cases in the philippine republic

7/21/2019 Cases in the Philippine Republic

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

PHILIPPINE VIRGINIA TOBACCO ADMINISTRATION, petitioner,vs.

COURT OF INDUSTRIAL RELATIONS, ET AL, 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 ofconstitutional significance. It is concerned with the expanded role of government necessitated by the increased responsibility to providefor 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, MakalintalinAgricultural Credit and Cooperative Financing Administration v. Confederation of Unions in Government Corporationsand offices,points the way to the right answer.

1It 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."

2It is much more so under the present Charter, which is impressed with an even more explicit recognition of

social and economic rights.3There 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 becausepetitioner is engaged in governmental rather than proprietary functions, that the labor controversy was beyond the jurisdiction of thenow defunct respondent Court. Nor is the objection raised that petitioner does not come within the coverage of the Eight-Hour LaborLaw persuasive.

5We 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 whereinthey alleged their employment relationship, the overtime services in excess of the regular eight hours a day rendered by them, and thefailure to pay them overtime compensation in accordance with Commonwealth Act No. 444. Their prayer was for the differentialbetween the amount actually paid to them and the amount allegedly due them.

6There 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 ofjurisdiction.

7The issues were thereafter joined, and the case set for trial, with both parties presenting their evidence.

8After the parties

submitted the case for decision, the then Presiding Judge Arsenio T. Martinez of respondent Court issued an order sustaining theclaims 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, butrespondent Court en banc denied the same.

10Hence this petition for certiorari.

Petitioner Philippine Virginia Tobacco Administration, as had been noted, would predicate its plea for the reversal of the ordercomplained of on the basic proposition that it is beyond the jurisdiction of respondent Court as it is exercising governmental functionsand 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. Norcould the challenged order be set aside on the additional argument that the Eight-Hour Labor Law is not applicable to it. So it was, atthe outset, made clear.

1. A reference to the enactments creating petitioner corporation suffices to demonstrate the merit of petitioner's plea that it performsgovernmental and not proprietary functions. As originally established by Republic Act No. 2265,

12its 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 inthe industry will be placed on a basis of economic security; (b) To establish and maintain balanced production and consumption ofVirginia tobacco and its manufactured products, and such marketing conditions as will insure and stabilize the price of a level sufficientto 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 Virginiatobacco so that the farmers will enjoy reasonable prices that secure a fair return of their investments; (d) To prescribe rules andregulations governing the grading, classifying, and inspecting of Virginia tobacco; and (e) To improve the living and economicconditions of the people engaged in the tobacco industry."

13The 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 inquantities marketable in both domestic and foreign markets, to establish this industry on an efficient and economic basis, and, to createa climate conducive to local cigarette manufacture of the qualities desired by the consuming public, blending imported and nativeVirginia leaf tobacco to improve the quality of locally manufactured cigarettes."

15The 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 AgriculturalCredit Administration (ACA) and the Philippine Virginia Tobacco Administration (PVTA) at the best obtainable prices and conditions inorder that a reinvigorated Virginia tobacco industry may be established on a sound basis; and 4. Improving the quality of locallymanufactured cigarettes through blending of imported and native Virginia leaf tobacco; such importation with corresponding exportation


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at a ratio of one kilo of imported to four kilos of exported Virginia tobacco, purchased by the importer-exporter from the PhilippineVirginia Tobacco Administration."

16

It is thus readily apparent from a cursory perusal of such statutory provisions why petitioner can rightfully invoke the doctrineannounced 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

18if 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 themaintenance 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 thistraditional classification, such constituent functions are exercised by the State as attributes of sovereignty, and not merely to promotethe welfare, progress and prosperity of the people these latter functions being ministrant, the exercise of which is optional on the partof the government."

19Nonetheless, 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 beleft to private enterprise and initiative and which the government was called upon to enter optionally, and only "because it was betterequipped to administer for the public welfare than is any private individual or group of individuals", continue to lose their well-definedboundaries and to be absorbed within activities that the government must undertake in its sovereign capacity if it is to meet theincreasing social challenges of the times. Here as almost everywhere else the tendency is undoubtedly towards a greater socializationof economic forces. Here of course this development was envisioned, indeed adopted as a national policy, by the Constitution itself inits declaration of principle concerning the promotion of social justice."

20Thus was laid to rest the doctrine in Bacani v. National Coconu

Corporation,21

based on the Wilsonian classification of the tasks incumbent on government into constituent and ministrant inaccordance with the laissez faireprinciple. That concept, then dominant in economics, was carried into the governmental sphere, asnoted in a textbook on political science,

22the 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 ofsociety."23

The other functions he would minimize as ministrant or optional.

It is a matter of law that in the Philippines, the laissez faireprinciple hardly commanded the authoritative position which at one time itheld in the United States. As early as 1919, Justice Malcolm in Rubi v. Provincial Board

24could affirm: "The doctrines of laissez

faireand of unrestricted freedom of the individual, as axioms of economic and political theory, are of the past. The modern period hasshown a widespread belief in the amplest possible demonstration of government activity."

25The 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 toit that the concept of laissez-faire was rejected. It entrusted to our government the responsibility of coping with social and economicproblems with the commensurate power of control over economic affairs. Thereby it could live up to its commitment to promote thegeneral welfare through state action."

27Nor 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 theConstitutional Convention, Manuel A. Roxas, later the first President of the Republic, made it clear when he disposed of the objection ofDelegate Jose Reyes of Sorsogon, who noted the "vast extensions in the sphere of governmental functions" and the "almost unlimitedpower to interfere in the affairs of industry and agriculture as well as to compete with existing business" as "reflections of the fascinationexerted by [the then] current tendencies' in other jurisdictions. He spoke thus: "My answer is that this constitution has a definite and welldefined philosophy, not only political but social and economic.... If in this Constitution the gentlemen will find declarations of economicpolicy they are there because they are necessary to safeguard the interest and welfare of the Filipino people because we believe thatthe days have come when in self-defense, a nation may provide in its constitution those safeguards, the patrimony, the freedom togrow, the freedom to develop national aspirations and national interests, not to be hampered by the artificial boundaries which aconstitutional provision automatically imposes."

28

It would be then to reject what was so emphatically stressed in the Agricultural Credit Administration decision about which theobservation was earlier made that it reflected the philosophy of the 1935 Constitution and is even more in consonance with theexpanded role of government accorded recognition in the present Charter if the plea of petitioner that it discharges governmentalfunction 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 reservedfor 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.

29It is a response to a trend noted by Justice Laurel inCalalang

v. Williams30

for the humanization of laws and the promotion of the interest of all component elements of society so that man's innateaspirations, 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 functionscannot militate against respondent Court assuming jurisdiction over this labor dispute. So it was mentioned earlier. As far backas Tabora v. Montelibano,

32this 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 objectivethere is no reason why its function should not be deemed governmental. The Government owes its very existence to that aim andpurposeto protect the people."

33In a subsequent case, Naric Worker's Union v. Hon. Alvendia,

34decided 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 theCourt of Industrial Relations, included among which is one that involves hours of employment under the Eight-Hour Labor Law, ruledthat 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 Naricwas performing governmental functions did not suffice to confer competence on the then respondent Judge to issue a preliminary


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injunction and to entertain a complaint for damages, which as pointed out by the labor union, was connected with an unfair laborpractice. 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 CornCorporation's seeking whatever remedy it is entitled to in the Court of Industrial Relations."

36Then, 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 firstinstance that is possessed of competence in a declaratory relief petition for the interpretation of a collective bargaining agreement, onethat could readily be thought of as pertaining to the judiciary, the answer was that "unless the law speaks clearly and unequivocally, thechoice should fall on the Court of Industrial Relations."

38Reference 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 anapproach.

39Nor 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 lapsedinto "innocuous desuetude."

40Respondent Court clearly was vested with jurisdiction.

3. The contention of petitioner that the Eight-Hour Labor Law41

does not apply to it hardly deserves any extended consideration. Thereis 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, itdevoted 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 summarytreatment appears to be a reflection more of the inherent weakness of the plea rather than the possession of an advocate's enviabletalent 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 inany industry or occupation, whether public or private ... ."

42Nor are private respondents included among the employees who are

thereby barred from enjoying the statutory benefits. It cited Marcelo v. Philippine National Red Cross43

and Boy Scouts of thePhilippines v. Araos.

44Certainly, 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 itrelies to obtain a ruling as to its governmental character should render clear the differentiation that exists. If as a result of the appealedorder, 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 causefor astonishment. It would appear, therefore, that such an objection based on this ground certainly cannot suffice for a reversal. Torepeat, 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 amotion for reconsideration are hereby affirmed. The last sentence of the Order of March 21, 1970 reads as follows: "To find how mucheach of them [private respondents] is entitled under this judgment, the Chief of the Examining Division, or any of his authorizedrepresentative, is hereby directed to make a reexamination of records, papers and documents in the possession of respondent PVTApertinent 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 proceedingsconformably to law. No costs.

Makalintal, C.J., Castro, Barredo, Antonio, Esguerra, Aquino, Concepcion Jr. and Martin, JJ., concur.


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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 Avancea 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 therelief of those damaged by the earthquake which took place in the Philippine Islands on June 3, 1863. Subsequent thereto and onOctober 6 of that year, a central relief board was appointed, by authority of the King of Spain, to distribute the moneys thus voluntarilycontributed. After a thorough investigation and consideration, the relief board allotted $365,703.50 to the various sufferers named in itsresolution, 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 laterdistributed, inaccordance with the above-mentioned allotments, the sum of $30,299.65, leaving a balance of S365,403.85 fordistribution. Upon the petition of the governing body of the Monte de Piedad, dated February 1, 1833, the Philippine Government, byorder dated the 1st of that month, directed its treasurer to turn over to the Monte de Piedadthe sum of $80,000 of the relief fund ininstallments 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 suitagainst the Monte de Piedada recover, "through the Attorney-General and in representation of the Government of the PhilippineIslands," the $80.000, together with interest, for the benefit of those persons or their heirs appearing in the list of names published inthe Official Gazette instituted on May 3, 1912, by the Government of the Philippine Islands, represented by the Insular Treasurer, andafter due trial, judgment was entered in favor of the plaintiff for the sum of $80,000 gold or its equivalent in Philippine currency, togetherwith legal interest from February 28, 1912, and the costs of the cause. The defendant appealed and makes the following assignment oferrors:

1. The court erred in not finding that the eighty thousand dollars ($80,000), give to the Monte de Piedady 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 ofthese Islands, within eight days following the day when claimed, in case the Supreme Government of Spain should notapprove 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 itsrights, as regards an important sum of money resulting from a national subscription opened by reason of the earthquake ofJune 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, isunconstitutional.

5. That the court erred in holding in its decision that there is no title for the prescription of this suit brought by the InsularGovernment against the Monte de Piedady 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 thesum 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 inwhat manner the indemnity might be paid to which, by virtue of the resolutions of the relief board, the persons who suffered damage bythe earthquake might be entitled, in order to perform the sacred obligation which the Government of Spain had assumed toward thedonors.

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

Board of Directors of the Monte de Piedadof Manila Presidencia.


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Excellency: The Board of Directors of the Monte de Piedady Caja de Ahorros of Manila informs your Excellency, First: Thatthe funds which it has up to the present been able to dispose of have been exhausted in loans on jewelry, and there onlyremains 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 necessaryto procure money. Third: That your Excellency has proposed to His Majesty's Government to apply to the funds of the Montede Piedada part of the funds held in the treasury derived form the national subscription for the relief of the distress caused bythe earthquake of 1863. Fourth: That in the public treasury there is held at the disposal of the central earthquake relief boardover $1090,000 which was deposited in the said treasury by order of your general Government, it having been transferredthereto 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 thousandpesos 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 toapprove the proposal made by your Excellency relative to the application to the needs of the Monte de Piedadof a pat of thesubscription intended to believe the distress caused by the earthquake of 1863, or for any other reason, the board of directorsof the Monte de Piedadobligates itself to return any sums which it may have received on account of the eighty thousandpesos, or the whole thereof, should it have received the same, by securing a loan from whichever bank or banks may lend itthe money at the cheapest rate upon the security of pawned jewelry. This is an urgent measure to save the Monte dePiedadin the present crisis and the board of directors trusts to secure your Excellency's entire cooperation and that of theother 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 Piedadof this city, in which it isstated that the funds which the said institution counted upon are nearly all invested in loans on jewelry and that the smallaccount remaining will scarcely suffice to cover the transactions of the next two days, for which reason it entreats the generalGovernment that, in pursuance of its telegraphic advice to H. M. Government, the latter direct that there be turned over tosaid Monte de Piedad$80,000 out of the funds in the public treasury obtained from the national subscription for the relief ofthe distress caused by the earthquake of 1863, said board obligating itself to return this sum should H. M. Government, for anyreason, 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 seriouslyinjure the credit of so beneficient an institution; and in view of the report upon the matter made by the Intendencia General deHacienda; and considering the fact that the public treasury has on hand a much greater sum from the source mentioned thanthat solicited; and considering that this general Government has submitted for the determination of H. M. Government that thebalance which, after strictly applying the proceeds obtained from the subscription referred to, may remain as a surplus shouldbe 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 thanto relieve distress, an act of charity which is exercised in the highest degree by the Monte de Piedad, for it liberates needyperson 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, andthat the great and laudable work of its establishment, and that the great and laudable and valuable if the aid it urgently seeksis not granted, since the suspension of its operations would seriously and regrettably damage the ever-growing credit ofthe 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 presentjuncture it would assume the nature of a disturbance of public order because of the extreme poverty of the poorer classesresulting 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, thisgeneral Government, in the exercise of the extraordinary powers conferred upon it and in conformity with the report of theIntendencia 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 Islandsobtained from the national subscription opened by reason of the earthquakes of 1863, amounts up to the sum $80,000, as itsneeds may require, in installments of $20,000.

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


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Third. The Intendencia General de Hacienda shall forthwith, and in preference to all other work, proceed to prepare thenecessary papers so that with the least possible delay the payment referred to may be made and the danger that menacesthe Monte de Piedadof 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 isthe total sum available at the present time, taking into consideration the sums delivered to the Monte de Piedadpursuant to the decreeissued 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 anunquestionable right to be paid the donations assigned to them therein, your general Government shall convoke them all within areasonable 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 freefrom all kinds of claims on the part of those interested in the distribution of the funds deposited in the vaults of the Treasury, such actionmay be taken as the circumstances shall require, after first consulting the relief board and your general Government and taking accountof what sums have been delivered to the Monte de Piedadand those that were expended in 1888 to relieve public calamities," and "inorder that all the points in connection with the proceedings had as a result of the earthquake be clearly understood, it is indispensablethat 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 referenceto 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 capitalin the year 1863 shall be paid the amounts allotted to them out of the sums sent from Spain for this purpose, with observanceof the rules specified in the said royal order, one of them being that before making the payment to the interested parties theassets shall be reduced to money. These assets, during the long period of time that has elapsed since they were turned overto the Treasury of the Philippine Islands, were used to cover the general needs of the appropriation, a part besides beinginvested in the relief of charitable institutions and another part to meet pressing needs occasioned by public calamities. OnJanuary 30, last, your Excellency was please to order the fulfillment of that sovereign mandate and referred the same tothis Intendencia for its information and the purposes desired (that is, for compliance with its directions and, as aforesaid, oneof these being the liquidation, recovery, and deposit with the Treasury of the sums paid out of that fund and which wereexpended in a different way from that intended by the donors) and this Intendencia believed the moment had arrived to claimfrom the board of directors of the Monte de Piedady Caja de Ahorros the sum of 80,000 pesos which, by decree of yourgeneral Government of the date of February 1, 1883, was loaned to it out of the said funds, the ( Monte de Piedad) obligatingitself to return the same within the period of eight days if H. M. Government did not approve the delivery. On this Intendencia'sdemanding from the Monte de Piedadthe eighty thousand pesos, thus complying with the provisions of the Royal Order, it wasto be supposed that no objection to its return would be made by the Monte de Piedadfor, when it received the loan, it formallyengaged 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 the80,000 pesos loaned to the Monte de Piedad, without doubt considering as sufficient the period of ten years during which ithas been using this large sum which lawfully belongs to their persons. This Intendencia also supposed that the Monte dePiedadno longer needed the amount of that loan, inasmuch as, far from investing it in beneficient transactions, it had turnedthe whole amount into the voluntary deposit funds bearing 5 per cent interests, the result of this operation being that the debtorloaned to the creditor on interest what the former had gratuitously received. But the Monte de Piedad, instead of fulfilling thepromise it made on receiving the sum, after repeated demands refused to return the money on the ground that only yourExcellency, and not the Intendencia (Treasury), is entitled to order the reimbursement, taking no account of the fact that thisIntendencia was acting in the discharge of a sovereign command, the fulfillment of which your Excellency was pleased toorder; and on the further ground that the sum of 80,000 pesos which it received from the fund intended for the earthquakevictims was not received as a loan, but as a donation, this in the opinion of this Intendencia, erroneously interpreting both thelast royal order which directed the apportionment of the amount of the subscription raised in the year 1863 and the superiordecree which granted the loan, inasmuch as in this letter no donation is made to the Monte de Piedadof the 80,000 pesos, butsimply a loan; besides, no donation whatever could be made of funds derived from a private subscription raised for a specificpurpose, 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 madeby the Monte de Piedad, and believing it useless to insist further in the matter of the claim for the aforementioned loan, or toargue in support thereof, this Intendencia believes the intervention of your Excellency necessary in this matter, if the royalOrder No. 1044 of December 3, last, is to be complied with, and for this purpose I beg your Excellency kindly to orderthe Monte de Piedadto reimburse within the period of eight days the 80,000 which it owes, and that you give this Intendenciapower to carry out the provisions of the said royal order. I must call to the attention of your Excellency that the said piousestablishment, during the last few days and after demand was made upon it, has endorsed to the Spanish-Filipino Bank nearlythe 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 theSpanish Government in regard to the $80,000 turned over to the Monte de Piedad.


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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 Treasuryderived from the subscription for the earthquake of 1863, $80,000 received from general Treasury as a returnable loan, and withoutinterest." The account was carried in this manner until January 1, 1899, when it was closed by transferring the amount to an accountcalled "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 ofthe Exmo. Sr. Presidente of the Council transmitted verbally to thePresidente 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 whatpurpose the Spanish Government delivered to the Monte de Piedadeighty thousand pesos obtained from the subscriptionopened in connection with the earthquake of 1863, as well as any other information that might be useful for the report whichyour office is called upon to furnish, I must state to your department that the books kept in these Pious Institutions, and whichhave been consulted for the purpose, show that on the 15th of February, 1883, they received as a reimbursable loan andwithout interest, twenty thousand pesos, which they deposited with their own funds. On the same account and on each of thedates of March 12, April 14 and June 2 of the said year, 1883, they also received and turned into their funds a like sum oftwenty 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 thePhilippine Government on the one side and the Monte de Piedadon the other, concerning the $80,000. The Monte de Piedad, aftersetting forth in its petition to the Governor-General its financial condition and its absolute necessity for more working capital, asked thatout of the sum of $100,000 held in the Treasury of the Philippine Islands, at the disposal of the central relief board, there be transferredto 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 agreedthat if the transfer of these funds should not be approved by the Government of Spain, the same would be returned forthwith. It did notask that the $80,000 be given to it as a donation. The Governor-General, after reciting the substance of the petition, stated that "thisgeneral Government has submitted for the determination of H. M. Government that the balance which, after strictly applying theproceeds obtained from the subscription referred to, may remain as a surplus, should be delivered to the Monte de Piedad, either as adonation, or as a loan upon the security of the credit of the institution," and "considering that no reasonable objection can be made togranting the request herein contained," directed the transfer of the $80,000 to be made with the understanding that "the Board ofDirectors of the Monte de Piedadis 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 connectionwith the $80,000 appears in this resolution of the Governor-General. It may be inferred from the royal orders that the MadridGovernment did tacitly approve of the transfer of the $80,000 to the Monte de Piedad as a loan without interest, but that Governmentcertainly did not approve such transfer as a donation for the reason that the Governor-General was directed by the royal order ofDecember 3, 1892, to inform the Madrid Government of the total available sum of the earthquake fund, "taking into consideration thesums 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 thereport of the Department of Finance there can be no doubt that it was so intended. That report refers expressly to the royal order ofDecember 3d, and sets forth in detail the action taken in order to secure the return of the $80,000. The Department of Finance, actingunder the orders of the Governor-General, understood that the $80,000 was transferred to the Monte de Piedadwell knew that itreceived this sum as a loan interest." The amount was thus carried in its books until January, 1899, when it was transferred to theaccount of the "Sagrada Mitra" and was thereafter known as the "Sagrada Mitra and subscription account." Furthermore, the Monte dePiedadrecognized 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 Piedadreceived the $80,000 as a mere loan or deposit andnot 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:


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The Spanish nation was professedly Roman Catholic and its King enjoyed the distinction of being deputy ex officio of the HolySee and Apostolic Vicar-General of the Indies, and as such it was his duty to protect all pious works and charitable institutionsin his kingdoms, especially those of the Indies; among the latter was the Monte de Piedadof the Philippines, of which saidKing and his deputy the Governor-General of the Philippines, as royal vice-patron, were, in a special and peculiar manner, theprotectors; the latter, as a result of the cession of the Philippine Islands, Implicitly renounced this high office and tacitlyreturned it to the Holy See, now represented by the Archbishop of Manila; the national subscription in question was a kind offoundation or pious work, for a charitable purpose in these Islands; and the entire subscription not being needed for its originalpurpose, the royal vice-patron, with the consent of the King, gave the surplus thereof to an analogous purpose; the fulfillmentof all these things involved, in the majority, if not in all cases, faithful compliance with the duty imposed upon him by the HolySee, when it conferred upon him the royal patronage of the Indies, a thing that touched him very closely in his conscience andreligion; 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 civilpowers.

In view of these circumstances it must be quite clear that, even without the express provisions of the Treaty of Paris, whichapparently expressly exclude such an idea, it did not befit the honor of either of the contracting parties to subrogate to theAmerican Government in lieu of the Spanish Government anything respecting the disposition of the funds de livered by thelatter to the Monte de Piedad. The same reasons that induced the Spanish Government to take over such things would resultin great inconvenience to the American Government in attempting to do so. The question was such a delicate one, for thereason that it affected the conscience, deeply religious, of the King of Spain, that it cannot be believed that it was ever hisintention 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 thisregard; 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 theorythat the sum in question was a donation to the Monte de Piedadand not a loan, and (2) because the charity founded by the donationsfor the earthquake sufferers is not and never was intended to be an ecclesiastical pious work. The first proposition has already beendecided adversely to the defendant's contention. As to the second, the record shows clearly that the fund was given by the donors for aspecific and definite purpose the relief of the earthquake sufferers and for no other purpose. The money was turned over to theSpanish Government to be devoted to that purpose. The Spanish Government remitted the money to the Philippine Government to bedistributed among the suffers. All officials, including the King of Spain and the Governor-General of the Philippine Islands, who took partin the disposal of the fund, acted in their purely civil, official capacity, and the fact that they might have belonged to a certain church hadnothing 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 $80,000reached the coffers of the Monte de Piedad(an institution under the control of the church) as a loan or deposit. If the charity in questionhad been founded as an ecclesiastical pious work, the King of Spain and the Governor-General, in their capacities as vicar-general ofthe 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 ofthe special agreement between the Government of Spain and the Holy See, based on the union of the church and state which wascompletely 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, thetrustee was the Spanish Government, the donees, the cestuis que trustent, were certain persons in the Philippine Islands. Thewhole matter is one of trusteeship. This is undisputed and indisputable. It follows that the Spanish Government at no time wasthe owner of the fund. Not being the owner of the fund it could not transfer the ownership. Whether or not it could transfer itstrusteeship it certainly never has expressly done so and the general terms of property transfer in the Treaty of Paris are whollyinsufficient for such a purpose even could Spain have transferred its trusteeship without the consent of the donors and evencould the United States, as a Government, have accepted such a trust under any power granted to it by the thirteen originalStates 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 orthe 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 theownership of the fund to the Monte de Piedad, the question arises, who may sue to recover this loan? It needs no argument to showthat the Spanish or Philippine Government, as trustee, could maintain an action for this purpose had there been no change ofsovereignty and if the right of action has not prescribed. But those governments were something more than mere common law trusteesof 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 timethere transactions took place, which are the law of June 20, 1894, the royal decree of April 27. 1875, and the instructions promulgatedon 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 wereremitted to the Philippine Government to be distributed among the earthquake sufferers by the Central Relief Board constituted, underarticle 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


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distinguished from a permanent public charitable institution. As the Spanish Government initiated the creation of the fund and as thedonors turned their contributions over to that Government, it became the duty of the latter, under article 7 of the instructions, to exercisesupervision and control over the moneys thus collected to the end that the will of the donors should be carried out. The relief board hadno 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, todispose of the surplus funds, should there be any, by assigning them to some other charitable purpose or institution. The secretarycould not dispose of any of the funds in this manner so long as they were necessary for the specific purpose for which they werecontributed. The secretary had the power, under the law above mentioned to appoint and totally or partially change the personnel of therelief board and to authorize the board to defend the rights of the charity in the courts. The authority of the board consisted only incarrying 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 thatthe 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 Governmentsof Spain and of the Philippine Islands in complying with their duties conferred upon them by law, acted in their governmental capacitiesin attempting to carry out the intention of the contributors. It will this be seen that those governments were something more, as we havesaid, than mere trustees of the fund.

It is further contended that the obligation on the part of the Monte de Piedadto return the $80,000 to the Government, even consideringit a loan, was wiped out on the change of sovereignty, or inn other words, the present Philippine Government cannot maintain thisaction for that reason. This contention, if true, "must result from settled principles of rigid law," as it cannot rest upon any title to the fundin the Monte de Piedadacquired prior to such change. While the obligation to return the $80,000 to the Spanish Government was stillpending, war between the United States and Spain ensued. Under the Treaty of Paris of December 10, 1898, the Archipelago, knownas the Philippine Islands, was ceded to the United States, the latter agreeing to pay Spain the sum of $20,000,000. Under the firstparagraph of the eighth article, Spain relinquished to the United States "all buildings, wharves, barracks, forts, structures, publichighways, and other immovable property which, in conformity with law, belonged to the public domain, and as such belonged to thecrown 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 theproposition that the $80,000 must be "other immovable property" mentioned in article 8 of the treaty, but upon contractual obligationsincurred before the Philippine Islands were ceded to the United States. We will not inquire what effect his cession had upon the law ofJune 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 lawstheretofore 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 publiclaw that the great body of municipal law which regulates private and domestic rights continues in force until abrogated orchanged by the new ruler.

If the above-mentioned legal provisions are in conflict with the political character, constitution or institutions of the new sovereign, theybecame 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 beenrepealed by the present Government. That they fall within the latter class is clear from their very nature and character. They are lawswhich 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, savingsbanks, etc.," all of which are in the nature of charitable institutions, from taxation, placed such institutions, in so far as the investment insecurities are concerned, under the general supervision of the Insular Treasurer (paragraph 4 of section 111 of Act No. 1189; see alsoAct No. 701).

Furthermore, upon the cession of the Philippine Islands the prerogatives of he crown of Spain devolved upon he United States. InMagill 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 gavetheir 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 thispower still remains with them except so fact as they have delegated a portion of it to the Federal Government. The sovereignwill 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 publicnature, by virtue of its general superintending authority over the public interests, where no other person is entrusted with it. (4Kent Com., 508, note.)

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


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This prerogative ofparens patriae is inherent in the supreme power of every State, whether that power is lodged in a royalperson or in the legislature, and has no affinity to those arbitrary powers which are sometimes exerted by irresponsiblemonarchs to the great detriment of the people and the destruction of their liberties. On the contrary, it is a most beneficientfunctions, and often necessary to be exercised in the interest of humanity, and for the prevention of injury to those who cannotprotect themselves.

The court in the same case, after quoting from Sohier vs.Mass. General Hospital (3 Cush., 483, 497), wherein the latter court held thatit is deemed indispensible that there should be a power in the legislature to authorize the same of the estates of in facts, idiots, insanepersons, 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 ofcharities, who are often in capable of vindicating their rights, and justly look for protection to the sovereign authority, actingasparens patriae. They show that this beneficient functions has not ceased t exist under the change of government from amonarchy to a republic; but that it now resides in the legislative department, ready to be called into exercise wheneverrequired for the purposes of justice and right, and is a clearly capable of being exercised in cases of charities as in any othercases 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-Generalhad 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, asdistinguished from the rights of individuals, before an action could be brought by the Attorney-General in the name of the people. Thecourt, 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 thepublic 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 wasunlawful, are the donors or the cestuis que trustent, and this Government is neither. Consequently, the plaintiff is not the proper party tobring the action." The earthquake fund was the result or the accumulation of a great number of small contributions. The names of thecontributors 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. Andno doubt a large number of the original sufferers have died, leaving various heirs. It would be impracticable for them to institute anaction or actions either individually or collectively to recover the $80,000. The only course that can be satisfactorily pursued is for theGovernment 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 istrue, to the specific purposes to which it was intended to be devoted, but within those limits consecrated to the public use, and becamepart 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 promptexercise 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 thereason that we have just held that the present Philippine Government is the proper party to the action. The Act is only a manifestationon the part of the Philippine Government to exercise the power or right which it undoubtedly had. The Act is not, as contended bycounsel, in conflict with the fifth section of the Act of Congress of July 1, 1902, because it does not take property without due process oflaw. 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 presentcharter from the Government of the Philippine Islands, was the same juristic person, and liable upon the obligations of the old city. Thiscourt held that the present municipality is a totally different corporate entity and in no way liable for the debts of the Spanishmunicipality. 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, thesuccessor 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 Piedaddeclined to return the $80,000when 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 wasinstituted 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 thePhilippine Government, (b) because the right of action to recover a deposit or trust funds does not prescribe, and (c) even if the defense


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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 Piedadreceived the $80,000 in 1883 "to be held under the sameconditions as at present in the treasury, to wit, at the disposal of the relief board." In compliance with the provisions of the royal order ofDecember 3, 1892, the Department of Finance called upon theMonte de Piedadin June, 1893, to return the $80,000. The Montedeclined to comply with this order upon the ground that only the Governor-General of the Philippine Islands and not the Department ofFinance had the right to order the reimbursement. The amount was carried on the books of the Monte as a returnable loan until January1, 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 theplaintiff is seeking to recover an ordinary loan. Upon this theory June, 1893, cannot be taken as the date when the statute of limitationsbegan 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 onethe action may have prescribed on May 3, 1912, because more than ten full years had elapsed after March 31, 1902. (Sections 38 and43, 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 allgovernments 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 boundby 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 tothe King, and that no time can bar his rights, was the maxim of the common laws, and was founded on the principle of publicpolicy, that as he was occupied with the cares of government he ought not to suffer from the negligence of his officer andservants. The principle is applicable to all governments, which must necessarily act through numerous agents, and is essentialto a preservation of the interests and property of the public. It is upon this principle that in this country the statutes of a Stateprescribing periods within which rights must be prosecuted are not held to embrace the State itself, unless it is expresslydesignated 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 fromthe 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 thesovereign or government, whether state or federal. But the rule is otherwise where the mischiefs to be remedied are of such anature that the state must necessarily be included, where the state goes into business in concert or in competition with hercitizens, or where a party seeks to enforces his private rights by suit in the name of the state or government, so that the latteris 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, isexercising its sovereign functions or powers and is seeking to carry out a trust developed upon it when the Philippine Islands wereceded 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 barredby the statute of limitations of Tennessee, either while it held them in trust for the Indians, or since it became the owner of suchcoupons. (U. S.vs.Nashville, etc., R. Co., supra.) So where lands are held in trust by the state and the beneficiaries have no right tosue, 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 tothe 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 theyquestion the correctness of the judgment in so far as it allows interest, and directs its payment in gold coin or in the equivalent inPhilippine currency.


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

Torres, Johnson and Araullo, JJ., concur.Moreland, J., did not sign.


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Republic of the PhilippinesSUPREME COURT

Manila

SECOND DIVISION

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 ofthe proceeds of an insurance policy issued on the life of her deceased father. The dispute centers as to who of them should be entitledto act as trustee thereof. The lower court applying the appropriate Civil Code provisions decided in favor of the mother, the plaintiff inthis case. Defendant uncle appealed. As noted, the lower court acted the way it did following the specific mandate of the law. Inaddition, 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 greaterattention to her. This is all the more likely considering that the child is with the mother. There are no circumstances then that did militateagainst 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 eitherthat the judiciary pursuant to its role as an agency of the State as parens patriae, with an even greater stress on family unity under thepresent Constitution, did weigh in the balance the opposing claims and did come to the conclusion that the welfare of the child called forthe mother to be entrusted with such responsibility. We have to affirm.

The appealed decision made clear: "There is no controversy as to the facts. "1The 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 themother, with whom the child is living, seeking the delivery of such sum. She filed the bond required by the Civil Code. Defendant wouldjustify 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 ofthe policy in question to plaintiff. Its main reliance was on Articles 320 and 321 of the Civil Code. The former provides: "The father, or inhis absence the mother, is the legal administrator of the property pertaining to the child under parental authority. If the property is worthmore than two thousand pesos, the father or mother shall give a bond subject to the approval of the Court of First Instance."

3The 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 whosecompany he lives; ...

4

Conformity to such explicit codal norm is apparent in this portion of the appealed decision: "The insurance proceeds belong to thebeneficiary. 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, belongsto the minor child in ownership, and in usufruct to the plaintiff, her mother. Since under our law the usufructuary is entitled topossession, the plaintiff is entitled to possession of the insurance proceeds. The trust, insofar as it is in conflict with the above quotedprovision of law, ispro tanto null and void. In order, however, to protect the rights of the minor, Millian Pilapil, the plaintiff should file anadditional bond in the guardianship proceedings, Sp. Proc. No. 2418-R of this Court to raise her bond therein to the total amount ofP5,000.00."

5

It is very clear, therefore, considering the above, that unless the applicability of the two cited Civil Code provisions can be disputed, thedecision must stand. There is no ambiguity in the language employed. The words are rather clear. Their meaning is unequivocal. Timeand time again, this Court has left no doubt that where codal or statutory norms are cast in categorical language, the task before it isnot one of interpretation but of application.

6So it must be in this case. So it was in the appealed decision.


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1. It would take more than just two paragraphs as found in the brief for the defendant-appellant7to 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 beenworded. 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 ofconcern for the offspring, the protection is supplied by the bond required. With the added circumstance that the child stays with themother, not the uncle, without any evidence of lack of maternal care, the decision arrived at can stand the test of the strictest scrutiny. Itis further fortified by the assumption, both logical and natural, that infidelity to the trust imposed by the deceased is much less in thecase 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 320of the Civil Code, was of that view: Thus "El derecho y la obligacion de administrar el Patrimonio de los hijos es una consecuencianatural y lgica de la patria potestad y de la presuncin de que nadie cuidar de los bienes de acqullos con mas cario y solicitudeque 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. Dela propia suerte aceptan en general dicho principio los Codigos extranjeros, con las limitaciones y requisitos de que trataremos misadelante."

8

2. The appealed decision is supported by another cogent consideration. It is buttressed by its adherence to the concept that thejudiciary, as an agency of the State acting as parenspatriae, is called upon whenever a pending suit of litigation affects one who is aminor to accord priority to his best interest. It may happen, as it did occur here, that family relations may press their respective claims. Itwould be more in consonance not only with the natural order of things but the tradition of the country for a parent to be preferred. itcould 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,

9there 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 tothose arbitrary powers which are sometimes exerted by irresponsible monarchs to the great detr iment of the people and the destructionof 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, itdoes not admit of doubt that even if a stronger case were presented for the uncle, still deference to a constitutional mandate wouldhave led the lower court to decide as it did.

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

Zaldivar (Chairman), Antonio, Fernandez and Aquino, JJ., concur.

Barredo, J., took no part.


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Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

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 mandamusin which petitioner prays that the respondent judge of the lower court be ordered to continue theproceedings in civil case No. 3012 of said court, which were initiated under the regime of the so-called Republic of the Philippinesestablished 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 andjudgements of the court of the Philippines under the Philippine Executive Commission and the Republic of the Philippines establishedduring the Japanese military occupation, and that, furthermore, the lower courts have no jurisdiction to take cognizance of and continuejudicial proceedings pending in the courts of the defunct Republic of the Philippines in the absence of an enabling law granting suchauthority. And the same respondent, in his answer and memorandum filed in this Court, contends that the government established inthe Philippines during the Japanese occupation were no de factogovernments.

On January 2, 1942, the Imperial Japanese Forces occupied the City of Manila, and on the next day their Commander in Chiefproclaimed "the Military Administration under law over the districts occupied by the Army." In said proclamation, it was also providedthat "so far as the Military Administration permits, all the laws now in force in the Commonwealth, as well as executive and judicialinstitutions, shall continue to be effective for the time being as in the past," and "all public officials shall remain in their present postsand 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, whowas appointed Chairman thereof, was instructed to proceed to the immediate coordination of the existing central administrative organsand judicial courts, based upon what had existed therefore, with approval of the said Commander in Chief, who was to exercisejurisdiction 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 thejustices of the peace and municipal courts under the Commonwealth were continued with the same jurisdiction, in conformity wi th theinstructions given to the said Chairman of the Executive Commission by the Commander in Chief of Japanese Forces in the Philippinesin the latter's Order No. 3 of February 20, 1942, concerning basic principles to be observed by the Philippine Executive Commission inexercising legislative, executive and judicial powers. Section 1 of said Order provided that "activities of the administration organs andjudicial 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 theyadministered and enforced.

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

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

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


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3. That all laws, regulations and processes of any other government in the Philippines than that of the said Commonwealth arenull 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 theGovernment of the United States, solemnly declared "the full powers and responsibilities under the Constitution restored to theCommonwealth 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 reducedto the following:(1) Whether the judicial acts and proceedings of the court existing in the Philippines under the Philippine ExecutiveCommission 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 DouglasMacArthur, Commander in Chief of the United States Army, in which he declared "that all laws, regulations and processes of any of thegovernment in the Philippines than that of the said Commonwealth are null and void and without legal effect in areas of the Philippinesfree of enemy occupation and control," has invalidated all judgements and judicial acts and proceedings of the said courts; and (3) If thesaid 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 continuethose proceedings pending in said courts at the time the Philippines were reoccupied and liberated by the United States and Filipinoforces, 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 andproceedings of the courts established in the Philippines under the Philippine Executive Commission and the Republic of the Philippineswere good and valid and remained good and valid even after the liberation or reoccupation of the Philippines by the United States andFilipino forces.

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

There are several kinds of de factogovernments. The first, or government de facto in a proper legal sense, is that government that getspossession and control of, or usurps, by force or by the voice of the majority, the rightful legal governments and maintains itself againstthe will of the latter, such as the government of England under the Commonwealth, first by Parliament and later by Cromwell asProtector. The second is that which is established and maintained by military forces who invade and occupy a territory of the enemy inthe course of war, and

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