HERBERT BROWNELL, JR., ATTORNEY GENERAL OF THE UNITED STATES, AS SUCCESSOR OF THE PHILIPPINE ALIEN PROPERTY ADMINISTRATOR, PLAINTIFF AND APPELLANT, VS. MACARIO BAUTISTA, DEFENDA…

On October 6, 1947, the Philippine Alien Property Administrator,
hereinafter referred to as Administrator, issued vesting order No.
P-394, which was amended on February 2, and July 14, 1949, vesting in
himself, among others, one-half undivided interest in the following
properties: (a) five parcel of land situate in the city of Baguio and one parcel situate in San Clemente, Tarlac; (b) personal properties consisting of furniture and household equipments; (c) the sum of P5,156.83 representing balance of a saving account with the People’s Bank & Trust Company, Baguio branch; (d) the sum of P1,867.50 representing rents and income of the lands mentioned above; and (e) the net proceeds of an insurance policy in the amount of P1,451.81.

The vesting was made upon the claim that the one-half undivided
interest was owned by Carlos Teraoka and Marie Dolores Teraoka who were
found to be nationals of Japan, an enemy country. After the vesting,
the Administrator demanded from their grandfather, Macario Bautista,
who was in possession of the aforementioned properties, the delivery to
him of the possession of one-half thereof. Macario Bautista refused to
comply with the demand claiming to be the sole owner of the
aforementioned properties having inherited them as the only surviving
heir of their former owners who were already dead, including Carlos
Teraoka and Marie Dolores. Because of such refusal, the Administrator
filed an action in the Court of First Instance of Mountain Province
praying for the partition of the properties and the delivery of
one-half thereof to the plaintiff. As one of the parcels involved was
sold to one Antonio Baluga, the latter was included in the complaint as
party defendant.

The Republic of the Philippines moved to intervene as party
plaintiff in view of the provision of the law to the effect that
whatever property may be vested in the Administrator would be
eventually transferred to the Republic This motion was granted, and the
Republic of the Philippines adopted as its own the complaint filed by
the Administrator.

Defendant Macario Bautista set up as special defense that he is the
sole owner of the properties in question with the exception of the lot
sold to his co-defendant Antonio Baluga; that as such owner he has
already spent a considerable amount on said properties in the form of
taxes, repairs, fines, penalties, and the like; that Muneo Teraoka was
not an enemy national but a naturalized Filipino citizen; that the
children of Muneo Teraoka, including Carlos and Marie Dolores, were
Filipino citizens; that the Philippine Alien Property Administrator
cannot vest properties not enemy-owned, such as the properties in
question and, therefore, he has no personality to bring the present
action for partition, for such right pertains only to the heirs of the
former owners of said properties who are the only ones who can maintain
an action for partition as co-owners thereof pro-indiviso; and that,
assuming that Carlos and Marie Dolores are Japanese nationals, the
present action for partition is premature, since said children are
still minors and as such have the right to elect Philippine citizenship
upon reaching the age of majority in accordance with the Philippine
constitution.

In reply to the claim that the Administrator had no authority to
vest the interest of Carlos and Marie Dolores because they are not
Japanese nationals, the Administrator stated that the determination of
the character of the properties vested and the nationality of their
owners by the Administrator under the law is conclusive and not subject
to judicial review; that if the vesting is erroneous, the remedy of the
owners is to file a claim under section 32, or a suit under section 9 (a),
of the Trading with the Enemy Act; and that the nationality of Carlos
and Marie Dolores cannot be passed upon in the present action.

After hearing, the court rendered judgment dismissing the complaint,
the court holding in effect that plaintiff failed to prove that Carlos
and Marie Dolores are Japanese nationals; that the evidence in fact
shows that they are Filipino citizens; and that the vesting of their
interest in the property in question was erroneous and, therefore, the
vesting order issued by the plaintiff in connection with said interest
is illegal and did not vest ownership thereof in the plaintiff. As to
Antonio Baluga, the court found that he was an innocent purchaser whose
title to the property cannot be reviewed.

From this judgment, the Administrator and the Republic of the
Philippines have appealed to the Court of Appeals. After the briefs had
been submitted within the reglementary period, the parties took steps
to have the case transferred to this court upon the plea that the
issues raised involve purely questions of law, and this move was
granted by the court. In the meantime, the Philippine Alien Property
Administration was terminated by Executive Order No. 10254 of the
President of the United States, effective June 29, 1951, and all its
rights, powers, duties, and functions, as well as the properties’
vested by it, were transferred to the Attorney General of the United
States, and so, on motion of the Attorney General of the United States,
the lower court, in its order of August 13, 1951, ordered the
substitution of this official in lieu of the Philippine Alien Property
Administrator.

Inasmuch as this case was transferred to this court upon the plea
that the only issues raised by the parties involve purely questions of
law, and hence facts as found by the lower court in its decision are
deemed admitted, for the purposes of the issues raised, we would quote
hereunder the pertinent portion of the decision wherein said facts are
outlined:

“In 1924, one Muneo Teraoka, also known as Charles
M. Teraoka, then a Japanese subject, married a native Filipino named
Antonina Bautista. Out of this wedlock six children were born, namely,
Victor, Sixto, Carlos, Marie Dolores, Catalina, and Eduardo. The couple
during their married life acquired all the properties described in the
complaint. On August 21, 1941, Muneo Teraoka died, survived by his
widow Antonina Bautista de Teraoka and his six children by her, above
named. An intestate proceedings was instituted in the Court of First
Instance of Baguio, as a result of which the real properties described
in the complaint were divided between the widow Antonina Bautista on
one hand, and the six surviving children on the other, giving to the
widow three parcels and to the six children in common another three
(see paragraphs 5 and 6 of the original complaint). The personal
properties enumerated in the complaint, as well as the cash and the
insurance policy of Antonina Bautista were not divided or touched in
the said intestate proceedings. Later or in December, 1944, Sixto
Teraoka died single at the age of 17 without leaving any issue, while
Victor Teraoka was taken by the Japanese soldiers on suspicion of being
spy and has never been heard of since then. He was presumably killed by
the Japanese soldiers. Victor Teraoka left no issue also and he died
single, at the age of about 19 years. On April 24, 1945, during the
bombing of the City of Baguio by the American forces of liberation,
Antonina Bautista and two of her children, Catalina and Eduardo, were
hit by bomb and died, Antonina Bautista died instantly, while Catalina
and Eduardo died later on the same day. After liberation and after the
surrender of Japan to the American forces, Carlos Teraoka and Marie
Dolores Teraoka, the only living members of the ill-fated Teraoka
family, these two then being minors, as they are still minors, being 19
and 16 years old, respectively, were taken by the American army to
Japan. Once in Japan the two went to stay with their grandfather,
father of Muneo Teraoka. They are still in Japan up to date living with
their paternal uncle, their grandfather having died. The evidence is
clear and greatly preponderant that these two brother and sister,
Carlos and Marie Dolores Teraoka, did not want to go to Japan but they
were powerless to resist, of too tender age to protest. They first
sought their nearest relatives once they were landed in Japan. After
liberation also, or to be more exact, on July 18, 1945, the Enemy
Property Custodian of the U. S. Army took into his custody the
properties described in the complaint on suspicion that these
properties were tainted with enemy interest. Then defendant Macario
Bautista, father of Antonina Bautista, believing that the entire
Teraoka family had already died, and being the nearest surviving or
relative of the Teraokaa, claimed the said properties from the Enemy
Property Custodian. The latter, ignorant of the existence in Japan of
two of the Teraoka, children, granted the petition of Macario Bautista
and released the said properties. Macario Bautista, then, by an
affidavit of adjudication, succeeded in securing the cancellation of
the certificates of title in his own name. Once he had the certificates
of title in his name, free of any lien or encumbrance, Macario Bautista
sold one lot (Lot No. 113 MM, now covered by Transfer Certificate of
Title No. T-331, in the name of Antonio Baluga, in favor of third party
defendant Eulalio D. Rosete who, in turn, sold it to defendant Antonio
Baluga, hence the said transfer Certificate of Title No. T-331 is now
in his name (Exh. 3-Baluga). On October 1946, the office of the
Philippine Alien Property Administration was established in the
Philippines. This new office assumed and took over the functions and
duties of the defunct Enemy Property Custodian of the United States
Army. This new office learned that, contrary to the assertion of
Macario Bautista that the entire Teraoka family had died already, two
of the Teraoka children, Carlos and Marie Dolores, are very much. alive
and are living in Japan. Then the Philippine Alien Property
Administrator, on the supposition that Carlos Teraoka and Marie Dolores
Teraoka are Japanese nationals, vested and took title to the portion of
the said properties belonging, by right of succession, to said Carlos
and Marie Dolores Teraoka, by virtue of Vesting Order No. P-394, issued
on February 2, 1949, which was later supplemented and amended. The
above facts have conclusively established by the evidence. In fact,
most of them are directly admitted or not contradicted by any of the
parties. Plaintiff filed this case of judicial partition on the theory
that the vesting order issued by plaintiff himself made him co-owner of
the said property in common with the defendants Macario Bautista and
Antonio Baluga,”

It is a well-settled rule that the Congress of the United States, in
time of war, may authorize and provide for the seizure and
sequestration, through executive channels, of properties believed to be
enemy-owned, if adequate provision be made for a return in case of
mistake. (Stoehr vs. Wallace, 255 U.S. 239, 65 L. ed, 604, 612; Central Union Trust Co. vs.
Garvan, 254 U. S. 554, 65 L. ed., 403.) Congress did this with the
approval of the Trading with the Enemy Act, which was originally
enacted on October 6, 1917, authorizing the President of the United
States, or the officer or agency that may be designated by him as his
representative, to determine the enemy ownership of the properties to
be seized. The agency so designated was the Alien Property Custodian.
Section 7 (c) of said act, as amended, referring more,
specially to the scope of the authority granted to the President,
provides as follows: “If the President shall so require any money or other property
* * * owning or belonging to, or held for, by or on account of, or on
behalf of, or for the benefit of, an enemy * * * which the President
after investigation shall determine is so owning or so belonging or is
so held, shall be conveyed, transferred, assigned, delivered, or
paid to the Alien Property Custodian, or the same may be seized by the
Alien Property Custodian” (Italics supplied).

On July 3, 1946, the Congress of the United States approved the
Philippine Property Act of 1946 providing in section 3 thereof that the
Trading with the Enemy Act, as amended, shall continue in force in the
Philippines after July 4, 1946, and adding that “all powers and
authority conferred upon the President of the United States or the
Alien Property Custodian by the terms of said Trading with the Enemy
Act, as amended, with respect to the Philippines shall continue
thereafter to be exercised by the President of the United States or
such other officer or agency as he may designate.” Inasmuch as the
Philippine Property Act of 1946 was approved only one day before the
granting of Philippine independence, the immediate designation of the
Alien Property Custodian of the United States, who was already the
designee of the President, to continue acting thereafter, was
considered most expedient to avoid disrupting the continuity of the
vesting program (Executive Order No. 9747). This was done without
prejudice however of establishing an independent agency which may take
charge of the administration and control of enemy properties in the
Philippines. So on October 14, 1946, the Philippine Alien Property
Administration was formally established having as head an Administrator
to be appointed by the President of the United States, and to this
Administrator were transferred the duties and functions of the
Custodian with respect to enemy properties located in the Philippines
(Executive Orders Nos. 9789 and 9818). During the pendency of the
present action, the Philippine Alien Property Administration was in
turn terminated effective June 29, 1951 by Executive Order No. 10254 of
the President of the United States, and the functions and duties of the
Philippine Alien Property Administrator were transferred to the
Attorney General of the United States.

It was in the exercise of the powers vested in him by the Trading
with the Enemy Act, the Philippine Property Act of 1946, and Executive
Order No. 9818 that the Philippine Alien Property Administrator vested
in himself the properties in question to be held, administered, or
otherwise dealt with in the interest and for the benefit of the United
States. Vesting Order No. P-394, which was issued in vesting said
properties, recites that, after proper investigation, the Administrator
had found that Carlos and Marie Dolores Teraoka were nationals of Japan
and that the properties were owned by said nationals.

It is now contended by the Philippine Alien Property Administrator
that, as the immediate effect of the vesting order, from the time the
properties were vested, title to them passed to the United States as
“completely as if by conveyance, transfer or assignment.” (Commercial
Trust Company vs. Miller, 262, U. S. 51, 57, 67 L. ed., 858,
861.) Being the owner, he contends,-the Administrator may obtain
possession of the properties vested, or “may either seize said
properties or proceed judicially to compel compliance with his demand
for possession.” But, in the present case, he avers—although the
Administrator could have seized the properties vested by him, under
section 7(c) of the Trading with the Enemy Act, he preferred to file
suit because “it was more orderly and decent to obtain possession by
the aid of the court than to seize them by violence and the strong
hand.” Hence, the Administrator preferred to institute the present
action under section 3 of the Philippine Property Act of 1946 the
pertinent portion of which reads:

” x x x Provided further, that the courts of first
instance of the Republic of the Philippines are hereby given
jurisdiction to make and enter all such rules as to notice or
otherwise, and all such orders and decrees, and to issue such process
as may be necessary and proper in the premises to enforce any orders,
rules, and regulations issued by the President of the United States,
the Alien Property Custodian, or such officer or agency designated by
the President of the United States pursuant to the Trading with the
Enemy Act, as amended, with such right of appeal therefrom as may be
provided by law.”

But, can the Philippine Alien Property Administrator now invoke the
Philippine Property Act of 1946 to enforce his vesting order or to
compel compliance with the demand for possession of the properties
vested, in spite of the proclamation of our independence on July 4,
1946? Does that act have extraterritorial effect in the Philippines
after Philippine independence? This is the issue now posed by counsel
for the defendants who contends that such an extension of authority
cannot be entertained as it would be in violation of our Constitution,
especially section 2, article VIII, which gives to the Supreme Court
jurisdiction to review, revise, reverse, modify, or affirm on appeal
final judgments and decrees of inferior courts in all cases involving
the constitutionality or validity of any treaty, law, ordinance,
executive order, or regulation. Counsel contends that, under this
all-embracing judicial power, that act cannot be given such effect in
this jurisdiction that would deprive the Supreme Court of its power to
look into the validity of the vesting order issued by the plaintiff.

Fortunately, the issue posed by counsel is not new, as the same has
already been passed upon by this court in a similar case. Thus, in the
case of Herbert Brownell, Jr. vs. Sun Life Assurance Company
of Canada, supra,, 228 this court held: “It is evident, therefore, that
the consent of the Philippine Government to the application of the
Philippine Property Act of 1946 to the Philippines after independence
was given, not only by the Executive Department of the Philippine
Government, but also by the Congress, which enacted the laws that would
implement or carry out the benefits accruing from the operation of the
United States law.” And in another portion of the decision, we also
said: “In the case at bar, our ratification of or concurrence to the
agreement for the extension of the Philippine Property Act of 1946 is
clearly implied from the acts of the President of the Philippines and
of the Secretary of Foreign Affairs, as well as by the enactment of
Republic Acts Nos. 7, 8, and 477.”

It is therefore clear that the Philippine Alien Property
Administrator can now invoke section 3 of the Philippine Property Act
of 1946 in order to secure the issuance of any peremptory order from
any court of first instance in this jurisdiction to enforce a vesting
order to enable said Administrator to obtain possession of the
properties vested. But, again, the issue that arises is: Is the action
taken by the Administrator, by its nature, substance, and prayer, one
that comes1 under said section 3 of the Philippine Property Act of
1946? If it is, then our courts can only pass upon the identity of the
property and the question of possession but cannot look into the
validity of the vesting order, nor entertain any adverse claim which
would require the determination of ownership of the property. (Silesian
American Corporation vs. Markham, 156 Fed. Supp., 793; In re Miller 281 Fed., 764, 773-774; Miller vs. Kaliwerke Aschersleben Aktien-Gesselsthaft, 253 Fed., 746, 752; Kahn vs. Garvan, 263 Fed., 909, 916; Garvan vs.
Certain Shares of International A. Corp. 276 Fed., 206, 207; In re
Sutherland, 21 Fed. 2d 667, 669.) If otherwise, then the court can look
into the ownership of the property and make the corresponding
adjudication. Of course, the vesting may be erroneous, or it may cover
property which does not belong to an alien enemy. If this case arises,
then the remedy of the interested party is to give notice of his claim
to the Alien Property Custodian, and if no action is taken thereon, to
bring an action in the proper court under section 9 (a) of the
Trading with the Enemy Act, where the validity of the vesting order can
be tested and the question of title adjudicated. According to the
plaintiff, this is the only course now open to the defendants in this
case.

After a careful examination of the complaint filed in this case, we
are inclined to uphold the contention of counsel for the defendants1 to
the effect that, “The present action is not one, and could not be one,
under section 3 of the Philippine Property Act of 1946 viewed from the
standpoint of its form, substance and prayer. The present action is
clearly an action for partition of real estate, which incidentally
includes personal properties, under Rule 71 of the Rules of Court.”
This can be gleaned from the nature both of the interest involved and
the relief prayed for in the complaint. It should be noted that the
complaint prays for partition of the properties and not merely for
delivery of their possession. Apparently, this is an action
contemplated in Rule 71 wherein the court, before proceeding with the
partition, has to pass upon the rights or the ownership of the parties
interested in the property (Section 2). In an action for partition the
determination of ownership is indispensable to make proper
adjudication. In this particular case, this acquires added force
considering that the titles of the properties appear issued in the name
of defendants, and the plaintiff contends that they belong to enemy
aliens. By filing this action of partition in the court a quo, the
Philippine Alien Property Administrator has submitted to its
jurisdiction and put in issue the legality of his vesting order. He
cannot therefore now dispute this power. It is true that the complaint
does not specifically allege that the Administrator is invoking the
authority of the court under section 3 of the Philippine Property Act
of 1946 and that the failure to make mention of that fact should not
militate against the stand of the Administrator, But while we agree
with this contention, the fact however remains that the very averments
of the complaint show that the real purpose of the action is not the
recovery of possession but the partition of the properties. This makes
this case come, as already said, under Rule 71 of our Rules of Court.

We are, therefore, persuaded to conclude, and so hold, that the
lower court did not err in passing upon the nationality of Carlos and
Marie Dolores Teraoka, or in determining the validity of the vesting
order issued by the Philippine Alien Property Administrator, wherefore
we affirm the decision appealed from, without pronouncement as to costs.

Paras, C.J., Pablo, Bengzon, Padilla, Montemayor, Reyes, A., Concepcion, Reyes, J.B.L., JJ., concur.