Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-13250 October 29, 1971

THE COLLECTOR OF INTERNAL REVENUE, petitioner, 

vs.
ANTONIO CAMPOS RUEDA, respondent..

Assistant Solicitor General Jose P. Alejandro and Special Attorney Jose G. Azurin, (O.S.G.)
for petitioner.

Ramirez and Ortigas for respondent.

FERNANDO, J.:

The basic issue posed by petitioner Collector of Internal Revenue in this appeal from a
decision of the Court of Tax Appeals as to whether or not the requisites of statehood, or at
least so much thereof as may be necessary for the acquisition of an international personality,
must be satisfied for a "foreign country" to fall within the exemption of Section 122 of the
National Internal Revenue Code  is now ripe for adjudication. and thus reversed the action
1

taken by petitioner Collector, who would hold respondent Antonio Campos Rueda, as
administrator of the estate of the late Estrella Soriano Vda. de Cerdeira, liable for the sum of
P161,874.95 as deficiency estate and inheritance taxes for the transfer of intangible personal
properties in the Philippines, the deceased, a Spanish national having been a resident of
Tangier, Morocco from 1931 up to the time of her death in 1955. In an earlier resolution
promulgated May 30, 1962, this Court on the assumption that the need for resolving the
principal question would be obviated, referred the matter back to the Court of Tax Appeals to
determine whether the alleged law of Tangier did grant the reciprocal tax exemption required
by the aforesaid Section 122. Then came an order from the Court of Tax Appeals submitting
copies of legislation of Tangier that would manifest that the element of reciprocity was not
lacking. It was not until July 29, 1969 that the case was deemed submitted for decision.
When the petition for review was filed on January 2, 1958, the basic issue raised was
impressed with an element of novelty. Four days thereafter, however, on January 6, 1958, it
was held by this Court that the aforesaid provision does not require that the "foreign country"
possess an international personality to come within its terms.  Accordingly, we have to affirm.
2

The decision of the Court of Tax Appeals, now under review, sets forth the background facts
as follows: "This is an appeal interposed by petitioner Antonio Campos Rueda as
administrator of the estate of the deceased Doña Maria de la Estrella Soriano Vda. de
Cerdeira, from the decision of the respondent Collector of Internal Revenue, assessing
against and demanding from the former the sum P161,874.95 as deficiency estate and
inheritance taxes, including interest and penalties, on the transfer of intangible personal
properties situated in the Philippines and belonging to said Maria de la Estrella Soriano Vda.
de Cerdeira. Maria de la Estrella Soriano Vda. de Cerdeira (Maria Cerdeira for short) is a
Spanish national, by reason of her marriage to a Spanish citizen and was a resident of
Tangier, Morocco from 1931 up to her death on January 2, 1955. At the time of her demise
she left, among others, intangible personal properties in the Philippines."  Then came this
3

portion: "On September 29, 1955, petitioner filed a provisional estate and inheritance tax
return on all the properties of the late Maria Cerdeira. On the same date, respondent,
pending investigation, issued an assessment for state and inheritance taxes in the respective
amounts of P111,592.48 and P157,791.48, or a total of P369,383.96 which tax liabilities
were paid by petitioner ... . On November 17, 1955, an amended return was filed ... wherein
intangible personal properties with the value of P396,308.90 were claimed as exempted from
taxes. On November 23, 1955, respondent, pending investigation, issued another
assessment for estate and inheritance taxes in the amounts of P202,262.40 and
P267,402.84, respectively, or a total of P469,665.24 ... . In a letter dated January 11, 1956,
respondent denied the request for exemption on the ground that the law of Tangier is not
reciprocal to Section 122 of the National Internal Revenue Code. Hence, respondent
demanded the payment of the sums of P239,439.49 representing deficiency estate and
inheritance taxes including ad valorem penalties, surcharges, interests and compromise
penalties ... . In a letter dated February 8, 1956, and received by respondent on the following
day, petitioner requested for the reconsideration of the decision denying the claim for tax
exemption of the intangible personal properties and the imposition of the 25% and 5% ad
valorem penalties ... . However, respondent denied request, in his letter dated May 5,
1956 ... and received by petitioner on May 21, 1956. Respondent premised the denial on the
grounds that there was no reciprocity [with Tangier, which was moreover] a mere principality,
not a foreign country. Consequently, respondent demanded the payment of the sums of
P73,851.21 and P88,023.74 respectively, or a total of P161,874.95 as deficiency estate and
inheritance taxes including surcharges, interests and compromise penalties." 4

CONTENTION OF COLLECTOR: the principal question as noted dealt with the reciprocity
aspect as well as the insisting by the Collector of Internal Revenue that Tangier was not a
foreign country within the meaning of Section 122.

PREVIOUS RULING: "foreign country", used in the last proviso of Section 122 of the
National Internal Revenue Code, refers to a government of that foreign power which,
although not an international person in the sense of international law, does not impose
transfer or death upon intangible person properties of our citizens not residing therein, or
whose law allows a similar exemption from such taxes. It is, therefore, not necessary that
Tangier should have been recognized by our Government order to entitle the petitioner to the
exemption benefits of the proviso of Section 122 of our Tax. Code." 5

"While section 122 of the Philippine Tax Code aforequoted speaks of 'intangible personal
property' in both subdivisions (a) and (b); the alleged laws of Tangier refer to 'bienes
muebles situados en Tanger', 'bienes muebles radicantes en Tanger', 'movables' and
'movable property'. In order that this Court may be able to determine whether the alleged
laws of Tangier grant the reciprocal tax exemptions required by Section 122 of the Tax Code,
and without, for the time being, going into the merits of the issues raised by the petitioner-
appellant, the case is [remanded] to the Court of Tax Appeals for the reception of evidence
or proof on whether or not the words `bienes muebles', 'movables' and 'movable properties
as used in the Tangier laws, include or embrace 'intangible person property', as used in the
Tax Code."  In line with the above resolution, the Court of Tax Appeals admitted evidence
6

submitted by the administrator petitioner Antonio Campos Rueda, consisting of exhibits of

laws of Tangier to the effect that "the transfers by reason of death of movable properties,
corporeal or incorporeal, including furniture and personal effects as well as of securities,
bonds, shares, ..., were not subject, on that date and in said zone, to the payment of any
death tax, whatever might have been the nationality of the deceased or his heirs and
legatees." It was further noted in an order of such Court referring the matter back to us that
such were duly admitted in evidence during the hearing of the case on September 9, 1963.
Respondent presented no evidence." 7

The controlling legal provision as noted is a proviso in Section 122 of the National Internal
Revenue Code. It reads thus: "That no tax shall be collected under this Title in respect of
intangible personal property (a) if the decedent at the time of his death was a resident of a
foreign country which at the time of his death did not impose a transfer tax or death tax of
any character in respect of intangible person property of the Philippines not residing in that
foreign country, or (b) if the laws of the foreign country of which the decedent was a resident
at the time of his death allow a similar exemption from transfer taxes or death taxes of every
character in respect of intangible personal property owned by citizens of the Philippines not
residing in that foreign country."  
8

The only obstacle therefore to a definitive ruling is whether or not as vigorously insisted upon
by petitioner the acquisition of internal personality is a condition sine qua non to Tangier
being considered a "foreign country". Deference to the De Lara ruling, as was made clear in
the opening paragraph of this opinion, calls for an affirmance of the decision of the Court of
Tax Appeals.

It does not admit of doubt that if a foreign country is to be identified with a state, it is required
in line with Pound's formulation that it be a politically organized sovereign community
independent of outside control bound by penalties of nationhood, legally supreme within its
territory, acting through a government functioning under a regime of 
law.  It is thus a sovereign person with the people composing it viewed as an organized
9

corporate society under a government with the legal competence to exact obedience to its
commands.   It has been referred to as a body-politic organized by common consent for
10

mutual defense and mutual safety and to promote the general welfare. Correctly has it been
11

described by Esmein as "the juridical personification of the nation."   This is to view it in the
12

light of its historical development. The stress is on its being a nation, its people occupying a
definite territory, politically organized, exercising by means of its government its sovereign
will over the individuals within it and maintaining its separate international personality. Laski
could speak of it then as a territorial society divided into government and subjects, claiming
within its allotted area a supremacy over all other institutions.  McIver similarly would point to
13

the power entrusted to its government to maintain within its territory the conditions of a legal
order and to enter into international relations.   With the latter requisite satisfied, international
14

law do not exact independence as a condition of statehood. So Hyde did opine.  15

Even on the assumption then that Tangier is bereft of international personality, petitioner has
not successfully made out a case. It bears repeating that four days after the filing of this
petition on January 6, 1958 in Collector of Internal Revenue v. De Lara,   it was specifically
16

held by us: "Considering the State of California as a foreign country in relation to section 122
of our Tax Code we believe and hold, as did the Tax Court, that the Ancilliary Administrator
is entitled the exemption from the inheritance tax on the intangible personal property found in
the Philippines."   There can be no doubt that California as a state in the American Union
17

was in the alleged requisite of international personality. Nonetheless, it was held to be a

foreign country within the meaning of Section 122 of the National Internal Revenue Code.  18

What is undeniable is that even prior to the De Lara ruling, this Court did commit itself to the
doctrine that even a tiny principality, that of Liechtenstein, hardly an international personality
in the sense, did fall under this exempt category. So it appears in an opinion of the Court by
the then Acting Chief Justicem Bengson who thereafter assumed that position in a
permanent capacity, in Kiene v. Collector of Internal Revenue.   As was therein noted: 'The
19

Board found from the documents submitted to it — proof of the laws of Liechtenstein — that
said country does not impose estate, inheritance and gift taxes on intangible property of
Filipino citizens not residing in that country. Wherefore, the Board declared that pursuant to
the exemption above established, no estate or inheritance taxes were collectible, Ludwig
Kiene being a resident of Liechtestein when he passed away."   Then came this definitive
20

ruling: "The Collector — hereafter named the respondent — cites decisions of the United
States Supreme Court and of this Court, holding that intangible personal property in the
Philippines belonging to a non-resident foreigner, who died outside of this country is subject
to the estate tax, in disregard of the principle 'mobilia sequuntur personam'. Such property is
admittedly taxable here. Without the proviso above quoted, the shares of stock owned here
by the Ludwig Kiene would be concededly subject to estate and inheritance taxes.
Nevertheless our Congress chose to make an exemption where conditions are such that
demand reciprocity — as in this case. And the exemption must be honored."  21

WHEREFORE, the decision of the respondent Court of Tax Appeals of October 30, 1957 is
affirmed. Without pronouncement as to costs.
 MAGALLONA v ERMITA
The Case
This original action for the writs of certiorari and prohibition assails the constitutionality
of Republic Act No. 95221 (RA 9522) adjusting the country’s archipelagic baselines and
classifying the baseline regime of nearby territories.

The Antecedents
In 1961, Congress passed Republic Act No. 3046 (RA 3046)2 demarcating the maritime
baselines of the Philippines as an archipelagic State. 3 This law followed the framing of
the Convention on the Territorial Sea and the Contiguous Zone in 1958 (UNCLOS I), 4
codifying, among others, the sovereign right of States parties over their "territorial sea,"
the breadth of which, however, was left undetermined. Attempts to fill this void during
the second round of negotiations in Geneva in 1960 (UNCLOS II) proved futile. Thus,
domestically, RA 3046 remained unchanged for nearly five decades, save for legislation
passed in 1968 (Republic Act No. 5446 [RA 5446]) correcting typographical errors and
reserving the drawing of baselines around Sabah in North Borneo.

In March 2009, Congress amended RA 3046 by enacting RA 9522, the statute now under
scrutiny. The change was prompted by the need to make RA 3046 compliant with the
terms of the United Nations Convention on the Law of the Sea (UNCLOS III), 5 which the
Philippines ratified on 27 February 1984.6 Among others, UNCLOS III prescribes the
water-land ratio, length, and contour of baselines of archipelagic States like the
Philippines7 and sets the deadline for the filing of application for the extended
continental shelf.8

Complying with these requirements, RA 9522

1. shortened one baseline,
2. optimized the location of some basepoints around the Philippine archipelago
and
3. classified adjacent territories, namely, the Kalayaan Island Group (KIG) and the
Scarborough Shoal, as "regimes of islands" whose islands generate their own
applicable maritime zones.

CONTENTION OF PETITIONERS:
(1) RA 9522 reduces Philippine maritime territory, and logically, the reach of the
Philippine state’s sovereign power, in violation of Article 1 of the 1987
Constitution,10 embodying the terms of the Treaty of Paris11 and ancillary
treaties,12 and
 (2) RA 9522 opens the country’s waters landward of the baselines to maritime
passage by all vessels and aircrafts, undermining Philippine sovereignty and
national security, contravening the country’s nuclear-free policy, and damaging
marine resources, in violation of relevant constitutional provisions. 13

(3) RA 9522’s treatment of the KIG as "regime of islands" not only results in the loss
of a large maritime area but also prejudices the livelihood of subsistence
fishermen.14 To buttress their argument of territorial diminution, petitioners
facially attack RA 9522 for what it excluded and included – its failure to reference
either the Treaty of Paris or Sabah and its use of UNCLOS III’s framework of
regime of islands to determine the maritime zones of the KIG and the
Scarborough Shoal.

Respondents also question the normative force, under international law, of petitioners’
assertion that what Spain ceded to the United States under the Treaty of Paris were the
islands and all the waters found within the boundaries of the rectangular area drawn
under the Treaty of Paris.
2. On the merits, whether RA 9522 is unconstitutional. On the merits, we find no basis
to declare RA 9522 unconstitutional.

RA 9522 is Not Unconstitutional

RA 9522 is a Statutory Tool
to Demarcate the Country’s
Maritime Zones and Continental
Shelf Under UNCLOS III, not to
Delineate Philippine Territory
Petitioners submit that RA 9522 "dismembers a large portion of the national territory"21
because it discards the pre-UNCLOS III demarcation of Philippine territory under the
Treaty of Paris and related treaties, successively encoded in the definition of national
territory under the 1935, 1973 and 1987 Constitutions. Petitioners theorize that this
constitutional definition trumps any treaty or statutory provision denying the Philippines
sovereign control over waters, beyond the territorial sea recognized at the time of the
Treaty of Paris, that Spain supposedly ceded to the United States. Petitioners argue that
from the Treaty of Paris’ technical description, Philippine sovereignty over territorial
waters extends hundreds of nautical miles around the Philippine archipelago, embracing
the rectangular area delineated in the Treaty of Paris. 22

UNCLOS III has nothing to do with the acquisition (or loss) of territory. It is a multilateral
treaty regulating, among others, sea-use rights over maritime zones (i.e., the territorial
waters [12 nautical miles from the baselines], contiguous zone [24 nautical miles from
the baselines], exclusive economic zone [200 nautical miles from the baselines]), and
continental shelves that UNCLOS III delimits.23 UNCLOS III was the culmination of
decades-long negotiations among United Nations members to codify norms regulating
the conduct of States in the world’s oceans and submarine areas, recognizing coastal
and archipelagic States’ graduated authority over a limited span of waters and
submarine lands along their coasts.

On the other hand, baselines laws such as RA 9522 are enacted by UNCLOS III States
parties to mark-out specific basepoints along their coasts from which baselines are
drawn, either straight or contoured, to serve as geographic starting points to measure
the breadth of the maritime zones and continental shelf. Article 48 of UNCLOS III on
archipelagic States like ours could not be any clearer:
Article 48. Measurement of the breadth of the territorial sea, the contiguous zone, the
exclusive economic zone and the continental shelf. – The breadth of the territorial sea,
the contiguous zone, the exclusive economic zone and the continental shelf shall be
measured from archipelagic baselines drawn in accordance with article 47. (Emphasis
supplied)

Thus, baselines laws are nothing but statutory mechanisms for UNCLOS III States parties
to delimit with precision the extent of their maritime zones and continental shelves. In
turn, this gives notice to the rest of the international community of the scope of the
maritime space and submarine areas within which States parties exercise treaty-based
rights, namely, the exercise of sovereignty over territorial waters (Article 2), the
jurisdiction to enforce customs, fiscal, immigration, and sanitation laws in the
contiguous zone (Article 33), and the right to exploit the living and non-living resources
in the exclusive economic zone (Article 56) and continental shelf (Article 77).
Even under petitioners’ theory that the Philippine territory embraces the islands and all
the waters within the rectangular area delimited in the Treaty of Paris, the baselines of
the Philippines would still have to be drawn in accordance with RA 9522 because this is
the only way to draw the baselines in conformity with UNCLOS III. The baselines cannot
be drawn from the boundaries or other portions of the rectangular area delineated in
the Treaty of Paris, but from the "outermost islands and drying reefs of the
archipelago."24
UNCLOS III and its ancillary baselines laws play no role in the acquisition, enlargement
or, as petitioners claim, diminution of territory. Under traditional international law
typology, States acquire (or conversely, lose) territory through occupation, accretion,
cession and prescription,25 not by executing multilateral treaties on the regulations of
sea-use rights or enacting statutes to comply with the treaty’s terms to delimit maritime
zones and continental shelves. Territorial claims to land features are outside UNCLOS III,
and are instead governed by the rules on general international law.26
RA 9522’s Use of the Framework
of Regime of Islands to Determine the
Maritime Zones of the KIG and the
Scarborough Shoal, not Inconsistent
with the Philippines’ Claim of Sovereignty
Over these Areas
Petitioners next submit that RA 9522’s use of UNCLOS III’s regime of islands framework
to draw the baselines, and to measure the breadth of the applicable maritime zones of
the KIG, "weakens our territorial claim" over that area.27 Petitioners add that the KIG’s
(and Scarborough Shoal’s) exclusion from the Philippine archipelagic baselines results in
the loss of "about 15,000 square nautical miles of territorial waters," prejudicing the
livelihood of subsistence fishermen.28 A comparison of the configuration of the baselines
drawn under RA 3046 and RA 9522 and the extent of maritime space encompassed by
each law, coupled with a reading of the text of RA 9522 and its congressional
deliberations, vis-à-vis the Philippines’ obligations under UNCLOS III, belie this
view.1avvphi1

The configuration of the baselines drawn under RA 3046 and RA 9522 shows that RA
9522 merely followed the basepoints mapped by RA 3046, save for at least nine
basepoints that RA 9522 skipped to optimize the location of basepoints and adjust the
length of one baseline (and thus comply with UNCLOS III’s limitation on the maximum
length of baselines). Under RA 3046, as under RA 9522, the KIG and the Scarborough
Shoal lie outside of the baselines drawn around the Philippine archipelago. This
undeniable cartographic fact takes the wind out of petitioners’ argument branding RA
9522 as a statutory renunciation of the Philippines’ claim over the KIG, assuming that
baselines are relevant for this purpose.
Petitioners’ assertion of loss of "about 15,000 square nautical miles of territorial waters"
under RA 9522 is similarly unfounded both in fact and law. On the contrary, RA 9522, by
optimizing the location of basepoints, increased the Philippines’ total maritime space
(covering its internal waters, territorial sea and exclusive economic zone) by 145,216
square nautical miles, as shown in the table below:29
Extent of maritime area
using RA 3046, as Extent of maritime area
amended, taking into using RA 9522, taking into
 
account the Treaty of account UNCLOS III (in
Paris’ delimitation (in square nautical miles)
square nautical miles)

Internal or
archipelagic waters 166,858 171,435

Territorial Sea 274,136 32,106

Exclusive Economic   382,669

Zone

TOTAL 440,994 586,210

Thus, as the map below shows, the reach of the exclusive economic zone drawn under
RA 9522 even extends way beyond the waters covered by the rectangular demarcation
under the Treaty of Paris. Of course, where there are overlapping exclusive economic
zones of opposite or adjacent States, there will have to be a delineation of maritime
boundaries in accordance with UNCLOS III.30
Further, petitioners’ argument that the KIG now lies outside Philippine territory because
the baselines that RA 9522 draws do not enclose the KIG is negated by RA 9522 itself.
Section 2 of the law commits to text the Philippines’ continued claim of sovereignty and
jurisdiction over the KIG and the Scarborough Shoal:
SEC. 2. The baselines in the following areas over which the Philippines likewise
exercises sovereignty and jurisdiction shall be determined as "Regime of Islands" under
the Republic of the Philippines consistent with Article 121 of the United Nations
Convention on the Law of the Sea (UNCLOS):
a) The Kalayaan Island Group as constituted under Presidential Decree No. 1596 and
b) Bajo de Masinloc, also known as Scarborough Shoal. (Emphasis supplied)

Had Congress in RA 9522 enclosed the KIG and the Scarborough Shoal as part of the
Philippine archipelago, adverse legal effects would have ensued. The Philippines would
have committed a breach of two provisions of UNCLOS III. First, Article 47 (3) of UNCLOS
III requires that "[t]he drawing of such baselines shall not depart to any appreciable
extent from the general configuration of the archipelago." Second, Article 47 (2) of
UNCLOS III requires that "the length of the baselines shall not exceed 100 nautical
miles," save for three per cent (3%) of the total number of baselines which can reach up
to 125 nautical miles.31

Although the Philippines has consistently claimed sovereignty over the KIG 32 and the
Scarborough Shoal for several decades, these outlying areas are located at an
appreciable distance from the nearest shoreline of the Philippine archipelago, 33 such
that any straight baseline loped around them from the nearest basepoint will inevitably
"depart to an appreciable extent from the general configuration of the archipelago."
The principal sponsor of RA 9522 in the Senate, Senator Miriam Defensor-Santiago, took
pains to emphasize the foregoing during the Senate deliberations:
What we call the Kalayaan Island Group or what the rest of the world call[] the Spratlys
and the Scarborough Shoal are outside our archipelagic baseline because if we put them
inside our baselines we might be accused of violating the provision of international law
which states: "The drawing of such baseline shall not depart to any appreciable extent
from the general configuration of the archipelago." So sa loob ng ating baseline, dapat
magkalapit ang mga islands. Dahil malayo ang Scarborough Shoal, hindi natin
masasabing malapit sila sa atin although we are still allowed by international law to
claim them as our own.
This is called contested islands outside our configuration. We see that our archipelago is
defined by the orange line which [we] call[] archipelagic baseline. Ngayon, tingnan ninyo
ang maliit na circle doon sa itaas, that is Scarborough Shoal, itong malaking circle sa
ibaba, that is Kalayaan Group or the Spratlys. Malayo na sila sa ating archipelago kaya
kung ilihis pa natin ang dating archipelagic baselines para lamang masama itong
dalawang circles, hindi na sila magkalapit at baka hindi na tatanggapin ng United
Nations because of the rule that it should follow the natural configuration of the
archipelago.34 (Emphasis supplied)
Similarly, the length of one baseline that RA 3046 drew exceeded UNCLOS III’s
limits.1avvphi1 The need to shorten this baseline, and in addition, to optimize the
location of basepoints using current maps, became imperative as discussed by
respondents:
[T]he amendment of the baselines law was necessary to enable the Philippines to draw
the outer limits of its maritime zones including the extended continental shelf in the
manner provided by Article 47 of [UNCLOS III]. As defined by R.A. 3046, as amended by
R.A. 5446, the baselines suffer from some technical deficiencies, to wit:
1. The length of the baseline across Moro Gulf (from Middle of 3 Rock Awash to
Tongquil Point) is 140.06 nautical miles x x x. This exceeds the maximum length allowed
under Article 47(2) of the [UNCLOS III], which states that "The length of such baselines
shall not exceed 100 nautical miles, except that up to 3 per cent of the total number of
baselines enclosing any archipelago may exceed that length, up to a maximum length of
125 nautical miles."
2. The selection of basepoints is not optimal. At least 9 basepoints can be skipped or
deleted from the baselines system. This will enclose an additional 2,195 nautical miles of
water.
3. Finally, the basepoints were drawn from maps existing in 1968, and not established
by geodetic survey methods. Accordingly, some of the points, particularly along the
west coasts of Luzon down to Palawan were later found to be located either inland or
on water, not on low-water line and drying reefs as prescribed by Article 47.35
Hence, far from surrendering the Philippines’ claim over the KIG and the Scarborough
Shoal, Congress’ decision to classify the KIG and the Scarborough Shoal as "‘Regime[s] of
Islands’ under the Republic of the Philippines consistent with Article 121" 36 of UNCLOS III
manifests the Philippine State’s responsible observance of its pacta sunt servanda
obligation under UNCLOS III. Under Article 121 of UNCLOS III, any "naturally formed area
of land, surrounded by water, which is above water at high tide," such as portions of the
KIG, qualifies under the category of "regime of islands," whose islands generate their
own applicable maritime zones.37
Statutory Claim Over Sabah under
RA 5446 Retained
Petitioners’ argument for the invalidity of RA 9522 for its failure to textualize the
Philippines’ claim over Sabah in North Borneo is also untenable. Section 2 of RA 5446,
which RA 9522 did not repeal, keeps open the door for drawing the baselines of Sabah:
Section 2. The definition of the baselines of the territorial sea of the Philippine
Archipelago as provided in this Act is without prejudice to the delineation of the
baselines of the territorial sea around the territory of Sabah, situated in North Borneo,
over which the Republic of the Philippines has acquired dominion and sovereignty.
(Emphasis supplied)
UNCLOS III and RA 9522 not
Incompatible with the Constitution’s
Delineation of Internal Waters
As their final argument against the validity of RA 9522, petitioners contend that the law
unconstitutionally "converts" internal waters into archipelagic waters, hence subjecting
these waters to the right of innocent and sea lanes passage under UNCLOS III, including
overflight. Petitioners extrapolate that these passage rights indubitably expose
Philippine internal waters to nuclear and maritime pollution hazards, in violation of the
Constitution.38
Whether referred to as Philippine "internal waters" under Article I of the Constitution 39
or as "archipelagic waters" under UNCLOS III (Article 49 [1]), the Philippines exercises
sovereignty over the body of water lying landward of the baselines, including the air
space over it and the submarine areas underneath. UNCLOS III affirms this:
Article 49. Legal status of archipelagic waters, of the air space over archipelagic waters
and of their bed and subsoil. –
1. The sovereignty of an archipelagic State extends to the waters enclosed by the
archipelagic baselines drawn in accordance with article 47, described as archipelagic
waters, regardless of their depth or distance from the coast.
2. This sovereignty extends to the air space over the archipelagic waters, as well as to
their bed and subsoil, and the resources contained therein.
xxxx
4. The regime of archipelagic sea lanes passage established in this Part shall not in other
respects affect the status of the archipelagic waters, including the sea lanes, or the
exercise by the archipelagic State of its sovereignty over such waters and their air
space, bed and subsoil, and the resources contained therein. (Emphasis supplied)
The fact of sovereignty, however, does not preclude the operation of municipal and
international law norms subjecting the territorial sea or archipelagic waters to
necessary, if not marginal, burdens in the interest of maintaining unimpeded,
expeditious international navigation, consistent with the international law principle of
freedom of navigation. Thus, domestically, the political branches of the Philippine
government, in the competent discharge of their constitutional powers, may pass
legislation designating routes within the archipelagic waters to regulate innocent and
sea lanes passage.40 Indeed, bills drawing nautical highways for sea lanes passage are
now pending in Congress.41
In the absence of municipal legislation, international law norms, now codified in
UNCLOS III, operate to grant innocent passage rights over the territorial sea or
archipelagic waters, subject to the treaty’s limitations and conditions for their exercise. 42
Significantly, the right of innocent passage is a customary international law,43 thus
automatically incorporated in the corpus of Philippine law.44 No modern State can
validly invoke its sovereignty to absolutely forbid innocent passage that is exercised in
accordance with customary international law without risking retaliatory measures from
the international community.
The fact that for archipelagic States, their archipelagic waters are subject to both the
right of innocent passage and sea lanes passage 45 does not place them in lesser footing
vis-à-vis continental coastal States which are subject, in their territorial sea, to the right
of innocent passage and the right of transit passage through international straits. The
imposition of these passage rights through archipelagic waters under UNCLOS III was a
concession by archipelagic States, in exchange for their right to claim all the waters
landward of their baselines, regardless of their depth or distance from the coast, as
archipelagic waters subject to their territorial sovereignty. More importantly, the
recognition of archipelagic States’ archipelago and the waters enclosed by their
baselines as one cohesive entity prevents the treatment of their islands as separate
islands under UNCLOS III.46 Separate islands generate their own maritime zones, placing
the waters between islands separated by more than 24 nautical miles beyond the
States’ territorial sovereignty, subjecting these waters to the rights of other States
under UNCLOS III.47
Petitioners’ invocation of non-executory constitutional provisions in Article II
(Declaration of Principles and State Policies)48 must also fail. Our present state of
jurisprudence considers the provisions in Article II as mere legislative guides, which,
absent enabling legislation, "do not embody judicially enforceable constitutional rights x
x x."49 Article II provisions serve as guides in formulating and interpreting implementing
legislation, as well as in interpreting executory provisions of the Constitution. Although
Oposa v. Factoran50 treated the right to a healthful and balanced ecology under Section
16 of Article II as an exception, the present petition lacks factual basis to substantiate
the claimed constitutional violation. The other provisions petitioners cite, relating to the
protection of marine wealth (Article XII, Section 2, paragraph 2 51 ) and subsistence
fishermen (Article XIII, Section 752 ), are not violated by RA 9522.
In fact, the demarcation of the baselines enables the Philippines to delimit its exclusive
economic zone, reserving solely to the Philippines the exploitation of all living and non-
living resources within such zone. Such a maritime delineation binds the international
community since the delineation is in strict observance of UNCLOS III. If the maritime
delineation is contrary to UNCLOS III, the international community will of course reject it
and will refuse to be bound by it.
UNCLOS III favors States with a long coastline like the Philippines. UNCLOS III creates a
sui generis maritime space – the exclusive economic zone – in waters previously part of
the high seas. UNCLOS III grants new rights to coastal States to exclusively exploit the
resources found within this zone up to 200 nautical miles.53 UNCLOS III, however,
preserves the traditional freedom of navigation of other States that attached to this
zone beyond the territorial sea before UNCLOS III.
RA 9522 and the Philippines’ Maritime Zones
Petitioners hold the view that, based on the permissive text of UNCLOS III, Congress was
not bound to pass RA 9522.54 We have looked at the relevant provision of UNCLOS III55
and we find petitioners’ reading plausible. Nevertheless, the prerogative of choosing this
option belongs to Congress, not to this Court. Moreover, the luxury of choosing this
option comes at a very steep price. Absent an UNCLOS III compliant baselines law, an
archipelagic State like the Philippines will find itself devoid of internationally acceptable
baselines from where the breadth of its maritime zones and continental shelf is
measured. This is recipe for a two-fronted disaster: first, it sends an open invitation to
the seafaring powers to freely enter and exploit the resources in the waters and
submarine areas around our archipelago; and second, it weakens the country’s case in
any international dispute over Philippine maritime space. These are consequences
Congress wisely avoided.
The enactment of UNCLOS III compliant baselines law for the Philippine archipelago and
adjacent areas, as embodied in RA 9522, allows an internationally-recognized
delimitation of the breadth of the Philippines’ maritime zones and continental shelf. RA
9522 is therefore a most vital step on the part of the Philippines in safeguarding its
maritime zones, consistent with the Constitution and our national interest.
 EN BANC
[G.R. No. L-9657.  November 29, 1956.]
LEOPOLDO T. BACANI and MATEO A. MATOTO, Plaintiffs-Appellees, vs. NATIONAL
COCONUT CORPORATION, ET AL., Defendants, NATIONAL COCONUT CORPORATION
and BOARD OF LIQUIDATORS, Defendants-Appellants.
 
DECISION
BAUTISTA ANGELO, J.:
Plaintiffs herein are court stenographers assigned in Branch VI of the Court of First
Instance of Manila. During the pendency of Civil Case No. 2293 of said court, entitled
Francisco Sycip vs. National Coconut Corporation, Assistant Corporate Counsel Federico
Alikpala, counsel for Defendant, requested said stenographers for copies of the
transcript of the stenographic notes taken by them during the
hearing. Plaintiffs complied with the request by delivering to Counsel Alikpala the
needed transcript containing 714 pages and thereafter submitted to him their bills for
the payment of their fees. The National Coconut Corporation paid the amount of P564
to Leopoldo T. Bacani and P150 to Mateo A. Matoto for said transcript at the rate of P1
per page.
Upon inspecting the books of this corporation, the Auditor General disallowed the
payment of these fees and sought the recovery of the amounts paid. On January 19,
1953, the Auditor General required the Plaintiffs to reimburse said amounts on the
strength of a circular of the Department of Justice wherein the opinion was expressed
that the National Coconut Corporation, being a government entity, was exempt from
the payment of the fees in question. On February 6, 1954, the Auditor General issued an
order directing the Cashier of the Department of Justice to deduct from the salary of
Leopoldo T. Bacani the amount of P25 every payday and from the salary of Mateo A.
Matoto the amount of P10 every payday beginning March 30, 1954. To prevent
deduction of these fees from their salaries and secure a judicial ruling that the National
Coconut Corporation is not a government entity within the purview of section 16, Rule
130 of the Rules of Court, this action was instituted in the Court of First Instance of
Manila.
Defendants set up as a defense that the National Coconut Corporation is a government
entity within the purview of section 2 of the Revised Administrative Code of 1917 and,
hence, it is exempt from paying the stenographers’ fees under Rule 130 of the Rules of
Court. After trial, the court found for the Plaintiffs declaring (1)
“that Defendant National Coconut Corporation is not a government entity within the
purview of section 16, Rule 130 of the Rules of Court; chan roblesvirtualawlibrary(2) that
the payments already made by said Defendant to Plaintiffs herein and received by the
latter from the former in the total amount of P714, for copies of the stenographic
transcripts in question, are valid, just and legal; chan roblesvirtualawlibraryand (3)
that Plaintiffs are under no obligation whatsoever to make a refund of these payments
already received by them.” This is an appeal from said decision.
Under section 16, Rule 130 of the Rules of Court, the Government of the Philippines is
exempt from paying the legal fees provided for therein, and among these fees are those
which stenographers may charge for the transcript of notes taken by them that may be
requested by any interested person (section 8). The fees in question are for the
transcript of notes taken during the hearing of a case in which the National Coconut
Corporation is interested, and the transcript was requested by its assistant corporate
counsel for the use of said corporation.
On the other hand, section 2 of the Revised Administrative Code defines the scope of
the term “Government of the Republic of the Philippines” as
follows:chanroblesvirtuallawlibrary
“‘The Government of the Philippine Islands’ is a term which refers to the corporate
governmental entity through which the functions of government are exercised
throughout the Philippine Islands, including, save as the contrary appears from the
context, the various arms through which political authority is made effective in said
Islands, whether pertaining to the central Government or to the provincial or municipal
branches or other form of local government.”
The question now to be determined is whether the National Coconut Corporation may
be considered as included in the term “Government of the Republic of the Philippines”
for the purposes of the exemption of the legal fees provided for in Rule 130 of the Rules
of Court.
As may be noted, the term “Government of the Republic of the Philippines” refers to a
government entity through which the functions of government are exercised, including
the various arms through which political authority is made effective in the Philippines,
whether pertaining to the central government or to the provincial or municipal branches
or other form of local government. This requires a little digression on the nature and
functions of our government as instituted in our Constitution.
To begin with, we state that the term “Government” may be defined as “that institution
or aggregate of institutions by which an independent society makes and carries out
those rules of action which are necessary to enable men to live in a social state, or
which are imposed upon the people forming that society by those who possess the
power or authority of prescribing them” (U.S. vs. Dorr, 2 Phil., 332). This institution,
when referring to the national government, has reference to what our Constitution has
established composed of three great departments, the legislative, executive, and the
judicial, through which the powers and functions of government are exercised. These
functions are twofold:chanroblesvirtuallawlibrary constitute and ministrant. The former
are those which constitute the very bonds of society and are compulsory in nature; chan
roblesvirtualawlibrarythe latter are those that are undertaken only by way of advancing
the general interests of society, and are merely optional. President Wilson enumerates
the constituent functions as follows:chanroblesvirtuallawlibrary
“‘(1)  The keeping of order and providing for the protection of persons and property
from violence and robbery.
‘(2)  The fixing of the legal relations between man and wife and between parents and
children.
‘(3)  The regulation of the holding, transmission, and interchange of property, and the
determination of its liabilities for debt or for crime.
‘(4)  The determination of contract rights between individuals.
‘(5)  The definition and punishment of crime.
‘(6)  The administration of justice in civil cases.
‘(7)  The determination of the political duties, privileges, and relations of citizens.
‘(8)  Dealings of the state with foreign powers:chanroblesvirtuallawlibrary the
preservation of the state from external danger or encroachment and the advancement
of its international interests.’“ (Malcolm, The Government of the Philippine Islands, p.
19.)
The most important of the ministrant functions are:chanroblesvirtuallawlibrary public
works, public education, public charity, health and safety regulations, and regulations of
trade and industry. The principles deter mining whether or not a government shall
exercise certain of these optional functions are:chanroblesvirtuallawlibrary (1) that a
government should do for the public welfare those things which private capital would
not naturally undertake and (2) that a government should do these things which by its
very nature it is better equipped to administer for the public welfare than is any private
individual or group of individuals. (Malcolm, The Government of the Philippine Islands,
pp. 19-20.)
From the above we may infer that, strictly speaking, there are functions which our
government is required to exercise to promote its objectives as expressed in our
Constitution and which are exercised by it as an attribute of sovereignty, and those
which it may exercise to promote merely the welfare, progress and prosperity of the
people. To this latter class belongs the organization of those corporations owned or
controlled by the government to promote certain aspects of the economic life of our
people such as the National Coconut Corporation. These are what we call government-
owned or controlled corporations which may take on the form of a private enterprise or
one organized with powers and formal characteristics of a private corporations under
the Corporation Law.
The question that now arises is:chanroblesvirtuallawlibrary Does the fact that these
corporation perform certain functions of government make them a part of the
Government of the Philippines?
The answer is simple:chanroblesvirtuallawlibrary they do not acquire that status for the
simple reason that they do not come under the classification of municipal or public
corporation. Take for instance the National Coconut Corporation. While it was organized
with the purpose of “adjusting the coconut industry to a position independent of trade
preferences in the United States” and of providing “Facilities for the better curing of
copra products and the proper utilization of coconut by-products”, a function which our
government has chosen to exercise to promote the coconut industry, however, it was
given a corporate power separate and distinct from our government, for it was made
subject to the provisions of our Corporation Law in so far as its corporate existence and
the powers that it may exercise are concerned (sections 2 and 4, Commonwealth Act
No. 518). It may sue and be sued in the same manner as any other private corporations,
and in this sense it is an entity different from our government. As this Court has aptly
said, “The mere fact that the Government happens to be a majority stockholder does
not make it a public corporation” (National Coal Co. vs. Collector of Internal Revenue, 46
Phil., 586-587). “By becoming a stockholder in the National Coal Company, the
Government divested itself of its sovereign character so far as respects the transactions
of the corporation cralaw . Unlike the Government, the corporation may be sued
without its consent, and is subject to taxation. Yet the National Coal Company remains
an agency or instrumentality of government.” (Government of the Philippine Islands vs.
Springer, 50 Phil., 288.)
To recapitulate, we may mention that the term “Government of the Republic of the
Philippines” used in section 2 of the Revised Administrative Code refers only to that
government entity through which the functions of the government are exercised as an
attribute of sovereignty, and in this are included those arms through which political
authority is made effective whether they be provincial, municipal or other form of local
government. These are what we call municipal corporations. They do not include
government entities which are given a corporate personality separate and distinct from
the government and which are governed by the Corporation Law. Their powers, duties
and liabilities have to be determined in the light of that law and of their corporate
charters. They do not therefore come within the exemption clause prescribed in section
16, Rule 130 of our Rules of Court.
“Public corporations are those formed or organized for the government of a portion of
the State.” (Section 3, Republic Act No. 1459, Corporation Law).
“‘The generally accepted definition of a municipal corporation would only include
organized cities and towns, and like organizations, with political and legislative powers
for the local, civil government and police regulations of the inhabitants of the particular
district included in the boundaries of the corporation.’ Heller vs. Stremmel, 52 Mo. 309,
312.”
“In its more general sense the phrase ‘municipal corporation’ may include both towns
and counties, and other public corporations created by government for political
purposes. In its more common and limited signification, it embraces only incorporated
villages, towns and cities. Dunn vs. Court of County Revenues, 85 Ala. 144, 146, 4 So.
661.” (McQuillin, Municipal Corporations, 2nd ed., Vol. 1, p. 385.)
“We may, therefore, define a municipal corporation in its historical and strict sense to
be the incorporation, by the authority of the government, of the inhabitants of a
particular place or district, and authorizing them in their corporate capacity to exercise
subordinate specified powers of legislation and regulation with respect to their local and
internal concerns. This power of local government is the distinctive purpose and the
distinguishing feature of a municipal corporation proper.” (Dillon, Municipal
Corporations, 5th ed., Vol. I, p. 59.)
It is true that under section 8, Rule 130, stenographers may only charge as fees P0.30 for
each page of transcript of not less than 200 words before the appeal is taken and P0.15
for each page after the filing of the appeal, but in this case the National Coconut
Corporation has agreed and in fact has paid P1.00 per page for the services rendered by
the Plaintiffs and has not raised any objection to the amount paid until its propriety was
disputed by the Auditor General. The payment of the fees in question became therefore
contractual and as such is valid even if it goes beyond the limit prescribed in section 8,
Rule 130 of the Rules of Court.
As regards the question of procedure raised by Appellants, suffice it to say that the same
is insubstantial, considering that this case refers not to a money claim disapproved by
the Auditor General but to an action of prohibition the purpose of which is to restrain
the officials concerned from deducting from Plaintiffs’ salaries the amount paid to them
as stenographers’ fees. This case does not come under section 1, Rule 45 of the Rules of
Court relative to appeals from a decision of the Auditor General.
Wherefore, the decision appealed from is affirmed, without pronouncement as to costs.
G.R. No. L-32052 July 25, 1975

PHILIPPINE VIRGINIA TOBACCO ADMINISTRATION, petitioner, 

vs.
COURT OF INDUSTRIAL RELATIONS, REUEL ABRAHAM, MILAGROS ABUEG, AVELINO
ACOSTA, CAROLINA ACOSTA, MARTIN AGSALUD, JOSEFINA AGUINALDO, GLORIA
ALBANO, ANTONIO ALUNING, COSME ALVAREZ, ISABEL ALZATE, AURORA APUSEN,
TOMAS ARCANGEL, LOURDES ARJONELLO, MANUEL AROMIN, DIONISIO ASISTIN, JOSE
AURE, NICASIO AZNAR, EUGENIO AZURIN, CLARITA BACUGAN, PIO BALAGOT,
HEREDIO BALMACEDA, ESTHER BANAAG, JOVENCIO BARBERO, MONICO BARBADILLO,
HERNANDO BARROZO, FILIPINA BARROZO, REMEDIO BARTOLOME, ANGELINA
BASCOS, JOSE BATALLA, ALMARIO BAUTISTA, EUGENIO BAUTISTA, JR., HERMALO
BAUTISTA, JUANITO BAUTISTA, SEVERINO BARBANO, CAPPIA BARGONIA, ESMERALDA
BERNARDEZ, RUBEN BERNARDEZ, ALFREDO BONGER, TOMAS BOQUIREN, ANGELINA
BRAVO, VIRGINIA BRINGA, ALBERTO BUNEO, SIMEON CABANAYAN, LUCRECIA
CACATIAN, LEONIDES CADAY, ANGELINA CADOTTE, IGNACIO CALAYCAY, PACIFICO
CALUB, RUFINO CALUZA, CALVIN CAMBA, ALFREDO CAMPOSENO, BAGUILITA CANTO,
ALFREDO CARRERA, PEDRO CASES, CRESCENTE CASIS, ERNESTO CASTANEDA,
HERMINIO CASTILLO, JOSE CASTRO, LEONOR CASTRO, MADEO CASTRO, MARIA
PINZON CASTRO, PABLO CATURA, RESTITUTO CESPADES, FLORA CHACON, EDMUNDO
CORPUZ, ESTHER CRUZ, CELIA CUARESMA, AQUILINO DACAYO, DIONISIA DASALLA,
SOCORRO DELFIN, ABELARDO DIAZ, ARTHUR DIAZ, CYNTHIA DIZON, MARCIA DIZON,
ISABELO DOMINGO, HONORATA DOZA, CAROLINA DUAD, JUSTINIANO EPISTOLA,
ROMEO ENCARNACION, PRIMITIVO ESCANO, ELSA ESPEJO, JUAN ESPEJO, RIZALINA
ESQUILLO, YSMAEL FARINAS, LORNA FAVIS, DAN FERNANDEZ, JAIME FERNANDEZ,
ALFREDO FERRER, MODESTO FERRER, JR., EUGENIO FLANDEZ, GUILLERMO FLORENDO,
ALFREDO FLORES, DOMINGA FLORES, ROMEO FLORES, LIGAYA FONTANILLA,
MELCHOR GASMEN, LEILA GASMENA, CONSUELO GAROLAGA, ALFONSO GOROSPE,
CESAR GOROSPE, RICARDO GOROSPE, JR., CARLITO GUZMAN, ERNESTO DE GUZMAN,
THELMA DE GUZMAN, FELIX HERNANDEZ, SOLIVEN HERNANDO, FRANCISCO HIDALGO,
LEONILO INES, SIXTO JAQUIES, TRINIDAD JAVIER, FERMIN LAGUA, GUALBERTO
LAMBINO, ROMAN LANTING, OSCAR LAZO, ROSARIO LAZO, JOSEFINA DE LARA,
AMBROSIO LAZOL, NALIE LIBATIQUE, LAMBERTO LLAMAS, ANTONIO LLANES,
ROMULA LOPEZ, ADRIANO LORENZANA, ANTONIO MACARAEG, ILDEFONSO MAGAT,
CECILIO MAGHANOY, ALFONSO MAGSANOC, AVELINA MALLARE, AUGUSTO MANALO,
DOMINADOR MANASAN, BENITO MANECLANG, JR., TIRSO MANGUMAY, EVELIA
MANZANO, HONORANTE MARIANO, DOMINGO MEDINA, MARTIN MENDOZA,
PERFECTO MILANA, EMILIO MILLAN, GREGORIO MONEGAS, CONSOLACION NAVALTA,
NOLI OCAMPO, VICENTE CLEGARIO, ELPIDIO PALMONES, ARACELI PANGALANGAN,
ISIDORO PANLASIGUI, JR., ARTEMIO PARIS, JR., FEDERICO PAYUMO, JR., NELIA
PAYUMO, BITUEN PAZ, FRANCISCO PENGSON, OSCAR PERALTA, PROCORRO PERALTA,
RAMON PERALTA, MINDA PICHAY, MAURO PIMENTEL, PRUDENCIO PIMENTEL,
LEOPOLDO PUNO, REYNALDO RABE, ROLANDO REA, CONSTANTINO REA, CECILIA
RICO, CECILIO RILLORAZA, AURORA ROMAN, MERCEDES RUBIO, URSULA RUPISAN,
OLIVIA SABADO, BERNARDO SACRAMENTO, LUZ SALVADOR, JOSE SAMSON, JR.,
ROMULA DE LOS SANTOS, ANTONIO SAYSON, JR., FLORANTE SERIL, MARIO SISON,
RUDY SISON, PROCEDIO TABIN, LUCENA TABISULA, HANNIBAL TAJANO, ENRIQUE
TIANGCO, JR., JUSTINIANO TOBIAS, NYMIA TOLENTINO, CONSTANTE TOLENTINO,
TEODORO TOREBIO, FEDERICO TRINIDAD, JOVENCINTO TRINIDAD, LAZARO VALDEZ,
LUDRALINA VALDEZ, MAXIMINA VALDEZ, FRANCISCO VELASCO, JR., ROSITA VELASCO,
SEVERO VANTANILLA, VENANCIO VENTIGAN, FELICITAS VENUS, NIEVES DE VERA,
ELISEO VERSOZA, SILVESTRE VILA, GLORIA VILLAMOR, ALEJANDRO VELLANUEVA,
DAVID VILLANUEVA, CAROLINA VILLASENOR ORLANDO VILLASTIQUE, MAJELLA
VILORIN, ROSARIO VILORIA, MAY VIRATA, FEDERICO VIRAY, MELBA YAMBAO, MARIO
ZAMORA, AUTENOR ABUEG, SOTERO ACEDO, HONRADO ALBERTO, FELIPE ALIDO,
VICENTE ANCHUELO, LIBERTAD APEROCHO, MARIANO BALBAGO, MARIO
BALMACEDA, DAISY BICENIO, SYLVIA BUSTAMANTE, RAYMUNDO GEMERINO, LAZARO
CAPURAS, ROGELIO CARUNGCONG, ZACARIAS CAYETANO, JR., LILY CHUA, ANDRES
CRUZ, ARTURO CRUZ, BIENVENIDO ESTEBAN, PABLO JARETA, MANUEL JOSE,
NESTORIA KINTANAR, CLEOPATRIA LAZEM. MELCHOR LAZO, JESUS LUNA, GASPAR
MARINAS, CESAR MAULSON, MANUEL MEDINA, JESUS PLURAD, LAKAMBINI RAZON,
GLORIA IBANEZ, JOSE SANTOS, ELEAZAR SQUI, JOSE TAMAYO, FELIPE TENORIO,
SILVINO UMALI, VICENTE ZARA, SATURNINO GARCIA, WILLIAM GARCIA, NORMA
GARINGARAO, ROSARIO ANTONIO, RUBEN BAUTISTA, QUIRINO PUESTO, NELIA M.
GOMERI, OSCAR R. LANUZA, AURORA M. LINDAYA, GREGORIO MOGSINO, JACRM B.
PAPA, GREGORIO R. RIEGO, TERESITA N. ROZUL, MAGTANGOL SAMALA, PORFIRIO
AGOCOLIS, LEONARDO MONTE, HERMELINO PATI, ALFREDO PAYOYO, PURIFICACION
ROJAS, ODANO TEANO, RICARDO SANTIAGO, and MARCELO
MANGAHAS, respondents. 

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

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

FERNANDO, J.:

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

The facts are undisputed. On December 20, 1966, claimants, now private respondents,
filed with respondent Court a petition wherein they alleged their employment
relationship, the overtime services in excess of the regular eight hours a day rendered
by them, and the failure to pay them overtime compensation in accordance with
Commonwealth Act No. 444. Their prayer was for the differential between the amount
actually paid to them and the amount allegedly due them.6 There was an answer filed by
petitioner Philippine Virginia Tobacco Administration denying the allegations and raising
the special defenses of lack of a cause of action and lack of jurisdiction. 7 The issues were
thereafter joined, and the case set for trial, with both parties presenting their
evidence.8 After the parties submitted the case for decision, the then Presiding Judge
Arsenio T. Martinez of respondent Court issued an order sustaining the claims of private
respondents for overtime services from December 23, 1963 up to the date the decision
was rendered on March 21, 1970, and directing petitioner to pay the same, minus what
it had already paid.9 There was a motion for reconsideration, but respondent Court en
banc denied the same. 10 Hence this petition for certiorari.

Petitioner Philippine Virginia Tobacco Administration, as had been noted, would

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

1. A reference to the enactments creating petitioner corporation suffices to

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

It is thus readily apparent from a cursory perusal of such statutory provisions why
petitioner can rightfully invoke the doctrine announced in the leading Agricultural Credit
and Cooperative Financing Administration decision 17 and why the objection of private
respondents with its overtones of the distinction between constituent and ministrant
functions of governments as set forth in Bacani v. National Coconut Corporation 18 if
futile. The irrelevance of such a distinction considering the needs of the times was
clearly pointed out by the present Chief Justice, who took note, speaking of the
reconstituted Agricultural Credit Administration, that functions of that sort "may not be
strictly what President Wilson described as "constituent" (as distinguished from
"ministrant"),such as those relating to the maintenance of peace and the prevention of
crime, those regulating property and property rights, those relating to the
administration of justice and the determination of political duties of citizens, and those
relating to national defense and foreign relations. Under this traditional classification,
such constituent functions are exercised by the State as attributes of sovereignty, and
not merely to promote the welfare, progress and prosperity of the people — these
latter functions being ministrant, the exercise of which is optional on the part of the
government." 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
be left to private enterprise and initiative and which the government was called upon to
enter optionally, and only "because it was better equipped to administer for the public
welfare than is any private individual or group of individuals", continue to lose their
well-defined boundaries and to be absorbed within activities that the government must
undertake in its sovereign capacity if it is to meet the increasing social challenges of the
times. Here as almost everywhere else the tendency is undoubtedly towards a greater
socialization of economic forces. Here of course this development was envisioned,
indeed adopted as a national policy, by the Constitution itself in its declaration of
principle concerning the promotion of social justice." 20 Thus was laid to rest the
doctrine in Bacani v. National Coconut Corporation, 21 based on the Wilsonian
classification of the tasks incumbent on government into constituent and ministrant in
accordance with the laissez faire principle. That concept, then dominant in economics,
was carried into the governmental sphere, as noted in a textbook on political
science, 22 the first edition of which was published in 1898, its author being the then
Professor, later American President, Woodrow Wilson. He took pains to emphasize that
what was categorized by him as constituent functions had its basis in a recognition of
what was demanded by the "strictest [concept of] laissez faire, [as they] are indeed the
very bonds of society." 23 The other functions he would minimize as ministrant or
optional.

It is a matter of law that in the Philippines, the laissez faire principle hardly commanded

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

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

2. The success that attended the efforts of petitioner to be adjudged as performing

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

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

WHEREFORE, the appealed Order of March 21, 1970 and the Resolution of respondent
Court en banc of May 8, 1970 denying a motion for reconsideration are hereby affirmed.
The last sentence of the Order of March 21, 1970 reads as follows: "To find how much
each of them [private respondents] is entitled under this judgment, the Chief of the
Examining Division, or any of his authorized representative, is hereby directed to make a
reexamination of records, papers and documents in the possession of respondent PVTA
pertinent and proper under the premises and to submit his report of his findings to the
Court for further disposition thereof." Accordingly, as provided by the New Labor Code,
this case is referred to the National Labor Relations Commission for further proceedings
conformably to law. No costs.

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

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

THE GOVERNMENT OF THE PHILIPPINE ISLANDS, represented by the Treasurer of the

Philippine Islands,plaintiff-appellee, 
vs.
EL MONTE DE PIEDAD Y CAJA DE AHORRAS DE MANILA, defendant-appellant.

William A. Kincaid and Thomas L. Hartigan for appellant. 

Attorney-General Avanceña for appellee.

TRENT, J.:

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

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

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

3. That the court erred in stating that the Government of the Philippine Islands
has subrogated the Spanish Government in its rights, as regards an important
sum of money resulting from a national subscription opened by reason of the
earthquake of June 3, 1863, in these Island.

4. That the court erred in not declaring that Act Numbered 2109, passed by the
Philippine Legislature on January 30, 1912, is unconstitutional.
 5. That the court erred in holding in its decision that there is no title for the
prescription of this suit brought by the Insular Government against the Monte de
Piedad y Caja de Ahorros for the reimbursement of the eighty thousand dollars
($80,000) given to it by the late Spanish Government of these Islands.

6. That the court erred in sentencing the Monte de Piedad y Caja de Ahorros to

reimburse the Philippine Government in the sum of eighty thousand dollars
($80,000) gold coin, or the equivalent thereof in the present legal tender
currency in circulation, with legal interest thereon from February 28th, 1912, and
the costs of this suit.

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

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

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

Excellency: The Board of Directors of the Monte de Piedad y Caja de Ahorros of

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

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

GENERAL GOVERNMENT OF THE PHILIPPINES. 

MANILA, February 1, 1883.

In view of the foregoing petition addressed to me by the board of directors of

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

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

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

Considering that no reasonable objection can be made to granting the request

herein contained, for the funds in question are sufficiently secured in the unlikely
event that H> M. Government does not approve the recommendation
mentioned, this general Government, in the exercise of the extraordinary
powers conferred upon it and in conformity with the report of the Intendencia
de Hacienda, resolves as follows:

First. Authority is hereby given to deliver to the Monte de Piedad, out of the sum
held in the public treasury of these Islands obtained from the national
subscription opened by reason of the earthquakes of 1863, amounts up to the
sum $80,000, as its needs may require, in installments of $20,000.

Second. The board of directors of the Monte de Piedad is solemnly bound to

return, within eight days after demand, the sums it may have so received, if H.
M. Government does not approve this resolution.

Third. The Intendencia General de Hacienda shall forthwith, and in preference to

all other work, proceed to prepare the necessary papers so that with the least
possible delay the payment referred to may be made and the danger that
menaces the Monte de Piedad of having to suspend its operations may be
averted.

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

(Signed) P. DE RIVERA.

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

Intendencia General de Hacienda de Filipinas (General Treasury of the

Philippines) — Excellency. — By Royal Order No. 1044 of December 3, last, it is
provided that the persons who sustained losses by the earthquakes that
occurred in your capital in the year 1863 shall be paid the amounts allotted to
them out of the sums sent from Spain for this purpose, with observance of the
rules specified in the said royal order, one of them being that before making the
payment to the interested parties the assets shall be reduced to money. These
assets, during the long period of time that has elapsed since they were turned
over to the Treasury of the Philippine Islands, were used to cover the general
needs of the appropriation, a part besides being invested in the relief of
charitable institutions and another part to meet pressing needs occasioned by
public calamities. On January 30, last, your Excellency was please to order the
fulfillment of that sovereign mandate and referred the same to
this Intendencia for its information and the purposes desired (that is, for
compliance with its directions and, as aforesaid, one of these being the
liquidation, recovery, and deposit with the Treasury of the sums paid out of that
fund and which were expended in a different way from that intended by the
donors) and this Intendencia believed the moment had arrived to claim from the
board of directors of the Monte de Piedad y Caja de Ahorros the sum of 80,000
pesos which, by decree of your general Government of the date of February 1,
1883, was loaned to it out of the said funds, the (Monte de Piedad) obligating
itself to return the same within the period of eight days if H. M. Government did
not approve the delivery. On this Intendencia's demanding from the Monte de
Piedad the eighty thousand pesos, thus complying with the provisions of the
Royal Order, it was to be supposed that no objection to its return would be made
by the Monte de Piedad for, when it received the loan, it formally engaged itself
to return it; and, besides, it was indisputable that the moment to do so had
arrived, inasmuch as H. M. Government, in ordering that the assets of the
earthquake relief fund should he collected, makes express mention of the 80,000
 pesos loaned to the Monte de Piedad, without doubt considering as sufficient
the period of ten years during which it has been using this large sum which
lawfully belongs to their persons. This Intendencia also supposed that the Monte
de Piedad no longer needed the amount of that loan, inasmuch as, far from
investing it in beneficient transactions, it had turned the whole amount into the
voluntary deposit funds bearing 5 per cent interests, the result of this operation
being that the debtor loaned to the creditor on interest what the former had
gratuitously received. But the Monte de Piedad, instead of fulfilling the promise
it made on receiving the sum, after repeated demands refused to return the
money on the ground that only your Excellency, and not
the Intendencia (Treasury), is entitled to order the reimbursement, taking no
account of the fact that this Intendencia was acting in the discharge of a
sovereign command, the fulfillment of which your Excellency was pleased to
order; and on the further ground that the sum of 80,000 pesos which it received
from the fund intended for the earthquake victims was not received as a loan,
but as a donation, this in the opinion of this Intendencia, erroneously
interpreting both the last royal order which directed the apportionment of the
amount of the subscription raised in the year 1863 and the superior decree
which granted the loan, inasmuch as in this letter no donation is made to
the Monte de Piedad of the 80,000 pesos, but simply a loan; besides, no
donation whatever could be made of funds derived from a private subscription
raised for a specific purpose, which funds are already distributed and the names
of the beneficiaries have been published in the Gaceta, there being lacking only
the mere material act of the delivery, which has been unduly delayed. In view of
the unexpected reply made by the Monte de Piedad, and believing it useless to
insist further in the matter of the claim for the aforementioned loan, or to argue
in support thereof, this Intendencia believes the intervention of your Excellency
necessary in this matter, if the royal Order No. 1044 of December 3, last, is to be
complied with, and for this purpose I beg your Excellency kindly to order
the Monte de Piedad to reimburse within the period of eight days the 80,000
which it owes, and that you give this Intendencia power to carry out the
provisions of the said royal order. I must call to the attention of your Excellency
that the said pious establishment, during the last few days and after demand was
made upon it, has endorsed to the Spanish-Filipino Bank nearly the whole of the
sum which it had on deposit in the general deposit funds.

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

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

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

MANILA, March 31, 1902.

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

Islands.

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

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

Manila, November 19, 1913 

(Sgd.) EMILIO LAZCANOTEGUI, 
Secretary

(Sgd.) O. K. EMILIO MORETA,

Managing Director.

The foregoing documentary evidence shows the nature of the transactions which took
place between the Government of Spain and the Philippine Government on the one side
and the Monte de Piedad on the other, concerning the $80,000. The Monte de Piedad,
after setting forth in its petition to the Governor-General its financial condition and its
absolute necessity for more working capital, asked that out of the sum of $100,000 held
in the Treasury of the Philippine Islands, at the disposal of the central relief board, there
be transferred to it the sum of $80,000 to be held under the same conditions, to wit, "at
the disposal of the relief board." The Monte de Piedad agreed that if the transfer of
these funds should not be approved by the Government of Spain, the same would be
returned forthwith. It did not ask that the $80,000 be given to it as a donation. The
Governor-General, after reciting the substance of the petition, stated that "this general
Government has submitted for the determination of H. M. Government that the balance
which, after strictly applying the proceeds obtained from the subscription referred to,
may remain as a surplus, should be delivered to the Monte de Piedad, either as a
donation, or as a loan upon the security of the credit of the institution," and
"considering that no reasonable objection can be made to granting the request herein
contained," directed the transfer of the $80,000 to be made with the understanding
that "the Board of Directors of the Monte de Piedad is solemnly bound to return, within
eight days after demand, the sums it may have so received, if H. M. Government does
not approve this resolution." It will be noted that the first and only time the word
"donation" was used in connection with the $80,000 appears in this resolution of the
Governor-General. It may be inferred from the royal orders that the Madrid
Government did tacitly approve of the transfer of the $80,000 to the Monte de Piedad
as a loan without interest, but that Government certainly did not approve such transfer
as a donation for the reason that the Governor-General was directed by the royal order
of December 3, 1892, to inform the Madrid Government of the total available sum of
the earthquake fund, "taking into consideration the sums delivered to the Monte de
Piedad pursuant to the decree issued by your general Government on February 1,
1883." This language, nothing else appearing, might admit of the interpretation that the
Madrid Government did not intend that the Governor-General of the Philippine Islands
should include the $80,000 in the total available sum, but when considered in
connection with the report of the Department of Finance there can be no doubt that it
was so intended. That report refers expressly to the royal order of December 3d, and
sets forth in detail the action taken in order to secure the return of the $80,000. The
Department of Finance, acting under the orders of the Governor-General, understood
that the $80,000 was transferred to the Monte de Piedad well knew that it received this
sum as a loan interest." The amount was thus carried in its books until January, 1899,
when it was transferred to the account of the "Sagrada Mitra" and was thereafter
known as the "Sagrada Mitra and subscription account." Furthermore, the Monte de
Piedad recognized and considered as late as March 31, 1902, that it received the
$80,000 "as a returnable loan, and without interest." Therefore, there cannot be the
slightest doubt the fact that the Monte de Piedad received the $80,000 as a mere loan
or deposit and not as a donation. Consequently, the first alleged error is entirely without
foundation.
Counsel for the defendant, in support of their third assignment of error, say in their
principal brief that:

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

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

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

And in their supplemental brief counsel say:

By the conceded facts the money in question is part of a charitable subscription.

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

If "the whole matter is one of trusteeship," and it being true that the Spanish
Government could not, as counsel say, transfer the ownership of the fund to the Monte
de Piedad, the question arises, who may sue to recover this loan? It needs no argument
to show that the Spanish or Philippine Government, as trustee, could maintain an action
for this purpose had there been no change of sovereignty and if the right of action has
not prescribed. But those governments were something more than mere common law
trustees of the fund. In order to determine their exact status with reference to this fund,
it is necessary to examine the law in force at the time there transactions took place,
which are the law of June 20, 1894, the royal decree of April 27. 1875, and the
instructions promulgated on the latter date. These legal provisions were applicable to
the Philippine Islands (Benedicto vs. De la Rama, 3 Phil. Rep., 34)

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

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

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

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

Furthermore, upon the cession of the Philippine Islands the prerogatives of he crown of
Spain devolved upon he United States. In Magill vs. Brown (16 Fed. Cas., 408), quoted
with approval in Mormon Charch vs. United States (136 U. S.,1, 57), the court said:
 The Revolution devolved on the State all the transcendent power of Parliament,
and the prerogative of the crown, and gave their Acts the same force and effect.

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

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

Chancelor Kent says:

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

The Supreme Court of the United States in Mormon Church vs. United States, supra,

after approving also the last quotations, said:

This prerogative of parens patriae is inherent in the supreme power of every

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

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

These remarks in reference to in facts, insane persons and person not known, or
not in being, apply to the beneficiaries of charities, who are often in capable of
vindicating their rights, and justly look for protection to the sovereign authority,
acting as parens patriae. They show that this beneficient functions has not
ceased t exist under the change of government from a monarchy to a republic;
but that it now resides in the legislative department, ready to be called into
exercise whenever required for the purposes of justice and right, and is a clearly
capable of being exercised in cases of charities as in any other cases whatever.
In People vs. Cogswell (113 Cal. 129, 130), it was urged that the plaintiff was not the real
party in interest; that the Attorney-General had no power to institute the action; and
that there must be an allegation and proof of a distinct right of the people as a whole, as
distinguished from the rights of individuals, before an action could be brought by the
Attorney-General in the name of the people. The court, in overruling these contentions,
held that it was not only the right but the duty of the Attorney-General to prosecute the
action, which related to charities, and approved the following quotation from Attorney-
General vs. Compton (1 Younge & C. C., 417):

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

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

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

As to the question raised in the fourth assignment of error relating to the

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

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

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

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

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

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

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

It is settled beyond doubt or controversy — upon the foundation of the great

principle of public policy, applicable to all governments alike, which forbids that
the public interests should be prejudiced by the negligence of the officers or
agents to whose care they are confided — that the United States, asserting rights
vested in it as a sovereign government, is not bound by any statute of
limitations, unless Congress has clearly manifested its intention that it should be
so bound. (Lindsey vs. Miller, 6 Pet. 666; U. S. vs. Knight, 14 Pet., 301;
Gibson vs. Chouteau, 13 Wall., 92; U. S. vs. Thompson, 98 U. S., 486;
Fink vs. O'Neil, 106 U. S., 272, 281.)

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

It is a matter of common knowledge that statutes of limitation do not run against

the State. That no laches can be imputed to the King, and that no time can bar
his rights, was the maxim of the common laws, and was founded on the principle
of public policy, that as he was occupied with the cares of government he ought
not to suffer from the negligence of his officer and servants. The principle is
applicable to all governments, which must necessarily act through numerous
agents, and is essential to a preservation of the interests and property of the
public. It is upon this principle that in this country the statutes of a State
prescribing periods within which rights must be prosecuted are not held to
embrace the State itself, unless it is expressly designated or the mischiefs to be
remedied are of such a nature that it must necessarily be included. As legislation
of a State can only apply to persons and thing over which the State has
jurisdiction, the United States are also necessarily excluded from the operation
of such statutes.
In 25 Cyc., 1006, the rule, supported by numerous authorities, is stated as follows:

In the absence of express statutory provision to the contrary, statute of

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

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

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

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

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

Torres, Johnson and Araullo, JJ., concur.

Moreland, J., did not sign.

Republic of the Philippines

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

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

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

A civil government or central administration organization under the name of "Philippine

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

The Chairman of the Executive Commission, as head of the central administrative

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

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

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

1. That the Government of the Commonwealth of the Philippines is, subject to

the supreme authority of the Government of the United States, the sole and only
government having legal and valid jurisdiction over the people in areas of the
Philippines free of enemy occupation and control;

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

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

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

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

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

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

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

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

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

According to the precepts of the Hague Conventions, as the belligerent occupant has the
right and is burdened with the duty to insure public order and safety during his military
occupation, he possesses all the powers of a de factogovernment, and he can
suspended the old laws and promulgate new ones and make such changes in the old as
he may see fit, but he is enjoined to respect, unless absolutely prevented by the
circumstances prevailing in the occupied territory, the municipal laws in force in the
country, that is, those laws which enforce public order and regulate social and
commercial life of the country. On the other hand, laws of a political nature or affecting
political relations, such as, among others, the right of assembly, the right to bear arms,
the freedom of the press, and the right to travel freely in the territory occupied, are
considered as suspended or in abeyance during the military occupation. Although the
local and civil administration of justice is suspended as a matter of course as soon as a
country is militarily occupied, it is not usual for the invader to take the whole
administration into his own hands. In practice, the local ordinary tribunals are
authorized to continue administering justice; and judges and other judicial officers are
kept in their posts if they accept the authority of the belligerent occupant or are
required to continue in their positions under the supervision of the military or civil
authorities appointed, by the Commander in Chief of the occupant. These principles and
practice have the sanction of all publicists who have considered the subject, and have
been asserted by the Supreme Court and applied by the President of the United States.

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

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

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

In the case of William vs. Bruffy (96 U. S. 176, 192), the Supreme Court of the United
States, discussing the validity of the acts of the Confederate States, said: "The same
general form of government, the same general laws for the administration of justice and
protection of private rights, which had existed in the States prior to the rebellion,
remained during its continuance and afterwards. As far as the Acts of the States do not
impair or tend to impair the supremacy of the national authority, or the just rights of
citizens under the Constitution, they are, in general, to be treated as valid and binding.
As we said in Horn vs. Lockhart (17 Wall., 570; 21 Law. ed., 657): "The existence of a
state of insurrection and war did not loosen the bonds of society, or do away with civil
government or the regular administration of the laws. Order was to be preserved, police
regulations maintained, crime prosecuted, property protected, contracts enforced,
marriages celebrated, estates settled, and the transfer and descent of property
regulated, precisely as in the time of peace. No one, that we are aware of, seriously
questions the validity of judicial or legislative Acts in the insurrectionary States touching
these and kindered subjects, where they were not hostile in their purpose or mode of
enforcement to the authority of the National Government, and did not impair the rights
of citizens under the Constitution'. The same doctrine has been asserted in numerous
other cases."

And the same court, in the case of Baldy vs. Hunter (171 U. S., 388, 400), held: "That
what occured or was done in respect of such matters under the authority of the laws of
these local de facto governments should not be disregarded or held to be
invalid merely because those governments were organized in hostility to the Union
established by the national Constitution; this, because the existence of war between the
United States and the Confederate States did not relieve those who are within the
insurrectionary lines from the necessity of civil obedience, nor destroy the bonds of
society nor do away with civil government or the regular administration of the laws, and
because transactions in the ordinary course of civil society as organized within the
enemy's territory although they may have indirectly or remotely promoted the ends of
the de facto or unlawful government organized to effect a dissolution of the Union,
were without blame 'except when proved to have been entered into with actual intent
to further invasion or insurrection:'" and "That judicial and legislative acts in the
respective states composing the so-called Confederate States should be respected by
the courts if they were not hostile in their purpose or mode of enforcement to the
authority of the National Government, and did not impair the rights of citizens under
the Constitution."
In view of the foregoing, it is evident that the Philippine Executive Commission, which
was organized by Order No. 1, issued on January 23, 1942, by the Commander of the
Japanese forces, was a civil government established by the military forces of occupation
and therefore a de facto government of the second kind. It was not different from the
government established by the British in Castine, Maine, or by the United States in
Tampico, Mexico. As Halleck says, "The government established over an enemy's
territory during the military occupation may exercise all the powers given by the laws of
war to the conqueror over the conquered, and is subject to all restrictions which that
code imposes. It is of little consequence whether such government be called a military
or civil government. Its character is the same and the source of its authority the same. In
either case it is a government imposed by the laws of war, and so far it concerns the
inhabitants of such territory or the rest of the world, those laws alone determine the
legality or illegality of its acts." (Vol. 2, p. 466.) The fact that the Philippine Executive
Commission was a civil and not a military government and was run by Filipinos and not
by Japanese nationals, is of no consequence. In 1806, when Napoleon occupied the
greater part of Prussia, he retained the existing administration under the general
direction of a french official (Langfrey History of Napoleon, 1, IV, 25); and, in the same
way, the Duke of Willington, on invading France, authorized the local authorities to
continue the exercise of their functions, apparently without appointing an English
superior. (Wellington Despatches, XI, 307.). The Germans, on the other hand, when they
invaded France in 1870, appointed their own officials, at least in Alsace and Lorraine, in
every department of administration and of every rank. (Calvo, pars. 2186-93; Hall,
International Law, 7th ed., p. 505, note 2.)

The so-called Republic of the Philippines, apparently established and organized as a

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

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

The governments by the Philippine Executive Commission and the Republic of the
Philippines during the Japanese military occupation being de facto governments, it
necessarily follows that the judicial acts and proceedings of the courts of justice of those
governments, which are not of a political complexion, were good and valid, and, by
virtue of the well-known principle of postliminy (postliminium) in international law,
remained good and valid after the liberation or reoccupation of the Philippines by the
American and Filipino forces under the leadership of General Douglas MacArthur.
According to that well-known principle in international law, the fact that a territory
which has been occupied by an enemy comes again into the power of its legitimate
government of sovereignty, "does not, except in a very few cases, wipe out the effects
of acts done by an invader, which for one reason or another it is within his competence
to do. Thus judicial acts done under his control, when they are not of a political
complexion, administrative acts so done, to the extent that they take effect during the
continuance of his control, and the various acts done during the same time by private
persons under the sanction of municipal law, remain good. Were it otherwise, the whole
social life of a community would be paralyzed by an invasion; and as between the state
and the individuals the evil would be scarcely less, — it would be hard for example that
payment of taxes made under duress should be ignored, and it would be contrary to the
general interest that the sentences passed upon criminals should be annulled by the
disappearance of the intrusive government ." (Hall, International Law, 7th ed., p. 518.)
And when the occupation and the abandonment have been each an incident of the
same war as in the present case, postliminy applies, even though the occupant has
acted as conqueror and for the time substituted his own sovereignty as the Japanese
intended to do apparently in granting independence to the Philippines and establishing
the so-called Republic of the Philippines. (Taylor, International Law, p. 615.)

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

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

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

It is true that the commanding general of a belligerent army of occupation, as an agent

of his government, may not unlawfully suspend existing laws and promulgate new ones
in the occupied territory, if and when the exigencies of the military occupation demand
such action. But even assuming that, under the law of nations, the legislative power of a
commander in chief of military forces who liberates or reoccupies his own territory
which has been occupied by an enemy, during the military and before the restoration of
the civil regime, is as broad as that of the commander in chief of the military forces of
invasion and occupation (although the exigencies of military reoccupation are evidently
less than those of occupation), it is to be presumed that General Douglas MacArthur,
who was acting as an agent or a representative of the Government and the President of
the United States, constitutional commander in chief of the United States Army, did not
intend to act against the principles of the law of nations asserted by the Supreme Court
of the United States from the early period of its existence, applied by the Presidents of
the United States, and later embodied in the Hague Conventions of 1907, as above
indicated. It is not to be presumed that General Douglas MacArthur, who enjoined in
the same proclamation of October 23, 1944, "upon the loyal citizens of the Philippines
full respect and obedience to the Constitution of the Commonwealth of the Philippines,"
should not only reverse the international policy and practice of his own government, but
also disregard in the same breath the provisions of section 3, Article II, of our
Constitution, which provides that "The Philippines renounces war as an instrument of
national policy, and adopts the generally accepted principles of international law as part
of the law of the Nation."

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

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

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

The respondent judge quotes a portion of Wheaton's International Law which say:
"Moreover when it is said that an occupier's acts are valid and under international law
should not be abrogated by the subsequent conqueror, it must be remembered that no
crucial instances exist to show that if his acts should be reversed, any international
wrong would be committed. What does happen is that most matters are allowed to
stand by the restored government, but the matter can hardly be put further than this."
(Wheaton, International Law, War, 7th English edition of 1944, p. 245.) And from this
quotion the respondent judge "draws the conclusion that whether the acts of the
occupant should be considered valid or not, is a question that is up to the restored
government to decide; that there is no rule of international law that denies to the
restored government to decide; that there is no rule of international law that denies to
the restored government the right of exercise its discretion on the matter, imposing
upon it in its stead the obligation of recognizing and enforcing the acts of the
overthrown government."

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

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

In the case of Raymond vs. Thomas (91 U.S., 712), a special order issued by the officer in
command of the forces of the United States in South Carolina after the end of the Civil
War, wholly annulling a decree rendered by a court of chancery in that state in a case
within its jurisdiction, was declared void, and not warranted by the acts approved
respectively March 2, 1867 (14 Stat., 428), and July 19 of the same year (15 id., 14),
which defined the powers and duties of military officers in command of the several
states then lately in rebellion. In the course of its decision the court said; "We have
looked carefully through the acts of March 2, 1867 and July 19, 1867. They give very
large governmental powers to the military commanders designated, within the States
committed respectively to their jurisdiction; but we have found nothing to warrant the
order here in question. . . . The clearest language would be necessary to satisfy us that
Congress intended that the power given by these acts should be so exercised. . . . It was
an arbitrary stretch of authority, needful to no good end that can be imagined. Whether
Congress could have conferred the power to do such an act is a question we are not
called upon to consider. It is an unbending rule of law that the exercise of military
power, where the rights of the citizen are concerned, shall never be pushed beyond
what the exigency requires. (Mithell vs. Harmony, 13 How., 115; Warden vs. Bailey, 4
Taunt., 67; Fabrigas vs. Moysten, 1 Cowp., 161; s.c., 1 Smith's L.C., pt. 2, p. 934.) Viewing
the subject before us from the standpoint indicated, we hold that the order was void."

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

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

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

Following these practice and precepts of the law of nations, Commander in Chief of the
Japanese Forces proclaimed on January 3, 1942, when Manila was occupied, the military
administration under martial law over the territory occupied by the army, and ordered
that "all the laws now in force in the Commonwealth, as well as executive and judicial
institutions, shall continue to be affective for the time being as in the past," and "all
public officials shall remain in their present post and carry on faithfully their duties as
before." When the Philippine Executive Commission was organized by Order No. 1 of
the Japanese Commander in Chief, on January 23, 1942, the Chairman of the Executive
Commission, by Executive Orders Nos. 1 and 4 of January 30 and February 5,
respectively, continued the Supreme Court, Court of Appeals, Court of First Instance,
and justices of the peace of courts, with the same jurisdiction in conformity with the
instructions given by the Commander in Chief of the Imperial Japanese Army in Order
No. 3 of February 20, 1942. And on October 14, 1943 when the so-called Republic of the
Philippines was inaugurated, the same courts were continued with no substantial
change in organization and jurisdiction thereof.

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

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

The court in the said case of U.S. vs. Reiter did not and could not say that the laws and
institutions of the country occupied if continued by the conqueror or occupant, become
the laws and the courts, by adoption, of the sovereign nation that is militarily occupying
the territory. Because, as already shown, belligerent or military occupation is essentially
provisional and does not serve to transfer the sovereignty over the occupied territory to
the occupant. What the court said was that, if such laws and institutions are continued
in use by the occupant, they become his and derive their force from him, in the sense
that he may continue or set them aside. The laws and institution or courts so continued
remain the laws and institutions or courts of the occupied territory. The laws and the
courts of the Philippines, therefore, did not become, by being continued as required by
the law of nations, laws and courts of Japan. The provision of Article 45, section III, of
the Hague Conventions of 1907 which prohibits any compulsion of the population of
occupied territory to swear allegiance to the hostile power, "extends to prohibit
everything which would assert or imply a change made by the invader in the legitimate
sovereignty. This duty is neither to innovate in the political life of the occupied districts,
nor needlessly to break the continuity of their legal life. Hence, so far as the courts of
justice are allowed to continue administering the territorial laws, they must be allowed
to give their sentences in the name of the legitimate sovereign " (Westlake, Int. Law,
Part II, second ed., p. 102). According to Wheaton, however, the victor need not allow
the use of that of the legitimate government. When in 1870, the Germans in France
attempted to violate that rule by ordering, after the fall of the Emperor Napoleon, the
courts of Nancy to administer justice in the name of the "High German Powers
occupying Alsace and Lorraine," upon the ground that the exercise of their powers in
the name of French people and government was at least an implied recognition of the
Republic, the courts refused to obey and suspended their sitting. Germany originally
ordered the use of the name of "High German Powers occupying Alsace and Lorraine,"
but later offered to allow use of the name of the Emperor or a compromise. (Wheaton,
International Law, War, 7th English ed. 1944, p. 244.) 

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

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

On the other hand, during the American regime, when section 78 of Act No. 136 was
enacted abolishing the civil jurisdiction of the provost courts created by the military
government of occupation in the Philippines during the Spanish-American War of 1898,
the same section 78 provided for the transfer of all civil actions then pending in the
provost courts to the proper tribunals, that is, to the justices of the peace courts, Court
of First Instance, or Supreme Court having jurisdiction over them according to law. And
later on, when the criminal jurisdiction of provost courts in the City of Manila was
abolished by section 3 of Act No. 186, the same section provided that criminal cases
pending therein within the jurisdiction of the municipal court created by Act No. 183
were transferred to the latter.

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

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

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

Moran, C.J., Ozaeta, Paras, Jaranilla and Pablo, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-36409 October 26, 1973

THE PEOPLE OF THE PHILIPPINES, plaintiff-appellee, 

vs.
LORETA GOZO, defendant-appellant.

Office of the Solicitor General Felix Q. Antonio, Assistant Solicitor General Jaime M.
Lantin and Solicitor Norberto P. Eduardo for plaintiff-appellee.

Jose T. Nery for defendant-appellant.

FERNANDO, J.:

Appellant seeks to set aside a judgment of the Court of First Instance of Zambales,
convicting her of a violation of an ordinance of Olongapo, Zambales, requiring a permit
from the municipal mayor for the construction or erection of a building, as well as any
modification, alteration, repair or demolition thereof. She questions its validity, or at the
very least, its applicability to her, by invoking due process,1 a contention she would
premise on what for her is the teaching of People v. Fajardo.2 If such a ground were far
from being impressed with solidity, she stands on quicksand when she would deny the
applicability of the ordinance to her, on the pretext that her house was constructed
within the naval base leased to the American armed forces. While yielding to the well-
settled doctrine that it does not thereby cease to be Philippine territory, she would, in
effect, seek to emasculate our sovereign rights by the assertion that we cannot exercise
therein administrative jurisdiction. To state the proposition is to make patent how much
it is tinged with unorthodoxy. Clearly then, the lower court decision must be affirmed
with the sole modification that she is given thirty days from the finality of a judgment to
obtain a permit, failing which, she is required to demolish the same.

The facts are undisputed. As set forth in the decision of the lower court: "The accused
bought a house and lot located inside the United States Naval Reservation within the
territorial jurisdiction of Olongapo City. She demolished the house and built another one
in its place, without a building permit from the City Mayor of Olongapo City, because
she was told by one Ernesto Evalle, an assistant in the City Mayor's office, as well as by
her neighbors in the area, that such building permit was not necessary for the
construction of the house. On December 29, 1966, Juan Malones, a building and lot
inspector of the City Engineer's Office, Olongapo City, together with Patrolman Ramon
Macahilas of the Olongapo City police force apprehended four carpenters working on
the house of the accused and they brought the carpenters to the Olongapo City police
headquarters for interrogation. ... After due investigation, Loreta Gozo was charged with
violation of Municipal Ordinance No. 14, S. of 1964 with the City Fiscal's Office." 3 The
City Court of Olongapo City found her guilty of violating Municipal Ordinance No. 14,
Series of 1964 and sentenced her to an imprisonment of one month as well as to pay
the costs. The Court of Instance of Zambales, on appeal, found her guilty on the above
facts of violating such municipal ordinance but would sentence her merely to pay a fine
of P200.00 and to demolish the house thus erected. She elevated the case to the Court
of Appeals but in her brief, she would put in issue the validity of such an ordinance on
constitutional ground or at the very least its applicability to her in view of the location of
her dwelling within the naval base. Accordingly, the Court of Appeals, in a resolution of
January 29, 1973, noting the constitutional question raised, certified the case to this
Court.

There is, as mentioned in the opening paragraph of this petition, no support in law for
the stand taken by appellant.
1. It would be fruitless for her to assert that local government units are devoid of
authority to require building permits. This Court, from Switzer v. Municipality of 
Cebu,4 decided in 1911, has sanctioned the validity of such measures. It is much too late
in the day to contend that such a requirement cannot be validly imposed. Even
appellant, justifiably concerned about the unfavorable impression that could be created
if she were to deny that such competence is vested in municipal corporations and
chartered cities, had to concede in her brief: "If, at all; the questioned ordinance may be
predicated under the general welfare clause ... ." 5 Its scope is wide, well-nigh all
embracing, covering every aspect of public health, public morals, public safety, and the
well being and good order of the community.6

It goes without saying that such a power is subject to limitations. Certainly, if its exercise
is violative of any constitutional right, then its validity could be impugned, or at the very
least, its applicability to the person adversely affected could be questioned. So much is
settled law. Apparently, appellant has adopted the view that a due process question
may indeed be raised in view of what for her is its oppressive character. She is led to
such a conclusion, relying on People v. Fajardo.7 A more careful scrutiny of such a
decision would not have led her astray, for that case is easily distinguishable. The facts
as set forth in the opinion follow: "It appears that on August 15, 1950, during the
incumbency of defendant-appellant Juan F. Fajardo as mayor of the municipality of
Baao, Camarines Sur, the municipal council passed the ordinance in question providing
as follows: "... 1. Any person or persons who will construct or repair a building should,
before constructing or repairing, obtain a written permit from the Municipal Mayor. ...
2. A fee of not less than P2.00 should be charged for each building permit and P1.00 for
each repair permit issued. ... 3. [Penalty]-Any violation of the provisions of the above,
this ordinance, shall make the violator liable to pay a fine of not less than P25 nor more
than P50 or imprisonment of not less than 12 days nor more than 24 days or both, at
the discretion of the court. If said building destroys the view of the Public Plaza or
occupies any public property, it shall be removed at the expense of the owner of the
building or house. ... ." Four years later, after the term of appellant Fajardo as mayor
had expired, he and his son-in-law, appellant Babilonia, filed a written request with the
incumbent municipal mayor for a permit to construct a building adjacent to their
gasoline station on a parcel of land registered in Fajardo's name, located along the
national highway and separated from the public plaza by a creek ... . On January 16,
1954, the request was denied, for the reason among others that the proposed building
would destroy the view or beauty of the public plaza ... . On January 18, 1954,
defendants reiterated their request for a building permit ..., but again the request was
turned down by the mayor. Whereupon, appellants proceeded with the construction of
the building without a permit, because they needed a place of residence very badly,
their former house having been destroyed by a typhoon and hitherto they had been
living on leased property."8

Clearly then, the application of such an ordinance to Fajardo was oppressive. A

conviction therefore for a violation thereof both in the justice of the peace court of
Baao, Camarines Sur as well as in the Court of First Instance could not be sustained. In
this case, on the contrary, appellant never bothered to comply with the ordinance.
Perhaps aware of such a crucial distinction, she would assert in her brief: "The evidence
showed that even if the accused were to secure a permit from the Mayor, the same
would not have been granted. To require the accused to obtain a permit before
constructing her house would be an exercise in futility. The law will not require anyone
to perform an impossibility, neither in law or in fact: ... ." 9 It would be from her own
version, at the very least then, premature to anticipate such an adverse result, and thus
to condemn an ordinance which certainly lends itself to an interpretation that is neither
oppressive, unfair, or unreasonable. That kind of interpretation suffices to remove any
possible question of its validity, as was expressly announced in Primicias v. Fugoso. 10 So
it appears from this portion of the opinion of Justice Feria, speaking for the Court: "Said
provision is susceptible of two constructions: one is that the Mayor of the City of Manila
is vested with unregulated discretion to grant or refuse to grant permit for the holding
of a lawful assembly or meeting, parade, or procession in the streets and other public
places of the City of Manila; and the other is that the applicant has the right to a permit
which shall be granted by the Mayor, subject only to the latter's reasonable discretion to
determine or specify the streets or public places to be used for the purpose, with a view
to prevent confusion by overlapping, to secure convenient use of the streets and public
places by others, and to provide adequate and proper policing to minimize the risk of
disorder. After a mature deliberation, we have arrived at the conclusion that we must
adopt the second construction, that is, construe the provisions of the said ordinance to
mean that it does not confer upon the Mayor the power to refuse to grant the permit,
but only the discretion, in issuing the permit, to determine or specify the streets or
public places where the parade or procession may pass or the meeting may be
held." 11 If, in a case affecting such a preferred freedom as the right to assembly, this
Court could construe an ordinance of the City of Manila so as to avoid offending against
a constitutional provision, there is nothing to preclude it from a similar mode of
approach in order to show the lack of merit of an attack against an ordinance requiring a
permit. Appellant cannot therefore take comfort from any broad statement in the
Fajardo opinion, which incidentally is taken out of context, considering the admitted
oppressive application of the challenged measure in that litigation. So much then for the
contention that she could not have been validly convicted for a violation of such
ordinance. Nor should it be forgotten that she did suffer the same fate twice, once from
the City Court and thereafter from the Court of First Instance. The reason is
obvious.Such ordinance applies to her.

2. Much less is a reversal indicated because of the alleged absence of the rather novel
concept of administrative jurisdiction on the part of Olongapo City. Nor is novelty the
only thing that may be said against it. Far worse is the assumption at war with
controlling and authoritative doctrines that the mere existence of military or naval bases
of a foreign country cuts deeply into the power to govern. Two leading cases may be
cited to show how offensive is such thinking to the juristic concept of
sovereignty, People v. Acierto, 12 and Reagan v. Commissioner of Internal Revenue. 13 As
was so emphatically set forth by Justice Tuason in Acierto: "By the Agreement, it should
be noted, the Philippine Government merely consents that the United States exercise
jurisdiction in certain cases. The consent was given purely as a matter of comity,
courtesy, or expediency. The Philippine Government has not abdicated its sovereignty
over the bases as part of the Philippine territory or divested itself completely of
jurisdiction over offenses committed therein. Under the terms of the treaty, the United
States Government has prior or preferential but not exclusive jurisdiction of such
offenses. The Philippine Government retains not only jurisdictional rights not granted,
but also all such ceded rights as the United States Military authorities for reasons of
their own decline to make use of. The first proposition is implied from the fact of
Philippine sovereignty over the bases; the second from the express provisions of the
treaty." 14 There was a reiteration of such a view in Reagan. Thus: "Nothing is better
settled than that the Philippines being independent and sovereign, its authority may be
exercised over its entire domain. There is no portion thereof that is beyond its power.
Within its limits, its decrees are supreme, its commands paramount. Its laws govern
therein, and everyone to whom it applies must submit to its terms. That is the extent of
its jurisdiction, both territorial and personal. Necessarily, likewise, it has to be exclusive.
If it were not thus, there is a diminution of sovereignty." 15 Then came this paragraph
dealing with the principle of auto-limitation: "It is to be admitted any state may, by its
consent, express or implied, submit to a restriction of its sovereign rights. There may
thus be a curtailment of what otherwise is a power plenary in character. That is the
concept of sovereignty as auto-limitation, which, in the succinct language of Jellinek, "is
the property of a state-force due to which it has the exclusive capacity of legal self-
determination and self-restriction." A state then, if it chooses to, may refrain from the
exercise of what otherwise is illimitable competence." 16 The opinion was at pains to
point out though that even then, there is at the most diminution of jurisdictional rights,
not its disappearance. The words employed follow: "Its laws may as to some persons
found within its territory no longer control. Nor does the matter end there. It is not
precluded from allowing another power to participate in the exercise of jurisdictional
right over certain portions of its territory. If it does so, it by no means follows that such
areas become impressed with an alien character. They retain their status as native soil.
They are still subject to its authority. Its jurisdiction may be diminished, but it does not
disappear. So it is with the bases under lease to the American armed forces by virtue of
the military bases agreement of 1947. They are not and cannot be foreign territory." 17

Can there be anything clearer, therefore, than that only a turnabout, unwarranted and
unjustified, from what is settled and orthodox law can lend the slightest degree of
plausibility to the contention of absence of administrative jurisdiction. If it were
otherwise, what was aptly referred to by Justice Tuason "as a matter of comity,
courtesy, or expediency" becomes one of obeisance and submission. If on a concern
purely domestic in its implications, devoid of any connection with national security, the
Military-Bases Agreement could be thus interpreted, then sovereignty indeed becomes
a mockery and an illusion. Nor does appellant's thesis rest on less shaky foundation by
the mere fact that Acierto and Reagan dealt with the competence of the national
government, while what is sought to be emasculated in this case is the so-called
administrative jurisdiction of a municipal corporation. Within the limits of its territory,
whatever statutory powers are vested upon it may be validly exercised. Any residual
authority and therein conferred, whether expressly or impliedly, belongs to the national
government, not to an alien country. What is even more to be deplored in this stand of
appellant is that no such claim is made by the American naval authorities, not that it
would do them any good if it were so asserted. To quote from Acierto anew: "The
carrying out of the provisions of the Bases Agreement is the concern of the contracting
parties alone. Whether, therefore, a given case which by the treaty comes within the
United States jurisdiction should be transferred to the Philippine authorities is a matter
about which the accused has nothing to do or say. In other words, the rights granted to
the United States by the treaty insure solely to that country and can not be raised by the
offender." 18 If an accused would suffer from such disability, even if the American armed
forces were the beneficiary of a treaty privilege, what is there for appellant to take hold
of when there is absolutely no showing of any alleged grant of what is quaintly referred
to as administrative jurisdiction? That is all, and it is more than enough, to make
manifest the futility of seeking a reversal.

WHEREFORE, the appealed decision of November 11, 1969 is affirmed insofar as it found
the accused, Loreta Gozo, guilty beyond reasonable doubt of a violation of Municipal
Ordinance No. 14, series of 1964 and sentencing her to pay a fine of P200.00 with
subsidiary imprisonment in case of insolvency, and modified insofar as she is required to
demolish the house that is the subject matter of the case, she being given a period of
thirty days from the finality of this decision within which to obtain the required permit.
Only upon her failure to do so will that portion of the appealed decision
requiringdemolition be enforced. Costs against the accused.

Makalintal, C.J., Zaldivar, Castro, Teehankee, Makasiar, Antonio and Esguerra, JJ.,
concur.

Barredo, J., took no part.

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

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

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

Claro M. Recto and Querube C. Makalintal for petitioner.

First Assistant Solicitor General Reyes and Solicitor Hernandez, Jr., for respondent.

RESOLUTION

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

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

Considering that the absolute and permanent allegiance of the inhabitants of a

territory occupied by the enemy of their legitimate government or sovereign is
not abrogated or severed by the enemy occupation, because the sovereignty of
the government or sovereign de jure is not transferred thereby to the occupier,
as we have held in the cases of Co Kim Cham vs. Valdez Tan Keh and Dizon (75
Phil., 113) and of Peralta vs. Director of Prisons (75 Phil., 285), and if it is not
transferred to the occupant it must necessarily remain vested in the legitimate
government; that the sovereignty vested in the titular government (which is the
supreme power which governs a body politic or society which constitute the
state) must be distinguished from the exercise of the rights inherent thereto, and
may be destroyed, or severed and transferred to another, but it cannot be
suspended because the existence of sovereignty cannot be suspended without
putting it out of existence or divesting the possessor thereof at least during the
so-called period of suspension; that what may be suspended is the exercise of
the rights of sovereignty with the control and government of the territory
occupied by the enemy passes temporarily to the occupant; that the subsistence
of the sovereignty of the legitimate government in a territory occupied by the
military forces of the enemy during the war, "although the former is in fact
prevented from exercising the supremacy over them" is one of the "rules of
international law of our times"; (II Oppenheim, 6th Lauterpacht ed., 1944, p.
482), recognized, by necessary implication, in articles 23, 44, 45, and 52 of Hague
Regulation; and that, as a corollary of the conclusion that the sovereignty itself is
not suspended and subsists during the enemy occupation, the allegiance of the
inhabitants to their legitimate government or sovereign subsists, and therefore
there is no such thing as suspended allegiance, the basic theory on which the
whole fabric of the petitioner's contention rests;

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

Considering that even adopting the words "temporarily allegiance," repudiated

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

Considering that, as a corollary of the suspension of the exercise of the rights of

sovereignty by the legitimate government in the territory occupied by the enemy
military forces, because the authority of the legitimate power to govern has
passed into the hands of the occupant (Article 43, Hague Regulations), the
political laws which prescribe the reciprocal rights, duties and obligation of
government and citizens, are suspended or in abeyance during military
occupation (Co Kim cham vs. Valdez Tan Keh and dizon, supra), for the only
reason that as they exclusively bear relation to the ousted legitimate
government, they are inoperative or not applicable to the government
established by the occupant; that the crimes against national security, such as
treason and espionage; inciting to war, correspondence with hostile country,
flight to enemy's country, as well as those against public order, such as rebellion,
sedition, and disloyalty, illegal possession of firearms, which are of political
complexion because they bear relation to, and are penalized by our Revised
Penal Code as crimes against the legitimate government, are also suspended or
become inapplicable as against the occupant, because they can not be
committed against the latter (Peralta vs. Director of Prisons, supra); and that,
while the offenses against public order to be preserved by the legitimate
government were inapplicable as offenses against the invader for the reason
above stated, unless adopted by him, were also inoperative as against the
ousted government for the latter was not responsible for the preservation of the
public order in the occupied territory, yet article 114 of the said Revised Penal
Code, was applicable to treason committed against the national security of the
legitimate government, because the inhabitants of the occupied territory were
still bound by their allegiance to the latter during the enemy occupation;

Considering that, although the military occupant is enjoined to respect or

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

Considering that, since the preservation of the allegiance or the obligation of

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

Considering that adoption of the petitioner's theory of suspended allegiance

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

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

Considering that the Commonwealth of the Philippines was a sovereign

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

Considering that section I (1) of the Ordinance appended to the Constitution

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

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

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

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

RAMON RUFFY, ET AL., petitioners, 

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

Placido C. Ramos for petitioners.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

"Not belonging to the judicial branch of the government, it follows that courts-martial
must pertain to the executive department; and they are in fact simply instrumentalities
of the executive power, provided by Congress for the President as Commander in Chief,
to aid him in properly commanding the army and navy and enforcing discipline therein,
and utilized under his orders or those of his authorized military representatives."
(Winthrop's Military Law and Precedents, 2d Edition, p. 49.) Of equal interest Clode, 2
M. F., 361, says of these courts in the British law: "It must never be lost sight of that the
only legitimate object of military tribunals is to aid the Crown to maintain the discipline
and government of the Army." (Footnote No. 24, p. 49, Winthrop's Military Law and
Precedents, 2d Edition.)

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

Moran, C.J., Paras, Feria, Pablo, Hilado, Bengzon, Briones and Padilla, JJ., concur.