BENITO E. LIM, AS ADMINISTRATOR OF THE INTESTATE ESTATE OF ARSENIA ENRIQUEZ, PLAINTIFF AND APPELLANT, VS. HERBERT BROWNELL, JR., ATTORNEY GENERAL OF THE UNITED STATES, AND ASAIC…

This is an appeal from an order of the Court of First Instance of
Manila, dismissing plaintiff’s action for the recovery of real property
for lack of jurisdiction over the subject matter.

The property in dispute consists of four parcels of land situated in
Tondo, City of Manila, with a total area of 29,151 square meters. The
lands were, after the last world war, found by the Alien Property
Custodian of the United States to be registered in the name of Asaichi
Kagawa, national of an enemy country, Japan, as evidenced by Transfer
Certificates of Title Nos. 64904 to 65140, inclusive, for which reason
the said Alien Property Custodian, on March 14, 1946, issued a vesting
order on the authority of the Trading with the Enemy Act of the United
States, as amended, vesting in himself the ownership over two of the
said lots, Lots Nos. 1 and 2. On July 6, 1948, the Philippine Alien
Property Administrator, (successor of the Alien Property Custodian)
under the authority of the same statute, issued a supplemental vesting
order, vesting in himself title to the remaining Lots Nos. 3 and 4. On
August 3,1948, the Philippine Alien Property Administrator (acting on
behalf of the President of the United States) and the President of the
Philippines, executed two formal agreements, one referring to Lots 1
and 2 and the other to Lots 3 and 4, whereby the said Administrator
transferred all the said four lots to the Republic of the Philippines
upon the latter’s undertaking fully to indemnify the United States for
all claims in relation to the property transferred, which claims are
payable by the United States of America or the Philippine Alien
Property Administrator of the United States under the Trading with the
Enemy Act, as amended, and for all such costs and expenses of
administration as may by law be charged against the property or
proceeds thereof hereby transferred.” The transfer agreements were
executed pursuant to section 3 of the Philippine Property Act of 1946
and Executive Order No. 9921, dated January 10, 1948, of the President
of’ the United States.

On the theory that the lots in question still belonged to Arsenia
Enriquez, the latter’s son Benito E. Lim filed on November 15, 1948 a
formal notice of claim to the property with the Philippine Alien
Property Administrator. The notice was subsequently amended to permit
Lim to prosecute the claim as administrator of the intestate estate. of
the deceased Arsenia Enriquez, thus, in effect, substituting the
intestate estate as the claimant, it being alleged that the lots were
once the property of Arsenia Enriquez; that they were mortgaged by her
to the Mercantile Bank of China; that the mortgage haying been
foreclosed, the property was sold at public auction during the war to
the Japanese Asaichi Kagawa, who, by means of threat and intimidation
succeeded in preventing Arsenia Enriquez from exercising her right of
redemption; and that Kagawa never acquired any valid title to the
property because he was ineligible under the Constitution to acquire
residential land in the Philippines by reason of alienage.

On March 7, 1950, the claim was disallowed by the Vested Property
Claims Committee of the Philippine Alien Property Administrator, arid
copy of the decision disallowing the claim was received by claimant’s
counsel on the 15th of that month. The claimant, however, took no
appeal to the Philippine Alien Property Administrator, so that pursuant
to the rules of procedure governing claims before the Philippine Alien
Property Administrator, the decision of the committee became final on
April 15, 1950, that is, twenty days after receipt of the decision by
claimant’s counsel.

On November 13, 1950, the claimant Benito E. Lim, as administrator
of the intestate estate of Arsenia Enriquez, filed a complaint in the
Court of First Instance of Manila against the Philippine Alien Property
Administrator (later substituted by the Attorney General of the United
States) for the recovery of the property in question with back rents.
The complaint was later amended to include Asaichi Kagawa as defendant.
As amended, it alleged that the lands in question formerly belonged to
Arsenia Enriquez and were mortgaged by her to the Mercantile Bank of
China; that the mortgage having been foreclosed, she was sentenced to
pay the mortgage debt within 3 months; that within those 3 months the
bank commissioner, who had been appointed liquidator of said bank,
assured her that she could pay her mortgage debt little by little in
monthly installments, and pursuant to that arrangement the income
derived from the mortgaged property were thereafter, applied to her
indebtedness, that such payment of the mortgage debt continued until a
few months after, the occupation of the City of Manila by the Japanese
forces, when the Bank of Taiwan, having taken over the administration
and control of all banks in the Philippines, including the Mercantile
Bank of China, had the properties sold at public auction on October 26,
1942 by the sheriff of the city; that the properties were awarded to
Asaichi Kagawa arid the sale was subsequently confirmed by the court;
that if Arsenia Enriquez failed to redeem the properties before the
confirmation of the sale, it was because of the financial depression
and also because she was prevented from doing so by Kagawa through
threats and intimidation; that the auction sale was irregular and
illegal because it was made without publication or notice and because
though the land was subdivided into lots, the same was sold as a whole;
that because of the irregularities mentioned, competitive bidding was
prevented or stifled with the result that the lands, which could have
been easily sold for P300,000 at then prevailing prices, were awarded
to Kagawa whose bid was only P54,460.40, a price that was “grossly
inadequate and shocking to the conscience;” that the titles to the
lands having been subsequently transferred to Kagawa, the latter in
June, 1943 illegally dispossessed Arsenia Enriquez and kept possession
of the properties until the liberation of the City of Manila; that as
Arsenia Enriquez was still the owner of the properties, the seizure
thereof by the United States Attorney General’s predecessors on the
assumption that they belong to Kagawa, as well as their decision
disallowing” her claim, was contrary to law. Plaintiff, therefore,
prayed that the sheriff’s sale to Kagawa and the vesting of the
properties in the Philippine Alien Property Administrator and the
transfer thereof by the United States to the Republic of the
Philippines be declared null and void; that Arsenia Enriquez be
adjudged owner of the said properties and the Register of Deeds of
Manila be ordered to issue the corresponding transfer certificates of
title to her; and that the defendant Attorney General of the United
States be required to pay rental from March 14, 1946, and the
Government of the Philippines from August 3, 1948, at the rate of
P30,000 per annum with legal interest.

The defendant Attorney General of the United States and the
defendant-intervenor Republic of the Philippines each filed an answer,
alleging by way of affirmative defenses (1) that the action with
respect to Lots 1 and 2 had already prescribed, the same not having
been brought within the period prescribed in section 33 of the Trading
with the Enemy Act, as amended, and (2) that the lower court had no
jurisdiction over the claim for rentals since; the action in that
regard constituted a suit against the United States to which it had not
given its consent, The defendant Asaichi Kagawa was summoned by
publication,, but having failed to file an answer to the complaint, he
was declared in default. Thereafter, a preliminary hearing on the
affirmative defenses was held at the instance of the United States
Attorney General pursuant to Section 5, Rule 8 of the Rules of Court.
After said hearing, the court ordered the complaint dismissed, on the
ground—as stated in the dispositive part of the order—that the “court
has no jurisdiction over the subject matter of this action, taking into
consideration the provisions of Sec, 34 (must be 33) of the Trading
with the Enemy Act, as the requirements needed by the above-mentioned
Act have not been fulfilled by the herein plaintiff.” From that order,
plaintiff has taken the present appeal.

Judging from the context of the order complained of, it would appear
that the dismissal of plaintiff’s action was actually based upon the
principle that a foreign state or its government cannot be sued without
its consent. Considering, however, the law applicable, we do not think
the order of dismissal can be sustained in its entirety. There is no
denying that an action against the Alien Property Custodian, or the
Attorney General of the United States as his successor, involving
vested property under the Trading with the Enemy Act located in the
Philippines, is in substance an action against the United States. The
immunity of the state from suit, however, cannot be invoked where the
action, as in the present case, is instituted by a person. Who is
neither an enemy or ally of an enemy for the purpose of establishing
his right, title or interest in vested property, and of recovering his
ownership and possession. Congressional consent to such suit has
expressly been given by the United States. (Sec. 3, Philippine Property
Act of 1946; Philippine Alien Property Administration vs. Gastelo, et al., 89 Phil., 568.)

The order of dismissal, however, with respect to plaintiff’s claim
for damages against the defendant Attorney General of the United States
must be upheld. The relief available to a person claiming enemy
property which has been vested by the Philippine Alien Property
Custodian is limited to those expressly provided for in the Trading
with the Enemy Act, which does riot include a suit for damages for the
use of such vested property. That action, as held by this Court in the
Castelo case just cited, is not one of those authorized under the Act
which may be instituted in the appropriate courts of the Philippines
under the provisions qt section 3 of the Philippine Property Act of
1946. Congressional consent to such suit has not been granted.

The claim for damages for the use of the property against the
intervenor defendant Republic of the Philippines to which it was
transferred, likewise, cannot be maintained because of the immunity of’
the state from suit. The claim obviously constitutes a charge against,
or financial liability to, the Government and consequently cannot be
entertained by the courts except with the consent of said government.
(Syquia vs. Almeda Lopez, 84 Phil., 812; 47 Off. Gaz., 665; Compañia General de Tabacos vs.
Gov’t of PI, 45 Phil., 663.) Plaintiff argues that by its intervention,
the Republic of the Philippines, in effect, waived its right of
non-suability, but it will be remembered that the Republic intervened
in the case merely to unite with the defendant Attorney General of the
United States in resisting, plaintiff’s claims, and for that reason
asked no affirmative relief against any party in the answer in
intervention it filed. On the other hand, plaintiff in his original
complaint made no claim against the Republic and only asked for damages
against it for the use of the property when the complaint was amended.
In its answer to the amended complaint, the Republic “reproduced arid
incorporated by reference” all the affirmative defenses contained in
the answer of the defendant Attorney General, one of which, as already
stated, is that the lower court had no jurisdiction over the claim for
rentals because of lack of consent to be sued. Clearly, this is not ,a
case where the state takes the, initiative in an action, against a
private party by filing a complaint in intervention, thereby
surrendering its privileged position and coming down to the level of
the defendant—as what happened in the case of Froilan vs. Pan
Oriental Shipping Co., et al. 95 Phil., 905 cited by plaintiff—but one
where the state, as one of the defendants merely resisted a claim
against it precisely on the ground, among others, of its privileged
position which exempts it from suit.

With respect to the recovery or return of the properties vested,
section 33 of the Trading with the Enemy Act, as amended, provides:

“SEC. 33. Return of property; notice; institution of suits, computation of time.—No
return may be made pursuant to section 9 or 32 unless notice of claim
has been, filed: (a) in the case of any property or interest acquired
by the United States prior to December 18, 1941, by August 9, 1948; or
(b) in the case of any property or interest acquired by the United
States on or after December 18, 1941, by April 30, 1949, or. two years
from the vesting of the property or interest in respect of “which the
claim is made, whichever is later. No suit pursuant to section 9 may be
instituted after April 30, 1949, or after the expiration of two years
from the date of the seizure by or vesting in the Alien Property
Custodian, as the case may be, of the property or interest in respect
of which relief is sought, whichever is later, but in computing such
two years there shall be excluded any period during which there was
pending a suit or claim for return pursuant to section 9 or 32(a)
hereof.” (USCA, Tit. 50, App., p. 216.)

From the above provisions, it is evident that a condition precedent
to a suit for the return of property vested under the Trading with the
Enemy Act is that it should be filed not later than April 30, 1949, or
within two years from the date of vesting, whichever is later, but in
computing such two years, the period during which there was pending a
suit or claim for the return of the said property pursuant to secs. 9
or 32 (a) of the Act shall be excluded. That limitation, as held in a
case, is jurisdictional. (See Cisatlantic Corporation, et al. vs.
Brownell, Jr., Civil Case No. 8-221, U. S. District Court, Southern
District, New York, affirmed by the United States Court of Appeals, 2nd
Circuit, May 11, 1955 (Docket No. 23499), annexed as appendices “D” and
“E” in appellees’ brief.) Such being the case, it is evident that the
court below erred in dismissing the complaint, at least insofar as lots
3 and 4 of the land in dispute are concerned. These lots were vested
only on July 6, 1948 and consequently the two-year period within which
to file the action for their recovery expired on July 7, 1950. But in
computing that two-year period, the time during which plaintiff’s claim
with the Philippine Alien Property Administration was pending— from
November 16, 1948 when the claim was filed to March 7, 1950 when it was
disallowed—should be excluded. The complaint therefore filed on
November 13, 1950 is well within the prescribed period. As a matter of
fact, the Attorney General of the United States concedes that the
dismissal of the complaint with respect to these lots was erroneous.
Indeed, he states that he had never asked for the dismissal of the
complaint with respect to them because the complaint insofar as those
properties were concerned was filed within the period provided for in
the law.

On the other hand, lots 1 and 2 were vested by the Alien Property
Custodian on March 14, 1946″. The two-year period, therefore, within
which to file a suit for their return expired on March 14, 1948. As no
suit or claim for the return of said properties pursuant to sections 9
or 32 (a) of the Trading with the Enemy Act was filed by plaintiff
within two years from the date of vesting, the “later” date and the
last on which suit could be brought was April 30, 1949. The claim filed
by plaintiff with the Philippine Alien Property Administration on
November 15, 1948 obviously could not toll the two-year period that had
already expired on March 14, 1948. And the complaint in the present
case having been filed only on November 13, 1950, the same is already
barred. (Pass vs. McGrath, 192 F. 2d 415; Kroll vs.
McGrath, 91 F. Supp. 173.) The lower court, therefore, had no
jurisdiction to entertain the action insofar as these lots are
concerned.

Plaintiff contends that section 33 of the Trading with the Enemy Act
cannot prevail over section 40 of the Code of Civil Procedure, which
provides that an action to recover real property prescribes after 10
years, on the theory that under international law questions relating to
real property are governed by the law of the place where the property
is located and that prescription, being remedial, is likewise governed
by the laws of the forum. But the Trading with the Enemy Act, by
consent of the Philippine Government, continued to be in force in the
Philippines even after July 4, 1946 (Brownell, Jr., vs. Sun Life Assurance Co. of Canada,^[*] 50 Off. Gaz., 4814; Brownell, Jr. vs.
Bautista, 95 Phil., 853) and consequently, is as much part of the law
of the land as section 40 of the Code of Civil Procedure. Contrary to
plaintiff’s claim, therefore, there is here no conflict of laws
involved. It should be stated that in an action under the Trading with
the Enemy Act for the recovery of property vested thereunder, the
rights of the parties must necessarily be governed by the terms of that
Act. Indeed, section 7 (c) thereof explicitly provides that the relief
available to a claimant of vested property is limited to those
expressly provided for by its terms.

Needless to say, the defense of limitation as contained in section
33 of the Trading with the Enemy Act, as amended, may be invoked not
only by the defendant Attorney General of the United States but also by
the intervenor Republic of the Philippines to which the lands in
question were transferred. To sustain plaintiff’s claim and preclude
the Republic from putting up that defense would render nugatory the
provisions of the Act. For in such case, a claimant who has failed to
file his claim or suit within the period provided for in section 33 of
the Act and consequently has forfeited whatever rights he may have
therein, could easily circumvent the law. It would also mean that the
transfer of vested property to the Republic would have the effect of
permitting re-examination of the title to such vested property which
has already become absolute in the name of the United States, the
transferor, for failure of the claimant to assert his claim within the
prescribed time. This absurdity, to say the least, cannot be
countenanced.

In view of the foregoing, the order appealed from insofar as it
dismisses the complaint with respect to Lots 1 and 2 and the claim for
damages against the Attorney General of the United States and the
Republic of the Philippines, is affirmed, but revoked insofar as it
dismisses the complaint with respect to Lots 3 and 4, as to which the
case is hereby remanded to the court below for further proceedings.
Without costs.

Paras, C. J., Bengzon, Montemayor, Bautista Angelo, Labrador, Concepcion, Reyes, J. B. L., Endencia, and Barrera, JJ., concur.

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^[*] 95 Phil. 228.