[ G. R. No. L-3405. April 28, 1951 ] 88 Phil. 625
[ G. R. No. L-3405. April 28, 1951 ]
INTESTATE ESTATE OF CHARLES A. MCDONOUGH. PEOPLES BANK AND TRUST CO., ADMINISTRATOR AND APPELLEE, VS. PHILIPPINE NATIONAL BANK, CREDITOR AND APPELLANT. D E C I S I O N
FERIA, J.:
This appeal is taken by the creditor and appellant, Philippine National Bank against the order of the Court of First Instance of Manila dated October 10, 1947, disallowing payment to the creditor Bank of interest due on a sixtyday note, Exhibit “A”, dated November 19, 1941, from January 19, 1942, up to the date of payment. The creditor and appellant filed with the said Court its claim of P3,916.60 as of November 14, 1945, dated February 1, 1946, against the Intestate Estate of Charles A, McDonough in the above entitled case, plus daily interest of P0.658 on P3,000 from November 15, 1945, until paid, due on a sixty-day promissory note dated November 19, 1941, signed jointly and severally by Atty. Charles A. McDonough and H. E. Bennet, for P3,000 payable sixty days after date with interest at the rate of 8 per cent per annum from maturity until paid. The administrator neither admitted nor denied said claim as he failed to file an answer pursuant to section 10 of Rule 87, Rules of Court, and at the hearing of the claim of the appellant Bank, the administrator did not object to the evidence presented by the creditor and appellant, the promissory note Exhibit “A”, and statement of account, Exhibit “B”. The lower Court in its order of October 10, 1947, approved the claim of the creditor and appellant in the amount of P3,000 with interest at the agreed rate of 8 per cent per annum from February, 1945, up to the date of payment, and not from January 20, 1942 to the date of payment, as claimed by the creditor and substantiated by the evidence. The creditor and appellant filed a motion for reconsideration dated October 29, 1947, based on the ground that the Commonwealth Act No. 672 (An Act to Rehabilitate the Philippine National Bank) allows it to charge interest during the war; that the effect of war on contracts entered into by parties is to suspend its operation, but thereafter, the right of the parties under it may be enforced; and that a promissory note will bear interest after maturity during the war, because the creditor Bank has opened its business during said period. On the other hand, the administrator and appellee opposed said motion for reconsideration on the ground that the deceased Charles A. McDonough, an American citizen, was interned by the Japanese during the latter part of the Japanese occupation of the Philippines; and that it is of common knowledge, of which the courts can take judicial cognizance, that the Japanese during their occupation of the Philippines, confiscated all assets of their enemies (United States citizens and other citizens of their allies) and prohibited them from paying their obligations. And the lower court denied said motion for reconsideration simply on the ground of lack of merit. The creditor and appellant assigns in his brief four errors committed by the Court a quo, but the most important and the only one which need be considered is the third, that is, that “the lower court erred in disallowing payment of interest due on the promissory note Exhibit A during the Japanese occupation.” The solution of the assignment of error depends upon the determination of the question whether there was a prohibition for the debtor, the late Charles A. McDonough, a citizen of the United States interned during the Japanese Occupation of the Philippines, to pay his debt to the creditor the Philippine National Bank. If there was such a prohibition interest is not demandable; otherwise, the administrator of the estate of the late debtor must pay the interest on the principal debt during the occupation. Because, as a general rule it may be safely laid down that whenever the law prohibits the payment of the principal, interest during the existence of the prohibition is not demandable (Heat Brown, 82 U. S. 128, 131; see also Ward.vs. Smith, 74 U. S., 207). It is contended, in support of the order appealed from, that “the Japanese confiscated all the assets of their enemies (United States citizens and other citizens of their allies), and prohibited them from paying their obligations.” There was no confiscation of the assets of their enemy by the Japanese. We have already held, in the case of Haw Pia vs. China Banking Corporation (45 Off. Gaz,, Supp., [9] 229) and in many cases subsequently decided, that the Japanese Military Authorities or occupant did not confiscate the assets of the enemy alien during the Japanese occupation, but only sequestrated or placed under custody their property and froze their assets in the bank in order to prevent their being1 used in aid of the enemy. The purpose of such sequestration and freezing of properties and assets of the enemy nationals, in the absence of effective measures of control, for confiscation of enemy property is prohibited or outlawed by Section III of the Hague Regulations, was to avoid the use of enemy owned property for financing propaganda, espionage and sabotage, and acquiring stocks of strategic materials and supplies for the enenly. As confirmation of non confiscation of the enemy propert by the Japanese, we have found as facts in the above mentioned case of Haw Pia vs. China Banking Corporation that, out of about P34,000,000 collected from the debtors of the enemy bank by the liquidator Bank of Taiwan, the latter paid to the depositors or creditors of the said banks about P34,000,000. The collection of the aforementioned sum from the enemy bank’s debtors, as well as the payment of withdrawals by the depositors, were regularly entered into the books of all the enemy banks in the Philippines in order that they could easily determine the respective amounts and the persons who had made the payments. This enabled all said banks to reopen and continue their business and declare dividends shortly after liberation, which would have been impossible had their assets been confiscated by the Japanese Military occupant. The Japanese Military Administration did not prohibit the enemy nationals from paying their overdue debts or obligations. On the contrary, the Director General of the Military Administration in his instructions dated June 30, 1942, No. 28 to Mr. Jose Yulo, then Chief Justice of the Supreme Court, and No. 42 to Mr. Jose P. Laurel, then Commissioner of Justice of the Philippine Government, about the procedure to be followed by the Courts in connection with “civil cases in which American, British or any other enemy subjects or hostile aliens are parties and which were pending in Philippine judicial courts at the outbreak of the war or such like cases as may be brought to said courts hereafter,” ordered that “the trial and determination of all pending1 cases shall be suspended and no new cases shall be accepted for filing except when approved by the Director General of the Japanese Military Administration upon application of the party or parties.” These instructions show that there was no such prohibition for the enemy aliens to pay their matured debts subject to the approval of the Japanese, for, otherwise, such Instructions should not have been given, because it would have been useless to approve the filing of suit against American, British or any other enemy subjects, if the latter were prohibited to pay their debts even if sentenced to do so by the Courts. Under said Instructions, the deceased Charles A. McDonough could have been sued and sentenced by the Courts to pay his debt with interests, or said debtor could have voluntarily paid his debt in order to avoid the suit, with the approval or consent which should have been granted upon application of the proper party or parties, because the Philippine National Bank was not considered as an enemy bank, but a bank of the Philippine Government then an ally of the Japanese Empire, and for that reason it w"as allowed to open and operate during the Japanese Occupation. The fact that the creditor and appellant did not bring an action against the late debtors with the approval of the Japanese Military Administration to collect the debtor’s debt, might be due to causes other than the alleged confiscation of the assets of the late Charles A. McDonough, because there was no such confiscation as already stated. If the debtor’s properties and assets were confiscated by the Japanese, there would be no property which may be administered now by the appellee. In view of the foregoing, the order appealed from is modified and the administrator of the estate of the late Charles A. McDonough is ordered to pay the appellant, Philippine National Bank, the sum of P3,000 with interest at the rate stipulated of 8 per cent per annum from January 9, 1942, to the date of payment, and the costs in this instance, on the ground that there was no prohibition during the Japanese occupation for the late Charles A. McDonough to pay his obligations contracted with the appellant, and not because of the provisions of the Commonwealth Act No. 672. So ordered. Paras, C. J., Pablo, Bengzon, Montemayor, Reyes, Jugo,. Bautista Angelo, JJ., concur.