest; Republic of the Philippines, Movant" declaring OCT No. 0-381 of the Registry of Deeds for the Province of La Union issued in the name of Rafael Galvez, null and void, and ordered the cancellation thereof.

The Order pertinently provided: Accordingly, with the foregoing, and without prejudice on the rights of incidental parties concerned herein to institute their respective appropriate actions compatible with whatever cause they may have, it is hereby declared and this court so holds that both proceedings in Land Registration Case No. N-361 and Original Certificate No. 0-381 of the Registry of Deeds for the province of La Union issued in virtue thereof and registered in the name of Rafael Galvez, are null and void; the Register of Deeds for the Province of La Union is hereby ordered to cancel the said original certificate and/or such other certificates of title issued subsequent thereto having reference to the same parcels of land; without pronouncement as to costs.

On October 28, 1963, Lepanto Consolidated Mining Company sold to herein petitioner Lots No. 1 and 4, with the deed being entered in TCT No. 4314 as entry No. 12381. Transfer Certificate of Title No. T-5710 was thus issued in favor of the petitioner which starting since then exercised proprietary rights over Lots No. 1 and 4.

In the meantime, Rafael Galvez filed his motion for reconsideration against the order issued by the trial court declaring OCT No. 0-381 null and void. The motion was denied on January 25, 1965. On appeal, the Court of Appeals ruled in favor of the Republic of the Philippines in a Resolution promulgated on August 14, 1973 in CA-G.R. No. 36061-R. 1âwphi1.nêt

Thereafter, the Court of Appeals issued an Entry of Judgment, certifying that its decision dated August 14, 1973 became final and executory on October 23, 1973.

On April 22, 1974, the trial court in L.R.C. Case No. N-361 issued a writ of execution of the judgment which was served on the Register of Deeds, San Fernando, La Union on April 29, 1974.

Twenty four long years, thereafter, on January 14, 1999, the Office of the Solicitor General received a letter dated January 11, 1999 from Mr. Victor G. Floresca, Vice-President, John Hay Poro Point Development Corporation, stating that the aforementioned orders and decision of the trial court in

L.R.C. No. N-361 have not been executed by the Register of Deeds, San Fernando, La Union despite receipt of the writ of execution.

On April 21, 1999, the Office of the Solicitor General filed a complaint for revival of judgment and cancellation of titles before the Regional Trial Court of the First Judicial Region (Branch 26, San Fernando, La Union) docketed therein as Civil Case No. 6346 entitled, "Republic of the Philippines, Plaintiff, versus Heirs of Rafael Galvez, represented by Teresita Tan, Reynaldo Mamaril, Elisa Bustos, Erlinda Balatbat, Regina Bustos, Shipside Incorporated and the Register of Deeds of La Union, Defendants."

The evidence shows that the impleaded defendants (except the Register of Deeds of the province of La Union) are the successors-in- interest of Rafael Galvez (not Reynaldo Galvez as alleged by the Solicitor General) over the property covered by OCT No. 0-381, namely: (a) Shipside Inc. which is presently the registered owner in fee simple of Lots No. 1 and 4 covered by TCT No. T -5710, with a total area of 7,079 square meters; (b) Elisa Bustos, Jesusito Galvez, and Teresita Tan who are the registered owners of Lot No. 2 of OCT No. 0-381; and (c) Elisa Bustos, Filipina Mamaril, Regina Bustos and Erlinda Balatbat who are the registered owners of Lot No. 3 of OCT No. 0-381, now covered by TCT No. T-4916, with an area of 1,583 square meters.

In its complaint in Civil Case No.6346, the Solicitor General argued that since the trial court in LRC Case No. 361 had ruled and declared OCT No. 0-381 to be null and void, which ruling was subsequently affirmed by the Court of Appeals, the defendants-successors-in-interest of Rafael Galvez have no valid title over the property covered by OCT No. 0-381, and the subsequent Torrens titles issued in their names should be consequently cancelled.

On July 22, 1999, petitioner Shipside, Inc. filed its Motion to Dismiss, based on the following grounds: (1) the complaint stated no cause of action because only final and executory judgments may be subject of an action for revival of judgment; (2) .the plaintiff is not the real party-in-interest because the real property covered by the Torrens titles sought to be cancelled, allegedly part of Camp Wallace (Wallace Air Station), were under the ownership and administration of the Bases Conversion Development Authority (BCDA) under Republic Act No. 7227; (3) plaintiff's cause of action is barred by prescription; {4) twenty-five years having lapsed since the issuance of the writ of execution, no action for revival of judgment may be instituted because under Paragraph 3 of Article 1144 of the Civil Code, such action may be brought only within ten (10) years from the time the judgment had been rendered.

An opposition to the motion to dismiss was filed by the Solicitor General on August 23, 1999, alleging among others, that: (1) the real party-in-interest is the Republic of the Philippines; and (2) prescription does not run against the State.

On August 31, 1999, the trial court denied petitioner's motion to dismiss and on October 14, 1999, its motion for reconsideration was likewise turned down.

On October 21, 1999, petitioner instituted a petition for certiorari and prohibition with the Court of Appeals, docketed therein as CA-G.R. SP No. 55535, on the ground that the orders of the trial court denying its motion to dismiss and its subsequent motion for reconsideration were issued in excess of jurisdiction.

On November 4, 1999, the Court of Appeals dismissed the petition in CA-G.R. SP No. 55535 on the ground that the verification and certification in the petition, tinder the signature of Lorenzo Balbin, Jr., was made without authority, there being no proof therein that Balbin was authorized to institute the petition for and in behalf and of petitioner.

On May 23, 2000, the Court of Appeals denied petitioner's, motion for reconsideration on the grounds that: (1) a complaint filed on behalf of a corporation can be made only if authorized by its Board of Directors, and in the absence thereof, the petition cannot prosper and be granted due course; and (2) petitioner was unable to show that it had substantially complied with the rule requiring proof of authority to institute an action or proceeding.

Hence, the instant petition.

In support of its petition, Shipside, Inc. asseverates that:

1. The Honorable Court of Appeals gravely abused its discretion in dismissing the petition when it made a conclusive legal presumption that Mr. Balbin had no authority to sign the petition despite the clarity of laws, jurisprudence and Secretary's certificate to the contrary;

2. The Honorable Court of Appeals abused its discretion when it dismissed the petition, in effect affirming the grave abuse of discretion committed by the lower court when it refused to dismiss the 1999 Complaint for Revival of a 1973 judgment, in violation of clear laws and jurisprudence.

Petitioner likewise adopted the arguments it raised in the petition' and comment/reply it filed with the Court of Appeals, attached to its petition as Exhibit "L" and "N", respectively.

In his Comment, the Solicitor General moved for the dismissal of the instant petition based on the following considerations: (1) Lorenzo Balbin, who signed for and in behalf of petitioner in the verification and certification of non-forum shopping portion of the petition, failed to show proof of his authorization to institute the petition for certiorari and prohibition with the Court of Appeals, thus the latter court acted correctly in dismissing the same; (2) the real party-in-interest in the case at bar being the Republic of the Philippines, its claims are imprescriptible.

In order to preserve the rights of herein parties, the Court issued a temporary restraining order on June 26, 2000 enjoining the trial court from conducting further proceedings in Civil Case No. 6346.

The issues posited in this case are: (1) whether or not an authorization from petitioner's Board of Directors is still required in order for its resident manager to institute or commence a legal action for and in behalf of the corporation; and (2) whether or not the Republic of the Philippines can maintain the action for revival of judgment herein.

We find for petitioner.

Anent the first issue:

The Court of Appeals dismissed the petition for certiorari on the ground that Lorenzo Balbin, the resident manager for petitioner, who was the signatory in the verification and certification on non-forum shopping, failed to show proof that he was authorized by petitioner's board of directors to file such a petition.

A corporation, such as petitioner, has no power except those expressly conferred on it by the Corporation Code and those that are implied or incidental to its existence. In turn, a corporation exercises said powers through its board of directors and/or its duly authorized officers and agents. Thus, it has been observed that the power of a corporation to sue and be sued in any court is lodged with the board of directors that exercises its corporate powers (Premium Marble Resources, Inc. v.

CA, 264 SCRA 11 [1996]). In turn, physical acts of the corporation, like the signing of documents, can be performed only by natural persons duly authorized for the purpose by corporate by-laws or by a specific act of the board of directors.

It is undisputed that on October 21, 1999, the time petitioner's Resident Manager Balbin filed the petition, there was no proof attached thereto that Balbin was authorized to sign the verification and non-forum shopping certification therein, as a consequence of which the petition was dismissed by the Court of Appeals. However, subsequent to such dismissal, petitioner filed a motion for reconsideration, attaching to said motion a certificate issued by its "board secretary stating that on October 11, 1999, or ten days prior to the filing of the petition, Balbin had been authorized by petitioner's board of directors to file said petition.

The Court has consistently held that the requirement regarding verification of a pleading is formal, not jurisdictional (Uy v. LandBank, G.R. No. 136100, July 24, 2000). Such requirement is simply a condition affecting the form of the pleading, non-compliance with which does not necessarily render the pleading fatally defective. Verification is simply intended to secure an assurance that the allegations in the pleading are true and correct and not the product of the imagination or a matter of speculation, and that the pleading is filed in good faith. The court may order the correction of the pleading if verification is lacking or act on the pleading although it is not verified, if the attending circumstances are such that strict compliance with the rules may be dispensed with in order that the ends of justice may thereby be served.

On the other hand, the lack of certification, against forum shopping is generally not curable by the submission thereof after the filing of the petition. Section 5, Rule 45 of the 1997 Rules of civil Procedure provides that the failure of the petitioner to submit the required documents that should accompany the petition, including the certification against forum shopping, shall be sufficient ground for the dismissal thereof. The same rule applies to certifications against forum shopping signed by a person on behalf of a corporation which are unaccompanied by proof that said signatory is authorized to file a petition on behalf of the corporation.

In certain exceptional circumstances, however, the Court has allowed the belated filing of the certification. InLoyola v. Court of Appeals, et. al. (245 SCRA 477 [1995]), the Court considered the filing of the certification one day after the filing of an election protest as substantial compliance with the requirement. In Roadway Express, Inc. v. Court of Appeals, et. al. (264 SCRA 696 [1996]), the Court allowed the filing of the certification 14 days before the dismissal of the petition. In "Uy v. LandBank, supra, the Court had dismissed Uy's petition for lack of verification and certification against non-forum shopping. However, it subsequently reinstated the petition after Uy submitted a motion to admit certification and non-forum shopping certification. In all these cases, there were special circumstances or compelling "reasons that justified the relaxation of the rule requiring verification and certification on non-forum shopping.

In the instant case, the merits of petitioner' case should be considered special circumstances or compelling reasons that justify tempering the requirement in regard to the certificate of non-forum shopping. Moreover, inLoyola, Roadway, and Uy, the Court excused non-compliance with the requirement as to the certificate of non-forum shopping. With more reason should we allow the instant petition since petitioner herein did submit a certification on non-forum shopping, failing only to show proof that the signatory was authorized to do so. That petitioner subsequently submitted a secretary's certificate attesting that Balbin was authorized to file an action on behalf of petitioner likewise, mitigates this oversight.

It must also be kept in mind that while the requirement of the certificate of non-forum shopping is mandatory, nonetheless the requirements must not be interpreted too literally and thus defeat the

objective of preventing the undesirable practice of forum-shopping (Bernardo v. NLRC, .255 SCRA 108 [1996]). Lastly, technical rules of procedure should be used to promote, not frustrate justice. While the swift unclogging of court dockets is a laudable objective, the granting of substantial justice is an even more urgent ideal.

Now to the second issue:

The action instituted by the Solicitor General in the trial court is one for revival of judgment which is governed by Article 1144(3) of the Civil Code and Section 6, Rule 39 of the 1997 Rules on Civil Procedure. Article 1144(3) provides that an action upon a judgment "must be brought within 10 years from the time the right of action accrues." On the other hand, Section 6, Rule 39 provides that a final and executory judgment or order may be executed on motion within five (5) years from the date of its entry, but that after the lapse of such time, and before it is barred by the statute of limitations, a judgment may be enforced by action. Taking these two provisions into consideration, it is plain that an action for revival of judgment must be brought within ten years from the time said judgment becomes final.

From the records of this, case, it is clear that the judgment sought to be revived became final on October 23, 1973. On the other hand, the action for revival of judgment was instituted only in 1999, or more than twenty-five (25) years after the judgment had become final. Hence, the action is barred by extinctive prescription considering that 'such an action can be instituted only within ten (10) years from the time the cause of action accrues.

The Solicitor General, nonetheless, argues that the State's cause , of action in the cancellation of the land title issued to petitioner's predecessor-in-interest is imprescriptible because it is included in Camp Wallace, which belongs to the government.

The argument is misleading.

While it is true that prescription does not run against the State, the same may not be invoked by the government in this case since it is no longer interested in the subject matter. While Camp Wallace may have belonged to the government at the time Rafael Galvez's title was ordered cancelled in Land Registration Case No. N-361, the same no longer holds true today.

Republic Act No. 7227, otherwise known as the Bases Conversion and Development Act of 1992, created the Bases Conversion and Development Authority Section 4 pertinently provides:

Section 4. Purposes of the Conversion Authority. - The Conversion Authority shall have the following purposes:

(a) To own, hold and/or administer the military reservations of John Hay Air Station, Wallace Air Station, O'Donnell Transmitter Station, San Miguel Naval Communications Station, Mt. Sta. Rita Station (Hermosa, Bataan) and those portions of Metro Manila military camps which may be transferred to it by the President;

Section 2 of Proclamation No. 216, issued on July 27, 1993, also provides:

Section 2. Transfer of Wallace Air Station Areas to the Bases Conversion and Development Authority. - All areas covered by the Wallace Air Station as embraced and defined by the 1947 Military Bases Agreement between the Philippines and the United States of America, as amended, excluding those covered by Presidential Proclamations and some 25-hectare

area for the radar and communication station of the Philippine Air Force, are hereby transferred to the Bases Conversion Development Authority ...

With the transfer of Camp Wallace to the BCDA, the government no longer has a right or interest to protect. Consequently, the Republic is not a real party in interest and it may not institute the instant action. Nor may it raise the defense of imprescriptibility, the same being applicable only in cases where the government is a party in interest. Under Section 2 of Rule 3 of the 1997 Rules of Civil Procedure, "every action must be prosecuted or defended in the name of the real party in interest." To qualify a person to be a real party in interest in whose name an action must be prosecuted, he must appear to be the present real owner of the right sought to enforced (Pioneer Insurance v. CA, 175 SCRA 668 [1989]). A real party in interest is the party who stands to be benefited or injured by the judgment in the suit, or the party entitled to the avails of the suit. And by real interest is meant a present substantial interest, as distinguished from a mere expectancy, or a future, contingent, subordinate or consequential interest (Ibonilla v. Province of Cebu, 210 SCRA 526 [1992]). Being the owner of the areas covered by Camp Wallace, it is the Bases Conversion and Development Authority, not the Government, which stands to be benefited if the land covered by TCT No. T-5710 issued in the name of petitioner is cancelled.

Nonetheless, it has been posited that the transfer of military reservations and their extensions to the BCDA is basically for the purpose of accelerating the sound and balanced conversion of these military reservations into alternative productive uses and to enhance the benefits to be derived from such property as a measure of promoting the economic and social development, particularly of Central Luzon and, in general, the country's goal for enhancement (Section 2, Republic Act No. 7227). It is contended that the transfer of these military reservations to the Conversion Authority does not amount to an abdication on the part of the Republic of its interests, but simply a recognition of the need to create a body corporate which will act as its agent for the realization of its program. It is consequently asserted that the Republic remains to be the real party in interest and the Conversion Authority merely its agent.

We, however, must not lose sight of the fact that the BCDA is an entity invested with a personality separate and distinct from the government. Section 3 of Republic Act No. 7227 reads:

Section 3. Creation of the Bases Conversion and Development Authority. - There is hereby created a body corporate to be known as the Conversion Authority which shall have the attribute of perpetual succession and shall be vested with the powers of a corporation.

It may not be amiss to state at this point that the functions of government have been classified into governmental or constituent and proprietary or ministrant. While public benefit and public welfare, particularly, the promotion of the economic and social development of Central Luzon, may be attributable to the operation of the BCDA, yet it is certain that the functions performed by the BCDA are basically proprietary in nature. The promotion of economic and social development of Central Luzon, in particular, and the country's goal for enhancement, in general, do not make the BCDA equivalent to the Government. Other corporations have been created by government to act as its agents for the realization of its programs, the SSS, GSIS, NAWASA arid the NIA, to count a few, and yet, the Court has ruled that these entities, although performing functions aimed at promoting public interest and public welfare, are not government-function corporations invested with governmental attributes. It may thus be said that the BCDA is not a mere agency of the Government but a corporate body performing proprietary functions.

Moreover, Section 5 of Republic Act No. 7227 provides:

Section 5. Powers of the Conversion Authority. - To carry out its objectives under this Act, the Conversion Authority is hereby vested with the following powers:

(a) To succeed in its corporate name, to sue and be sued in such corporate name and to adopt, alter and use a corporate seal which shall be judicially noticed;

Having the capacity to sue or be sued, it should thus be the BCDA which may file an action to cancel petitioner's title, not the Republic, the former being the real party in interest. One having no right or interest to protect cannot invoke the jurisdiction of the court as a party plaintiff in an action (Ralla v. Ralla, 199 SCRA 495 [1991]). A suit may be dismissed if the plaintiff or the defendant is not a real party in interest. If the suit is not brought in the name of the real party in interest, a motion to dismiss may be filed, as was done by petitioner in this case, on the ground that the complaint states no cause of action (Tanpingco v. IAC, 207 SCRA 652 [1992]).

However, E.B. Marcha Transport Co., Inc. v. IAC (147 SCRA 276 [1987]) is cited as authority that the Republic is the proper party to sue for the recovery of possession of property which at the time of the institution of the suit was no longer held by the national government but by the Philippine Ports Authority .In E.B. Marcha, the Court ruled:

It can be said that in suing for the recovery of the rentals, the Republic of the Philippines, acted as principal of the Philippine Ports Authority, directly exercising the commission it had earlier conferred on the latter as its agent. We may presume that, by doing so, the Republic of the Philippines did not intend .to retain the said rentals for its own use, considering that by its voluntary act it had transferred the land in question to the Philippine Ports Authority effective July 11, 1974. The Republic of the Philippines had simply sought to assist, not supplant, the Philippine Ports Authority, whose title to the disputed property it continues to recognize, We may expect then that the said rentals, once collected by the Republic of the Philippines, shall be turned over by it to the Philippine Ports Authority conformably to the purposes of P.D. No. 857.

E.B. Marcha is, however, not on all fours with the case at bar. In the former, the Court considered the Republic a proper party to sue since the claims of the Republic and the Philippine Ports Authority against the petitioner therein were the same. To dismiss the complaint in E.B. Marcha would have brought needless delay in the settlement of the matter since the PPA would have to refile the case on the same claim already litigated upon. Such is not the case here since to allow the government to sue herein enables it to raise the issue of imprescriptibility, a claim which is not available to the BCDA. The rule that prescription does not run against the State does not apply to corporations or artificial bodies created by the State for special purposes, it being said that when the title of the Republic has been divested, its grantees, although artificial bodies of its own creation, are in the same category as ordinary persons (Kingston v. LeHigh Valley Coal Co., 241 Pa 469). By raising the claim of imprescriptibility, a claim which cannot be raised by the BCDA, the Government not only assists the BCDA, as it did in E.B. Marcha, it even supplants the latter, a course of action proscribed by said case.

Moreover, to recognize the Government as a proper party to sue in this case would set a bad precedent as it would allow the Republic to prosecute, on behalf of government-owned or controlled corporations, causes of action which have already prescribed, on the pretext that the Government is the real party in interest against whom prescription does not run, said corporations having been created merely as agents for the realization of government programs.

Parenthetically, petitioner was not a party to the original suit for cancellation of title commenced by the Republic twenty-seven years for which it is now being made to answer, nay, being made to suffer financial losses.

It should also be noted that petitioner is unquestionably a buyer in good faith and for value, having acquired the property in 1963, or 5 years after the issuance of the original certificate of title, as a third transferee. If only not to do violence and to give some measure of respect to the Torrens System, petitioner must be afforded some measure of protection.

One more point.

Since the portion in dispute now forms part of the property owned and administered by the Bases Conversion and Development Authority, it is alienable and registerable real property.

We find it unnecessary to rule on the other matters raised by the herein parties.

WHEREFORE, the petition is hereby granted and the orders dated August 31, 1999 and October 4, 1999 of the Regional Trial, Court of the First National Judicial Region (Branch 26, San Fernando, La Union) in Civil Case No. 6346 entitled "Republic of the Philippines, Plaintiff, versus Heirs of Rafael Galvez, et. al., Defendants" as well as the resolutions promulgated on November 4, 1999 and May 23, 2000 by the Court of Appeals (Twelfth Division) in

CA-G.R. SP No. 55535 entitled "Shipside, Inc., Petitioner versus Ron. Alfredo Cajigal, as Judge, RTC, San Fernando, La Union, Branch 26, and the Republic of the Philippines, Respondents" are hereby reversed and set aside. The complaint in Civil Case No. 6346, Regional Trial Court, Branch 26, San Fernando City, La Union entitled "Republic of the Philippines, Plaintiff, versus Heirs of Rafael Galvez, et al." is ordered dismissed, without prejudice to the filing of an appropriate action by the Bases Development and Conversion Authority.

SO ORDERED.

G.R. No. 110526 February 10, 1998

ASSOCIATION OF PHILIPPINE COCONUT DESICCATORS, petitioner, vs.PHILIPPINE COCONUT AUTHORITY, respondent.

 

MENDOZA, J.:

At issue in this case is the validity of a resolution, dated March 24, 1993, of the Philippine Coconut Authority in which it declares that it will no longer require those wishing to engage in coconut processing to apply to it for a license or permit as a condition for engaging in such business.

Petitioner Association of Philippine Coconut Desiccators (hereafter referred to as APCD) brought this suit forcertiorari and mandamus against respondent Philippine Coconut Authority (PCA) to invalidate the latter's Board Resolution No. 018-93 and the certificates of registration issued under it on the ground that the resolution in question is beyond the power of the PCA to adopt, and to compel said administrative agency to comply instead with the mandatory provisions of statutes regulating the desiccated coconut industry, in particular, and the coconut industry, in general.

As disclosed by the parties' pleadings, the facts are as follows:

On November 5, 1992, seven desiccated coconut processing companies belonging to the APCD brought suit in the Regional Trial Court, National Capital Judicial Region in Makati, Metro Manila, to enjoin the PCA from issuing permits to certain applicants for the establishment of new desiccated coconut processing plants. Petitioner alleged that the issuance of licenses to the applicants would violate PCA's Administrative Order No. 02, series of 1991, as the applicants were seeking permits to operate in areas considered "congested" under the administrative order. 1

On November 6, 1992, the trial court issued a temporary restraining order and, on November 25, 1992, a writ of preliminary injunction, enjoining the PCA from processing and issuing licenses to Primex Products, Inc., Coco Manila, Superstar (Candelaria) and Superstar (Davao) upon the posting of a bond in the amount of P100,000.00.2

Subsequently and while the case was pending in the Regional Trial Court, the Governing Board of the PCA issued on March 24, 1993 Resolution No. 018-93, providing for the withdrawal of the Philippine Coconut Authority from all regulation of the coconut product processing industry. While it continues the registration of coconut product processors, the registration would be limited to the "monitoring" of their volumes of production and administration of quality standards. The full text of the resolution reads:

RESOLUTION NO. 018-93POLICY DECLARATION DEREGULATING

THE ESTABLISHMENT OF NEW COCONUTPROCESSING PLANTS

WHEREAS, it is the policy of the State to promote free enterprise unhampered by protective regulations and unnecessary bureaucratic red tapes;

WHEREAS, the deregulation of certain sectors of the coconut industry, such as marketing of coconut oils pursuant to Presidential Decree No. 1960, the lifting of export and commodity clearances under Executive Order No. 1016, and relaxation of regulated capacity for the desiccated coconut sector pursuant to Presidential Memorandum of February 11, 1988, has become a centerpiece of the present dispensation;

WHEREAS, the issuance of permits or licenses prior to business operation is a form of regulation which is not provided in the charter of nor included among the powers of the PCA;

WHEREAS, the Governing Board of PCA has determined to follow and further support the deregulation policy and effort of the government to promote free enterprise;

NOW THEREFORE, BE IT RESOLVED AS IT IS HEREBY RESOLVED, that, henceforth, PCA shall no longer require any coconut oil mill, coconut oil refinery, coconut desiccator, coconut product processor/factory, coconut fiber plant or any similar coconut processing plant to apply with PCA and the latter shall no longer issue any form of license or permit as condition prior to establishment or operation of such mills or plants;

RESOLVED, FURTHER, that the PCA shall limit itself only to simply registering the aforementioned coconut product processors for the purpose of monitoring their volumes of production, administration of quality standards with the corresponding service fees/charges.

ADOPTED this 24th day of March 1993, at Quezon City. 3

The PCA then proceeded to issue "certificates of registration" to those wishing to operate desiccated coconut processing plants, prompting petitioner to appeal to the Office of the President of the Philippines on April 26, 1993 not to approve the resolution in question. Despite follow-up letters sent on May 25 and June 2, 1993, petitioner received no reply from the Office of the President. The "certificates of registration" issued in the meantime by the PCA has enabled a number of new coconut mills to operate. Hence this petition.

Petitioner alleges:

I

RESPONDENT PCA'S BOARD RESOLUTION NO. 018-93 IS NULL AND VOID FOR BEING AN UNDUE EXERCISE OF LEGISLATIVE POWER BY AN ADMINISTRATIVE BODY.

II

ASIDE FROM BEING ULTRA-VIRES, BOARD RESOLUTION NO. 018-93 IS WITHOUT ANY BASIS, ARBITRARY, UNREASONABLE AND THEREFORE IN VIOLATION OF SUBSTANTIVE DUE PROCESS OF LAW.

III

IN PASSING BOARD RESOLUTION NO. 018-93, RESPONDENT PCA VIOLATED THE PROCEDURAL DUE PROCESS REQUIREMENT OF CONSULTATION PROVIDED IN PRESIDENTIAL DECREE NO. 1644, EXECUTIVE ORDER NO. 826 AND PCA ADMINISTRATIVE ORDER NO. 002, SERIES OF 1991.

On the other hand, in addition to answering petitioner's arguments, respondent PCA alleges that this petition should be denied on the ground that petitioner has a pending appeal before the Office of the President. Respondent accuses petitioner of forum-shopping in filing this petition and of failing to exhaust available administrative remedies before coming to this Court. Respondent anchors its argument on the general rule that one who brings an action under Rule 65 must show that one has no appeal nor any plain, speedy, and adequate remedy in the ordinary course of law.

I.

The rule of requiring exhaustion of administrative remedies before a party may seek judicial review, so strenuously urged by the Solicitor General on behalf of respondent, has obviously no application here. The resolution in question was issued by the PCA in the exercise of its rule-making or legislative power. However, only judicial review of decisions of administrative agencies made in the exercise of their quasi-judicial function is subject to the exhaustion doctrine. The exhaustion doctrine stands as a bar to an action which is not yet complete4 and it is clear, in the case at bar, that after its promulgation the resolution of the PCA abandoning regulation of the desiccated coconut industry became effective. To be sure, the PCA is under the direct supervision of the President of the Philippines but there is nothing in P.D. No. 232, P.D. No. 961, P.D. No. 1468 and P.D. No. 1644 defining the powers and functions of the PCA which requires rules and regulations issued by it to be approved by the President before they become effective.

In any event, although the APCD has appealed the resolution in question to the Office of the President, considering the fact that two months after they had sent their first letter on April 26, 1993 they still had to hear from the President's office, meanwhile respondent PCA was issuing certificates of registration indiscriminately to new coconut millers, we hold that petitioner was justified in filing this case on June 25, 1993. 5 Indeed, after writing the Office of the President on April 26, 1993 6 petitioner sent inquiries to that office not once, but twice, on May 26, 1993  7and on June 2, 1993, 8 but petitioner did not receive any reply.

II.

We now turn to the merit of the present petition. The Philippine Coconut Authority was originally created by P.D. 232 on June 30, 1973, to take over the powers and functions of the Coconut Coordinating Council, the Philippine Coconut Administration and the Philippine Coconut Research Institute. On June 11, 1978, by P.D. No. 1468, it was made "an independent public corporation . . . directly reporting to, and supervised by, the President of the Philippines," 9 and charged with carrying out the State's policy "to promote the rapid integrated development and growth of the coconut and other palm oil industry in all its aspects and to ensure that the coconut farmers become direct participants in, and beneficiaries of, such development and growth." 10 through a regulatory scheme set up by law. 11

Through this scheme, the government, on August 28, 1982, temporarily prohibited the opening of new coconut processing plants and, four months later, phased out some of the existing ones in view of overproduction in the coconut industry which resulted in cut-throat competition, underselling and smuggling of poor quality products and ultimately in the decline of the export performance of coconut-based commodities. The establishment of new plants could be authorized only upon determination by the PCA of the existence of certain economic conditions and the approval of the President of the Philippines. Thus, Executive Order No. 826, dated August 28, 1982, provided:

Sec. 1. Prohibition. — Except as herein provided, no government agency or instrumentality shall hereafter authorize, approve or grant any permit or license for the establishment or operation of new desiccated coconut processing plants, including the importation of machinery or equipment for the purpose. In the event of a need to establish a new plant, or

expand the capacity, relocate or upgrade the efficiencies of any existing desiccated plant, the Philippine Coconut Authority may, upon proper determination of such need and evaluation of the condition relating to:

a. the existing market demand;

b. the production capacity prevailing in the country or locality;

c. the level and flow of raw materials; and

d. other circumstances which may affect the growth or viability of the industry concerned,

authorize or grant the application for, the establishment or expansion of capacity, relocation or upgrading of efficiencies of such desiccated coconut processing plant, subject to the approval of the President.

On December 6, 1982, a phase-out of some of the existing plants was ordered by the government after finding that "a mere freeze in the present capacity of existing plants will not afford a viable solution to the problem considering that the total available limited market is not adequate to support all the existing processing plants, making it imperative to reduce the number of existing processing plants." 12 Accordingly, it was ordered: 13

Sec. 1. The Philippine Coconut Authority is hereby ordered to take such action as may be necessary to reduce the number of existing desiccated coconut processing plants to a level which will insure the survival of the remaining plants. The Authority is hereby directed to determine which of the existing processing plants should be phased out and to enter into appropriate contracts with such plants for the above purpose.

It was only on October 23, 1987 when the PCA adopted Resolution No. 058-87, authorizing the establishment and operation of additional DCN plants, in view of the increased demand for desiccated coconut products in the world's markets, particularly in Germany, the Netherlands and Australia. Even then, the opening of new plants was made subject to "such implementing guidelines to be set forth by the Authority" and "subject to the final approval of the President."

The guidelines promulgated by the PCA, as embodied in Administrative Order No. 002, series of 1991, inter aliaauthorized the opening of new plants in "non-congested areas only as declared by the PCA" and subject to compliance by applicants with "all procedures and requirements for registration under Administrative Order No. 003, series of 1981 and this Order." In addition, as the opening of new plants was premised on the increased global demand for desiccated coconut products, the new entrants were required to submit sworn statements of the names and addresses of prospective foreign buyers.

This form of "deregulation" was approved by President Aquino in her memorandum, dated February 11, 1988, to the PCA. Affirming the regulatory scheme, the President stated in her memorandum:

It appears that pursuant to Executive Order No. 826 providing measures for the protection of the Desiccated Coconut Industry, the Philippine Coconut Authority evaluated the conditions relating to: (a) the existing market demands; (b) the production capacity prevailing in the country or locality; (c) the level and flow of raw materials; and (d) other circumstances which may affect the growth or viability of the industry concerned and that the result of such evaluation favored the expansion of production and market of desiccated coconut products.

In view hereof and the favorable recommendation of the Secretary of Agriculture, the deregulation of the Desiccated Coconut Industry as recommended in Resolution No. 058-87 adopted by the PCA Governing Board on October 28, 1987 (sic) is hereby approved. 14

These measures — the restriction in 1982 on entry into the field, the reduction the same year of the number of the existing coconut mills and then the lifting of the restrictions in 1987 — were adopted within the framework of regulation as established by law "to promote the rapid integrated development and growth of the coconut and other palm oil industry in all its aspects and to ensure that the coconut farmers become direct participants in, and beneficiaries of, such development and growth." 15 Contrary to the assertion in the dissent, the power given to the Philippine Coconut Authority — and before it to the Philippine Coconut Administration — "to formulate and adopt a general program of development for the coconut and other palm oils industry" 16 is not a roving commission to adopt any program deemed necessary to promote the development of the coconut and other palm oils industry, but one to be exercised in the context of this regulatory structure.

In plain disregard of this legislative purpose, the PCA adopted on March 24, 1993 the questioned resolution which allows not only the indiscriminate opening of new coconut processing plants but the virtual dismantling of the regulatory infrastructure whereby, forsaking controls theretofore placed in its keeping, the PCA limits its function to the innocuous one of "monitoring" compliance by coconut millers with quality standards and volumes of production. In effect, the PCA would simply be compiling statistical data on these matters, but in case of violations of standards there would be nothing much it would do. The field would be left without an umpire who would retire to the bleachers to become a mere spectator. As the PCA provided in its Resolution No. 018-93:

NOW, THEREFORE, BE IT RESOLVED AS IT IS HEREBY RESOLVED, that, henceforth, PCA shall no longer require any coconut oil mill, coconut oil refinery, coconut desiccator, coconut product processor/factory, coconut fiber plant or any similar coconut processing plant to apply with PCA and the latter shall no longer issue any form of license or permit as condition prior to establishment or operation of such mills or plants;

RESOLVED, FURTHER, that the PCA shall limit itself only to simply registering the aforementioned coconut product processors for the purpose of monitoring their volumes of production, administration of quality standards with the corresponding service fees/charges.

The issue is not whether the PCA has the power to adopt this resolution to carry out its mandate under the law "to promote the accelerated growth and development of the coconut and other palm oil industry." 17 The issue rather is whether it can renounce the power to regulate implicit in the law creating it for that is what the resolution in question actually is.

Under Art. II, § 3(a) of the Revised Coconut Code (P.D. No. 1468), the role of the PCA is "To formulate and adopt a general program of development for the coconut and other palm oil industry in all its aspects." By limiting the purpose of registration to merely "monitoring volumes of production [and] administration of quality standards" of coconut processing plants, the PCA in effect abdicates its role and leaves it almost completely to market forces how the coconut industry will develop.

Art. II, § 3 of P.D. No. 1468 further requires the PCA:

(h) To regulate the marketing and the exportation of copra and its by-products by establishing standards for domestic trade and export and, thereafter, to conduct an inspection of all copra and its by-products proposed for export to determine if they conform to the standards established;

Instead of determining the qualifications of market players and preventing the entry into the field of those who are unfit, the PCA now relies entirely on competition — with all its wastefulness and inefficiency — to do the weeding out, in its naive belief in survival of the fittest. The result can very well be a repeat of 1982 when free enterprise degenerated into a "free-for-all," resulting in cut-throat competition, underselling, the production of inferior products and the like, which badly affected the foreign trade performance of the coconut industry.

Indeed, by repudiating its role in the regulatory scheme, the PCA has put at risk other statutory provisions, particularly those of P.D. No. 1644, to wit:

Sec. 1. The Philippine Coconut Authority shall have full power and authority to regulate the marketing and export of copra, coconut oil and their by-products, in furtherance of the steps being taken to rationalize the coconut oil milling industry.

Sec. 2. In the exercise of its powers under Section 1 hereof, the Philippine Coconut Authority may initiate and implement such measures as may be necessary to attain the rationalization of the coconut oil milling industry, including, but not limited to, the following measures:

(a) Imposition of floor and/or ceiling prices for all exports of copra, coconut oil and their by-products;

(b) Prescription of quality standards;

(c) Establishment of maximum quantities for particular periods and particular markets;

(d) Inspection and survey of export shipments through an independent international superintendent or surveyor.

In the exercise of its powers hereunder, the Philippine Coconut Authority shall consult with, and be guided by, the recommendation of the coconut farmers, through corporations owned or controlled by them through the Coconut Industry Investment Fund and the private corporation authorized to be organized under Letter of Instructions No. 926.

and the Revised Coconut Code (P.D. No. 1468), Art. II, § 3, to wit:

(m) Except in respect of entities owned or controlled by the Government or by the coconut farmers under Sections 9 and 10, Article III hereof, the Authority shall have full power and authority to regulate the production, distribution and utilization of all subsidized coconut-based products, and to require the submission of such reports or documents as may be deemed necessary by the Authority to ascertain whether the levy payments and/or subsidy claims are due and correct and whether the subsidized products are distributed among, and utilized by, the consumers authorized by the Authority.

The dissent seems to be saying that in the same way that restrictions on entry into the field were imposed in 1982 and then relaxed in 1987, they can be totally lifted now without prejudice to reimposing them in the future should it become necessary to do so. There is really no renunciation of the power to regulate, it is claimed. Trimming down of PCA's function to registration is not an abdication of the power to regulate but is regulation itself. But how can this be done when, under Resolution No. 018-93, the PCA no longer requires a license as condition for the establishment or operation of a plant? If a number of processing firms go to areas which are already congested, the PCA cannot stop them from doing so. If there is overproduction, the PCA cannot order a cut back in

their production. This is because the licensing system is the mechanism for regulation. Without it the PCA will not be able to regulate coconut plants or mills.

In the first "whereas" clause of the questioned resolution as set out above, the PCA invokes a policy of free enterprise that is "unhampered by protective regulations and unnecessary bureaucratic red tape" as justification for abolishing the licensing system. There can be no quarrel with the elimination of "unnecessary red tape." That is within the power of the PCA to do and indeed it should eliminate red tape. Its success in doing so will be applauded. But free enterprise does not call for removal of "protective regulations."

Our Constitutions, beginning with the 1935 document, have repudiated laissez-faire as an economic principle. 18Although the present Constitution enshrines free enterprise as a policy, 19 it nonetheless reserves to the government the power to intervene whenever necessary to promote the general welfare. This is clear from the following provisions of Art. XII of the Constitution which, so far as pertinent, state:

Sec. 6. . . . Individuals and private groups, including corporations, cooperatives, and similar collective organizations, shall have the right to own, establish, and operate economic enterprises, subject to the duty of the State to promote distributive justice and to intervene when the common good so demands.

Sec. 19. The State shall regulate or prohibit monopolies when the public interest so requires. No combinations in restraint of trade or unfair competition shall be allowed. (Emphasis added).

At all events, any change in policy must be made by the legislative department of the government. The regulatory system has been set up by law. It is beyond the power of an administrative agency to dismantle it. Indeed, petitioner charges the PCA of seeking to render moot a case filed by some of its members questioning the grant of licenses to certain parties by adopting the resolution in question. It is alleged that members of petitioner complained to the court that the PCA had authorized the establishment and operation of new plants in areas which were already crowded, in violation of its Administrative Order No. 002, series of 1991. In response, the Regional Trial Court issued a writ of preliminary injunction, enjoining the PCA from issuing licenses to the private respondent in that case.

These allegations of petitioner have not been denied here. It would thus seem that instead of defending its decision to allow new entrants into the field against petitioner's claim that the PCA decision violated the guidelines in Administrative Order No. 002, series of 1991, the PCA adopted the resolution in question to render the case moot. In so doing, the PCA abdicated its function of regulation and left the field to untrammeled competition that is likely to resurrect the evils of cut-throat competition, underselling and overproduction which in 1982 required the temporary closing of the field to new players in order to save the industry.

The PCA cannot rely on the memorandum of then President Aquino for authority to adopt the resolution in question. As already stated, what President Aquino approved in 1988 was the establishment and operation of new DCN plants subject to the guidelines to be drawn by the PCA. 20 In the first place, she could not have intended to amend the several laws already mentioned, which set up the regulatory system, by a mere memoranda to the PCA. In the second place, even if that had been her intention, her act would be without effect considering that, when she issued the memorandum in question on February 11, 1988, she was no longer vested with legislative authority.  21

WHEREFORE, the petition is GRANTED. PCA Resolution No. 018-93 and all certificates of registration issued under it are hereby declared NULL and VOID for having been issued in excess of the power of the Philippine Coconut Authority to adopt or issue.

SO ORDERED.

G.R. No. L-32052 July 25, 1975

PHILIPPINE VIRGINIA TOBACCO ADMINISTRATION, petitioner, vs.COURT OF INDUSTRIAL RELATIONS, REUEL ABRAHAM, MILAGROS ABUEG, AVELINO ACOSTA, CAROLINA ACOSTA, MARTIN AGSALUD, JOSEFINA AGUINALDO, GLORIA ALBANO, ANTONIO ALUNING, COSME ALVAREZ, ISABEL ALZATE, AURORA APUSEN, TOMAS ARCANGEL, LOURDES ARJONELLO, MANUEL AROMIN, DIONISIO ASISTIN, JOSE AURE, NICASIO AZNAR, EUGENIO AZURIN, CLARITA BACUGAN, PIO BALAGOT, HEREDIO BALMACEDA, ESTHER BANAAG, JOVENCIO BARBERO, MONICO BARBADILLO, HERNANDO BARROZO, FILIPINA BARROZO, REMEDIO BARTOLOME, ANGELINA BASCOS, JOSE BATALLA, ALMARIO BAUTISTA, EUGENIO BAUTISTA, JR., HERMALO BAUTISTA, JUANITO BAUTISTA, SEVERINO BARBANO, CAPPIA BARGONIA, ESMERALDA BERNARDEZ, RUBEN BERNARDEZ, ALFREDO BONGER, TOMAS BOQUIREN, ANGELINA BRAVO, VIRGINIA BRINGA, ALBERTO BUNEO, SIMEON CABANAYAN, LUCRECIA CACATIAN, LEONIDES CADAY, ANGELINA CADOTTE, IGNACIO CALAYCAY, PACIFICO CALUB, RUFINO CALUZA, CALVIN CAMBA, ALFREDO CAMPOSENO, BAGUILITA CANTO, ALFREDO CARRERA, PEDRO CASES, CRESCENTE CASIS, ERNESTO CASTANEDA, HERMINIO CASTILLO, JOSE CASTRO, LEONOR CASTRO, MADEO CASTRO, MARIA PINZON CASTRO, PABLO CATURA, RESTITUTO CESPADES, FLORA CHACON, EDMUNDO CORPUZ, ESTHER CRUZ, CELIA CUARESMA, AQUILINO DACAYO, DIONISIA DASALLA, SOCORRO DELFIN, ABELARDO DIAZ, ARTHUR DIAZ, CYNTHIA DIZON, MARCIA DIZON, ISABELO DOMINGO, HONORATA DOZA, CAROLINA DUAD, JUSTINIANO EPISTOLA, ROMEO ENCARNACION, PRIMITIVO ESCANO, ELSA ESPEJO, JUAN ESPEJO, RIZALINA ESQUILLO, YSMAEL FARINAS, LORNA FAVIS, DAN FERNANDEZ, JAIME FERNANDEZ, ALFREDO FERRER, MODESTO FERRER, JR., EUGENIO FLANDEZ, GUILLERMO FLORENDO, ALFREDO FLORES, DOMINGA FLORES, ROMEO FLORES, LIGAYA FONTANILLA, MELCHOR GASMEN, LEILA GASMENA, CONSUELO GAROLAGA, ALFONSO GOROSPE, CESAR GOROSPE, RICARDO GOROSPE, JR., CARLITO GUZMAN, ERNESTO DE GUZMAN, THELMA DE GUZMAN, FELIX HERNANDEZ, SOLIVEN HERNANDO, FRANCISCO HIDALGO, LEONILO INES, SIXTO JAQUIES, TRINIDAD JAVIER, FERMIN LAGUA, GUALBERTO LAMBINO, ROMAN LANTING, OSCAR LAZO, ROSARIO LAZO, JOSEFINA DE LARA, AMBROSIO LAZOL, NALIE LIBATIQUE, LAMBERTO LLAMAS, ANTONIO LLANES, ROMULA LOPEZ, ADRIANO LORENZANA, ANTONIO MACARAEG, ILDEFONSO MAGAT, CECILIO MAGHANOY, ALFONSO MAGSANOC, AVELINA MALLARE, AUGUSTO MANALO, DOMINADOR MANASAN, BENITO MANECLANG, JR., TIRSO MANGUMAY, EVELIA MANZANO, HONORANTE MARIANO, DOMINGO MEDINA, MARTIN MENDOZA, PERFECTO MILANA, EMILIO MILLAN, GREGORIO MONEGAS, CONSOLACION NAVALTA, NOLI OCAMPO, VICENTE CLEGARIO, ELPIDIO PALMONES, ARACELI PANGALANGAN, ISIDORO PANLASIGUI, JR., ARTEMIO PARIS, JR., FEDERICO PAYUMO, JR., NELIA PAYUMO, BITUEN PAZ, FRANCISCO PENGSON, OSCAR PERALTA, PROCORRO PERALTA, RAMON PERALTA, MINDA PICHAY, MAURO PIMENTEL, PRUDENCIO PIMENTEL, LEOPOLDO PUNO, REYNALDO RABE, ROLANDO REA, CONSTANTINO REA, CECILIA RICO, CECILIO RILLORAZA, AURORA ROMAN, MERCEDES RUBIO, URSULA RUPISAN, OLIVIA SABADO, BERNARDO SACRAMENTO, LUZ SALVADOR, JOSE SAMSON, JR., ROMULA DE LOS SANTOS, ANTONIO SAYSON, JR., FLORANTE SERIL, MARIO SISON, RUDY SISON, PROCEDIO TABIN, LUCENA TABISULA, HANNIBAL TAJANO, ENRIQUE TIANGCO, JR., JUSTINIANO TOBIAS, NYMIA TOLENTINO, CONSTANTE TOLENTINO, TEODORO TOREBIO, FEDERICO TRINIDAD, JOVENCINTO TRINIDAD, LAZARO VALDEZ, LUDRALINA VALDEZ, MAXIMINA VALDEZ, FRANCISCO VELASCO, JR., ROSITA VELASCO, SEVERO VANTANILLA, VENANCIO VENTIGAN, FELICITAS VENUS, NIEVES DE VERA, ELISEO VERSOZA, SILVESTRE VILA, GLORIA VILLAMOR, ALEJANDRO VELLANUEVA, DAVID VILLANUEVA, CAROLINA VILLASENOR ORLANDO VILLASTIQUE,

MAJELLA VILORIN, ROSARIO VILORIA, MAY VIRATA, FEDERICO VIRAY, MELBA YAMBAO, MARIO ZAMORA, AUTENOR ABUEG, SOTERO ACEDO, HONRADO ALBERTO, FELIPE ALIDO, VICENTE ANCHUELO, LIBERTAD APEROCHO, MARIANO BALBAGO, MARIO BALMACEDA, DAISY BICENIO, SYLVIA BUSTAMANTE, RAYMUNDO GEMERINO, LAZARO CAPURAS, ROGELIO CARUNGCONG, ZACARIAS CAYETANO, JR., LILY CHUA, ANDRES CRUZ, ARTURO CRUZ, BIENVENIDO ESTEBAN, PABLO JARETA, MANUEL JOSE, NESTORIA KINTANAR, CLEOPATRIA LAZEM. MELCHOR LAZO, JESUS LUNA, GASPAR MARINAS, CESAR MAULSON, MANUEL MEDINA, JESUS PLURAD, LAKAMBINI RAZON, GLORIA IBANEZ, JOSE SANTOS, ELEAZAR SQUI, JOSE TAMAYO, FELIPE TENORIO, SILVINO UMALI, VICENTE ZARA, SATURNINO GARCIA, WILLIAM GARCIA, NORMA GARINGARAO, ROSARIO ANTONIO, RUBEN BAUTISTA, QUIRINO PUESTO, NELIA M. GOMERI, OSCAR R. LANUZA, AURORA M. LINDAYA, GREGORIO MOGSINO, JACRM B. PAPA, GREGORIO R. RIEGO, TERESITA N. ROZUL, MAGTANGOL SAMALA, PORFIRIO AGOCOLIS, LEONARDO MONTE, HERMELINO PATI, ALFREDO PAYOYO, PURIFICACION ROJAS, ODANO TEANO, RICARDO SANTIAGO, and MARCELO MANGAHAS, respondents.

Gov't. Corp. Counsel Leopoldo M. Abellera, Trial Attorneys Manuel M. Lazaro and Vicente Constantine, Jr., for petitioner.

Renato B. Kare and Simeon C. Sato for private respondents.

 

FERNANDO, J.:

The principal issue that calls for resolution in this appeal by certiorari from an order of respondent Court of Industrial Relations is one of constitutional significance. It is concerned with the expanded role of government necessitated by the increased responsibility to provide for the general welfare. More specifically, it deals with the question of whether petitioner, the Philippine Virginia Tobacco Administration, discharges governmental and not proprietary functions. The landmark opinion of the then Justice, row Chief Justice, Makalintal in Agricultural Credit and Cooperative Financing Administration v. Confederation of Unions in Government Corporations and offices, points the way to the right answer. 1 It interpreted the then fundamental law as hostile to the view of a limited or negative state. It is antithetical to the laissez faire concept. For as noted in an earlier decision, the welfare state concept "is not alien to the philosophy of [the 1935] Constitution." 2 It is much more so under the present Charter, which is impressed with an even more explicit recognition of social and economic rights.  3 There is manifest, to recall Laski, "a definite increase in the profundity of the social conscience," resulting in "a state which seeks to realize more fully the common good of its members." 4 It does not necessarily follow, however, just because petitioner is engaged in governmental rather than proprietary functions, that the labor controversy was beyond the jurisdiction of the now defunct respondent Court. Nor is the objection raised that petitioner does not come within the coverage of the Eight-Hour Labor Law persuasive.  5 We cannot then grant the reversal sought. We affirm.

The facts are undisputed. On December 20, 1966, claimants, now private respondents, filed with respondent Court a petition wherein they alleged their employment relationship, the overtime services in excess of the regular eight hours a day rendered by them, and the failure to pay them overtime compensation in accordance with Commonwealth Act No. 444. Their prayer was for the differential between the amount actually paid to them and the amount allegedly due them. 6 There was an answer filed by petitioner Philippine Virginia Tobacco Administration denying the allegations and raising the special defenses of lack of a cause of action and lack of jurisdiction. 7 The issues were thereafter joined, and the case set for trial, with both parties presenting their evidence.  8 After the parties submitted the case for decision, the then Presiding Judge Arsenio T. Martinez of respondent Court issued an order sustaining the claims of private respondents for overtime services from December 23, 1963 up to

the date the decision was rendered on March 21, 1970, and directing petitioner to pay the same, minus what it had already paid. 9 There was a motion for reconsideration, but respondent Court en banc denied the same. 10 Hence this petition for certiorari.

Petitioner Philippine Virginia Tobacco Administration, as had been noted, would predicate its plea for the reversal of the order complained of on the basic proposition that it is beyond the jurisdiction of respondent Court as it is exercising governmental functions and that it is exempt from the operation of Commonwealth Act No. 444. 11While, to repeat, its submission as to the governmental character of its operation is to be given credence, it is not a necessary consequence that respondent Court is devoid of jurisdiction. Nor could the challenged order be set aside on the additional argument that the Eight-Hour Labor Law is not applicable to it. So it was, at the outset, made clear.

1. A reference to the enactments creating petitioner corporation suffices to demonstrate the merit of petitioner's plea that it performs governmental and not proprietary functions. As originally established by Republic Act No. 2265, 12 its purposes and objectives were set forth thus: "(a) To promote the effective merchandising of Virginia tobacco in the domestic and foreign markets so that those engaged in the industry will be placed on a basis of economic security; (b) To establish and maintain balanced production and consumption of Virginia tobacco and its manufactured products, and such marketing conditions as will insure and stabilize the price of a level sufficient to cover the cost of production plus reasonable profit both in the local as well as in the foreign market; (c) To create, establish, maintain, and operate processing, warehousing and marketing facilities in suitable centers and supervise the selling and buying of Virginia tobacco so that the farmers will enjoy reasonable prices that secure a fair return of their investments; (d) To prescribe rules and regulations governing the grading, classifying, and inspecting of Virginia tobacco; and (e) To improve the living and economic conditions of the people engaged in the tobacco industry." 13 The amendatory statute, Republic Act No. 4155, 14renders even more evident its nature as a governmental agency. Its first section on the declaration of policy reads: "It is declared to be the national policy, with respect to the local Virginia tobacco industry, to encourage the production of local Virginia tobacco of the qualities needed and in quantities marketable in both domestic and foreign markets, to establish this industry on an efficient and economic basis, and, to create a climate conducive to local cigarette manufacture of the qualities desired by the consuming public, blending imported and native Virginia leaf tobacco to improve the quality of locally manufactured cigarettes." 15 The objectives are set forth thus: "To attain this national policy the following objectives are hereby adopted: 1. Financing; 2. Marketing; 3. The disposal of stocks of the Agricultural Credit Administration (ACA) and the Philippine Virginia Tobacco Administration (PVTA) at the best obtainable prices and conditions in order that a reinvigorated Virginia tobacco industry may be established on a sound basis; and 4. Improving the quality of locally manufactured cigarettes through blending of imported and native Virginia leaf tobacco; such importation with corresponding exportation at a ratio of one kilo of imported to four kilos of exported Virginia tobacco, purchased by the importer-exporter from the Philippine Virginia Tobacco Administration." 16

It is thus readily apparent from a cursory perusal of such statutory provisions why petitioner can rightfully invoke the doctrine announced in the leading Agricultural Credit and Cooperative Financing Administration decision 17and why the objection of private respondents with its overtones of the distinction between constituent and ministrant functions of governments as set forth in Bacani v. National Coconut Corporation 18 if futile. The irrelevance of such a distinction considering the needs of the times was clearly pointed out by the present Chief Justice, who took note, speaking of the reconstituted Agricultural Credit Administration, that functions of that sort "may not be strictly what President Wilson described as "constituent" (as distinguished from "ministrant"),such as those relating to the maintenance of peace and the prevention of crime, those regulating property and property rights, those relating to the administration of justice and the determination of political duties of citizens, and those relating to national defense and foreign relations. Under this traditional classification, such constituent functions are exercised by the State as attributes of sovereignty, and not merely to promote the welfare, progress and prosperity of the people — these latter functions being ministrant, the exercise of which is optional on the part of the government." 19 Nonetheless, as he explained so persuasively: "The growing complexities of modern society, however, have rendered this traditional classification of the functions of government quite

unrealistic, not to say obsolete. The areas which used to be left to private enterprise and initiative and which the government was called upon to enter optionally, and only "because it was better equipped to administer for the public welfare than is any private individual or group of individuals", continue to lose their well-defined boundaries and to be absorbed within activities that the government must undertake in its sovereign capacity if it is to meet the increasing social challenges of the times. Here as almost everywhere else the tendency is undoubtedly towards a greater socialization of economic forces. Here of course this development was envisioned, indeed adopted as a national policy, by the Constitution itself in its declaration of principle concerning the promotion of social justice." 20 Thus was laid to rest the doctrine in Bacani v. National Coconut Corporation,21 based on the Wilsonian classification of the tasks incumbent on government into constituent and ministrant in accordance with the laissez faire principle. That concept, then dominant in economics, was carried into the governmental sphere, as noted in a textbook on political science, 22 the first edition of which was published in 1898, its author being the then Professor, later American President, Woodrow Wilson. He took pains to emphasize that what was categorized by him as constituent functions had its basis in a recognition of what was demanded by the "strictest [concept of] laissez faire, [as they] are indeed the very bonds of society." 23 The other functions he would minimize as ministrant or optional.

It is a matter of law that in the Philippines, the laissez faire principle hardly commanded the authoritative position which at one time it held in the United States. As early as 1919, Justice Malcolm in Rubi v. Provincial Board 24could affirm: "The doctrines of laissez faire and of unrestricted freedom of the individual, as axioms of economic and political theory, are of the past. The modern period has shown a widespread belief in the amplest possible demonstration of government activity." 25 The 1935 Constitution, as was indicated earlier, continued that approach. As noted in Edu v. Ericta: 26 "What is more, to erase any doubts, the Constitutional Convention saw to it that the concept of laissez-faire was rejected. It entrusted to our government the responsibility of coping with social and economic problems with the commensurate power of control over economic affairs. Thereby it could live up to its commitment to promote the general welfare through state action." 27 Nor did the opinion in Edu stop there: "To repeat, our Constitution which took effect in 1935 erased whatever doubts there might be on that score. Its philosophy is a repudiation of laissez-faire. One of the leading members of the Constitutional Convention, Manuel A. Roxas, later the first President of the Republic, made it clear when he disposed of the objection of Delegate Jose Reyes of Sorsogon, who noted the "vast extensions in the sphere of governmental functions" and the "almost unlimited power to interfere in the affairs of industry and agriculture as well as to compete with existing business" as "reflections of the fascination exerted by [the then] current tendencies' in other jurisdictions. He spoke thus: "My answer is that this constitution has a definite and well defined philosophy, not only political but social and economic.... If in this Constitution the gentlemen will find declarations of economic policy they are there because they are necessary to safeguard the interest and welfare of the Filipino people because we believe that the days have come when in self-defense, a nation may provide in its constitution those safeguards, the patrimony, the freedom to grow, the freedom to develop national aspirations and national interests, not to be hampered by the artificial boundaries which a constitutional provision automatically imposes." 28

It would be then to reject what was so emphatically stressed in the Agricultural Credit Administration decision about which the observation was earlier made that it reflected the philosophy of the 1935 Constitution and is even more in consonance with the expanded role of government accorded recognition in the present Charter if the plea of petitioner that it discharges governmental function were not heeded. That path this Court is not prepared to take. That would be to go backward, to retreat rather than to advance. Nothing can thus be clearer than that there is no constitutional obstacle to a government pursuing lines of endeavor, formerly reserved for private enterprise. This is one way, in the language of Laski, by which through such activities, "the harsh contract which [does] obtain between the levels of the rich and the poor" may be minimized. 29 It is a response to a trend noted by Justice Laurel in Calalang v. Williams 30 for the humanization of laws and the promotion of the interest of all component elements of society so that man's innate aspirations, in what was so felicitously termed by the First Lady as "a compassionate society" be attained. 31

2. The success that attended the efforts of petitioner to be adjudged as performing governmental rather than proprietary functions cannot militate against respondent Court assuming jurisdiction over this labor dispute. So it was mentioned earlier. As far back as Tabora v. Montelibano, 32 this Court, speaking through Justice Padilla, declared: The NARIC was established by the Government to protect the people against excessive or unreasonable rise in the price of cereals by unscrupulous dealers. With that main objective there is no reason why its function should not be deemed governmental. The Government owes its very existence to that aim and purpose — to protect the people." 33 In a subsequent case, Naric Worker's Union v. Hon. Alvendia, 34 decided four years later, this Court, relying on Philippine Association of Free Labor Unions v. Tan, 35 which specified the cases within the exclusive jurisdiction of the Court of Industrial Relations, included among which is one that involves hours of employment under the Eight-Hour Labor Law, ruled that it is precisely respondent Court and not ordinary courts that should pass upon that particular labor controversy. For Justice J. B. L. Reyes, the ponente, the fact that there were judicial as well as administrative and executive pronouncements to the effect that the Naric was performing governmental functions did not suffice to confer competence on the then respondent Judge to issue a preliminary injunction and to entertain a complaint for damages, which as pointed out by the labor union, was connected with an unfair labor practice. This is emphasized by the dispositive portion of the decision: "Wherefore, the restraining orders complained of, dated May 19, 1958 and May 27, 1958, are set aside, and the complaint is ordered dismissed, without prejudice to the National Rice and Corn Corporation's seeking whatever remedy it is entitled to in the Court of Industrial Relations." 36 Then, too, in a case involving petitioner itself, Philippine Virginia Tobacco Administration, 37 where the point in dispute was whether it was respondent Court or a court of first instance that is possessed of competence in a declaratory relief petition for the interpretation of a collective bargaining agreement, one that could readily be thought of as pertaining to the judiciary, the answer was that "unless the law speaks clearly and unequivocally, the choice should fall on the Court of Industrial Relations." 38 Reference to a number of decisions which recognized in the then respondent Court the jurisdiction to determine labor controversies by government-owned or controlled corporations lends to support to such an approach. 39 Nor could it be explained only on the assumption that proprietary rather than governmental functions did call for such a conclusion. It is to be admitted that such a view was not previously bereft of plausibility. With the aforecited Agricultural Credit and Cooperative Financing Administration decision rendering obsolete the Bacani doctrine, it has, to use a Wilsonian phrase, now lapsed into "innocuous desuetude." 40 Respondent Court clearly was vested with jurisdiction.

3. The contention of petitioner that the Eight-Hour Labor Law 41 does not apply to it hardly deserves any extended consideration. There is an air of casualness in the way such an argument was advanced in its petition for review as well as in its brief. In both pleadings, it devoted less than a full page to its discussion. There is much to be said for brevity, but not in this case. Such a terse and summary treatment appears to be a reflection more of the inherent weakness of the plea rather than the possession of an advocate's enviable talent for concision. It did cite Section 2 of the Act, but its very language leaves no doubt that "it shall apply to all persons employed in any industry or occupation, whether public or private ... ." 42 Nor are private respondents included among the employees who are thereby barred from enjoying the statutory benefits. It cited Marcelo v. Philippine National Red Cross 43 and Boy Scouts of the Philippines v. Araos. 44 Certainly, the activities to which the two above public corporations devote themselves can easily be distinguished from that engaged in by petitioner. A reference to the pertinent sections of both Republic Acts 2265 and 2155 on which it relies to obtain a ruling as to its governmental character should render clear the differentiation that exists. If as a result of the appealed order, financial burden would have to be borne by petitioner, it has only itself to blame. It need not have required private respondents to render overtime service. It can hardly be surmised that one of its chief problems is paucity of personnel. That would indeed be a cause for astonishment. It would appear, therefore, that such an objection based on this ground certainly cannot suffice for a reversal. To repeat, respondent Court must be sustained.

WHEREFORE, the appealed Order of March 21, 1970 and the Resolution of respondent Court en banc of May 8, 1970 denying a motion for reconsideration are hereby affirmed. The last sentence of the Order of March 21, 1970 reads as follows: "To find how much each of them [private respondents] is entitled under this judgment, the Chief of the Examining Division, or any of his authorized

representative, is hereby directed to make a reexamination of records, papers and documents in the possession of respondent PVTA pertinent and proper under the premises and to submit his report of his findings to the Court for further disposition thereof." Accordingly, as provided by the New Labor Code, this case is referred to the National Labor Relations Commission for further proceedings conformably to law. No costs.

G.R. No. L-9959 December 13, 1916

THE GOVERNMENT OF THE PHILIPPINE ISLANDS, represented by the Treasurer of the Philippine Islands,plaintiff-appellee, vs.EL MONTE DE PIEDAD Y CAJA DE AHORRAS DE MANILA, defendant-appellant.

William A. Kincaid and Thomas L. Hartigan for appellant. Attorney-General Avanceña for appellee.

 

TRENT, J.:

About $400,000, were subscribed and paid into the treasury of the Philippine Islands by the inhabitants of the Spanish Dominions of the relief of those damaged by the earthquake which took place in the Philippine Islands on June 3, 1863. Subsequent thereto and on October 6 of that year, a central relief board was appointed, by authority of the King of Spain, to distribute the moneys thus voluntarily contributed. After a thorough investigation and consideration, the relief board allotted $365,703.50 to the various sufferers named in its resolution, dated September 22, 1866, and, by order of the Governor-General of the Philippine Islands, a list of these allotments, together with the names of those entitled thereto, was published in the Official Gazette of Manila dated April 7, 1870. There was later distributed, inaccordance with the above-mentioned allotments, the sum of $30,299.65, leaving a balance of S365,403.85 for distribution. Upon the petition of the governing body of the Monte de Piedad, dated February 1, 1833, the Philippine Government, by order dated the 1st of that month, directed its treasurer to turn over to the Monte de Piedad the sum of $80,000 of the relief fund in installments of $20,000 each. These amounts were received on the following dates: February 15, March 12, April 14, and June 2, 1883, and are still in the possession of the Monte de Piedad. On account of various petitions of the persons, and heirs of others to whom the above-mentioned allotments were made by the central relief board for the payment of those amounts, the Philippine Islands to bring suit against the Monte de Piedad a recover, "through the Attorney-General and in representation of the Government of the Philippine Islands," the $80.000, together with interest, for the benefit of those persons or their heirs appearing in the list of names published in the Official Gazette instituted on May 3, 1912, by the Government of the Philippine Islands, represented by the Insular Treasurer, and after due trial, judgment was entered in favor of the plaintiff for the sum of $80,000 gold or its equivalent in Philippine currency, together with legal interest from February 28, 1912, and the costs of the cause. The defendant appealed and makes the following assignment of errors:

1. The court erred in not finding that the eighty thousand dollars ($80,000), give to the Monte de Piedad y Caja de Ahorros, were so given as a donation subject to one condition, to wit: the return of such sum of money to the Spanish Government of these Islands, within eight days following the day when claimed, in case the Supreme Government of Spain should not approve the action taken by the former government.

2. The court erred in not having decreed that this donation had been cleared; said eighty thousand dollars ($80,000) being at present the exclusive property of the appellant the Monte de Piedad y Caja de Ahorros.

3. That the court erred in stating that the Government of the Philippine Islands has subrogated the Spanish Government in its rights, as regards an important sum of money

resulting from a national subscription opened by reason of the earthquake of June 3, 1863, in these Island.

4. That the court erred in not declaring that Act Numbered 2109, passed by the Philippine Legislature on January 30, 1912, is unconstitutional.

5. That the court erred in holding in its decision that there is no title for the prescription of this suit brought by the Insular Government against the Monte de Piedad y Caja de Ahorros for the reimbursement of the eighty thousand dollars ($80,000) given to it by the late Spanish Government of these Islands.

6. That the court erred in sentencing the Monte de Piedad y Caja de Ahorros to reimburse the Philippine Government in the sum of eighty thousand dollars ($80,000) gold coin, or the equivalent thereof in the present legal tender currency in circulation, with legal interest thereon from February 28th, 1912, and the costs of this suit.

In the royal order of June 29, 1879, the Governor-General of the Philippine Islands was directed to inform the home Government in what manner the indemnity might be paid to which, by virtue of the resolutions of the relief board, the persons who suffered damage by the earthquake might be entitled, in order to perform the sacred obligation which the Government of Spain had assumed toward the donors.

The next pertinent document in order is the defendant's petition, dated February 1, 1883, addressed to the Governor-General of the Philippine Islands, which reads:

Board of Directors of the Monte de Piedad of Manila Presidencia.

Excellency: The Board of Directors of the Monte de Piedad y Caja de Ahorros of Manila informs your Excellency, First: That the funds which it has up to the present been able to dispose of have been exhausted in loans on jewelry, and there only remains the sum of one thousand and odd pesos, which will be expended between to-day and day after tomorrow. Second: That, to maintain the credit of the establishment, which would be greatly injured were its operations suspended, it is necessary to procure money. Third: That your Excellency has proposed to His Majesty's Government to apply to the funds of theMonte de Piedad a part of the funds held in the treasury derived form the national subscription for the relief of the distress caused by the earthquake of 1863. Fourth: That in the public treasury there is held at the disposal of the central earthquake relief board over $1090,000 which was deposited in the said treasury by order of your general Government, it having been transferred thereto from the Spanish-Filipino Bank where it had been held. fifth: That in the straightened circumstances of the moment, your Excellency can, to avert impending disaster to the Monte de Piedad, order that, out of that sum of one hundred thousand pesos held in the Treasury at the disposal of the central relief board, there be transferred to the Monte de Piedadthe sum of $80,000, there to be held under the same conditions as at present in the Treasury, to wit, at the disposal of the Relief Board. Sixth: That should this transfer not be approved for any reason, either because of the failure of His Majesty's Government to approve the proposal made by your Excellency relative to the application to the needs of the Monte de Piedad of a pat of the subscription intended to believe the distress caused by the earthquake of 1863, or for any other reason, the board of directors of the Monte de Piedad obligates itself to return any sums which it may have received on account of the eighty thousand pesos, or the whole thereof, should it have received the same, by securing a loan from whichever bank or banks may lend it the money at the cheapest rate upon the security of pawned jewelry. — This is an urgent measure to save the Monte de Piedad in the

present crisis and the board of directors trusts to secure your Excellency's entire cooperation and that of the other officials who have take part in the transaction.

The Governor-General's resolution on the foregoing petition is as follows:

GENERAL GOVERNMENT OF THE PHILIPPINES. MANILA, February 1, 1883.

In view of the foregoing petition addressed to me by the board of directors of the Monte de Piedad of this city, in which it is stated that the funds which the said institution counted upon are nearly all invested in loans on jewelry and that the small account remaining will scarcely suffice to cover the transactions of the next two days, for which reason it entreats the general Government that, in pursuance of its telegraphic advice to H. M. Government, the latter direct that there be turned over to said Monte de Piedad $80,000 out of the funds in the public treasury obtained from the national subscription for the relief of the distress caused by the earthquake of 1863, said board obligating itself to return this sum should H. M. Government, for any reason, not approve the said proposal, and for this purpose it will procure funds by means of loans raised on pawned jewelry; it stated further that if the aid so solicited is not furnished, it will be compelled to suspend operations, which would seriously injure the credit of so beneficient an institution; and in view of the report upon the matter made by the Intendencia General de Hacienda; and considering the fact that the public treasury has on hand a much greater sum from the source mentioned than that solicited; and considering that this general Government has submitted for the determination of H. M. Government that the balance which, after strictly applying the proceeds obtained from the subscription referred to, may remain as a surplus should be delivered to the Monte de Piedad, either as a donation, or as a loan upon the security of the credit of the institution, believing that in so doing the wishes of the donors would be faithfully interpreted inasmuch as those wishes were no other than to relieve distress, an act of charity which is exercised in the highest degree by the Monte de Piedad, for it liberates needy person from the pernicious effects of usury; and

Considering that the lofty purposes that brought about the creation of the pious institution referred to would be frustrated, and that the great and laudable work of its establishment, and that the great and laudable and valuable if the aid it urgently seeks is not granted, since the suspension of its operations would seriously and regrettably damage the ever-growing credit of the Monte de Piedad; and

Considering that if such a thing would at any time cause deep distress in the public mind, it might be said that at the present juncture it would assume the nature of a disturbance of public order because of the extreme poverty of the poorer classes resulting from the late calamities, and because it is the only institution which can mitigate the effects of such poverty; and

Considering that no reasonable objection can be made to granting the request herein contained, for the funds in question are sufficiently secured in the unlikely event that H> M. Government does not approve the recommendation mentioned, this general Government, in the exercise of the extraordinary powers conferred upon it and in conformity with the report of the Intendencia de Hacienda, resolves as follows:

First. Authority is hereby given to deliver to the Monte de Piedad, out of the sum held in the public treasury of these Islands obtained from the national subscription opened by reason of

the earthquakes of 1863, amounts up to the sum $80,000, as its needs may require, in installments of $20,000.

Second. The board of directors of the Monte de Piedad is solemnly bound to return, within eight days after demand, the sums it may have so received, if H. M. Government does not approve this resolution.

Third. The Intendencia General de Hacienda shall forthwith, and in preference to all other work, proceed to prepare the necessary papers so that with the least possible delay the payment referred to may be made and the danger that menaces the Monte de Piedad of having to suspend its operations may be averted.

H. M. Government shall be advised hereof. lawphi1.net

(Signed) P. DE RIVERA.

By the royal order of December 3, 1892, the Governor-General of the Philippine Islands was ordered to "inform this ministerio what is the total sum available at the present time, taking into consideration the sums delivered to the Monte de Piedad pursuant to the decree issued by your general Government on February 1, 1883," and after the rights of the claimants, whose names were published in the Official Gazette of Manila on April 7, 1870, and their heirs had been established, as therein provided, as such persons "have an unquestionable right to be paid the donations assigned to them therein, your general Government shall convoke them all within a reasonable period and shall pay their shares to such as shall identify themselves, without regard to their financial status," and finally "that when all the proceedings and operations herein mentioned have been concluded and the Government can consider itself free from all kinds of claims on the part of those interested in the distribution of the funds deposited in the vaults of the Treasury, such action may be taken as the circumstances shall require, after first consulting the relief board and your general Government and taking account of what sums have been delivered to the Monte de Piedad and those that were expended in 1888 to relieve public calamities," and "in order that all the points in connection with the proceedings had as a result of the earthquake be clearly understood, it is indispensable that the offices hereinbefore mentioned comply with the provisions contained in paragraphs 2 and 3 of the royal order of June 25, 1879." On receipt of this Finance order by the Governor-General, the Department of Finance was called upon for a report in reference to the $80,000 turned over to the defendant, and that Department's report to the Governor-General dated June 28, 1893, reads:

Intendencia General de Hacienda de Filipinas (General Treasury of the Philippines) — Excellency. — By Royal Order No. 1044 of December 3, last, it is provided that the persons who sustained losses by the earthquakes that occurred in your capital in the year 1863 shall be paid the amounts allotted to them out of the sums sent from Spain for this purpose, with observance of the rules specified in the said royal order, one of them being that before making the payment to the interested parties the assets shall be reduced to money. These assets, during the long period of time that has elapsed since they were turned over to the Treasury of the Philippine Islands, were used to cover the general needs of the appropriation, a part besides being invested in the relief of charitable institutions and another part to meet pressing needs occasioned by public calamities. On January 30, last, your Excellency was please to order the fulfillment of that sovereign mandate and referred the same to this Intendencia for its information and the purposes desired (that is, for compliance with its directions and, as aforesaid, one of these being the liquidation, recovery, and deposit with the Treasury of the sums paid out of that fund and which were expended in a different way from that intended by the donors) and this Intendencia believed the moment had arrived to claim from the board of directors of the Monte de Piedad y Caja de Ahorros the sum of 80,000 pesos which, by decree of your general Government of the date of February 1, 1883,

was loaned to it out of the said funds, the (Monte de Piedad) obligating itself to return the same within the period of eight days if H. M. Government did not approve the delivery. On this Intendencia's demanding from the Monte de Piedad the eighty thousand pesos, thus complying with the provisions of the Royal Order, it was to be supposed that no objection to its return would be made by the Monte de Piedad for, when it received the loan, it formally engaged itself to return it; and, besides, it was indisputable that the moment to do so had arrived, inasmuch as H. M. Government, in ordering that the assets of the earthquake relief fund should he collected, makes express mention of the 80,000 pesos loaned to the Monte de Piedad, without doubt considering as sufficient the period of ten years during which it has been using this large sum which lawfully belongs to their persons. This Intendencia also supposed that the Monte de Piedad no longer needed the amount of that loan, inasmuch as, far from investing it in beneficient transactions, it had turned the whole amount into the voluntary deposit funds bearing 5 per cent interests, the result of this operation being that the debtor loaned to the creditor on interest what the former had gratuitously received. But the Monte de Piedad, instead of fulfilling the promise it made on receiving the sum, after repeated demands refused to return the money on the ground that only your Excellency, and not the Intendencia (Treasury), is entitled to order the reimbursement, taking no account of the fact that this Intendencia was acting in the discharge of a sovereign command, the fulfillment of which your Excellency was pleased to order; and on the further ground that the sum of 80,000 pesos which it received from the fund intended for the earthquake victims was not received as a loan, but as a donation, this in the opinion of this Intendencia, erroneously interpreting both the last royal order which directed the apportionment of the amount of the subscription raised in the year 1863 and the superior decree which granted the loan, inasmuch as in this letter no donation is made to the Monte de Piedad of the 80,000 pesos, but simply a loan; besides, no donation whatever could be made of funds derived from a private subscription raised for a specific purpose, which funds are already distributed and the names of the beneficiaries have been published in the Gaceta, there being lacking only the mere material act of the delivery, which has been unduly delayed. In view of the unexpected reply made by the Monte de Piedad, and believing it useless to insist further in the matter of the claim for the aforementioned loan, or to argue in support thereof, this Intendencia believes the intervention of your Excellency necessary in this matter, if the royal Order No. 1044 of December 3, last, is to be complied with, and for this purpose I beg your Excellency kindly to order the Monte de Piedad to reimburse within the period of eight days the 80,000 which it owes, and that you give this Intendencia power to carry out the provisions of the said royal order. I must call to the attention of your Excellency that the said pious establishment, during the last few days and after demand was made upon it, has endorsed to the Spanish-Filipino Bank nearly the whole of the sum which it had on deposit in the general deposit funds.

The record in the case under consideration fails to disclose any further definite action taken by either the Philippine Government or the Spanish Government in regard to the $80,000 turned over to the Monte de Piedad.

In the defendant's general ledger the following entries appear: "Public Treasury: February 15, 1883, $20,000; March 12, 1883, $20,000; April 14, 1883, $20,000; June 2, 1883, $20,000, total $80,000." The book entry for this total is as follows: "To the public Treasury derived from the subscription for the earthquake of 1863, $80,000 received from general Treasury as a returnable loan, and without interest." The account was carried in this manner until January 1, 1899, when it was closed by transferring the amount to an account called "Sagrada Mitra," which latter account was a loan of $15,000 made to the defendant by the Archbishop of Manila, without interest, thereby placing the "Sagrada Mitra" account at $95,000 instead of $15,000. The above-mentioned journal entry for January 1, 1899, reads: "Sagrada Mitra and subscription, balance of these two account which on this

date are united in accordance with an order of the Exmo. Sr. Presidente of the Council transmitted verbally to the Presidente Gerente of these institutions, $95,000."

On March 16, 1902, the Philippine government called upon the defendant for information concerning the status of the $80,000 and received the following reply:

MANILA, March 31, 1902.

To the Attorney-General of the Department of Justice of the Philippine Islands.

SIR: In reply to your courteous letter of the 16th inst., in which you request information from this office as to when and for what purpose the Spanish Government delivered to the Monte de Piedad eighty thousand pesos obtained from the subscription opened in connection with the earthquake of 1863, as well as any other information that might be useful for the report which your office is called upon to furnish, I must state to your department that the books kept in these Pious Institutions, and which have been consulted for the purpose, show that on the 15th of February, 1883, they received as a reimbursable loan and without interest, twenty thousand pesos, which they deposited with their own funds. On the same account and on each of the dates of March 12, April 14 and June 2 of the said year, 1883, they also received and turned into their funds a like sum of twenty thousand pesos, making a total of eighty thousand pesos. — (Signed) Emilio Moreta.

I hereby certify that the foregoing is a literal copy of that found in the letter book No. 2 of those Pious Institutions.

Manila, November 19, 1913 (Sgd.) EMILIO LAZCANOTEGUI, Secretary

(Sgd.) O. K. EMILIO MORETA,Managing Director.

The foregoing documentary evidence shows the nature of the transactions which took place between the Government of Spain and the Philippine Government on the one side and the Monte de Piedad on the other, concerning the $80,000. The Monte de Piedad, after setting forth in its petition to the Governor-General its financial condition and its absolute necessity for more working capital, asked that out of the sum of $100,000 held in the Treasury of the Philippine Islands, at the disposal of the central relief board, there be transferred to it the sum of $80,000 to be held under the same conditions, to wit, "at the disposal of the relief board." The Monte de Piedad agreed that if the transfer of these funds should not be approved by the Government of Spain, the same would be returned forthwith. It did not ask that the $80,000 be given to it as a donation. The Governor-General, after reciting the substance of the petition, stated that "this general Government has submitted for the determination of H. M. Government that the balance which, after strictly applying the proceeds obtained from the subscription referred to, may remain as a surplus, should be delivered to the Monte de Piedad, either as a donation, or as a loan upon the security of the credit of the institution," and "considering that no reasonable objection can be made to granting the request herein contained," directed the transfer of the $80,000 to be made with the understanding that "the Board of Directors of the Monte de Piedad is solemnly bound to return, within eight days after demand, the sums it may have so received, if H. M. Government does not approve this resolution." It will be noted that the first and only time the word "donation" was used in connection with the $80,000 appears in this resolution of the Governor-General. It may be inferred from the royal orders that the Madrid Government did tacitly approve of the transfer of the $80,000 to the Monte de Piedad as a

loan without interest, but that Government certainly did not approve such transfer as a donation for the reason that the Governor-General was directed by the royal order of December 3, 1892, to inform the Madrid Government of the total available sum of the earthquake fund, "taking into consideration the sums delivered to the Monte de Piedadpursuant to the decree issued by your general Government on February 1, 1883." This language, nothing else appearing, might admit of the interpretation that the Madrid Government did not intend that the Governor-General of the Philippine Islands should include the $80,000 in the total available sum, but when considered in connection with the report of the Department of Finance there can be no doubt that it was so intended. That report refers expressly to the royal order of December 3d, and sets forth in detail the action taken in order to secure the return of the $80,000. The Department of Finance, acting under the orders of the Governor-General, understood that the $80,000 was transferred to the Monte de Piedad well knew that it received this sum as a loan interest." The amount was thus carried in its books until January, 1899, when it was transferred to the account of the "Sagrada Mitra" and was thereafter known as the "Sagrada Mitra and subscription account." Furthermore, the Monte de Piedad recognized and considered as late as March 31, 1902, that it received the $80,000 "as a returnable loan, and without interest." Therefore, there cannot be the slightest doubt the fact that the Monte de Piedad received the $80,000 as a mere loan or deposit and not as a donation. Consequently, the first alleged error is entirely without foundation.

Counsel for the defendant, in support of their third assignment of error, say in their principal brief that:

The Spanish nation was professedly Roman Catholic and its King enjoyed the distinction of being deputy ex officio of the Holy See and Apostolic Vicar-General of the Indies, and as such it was his duty to protect all pious works and charitable institutions in his kingdoms, especially those of the Indies; among the latter was the Monte de Piedad of the Philippines, of which said King and his deputy the Governor-General of the Philippines, as royal vice-patron, were, in a special and peculiar manner, the protectors; the latter, as a result of the cession of the Philippine Islands, Implicitly renounced this high office and tacitly returned it to the Holy See, now represented by the Archbishop of Manila; the national subscription in question was a kind of foundation or pious work, for a charitable purpose in these Islands; and the entire subscription not being needed for its original purpose, the royal vice-patron, with the consent of the King, gave the surplus thereof to an analogous purpose; the fulfillment of all these things involved, in the majority, if not in all cases, faithful compliance with the duty imposed upon him by the Holy See, when it conferred upon him the royal patronage of the Indies, a thing that touched him very closely in his conscience and religion; the cessionary Government though Christian, was not Roman Catholic and prided itself on its policy of non-interference in religious matters, and inveterately maintained a complete separation between the ecclesiastical and civil powers.

In view of these circumstances it must be quite clear that, even without the express provisions of the Treaty of Paris, which apparently expressly exclude such an idea, it did not befit the honor of either of the contracting parties to subrogate to the American Government in lieu of the Spanish Government anything respecting the disposition of the funds delivered by the latter to the Monte de Piedad. The same reasons that induced the Spanish Government to take over such things would result in great inconvenience to the American Government in attempting to do so. The question was such a delicate one, for the reason that it affected the conscience, deeply religious, of the King of Spain, that it cannot be believed that it was ever his intention to confide the exercise thereof to a Government like the American. (U. S. vs. Arredondo, 6 Pet. [U. S.], 711.)

It is thus seen that the American Government did not subrogate the Spanish Government or rather, the King of Spain, in this regard; and as the condition annexed to the donation was lawful and possible of fulfillment at the time the contract was made, but became impossible of fulfillment by the cession made by the Spanish Government in these Islands, compliance therewith is excused and the contract has been cleared thereof.

The contention of counsel, as thus stated, in untenable for two reason, (1) because such contention is based upon the erroneous theory that the sum in question was a donation to the Monte de Piedad and not a loan, and (2) because the charity founded by the donations for the earthquake sufferers is not and never was intended to be an ecclesiastical pious work. The first proposition has already been decided adversely to the defendant's contention. As to the second, the record shows clearly that the fund was given by the donors for a specific and definite purpose — the relief of the earthquake sufferers — and for no other purpose. The money was turned over to the Spanish Government to be devoted to that purpose. The Spanish Government remitted the money to the Philippine Government to be distributed among the suffers. All officials, including the King of Spain and the Governor-General of the Philippine Islands, who took part in the disposal of the fund, acted in their purely civil, official capacity, and the fact that they might have belonged to a certain church had nothing to do with their acts in this matter. The church, as such, had nothing to do with the fund in any way whatever until the $80,000 reached the coffers of the Monte de Piedad (an institution under the control of the church) as a loan or deposit. If the charity in question had been founded as an ecclesiastical pious work, the King of Spain and the Governor-General, in their capacities as vicar-general of the Indies and as royal vice-patron, respectively, would have disposed of the fund as such and not in their civil capacities, and such functions could not have been transferred to the present Philippine Government, because the right to so act would have arisen out of the special agreement between the Government of Spain and the Holy See, based on the union of the church and state which was completely separated with the change of sovereignty.

And in their supplemental brief counsel say:

By the conceded facts the money in question is part of a charitable subscription. The donors were persons in Spain, the trustee was the Spanish Government, the donees, the cestuis que trustent, were certain persons in the Philippine Islands. The whole matter is one of trusteeship. This is undisputed and indisputable. It follows that the Spanish Government at no time was the owner of the fund. Not being the owner of the fund it could not transfer the ownership. Whether or not it could transfer its trusteeship it certainly never has expressly done so and the general terms of property transfer in the Treaty of Paris are wholly insufficient for such a purpose even could Spain have transferred its trusteeship without the consent of the donors and even could the United States, as a Government, have accepted such a trust under any power granted to it by the thirteen original States in the Constitution, which is more than doubtful. It follows further that this Government is not a proper party to the action. The only persons who could claim to be damaged by this payment to the Monte, if it was unlawful, are the donors or the cestuis que trustent, and this Government is neither.

If "the whole matter is one of trusteeship," and it being true that the Spanish Government could not, as counsel say, transfer the ownership of the fund to the Monte de Piedad, the question arises, who may sue to recover this loan? It needs no argument to show that the Spanish or Philippine Government, as trustee, could maintain an action for this purpose had there been no change of sovereignty and if the right of action has not prescribed. But those governments were something more than mere common law trustees of the fund. In order to determine their exact status with reference to this fund, it is necessary to examine the law in force at the time there transactions took place, which are the law of June 20, 1894, the royal decree of April 27. 1875, and the instructions

promulgated on the latter date. These legal provisions were applicable to the Philippine Islands (Benedicto vs. De la Rama, 3 Phil. Rep., 34)

The funds collected as a result of the national subscription opened in Spain by royal order of the Spanish Government and which were remitted to the Philippine Government to be distributed among the earthquake sufferers by the Central Relief Board constituted, under article 1 of the law of June 20, 1894, and article 2 of the instructions of April 27, 1875, a special charity of a temporary nature as distinguished from a permanent public charitable institution. As the Spanish Government initiated the creation of the fund and as the donors turned their contributions over to that Government, it became the duty of the latter, under article 7 of the instructions, to exercise supervision and control over the moneys thus collected to the end that the will of the donors should be carried out. The relief board had no power whatever to dispose of the funds confided to its charge for other purposes than to distribute them among the sufferers, because paragraph 3 of article 11 of the instructions conferred the power upon the secretary of the interior of Spain, and no other, to dispose of the surplus funds, should there be any, by assigning them to some other charitable purpose or institution. The secretary could not dispose of any of the funds in this manner so long as they were necessary for the specific purpose for which they were contributed. The secretary had the power, under the law above mentioned to appoint and totally or partially change the personnel of the relief board and to authorize the board to defend the rights of the charity in the courts. The authority of the board consisted only in carrying out the will of the donors as directed by the Government whose duty it was to watch over the acts of the board and to see that the funds were applied to the purposes for which they were contributed .The secretary of the interior, as the representative of His Majesty's Government, exercised these powers and duties through the Governor-General of the Philippine Islands. The Governments of Spain and of the Philippine Islands in complying with their duties conferred upon them by law, acted in their governmental capacities in attempting to carry out the intention of the contributors. It will this be seen that those governments were something more, as we have said, than mere trustees of the fund.

It is further contended that the obligation on the part of the Monte de Piedad to return the $80,000 to the Government, even considering it a loan, was wiped out on the change of sovereignty, or inn other words, the present Philippine Government cannot maintain this action for that reason. This contention, if true, "must result from settled principles of rigid law," as it cannot rest upon any title to the fund in the Monte de Piedad acquired prior to such change. While the obligation to return the $80,000 to the Spanish Government was still pending, war between the United States and Spain ensued. Under the Treaty of Paris of December 10, 1898, the Archipelago, known as the Philippine Islands, was ceded to the United States, the latter agreeing to pay Spain the sum of $20,000,000. Under the first paragraph of the eighth article, Spain relinquished to the United States "all buildings, wharves, barracks, forts, structures, public highways, and other immovable property which, in conformity with law, belonged to the public domain, and as such belonged to the crown of Spain." As the $80,000 were not included therein, it is said that the right to recover this amount did not, therefore, pass to the present sovereign. This, in our opinion, does not follow as a necessary consequence, as the right to recover does not rest upon the proposition that the $80,000 must be "other immovable property" mentioned in article 8 of the treaty, but upon contractual obligations incurred before the Philippine Islands were ceded to the United States. We will not inquire what effect his cession had upon the law of June 20, 1849, the royal decree of April 27, 1875, and the instructions promulgated on the latter date. In Vilas vs. Manila (220 U. S., 345), the court said:

That there is a total abrogation of the former political relations of the inhabitants of the ceded region is obvious. That all laws theretofore in force which are in conflict with the political character, constitution, or institutions of the substituted sovereign, lose their force, is also plain. (Alvarez y Sanchez vs. United States, 216 U. S., 167.) But it is equally settled in the same public law that the great body of municipal law which regulates private and domestic rights continues in force until abrogated or changed by the new ruler.

If the above-mentioned legal provisions are in conflict with the political character, constitution or institutions of the new sovereign, they became inoperative or lost their force upon the cession of the Philippine Islands to the United States, but if they are among "that great body of municipal law which regulates private and domestic rights," they continued in force and are still in force unless they have been repealed by the present Government. That they fall within the latter class is clear from their very nature and character. They are laws which are not political in any sense of the word. They conferred upon the Spanish Government the right and duty to supervise, regulate, and to some extent control charities and charitable institutions. The present sovereign, in exempting "provident institutions, savings banks, etc.," all of which are in the nature of charitable institutions, from taxation, placed such institutions, in so far as the investment in securities are concerned, under the general supervision of the Insular Treasurer (paragraph 4 of section 111 of Act No. 1189; see also Act No. 701).

Furthermore, upon the cession of the Philippine Islands the prerogatives of he crown of Spain devolved upon he United States. In Magill vs. Brown (16 Fed. Cas., 408), quoted with approval in Mormon Charch vs. United States (136 U. S.,1, 57), the court said:

The Revolution devolved on the State all the transcendent power of Parliament, and the prerogative of the crown, and gave their Acts the same force and effect.

In Fontain vs. Ravenel (17 Hw., 369, 384), Mr. Justice McLean, delivering the opinion of the court in a charity case, said:

When this country achieved its independence, the prerogatives of the crown devolved upon the people of the States. And this power still remains with them except so fact as they have delegated a portion of it to the Federal Government. The sovereign will is made known to us by legislative enactment. The State as a sovereign, is the parens patriae.

Chancelor Kent says:

In this country, the legislature or government of the State, as parens patriae, has the right to enforce all charities of public nature, by virtue of its general superintending authority over the public interests, where no other person is entrusted with it. (4 Kent Com., 508, note.)

The Supreme Court of the United States in Mormon Church vs. United States, supra, after approving also the last quotations, said:

This prerogative of parens patriae is inherent in the supreme power of every State, whether that power is lodged in a royal person or in the legislature, and has no affinity to those arbitrary powers which are sometimes exerted by irresponsible monarchs to the great detriment of the people and the destruction of their liberties. On the contrary, it is a most beneficient functions, and often necessary to be exercised in the interest of humanity, and for the prevention of injury to those who cannot protect themselves.

The court in the same case, after quoting from Sohier vs. Mass. General Hospital (3 Cush., 483, 497), wherein the latter court held that it is deemed indispensible that there should be a power in the legislature to authorize the same of the estates of in facts, idiots, insane persons, and persons not known, or not in being, who cannot act for themselves, said:

These remarks in reference to in facts, insane persons and person not known, or not in being, apply to the beneficiaries of charities, who are often in capable of vindicating their

rights, and justly look for protection to the sovereign authority, acting as parens patriae. They show that this beneficient functions has not ceased t exist under the change of government from a monarchy to a republic; but that it now resides in the legislative department, ready to be called into exercise whenever required for the purposes of justice and right, and is a clearly capable of being exercised in cases of charities as in any other cases whatever.

In People vs. Cogswell (113 Cal. 129, 130), it was urged that the plaintiff was not the real party in interest; that the Attorney-General had no power to institute the action; and that there must be an allegation and proof of a distinct right of the people as a whole, as distinguished from the rights of individuals, before an action could be brought by the Attorney-General in the name of the people. The court, in overruling these contentions, held that it was not only the right but the duty of the Attorney-General to prosecute the action, which related to charities, and approved the following quotation from Attorney-General vs. Compton (1 Younge & C. C., 417):

Where property affected by a trust for public purposes is in the hands of those who hold it devoted to that trust, it is the privilege of the public that the crown should be entitled to intervene by its officers for the purpose of asserting, on behalf on the public generally, the public interest and the public right, which, probably, no individual could be found effectually to assert, even if the interest were such as to allow it. (2 Knet's Commentaries, 10th ed., 359; Lewin on Trusts, sec. 732.)

It is further urged, as above indicated, that "the only persons who could claim to be damaged by this payment to the Monte, if it was unlawful, are the donors or the cestuis que trustent, and this Government is neither. Consequently, the plaintiff is not the proper party to bring the action." The earthquake fund was the result or the accumulation of a great number of small contributions. The names of the contributors do not appear in the record. Their whereabouts are unknown. They parted with the title to their respective contributions. The beneficiaries, consisting of the original sufferers and their heirs, could have been ascertained. They are quite numerous also. And no doubt a large number of the original sufferers have died, leaving various heirs. It would be impracticable for them to institute an action or actions either individually or collectively to recover the $80,000. The only course that can be satisfactorily pursued is for the Government to again assume control of the fund and devote it to the object for which it was originally destined.

The impracticability of pursuing a different course, however, is not the true ground upon which the right of the Government to maintain the action rests. The true ground is that the money being given to a charity became, in a measure, public property, only applicable, it is true, to the specific purposes to which it was intended to be devoted, but within those limits consecrated to the public use, and became part of the public resources for promoting the happiness and welfare of the Philippine Government. (Mormon Church vs. U. S., supra.) To deny the Government's right to maintain this action would be contrary to sound public policy, as tending to discourage the prompt exercise of similar acts of humanity and Christian benevolence in like instances in the future.

As to the question raised in the fourth assignment of error relating to the constitutionality of Act No. 2109, little need be said for the reason that we have just held that the present Philippine Government is the proper party to the action. The Act is only a manifestation on the part of the Philippine Government to exercise the power or right which it undoubtedly had. The Act is not, as contended by counsel, in conflict with the fifth section of the Act of Congress of July 1, 1902, because it does not take property without due process of law. In fact, the defendant is not the owner of the $80,000, but holds it as a loan subject to the disposal of the central relief board. Therefor, there can be nothing in the Act which transcends the power of the Philippine Legislature.

In Vilas vs. Manila, supra, the plaintiff was a creditor of the city of Manila as it existed before the cession of the Philippine Islands to the United States by the Treaty of Paris of December 10, 1898. The action was brought upon the theory that the city, under its present charter from the Government of the Philippine Islands, was the same juristic person, and liable upon the obligations of the old city. This court held that the present municipality is a totally different corporate entity and in no way liable for the debts of the Spanish municipality. The Supreme Court of the United States, in reversing this judgment and in holding the city liable for the old debt, said:

The juristic identity of the corporation has been in no wise affected, and, in law, the present city is, in every legal sense, the successor of the old. As such it is entitled to the property and property rights of the predecessor corporation, and is, in law, subject to all of its liabilities.

In support of the fifth assignment of error counsel for the defendant argue that as the Monte de Piedad declined to return the $80,000 when ordered to do so by the Department of Finance in June, 1893, the plaintiff's right of action had prescribed at the time this suit was instituted on May 3, 1912, citing and relying upon article 1961, 1964 and 1969 of the Civil Code. While on the other hand, the Attorney-General contends that the right of action had not prescribed (a) because the defense of prescription cannot be set up against the Philippine Government, (b) because the right of action to recover a deposit or trust funds does not prescribe, and (c) even if the defense of prescription could be interposed against the Government and if the action had, in fact, prescribed, the same was revived by Act No. 2109.

The material facts relating to this question are these: The Monte de Piedad received the $80,000 in 1883 "to be held under the same conditions as at present in the treasury, to wit, at the disposal of the relief board." In compliance with the provisions of the royal order of December 3, 1892, the Department of Finance called upon the Monte de Piedad in June, 1893, to return the $80,000. The Monte declined to comply with this order upon the ground that only the Governor-General of the Philippine Islands and not the Department of Finance had the right to order the reimbursement. The amount was carried on the books of the Monte as a returnable loan until January 1, 1899, when it was transferred to the account of the "Sagrada Mitra." On March 31, 1902, the Monte, through its legal representative, stated in writing that the amount in question was received as a reimbursable loan, without interest. Act No. 2109 became effective January 30, 1912, and the action was instituted on May 3rd of that year.

Counsel for the defendant treat the question of prescription as if the action was one between individuals or corporations wherein the plaintiff is seeking to recover an ordinary loan. Upon this theory June, 1893, cannot be taken as the date when the statute of limitations began to run, for the reason that the defendant acknowledged in writing on March 31, 1902, that the $80,000 were received as a loan, thereby in effect admitting that it still owed the amount. (Section 50, Code of Civil Procedure.) But if counsels' theory is the correct one the action may have prescribed on May 3, 1912, because more than ten full years had elapsed after March 31, 1902. (Sections 38 and 43, Code of Civil Procedure.)

Is the Philippine Government bound by the statute of limitations? The Supreme Court of the United States in U. S.vs. Nashville, Chattanooga & St. Louis Railway Co. (118 U. S., 120, 125), said:

It is settled beyond doubt or controversy — upon the foundation of the great principle of public policy, applicable to all governments alike, which forbids that the public interests should be prejudiced by the negligence of the officers or agents to whose care they are confided — that the United States, asserting rights vested in it as a sovereign government, is not bound by any statute of limitations, unless Congress has clearly manifested its intention that it should be so bound. (Lindsey vs. Miller, 6 Pet. 666; U. S. vs.Knight, 14 Pet., 301;

Gibson vs. Chouteau, 13 Wall., 92; U. S. vs. Thompson, 98 U. S., 486; Fink vs. O'Neil, 106 U. S., 272, 281.)

In Gibson vs. Choteau, supra, the court said:

It is a matter of common knowledge that statutes of limitation do not run against the State. That no laches can be imputed to the King, and that no time can bar his rights, was the maxim of the common laws, and was founded on the principle of public policy, that as he was occupied with the cares of government he ought not to suffer from the negligence of his officer and servants. The principle is applicable to all governments, which must necessarily act through numerous agents, and is essential to a preservation of the interests and property of the public. It is upon this principle that in this country the statutes of a State prescribing periods within which rights must be prosecuted are not held to embrace the State itself, unless it is expressly designated or the mischiefs to be remedied are of such a nature that it must necessarily be included. As legislation of a State can only apply to persons and thing over which the State has jurisdiction, the United States are also necessarily excluded from the operation of such statutes.

In 25 Cyc., 1006, the rule, supported by numerous authorities, is stated as follows:

In the absence of express statutory provision to the contrary, statute of limitations do not as a general rule run against the sovereign or government, whether state or federal. But the rule is otherwise where the mischiefs to be remedied are of such a nature that the state must necessarily be included, where the state goes into business in concert or in competition with her citizens, or where a party seeks to enforces his private rights by suit in the name of the state or government, so that the latter is only a nominal party.

In the instant case the Philippine Government is not a mere nominal party because it, in bringing and prosecuting this action, is exercising its sovereign functions or powers and is seeking to carry out a trust developed upon it when the Philippine Islands were ceded to the United States. The United States having in 1852, purchased as trustee for the Chickasaw Indians under treaty with that tribe, certain bonds of the State of Tennessee, the right of action of the Government on the coupons of such bonds could not be barred by the statute of limitations of Tennessee, either while it held them in trust for the Indians, or since it became the owner of such coupons. (U. S.vs. Nashville, etc., R. Co., supra.) So where lands are held in trust by the state and the beneficiaries have no right to sue, a statute does not run against the State's right of action for trespass on the trust lands. (Greene Tp. vs.Campbell, 16 Ohio St., 11; see also Atty.-Gen. vs. Midland R. Co., 3 Ont., 511 [following Reg. vs. Williams, 39 U. C. Q. B., 397].)

These principles being based "upon the foundation of the great principle of public policy" are, in the very nature of things, applicable to the Philippine Government.

Counsel in their argument in support of the sixth and last assignments of error do not question the amount of the judgment nor do they question the correctness of the judgment in so far as it allows interest, and directs its payment in gold coin or in the equivalent in Philippine currency.

For the foregoing reasons the judgment appealed from is affirmed, with costs against the appellant. So ordered.

G.R. No. L-25843 July 25, 1974

MELCHORA CABANAS, plaintiff-appellee, vs.FRANCISCO PILAPIL, defendant-appellant.

Seno, Mendoza & Associates for plaintiff-appellee.

Emilio Benitez, Jr. for defendant-appellant.

 

FERNANDO, J.:p

The disputants in this appeal from a question of law from a lower court decision are the mother and the uncle of a minor beneficiary of the proceeds of an insurance policy issued on the life of her deceased father. The dispute centers as to who of them should be entitled to act as trustee thereof. The lower court applying the appropriate Civil Code provisions decided in favor of the mother, the plaintiff in this case. Defendant uncle appealed. As noted, the lower court acted the way it did following the specific mandate of the law. In addition, it must have taken into account the principle that in cases of this nature the welfare of the child is the paramount consideration. It is not an unreasonable assumption that between a mother and an uncle, the former is likely to lavish more care on and pay greater attention to her. This is all the more likely considering that the child is with the mother. There are no circumstances then that did militate against what conforms to the natural order of things, even if the language of the law were not as clear. It is not to be lost sight of either that the judiciary pursuant to its role as an agency of the State as parens patriae, with an even greater stress on family unity under the present Constitution, did weigh in the balance the opposing claims and did come to the conclusion that the welfare of the child called for the mother to be entrusted with such responsibility. We have to affirm.

The appealed decision made clear: "There is no controversy as to the facts. " 1 The insured, Florentino Pilapil had a child, Millian Pilapil, with a married woman, the plaintiff, Melchora Cabanas. She was ten years old at the time the complaint was filed on October 10, 1964. The defendant, Francisco Pilapil, is the brother of the deceased. The deceased insured himself and instituted as beneficiary, his child, with his brother to act as trustee during her minority. Upon his death, the proceeds were paid to him. Hence this complaint by the mother, with whom the child is living, seeking the delivery of such sum. She filed the bond required by the Civil Code. Defendant would justify his claim to the retention of the amount in question by invoking the terms of the insurance policy. 2

After trial duly had, the lower court in a decision of May 10, 1965, rendered judgment ordering the defendant to deliver the proceeds of the policy in question to plaintiff. Its main reliance was on Articles 320 and 321 of the Civil Code. The former provides: "The father, or in his absence the mother, is the legal administrator of the property pertaining to the child under parental authority. If the property is worth more than two thousand pesos, the father or mother shall give a bond subject to the approval of the Court of First Instance." 3 The latter states: "The property which the unemancipated child has acquired or may acquire with his work or industry, or by any lucrative title, belongs to the child in ownership, and in usufruct to the father or mother under whom he is under parental authority and whose company he lives; ... 4

Conformity to such explicit codal norm is apparent in this portion of the appealed decision: "The insurance proceeds belong to the beneficiary. The beneficiary is a minor under the custody and

parental authority of the plaintiff, her mother. The said minor lives with plaintiff or lives in the company of the plaintiff. The said minor acquired this property by lucrative title. Said property, therefore, belongs to the minor child in ownership, and in usufruct to the plaintiff, her mother. Since under our law the usufructuary is entitled to possession, the plaintiff is entitled to possession of the insurance proceeds. The trust, insofar as it is in conflict with the above quoted provision of law, is pro tanto null and void. In order, however, to protect the rights of the minor, Millian Pilapil, the plaintiff should file an additional bond in the guardianship proceedings, Sp. Proc. No. 2418-R of this Court to raise her bond therein to the total amount of P5,000.00." 5

It is very clear, therefore, considering the above, that unless the applicability of the two cited Civil Code provisions can be disputed, the decision must stand. There is no ambiguity in the language employed. The words are rather clear. Their meaning is unequivocal. Time and time again, this Court has left no doubt that where codal or statutory norms are cast in categorical language, the task before it is not one of interpretation but of application. 6So it must be in this case. So it was in the appealed decision.

1. It would take more than just two paragraphs as found in the brief for the defendant-appellant  7 to blunt the force of legal commands that speak so plainly and so unqualifiedly. Even if it were a question of policy, the conclusion will remain unaltered. What is paramount, as mentioned at the outset, is the welfare of the child. It is in consonance with such primordial end that Articles 320 and 321 have been worded. There is recognition in the law of the deep ties that bind parent and child. In the event that there is less than full measure of concern for the offspring, the protection is supplied by the bond required. With the added circumstance that the child stays with the mother, not the uncle, without any evidence of lack of maternal care, the decision arrived at can stand the test of the strictest scrutiny. It is further fortified by the assumption, both logical and natural, that infidelity to the trust imposed by the deceased is much less in the case of a mother than in the case of an uncle. Manresa, commenting on Article 159 of the Civil Code of Spain, the source of Article 320 of the Civil Code, was of that view: Thus "El derecho y la obligacion de administrar el Patrimonio de los hijos es una consecuencia natural y lógica de la patria potestad y de la presunción de que nadie cuidará de los bienes de acquéllos con mas cariño y solicitude que los padres. En nuestro Derecho antiguo puede decirse que se hallaba reconocida de una manera indirecta aquelia doctrina, y asi se desprende de la sentencia del Tribunal Supremeo de 30 de diciembre de 1864, que se refiere a la ley 24, tit. XIII de la Partida 5. De la propia suerte aceptan en general dicho principio los Codigos extranjeros, con las limitaciones y requisitos de que trataremos mis adelante."  8

2. The appealed decision is supported by another cogent consideration. It is buttressed by its adherence to the concept that the judiciary, as an agency of the State acting as parens patriae, is called upon whenever a pending suit of litigation affects one who is a minor to accord priority to his best interest. It may happen, as it did occur here, that family relations may press their respective claims. It would be more in consonance not only with the natural order of things but the tradition of the country for a parent to be preferred. it could have been different if the conflict were between father and mother. Such is not the case at all. It is a mother asserting priority. Certainly the judiciary as the instrumentality of the State in its role of parens patriae, cannot remain insensible to the validity of her plea. In a recent case, 9 there is this quotation from an opinion of the United States Supreme Court: "This prerogative of parens patriae is inherent in the supreme power of every State, whether that power is lodged in a royal person or in the legislature, and has no affinity to those arbitrary powers which are sometimes exerted by irresponsible monarchs to the great detriment of the people and the destruction of their liberties." What is more, there is this constitutional provision vitalizing this concept. It reads: "The State shall strengthen the family as a basic social institution." 10 If, as the Constitution so wisely dictates, it is the family as a unit that has to be strengthened, it does not admit of doubt that even if a stronger case were presented for the uncle, still deference to a constitutional mandate would have led the lower court to decide as it did.

WHEREFORE, the decision of May 10, 1965 is affirmed. Costs against defendant-appellant.

G.R. No. L-5            September 17, 1945

CO KIM CHAM (alias CO KIM CHAM), petitioner, vs.EUSEBIO VALDEZ TAN KEH and ARSENIO P. DIZON, Judge of First Instance of Manila, respondents.1

Marcelino Lontok for petitioner.P. A. Revilla for respondent Valdez Tan Keh.Respondent Judge Dizon in his own behalf.

FERIA, J.:

This petition for mandamus in which petitioner prays that the respondent judge of the lower court be ordered to continue the proceedings in civil case No. 3012 of said court, which were initiated under the regime of the so-called Republic of the Philippines established during the Japanese military occupation of these Islands.

The respondent judge refused to take cognizance of and continue the proceedings in said case on the ground that the proclamation issued on October 23, 1944, by General Douglas MacArthur had the effect of invalidating and nullifying all judicial proceedings and judgements of the court of the Philippines under the Philippine Executive Commission and the Republic of the Philippines established during the Japanese military occupation, and that, furthermore, the lower courts have no jurisdiction to take cognizance of and continue judicial proceedings pending in the courts of the defunct Republic of the Philippines in the absence of an enabling law granting such authority. And the same respondent, in his answer and memorandum filed in this Court, contends that the government established in the Philippines during the Japanese occupation were no de facto governments.

On January 2, 1942, the Imperial Japanese Forces occupied the City of Manila, and on the next day their Commander in Chief proclaimed "the Military Administration under law over the districts occupied by the Army." In said proclamation, it was also provided that "so far as the Military Administration permits, all the laws now in force in the Commonwealth, as well as executive and judicial institutions, shall continue to be effective for the time being as in the past," and "all public officials shall remain in their present posts and carry on faithfully their duties as before."

A civil government or central administration organization under the name of "Philippine Executive Commission was organized by Order No. 1 issued on January 23, 1942, by the Commander in Chief of the Japanese Forces in the Philippines, and Jorge B. Vargas, who was appointed Chairman thereof, was instructed to proceed to the immediate coordination of the existing central administrative organs and judicial courts, based upon what had existed therefore, with approval of the said Commander in Chief, who was to exercise jurisdiction over judicial courts.

The Chairman of the Executive Commission, as head of the central administrative organization, issued Executive Orders Nos. 1 and 4, dated January 30 and February 5, 1942, respectively, in which the Supreme Court, Court of Appeals, Courts of First Instance, and the justices of the peace and municipal courts under the Commonwealth were continued with the same jurisdiction, in conformity with the instructions given to the said Chairman of the Executive Commission by the Commander in Chief of Japanese Forces in the Philippines in the latter's Order No. 3 of February 20, 1942, concerning basic principles to be observed by the Philippine Executive Commission in exercising legislative, executive and judicial powers. Section 1 of said Order provided that "activities

of the administration organs and judicial courts in the Philippines shall be based upon the existing statutes, orders, ordinances and customs. . . ."

On October 14, 1943, the so-called Republic of the Philippines was inaugurated, but no substantial change was effected thereby in the organization and jurisdiction of the different courts that functioned during the Philippine Executive Commission, and in the laws they administered and enforced.

On October 23, 1944, a few days after the historic landing in Leyte, General Douglas MacArthur issued a proclamation to the People of the Philippines which declared:

1. That the Government of the Commonwealth of the Philippines is, subject to the supreme authority of the Government of the United States, the sole and only government having legal and valid jurisdiction over the people in areas of the Philippines free of enemy occupation and control;

2. That the laws now existing on the statute books of the Commonwealth of the Philippines and the regulations promulgated pursuant thereto are in full force and effect and legally binding upon the people in areas of the Philippines free of enemy occupation and control; and

3. That all laws, regulations and processes of any other government in the Philippines than that of the said Commonwealth are null and void and without legal effect in areas of the Philippines free of enemy occupation and control.

On February 3, 1945, the City of Manila was partially liberated and on February 27, 1945, General MacArthur, on behalf of the Government of the United States, solemnly declared "the full powers and responsibilities under the Constitution restored to the Commonwealth whose seat is here established as provided by law."

In the light of these facts and events of contemporary history, the principal questions to be resolved in the present case may be reduced to the following:(1) Whether the judicial acts and proceedings of the court existing in the Philippines under the Philippine Executive Commission and the Republic of the Philippines were good and valid and remained so even after the liberation or reoccupation of the Philippines by the United States and Filipino forces; (2)Whether the proclamation issued on October 23, 1944, by General Douglas MacArthur, Commander in Chief of the United States Army, in which he declared "that all laws, regulations and processes of any of the government in the Philippines than that of the said Commonwealth are null and void and without legal effect in areas of the Philippines free of enemy occupation and control," has invalidated all judgements and judicial acts and proceedings of the said courts; and (3) If the said judicial acts and proceedings have not been invalidated by said proclamation, whether the present courts of the Commonwealth, which were the same court existing prior to, and continued during, the Japanese military occupation of the Philippines, may continue those proceedings pending in said courts at the time the Philippines were reoccupied and liberated by the United States and Filipino forces, and the Commonwealth of the Philippines were reestablished in the Islands.

We shall now proceed to consider the first question, that is, whether or not under the rules of international law the judicial acts and proceedings of the courts established in the Philippines under the Philippine Executive Commission and the Republic of the Philippines were good and valid and remained good and valid even after the liberation or reoccupation of the Philippines by the United States and Filipino forces.

1. It is a legal truism in political and international law that all acts and proceedings of the legislative, executive, and judicial departments of a de facto government are good and valid. The question to be determined is whether or not the governments established in these Islands under the names of the Philippine Executive Commission and Republic of the Philippines during the Japanese military occupation or regime were de facto governments. If they were, the judicial acts and proceedings of those governments remain good and valid even after the liberation or reoccupation of the Philippines by the American and Filipino forces.

There are several kinds of de facto governments. The first, or government de facto in a proper legal sense, is that government that gets possession and control of, or usurps, by force or by the voice of the majority, the rightful legal governments and maintains itself against the will of the latter, such as the government of England under the Commonwealth, first by Parliament and later by Cromwell as Protector. The second is that which is established and maintained by military forces who invade and occupy a territory of the enemy in the course of war, and which is denominated a government of paramount force, as the cases of Castine, in Maine, which was reduced to British possession in the war of 1812, and Tampico, Mexico, occupied during the war with Mexico, by the troops of the United States. And the third is that established as an independent government by the inhabitants of a country who rise in insurrection against the parent state of such as the government of the Southern Confederacy in revolt not concerned in the present case with the first kind, but only with the second and third kinds of de factogovernments.

Speaking of government "de facto" of the second kind, the Supreme Court of the United States, in the case of Thorington vs. Smith (8 Wall., 1), said: "But there is another description of government, called also by publicists a government de facto, but which might, perhaps, be more aptly denominated a government of paramount force. Its distinguishing characteristics are (1), that its existence is maintained by active military power with the territories, and against the rightful authority of an established and lawful government; and (2), that while it exists it necessarily be obeyed in civil matters by private citizens who, by acts of obedience rendered in submission to such force, do not become responsible, or wrongdoers, for those acts, though not warranted by the laws of the rightful government. Actual governments of this sort are established over districts differing greatly in extent and conditions. They are usually administered directly by military authority, but they may be administered, also, civil authority, supported more or less directly by military force. . . . One example of this sort of government is found in the case of Castine, in Mine, reduced to British possession in the war of 1812 . . . U. S. vs. Rice (4 Wheaton, 253). A like example is found in the case of Tampico, occupied during the war with Mexico, by the troops of the United States . . . Fleming vs. Page (9 Howard, 614). These were cases of temporary possessions of territory by lawfull and regular governments at war with the country of which the territory so possessed was part."

The powers and duties of de facto governments of this description are regulated in Section III of the Hague Conventions of 1907, which is a revision of the provisions of the Hague Conventions of 1899 on the same subject of said Section III provides "the authority of the legislative power having actually passed into the hands of the occupant, the latter shall take steps in his power to reestablish and insure, as far as possible, public order and safety, while respecting, unless absolutely prevented, the laws in force in the country."

According to the precepts of the Hague Conventions, as the belligerent occupant has the right and is burdened with the duty to insure public order and safety during his military occupation, he possesses all the powers of a de facto government, and he can suspended the old laws and promulgate new ones and make such changes in the old as he may see fit, but he is enjoined to respect, unless absolutely prevented by the circumstances prevailing in the occupied territory, the municipal laws in force in the country, that is, those laws which enforce public order and regulate social and commercial life of the country. On the other hand, laws of a political nature or affecting political

relations, such as, among others, the right of assembly, the right to bear arms, the freedom of the press, and the right to travel freely in the territory occupied, are considered as suspended or in abeyance during the military occupation. Although the local and civil administration of justice is suspended as a matter of course as soon as a country is militarily occupied, it is not usual for the invader to take the whole administration into his own hands. In practice, the local ordinary tribunals are authorized to continue administering justice; and judges and other judicial officers are kept in their posts if they accept the authority of the belligerent occupant or are required to continue in their positions under the supervision of the military or civil authorities appointed, by the Commander in Chief of the occupant. These principles and practice have the sanction of all publicists who have considered the subject, and have been asserted by the Supreme Court and applied by the President of the United States.

The doctrine upon this subject is thus summed up by Halleck, in his work on International Law (Vol. 2, p. 444): "The right of one belligerent to occupy and govern the territory of the enemy while in its military possession, is one of the incidents of war, and flows directly from the right to conquer. We, therefore, do not look to the Constitution or political institutions of the conqueror, for authority to establish a government for the territory of the enemy in his possession, during its military occupation, nor for the rules by which the powers of such government are regulated and limited. Such authority and such rules are derived directly from the laws war, as established by the usage of the of the world, and confirmed by the writings of publicists and decisions of courts — in fine, from the law of nations. . . . The municipal laws of a conquered territory, or the laws which regulate private rights, continue in force during military occupation, excepts so far as they are suspended or changed by the acts of conqueror. . . . He, nevertheless, has all the powers of a de facto government, and can at his pleasure either change the existing laws or make new ones."

And applying the principles for the exercise of military authority in an occupied territory, which were later embodied in the said Hague Conventions, President McKinley, in his executive order to the Secretary of War of May 19,1898, relating to the occupation of the Philippines by United States forces, said in part: "Though the powers of the military occupant are absolute and supreme, and immediately operate upon the political condition of the inhabitants, the municipal laws of the conquered territory, such as affect private rights of person and property and provide for the punishment of crime, are considered as continuing in force, so far as they are compatible with the new order of things, until they are suspended or superseded by the occupying belligerent; and in practice they are not usually abrogated, but are allowed to remain in force and to be administered by the ordinary tribunals, substantially as they were before the occupation. This enlightened practice is, so far as possible, to be adhered to on the present occasion. The judges and the other officials connected with the administration of justice may, if they accept the authority of the United States, continue to administer the ordinary law of the land as between man and man under the supervision of the American Commander in Chief." (Richardson's Messages and Papers of President, X, p. 209.)

As to "de facto" government of the third kind, the Supreme Court of the United States, in the same case of Thorington vs. Smith, supra, recognized the government set up by the Confederate States as a de factogovernment. In that case, it was held that "the central government established for the insurgent States differed from the temporary governments at Castine and Tampico in the circumstance that its authority did no originate in lawful acts of regular war; but it was not, on the account, less actual or less supreme. And we think that it must be classed among the governments of which these are examples. . . .

In the case of William vs. Bruffy (96 U. S. 176, 192), the Supreme Court of the United States, discussing the validity of the acts of the Confederate States, said: "The same general form of government, the same general laws for the administration of justice and protection of private rights, which had existed in the States prior to the rebellion, remained during its continuance and

afterwards. As far as the Acts of the States do not impair or tend to impair the supremacy of the national authority, or the just rights of citizens under the Constitution, they are, in general, to be treated as valid and binding. As we said in Horn vs. Lockhart (17 Wall., 570; 21 Law. ed., 657): "The existence of a state of insurrection and war did not loosen the bonds of society, or do away with civil government or the regular administration of the laws. Order was to be preserved, police regulations maintained, crime prosecuted, property protected, contracts enforced, marriages celebrated, estates settled, and the transfer and descent of property regulated, precisely as in the time of peace. No one, that we are aware of, seriously questions the validity of judicial or legislative Acts in the insurrectionary States touching these and kindered subjects, where they were not hostile in their purpose or mode of enforcement to the authority of the National Government, and did not impair the rights of citizens under the Constitution'. The same doctrine has been asserted in numerous other cases."

And the same court, in the case of Baldy vs. Hunter (171 U. S., 388, 400), held: "That what occured or was done in respect of such matters under the authority of the laws of these local de facto governments should not be disregarded or held to be invalid merely because those governments were organized in hostility to the Union established by the national Constitution; this, because the existence of war between the United States and the Confederate States did not relieve those who are within the insurrectionary lines from the necessity of civil obedience, nor destroy the bonds of society nor do away with civil government or the regular administration of the laws, and because transactions in the ordinary course of civil society as organized within the enemy's territory although they may have indirectly or remotely promoted the ends of the de facto or unlawful government organized to effect a dissolution of the Union, were without blame 'except when proved to have been entered intowith actual intent to further invasion or insurrection:'" and "That judicial and legislative acts in the respective states composing the so-called Confederate States should be respected by the courts if they were not hostile in their purpose or mode of enforcement to the authority of the National Government, and did not impair the rights of citizens under the Constitution."

In view of the foregoing, it is evident that the Philippine Executive Commission, which was organized by Order No. 1, issued on January 23, 1942, by the Commander of the Japanese forces, was a civil government established by the military forces of occupation and therefore a de facto government of the second kind. It was not different from the government established by the British in Castine, Maine, or by the United States in Tampico, Mexico. As Halleck says, "The government established over an enemy's territory during the military occupation may exercise all the powers given by the laws of war to the conqueror over the conquered, and is subject to all restrictions which that code imposes. It is of little consequence whether such government be called a military or civil government. Its character is the same and the source of its authority the same. In either case it is a government imposed by the laws of war, and so far it concerns the inhabitants of such territory or the rest of the world, those laws alone determine the legality or illegality of its acts." (Vol. 2, p. 466.) The fact that the Philippine Executive Commission was a civil and not a military government and was run by Filipinos and not by Japanese nationals, is of no consequence. In 1806, when Napoleon occupied the greater part of Prussia, he retained the existing administration under the general direction of a french official (Langfrey History of Napoleon, 1, IV, 25); and, in the same way, the Duke of Willington, on invading France, authorized the local authorities to continue the exercise of their functions, apparently without appointing an English superior. (Wellington Despatches, XI, 307.). The Germans, on the other hand, when they invaded France in 1870, appointed their own officials, at least in Alsace and Lorraine, in every department of administration and of every rank. (Calvo, pars. 2186-93; Hall, International Law, 7th ed., p. 505, note 2.)

The so-called Republic of the Philippines, apparently established and organized as a sovereign state independent from any other government by the Filipino people, was, in truth and reality, a government established by the belligerent occupant or the Japanese forces of occupation. It was of

the same character as the Philippine Executive Commission, and the ultimate source of its authority was the same — the Japanese military authority and government. As General MacArthur stated in his proclamation of October 23, 1944, a portion of which has been already quoted, "under enemy duress, a so-called government styled as the 'Republic of the Philippines' was established on October 14, 1943, based upon neither the free expression of the people's will nor the sanction of the Government of the United States." Japan had no legal power to grant independence to the Philippines or transfer the sovereignty of the United States to, or recognize the latent sovereignty of, the Filipino people, before its military occupation and possession of the Islands had matured into an absolute and permanent dominion or sovereignty by a treaty of peace or other means recognized in the law of nations. For it is a well-established doctrine in International Law, recognized in Article 45 of the Hauge Conventions of 1907 (which prohibits compulsion of the population of the occupied territory to swear allegiance to the hostile power), the belligerent occupation, being essentially provisional, does not serve to transfer sovereignty over the territory controlled although the de jure government is during the period of occupancy deprived of the power to exercise its rights as such. (Thirty Hogshead of Sugar vs. Boyle, 9 Cranch, 191; United States vs. Rice, 4 Wheat., 246; Fleming vs.Page, 9 Howard, 603; Downes vs. Bidwell, 182 U. S., 345.) The formation of the Republic of the Philippines was a scheme contrived by Japan to delude the Filipino people into believing in the apparent magnanimity of the Japanese gesture of transferring or turning over the rights of government into the hands of Filipinos. It was established under the mistaken belief that by doing so, Japan would secure the cooperation or at least the neutrality of the Filipino people in her war against the United States and other allied nations.

Indeed, even if the Republic of the Philippines had been established by the free will of the Filipino who, taking advantage of the withdrawal of the American forces from the Islands, and the occupation thereof by the Japanese forces of invasion, had organized an independent government under the name with the support and backing of Japan, such government would have been considered as one established by the Filipinos in insurrection or rebellion against the parent state or the Unite States. And as such, it would have been a de facto government similar to that organized by the confederate states during the war of secession and recognized as such by the by the Supreme Court of the United States in numerous cases, notably those of Thorington vs. Smith, Williams vs.Bruffy, and Badly vs. Hunter, above quoted; and similar to the short-lived government established by the Filipino insurgents in the Island of Cebu during the Spanish-American war, recognized as a de facto government by the Supreme Court of the United States in the case of McCleod vs. United States (299 U. S., 416). According to the facts in the last-named case, the Spanish forces evacuated the Island of Cebu on December 25, 1898, having first appointed a provisional government, and shortly afterwards, the Filipinos, formerly in insurrection against Spain, took possession of the Islands and established a republic, governing the Islands until possession thereof was surrendered to the United States on February 22, 1898. And the said Supreme Court held in that case that "such government was of the class of de facto governments described in I Moore's International Law Digest, S 20, . . . 'called also by publicists a government de facto, but which might, perhaps, be more aptly denominated a government of paramount force . . '." That is to say, that the government of a country in possession of belligerent forces in insurrection or rebellion against the parent state, rests upon the same principles as that of a territory occupied by the hostile army of an enemy at regular war with the legitimate power.

The governments by the Philippine Executive Commission and the Republic of the Philippines during the Japanese military occupation being de facto governments, it necessarily follows that the judicial acts and proceedings of the courts of justice of those governments, which are not of a political complexion, were good and valid, and, by virtue of the well-known principle of postliminy (postliminium) in international law, remained good and valid after the liberation or reoccupation of the Philippines by the American and Filipino forces under the leadership of General Douglas MacArthur. According to that well-known principle in international law, the fact that a territory which has been occupied by an enemy comes again into the power of its legitimate government of sovereignty,

"does not, except in a very few cases, wipe out the effects of acts done by an invader, which for one reason or another it is within his competence to do. Thus judicial acts done under his control, when they are not of a political complexion, administrative acts so done, to the extent that they take effect during the continuance of his control, and the various acts done during the same time by private persons under the sanction of municipal law, remain good. Were it otherwise, the whole social life of a community would be paralyzed by an invasion; and as between the state and the individuals the evil would be scarcely less, — it would be hard for example that payment of taxes made under duress should be ignored, and it would be contrary to the general interest that the sentences passed upon criminals should be annulled by the disappearance of the intrusive government ." (Hall, International Law, 7th ed., p. 518.) And when the occupation and the abandonment have been each an incident of the same war as in the present case, postliminy applies, even though the occupant has acted as conqueror and for the time substituted his own sovereignty as the Japanese intended to do apparently in granting independence to the Philippines and establishing the so-called Republic of the Philippines. (Taylor, International Law, p. 615.)

That not only judicial but also legislative acts of de facto governments, which are not of a political complexion, are and remain valid after reoccupation of a territory occupied by a belligerent occupant, is confirmed by the Proclamation issued by General Douglas MacArthur on October 23, 1944, which declares null and void all laws, regulations and processes of the governments established in the Philippines during the Japanese occupation, for it would not have been necessary for said proclamation to abrogate them if they were invalid ab initio.

2. The second question hinges upon the interpretation of the phrase "processes of any other government" as used in the above-quoted proclamation of General Douglas MacArthur of October 23, 1944 — that is, whether it was the intention of the Commander in Chief of the American Forces to annul and void thereby all judgments and judicial proceedings of the courts established in the Philippines during the Japanese military occupation.

The phrase "processes of any other government" is broad and may refer not only to the judicial processes, but also to administrative or legislative, as well as constitutional, processes of the Republic of the Philippines or other governmental agencies established in the Islands during the Japanese occupation. Taking into consideration the fact that, as above indicated, according to the well-known principles of international law all judgements and judicial proceedings, which are not of a political complexion, of the de facto governments during the Japanese military occupation were good and valid before and remained so after the occupied territory had come again into the power of the titular sovereign, it should be presumed that it was not, and could not have been, the intention of General Douglas MacArthur, in using the phrase "processes of any other government" in said proclamation, to refer to judicial processes, in violation of said principles of international law. The only reasonable construction of the said phrase is that it refers to governmental processes other than judicial processes of court proceedings, for according to a well-known rule of statutory construction, set forth in 25 R. C. L., p. 1028, "a statute ought never to be construed to violate the law of nations if any other possible construction remains."

It is true that the commanding general of a belligerent army of occupation, as an agent of his government, may not unlawfully suspend existing laws and promulgate new ones in the occupied territory, if and when the exigencies of the military occupation demand such action. But even assuming that, under the law of nations, the legislative power of a commander in chief of military forces who liberates or reoccupies his own territory which has been occupied by an enemy, during the military and before the restoration of the civil regime, is as broad as that of the commander in chief of the military forces of invasion and occupation (although the exigencies of military reoccupation are evidently less than those of occupation), it is to be presumed that General Douglas MacArthur, who was acting as an agent or a representative of the Government and the President of

the United States, constitutional commander in chief of the United States Army, did not intend to act against the principles of the law of nations asserted by the Supreme Court of the United States from the early period of its existence, applied by the Presidents of the United States, and later embodied in the Hague Conventions of 1907, as above indicated. It is not to be presumed that General Douglas MacArthur, who enjoined in the same proclamation of October 23, 1944, "upon the loyal citizens of the Philippines full respect and obedience to the Constitution of the Commonwealth of the Philippines," should not only reverse the international policy and practice of his own government, but also disregard in the same breath the provisions of section 3, Article II, of our Constitution, which provides that "The Philippines renounces war as an instrument of national policy, and adopts the generally accepted principles of international law as part of the law of the Nation."

Moreover, from a contrary construction great inconvenience and public hardship would result, and great public interests would be endangered and sacrificed, for disputes or suits already adjudged would have to be again settled accrued or vested rights nullified, sentences passed on criminals set aside, and criminals might easily become immune for evidence against them may have already disappeared or be no longer available, especially now that almost all court records in the Philippines have been destroyed by fire as a consequence of the war. And it is another well-established rule of statutory construction that where great inconvenience will result from a particular construction, or great public interests would be endangered or sacrificed, or great mischief done, such construction is to be avoided, or the court ought to presume that such construction was not intended by the makers of the law, unless required by clear and unequivocal words. (25 R. C. L., pp. 1025, 1027.)

The mere conception or thought of possibility that the titular sovereign or his representatives who reoccupies a territory occupied by an enemy, may set aside or annul all the judicial acts or proceedings of the tribunals which the belligerent occupant had the right and duty to establish in order to insure public order and safety during military occupation, would be sufficient to paralyze the social life of the country or occupied territory, for it would have to be expected that litigants would not willingly submit their litigation to courts whose judgements or decisions may afterwards be annulled, and criminals would not be deterred from committing crimes or offenses in the expectancy that they may escaped the penalty if judgments rendered against them may be afterwards set aside.

That the proclamation has not invalidated all the judgements and proceedings of the courts of justice during the Japanese regime, is impliedly confirmed by Executive Order No. 37, which has the force of law, issued by the President of the Philippines on March 10, 1945, by virtue of the emergency legislative power vested in him by the Constitution and the laws of the Commonwealth of the Philippines. Said Executive order abolished the Court of Appeals, and provided "that all case which have heretofore been duly appealed to the Court of Appeals shall be transmitted to the Supreme Court final decision." This provision impliedly recognizes that the judgments and proceedings of the courts during the Japanese military occupation have not been invalidated by the proclamation of General MacArthur of October 23, because the said Order does not say or refer to cases which have been duly appealed to said court prior to the Japanese occupation, but to cases which had therefore, that is, up to March 10, 1945, been duly appealed to the Court of Appeals; and it is to be presumed that almost all, if not all, appealed cases pending in the Court of Appeals prior to the Japanese military occupation of Manila on January 2, 1942, had been disposed of by the latter before the restoration of the Commonwealth Government in 1945; while almost all, if not all, appealed cases pending on March 10, 1945, in the Court of Appeals were from judgments rendered by the Court of First Instance during the Japanese regime.

The respondent judge quotes a portion of Wheaton's International Law which say: "Moreover when it is said that an occupier's acts are valid and under international law should not be abrogated by the subsequent conqueror, it must be remembered that no crucial instances exist to show that if his acts should be reversed, any international wrong would be committed. What does happen is that most

matters are allowed to stand by the restored government, but the matter can hardly be put further than this." (Wheaton, International Law, War, 7th English edition of 1944, p. 245.) And from this quotion the respondent judge "draws the conclusion that whether the acts of the occupant should be considered valid or not, is a question that is up to the restored government to decide; that there is no rule of international law that denies to the restored government to decide; that there is no rule of international law that denies to the restored government the right of exercise its discretion on the matter, imposing upon it in its stead the obligation of recognizing and enforcing the acts of the overthrown government."

There is doubt that the subsequent conqueror has the right to abrogate most of the acts of the occupier, such as the laws, regulations and processes other than judicial of the government established by the belligerent occupant. But in view of the fact that the proclamation uses the words "processes of any other government" and not "judicial processes" prisely, it is not necessary to determine whether or not General Douglas MacArthur had power to annul and set aside all judgments and proceedings of the courts during the Japanese occupation. The question to be determined is whether or not it was his intention, as representative of the President of the United States, to avoid or nullify them. If the proclamation had, expressly or by necessary implication, declared null and void the judicial processes of any other government, it would be necessary for this court to decide in the present case whether or not General Douglas MacArthur had authority to declare them null and void. But the proclamation did not so provide, undoubtedly because the author thereof was fully aware of the limitations of his powers as Commander in Chief of Military Forces of liberation or subsequent conqueror.

Not only the Hague Regulations, but also the principles of international law, as they result from the usages established between civilized nations, the laws of humanity and the requirements of the public of conscience, constitute or from the law of nations. (Preamble of the Hague Conventions; Westlake, International Law, 2d ed., Part II, p. 61.) Article 43, section III, of the Hague Regulations or Conventions which we have already quoted in discussing the first question, imposes upon the occupant the obligation to establish courts; and Article 23 (h), section II, of the same Conventions, which prohibits the belligerent occupant "to declare . . . suspended . . . in a Court of Law the rights and action of the nationals of the hostile party," forbids him to make any declaration preventing the inhabitants from using their courts to assert or enforce their civil rights. (Decision of the Court of Appeals of England in the case of Porter vs. Fruedenburg, L.R. [1915], 1 K.B., 857.) If a belligerent occupant is required to establish courts of justice in the territory occupied, and forbidden to prevent the nationals thereof from asserting or enforcing therein their civil rights, by necessary implication, the military commander of the forces of liberation or the restored government is restrained from nullifying or setting aside the judgments rendered by said courts in their litigation during the period of occupation. Otherwise, the purpose of these precepts of the Hague Conventions would be thwarted, for to declare them null and void would be tantamount to suspending in said courts the right and action of the nationals of the territory during the military occupation thereof by the enemy. It goes without saying that a law that enjoins a person to do something will not at the same time empower another to undo the same. Although the question whether the President or commanding officer of the United States Army has violated restraints imposed by the constitution and laws of his country is obviously of a domestic nature, yet, in construing and applying limitations imposed on the executive authority, the Supreme Court of the United States, in the case of Ochoa, vs. Hernandez (230 U.S., 139), has declared that they "arise from general rules of international law and from fundamental principles known wherever the American flag flies."

In the case of Raymond vs. Thomas (91 U.S., 712), a special order issued by the officer in command of the forces of the United States in South Carolina after the end of the Civil War, wholly annulling a decree rendered by a court of chancery in that state in a case within its jurisdiction, was declared void, and not warranted by the acts approved respectively March 2, 1867 (14 Stat., 428), and July 19 of the same year (15 id., 14), which defined the powers and duties of military officers in command of

the several states then lately in rebellion. In the course of its decision the court said; "We have looked carefully through the acts of March 2, 1867 and July 19, 1867. They give very large governmental powers to the military commanders designated, within the States committed respectively to their jurisdiction; but we have found nothing to warrant the order here in question. . . . The clearest language would be necessary to satisfy us that Congress intended that the power given by these acts should be so exercised. . . . It was an arbitrary stretch of authority, needful to no good end that can be imagined. Whether Congress could have conferred the power to do such an act is a question we are not called upon to consider. It is an unbending rule of law that the exercise of military power, where the rights of the citizen are concerned, shall never be pushed beyond what the exigency requires. (Mithell vs. Harmony, 13 How., 115; Warden vs. Bailey, 4 Taunt., 67; Fabrigas vs. Moysten, 1 Cowp., 161; s.c., 1 Smith's L.C., pt. 2, p. 934.) Viewing the subject before us from the standpoint indicated, we hold that the order was void."

It is, therefore, evident that the proclamation of General MacArthur of October 23, 1944, which declared that "all laws, regulations and processes of any other government in the Philippines than that of the said Commonwealth are null and void without legal effect in areas of the Philippines free of enemy occupation and control," has not invalidated the judicial acts and proceedings, which are not a political complexion, of the courts of justice in the Philippines that were continued by the Philippine Executive Commission and the Republic of the Philippines during the Japanese military occupation, and that said judicial acts and proceedings were good and valid before and now good and valid after the reoccupation of liberation of the Philippines by the American and Filipino forces.

3. The third and last question is whether or not the courts of the Commonwealth, which are the same as those existing prior to, and continued during, the Japanese military occupation by the Philippine Executive Commission and by the so-called Republic of the Philippines, have jurisdiction to continue now the proceedings in actions pending in said courts at the time the Philippine Islands were reoccupied or liberated by the American and Filipino forces, and the Commonwealth Government was restored.

Although in theory the authority the authority of the local civil and judicial administration is suspended as a matter of course as soon as military occupation takes place, in practice the invader does not usually take the administration of justice into his own hands, but continues the ordinary courts or tribunals to administer the laws of the country which he is enjoined, unless absolutely prevented, to respect. As stated in the above-quoted Executive Order of President McKinley to the Secretary of War on May 19, 1898, "in practice, they (the municipal laws) are not usually abrogated but are allowed to remain in force and to be administered by the ordinary tribunals substantially as they were before the occupation. This enlightened practice is, so far as possible, to be adhered to on the present occasion." And Taylor in this connection says: "From a theoretical point of view it may be said that the conqueror is armed with the right to substitute his arbitrary will for all preexisting forms of government, legislative, executive and judicial. From the stand-point of actual practice such arbitrary will is restrained by the provision of the law of nations which compels the conqueror to continue local laws and institution so far as military necessity will permit." (Taylor, International Public Law, p.596.) Undoubtedly, this practice has been adopted in order that the ordinary pursuits and business of society may not be unnecessarily deranged, inasmuch as belligerent occupation is essentially provisional, and the government established by the occupant of transient character.

Following these practice and precepts of the law of nations, Commander in Chief of the Japanese Forces proclaimed on January 3, 1942, when Manila was occupied, the military administration under martial law over the territory occupied by the army, and ordered that "all the laws now in force in the Commonwealth, as well as executive and judicial institutions, shall continue to be affective for the time being as in the past," and "all public officials shall remain in their present post and carry on faithfully their duties as before." When the Philippine Executive Commission was organized by Order

No. 1 of the Japanese Commander in Chief, on January 23, 1942, the Chairman of the Executive Commission, by Executive Orders Nos. 1 and 4 of January 30 and February 5, respectively, continued the Supreme Court, Court of Appeals, Court of First Instance, and justices of the peace of courts, with the same jurisdiction in conformity with the instructions given by the Commander in Chief of the Imperial Japanese Army in Order No. 3 of February 20, 1942. And on October 14, 1943 when the so-called Republic of the Philippines was inaugurated, the same courts were continued with no substantial change in organization and jurisdiction thereof.

If the proceedings pending in the different courts of the Islands prior to the Japanese military occupation had been continued during the Japanese military administration, the Philippine Executive Commission, and the so-called Republic of the Philippines, it stands to reason that the same courts, which had become reestablished and conceived of as having in continued existence upon the reoccupation and liberation of the Philippines by virtue of the principle of postliminy (Hall, International Law, 7th ed., p. 516), may continue the proceedings in cases then pending in said courts, without necessity of enacting a law conferring jurisdiction upon them to continue said proceedings. As Taylor graphically points out in speaking of said principles "a state or other governmental entity, upon the removal of a foreign military force, resumes its old place with its right and duties substantially unimpaired. . . . Such political resurrection is the result of a law analogous to that which enables elastic bodies to regain their original shape upon removal of the external force, — and subject to the same exception in case of absolute crushing of the whole fibre and content." (Taylor, International Public Law, p. 615.)

The argument advanced by the respondent judge in his resolution in support in his conclusion that the Court of First Instance of Manila presided over by him "has no authority to take cognizance of, and continue said proceedings (of this case) to final judgment until and unless the Government of the Commonwealth of the Philippines . . . shall have provided for the transfer of the jurisdiction of the courts of the now defunct Republic of the Philippines, and the cases commenced and the left pending therein," is "that said courts were a government alien to the Commonwealth Government. The laws they enforced were, true enough, laws of the Commonwealth prior to Japanese occupation, but they had become the laws — and the courts had become the institutions — of Japan by adoption (U.S. vs. Reiter. 27 F. Cases, No. 16146), as they became later on the laws and institutions of the Philippine Executive Commission and the Republic of the Philippines."

The court in the said case of U.S. vs. Reiter did not and could not say that the laws and institutions of the country occupied if continued by the conqueror or occupant, become the laws and the courts, by adoption, of the sovereign nation that is militarily occupying the territory. Because, as already shown, belligerent or military occupation is essentially provisional and does not serve to transfer the sovereignty over the occupied territory to the occupant. What the court said was that, if such laws and institutions are continued in use by the occupant, they become his and derive their force from him, in the sense that he may continue or set them aside. The laws and institution or courts so continued remain the laws and institutions or courts of the occupied territory. The laws and the courts of the Philippines, therefore, did not become, by being continued as required by the law of nations, laws and courts of Japan. The provision of Article 45, section III, of the Hague Conventions of 1907 which prohibits any compulsion of the population of occupied territory to swear allegiance to the hostile power, "extends to prohibit everything which would assert or imply a change made by the invader in the legitimate sovereignty. This duty is neither to innovate in the political life of the occupied districts, nor needlessly to break the continuity of their legal life. Hence, so far as the courts of justice are allowed to continue administering the territorial laws, they must be allowed to give their sentences in the name of the legitimate sovereign " (Westlake, Int. Law, Part II, second ed., p. 102). According to Wheaton, however, the victor need not allow the use of that of the legitimate government. When in 1870, the Germans in France attempted to violate that rule by ordering, after the fall of the Emperor Napoleon, the courts of Nancy to administer justice in the name of the "High German Powers occupying Alsace and Lorraine," upon the ground that the exercise of their powers

in the name of French people and government was at least an implied recognition of the Republic, the courts refused to obey and suspended their sitting. Germany originally ordered the use of the name of "High German Powers occupying Alsace and Lorraine," but later offered to allow use of the name of the Emperor or a compromise. (Wheaton, International Law, War, 7th English ed. 1944, p. 244.)

Furthermore, it is a legal maxim, that excepting that of a political nature, "Law once established continues until changed by the some competent legislative power. It is not change merely by change of sovereignty." (Joseph H. Beale, Cases on Conflict of Laws, III, Summary Section 9, citing Commonwealth vs. Chapman, 13 Met., 68.) As the same author says, in his Treatise on the Conflict on Laws (Cambridge, 1916, Section 131): "There can no break or interregnum in law. From the time the law comes into existence with the first-felt corporateness of a primitive people it must last until the final disappearance of human society. Once created, it persists until a change take place, and when changed it continues in such changed condition until the next change, and so forever. Conquest or colonization is impotent to bring law to an end; in spite of change of constitution, the law continues unchanged until the new sovereign by legislative acts creates a change."

As courts are creatures of statutes and their existence defends upon that of the laws which create and confer upon them their jurisdiction, it is evident that such laws, not being a political nature, are not abrogated by a change of sovereignty, and continue in force "ex proprio vigore" unless and until repealed by legislative acts. A proclamation that said laws and courts are expressly continued is not necessary in order that they may continue in force. Such proclamation, if made, is but a declaration of the intention of respecting and not repealing those laws. Therefore, even assuming that Japan had legally acquired sovereignty over these Islands, which she had afterwards transferred to the so-called Republic of the Philippines, and that the laws and the courts of these Islands had become the courts of Japan, as the said courts of the laws creating and conferring jurisdiction upon them have continued in force until now, it necessarily follows that the same courts may continue exercising the same jurisdiction over cases pending therein before the restoration of the Commonwealth Government, unless and until they are abolished or the laws creating and conferring jurisdiction upon them are repealed by the said government. As a consequence, enabling laws or acts providing that proceedings pending in one court be continued by or transferred to another court, are not required by the mere change of government or sovereignty. They are necessary only in case the former courts are abolished or their jurisdiction so change that they can no longer continue taking cognizance of the cases and proceedings commenced therein, in order that the new courts or the courts having jurisdiction over said cases may continue the proceedings. When the Spanish sovereignty in the Philippine Islands ceased and the Islands came into the possession of the United States, the "Audiencia" or Supreme Court was continued and did not cease to exist, and proceeded to take cognizance of the actions pending therein upon the cessation of the Spanish sovereignty until the said "Audiencia" or Supreme Court was abolished, and the Supreme Court created in Chapter II of Act No. 136 was substituted in lieu thereof. And the Courts of First Instance of the Islands during the Spanish regime continued taking cognizance of cases pending therein upon the change of sovereignty, until section 65 of the same Act No. 136 abolished them and created in its Chapter IV the present Courts of First Instance in substitution of the former. Similarly, no enabling acts were enacted during the Japanese occupation, but a mere proclamation or order that the courts in the Island were continued.

On the other hand, during the American regime, when section 78 of Act No. 136 was enacted abolishing the civil jurisdiction of the provost courts created by the military government of occupation in the Philippines during the Spanish-American War of 1898, the same section 78 provided for the transfer of all civil actions then pending in the provost courts to the proper tribunals, that is, to the justices of the peace courts, Court of First Instance, or Supreme Court having jurisdiction over them according to law. And later on, when the criminal jurisdiction of provost courts in the City of Manila was abolished by section 3 of Act No. 186, the same section provided that criminal cases pending

therein within the jurisdiction of the municipal court created by Act No. 183 were transferred to the latter.

That the present courts as the same courts which had been functioning during the Japanese regime and, therefore, can continue the proceedings in cases pending therein prior to the restoration of the Commonwealth of the Philippines, is confirmed by Executive Order No. 37 which we have already quoted in support of our conclusion in connection with the second question. Said Executive Order provides"(1) that the Court of Appeals created and established under Commonwealth Act No. 3 as amended, be abolished, as it is hereby abolished," and "(2) that all cases which have heretofore been duly appealed to the Court of Appeals shall be transmitted to the Supreme Court for final decision. . . ." In so providing, the said Order considers that the Court of Appeals abolished was the same that existed prior to, and continued after, the restoration of the Commonwealth Government; for, as we have stated in discussing the previous question, almost all, if not all, of the cases pending therein, or which had theretofore (that is, up to March 10, 1945) been duly appealed to said court, must have been cases coming from the Courts of First Instance during the so-called Republic of the Philippines. If the Court of Appeals abolished by the said Executive Order was not the same one which had been functioning during the Republic, but that which had existed up to the time of the Japanese occupation, it would have provided that all the cases which had, prior to and up to that occupation on January 2, 1942, been dully appealed to the said Court of Appeals shall be transmitted to the Supreme Court for final decision.

It is, therefore, obvious that the present courts have jurisdiction to continue, to final judgment, the proceedings in cases, not of political complexion, pending therein at the time of the restoration of the Commonwealth Government.

Having arrived at the above conclusions, it follows that the Court of First Instance of Manila has jurisdiction to continue to final judgment the proceedings in civil case No. 3012, which involves civil rights of the parties under the laws of the Commonwealth Government, pending in said court at the time of the restoration of the said Government; and that the respondent judge of the court, having refused to act and continue him does a duty resulting from his office as presiding judge of that court, mandamus is the speedy and adequate remedy in the ordinary course of law, especially taking into consideration the fact that the question of jurisdiction herein involved does affect not only this particular case, but many other cases now pending in all the courts of these Islands.

In view of all the foregoing it is adjudged and decreed that a writ of mandamus issue, directed to the respondent judge of the Court of First Instance of Manila, ordering him to take cognizance of and continue to final judgment the proceedings in civil case No. 3012 of said court. No pronouncement as to costs. So ordered.

G.R. No. L-409             January 30, 1947

ANASTACIO LAUREL, petitioner, vs.ERIBERTO MISA, respondent.

Claro M. Recto and Querube C. Makalintal for petitioner.First Assistant Solicitor General Reyes and Solicitor Hernandez, Jr., for respondent.

R E S O L U T I O N

In G.R. No. L-409, Anastacio Laurel vs. Eriberto Misa, etc., the Court, acting on the petition for habeas corpus filed by Anastacio Laurel and based on a theory that a Filipino citizen who adhered to the enemy giving the latter aid and comfort during the Japanese occupation cannot be prosecuted for the crime of treason defined and penalized by article 114 of the Revised Penal Code, for the reason (1) that the sovereignty of the legitimate government in the Philippines and, consequently, the correlative allegiance of Filipino citizens thereto was then suspended; and (2) that there was a change of sovereignty over these Islands upon the proclamation of the Philippine Republic:

(1) Considering that a citizen or subject owes, not a qualified and temporary, but an absolute and permanent allegiance, which consists in the obligation of fidelity and obedience to his government or sovereign; and that this absolute and permanent allegiance should not be confused with the qualified and temporary allegiance which a foreigner owes to the government or sovereign of the territory wherein he resides, so long as he remains there, in return for the protection he receives, and which consists in the obedience to the laws of the government or sovereign. (Carlisle vs. Unite States, 21 Law. ed., 429; Secretary of State Webster Report to the President of the United States in the case of Thraser, 6 Web. Works, 526);

Considering that the absolute and permanent allegiance of the inhabitants of a territory occupied by the enemy of their legitimate government or sovereign is not abrogated or severed by the enemy occupation, because the sovereignty of the government or sovereign de jure is not transferred thereby to the occupier, as we have held in the cases of Co Kim Cham vs. Valdez Tan Keh and Dizon (75 Phil., 113) and of Peralta vs. Director of Prisons (75 Phil., 285), and if it is not transferred to the occupant it must necessarily remain vested in the legitimate government; that the sovereignty vested in the titular government (which is the supreme power which governs a body politic or society which constitute the state) must be distinguished from the exercise of the rights inherent thereto, and may be destroyed, or severed and transferred to another, but it cannot be suspended because the existence of sovereignty cannot be suspended without putting it out of existence or divesting the possessor thereof at least during the so-called period of suspension; that what may be suspended is the exercise of the rights of sovereignty with the control and government of the territory occupied by the enemy passes temporarily to the occupant; that the subsistence of the sovereignty of the legitimate government in a territory occupied by the military forces of the enemy during the war, "although the former is in fact prevented from exercising the supremacy over them" is one of the "rules of international law of our times"; (II Oppenheim, 6th Lauterpacht ed., 1944, p. 482), recognized, by necessary implication, in articles 23, 44, 45, and 52 of Hague Regulation; and that, as a corollary of the conclusion that the sovereignty itself is not suspended and subsists during the enemy occupation, the allegiance of the inhabitants to their legitimate government or sovereign subsists, and therefore there is

no such thing as suspended allegiance, the basic theory on which the whole fabric of the petitioner's contention rests;

Considering that the conclusion that the sovereignty of the United State was suspended in Castine, set forth in the decision in the case of United States vs. Rice, 4 Wheaton, 246, 253, decided in 1819, and quoted in our decision in the cases of Co Kim Cham vs. Valdez Tan Keh and Dizon and Peralta vs. Director of Prisons, supra, in connection with the question, not of sovereignty, but of the existence of a government de facto therein and its power to promulgate rules and laws in the occupied territory, must have been based, either on the theory adopted subsequently in the Hague Convention of 1907, that the military occupation of an enemy territory does not transfer the sovereignty to the occupant; that, in the first case, the word "sovereignty" used therein should be construed to mean the exercise of the rights of sovereignty, because as this remains vested in the legitimate government and is not transferred to the occupier, it cannot be suspended without putting it out of existence or divesting said government thereof; and that in the second case, that is, if the said conclusion or doctrine refers to the suspension of the sovereignty itself, it has become obsolete after the adoption of the Hague Regulations in 1907, and therefore it can not be applied to the present case;

Considering that even adopting the words "temporarily allegiance," repudiated by Oppenheim and other publicists, as descriptive of the relations borne by the inhabitants of the territory occupied by the enemy toward the military government established over them, such allegiance may, at most, be considered similar to the temporary allegiance which a foreigner owes to the government or sovereign of the territory wherein he resides in return for the protection he receives as above described, and does not do away with the absolute and permanent allegiance which the citizen residing in a foreign country owes to his own government or sovereign; that just as a citizen or subject of a government or sovereign may be prosecuted for and convicted of treason committed in a foreign country, in the same way an inhabitant of a territory occupied by the military forces of the enemy may commit treason against his own legitimate government or sovereign if he adheres to the enemies of the latter by giving them aid and comfort; and that if the allegiance of a citizen or subject to his government or sovereign is nothing more than obedience to its laws in return for the protection he receives, it would necessarily follow that a citizen who resides in a foreign country or state would, on one hand, ipso facto acquire the citizenship thereof since he has enforce public order and regulate the social and commercial life, in return for the protection he receives, and would, on the other hand, lose his original citizenship, because he would not be bound to obey most of the laws of his own government or sovereign, and would not receive, while in a foreign country, the protection he is entitled to in his own;

Considering that, as a corollary of the suspension of the exercise of the rights of sovereignty by the legitimate government in the territory occupied by the enemy military forces, because the authority of the legitimate power to govern has passed into the hands of the occupant (Article 43, Hague Regulations), the political laws which prescribe the reciprocal rights, duties and obligation of government and citizens, are suspended or in abeyance during military occupation (Co Kim cham vs. Valdez Tan Keh and dizon, supra), for the only reason that as they exclusively bear relation to the ousted legitimate government, they are inoperative or not applicable to the government established by the occupant; that the crimes against national security, such as treason and espionage; inciting to war, correspondence with hostile country, flight to enemy's country, as well as those against public order, such as rebellion, sedition, and disloyalty, illegal possession of firearms, which are of political complexion because they bear relation to, and are penalized by our Revised Penal Code as crimes against the legitimate government, are also suspended or become inapplicable as against the occupant, because they can not be committed against the latter

(Peralta vs.Director of Prisons, supra); and that, while the offenses against public order to be preserved by the legitimate government were inapplicable as offenses against the invader for the reason above stated, unless adopted by him, were also inoperative as against the ousted government for the latter was not responsible for the preservation of the public order in the occupied territory, yet article 114 of the said Revised Penal Code, was applicable to treason committed against the national security of the legitimate government, because the inhabitants of the occupied territory were still bound by their allegiance to the latter during the enemy occupation;

Considering that, although the military occupant is enjoined to respect or continue in force, unless absolutely prevented by the circumstances, those laws that enforce public order and regulate the social and commercial life of the country, he has, nevertheless, all the powers of de facto government and may, at his pleasure, either change the existing laws or make new ones when the exigencies of the military service demand such action, that is, when it is necessary for the occupier to do so for the control of the country and the protection of his army, subject to the restrictions or limitations imposed by the Hague Regulations, the usages established by civilized nations, the laws of humanity and the requirements of public conscience (Peralta vs. Director of Prisons, supra; 1940 United States Rules of Land Warfare 76, 77); and that, consequently, all acts of the military occupant dictated within these limitations are obligatory upon the inhabitants of the territory, who are bound to obey them, and the laws of the legitimate government which have not been adopted, as well and those which, though continued in force, are in conflict with such laws and orders of the occupier, shall be considered as suspended or not in force and binding upon said inhabitants;

Considering that, since the preservation of the allegiance or the obligation of fidelity and obedience of a citizen or subject to his government or sovereign does not demand from him a positive action, but only passive attitude or forbearance from adhering to the enemy by giving the latter aid and comfort, the occupant has no power, as a corollary of the preceding consideration, to repeal or suspend the operation of the law of treason, essential for the preservation of the allegiance owed by the inhabitants to their legitimate government, or compel them to adhere and give aid and comfort to him; because it is evident that such action is not demanded by the exigencies of the military service or not necessary for the control of the inhabitants and the safety and protection of his army, and because it is tantamount to practically transfer temporarily to the occupant their allegiance to the titular government or sovereign; and that, therefore, if an inhabitant of the occupied territory were compelled illegally by the military occupant, through force, threat or intimidation, to give him aid and comfort, the former may lawfully resist and die if necessary as a hero, or submit thereto without becoming a traitor;

Considering that adoption of the petitioner's theory of suspended allegiance would lead to disastrous consequences for small and weak nations or states, and would be repugnant to the laws of humanity and requirements of public conscience, for it would allow invaders to legally recruit or enlist the Quisling inhabitants of the occupied territory to fight against their own government without the latter incurring the risk of being prosecuted for treason, and even compel those who are not aid them in their military operation against the resisting enemy forces in order to completely subdue and conquer the whole nation, and thus deprive them all of their own independence or sovereignty — such theory would sanction the action of invaders in forcing the people of a free and sovereign country to be a party in the nefarious task of depriving themselves of their own freedom and independence and repressing the exercise by them of their own sovereignty; in other words, to commit a political suicide;

(2) Considering that the crime of treason against the government of the Philippines defined and penalized in article 114 of the Penal Code, though originally intended to be a crime against said government as then organized by authority of the sovereign people of the United States, exercised through their authorized representative, the Congress and the President of the United States, was made, upon the establishment of the Commonwealth Government in 1935, a crime against the Government of the Philippines established by authority of the people of the Philippines, in whom the sovereignty resides according to section 1, Article II, of the Constitution of the Philippines, by virtue of the provision of section 2, Article XVI thereof, which provides that "All laws of the Philippine Islands . . . shall remain operative, unless inconsistent with this Constitution . . . and all references in such laws to the Government or officials of the Philippine Islands, shall be construed, in so far as applicable, to refer to the Government and corresponding officials under this constitution;

Considering that the Commonwealth of the Philippines was a sovereign government, though not absolute but subject to certain limitations imposed in the Independence Act and incorporated as Ordinance appended to our Constitution, was recognized not only by the Legislative Department or Congress of the United States in approving the Independence Law above quoted and the Constitution of the Philippines, which contains the declaration that "Sovereignty resides in the people and all government authority emanates from them" (section 1, Article II), but also by the Executive Department of the United States; that the late President Roosevelt in one of his messages to Congress said, among others, "As I stated on August 12, 1943, the United States in practice regards the Philippines as having now the status as a government of other independent nations — in fact all the attributes of complete and respected nationhood" (Congressional Record, Vol. 29, part 6, page 8173); and that it is a principle upheld by the Supreme Court of the United States in many cases, among them in the case of Jones vs. United States (137 U.S., 202; 34 Law. ed., 691, 696) that the question of sovereignty is "a purely political question, the determination of which by the legislative and executive departments of any government conclusively binds the judges, as well as all other officers, citizens and subjects of the country.

Considering that section I (1) of the Ordinance appended to the Constitution which provides that pending the final and complete withdrawal of the sovereignty of the United States "All citizens of the Philippines shall owe allegiance to the United States", was one of the few limitations of the sovereignty of the Filipino people retained by the United States, but these limitations do not away or are not inconsistent with said sovereignty, in the same way that the people of each State of the Union preserves its own sovereignty although limited by that of the United States conferred upon the latter by the States; that just as to reason may be committed against the Federal as well as against the State Government, in the same way treason may have been committed during the Japanese occupation against the sovereignty of the United States as well as against the sovereignty of the Philippine Commonwealth; and that the change of our form of government from Commonwealth to Republic does not affect the prosecution of those charged with the crime of treason committed during the Commonwealth, because it is an offense against the same government and the same sovereign people, for Article XVIII of our Constitution provides that "The government established by this constitution shall be known as the Commonwealth of the Philippines. Upon the final and complete withdrawal of the sovereignty of the United States and the proclamation of Philippine independence, the Commonwealth of the Philippines shall thenceforth be known as the Republic of the Philippines";

This Court resolves, without prejudice to write later on a more extended opinion, to deny the petitioner's petition, as it is hereby denied, for the reasons above set forth and for others to be stated in the said opinion, without prejudice to concurring opinion therein, if any. Messrs.

Justices Paras and Hontiveros dissent in a separate opinion. Mr. justice Perfecto concurs in a separate opinion.

G.R. No. L-49            November 12, 1945

WILLIAM F. PERALTA, petitioner, vs.THE DIRECTOR OF PRISONS, respondent.

William F. Peralta in his own behalf.Office of the Solicitor General Tañada for respondent.City Fiscal Mabanag as amicus curiae.

FERIA, J.:

Petitioner-defendant, a member of the Metropolitan Constabulary of Manila charged with the supervision and control of the production, procurement and distribution of goods and other necessaries as defined in section 1 of Act No. 9 of the National Assembly of the so-called Republic of the Philippines, was prosecuted for the crime of robbery as defined and penalized by section 2 (a) of Act No. 65 of the same Assembly. He was found guilty and sentenced to life imprisonment, which he commenced to serve on August 21, 1944, by the Court of Special and Exclusive Criminal Jurisdiction, created in section 1 of Ordinance No. 7 promulgated by the President of the so-called Republic of the Philippines, pursuant to the authority conferred upon him by the Constitution and laws of the said Republic. And the procedure followed in the trial was the summary one established in Chapter II of Executive Order No. 157 of the Chairman of the Executive Commission, made applicable to the trial violations of said Act No. 65 by section 9 thereof and section 5 of said Ordinance No. 7.

The petition for habeas corpus is based on the ground that the Court of Special and Executive Criminal Jurisdiction created by Ordinance No. 7 "was a political instrumentality of the military forces of the Japanese Imperial Army, the aims and purposes of which are repugnant to those aims and political purposes of the Commonwealth of the Philippines, as well as those of the United States of America, and therefore, null and void ab initio," that the provisions of said Ordinance No. 7 are violative of the fundamental laws of the Commonwealth of the Philippines and "the petitioner has been deprived of his constitutional rights"; that the petitioner herein is being punished by a law created to serve the political purpose of the Japanese Imperial Army in the Philippines, and "that the penalties provided for are much (more) severe than the penalties provided for in the Revised Penal Code."

The Solicitor General, in his answer in behalf of the respondent, states that, in his own opinion, for the reasons expressed in his brief in the case of People of the Philippines, plaintiff-appellant, vs. Benedicto Jose y Santos, defendant-appellee, G. R. No. L-22 (p. 612, post), the acts and proceedings taken and had before the said Court of Special and Exclusive Criminal Jurisdiction which resulted in the conviction and imprisonment of the herein petitioner, should now be denied force and efficacy, and therefore the petition for habeas corpus should be granted. The reasons advanced by the Solicitor General in said brief and in his reply memorandum in support of his contention are, that the Court of Special and Exclusive Criminal Jurisdiction created, and the summary procedure prescribed therefor, by said Ordinance No. 7 in connection with Executive Order No. 157 of the Chairman of the Executive Commission are tinged with political complexion; that the procedure prescribed in Ordinance No. 7 does not afford a fair trial, violates the Constitution of the Commonwealth, and impairs the Constitutional rights of accused persons under their legitimate Constitution. And he cites, in support of this last proposition, the decisions of the Supreme Court of the United States in the cases of Texas vs. White (7 Wall., 700, 743); Horn vs. Lockart (17 Wall.,

570, 581); United States vs. Home Insurance Co. (22 Wall., 99, 104); Sprott vs.United States (20 Wall., 459).

The City Fiscal of Manila appeared before this Court as amicus curiae. In his memorandum he submits that the petition for habeas corpus be denied on the following grounds: That the Court of Special and Exclusive Criminal Jurisdiction and the Acts, Ordinances and Executive Orders, creating it are not of a political complexion, for said Court was created, and the crimes and offenses placed under its jurisdiction were penalized heavily, in response to an urgent necessity, according to the preamble of Ordinance No. 7; that the right to appeal in a criminal case is not a constitutional right; and that the summary procedure established in said Ordinance No. 7 is not violative of the provision of Article III, section 1 (18) of the Constitution of the Commonwealth, to the effect that no person shall be compelled to be a witness against himself, nor of the provision of section 1 (1) of the same Article that no person shall be deprived of life, liberty, or property without due process of law.

The features of the summary procedure adopted by Ordinance No. 7, assailed by the petitioner and the Solicitor General as impairing the constitutional rights of an accused are: that court may interrogate the accused and witnesses before trial in order to clarify the points in dispute; that the refusal of the accused to answer the questions may be considered unfavorable to him; that if from the facts admitted at the preliminary interrogatory it appears that the defendant is guilty, he may be immediately convicted; and that the sentence of the sentence of the court is not appealable, except in case of death penalty which cannot be executed unless and until reviewed and affirmed by a special division of the Supreme Court composed of three Justices.

Before proceeding further, and in order to determine the law applicable to the questions involved in the present case, it is necessary to bear in mind the nature and status of the government established in these Islands by the Japanese forces of occupation under the designation of Republic of the Philippines.

In the case of Co Kim Cham vs. Valdez Tan Keh and Dizon (G. R. No. L-5, pp. 113, 127, ante), recently decided, this Court, speaking through the Justice who pens this decision, held:

In view of the foregoing, it is evident that the Philippines Executive Commission, which was organized by Order No. 1, issued on January 23, 1942, by the Commander of the Japanese forces, was a civil government established by the military forces of occupation and therefore a de facto government of the second kind. It was not different from the government established by the British in Castine, Maine, or by the United States in Tanpico, Mexico. As Halleck says, "the government established over an enemy's territory during the military occupation may exercise all the powers given by the laws of war to the conqueror over the conquered, and is subject to all restrictions which that code imposes. It is of little consequence whether such government be called a military or civil government. Its character is the same and the source of its authority the same. In either case it is a government imposed by the laws of war and so far as it concerns the inhabitants of such territory or the rest of the world those laws alone determine the legality or illegality of its acts." (vol. 2 p. 466.) The fact that the Philippine Executive Commission was a civil and not a military government and was run by Filipinos and not by Japanese nationals is of no consequence.

And speaking of the so-called Republic of the Philippines in the same decision, this Court said:

The so-called Republic of the Philippines, apparently established and organized as a sovereign state independent from any other government by the Filipino people, was, in truth and reality, a government established by the belligerent occupant or the Japanese forces of occupation. It was of the same character as the Philippine Executive Commission, and the

ultimate source of its authority was the same — the Japanese military authority and government. As General MacArthur stated in his proclamation of October 23, 1944, a portion of which has been already quoted, "under enemy duress, a so-called government styled as the 'Republic of the Philippines' was established on October 14, 1943, based upon neither the free expression of the peoples" will nor the sanction of the Government of the United States.' Japan had no legal power to grant independence to the Philippines or transfer the sovereignty of the United States to, or recognize the latent sovereignty of the Filipino people, before its military occupation and possession of the Islands had matured into an absolute and permanent dominion or sovereignty by a treaty of peace or other means recognized in the law of nations.

As the so-called Republic of the Philippines was a de facto government of the second kind (of paramount force), as the government established in Castine, Maine, during its occupation by the British forces and as that of Tampico, Mexico, occupied during the war with that the country by the United State Army, the question involved in the present case cannot be decided in the light of the Constitution of the Commonwealth Government; because the belligerent occupant was totally independent of the constitution of the occupied territory in carrying out the administration over said territory; and the doctrine laid down by the Supreme Court of the United States in the cases involving the validity of judicial and legislative acts of the Confederate States, considered as de factogovernments of the third kind, does not apply to the acts of the so-called Republic of the Philippines which is a de facto government of paramount force. The Constitution of the so-called Republic of the Philippines can neither be applied, since the validity of an act of a belligerent occupant cannot be tested in the light of another act of the same occupant, whose criminal jurisdiction is drawn entirely from the law martial as defined in the usages of nations.

In the case of United States vs. Rice (4 Wheaton, 246), the Supreme Court of the United States held that, by the military occupation of Castine, Maine, the sovereignty of the United States in the territory was, of course, suspended, and the laws of the United States could no longer be rightfully enforced there or be obligatory upon the inhabitants who remained and submitted to the belligerent occupant. By the surrender the inhabitants passed under a temporary allegiance to the British government, and were bound by such laws, and such only, as it chose to recognize and impose. And Oppenheim, in his Treatise on International Law, says that, in carrying out the administration over the occupied territory and its inhabitants, "the (belligerent) occupant is totally independent of the constitution and the laws of the territory, since occupation is an aim of warfare, and the maintenance and safety of his forces, and the purpose of war, stand in the foreground of his interest and must be promoted under all circumstances or conditions. (Vol. II, Sixth Edition, Revised, 1944, p. 342.)

The doctrine laid down in the decisions of the Supreme Court of the United States (in the cases of Texas vs.White, 7 Wall., 700; Horn vs. Lockart, 17 Wall., 570; Williams vs. Bruffy, 96 U. S., 176 United States vs. Home Insurance Co., 20 Wall., 249; Sprott vs. United States, 20 Wall., 459, and others) that the judicial and legislative acts of the Confederate States which impaired the rights of the citizens under the Constitution of the United States or of the States, or were in conflict with those constitutions, were null and void, is not applicable to the present case. Because that doctrine rests on the propositions that "the concession (of belligerency) made to the Confederate Government . . . sanctioned no hostile legislation . . . and it impaired in no respect the rights of loyal and citizens as they existed at the commencement of hostilities" (Williams vs. Bruffy, supra);that the Union is perpetual and indissoluble, and the obligation of allegiance to the to the estate and obedience to her laws and the estate constitution, subject to the Constitution of the United States, remained unimpaired during the War of Secession (Texas vs. White, supra) and that the Confederate States "in most, if not in all instances, merely transferred the existing state organizations to the support of a new and different national head. the same constitution, the same laws for the protection of the property and personal rights remained and were administered by the same officers." (Sprott vs. United States, supra). In fine, because in the case of the Confederate States, the

constitution of each state and that of the United States or the Union continued in force in those states during the War of Secession; while the Constitution of the Commonwealth Government was suspended during the occupation of the Philippines by the Japanese forces of the belligerent occupant at regular war with the United States.

The question which we have to resolve in the present case in the light of the law of nations are, first, the validity of the creation of the Court of Special and Exclusive Criminal Jurisdiction, and of the summary procedure adopted for that court; secondly, the validity of the sentence which imprisonment during the Japanese military occupation; and thirdly, if they were then valid, the effect on said punitive sentence of the reoccupation of the Philippines and the restoration therein of the Commonwealth Government.

(1) As to the validity of the creation of the Court of Special and Exclusive Criminal Jurisdiction by Ordinance No. 7, the only factor to be considered is the authority of the legislative power which promulgated said law or ordinance. It is well established in International Law that "The criminal jurisdiction established by the invader in the occupied territory finds its source neither in the laws of the conquering or conquered state, — it is drawn entirely form the law martial as defined in the usages of nations. The authority thus derived can be asserted either through special tribunals, whose authority and procedure is defined in the military code of the conquering state, or through the ordinary courts and authorities of the occupied district." (Taylor, International Public Law, p. 598.) The so-called Republic of the Philippines, being a governmental instrumentality of the belligerent occupant, had therefore the power or was competent to create the Court of Special and Exclusive Criminal Jurisdiction. No question may arise as to whether or not a court is of political complexion, for it is mere a governmental agency charged with the duty of applying the law to cases falling within its jurisdiction. Its judgments and sentences may be of political complexion, or not depending upon the nature or character of the law so applied. There is no room for doubt, therefore, as to the validity of the creation of the court in question.

With respect to the Summary procedure adopted by Ordinance No. 7, and followed in the trial of the case which resulted in the conviction of the herein petitioner, there is also no question as to the power or competence of the belligerent occupant to promulgate the law providing for such procedure. For "the invader deals freely with the relations of the inhabitants of the occupied territory towards himself . . . for his security also, he declares certain acts, not forbidden by the ordinary laws of the country, to be punishable; and he so far suspends the laws which guard personal liberty as is required for the summary punishment of any one doing such acts." (Hall's International Law, seventh ed., p. 5000). A belligerent "occupant may where necessary, set up military courts instead of the ordinary courts; and in case, and in so far as, he admits the administration of justice by the ordinary courts, he may nevertheless, so far as is necessary for military purposes, or for the maintenance of public order and safety temporarily alter the laws, especially the Criminal Law, on the basis of which justice is administered as well as the laws regarding procedure." (Oppenheim's International Law, Vol. II, sixth edition, 1944, p.349.)

No objection can be set up to the legality of its provisions in the light of the precepts of our Commonwealth Constitution relating to the rights of accused under that Constitution, because the latter was not in force during the period of the Japanese military occupation, as we have already stated. Nor may said Constitution be applied upon its revival at the time of the re-occupation of the Philippines by virtue of the principle of postliminium because "a constitution should operate prospectively only, unless the words employed show a clear intention that it should have a retrospective effect" (Cooley's Constitutional Limitations, seventh edition, page 97, and cases quoted and cited in the footnote), especially as regards laws of procedure applied to cases already terminated completely.

The only restrictions or limitations imposed upon the power of a belligerent occupant to alter the laws or promulgate new ones, especially the criminal law as well as the laws regarding procedure, so far as it is necessary for military purposes, that is, for his control of the territory and the safety and protection of his army, are those imposed by the Hague Regulations, the usages established by civilized nations, the laws of humanity and the requirements of public conscience. It is obvious that the summary procedure under consideration does not violate those precepts. It cannot be considered as violating the laws of humanity and public conscience, for it is less objectionable, even from the point of view of those who are used to the accusatory system of criminal procedure than the procedural laws based on the semi-inquisitorial or mixed system prevailing in France and other countries in continental Europe.

(2) The validity of the sentence rendered by the Court of Special and Exclusive Criminal Jurisdiction which imposes life imprisonment upon the herein petitioner, depends upon the competence or power of the belligerent occupant to promulgate Act No. 65 which punishes the crime of which said petitioner was convicted.

Westlake says that Article XLIII, Section III, of the Hague Conventions of 1907 "indicates that the laws to be enforced by the occupant consist of, first, the territorial law in general, as that which stands to the public order and social and commercial life of the district in a relation of mutual adaptation, so that any needless displacement of it would defeat the object which the invader is enjoined to have in view, and secondly, such variations of the territorial law as may be required by real necessity and are not expressly prohibited by any of the rules which will come before us. Such variations will naturally be greatest in what concerns the relation of the communities and individuals within the district to the invading army and its followers, it being necessary for the protection of the latter, and for the unhindered prosecution of the war by them, that acts committed to their detriment shall not only lose what justification the territorial law might give them as committed against enemies, but shall be repressed more severely than the territorial law would repress acts committed against fellow subjects. Indeed the entire relation between the invaders and the invaded, so far as it may fall within the criminal department whether by the intrinsic nature of the acts done or in consequence of the regulations made by the invaders, may be considered as taken out of the territorial law and referred to what is called martial law." (Westlake, International Law, Part II, War, p. 96.)

According to Hyde (International Law, Vol. II, p. 386), the term "martial law," in so far as it is used to describe any fact in relation to belligerent occupation, does not refer to a particular code or system of law, or to a special agency entrusted with its administration. The term merely signifies that the body of law actually applied, having the sanction of military authority, is essentially martial. All law, by whomsoever administered, in an occupied district martial law; and it is none the less so when applied by civil courts in matters devoid of special interest to the occupant. The words "martial law" are doubtless suggestive of the power of the occupant to share the law as he sees fit; that is, to determine what shall be deemed lawful or unlawful acts, to establish tests for ascertaining the guilt of offenders, to fix penalties, and generally to administer justice through such agencies as the found expedient.

And the United States Rules of Land Warfare provide that the belligerent occupant may promulgate such new laws and regulations as military necessity demands, and in this class will be included those laws which come into being as a result of military rule; that is, those which establish new crimes and offenses incident to a state of war and are necessary for the control of the country and the protection of the army, for the principal object of the occupant is to provide for the security of the invading army and to contribute to its support and efficiency and the success of its operations. (Pub. 1940, pp. 76, 77.)

From the above it appears clear that it was within the power and competence of the belligerent occupant to promulgate, through the National Assembly of the so-called Republic of the Philippines, Act No. 65 of the said Assembly, which penalizes the crimes of robbery and other offenses by imprisonment ranging from the maximum period of the imprisonment prescribed by the laws and ordinances promulgated by the President of the so-called Republic as minimum, to life imprisonment or death as maximum. Although these crimes are defined in the Revised Penal Code, they were altered and penalized by said Act No. 65 with different and heavier penalties, as new crimes and offenses demanded by military necessity, incident to a state of war, and necessary for the control of the country by the belligerent occupant, the protection and safety of the army of occupation, its support and efficiency, and the success of its operations.

They are not the same ordinary offenses penalized by the Revised Penal Code. — The criminal acts penalized by said Act No. 65 are those committed by persons charged or connected with the supervision and control of the production, procurement and distribution of foods and other necessaries; and the penalties imposed upon the violators are different from and much heavier than those provided by the Revised Penal Code for the same ordinary crimes. The acts penalized by said Act were taken out of the territorial law or Revised Penal Code, and referred to what is called martial law by international jurists, defined above by Hyde, in order, not only to prevent food and other necessaries from reaching the "guerrillas" which were harassing the belligerent occupant from every nook and corner of the country, but also to preserve the food supply and other necessaries in order that, in case of necessity, the Imperial Japanese forces could easily requisition them, as they did, and as they had the right to do in accordance with the law of nations for their maintenance and subsistence (Art. LII, Sec. III, Hague Conventions of 1907). Especially taking into consideration the fact, of which this court may take judicial notice, that the Imperial Japanese Army had depended mostly for their supply upon the produce of this country.

The crimes penalized by Act No. 65 — as well as the crimes against national security and the law of nations, to wit: treason, espionage, inciting war, violation of neutrality, correspondence with hostile country, flight to enemy's country, piracy; and the crimes against public order, such as rebellion, sedition and disloyalty, illegal possession of firearms and other, penalized by Ordinance No. 7 and placed under jurisdiction of the Court of Special and Exclusive Criminal Jurisdiction — are all of a political complexion, because the acts constituting those offenses were punished, as are all political offenses, for public rather than private reasons, and were acts in aid or favor of the enemy and against the welfare, safety and security of the belligerent occupant. While it is true that these offenses, when committed against the Commonwealth or United States Government, are defined and also penalized by the territorial law Revised Penal Code, they became inapplicable as crimes against the occupier upon the occupation of the Islands by the Japanese forces. And they had to be taken out of the territorial law and made punishable by said Ordinance No. 7, for they were not penalized before under the Revised Penal Code when committed against the belligerent occupant or the government established by him in these Island. They are also considered by some writers as war crimes in a broad sense. In this connection Wheaton observes the following:

"Of 'war crimes' the number is naturally indefinite, depending as they do on the acts from time to time ordered to be done or forbidden to be done in the martial law proclamation or regulations of the invading or occupying commander. Thus, in the Anglo-Boer war, the British military authorities proclaimed the following to be offenses against their martial law; — Being in possession of arms, ammunition, etc.; traveling without a permit; sending prohibited goods; holding meetings other than those allowed; using seditious language; spreading alarmist reports; overcharging for goods; wearing uniforms without due authority; going out of doors between certain hours; injuring military animals or stores; being in possession, without a permit, of horses, vehicles, cycles, etc.; hindering those in execution of military orders; trespassing on defense works. Such offenses, together with several others, were specified in the Japanese regulations made in the Russo-Japanese war." (Wheaton's International Law, War, seventh edition, 1944, p. 242.)

It is, therefore, evident that the sentence rendered by the Court of Special and Exclusive Criminal Jurisdiction against the petitioner, imposing upon him the penalty of life imprisonment, was good and valid, since it was within the admitted power or competence of the belligerent occupant to promulgate the law penalizing the crime of which petitioner was convicted.

(3) The last question is the legal effect of the reoccupation of the Philippines and restoration of the Commonwealth Government; that is whether or not, by the principle of postliminy, the punitive sentence which petitioner is now serving fell through or ceased to be valid from that time.

In order to resolve this last question, it is not necessary to enter into an elaborate discussion on the matter. It is sufficient to quote the opinion on the subject of several international jurists and our recent decision in the case ofCo Kim Cham vs. Valdez Tan Keh and Dizon, supra.

Hall, commenting on the effect of the principle of postliminy upon sentences of the tribunals continued or created by the belligerent occupant, opines "that judicial acts done under this control, when they are not of a political complexion, administrative acts so done, to the extent that they take effect during the continuance of his control, and the various acts done during the same time by private persons under the sanction of municipal law, remain good. . . . Political acts on the other hand fall through as of course, whether they introduce any positive change into the organization of the country, or whether they only suspend the working of that already in existence. The execution also of punitive sentences ceases as of course when they have had reference to acts not criminal by the municipal law of the state, such for example as acts directed against the security or control of the invader." (Hall's International Law, seventh edition, p. 518.)

Westlake, speaking of the duration of the validity of punitive sentences for offenses such as the one in question, which is within the admitted power or competence of the belligerent occupant to punish, says that: "To the extent to which the legal power of the occupant is admitted he can make law for the duration of his occupation. Like any other legislator he is morally subject to the duty of giving sufficient notice of his enactments or regulations, not indeed so as to be debarred from carrying out his will without notice, when required by military necessity and so far as practically carrying out his will can be distinguished from punishment, but always remembering that to punish for breach of a regulation a person who was justifiably ignorant of it would be outrageous. But the law made by the occupant within his admitted power, whether morally justifiable or not, will bind any member of the occupied population as against any other member of it, and will bind as between them all and their national government, so far as it produces an effect during the occupation. When the occupation comes to an end the authority of the national government is restored, either by the progress of operations during the war or by the conclusion of a peace, no redress can be had for what has been actually carried out but nothing further can follow from the occupant's legislation. A prisoner detained under it must be released, and no civil right conferred by it can be further enforced. The enemy's law depends on him for enforcement as well as for enactment. The invaded state is not subject to the indignity of being obliged to execute his commands. (Westlake, International Law, Part II, War, pp. 97, 98.)

And Wheaton, who, as above stated, considers as war crimes such offenses as those penalized in Ordinance No. 7 and Act No. 65, says: "In general, the cast of the occupant possess legal validity, and under international law should not be abrogated by the subsequent government. But this rule does not necessarily apply to acts that exceed the occupant's power (e.g., alienation of the domains of the State or the sovereign), to sentences for 'war treason' and 'war crimes,' to acts of a political character, and to those that beyond the period of occupation. When occupation ceases, no reparation is legally due for what has already been carried out." (Wheaton's International Law, supra, p. 245.)

We have already held in our recent decision in the case of Co Kim Cham vs. Valdez Tan Keh and Dizon, supra, that all judgments of political complexion of the courts during the Japanese regime, ceased to be valid upon the reoccupation of the islands by virtue of the principle or right of postliminium. Applying that doctrine to the present case, the sentence which convicted the petitioner of a crime of a political complexion must be considered as having ceased to be valid ipso facto upon the reoccupation or liberation of the Philippines by General Douglas MacArthur.

It may not be amiss to say in this connection that it is not necessary and proper to invoke the proclamation of General Douglas MacArthur declaring null and void all laws, among them Act No. 65, of the so-called Republic of the Philippines under which petitioner was convicted, in order to give retroactive effect to the nullification of said penal act and invalidate sentence rendered against petitioner under said law, a sentence which, before the proclamation, had already become null and of no effect.

We therefore hold that the punitive sentence under consideration, although good and valid during the military occupation of the Philippines by the Japanese forces, ceased to be good and valid ipso facto upon the reoccupation of these Island and the restoration therein of the Commonwealth Government.

In view of all the foregoing, the writ of habeas corpus prayed for is hereby granted and it is ordered that the petitioner be released forthwith, without pronouncement as to costs. So ordered.

G.R. No. L-533             August 20, 1946

RAMON RUFFY, ET AL., petitioners, vs.THE CHIEF OF STAFF, PHILIPPINE ARMY, ET AL., respondents.

Placido C. Ramos for petitioners.Lt. Col. Fred Ruiz Castro and Capt. Ramon V. Diaz, JAGS, PA., for respondents.

TUASON, J.:

This was a petition for prohibition, praying that the respondents, the Chief of Staff and the General Court Martial of the Philippine Army, be commanded to desist from further proceedings in the trial of petitioners before that body. Preliminary injunction having been denied by us and the General Court Martial having gone ahead with the trial, which eventually resulted in the acquittal of one of the defendants, Ramon Ruffy, the dismissal of the case as to another, Victoriano Dinglasan, and the conviction of Jose L. Garcia, Prudente M. Francisco, Dominador Adeva and Andres Fortus, the last-named four petitioners now seek in their memorandum to convert the petition into one for certiorari, with the prayer that the records of the proceedings before the General Court Martial be ordered certified to this court for review.

The ground of the petition was that the petitioners were not subject to military law at the time the offense for which they had been placed on trial was committed. In their memorandum they have raised an additional question of law — that the 93d Article of War is unconstitutional.

An outline of the petitioner's previous connection with the Philippine Army, the Philippine Constabulary, and/or with guerrilla organizations will presently be made. This outline is based on allegations in the petition and the answer, and on exhibits attached thereto and to the parties' memoranda, exhibits which were offered in the course of the oral argument and admitted without objection. The said exhibits are public documents certified by the officials who had them in custody in their official capacity. They are presumed to be authentic, as we have no doubt they are.

It appears that at the outbreak of war on December 8, 1941, Ramon Ruffy was the Provincial Commander, Prudente M. Francisco, a junior officer, and Andres Fortus, a corporal, all of the Philippine Constabulary garrison stationed in Mindoro. When, on February 27, 1942, the Japanese forces landed in Mindoro, Major Ruffy retreated to the mountains instead of surrendering to the enemy, disbanded his company, and organized and led a guerrilla outfit known as Bolo Combat team of Bolo Area. Lieutenant Francisco, Corporal Fortus and Jose L. Garcia, the last then a civilian joined Major Ruffy's organization towards the latter part of 1942, while Dominador Adeva and Victoriano Dinglasan, then likewise civilians, became its members some time in 1943..

Meanwhile, Brigadier General Macario Peralta, Jr., then a lieutenant colonel of the Philippine Army, also took to the hills of Panay and led the operation of the 6th Military District, one of the districts into which the Philippine Army had been divided before the war. About November, 1942, Colonel Peralta succeeded in contacting the General Headquarters of General MacArthur in Australia as the result of which on February 13, 1943, the 6th Military District was recognized by the Headquarters of the Southwest Pacific Area as a military unit and part of its command.

Even before General MacArthur's recognition of the 6th Military District Colonel Peralta had extended its sphere of operation to comprise Mindoro and Marinduque, and had, on January 2,

1943, named Major Ruffy as Acting Commander for those two provinces and Commanding Officer of the 3rd Battalion, 66 Infantry 61st Division, Philippine Corps. After the recognition, 2d Lieut. Prudente M. Francisco, by virtue of Special Orders No. 99, dated November 2, 1943, and signed by Enrique L. Jurado, Major, OSE, Commanding, was assigned as S-3 in the Bolo Area. Major, later Lieut. Col., Jurado, it should be noted, had been dispatched by the 6th Military District to Mindoro to assume operational control supervision over the Bolo Area unit and to make and direct the necessary report to the Headquarters, 6th Military District, in Panay. On April 26, 1944, by General Orders No. 40 of the 6th Military District, 2d Lieutenant Francisco was promoted to the rank of 1st Lieutenant (Brevet), effective April 15, 1944, subject to approval by the President of the Philippines, and was re-assigned to the Bolo Area. As to Andres Fortus he was assigned to the same Bolo Area as probationary 3d lieutenant for two-month probationary training, by the Headquarters of the 6th Military District, as per Special Orders No. 70, dated May 15, 1944.

According to a memorandum of the Chief of Staff, 6th Military District, dated January 1943, and signed by L.R. Relunia, Lieut. Col., CE, Chief of Staff, Jose L. Garcia and Dominador Adeva were appointed 3d lieutenants, infantry as of December 31, 1942. Garcia later was promoted to the rank of captain, effective March 15, 1943, as per Special Orders No. 82, issued in the field, 6th Military District, and dated August 28, 1943. On May 24, 1943, Jose L. Garcia took his oath before Captain Esteban P. Beloncio, then Acting Commanding Officer, 3d Battalion, 66th Infantry Regiment, 61st Division, 6th Military District.

As has been said, the 6th Military District sent Lieut. Col. Enrique L. Jurado to be Commanding Officer of the Bolo Combat Team in Mindoro and to undertake other missions of Military character. Pursuant to instructions, Colonel Jurado on November 2, 1943, assigned Major Ruffy as Commanding Officer of the Bolo Area with 3d Lieut. Dominador Adeva and 2d Lieut. Prudente M. Francisco as members of his staff and Victoriano Dinglasan as Finance Officer, as per Special Orders No. 99 dated November 2, 1943. In a memorandum of Colonel Jurado for Major Ruffy bearing date 25 June, 1944, it was stated that Captain Garcia had been given P5,000 for palay and Lieut. Francisco P9,000, P5,000 for palay and P4,000 for salary of the personnel B. Company.

A change in the command of the Bolo Area was effected by Colonel Jurado on June 8, 1944: Major Ruffy was relieved of his assignment as Commanding Officer, Bolo Battalion, and Capt. Esteban P. Beloncio was put in Ruffy's place. On October 19, 1944, Lieut. Col. Jurado was slain allegedly by the petitioners. After the commission of this crime, the petitioners, it is alleged, seceded from the 6th Military District. It was this murder which gave rise to petitioner's trial, the legality of which is now being contested.

On July 26, 1941, the President of the Untied States issued a military order the pertinent paragraph of which stated: ". . . as Commander in Chief of the Army and Navy of the United States, I hereby call and order into the service of the armed forces of the United States Army, for the period of the existing emergency, and place under the command of the general officer, United States Army, to be designated by the Secretary of War, from time to time, all of the organized military forces of the Government of the Commonwealth." Following the issuance of President Roosevelt's order General Douglas MacArthur was appointed Commanding General of the United States Armed Forces in the Far East.

It is contended, in behalf of Captain Francisco and Lieutenant Fortus, that "by the enemy occupation of the Philippines, the National Defense Act and all laws and regulations creating and governing the existence of the Philippine Army including the Articles of War, were suspended and in abeyance during such belligerent occupation."

The paragraph quoted in the petitioner's memorandum from Winthrop's Military Law and Precedents and the subsequent paragraph which has been omitted furnish a complete answer to petitioner's contention of the Philippines by Japanese forces, the officers and men of the Philippine Army did not cease to be fully in the service, though in a measure,' only in a measure, they were not subject to the military jurisdiction, if they were not active duty. In the latter case, like officers and soldiers on leave of absence or held as prisoners of war, they could not be held guilty of a breach of the discipline of the command or of a neglect of duty, or disobedience of orders, or mutiny, or subject to a military trial therefor; but for an act unbecoming an officer and a gentleman, or an act which constitutes an offense of the class specified in the 95th Article of War, they may in general be legally held subject to military jurisdiction and trial. "So a prisoner of war, though not subject, while held by the enemy, to the discipline of his own army, would, when exchanged of paroled, be not exempt from liability for such offenses as criminal acts or injuriuos conduct committed during his captivity against other officers or soldiers in the same status." (Winthrop's Military Law and Precedents, 2d Edition, pp. 91, 92.)

The rule invoked by counsel, namely, that laws of political nature or affecting political relations are considered superseded or in abeyance during the military occupation, is intended for the governing of the civil inhabitants of the occupied territory. It is not intended for and does not bind the enemies in arms. This is self-evident from the very nature of things. The paradox of a contrary ruling should readily manifest itself. Under the petitioner's theory the forces of resistance operating in an occupied territory would have to abide by the outlawing of their own existence. They would be stripped of the very life-blood of an army, the right and the ability to maintain order and discipline within the organization and to try the men guilty of breach thereof.

The surrender by General Wainright of the Fil-American Forces does not profit the petitioner's who were former members of the Philippine Constabulary any more than does the rule of war or international law they cite. The fall of Bataan and Corregidor did not end the war. It did not, legally or otherwise, keep the United States and the Commonwealth of the Philippines from organizing a new army, regular or irregular, out of new men and men in the old service who had refused to surrender or who having surrendered, had decided to carry on the fight through other diverse means and methods. The fall of Corregidor and Bataan just marked the beginning of the gigantic preparation for the gigantic drive that was to fight its way to and beyond the Philippines in fulfillment of General MacArthur's classic promise, "I shall return." The heroic role which the guerrillas played in that preparation and in the subsequent liberation of the Philippines is now history.

Independently of their previous connection with the Philippine Army and the Philippine Constabulary, Captain Francisco and Lieutenant Fortus as well as Major Garcia and Lieutenant Adeva were subject to military jurisdiction.

The 2d Article of War defines and enumerates the persons subject to military law as follows:

Art. 2. Persons Subject to Military Law. — The following persons are subject to these articles and shall be understood as included in the term "any person subject to military law" or "persons subject to military law," whenever used in these articles:

(a) All officers, members of the Nurse Corps and soldiers belonging to the Regular Force of the Philippine Army; all reservists, from the dates of their call to active duty and while on such active duty; all trainees undergoing military instructions; and all other persons lawfully called, drafted, or order to obey the same;

(b) Cadets, flying cadets, and probationary third lieutenants;

(c) All retainers to the camp and all persons accompanying or serving with the Army of the Philippines in the field in time of war or when martial law is declared though not otherwise subject to these articles;

(d) All persons under sentences adjudged by courts-martial.

It is our opinion that the petitioners come within the general application of the clause in sub-paragraph (a); "and all other persons lawfully called, drafted, or ordered into, or to duty for training in, the said service, from the dates they are required by the terms of the call, draft, or order to obey the same." By their acceptance of appointments as officers in the Bolo Area from the General Headquarters of the 6th Military District, they became members of the Philippine Army amendable to the Articles of War. The Bolo Area, as has been seen, was a contigent of the 6th Military District which, as has also been pointed out, had been recognized by and placed under the operational control of the United States Army in the Southwest Pacific. The Bolo Area received supplies and funds for the salaries of its officers and men from the Southwest Pacific Command. As officers in the Bolo Area and the 6th Military District, the petitioners operated under the orders of duly established and duly appointed commanders of the United States Army.

The attitude of the enemy toward underground movements did not affect the military status of guerrillas who had been called into the service of the Philippine Army. If the invaders refused to look upon guerrillas, without distinctions, as legitimate troops, that did not stop the guerillas who had been inducted into the service of the Philippine Army from being component parts thereof, bound to obey military status of guerrillas was to be judged not by the concept of the army of the country for which they fought.

The constitutionality of the 93d Article of War is assailed. This article ordains "that any person subject to military law who commits murder in time of was shall suffer death or imprisonment for life, as the court martial may direct." It is argued that since "no review is provided by that law to be made by the Supreme Court, irrespective of whether the punishment is for life imprisonment or death", it violates Article VIII, section 2, paragraph 4, of the Constitution of the Philippines which provides that "the National Assembly may not deprive the Supreme Court of its original jurisdiction over all criminal cases in which the penalty imposed is death or life imprisonment."

We think the petitioners are in error. This error arose from failure to perceive the nature of courts martial and the sources of the authority for their creation.

Courts martial are agencies of executive character, and one of the authorities "for the ordering of courts martial has been held to be attached to the constitutional functions of the President as Commander in Chief, independently of legislation." (Winthrop's Military Law and Precedents, 2d Edition, p. 49.) Unlike courts of law, they are not a portion of the judiciary. "The Supreme Court of the United States referring to the provisions of the Constitution authorizing Congress to provide for the government of the army, excepting military offenses from the civil jurisdiction, and making the President Commander in Chief, observes as follows: "These provisions show that Congress has the power to provide for the trial and punishment of military and naval offenses in the manner then and now practiced by civilized nations, and that the power to do so is given without any connection between it and the 3d Article of the United States; indeed that the two powers are entirely independent of each other."

"Not belonging to the judicial branch of the government, it follows that courts-martial must pertain to the executive department; and they are in fact simply instrumentalities of the executive power, provided by Congress for the President as Commander in Chief, to aid him in properly commanding the army and navy and enforcing discipline therein, and utilized under his orders or those of his

authorized military representatives." (Winthrop's Military Law and Precedents, 2d Edition, p. 49.) Of equal interest Clode, 2 M. F., 361, says of these courts in the British law: "It must never be lost sight of that the only legitimate object of military tribunals is to aid the Crown to maintain the discipline and government of the Army." (Footnote No. 24, p. 49, Winthrop's Military Law and Precedents, 2d Edition.)

Our conclusion, therefore, is that the petition has no merit and that it should be dismissed with costs. It is so ordered.

United States Supreme CourtVILAS v. CITY OF MANILA, (1911)

No. 53Argued:     Decided: April 3, 1911

[220 U.S. 345, 346]   Messrs. Frederic R. Coudert, Howard Thayer Kingsbury, Paul Fuller, and Harry Weston Van Dyke for plaintiffs in error and appellants.[220 U.S. 345, 349]   Messrs. Paul Charlton andIsaac Adams for appellee.[220 U.S. 345, 351]  Mr. Justice Lurton delivered the opinion of the court:The plaintiffs in error, who were plaintiffs below, are creditors of the city of Manila as it existed before the cession of the Philippine Islands to the United States by the treaty of Paris, December 10, 1898 [30 Stat. at L. 1754]. Upon the theory that the city, under its present charter from the government of the Philippine Islands, is the same juristic person and liable upon the obligations of the old city, these actions were brought against it. The supreme court of the Philippine Islands denied relief, holding that the present municipality is a totally different corporate entity, and in no way liable for the debts of the Spanish municipality. [220 U.S. 345, 352]   The fundamental question is whether, notwithstanding the cession of the Philippine Islands to the United States, followed by a reincorporation of the city, the present municipality is liable for the obligations of the city incurred prior to the cession to the United States.We shall confine ourselves to the question whether the plaintiffs in error are entitled to judgments against the city upon their several claims. Whether there is a remedy adequate to the collection when reduced to judgment is not presented by the record. But whether there is or is not a remedy affords no reason why the plaintiffs in error may not reduce their claims to judgment. Mt. Pleasant v. Beckwith, 100 U.S. 514, 530   , 25 S. L. ed. 699, 703. The city confessedly may be sued under its existing charter, and that implies at least a right to judgment if they establish their demands.The city as now incorporated has succeeded to all of the property rights of the old city and to the right to enforce all of its causes of action. There is identity of purpose between the Spanish and American charters and substantial identity of municipal powers. The area and the inhabitants incorporated are substantially the same. But for the change of sovereignty which has occurred under the treaty of Paris, the question of the liability of the city under its new charter for the debts of the old city would seem to be of easy solution. The principal question would therefore seem to be the legal consequence of the cession referred to upon the property rights and civil obligations of the city incurred before the cession. And so the question was made to turn in the court below upon the consequence of a change in sovereignty and a reincorporation of the city by the substituted sovereignty.This disposes of the question of the jurisdiction of this court, grounded upon the absence from the petition of the plaintiffs of any distinct claim under the treaty of Paris, since, under 10 of the Philippine organic act [220 U.S. 345, 353]   of July 1, 1902 [32 Stat. at L. 695, chap. 1369, U. S. Comp. Stat. Supp. 1909, p. 226], this court is given jurisdiction to review any final decree or judgment of the supreme court of the Philippine Islands where any treaty of the United States 'is involved.' That treaty was necessarily 'involved,' since neither the court below nor this court can determine the continuity of the municipality nor the liability of the city as it now exists for the obligation of the old city, without considering the effect of the change of sovereignty resulting from that treaty. See Reavis v. Fianza, 215 U.S. 16, 22   , 54 S. L. ed. 72, 75, 30 Sup. Ct. rep. 1.The historical continuity of a municipality embracing the inhabitants of the territory now occupied by the city of Manila is impressive. Before the conquest of the Philippine Islands by Spain, Manila existed. The Spaniards found on the spot now occupied a populous and fortified community of Moros. In 1571 they occupied what was then and is now known as Manila, and established it as a municipal corporation. In 1574 there was conferred upon it the title of 'Illustrious and ever loyal city of Manila.' From time to time there occurred amendments, and, on January 19, 1894, there was a reorganization of the city government under a royal decree of that date. Under that charter there was power to incur debts for municipal purposes and power to sue and be sued. The obligations here in suit were incurred under the charter referred to, and are obviously obligations strictly within the provision of the municipal power. To pay judgments upon such debts it was the duty of the ayuntamiento of Manila, which was the corporate name of the old city, to make provision in its budget.

The contention that the liability of the city upon such obligations was destroyed by a mere change of sovereignty is obviously one which is without a shadow of moral force, and, if true, must result from settled principles of rigid law. While the contracts from which the claims in suit resulted were in progress, war between the United [220 U.S. 345, 354]   States and Spain ensued. On August 13, 1898, the city was occupied by the forces of this government, and its affairs conducted by military authority. On July 31, 1901, the present incorporating act was passed, and the city since that time has been an autonomous municipality. The charter in force is act 183 of the Philippine Commission, and now may be found as chapters 68 to 75 of the compiled acts of the Philippine Commission. The 1st section of the charter of 1901 reads as follows:'The inhabitants of the city of Manila, residing within the territory described in 2 of this act, are hereby constituted a municipality, which shall be known as the city of Manila, and by that name shall have perpetual succession, and shall possess all the rights of property herein granted or heretofore enjoyed and possessed by the city of Manila as organized under Spanish sovereignty.'The boundaries described in 2 include substantially the area and inhabitants which had theretofore constituted the old city.By 4 of the same act, the government of the city was invested in a municipal board.Section 16 grants certain legislative powers to the board, and provides that it shall 'take possession of all lands, buildings, offices, books, papers, records, moneys, credits, securities, assets, accounts, or other property or rights belonging to the former city of Manila, or pertaining to the business or interests thereof, and, subject to the provisions herein set forth, shall have control of all its property except the building known as the ayuntamiento, provision for the occupation and control of which is made in 15 of this act; shall collect taxes and other revenues, and apply the same in accordance with appropriations, as hereinbefore provided, to the payment of the municipal expenses; shall supervise and control the discharge of official duties by subordinates; shall institute judicial proceedings to recover property and [220 U.S. 345, 355]   funds of the city wherever found, or otherwise to protect the interests of the city, and shall defend all suits against the city,' etc.Section 69 of the charter expressly preserved 'all city ordinances and orders in force at the time of the passage of this act, and not inconsistent herewith,' until modified or repealed by ordinances passed under this act.Section 72 is the repealing clause, and provides for the repeal of 'all acts, orders, and regulations' which are inconsistent with the provisions of the act.The charter contains no reference to the obligations or contracts of the old city.If we understand the argument against the liability here asserted, it proceeds mainly upon the theory that inasmuch as the predecessor of the present city, the ayuntamiento of Manila, was a corporate entity created by the Spanish government, when the sovereignty of Spain in the islands was terminated by the treaty of cession, if not by the capitulation of August 13, 1898, the municipality ipso facto disappeared for all purposes. This conclusion is reached upon the supposed analogy to the doctrine of principal and agent, the death of the principal ending the agency. So complete is the supposed death and annihilation of a municipal entity by extinction of sovereignty of the creating state that it was said in one of the opinions below that all of the public property of Manila passed to the United States, 'for a consideration, which was paid,' and that the United States was therefore justified in creating an absolutely new municipality, and endowing it with all of the assets of the defunct city, free from any obligation to the creditors of that city. And so the matter was dismissed in the Trigas Case by the court of first instance, by the suggestion that 'the plaintiff may have a claim against the Crown of Spain, which has received from the United States payment for that done by the plaintiff.' [220 U.S. 345, 356]   We are unable to agree with the argument. It loses sight of the dual character of municipal corporations. They exercise powers which are governmental and powers which are of a private or business character. In the one character a municipal corporation is a governmental subdivision, and for that purpose exercises by delegation a part of the sovereignty of the state. In the other character it is a mere legal entity or juristic person. In the latter character it stands for the community in the administration of local affairs wholly beyond the sphere of the public purposes for which its governmental powers are conferred.The distinction is observed in South Carolina v. United States, 199 U.S. 437, 461   , 50 S. L. ed. 261, 269, 26 Sup. Ct. Rep. 110, 4 A. & E. Ann. Cas. 737, where Lloyd v. New York, 5 N. Y. 369, 374, 55 Am. Dec.

347, and Western Sav. Fund Soc. v. Philadelphia, 31 Pa. 175, 72 Am. Dec. 730, are cited and approved. In Lloyd v. New York, supra, it is said:'The corporation of the city of New York possesses two kinds of powers: one governmental and public, and to the extent they are held and exercised, is clothed with sovereignty; the other private, and to the extent they are held and exercised, is a legal individual. The former are given and used for public purposes, the latter for private purposes. While in the exercise of the former, the corporation is a municipal government; and while in the exercise of the latter, is a corporate legal individual.'See also Dill. Mun. Corp. 4th ed. 66; Petersburg v. Applegarth, 28 Gratt. 321, 343, 26 Am. Rep. 357, and Oliver v. Worcester, 102 Mass. 489, 3 Am. Rep. 485.In view of the dual character of municipal corporations there is no public reason for presuming their total dissolution as a mere consequence of military occupation or territorial cession. The suspension of such governmental functions as are obviously incompatible with the new political relations thus brought about may be presumed. [220 U.S. 345, 357]   But no such implication may be reasonably indulged beyond that result.Such a conclusion is in harmony with the settled principles of public law as declared by this and other courts and expounded by the text-books upon the laws of war and international law. Taylor, International Pub. Law , 578.That there is a total abrogation of the former political relations of the inhabitants of the ceded region is obvious. That all laws theretofore in force which are in confiict with the political character, constitution, or institutions of the substituted sovereign, lose their force, is also plain. Alvarez y Sanchez v. United States, 216 U.S. 167   , 54 L. ed. 432, 30 Sup. Ct. Rep. 367. But it is equally settled in the same public law that that great body of municipal law which regulates private and domestic rights continues in force until abrogated or changed by the new ruler. In Chicago, R. I. & P. R. Co. v. McGlinn, 114 U.S. 542, 546   , 29 S. L. ed. 270, 271, 5 Sup. Ct. Rep. 1005, it was said:'It is a general rule of public law, recognized and acted upon by the United States, that whenever political jurisdiction and legislative power over any territory are transferred from one nation or sovereign to another, the municipal laws of the country, that is, laws which are intended for the protection of private rights, continue in force until abrogated or changed by the new government or sovereign. By the cession, public property passes from one government to the other, but private property remains as before, and with it those municipal laws which are designed to secure its peaceful use and enjoyment. As a matter of course, all laws, ordinances, and regulations in conflict with the political character, institutions, and constitution of the new government are at once displaced. Thus, upon a cession of political jurisdiction and legislative power-and the latter is involved in the former-to the United States, the laws of the country in support of an established religion, or abridging the freedom of the [220 U.S. 345, 358]   press, or authorizing cruel and unusual punishments, and the like, would at once cease to be of obligatory force without any declaration to that effect; and the laws of the country on other subjects would necessarily be superseded by existing laws of the new government upon the same matters. But with respect to other laws affecting the possession, use, and transfer of property, and designed to secure good order and peace in the community, and promote its health and prosperity, which are strictly of a municipal character, the rule is general, that a change of government leaves them in force until, by direct action of the new government, they are altered or repealed.'The above language was quoted with approval in Downes v. Bidwell, 182 U.S. 244, 298   , 45 S. L. ed. 1088, 1110, 21 Sup. Ct. Rep. 770.That the United States might, by virtue of its situation under a treaty ceding full title, have utterly extinguished every municipality which it found in existence in the Philippine Islands, may be conceded. That it did so, in view of the practice of nations to the contrary, is not to be presumed, and can only be established by cogent evidence.That during military occupation the affairs of the city were in a large part administered by officials put in place by military order did not operate to dissolve the corporation, or relieve it from liability upon obligations incurred before the occupation, nor those created for municipal purposes by the administrators of its affairs while its old officials were displaced. New Orleans v. New York Mail S. S. Co. 20 Wall. 387, 394, 22 L. ed. 354, 358. During that occupation and military administration the business of the city was carried on as usual. Taxes were assessed and taxes collected and expended for local purposes, and many of the officials carrying on the government were those found in office when the city was occupied.

The continuity of the corporate city was not inconsistent with military occupation or the constitution or institutions of the occupying power. This [220 U.S. 345, 359]   is made evident by the occurrences at the time of capitulation. Thus, the articles of capitulation concluded in these words: 'This city, its inhabitants, . . . and its private property of all descriptions, are placed under the special safeguard of the faith and honor of the American Army.' This was quoted in President McKinley's instructions of April 7, 1900, to the Philippine Commission, and touching this he said: 'I believe that this pledge has been faithfully kept.' And the commission was directed to labor for the full performance of this obligation. This instruction was in line with and in fulfilment of the 8th article of the treaty of Paris of December 10, 1898. Under the 3d article of that treaty the archipelago known as the Philippine Islands was ceded to the United States, the latter agreeing to pay to Spain the sum of $20,000,000. Under the first paragraph of the 8th article, Spain relinquished to the United States 'all the buildings, wharves, barracks, forts, structures, public highways, and other immovable property which, in conformity with law, belong to the public domain, and as such belong to the Crown of Spain.' It is under this clause, in connection with the clause agreeing to pay to Spain $20,000,000 for the cession of the Philippine group, that the contention that all of the public rights of the city of Manila were acquired by the United States, which country was therefore justified, as absolute owner, in granting the property rights so acquired to what is called the 'absolutely new corporation' created thereafter. But the qualifying words touching property rights relinquished by Spain limit the relinquishment to 'property which, in conformity with law, belonging to the public domain, and as such belong to the Crown of Spain.' It did not affect property which did not, in 'conformity with law, belong to the Crown of Spain.' That it was not intended to apply to property which, 'in conformity with law,' belonged to the city of Manila as a municipal cor- [220 U.S. 345, 360]   poration, is clear. This is demonstrated by the second paragraph of the same article, which reads: 'And it is hereby declared that the relinquishment or cession, as the case may be, to which the preceding paragraph refers, cannot in any respect impair the property or rights which by law belong to the peaceful possession of property of all kinds, of provinces, municipalities, public or private establishments . . . having legal capacity to acquire and possess property in the aforesaid territories renounced or ceded, or of private individuals.' Thus, the property and property rights of municipal corporations were protected and safeguarded precisely as were the property and property rights of individuals.That the cession did not operate as an extinction or dissolution of corporations is herein recognized, for the stipulation against impairment of their property rights has this plain significance.The conclusion we reach, that the legal entity survived both the military occupation and the cession which followed, finds support in the cases which hold that the Pueblos of San Francisco and Los Angeles, which existed as municipal organizations prior to the cession of California by Mexico, continued to exist with their community and property rights intact. Cohas v. Raisin, 3 Cal. 443; Hart v. Burnett, 15 Cal. 530; Townsend v. Greeley, 5 Wall. 326, 18 L. ed. 547; Merryman v. Bourne, 9 Wall. 592, 602, 19 L. ed. 683, 686; Moore v. Steinbach, 127 U.S. 70   , 32 L. ed. 51, 8 Sup. Ct. Rep. 1067; Los Angeles Farming & Mill. Co. v. Los Angeles, 217 U.S. 217   , 54 L. ed. 736, 30 Sup. Ct. Rep. 452.Were corporate identity and corporate liability extinguished as a necessary legal result of the new charter granted in 1901 by the Philippine Commission? The inhabitants of the old city are the incorporators of the new. There is substantially identity of area. There are some changes in the form of government and some changes in corporate powers and methods of administration. the new corporation is endowed with all of the property and [220 U.S. 345, 361]  property rights of the old. It has the same power to sue and be sued which the former corporation had. There is not the slightest suggestion that the new corporation shall not succeed to the contracts and obligations of the old corporation. Laying out of view any question of the constitutional guaranty against impairment of the obligation of contracts, there is, in the absence of express legislative declaration of a contrary purpose, no reason for supposing that the reincorporation of an old municipality is intended to permit an escape from the obligations of the old, to whose property and rights it has succeeded. The juristic identity of the corporation has been in no wise affected, and, in law, the present city is, in every legal sense, the successor of the old. As such it is entitled to the property and property rights of the predecessor corporation, and is, in law, subject to all of its liabilities. Broughton v. Pensacola 93 U.S. 266   , 23 L. ed. 896; Mt. Pleasant v. Beckwith, 100 U.S. 520   , 25 L. ed. 699; Mobile v. Watson, 116 U.S. 289   , 29 L. ed. 620, 6 Sup. Ct. Rep. 398; Shapleigh v. San Angelo, 167 U.S. 646, 655   , 42 S. L. ed. 310, 313, 17 Sup. Ct. Rep. 957; O'Connor v. Memphis, 6 Lea, 730; Colchester v. Seaber, 3 Burr. 1866, 1870, in which case, when a municipality became disabled to act and obtained a new charter,

in an action upon an obligation of the old corporation, there was judgment for the creditor, Lord Mansfield saying:'Many corporations, for want of legal magistrates, have lost their activity, and obtained new charters. Maidstone, Radnor, Carmarthen, and many more are in the same case with Colchester. And yet it has never been disputed but that the new charters revive and give activity to the old corporation; except, perhaps, in that case in Levinz, where the corporation had a new name; and even there the court made no doubt. Where the question has arisen upon any remarkable metamorphosis, it has always been determined 'that they remain the same as to debts and rights."Morris v. State, 62 Tex. 728, 730. [220 U.S. 345, 362]   In Shapleigh v. San Angelo, supra, this court said in a similar case:'The state's plenary power over its municipal corporations to change their organization, to modify their method of internal government, or to abolish them altogether, is not restricted by contracts entered into by the municipality with its creditors or with private parties. An absolute repeal of a municipal charter is therefor effectual so far as it abolishes the old corporate organization; but when the same or substantially the same inhabitants are erected into a new corporation, whether with extended or restricted territorial limits, such new corporation is treated as in law the successor of the old one, entitled to its property rights, and subject to its liabilities.'The cases of Trigas and Vilas went off upon demurrers, and no question of remedy arises here.The appeal of Aguado is from a decree upon a final hearing denying him all relief.That all three of the plaintiffs in error are entitled to proceed to judgment when they shall establish their several claims is obvious from what we have said. But in the Aguado Case it is sought to establish his claim as a charge against certain property and funds held by the city as trustee, known as the Carriedo fund. In 1734 one Don Francisco Carriedo y Perodo bequeathed to the city a fund for the establishment of waterworks, to be kept as a separate fund and devoted to the erection and maintenance of the works. This fund was loyally kept and greatly increased, and was enlarged by a special tax upon meat, devoted to that purpose. The works were finally completed in 1878, and have been since operated by the city, the income and special tax going to maintenance. Certain securities belonging to the fund are now held by the city, the income being applied to the operation of the works. Aguado took a contract to supply coal for the use of the [220 U.S. 345, 363]   Carriedo works, and made a deposit to guarantee the contract. When the city was occupied by the American Army it was indebted to him for coal so supplied, as well as for the deposit so made. That the coal was bought for and used in the operation of the Carriedo works is not denied. But there is no evidence that the credit was given to the Carriedo fund so held in trust under the will of Carriedo. The contract was made with the ayuntamiento of Manila, just as all other contracts for city supplies or works were made. The contract not having been made with special reference to the liability of the fund held in trust by the city, but apparently upon the general credit of the city, we are not disposed to reverse the judgment of the court below, holding that the claim of Aguado did not constitute a charge upon the Carriedo fund.Aguado is, nevertheless, entitled to a judgment. The designation of the city in the petition as trustee may be regarded as descriptive. The debt having been incurred by the city, it must be regarded as a city liability. Taylor v. Davis (Taylor v. Mayo), 110 U.S. 330, 336   , 28 S. L. ed. 163, 165, 4 Sup. Ct. Rep. 147.Our conclusion is that the decree in the Aguado Case must be reversed and the case remanded, with direction to render judgment and such other relief as may seem in conformity with law. The judgments in the Trigas and Vilas Cases will be reversed and the cases remanded, with direction to overrule the respective demurrers, and for such other action as may be consistent with law, and consistent with this opinion.- See more at: http://caselaw.findlaw.com/us-supreme-court/220/345.html#sthash.LKGyw0TO.dpuf