[ G.R. No. L-1494. December 21, 1950 ] G.R. No. L-1494
[ G.R. No. L-1494. December 21, 1950 ]
ALLISON J. GIBBS, ET AL., PLAINTIFFS-APPELLEES, VS. EULOGIO RODRIGUEZ, SR., ET AL., DEFENDANTS-APPELLANTS. R E S O L U T I O N
FERIA, J.:
This is a motion for reconsideration of the decision of this Court in the present case filed by the plaintiffs on the grounds (I) that “even if it is assumed that the Japanese had authority to demand payment oi1 plaintiffs’ U.S. dollar credit in Japanese military pesos, the payments allegedly made by the defendants to the Japanese should be credited against the amount owed to plaintiffs only at the express mortgage rate, namely, at the cost in Japanese military pesos (or at the fair rate of exchange) of the U.S. dollar demand draft on New York called for in the mortgage; this would leave a balance due plaintiffs after such application of not less than $40,024.07”; and (II) that the decision of this Court in the Haw Pia case on the strength of which the present case has been decided, is erroneous, and in support of the petitioners’ contention our attention is invited to an article appearing in the June 1949 issue of the Philippine Law Journal written by Professor Charles Cheney Hyde, author of “International Law as chiefly interpreted and applied by the United States.”
I
As to the first ground, suffice it to say that if the Japanese military occupant had power to sequestrate and, in fact, sequestrated the plaintiffs’ credit, it had subrogated into the rights or stood in the shoes of the plaintiffs as creditor and, ¦therefore, had the right to demand and accept, through Japanese Enemy Property Custodian, the payment of all the defendants’ debts to the plaintiffs in Japanese military notes without of course compelling the defendants to pay interests not yet then due, and completely release thereby said obligation, without prejudice to the plaintiffs’ right to demand, through their government from the Japanese after the war, the reimbursement of the full value of their sequestrated credit. We have held in the decision that “whatever might have been the intrinsic or extrinsic value of the Japanese war-notes which the Bank of Taiwan has received as full satisfaction of the obligation of the appellee’s debtors to it, is of no consequence in the present case. As we have already stated, the Japanese war-notes were issued as legal tender at par with the Philippine peso, and guaranteed by Japanese Government which “takes full responsibility for their usage having the correct amount to back them up” (Proclamation of Jan. 3,1942). Now that the outcome of the war has turned against Japan, the enemy, banks have the right to demand from Japan, through their States or Government, payments or compensation in Philippine peso or U.S. dollars as the case may be, for the loss or damage inflicted on the property by the emergency war measure taken by the enemy.”
Furthermore, when the Court of First Instance of Manila rendered, judgment sentencing the defendants in the present case to pay their debt to the plaintiffs, after the moratorium has been lifted, in American dollars or its equivalent in Philippine pesos which, according to said Section 1612 of the Revised Administrative Code, was at the rate of two Philippine pesos to one American dollar, the plaintiffs did not appeal from said part of the judgment nor assail it as erroneous in their briefs, and therefore plaintiffs cannot; now raise that question for the first time in their motion for reconsideration.
The decision of this Court in the Legarda case did not hold that the defendant Burke had the right to refuse the payment by the debtor of his debt in British currency in Japanese war notes. This Supreme Court returned the case to the lower court for further proceeding and the writer of the opinion of the court in said case only said that “still it is serious question whether the defendant Burke who was a special creditor having the right to insist upon his option to receive payment in British currency or the equivalent of British currency at that time, could be enjoined to receive Japanese money specially at par.” Moreover in the Legarda case the action was instituted by the debtor against his creditor to compel the latter to accept the payment in Japanese military notes, while in the present the payment of the debtors’ debt to their creditors was demanded and accepted by the Japanese Military Occupant in the exercise of its power to sequestrate the property of said creditors who were enemy citizens, without prejudice to the right of the latter to demand from the Japanese Goverment full compensation for the seizure through State Department channels at the peace table. (United States v. SS. White Dental Manufacturing Co., 274 U.S. 598, 402 (1927).
II
With respect to the article of Professor Charles Cheney Hyde on the decision of this Court in the case of Haw Pia v. China Banking Corporation, G.R. No. L-554, promulgated on April 9, 1948, it may not be amiss to state, by way of a preamble before proceeding, that according to Article 38 of the Statutes of the International Court of Justice, the Court shall, subject to certain limitations, apply judicial decisions as a subsidiary means for the determination of rules of international law. Although courts are not organs of the State for expressing in a binding manner its views on foreign affairs, they are nevertheless organs of the State giving, as a rule, impartial expression to ¦what is believed to be International Law. For this reason, judgments of municipal tribunals are of considerable practical importance for determining what is the right rule of International Law. This is now being increasingly recognised, and periodical unofficial collections of decisions of both international and municipal courts are being published. In pleadings before international tribunals litigants still fortify their arguments by reference to writings of international jurists, but with the growth of international judicial activity and of the practice of States evidenced by widely accessible records and reports, it is natural that reliance on the authority of writers as evidence of International Law should tend to diminish. For it is as evidence of the law and not as a law-creating factor that the usefulness of teachings of writers has been occasionally admitted in judicial pronouncements. But inasmuch as a source of law is conceived as a factor influencing the judge in rendering his decision, the work of writers may continue to play a part in proportion to its intrinsic scientific value, its impartiality and its determination to scrutinise criticaly the practice of States by reference to legal principle. (International Law by Oppenheim, Vol. I, pp. 29-32)
It does not seem, therefore, proper for an attorney or jurist, in trying to protect or defend the interest of parties affected adversely by a decision rendered by the Supreme court of a Sovereign foreign Power to assail it with arguments premised on facts different from those found by their court on which the decision is based and dub that decision as one in violation of International Law. A decision of the Supreme Court of the small Republic of the Philippines is as much a source of International Law as a decision of the Supreme Court of the great Republic of the United States of America. The article of Professor Hyde in which the author commenting on the decision in the Haw Pia case, says that it “will do the utmost harm to American Interest”[1], does not deserve the same weight as his opinions set forth in his work “international Law chiefly as interpreted and applied by the United States.” Because the article was written and published more than one year after our decision not by an impartial jurist and ante litem motam, but by an attorney who tries to defend American interests in the Philippines after an action was instituted in the Supreme Court of the State of New York by the Compaiia Tabacalera, a corporation owned mostly by Spaniards and doing business in these Islands, against the National City Bank of New York, an action based on the decision of this .Supreme Court of the Philippines in the said Haw Pia case.
For clarity’s sake, we shall discuss separately the arguments and conclusions advanced by Mr. Hyde in support of his contention that our decision in the Haw Pia case is a violation of International Law: (1) first, on the validity of the payment made in war notes to the Bank of Taiwan by Haw Pia of his pre-war debt to the China Bank; (2) secondly, on the alleged failure of the Bank of Taiwan, liquidator of the China Banking Corporation, to properly and adequately perform its function as such; (3) and thirdly, on the so-called failure of the Philippine Republic to heed certain contractual undertaking in the Inter-Allied Declaration of January 5, 1943, in London, to which the late President Quezon adhered in behalf of the Commonwealth of the Philippines. We shall copy the pertinent parts of the article dealing with each of those subjects, and then refute Mr.Hyde’s contentions by transcribing the corresponding portion of our decision in said Haw Pia case plus some additional comments.
(l) As to the first, Prof. Hyde has evidently missed the point with respect to the main issue decided in the Haw Pia case in the article In question, and consequently his conclusions are incorrect from the beginning to the end for they are based on wrong premises. At the beginning he says, among others, the following:
“The decision of the Supreme court of the Philippine Republic in the Haw Pia case constitutes internationally illegal conduct upon the part of the Philippine Government which is productive of a solid claim for compensation in behalf of alien nationals or creditors who suffered loss as a direct consequence of such decision. %e Japanese decrees -which permitted Haw Pia, a local debtor, fully to satisfy her pre-war peso indebtedness to the local office of a foreign creditor bank by payment in a greatly depreciated Japanese military currency were in violation of International Law. ^hey permitted the debtor to satisfy her debt in a currency not contemplated by the parties and of little or no value at the time of payment. By such payment a mortgage of property given to secure such debt was satisfied of record. The recognition by the Supreme Court of the Philippines of the Japanese decrees which resulted in this harm-producing aet is also a violation of International Law by such court.
This decision will do the utmost harm to American interests in the Philippines unless remedied by Philippine legislation or some kindred process.
In the Haw Pia case there has been confusion of thought manifested in various quarters due in part to failure to observe all the relevant facts in the case, to failure also to observe the character of the practice that has grown up in relation to the privileges of a belligerent occupant especially in relation to uses of legal tender, and to failure to observe the nature of certain acts on the part of the Japanese agency or so-called liquidator in the present case, and finally, to observe the failure of the Philippine Republic to heed certain contractual undertakings which it has accepted, x x x.
In a word, various aspects of the case have been dealt with by the courts and commentators in a fantastic way that might be called old-fashioned, because of failure to seek light on what state practices ordained, and because ignorance thereof served to bolster up conclusions that could not have been reached if faithful and penetrating studies of that practice had been made. Again, loose treatment of some secondary materials has pointed to neglectful and superficial work. Thus, for example, the views of this writer have more than once been quoted or cited as indicating the rights of a belligerent occupant as such when those views had reference to a different matter, and notably to what a belligerent State might do with respect to alien enemy property found within its own domain. Much more important, ’no question has been raised as to the value of the money paid.'
x x x x x
We now come to the question whether a belligerent occupant has the right through such uses of a depressed currency, by making it legal tender and continuing it as such, to oblige a creditor to accept in payment of a debt something that -was at the time of payment practically or almost worthless. As has been suggested above, there is no evidence manifested by any practices that have been seen which indicates that occupying powers (other than Japan) have sought by causing a depressed currency to be legal tender, to oblige a creditor to accept in payment of a debt something that was of little value. The scope of the occupant’s right depends upon the decree of harm wrought to the creditor by the occupant’s decrees.
In a word, the practice which has developed shows a significant and complete abstention from such conduct on the part of occupants and also vigorous and successful restrictions from foreign offended States when it was attempted. In general the abstention and the correction of abuses may be regarded as establishing a general rule of International Law forbidding the occupant to make it possible for the debtor to rob his creditors by the satisfaction of & debt through a greatly depreciated and practically worthless currency. Indeed what has taken place amounts to an impressive practice reflecting the creation or acknowledgment of a prohibitive rule of International Law. The general tenor of the Hague Regulations of 1907 is in complete harmony with this limitation of the right of the occupant as thus set forth. Or, to express it differently, those Regulations call for the limitation, x x x” (Philippine Law Journal, Vol. 2XLY, June, 1949 ? pp. 141, 142, 144-145)
Professor Hyde has missed the point, because the question involved and decided in the Haw Pia case was not the validity of the Japanese decrees permitting a local debtor to satisfy fully his prewar peso indebtedness to the local office of a foreign creditor bank by payment in a greatly depreciated military currency, but the power of the Japanese Military Administration to order validly the liquidation or winding up of the defendant China Banking Corporation considered as a hostile bank, by the Bank of Taiwan appointed as the liquidator and authorized to demand and accept the payment by the debtors to the defendant bank in order to sequestrate the latter’s assets. And the ruling in the Haw Pia case has been applied to the present case, as well as to the oases of Hongkong & Shanghai Banking Corporation vs. Luis Perez Samanillo, G. R. No. L-1345, and Everret Steamship Corporation vs. Bank of the Philippine Islands, G. R. No. L-1729, because in these three cases the Japanese Military Administration required the debtors to pay to the Bank of Taiwan, as depositary of the Bureau of Enemy Property Custody or Alien Property Custodian, their debts to their creditors who were alien enemies, in order to sequestrate, not confiscate, the properties of the enemy aliens during the war, sequestration permitted and not prohibited by International Law or the Hague Regulations.
In our decision in the Haw Pia case we held, among others, the following:
“The appellant’s assignments of error may be reduced to two, to wit: First, whether or not the Japanese Military ¦Administration had authority to order the liquidation or winding up of the business of defendant-appellee China Banking Corporation, and to appoint the Bank of Taiwan liquidator authorized as such to accept the payment by the plaintiff-appellants debt to said defendant-appellee, and second, whether or not;, such payment by the plaintiff-appellant has extinguished her obligation to said defendant-appellee.
As to the first question, we are of the considered opinion, and therefore hold, that the Japanese Military authorities had power, under the international law, to order the liquidation of the China Banking Corporation and to appoint and authorize the Bank of Taiwan as liquidator to accept the payment in question, because such liquidation is not a confiscation of the properties of the bank appellee, but a mere sequestration of its assets which required the liquidation or winding up of the business of said bank. All the arguments to the contrary in support of the decision appealed from are predicated upon the erroneous assumption that the liquidation or winding up of the affairs of the China Banking Corporation in order to determine its liabilities and not assets to be sequestrated or controlled was an act of confiscation or appropriation of private property contrary to Art. 46, Sec. Ill of the Hague Regulations of 1907.
x x x x
Before the Hague Convention, it was the usage or practice to allow or permit the confiscation or appropriation by the belligerent occupant not only of public but also of private property of the enemy in a territory occupied by the belligerent hostile army; and as such usage or practice was allowed, a fortiori, any other act short of confiscation was necessarily permitted. Sec. Ill of the Hague Regulations only prohibits the confiscation of private property by order of the Military authorities (art. 46), and pillage or stealing and thievery thereof by individuals (art. 47); and as regards public property, Art. 53 provides that cash funds, and property liable to requisition and all other movable property belonging to the State susceptible of military use or operation, may be confiscated or taken possession of as a booty and utilized for the benefit of the invader’s government (II Oppenheim, 8th ed. Sec. 137: 320 & 321, War Department; Basic Field Manual; Rules of Land Warfare FM 27-10). The belligerents in their effort to control enemy property within their jurisdiction or in territories occupied by their armed forces in order to avoid their use in aid of the enemy and to increase their own resources, after the Hague Convention and specially during the first World War, had to resort to such measures of prevention which do not amount to a straight confiscation, as freezing, blocking, placing under custody and sequestrating the enemy private property. Such acts are recognized as not repugnant to the provision of Art. 46 or any other articles of the Hague Regulations by well known writers on International Law, and are authorized in the Army and Navy Manual of Military Government and Civil Affairs not only of the United States, but also in similar manuals of Army and Navy of other civilized countries.
Hyde in his International Law as chiefly interpreted and applied by the United States, Vol. 3, 6th ed., p. 1727, has the following to say:
‘In examining the efforts of a belligerent to control in various ways property within its domain that has such a connection with nationals of the enemy that it may be fairly regarded as enemy property, it is important to enquire whether the attempt is made to appropriate property without compensation, divesting him not only of title, but also of any right or interest in what is taken, without prospect of reimbursement, or whether those efforts constitute an assumption of control which, regarless of any transfer of title, is not designed to produce such a deprivation. The character of the belligerent acts in the two situations is not identical. To refer to both as confiscatory is not productive of clearness of thought, unless a loose and broad signification be attached to the term ‘confiscation.1 The point to be noted is that a belligerent may in fact deprive an alien enemy owner of property by process that are not essentially confiscatory, even though the taking and retention may cause him severe loss and hardship. Recourse to such non-confiscatory retentions or deprivations has marked the conduct of belligerents since the beginning of the World War in 1914. may perhaps be appropriately referred to as a sequestration, xxx
‘A belligerent may fairly endeavor to prevent enemy property of any kind within its territory (or elsewhere within its reach) from being so employed as to afford direct military aid to its foe. Measures of prevention may, in a particular case, assume a confiscatory aspect. In such a situation the question may arise whether those measures are, nevertheless, excusable. It is believed that they may be, and that they are not invariably unlawful despite the absence of efforts to compensate the owners.’ (underline ours)
x x x x x
And Oppenheim in his International Law, Vol. 2, 6th ed., by Lauterpacht, says:
‘But the desire to eliminate the financial and commercial influence of the enemy, and other motives, presently led in most States to exceptional war measures against the businesses and property of enemies, which, though not confiscation, inflicted great loss and injury. Sometimes these measures stopped short of divesting the enemy ownership of the property; but in other cases, the businesses or property were liquidated, and were represented at the close of hostilities by nothing else that the proceeds of their realization, often-enough out of all proportion to their value. In the Trading with the Enemy Act, 1939, provisions was made for the appointment of custodians of enemy property in order to prevent the payment of money to enemies and to preserve enemy property in contemplation of arrangements to be made at the conclusion of peace.
x x x x x
Ernest K. Feilchenfeld in his ‘The International Economic-Law of Belligerent Occupation (1942)’ supports the foregoing conclusion of Hyde, when he says that ‘According to Art. 46 of the Hague Regulations, private property must be respected and cannot be confiscated. This rule affords protection against the laws of property, through outright confiscation, but not against losses under lawful requisition, contribution, seizure, fines, taxes, and expropriation’ (Par. 208, p. 51). And later on he adds ‘A complete nationalization of a corporation for the benefit of the occupant could not be anything but a permanent measure involving final effects beyond , the duration of the occupation, There is no military need for it because the same practical results can be achieved by temporary sequestration,’ (par. 385, p. 107).
Martin Domke[2] in his Trading with the Enemy in World War II, pp. 4 & 5, speaking of Warfare on Economic and military fronts, says that ‘Freezing Control is but one phase of the present war effort; it is but one weapon on the total war which is now being waged on both, economic and military fronts. Coupled with Freezing Control as a part of this nation’s program, of economic warfare are to be found export control, the promulgation of a Black List, censorship, seizure of enemy-owned property, and financial and land-lease aid to allied and friendly nations, x x x.
x x x x x
The sequestration or liquidation of enemy banks in occupied territories is authorized expressly by the United States Army and Navy Manual of. Military Government and Civil Affairs F.M. 2710 OPNAV 50-E-3, which, mandatory and controlling upon the theatre commanders of the U.S. forces in said territories, provides in its paragraph 12 the following:
‘Functions of Civil .Affairs Officers.—In the occupation of such territories for a considerable period of time, the civil affairs officers will in most cases be concerned with the following and other activities;
- MONEY AND BANKING.–Closing, if necessary and guarding of banks, bank funds, safe deposit boxes, securities and records; providing interim banking and credit needs; liquidation; reorganization, and reopening of banks at appropriate times; x x x.
The Civil Affairs Officers are concerned, that is, entrusted with the performance of the functions enumerated above, when so directed by the Chief Commander of the occupant military forces.
Not only the United States Army and. Navy Manual of Military Government and Civil Affairs but similar manuals of other countries authorize the liquidation of impounding of the assets of enemy banks or the freezing, blocking and impounding of enemy properties in the occupied hostile territories without violating Art. 46 or other articles of the Hague Regulations. They do not amount to an outright confiscation of private property, and were put into effect by the Allied Army in the occupied hostile territories in Europe.
On the other hand, the provisions of the Trading with the Enemy Acts enacted by the United States and almost all the principal nations since the first World War, including England, Germany, France, and other European countries, as well as Japan, -confirms that the assets of enemy corporations, specially banks incorporated under the laws of the country at war with the occupant and doing business in the occupied territory, may be legally sequestrated, and the business thereof wound up or liquidated. Such sequestration or seizure of properties is not an act for the confiscation of enemy property, but for the conservation of it, subject to further disposition by treaty between the belligerents at the end of the war. Sec. 12 of the Trading with the Enemy Act of the United States provides that ‘after the end of the war any claim of enemy or ally of an enemy to any money or other property received and held by the Alien Custodian or deposited in the United States Treasury, shall be settled as Congress shall direct.’
The purpose of such sequestration is well expounded in the Annual Report of the Office of the -Alien Custodian for a period from March 11, 1943, to June 30, 1945.‘In the absence of effective measures of control, enemy-owned property can be used to further the interest of the enemy and to impede our own war effort. An enemy-controlled assets can be used to finance propaganda, espionage, and sabotage in this country or in countries friendly to our cause. They can be used to acquire stocks of strategic materials and supplies x x x x was to the enemy, they will be diverted from our own war effort.” (Haw Pia vs. China Banking corporation, L-554, pp. 3-10,.12-13, Original Decision.)
As we have already said, from the decision above quoted it appears that the “question whether a belligerent occupant has the right through such uses of a depressed currency, by making it legal tender and continuing it as such to oblige a creditor to accept in payment of a debt something that was at the time of payment practically or almost worthless,” which Prof. Hyde discusses at length in his article, has no bearing on the question involved and decided in the Haw Pia case and therefore, Prof. Hyde’s criticisms are predicated upon a wrong premise.
However, although the question of legal tender was only, incidental to the issue in the Haw Pia case, we have shown in our decision that the power of a military occupant to issue military, currency is based; not only on the military occupant’s general power to maintain law and order recognized In Art. 43 of the Hague Regulations, but also on military necessity; and said power was exercised during the last World ‘War not only by Germany who used in most occupied areas the Reichskroditkassa mark, a paper currency printed in Germany and (denominated in German monetary units, but also by the Allies in the occupied enemy territory of Sicily, Germany and Austria. The Combined Directives of the Combined Chiefs of Staffs of the Supreme Allied Commander issued on June 24, 1943, April 28, 1944, and June 27, 1947, declared respectively as legal tender the yellow seal dollars currency and the British military notes j(BMN) in Sicily, the Allied military mark and the yellow seal ¦dollars in Germany, and the Allied military shillings in Austria. When the Japanese Military occupant issued the Proclamation of January 3, 1942, which declared the Japanese military notes (of small denominations up to ten pesos as legal tender at par with the Philippine peso, the purchasing power of said notes was then the same as that of the Philippine peso. If the Japanese war notes became depressed and valueless, it was because the [war was prolonged and lost by the Japanese contrary to their expectation of winning the war in a short time, and not because they issued purposely a depressed and valueless currency as legal tender. If their expectation had been realized ¦ no question as to the validity of the Japanese military notes ;as legal tender would have come up.
There was no Japanese order or decree or any particular ease in which the Japanese military occupant or agents had actually compelled all creditors to accept in payment of prewar debts depressed currency or Japanese war notes; as a matter of fact several cases are still pending in our courts in which debtors of prewar debts had to file civil actions to compel their creditors ;to accept Japanese war notes deposited by them in court in payment of prewar obligations which became due and payable duringTbccupation. What the Japanese military occupant did in the Haw Pia case was to issue Administrative Ordinance No. 1, dated July 31, 1941, ordering the liquidation of the seven banks of hostile countries among them the defendant China Banking Corporation, appointing the Bank of Taiwan, Ltd. as liquidator of said banks and demanding the payments of all loans, advances and other receivables of the banks which were thereby declared due and payable notwithstanding the terms and conditions of the contract, in order to sequestrate the latter’s assets during the war; and in the present case as well as the Perez Samanillo and Everret cases the Japanese Military Administration ordered the debtors to pay to the Japanese Enemy Property Custodian or Bank of Taiwan their debts due to their creditors who were enemy aliens or corporations, in order to sequestrate the money so paid. Of course the medium of payment, being a currency declared legal tender by the same Japanese military occupant, had to be accepted by the Bank of Taiwan, an agent of the latter, for it would have been the height of folly and an absurdity for the Bank of Taiwan to refuse to accept them; for even if they were valueless the enemy creditors would not legally suffer any loss thereby, because under International Law the Japanese military authorities were responsible after the war to pay said creditors full compensation for such sequestration through their respective governments at the conference table, regardless of the intrinsic or extrinsic value of the money accepted by them.
As we have stated in this connection in our decision “But be that as it may, whatever might have been the intrinsic or extrinsic value of the Japanese war-notes which the Bank of Taiwan has received as full satisfaction of the obligation of the appellee’s debtors to it, is of no consequence in the present case. As we have already stated, the Japanese war-notes were issued as legal tender at par with the philippine peso, and guaranteed by Japanese Government ‘which takes full responsibility for their usage having the correct amount to back them up (Proclamation of Jan. 3, 1948). Now that the outcome of the war has turned against Japan, It he enemy banks have the right to demand from Japan, through their States or Government, payments or compensation in Philippine peso or U.S. dollars as the case may be, for the loss or damage inflicted on the property by the emergency war measure taken by the enemy. If Japan had won the war or were the victor, the property or money of said banks sequestrated or impounded by her might be retained by Japan and credited to the respective State of which the owners’ of said banks were nationals, as a payment on account of the sums payable by them as indemnity under the treaties, and the said owners were to look for compensation to their respective States. (VI Hackworth Digest of International Law, p. 232; 2 Oppenheim, 6th fed. by Lauterpacht, page 263).
We have quoted once the view of Professor Hyde on the assumption that Professor Hyde would not give the words “domain or territory,” wherein private property of enemy nationals may be sequestrated under the Trading with, the Enemy Act, and interpretation he seems to give now in his article, different from that of the other writers and authorities we have also quoted and specially of the Executive Department of the United States Government which we shall hereinafter quote, in order to show that if the United States as well as the other Allied countries applied and enforced during ,the last world war their Trading with the Enemy Act in any territory occupied by their armed forces, as vie have shown in our decision, Japan had also the right to do the same in the Philippines by virtue of the international law principle that “what is permitted to one belligerent is also allowed to the other.”
An agency of the Executive Branch of the United States Government, i.e., the Alien Property Custodian, in March, 1944 recognized the validity of the liquidation by the Japanese military authorities of branches of the National City Bank of New York situated in Japan, Korea and in territory occupied by the Japanese military forces, namely, Tokyo, Dairen and Harbin. The Custodian expressly held that payments made by debtors of said branch banks to the Japanese liquidator, namely, the Yokohama Specie Bank, appointed under the Japanese Enemy Assets Control Law (December 22, 1941), constituted valid payment of such debts to the branch banks, The authority for the appointment of the Yokohama Specie Bank, Limited, as such liquidator was identical with that for the appointment of the Bank of Taiwan as liquidator of China Bank Corporation plaintiff in the Haw Pia case.
This determination was made in the proceedings for the liquidation of the New York branch of the Yokohama Specie Bank conducted by the Superintendent of Banks of the State of New York under the supervision of the United States Alien Property Custodian, and was based upon an opinion of the General Counsel to the ^lien Property Custodian, dated March 14, 1944, in which the said General Counsel held in part as follows:
“There is in fact reason to believe that National City Bank has no cause of action against anyone. Article III of the Enemy Assets Control Law of Japan (December 22, 1941) provides:
‘When a person liable for a debt to an enemy country, an enemy national, or others designated by the Order, performs to a person designated by the Government, the payment of money or the delivery of articles which are the object of the debt—it shall have discharged that obligation.’
By order of February 10, 1942, made pursuant to the Enemy Assets Control Law (December 22, 1941), Yokohama Specie Bank was entrusted by the Japanese government with the liquidation of National City Bank’s branches in Japan and occupied territory, subject to no presently relevant exceptions. Upon appointment, Yokohama specie sank commenced the liquidation thereof. Information obtained from an officer of the Department of State, recently repatriated from Japan, indicates that liquidation of National ^ity Bank, Japan, has proceeded in accordance with the law quoted above. It is a fair assumption that Yokohama specie Bank, engaged in liquidating these branches in its capacity as administrator, collected from itself in its capacity as a commercial bank the moneys owing to National City Bank’s foreign branches, and consequently that the Yokohama Specie Bank branches were, in accordance with the terms of Article III supra, discharged of those obligations. The deposits of National city Bank branches in the Far Eastern branches of Yokohama Specie Bank are outside the jurisdiction of the United States, and the only liability that Yokohama Specie Bank incurred by its failure to pay was that which the Japanese law might impose. Deutsche Bank Filiale Nurnberg v. Humphrey. 272 U.S. 517, 520 (1926). By that law, payment of the deposits to the governmental administrator satisfied the debt owed by the depository. If the obligation was discharged by Japanese law, no right remains to be recognized in this country, except such as may be urged through State Department channels at the peace table. See United States v. S.S. White Dental Mfg. Co. 274 U.S. (1927). As was said by Mr. Justice Holmes in an analogous case;
‘x x x in any view of all that had happened the only obligations of the Wiener Bank-Verein were those imposed by the law of Austria-Hungary, and that if that law discharged the debt the debt was discharged everywhere.’ Zimmerman v. Sutherland, 274 U.S. 253, 256 (1927).”
The opinion proceeds to state that the sequestration in question was effected pursuant to valid and binding orders of the Japanese government and that recognition is given by the courts of the United States to the power of a belligerent to thus sequester property even when that power is exercised adversely to United States nationals. United States v. White Dental Mfg. Co., 274 U.S. 398. The ‘sequestration was held not to create any right in the National City Bank and to have imposed no liability on the Japanese Government except as may arise from subsequent treaties. As was said by Mr. Justice Stone:
‘The sequestration of enemy property was within the rights of the German government as a belligerent power and when effected left the corporation without right to demand its release or compensation for its seizure, at least until the declaration of peace x x x.’ United States v. S.S. White Dental Mfg. Co., 274 U.S. 398, 402 (1927).”
(2) Prof. Hyde discussing the second point says:
“In the present case the Bank of Taiwan is constantly referred to as the “Liquidator” of the China Banking Corporation. This leads to the question whether it properly or adequately performed its function as liquidator. The liquidation of a corporation is synonymous with the winding up of the affairs, of the corporation. There is no proper or complete liquidation in which debts to creditors are not settled and paid as well as assets reduced to a liquid state. In the present case, only about ten per cent of the deposits of foreign banks were allowed to be withdrawn.
The conduct of the liquidator in the present case had also another significance. Its retention of money representing debts due by foreign banks to depositors served in fact to be a convenient means of preserving them so that they would be subjected to the dangers of inflation and deterioration of currency which the Japanese Government might later apply. Thus here was a process whereby the occupant held within its grip something which later by a method akin to confiscation it could ruin the value of, contrary to the injunctions of the Hague Regulations. Looked at in this way, the conduct of the liquidator as an agency of the Japanese Government together with the later action of that Government united jointly to facilitate and also effectuate the commission of an international wrong. That wrong was of a type which Article 43 and 46 of the Hague Regulations of 1907 appeared to forbid.
A third conclusion is to be drawn from the same fact. There would be a discrimination against non-Filipinos not permissible pursuant to international law. Filipinos, axis nationals and neutrals were able to utilize the payments received by them at a time when they had value. The foreign banks on the other hand could not pay more than ten per cent of their deposits and remained indebted to their depositors in full.
x x x x x
The refusal of the liquidator, the Bank of Taiwan, twice to release the mortgage in the Haw Pia case stands out as a significant fact. Of course, it is possible that the liquidator received payment of 4,563.78 pesos made by the debtor in August 1944 merely for what it was worth. It may have been known to the liquidator at the time that Japanese military pesos of larger denominations than ten peso notes had not been made legal tender, or it may have doubted whether they had been tender. Hence the liquidator may have felt obliged, in case payment were made in such larger Japanese notes, not to regard them as adequate for the settlement of the debt. Or, the liquidator may have been influenced by the vastiness and impropriety of the Japanese acts of inflation which if allowed to enable the debtor to pay her debt therewith, would have amounted to sheer robbery of the creditor, both violative of precedent and hurtful to the prestige of the Japanese Government. In a word, there are numerous reasons any one of which might have served to put the liquidator on its guard, and to cause it to leave the matter to its own later decision. Be that as it may, it is a reasonable assumption that shrewd debtors ran to the windows of the Bank of Taiwan in the attempt to take advantage of the decrease of the value of the occupation currency, one peso of the Philippines being then equivalent to at least fifteen pesos of the military notes.”
The liquidation ordered by the Japanese Administrative Ordinance Ho. 11 of July 31, 1940, was not a complete liquidation of all the affairs of the local Banks controlled by enemy nationals, but only a liquidation of all the’ credits of said banks in order to liquidate and sequestrate them. Said Ordinance only provided that “2. The Bank of Taiwan Ltd Has been appointed liquidator of the above banks. All loans, advances and other receivables of the banks are hereby declared due and payable notwithstanding the terms and conditions of the contract. Debtors are given from today until September 30. 1942, to pay the principal and interest of their obligations. All payments made thereafter shall be charged additional interest at 3 per cent per annum, except “only in special case where they may be waived.” For that reason the creditors or depositors of the Banks were allowed to withdraw restricted amounts only from their deposits as a protective measure to prevent runs on banks owned or controlled by the enemy nationals, which would result from mass withdrawals. And it is incorrect or contrary to facts to flay, as Professor Hyde avers, that “only about ten per cent of; the deposits of foreign were allowed to be withdrawn” For what we have found in our decision in the Haw Pia case is the following:
“That the liquidation or winding up of the business of the China Banking Corporation and other enemy banks did not constitute a confiscation or appropriation of their properties or of the debts due them from their debtors, but a mere sequestration of their assets during the duration of the war for the purposes already stated, is evidenced conclusively by the following uncontroverted facts set forth in the briefs of both parties and amici curiae:
(1) Out of the sum of about P34,000,000.00 collected from the debtors by the liquidator Bank of Taiwan, the latter paid out to the depositors or creditors of the same Bank about P9,000,000.00; and it is common sense that this last amount should not have been desimbursed or taken out of the said amount of about 534,000,000.00 had it been the intention of the Japanese Military Administration to confiscate this amount collected by the Bank of Taiwan.”
x x x x x x
As the enemy banks were closed and had not received deposits in Japanese Military notes during the occupation, they did not run the risk, as the other banks did, of being responsible for such deposits in genuine Philippine currency had not the Philippine Government declared after liberation such deposits to be of no value. The retention by the [liquidator “of money representing debts due by foreign banks to depositors” did not, as professor Hyde affirms, “serve in fast to be a convenient means of preserving them so that they would be subjected to the dangers of inflation and deterioration of currency which the Japanese Government might ,later apply”. As all the payments made to the Bank of Taiwan in Japanese war notes of the credits of the enemy Banks, except about twenty seven, not ten, per cent paid by the liquidator to the Banks’ depositors, had been sequestrated, said Banks could not have been subjected to the dangers of inflation or deterioration of currency; because, we have already stated above, the Japanese Government assumed the responsibility and is responsible for the payment, in terms of Philippine pesos or U.S. dollars, of the foreign Banks’ credits they have colleoted and sequestrated, and the Banks may demand the payment thereof through their respective Governments at the Peace Conference.
Although it is obviously immaterial whatever may have been the opinion of the legislator on the validity or adequacy of the currency paid by Havs Pia for the settlement of his debt, there is nothing in the record to show that the Bank of Taiwan refused or declined twice to release the mortgage in the Haw Pia case, as Professor Hyde affirms. What appeared in the record was that Haw Pia alleged in his complaint filed in August, 1945, that the defendants, refering to the China Banking Corporation because the Bank of Taiwan was only a nominal defendant and in 1945 was no longer doing business in the Philippines, refused and neglected to execute the deed of cancellation of mortgage of the property, and for that reason Haw Pia had filed that action against the China Banking Corporation. It is a fact, of which we have judicial notice7that the Bank of Taiwan had executed deeds of cancellation of mortgages for all payments received by it in payment of the Banks’ and the enemy nationals’ mortgage credits, and the plaintiffs in the present case of Gibbs v. Rodriguez and in the case of Hongkong Shanghai Banking Corporation v. Perez Samanillo, precisely demanded in their action the annulment of the deed of cancellation of the defendants’ mortgages executed by the Bank of Taiwan.
(3) And, with respect to the so-called failure of the [Philippine Republic to heed certain contractual undertaking [in the Inter-Allied Declaration of January 5, 1943, professor Hyde says in his article the following:
“We now come to an important contractual undertaking by the Philippine Republic. The Government of the Philippines undertook to invalidate all Japanese dealings by which property in which nationals of United Nations were interested was hurt by violations of rules of International Law. Evidence of this undertaking is seen in the “Inter-Allied Declaration Against , Acts of Dispossession Committed in Territories under Enemy Occupation or Control (with covering Statement by His Majesty’s Government in the United Kingdom and Explanatory Memorandum issued by the parties to the Declaration)”, London, January 5, 1943, to which the Government of the Commonwealth of the Philippines adhered on January 19, 1943.
x x x x x
It is not here contended that the .Allied Nations contemplated on January 5, 1943 the consideration of payments made to banks in the currency of the occupied European countries as invalid. The inflation in these countries had not progressed to a degree that such thoughts came to the minds of the signatories. It is here contended, however, that property is “dispossessed” within the meaning of the Inter-Allied Declaration where the degree of inflation is as great as that indicated in the figure in the table above given on page 155 of this document.
If this be a correct statement, the governments participating in the agreement of January 5, 1945, found themselves legally obliged to reaeh a determination that debtors were not relieved from liability by payments of debts to occupation authorities, when through a larger inflation such payment would amount to practical robbery of the creditor for the benefit of the debtor.
x x x x x
The Inter-Allied Declaration of January 5, 1943, in the light of the official interpretation given to it, has a direct bearing upon the obligation assumed by the Philippine Republic in the Haw Pia case. It is evidence of definite undertaking by the Republic to undo the consequences of acts mutually regarded as wrongful, and manifested in the inflationary conduct of Japan that was contemptuous of the rights of alien creditors growing out of debts due them by Philippine debtors. Of direct consequence of the agreement was the obligation on the part of the Republic by some appropriate process to permit no local agency, judicial or other, to give effect to the Japanese decrees. xxx Thus, when the Supreme Court, through ignorance of what had taken place, or for any other reason, regarded as enforceable or valid the Japanese edicts, it made itself the means by which its own country violated an international obligation laid down by contract, x x x.”
As we have already said, we have not determined in the Haw Pia case, contrary to Professor Hyde’s erroneous assumption, that ;‘debtors were relieved from liability by payments in a greatly depreciated currency or Japanese war notes to the occupation authorities: of the pre-war debts they owed to their ‘creditors (national, neutral or enemy aliens).
What we have declared is that the Military Occupant had power to order the liquidation of the hostile banks appointing; the Bank of Taiwan as liquidator and sequestrate their assets, and that, therefore, the payment made by Haw Pia to the Bank of Taiwan of his pre-war debt to the China Banking Corporation was valid and extinguished his obligation to the latter; and for that reason this Court did not deem it necessary to discuss and pass upon the effect on said case of the adherence by the late President Quezon in behalf of the Commonwealth of the Philippines to the United :Nations Declaration of January 5, 1943, in London. Because in said declaration the United Nations “stated their intention to do their utmost to defeat the methods of dispossession practised by the Governments with which they are at war against the countries and people who have so wantonly assaulted and depoiled”, and “reserved all their rights to declare invalid, but did not actually invalidate, any transfers of, or dealing with, property, rights and interests of any description whatsoever” in the occupied territories which have taken “the form of open looting or plunder”; and we have held that the acts of the Japanese Occupant involved in the Haw Pia case did not constitute a confiscation but a mere sequestration of private property, not in excess of those limited rights granted such occupant under International Law.
Besides, as the governments which were parties to that agreement did not bind themselves, but only reserved all their rights, to invalidate such acts, the Government of the Philippines did not exercise that reserved right[3] to declare invalid the payments made to the Bank of Taiwan by debtors of their debts to the enemy banks or nationals. On the contrary it enacted in 1945 Commonwealth Act No. 727 which provided that payment on demand or tendered and accepted during the period of the Japanese invasion on obligation incurred or contracted prior to such period shall be considered valid.” Although said Act was vetoed by President Truman on the assumption that it was a currency statute and required his approval, it is obvious, without necessity of discussing whether or not said Act 727 was really a currency measure, that it was a declaration of the policy of the Legislative and Executive Departments of the Government.
Wherefore, we find both the first ground as well as the second ground of the motion for reconsideration based on Professor Charles Cheney Hyde’s contentions submitted by the petitioners without merit, and deny said motion for reconsideration.
Moran, C.J., Paras, Pablo, Bengzon, Montemayor, Reyes, and Bautista Angelo, JJ., concur.
Padilla, and Jugo, JJ., no part.
TUASON, J., dissenting:
I dissent from the majority opinion on the grounds stated in Mr. Justice Hilado’s dissenting opinion, in which I joined, in Haw Pia v. China Banking Corporation, 45 O.G. Supp. No. 9, 229, and in my dissents in other allied cases.